Assurant Beats on Higher Premium - Analyst Blog
February 02 2012 - 9:15AM
Zacks
Assurant Inc. (AIZ) reported
fourth quarter 2011 operating earnings of $1.65 per share, beating
the Zacks Consensus Estimate by a good 28 cents and also
significantly ahead of the prior-year quarter’s earnings of $1.08
per share. The outperformance was the result of significant
contributions from Assurant Specialty Property, Assurant Health and
Assurant Solutions, party offset by lower operating income from
Assurant Employee Benefits. Earnings also benefited from a lower
share count.
Total revenue for the reported quarter stood at $2.1 billion,
unchanged relative to the prior-year quarter.
Net earned premiums also remained unchanged at $1.8 billion
compared with the prior-year quarter. Net investment income dipped
3.5% to $171.6 million owing to a drop in yields.
For the full year, Assurant's operating income decreased to
$4.55 per share from $5.02 per share in the year-ago quarter.
Earnings, however, compared favorably with the Zacks Consensus
Estimate of $4.28 per share. Total revenue fell to $8.27 billion
from $8.53
billion.
Segment Performance
Net operating income at Assurant Solutions
increased more than two-fold to $28.5 million from
$11.7 million in the prior-year quarter. This can be primarily
attributed to stronger business from international operations and
growth in domestic business. Net earned premiums increased 4% year
over year to $691.3 million, primarily owing to growth in domestic
and international income and partly offset by continued run-off of
the domestic credit business and service contract from old
customers.
Assurant Specialty Property’s
net operating income increased 22% year over year to $116.1
million, primarily the result of no reportable catastrophe losses
compared with $9.8 million after-tax of reportable catastrophe
losses in fourth quarter 2010. Net earned premiums increased 3%
year over year to $517.6 million.
Net premiums earned at Assurant Health fell
5.0% year over year to $445 million. This was due to the decline in
traditional individual medical and small group business. Net
operating income increased 51% year over year to $22.7 million,
owing to reduced operating expenses and lower after-tax accrual of
premium rebates associated with the minimum medical ratio
requirement provisions, as stated by the Health Care Reform
Act.
Year over year, Assurant Employee Benefits' net
premiums earned declined 2% to $268.0 million. The decrease in
premium was due to pricing actions on a block of assumed disability
business and lower sales, partly mitigated by premium growth in
voluntary and supplemental products. Net operating income dropped
significantly by 18% to $14.5 million on the back of lower
favorable loss experience and low disability incidence.
The financial position of Assurant remains strong with $4.5
billion of equity capital, unchanged from the level at the end of
2010. The company maintains a low leverage ratio of 17.9% and has
no debt maturing until 2014.
Book value per share, excluding accumulated and other
comprehensive income, increased 14.0% to $49.05 from $43.08 on
December 31, 2010. The company repurchased 4.5 million shares
during the quarter at a total cost of $173 million.
Assurant’s fourth quarter results reflected continued execution
of the company’s growth strategy. Also, full year results reflect
favorable performance, despite the high cat losses incurred. The
company managed to beat the estimate on the back of better
performance from its international business. Though the company is
facing operating headwinds related to economy and regulations in
its businesses, we expect it to perform well over the longer term
given a solid capital position, low leverage and good capital
management. We thus reiterate our Neutral recommendation on the
shares of Assurant, which closely competes with Torchmark
Corp. (TMK) and Unum
Group (UNM).
ASSURANT INC (AIZ): Free Stock Analysis Report
TORCHMARK CORP (TMK): Free Stock Analysis Report
UNUM GROUP (UNM): Free Stock Analysis Report
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