Assurant Beats Q2 Earnings Estimates on Top Line Improvement


Assurant Inc. (AIZ) reported second-quarter 2014 operating income of $1.62 per share, comfortably beating the Zacks Consensus Estimate of $1.53. Earnings were up 5.9% on a year-over-year basis.

The quarter’s results were driven by strong performance at Assurant Solutions, partly offset by fire damage and severe weather-related damages at the Assurant Specialty Property segment.

Net income per share increased 14.7% year over year to $1.95.

Total revenue came in at $2.6 billion, up 18.2% year over year and above the Zacks Consensus Estimate of $2.4 billion.

Net earned premiums, fees and other income amounted to $2.4 billion, up 20.0% year over year led by growth across the company’s segments - Assurant Specialty Property, Employee Benefits and Solutions.

Net investment income increased 2.2% year over year to $167.5 million, primarily led by higher investment income from real estate joint venture partnerships.

Segment Performance

Premium earned fees and other at Assurant Solutions improved 21% year over year to $933.4 million, led by growth in covered mobile devices globally as well as fee income from client marketing programs. Operating income increased a whopping 89% year over year to $59.5 million, primarily from continued client marketing programs and favorable loss experience.

Premiums earned at Assurant Specialty Property increased 17% year over year to $714.3 million on the back of positive developments in lender-placed loan portfolios and the Field Asset Services acquisition. Net operating income of $97.7 million, however, declined 36% year over year due to higher non-catastrophe losses from severe weather.

Net premiums earned at Assurant Health shot up 28% year over year to $514.2 million, led by strong sales of growth in individual major medical products sales and a $55 million increase in estimated recoveries from the Affordable Care Act (:ACA) risk-adjustment program. However, the segment incurred an operating loss of $2.5 million compared with operating profit of $4.1 million in the year-ago quarter due to less favorable loss experience from the new ACA qualified policies as well as a higher tax rate related to the health care reform.

Net premiums earned at the Assurant Employee Benefits segment increased 4% year over year to $268.8 million led by continued growth in voluntary products, partly offset by lower premium from employer-paid products. Net operating income escalated 25% due to $13.9 million thanks to lower claims incidence in disability business coupled with favorable life mortality rates.

Financial Position

The financial position of Assurant remains strong with $4.6 billion of equity capital as of Jun 30, 2014, up 3.9% from year-end 2013.

The company’s leverage ratio moderated to 20.3% as of Jun 30, 2014 compared with 27.1% as of Dec 31, 2013.

Book value per share, a measure of net worth, increased 2.6% sequentially to $62.61 as of Jun 30, 2014.

The company spent a total of $79.4 million to buy back shares and pay dividend to its shareholders in the reported quarter.

Looking Ahead

For 2014, management expects premium and fees in its Specialty property segment to grow slightly compared to 2013 levels. Premium growth is expected to result from the recent acquisition of StreetLinks. Bottom-line results will be affected by higher expense ratio as well as higher loss ratio.

Assurant’s Solutions line will see top-line growth from increases in mobile. Bottom line will benefit from expense management initiatives along with higher contribution from international business.  

The Health line of Assurant’s business is likely to witness top-line growth due to an increase in sales of new individual major medical policies. The bottom line will, however, be under pressure due to high effective tax liabilities and higher sales commissions.

Likewise, the Employee Benefits business’ top-line growth is expected to increase due to growth in voluntary products. Nonetheless, earnings are likely to be affected by continued expense management and higher expenditure which will be incurred to generate higher voluntary sales.

Assurant presently carries a Zacks Rank #3 (Hold).

Peer Performance

Other insurers like UnitedHealth Group Inc. (UNH) and ACE Limited (ACE) reported second-quarter earnings ahead of the respective Zacks Consensus Estimate. Another player, RLI Corp.’s (RLI) second-quarter earnings came in line with the Zacks Consensus Estimate.

Read the Full Research Report on RLI
Read the Full Research Report on ACE
Read the Full Research Report on AIZ
Read the Full Research Report on UNH

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