[April 23, 2014] |
|
Assurant Reports First Quarter 2014 Financial Results
NEW YORK --(Business Wire)--
Assurant,
Inc. (NYSE: AIZ), a premier provider of specialty insurance and
insurance-related products and services, today reported results for the
first quarter ended March 31, 2014.
"We are pleased with the overall performance of all our businesses in
first quarter 2014," said Robert
B. Pollock, president and CEO of Assurant. "These results reflect
the progress we are making as we expand our offerings, strengthen our
core businesses and drive operational excellence across Assurant."
First Quarter 2014 Consolidated Results
-
Net operating income1 increased to $124.4
million, or $1.68 per diluted share, compared to first quarter 2013
net operating income of $109.3 million, or $1.35 per diluted share,
primarily reflecting strong results at Assurant Solutions as well as a
higher contribution from Assurant Employee Benefits.
-
Net income increased to $137.2 million, or $1.86 per diluted
share, compared to first quarter 2013 net income of $117.8 million, or
$1.46 per diluted share, primarily due to the improvements noted
above. After-tax net realized gains on investments were $12.8 million,
compared to gains of $8.5 million in first quarter 2013.
-
Net earned premiums, fees and other income were $2.3 billion,
compared to $2.0 billion in first quarter 2013, reflecting improvement
across all business segments. Fee income increased in the quarter due
to strong growth in U.S. mobile programs and contributions from the
acquisitions of Lifestyle Services Group and Field Asset Services.
-
Net investment income increased slightly to $168.1 million,
compared to $166.0 million in first quarter 2013. First quarter 2014
includes $9.8 million of investment income from real estate joint
venture partnerships, compared to $2.8 million in first quarter 2013.
Reconciliation of Net Operating Income to Net Income
|
|
|
|
|
|
(UNAUDITED)
|
|
1Q
|
|
1Q
|
(dollars in millions, net of tax)
|
|
2014
|
|
2013
|
Assurant Solutions
|
|
$
|
49.5
|
|
|
$
|
34.9
|
|
Assurant Specialty Property
|
|
|
97.7
|
|
|
|
94.2
|
|
Assurant Health
|
|
|
(7.1
|
)
|
|
|
(5.3
|
)
|
Assurant Employee Benefits
|
|
|
13.9
|
|
|
|
6.1
|
|
Corporate and other
|
|
|
(20.9
|
)
|
|
|
(13.5
|
)
|
Amortization of deferred gain on disposal of businesses
|
|
|
2.4
|
|
|
|
2.7
|
|
Interest expense
|
|
|
(11.1
|
)
|
|
|
(9.8
|
)
|
Net operating income
|
|
|
124.4
|
|
|
|
109.3
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
Net realized gains on investments
|
|
|
12.8
|
|
|
|
8.5
|
|
Net income
|
|
$
|
137.2
|
|
|
$
|
117.8
|
|
Note: Additional financial information, including a schedule of
disclosed items that affected Assurant's results by business for the
last five quarters (page 20), is available in the Company's Financial
Supplement, located in the Investor Relations section of www.assurant.com.
Assurant Solutions
|
(in millions)
|
|
|
1Q14
|
|
|
1Q13
|
|
% Change
|
Net operating income
|
|
$
|
49.5
|
|
$
|
34.9
|
|
42%
|
Net earned premiums, fees and other
|
|
$
|
894.0
|
|
$
|
768.6
|
|
16%
|
-
Net operating income increased in first quarter 2014 due to
strong results in domestic mobile, which includes additional profit
generated from client marketing programs and favorable loss
experience. Prior expense management actions also contributed to the
improvement.
-
Net earned premiums, fees and other income increased in the
quarter, primarily due to growth in domestic mobile subscribers and
the Lifestyle Services Group acquisition.
-
Domestic combined ratio for the quarter was 93.7
percent, compared to 96.9 percent in first quarter 2013. Additional
fee income generated from client marketing programs, favorable mobile
loss experience and previous expense management actions contributed to
the improvement.
-
International combined ratio improved to 101.7 percent
in first quarter 2014, compared to 102.3 percent, reflecting prior
restructuring actions in Europe.
Assurant Specialty Property
|
(in millions)
|
|
|
1Q14
|
|
|
1Q13
|
|
% Change
|
Net operating income
|
|
$
|
97.7
|
|
$
|
94.2
|
|
4%
|
Net earned premiums, fees and other
|
|
$
|
664.1
|
|
$
|
556.0
|
|
19%
|
-
Net operating income increased slightly in first quarter 2014
due to revenue growth in the lender-placed insurance business. Results
include $5.1 million in reportable catastrophe losses, compared to
$10.0 million in first quarter 2013. Results for first quarter 2013
also included a $14.0 million regulatory settlement. Absent these
items, results for the quarter decreased, primarily due to higher
non-catastrophe losses.
-
Net earned premiums, fees and other income increased in first
quarter 2014, primarily due to the discontinuation of a client
quota-share arrangement and lender-placed loan portfolios added in
2013. Contributions from the multi-family housing business and the
Field Asset Services acquisition also drove the improvement.
-
Combined ratio increased in first quarter 2014 to 82.0 percent,
compared to 77.7 percent in first quarter 2013, primarily due to
severe winter weather as well as lower premium rates on lender-placed
policies.
Assurant Health
|
(in millions)
|
|
|
1Q14
|
|
|
1Q13
|
|
% Change
|
|
Net operating loss
|
|
$
|
(7.1
|
)
|
|
$
|
(5.3
|
)
|
|
(34)
|
%
|
Net earned premiums, fees and other
|
|
$
|
431.0
|
|
|
$
|
385.3
|
|
|
12
|
%
|
-
Net operating loss in first quarter 2014 increased, reflecting
higher commissions on new sales and less favorable loss experience,
partially offset by accruals under the Affordable Care Act (ACA) risk
mitigation programs. Results include a $5.7 million tax liability
increase related to the ACA, compared to $10.2 million in first
quarter 2013.
-
Net earned premiums, fees and other income increased in the
quarter due to continued strong sales of major medical, affordable
choice and supplemental products.
-
Sales increased in first quarter 2014, primarily due to
increased sales of individual major medical products during the ACA
open enrollment period.
Assurant Employee Benefits
|
(in millions)
|
|
|
1Q14
|
|
|
1Q13
|
|
% Change
|
Net operating income
|
|
$
|
13.9
|
|
$
|
6.1
|
|
128%
|
Net earned premiums, fees and other
|
|
$
|
267.7
|
|
$
|
257.6
|
|
4%
|
-
Net operating income increased in the quarter due to favorable
life and dental loss experience. Results also benefited from
additional investment income from real estate joint venture
partnerships and an increase in the reserve discount rate for new
long-term disability claims.
-
Net earned premiums, fees and other income increased in first
quarter 2014 due to growth in voluntary products, partially offset by
declines in employer-paid products.
-
Sales increased in first quarter 2014, primarily driven by
voluntary products.
Corporate & Other
|
(in millions)
|
|
|
1Q14
|
|
|
1Q13
|
|
% Change
|
Net operating loss
|
|
$
|
(20.9)
|
|
$
|
(13.5)
|
|
(55)%
|
-
Net operating loss increased for first quarter 2014, primarily
due to higher tax liabilities.
Capital Position
-
Corporate capital stood at approximately $540 million as of
March 31, 2014. Deployable capital, which excludes the company's $250
million risk buffer, totaled approximately $290 million. During the
quarter, Assurant retired $467 million of debt that matured in
February 2014. In addition, the holding company infused $7 million of
capital, net of dividends, into certain business segments to support
growth.
-
Share repurchases and dividends totaled $39.1 million in first
quarter 2014. Dividends to shareholders totaled $18.2 million, and
Assurant repurchased 314,600 shares of common stock for $20.9 million.
Through April 18, 2014, the Company repurchased an additional 190,000
shares for $12.3 million, and has $671.6 million remaining in
repurchase authorization.
Financial Position
-
Stockholders' equity, excluding accumulated other comprehensive
income (AOCI), was $4.5 billion at March 31, 2014, up $106.2 million
from Dec. 31, 2013.
-
Book value per diluted share2,
excluding AOCI, increased 2.6 percent to $61.05 at March 31, 2014 from
$59.48 at Dec. 31, 2013. AOCI increased $156.7 million to $583.5
million as of March 31, 2014, from $426.8 million at Dec. 31, 2013.
-
Annualized operating return on average equity (ROE)3,
excluding AOCI, was 11.2 percent for the quarter compared to full-year
operating ROE, excluding AOCI, of 10.6 percent in 2013.
-
Total assets as of March 31, 2014 were approximately $29.7
billion. The ratio of debt to total capital4,
excluding AOCI, decreased to 20.6 percent at March 31, 2014 from 27.1
percent at Dec. 31, 2013, reflecting repayment of the February 2014
notes. The ratio of invested assets to equity remained unchanged at
2.9 from Dec. 31, 2013.
Company Outlook
Based on current market conditions, for full-year 2014, the Company now
expects:
-
Assurant Solutions' net earned premiums and fees to increase
compared to 2013, primarily driven by growth in mobile. Net operating
income to increase due to higher contributions from mobile, improved
international results and savings from previous expense management
actions. Quarterly results to vary, reflecting timing of new product
introductions, client marketing programs and seasonal trends in
mobile. The business segment to achieve $50 million of net operating
income in fourth quarter 2014.
-
Assurant Specialty Property's net earned premiums and fees to
remain level with 2013. Growth in targeted areas, including
contributions from the recently announced StreetLinks acquisition, to
be partially offset by declines in lender-placed insurance. Overall
results to be affected by catastrophe losses, lower placement and
premium rates in lender-placed insurance, and possible loss of tracked
loans. Expense ratio to increase, primarily reflecting a higher mix of
fee income business and additional operating costs to support
lender-placed insurance. Non-catastrophe loss ratio to increase due to
higher claims frequency and lower premium rates.
-
Assurant Health's net earned premiums and fees to increase
compared to 2013 due to sales of new individual major medical policies
under the ACA. Modest segment net operating loss to reflect higher tax
liabilities, inclusive of the additional $5.7 million tax liability in
the first quarter, and higher commission expenses on new sales.
Results to vary based on emerging claims experience under ACA plans
and related risk mitigation programs.
-
Assurant Employee Benefits' net earned premiums and fees to
increase compared to 2013 due to growth in voluntary products.
Continued expense management actions to offset higher expenditures to
support accelerated growth in voluntary. Results to be affected by
employment trends and capital market conditions.
Consistent with the previously reported outlook, for full-year 2014, the
Company continues to expect:
-
Corporate & Other full-year net operating loss to decrease
to approximately $70 million, benefiting from expense management
actions underway and lower employee-benefit related costs.
-
Capital to be deployed through strategic acquisitions, common
stock dividends and share repurchases, subject to market conditions
and legal requirements. Business segment dividends to Corporate to
approximate segment net operating income, net of infusions. Dividends
subject to the growth of the businesses, rating agency and regulatory
capital requirements as well as investment performance.
Earnings Conference Call
-
The first quarter 2014 earnings conference call and webcast to
be held on Thurs., April 24, 2014 at 8:00 a.m. ET. The live and
archived webcast along with supplemental information also will be
available in the Investor Relations section of www.assurant.com.
About Assurant Assurant is a premier provider of specialized
insurance products and related services in North America, Latin America,
Europe and other select worldwide markets. The four key businesses --
Assurant Solutions, Assurant Specialty Property, Assurant Health and
Assurant Employee Benefits -- partner with clients who are leaders in
their industries and build leadership positions in a number of specialty
insurance market segments. Assurant businesses provide mobile device
protection; debt protection administration; credit-related insurance;
warranties and service contracts; pre-funded funeral insurance; solar
project insurance; lender-placed homeowners insurance; renters insurance
and related products; manufactured housing homeowners insurance;
individual health and small employer group health insurance; group
dental insurance; group disability insurance; and group life insurance.
Assurant, a Fortune 500 company and a member of the S&P 500, is traded
on the New York Stock Exchange under the symbol AIZ. Assurant has
approximately $30 billion in assets and $9 billion in annual revenue.
Assurant has approximately 16,600 employees worldwide and is
headquartered in New York's financial district. For more information on
Assurant, please visit www.assurant.com
and follow us on Twitter (News - Alert) (@AssurantNews).
Safe Harbor Statement Some of the statements included in
this news release and its exhibits, particularly those anticipating
future financial performance, business prospects, growth and operating
strategies and similar matters, are forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. You can identify these statements by the fact that they may use
words such as "will," "anticipate," "expect," "estimate," "project,"
"intend," "plan," "believe," "target," "forecast," or the negative
versions of those words and terms with a similar meaning. Our actual
results may differ materially from those projected in the
forward-looking statements. The Company undertakes no obligation to
update any forward-looking statements in this earnings release or the
exhibits as a result of new information or future events or developments.
The following risk factors could cause our actual results to differ
materially from those currently estimated by management, including those
projected in the Company outlook:
(i)
|
|
actions by governmental agencies or government sponsored entities or
other circumstances, including pending regulatory matters affecting
our lender-placed insurance business, that could result in
reductions of the premium rates we charge, increases in the claims
we pay, fines or penalties, or other expenses;
|
(ii)
|
|
loss of significant client relationships, distribution sources and
contracts;
|
(iii)
|
|
unfavorable outcomes in litigation and/or regulatory investigations
that could negatively affect our business and reputation;
|
(iv)
|
|
current or new laws and regulations that could increase our costs
and decrease our revenues;
|
(v)
|
|
the effects of the Patient Protection and Affordable Care Act and
the Health Care and Education Reconciliation Act of 2010, and the
rules and regulations thereunder, on our health and employee
benefits businesses;
|
(vi)
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significant competitive pressures in our businesses;
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(vii)
|
|
failure to attract and retain sales representatives or key managers;
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(viii)
|
|
losses due to natural or man-made catastrophes;
|
(ix)
|
|
a decline in our credit or financial strength ratings (including the
risk of ratings downgrades in the insurance industry);
|
(x)
|
|
deterioration in the Company's market capitalization compared to its
book value that could result in an impairment of goodwill;
|
(xi)
|
|
risks related to our international operations, including
fluctuations in exchange rates;
|
(xii)
|
|
general global economic, financial market and political conditions
(including difficult conditions in financial, capital, credit and
currency markets, the global economic slowdown, fluctuations in
interest rates or a prolonged period of low interest rates, monetary
policies, unemployment and inflationary pressure);
|
(xiii)
|
|
failure to find and integrate suitable acquisitions and new ventures;
|
(xiv)
|
|
cyber security threats and cyber attacks;
|
(xv)
|
|
failure to effectively maintain and modernize our information
systems;
|
(xvi)
|
|
data breaches compromising client information and privacy;
|
(xvii)
|
|
failure to predict or manage benefits, claims and other costs;
|
(xviii)
|
|
uncertain tax positions and unexpected tax liabilities;
|
(xix)
|
|
inadequacy of reserves established for future claims;
|
(xx)
|
|
risks related to outsourcing activities;
|
(xxi)
|
|
unavailability, inadequacy and unaffordable pricing of reinsurance
coverage;
|
(xxii)
|
|
diminished value of invested assets in our investment portfolio (due
to, among other things, volatility in financial markets; the global
economic slowdown; credit, currency and liquidity risk; other than
temporary impairments and increases in interest rates);
|
(xxiii)
|
|
insolvency of third parties to whom we have sold or may sell
businesses through reinsurance or modified co-insurance;
|
(xxiv)
|
|
inability of reinsurers to meet their obligations;
|
(xxv)
|
|
credit risk of some of our agents in Assurant Specialty Property and
Assurant Solutions;
|
(xxvi)
|
|
inability of our subsidiaries to pay sufficient dividends;
|
(xxvii)
|
|
failure to provide for succession of senior management and key
executives; and
|
(xxviii)
|
|
cyclicality of the insurance industry.
|
For a detailed discussion of the risk factors that could affect our
actual results, please refer to the risk factors identified in our SEC (News - Alert)
reports, including, but not limited to, our 2013 Annual Report on Form
10-K as filed with the SEC.
Non-GAAP Financial Measures Assurant uses the following
non-GAAP financial measures to analyze the Company's operating
performance for the periods presented in this news release. Because
Assurant's calculation of these measures may differ from similar
measures used by other companies, investors should be careful when
comparing Assurant's non-GAAP financial measures to those of other
companies.
(1) Assurant uses net operating income as an important measure of the
Company's operating performance. As shown in the net operating income
reconciliation table, net operating income equals net income, excluding
net realized gains (losses) on investments and other unusual and/or
infrequent items. The Company believes net operating income provides
investors a valuable measure of the performance of the Company's ongoing
business, because it excludes both the effect of net realized gains
(losses) on investments that tend to be highly variable from period to
period, and those events that are unusual and/or unlikely to recur.
(2) Assurant uses book value per diluted share, excluding AOCI, as an
important measure of the Company's stockholders' value. Book value per
diluted share, excluding AOCI, equals total stockholders' equity,
excluding AOCI, divided by diluted shares outstanding. The Company
believes book value per diluted share, excluding AOCI, provides
investors a valuable measure of stockholders' value because it excludes
the effect of unrealized gains (losses) on investments, which tend to be
highly variable from period to period and other AOCI items. The
comparable GAAP measure would be book value per diluted share, defined
as total stockholders' equity divided by diluted shares outstanding.
Book value per diluted share was $68.94 and $65.24 as of March 31, 2014
and Dec. 31, 2013, respectively, as shown in the reconciliation table
below.
|
|
1Q
|
|
4Q
|
|
|
2014
|
|
2013
|
Book value per diluted share (excluding AOCI)
|
|
$61.05
|
|
$59.48
|
Change due to effect of including AOCI
|
|
7.89
|
|
5.76
|
Book value per diluted share
|
|
$68.94
|
|
$65.24
|
(3) Assurant uses annualized operating ROE, excluding AOCI, as an
important measure of the Company's operating performance. Annualized
operating ROE equals net operating income for the periods presented,
divided by average stockholders' equity for the year-to-date period,
excluding AOCI, and then the return is annualized, if necessary. The
Company believes annualized operating ROE, excluding AOCI, provides
investors a valuable measure of the performance of the Company's ongoing
business, because it excludes the effect of net realized gains (losses)
on investments that tend to be highly variable from period-to-period,
AOCI items and those events that are unusual and/or unlikely to recur.
The comparable GAAP measure would be annualized GAAP ROE, defined as net
income, for the periods presented, divided by average stockholders'
equity for the year-to-date period, and then the return is annualized,
if necessary. Consolidated annualized GAAP ROE for the three months
ended March 31, 2014 and 12 months ended Dec. 31, 2013 was 11.1 percent
and 9.8 percent, respectively, as shown in the following reconciliation
table.
|
|
1Q
|
|
Twelve
Months
|
|
|
2014
|
|
2013
|
Annualized operating return on average equity (excluding AOCI)
|
|
11.2%
|
|
10.6%
|
Net realized gains on investments
|
|
1.2%
|
|
0.5%
|
Change due to effect of including AOCI
|
|
(1.3)%
|
|
(1.3)%
|
Annualized GAAP return on average equity
|
|
11.1%
|
|
9.8%
|
(4) Assurant uses a ratio of debt to total capital, excluding AOCI, as
an important measure of the Company's financial leverage. Assurant's
debt to total capital ratio, excluding AOCI, equals debt divided by the
sum of debt and total stockholders' equity excluding AOCI. The Company
believes that the debt to total capital ratio, excluding AOCI, provides
investors a valuable measure of financial leverage, because it excludes
the effect of unrealized gains (losses) on investments, which tend to be
highly variable from period to period, and other AOCI items. The
comparable GAAP measure would be the ratio of debt to total capital. The
debt to total capital ratio as of March 31, 2014 and Dec. 31, 2013 was
18.7 percent and 25.3 percent, respectively, as shown in the following
reconciliation table.
|
|
1Q
|
|
4Q
|
|
|
2014
|
|
2013
|
Debt to total capital ratio (excluding AOCI)
|
|
20.6%
|
|
27.1%
|
Change due to effect of including AOCI
|
|
(1.9)%
|
|
(1.8)%
|
Debt to total capital ratio
|
|
18.7%
|
|
25.3%
|
A summary of net operating income disclosed items is included on page 20
of the Company's Financial Supplement, which is available in the
Investor Relations section of www.assurant.com.
Assurant, Inc.
Consolidated Statement of Operations (unaudited)
Three Months Ended March 31, 2014 and 2013
|
|
|
1Q
|
|
1Q
|
|
|
2014
|
|
2013
|
|
|
(in thousands except number of shares and per share amounts)
|
|
|
|
|
|
Revenues
|
|
|
|
|
Net earned premiums
|
|
$
|
2,060,462
|
|
$
|
1,850,448
|
Net investment income
|
|
|
168,058
|
|
|
165,985
|
Net realized gains on investments
|
|
|
19,751
|
|
|
13,038
|
Amortization of deferred gain on disposal of businesses
|
|
|
3,660
|
|
|
4,092
|
Fees and other income
|
|
|
196,441
|
|
|
117,060
|
Total revenues
|
|
|
2,448,372
|
|
|
2,150,623
|
Benefits, losses and expenses
|
|
|
|
|
Policyholder benefits
|
|
|
1,008,032
|
|
|
857,361
|
Selling, underwriting, general and administrative expenses
|
|
|
1,188,022
|
|
|
1,071,760
|
Interest expense
|
|
|
17,065
|
|
|
15,078
|
Total benefits, losses and expenses
|
|
|
2,213,119
|
|
|
1,944,199
|
Income before provision for income taxes
|
|
|
235,253
|
|
|
206,424
|
Provision for income taxes
|
|
|
98,008
|
|
|
88,644
|
Net income
|
|
$
|
137,245
|
|
$
|
117,780
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
Basic
|
|
$
|
1.88
|
|
$
|
1.47
|
Diluted
|
|
$
|
1.86
|
|
$
|
1.46
|
|
|
|
|
|
Dividends per share
|
|
$
|
0.25
|
|
$
|
0.21
|
|
|
|
|
|
Share data:
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
72,848,756
|
|
|
79,984,576
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
73,873,952
|
|
|
80,946,649
|
Assurant, Inc.
Consolidated Condensed Balance Sheets (unaudited)
At March 31, 2014 and Dec. 31, 2013
|
|
|
March 31,
|
|
December 31,
|
|
|
2014
|
|
2013
|
|
|
(in thousands)
|
|
|
|
|
|
Assets
|
|
|
|
|
Investments and cash and cash equivalents
|
|
$
|
15,723,679
|
|
$
|
15,961,199
|
Reinsurance recoverables
|
|
|
5,824,365
|
|
|
5,752,134
|
Deferred acquisition costs
|
|
|
3,158,031
|
|
|
3,128,931
|
Goodwill
|
|
|
785,453
|
|
|
784,561
|
Assets held in separate accounts
|
|
|
1,916,990
|
|
|
1,941,747
|
Other assets
|
|
|
2,259,867
|
|
|
2,146,117
|
Total assets
|
|
$
|
29,668,385
|
|
$
|
29,714,689
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Policyholder benefits and claims payable
|
|
$
|
12,121,544
|
|
$
|
12,035,943
|
Unearned premiums
|
|
|
6,610,702
|
|
|
6,662,672
|
Debt
|
|
|
1,170,859
|
|
|
1,638,118
|
Liabilities related to separate accounts
|
|
|
1,916,990
|
|
|
1,941,747
|
Deferred gain on disposal of businesses
|
|
|
95,651
|
|
|
99,311
|
Accounts payable and other liabilities
|
|
|
2,656,351
|
|
|
2,503,419
|
Total liabilities
|
|
|
24,572,097
|
|
|
24,881,210
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
Equity, excluding accumulated other comprehensive income
|
|
|
4,512,807
|
|
|
4,406,649
|
Accumulated other comprehensive income
|
|
|
583,481
|
|
|
426,830
|
Total stockholders' equity
|
|
|
5,096,288
|
|
|
4,833,479
|
Total liabilities and stockholders' equity
|
|
$
|
29,668,385
|
|
$
|
29,714,689
|
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