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Assurant Inc. (AIZ - Analyst Report)  reported second quarter 2013 operating earnings of $1.53 per share, which surpassed the Zacks Consensus Estimate of $1.45 per share. Earnings were, however, significantly down 16% year over year.
 
Better than expected earnings came on the back of strong results from Assurant’s Specialty Property business.
 
Net income was $1.70 per share down 13% year over year.
 
Total revenue for the reported quarter increased 5.1% year over year to $2.24 billion, led by higher premiums, net realized gains on investment, and fees and other income.
 
Net earned premiums improved 5.3% year over year to $2.0 billion. Net investment decreased to $163.9 million from $199.3 million in the year-ago quarter.
 
Segment Performance
 
Premium earned at Assurant Solutions increased 7% year over year to $774.6 million, led by improvements in international as well as domestic businesses. Operating income decreased 22% to $31.4 million. 
 
Premiums earned at Assurant Specialty Property increased 19% year over year to $612.0 million due to positive developments in loan portfolios and multi-family housing products. Net operating income, was up 15% year over year to $106.5 million. 
 
Net premiums earned at Assurant Health fell 2.0% year over year to $402.9 million attributable to decline in individual major medical policies as well as lower small group insured lives. Net operating income declined considerably to $4.1 million from $28.9 million in the year-ago quarter.
 
Net premiums earned by Assurant Employee Benefits segment remained stable relative to the year-ago quarter at $259.2 million. Net operating income decreased 38% year over year to $11.5 million. 
 
Financial Position
 
The financial position of Assurant remains strong with $4.4 billion of equity capital as of Jun 30, 2013, which remained unchanged on a sequential basis. The company leverage ratio increased to 27.3% as of Mar 31, 2013 compared with 18.4% as of Dec 31, 2012.
 
Book value per share excluding accumulated and other comprehensive income, increased 5.2% to $56.67 from $53.87 at Dec 31, 2012.
 
Assurant repurchased 3.6 million shares during the quarter for a total of $174.2 million.
 
Looking Ahead
 
For 2013, management expects its Specialty line of business to benefit from growth in multi-housing loans and higher volume in lender-placed loan portfolios.
 
Its Solutions line will see higher top-line growth from increases in domestic as well as international businesses.
 
The Health line of business is expected to see depressed earnings from the ongoing implementation of health care reform as well as a decline in investment income from real estate joint venture partnerships.
 
The Employee Benefits business top line growth is expected to remain unchanged relative to 2012. However, a low interest rate will result in overall earnings decline of the segment. 
 
Assurant currently carries a Zacks Rank #3 (Hold). Other players – Assured Guaranty Ltd. (AGO - Snapshot Report), MetLife, Inc. (MET - Analyst Report), CIGNA Corp. (CI - Analyst Report) all with a Zacks Rank #2 (Buy) -- are scheduled to release second quarter earnings shortly. 

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