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(AIZ - Analyst Report
) third quarter earnings came in at $1.71 per share, significantly ahead of the Zacks Consensus Estimate of $1.45 per share. Earnings also increased 10.3% year over year.
Assurant’s better-than-expected results were driven by strong performance by Assurant Specialty Property. A lower share count due to share repurchases also boosted the bottom-line results.
Net income increased to $128.8 million, or $1.68 per diluted share, compared to net income of $126.3 million, or $1.52 per diluted share in the year-ago quarter.
Net earned premiums, fees and other income were $2.1 billion up 50% year over year led by continued growth at Assurant Specialty Property and Assurant Solutions.
Lower investment yields dragged down net investment income to $159.2 million, down 6.0% year over year.
Premium earned, fees and other at Assurant Solutions increased 5% year over year to $792.9 million, led by improvement in Latin American operations as well as large service contracts in domestic businesses. Operating income, however decreased 1% to $36.2 million, due to adverse domestic loss experience from one of the established mobile programs.
Premiums earned at Assurant Specialty Property increased 18% year over year to $642.0 million due to positive developments in loan portfolios and multi-family housing products. A lack of significant catastrophe along with growth in lender-placed business pulled up net operating income which was up 29% year over year to $115.1 million.
Net premiums earned at Assurant Health remained unchanged year over year. While the segment saw a growth in small group, affordable choice and supplemental products, it was offset by a decline in individual major medical premiums. Net operating income declined 42% year over year to $6.6 million due to less favorable loss experience.
Net premiums earned by Assurant Employee Benefits segment declined 1% year over year due to continued growth in voluntary products, offset by lower long-term disability business. Less favorable disability loss experience dragged down net operating income by 54% year over year to $11.5 million.
The financial position of Assurant remains strong with $4.4 billion of equity capital as of Sep 30, 2013, which remained unchanged on a sequential basis, but up 9.5% from Dec 31, 2012.
The company leverage ratio increased to 27.1% as of Sep 30, 2013 compared with 18.3% as of Dec 31, 2012.
Book value per share excluding accumulated and other comprehensive income, increased 8.2% to $58.27 from $53.87 at Dec 31, 2012.
Assurant repurchased 1.9 million shares during the quarter for a total of $104.9 million.
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 and discontinuation of a client quota-share arrangement.
Its Solutions line will see higher top-line growth from increases in domestic as well as international businesses. In the fourth quarter, the segment is expected to report about $50 million of net operating income and a 14% annualized operating ROE.
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, less favorable disability experience and a reduction in reserve discount rate.
Assurant currently carries a Zacks Rank #2 (Buy). Other players – FBL Financial Group, Inc.
(FFG - Snapshot Report
) and Kemper Corporation
) both with Zacks Rank #1 (Strong Buy) will announce third quarter 2013 earnings on Oct 31. CIGNA Corp.
(CI - Analyst Report
) with Zacks Rank #2 (Buy) is also scheduled to release its earnings on the same day.