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Assurant (AIZ) Reports Narrower-Than-Expected Loss in Q3
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Assurant, Inc. (AIZ - Free Report) reported third-quarter 2017 net operating loss of $1.40 per share, narrower than the Zacks Consensus Estimate loss of $1.79. Also, the net operating loss in the reported quarter compared unfavorably with the net operating income of $1.00 in the year-ago quarter. Significantly higher catastrophe losses resulted in such a weak earnings performance.
Nonetheless, the company remains focused on delivering its full-year 2017 financial objectives. Also, the company anticipates its buyout of The Warranty Group to boost its opportunities to scale and enhance lifestyle offerings in 2018, while experiencing more predictable and diversified earnings as well as cash flow in the long term.
Total revenues fell 7.9% year over year to $1.6 billion, mainly due to lower premiums earned. The top line missed the Zacks Consensus Estimate by 1.6%.
Net investment income improved 6.3% year over year to $132.6 million.
Total benefits, losses and expenses increased 5% to $1.7 billion, mainly due to a significant increase in policyholder benefits.
Segmental Performance
Assurant has revised its reportable segments in keeping with its evolved global operating model, which supported its multi-year transformation. As of fourth-quarter 2016, Assurant reported through four segments — Global Housing (formerly known as the Assurant Specialty), Global Lifestyle (formerly included in the Assurant Solutions), Global Preneed (formerly included in the Assurant Solutions) and Corporate & Other.
Net earned premiums, fees and others at Global Housing fell about 8.4% year over year to $530.3 million, primarily due to anticipated lower placements rates in lender-placed insurance as well as catastrophe premiums. Also, reduced demand for originations and field services, together with the decrease in client volumes in mortgage solutions led to this downside. However, revenue growth in multi-family housing partially offset this downside.
The company reported net operating loss of $110.3 million, which compared unfavorably with the net operating income of $44.5 million in the year-ago quarter. This dismal performance was mainly attributable to the $186.8 million of catastrophe losses arising from Hurricanes Harvey, Irma and Maria as well as the Mexico City earthquake.
Net earned premiums, fees and others at Global Lifestyle declined 9.3% year over year to $841.7 million. This deterioration was primarily attributable to a change in program structure for a large service contract client in Connected Living, implemented in the fourth quarter of 2016.
Net operating income of $42.6 million surged 50.5% year over year. The upside was driven by a tax benefit of $9.6 million along with growth in mobile and additional real estate joint venture partnership income.
Net earned premiums, fees and others at Global Preneed grew 3.2% year over year to $44.6 million, primarily owing to growth in the United States and Canada, especially in Final Need.
Net operating income declined 14.6% year over year to $12.3 million due to lower real estate joint venture investment income.
Net operating loss at Corporate & Other was $13 million, substantially narrower than the year-ago quarter net operating loss of $17.4 million. Lower taxes and reduced corporate expenses in the reported quarter, drove this improvement.
Financial Position
Assurant’s financial position remains strong with around $570 million in corporate capital as of Sep 30, 2017. Total assets rose 9.1% to $32.4 billion as of Sep 30, 2017, from $29.7 billion at year-end 2016.
Share Repurchase and Dividends Update
The company’s total share buybacks and dividends amounted to $63 million in the third quarter. While share buyback totaled $34 million, dividend payout totaled $29 million.
The company anticipates to complete its return of $1.5 billion of capital to shareholders by the end of 2017. As of Sep 30, 2017, the company has $408 million remaining in the current repurchase authorization.
2017 Outlook
Assurant estimates net operating income (excluding reportable catastrophe losses) to increase on a moderate basis compared with the 2016 level. This is primarily on the back of anticipated profitable growth in fee-based, capital-light offerings (comprising Connected Living, multi-family housing and mortgage solutions) and lower net operating loss at Corporate. However, declines in lender-placed insurance and other legacy businesses are likely to limit this uptrend.
Assurant projects operating earnings per share (excluding catastrophe losses) to grow in double-digits from 2016 owing to share buyback activity.
The company expects Global Housing to witness a year-over-year decline in its net earned premiums and net operating income, excluding reportable catastrophe losses. Further decline in the ongoing lender-placed insurance normalization, which represents lower placement rates for the second half of 2017, along with reduced contributions from mortgage solutions are anticipated to reduce the above-mentioned metric. However, expense savings and profitable growth in multi-family housing are likely to partially offset this downside.
Global Lifestyle’s net operating income is likely to increase owing to an improved performance in Connected Living, fueled by growth in new and existing mobile programs as well as higher contributions from vehicle protection and expense efficiencies. The decline in credit insurance and legacy North American retail clients is likely to continue. The company anticipates revenues to fall, primarily due to a change in program structure for a large service contract client. In addition, the company estimates net earned premiums to decrease by about $500 million from 2016 due to reduction in expenses. This apart, the company might witness a rise in net earned premiums and fee income owing to growth in Connected Living and vehicle protection globally. However, results are likely to be impacted by foreign exchange.
Global Preneed is anticipated to experience an increase in its fee income and earnings, mainly on the back of the company’s alignment with market leaders and operational efficiencies.
Assurant expects full-year net operating loss to range between $55 million and $60 million at Corporate & Other compared with $71 million in 2016, thanks to lower tax and employee-related costs as well as reduced corporate expenditures.
Zacks Rank
Currently, Assurant carries a Zacks Rank #5 (Strong Sell).
Among other firms from the insurance industry that have reported third-quarter earnings so far, the bottom line of The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) surpassed the respective Zacks Consensus Estimate.
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Assurant (AIZ) Reports Narrower-Than-Expected Loss in Q3
Assurant, Inc. (AIZ - Free Report) reported third-quarter 2017 net operating loss of $1.40 per share, narrower than the Zacks Consensus Estimate loss of $1.79. Also, the net operating loss in the reported quarter compared unfavorably with the net operating income of $1.00 in the year-ago quarter. Significantly higher catastrophe losses resulted in such a weak earnings performance.
Assurant, Inc. Price, Consensus and EPS Surprise
Assurant, Inc. Price, Consensus and EPS Surprise | Assurant, Inc. Quote
Nonetheless, the company remains focused on delivering its full-year 2017 financial objectives. Also, the company anticipates its buyout of The Warranty Group to boost its opportunities to scale and enhance lifestyle offerings in 2018, while experiencing more predictable and diversified earnings as well as cash flow in the long term.
Total revenues fell 7.9% year over year to $1.6 billion, mainly due to lower premiums earned. The top line missed the Zacks Consensus Estimate by 1.6%.
Net investment income improved 6.3% year over year to $132.6 million.
Total benefits, losses and expenses increased 5% to $1.7 billion, mainly due to a significant increase in policyholder benefits.
Segmental Performance
Assurant has revised its reportable segments in keeping with its evolved global operating model, which supported its multi-year transformation. As of fourth-quarter 2016, Assurant reported through four segments — Global Housing (formerly known as the Assurant Specialty), Global Lifestyle (formerly included in the Assurant Solutions), Global Preneed (formerly included in the Assurant Solutions) and Corporate & Other.
Net earned premiums, fees and others at Global Housing fell about 8.4% year over year to $530.3 million, primarily due to anticipated lower placements rates in lender-placed insurance as well as catastrophe premiums. Also, reduced demand for originations and field services, together with the decrease in client volumes in mortgage solutions led to this downside. However, revenue growth in multi-family housing partially offset this downside.
The company reported net operating loss of $110.3 million, which compared unfavorably with the net operating income of $44.5 million in the year-ago quarter. This dismal performance was mainly attributable to the $186.8 million of catastrophe losses arising from Hurricanes Harvey, Irma and Maria as well as the Mexico City earthquake.
Net earned premiums, fees and others at Global Lifestyle declined 9.3% year over year to $841.7 million. This deterioration was primarily attributable to a change in program structure for a large service contract client in Connected Living, implemented in the fourth quarter of 2016.
Net operating income of $42.6 million surged 50.5% year over year. The upside was driven by a tax benefit of $9.6 million along with growth in mobile and additional real estate joint venture partnership income.
Net earned premiums, fees and others at Global Preneed grew 3.2% year over year to $44.6 million, primarily owing to growth in the United States and Canada, especially in Final Need.
Net operating income declined 14.6% year over year to $12.3 million due to lower real estate joint venture investment income.
Net operating loss at Corporate & Other was $13 million, substantially narrower than the year-ago quarter net operating loss of $17.4 million. Lower taxes and reduced corporate expenses in the reported quarter, drove this improvement.
Financial Position
Assurant’s financial position remains strong with around $570 million in corporate capital as of Sep 30, 2017. Total assets rose 9.1% to $32.4 billion as of Sep 30, 2017, from $29.7 billion at year-end 2016.
Share Repurchase and Dividends Update
The company’s total share buybacks and dividends amounted to $63 million in the third quarter. While share buyback totaled $34 million, dividend payout totaled $29 million.
The company anticipates to complete its return of $1.5 billion of capital to shareholders by the end of 2017. As of Sep 30, 2017, the company has $408 million remaining in the current repurchase authorization.
2017 Outlook
Assurant estimates net operating income (excluding reportable catastrophe losses) to increase on a moderate basis compared with the 2016 level. This is primarily on the back of anticipated profitable growth in fee-based, capital-light offerings (comprising Connected Living, multi-family housing and mortgage solutions) and lower net operating loss at Corporate. However, declines in lender-placed insurance and other legacy businesses are likely to limit this uptrend.
Assurant projects operating earnings per share (excluding catastrophe losses) to grow in double-digits from 2016 owing to share buyback activity.
The company expects Global Housing to witness a year-over-year decline in its net earned premiums and net operating income, excluding reportable catastrophe losses. Further decline in the ongoing lender-placed insurance normalization, which represents lower placement rates for the second half of 2017, along with reduced contributions from mortgage solutions are anticipated to reduce the above-mentioned metric. However, expense savings and profitable growth in multi-family housing are likely to partially offset this downside.
Global Lifestyle’s net operating income is likely to increase owing to an improved performance in Connected Living, fueled by growth in new and existing mobile programs as well as higher contributions from vehicle protection and expense efficiencies. The decline in credit insurance and legacy North American retail clients is likely to continue. The company anticipates revenues to fall, primarily due to a change in program structure for a large service contract client. In addition, the company estimates net earned premiums to decrease by about $500 million from 2016 due to reduction in expenses. This apart, the company might witness a rise in net earned premiums and fee income owing to growth in Connected Living and vehicle protection globally. However, results are likely to be impacted by foreign exchange.
Global Preneed is anticipated to experience an increase in its fee income and earnings, mainly on the back of the company’s alignment with market leaders and operational efficiencies.
Assurant expects full-year net operating loss to range between $55 million and $60 million at Corporate & Other compared with $71 million in 2016, thanks to lower tax and employee-related costs as well as reduced corporate expenditures.
Zacks Rank
Currently, Assurant carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Among other firms from the insurance industry that have reported third-quarter earnings so far, the bottom line of The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) surpassed the respective Zacks Consensus Estimate.
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Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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