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Assurant's (AIZ) Q4 Earnings Miss Estimates; Down Y/Y

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Assurant Inc. (AIZ - Free Report) reported fourth-quarter 2014 net operating income of 87 cents per share, missing the Zacks Consensus Estimate of $1.66 and declining 38.7% year over year.

 

 

The downside in the quarter was driven by solid mobile results at Assurant Solutions offset by increased claims at Assurant Health and the anticipated normalization of lender-placed insurance at Assurant Specialty Property.

Including net realized gains on investments, loss on divested business, change in tax liabilities and in derivative investment net income came in at $49.8 million or 69 cents per share declining 54.2% year over year.

Total revenue came in at $2.6 billion, up 9.2% year over year and surpassing the Zacks Consensus Estimate by 2%. The upside was driven by higher net premiums earned, fees and other income and net realized gains on investments.

Net earned premiums, fees and other income amounted to $2.5 billion, up 15.8% year over year led by growth across the company’s Assurant Solution, Assurant Health and Assurant Employee Benefits segments.

Net investment income decreased 1.4% year over year to $158.9 million, due to lower investment yields.

Total benefits, losses and expenses came in at $2.5 billion, 13.9% higher year over year due to an increase in policy holder benefits, and higher selling, underwriting, general and administrative expenses.

Full-Year 2014 Highlights

Assurant reported 2014 net operating income of $6.00 per share, missing the Zacks Consensus Estimate of $6.56 and also declining 0.17% year over year.

Total revenue came in at $10.4 billion, up 14.7% year over year and surpassing the Zacks Consensus Estimate by 2.9%. The upside was driven by higher net premiums earned, fees and other income, net investment income and net realized gains on investments.

Segment Performance
 
Net earned premiums, fees and other at Assurant Solutions improved 18% year over year to $1.0 billion, led by increase in mobile subscriptions, growth at a large service contract client, as well as contributions from vehicle service contracts and higher fee income from client marketing programs.

Operating income increased 157% year over year to $58.1 million, primarily due to strong results in mobile and expense savings.

Net earned premiums, fees and other at Assurant Specialty Property decreased 2% year over year to $686.5 million due to a decline in lender-placed insurance premiums.

Net operating income of $71.0 million declined 34% year over year primarily due to lower lender-placed insurance placements and premium rates, higher non-catastrophe losses and the previously disclosed loss of client business.

Net earned premiums, fees and other at Assurant Health shot up 21% year over year to $503.0 million, led by strong sales growth in individual major medical products and a $9 million in the estimated recoveries from the Affordable Care Act (ACA) risk-adjustment program.

However, the segment incurred an operating loss of $36.8 million compared with operating profit of $0.6 million in the year-ago quarter due to increased claims in the ACA qualified policies.

Net earned premiums, fees and other at the Assurant Employee Benefits segment increased 3% year over year to $269.4 million led by continued growth in voluntary products.

Net operating income decreased $7.2 million from $10.8 million in the year ago quarter, attributable to less favorable disability loss experience.

Financial Position
 

The financial position of Assurant remains strong with $560 million of corporate capital as of Dec 31, 2014.
 
The company’s leverage ratio moderated to 18.4% as of Dec 31, 2014 compared with 25.3% as of Dec 31, 2013.
 
Book value per share, excluding accumulated other comprehensive income (AOCI), a measure of net worth, was $64.82 as of Dec 31, 2014, up 9% from the Dec 2013 level.  

Share Repurchase and Dividends Update
 
The company spent a total of $218.3 million to buy back shares and pay dividend of $77.5 million to its shareholders in the reported quarter. Through Feb 6, 2015, the Company made an additional repurchase of 0.5million shares for $34.7 million, with $452 million remaining in the current repurchase authorization.
 
2015 Outlook

The company expects Assurant Solutions’ net earned premiums, fees and net operating income to be in line with 2014 levels. A continued growth from mobile and vehicle service contracts globally are anticipated to aid the results. Moreover, the loss of domestic mobile tablet program, carrier marketing programs, decline in volumes at certain domestic retailers and foreign exchange volatility are the other factors that are expected to affect the results.

Assurant Specialty Property’s net earned premiums and net operating income are likely to decline from that of 2014, due to normalization of lender-placed insurance business, and the previously announced loss of client business and the sale of ARIC. The segment is expected to generate net savings in the latter part of the year due to the initiatives taken to lower expenses in lender-placed insurance.

Assurant Health’s net earned premiums and fees are anticipated to increase from that of 2014 on the back of strong individual major medical policy sales. The results are also expected to improve due to the plan design and pricing changes implemented for 2015 and ongoing expense discipline.

Assurant Employee Benefits’ net earned premiums and fees are expected to improve from the year-ago level due to growth in voluntary products. The continued expense management actions will offset pressures from lower investment income. Results are also expected to be affected by U.S. employment trends and capital market conditions.

Corporate & Other full-year net operating loss is expected to decline to $60–65 million, reflecting expense reductions.

Currently, Assurant carries a Zacks Rank #3 (Hold).

Performance of Other Multiline Insurers

The fourth-quarter 2014 results of other stocks like Cigna Corp. (CI - Free Report) along with Kemper Corp. (KMPR - Free Report) and The Hartford Financial Services Group Inc. (HIG - Free Report) have surpassed the Zacks Consensus Estimate.



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