Specialty insurance provider
) has declared an increase in its share buyback authorization
program, which comes on the heels of an approval to increase
dividend announced last week.
The board of directors of Assurant approved the repurchase of up
to $600 million of its shares. The new authorization comes on top
of $170 million remaining under the existing program as of April
Assurant will use its healthy cash flow from operations to
buyback shares. The company ended the first quarter with $600
million in total holding company capital and has a strong balance
sheet with a low debt ratio of 18.2% and no debt maturing until
Assurant has been aggressively buying back shares. In the first
four months of 2012, the company has already bought back 3.3
million shares for a total of $135 million.
The company has bought back approximately 43% of its common
shares over the past eight years. It, however, suspended share
repurchases in September 2007, when the company faced a SEC
investigation regarding certain loss mitigation products. However,
the company resumed its buyback plan a year later.
Assurant has a consistent track record of paying back money to
its shareholders. Last week, the company hiked its annual dividend
payment by 17%, representing the ninth dividend increase since
Assurant has kept its shareholders happy by actively managing
its capital via dividend payment and share buybacks. Share buyback
along with dividend payments constituted a total payout ratio of
135% in 2011, which implies that the company distributed 135% of
its net income for paying dividends and buying back shares.
Assurant's different business units are challenged by
macroeconomic weakness. While its Employment Benefits business is
suffering from a weak payroll, its health business outlook remains
uncertain given the impending Health Care Reform decision.
Though its Specialty property business is performing well,
earnings from this segment are expected to decline given increased
regulatory scrutiny over the rate reduction of forced place
insurance. The company's Solutions business is also suffering from
weakness in the U.K though the domestic results continue to be
Overall, we expect top-line growth at Assurant to remain weak,
at least till first half of 2013. In such a scenario, the company's
attractive capital deployment plan will play an important role in
maintaining investor confidence.
Assurant closely competes with
W. R. Berkley Corp.
The Travelers Companies Inc.
). The stock currently retains a Zacks # 3 Rank, which translates
into a short-term Hold rating. Considering the fundamentals, we are
also maintaining our long-term Neutral recommendation on the
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