) reported second quarter 2012 operating earnings of $1.81 per
share, beating the Zacks Consensus Estimate by a good 41 cents and
also significantly ahead of the prior-year quarter earnings of 76
cents per share. The outperformance was the result of significant
contributions from its business lines - Specialty Property, Health
and Employee Benefits. A lower share count also boosted bottom-line
Total revenue for the reported quarter increased modestly by
approximately 3.2% year over to $2.13 billion, led by higher
premiums, net investment income, net realized gains on investment,
and fees and other income. Revenues also beat the Zacks Consensus
Estimate of $2.07 billion.
Net earned premiums also showed a modest increase of 2% year
over year to $1.9 billion. Net investment income increased 14.7%
year over year to $199.3 million.
Premiums earned at
increased 6% year over year to $721.7 million, led by growth in
both the domestic as well as international businesses. Operating
income increased 3.1% to $40.4 million.
Premiums earned at
Assurant Specialty Property
increased 7% year over year to $515.5 million led by growth in loan
portfolios and multi-family housing products including increased
fees from the SureDeposit acquisition. A higher premium earned
coupled with very low catastrophe related losses during the quarter
led to more than a twofold increase in operating income to $92.3
Net premiums earned at
fell 5.0% year over year to $410.6 million. This was due to a
decline in traditional individual medical and small group business
sales, partially offset by higher sale of supplemental and
affordable choice products. Net operating income of $28.9 million
increased more than five times year over year, led by lower expense
and favorable loss experience and $13.9 million income from real
estate joint venture investments.
Net premiums earned by
Assurant Employee Benefits
segment declined 4% year over year to $259.3 million due to the
loss of two clients in the disability line of business, partly
mitigated by premium growth in voluntary and supplemental products.
Net operating income increased more than twofold year over year to
$18.6 million on the back of favorable loss experience.
The financial position of Assurant remains strong with $4.4
billion of equity capital as of June 30, 2012, unchanged
sequentially. The company maintains a low leverage ratio of
Book value per share, excluding accumulated and other
comprehensive income, increased 9.0% from year end 2011 to $51.62.
The company repurchased 4.6 million shares during the quarter at a
total cost of $160.2 million.
For the rest of 2012, management expects its Specialty line of
business to benefit from growth in multi-housing loans. Its
Solutions line will see higher top-line growth from an increase in
domestic as well as international businesses. Its Health line of
business is expected to benefit from increased sales of voluntary
and supplemental products and also from expense savings and the
recent agreement with Aetna Signature Administration. Its Employee
Benefits business is expected to witness top-line growth from
higher sale of supplemental and voluntary products.
Along with organic growth, we expect bottom-line earnings at
Assurant to get a boost from its share buyback activity.
Assurant, which closely competes with
), 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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