Assurant, Inc. (AIZ)

AIZ 
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Assurant, Inc. (AIZ)

Q3 2009 Earnings Call

October 29, 2009 8:00 am ET

Executives

Melissa Kivett – Senior Vice President Investor Relations

Robert B. Pollack – President, Chief Executive Officer & Director

Michael J. Peninger – Chief Financial Officer & Executive Vice President

Christopher J. Pagano – Executive Vice President, Treasurer, Chief Investment Officer & President Assurant Asset Management

Analysts

Jeffrey Schuman – Keefe, Bruyette & Woods

Steven Schwartz – Raymond James

Edward Spehar – Bank of America Merrill Lynch

Mark Hughes – SunTrust Robinson Humphrey

John Nadel – Sterne, Agee & Leach

Adam Klauber – Fox-Pitt Kelton

Presentation

Operator

Welcome to the Assurant third quarter 2009 financial results conference call. At this time all participants are in a listen only mode. A question and answer session will take place at the conclusion of the prepared remarks. Also, today’s call is being recorded. I would now like to turn the call over to Ms. Melissa Kivett, Senior Vice President Investor Relations.

Melissa Kivett

Welcome to Assurant’s 200 third quarter earnings conference call. Joining me with prepared remarks are Rob Pollack, President and Chief Executive Officer of Assurant and Mike Peninger, our Chief Financial Officer. Prepared remarks will last about 25 minutes and then we’ll open the call to questions. Chris Pagano, our Chief Investment Officer and Treasurer is also here for questions.

Yesterday we issued a news release announcing our third quarter 2009 financial results. The news release as well as corresponding supplementary financial information are also available on our website at www.Assurant.com. Some of the statements that we make during today’s call may contain forward-looking information. Our actual results may differ materially from those projected in the forward-looking statements.

We caution you about relying on these forward-looking statements and direct you to consider the discussions of risks and uncertainties associated with our business and results of operations contained in our 2008 Form 10K and subsequently filed forms 10Q and 8K which can be accessed from our website. The company undertakes no obligation to update or revise any forward-looking statements.

Additionally, the presentation will contain non-GAAP financial measures which we believe are meaningful in evaluating the company’s performance. For more detailed disclosures on these non-GAAP measures, the most comparable GAAP measures and a reconciliation of the two, please refer to yesterday’s earnings release and the supplementary financial information that is on our website. Now, I’d like to turn the call over to Rob Pollack.

Robert B. Pollack

The third quarter of 2009 was good for Assurant on several fronts. Actions we have taken to strengthen performance, reduce expenses and improve loss ratios are paying off but clearly a benign hurricane season factored in to our results. Operating results for the quarter increased both year-over-year and sequential comparisons. We are continuing to explore other avenues to grow our business and improve operating performance in a challenging economic environment.

Our financial position at Assurant remains strong and our balance sheet strengthened due to improved asset valuations. We grew our holding company capital position by $110 million in the third quarter to $360 million, our book value per share by about 3% excluding AOCI and we generated an annualized operating return on equity of 10.7%. We also returned approximately $50 million of capital to shareholders including $18 million in dividend and $32 million in share repurchases during the third quarter.

At Assurant Specialty Property, results benefited from the lack of storm activity. We added a new client which increased our track loan portfolio and we also saw portfolios of some of our clients grow because of consolidation. However, over the next few years we expect property revenues will decline as the market inventory of subprime loans declines. We also expect the ongoing consolidation of loan servicers will create margin pressures. We continue to execute on the operating efficiencies to deal with these trends. Finally, we’ve already received about $250 million in dividends from this business. We are on track to dividend all of this year’s earnings.

Turning to Assurant Solutions, operating results continued to show improvement both sequentially and quarter-over-quarter. We’ve added new clients and distribution channels to deal with the slowdown in consumer spending as well as the bankruptcies with several of our clients. We’re pleased that both our Signal and GE’s Warranty management group acquisitions are producing results consistent with our assumptions.

Our pre-need business is building steady moment and is providing results consistent with our target returns. Internationally results continue to be negatively impacted by high unemployment in the UK. However, we are pleased with progress we are making in Canada and Latin American on both revenues and combined ratios. Domestically, the results have improved from our continued risk management efforts with existing clients.

At Assurant Health we continue to manage through an especially challenging landscape. Although utilization trends continued at historically high levels, they stabilized in the third quarter. The rating and plan design actions we are taking should be sufficient to reflect the utilization we began to experience in the fourth quarter of last year. We expect profitability will be back in the range of a 4% after tax margin by the fourth quarter of 2010.

The overall outcome of healthcare reform discussion will not be known for some time. We cannot speculate on what might develop but we can say we support healthcare reform and believe all Americans must have access to quality affordable healthcare. We’re still working to provide input towards a solution. We’re preparing for various possibilities and believe Assurant Health expertise allow us to adapt to changes in the individual market.

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