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Assurant, Inc. (AIZ)
Q4 2009 Earnings Call Transcript
February 4, 2010 9:00 am ET
Melissa Kivett – SVP, IR
Rob Pollock – President and CEO
Mike Peninger – EVP and CFO
Chris Pagano – EVP and Treasurer; President and Chief Investment Officer, Assurant Asset Management.
Ed Spehar – BofA
Steven Schwartz – Raymond James & Associates
John Nadel – Sterne, Agee
Jimmy Bhullar – J.P. Morgan
Mark Hughes – SunTrust
Vinay Misquith – Credit Suisse
Jeff Schuman – KBW Investments
Previous Statements by AIZ
» Assurant, Inc. Q3 2009 Earnings Call Transcript
» Assurant Q2 2009 Earnings Transcript
» Assurant Inc., Q1 2009 Earnings Call Transcript
Thanks so much. Welcome to Assurant’s 2009 fourth quarter earnings conference call. Joining me with prepared remarks are Rob Pollock, President and Chief Executive Officer of Assurant, and Mike Peninger, our Chief Financial Officer. Prepared remarks will last about 20 minutes and then we will 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 fourth quarter and year-end 2009 financial results. The news release as well as corresponding supplementary financial information are available on our website at assurant.com. Some of the statements that we make during today’s call may contain forward-looking information and our actual results may differ materially from those projected in these 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 10-K and subsequently filed forms 10-Q and 8-K, which can be accessed from our website. The company undertakes no obligation to update or revise any forward-looking statements.
Additionally, this 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 you can find on our website.
Now, I’d like to turn the call over to Rob Pollock.
Thanks, Melissa, and good morning, everyone. I want to thank our employees for their continued efforts to meet customer needs and provide service to our clients in what has been a challenging year for everyone in the financial services sector. Our business results fluctuated, but our commitment to our customers did not. Our capital and asset management strategies helped us strengthen our balance sheet. Meanwhile, we have taken and will continue to take actions to grow our business, manage expenses, and improve our results.
Let me highlight some key items in our results. In 2009, we generated an operating return on equity of 10.1%. Although this result is not indicative of our aspirations or historic performance, it is solid, especially when evaluated in context of the environment. We grew our book value per diluted share, excluding accumulated other comprehensive income by 9% for the year despite significant legal expenses and a goodwill impairment charge.
We instituted cost reduction and expense saving initiatives that resulted in restructuring charges of about $12 million after-tax in the quarter and about $19 million for the year. These initiatives will generate run rate savings of about $22 million after-tax annually at current expense levels across the company.
As we highlighted in our news release, we took an $83 million impairment charge to goodwill this quarter. The accounting rules on this issue are very technical, but I want to put it in context. This is a non-cash charge. It has no impact on statutory earnings or our deployable capital position. And finally, it has not changed our outlook for our businesses.
Let me comment upon the litigation reserve increase of $24 million after-tax in Assurant Health. Last Friday, a jury in Colorado returned a $37 million verdict against us on a case that was filed in 2006. While we cannot comment on the specifics of this case, we disagree strongly with the verdict and will vigorously pursue post-trial motions as well as an appeal.
Independent of this verdict, the health insurance landscape is changing quickly. Assurant Health has taken steps to help ensure that customers better understand the individual and short-term policies they are purchasing. We offer an independent third-party medical review beyond our internal appeals process for any situations where there is a rescission of coverage.
Before turning to Mike for an in-depth view of results, let me highlight our outlook for 2010. Beginning with our businesses, we expect continued evolution in the marketplace at Specialty Property. We know that the overall number of mortgage loans outstanding is declining and expect this trend to continue until the residential real estate market recovers. The decline will be more pronounced in the subprime sector where policy placement rates are higher.
The movement of portfolios between loan servicers will continue to create quarterly variability in gross written premiums beyond the seasonality we have seen in this business. Consolidation of mortgage portfolios by our clients will pressure margins as loans transition to terms found in the most favorable portfolio contract.