Assurant, Inc. (AIZ)
Q4 2011 Earnings Conference Call
February 2, 2012 8:00 AM ET
Melissa Kivett – Senior Vice President, Investor Relations
Rob Pollock – President and Chief Executive Officer
Mike Peninger – Chief Financial Officer
Chris Pagano – Chief Investment Officer and Treasurer
Mark Finkelstein – Evercore Partners
Jimmy Bhullar – JP Morgan
Edward Spehar – Bank of America/Merrill Lynch
Steven Schwartz - Raymond James and Associates
John Nadel – Sterne Agee
Mark Hughes – SunTrust
Chris Giovanni – Goldman Sachs
Jeffrey Schuman – Keefe, Bruyette & Woods
Previous Statements by AIZ
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Thanks very much and good morning everyone. We look forward t discussing our fourth quarter and full year 2011 results with you. Joining me for Assurant’s conference call are Rob Pollock, our President and Chief Executive Officer, Mike Peninger, our Chief Financial Officer and Chris Pagano, our Chief Investment Officer and Treasurer.
Yesterday afternoon we issued a news release announcing our fourth quarter and full year results. Both the release and corresponding supplemental financial information are available at assurant.com. You may have noticed that our news release now includes some information you have previously received on the call.
Today, we’ll focus on the highlights and priorities of each of our businesses and provide more time for Q&A. We’ll start today’s call with brief remarks from Rob and Mike and Chris participating in the Q&A session.
Some of the statements we make on today’s calls may be forward-looking and actual results may differ materially from those projected in these statements. Additional information on factors that could cause actual results to differ materially from those projected can be found in yesterday’s news release as well as our SEC reports including our 2010 Form 10-K, available at assurant.com.
Today’s call will contain non-GAAP financial measures which we believe are meaningful in evaluating the Company’s performance. For more details on these measures, the most comparable GAAP measures and a reconciliation of the two, please refer to the news release and financial supplemental information posted at assurant.com.
Now, I’ll turn the call over to Rob.
Thanks, Melissa, and good morning, everyone. We are pleased with our results in the quarter. We have grown in areas we have identified as attractive for our future success. At the same time, we continued to generate substantial free cash flow from operations. This provides us with a strong and flexible capital position. We measure our success with three important financial metrics.
First, operating return on equity, excluding accumulated other comprehensive income for AOCI. We reported a 13.8% annualized return during the fourth quarter which increased the full year return to 9.9%.
Second, growth in book value per diluted share excluding AOCI. We saw an increase of about 14% for the year. Third, growth in revenues defined by earned premiums and fee income.
Overall, total revenues declined by about 3% in 2011 compared to 2010. In the quarter, we achieved modest growth on both the year-over-year and sequential comparisons. The areas we have targeted for future growth are linked to broad social and economic trends.
They include the growing importance of wireless mobile devices to consumers. Increases in rental housing versus home ownership, consumer’s desire for more choice and greater affordability in their health insurance plans, and employers moving away from payment for benefits to sponsorship of voluntary employee funded products. We achieved growth in each of these areas in 2011 and believe they offer great opportunities for our future.
Now let me make some specific comments about the environment, each of our businesses face. I’ll begin with Assurant Solutions. Consumer spending remains sluggish in the US and economic uncertainty persists in Europe. However, revenues from our wireless and service contract offerings, especially in Latin America are expanding. While Solutions expects overall modest premium growth in 2012, we are disappointed that one of our domestic wireless clients will be leaving.
We are in discussions with them concerning the timing. Nonetheless we remain optimistic. We continue to allocate resources to wireless due to its underlying growth trajectory and its intersection with our core capabilities. Turning to Specialty Property, there are fewer mortgage loans originating in the US and foreclosures are projected to increase. Despite these trends, our lender-placed insurance tracking system and product offerings are helping us win business and serve existing clients.
Some of whom are growing their servicing portfolios. As we have communicated, we are not party to the proposed settlement between the State Attorney General and Mortgage Servicers. We understand that the proposed terms of the settlement focused primarily on foreclosure practices and loan modifications.
Insurance is regulated at the state level. We have regular interaction with the different insurance departments. Occasionally, we receive information request. Last fall, we received an information request not as a penal from the New York Department of Financial Services. We are co-operating fully and are virtually complete with a few data items being produced in the next couple of weeks.
Our lender-placed products provide value to consumers. For example, in the third quarter we paid claims of more than $75 million on 10,000 homes that were impacted by Hurricane Irene. This underscores that our product provides value and helps customers in their time of need.