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Assurant, Inc. (AIZ)
Q3 2012 Earnings Call
October 25, 2012; 08:00 a.m. ET
Rob Pollock - President & Chief Executive Officer
Mike Peninger - Chief Financial Officer
Chris Pagano - Chief Investment Officer & Treasurer
Francesca Luthi - Senior Vice President of Investor Relations
Mark Finkelstein - Evercore Partners
Chris Giovanni - Goldman Sachs
Jeffrey Schuman - KBW
John Nadel - Sterne, Agee & Leach
Sean Dargan - Macquarie Research Equities
Steven Schwartz - Raymond James
Mark Hughes - Suntrust Robinson Humphrey
Previous Statements by AIZ
» Assurant's CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Assurant's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Assurant's CEO Discusses Q4 2011 Results - Earnings Call Transcript
» Assurant's CEO Discusses Q3 2011 Results - Earnings Conference Call
It is now my pleasure to turn the floor over to Francesca Luthi, Senior Vice President of Investor Relations. You may begin.
Thank you Quint and good morning everyone. We look forward to discussing our third quarter 2012 results with you today. 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 third quarter results. Both the release and corresponding financial supplemental are available at Assurant.com. As a reminder, all prior period financial information presented in the release, financial supplement and on this call reflects the new accounting guidelines for deferred acquisition costs, which the company adopted as of January 1, 2012.
We’ll start today’s call with brief remarks from Rob and Mike, with Chris participating in the Q&A session.
As a reminder, some of the statements we make on today’s call 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 new release, as well as in our SEC reports, including our 2011 Form 10-K, second quarter 2012 Form 10-Q and the upcoming third quarter Form 10-Q available at Assurant.com.
Today’s call will also 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 supplement posted on Assurant.com.
And with that, I will turn the call over to Rob.
Good morning everyone and thanks Francesca. We are pleased to have you on the Assurant team and appreciate the seamless transitions you provided investors, because of the broad experience you bring to the job.
I also want to congratulate and thank Melissa Kivett as she moves to her new role as Senior Vice President, Business Development and Strategy. This is an excellent example of how we develop the leadership team at Assurant.
Our results for the third quarter of 2012 were strong and in line with our expectations. We are pleased with our continued progress in executing our strategy as we gain traction in the areas we have targeted for profitable growth. We are committed to creating long term value for shareholders and our capital management strategy is a key driver.
For the first nine months of 2012, we’ve returned approximately $420 million to shareholders via dividends and share repurchases and we did this while maintaining a strong balance sheet.
Let me outline our performance against the three key operating metrics we used to track our progress. First, we reported an annualized operating return on equity, excluding accumulated other comprehensive income or AOCI of 11.8% for the quarter. Year-to-date, annualized operating return on equity is 13.6%. This includes $20 million of income from real estate joint ventures and $28 million from reportable catastrophe losses.
Second, book value per diluted share excluding AOCI grew by 4% in the quarter and by 13% year-to-date. Solid earnings and continued share repurchases drove the increase.
Third, revenue defined as net earned premiums and fee income grew by 4% to $2 billion compared to the third quarter of 2011, with solutions in specialty property leading the increase. Year-to-date revenue increased by about 3% compared to last year.
In 2012 our focus has been on achieving profitable growth and we are making solid progress, but the macro environment is challenging. Unemployment remains alleviated, interest rates are at record lows and regulatory changes pervasive throughout the financial services sector in general and the insurance industry in particular.
Now, let me comment on the businesses and the key trends influencing our results. In Assurant Solutions, both revenue and net operating income increased in the quarter compared to 2011. Improved performance in our domestic service contract business and across our Latin American operations, including mobile, were the primary contributors.
As sales have begun to rebound in the U.S. automotive sector, our vehicle service contract business is gaining renewed momentum. In addition, the continued growth and the use of mobile devices has expanded the market opportunity for our products worldwide.
Our pre-need business continues to perform well as we work closely with the industry leader SCI. As we look ahead, we are focused on achieving a 14% ROE in solutions in 2014. This will require a continued organizational focus on our strategic growth areas and reduced resources on nine growth areas.
Turning to Assurant Specialty Property, our track record of great client service continues to generate success. We expanded our lender place business with new and existing clients. In the third quarter we signed a contract with a new client for a portfolio of 1 million loans, with expected placement rates around 1%. We expect to earn premiums on this business after the loans are on boarded in the first quarter of 2013.