Assurant Q1 Earnings Beat Estimates by a Penny; Down Y/Y - Analyst Blog

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Assurant Inc.AIZ reported first-quarter 2015 net operating income of 63 cents per share, beating the Zacks Consensus Estimate by a penny but declining substantially from $1.68 per share earned in the year-ago quarter.

Loss incurred by Affordable Care Act (ACA) policies as expected at Assurant Health and the ongoing normalization of lender-placed insurance at Assurant Specialty Property were responsible for the decline in the bottom line.

Assurant Inc. - Earnings Surprise | FindTheCompany

Total revenue came in at $2.6 billion, up 6.1% year over year and in line with Zacks Consensus Estimate . The upside was driven by higher net premiums earned, fees and other income, partly offset by lower investment income.

Net earned premiums, fees and other income amounted to $2.4 billion, up 4.3% year over year on growth across Assurant Health, Solutions and Specialty segments.

Net investment income decreased 9.4% year over year to $152.3 million, due to less investment income from real estate joint venture partnerships.

Total benefits, losses and expenses came in at $2.5 billion, 13.7% higher year over year due to an increase in policy holder benefits, and higher selling, underwriting, general and administrative expenses.

Segment Performance

Net earned premiums, fees and other at Assurant Solutions improved 4% year over year to $927.5 million. While premium earned remained flat, fee income grew primarily on contribution from mobile programs and recent acquisitions.

Operating income increased 9.9% year over year to $54.4 million, primarily on strong mobile results and expense savings, partly offset by foreign exchange volatility.

Net earned premiums, fees and other at Assurant Specialty Property decreased 8% year over year to $686.5 million due to the divestiture of American Reliable Insurance Company (ARIC) as well as lower placement and premium rates in lender-placed insurance.

Net operating income of $75.1 million declined 23% year over year primarily due to lower lender-placed insurance placements and premium rates.

Net earned premiums, fees and other at Assurant Health shot up 45% year over year to $625.7 million on strong sales growth at individual major medical products and $64.3 million in estimated recoveries from the Affordable Care Act (ACA) risk-adjustment program.

However, the segment incurred an operating loss of $84 million compared with operating loss of $7.1 million in the year-ago quarter due to increased claims in the ACA qualified policies and a reduction in 2014 estimated recoveries from the ACA risk-mitigation programs.

Net earned premiums, fees and other at the Assurant Employee Benefits segment increased 2% year over year to $273.2 million led by continued growth in voluntary products.

Net operating income decreased 27% year over year to $10.1 million due to less favorable disability loss experience and lower investment income from real estate joint venture partnerships.

Financial Position

The financial position of Assurant remains strong with $570 million in corporate capital as of Mar 31, 2015.

The company's leverage ratio increased slightly to 20.4% as of Mar 31, 2015 from 20.2% as of Dec 31, 2014.

Book value per share, excluding accumulated other comprehensive income, a measure of net worth, was $65.22 as of Mar 31, 2015, up slightly from $64.82 as of Dec 31, 2014.

Share Repurchase and Dividends Update

The company spent a total of $100.5 million to buy back shares and pay dividend in the reported quarter.

2015 Outlook Update

The company expects Assurant Solutions' net earned premiums, fees and net operating income to be in line with the 2014 levels. Continued growth in mobile and vehicle service contracts globally are anticipated to be catalysts to growth. Moreover, loss of the domestic mobile tablet program, carrier marketing programs, decline in volumes at certain domestic retailers and foreign exchange volatility might affect results.

Assurant Specialty Property's net earned premiums and net operating income are likely to decline from 2014 due to normalization of lender-placed insurance business, the previously announced loss of client business and the sale of ARIC. The segment is expected to generate net savings in the latter part of the year from the initiatives taken to lower expenses in lender-placed insurance.

Assurant Health's net earned premiums and fees are anticipated to increase from 2014 on the back of strong individual major medical policy sales. The results will also be affected by an elevated claims experience on ACA qualified policies and estimated recoverables under ACA risk-mitigation programs.

Assurant Employee Benefits' net earned premiums and fees are expected to improve from the year-ago level on the back of growth in voluntary products. Continued expense management actions will offset pressure from lower investment income. Results are also expected to be affected by U.S. employment trends and capital market conditions.

Assurant's first-quarter earnings lacked luster due to weak premium growth in most of its operating segments. We don't expect sanguine results from the company in the near term till the weakness in its segments reverses.

Assurant carries a Zacks Rank #3 (Hold).

Performance of Other Multi-Line Insurers

First-quarter 2015 earnings of other stocks like Cigna Corp. CI , The Chubb Corp. CB and Hartford Financial Services Group Inc. HIG have surpassed the respective Zacks Consensus Estimate.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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