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Assurant's (AIZ) Q4 Earnings Beat, Revenues Miss Estimates

Assurant, Inc.AIZ reported fourth-quarter 2016 net operating income of 46 cents per share that surpassed the Zacks Consensus Estimate by 15%. However, the bottom line plunged 35.2% from 71 cents per share earned in the year-ago quarter. Higher reportable catastrophe losses, and ongoing normalization of lender-placed insurance in Global Housing led to the year-over-year deterioration. However, improved Connected Living performance in Global Lifestyle and lower net operating loss at Corporate & Other partially offset the downside.

Total revenue plunged about 33% year over year to $1.69 billion due to lower premiums earned and a decline in net investment income. Moreover, it missed the Zacks Consensus Estimate of $1.71 billion by 1.2%.

Net investment income declined 14% year over year to $135.4 million.

Total benefits, losses and expenses decreased 30.4% to $1.7 billion, mainly due to a significant decline in policyholder benefits and selling, underwriting, general and administrative expenses.

Full-Year 2016 Highlights

Assurant's full-year operating net earnings plunged 22.7% year over year to $4.47 per share.

Total revenues for 2016 declined 32.4% year over year to $6.9 billion.

Segmental Performance

Assurant has revised its reportable segments in keeping with its evolved global operating model that resulted in its multi-year transformation. As of fourth quarter 2016, Assurant has reported through its four segments - Global Housing (formerly known as the Assurant Specialty), Global Lifestyle (formerly included in the Assurant Solutions), Global Preneed (formerly included in the Assurant Solutions) and Corporate & Other.

Net earned premiums, fees and others at Global Housing fell 5.1% year over year to $571.2 million, primarily due to lender-placed normalization. However, growth in multi-family housing and mortgage solutions, including the acquisition of American Title Inc., partially offset the downside.

Net operating income plummeted 81.3% year over year to $10.8 million. Higher catastrophe losses, ongoing lender-placed insurance normalization, as well as additional lender-placed regulatory expenses led to the downside.

Net earned premiums, fees and others at Global Lifestyle declined 3.6% year over year to $929.2 million. The deterioration was primarily attributable to a change in program structure for a large service contract client, impact of foreign exchange, and continued declines in legacy North American retail clients and credit insurance. Growth in fee income from global mobile programs and higher premiums from vehicle protection offerings, partially offset the downside.

Net operating income of $34.6 million soared 78.4% year over year. The upside was attributable to better mobile and service contract performance in Connected Living and additional investment income from real estate joint venture partnerships.

Net earned premiums, fees and others at Global Preneed rose 6.9% year over year to $42.1 million, primarily as the result of sales of policies written in prior years.

Net operating income increased 6.9% year over year to $10.9 million. Additional investment income from real estate joint venture partnerships drove the upside.

Net operating loss at Corporate & Other came in at $20.3 million, narrower than the year-ago quarter net operating loss of $30.7 million. Lower tax expense and higher net investment income from increased assets at the holding company following the sale of Assurant Employee Benefits resulted in the improvement. However, an increase in expenses to support the multi-year transformation was a partial dampener.

Financial Position

Assurant's financial position remains strong with around $775 million in corporate capital as of Dec 31, 2016. Total assets dipped 1.1% year over year and amounted to $29.7 billion as of Dec 31, 2016.

Share Repurchase and Dividends Update

The company's total share buybacks and dividends amounted to $995 million in 2016. While share buyback totaled $869 million, dividends payout totaled $125 million.

The company spent about $36.1 million to repurchase an additional 0.4 million shares from Jan 1, 2017 through Feb 3, 2017. It now has $646.8 million remaining in the current repurchase authorization.

2017 Outlook

The company expects Global Housing to witness a year-over-year decline in its net earned premiums and net operating income, excluding reportable catastrophe losses. The ongoing lender-placed insurance normalization is anticipated to result in the decrease in the above-mentioned metric. However, expense savings and profitable growth in multi-family housing and mortgage solutions are likely to partially offset the downside. Moreover, the company expects multi-family housing and mortgage solutions to expand market share.

Global Lifestyle 's net operating income is likely to increase due to improved performance in Connected Living, fueled by mobile as well as higher contributions from vehicle protection and expense efficiencies. The decline in credit insurance and legacy North American retail clients is likely to continue. The company anticipates revenues to fall, primarily owing to a change in program structure for a large service contract client. In addition, the company estimates net earned premiums to decrease by about $500 million from 2016 due to reduction in expenses. This apart, the company might witness a rise in net earned premiums and fee income owing to growth in Connected Living and vehicle protection globally. However, results are likely to be impacted by foreign exchange.

Global Preneed is anticipated to experience an increase in fee income and earnings, mainly due to sales growth across North America due to the company's alignment with market leaders and operational efficiencies.

Full-year net operating loss of about $70 million at Corporate & Other is projected to remain flat with the 2016-level. This is because the company's continued expense-reduction initiatives are offset by investments to support its multi-year transformation.

Assurant, Inc. Price, Consensus and EPS Surprise

Assurant, Inc. Price, Consensus and EPS Surprise | Assurant, Inc. Quote

Zacks Rank

Currently, Assurant carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Insurers

Among the other players from the insurance industry that have reported their fourth-quarter earnings so far, the bottom line at The Progressive Corporation PGR , The Travelers Companies, Inc. TRV and RLI Corp. RLI beat their 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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