1Q 2016 Net Operating Income of $100.1
million, $1.52 per diluted share1Q 2016 Net Income of $220.3
million, $3.34 per diluted share
• 11.2 percent annualized operating ROE, excluding AOCI1; 19.4
percent annualized GAAP ROE
• $291 million returned to shareholders in share repurchases and
dividends in 1Q 2016
• $450 million in corporate capital at quarter-end
Assurant, Inc. (NYSE:AIZ), a premier provider of specialty
protection products and related services, today reported results
for first quarter ended March 31, 2016.
“In the first quarter, we continued to make significant progress
in our multi-year transformation as demonstrated by the organic
growth in our fee-based, capital-light businesses and increased
operating efficiencies,” said Alan B. Colberg, president and CEO of
Assurant. “Despite the decline in earnings for the quarter, results
were solid and exceeded our expectations. Looking forward, we
remain focused on serving our customers while creating value for
our shareholders through growth in our businesses, operating
efficiencies and disciplined capital management.”
Reconciliation of Net Operating Income to Net Income
Beginning in first quarter 2016, Assurant is revising its
financial supplement and corresponding news release to reflect the
company’s ongoing multi-year, transformation to focus on specialty
housing and lifestyle protection products and services. Assurant
Health runoff operations, Assurant Employee Benefits, which was
sold on March 1, 2016, and amortization of deferred gains on
disposal of businesses have been removed from net operating income.
Prior period amounts have been revised to conform to the updated
presentation as reflected in the following table. In addition, the
company has updated revenue categories for Assurant Solutions and
Assurant Specialty Property to align with its key business lines as
well as risk-based and fee-based, capital-light models.
(UNAUDITED)
1Q 1Q (dollars in millions, net of tax)
2016 2015 Assurant Solutions $ 47.1 $ 54.4
Assurant Specialty Property 76.4 75.1 Corporate and other (14.0)
(4.1) Interest expense (9.4) (8.9)
Net operating
income 100.1 116.5
Adjustments: Assurant
Health runoff operations (27.2) (84.0) Assurant Employee Benefits
10.5 10.1 Net realized gains on investments 105.2 2.6 Amortization
of deferred gains on disposal of businesses 30.9 2.1 Other
adjustments 0.8 2.7
Net income $ 220.3 $ 50.0
Note: Additional financial information, including a schedule of
disclosed items that affected Assurant’s results by business for
the last four quarters appears on page 19 of the company’s
Financial Supplement, and is located in the Investor Relations
section of www.assurant.com.
First Quarter 2016 Consolidated Results
- Net operating income2 decreased
to $100.1 million, or $1.52 per diluted share, compared to first
quarter 2015 net operating income of $116.5 million, or $1.65 per
diluted share. Results primarily reflect higher tax expense and
employee-related benefit costs at Corporate, compared to first
quarter 2015, as well as lower contributions from mobile business
and North American retail clients. Results in the quarter include
$9.4 million of reportable catastrophe losses at Assurant Specialty
Property, compared to $3.4 million in first quarter 2015.Excluding
catastrophe losses, net operating income for first quarter 2016
decreased to $109.5 million, compared to $119.9 million in the
prior year period, reflecting the factors noted above.
- Net income increased to $220.3
million, or $3.34 per diluted share, compared to first quarter 2015
net income of $50.0 million, or $0.71 per diluted share, primarily
due to a $102.5 million increase in net realized gains on
investments related to the transfer of assets and other items
associated with the sale of Assurant Employee Benefits. Results
also reflect the ongoing wind down of Assurant Health
operations.
- Net earned premiums, fees and other
income were $1.55 billion, compared to $1.54 billion in first
quarter 2015. Growth in global mobile offerings in Assurant
Solutions’ Connected Living business and in multi-family housing
and mortgage solutions at Assurant Specialty Property more than
offset declines in lender-placed insurance. Fee-based and
capital-light offerings accounted for 52 percent of total, compared
to 48 percent in first quarter of 2015.
Housing and Lifestyle Businesses
Assurant Solutions
(in millions)
1Q16 1Q15 % Change Net
operating income $ 47.1 $ 54.4 (13)%
Net earned premiums,
fees and other $ 977.0
$ 927.5
5%
- Net operating income decreased
in first quarter 2016, primarily due to the previously disclosed
loss of a tablet program and lower contributions from North
American retail clients in Connected Living. A $3.9 million net
adjustment related to reserves and the amortization of deferred
acquisition costs for an older block of preneed policies also
lowered results.
- Net earned premiums, fees and other
income increased in first quarter 2016, compared to the prior
year period, reflecting global growth in mobile covered devices as
well as expansion of the vehicle protection business. Foreign
exchange volatility and the loss of the tablet program partially
offset the improvement.
Assurant Specialty Property
(in
millions)
1Q16 1Q15 % Change Net operating
income $ 76.4 $ 75.1 2%
Net earned premiums, fees and
other $ 577.4
$ 612.7 (6)%
- Net operating income increased
slightly in first quarter due to lower expenses and non-catastrophe
losses as well as reduced reinsurance costs. Ongoing normalization
of the lender-placed insurance business including the previously
disclosed loss of business partially offset the improvement.
Results in the quarter reflect $9.4 million of reportable
catastrophe losses, compared to $3.4 million in first quarter
2015.
- Net earned premiums, fees and other
income decreased in the quarter. Growth in mortgage solutions
and multi-family housing businesses partially offset the decline
from the ongoing normalization of the lender-placed insurance
business, including the previously disclosed loss of business.
- Combined ratio for risk-based
businesses(a) was 80.7 percent, compared to 82.1 percent in
first quarter 2015. Results reflect improved non-catastrophe loss
experience due to a reduction in the frequency and severity of
claims and savings from cost efficiency efforts, partially offset
by lower lender-placed insurance premiums.
- Pre-tax margin for fee-based,
capital-light businesses(b) was 11.0 percent, compared to 4.8
percent in first quarter 2015, due to growth from new and existing
clients in the multi-family and mortgage solutions businesses.
(a) Combined ratio for the risk-based businesses is equal to
total benefits, losses and expenses, including reportable
catastrophe losses, divided by net earned premiums and fees and
other income, for lender-placed and manufactured housing and other
businesses.
(b) Pre-tax margin for the fee-based, capital-light businesses
is equal to income before provision for income taxes divided by
total net earned premiums, fees and other, for multi-family housing
and mortgage solutions businesses.
Corporate & Other
(in
millions)
1Q16 1Q15 % Change Net operating
loss $ (14.0)
$ (4.1)
247%
- Net operating loss increased in
first quarter 2016, reflecting higher tax expense and
employee-related benefit costs. First quarter 2015 benefited from a
tax consolidating adjustment that reversed during 2015.
Assurant Health Runoff Operations
Following the decision to exit the health insurance business in
2015, the company began to wind down operations and expects to be
substantially out of the health insurance market by the end of
2016.
- Net loss of $27.2 million,
reflecting $9.5 million after-tax of severance costs as well as
indirect expenses not included in the previously established
premium deficiency reserves.
- ACA risk-mitigation payments
received from the Centers for Medicare and Medicaid Services as of
March 31, 2016 for 2015 ACA-qualified policies totaled $28.6
million. As of March 31, 2016, estimated recoverables for 2015
ACA-qualified policies totaled $486.5 million, reflecting $221.5
million from the risk-adjustment program and $265.0 million from
the reinsurance program. The company did not record any net
recoverables for the 2015 risk-corridors program.
Capital Position
- Corporate capital approximated
$450 million as of March 31, 2016, including $250 million of new
short-term financing to fund quarterly share repurchase activity in
advance of receiving dividends from the Assurant Employee Benefits
proceeds. Adjusting for the company’s $250 million risk buffer,
deployable capital totaled $200 million.Share repurchases and
dividends totaled $290.9 million in first quarter 2016. Dividends
to shareholders totaled $32.4 million, and Assurant repurchased
approximately 3.4 million shares of common stock for $258.5
million. Through April 22, 2016, the company repurchased an
additional 807,000 shares for approximately $64.0 million, with
$629.8 million remaining in the current repurchase
authorization.During the quarter, segment dividends paid to the
holding company totaled $120 million. This includes $65 million of
dividends from Assurant Health with the balance from Assurant
Solutions and Assurant Specialty Property.
Financial Position
- Stockholders’ equity, excluding
accumulated other comprehensive income (AOCI), was $4.3 billion at
March 31, 2016, down $66.0 million since Dec. 31, 2015, reflecting
the sale of Assurant Employee Benefits.
- Annualized operating ROE,
excluding AOCI,1 was 11.2 percent for the quarter (also excludes
Assurant Health runoff operations and Assurant Employee Benefits),
compared to full-year operating ROE, excluding AOCI, of 11.5
percent in 2015.Annualized operating ROE, excluding AOCI and
reportable catastrophe losses,3 was 12.3 percent for the quarter
compared to 12.0 percent for full-year 2015.
- Total assets, as of March 31,
2016 were approximately $30.3 billion.
- Ratio of debt to total capital,
excluding AOCI,4 increased to 24.6 percent as of March 31, 2016
from 20.9 percent as of Dec. 31, 2015 reflecting an additional $250
million short-term loan to be repaid upon receipt of dividends from
the sale of Assurant Employee Benefits.
Company Outlook
Based on current market conditions, for full-year 2016, the
company expects:
- Assurant Solutions’ net earned
premiums and fees and net operating income to increase from 2015
levels. Overall results expected to improve in the second half of
the year driven by new mobile programs, improved international
profitability and expense initiatives. Results to be affected by
foreign exchange volatility, lower service contract revenue from
legacy North American retail clients and continued declines in
credit insurance.
- Assurant Specialty Property’s
net earned premiums and net operating income to decrease from 2015
levels. Results to be affected by the ongoing normalization of
lender-placed insurance business partially offset by increased
efficiencies and expense savings initiatives. Multi-family housing
and mortgage solutions businesses to expand via market share gains.
Overall results to be affected by catastrophe losses.
- Corporate & Other full-year
net operating loss to approximate $70 million. Expense savings
actions to offset residual expenses associated with Assurant
Employee Benefits and Assurant Health.
- Capital to be deployed through a
combination of share repurchases, common stock dividends,
reinvestments in the business and acquisitions in Housing and
Lifestyle, subject to market conditions and other factors. Business
segment dividends from Assurant Solutions and Assurant Specialty
Property to approximate segment net operating income, subject to
the growth of the businesses, rating agency and regulatory capital
requirements. Sale of Assurant Employee Benefits on March 1, 2016
provided approximately $1 billion of net proceeds, including
capital releases.
Based on current market conditions, for full-year 2016, the
company expects in regards to runoff operations:
- Assurant Health to substantially
complete the process to exit the health insurance market in 2016.
During the remainder of the wind down, the company to incur up to
$20 million to $30 million pre-tax of additional exit-related
charges, as well as certain overhead expenses that are excluded
from the premium deficiency reserve accrual. Assurant Health
dividends expected to approximate $475 million for full-year, of
which $65 million was received in first quarter 2016, subject to
ultimate development of claims, actual expenses needed to wind down
operations, recoveries from ACA-risk mitigation payments and
regulatory approval.
Earnings Conference Call
- The first quarter 2016 earnings
conference call and webcast to be held on Wednesday, April 27, 2016
at 8:00 a.m. ET. The live and archived webcast along with
supplemental information will be available in the Investor
Relations section of www.assurant.com.
About Assurant
Assurant, Inc. (NYSE:AIZ) is a global provider of risk
management solutions, protecting where consumers live and the goods
they buy. A Fortune 500 company, Assurant focuses on the housing
and lifestyle markets, and is among the market leaders in mobile
device protection; vehicle protection; pre-funded funeral
insurance; renters insurance; lender-placed homeowners insurance;
and mortgage valuation and field services. With approximately $30
billion in assets and $8 billion in annual revenue, Assurant is
located in 15 countries, while its Assurant Foundation works to
support and improve communities. Learn more at assurant.com or on
Twitter @AssurantNews.
Safe Harbor Statement
Some of the statements included in this news release and its
exhibits, particularly those anticipating future financial
performance, business prospects, growth and operating strategies
and similar matters, are forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995. You can identify these statements by the use of words such as
“outlook,” “will,” “may,” “anticipates,” “expects,” “estimates,”
“projects,” “intends,” “plans,” “believes,” “targets,” “forecasts,”
“potential,” “approximately,” or the negative version of those
words and other words and terms with a similar meaning. Any
forward-looking statements contained in this news release or its
exhibits are based upon our historical performance and on current
plans, estimates and expectations. The inclusion of this
forward-looking information should not be regarded as a
representation by us or any other person that the future plans,
estimates or expectations contemplated by us will be achieved. Our
actual results might differ materially from those projected in the
forward-looking statements. The company undertakes no obligation to
update or review any forward-looking statements in this news
release or the exhibits, whether as a result of new information,
future events or other developments. The following risk factors
could cause our actual results to differ materially from those
currently estimated by management, including those projected in the
company outlook:
(i) actions by governmental agencies or
government sponsored entities or other circumstances, including
pending regulatory matters affecting our lender-placed insurance
business, that could result in reductions of premium rates or
increases in expenses, including claims, fines, penalties or other
expenses; (ii)
loss of significant client relationships
or business, distribution sources or contracts and reliance on a
few clients;
(iii)
potential variations between the final
risk adjustment amount and reinsurance amounts, as determined by
the U.S. Department of Health and Human Services under the
Affordable Care Act, and the company's estimate;
(iv) unfavorable outcomes in litigation and/or regulatory
investigations that could negatively affect our results, business
and reputation; (v) inability to execute strategic plans related to
acquisitions, dispositions or new ventures; (vi) failure to
adequately predict or manage benefits, claims and other costs;
(vii)
inadequacy of reserves established for
future claims;
(viii)
current or new laws and regulations that
could increase our costs and decrease our revenues;
(ix) significant competitive pressures in our businesses; (x)
failure to attract and retain sales representatives, key managers,
agents or brokers; (xi) losses due to natural or man-made
catastrophes;
(xii)
a decline in our credit or financial
strength ratings (including the risk of ratings downgrades in the
insurance industry);
(xiii)
deterioration in our market capitalization
compared to its book value that could result in an impairment of
goodwill;
(xiv)
risks related to our international
operations, including fluctuations in exchange rates;
(xv) data breaches compromising client information and privacy;
(xvi)
general global economic, financial market
and political conditions (including difficult conditions in
financial, capital, credit and currency markets, the global
economic slowdown, fluctuations in interest rates or a prolonged
period of low interest rates, monetary policies, unemployment and
inflationary pressure);
(xvii)
cyber security threats and cyber
attacks;
(xviii)
failure to effectively maintain and
modernize our information systems;
(xix)
uncertain tax positions and unexpected tax
liabilities;
(xx) risks related to outsourcing activities;
(xxi)
unavailability, inadequacy and
unaffordable pricing of reinsurance coverage;
(xxii)
diminished value of invested assets in our
investment portfolio (due to, among other things, volatility in
financial markets; the global economic slowdown; credit, currency
and liquidity risk; other than temporary impairments and increases
in interest rates);
(xxiii)
insolvency of third parties to whom we
have sold or may sell businesses through reinsurance or modified
co-insurance;
(xxiv)
inability of reinsurers to meet their
obligations;
(xxv)
credit risk of some of our agents in
Assurant Specialty Property and Assurant Solutions;
(xxvi)
inability of our subsidiaries to pay
sufficient dividends;
(xxvii)
failure to provide for succession of
senior management and key executives; and
(xxviii)
cyclicality of the insurance industry.
For a detailed discussion of the risk factors that could affect
our actual results, please refer to the risk factors identified in
our SEC reports, including, but not limited to our 2015 Annual
Report on Form 10-K, as filed with the SEC, and our upcoming First
Quarter Report on Form 10-Q.
Non-GAAP Financial Measures
Assurant uses the following non-GAAP financial measures to
analyze the company’s operating performance for the periods
presented in this news release. Because Assurant’s calculation of
these measures may differ from similar measures used by other
companies, investors should be careful when comparing Assurant’s
non-GAAP financial measures to those of other companies.
(1) Assurant uses operating return on equity ("Operating ROE"),
excluding accumulated other comprehensive income ("AOCI"), as an
important measure of the company’s operating performance. Operating
ROE, excluding AOCI, equals net operating income (defined below)
for the periods presented divided by average stockholders’ equity,
excluding AOCI, for the year to date period. The company believes
Operating ROE provides investors a valuable measure of the
performance of the company’s ongoing business because it excludes
the effect of Assurant Health runoff operations and the divested
Assurant Employee Benefits business, which was sold on March 1,
2016. The calculation also excludes net realized gains (losses) on
investments, amortization of deferred gains on disposal of
businesses and those events that are highly variable and do not
represent the ongoing operations of the company. The comparable
GAAP measure would be GAAP return on equity (“GAAP ROE”), defined
as net income, for the periods presented, divided by average
stockholders’ equity for the year to date period.
1Q 12 Months 2016
2015 Annual operating return on average equity 11.2%
11.5% Assurant Health runoff operations (3.0)% (10.6)% Assurant
Employee Benefits 1.2% 1.4% Net realized gains on investments 11.8%
0.6% Amortization of deferred gains on disposal of businesses 3.5%
0.2% Other adjustments: Gain on divested business - 0.3% Change in
tax liabilities - 0.5% Payment received related to previous sale of
subsidiary - 0.3% Gain related to benefit plan activity 2.1% -
Amount related to the sale of AEB (1.9)% - Change in derivative
investment (0.1)% (0.1)% Change due to effect of including AOCI
(5.4)% (1.2)%
Annual GAAP return on average
equity 19.4% 2.9%
(2) Assurant uses net operating income as an important measure
of the company’s operating performance. Net operating income equals
net income, excluding Assurant Health runoff operations, Assurant
Employee Benefits, net realized gains (losses) on investments,
amortization of deferred gains on disposal of businesses and other
unusual and/or infrequent items. The company believes net operating
income provides investors a valuable measure of the performance of
the company’s ongoing business because it excludes the effect of
Assurant Health runoff operations and the divested Assurant
Employee Benefits business, which was sold on March 1, 2016. The
calculation also excludes net realized gains (losses) on
investments, amortization of deferred gains on disposal of
businesses and those events that are highly variable and do not
represent the ongoing operations of the company.
(3) Assurant uses Operating ROE, excluding AOCI (defined above)
and reportable catastrophe losses, as another important measure of
the company’s operating performance. The company believes Operating
ROE excluding AOCI and reportable catastrophe losses provides
investors a valuable measure of the performance of the company’s
ongoing business because it excludes the effect of reportable
catastrophe losses, which can be volatile. The comparable GAAP
measure would be GAAP ROE.
1Q
12 Months 2016 2015
Annual operating return on average equity, excluding AOCI and
reportable catastrophe losses 12.3% 12.0% Assurant Health
runoff operations (3.0)% (10.6)% Assurant Employee Benefits 1.2%
1.4% Net realized gains on investments 11.8% 0.6% Amortization of
deferred gains on disposal of businesses 3.5% 0.2% Reportable
catastrophe losses (1.1)% (0.5)% Other adjustments: Gain on
divested business - 0.3% Change in tax liabilities - 0.5% Payment
received related to previous sale of subsidiary - 0.3% Gain related
to benefit plan activity 2.1% - Amount related to the sale of AEB
(1.9)% - Change in derivative investment (0.1)% (0.1)% Change due
to effect of including AOCI (5.4)% (1.2)%
Annual GAAP return on average equity 19.4%
2.9%
(4) Assurant uses a ratio of debt to total capital, excluding
AOCI, as an important measure of the company’s financial leverage.
Assurant’s debt to total capital ratio, excluding AOCI, equals debt
divided by the sum of debt and total stockholders’ equity,
excluding AOCI. The company believes that the debt to total capital
ratio, excluding AOCI, provides investors a valuable measure of
financial leverage, because it excludes the effect of unrealized
gains (losses) on investments, which are highly variable and do not
represent the ongoing operations of the company, and other AOCI
items. The comparable GAAP measure would be the ratio of debt to
total capital.
1Q
4Q 2016 2015 Debt to
total capital ratio (excluding AOCI ) 24.6%
20.9%
Change due to effect of including AOCI (0.9)%
(0.4)%
Debt to total capital ratio 23.7%
20.5%
A summary of net operating income disclosed items is included on
page 19 of the company’s Financial Supplement, which is available
in the Investor Relations section of www.assurant.com.
Assurant, Inc.
Consolidated Statement of Operations
(unaudited)
Three Months Ended March 31, 2016 and
2015
1Q 2016
2015
(in thousands except number of shares
and per share amounts)
Revenues Net earned premiums $ 1,415,238 $ 2,159,562
Fees and other income 357,690 279,562 Net investment income 135,707
152,273 Net realized gains on investments 161,718 3,955 Gain on
pension plan curtailment 29,578 -
Amortization of deferred gains on disposal
of businesses
47,596 3,258 Total revenues 2,147,527
2,598,610
Benefits, losses and expenses Policyholder
benefits 543,816 1,210,727 Selling, underwriting, general and
administrative expenses 1,251,701 1,290,912 Interest expense
14,503 13,778 Total benefits, losses and expenses
1,810,020 2,515,417 Income before provision for income taxes
337,507 83,193 Provision for income taxes 117,189
33,149 Net income $ 220,318 $ 50,044
Net income
per share: Basic $ 3.38 $ 0.72 Diluted $ 3.34 $ 0.71
Dividends per share $ 0.50 $ 0.27
Share data:
Basic weighted average shares outstanding 65,086,935 69,770,224
Diluted weighted average shares outstanding 65,920,546
70,757,549
Assurant, Inc.
Consolidated Condensed Balance Sheets
(unaudited)
At March 31, 2016 and Dec. 31,
2015
March 31, December 31, 2016 2015
(in thousands) Assets Investments and cash and
cash equivalents $ 13,485,925 $ 14,283,077 Reinsurance recoverables
8,689,823 7,470,403 Deferred acquisition costs 3,079,611 3,150,934
Goodwill 839,766 833,512 Assets held in separate accounts 1,719,454
1,798,104 Other assets 2,472,616 2,500,372 Total
assets $ 30,287,195 $ 30,036,402
Liabilities
Policyholder benefits and claims payable $ 13,064,929 13,363,413
Unearned premiums 6,308,939 6,423,720 Debt 1,414,704 1,164,656
Liabilities related to separate accounts 1,719,454 1,798,104
Deferred gain on disposal of businesses 564,122 92,327 Accounts
payable and other liabilities 2,650,402 2,670,215
Total liabilities 25,722,550 25,512,435
Stockholders' equity Equity, excluding accumulated other
comprehensive income 4,339,405 4,405,418 Accumulated other
comprehensive income 225,240 118,549 Total
stockholders' equity 4,564,645 4,523,967 Total
liabilities and stockholders' equity $ 30,287,195 $ 30,036,402
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160426006831/en/
For Assurant:Media:Vera Carley,
212.859.7002Assistant Vice President, External
Communicationvera.carley@assurant.comorInvestor
Relations:Suzanne Shepherd, 212.859.7062Vice President,
Investor Relationssuzanne.shepherd@assurant.com
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