2Q 2016 Net Income of $169.3 million, $2.70
per diluted share
2Q 2016 Net Operating Income of $89.0
million, $1.42 per diluted share
• 17.1 percent annualized GAAP ROE year-to-date; 10.5 percent
annualized operating ROE, excluding AOCI1 year-to-date
• $226 million returned to shareholders in share repurchases and
dividends in 2Q 2016
• $725 million in corporate capital at June 30, 2016
Assurant, Inc. (NYSE: AIZ), a global provider of risk management
solutions, today reported results for second quarter ended June 30,
2016.
“Our second quarter operating results were in line with our
outlook for the year and demonstrate a continued focus on the
multi-year transformation of our business,” said Alan Colberg,
president and CEO of Assurant. “While operating results this
quarter were lower year-over-year, we are reaching key milestones
by strengthening our portfolio of businesses and realigning our
organization. Our continued expansion in the housing and lifestyle
markets enables us to further sharpen our customer focus and
generate long-term profitable growth.”
Reconciliation of Net Operating Income
to Net Income
(UNAUDITED) 2Q 2Q 6
Months 6 Months (dollars in millions, net of
tax) 2016 2015
2016 2015
Assurant Solutions $ 61.4 $ 60.8 $ 108.5 $ 115.2 Assurant
Specialty Property 56.9 87.5 133.3 162.6
Corporate and other
(19.4 ) (9.1 ) (33.3 ) (13.2 ) Interest expense (9.9 )
(9.0 ) (19.3 ) (17.9 )
Net operating
income 89.0 130.2 189.2
246.7
Adjustments: Assurant Health
runoff operations (5.4 ) (123.8 ) (32.6 ) (207.7 ) Assurant
Employee Benefits - 11.3 10.5 21.4 Net realized gains on
investments 14.0 7.8 119.2 10.4 Amortization of deferred gains on
disposal of businesses 81.8 2.1 112.7 4.2 Other adjustments
(10.1 ) 5.2 (9.3 ) 7.8
Net
income $ 169.3 $ 32.8 $ 389.7 $ 82.8
Note: Beginning in first quarter 2016, Assurant revised 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 and align
revenue categories with its key business lines as well as
risk-based and fee-based, capital-light models. Assurant Health
runoff operations, Assurant Employee Benefits, which was sold on
March 1, 2016, and amortization of deferred gains on disposal of
businesses and other variable items have been removed from net
operating income. Prior period amounts have been revised to conform
to the updated presentation as reflected in the following
tables.
Additional financial information, including a schedule of
disclosed items that affected Assurant’s results by business for
the last four quarters appears on page 20 of the company’s
Financial Supplement, and is located in the Investor Relations
section of www.assurant.com.
Second Quarter 2016 Consolidated Results
- Net income increased to $169.3
million, or $2.70 per diluted share, compared to second quarter
2015 net income of $32.8 million, or $0.47 per diluted share,
primarily due to lower losses and exit-related charges from the
wind down of Assurant Health runoff operations and the increase in
the amortization of deferred gains due to the first quarter 2016
sale of Assurant Employee Benefits.
- Net operating income2 decreased
to $89.0 million, or $1.42 per diluted share, compared to second
quarter 2015 net operating income of $130.2 million, or $1.88 per
diluted share. The decline was due to the ongoing normalization of
the lender-placed insurance business, lower service contract
contributions from North American retail clients, the previously
disclosed loss of a tablet program and higher tax expense at
Corporate. Second quarter 2016 included a $9.6 million higher tax
benefit at Assurant Solutions and $9.9 million of additional
reportable catastrophe losses at Assurant Specialty Property,
compared to second quarter 2015.Excluding catastrophe losses, net
operating income for second quarter 2016 decreased to $105.0
million, compared to $136.3 million in the prior year period,
reflecting the factors noted above.
- Net earned premiums, fees and other
income from Assurant Solutions and Assurant Specialty Property
decreased to $1.52 billion, compared to $1.57 billion in second
quarter 2015, as declines in lender-placed insurance were partially
offset by growth in mobile and vehicle protection offerings.
Housing and Lifestyle Businesses
Assurant Solutions (in millions)
2Q16
2Q15 % Change
6M16 6M15 % Change
Net operating income $ 61.4 $ 60.8 1% $ 108.5 $ 115.2
(6)%
Net earned premiums, fees and other $ 958.2
$ 931.2 3% $ 1,935.2
$ 1,858.7 4%
- Net operating income was flat in
second quarter 2016 and included a one-time $18.0 million tax
benefit, compared to an $8.4 million net tax benefit in the prior
year period. Absent these items, net operating income declined,
primarily due to lower service contract contributions from North
American retail clients and the previously disclosed loss of a
tablet program.
- Net earned premiums, fees and other
income increased in the quarter, compared to second quarter
2015, reflecting growth in mobile programs and in the vehicle
protection business. Foreign exchange volatility and the loss of
the tablet program partially offset the improvement.
Assurant Specialty Property (in millions)
2Q16
2Q15 % Change
6M16 6M15 %
Change Net operating income $ 56.9 $ 87.5 (35)% $ 133.3
$ 162.6 (18)%
Net earned premiums, fees and other
$ 561.2 $ 638.2 (12)%
$ 1,138.5 $ 1,250.8 (9)%
- Net operating income decreased
in the quarter, primarily due to ongoing normalization of the
lender-placed insurance business, lower real-estate owned policy
volume, the previously disclosed loss of business and higher
weather-related claims. Results included $16.0 million of
reportable catastrophe losses, compared to $6.1 million in second
quarter 2015.
- Net earned premiums, fees and other
income decreased in second quarter 2016 due to the ongoing
normalization of the lender-placed insurance business, lower
real-estate owned policy volume and the previously disclosed loss
of business. Growth in multi-family housing and mortgage solutions
partially offset the decline.
- Combined ratio for risk-based
businesses(a) was 87.3 percent, compared to 82.4 percent
in second quarter 2015. Results primarily reflect an increase in
weather-related claims and lower lender-placed insurance net earned
premiums.
- Pre-tax margin for fee-based,
capital-light businesses(b) was 11.2 percent, compared
to 13.7 percent in second quarter 2015, primarily due to increased
general expenses to support growth in our mortgage solutions
business.
(a) Combined ratio for the risk-based businesses are 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 income, for multi-family
housing and mortgage solutions businesses.
Corporate & Other (in millions)
2Q16
2Q15 % Change
6M16 6M15 % Change
Net operating loss3
$ (19.4 ) $ (9.1 ) (111)%
(33.3 ) $ (13.2 ) (152)%
- Net operating loss3
increased in second quarter 2016, primarily due to higher tax
expense. Second 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 $5.4 million
reflects a reduction in estimated recoverables related to 2015 ACA
risk mitigation programs, partially offset by more favorable claims
development and a pharmacy rebate. Results also included $4.1
million after-tax of severance costs.
- ACA risk-mitigation payments
received from the Centers for Medicare and Medicaid Services as of
June 30, 2016 for 2015 ACA-qualified policies totaled $66.3
million. Following receipt of the final payment notifications for
2015 risk mitigation programs from CMS, including a lower risk
adjustment payment, estimated recoverables for ACA-qualified
policies totaled $419.4 million as of June 30, 2016. This includes
$197.2 million from the risk-adjustment program and $222.2 million
from the reinsurance program. The company did not record any net
recoverables for the 2015 risk-corridors program.
Capital Position
- Corporate capital approximated
$725 million as of June 30, 2016. Deployable capital totaled
approximately $475 million, adjusting for the company’s $250
million risk buffer.In second quarter 2016, segment dividends paid
to the holding company totaled $774 million. This comprised $84
million from Assurant Health, $604 million in proceeds from the
sale of Assurant Employee Benefits, and $86 million from Assurant
Solutions and Assurant Specialty Property.The company repaid $250
million in short-term financing after receiving approval to
dividend proceeds from the sale of Assurant Employee
Benefits.During the quarter, the company also invested $9 million
in mobile technology capabilities and set aside $45 million for the
July 1, 2016 closing of a title and valuation services
company.
- Share repurchases and dividends
totaled $226 million in second quarter 2016. Dividends to
shareholders totaled $33 million, and Assurant repurchased
approximately 2.3 million shares of common stock for $193 million.
Through July 22, 2016, the company repurchased an additional
363,000 shares for approximately $32 million, with $469 million
remaining under the current repurchase authorization.
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 realized expense savings. 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 related 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 & Other4 full-year
net operating loss to approximate $70 million. Expense savings
actions to offset residual expenses associated with Assurant
Employee Benefits.
- 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. Company to receive nearly $1 billion of net proceeds,
including capital releases, related to the sale of Assurant
Employee Benefits mainly in 2016, with a total of $618 million
received year-to-date.
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 expects to incur
$13 million to $23 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 to approximate $475 million for full-year, of which $149
million was received in the first six months of 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 CallThe
second quarter 2016 earnings conference call and webcast to be held
on Wednesday, July 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; extended service contracts; 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 $6 billion in
annualized revenue as of June 30, 2016, Assurant is located in 16
countries, while its Assurant Foundation works to support and
improve communities. Learn more at assurant.com or on Twitter
@AssurantNews.
Safe Harbor StatementSome 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 and our First Quarter Report on Form 10-Q, as
filed with the SEC.
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.
6 Months 12 Months 2016
2015 Annual operating return on average equity, excluding
AOCI 10.5 % 11.5 % Assurant Health runoff operations
(1.8)
%
(10.6)
%
Assurant Employee Benefits 0.6 % 1.4 % Net realized gains on
investments 6.6 % 0.6 % Amortization of deferred gains on disposal
of businesses 6.3 % 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 1.0 % - Amount related to the sale of AEB
(1.0)
%
- Intangible asset impairment
(0.5)
%
- Change in derivative investment -
(0.1)
%
Change due to effect of including AOCI
(4.6)
%
(1.2)
%
Annual GAAP return on average equity 17.1 % 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 highly variable 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.
(UNAUDITED) 2Q 2Q 6
Months 6 Months (dollars in millions)
2016 2015 2016
2015 Net operating income $ 89.0 $ 130.2 $ 189.2 $
246.7
Adjustments (pre-tax): Assurant Health runoff
operations (7.8 ) (178.3 ) (42.0 ) (283.7 ) Assurant Employee
Benefits - 16.7 16.7 32.9 Net realized gains on investments 21.6
12.0 183.4 16.0 Amortization of deferred gains on disposal of
businesses 125.8 3.2 173.4 6.5 Other adjustments (15.6 ) 8.3 (14.3
) 12.4 (Provision) benefit for income taxes (43.7 )
40.7 (116.7 ) 52.0
Net income $
169.3 $ 32.8 $ 389.7 $ 82.8
(3)
Assurant uses Corporate & Other net
operating loss as an important measure of the corporate segment’s
operating performance. Corporate & Other net operating loss
equals segment net income (loss), excluding amortization of
deferred gains on disposal of businesses, net realized gains
(losses) on investments, interest expense and other highly variable
items. The company believes Corporate & Other net operating
loss provides investors a valuable measure of the performance of
the company’s corporate segment because it excludes the effect of
amortization of deferred gains on disposal of businesses, net
realized gains (losses) on investments, interest expense and those
events that are highly variable and do not represent the ongoing
operations of the company’s corporate segment. The comparable GAAP
measure would be Corporate & Other segment net income.
UNAUDITED 2Q 2Q 6
Months 6 Months (dollars in millions)
2016 2015 2016
2015 GAAP Corporate & Other segment net income
(loss) $ 56.4 $ (3.1 ) $ 170.0 $ (8.6 )
Adjustments,
pre-tax: Amortization of deferred gains on disposal of
businesses (125.8 ) (3.2 ) (173.4 ) (6.5 ) Interest expense 15.2
13.8 29.7 27.6 Net realized gains on investments (21.6 ) (12.0 )
(183.3 ) (16.0 ) Other adjustments 15.6 (8.3 ) 14.3 (12.5 ) Benefit
for income taxes 40.8 3.7 109.4
2.8
Corporate & Other net operating
loss
$ (19.4 ) $ (9.1 ) $ (33.3 ) $ (13.2 )
(4)
The company outlook for Corporate &
Other full-year net operating loss constitutes forward-looking
information and the company believes that a quantitative
reconciliation of such forward-looking information to the most
comparable GAAP measure cannot be made available without
unreasonable efforts. A reconciliation would require the company to
quantify amortization of deferred gains on disposal of businesses,
interest expense, net realized gains on investments, and change in
derivative investment. The last two components cannot be reliably
quantified due to the combination of variability and volatility of
such components and may, depending on the size of the components,
have a significant impact on the reconciliation. The company is
able to reasonably quantify the first two components for the
forecast period, assuming no additional debt is acquired in the
forecast period. Amortization of deferred gains on disposal of
businesses is estimated to be approximately $120.0 million while
interest expense is estimated to be approximately $18.0
million.
A summary of net operating income disclosed items is included on
page 20 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 and Six Months Ended June
30, 2016 and 2015
2Q 6 Months 2016 2015
2016 2015
(in thousands except number of shares
and per share amounts)
Revenues Net earned premiums $ 1,202,224 $ 2,138,258
$ 2,617,462 $ 4,297,820 Fees and other income 328,305 323,609
685,995 603,171 Net investment income 119,820 167,786 255,527
320,059 Net realized gains on investments 21,626 11,999 183,344
15,954 Gain on pension plan curtailment - - 29,578 - Amortization
of deferred gains on disposal of businesses 125,818
3,242 173,414 6,500 Total revenues 1,797,793
2,644,894 3,945,320 5,243,504
Benefits,
losses and expenses Policyholder benefits 400,814 1,267,714
944,630 2,478,441 Selling, underwriting, general and administrative
expenses 1,146,235 1,323,377 2,397,936 2,614,289 Interest expense
15,232 13,778 29,735 27,556 Total
benefits, losses and expenses 1,562,281 2,604,869
3,372,301 5,120,286 Income before provision for
income taxes 235,512 40,025 573,019 123,218 Provision for income
taxes 66,163 7,236 183,352 40,385 Net
income $ 169,349 $ 32,789 $ 389,667 $ 82,833
Net
income per share: Basic $ 2.72 $ 0.48 $ 6.12 $ 1.20 Diluted $
2.70 $ 0.47 $ 6.06 $ 1.18
Dividends per share $ 0.50
$ 0.30 $ 1.00 $ 0.57
Share data: Basic weighted
average shares outstanding 62,244,778 68,558,472 63,665,856
69,161,001 Diluted weighted average shares outstanding
62,723,292 69,244,399 64,274,009 69,946,364
Assurant, Inc.
Consolidated Condensed Balance Sheets
(unaudited)
At June 30, 2016 and Dec. 31,
2015
June 30, December 31, 2016 2015
(in thousands) Assets Investments and cash and
cash equivalents $ 13,194,171 $ 14,283,077 Reinsurance recoverables
8,727,343 7,470,403 Deferred acquisition costs 3,001,603 3,150,934
Goodwill 834,173 833,512 Assets held in separate accounts 1,714,443
1,798,104 Other assets 2,332,480 2,500,372 Total
assets $ 29,804,213 $ 30,036,402
Liabilities
Policyholder benefits and claims payable $ 13,025,128 13,363,413
Unearned premiums 6,298,466 6,423,720 Debt 1,165,255 1,164,656
Liabilities related to separate accounts 1,714,443 1,798,104
Deferred gain on disposal of businesses 439,268 92,327 Accounts
payable and other liabilities 2,553,582 2,670,215
Total liabilities 25,196,142 25,512,435
Stockholders' equity Equity, excluding accumulated other
comprehensive income 4,280,817 4,405,418 Accumulated other
comprehensive income 327,254 118,549 Total
stockholders' equity 4,608,071 4,523,967 Total
liabilities and stockholders' equity $ 29,804,213 $ 30,036,402
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160726006515/en/
Assurant, Inc.Media:Vera CarleyAssistant Vice President,
External CommunicationPhone:
212.859.7002vera.carley@assurant.comorInvestor
Relations:Suzanne ShepherdVice President, Investor
RelationsPhone: 212.859.7062suzanne.shepherd@assurant.com
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