Net Income of $190.0 Million ($1.59 per diluted share), Up 14% Compared to Q2 2007 NEW YORK, July 31
NEW YORK, July 31 /PRNewswire-FirstCall/ -- Assurant, Inc. ("Assurant")
(NYSE: AIZ), a premier provider of specialized insurance and insurance-related
products and services, today reported its results for the second quarter and
first six months of 2008.
Robert B. Pollock, president and chief executive officer, said: "Despite a
slowing economy and uncertain capital markets, Assurant had a solid quarter
and strong first half of 2008. We delivered double digit growth in net
operating income on both a quarterly and year to date basis and generated an
operating return on equity well in excess of 15% -- both key metrics for
Assurant."
"Our solid results this quarter and for the first half of 2008 continue to
demonstrate the value of our diversified specialty insurance platform. We
continue to execute our strategy and are financially well positioned for the
opportunities and challenges arising from the changing economic landscape,"
Mr. Pollock concluded.
Second Quarter Results
Net income in the second quarter of 2008 increased 14% to $190.0 million,
or $1.59 per diluted share, versus net income of $166.3 million, or $1.36 per
diluted share, in the second quarter of 2007. The second quarter of 2008
included a gain of $26.6 million after-tax from the sale of an inactive
subsidiary and $22.4 million of net after-tax realized losses on investments
including $17.9 million from other than temporary impairments in the
investment portfolio.
Net operating income (see footnote 1 at the end of this release) for the
second quarter of 2008 increased 10% to $185.8 million, or $1.55 per diluted
share, compared to net operating income of $168.3 million, or $1.37 per
diluted share, for the second quarter of 2007.
Net earned premiums of $2.0 billion in the second quarter of 2008
increased 11% from $1.8 billion in the same period of 2007, driven primarily
by growth in Assurant Specialty Property and Assurant Solutions.
Net investment income in the second quarter of 2008 increased 6% to $201.2
million from $190.3 million in the second quarter of 2007. The second quarter
of 2008 benefited from an increase in average invested assets.
Six-Month Results
Net income in the first half of 2008 was $376.8 million, or $3.16 per
diluted share, an increase of 9% versus first half 2007 net income of $345.7
million, or $2.80 per diluted share. Net income for the first six months of
2008 included a gain of $26.6 million after-tax from the sale of an inactive
subsidiary and $50.5 million of net after-tax realized losses on investments,
including $46.1 million from other than temporary impairments in the
investment portfolio.
Net operating income for the first half of 2008 was $400.7 million, or
$3.36 per diluted share, an increase of 16% versus first half 2007 net
operating income of $344.1 million, or $2.79 per diluted share.
Net earned premiums of $3.9 billion in the first half of 2008 represent an
11% increase over first half 2007 net earned premiums of $3.6 billion, driven
primarily by growth in Assurant Specialty Property and Assurant Solutions.
Net investment income in the first half of 2008 decreased 2% to $399.0
million from $407.2 million in the first half of 2007. This was attributable
to a decrease of $33.1 million in investment income from real estate joint
venture partnerships in the first six months of 2008 compared to the same
period in 2007. The first six months of 2008 benefited from an increase in
average invested assets.
The following chart provides a reconciliation of net operating income to
net income for Assurant:
Reconciliation of Net operating income to Net income
For the Three For the Six
Months Ended Months Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
(UNAUDITED)
(dollars in millions, net of tax)
Assurant Solutions$ 32.4 $ 30.2 $ 79.9 $ 74.3
Assurant Specialty Property 131.0 90.2255.8164.6
Assurant Health 27.7 33.8 65.0 74.4
Assurant Employee Benefits 18.6 21.5 35.0 50.4
Corporate and other (18.8)(2.9) (24.7) (10.5)
Amortization of deferred gain on
disposal of businesses 4.8 5.4 9.6 10.8
Interest expense (9.9)(9.9) (19.9) (19.9)
Net operating income 185.8168.3400.7344.1
Adjustments:
Net realized (losses) gains on
investments(22.4)(2.0) (50.5) 1.6
Gain on sale of inactive subsidiary 26.6 - 26.6 -
Net income $ 190.0 $ 166.3 $ 376.8 $ 345.7
Assurant Solutions
Assurant Solutions second quarter 2008 net operating income was $32.4
million, up 7% from second quarter 2007 net operating income of $30.2 million.
The increase for the quarter was driven by favorable domestic loss experience.
This was offset by a $6.9 million after-tax charge related to losses from a
credit life product in Brazil. The second quarter of 2007 benefited from $3.6
million after-tax relating to three items: $3.5 million in fees from the sale
of the U.S. preneed independent franchise, $4.5 million of income resulting
from a project to improve the reconciliation of client commission payable
accounts, and a $4.4 million charge related to a credit life product in
Brazil. Net operating income for the first six months of 2008 was $79.9
million, up 8% from $74.3 million for the first six months of 2007. Results
for the six months benefited from improved domestic loss experience and $11.7
million of after-tax income from contract-related settlements with domestic
service contract clients. This improvement was offset by continued investment
in international operations and a decrease of $9.3 million after-tax of
investment income from real estate joint venture partnerships compared to the
first half of 2007.
Assurant Solutions second quarter 2008 net earned premiums increased 13%
to $700.6 million from $618.7 million in the second quarter of 2007. Net
earned premiums for the first six months of 2008 were $1.4 billion, up 15%
from $1.2 billion for the first six months of 2007. The increases for the
quarter and the first six months were primarily driven by continued growth in
the domestic and international service contracts; growth in preneed primarily
from the July 2007 acquisition of Mayflower National Life Insurance Company;
and the impact of favorable foreign currency exchange. Results were offset by
a continued decline in premiums related to the domestic independent runoff in
preneed and domestic credit insurance.
Assurant Specialty Property
Assurant Specialty Property second quarter 2008 net operating income was
$131.0 million, up 45% from $90.2 million in the second quarter of 2007. Net
operating income for the first six months of 2008 was $255.8 million, up 55%
from $164.6 for the first six months of 2007. The increases for the quarter
and first six months were primarily driven by the continued growth in
creditor-placed homeowners insurance, continued favorable combined ratios and
an increase in investment income. Assurant historically reported Insurance
Services Office (ISO) catastrophe related losses in excess of $5 million per
event and this quarter no single event reached that threshold. However, there
was an unusually high frequency of ISO events in the second quarter of 2008
which resulted in $11.5 million after-tax of catastrophe related losses in
comparison to $3.4 million after-tax in the second quarter of 2007. Second
quarter 2007 included income of $5.5 million after-tax from a project to
improve the reconciliation of client commission payable accounts.
Assurant Specialty Property second quarter 2008 net earned premiums
increased 36% to $533.9 million compared to $393.6 million in the same
year-ago period. Net earned premium for the first six months of 2008
increased 33% to $1.0 billion compared to $760.7 million for the first six
months of 2007. The increases for the quarter and first six months are
primarily due to the continued organic growth in creditor-placed homeowners
insurance.
Assurant Health
Assurant Health second quarter 2008 net operating income was $27.7
million, a decrease of 18% compared to second quarter 2007 net operating
income of $33.8 million. Net operating income for the first six months of
2008 was $65.0 million, a decrease of 13% compared to $74.4 million for the
first six months of 2007. The decreases for the quarter and first six months
were primarily driven by a continued decline in small group medical premiums
and an increase in the combined ratio due to less favorable individual medical
loss experience.
Assurant Health second quarter 2008 net earned premiums decreased 5% to
$487.7 million from $513.9 million in the second quarter of 2007. The
continued decline in small group medical premiums was accompanied by a 1%
decrease in individual medical premiums during the second quarter. Net earned
premiums for the first six months of 2008 decreased 4% to $983.8 million
compared to $1.0 billion for the first six months of 2007. For the first six
months of 2008, small group medical premiums were down 14% while individual
medical premiums grew slightly.
Assurant Employee Benefits
Assurant Employee Benefits second quarter 2008 net operating income was
$18.6 million, down 13% from second quarter 2007 net operating income of $21.5
million. Net operating income for the first six months of 2008 was $35.0
million, down 31% from $50.4 million for the first six months of 2007.
Results for the second quarter and first six months of 2008 are lower as a
result of less favorable loss experience compared to the same period in 2007.
In addition, investment income from real estate joint venture partnerships
declined $9.1 million after-tax in the first six months of 2008 compared to
the first six months of 2007.
Assurant Employee Benefits second quarter 2008 net earned premiums
increased slightly to $273.2 million compared to $272.5 million in the second
quarter of 2007. Net earned premiums for the first six months of 2008
decreased 3% to $553.7 million from $569.1 million in the first six months of
2007. Results for the first six months of 2008 included $5.5 million in
single premiums from closed blocks of business compared to $22.8 million in
the first six months of 2007.
Corporate and other
Corporate and other net operating loss for the second quarter of 2008 was
$18.8 million, compared to a loss of $2.9 million in the second quarter of
2007. Higher losses for the quarter were mainly due to a decline of $2.3
million after-tax in investment income and $3.0 million of after-tax expenses
related to the ongoing SEC investigation regarding certain loss mitigation
products. The second quarter 2007 results included $2.9 million of tax
benefit from the change in certain tax liabilities. Corporate and other net
operating loss for the first six months of 2008 was $24.7 million compared to
a loss of $10.5 million for the first six months of 2007. The increase in net
operating loss was mainly due to a decline of $5.1 million after-tax in
investment income and $4.6 million after-tax expenses related to the ongoing
SEC investigation regarding certain loss mitigation products. Results for the
first six months of 2007 were negatively impacted by $2.9 million of tax
expense from the change in certain tax liabilities.
Financial Position
Our strength is reflected in our financial position. At June 30, 2008
total assets were $26.2 billion. Stockholders' equity, excluding accumulated
other comprehensive income (AOCI), was $4.4 billion and book value per diluted
share, excluding AOCI, was up 9% to $36.68 from $33.73 at December 31, 2007.
Debt to total capital, excluding AOCI, improved to 18.3% from 19.7% at
December 31, 2007.
Earnings Conference Call
Assurant will host a conference call today at 9:00 A.M. (ET) with access
available via Internet and telephone. Investors and analysts may participate
in the live conference call by dialing 888-603-6873 (toll-free domestic) or
404-665-9924 (international); passcode: 29716034. Please call to register at
least 10 minutes before the conference call begins. A replay of the call will
be available for one week via telephone starting at approximately 12:00 P.M.
(ET) today and can be accessed at 800-642-1687 (toll-free domestic) or
706-645-9291 (international); passcode: 29716034. The webcast will be
archived on Assurant's website.
About Assurant
Assurant is a premier provider of specialized insurance products and
related services in North America and selected other international markets.
The four key businesses -- Assurant Solutions; Assurant Specialty Property;
Assurant Health; and Assurant Employee Benefits -- have partnered with clients
who are leaders in their industries and have built leadership positions in a
number of specialty insurance market segments in the U.S. and selected
international markets. The Assurant business units provide debt protection
administration; credit-related insurance; warranties and service contracts;
pre-funded funeral insurance; creditor-placed homeowners insurance;
manufactured housing homeowners insurance; individual health and small
employer group health insurance; group dental insurance; group disability
insurance; and group life insurance.
Assurant, a Fortune 500 company and a member of the S&P 500, is traded on
the New York Stock Exchange under the symbol AIZ. Assurant has more than $26
billion in assets and $8 billion in annual revenue. Assurant has
approximately 14,000 employees worldwide and is headquartered in New York's
financial district. www.assurant.com.
Safe Harbor Statement
Some of the statements included in this press release and its exhibits,
particularly those anticipating future financial performance, business
prospects, growth and operating strategies and similar matters, are
forward-looking statements that involve a number of risks and uncertainties.
You can identify these statements by the fact that they may use words such as
"will," "anticipate," "expect," "estimate," "project," "intend," "plan,"
"believe," "target," "forecast," or the negative versions of those words and
terms with a similar meaning. Our actual results might differ materially from
those projected in the forward-looking statements. The Company undertakes no
obligation to update any forward-looking statements in this earnings release
or the exhibits as a result of new information or future events or
developments.
The following risk factors could cause our actual results to differ
materially from those currently estimated by management: (i) failure to
maintain significant client relationships, distribution sources and
contractual arrangements; (ii) failure to attract and retain sales
representatives; (iii) general global economic, financial market and political
conditions (including fluctuations in interest rates, mortgage rates, monetary
policies and inflationary pressure); (iv) inadequacy of reserves established
for future claims losses; (v) failure to predict or manage benefits, claims
and other costs; (vi) diminished value of invested assets in our investment
portfolio (due to, among other things, credit and liquidity risk,
environmental liability exposure and inability to target an appropriate
overall risk level); (vii) losses due to natural and man-made catastrophes;
(viii) unavailability, inadequacy and unaffordable pricing of reinsurance
coverage; (ix) inability of reinsurers to meet their obligations; (x)
insolvency of third parties to whom we have sold or may sell businesses
through reinsurance or modified co-insurance; (xi) credit risk of some of our
agents in Assurant Specialty Property and Solutions; (xii) a further decline
in the manufactured housing industry; (xiii) a decline in our credit or
financial strength ratings; (xiv) failure to effectively maintain and
modernize our information systems; (xv) failure to protect client information
and privacy; (xvi) failure to find and integrate suitable acquisitions and new
insurance ventures; (xvii) inability of our subsidiaries to pay sufficient
dividends; (xviii) failure to provide for succession of senior management and
key executives; (xix) negative publicity and impact on our business due to
unfavorable outcomes in litigation and regulatory investigations (including
the potential impact on our reputation and business of a negative outcome in
the ongoing SEC investigation); (xx) significant competitive pressures in our
businesses and cyclicality of the insurance industry: (xxi) current or new
laws and regulations that could increase our costs or limit our growth.
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 Annual Report on 10-K, 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 press
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 net operating income as an important measure of the
company's operating performance. As shown in the chart on page 2, net
operating income equals net income excluding net realized gains (losses) on
investments 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 both the effect of
realized gains (losses) on investments that tend to be highly variable from
period to period, and those events that are unusual and/or unlikely to recur.
Please see page 17 of the financial supplement, which is available on our
website at www.assurant.com, for a summary of net operating income disclosed
items.
Assurant, Inc. and Subsidiaries
Consolidated Statement of Operations (unaudited)
Three and Six Months Ended June 30, 2008 and 2007
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
(in thousands except number of shares and per share
amounts)
Revenues
Net earned premiums
and other
considerations $1,995,516 $1,798,687 $3,936,933 $3,558,196
Net investment income 201,211 190,302 398,985 407,198
Net realized (losses)
gains on investments (34,574) (3,086) (77,717) 2,484
Amortization of
deferred gain on
disposal of
businesses 7,3278,246 14,706 16,595
Fees and other income 79,280 70,578 153,178 137,517
Total revenues2,248,7602,064,7274,426,0854,121,990
Benefits, losses and
expenses
Policyholder benefits 998,208 903,0811,935,6671,791,575
Selling, underwriting,
general and
administrative expenses 985,851 893,8761,924,5011,769,830
Interest expense15,287 15,296 30,575 30,593
Total benefits, losses
and expenses 1,999,3461,812,2533,890,7433,591,998
Income before
provision for income
taxes 249,414 252,474 535,342 529,992
Provision for income
taxes 59,460 86,194 158,558 184,255
Net income $189,954 $166,280 $376,784 $345,737
Net income per share:
Basic $1.61 $1.38$3.19$2.85
Diluted $1.59 $1.36$3.16$2.80
Dividends per share $0.14 $0.12$0.26$0.22
Share Data:
Basic weighted
average shares
outstanding 118,059,955 120,657,052 117,971,858 121,399,339
Diluted weighted
average shares
outstanding 119,492,837 122,492,504 119,423,506 123,334,227
Assurant, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
At June 30, 2008 (unaudited) and December 31, 2007
June 30,December 31,
2008 2007
(in thousands)
Assets
Investments and cash and cash
equivalents $ 14,483,940 $ 14,552,115
Reinsurance recoverables 3,916,486 3,904,348
Deferred acquisition costs 2,917,852 2,895,345
Goodwill 828,743 832,656
Assets held in separate accounts 2,662,175 3,143,288
Other assets 1,402,836 1,422,564
Total assets 26,212,03226,750,316
Liabilities
Policyholder benefits and claims payable10,517,49510,492,580
Unearned premiums5,531,862 5,410,709
Debt 971,909 971,863
Mandatorily redeemable preferred stock 11,16021,160
Liabilities related to separate accounts 2,662,175 3,143,288
Accounts payable and other liabilities 2,269,951 2,621,813
Total liabilities21,964,55222,661,413
Stockholders' equity
Equity, excluding accumulated other
comprehensive (loss) income 4,385,248 4,034,992
Accumulated other comprehensive
(loss) income(137,768) 53,911
Total stockholders' equity4,247,480 4,088,903
Total liabilities and stockholders'
equity $ 26,212,032 $ 26,750,316
SOURCE Assurant, Inc.
