U.S. property and casualty insurer Assurant Inc. (AIZ) reported fourth-quarter 2013 operating income of $1.42 per share, beating the Zacks Consensus Estimate by a penny. Earnings zoomed up 20 times year over year owing to no reportable catastrophe losses during the quarter. This compared favorably with $135.0 million of reportable catastrophe losses in the prior-year quarter. A lower share count due to share repurchases also boosted the bottom-line results.
Net income increased to $108.8 million or $1.46 per share from $25.0 million or 31 cents per share recorded in fourth-quarter 2012.
Total revenue at Assurant came in at $2.4 billion, up 11.1% year over year and higher than the Zacks Consensus Estimate of $2.23 billion.
Net earned premiums, fees and other income amounted to $2.2 billion, up 14.2% year over year led by continued growth at Assurant Specialty Property and Assurant Solutions.
Lower investment yields dragged down net investment income by 6.3% year over year to $161.2 million.
Full Year Highlights
For full year 2013, earnings per share were $6.01, up 14.0% year over year and also beating the Zacks Consensus Estimate by a penny.
Total revenue for the year was $9.05 billion, increasing 6.3% year over year and comfortably exceeding the Zacks Consensus Estimate of $8.6 billion.
Segment Performance
Premium earned fees and other at Assurant Solutions improved 18% year over year to $848.1 million, led by growth in domestic service contracts, including vehicle service contracts and mobile. Operating income increased 6.8 times year over year to $22.6 million, primarily due to improved results in domestic service contracts including mobile, and previous expense management actions.
Premiums earned at Assurant Specialty Property increased 20% year over year to $703.3 million due to positive developments in lender-placed loan portfolios and multi-family housing products. A lack of catastrophe loss pulled up net operating income to $107.8 million, 10 times higher year over year.
Net premiums earned at Assurant Health increased 7% year over year to $416.7 million. Net operating income was up 3 times year over year to $0.6 million.
Net premiums earned at the Assurant Employee Benefits segment increased 2% year over year to $262.9 million led by a continued growth in voluntary products. Less favorable disability loss experience dragged down net operating income by 37% year over year to $10.8 million.
Financial Position
The financial position of Assurant remains strong with $4.4 billion of equity capital as of Dec 31, 2013, which remained unchanged year over year.
Leverage ratio increased to 27.1% as of Dec 31, 2013 compared with 18.3% as of Dec 31, 2012.
Book value per share, a measure of net worth, increased 10.4% year over year to $59.48 as of Dec 31, 2013.
Looking Ahead
For 2014, management expects lower premium earned in its Specialty property line of business due to lower contributions from lender-placed insurance. Business from multi-family housing and property preservation is expected to grow as the housing market improves.
Assurant’s Solutions line will see higher top-line growth from increases in mobile as well as all product lines in Latin America. In the fourth quarter of 2014, the segment is expected to report about $50 million of net operating income.
The Health line of business is likely to witness top-line growth due to increase in sales of new major medical policies. Bottom-line margin will, however, be squeezed by high effective tax rate and higher sales commissions.
The Employee Benefits business’ top-line growth is expected to increase due to growth in voluntary products. Moreover, earnings are likely to be affected by continued expense management and higher expenditure which will be incurred to generate higher voluntary sales.
Assurant currently carries a Zacks Rank #3 (Hold). Better-ranked players worth considering are CNO Financial Group, Inc. (CNO), with a Zacks Rank #1 (Strong Buy), and American International Group, Inc. (AIG) and Cigna Corp. (CI) with a Zacks Rank #2 (Buy). All these stocks are due to release their fourth-quarter earnings results soon.
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