Assurant, Inc. ("Assurant") (NYSE: AIZ), a premier provider of specialty insurance and insurance-related products and services, today reported results for the second quarter and first six months of 2010.
"We are pleased with improved operating results for both the second quarter and first half of 2010," said Robert B. Pollock, Assurant's president and chief executive officer. "Our disciplined decision making allows us to add new clients, retain existing clients and manage expenses across all of our businesses. We are well-positioned for the long-term despite the challenges created by a slow economic recovery and the continued uncertainty surrounding health care reform."
Second Quarter 2010 Results
Net operating income for the second quarter 2010 increased 53 percent to $152.2 million, or $1.35 per diluted share, compared to second quarter 2009 net operating income of $99.3 million, or $.84 per diluted share. Assurant Specialty Property again delivered strong results. Assurant Health operating results improved and included $17.4 million after-tax from a reserve decrease due to a legal settlement. Second quarter 2010 results included a $7.3 million after-tax restructuring charge for workforce reductions at Assurant Employee Benefits and Corporate.
Net income for the second quarter 2010 decreased 15 percent to $164.7 million, or $1.46 per diluted share, compared to second quarter 2009 net income of $193.3 million, or $1.63 per diluted share. Net income in the second quarter 2009 included $85.0 million after-tax from a favorable legal settlement.
After-tax net realized gains on investments were $12.5 million in the quarter, compared to losses of $4.0 million in second quarter 2009.
Net earned premiums in the second quarter 2010 were $1.8 billion, down slightly from second quarter 2009 primarily due to a decline in premiums at Assurant Solutions.
Six-Month Results
Net operating income for the first half of 2010 increased 29 percent to $306.5 million, or $2.66 per diluted share, compared to $237.1 million, or $2.00 per diluted share, in 2009. Results in each operating business produced year-over-year improvement. Six-month earnings reflected strong results, particularly at Assurant Specialty Property. Results include a reserve decrease due to a legal settlement at Assurant Health.
Net income for the first six months of 2010 increased 18 percent to $321.9 million, or $2.80 per diluted share, versus $273.9 million, or $2.31 per diluted share in 2009. After-tax net realized gains on investments were $15.4 million for the first six months of 2010, compared to losses of $40.2 million in the first half of 2009. Net income for 2009 also included an $85.0 million benefit from a favorable legal settlement.
Net earned premiums in the first half of 2010 were $3.8 billion, up slightly from the first half of 2009 primarily due to growth at Assurant Employee Benefits.
A schedule of disclosed items that affected Assurant's results by business for the last five quarters is available on page 19 of the Company's Financial Supplement, which is available at www.assurant.com.
Assurant Solutions
Net operating income was up for the quarter and six months despite higher tax rates in both periods. It was level for the quarter and down slightly for the six months versus 2009 after adjusting for a $2.4 million after-tax restructuring charge in the second quarter of 2009. In the quarter, the domestic combined ratio increased slightly while the international combined ratio declined primarily due to improved loss experience in the United Kingdom. Results for the six months reflect better domestic and international loss experience as well as a favorable impact from foreign exchange.
Net earned premiums decreased for the quarter and six months. The primary reasons are a decline in domestic net earned premiums caused by lower service contract sales in 2009 from former clients that are no longer in business, the decline in preneed premiums and the continued run-off of domestic credit. International net earned premiums grew for both the quarter and the six months due to the addition of new clients and the favorable impact of foreign exchange.
Assurant Specialty Property
Net operating income increased for both the quarter and six months, reflecting improvements in both loss and expense ratios. Results for second quarter 2010 included $5.0 million after-tax of reportable catastrophe losses. There were no reportable catastrophes during 2009. Second quarter 2009 results also included a $2.5 million after-tax restructuring charge.
Net earned premiums were level for the quarter and up slightly for the six months as the first quarter 2010 results included a $13.6 million favorable adjustment from an unearned premium reserve review. Growth in creditor-placed homeowners, creditor-placed flood and renters insurance for the quarter and six months was offset by increased ceded creditor-placed homeowners' premiums and lower real estate owned premiums.
Assurant Health
Net operating income for the second quarter and first six months of 2010 reflected improved loss ratios due to pricing and plan design changes initiated in 2009, and a $17.4 million after-tax benefit from a reserve decrease due to a legal settlement. Second quarter 2009 results included a $9.0 million after-tax reserve strengthening.
Net earned premiums for the second quarter and six months declined due to reduced small group and short-term medical premiums while individual medical premiums increased slightly.
Assurant Employee Benefits
Net operating income for the second quarter and first six months of 2010 increased due to improved loss experience. Very favorable disability incidence and life mortality contributed to the increase. Second quarter results include a $4.4 million after-tax restructuring charge in 2010 and a $1.5 million restructuring charge in 2009.
Net earned premiums increased for the second quarter and six months of 2010 due to the acquisition of a block of business and reinsurance clients added in the fourth quarter of 2009.
Corporate & Other
Net operating loss in the second quarter and six months improved mainly due to reduced tax expenses. The second quarter of 2010 included a $2.9 million after-tax restructuring charge while the six months of 2009 included a $4.6 million after-tax compensation expense in the second quarter 2009.
Capital Position
The Company repurchased 6.1 million of its outstanding common shares for an aggregate purchase price of $215.1 million in the second quarter 2010. From quarter end through July 23, the Company repurchased an additional 910,000 shares for an aggregate purchase price of $32.7 million. Year-to-date repurchases through July 23 total 10.4 million shares for an aggregate purchase price of $357.0 million, leaving $413.0 million remaining in the Company's repurchase authorization. The Company raised its dividend from $0.15 to $0.16 per common share during the quarter. As of June 30, 2010, corporate capital totaled approximately $575 million, up from $477 million at March 31, 2010.
Financial Position
Stockholders' equity, excluding accumulated other comprehensive income ("AOCI"), decreased slightly to $4.8 billion at June 30, 2010. The book value per diluted share, excluding AOCI, increased 7 percent to $43.42, from $40.47 at Dec. 31, 2009. AOCI improved by $212 million from Dec. 31, 2009. The annualized operating return on equity ("ROE") was 12.7 percent for the quarter. As of June 30, 2010, total assets were $26.1 billion. The ratio of debt to total capital, excluding AOCI, increased slightly to 17.1 percent at June 30, 2010 versus 17.0 percent at Dec. 31, 2009.
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