Assurant Reports First Quarter 2015 Financial Results

1Q 2015 Net Operating Income of $44.8 million, $0.63 per diluted share 

1Q 2015 Net Income of $50.0 million, $0.71 per diluted share

• Net operating income increased in first quarter 2015, primarily due to growth in mobile covered devices and related-service offerings, partially offset by foreign exchange volatility.
  
  
• Net earned premiums, fees and other income increased in the quarter. Premiums were flat
  as growth at a large domestic service contract client was offset by foreign exchange volatility and declining volumes at certain retailers. Fee income growth primarily reflects contributions from mobile programs and recent acquisitions.
  
  
• Domestic combined ratio for the quarter improved to 90.9 percent, compared to 93.7 percent in first quarter 2014, primarily due to additional fee income from client mobile marketing and logistics services.

• International combined ratio increased to 105.9 percent for the quarter, compared to 101.7 percent in first quarter 2014, primarily reflecting less favorable loss experience in Latin America and acquisition integration expenses in Europe.

Assurant Specialty Property

• Net operating income decreased in first quarter, primarily driven by the ongoing normalization of lender-placed insurance. First quarter 2015 included $3.4 million of reportable catastrophe losses, compared to $5.1 million of reportable catastrophe losses in first quarter 2014.

• Net earned premiums, fees and other income decreased in the quarter, primarily due to the divestiture of ARIC and lower placement and premium rates in lender-placed insurance. Fee income grew, reflecting contributions from mortgage solutions.
   
• Combined ratio increased in the quarter to 84.9 percent, compared to 82.0 percent in first quarter 2014. Results reflect lower lender-placed insurance premiums and a higher mix of fee-based businesses, partially offset by a lower frequency of winter-weather and fire related claims.

Assurant Health

• Net operating loss in the quarter increased. Approximately half of the loss was attributable to a reduction in 2014 estimated recoveries from the ACA risk-mitigation programs. The remainder reflects elevated claims on 2015 ACA policies. First quarter 2014 included a $5.7 million tax liability increase related to the ACA.
  
  
• Net earned premiums, fees and other income increased in first quarter due to growth in individual major medical product sales. Quarterly results reflect $64.3 million in estimated recoveries from the ACA risk-adjustment program related to 2015 policies.
  
  
• Sales decreased in first quarter 2015, due to the implementation of lower commissions in certain distribution channels and a shorter 2015 open-enrollment period compared to the prior year. 

Assurant Employee Benefits

• Net operating income decreased in the quarter, primarily due to lower investment income from real estate joint venture partnerships. Less favorable disability results also contributed to the decline.
  
  
• Net earned premiums, fees and other income increased in first quarter 2015, primarily reflecting continued growth in voluntary products.

• Sales increased in the quarter across all product lines, primarily in voluntary.

Corporate & Other

• Net operating loss decreased in first quarter 2015, primarily due to lower employee-related benefit costs and a favorable change in tax liabilities. This tax benefit is expected to reverse during the course of the year.

Capital Position

• Corporate capital approximated $570 million as of March 31, 2015. Adjusting for the Company’s $250 million risk buffer, deployable capital totaled approximately $320 million, including proceeds from the sale of ARIC. In first quarter 2015, the business segments paid approximately $55 million of dividends, net of infusions, to the holding company.

• Share repurchases and dividends totaled $100.5 million in first quarter 2015. Dividends to shareholders totaled $18.8 million. Through May 1, 2015, the Company repurchased an additional 669,000 shares for $41.0 million, with $364.1 million remaining in the current repurchase authorization.

Financial Position

• Stockholders’ equity, excluding accumulated other comprehensive income (AOCI), decreased slightly to $4.6 billion at March 31, 2015 from Dec. 31, 2014.

• Book value per diluted share², excluding AOCI, increased slightly to $65.22 at March 31, 2015, compared to $64.82 at Dec. 31, 2014. AOCI decreased $6.8 million to $549.0 million as of March 31, 2015, from $555.8 million at Dec. 31, 2014.

• Annualized operating return on average equity (ROE)³, excluding AOCI, was 3.9 percent for the quarter compared to full-year operating ROE, excluding AOCI, of 9.7 percent in 2014.
  
  
• Total assets as of March 31, 2015 were approximately $30.8 billion. The ratio of debt to total capital⁴, excluding AOCI, increased to 20.4 percent at March 31, 2015 from 20.2 percent at Dec. 31, 2014. The ratio of invested assets to equity increased to 2.8, compared to 2.7 from Dec. 31, 2014.

Company Outlook

Based on current market conditions, for full-year 2015, the Company now expects:

• Assurant Health’s net earned premiums and fees to increase compared to 2014 due to sales of individual major medical policies. Results to be affected by elevated claims experience on ACA qualified policies and estimated recoverables under ACA risk-mitigation programs. Exploring strategic alternatives for the segment including a sale of the business. Absent a sale, the Company to begin the process this year to exit the health insurance market. The Company's exit of the health insurance market to be substantially complete in 2016.

Consistent with the previously reported outlook, for full-year 2015, the Company continues to expect:

• Assurant Solutions’ net earned premiums and fees and net operating income to approximate 2014 levels driven by continued growth from mobile and vehicle service contracts globally. Results to be affected by the previously disclosed loss of a domestic mobile tablet program, carrier marketing programs, declining volumes at certain retailers and foreign exchange volatility.

• Assurant Specialty Property’s net earned premiums and net operating income to decrease from 2014, reflecting ongoing normalization of lender-placed insurance business, previously announced loss of client business and the sale of ARIC. Initiatives to lower expenses in lender-placed insurance to generate net savings in the latter part of the year. Contributions from multi-family housing and mortgage solutions to partially offset the decline. Overall results to be affected by catastrophe losses.

• Assurant Employee Benefits’ net earned premiums and fees to increase compared to 2014 due to growth in voluntary products. Continued expense management actions to offset pressures from lower investment income. Results to be affected by U.S. employment trends and capital market conditions.

• Corporate & Other full-year net operating loss to decline to $60-65 million, reflecting expense reductions.  

• Capital to be deployed on share repurchases, common stock dividends, investments in the business and strategic acquisitions, subject to market conditions and legal requirements. Business segment dividends to Corporate to approximate segment net operating income and to be subject to the growth of the businesses, rating agency and regulatory capital requirements as well as investment performance.

Earnings Conference Call

• The first quarter 2015 earnings conference call and webcast to be held on May 6, 2015 at 8:00 a.m. ET. The live and archived webcast along with supplemental information also will be available in the Investor Relations section of www.assurant.com.

About Assurant

Assurant safeguards clients and consumers when the unexpected occurs. A provider of specialty protection products and related services, Assurant operates in North America, Latin America, Europe and other select worldwide markets through four operating segments. Assurant Solutions, Assurant Specialty Property, Assurant Health and Assurant Employee Benefits partner with clients who are leaders in their industries to provide consumers peace of mind and financial security. Our diverse range of products and services include mobile device protection products and services; debt protection administration; credit-related insurance; warranties and extended service products and related services for consumer electronics, appliances and vehicles; pre-funded funeral insurance; lender-placed homeowners insurance; property, appraisal, preservation and valuation services; flood insurance; renters insurance and related products; 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 approximately $31 billion in assets and $10 billion in annual revenue. Assurant has approximately 17,500 employees worldwide and is headquartered in New York's financial district. For more information on Assurant, please visit www.assurant.com and follow us on Twitter @AssurantNews.

Media Contact:
Vera Carley
Assistant Vice President, External Communication
Phone: 212.859.7002
[email protected]            

Investor Relations Contact:
Suzanne Shepherd
Assistant Vice President, Investor Relations
Phone: 212.859.7062
[email protected]

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 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 may 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, including those projected in the Company outlook:

The following risk factors could cause our actual results to differ materially from those currently estimated by management: 

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 2014 Annual Report on Form 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 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 net operating income as an important measure of the Company’s operating performance. As shown in the net operating income reconciliation table, 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 net 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 refer to page 2 of this release for a reconciliation of net operating income to net income.

(2) Assurant uses book value per diluted share, excluding AOCI, as an important measure of the Company’s stockholders’ value. Book value per diluted share, excluding AOCI, equals total stockholders’ equity, excluding AOCI, divided by diluted shares outstanding. The Company believes book value per diluted share, excluding AOCI, provides investors a valuable measure of stockholders’ value because it excludes the effect of unrealized gains (losses) on investments, which tend to be highly variable from period to period and other AOCI items. The comparable GAAP measure would be book value per diluted share, defined as total stockholders’ equity divided by diluted shares outstanding. Book value per diluted share was $73.04 and $72.61 as of March 31, 2015 and Dec. 31, 2014, respectively, as shown in the reconciliation table below.