(AIZ) Assurant Earnings Report Falls Below Consensus Estimates

February 5th, 2010

Assurant Inc. (AIZ) fourth quarter earnings of 86 cents per share lagged behind the Zacks Consensus Estimate of $1.01. Results also compared unfavorably with earnings of $1.30 in the year-ago quarter. Earnings were strained by restructuring charges of $12.3 million and a net operating loss of $29.7 million at Assurant Health.

With all of Assurant’s businesses experiencing modest downturns in the current recessionary environment, net earned premiums declined 4% year-over-year to $1.9 billion. Net investment income decreased to $172.5 million from $183.0 million in the fourth quarter of 2008.

Segment Results

Net operating income at Assurant Solutions improved considerably to $30.2 million from $11.9 million in the prior-year period due to favorable domestic service contract loss experience. Net earned premiums declined 4.0% year-over-year due to the impact of a previously disclosed accounting change affecting pre-need business sold in 2009, and the impact of foreign exchange.

Assurant Specialty Property reported a 10.0 year-over-year decline in net operating income to $106.9 million due to higher reinsurance costs and higher non-catastrophe loss experience. Net earned premiums declined 4.0% year-over-year due to declines in real estate owned premiums and increased reinsurance costs.

Assurant Health, whose outlook remains exposed to the continued reduction in small group premiums and less favorable individual medical loss experience, reported a 3.0% year-over-year decline in net earned premiums. Restructuring costs Incorporatedrease in litigation reserve, and expenses related to H1N1 medical services caused an operating loss of $29.7 million, compared to an operating profit of $25.1 million in the year-ago quarter.

Lower premiums coupled with lower net investment income at Assurant Employee Benefits led to an18.0% decline in net operating income to $11.6 million. Economic pressures in the small business sector contributed a 4.0% decline in net premiums earned to $270.0 million.

For full year, net operating income came in at $464.9 million or $3.92 per share, compared to net operating income of $637.4 million or $5.36 per share, in 2008. The decline was primarily due to a net operating loss for Assurant Health coupled with reduced earnings at Assurant Employee Benefits and restructuring charges.

Net earned premiums in 2009 were $7.6 billion, down from $7.9 billion in 2008, contributed by a decline in all its business segments.

Book value per diluted share, excluding AOCI Incorporatedreased 9.0% in 2009 to $40.47, from $37.16 as of Dec 31, 2008. The ratio of debt to total capital, excluding AOCI, improved to 17.0% versus 18.3% as of Dec 31, 2008.

To sum up, Assurant’s results clearly reflect the economic pressure on consumers and small businesses that is affecting its business. The company that had been consistently posting above 15% return on equity (ROE) reported a lower ROE of 10.1%.

To combat the challenging domestic economic environment, the company has taken cost control measures. With a low debt-to-capital ratio and resumption of the share repurchase program, we expect the company to deliver shareholder returns going forward.

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(AIZ) Assurant Earnings Report Falls Below Consensus Estimates

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(AIZ) Assurant Earnings Report Falls Below Consensus Estimates

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