Assurant, Inc. (AIZ), a provider of specialized insurance, reported a 93% plunge in profit for the fourth quarter from last year, hurt by a goodwill impairment charge and a net operating loss at Assurant Health that includes a litigation reserve increase. The company also said that following the settlement of the SEC's finite reinsurance investigation announced last month, it expects to resume its share repurchase program.
n mid-January, Assurant announced a settlement of the SEC's finite reinsurance investigation. Following the conclusion of the matter, the company now expects to resume its share repurchase program after the earnings blackout period ends on February 8, 2010.
The New York-based company reported net income for the fourth quarter of $11.94 million or $0.10 per share, down from $182.44 million or $1.55 per share in the year-ago period.
The decline in net income was driven by a non-cash goodwill impairment charge of $83.0 million or $0.70 per share, and a net operating loss at Assurant Health of $29.7 million that includes a litigation reserve increase of $24.0 million after-tax. The impairment relates to goodwill that arose from a 2001 acquisition in Assurant Employee Benefits.
The year-ago period's results included a $62.4 million tax benefit related to the sale of an inactive life insurance subsidiary.
Net operating income for the quarter decreased to $101.6 million or $0.86 per share from $153.7 million or $1.30 per share in the prior-year period, reflecting restructuring charges of $12.3 million after-tax and the $29.7 million loss for Assurant Health.
On average, twelve analysts polled by Thomson Reuters estimated earnings of $1.01 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenues for the quarter declined to $2.18 billion from $2.22 billion in the same period last year, and missed analysts' consensus revenue estimate of $2.12 billion. Net earned premiums in the fourth quarter were $1.93 billion, down 4% from the prior-year period, with all Assurant businesses experiencing modest downturns in the recessionary environment.
Net investment income also decreased to $172.50 million from $183.05 million a year ago due to lower average invested assets and lower yields. After-tax net realized losses on investments for the latest quarter were $7.6 million, compared to net realized losses of $33.7 million in the year-ago period. However, fees and other income rose to $93.67 million from $77.71 million a year ago.
Segment wise, Assurant Health had a net operating loss of $29.7 million, compared to net operating income of $25.1 million in the prior-year quarter. Results for the quarter reflect a $24.0 million after-tax litigation reserve increase, $2.5 million of after-tax expenses for H1N1-related medical services, and $2.9 million of after-tax restructuring costs. The business also experienced substantial increases in utilization and intensity of medical services during the quarter.
Assurant Solutions' net operating income for the quarter more than doubled from last year to $30.2 million as a result of favorable domestic service contract loss experience.Assurant Specialty Property's net operating income for the quarter declined 10% from last year to $106.9 million, partly due to higher reinsurance costs and higher non-catastrophe loss experience.
Net operating income for Assurant Employee Benefits declined 18% from the previous-year quarter to $11.6 million due to lower premiums and lower net investment income. The decline in premiums across all product lines were driven by economic pressures in the small business sector as well as the previously disclosed loss of assumed client reinsurance premiums.
For fiscal year 2009, Assurant reported a 4% decline in net income to $430.57 million or $3.63 per share from $447.80 million or $3.76 per share a year ago.
The results for the latest year includes an $83.0 million non-cash goodwill impairment charge, a $30.2 million loss for Assurant Health, and an $83.5 million after-tax benefit from a favorable legal settlement. The prior year's results included an $89.0 million tax benefit related to the sale of an inactive life insurance subsidiary.
Net operating income for the year was $464.9 million or $3.92 per share, down from $637.4 million or $5.36 per share last year. Analysts expected the company to report earnings of $4.08 per share for the year.
The decline in net operating income was primarily due to a $30.2 million net operating loss for Assurant Health, in addition to reduced earnings at Assurant Employee Benefits. Results for the year also include $18.7 million of after-tax restructuring charges across all Assurant businesses.
However, total revenues for the year increased to $8.70 billion from $8.60 billion in the previous year, and topped analysts' consensus revenue estimate of $8.65 billion. Net earned premiums for the year were $7.55 billion, down from $7.93 billion in the previous year. Net investment income declined to $698.84 million from $774.35 million a year ago, while net realized losses on investments narrowed to $53.60 million from $428.68 million in the prior year. Fees and other income rose to $482.46 million from $300.80 million a year ago.
In January, Assurant's board of directors authorized an additional $600 million for the repurchase of the company's shares. This brings the company's total repurchase authorization to $770 million for use in the open market and/or for private transactions.
Among Assurant's peers, Aflac Inc. (AFL) on Tuesday reported an increase in profit for the fourth quarter profit from last year, aided by 7.9% growth in revenues. The Columbus, Georgia-based company reported net income for the fourth quarter of $251 million or $0.53 per share, compared to $197 million or $0.42 per share in the year-ago quarter. Total revenues for the quarter increased to $4.6 billion from $4.3 billion in the prior-year quarter, benefited from the strengthening of the yen to the dollar exchange rate.
AIZ closed Wednesday's regular trading at $31.66, down $0.45 or 1.40% on a volume of 1.16 million shares. In the past 52 weeks, the stock has been trading in a range of $16.34-$33.37.
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