Reinsurance News

Catastrophe losses & tax cuts impact Assurant’s Q4 results

13th February 2019 - Author: Matt Sheehan

U.S. specialty insurance group Assurant has posted its results for the fourth quarter of 2018, which include a reduction in net income from $312.9 million in Q4 2017 to $20.3 million in Q4 2018.

AssurantThis decease was primarily driven by $95.5 million of catastrophe losses in Q4 2018 and the absence of the one-off benefit from the U.S Tax Cuts and Jobs Act, which contributed $177 million to Assurant’s net income in Q4 2017.

Assurant was also impacted by net realised losses on investments in Q4, although these were partially offset by a lower effective tax rate and contributions from The Warranty Group (TWG), which Assurant acquired for $2.5 billion in May 2018.

These factors also resulted in a decrease to Assurant’s full-year 2018 net income, which fell by 54% to $236.8 million, down from $519.6 million in 2017.

Despite this, Assurant managed to grow its net operating income to $345.4 million, up from $220.0 million in 2017, primarily due to contributions from TWG, a lower effective tax rate, and $22.8 million of lower reportable catastrophe losses.

AmericanAg - Global Reinsurance Solutions

Excluding catastrophes, the company’s full-year net operating income was $515.1 million, and Assurant beat expectations on its net operating income per diluted share, which increased from $3.98 in 2017 to $5.80 in 2018, driven by the growth in net operating income and share repurchases.

Looking ahead, Assurant is anticipating its net operating income per diluted share to increase by 6% to 10% in 2019 due to profitable growth in its Global Lifestyle and Global Housing segments, as well as share repurchases.

However, this growth rate excludes an expected negative impact of 2% resulting from a higher reinsurance spend, which the company implemented to further reduce its catastrophe exposure and mitigate the full-year impact of the 10.4 million shares issued for the TWG acquisition.

For Q4 2018, Assurant’s net earned premiums, fees and other income from the Global Housing, Global Lifestyle and Global Preneed segments totalled $2.17 billion, compared to $1.52 billion in fourth quarter 2017, driven by $645 million of revenue from TWG.

In terms of the full-year results, net earned premiums, fees and other income from these segments totalled $7.5 billion, compared to $5.8 billion in 2017, driven by $1.5 billion of revenue from TWG.

Assurant expects to achieve double-digit earnings growth in 2019, reflecting full-year contributions from TWG including $25 million to $30 million after-tax of additional synergy realisation, modest organic growth across Connected Living, Global Automotive and multifamily housing, as well as ongoing expense management efforts.

Alan Colberg, President and Chief Executive Officer (CEO) of Assurant, commented on the company’s results: “In 2018, we successfully executed on our financial commitments, achieving solid earnings growth, while further expanding our offerings across Connected Living, Global Automotive and multifamily housing.”

“By building on our momentum, we expect to realize incremental value from our acquisition of TWG, while strengthening our Lifestyle and Housing offerings to continue our outperformance over the long-term,” he added.

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