Assurant, Inc. (AIZ) Q2 2012 Earnings Call July 26, 2012, 8:00 a.m. ET Executives Melissa Kivett – Senior Vice President, IR Rob Pollock – President and CEO Mike Peninger – CFO Chris Pagano – CIO and Treasurer Analysts Chris Giovanni – Goldman Sachs Steven Schwartz - Raymond James and Associates Mark Finkelstein – Evercore Partners John Nadel – Sterne Agee & Leach Sean Dargan – Macquarie Capital Edward Spehar – BofA/Merrill Lynch Jeffrey Schuman – Keefe, Bruyette & Woods Mark Hughes – Suntrust Robinson Humphrey Presentation Operator Operator
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Some of the statements we make on today's call may be forward-looking. And actual results may differ materially from those projected in these statements. Additional information on these factors that could cause actual results to differ materially from those projected can be found in yesterday's new release as well as in our SEC reports including our 2011 form 10K available at Assurant.com.Today's call will also contain non-GAAP financial measures, which we believe are meaningful in evaluating the company's performance. For more details on these measures, the most comparable GAAP measures, and a reconciliation of the two, please refer to the news release and financial supplement posted at Assurant.com. Now I'll turn the call over to Rob. Rob Pollock Thanks, Melissa, and good morning everyone. Our results in the second quarter were strong. Our strategy to focus on growth in four targeted areas is working despite continued economic headwinds. We continued to return capital to shareholders via dividends and repurchase. Our activity demonstrates the long term value we believe our shares represent at current prices. We are pleased with our performance against the three important financial metrics we've highlighted before. First, we reported an annualized operating return on equity excluding accumulated other comprehensive income or AOCI of 14.4% for the quarter. This includes $19 million of income from real estate joint ventures, and $10 million of losses from reportable catastrophes. Year-to-date, annualized results stand at 14.6%. Second, growth in book value per diluted share excluding AOCI was 5.3% during the quarter. This brings the year-to-date growth to 9%. Third, revenue defined by net earned premiums and fee income grew by over 2% year-over-year to $1.9 billion. Year-to-date, the increase is 1.9%. Now let me comment on the businesses. In Solutions, despite a challenging retail sales environment, our business continued to grow through the addition of new clients. We were pleased to announce our mobile protection program will be offered to T-Mobile's 4G pre-paid customers. In combination with Telefonica and the Sprint tablet program, it demonstrates our ability to find creative solutions for clients and consumers in this fast growing segment.
In international operations, we saw a modest improvement in our combined ratio. We continue to monitor European results carefully given the economic uncertainty in that region.In Specialty Property, we continued to see growth in both multi-family housing products and lender placed insurance. While the overall inventory of mortgage loans again declined modestly, we continued to add new loan portfolios. The programs and activities to prevent property foreclosures have caused our coverage to remain in effect far longer than we have seen historically or expected. As these loans resolve through foreclosure and short sale, which could accelerate, our premiums and earnings will decline. Lender placed returns will be lower than in the past, but as a specialty business, they will continue to be attractive. After Mike reviews the financial highlights for the quarter, I'll provide additional details and an update on the actions underway in our lender placed business. Assurant Health continues to make great progress in the post-reform environment. Health is offering affordable choice products for consumers, expanding distribution, and reducing operating expenses. As medical costs continue to increase, we believe consumers will find our affordable choice plans even more attractive. We are seeing the number of individuals covered under our programs growing. At Assurant Employee Benefits, net operating income improved as all product lines had favorable experience. Our new agreement with United Concordia announced in June will expand our dental network, which is now one of the largest in the industry. Our growth priority at Benefits is on voluntary products, which represented more than half of our sales for the quarter. Overall, we were pleased with our results, and believe we are well positioned. And with that, I'll turn it to Mike for more comments in the second quarter. Mike Peninger Thanks, Rob. I'll discuss a few second quarter highlights and priorities for each of our businesses starting with Assurant Solutions. Read the rest of this transcript for free on seekingalpha.com