As part of its concerted effort to enhance value for its shareholders, Assurant Inc. (AIZ) announced a 7% increase in its quarterly common stock dividend on May 14, 2010. The board of directors of Assurant will now pay a quarterly dividend of 16 cents per share, up from 15 cents paid on March 8, 2010. The increased dividend will be paid on June 8 to shareholders of record as of May 24.
Assurant has had a consistent track record of paying quarterly dividends, and the current dividend is not an exception, representing the company’s sixth straight year of a dividend increase.
The industry’s statutory capital levels have fallen sharply during the last few years as a result of market turmoil, and consequently some companies are still facing liquidity challenges. In this lackluster scenario of liquidity crunches, Assurant seems to be quite strong with its capital and liquidity, thus helping it increase its quarterly dividend.
The dividend hike was primarily supported by Assurant’s strong balance sheet and its ability to generate healthy cash flow. Assurant’s annualized dividend yield of 1.78% is substantially higher than its nearest peer CIGNA Corporation’s (CI) with the latter’s annualized dividend yield of 0.12%.
Assurant’s investments and cash and cash equivalent balance at the end of the first quarter 2010 was $14,541.1 million, higher than $14,476.4 million at the end of the fourth quarter 2009. Cash inflow in the first quarter of 2010 totaled $119.7 million, compared with cash outflow of $267.2 million in the prior-year quarter, primarily driven by an increase in gross written premiums and fewer paid claims related to 2008 hurricanes. We expect further strength in Assurant’s capital position once the economic recovery gains momentum.
We think a strong balance sheet, moderate debt capital and favorable credit ratings can be viewed as positives for Assurant. Resumption of share repurchases will further add to shareholders’ returns. However, Assurant’s Specialty Property segment is suffering from the fallout of subprime crisis. In addition, increased catastrophe exposure and lower investment income will put earnings under pressure in the near term.
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Read the full analyst report on “CI”
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