Finance

Catching up with Batesville and Assurant

Foundation Partners why I partnered

Hillenbrand Industries, parent company of Batesville Casket Company and Assurant, the financial services company that counts it Global Preneed business among its three divisions both reported financial results during early May and we now bring you those results.

Batesville Casket, which represents about 20% of the total revenue of Hillenbrand Industries reported an increase of about 1% in revenue for their 2nd Quarter 2020 which encompassed the January 2020 thru March 2020 period.  According to their report, that you can see here, they reported about $139 million in sales for the quarter and an increase in EBITDA margin which they attribute to a higher burial volume partially offset by higher wages and benefits.

Hillenbrand CEO Joe Ravner made these comments about Batesville Casket Company in the company’s earnings call with stock analysts:

“Finally, the third bucket is our Batesville business. Historically, this business has been less sensitive to economic cycles and has generated reliable and predictable cash flow. Batesville experienced pockets of higher demand for burial caskets starting in late March. It’s a trend that continued through April in certain metropolitan areas that have been harder hit by the virus.

Although we may continue to see increased mortality in certain geographic markets in the near term, we’ve also seen elevated cremation rates which serve as an offset to casket demand. Looking beyond the near-term mortality associated with the pandemic, we expect burial demand will quickly return to normal and resume its long tailed, slow secular decline of about 1% to 3% per year, consistent with history and with little impact from the macroeconomic environment. . . . . 

Our second strategic pillar is to leverage Batesville for cash. Batesville has a long history of manufacturing excellence and has deep and long-standing customer relationships that make it a leader in the North American death care industry. We run this business for cash, and it continues to provide the cash flow for us to diversify our revenue streams and offset long-term risk associated with the burial casket market. It has been historically less economically sensitive and has provided stable and predictable cash flow that is more important than ever in today’s environment.”

Assurant Global Preneed – The Global Preneed segment of Assurant grew in Net Operating Income during their 1st Quarter 2020 from $11.8 million in 1Q 2019 to $12.3 million in Net Operating Income for 1Q 2020 – an increase of about 4.2%.  Net Operating Income for the entire company increased to about $163 million in 1Q 2020 from about $140 million in 1Q 2019.  You can access the Assurant financial results here.

Alan Colberg, President and CEO of Assurant made these comments in the company’s earning call about the Global Preneed segment:

“Moving to Global Preneed, results in the first quarter were largely in line with our expectations. This
business benefits from lower mortality risk than traditional life insurance products, and acts as more of a
spread business.  In light of the current low interest rate environment, we’ve worked with our partners to make changes to
the product as well as help our clients complete the sales process virtually. We will continue to evaluate
other actions as appropriate.  With regards to mortality, experience has been largely consistent with our experience last year. We
attribute this to our policy footprint, including the fact that we do not write in New York. In summary, despite this uncertainty, we believe our business is resilient and that Assurant will weather this period and emerge strong.”

Richard Dziadzio, Chief Financial Officer of Assurant shared these comments about the Global Preneed segment:

“Now, let’s move to Global Preneed. This segment reported $12 million of net operating income, up slightly year-over-year driven by continued growth within the business.  Revenue for Preneed was up 9%, driven by US growth, including Final Need sales.   As we look ahead, we expect some pressure from lower yields on new sales through the current interest rate environment.   However, given the 10-year average duration of our investment portfolio, our existing block of business should not be significantly impacted for some years to come.   As Alan mentioned, so far we haven’t seen any significant spikes in mortality due to COVID-19.   As a reminder, a large portion of our policies are concentrated in California, Texas, South Carolina and Tennessee.   So far, these states have experienced lower mortality from COVID-19 compared to states in the Northeast.”

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