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Analyst Blog

On Dec 26, 2013, shares of Assurant Inc. (AIZ - Analyst Report) hit a 52-week high of $66.73.

The momentum was driven by continued outperformance, improved outlook, new share repurchase authorization and strong credit scores.

Assurant delivered positive earnings surprises in three of the last four quarters with an average beat of 32.9%. In the last reported quarter, this multiline insurer posted impressive results with a positive earnings surprise of 17.9%. Earnings also fared well year over year. Assurant’s better-than-expected results were driven by strong performance by Assurant Specialty Property. A lower share count due to share repurchases also boosted the bottom line.  

For 2013, management expects its Specialty line of business to benefit from growth in multi-housing loans, higher volume in lender-placed loan portfolios, and discontinuation of a client quota-share arrangement. Its Solutions line is likely to experience higher top-line growth from increases in domestic as well as international businesses. In the fourth quarter, the segment is expected to report about $50 million of net operating income and a 14% annualized operating ROE.

With respect to returning value to shareholders, the board of directors of Assurant approved an increase of $600 million of share buyback. The company spent $351 million to buy back 7 million shares from the beginning of 2013 through October. Assurant was left with $152 million for repurchases as of Oct 31, 2013.

In addition, A.M. Best Co. affirmed Assurant’s issuer credit ratings (ICR) at ‘bbb’. The outlook on the ratings was pulled up to positive from stable. The rating agency concurrently affirmed the financial strength rating (FSR) of A (Excellent) and ICRs of the property/casualty subsidiaries of Assurant and FSRs of A- (Excellent) and ICRs of “a-”of Assurant’s life/health subsidiaries.

Valuation for Assurant looks attractive. The shares are trading at a discount to the peer group average on a forward price-to-earnings basis while return on equity is higher than the peer group average. In addition, year-to-date return from the stock was 91.0%, much above the S&P’s return of 29.2%.

Assurant presently carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the insurance sector include CNO Financial Group, Inc. (CNO - Analyst Report), Kemper Corp. (KMPR - Snapshot Report) and Prudential plc (PUK - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

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