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We are reiterating our Neutral recommendation on the shares of Assurant Inc. (AIZ - Analyst Report) prior to its third-quarter earnings release, scheduled for October 24, 2012. We expect the company to continue performing favorably during the quarter.  However, we are concerned with micro as well as macro economic headwinds faced by its various business lines. 

The Zacks Consensus estimates third quarter earnings of $1.35 per share which would translate into earnings growth of 70.5% year over year.  
 
Assurant Solutions has been performing well over the past several quarters. Though results in UK have been disappointing for some quarters, the company has taken several steps to improve in the international arena.
 
Over the longer time horizon, the international business is anticipated to continue growing at a steadily, and the domestic business should rebound as the economy improves and consumer electronics spending recovers, leading to overall revenue growth.  
 
Though Assurant Health had been underperforming for the past several quarters, its profitability has shown some improvement. In response to the challenging marketplace, the company entered into a network agreement with AETNA signature Administrators and a marketing agreement with American Family. In addition, it focused on the distribution of individual healthy policies to its customers. 
 
The Employee Benefits segment has been pressured by persistent economic challenges in the small group sector leading to higher lapse rates and lower premium growth on in-force policies. Since there have been few new employee additions and a modest wage growth, premium income from the segment will remain under pressure in the near term. 
 
In the absence of a substantial organic growth, Assurant has maintained its bottom-line earnings via an active capital management strategy.
 
Assurant is conservatively placed with respect to its investment portfolio. It has below-average investment allocations to risky assets such as commercial real estate, European sovereign debt, BBB bonds and subprime/Alt-A securities. We believe this conservative portfolio will cushion earnings if the macro conditions deteriorate.
 
Based in New York’s financial district, Assurant competes with Principal Financial Group Inc. (PFG - Analyst Report), Loews Corp. (L - Analyst Report) and Conesco Inc. (CNO - Analyst Report) among others. The company’s stock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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