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Why Is Assurant (AIZ) Down 4.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Assurant (AIZ - Free Report) . Shares have lost about 4.6% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Assurant due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Assurant Q1 Earnings Beat Estimates, Increase Y/Y

Assurant, Inc. reported first-quarter 2022 net operating income of $3.75 per share, which beat the Zacks Consensus Estimate by 31%. The bottom line increased 51.8% from the year-ago quarter.

Quarterly results benefited from growth in lender-placed from higher average insured values and solid results across Connected Living and Global Automotive businesses.

Total revenues increased 4.6% year over year to $2.5 billion due to higher net earned premiums, fees and other income and net investment income. The top line however missed the Zacks Consensus Estimate by 2.3%.

Net investment income was up 13.1% year over year to $86.3 million. Total benefits, loss and expenses increased 3.2% to $2.3 billion, mainly on account of an increase in underwriting, selling, general and administrative expenses.

Segmental Performance

Revenue at Global Housing increased 1% year over year to $496.8 million, primarily due to growth in lender-placed from higher average insured values and premium rates and multifamily housing. The increase was partially offset by a decline in specialty products from client runoff.

Adjusted EBITDA of $103.8 million improved 11% year over year, primarily due to a $40.5 million pre-tax decrease in reportable catastrophes.

Revenues at Global Lifestyle increased 5% year over year to $1.9 billion. The increase was due to Global Automotive premium increases from strong prior period sales. Connected Living increased modestly as mobile fee income growth from service and repair and trade-in was partially offset by premium declines in runoff mobile programs.

Adjusted EBITDA of $217.4 million improved 13% year over year due to strong results across Connected Living and Global Automotive.

Adjusted EBITDA loss at Corporate & Other was $22.2 million, narrower than the year-ago quarter’s adjusted EBITDA loss on lower employee-related expenses and an increase in investment income from higher asset balances.

Financial Position

Liquidity was $738 million as of Mar 31, 2022, about $513 million higher than the company’s current targeted minimum level of $225 million, which includes the remaining proceeds from the sale of Global Preneed.

Total assets decreased 2.6% to $33 billion as of Mar 31, 2022 from 2021 end.
Total shareholders’ equity came in at $5 billion, down 8.5% year over year.

Share Repurchase and Dividend Update

In the first quarter of 2022, Assurant repurchased 1.5 million shares for $242 million. From Apr 1 through May 1, 2022, Assurant repurchased additional shares for approximately $86 million. It now has $514 million remaining under the current repurchase authorization. Assurant’s total dividends amounted to $37 million in the first quarter of 2022.

2022 Guidance

Assurant expects 8 to 10% growth in adjusted EBITDA, excluding reportable catastrophes, driven by profitable growth across Global Lifestyle and Global Housing.

Global Lifestyle adjusted EBITDA is expected to increase by low double-digits, driven mainly by mobile in Connected Living from global expansion in existing and new clients across device protection and trade-in and upgrade programs. This will be partially offset by strategic investments to support new business opportunities, including in-store mobile service and repair capabilities and unfavorable impacts of foreign exchange.

Global Automotive is expected to increase, driven by higher investment income and business performance. Global Housing adjusted EBITDA, excluding reportable catastrophes, is anticipated to increase by mid-single-digits driven by growth in lender-placed from expense initiatives and higher average insured values, which are expected to more than offset higher claims and reinsurance costs.

Corporate and Other Adjusted EBITDA loss is expected to be nearly $105 million. Assurant expects 16% to 20% growth in adjusted earnings, excluding reportable catastrophes, per share, driven by continued profitable growth and share buybacks.

Assurant’s consolidated effective tax rate is expected to be around 22% to 24%, which reflects the impact of the first quarter tax benefit. Capital is projected to be deployed to support business growth by funding investments and M&A, and to return capital to shareholders in the form of share repurchases and dividends, subject to the board’s approval and market conditions.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Assurant has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Assurant has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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