It has been about a month since the last earnings report for Assurant (AIZ Quick QuoteAIZ - Free Report) . Shares have lost about 1.6% in that time frame, underperforming 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 Q3 Earnings Surpass, Revenues Increase Y/Y

Assurant, Inc. reported third-quarter 2023 net operating income of $4.29 per share, which beat the Zacks Consensus Estimate by 73%. The bottom line surged more than fourfold from the year-ago quarter. The results reflected an increase in the Connected Living business from growth in North American mobile subscribers, the absence of catastrophe reinstatement premiums, an improvement in the Homeowners business and higher net investment income.

Total revenues increased 8.5% year over year to $2.8 billion due to higher net earned premiums, fees and other income and net investment income. The top line beat the Zacks Consensus Estimate by 4.5%. Net investment income was up 50.2% year over year to $125.5 million and beat the Zacks Consensus Estimate of $111 million. The figure was higher than our estimate of $101.2 million.

Total benefits, loss and expenses increased 0.2% to $2.5 billion, mainly on account of an increase in underwriting, selling, general and administrative expenses and interest expense. The figure was higher than our estimate of $2.4 billion.

Segmental Performance

Revenues at Global Housing increased 24.7% year over year to $584.8 million. The growth was driven by the Homeowners business from higher average insured values and premium rates to address increased claims severity as well as improved policies in-force. The increase was also driven by the absence of catastrophe reinstatement premiums and higher net investment income. The figure beat the Zacks Consensus Estimate of $534 million and was higher than our estimate of $531.3 million.

Adjusted EBITDA was $165.1 million against the year-ago quarter’s adjusted EBITDA loss of $38.5 million. Excluding reportable catastrophes, adjusted EBITDA more than doubled year over year to $191.3 million. The growth was due to lower non-catastrophe loss experience, including a $14.6 million reserve reduction in the current quarter, as well as higher net earned premiums and expense leverage within the Homeowners business. Higher net investment income also contributed to the growth. The figure was higher than our estimate of $155.4 million.

Revenues at Global Lifestyle increased 5.3% year over year to $2.2 billion. The improvement was primarily driven by higher net investment income, prior period sales in Global Automotive and an increase in Connected Living business from growth in North American mobile subscribers, partially offset by an approximately $55 million impact from previously disclosed mobile program contract changes as well as runoff mobile programs. The figure beat the Zacks Consensus Estimate of $2.1 billion and was higher than our estimate of $2 billion.

Adjusted EBITDA of $191.8 million increased 7% year over year, driven by growth in the Connected Living business, which was partially offset by lower Global Automotive results.

Adjusted EBITDA loss at Corporate & Other was $26.2 million, wider than the year-ago quarter’s adjusted EBITDA loss of $24.9 million. The wider loss was due to higher employee-related expenses, which was partially offset by higher net investment income.

Financial Position

Liquidity was $491 million as of Sep 30, 2023, which was $266 million higher than the company’s current targeted minimum level of $225 million. Total assets increased 0.2% to $33.2 billion as of Sep 30, 2023 from 2022 end. The figure, however, was higher than our estimate of $32.5 billion. Total shareholders’ equity came in at $4.5 billion, up 6.2% year over year. The figure was higher than our estimate of $4.2 billion.

Share Repurchase and Dividend Update

In third-quarter 2023, Assurant repurchased approximately 0.3 million shares for $50 million. From Oct 1 through Oct 31, 2023, the company repurchased approximately 0.2 million shares for $30 million. It now has $174 million remaining under the current repurchase authorization. Assurant’s total dividends amounted to $37 million in the third quarter of 2023.

2023 Guidance

Assurant expects adjusted EBITDA, excluding reportable catastrophes, to increase by mid- to high-teens, as significant growth in Global Housing is partially offset by a modest decline in Global Lifestyle.

The company expects Global Housing Adjusted EBITDA, excluding reportable catastrophes, to grow significantly, driven by strong performance in the Homeowners business reflecting higher lender-placed net earned premiums, improving non-catastrophe loss experience, including favorable prior period reserve development and continued expense savings.

AIZ expects Global Lifestyle Adjusted EBITDA to decline modestly, due to Global Automotive’s elevated claims costs and lower contributions within Asia Pacific, including softer volumes and the impact of foreign exchange. The decline will be partially offset by higher net investment income, mobile growth in North America and continued expense savings.

Corporate and Other Adjusted EBITDA loss is expected to be approximately $105 million as the company continues to drive expense leverage.

Assurant expects adjusted earnings, excluding reportable catastrophes, per diluted share growth rate to exceed growth in adjusted EBITDA, excluding reportable catastrophes driven by higher earnings, a lower effective tax rate and the impact of share repurchases.

AIZ expects a depreciation expense of approximately $105 million, an interest expense of approximately $108 million and an effective tax rate of approximately 20% to 22%.

Assurant expects business segment dividends to approximate 65% of segment Adjusted EBITDA, including reportable catastrophes, which takes into account the extended restructuring plan. This is subject to the business and investment portfolio performance, and rating agency and regulatory capital requirements.

Capital deployment priorities are projected to focus on maintaining a strong financial position, supporting business growth by funding investments and M&A and returning capital to shareholders through common stock dividends and share repurchases, subject to board approval.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Assurant has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Assurant has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.