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Assurant Gains 8% Year to Date: Will the Bull Run Continue?

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That Assurant Inc. (AIZ - Free Report) stock is favored by investors is well corroborated by its agreeable share price movement. Shares of the company have climbed 7.7% year to date against its industry’s decrease of 8.3%. The stock has also outperformed the S&P 500 index’s gain of 5.4%. In fact, shares hit a 52-week high of $108.28 in yesterday’s trading session.


With a market capitalization of $6.8 billion, average volume of shares traded in the last three months were 0.8 million.

Reasons Behind the Price Rise

Assurant recently announced a $1.3-billion 2018 property catastrophe reinsurance program, intended to curb risk and financial exposure, fortifying financial capabilities. The reinsurance coverage comprises $985 million for the U.S. catastrophe loss and $315 billion for the International segment.

The company has intensified focus on Specialty Property and Casualty and Lifestyle Protection. In its efforts to consolidate its presence as an ace provider in the vehicle protection business, the insurer acquired The Warranty Group. The buyout will aid Assurant to penetrate in the Asia-Pacific mobile market with expanded abilities. The acquisitions will be moderately accretive to Assurant’s 2018 operating earnings per share and by 2019, the company estimates about $60 million of pre-tax operating synergies.

The company has delivered a positive surprise in the last couple of reported quarters.  The outperformance is attributable to lower effective tax rate, decent underlying profitable growth in key businesses like mobile and multi-family housing and absence of lender-placed regulatory expenses in Global Housing.

Assurant carries a Zacks Rank #2 (Buy). With optimism surrounding the company’s healthy performance, the Zacks Consensus Estimate for 2018 has moved 1.2% north over the last 60 days.

Can the Bull Run Continue?

Assurant is restructuring its business for long-term growth. The company envisions earnings growth and margin expansion at the Lifestyle segment through a combination of profitable growth and operating efficiencies worldwide. To strengthen its capabilities in the housing market, Assurant acquired American Title, complementing its strategy to focus on risk management in the housing market as well as on expansion of fee-based business.

Driven by mobile programs as well as higher contributions from vehicle protection and expense efficiencies, the company expects Global Lifestyle net operating income to increase in 2018.

Assurant boasts a strong capital management policy in place. Traditionally, the company has been utilizing 50% of its free cash flow to repurchase shares.

For 2018, net operating income is estimated at 10-14% growth over the tally recorded in 2017. The Zacks Consensus Estimate is pegged at $7.63, skyrocketing 91.7% on 22.6% higher revenues of $7.7 billion.

The company targets 15% average annual long-term bottom-line growth and gross expense savings of $100 million.

Lower tax rate owing to the overhaul in tax policy, which slashed the rate to 21% from 35%, should lend an additional boost to the bottom line.

Strong franchise, consistent cash flow generation, moderate debt ratio, a robust Solutions business, business restructuring as well as disciplined capital management strategy should drive business growth going forward.

Other Stocks to Consider

Investors interested in multiline industry can also look at some other top-ranked stocks such as Cigna Corp (CI - Free Report) , MGIC Investment Corporation (MTG - Free Report) and The Hartford Financial Services Group, Inc. (HIG - Free Report) . Each stock carries the same bullish Zacks Rank of 2 as Assurant’s. You can see the complete list of today’s Zacks #1 Rank stocks here. .
    
Cigna provides health care and related benefits, majority of which, offered through workplace. The company delivered an average four-quarter positive surprise of 15.74%.

MGIC Investment provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. The company pulled off an average four-quarter earnings surprise of 29.96%.

The Hartford provides insurance and financial services to individual and business customers in the United States. The company came up with an average four-quarter beat of 9.55%.

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