Assurant, Inc. (AIZ - Free Report) is currently riding on strong premium earned at its Global Lifestyle and Global Preneed segments, which, in turn, is boosting its top-line growth.
The Zacks Consensus Estimate for 2020 and 2021 earnings per share is pegged at $9.30 and $10.76, indicating an improvement of 8.7% and 15.7%, respectively, from the year-ago reported figure.
Estimates for Assurant have been revised upward over the past seven days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2020 earnings has moved north by 0.1% and the same for 2021 has moved north by 0.9% in the said time frame.
Assurant’s return on equity was 10% in the trailing 12-month period, higher than the industry average of 9.2%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.
The company has a decent earnings surprise history. It surpassed estimates in three of the trailing four quarters, the beat being 2.64%, on average.
What’s Driving Assurant?
The multi-line insurer continues to witness strong performance in its two segments – Global Lifestyle and Global Preneed. The Global Lifestyle segment, which accounted for nearly 74% of the company’s total net operating income in the first quarter, has consistently performed well, owing to an increase in mobile subscribers from new and existing programs, as well as higher income from Global Automotive.
The company’s Global Preneed segment put up an impressive performance as well. Net earned premiums, fees and other income in this segment rose 9% year over year in the first quarter owing to continued growth in the United States from prefunded funeral policies as well as prior period sales of the Final Need product. Based on such solid segmental results, Assurant’s top line registered a rise of 10.7% year over year in the first quarter. This momentum is expected to continue in the near future as well.
Net investment income continues to be another important driver of the company’s top-line. It witnessed CAGR of 9.4% over the last three years (2016-2019). Though it decreased 6.2% year over year in the first quarter of 2020., factors like income from consolidated investment entities (CIEs), sale of direct real estate venture properties, as well as income from higher overall invested assets are likely to drive the metric going forward.
The company’s liquidity has remained strong throughout the year. At the end of March, it had $433.4 million of holding company liquidity, which is above the company’s current targeted minimum level of $225 million. The company drew $200.0 million of its $450 million revolving credit facility in March in a bid to strengthen its liquidity position and capital flexibility during this period of economic uncertainty.
Furthermore, Assurant boasts a solid capital position by virtue of which it returns value to shareholders in the form of share buybacks and dividends. It now has $411 million remaining under its current share buyback authorization Its dividend payouts rose at a CAGR of 20.3% in the past five years (2014-2019).
However, Assurant has been witnessing high costs due to rise in policyholder benefits, general and administrative expenses. Expenses increased at a two-year (2017 -2019) CAGR of 26.4%. Such costs tend to weigh on company’s margins.
Shares of this Zacks Rank #3 (Hold) company have lost 9.2% in a year compared with its industry’s decline of 30.3%. We believe that Assurant’s strong fundamentals are likely to drive its shares going forward.
Stocks to Consider
Some better-ranked stocks from the same space are EverQuote Inc (EVER - Free Report) , James River Group Holdings Ltd (JRVR - Free Report) and Kemper Corporation (KMPR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
EverQuote surpassed estimates in each of the last four quarters, with the average positive surprise being 86.67%.
James River Group surpassed estimates in three of the last four quarters, with the average positive surprise being 7.31%.
Kemper surpassed estimates in each of the last four quarters, with the average positive surprise being 16.25%.
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