A month has gone by since the last earnings report for Assurant (AIZ). Shares have added about 1.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Assurant due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Assurant Q3 Earnings Meet, Revenues Miss Estimates
Assurant, Inc. reported third-quarter 2019 net operating income of $1.69 per share, which met the Zacks Consensus Estimate. The bottom line increased 59% from the year-ago quarter.
The results reflected contributions from earnings expansion in Global Lifestyle and lower catastrophes in Global Housing.
Total revenues were up 9.6% year over year to $2.5 billion, mainly attributable to higher premiums earned (up 8.7%) and net investment income (up 11.7%). However, the top line missed the Zacks Consensus Estimate by 1.9%.
Total benefits, loss and expenses escalated 15% to $2.5 billion, mainly on account of an increase in policyholder benefits, selling, underwriting, general and administrative expenses plus interest expense.
Net earned premiums, fees and others at Global Housing declined 2% year over year to $510.3 million, primarily due to the sale of mortgage solutions.
Net operating income of $41.6 million improved 114% year over year.
Net earned premiums, fees and others at Global Lifestyle increased 13% year over year to $1.7 billion. This upside was primarily driven by increased contributions from Connected Living and higher trade-in volumes compared with the prior-year period.
Net operating income of $102.1 million increased 35% year over year, driven by strong organic growth of mobile subscribers in Asia Pacific and North America, and improved operating performance in European mobile business.
Net earned premiums, fees and others at Global Preneed rose 6% year over year to $50.8 million, primarily owing to growth in prefunded funeral policies in the United States as well as prior-period sales of the Final Need products.
Net operating income declined 56% year over year to $7.4 million, mainly due to a charge relating to accounting adjustment.
Net operating loss at Corporate & Other was $20.8 million, wider than the year-ago quarter’s net operating loss of $19 million, attributable to lower tax rate.
Assurant estimates net operating income (excluding reportable catastrophe loss) to grow between 6% and 10% from 2018 level, driven by profitability achieved in Global Lifestyle and share buybacks. This growth rate includes full-year impact of the 10.4 million shares issued for the Warranty Group buyout.
Consolidated effective tax rate is projected between 23% and 25%.
Double-digit earnings growth is likely to reflect full-year contributions from the Warranty Group that will include $30 million after tax of additional synergy realization, modest organic growth across Connected Living, Global Automotive and multifamily housing, and ongoing expense management efforts. However, persistent declines in Global Financial Services might partially offset earnings growth.
Assurant expects full-year net operating loss to be around 2018 level at Corporate & Other. Additionally, interest expense is projected to be $83 million and preferred dividends are anticipated to be $19 million. Both these estimates include full-year financing cost associated with the buyout of Warranty Group.
Assurant anticipates Global Housing net operating income, excluding catastrophe losses, to modestly decline from 2018 level, due to elevated severity and frequency of claims in small commercial products.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
Currently, Assurant has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, 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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