Assurant (AIZ) Up 2.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Assurant (AIZ). Shares have added about 2.6% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Assurant Q4 Earnings Top on Solid Global Housing Results
Assurant, Inc. reported fourth-quarter 2023 net operating income of $4.58 per share, which beat the Zacks Consensus Estimate by 23.4%. The bottom line surged 41.8% year over year. The results reflected solid performance at Global Housing.
Total revenues increased 12.4% year over year to $3 billion due to higher net earned premiums, fees and other income and net investment income. The top line beat the Zacks Consensus Estimate by 7.9%. Adjusted EBITDA, excluding reportable catastrophes, increased 29% to $382.4 million.
Total benefits, loss and expenses increased 7.8% to $2.8 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
Net earned premiums, fees and other income at Global Housing increased 7% to $545.8 million. Homeowners top-line growth was driven by higher average premiums and growth in policies in-force within lender-placed. The figure missed the Zacks Consensus Estimate of $553 million and was lower than our estimate of $552.6 million.
Adjusted EBITDA was $186.1 million, up 56% year over year. Excluding reportable catastrophes, adjusted EBITDA increased 48% year over year to $208 million, primarily attributable to lower non-catastrophe loss experience. Results also benefited from continued top-line growth within Homeowners and higher net investment income. The figure was higher than our estimate of $183 million.
Net earned premiums, fees and other income at Global Lifestyle increased 13% to $2.3 billion, driven by growth across Global Automotive and Connected Living. The figure beat the Zacks Consensus Estimate of $2.1 billion and was higher than our estimate of $2 billion.
Adjusted EBITDA of $204.6 million increased 12% year over year, driven by growth in Connected Living as a result of stronger mobile device protection results across carrier and cable operator clients in North America, as well as higher investment income. Global Automotive was flat, as elevated claims costs were largely offset by higher investment income.
Adjusted EBITDA loss at Corporate & Other was $29.9 million, wider than the year-ago quarter’s adjusted EBITDA loss of $27.2 million. The wider loss was due to higher employee-related expenses, which were partially offset by higher net investment income.
Full-Year Highlights
Adjusted earnings increased 39% to $15.49 per share in 2023.
Net earned premiums, fees and other income from the Global Lifestyle and Global Housing segments totaled $10,7 billion, up 8%, driven by an increase in Global Lifestyle, mainly from prior period sales in Global Automotive and growth in Global Housing from Homeowners. Adjusted EBITDA, excluding reportable catastrophes, increased 21% to $1.4 billion.
Financial Position
Liquidity was $606 million as of Dec 31, 2023, which was $381 million higher than the company’s current targeted minimum level of $225 million. Total assets increased 1.6% to $33.6 billion as of Dec 31, 2023 from 2022 end.
Debt of $2.1 billion decreased 2%. Total shareholders’ equity came in at $4.8 billion, up 14% year over year.
Share Repurchase and Dividend Update
In 2023, Assurant repurchased approximately 1.3 million shares for $200 million. From Jan 1 through Feb 2, the company repurchased approximately 0.06 million shares for $20 million. It now has $664 million remaining under the current repurchase authorization. Assurant’s total dividends amounted to $152 million in 2023.
2024 Guidance
Assurant expects adjusted EBITDA, excluding reportable catastrophes, to increase by mid-single digits, driven by both Global Lifestyle and Global Housing, at similar growth rates. Adjusted EPS, excluding catastrophes, is expected to grow modestly below adjusted EBITDA, excluding catastrophes growth, primarily reflecting an increase in depreciation expense from strategic technology investments.
Corporate and Other adjusted EBITDA loss is expected to be approximately $105 million as the company continues to drive expense leverage. The effective tax rate is expected to be in the range of 20% to 22%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, Assurant has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Assurant has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Assurant belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, The Hartford (HIG), has gained 8.5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
The Hartford reported revenues of $4.31 billion in the last reported quarter, representing a year-over-year change of +7.6%. EPS of $3.06 for the same period compares with $2.31 a year ago.
The Hartford is expected to post earnings of $2.38 per share for the current quarter, representing a year-over-year change of +41.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.9%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for The Hartford. Also, the stock has a VGM Score of B.
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