Assurant (AIZ) Banks on Solid Segmental Growth Amid Cost Woes
Assurant, Inc. AIZ is well-poised for growth, driven by increased mobile subscribers in North America, inorganic and organic growth strategies, higher average insured values and effective capital deployment.
Continued organic growth across distribution channels, better loss experience from select ancillary products and higher investment income should drive Global Automotive of the Global Lifestyle segment. Connected Living is likely to gain from higher trade-in volumes, higher international earnings and continued mobile subscriber growth in North America.
Adjusted EBITDA in Global Lifestyle is expected to grow on the back of increased mobile subscribers in North America and more favorable mobile loss experience in Connected Living as well as higher investment income and favorable loss experience in select ancillary products in Global Automotive.
Assurant has adopted inorganic and organic growth strategies to drive the Global Lifestyle segment. In September 2022, Assurant entered into a new multi-year agreement to extend its longstanding partnership with T-Mobile. This contract extension provides it with increased long-term visibility in U.S. mobile business. It gives a greater opportunity to increase repair volumes through more than 500 Cell Phone Repair locations along with the ability to leverage this capability with other U.S. clients.
The Global Housing segment should gain from the higher average insured values, policies in force and premium rates in Lender-placed Insurance business, including contributions from a new client.
Net investment income is expected to gain from higher income from higher yields on fixed maturity securities and cash and cash equivalents and increased income from commercial mortgage loans on real estate due to a rise in invested assets.
Assurant has a strong capital management policy in place. Its solid capital position supports effective capital deployment. At present, $274.5 million remains unused under the repurchase authorization. AIZ expects to deploy capital primarily to support business growth by funding investments, mergers and acquisitions and returning capital to shareholders in the form of share repurchases and dividends.
The multi-line insurer has been experiencing an increase in operating expenses driven by higher policyholder benefits, underwriting, selling, general and administrative expenses and goodwill impairment. Such expenses continue to weigh on margin expansion.
Assurant expects adjusted EBITDA, excluding reportable catastrophes, to increase by low single-digits, with results improving as the year progresses, led by improved performance in Global Housing and more modest growth in Global Lifestyle.
Global Housing Adjusted EBITDA, excluding reportable catastrophes, is expected to grow from revised 2022 results of $417.4 million.
Global Lifestyle Adjusted EBITDA is expected to grow modestly from revised 2022 results of $809.4 million. Lower contributions from international, including the impact of continued foreign exchange headwinds, are expected to pressure results particularly in the first half of 2023.
Assurant expects adjusted earnings, excluding reportable catastrophes, per diluted share growth rate to be lower than Adjusted EBITDA, excluding reportable catastrophes growth. This is due to higher depreciation expense of approximately $114 million and a higher effective tax rate of approximately 22% to 24%, following a $9 million benefit in 2022.
Other Industry Players
Other players in the multi-line insurance industry include Radian Group Inc. RDN, American International Group, Inc. AIG and EverQuote, Inc. EVER.
Radian’s earnings surpassed estimates in each of the last four quarters, the average being 38.62%.
Radian remains focused on improving its mortgage insurance portfolio, growing the Homegenius business and managing capital resources. Continued high levels of the new mortgage insurance business, as well as an increase in persistency, is likely to drive the primary insurance in force, the main driver of future earnings for Radian Group.
American International’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 6.94%.
American International is well-poised to grow on the back of acquisitions and prudent capital allocation. Improving travel and warranty operations are likely to drive AIG’s personal lines insurance business. Strategic business de-risking and acquisitions, cost-control efforts and accelerated capital deployment will drive American International’s growth.
EverQuote’s earnings surpassed estimates in each of the last four quarters, the average being 39.08%.
EverQuote is well-poised for growth owing to the solid performance of automotive and other insurance marketplace verticals. EVER remains focused on rapidly expanding into new verticals. Increasing consumer traffic, higher quote request volume and innovating advertiser products and services will continue to boost revenues.
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