Assurant (AIZ) Down 7.1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Assurant (AIZ). Shares have lost about 7.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Assurant due for a breakout? 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 drivers.
Assurant Q4 Earnings & Revenues Beat, Premiums Rise Y/Y
Assurant, Inc. reported fourth-quarter 2022 net operating income of $3.23 per share, which beat the Zacks Consensus Estimate by 24.7%. The bottom line increased 15% from the year-ago quarter. The quarterly results reflected higher average insured values, premium rates and lender placed policies in-force, growth in Connected Living and in North American mobile subscribers income. However, the upside was partly offset by elevated costs.
Total revenues were up 3.7% year over year to $2.7 billion driven by higher net earned premiums and net investment income. The top line beat the Zacks Consensus Estimate by 1.2%. Net earned premiums of $2.3 billion climbed 4% year over year. The figure was higher than our estimate of $2.2 billion. Net investment income increased 29.2% year over year to $102.3 million. The figure was higher than our estimate of $90.6 million.
Total benefits, loss and expenses increased 5.8% to $2.6 billion driven by higher policyholder benefits, underwriting, selling, general and administrative expenses, goodwill impairment and interest expense. The figure was higher than our estimate of $2.4 billion.
Full-Year Highlights
For 2022, Assurant delivered a net operating income of $11.13 per share, which beat the Zacks Consensus Estimate by 5.7%. The bottom line improved 9% year over year. Total revenues of $10.4 billion beat the consensus mark by 0.8% and grew 3.1% year over year.
Segmental Performance
Revenues at Global Housing increased 11.1% year over year to $567.6 million, primarily driven by higher net earned premiums and net investment income. The figure was higher than our estimate of $551.1 million. Adjusted EBITDA increased 11% year over year to $135.3 million because of higher average insured values, premium rates and lender placed policies in-force. It was partially offset by a $17.8 million increase in reportable catastrophes from winter storms and Hurricane Nicole.
Revenues at Global Lifestyle increased 1.9% year over year to $2.1 billion because of higher net earned premiums and net investment income. The figure was higher than our estimate of $2 billion. Adjusted EBITDA increased 6% year over year to $166.1 million. The increase was driven by Connected Living and higher net investment income. It was partially offset by weaker performance in Asia Pacific and Europe, including the unfavorable impact of foreign exchange, as well as an increase in claims costs within Global Automotive. Connected Living benefited from reduced mobile service and repair expenses compared with the prior year period and a modest increase in North American mobile subscribers.
Adjusted EBITDA loss at Corporate & Other was $27.2 million, wider than the year-ago quarter’s adjusted EBITDA loss of $25.5 million due to lower investment income.
Financial Update
The company exited the fourth quarter with total assets of $33.1 billion, down 2.3% year over year. Debt was $2.1 billion, which decreased 3.3% year over year. Stockholders’ equity of $4.2 billion at the end of the quarter decreased 22.6% year over year.
Share Repurchase and Dividend Update
In the fourth quarter of 2022, Assurant repurchased shares for $13 million. From Jan 1 through Feb 3, 2023, Assurant did not repurchase any shares. It now has $274 million remaining under the current repurchase authorization.
Assurant’s total dividends amounted to $38 million in the fourth quarter of 2022.
2023 Guidance
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. Higher 2023 catastrophe reinsurance program costs as well as continued elevated non-catastrophe loss experience across all lines of business, particularly in the first half of 2023, are expected to impact the segment.
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. Corporate and Other Adjusted EBITDA loss is expected to be approximately $105 million as the company continues to drive expense leverage.
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.
Interest expense is estimated to be approximately $110 million, in-line with 2022.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -16.47% due to these changes.
VGM Scores
Currently, Assurant has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Assurant has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Assurant, Inc. (AIZ) : Free Stock Analysis Report
