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Assurant (AIZ) Gains 15% in a Year: Will the Rally Continue?

Zacks Equity Research

Shares of Assurant Inc. AIZ have rallied 14.5% in a year against the industry’s decrease of 10.3%. The Zacks S&P 500 composite gained 2.1% in the said time frame With market capitalization of $6.2 billion, average volume of shares traded in the last three months was 0.5 million.

What’s Driving the Stock?

The company delivered positive earnings surprise in all the reported quarters of 2018 with the average beat being 22.71%.

Net operating income in 2018, excluding reportable catastrophes, increased 25%, at the high end of its guidance. This upside was driven by a lower effective tax rate, contribution from The Warranty Group acquisition and organic growth in targeted areas. Operating earnings per share, excluding catastrophes, increased 16%.

The Zacks Consensus Estimate for 2019 has moved up 0.7% in the past 30 days.

Assurant has been pursuing strategic initiatives to expand its housing and lifestyle businesses.

Assurant envisions earnings growth and margin expansion at the Lifestyle segment through a combination of profitable growth and operating efficiencies worldwide. Growth at Connected Living and Global Automotive should continue to drive the top line at Global Lifestyle. Global housing should continue to get support from expansion of specialty property offerings.

Assurant is also focused on growing fee-based capital-light businesses. Management estimates the contribution to grow in double digits over the longer term. Also, the expansion of fee-based offerings will help the company to achieve the goal of 15% operating ROE by 2020.

Its capital deployment policy is also impressive. Traditionally, the company has utilized 50% of its free cash flow to repurchase shares. The company has already bought back $22 million worth of shares and has $739 million remaining under its current share buyback authorization. Also, it has raised dividend for 15 straight years.

The Zacks Consensus Estimate for earnings and revenues indicates year-over-year improvement of 47.2% and 18.3%, respectively for 2019. For 2020, earnings and revenues are estimated to increase 14.2% and 5.6%, respectively year over year.

The stock carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks from the finance sector are Arch Capital Group Ltd. ACGL, Berkshire Hathaway Inc. BRK.B and Torchmark Corporation TMK.

Arch Capital Group provides property, casualty and mortgage insurance and reinsurance products worldwide. The company delivered positive surprise in all the last four reported quarters, with the average being 14.72%. The company has a Zacks Rank of 1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.

Berkshire Hathaway provides property and casualty insurance and reinsurance plus life, accident and health reinsurance besides operating railroad systems in North America. The company came up with positive surprise in three of the preceding four reported quarters, the average beat being 4.31%. The company is a Zacks #1 Ranked player.

Torchmark provides various life and health insurance products and annuities in the United States, Canada and New Zealand. The company pulled off positive surprise in three of the preceding four quarters, with the average beat being 2%. The company holds a Zacks Rank #2 (Buy).  

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