Assurant (AIZ) Q3 Earnings Surpass, Revenues Increase Y/Y
Assurant, Inc. AIZ reported third-quarter 2023 net operating income of $4.29 per share, which beat the Zacks Consensus Estimate by 73%. The bottom line surged more than fourfold from the year-ago quarter.
The results reflected an increase in the Connected Living business from growth in North American mobile subscribers, the absence of catastrophe reinstatement premiums, an improvement in the Homeowners business and higher net investment income.
Total revenues increased 8.5% year over year to $2.8 billion due to higher net earned premiums, fees and other income and net investment income. The top line beat the Zacks Consensus Estimate by 4.5%.
Net investment income was up 50.2% year over year to $125.5 million and beat the Zacks Consensus Estimate of $111 million. The figure was higher than our estimate of $101.2 million.
Total benefits, loss and expenses increased 0.2% to $2.5 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.
Assurant, Inc. Price, Consensus and EPS Surprise
Assurant, Inc. price-consensus-eps-surprise-chart | Assurant, Inc. Quote
Segmental Performance
Revenues at Global Housing increased 24.7% year over year to $584.8 million. The growth was driven by the Homeowners business from higher average insured values and premium rates to address increased claims severity as well as improved policies in-force. The increase was also driven by the absence of catastrophe reinstatement premiums and higher net investment income. The figure beat the Zacks Consensus Estimate of $534 million and was higher than our estimate of $531.3 million.
Adjusted EBITDA was $165.1 million against the year-ago quarter’s adjusted EBITDA loss of $38.5 million. Excluding reportable catastrophes, adjusted EBITDA more than doubled year over year to $191.3 million. The growth was due to lower non-catastrophe loss experience, including a $14.6 million reserve reduction in the current quarter, as well as higher net earned premiums and expense leverage within the Homeowners business. Higher net investment income also contributed to the growth. The figure was higher than our estimate of $155.4 million.
Revenues at Global Lifestyle increased 5.3% year over year to $2.2 billion. The improvement was primarily driven by higher net investment income, prior period sales in Global Automotive and an increase in Connected Living business from growth in North American mobile subscribers, partially offset by an approximately $55 million impact from previously disclosed mobile program contract changes as well as runoff mobile programs. The figure beat the Zacks Consensus Estimate of $2.1 billion and was higher than our estimate of $2 billion.
Adjusted EBITDA of $191.8 million increased 7% year over year, driven by growth in the Connected Living business, which was partially offset by lower Global Automotive results.
Adjusted EBITDA loss at Corporate & Other was $26.2 million, wider than the year-ago quarter’s adjusted EBITDA loss of $24.9 million. The wider loss was due to higher employee-related expenses, which was partially offset by higher net investment income.
Financial Position
Liquidity was $491 million as of Sep 30, 2023, which was $266 million higher than the company’s current targeted minimum level of $225 million.
Total assets increased 0.2% to $33.2 billion as of Sep 30, 2023 from 2022 end. The figure, however, was higher than our estimate of $32.5 billion.
Total shareholders’ equity came in at $4.5 billion, up 6.2% year over year. The figure was higher than our estimate of $4.2 billion.
Share Repurchase and Dividend Update
In third-quarter 2023, Assurant repurchased approximately 0.3 million shares for $50 million. From Oct 1 through Oct 31, 2023, the company repurchased approximately 0.2 million shares for $30 million. It now has $174 million remaining under the current repurchase authorization.
Assurant’s total dividends amounted to $37 million in the third quarter of 2023.
2023 Guidance
Assurant expects adjusted EBITDA, excluding reportable catastrophes, to increase by mid- to high-teens, as significant growth in Global Housing is partially offset by a modest decline in Global Lifestyle.
The company expects Global Housing Adjusted EBITDA, excluding reportable catastrophes, to grow significantly, driven by strong performance in the Homeowners business reflecting higher lender-placed net earned premiums, improving non-catastrophe loss experience, including favorable prior period reserve development and continued expense savings.
AIZ expects Global Lifestyle Adjusted EBITDA to decline modestly, due to Global Automotive’s elevated claims costs and lower contributions within Asia Pacific, including softer volumes and the impact of foreign exchange. The decline will be partially offset by higher net investment income, mobile growth in North America and continued expense savings.
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 exceed growth in adjusted EBITDA, excluding reportable catastrophes driven by higher earnings, a lower effective tax rate and the impact of share repurchases.
AIZ expects a depreciation expense of approximately $105 million, an interest expense of approximately $108 million and an effective tax rate of approximately 20% to 22%.
Assurant expects business segment dividends to approximate 65% of segment Adjusted EBITDA, including reportable catastrophes, which takes into account the extended restructuring plan. This is subject to the business and investment portfolio performance, and rating agency and regulatory capital requirements.
Capital deployment priorities are projected to focus on maintaining a strong financial position, supporting business growth by funding investments and M&A and returning capital to shareholders through common stock dividends and share repurchases, subject to board approval.
Zacks Rank
Assurant currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Some Other Insurers
Everest Group, Ltd.’s EG third-quarter 2023 operating income per share of $14.14 beat the Zacks Consensus Estimate by 39%. The bottom line rebounded from the year-ago loss of $5.28. Everest Group’s total operating revenues of nearly $4 billion increased 25.6% year over year on higher premiums earned and net investment income. The top line beat the consensus mark by 4.9%. Gross written premiums improved 19.3% year over year to $4.4 billion, driven by 32.7% growth in Reinsurance and 3.5% growth in Insurance. Our estimate was $4.1 billion.
Net investment income was $406 million, more than double year over year. The upside was driven by strong fixed income and alternative investment returns. Our estimate was $238.5 million. The Zacks Consensus Estimate was pegged at $339 million. Total claims and expenses decreased 6% to $3.3 billion, primarily due to lower incurred losses and loss adjustment expenses. Our estimate was $3.5 billion. Pre-tax underwriting income was $301 million, rebounding from the year-ago loss of $367 million. Pre-tax catastrophe losses net of estimated recoveries and reinstatement premiums were $170 million, narrower than $730 million in the year-ago quarter. The combined ratio improved 2,050 basis points (bps) year over year to 91.4 in the reported quarter. The Zacks Consensus Estimate was 95, while our estimate was 95.6.
CNA Financial Corporation CNA reported third-quarter 2023 core earnings of $1.06 per share, which beat the Zacks Consensus Estimate by 15.2%. The bottom line increased 35.9% year over year. Total operating revenues of CNA Financial were $3 billion, up 11.8% year over year due to higher premiums and net investment income. The top line beat the Zacks Consensus Estimate by 3.1%.
Net written premiums of Property & Casualty Operations increased 6% year over year to $2.2 billion, driven by a retention rate of 83% and renewal premium change of 6%, with a written rate of 6%, exposure change of 1% and new business increase of 4%. Pretax net investment income increased 31% to $553 million pretax, including a $72 million increase from limited partnerships and common stock to $28 million and a $59 million increase from fixed-income securities and other investments to $525 million. Total claims, benefits and expenses remained almost flat year over year at $3 billion and came in line with our estimate. Catastrophe losses were $94 million, narrower than a loss of $114 million in the year-ago quarter. Underwriting income increased 56% year over year to $131 million. The combined ratio improved 150 bps year over year to 94.3. The Zacks Consensus Estimate was pegged at 95.
Arch Capital Group Ltd. ACGL reported third-quarter 2023 operating income of $2.31 per share, beating the Zacks Consensus Estimate by 50%. The bottom line increased more than eightfold year over year. Gross premiums written improved 17.2% year over year to $4.5 billion. Net premiums written climbed 35.8% year over year to $3.4 billion on higher premiums written across its Insurance and Reinsurance segments as hard market rates and rising inflation drove client demand for many of its property and casualty products. Net premiums beat our estimate of $3 billion.
Net investment income increased 108.5% year over year to $269 million and beat our estimate of $265.3 million. It was driven by higher interest rates and growth in invested assets, which benefited from strong operating cash flows. The Zacks Consensus Estimate was pegged at $261 million. Operating revenues of $3.5 billion rose 32.6% year over year, driven by higher net premiums earned and net investment income. It beat the Zacks Consensus Estimate by 1.5%. Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $180 million. Arch Capital’s underwriting income increased more than tenfold year over year to $721 million.
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