We reiterate our Neutral recommendation on Assurant Inc. ( AIZ) following third quarter earnings. Though the company reported better-than-expected results and delivered a positive surprise of 18%, weakness in the company’s specialty property, employee benefits as well as health business keeps us on the sidelines.
On Oct 24, 2013, Assurant reported third quarter earnings of $1.71 per share, significantly ahead of the Zacks Consensus Estimate of $1.45 per share. Earnings also increased 10.3% year over year. Assurant’s better-than-expected results were driven by strong performance by its Specialty Property segment. A lower share count due to share repurchases also boosted the bottom-line results.
The company witnessed rising earnings estimates following third quarter earnings release. Over the past 30 days the Zacks Consensus Estimate for 2013 went up by 4.1% to $6.08 as 10 of 11 estimates moved up. The same for 2014 was up by 1.8% to $6.15 per share as 4 of 11 estimated were revised upward.
From an operational view point, Assurant boasts of a solid franchise, strong management team and diversified product and geographic profile.
We are also upbeat about Assurant's Solutions division. This division has been performing well over the past many quarters. With international as well as domestic business improving, we expect top line earnings growth.
On the tepid side, Employee Benefits segment has been pressured by persistent economic challenges in the small group sector leading to higher lapse rates and lower premium growth on in-force policies.
We are also concerned about the long term performance at Specialty Property where expected regulator mandated price reductions and declining placement rates will pressurize revenues.
Another segment of Assurant – Health insurance, had been underperforming for the past several quarters due to the challenging marketplace.
Nevertheless, this Zacks Rank#2 (Buy) stock’s strong balance sheet with disciplined capital management will continue to aid its solid results.
Other stocks to consider