Assurant Inc. AIZ announced its 2020 property catastrophe (CAT) reinsurance program worth $1.15 billion. Assurant’s premium for this reinsurance program is expected to be $138 million pre-tax.
A portion of the 2020 CAT reinsurance program is on a per-occurrence basis, which will provide protection of up to $930 million. This amount is in excess of $80 million retention for the United States. The program thus includes coverage in the Caribbean of up to $175 million in excess of $20 million, and the extension of 2020 Latin America protection of up to $170 million in excess of $7 million.
Given continued execution of its long-term strategy to lower less attractive risk exposure, the company has been doing away with businesses that do not meet its risk-return criteria. This in turn has enabled the company to lower overall tower limit by $230 million.
Considering the fact that Florida is a hurricane-prone state, Assurant is also opting for multiple storm protection coverage in the area to guard itself against further losses.
A reinsurance agreement is a kind of reimbursement program for an insurance company. Programs such as these lower the financial exposure of the company and enable them to better serve both homeowners as well as renters who suffer due to harsh weather conditions.
Given its exposure to catastrophes losses, this Zacks Rank #3 (Hold) insurer intends to mitigate the losses through reinsurance program. The company’s multiyear reinsurance contracts, now in place, cover about 50% of the U.S. Program for the next two to five years, up from 36% in 2019, adding stability at attractive pricing. This program is expected to protect the insurer’s earnings and cash flows during an active cat year.
Assurant has taken an extended reinsurance cover as its business exposure in catastrophe prone areas has increased. The company offers its reinsurance program to more than 40 reinsurers, most of which carry strong investment grade ratings of A- or better from A.M. Best.
The company’s shares have lost 23.2% year to date, compared with the industry's decline of 26.2%. Attractive portfolio of market-leading businesses in housing and lifestyle markets, integrated risk offerings, significant free cash flow generation and disciplined capital management to support organic growth, pursue select acquisitions and return capital to shareholders should help shares bounce back.
Stocks to Consider
Some belter-ranked insurers are Old Republic International Corporation ORI, Horace Mann Educators Corporation HMN and MGIC Investment Corporation MTG.
Old Republic International engages in the insurance underwriting and related services business primarily in the United States and Canada. The company delivered positive surprise of 104.35% in the last reported quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Horace Mann Educators operates as a multiline insurance company in the United States. The company delivered positive surprise of 16.42% in the last reported quarter. The stock caries a Zacks Rank #2 (Buy).
MGIC Investment provides private mortgage insurance, other mortgage credit risk management solutions, and ancillary services to lenders and government sponsored entities in the United States, Puerto Rico, and Guam. The company delivered positive surprise of 10.53% in the last reported quarter. The stock caries a Zacks Rank #2.
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