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It has been about a month since the last earnings report for Assurant (AIZ). Shares have lost about 9.8% 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 the most recent earnings report in order to get a better handle on the important drivers.
Assurant Q3 Earnings & Revenues Top Estimates, Rise Y/Y
Assurant delivered third-quarter 2021 net operating income of $1.41 per share, which surpassed the Zacks Consensus Estimate by 14.6%. The bottom line rose 23% year over year.
The company’s results benefited from strong top-line growth, lesser catastrophe losses being incurred coupled with solid contributions of Global Automotive and Connected Living, which forms part of the Global Lifestyle segment. However, the upside was partly offset by an uptick in non-catastrophe loss experience within the Global Housing segment and elevated costs.
Total revenues inched up 1.7% year over year to $2.5 billion due to higher net earned premiums, fees and other income, and net investment income. The top line outpaced the consensus mark by 1.3%. Net investment income of $76 million improved 20.1% year over year in the quarter under review.
Total benefits, losses and expenses of $2.4 billion escalated 8% year over year mainly due to a rise in selling, underwriting, general and administrative expenses, and interest expenses.
Global Lifestyle’s revenues amounted to $2 billion, which rose 9% year over year in the third quarter. The improvement was the result of solid trade-in volume leading to fee-income growth in Connected Living coupled with a strong net earned premium benefiting Global Automotive’s performance. Net operating income of $124 million advanced 16% year over year due to growth in Global Automotive and Connected Living.
Revenues at Global Housing dipped 1% year over year to $486.7 million in the quarter under review due to a decent reduction in specialty products and lender-placed. However, the downside was partly offset by well-performing multifamily housing. Net operating income plunged 76% year over year to $3.2 million.
Net operating loss at Corporate & Other came in at $21.3 million, narrower than the prior-year quarter’s loss of $25.7 million. The uptick can be attributed to reduced employee-related and third-party costs coupled with a decline in real-estate costs leading to expense savings.
Financial Update (as of Sep 30, 2021)
The company exited the third quarter with liquidity of $1.3 billion, which remains $1.1 billion higher than the company’s current targeted minimum level of $225 million. Total assets of $33.6 billion declined 24.7% from the 2020-end level. Total shareholders’ equity dropped 3.5% from the figure as of Dec 31, 2020, to $5.7 billion.
Share Repurchase and Dividend Update
The company bought back two million shares worth $323 million in the third quarter. During Oct 1-Oct 29, the company bought back additional shares of nearly 0.6 million for roughly $97 million. It has $1 billion left under its current share-buyback program. The company’s total common stock dividends amounted to $39 million in the quarter under review.
Assurant continues to anticipate net operating income, excluding reportable catastrophes per diluted share, to register 10% to 14% approximate growth from the 2020’s figure of $9.88. Based on year-to-date results and fourth-quarter forecasts, the company expects to remain nearer to the top half of the full-year range (10-14%). Management reiterated that strength in Global Lifestyle, a decline in Corporate loss and share buybacks are expected to provide a boost to 2021 results.
The company expects that adjusted EBITDA, excluding reportable catastrophes, will likely increase at the same rate as that of net operating income, excluding reportable catastrophes. The Global Lifestyle segment is projected to experience double-digit adjusted EBITDA growth.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
At this time, Assurant has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Assurant has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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