Assurant (AIZ) Down 20.7% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Assurant (NYSE:AIZ). Shares have lost about 20.7% 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 its most recent earnings report in order to get a better handle on the important drivers.

Assurant Earnings Miss Estimates in Q4, Surge Y/Y

Assurant, Inc. reported fourth-quarter 2019 net operating income of $2.25 per share, which missed the Zacks Consensus Estimate by 6.6%. However, the bottom line surged 192.2% from the year-ago quarter.

Results gained from lower catastrophes, diminution in the valuation allowance associated with the company’s ACA risk corridor program receivables and the elimination of net realized losses on investments.

Total revenues were up 10.7% year over year to $2.6 billion, mainly attributable to higher premiums earned (up 12.4%) and net investment income (up 2.3%). Also, the top line beat the Zacks Consensus Estimate by 4.4%.

Total benefits, loss and expenses escalated 6.7% to $2.4 billion mainly on account of net losses suffered due to the company’s decision of divesting its business (Iké), and rise in selling, underwriting, general & administrative expenses.

Segmental Performance

Net earned premiums, fees and others at Global Housing improved 2% year over year to $513.3 million, driven by increased sharing economy offerings and multifamily housing.

The segment reported net operating income of $72.9 million against net operating loss of $12.4 million a year ago.

Net earned premiums, fees and others at Global Lifestyle increased 14% year over year to $1.9 billion. The upside was primarily driven by strong growth in Global Automotive and the expansion of mobile programs that were launched over the last three years.

Net operating income of $97.3 million declined 1% year over year primarily due to planned investments in mobile to drive growth and increased expenses in Global Automotive.

Net earned premiums, fees and others at Global Preneed rose 6% year over year to $51.4 million, primarily owing to growth in prefunded funeral policies as well as prior-period sales of the Final Need product. Net operating income declined 2% year over year to $16.1 million mainly due to reduced investment income from real estate joint venture partnerships and hence lower yields when compared with the prior-year period.

Net operating loss at Corporate & Other was $21.6 million, narrower than the year-ago quarter’s $27.5 million, attributable to reduced employee-related expenses and advantage from consolidated tax rate adjustment.

Financial Update

The company exited the fourth quarter with total assets of $44.3 billion, up 7.8% year over year. Debt was $2 billion, which increased marginally year over year.

Stockholders’ equity of $5.7 billion at the end of the quarter increased 10.7% year over year.

2020 Guidance

Assurant estimates net operating income (excluding reportable catastrophe loss) to grow between 10% and 14% from the 2019 level, driven by strong performance across all business segments and share buybacks.

Net operating income growth is likely to reflect moderate gains in Global Lifestyle, mainly driven by Connected Living. However, persistent declines in legacy Global Financial Services and continued investments might partially offset net operating income growth.

For Corporate & Other, Assurant expects yearly net operating loss to be around that reported in 2019. Additionally, interest expenses are projected to be $81 million and preferred dividends are anticipated to be $19 million.
Assurant anticipates Global Housing net operating income, excluding catastrophe losses, to grow across all business lines.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, Assurant has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

Assurant has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.