Shares of Assurant, Inc. AIZ closed at $197.31 on Tuesday, near its 52-week high of $199.50. This proximity underscores investor confidence. It has the ingredients for further price appreciation. The stock is trading above the 50-day and 200-day simple moving average (SMA) of $184.33 and $175.46, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

Shares of AIZ have gained 19.7% in the past three months, outperforming the industry’s, the Finance sector’s and the Zacks S&P 500 composite’s growth of 6.4%, 2.7% and 3.9%, respectively.

AIZ Outperforms Industry, Sector, S&P 500 in 3-Months

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Earnings of Assurant grew 20.2% in the last five years, better than the industry average of 9%. AIZ has a solid surprise history. The life insurer has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 33.56%.

Optimistic Analyst Sentiment on AIZ

Each of the five analysts covering the stock has raised estimates for 2024 and four analysts have raised the same for 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 2.9% and 4.5% north, respectively, in the last 60 days.

AIZ’s Growth Projection Encourages

The Zacks Consensus Estimate for Assurant’s 2024 earnings per share indicates a year-over-year increase of 6.7%. The consensus estimate for revenues is pegged at $11.75 billion, implying a year-over-year improvement of 4.8%. The consensus estimate for 2025 earnings per share and revenues indicates an increase of 6.1% and 3.2%, respectively, from the corresponding 2024 estimates.

Assurant’s Favorable Return on Capital

Return on equity in the trailing 12 months was 19.6%, better than the industry average of 16%. This highlights the company’s efficiency in utilizing shareholders’ funds. 

Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting AIZ’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 12.4%, better than the industry average of 2.5%.

Key Points to Note for AIZ

Assurant’s focus on growing fee-based capital-light businesses that presently constitute 52% of segmental revenues bodes well for growth. Management estimates that contribution from the same will continue to grow in double digits over the long term.

Better performance in Homeowners reflecting higher lender-placed net earned premiums should drive better results at Global Housing. At the same time, growth across Connected Living and Global Automotive should drive Global Lifestyle.

The insurer remains focused on ramping up the Connected Living platform, deploying innovative products and services, and adding new partnerships. These initiatives are expected to double the margins of Connected Living to 8% over the long term.

Investment income, which has been witnessing an increase in net investment income over the past few years, should benefit from higher yields on fixed-maturity securities.

Prudent Capital Deployment

AIZ has a solid capital management policy in place. The insurer has been increasing dividends for the last 19 straight years. Assurant expects to be on the high end of the $200-$300 million share repurchases range for 2024. Notably, its free cash flow conversion has remained more than 100% over the last many quarters, reflecting its solid earnings.

AIZ Shares are Undervalued

Assurant shares are trading at a price-to-book multiple of 2.05, lower than the industry average of 2.71.

Its pricing, at a discount to the industry average, gives a better entry point to investors. Also, it has a Value Score of B. 

Shares of other multi-line insurers like MGIC Investment Corporation MTG, Radian Group Inc. RDN and Old Republic International Corporation ORI are also trading at a multiple lower than the industry average.

Final Take on AIZ

Well-performing Global Lifestyle business, growth of fee-based capital-light businesses, solid capital management, favorable estimates and effective capital deployment should favor Assurant’s results. AIZ's higher return on capital and favorable growth estimates present significant growth opportunities.

Assurant also has a VGM Score of B. Stocks with a favorable VGM Score are those with the most attractive value, best growth and most promising momentum compared with peers. Coupled with the positives and the affordability of the stock, the time appears right for potential investors to bet on this Zacks Rank #2 (Buy) insurer. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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MGIC Investment Corporation (MTG) : Free Stock Analysis Report

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