AIZ Stock Trading at a Discount to Industry at 1.85X: Time to Hold?
Image Source: Zacks Investment Research
Shares of Assurant have gained 14% in the past year, outperforming its industry and the Zacks S&P 500 composite's growth of 6.4% and 11.8%, respectively. It, however, underperformed the Finance sector's return of 18.2%.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Assurant's 2025 revenues is pegged at $12.59 billion, implying a year-over-year improvement of 5.2%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 18.7% and 4.4%, respectively, from the corresponding 2024 estimates. Earnings have grown 16.6% in the past five years, better than the industry average of 10.2%.
Two of the five analysts covering the stock have lowered estimates for 2025, while two analysts have raised the same for 2026 over the past 60 days. Thus, the Zacks Consensus Estimate for 2025 earnings has moved down 0.6% in the past 60 days, while the same for 2026 has moved up 0.9% in the same time frame.
Return on equity in the trailing 12 months was 15.4%, better than the industry average of 14.8%. 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 9.9%, better than the industry average of 2%.
Assurant's focus on growing fee-based capital-light businesses, which account for 52% of segmental revenues, bodes well for growth. Management estimates that the contribution from the same will continue to grow in double digits over the long term. Within Connected Living, AIZ continues to support long-term growth through the development of innovative offerings for partners. U.S. Connected Living is poised for solid growth, particularly within the mobile protection business, riding on innovative offerings, customer experience expertise and improved relationships with mobile carriers and cable operators. Homeowners' top-line growth, more favorable loss experience from prior-period development on claims, growth in policies in-force and higher average premiums within lender-placed, as well as growth across various specialty products, should drive better results at Global Housing. For 2025, AIZ expects Global Housing adjusted EBITDA, excluding reportable catastrophes, to increase.Global Lifestyle growth is expected to be driven by Connected Living from growth in global mobile device protection and a new financial services program, inorganic and organic growth strategies. For 2025, Assurant expects adjusted EBITDA in this segment to increase from growth in Connected Living and Global Automotive. 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.
Assurant has a solid capital management policy. It expects to deploy capital to fund investments, mergers and acquisitions. In November 2024, the board approved a dividend hike of 11%, which is the 20th consecutive year of increase. In the first quarter of 2025, Assurant repurchased shares for $62 million. As of now, $287 million remains under the current repurchase authorization. From a share repurchase perspective, Assurant's expected range for 2025 is between $200 million and $300 million, subject to M&A as well as market and other conditions. For the remainder of 2025, AIZ continues to expect share repurchases will remain more balanced due to the ability of its businesses to generate significant cash flow. The ultimate level of repurchases will depend on M&A opportunities and other market conditions.
Focus on capital-light businesses, Homeowners growth, and Connected Living growth within the mobile protection business should favor Assurant's results. Higher return on capital, as well as favorable growth estimates and attractive valuations, should continue to benefit the insurer over the long term. Assurant also has an impressive dividend history, reflecting capital strength, that are expected to be attractive to generate long-term value for shareholders. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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