Assurant (AIZ) Estimates Catastrophe Loss From Harvey, Irma

Assurant Inc. (NYSE:AIZ) recently announced pre-tax catastrophe loss estimates stemming from the impact of Hurricane Harvey and preliminary loss estimates from Hurricane Irma.

Assurant projects between $134 million and $140 million pre-tax of reportable catastrophe losses, net of reinsurance and reinstatement premiums resulting from Hurricane Harvey. The loss will impact the third-quarter performance of its Global Housing segment the most. In fact, the segment has already been facing headwinds regarding lender-places business. The company is realigning business with an eye on higher growth returns. We expect the outcomes to remain depressed as the segment’s performance is hampered by the catastrophe.

With respect to Hurricane Irma, this Zacks Rank #3 (Hold) insurer expects loss to exceed its retention of $125 million pre-tax. However, the same will be covered by its reinsurance program. This July, Assurant announced a $1.36 billion 2017 property catastrophe reinsurance program, intended to lower the company’s risk and financial exposure, thereby augmenting financial capabilities.

The reinsurance coverage comprises $1.03 billion for the U.S. catastrophe loss and $0.33 billion for the International segment. Within the program, Assurant will cover $100 million loss while reinsure 90% of $324 million loss from its Florida Hurricane Catastrophe Fund. The International per-occurrence catastrophe coverage for Caribbean region is $152.5 million. These will likely cushion the company’s third-quarter results.

Assurant stated to maintain strong surplus levels in insurance companies. It boasts a solid capital position with $625 million of capital as of Jun 30, 2017.

Assurant had also experienced catastrophe losses from Louisiana floods in the year-ago quarter. Catastrophe losses were $33 million in third-quarter 2016 compared with none in third- quarter 2015.

The Zacks Consensus Estimate for the third quarter is currently pegged at $1.45 per share, which reflects a year-over-year increase of 45%. We expect the estimates to move downward as analysts incorporate the impact of the catastrophe loss.

Shares of Assurant have gained 0.5% year to date, underperforming the industry’s increase of 2.9%. Estimates for 2017 have inched up 0.4% while the same for 2018 remain unchanged in the last seven days. Strategic initiatives to fuel growth and a solid capital position should continue to drive the shares higher.

Recently, The Travelers Companies, Inc. (NYSE:TRV) announced pre-tax catastrophe loss between $375 million and $750 million or $245 million and $490 million after-tax from Hurricane Harvey.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Atlas Financial Holdings, Inc. (NASDAQ:AFH) and Markel Corporation (NYSE:MKL) , both flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atlas Financial Holdings engages in underwriting commercial automobile insurance policies in the United States. The company’s average four-quarter surprise is 57.94%

Markel Corporation markets and underwrites specialty insurance products in the United States and internationally. The company’s average four-quarter surprise is 21.06%

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