Assurant Eyes Long-Term Growth; Low Interest Rates A Drag

On Sep 5, 2016, we issued an updated research report on Assurant, Inc. (NYSE:AIZ) .

Assurant remains committed to boosting long-term growth and in keeping with the plan has been restructuring its business. To this end, the company has divested its Employee Benefits business and intends to exit the health insurance market in 2016. The insurer has also been focusing on Specialty Property and Casualty and Lifestyle Protection businesses.

Notably, the company received dividends worth $604 million following the sale of Employee Benefits. Also, it anticipates more dividend receipts in the later part of 2016 and in 2017 as it releases its capital. This should further support the business.

Moreover, Assurant remains focused on evolving the lender-placed platform at Specialty Property to further enhance its market-leading position. The insurer expects the capital generated from Solutions and Specialty Property to offer enough flexibility for effective capital deployment to further boost its operations. Also, management intends to return $1.5 billion to shareholders by the end of 2017. This makes it an attractive pick for yield seeking investors.

However, intense competition in the domestic as well as international markets and low interest rates remain headwinds.

In addition, as Assurant Health is expected to fully exit the health insurance market in 2016, the company is likely to incur $13–$23 million pre-tax of extra exit-related charges and overhead expenses, which might hurt the bottom line.

The Zacks Consensus Estimate has also witnessed downward revisions over the last 60 days as most of the estimates trended south. Nonetheless, banking on the operational strength, management projects at least 15% annual increase in operating earnings per share and 15% growth in return on equity by 2020.

Zacks Rank and Stocks to Consider

Currently, Assurant carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space are ageas SA/NV (OTC:AGESY) , CNO Financial Group, Inc. (NYSE:CNO) and James River Group Holdings, Ltd. (NASDAQ:JRVR) . Each of the stocks holds a Zacks Rank #2 (Buy).

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