Assurant’s 16.3% return over the past six months has outpaced the S&P 500 by 7%, and its stock price has climbed to $276.84 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy Assurant, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Assurant Not Exciting?
We’re happy investors have made money, but we’re sitting this one out for now. Here are three reasons we avoid AIZ, plus one stock we’d rather own.
1. Net Premiums Earned Point to Soft Demand
When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.
Assurant’s net premiums earned has grown at a 5.2% annualized rate over the last five years, worse than the broader insurance industry and slower than its total revenue.
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Assurant’s EPS grew at an unimpressive 13% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 7.6% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
3. Substandard BVPS Growth Indicates Limited Asset Expansion
Book value per share (BVPS) serves as a key indicator of an insurer’s financial stability, reflecting a company’s ability to maintain adequate capital levels and meet its long-term obligations to policyholders.
To the detriment of investors, Assurant’s BVPS grew at a mediocre 11.8% annual clip over the last two years.
Final Judgment
Assurant isn’t a terrible business, but it doesn’t pass our bar. With its shares topping the market in recent months, the stock trades at 2.2× forward P/B (or $276.84 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We’re pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a dominant aerospace business that has perfected its M&A strategy.
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