Assurant (AIZ): Buy, Sell, or Hold Post Q3 Earnings?

Assurant’s 20.9% return over the past six months has outpaced the S&P 500 by 7.5%, and its stock price has climbed to $241.51 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is there a buying opportunity in Assurant, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free for active Edge members.

Why Is Assurant Not Exciting?

We’re glad investors have benefited from the price increase, but we're swiping left on Assurant for now. Here are three reasons we avoid AIZ and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Insurance companies earn revenue from three primary sources: 1) The core insurance business itself, often called underwriting and represented in the income statement as premiums 2) Income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities 3) Fees from various sources such as policy administration, annuities, or other value-added services.

Over the last five years, Assurant grew its revenue at a tepid 5.1% compounded annual growth rate. This fell short of our benchmark for the insurance sector.

2. Net Premiums Earned Point to Soft Demand

Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.

Assurant’s net premiums earned has grown at a 4.6% annualized rate over the last five years, worse than the broader insurance industry and in line with its total revenue.

3. Steady Increase in BVPS Highlights Solid Asset Growth

For insurers, book value per share (BVPS) is a vital measure of financial health, representing the total assets available to shareholders after accounting for all liabilities, including policyholder reserves and claims obligations.

Although Assurant’s BVPS increased by a meager 2.7% annually over the last five years, the good news is that its growth has recently accelerated as BVPS grew at a solid 16.1% annual clip over the past two years (from $85.15 to $114.72 per share).

Final Judgment

Assurant’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 2.1× forward P/B (or $241.51 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 fairly confident there are better investments elsewhere. We’d recommend looking at one of our top software and edge computing picks.

Stocks We Like More Than Assurant

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