Bear Of The Day: Assurant, Inc. (AIZ)

Assurant, Inc. (AIZ - Analyst Report) had pre-announced that their Health segment was experiencing adverse conditions during Q1, and that management was looking into strategic alternatives for both their Health and Employee Benefits divisions. But during Q1, the company experienced weakness in three out of four of their key divisions, and saw mixed underwriting results. The combination of these factors has made Assurant the Zacks Bear of the Day.

This Zacks Ranked #5 (Strong Sell) company is a premier provider of specialized insurance products and related services in North America and selected other international markets.  Assurant has four key businesses, Assurant Employee Benefits, Assurant Health, Assurant Solutions, and Assurant Specialty Property.  The company distributes its insurance products and services through various distribution channels.

In their most recent quarter, the Health segment recorded a loss of $84 million due to a revision in estimated recoveries associated with 2014 policies under the Affordable Health Care Act.  Further, the Employee Benefits segment saw earnings drop 27%, and Specialty Property earnings fell 23%.  Also, the Solutions division lost a mobile tablet program, which is expected to negatively impact premiums by almost $100 million annually starting in Q2 15.  

Estimates Graph

The graph below shows AIZ’s historic price levels against the EPS consensus.  As you can see the estimates are significantly declining for 2015 and 2016.

Declining Estimates

Over the past 30 days, earnings estimates have declined for Q2 15, Q3 15, FY 15, and FY 16; Q2 15 dropped from $1.37 to $1.21, Q3 15 fell from $1.29 to $1.12, FY 15 tumbled from $4.65 to $4.24, and FY 16 declined from $6.48 to $6.33.

Bottom Line

While the negative Health segment operating loss was anticipated, the less than expected performance of the Employee Benefits, Solutions, and Specialty Property segments was disconcerting.  While there was some positives, the difficult first quarter will still make the remainder of 2015 challenging for management.

If you are inclined to invest in the Insurance-Multi line segment, you would be best served by looking into Ageas-Adr (AGESY - Snapshot Report), Assured Guarnty (AGO - Snapshot Report), or Old Rep Intl (ORI - Snapshot Report).  All three carry a Zacks Rank #1 (Strong Buy).