Assurant, Inc. (NYSE:AIZN): A Diversified Specialty Insurer Delivering Consistent Outperformance

Published on September 24, 2024 | Ticker: AIZN

Assurant, Inc. (NYSE:AIZN) is a leading global business services company that supports, protects and connects major consumer purchases. The company operates in two primary segments - Global Lifestyle and Global Housing - and has consistently delivered strong financial results, outperforming the broader P&C insurance industry.

Financials

In fiscal year 2023, Assurant reported annual net income of $642.5 million, annual revenue of $11.13 billion, annual operating cash flow of $1.14 billion, and annual free cash flow of $935.6 million. The company's diversified business model and market leadership positions have enabled it to navigate challenging macroeconomic conditions and generate robust financial performance.

For the first quarter of 2024, Assurant reported adjusted EBITDA of $384 million, up 31% year-over-year excluding reportable catastrophes. Adjusted EPS grew 42% year-over-year to $4.97, also excluding reportable catastrophes. These strong results were driven by the continued strength of the Global Housing segment as well as growth in Global Lifestyle.

Global Lifestyle Segment: Powering Ahead with Connected Living

Assurant's Global Lifestyle segment, which includes the Connected Living and Global Automotive businesses, generated adjusted EBITDA of $208 million in the first quarter of 2024, up 4% year-over-year. This growth was primarily driven by the Connected Living business, which saw a 14% increase in adjusted EBITDA.

The Connected Living business benefited from continued momentum in the company's U.S. mobile protection programs, higher investment income, and a one-time $6.9 million client contract benefit. These positive factors were partially offset by new client and program implementation expenses, as well as unfavorable foreign exchange impacts.

Global Automotive, on the other hand, experienced a 9% decline in adjusted EBITDA due to higher claims costs from persistent inflation impacts on vehicle parts and labor, as well as the normalization of select ancillary products. Assurant has been taking actions to address these elevated claims costs, including implementing additional rate increases and strengthening its claims adjudication process.

For the full year 2024, Assurant expects Global Lifestyle's adjusted EBITDA to grow, driven by the continued expansion of its U.S. Connected Living business. Global Automotive is expected to be flat, as higher investment income offsets the continued loss pressure from inflation.

Global Housing Segment: A Standout Performer

Assurant's Global Housing segment delivered exceptional results in the first quarter of 2024, with adjusted EBITDA of $193 million, including $13 million of reportable catastrophes. Excluding reportable catastrophes, adjusted EBITDA increased by 74% year-over-year to $205 million.

The significant improvement in Global Housing's performance was driven by several factors. First, the segment experienced lower non-catastrophe loss ratios, benefiting from moderating claims trends and higher average premiums. This included a $16 million favorable year-over-year impact from prior period reserve development.

Additionally, Global Housing continued to benefit from top-line growth in the Homeowners business, driven by higher average premiums and an increase in the number of in-force policies. The segment also saw lower catastrophe reinsurance costs and higher investment income.

Assurant's unique business model in Global Housing, with its strong market positions, ability to quickly achieve rate adequacy, and operational efficiencies, has been a key driver of the segment's outperformance. The company expects Global Housing's full-year 2024 adjusted EBITDA growth, excluding catastrophes, to lead the overall enterprise.

Corporate and Other Segment: Investing for the Future

Assurant's Corporate and Other segment reported an adjusted EBITDA loss of $30 million in the first quarter of 2024, a $5 million year-over-year increase. This was primarily due to higher expenses to support the company's enterprise growth initiatives.

For the full year 2024, Assurant expects the Corporate and Other segment's adjusted EBITDA loss to approximate $110 million, consistent with 2023 levels. These investments are aimed at enhancing the company's capabilities and supporting new partnerships, laying the groundwork for continued growth.

Capital Management and Liquidity

Assurant's strong financial performance has enabled the company to generate significant deployable capital, with $254 million in segment dividends upstreamed in the first quarter of 2024. As of March 31, 2024, the company had $622 million in holding company liquidity, up from $606 million at the end of 2023.

This solid capital position has allowed Assurant to return $77 million to shareholders in the first quarter, including $40 million in share repurchases. The company expects to continue its balanced approach to capital management, with share repurchases in the range of $200 million to $300 million for the full year 2024, depending on strategic M&A opportunities, market conditions, and catastrophe activity.

Assurant's catastrophe reinsurance program has also been optimized, with the transition to a single placement date in April 2024. The company's 2024 catastrophe reinsurance premiums are estimated to be approximately $190 million, a reduction from $207 million in 2023, while providing increased coverage at attractive terms.

Outlook

Assurant's strong first quarter performance and unique business model position the company for continued success. For the full year 2024, the company expects enterprise adjusted EBITDA to grow by mid-single digits, excluding catastrophes, with Global Housing leading the enterprise growth.

Conclusion

The company's diversified business model, market leadership positions, and focus on operational excellence have enabled Assurant to consistently deliver financial outperformance. With a solid capital position, disciplined capital management, and strategic investments in growth initiatives, Assurant is well-equipped to navigate the evolving market landscape and create long-term value for its shareholders.

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