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What's in the Cards for Assurant (AIZ) This Earnings Season?

Assurant, Inc. AIZ is slated to report third-quarter 2020 results on Nov 2, after market close. The company beat estimates in three of the last four quarters, delivering an average earnings surprise of 6%.

Factors at Play

Assurant’s third-quarter performance is likely to have been impacted by adverse forex, and lower investment income and lower mortality risk.

The company expects growth in Global Lifestyle’s net operating income. However, earnings are expected to be lower in the to-be-reported quarter. This is likely due to adverse foreign exchange and lower investment income, auto normalization of claims activity in Connected Living at higher levels, and the timing and availability of new phone introductions impacting trade-in activity.

The company expects Global Housing net operating income, excluding catastrophes, to increase, driven by improved results in specialty businesses and growth in multifamily housing. However, it also estimates the results of Global Housing for the second half of 2020 to be not on par with the first half. This is because it projects normalized level of claims frequency, reduced real estate owned (REO) volumes, absence of income from the financially insolvent client in lender-placed and lower investment income due to the lower yields available in the current interest rate environment.

The company expects earnings of Global Preneed to increase in the second half of 2020 compared with the first half of the year owing to more favorable mortality trends. The company estimates the reduction in mortality to be partially offset by investment income declines. Also, new sales are expected to fluctuate in the third quarter.

All these factors combined are likely to have adversely impacted revenues. The Zacks Consensus Estimate for revenues is pegged at $2.4 billion, indicating a 1.9% decrease from the year-ago reported figure.

Higher amortization of deferred acquisition costs and value of business acquired and underwriting, general and administrative expenses are likely to have increased expenses in the third quarter.

The company expects to resume share repurchases in the third quarter and reach its objective of returning $1.35 billion of capital to shareholders between 2019 and 2021 on the back of strong capital position. This is expected to have provided support to the bottom-line.

For the to-be-reported quarter, the Zacks Consensus Estimate for the company’s earnings is pegged at 94 cents, indicating a decline of 44.3% from the year-ago reported figure.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Assurant this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Assurant has an Earnings ESP of 0.00%. This is because the both Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 94 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Assurant, Inc. Price and EPS Surprise

Zacks Rank: Assurant currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Some stocks worth considering from the insurance sector with the apt combination of elements to surpass estimates this reporting cycle are as follows:

Cigna Corporation CI has an Earnings ESP of +1.86% and a Zacks Rank #2.

CNO Financial Group CNO has an Earnings ESP of +2.52% and is a Zacks #2 Ranked stock.

MGIC Investment MTG has an Earnings ESP of +14.89% and a Zacks Rank #3.

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MGIC Investment Corporation (MTG): Free Stock Analysis Report
 
CNO Financial Group, Inc. (CNO): Free Stock Analysis Report
 
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Assurant, Inc. (AIZ): Free Stock Analysis Report
 
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