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Business Mix Shift Positions Assurant For Better Growth, ROE, Morgan Stanley Says In Bullish Initiation

Business Mix Shift Positions Assurant For Better Growth, ROE, Morgan Stanley Says In Bullish Initiation
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Insurer Assurant, Inc. (NYSE: AIZ) is poised for a 15-percent compound annual earnings growth rate thanks to accelerating growth and its accretive acquisition of TWG, according to Morgan Stanley.

The Analyst

Analyst Kai Pan initiated coverage of Assurant with an Overweight rating and $125 price target.

The Thesis

Assurant has repositioned itself, with focus on protecting homes and consumer products, with about 70 percent market share in lender-placed homeowners insurance, Pan said in a Tuesday note. (See the analyst's track record here.)

The company provides extended warranty plans protecting over 140 million cars, phones and electronics, the analyst said. 

Assurant's risk management, integrated solutions and strong partnerships are its key competitive advantages, Pan said. 

"Its business mix shift from risk-based insurance toward capital-light protection plans positions the company for faster growth and higher ROE." 

The drivers of the 15-percent EPS CAGR Morgan Stanley is projecting will be is to be driven by accelerating product protection growth, stabilization in lender-placed insurance, $100 million in operating efficiency improvement, the accretive acquisition of TWG and strong capital management, Pan said. 

Morgan Stanley estimates over 14-percent revenue CAGR in the company's product protection business and 6-percent annual margin expansion from scale and improving efficiency.

Countercyclical headwinds in Assurant's lender-placed business are abating as mortgage delinquencies bottom out, Pan said. 

Assurant's valuation does not reflect its growth potential and the change in its business mix, the analyst said.  

The Price Action

Assurant shares have gained about 7 percent year-to-date.

Related Links:

UBS Gets Bullish On Insurance Stocks

Insurance Companies Boost Usage Of Bond ETFs

Latest Ratings for AIZ

Jul 2018Keefe Bruyette & WoodsInitiates Coverage OnOutperform
Jul 2018Morgan StanleyInitiates Coverage OnOverweight
Jun 2018UBSMaintainsBuyBuy

View More Analyst Ratings for AIZ
View the Latest Analyst Ratings

Posted-In: insurance Kai Pan Morgan Stanley Risk ManagementAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga


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