Connected Living And Verizon Partnerships Will Shape Future Markets

Key Takeaways

• Strategic partnerships and innovative offerings in Connected Living foster growth opportunities through improved client relationships and product advancements.
  
• Investment in technology, new product launches, and operational excellence supports revenue growth and profitability across multiple business segments.
  
• Exposure to macroeconomic conditions, trade dynamics, and catastrophic events may challenge Assurant's margins, revenues, and growth across various segments.

Catalysts

Provides protection services to connected devices, homes, and automobiles in North America, Latin America, Europe, and the Asia Pacific.

• The diversified global operating model and partnerships with leading brands, including Verizon, provide opportunities for growth in revenue through strategic client relationships and innovative product offerings in Connected Living.
  
• Continued investment in leading-edge technology, such as automation, robotics, and AI, at device care centers creates potential for improved operational efficiencies, thereby potentially enhancing net margins.
  
• Lender-placed policy growth, bolstered by changes in the voluntary insurance market, is expected to drive significant top-line growth in Global Housing, as evidenced by a 17% increase in homeowners' revenue in the first quarter.
  
• New product launches in Global Automotive, combined with improved loss experience, support stable earnings and present opportunities for additional revenue growth from expanded market share in the U.S. and international distribution channels.
  
• A strong focus on operational excellence and financial performance, with significant investments in new client program launches, is anticipated to contribute to growth in adjusted earnings per share, reflecting Assurant's commitment to long-term profitability.

Assurant Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Assurant's revenue will grow by 3.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.4% today to 8.5% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $23.02) by about May 2028, up from $760.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.3x on those 2028 earnings, down from 13.2x today. This future PE is lower than the current PE for the US Insurance industry at 14.4x.
• Analysts expect the number of shares outstanding to decline by 2.3% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.24%, as per the Simply Wall St company report.

Assurant Future Earnings Per Share Growth

Risks

• Assurant's exposure to macroeconomic conditions and tariffs could lead to increased claims costs, particularly in the housing and auto sectors, potentially impacting net margins.
  
• Foreign exchange fluctuations and investments in new partnerships and programs might suppress growth in the Global Lifestyle segment, affecting adjusted EBITDA and earnings per share.
  
• Assurant's Global Auto business faces challenges from new versus used car dynamics and potential inflation impacts on claims costs, which could impact revenue and profitability.
  
• Catastrophic events, such as California wildfires, have already led to significant losses and could continue to strain reinsurance costs, impacting earnings.
  
• The uncertainty in the trade-in programs and competitive intensity in the mobile segment could influence the connected living revenue, affecting the company's ability to meet growth expectations.

Valuation

• The analysts have a consensus price target of $227.4 for Assurant based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $250.0, and the most bearish reporting a price target of just $200.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $13.3 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 11.3x, assuming you use a discount rate of 6.2%.
  
• Given the current share price of $197.82, the analyst price target of $227.4 is 13.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.