Major Mobile Carrier Partnerships Will Expand Customer Base And Services In Global Lifestyle And Connected Living

Key Takeaways

• Strategic partnerships and technology investments are anticipated to drive revenue growth and improve efficiency.
  
• Strong shareholder returns through share repurchases and dividends reflect robust cash flow and earnings per share growth.
  
• Assurant faces challenges in profitability and revenue due to tariffs, FX fluctuations, uncertain market growth, and rising claims from natural catastrophes.

Catalysts

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

• Significant client wins and renewals in Global Lifestyle and Connected Living, including partnerships with major mobile carriers, which are expected to drive revenue growth through expanded customer base and service offerings.
  
• Strategic investments in technology innovation, automation, and new product launches, such as T-Mobile's Protection 360 HomeTech product, are anticipated to enhance revenue and efficiency, potentially improving net margins.
  
• Stabilization of earnings in Global Automotive through targeted actions to address elevated claim costs suggests potential improvement in net margins, boosting overall earnings.
  
• Strong performance and growth in Global Housing, with improved efficiency and policy growth, underpinning expected EBITDA expansion and favorable net margin trends.
  
• Robust capital return to shareholders through share repurchases and dividend increases, signaling strong cash flow generation and contributing to earnings per share growth.

Assurant Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Assurant's revenue will grow by 4.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.4% today to 8.4% in 3 years time.
• Analysts expect earnings to reach $1.1 billion (and earnings per share of $22.93) by about March 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 11.7x on those 2028 earnings, down from 13.7x today. This future PE is lower than the current PE for the US Insurance industry at 13.2x.
• 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 6.42%, as per the Simply Wall St company report.

Assurant Future Earnings Per Share Growth

Risks

• The potential impact of tariffs and rising input costs could result in higher claims expenses and reduced consumer demand, affecting net margins and overall profitability.
  
• Foreign exchange (FX) rate fluctuations present risks that could negatively affect revenue and profitability, given the global nature of Assurant's operations.
  
• The investment spending required for new client programs and partnerships might not yield the anticipated returns, affecting the company's short-term net margins and earnings.
  
• The long-term sustainability of market growth in the Global Automotive and Connected Living segments is uncertain, and any slowdown could affect overall revenue growth and profitability.
  
• Natural catastrophes, like wildfires in California, could lead to increased claims expenses, affecting net margins and financial stability despite current reinsurance coverage.

Valuation

• The analysts have a consensus price target of $232.6 for Assurant based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $13.5 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 11.7x, assuming you use a discount rate of 6.4%.
  
• Given the current share price of $204.58, the analyst price target of $232.6 is 12.0% 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.