Assurant Is A Niche Insurer With Great Capital Position But Limited Upside

Credit Suisse’s John Nade believes that despite Assurant, Inc. AIZ being a “true niche” insurer and the company having a robust capital position, there is limited upside to the stock, following the recent share price appreciation.

Nade initiated coverage of the company with a Neutral rating and price target of $93.

Reasons For A Neutral Rating

Although Assurant has an improved business mix and attractive free cash flow profile, the analyst believes that the consensus EPS forecasts for the company could prove too high during 2017–2018.

Related Link: Credit Suisse Neutral On Several Insurance Names: Reinsurance Group, Unum, Torchmark

Nade also mentioned that “even after taking into account excess capital in the valuation and ascribing an above-average multiple of 12x to the ongoing operations, we believe the risk/reward at current levels is relatively unattractive.”

Reasons For Caution

In addition, the analyst believes that the average annual EPS CAGR of over 15 percent through 2020 and ongoing ROE of 15 percent could be difficult for the company to achieve, particularly against the backdrop of the current operating environment.

“While we think management has done an excellent job executing its plan to simplify the business and deploy capital thoughtfully, we see less accretion from buybacks (owing to share price appreciation) and believe that a larger portion of excess capital is likely to be deployed via M&A,” Nade went on to say.

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