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Assurant's $1.36B Reinsurance Program to Curb Financial Risk

Zacks Equity Research
Updated

Assurant Inc. AIZ has announced an $1.36 billion 2017 property catastrophe reinsurance program, intended to lower its risk and financial exposure, thereby augmenting financial capabilities. The reinsurance coverage comprises $1.03 for U.S. catastrophe loss and $0.33 billion for the International segment.

The company announced that its reinsurance premiums are projected to be $125.6 million. This is about $7 million lower than the reinsurance premium of $132.6 million in 2016. The reduction in premiums stemmed from an improved market pricing, as well as the company’s lowered exposure to lender-placed insurance.

Per the program, the U.S. per-occurrence catastrophe coverage encompasses Assurant retaining $125 million coverage and the reinsuring, $1.03 billion coverage. The multi-year reinsurance contract should cover a portion of the $895 million layer in excess of $260 million through 2018. In its Florida Hurricane Catastrophe Fund, Assurant will cover $100 million loss while reinsure 90% of $324 million loss.

Per the program, International per-occurrence catastrophe coverage has increased from the previous year with expansion of Assurant’s business in select property markets. The International per-occurrence catastrophe coverage for Latin America is $183.5 million and for Caribbean is $152.5 million. Assurant will have $4.5 million coverage for loss in Latin America and $17.5 million in Caribbean.

With this new reinsurance program, the Zacks Rank #4 (Sell) multiline insurer can now better serve its 2.8 million homeowners and renters policyholders.

The company is on track to restructure its business for long-term growth. It is shedding off non-growth business and intensifying the focus on Specialty Property and Casualty and Lifestyle Protection. In this scenario, reinsuring its insurance coverage seems prudent. This move can possibly enhance the company’s profitability and financial flexibility.

Shares of Assurant have outperformed the Zacks categorized Multiline Insurance industry, year to date. While the company’s shares rose 13%, the industry gained 5.8%. We expect such growth drivers to drive the shares higher, going forward.


 

Stocks to Consider

Few better-ranked stocks from the insurance industry are Cigna Corp CI, FBL Financial Group, Inc. FFG and Progressive Corp. PGR

Progressive provides personal and commercial property-casualty insurance, plus other specialty property-casualty insurance and related services primarily in the U.S. The company has delivered positive surprises in two of the last four quarters with an average beat of 4.95%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

FBL Financial sells individual life insurance and annuity products. The company has delivered positive surprises in two of the last four quarters with an average beat of 1.98%. The stock holds a Zacks Rank #2.

Cigna provides health care and related benefits, the majority of which are offered through workplace. The company has delivered positive surprises in three of the last four quarters with an average beat of 1.35%. The stock carries a Zacks Rank #2 (Buy).

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Assurant, Inc. (AIZ) : Free Stock Analysis Report
 
Cigna Corporation (CI) : Free Stock Analysis Report
 
FBL Financial Group, Inc. (FFG) : Free Stock Analysis Report
 
Progressive Corporation (The) (PGR) : Free Stock Analysis Report
 
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