Insurance Stocks

Assurant Inc. Valuation – November 2015 Update $AIZ

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Assurant Inc. (AIZ) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Assurant, Inc. (Assurant) is a provider of insurance products and related services, which operates in North America, Latin America, Europe and across the world. The Company operates in four segments: Assurant Solution, Assurant Specialty Property, Assurant Health and Assurant Employee Benefits. Assurant Solutions provides mobile device protection, debt protection administration, credit-related insurance, warranties and service contracts and pre-funded funeral insurance. Assurant Specialty Property provides lender-placed homeowners insurance, renters insurance and related products and manufactured housing homeowners insurance. Assurant Health provides individual health and small employer group health insurance. Assurant Employee Benefits primarily provides group dental insurance, group disability insurance and group life insurance.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AIZ – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $5,546,285,559 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 2.58% Fail
5. Moderate PEmg Ratio PEmg < 20 17.25 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.22 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

AIZ value Chart November 2015

EPSmg $4.88
MG Growth Estimate 2.91%
MG Value $69.99
Opinion Overvalued
MG Value based on 3% Growth $70.82
MG Value based on 0% Growth $41.51
Market Implied Growth Rate 4.37%
Current Price $84.24
% of Intrinsic Value 120.37%

Assurant Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $4.09 in 2011 to an estimated $4.88 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 4.37% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Assurant Inc. (AIZ)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

AIZ Charts November 2015

Graham Number $60.91
PEmg 17.25
PB Ratio 1.22
Dividend Yield 1.35%
Number of Consecutive Years of Dividend Growth 12

 

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Most Recent Balance Sheet Figures

Long-Term Debt $1,171,305,000
Total Assets $30,586,090,000
Intangible Assets $1,185,899,000
Total Liabilities $25,902,490,000
Shares Outstanding (Diluted Average) 67,633,000

Earnings Per Share History

Next Fiscal Year Estimate $2.35
Dec14 $6.44
Dec13 $6.30
Dec12 $5.67
Dec11 $5.51
Dec10 $2.50
Dec09 $3.63
Dec08 $3.76
Dec07 $5.38
Dec06 $5.57
Dec05 $3.50
Dec04 $2.53
Dec03 $1.70
Dec02 -$9.17
Dec01 $0.90
Dec00 $0.85

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.88
Dec14 $5.86
Dec13 $5.29
Dec12 $4.59
Dec11 $4.09
Dec10 $3.64
Dec09 $4.26
Dec08 $4.44
Dec07 $4.43
Dec06 $2.91
Dec05 $1.02
Dec04 -$0.36
Dec03 -$1.59
Dec02 -$2.65
Dec01 $0.53
Dec00 $0.28

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Insurance Industry – October 2015
The 20 Best Stocks For Value Investors This Week – 8/15/15
Assurant Inc. Analysis – August 2015 Update $AIZ
47 Companies in the Spotlight This Week – 5/16/15
Assurant Inc. Quarterly Valuation – May 2015 $AIZ

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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