AIZ - Comments Following Travel with Assurant Management, Raising Target to $310

Research evidence excerpt

AIZ - Comments Following Travel with Assurant Management, Raising Target to $310

Truist Securities

Home warranty should be a long-term growth driver for AIZ. The CFO said their strategy is to provide more value to clients in the

form of higher benefits, which they believe is in contrast to legacy market participants who have been maximizing margin (and thereby

providing less value to policyholders). They judge that their extensive repair networks in the retail channel – including relationships with

Lowe's (LOW, Buy, Ciccarelli), Best Buy (BBY, Hold, Ciccarelli), and GE Appliances (GE, NR) – provide them with considerable expertise

in managing contractors. The CFO noted that the company’s substantial investments in data and technology should likewise provide

an advantage for them in the home warranty sector, especially given their emphasis on B-to-B-to-C distribution, which is enhanced by

close integration with partners. Management’s goal in home warranty – as with all of their businesses – is to be the #1 or #2 player; they

believe this gives them the scale to make investments in new capabilities that extend their market share leadership and effectively box

out smaller competitors.

The company’s solid balance sheet and cash flow should support future growth. Free cash flow should approximate 50-60% of

dividends from the subsidiaries, which last year totaled $925 million and are generally expected to increase along with earnings. The

company’s share buyback target was originally announced at $250-$350 million and was subsequently narrowed to $300-$350 million

in light of the elevated purchase activity in the first quarter. That said, management expressed a strong preference for using capital to

support growth given the attractive opportunities in front of them.