Assurant Inc., the insurer of foreclosed homes, climbed to the highest in five months after Goldman Sachs Group Inc. recommended investing in the stock on the prospect the company will repurchase shares.
Assurant gained 2.3 percent to $38.57 at 9:34 a.m. in New York after Goldman Sachs upgraded its rating to buy from neutral. The New York-based company dropped 6.1 percent this year, compared with the 11 percent gain of the 24-company KBW Insurance Index.
Chief Executive Officer Robert Pollock said last month that Assurant will have more capital to deploy as its business insuring foreclosed homes shrinks amid an improving housing market. Goldman Sachs analysts led by Christopher Giovanni said the company may repurchase $640 million of shares between the third quarter of this year and the last three months of 2013.
“We expect AIZ to continue to aggressively deploy its capital via buybacks,” the analysts wrote in a note to clients today, using the company’s ticker symbol. “AIZ has the best free cash flow story within our coverage group.”
Coverage of foreclosed homes expanded as homeowners missed payments amid the worst housing crash in seven decades. Regulators in California, Florida and New York have been investigating whether insurers charged too much for so-called force-placed insurance and the national group of insurance overseers held a hearing on the business in August.
Investors are overly pessimistic about cuts in Assurant’s prices tied to the investigations, the analysts said. Assurant may reduce rates by 20 percent in California, 15 percent in Florida, and 10 percent in New York, the analysts estimated.