The longer it takes for the impact of regulatory actions to take place, Nadel says, "the stronger the company's free cash flow will remain, and thus capital management is likely to remain elevated."

Nadel's scrutiny of the force-placed industry and Assurant in particular was prompted by a March 21 agreement between New York and Assurant that the insurer cut rates and institute other reforms.

Benjamin Lawsky, superintendent of the state Department of Financial Services, urged other states to implement the same reforms as New York while at the quarterly meeting of the National Association of Insurance Commissioners in Houston.

Nadel says his original downgrade of Assurant to underperform was prompted by concerns of "potential material downside risk to forced-placed premium rates and thus a material reduction in earnings and returns from Assurant's largest earnings sector."

Nadel says, in some respects, the concerns were warranted because California and New York have imposed 30 percent, and what appears to be 30-50 percent, rate reductions, respectively.

However, these two states account for less than 15 percent of forced-placed premiums, Nadel points out.

Florida, on the other hand, accounts for 35 percent or more of Assurant's force-placed insurance business.

"Given the less onerous rate reduction Florida approved for Assurant's closest competitor QBE, we believe the likelihood is that Assurant's rate reduction will be even less severe since [Assurant] is well known to be a lower-cost provider," Nadel says.