ASSURANT, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Year-to-Date Performance: Adjusted EBITDA up 15% and adjusted EPS up 21% excluding catastrophes. Outperformance led by Global Housing and underlying growth in Connected Living, muted by investments and foreign exchange.
• Segment Highlights:
  • Global Lifestyle: Flat YTD due to elevated claims in global automotive and foreign exchange impacts.
  • Connected Living: YTD adjusted EBITDA up 3% constant-currency, with $21 million invested in first nine months, including a new device care center in Nashville.
  • Global Auto: Elevated losses in GAAP products, but vehicle service contract claims inflation stabilized with rate increases.
  • Global Housing: Strong performance with 34% YTD earnings growth excluding catastrophes, driven by policy growth in lender-placed and renters.
• Enterprise Outlook: Expect full-year adjusted EBITDA low-double-digit growth and adjusted EPS mid to high teens excluding catastrophes. Global Housing to grow solidly, Global Lifestyle to see modest growth with Connected Living investments.
• Transformation: Multi-year transformation enhanced business mix, risk profile, and market positioning, focusing on lifestyle and housing markets with B2B2C partnerships.

Segment Performance

• Global Lifestyle: Adjusted EBITDA decreased 4% in Q3. Year-to-date, relatively flat versus prior period due to elevated claims in global automotive and unfavorable foreign exchange of $10 million (2%).
• Connected Living: Year-to-date adjusted EBITDA increased 3% on constant-currency basis. $21 million invested in first nine months, with ~$8 million investment in Q3. Growth in global mobile protection programs with over 2 million additional devices protected, offset by investments in new capabilities and client partnerships.
• Global Auto: Earnings down modestly year-over-year due to elevated losses in ancillary GAAP products. Claims inflation in vehicle service contract business stabilized, with rate increases beginning to moderate impacts.
• Global Housing: Third quarter adjusted EBITDA including reportable catastrophes was $92 million; excluding catastrophes, up 20% to $229 million. Year-to-date earnings up 34% excluding reportable catastrophes. Policy growth in lender-placed (placement rate 1.92%, up 12 basis points YTD) and renters (adjusted EBITDA growth supported by PMC channel expansion).
• Corporate: Adjusted EBITDA loss in Q3 was $30 million, expected full-year corporate adjusted EBITDA loss ~$115 million.

Guidance

• Expect full-year adjusted EBITDA to grow low-double-digits and adjusted EPS to increase mid to high teens, both excluding catastrophes.
• Connected Living investment spend of $21 million YTD is sunsetting in 2024, with new investments expected in 2025 for net-new clients and programs.
• Global Housing expected to grow solidly in 2025 with policy count growth, increased average insured values, and expense leverage.

Risks

• Unfavorable foreign exchange impacts on International results.
• Macroeconomic factors affecting the voluntary homeowners coverage market, driving placement rate growth.
• Elevated losses in Global Auto's ancillary GAAP products, though expected to be short-term.
• Impact of catastrophes on pricing and reinsurance costs in Global Housing.

Q: On Global Housing, how are you thinking about pricing for 2025 and reinsurance program?

A: Keith Demmings mentioned they feel good about the reinsurance program, haven't touched the reinsurance tower yet, and expect pricing to be relatively stable in 2025. Keith Meier added they'll share reinsurance program details in February and expect to approach their retention point.

Q: On voluntary business momentum, how is the trend?

A: Keith Demmings stated voluntary business placement rate is up 6 basis-points sequentially and 18 basis-points Y/Y, driven by hard market factors and growth in underlying business.

Q: On investment spend in Connected Living, clarification on sunsetting and new spend?

A: Keith Demmings said $21 million YTD investment spend is related to new client launches and device care center, sunsetting in 2024 with new investments expected in 2025 for net-new programs.

Q: Lessons from Global Housing profitability transfer to Global Auto?

A: Keith Demmings said lessons from housing can be applied to Auto, addressing issues through rate changes, product redesign, and operational efficiency, expecting longer-term tailwinds in Auto.