NYSE:AIZ Assurant Q2 2023 Earnings Report $196.42 -1.40 (-0.71%) Closing price 05/7/2025 03:59 PM EasternExtended Trading$196.76 +0.34 (+0.17%) As of 05:23 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Assurant EPS ResultsActual EPS$3.89Consensus EPS $2.60Beat/MissBeat by +$1.29One Year Ago EPSN/AAssurant Revenue ResultsActual Revenue$2.75 billionExpected Revenue$2.64 billionBeat/MissBeat by +$113.46 millionYoY Revenue GrowthN/AAssurant Announcement DetailsQuarterQ2 2023Date8/1/2023TimeN/AConference Call DateWednesday, August 2, 2023Conference Call Time8:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Assurant Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 2, 2023 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Welcome to Assurant's Second Quarter 2023 Conference Call and Webcast. It is now my pleasure to turn the floor over to Suzanne Shepherd, Senior Vice President of Investor Relations Speaker 100:00:57Thank you, operator, and good morning, everyone. We look forward to discussing our Q2 2023 results with you today. Joining me for Assurant's conference call are Keith Demings, our President and Chief Executive Officer and Richard Dzadjou, our Chief Financial Officer. Yesterday, after the market closed, we issued a news release announcing our results for the Q2 of 2023. The release and corresponding financial are available on assurant.com. Speaker 100:01:26We'll start today's call with remarks from Keith and Richard before moving into a Q and A session. Some of the statements made today are forward looking. Forward looking statements are based upon our historical performance and current expectations and subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in yesterday's earnings release and financial supplement as well as in our SEC reports. During today's call, we will refer to our non GAAP financial measures, which we believe are important in evaluating the company's performance. Speaker 100:02:06For more details on these measures, the most comparable GAAP measures and a reconciliation of the 2, please refer to yesterday's news release and financial supplement. I will now turn the call over to Keith. Speaker 200:02:19Thanks, Suzanne, and good morning, everyone. Our results in the second quarter were strong are well ahead of our expectations with adjusted EBITDA excluding cats growing 21% year over year are in the range of 6% on a year to date basis. Results were largely driven by continued momentum in Global Housing, are in line with the results of the call. Our performance is a testament to the resilience of our global business model, our compelling client offerings and steadfast focus on operational excellence. Looking at our business segments. Speaker 200:03:00Global Housing adjusted EBITDA increased 49% year to date, excluding catastrophes. These results reflect actions taken to transform our housing business, including focusing on product lines where we have a strong right to win, are in the same store. Dramatically reducing non core areas and our international catastrophe exposure and aggressively deploying digital solutions to improve customer experience, will be in the range of $1,000,000 while driving greater operational efficiencies. This underscores our ability to quickly respond to ever evolving market dynamics, are driving continuous improvement and better performance over time. During the first half of twenty twenty three, Top line performance in our homeowners business increased 18% year over year. Speaker 200:03:47This reflects higher average insured values and state approved rate increases to account for higher claims severities from inflationary factors in lender placed. Policy counts increased double digits this year from have expanded loan portfolios of new and existing clients. While policy growth has been a contributor so far this year, will be expected to level off from the first half of the year. In our renters business, our property management company distribution channel have shown strong policy growth year to date, increasing 14%. This has been driven by the ongoing rollout of our Cover 360 solution, are in the range of $1,000,000,000 of the long term investments we've made in renters that has consistently added value to our PMC partners and customers over the last several years. Speaker 200:04:37Our strong growth within the PMC channel has helped to diversify profit pools to partially offset lower contributions from our affinity partners, along with higher non cat losses, which have returned to more normalized levels. In summary, We're very pleased with Global Housing's performance year to date and expect strong year over year earnings growth to continue into the second half of twenty twenty three. Turning to Global Lifestyle, underlying segment results were solid and demonstrated steady improvement from the second half of last year. Lifestyle earnings for the 1st 6 months of the year have increased $34,000,000 or 9% over the second half of last year from improved Connected Living results. Within Connected Living, we continue to invest in our technology platforms As we deepen our focus on product innovation and evolving our service delivery capabilities to improve customer experience. Speaker 200:05:36Are focused on innovation and global trade in capabilities has continued to drive a significant level of interest from existing and prospective mobile partners. As we continue to realize ongoing efficiencies, have implemented extensive actions to mitigate macroeconomic headwinds throughout our global operations. In Europe, These actions have had a positive impact, ultimately helping to stabilize earnings and allowing us to remain focused on growing the top line. Within extended service contracts, we've made significant progress with our partners in executing large scale protection and administration programs. In addition, after several quarters of elevated claims severity, we've seen an improvement in the 2nd quarter loss ratio due to rate increases with several clients. Speaker 200:06:27In our global auto business, consistent across the industry, our repair costs have continued to increase from inflation. Have taken decisive actions to improve performance. For example, we've implemented prospective rate increases with several key clients and we're also partnering with our clients to identify cost savings on claims to improve loss experience for programs where we hold the risk. It's difficult to predict the timing of an earnings inflection point, but we expect to see continued improvements as new business earn through, Although improvement may take several quarters to materialize. Overall, Global Lifestyle earnings were in line with our expectations for the first half of twenty twenty three. Speaker 200:07:12And while we work to create new vectors of growth for lifestyle, we now anticipate Global Lifestyle's adjusted EBITDA will be down modestly for the full year. This is mainly due to the headwinds in global auto we just discussed and lower international contributions Speaker 300:07:30are in the range of $1,000,000 primarily from Japan. Speaker 200:07:31Reflecting on the first half of twenty twenty three, our results have demonstrated the attractiveness of our compelling business model with clear competitive advantages, including alignment with global market leaders across lines of business, leadership positions with scale advantages in attractive and growing lifestyle and housing markets demonstrated ability to innovate and differentiate through specialized solutions and a have a strong track record of taking decisive actions to overcome market challenges and drive performance. Combined Global Lifestyle and Global Housing should continue to generate strong returns and cash flow, highlighting the strength and resiliency of Assurant. Prior to moving to our enterprise outlook and results, I want to take a moment to discuss the progress we've made through our sustainability efforts, a key differentiator for Assurant. In June, we published our 2023 Sustainability Report, Reaffirming our long term priorities around talent, products and climate. The report highlights our progress in reinforcing our company culture And leveraging ongoing employee listening and feedback to help support our global diverse workforce. Speaker 200:08:50The report reaffirms our 2020 to 2025 ESG strategic focus areas of talent, products and climate to build a more sustainable future together with our clients, customers, employees and suppliers. We continue to view our commitment to sustainability as a competitive advantage that delivers short and long term business value. Of note, we achieved our 2025 supplier diversity target 2 years ahead of schedule. We increased our global gender diversity overall. We expanded coverage for our electric vehicle protection products and we repurposed 22,000,000 mobile devices globally. Speaker 200:09:33Now let's turn to our enterprise outlook and capital. Given first half results and anticipated performance for the remainder of the year, from our original expectation of low single digit growth. Adjusted EPS growth is now expected to approximate adjusted EBITDA growth, each excluding reportable catastrophes, an improvement over our previous expectations for EPS growth to trail our EBITDA growth. The increase is mainly due to our higher than expected adjusted EBITDA growth, which is now outpacing the increases to depreciation and tax expenses. From a capital perspective, we upstreamed $180,000,000 of segment dividends during the quarter and $292,000,000 year to date, are in the range of $1,000,000 of the company's liquidity, are at a significantly higher level than at the end of the Q1. Speaker 200:10:41As expected, we resumed share repurchases during the Q2, purchases are repurchasing $20,000,000 of common stock as well as an additional $10,000,000 throughout July. For the remainder of the year, we would expect to gradually accelerate our level of buybacks with the majority weighted toward the 4th quarter. Are in the range of 2.5 times. Exceed the 2022 underlying buyback activity of $200,000,000 Overall, it's been a strong first half of the year and we're well positioned for the full year. In both housing and lifestyle, it will be critical for us to continue to execute through innovation and enhanced customer experience for our clients and their end consumers, which is what differentiates Assurant and supports long term growth. Speaker 200:11:37I'll now turn the call over to Richard to review 2nd quarter results and our 2023 outlook in greater detail. Richard? Speaker 400:11:45Thank you, Keith, and good morning, everyone. For the Q2 of 2023, adjusted EBITDA, excluding reportable catastrophes, totaled $337,000,000 up $59,000,000 or 21% year over year. And adjusted earnings per share, excluding reportable catastrophes, totaled $4.09 for the quarter, up 26% year over year. Let's start with Global Lifestyle for our segment results. The segment reported adjusted EBITDA of $197,000,000 in the 2nd quarter, are in a 11% decline year over year. Speaker 400:12:21However, prior period results included a real estate joint venture gain of $13,000,000 are mainly impacting Global Automotive. If we exclude this prior period gain, adjusted EBITDA declined only 5% or $11,000,000 are in line with our expectations. This decrease was primarily driven by lower results in global auto as continued inflationary impacts on labor and parts increased average claims severity. We also incurred increased claims cost on ancillary products As these costs revert to more normalized levels following their post COVID lows. The auto earnings Decline was partially offset by higher investment income from higher yields and growth in the U. Speaker 400:13:04S. Across distribution channels. In terms of Connected Living, excluding the prior period real estate gain and $3,000,000 of unfavorable foreign exchange, earnings were roughly flat. In mobile, earnings were down from softer results in Japan and Europe as expected. As a reminder, headwinds in international earnings did not materialize are in the second half of twenty twenty two. Speaker 400:13:30In Japan, we continue to experience subscriber declines As our 4 year protection product continues to run off and in Europe, while we are benefiting from previous expense actions Taken in the latter part of 2022 and the beginning of 2023, lower volumes have impacted year over year results. U. S. Mobile earnings were flat year over year as growth in North American device protection programs from carrier and cable operator clients was offset by lower mobile trading results. Trading results were impacted by lower volumes due to the timing and structure of carrier promotions and lower fee income from the previously disclosed contract change. Speaker 400:14:13However, higher prices on used devices partially offset the decline. Extended service contract earnings increased as U. S. Client performance improved, benefiting the rate increases implemented from several clients that began to offset the impact of higher claims costs. Are in the range of $1,000,000 or 5%. Speaker 400:14:41This growth was primarily driven by Global Automotive, reflecting prior period sales of vehicle service contracts. Connected living's net earned premiums, fees and other income increased 1%. However, this includes an approximate $60,000,000 negative impact from the previously disclosed mobile program contract changes, which had no impact on profitability. Are participating in these contract changes, Connected Living net earned premiums, fees and other income grew by 6%. The quarter benefited from growth in mobile subscribers in North America, excluding client runoff and higher contributions from extended service contracts. Speaker 400:15:24For the full year 2023, We now expect adjusted EBITDA to be down modestly for Global Lifestyle. Global Auto is expected to be down for the full year As we anticipate loss experience to remain unfavorable for several quarters and the impacts from continued normalization of loss experience for select ancillary products previously mentioned. As Keith described, we've taken specific actions such as rate increases on new business, are in the range of $1,000,000 which is why we expect an increase in profitability over time. Higher investment income has and is expected to continue In Connected Living, we do expect our U. S. Speaker 400:16:15Connected Living business to grow modestly for the As a reminder, 3rd quarter results historically include both lower trade in volumes and higher loss seasonality. These items typically improve in the 4th quarter. In addition, our Q3 results last year included an $11,000,000 one time client benefit in connected living. And while Japan and Europe have stabilized, we are focused on top line growth, which has been slower to materialize than expected. Finally, we will also continue to focus on expenses while investing in growth opportunities we have strong momentum with clients. Speaker 400:16:58In terms of net earned premiums, fees and other income for the full year, Lifestyle is expected to grow as growth in Global Automotive is partially offset by ongoing foreign exchange headwinds. Are now in the Global Housing. Adjusted EBITDA was $155,000,000 which included $13,000,000 in reportable catastrophes from severe windstorms in the Southeast U. S. And flooding in Florida. Speaker 400:17:24Excluding reportable catastrophes, adjusted EBITDA more than doubled to $168,000,000 or up $87,000,000 from both top line growth and favorable non cat loss experience within homeowners. Top line growth in lender placed came from higher average insured values and premium rates as well as more policies in force. These together accounted for approximately half of the increase in earnings. And is comprised of a $28,000,000 reserve reduction in the current quarter, plus a $12,000,000 reserve strengthening in the Q2 of 'twenty 2. Excluding prior period development, non cat loss experience increased modestly due to the increase in frequency and severity. Speaker 400:18:21Higher investment income also contributed to earnings growth. Turning to our reinsurance program, we completed our 2023 catastrophe reinsurance program in June. We fared well in the market with this year's total cost increasing less than previously expected are in the range of approximately 20.22. This increase is relatively small due to the strategic actions taken, including exiting our international footprint, increasing our level of retention and adjusting our reinsurance coverage. As anticipated, our first event retention increased to $125,000,000 from its previous level of $80,000,000 and the retention level reduces to $100,000,000 for second and third events. Speaker 400:19:07We also increased our total program coverage are in the 1 in 225 year probable maximum loss to further minimize our risk from extreme catastrophes. Are in line with the results. Moving to renters and other, earnings increased largely due to a benefit within our NFIP flood business of $5,000,000 Excluding this item, results were in line with 2022. For the full year 2023, we expect Global Housing adjusted EBITDA, excluding reportable cash to grow significantly due to strong performance in homeowners driven by top line expansion from lender placed. Regarding the second half of the year, we expect ongoing momentum from a continued gradual abatement of inflation, are in Speaker 300:19:53the range of lower Speaker 400:19:53seasonal losses, particularly in the Q4 and continued revenue strength. This momentum should offset have a modest increase in catastrophe reinsurance costs in the absence of both another NFID benefit and additional favorable reserve development, which can be difficult to predict. Together, these last two items contributed are $33,000,000 to our first half results. Moving to corporate, the 2nd quarter adjusted EBITDA loss was $29,000,000 are up $4,000,000 from lower investment income. For the full year 2023, we expect the corporate adjusted EBITDA loss are subject to the financial statements. Speaker 400:20:36I would also mention that the investment portfolio continues to perform well with higher interest rates improving both short and longer term returns. Turning to holding company liquidity, we ended the quarter with $495,000,000 In the Q2, dividends from our operating segments totaled $180,000,000 In addition to cash used for corporate and interest expenses, 2nd quarter cash outflows included 3 main items, dollars 20,000,000 of share repurchases, $40,000,000 of common stock dividends and $50,000,000 related to previous acquisitions within Global Auto. For the full year, we expect our businesses to continue to generate meaningful cash flows, approximating 65% of segment adjusted EBITDA, including reportable catastrophes. This is consistent with our previous forecast. Cash flow expectations assume a continuation of the current economic environment and are subject to the growth of the businesses, investment portfolio performance and rating agency and regulatory requirements. Speaker 400:21:44In closing, we're quite pleased with our first half overall performance, Operator00:22:33Our first question is coming from the line of turn the call over to Jeff Schmitt from William Blair. Please go ahead. Speaker 400:22:44Hi, good morning. Speaker 500:22:45Good morning. Global Housing seems to really be turning a corner here. But just looking at that, you'd mentioned the favorable development charge. I think it was 28,000,000 participants are in the line of the call. When we backed that out, the underlying loss ratio was at 44%, which is still sort of high relative to historical levels, And especially I think considering with the way that housing material and labor cost inflation have moved down. Speaker 500:23:14So are you just sort of taking a conservative posture there or what are you seeing? Speaker 200:23:23Yes. So maybe A couple of comments, obviously, really pleased with the progress that the team's made. We talked a lot about it last year, a lot of actions to streamline the business to focus on the core products and obviously put appropriate rate adjustments in place and certainly it's showing through In the first half of the year and to your point, that's exactly the way we look at it. We adjust the $28,000,000 of in the quarter, we also adjust for the $5,000,000 FEMA bonus as we look at our overall results. Are underlined still incredibly strong, dollars 135,000,000 in the quarter. Speaker 200:24:00And then to your point, current accident quarter loss ratios are 44%, I think are a little under 42% last year and that's just a factor of the increased inflationary pressure that we see are being largely offset by the work we're doing on rate, but not fully back to the levels that we saw last year. So as we think about The strong fundamental performance in housing, it's not a result of unusually low loss ratios. In fact, kind of our year to date normalized combines are kind of right in the range of what we would have otherwise expected. But Richard, I don't know if you wanted to add anything else to that? Speaker 600:24:37Yes, exactly. And I would just say, if we look year over year, you're exactly right, Jeff, with the 44%, that's a couple of points are above last year's level same time. And as Keith said, I think we do have some inflation that's it's higher last year than the costs are are higher this year than last year, so that's running through a little more frequency. And just also, there was more, I would call severe convexity storms in the last quarter. And while those storms, most of those storms didn't make it to reportable cats for us over $5,000,000 as We had a very low level in the quarter. Speaker 600:25:16Some of them are in the non cat loss ratio. So We did have our share of those, I would say, overall. And that's within the couple point increase that we see over the year as well. Speaker 500:25:30Okay. That makes sense. And then what was the inflation guard adjustment? I think that goes in maybe once a year, but what is that going to be this year versus last year? Obviously, that's going to go into premium. Speaker 500:25:45And then are you still getting rate sort of above that as well? Speaker 200:25:49Yes. So we talked about inflation guard going in are in the range of double digit levels last July. So we would have put the final adjustments through based on that in June of this year. And then to your point, we do an annual adjustment. It's 3.1% adjustment that would go in on top of that for July to AIV. Speaker 200:26:11And then modest rate adjustments plus and minus as we think about managing across all of our states, but certainly still have More to earn through from last year's AID adjustments and then on top of that the 3% that you that we just put in place in July. Speaker 500:26:30Okay, great. Thank you. Speaker 200:26:32Welcome. Thank you. Operator00:26:34Our next question comes from the line of Brian Meredith from UBS. Please go ahead. Speaker 300:26:40Good morning, Mark. Speaker 700:26:40Yes, thanks. Good morning. Good morning. A couple of questions here for you. First, can you talk a little bit about The inflationary pressures you're seeing in global auto, and I understand it's going to pressure margins here through remainder of 2023. Speaker 700:26:57Is this something we're going to see continuing to pressure margin throughout 2024 just as it takes time for These contract changes to work through numbers. Speaker 200:27:07Yes. I definitely think there'll be continued pressure. I do expect 2024 are going to be improved from 2023, but definitely we'll see elevated levels of losses From the inflationary pressure on the parts and labor and auto, as I think about sizing that for you, I'd probably think Maybe a little north of $10,000,000 a quarter in EBITDA impact. So if I was going to size it for this year, that's probably the range that we would put on it. I would say that we expect that to recover over time, both in terms of the rate will be able to take the time to try and drive down claim costs as well. Speaker 200:27:55And that obviously can have a more near term benefit and the rate takes a little longer to earn through. What I would say is we've taken the actions that we want to take. So we've had great dialogue with our clients. There's only a handful of clients Where this is really an impact for us and we've made rate adjustments already in partnership, our interests are very well aligned with our clients and We feel confident that we're going to get this to the right level over time. You've seen us resolve issues from inflation in housing. Speaker 200:28:25We've resolved issues on ESC. Obviously, auto is a new area of focus and our team is 100% focused on delivering and executing. Speaker 700:28:35Excellent. And then second question, Japan, when are we Speaker 400:28:40going to lap some of Speaker 700:28:41these kind of contract roll things that were going on? When will that finally be kind of be done? Is that the end of this year? Is there any kind of going into 2024 as the contract changes in Japan? Speaker 200:28:54Yes. I think that runs through really this year and I would expect to see a lot more stability, as we head into 2024. And then I do think we've got Yes, an incredible position in the Japanese market. We partner with all 4 carriers. There's a tremendous amount of long term growth opportunity in that market and I definitely think we'll see growth again in 2024 and over the long term. Speaker 700:29:19So that's a meaningful part of the headwind you're seeing is Japan kind of contract role more than kind of an economic situation. Speaker 200:29:26Yes. I think the financial performance is still are very strong in Japan. I would say the first half of this year stabilized from the second half of last year. We had a very strong are in the first half, both in Japan and Europe in our 2022 results. So from a year over year comparison, definitely they look down. Speaker 200:29:46But in terms of sequential as we looked at exiting last year, they're both very stable. So I'm really pleased with that performance. In fact, Europe is above where it finished the year and Japan, very stable to where it finished. But it is a meaningful contributor for us and it's an important part of long term growth. So it will no doubt be a priority. Speaker 600:30:07Great. Thank you. Speaker 200:30:09Great. Thank you. Operator00:30:11Our next question comes from the line of Mark Hughes from Tuuris. Please go ahead. Speaker 800:30:25The fee income, what's your outlook in terms of kind of programs or trade in promotions As we think about the balance of the year. Speaker 200:30:38Sure. And maybe I'll start and certainly Richard if you have other thoughts on fee income. But We saw and this can be volatile quarter to quarter really dependent on promotional activity within the industry. We were fortunate, Particularly in the U. S, we partner with all of the major carriers, which is a great position to be in from a trade in perspective. Speaker 200:30:59We definitely saw lower trade in volume in Q2, whether you look at it sequentially or year over year, and that's really just a function of the amount of advertising, the promotion And how hard are carriers pushing to upgrade customers to new devices and then how aggressively are they promoting trade in offers and That ebbs and flows. It was a little bit down in the quarter, to the extent that, as new devices come out in the fall, We certainly expect to see more aggressive marketing campaigns, but it's a little bit in the control of the hands of our clients and it's a very dynamic market, but Continues to be important for our clients and something that we're very focused on. Speaker 600:31:42And Typically, Mark, we would Q3, we're not expecting big increases. Typically, a higher period would be kind of Q4 for us. So a little bit what we mentioned in our remarks as well. So there is some seasonality to it as Keith mentioned in the second half of the Speaker 300:31:59year. Understood. You mentioned Speaker 800:32:04the inflation guard up 3%. Any prospect for additional rate on top of that based on the date approved increases? Speaker 200:32:15I would say some marginal rate increases certainly state by state and obviously we look at are participating in our rates very closely. So there'll be a little bit of additional rate coming through, but obviously the big adjustments We put through last year that are still earning through the book. Speaker 600:32:35Yes. I think as we look at sorry, Mark, as we look forward to the second half of the year, we could see slight increases, but we're not seeing large increases to revenues continuing. I think we've kind of have gotten there already, plus we've gotten out of certain international areas. So overall, the revenues will be impacted a little bit by that. But overall, I think there'll be a little more to come, but not certainly not the levels we've seen over the past year. Speaker 800:33:05Yes. And how about the new money yield on investments versus portfolio yield? What are the prospects for more improvement there? Speaker 600:33:15Well, I'd divide into a couple of things. I mean, we've actually had some nice increase in investment income over the last year. Participants are in the range of $30,000,000 in cash in short term and then obviously we didn't have a real estate gain are in the range of $1,000,000 this quarter. But just on your question on yields, we do have in the long term, our fixed income portfolio is 5 year duration. So we get a continuous role on that and we'll get a continuous kind of increase in those longer term yields. Speaker 600:33:47We've really benefited from short term rates also, which is accounts for almost as much as the increase or as much as the increase in the longer term yields, right, with the Fed increasing interest rates. At some point in the future, those will probably come down. So we'll see that cash return come down. Who knows when that will happen, but we could see that as well. But on a longer term basis, we should continue to get some yield increase. Speaker 800:34:13Appreciate it. Thank you. Speaker 600:34:15Thank you, Mark. Thank you. Operator00:34:18Our next question comes from the line of Tommy McJoynt with KBW. Please go ahead. Speaker 200:34:24Good morning, Tommy. Speaker 900:34:26Hey, good morning, guys. Thanks for taking my questions here. You mentioned the expectations for modest are in connected living this year, and we've had a little bit of discussion on sort of U. S, Japan and Europe. Could you dissect those expectations for that modest growth into any maybe sort of ranges for U. Speaker 900:34:46S. Up X percent, Japan down X percent. Just trying to get a gauge of exactly how much have a headwind in terms of the overall number that Japan and Europe actually are. Speaker 200:34:58Yes. I'd say, if I look at are in the same store. Lifestyle and we think about the outlook for 2023, I would say domestic connected living, I think we had a strong first half and that will continue are consistently for the back half of the year and that will yield modest growth for Connected Living U. S. So performance pretty steady, but that's going to be an increase year over year and again that's overcoming the one time client benefit we had last year in the Q3 for 11,000,000 In terms of international, I'd say our expectations in the second half would be consistent with what we saw in the first half. Speaker 200:35:34So continued stability, and obviously then putting our attention to driving longer term growth opportunities, particularly in Europe and Asia Pacific. And then in terms of the auto side of the business, I'd say auto losses will remain kind of at elevated levels as we saw in the first half. Will continue to see the normalization of GAAP and I would expect auto in the back half of the year to reflect Something more similar to what we saw in the Q2. That'd be the simple way for me to think about it, Tommy. Speaker 900:36:08Okay. Yes, that's helpful. And then switching over to some of the line of questioning on housing. Obviously, there's been pretty tremendous growth this year. I think you guys have last given your sort of normalized cat load expectations for $140,000,000 for this year. Speaker 900:36:28With all the growth that you've seen in housing, do you have any early indications for what you might consider have a normalized cat load as we head into 2024? Speaker 600:36:37Yes. We haven't really updated our cat load. I mean, we put it in for the year and then to be honest after that, it's sort of like the weather the cats will get, I would say. So we're still at that $140,000,000 $40,000,000 number so far. But speaking of that, we were really happy with the reinsurance, the cat reinsurance placement that we put into place where we had thought going into the season at the end of last year, we get an increase, non negligible increase in our cat reinsurance. Speaker 600:37:15And actually at the end of the day, we're only going to be modestly up over the year. And we've done that through a number of things, whether it's are increasing the retention level, working with our reinsurers, exiting some of the international or exiting the international property footprint that we have. So we've done a lot of things to kind of protect the company. We increased the top end as well to 1225 year are in a good position. So far in through July, we haven't had Any cats hit us that are reportable so far. Speaker 600:37:51So we'll wait and see. Obviously, we're in cat season right now. So we'll see how it comes out. Speaker 900:38:00Participants Got it. Yes. Knock on wood. Okay. Thank you. Speaker 900:38:02Yes. Thanks, Tommy. Speaker 200:38:04Indeed. Operator00:38:33Our next question comes from the line of John Barnidge from Piper Sandler. Please go ahead. Speaker 300:38:41Hi, John. Good morning, John. Hi, good morning. Thanks for the opportunity. In your prepared remarks, you talked about new Speaker 200:38:56Yes, certainly, a couple of thoughts. I mean, we've got great momentum with clients in Global Lifestyle around the world. If I think about are Speaker 300:39:08in the market. Speaker 200:39:08Our mobile business and the traction we've had over the course of the last 7 or 8 years has been pretty steady. We've got relationships with So many of the marquee brands globally and that yields a lot of opportunity to do new things, introduce new services, innovate with new products, try to find new ways to help them drive success. So I would say we've got as much ongoing dialogue with clients today and prospects today as we've ever had and there seems to be a constant interest in innovating and doing new things. And the fact that we've got are really wide ranging capability set, I think is a huge advantage for us and we'd look to see that continue to drive growth long term. Speaker 300:39:54Thank you for that. And then my follow-up question, you talked about expense reductions across the global franchise. Is that above what was previously contemplated and do the lifestyle input cost trends drive an increase in cost reductions? Thank you. Speaker 200:40:10Yes, maybe I'll start and then Richard can add on. But certainly, we've tried to be very disciplined around expense management. Our goal this here was to hold our G and A expenses relatively flat. That means we have to overcome merit increases, participants are in the range of $1,000,000 additional costs for health and well-being for our employees. We've got to absorb incremental growth and incremental investment and we've tried to do that with some of the expense actions that we took in the Q4 last year, but also a pretty intense focus on driving digital first and automation through all of our operations, whether they were call center claims operations or even our depots, That continues to be a huge area of focus for us and we're really pleased with the progress we've made so far. Speaker 200:40:58But Richard, anything else you want to add on expenses? Speaker 600:41:02Yes. I would just say and then turn to the housing side in particular, we've gotten some really good leverage participants are in the range of $1,000,000,000 of our expense base with some of the investments we've made in automation and digital capabilities. And you've seen in our supplement, the expense ratio go down a number of points over the last year where we're at 38.8. Now part of that we had that NFIP bonus that have been very pleased with the fact that we've had increases in revenues and not a proportionate increase in expenses. So That really demonstrates we are getting leverage out of the business, out of the operations and all of the work that we talked about last year Speaker 200:41:54Great. Thanks, John. Operator00:42:00Our last question is coming from the line of Grace Carter from Bank of America. Please go ahead. Speaker 400:42:07Good morning, Grace. Good morning, Grace. Speaker 1000:42:10Good morning. Hello. I think that we had previously talked about maybe some seasonality in the Connected Living book in 3Q just with are more likely to be out and about and maybe damage their devices. I was just curious if you could quantify that on a historical basis, just how we're thinking about, how the loss ratio might shape up in the second half of the year? Speaker 200:42:36Yes. Maybe I'll offer a couple of thoughts and then ask Richard to jump in. But definitely, you're correct. We do see seasonality in Q3, we also see, to Richard's point earlier, lower trade in volume in the 3rd quarter and higher trade in volume in the Q4. So as a result, we'd expect to see an improvement in Q4 over Q3 for Connected Living. Speaker 200:42:59And To the extent that we've got certain mobile programs where we're on risk, obviously, we see that impact on frequency in our quarterly results in the Q3. Now we have moved one of our clients to a reinsurance structure, which we talked about that non economic contract change that certainly will help mitigate some of that impact. But I don't think we've sized what we would expect the delta to be, but Richard, you might want to add some commentary? Speaker 600:43:30Yes. We haven't sized it, but I would say it's are modest. I mean, really what we wanted to portray is really Q3 is typically a softer quarter from us for us for the trade ins and some claims increase. It's not hugely material, but it's enough for us to talk about to really say, hey, when you're looking at Q3 and Q4, if you're modeling that, Q3 is going to be softer and Q4 is usually stronger because we don't have the claims, participants The increase in claims that we just talked about and then trade ins are usually higher. Speaker 1000:44:05Thank you. And then I guess on the decrease year over year in global devices service, to what Is that driven by the discontinuation of the in store repair capabilities versus any other factors? Thank you. Speaker 200:44:21Yes, That was 400,000 on a year over year basis. So you could remove 400,000 from Q2 last year and that will give you All right. I think we took all of the questions. So thank you everyone for joining today and we'll certainly look forward are speaking to you again in November for our Q3 earnings call. And as usual, please reach out to Suzanne and Sean if you have any follow-up questions. Speaker 200:44:53And again, thanks everybody. Operator00:44:56Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallAssurant Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Assurant Earnings HeadlinesAssurant Inc (AIZ) Q1 2025 Earnings Call Highlights: Strong Growth in Adjusted EBITDA and ...May 8 at 5:46 AM | uk.finance.yahoo.comAssurant’s Q1 2025 Earnings Call: Growth Amid ChallengesMay 7 at 8:36 PM | tipranks.comNew breed of trader (Wall Street hates us?)Wall Street big wigs and old-money bankers can’t touch this 1 type of stock. And that opens the door for traders like you and me. They couldn’t touch this tech stock that ran from $1.50 to $98.40 in a week. Great – more for us. They wouldn’t touch this little-known imaging company. That’s fine – my friends and I were happy to ride it from $6 to $35 over breakfast.May 8, 2025 | Timothy Sykes (Ad)Assurant outlines 2025 growth targets driven by lifestyle and housing segmentsMay 7 at 1:12 PM | msn.comAssurant, Inc. (AIZ) Q1 2025 Earnings Call TranscriptMay 7 at 1:12 PM | seekingalpha.comAssurant, Inc. 2025 Q1 - Results - Earnings Call PresentationMay 7 at 10:29 AM | seekingalpha.comSee More Assurant Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Assurant? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Assurant and other key companies, straight to your email. Email Address About AssurantAssurant (NYSE:AIZ), together with its subsidiaries, provides business services that supports, protects, and connects consumer purchases in North America, Latin America, Europe, and the Asia Pacific. The company operates through two segments: Global Lifestyle and Global Housing. The Global Lifestyle segment offers mobile device solutions, and extended service contracts and related services for consumer electronics and appliances, and credit and other insurance products; and vehicle protection, commercial equipment, and other related services. The Global Housing segment provides lender-placed homeowners, manufactured housing, and flood insurance; renters insurance and related products; and voluntary manufactured housing, and condominium and homeowners insurance products. The company was formerly known as Fortis, Inc. and changed its name to Assurant, Inc. in February 2004. Assurant, Inc. was founded in 1892 and is headquartered in Atlanta, Georgia.View Assurant ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Disney Stock Jumps on Earnings—Is the Magic Sustainable?Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release? 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There are 11 speakers on the call. Operator00:00:00Welcome to Assurant's Second Quarter 2023 Conference Call and Webcast. It is now my pleasure to turn the floor over to Suzanne Shepherd, Senior Vice President of Investor Relations Speaker 100:00:57Thank you, operator, and good morning, everyone. We look forward to discussing our Q2 2023 results with you today. Joining me for Assurant's conference call are Keith Demings, our President and Chief Executive Officer and Richard Dzadjou, our Chief Financial Officer. Yesterday, after the market closed, we issued a news release announcing our results for the Q2 of 2023. The release and corresponding financial are available on assurant.com. Speaker 100:01:26We'll start today's call with remarks from Keith and Richard before moving into a Q and A session. Some of the statements made today are forward looking. Forward looking statements are based upon our historical performance and current expectations and subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in yesterday's earnings release and financial supplement as well as in our SEC reports. During today's call, we will refer to our non GAAP financial measures, which we believe are important in evaluating the company's performance. Speaker 100:02:06For more details on these measures, the most comparable GAAP measures and a reconciliation of the 2, please refer to yesterday's news release and financial supplement. I will now turn the call over to Keith. Speaker 200:02:19Thanks, Suzanne, and good morning, everyone. Our results in the second quarter were strong are well ahead of our expectations with adjusted EBITDA excluding cats growing 21% year over year are in the range of 6% on a year to date basis. Results were largely driven by continued momentum in Global Housing, are in line with the results of the call. Our performance is a testament to the resilience of our global business model, our compelling client offerings and steadfast focus on operational excellence. Looking at our business segments. Speaker 200:03:00Global Housing adjusted EBITDA increased 49% year to date, excluding catastrophes. These results reflect actions taken to transform our housing business, including focusing on product lines where we have a strong right to win, are in the same store. Dramatically reducing non core areas and our international catastrophe exposure and aggressively deploying digital solutions to improve customer experience, will be in the range of $1,000,000 while driving greater operational efficiencies. This underscores our ability to quickly respond to ever evolving market dynamics, are driving continuous improvement and better performance over time. During the first half of twenty twenty three, Top line performance in our homeowners business increased 18% year over year. Speaker 200:03:47This reflects higher average insured values and state approved rate increases to account for higher claims severities from inflationary factors in lender placed. Policy counts increased double digits this year from have expanded loan portfolios of new and existing clients. While policy growth has been a contributor so far this year, will be expected to level off from the first half of the year. In our renters business, our property management company distribution channel have shown strong policy growth year to date, increasing 14%. This has been driven by the ongoing rollout of our Cover 360 solution, are in the range of $1,000,000,000 of the long term investments we've made in renters that has consistently added value to our PMC partners and customers over the last several years. Speaker 200:04:37Our strong growth within the PMC channel has helped to diversify profit pools to partially offset lower contributions from our affinity partners, along with higher non cat losses, which have returned to more normalized levels. In summary, We're very pleased with Global Housing's performance year to date and expect strong year over year earnings growth to continue into the second half of twenty twenty three. Turning to Global Lifestyle, underlying segment results were solid and demonstrated steady improvement from the second half of last year. Lifestyle earnings for the 1st 6 months of the year have increased $34,000,000 or 9% over the second half of last year from improved Connected Living results. Within Connected Living, we continue to invest in our technology platforms As we deepen our focus on product innovation and evolving our service delivery capabilities to improve customer experience. Speaker 200:05:36Are focused on innovation and global trade in capabilities has continued to drive a significant level of interest from existing and prospective mobile partners. As we continue to realize ongoing efficiencies, have implemented extensive actions to mitigate macroeconomic headwinds throughout our global operations. In Europe, These actions have had a positive impact, ultimately helping to stabilize earnings and allowing us to remain focused on growing the top line. Within extended service contracts, we've made significant progress with our partners in executing large scale protection and administration programs. In addition, after several quarters of elevated claims severity, we've seen an improvement in the 2nd quarter loss ratio due to rate increases with several clients. Speaker 200:06:27In our global auto business, consistent across the industry, our repair costs have continued to increase from inflation. Have taken decisive actions to improve performance. For example, we've implemented prospective rate increases with several key clients and we're also partnering with our clients to identify cost savings on claims to improve loss experience for programs where we hold the risk. It's difficult to predict the timing of an earnings inflection point, but we expect to see continued improvements as new business earn through, Although improvement may take several quarters to materialize. Overall, Global Lifestyle earnings were in line with our expectations for the first half of twenty twenty three. Speaker 200:07:12And while we work to create new vectors of growth for lifestyle, we now anticipate Global Lifestyle's adjusted EBITDA will be down modestly for the full year. This is mainly due to the headwinds in global auto we just discussed and lower international contributions Speaker 300:07:30are in the range of $1,000,000 primarily from Japan. Speaker 200:07:31Reflecting on the first half of twenty twenty three, our results have demonstrated the attractiveness of our compelling business model with clear competitive advantages, including alignment with global market leaders across lines of business, leadership positions with scale advantages in attractive and growing lifestyle and housing markets demonstrated ability to innovate and differentiate through specialized solutions and a have a strong track record of taking decisive actions to overcome market challenges and drive performance. Combined Global Lifestyle and Global Housing should continue to generate strong returns and cash flow, highlighting the strength and resiliency of Assurant. Prior to moving to our enterprise outlook and results, I want to take a moment to discuss the progress we've made through our sustainability efforts, a key differentiator for Assurant. In June, we published our 2023 Sustainability Report, Reaffirming our long term priorities around talent, products and climate. The report highlights our progress in reinforcing our company culture And leveraging ongoing employee listening and feedback to help support our global diverse workforce. Speaker 200:08:50The report reaffirms our 2020 to 2025 ESG strategic focus areas of talent, products and climate to build a more sustainable future together with our clients, customers, employees and suppliers. We continue to view our commitment to sustainability as a competitive advantage that delivers short and long term business value. Of note, we achieved our 2025 supplier diversity target 2 years ahead of schedule. We increased our global gender diversity overall. We expanded coverage for our electric vehicle protection products and we repurposed 22,000,000 mobile devices globally. Speaker 200:09:33Now let's turn to our enterprise outlook and capital. Given first half results and anticipated performance for the remainder of the year, from our original expectation of low single digit growth. Adjusted EPS growth is now expected to approximate adjusted EBITDA growth, each excluding reportable catastrophes, an improvement over our previous expectations for EPS growth to trail our EBITDA growth. The increase is mainly due to our higher than expected adjusted EBITDA growth, which is now outpacing the increases to depreciation and tax expenses. From a capital perspective, we upstreamed $180,000,000 of segment dividends during the quarter and $292,000,000 year to date, are in the range of $1,000,000 of the company's liquidity, are at a significantly higher level than at the end of the Q1. Speaker 200:10:41As expected, we resumed share repurchases during the Q2, purchases are repurchasing $20,000,000 of common stock as well as an additional $10,000,000 throughout July. For the remainder of the year, we would expect to gradually accelerate our level of buybacks with the majority weighted toward the 4th quarter. Are in the range of 2.5 times. Exceed the 2022 underlying buyback activity of $200,000,000 Overall, it's been a strong first half of the year and we're well positioned for the full year. In both housing and lifestyle, it will be critical for us to continue to execute through innovation and enhanced customer experience for our clients and their end consumers, which is what differentiates Assurant and supports long term growth. Speaker 200:11:37I'll now turn the call over to Richard to review 2nd quarter results and our 2023 outlook in greater detail. Richard? Speaker 400:11:45Thank you, Keith, and good morning, everyone. For the Q2 of 2023, adjusted EBITDA, excluding reportable catastrophes, totaled $337,000,000 up $59,000,000 or 21% year over year. And adjusted earnings per share, excluding reportable catastrophes, totaled $4.09 for the quarter, up 26% year over year. Let's start with Global Lifestyle for our segment results. The segment reported adjusted EBITDA of $197,000,000 in the 2nd quarter, are in a 11% decline year over year. Speaker 400:12:21However, prior period results included a real estate joint venture gain of $13,000,000 are mainly impacting Global Automotive. If we exclude this prior period gain, adjusted EBITDA declined only 5% or $11,000,000 are in line with our expectations. This decrease was primarily driven by lower results in global auto as continued inflationary impacts on labor and parts increased average claims severity. We also incurred increased claims cost on ancillary products As these costs revert to more normalized levels following their post COVID lows. The auto earnings Decline was partially offset by higher investment income from higher yields and growth in the U. Speaker 400:13:04S. Across distribution channels. In terms of Connected Living, excluding the prior period real estate gain and $3,000,000 of unfavorable foreign exchange, earnings were roughly flat. In mobile, earnings were down from softer results in Japan and Europe as expected. As a reminder, headwinds in international earnings did not materialize are in the second half of twenty twenty two. Speaker 400:13:30In Japan, we continue to experience subscriber declines As our 4 year protection product continues to run off and in Europe, while we are benefiting from previous expense actions Taken in the latter part of 2022 and the beginning of 2023, lower volumes have impacted year over year results. U. S. Mobile earnings were flat year over year as growth in North American device protection programs from carrier and cable operator clients was offset by lower mobile trading results. Trading results were impacted by lower volumes due to the timing and structure of carrier promotions and lower fee income from the previously disclosed contract change. Speaker 400:14:13However, higher prices on used devices partially offset the decline. Extended service contract earnings increased as U. S. Client performance improved, benefiting the rate increases implemented from several clients that began to offset the impact of higher claims costs. Are in the range of $1,000,000 or 5%. Speaker 400:14:41This growth was primarily driven by Global Automotive, reflecting prior period sales of vehicle service contracts. Connected living's net earned premiums, fees and other income increased 1%. However, this includes an approximate $60,000,000 negative impact from the previously disclosed mobile program contract changes, which had no impact on profitability. Are participating in these contract changes, Connected Living net earned premiums, fees and other income grew by 6%. The quarter benefited from growth in mobile subscribers in North America, excluding client runoff and higher contributions from extended service contracts. Speaker 400:15:24For the full year 2023, We now expect adjusted EBITDA to be down modestly for Global Lifestyle. Global Auto is expected to be down for the full year As we anticipate loss experience to remain unfavorable for several quarters and the impacts from continued normalization of loss experience for select ancillary products previously mentioned. As Keith described, we've taken specific actions such as rate increases on new business, are in the range of $1,000,000 which is why we expect an increase in profitability over time. Higher investment income has and is expected to continue In Connected Living, we do expect our U. S. Speaker 400:16:15Connected Living business to grow modestly for the As a reminder, 3rd quarter results historically include both lower trade in volumes and higher loss seasonality. These items typically improve in the 4th quarter. In addition, our Q3 results last year included an $11,000,000 one time client benefit in connected living. And while Japan and Europe have stabilized, we are focused on top line growth, which has been slower to materialize than expected. Finally, we will also continue to focus on expenses while investing in growth opportunities we have strong momentum with clients. Speaker 400:16:58In terms of net earned premiums, fees and other income for the full year, Lifestyle is expected to grow as growth in Global Automotive is partially offset by ongoing foreign exchange headwinds. Are now in the Global Housing. Adjusted EBITDA was $155,000,000 which included $13,000,000 in reportable catastrophes from severe windstorms in the Southeast U. S. And flooding in Florida. Speaker 400:17:24Excluding reportable catastrophes, adjusted EBITDA more than doubled to $168,000,000 or up $87,000,000 from both top line growth and favorable non cat loss experience within homeowners. Top line growth in lender placed came from higher average insured values and premium rates as well as more policies in force. These together accounted for approximately half of the increase in earnings. And is comprised of a $28,000,000 reserve reduction in the current quarter, plus a $12,000,000 reserve strengthening in the Q2 of 'twenty 2. Excluding prior period development, non cat loss experience increased modestly due to the increase in frequency and severity. Speaker 400:18:21Higher investment income also contributed to earnings growth. Turning to our reinsurance program, we completed our 2023 catastrophe reinsurance program in June. We fared well in the market with this year's total cost increasing less than previously expected are in the range of approximately 20.22. This increase is relatively small due to the strategic actions taken, including exiting our international footprint, increasing our level of retention and adjusting our reinsurance coverage. As anticipated, our first event retention increased to $125,000,000 from its previous level of $80,000,000 and the retention level reduces to $100,000,000 for second and third events. Speaker 400:19:07We also increased our total program coverage are in the 1 in 225 year probable maximum loss to further minimize our risk from extreme catastrophes. Are in line with the results. Moving to renters and other, earnings increased largely due to a benefit within our NFIP flood business of $5,000,000 Excluding this item, results were in line with 2022. For the full year 2023, we expect Global Housing adjusted EBITDA, excluding reportable cash to grow significantly due to strong performance in homeowners driven by top line expansion from lender placed. Regarding the second half of the year, we expect ongoing momentum from a continued gradual abatement of inflation, are in Speaker 300:19:53the range of lower Speaker 400:19:53seasonal losses, particularly in the Q4 and continued revenue strength. This momentum should offset have a modest increase in catastrophe reinsurance costs in the absence of both another NFID benefit and additional favorable reserve development, which can be difficult to predict. Together, these last two items contributed are $33,000,000 to our first half results. Moving to corporate, the 2nd quarter adjusted EBITDA loss was $29,000,000 are up $4,000,000 from lower investment income. For the full year 2023, we expect the corporate adjusted EBITDA loss are subject to the financial statements. Speaker 400:20:36I would also mention that the investment portfolio continues to perform well with higher interest rates improving both short and longer term returns. Turning to holding company liquidity, we ended the quarter with $495,000,000 In the Q2, dividends from our operating segments totaled $180,000,000 In addition to cash used for corporate and interest expenses, 2nd quarter cash outflows included 3 main items, dollars 20,000,000 of share repurchases, $40,000,000 of common stock dividends and $50,000,000 related to previous acquisitions within Global Auto. For the full year, we expect our businesses to continue to generate meaningful cash flows, approximating 65% of segment adjusted EBITDA, including reportable catastrophes. This is consistent with our previous forecast. Cash flow expectations assume a continuation of the current economic environment and are subject to the growth of the businesses, investment portfolio performance and rating agency and regulatory requirements. Speaker 400:21:44In closing, we're quite pleased with our first half overall performance, Operator00:22:33Our first question is coming from the line of turn the call over to Jeff Schmitt from William Blair. Please go ahead. Speaker 400:22:44Hi, good morning. Speaker 500:22:45Good morning. Global Housing seems to really be turning a corner here. But just looking at that, you'd mentioned the favorable development charge. I think it was 28,000,000 participants are in the line of the call. When we backed that out, the underlying loss ratio was at 44%, which is still sort of high relative to historical levels, And especially I think considering with the way that housing material and labor cost inflation have moved down. Speaker 500:23:14So are you just sort of taking a conservative posture there or what are you seeing? Speaker 200:23:23Yes. So maybe A couple of comments, obviously, really pleased with the progress that the team's made. We talked a lot about it last year, a lot of actions to streamline the business to focus on the core products and obviously put appropriate rate adjustments in place and certainly it's showing through In the first half of the year and to your point, that's exactly the way we look at it. We adjust the $28,000,000 of in the quarter, we also adjust for the $5,000,000 FEMA bonus as we look at our overall results. Are underlined still incredibly strong, dollars 135,000,000 in the quarter. Speaker 200:24:00And then to your point, current accident quarter loss ratios are 44%, I think are a little under 42% last year and that's just a factor of the increased inflationary pressure that we see are being largely offset by the work we're doing on rate, but not fully back to the levels that we saw last year. So as we think about The strong fundamental performance in housing, it's not a result of unusually low loss ratios. In fact, kind of our year to date normalized combines are kind of right in the range of what we would have otherwise expected. But Richard, I don't know if you wanted to add anything else to that? Speaker 600:24:37Yes, exactly. And I would just say, if we look year over year, you're exactly right, Jeff, with the 44%, that's a couple of points are above last year's level same time. And as Keith said, I think we do have some inflation that's it's higher last year than the costs are are higher this year than last year, so that's running through a little more frequency. And just also, there was more, I would call severe convexity storms in the last quarter. And while those storms, most of those storms didn't make it to reportable cats for us over $5,000,000 as We had a very low level in the quarter. Speaker 600:25:16Some of them are in the non cat loss ratio. So We did have our share of those, I would say, overall. And that's within the couple point increase that we see over the year as well. Speaker 500:25:30Okay. That makes sense. And then what was the inflation guard adjustment? I think that goes in maybe once a year, but what is that going to be this year versus last year? Obviously, that's going to go into premium. Speaker 500:25:45And then are you still getting rate sort of above that as well? Speaker 200:25:49Yes. So we talked about inflation guard going in are in the range of double digit levels last July. So we would have put the final adjustments through based on that in June of this year. And then to your point, we do an annual adjustment. It's 3.1% adjustment that would go in on top of that for July to AIV. Speaker 200:26:11And then modest rate adjustments plus and minus as we think about managing across all of our states, but certainly still have More to earn through from last year's AID adjustments and then on top of that the 3% that you that we just put in place in July. Speaker 500:26:30Okay, great. Thank you. Speaker 200:26:32Welcome. Thank you. Operator00:26:34Our next question comes from the line of Brian Meredith from UBS. Please go ahead. Speaker 300:26:40Good morning, Mark. Speaker 700:26:40Yes, thanks. Good morning. Good morning. A couple of questions here for you. First, can you talk a little bit about The inflationary pressures you're seeing in global auto, and I understand it's going to pressure margins here through remainder of 2023. Speaker 700:26:57Is this something we're going to see continuing to pressure margin throughout 2024 just as it takes time for These contract changes to work through numbers. Speaker 200:27:07Yes. I definitely think there'll be continued pressure. I do expect 2024 are going to be improved from 2023, but definitely we'll see elevated levels of losses From the inflationary pressure on the parts and labor and auto, as I think about sizing that for you, I'd probably think Maybe a little north of $10,000,000 a quarter in EBITDA impact. So if I was going to size it for this year, that's probably the range that we would put on it. I would say that we expect that to recover over time, both in terms of the rate will be able to take the time to try and drive down claim costs as well. Speaker 200:27:55And that obviously can have a more near term benefit and the rate takes a little longer to earn through. What I would say is we've taken the actions that we want to take. So we've had great dialogue with our clients. There's only a handful of clients Where this is really an impact for us and we've made rate adjustments already in partnership, our interests are very well aligned with our clients and We feel confident that we're going to get this to the right level over time. You've seen us resolve issues from inflation in housing. Speaker 200:28:25We've resolved issues on ESC. Obviously, auto is a new area of focus and our team is 100% focused on delivering and executing. Speaker 700:28:35Excellent. And then second question, Japan, when are we Speaker 400:28:40going to lap some of Speaker 700:28:41these kind of contract roll things that were going on? When will that finally be kind of be done? Is that the end of this year? Is there any kind of going into 2024 as the contract changes in Japan? Speaker 200:28:54Yes. I think that runs through really this year and I would expect to see a lot more stability, as we head into 2024. And then I do think we've got Yes, an incredible position in the Japanese market. We partner with all 4 carriers. There's a tremendous amount of long term growth opportunity in that market and I definitely think we'll see growth again in 2024 and over the long term. Speaker 700:29:19So that's a meaningful part of the headwind you're seeing is Japan kind of contract role more than kind of an economic situation. Speaker 200:29:26Yes. I think the financial performance is still are very strong in Japan. I would say the first half of this year stabilized from the second half of last year. We had a very strong are in the first half, both in Japan and Europe in our 2022 results. So from a year over year comparison, definitely they look down. Speaker 200:29:46But in terms of sequential as we looked at exiting last year, they're both very stable. So I'm really pleased with that performance. In fact, Europe is above where it finished the year and Japan, very stable to where it finished. But it is a meaningful contributor for us and it's an important part of long term growth. So it will no doubt be a priority. Speaker 600:30:07Great. Thank you. Speaker 200:30:09Great. Thank you. Operator00:30:11Our next question comes from the line of Mark Hughes from Tuuris. Please go ahead. Speaker 800:30:25The fee income, what's your outlook in terms of kind of programs or trade in promotions As we think about the balance of the year. Speaker 200:30:38Sure. And maybe I'll start and certainly Richard if you have other thoughts on fee income. But We saw and this can be volatile quarter to quarter really dependent on promotional activity within the industry. We were fortunate, Particularly in the U. S, we partner with all of the major carriers, which is a great position to be in from a trade in perspective. Speaker 200:30:59We definitely saw lower trade in volume in Q2, whether you look at it sequentially or year over year, and that's really just a function of the amount of advertising, the promotion And how hard are carriers pushing to upgrade customers to new devices and then how aggressively are they promoting trade in offers and That ebbs and flows. It was a little bit down in the quarter, to the extent that, as new devices come out in the fall, We certainly expect to see more aggressive marketing campaigns, but it's a little bit in the control of the hands of our clients and it's a very dynamic market, but Continues to be important for our clients and something that we're very focused on. Speaker 600:31:42And Typically, Mark, we would Q3, we're not expecting big increases. Typically, a higher period would be kind of Q4 for us. So a little bit what we mentioned in our remarks as well. So there is some seasonality to it as Keith mentioned in the second half of the Speaker 300:31:59year. Understood. You mentioned Speaker 800:32:04the inflation guard up 3%. Any prospect for additional rate on top of that based on the date approved increases? Speaker 200:32:15I would say some marginal rate increases certainly state by state and obviously we look at are participating in our rates very closely. So there'll be a little bit of additional rate coming through, but obviously the big adjustments We put through last year that are still earning through the book. Speaker 600:32:35Yes. I think as we look at sorry, Mark, as we look forward to the second half of the year, we could see slight increases, but we're not seeing large increases to revenues continuing. I think we've kind of have gotten there already, plus we've gotten out of certain international areas. So overall, the revenues will be impacted a little bit by that. But overall, I think there'll be a little more to come, but not certainly not the levels we've seen over the past year. Speaker 800:33:05Yes. And how about the new money yield on investments versus portfolio yield? What are the prospects for more improvement there? Speaker 600:33:15Well, I'd divide into a couple of things. I mean, we've actually had some nice increase in investment income over the last year. Participants are in the range of $30,000,000 in cash in short term and then obviously we didn't have a real estate gain are in the range of $1,000,000 this quarter. But just on your question on yields, we do have in the long term, our fixed income portfolio is 5 year duration. So we get a continuous role on that and we'll get a continuous kind of increase in those longer term yields. Speaker 600:33:47We've really benefited from short term rates also, which is accounts for almost as much as the increase or as much as the increase in the longer term yields, right, with the Fed increasing interest rates. At some point in the future, those will probably come down. So we'll see that cash return come down. Who knows when that will happen, but we could see that as well. But on a longer term basis, we should continue to get some yield increase. Speaker 800:34:13Appreciate it. Thank you. Speaker 600:34:15Thank you, Mark. Thank you. Operator00:34:18Our next question comes from the line of Tommy McJoynt with KBW. Please go ahead. Speaker 200:34:24Good morning, Tommy. Speaker 900:34:26Hey, good morning, guys. Thanks for taking my questions here. You mentioned the expectations for modest are in connected living this year, and we've had a little bit of discussion on sort of U. S, Japan and Europe. Could you dissect those expectations for that modest growth into any maybe sort of ranges for U. Speaker 900:34:46S. Up X percent, Japan down X percent. Just trying to get a gauge of exactly how much have a headwind in terms of the overall number that Japan and Europe actually are. Speaker 200:34:58Yes. I'd say, if I look at are in the same store. Lifestyle and we think about the outlook for 2023, I would say domestic connected living, I think we had a strong first half and that will continue are consistently for the back half of the year and that will yield modest growth for Connected Living U. S. So performance pretty steady, but that's going to be an increase year over year and again that's overcoming the one time client benefit we had last year in the Q3 for 11,000,000 In terms of international, I'd say our expectations in the second half would be consistent with what we saw in the first half. Speaker 200:35:34So continued stability, and obviously then putting our attention to driving longer term growth opportunities, particularly in Europe and Asia Pacific. And then in terms of the auto side of the business, I'd say auto losses will remain kind of at elevated levels as we saw in the first half. Will continue to see the normalization of GAAP and I would expect auto in the back half of the year to reflect Something more similar to what we saw in the Q2. That'd be the simple way for me to think about it, Tommy. Speaker 900:36:08Okay. Yes, that's helpful. And then switching over to some of the line of questioning on housing. Obviously, there's been pretty tremendous growth this year. I think you guys have last given your sort of normalized cat load expectations for $140,000,000 for this year. Speaker 900:36:28With all the growth that you've seen in housing, do you have any early indications for what you might consider have a normalized cat load as we head into 2024? Speaker 600:36:37Yes. We haven't really updated our cat load. I mean, we put it in for the year and then to be honest after that, it's sort of like the weather the cats will get, I would say. So we're still at that $140,000,000 $40,000,000 number so far. But speaking of that, we were really happy with the reinsurance, the cat reinsurance placement that we put into place where we had thought going into the season at the end of last year, we get an increase, non negligible increase in our cat reinsurance. Speaker 600:37:15And actually at the end of the day, we're only going to be modestly up over the year. And we've done that through a number of things, whether it's are increasing the retention level, working with our reinsurers, exiting some of the international or exiting the international property footprint that we have. So we've done a lot of things to kind of protect the company. We increased the top end as well to 1225 year are in a good position. So far in through July, we haven't had Any cats hit us that are reportable so far. Speaker 600:37:51So we'll wait and see. Obviously, we're in cat season right now. So we'll see how it comes out. Speaker 900:38:00Participants Got it. Yes. Knock on wood. Okay. Thank you. Speaker 900:38:02Yes. Thanks, Tommy. Speaker 200:38:04Indeed. Operator00:38:33Our next question comes from the line of John Barnidge from Piper Sandler. Please go ahead. Speaker 300:38:41Hi, John. Good morning, John. Hi, good morning. Thanks for the opportunity. In your prepared remarks, you talked about new Speaker 200:38:56Yes, certainly, a couple of thoughts. I mean, we've got great momentum with clients in Global Lifestyle around the world. If I think about are Speaker 300:39:08in the market. Speaker 200:39:08Our mobile business and the traction we've had over the course of the last 7 or 8 years has been pretty steady. We've got relationships with So many of the marquee brands globally and that yields a lot of opportunity to do new things, introduce new services, innovate with new products, try to find new ways to help them drive success. So I would say we've got as much ongoing dialogue with clients today and prospects today as we've ever had and there seems to be a constant interest in innovating and doing new things. And the fact that we've got are really wide ranging capability set, I think is a huge advantage for us and we'd look to see that continue to drive growth long term. Speaker 300:39:54Thank you for that. And then my follow-up question, you talked about expense reductions across the global franchise. Is that above what was previously contemplated and do the lifestyle input cost trends drive an increase in cost reductions? Thank you. Speaker 200:40:10Yes, maybe I'll start and then Richard can add on. But certainly, we've tried to be very disciplined around expense management. Our goal this here was to hold our G and A expenses relatively flat. That means we have to overcome merit increases, participants are in the range of $1,000,000 additional costs for health and well-being for our employees. We've got to absorb incremental growth and incremental investment and we've tried to do that with some of the expense actions that we took in the Q4 last year, but also a pretty intense focus on driving digital first and automation through all of our operations, whether they were call center claims operations or even our depots, That continues to be a huge area of focus for us and we're really pleased with the progress we've made so far. Speaker 200:40:58But Richard, anything else you want to add on expenses? Speaker 600:41:02Yes. I would just say and then turn to the housing side in particular, we've gotten some really good leverage participants are in the range of $1,000,000,000 of our expense base with some of the investments we've made in automation and digital capabilities. And you've seen in our supplement, the expense ratio go down a number of points over the last year where we're at 38.8. Now part of that we had that NFIP bonus that have been very pleased with the fact that we've had increases in revenues and not a proportionate increase in expenses. So That really demonstrates we are getting leverage out of the business, out of the operations and all of the work that we talked about last year Speaker 200:41:54Great. Thanks, John. Operator00:42:00Our last question is coming from the line of Grace Carter from Bank of America. Please go ahead. Speaker 400:42:07Good morning, Grace. Good morning, Grace. Speaker 1000:42:10Good morning. Hello. I think that we had previously talked about maybe some seasonality in the Connected Living book in 3Q just with are more likely to be out and about and maybe damage their devices. I was just curious if you could quantify that on a historical basis, just how we're thinking about, how the loss ratio might shape up in the second half of the year? Speaker 200:42:36Yes. Maybe I'll offer a couple of thoughts and then ask Richard to jump in. But definitely, you're correct. We do see seasonality in Q3, we also see, to Richard's point earlier, lower trade in volume in the 3rd quarter and higher trade in volume in the Q4. So as a result, we'd expect to see an improvement in Q4 over Q3 for Connected Living. Speaker 200:42:59And To the extent that we've got certain mobile programs where we're on risk, obviously, we see that impact on frequency in our quarterly results in the Q3. Now we have moved one of our clients to a reinsurance structure, which we talked about that non economic contract change that certainly will help mitigate some of that impact. But I don't think we've sized what we would expect the delta to be, but Richard, you might want to add some commentary? Speaker 600:43:30Yes. We haven't sized it, but I would say it's are modest. I mean, really what we wanted to portray is really Q3 is typically a softer quarter from us for us for the trade ins and some claims increase. It's not hugely material, but it's enough for us to talk about to really say, hey, when you're looking at Q3 and Q4, if you're modeling that, Q3 is going to be softer and Q4 is usually stronger because we don't have the claims, participants The increase in claims that we just talked about and then trade ins are usually higher. Speaker 1000:44:05Thank you. And then I guess on the decrease year over year in global devices service, to what Is that driven by the discontinuation of the in store repair capabilities versus any other factors? Thank you. Speaker 200:44:21Yes, That was 400,000 on a year over year basis. So you could remove 400,000 from Q2 last year and that will give you All right. I think we took all of the questions. So thank you everyone for joining today and we'll certainly look forward are speaking to you again in November for our Q3 earnings call. And as usual, please reach out to Suzanne and Sean if you have any follow-up questions. Speaker 200:44:53And again, thanks everybody. Operator00:44:56Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.Read morePowered by