Assurant, Inc.

Q3 2021 Earnings Conference Call


spk_0: welcome to usher and third third quarter two thousand twenty one conference call and webcast at this time all participants have been placed in the listen only mode and the floor will be open for questions following management's prepared remarks if you would like to ask a question at that time please press bar one on your touchstone phone if at any point your question has been answered you may remove yourself from the queue by pressing the pound key we ask that you please pick up your handset dello optimal sound quality lastly if he should require operator assistance least press start zero it is now my pleasure the during the for over to since then shepherd senior vice president of investor relations and sustainability you may begin thank you operator and good morning everyone we look forward to discussing our third quarter two thousand twenty one results with you today
spk_1: joining the for assurance conference call our allen kohlberg or chief executive officer keep them in our president and return jojo or chief financial officer yesterday after the marquis close we issued a news release announcing our results for the third quarter two thousand twenty one the relief and corresponding for cancel supplement are available unasur and dot com will start to the a call for mark from alan keith and richard before moving into a q and a session some of these statements made the therefore we're looking forward looking statements are subject to read uncertainties and other factors that may cause actual results to differ materially from those contemplated by the statement additional information regarding these doctors can be found in yesterday's earnings release as well as and are as the report during today's call the war for to non gap financial measures which we believe are important in evaluating the company's performance for more detail on these measures the most comparable gap measure and reconciliation of the to please refer to yesterday's news release and financial settlement i will now turn the call over town
spk_2: thanks suzanne good morning everyone or third quarter results were strong driven by double digit operators growth and global lifestyle the strength of our global automotive and connect the living off where he continued to validate our long term strategy of focusing on are higher broke the base and capital light businesses we continue to make progress and building a more sustainable company for all stakeholders during the quarter of pukey highlights include it for the first time assurant was awarded a bronze accreditation by echo bodice one of the largest sustainability radio companies writing a among the top fifty percent of all seventy five thousand participating companies in addition this quarter we provided additional transparency to track our progress on our journey to go the more diverse and inclusive assurance with the recent disclosure of r e o one report which provides gender race and ethnicity data by job category for us based and boys we believe a diverse and inclusive workforce will best foster innovation a key ingredient to sustaining are all performance longer term booking are furnished performance year to date net operating income per share excluding affordable catastrophes was eight dollars and seventy five cents a twelve percent compared to the first nine months of last year net operating income and adjusted ebitda also excluding couch both increased by ten percent to five hundred and twenty eight million dollars and eight hundred and sixty two million dollars respectively these results support or for your outlook of tend to forty percent growth in net operating income per share excluding your portable catastrophes marking or fifth consecutive year of strong profitable growth given year to date results and our expectations for the fourth quarter we would expect the and the you're closer to the top half of this range we've also now completed our three year one point three five billion dollar capital were to an objective for march twenty making them industry day a quarter ahead of schedule following the clothes on the sale of global printed in august we've also made meaningful progress and returning an additional nine hundred million dollars to shareholders or twenty twenty one u p s l what is driven by at least hi single digit net operating income growth excluding cats as well as share repurchases bring to our business performance and global lifestyle we're on track to grow adjusted ebitda by double digits and twenty twenty one from six hundred and thirty seven million dollars and twenty twenty driven by global automotive and connected living we have benefited from the stable recurring revenue stream of are installed base of mobile subscribers and our success in launching additional offerings and capabilities for mobile carrier cable operator oh yeah i'm and we tell clients globally definitely or mobile trade an upgrade business and expanded service delivery options are increasingly important to our profitability and also and providing differentiated and superior customer experience within global automotive we benefited from increase scale going the number of vehicles we protect by twenty percent over fifty two million since the watch a group acquisition twenty a t we believe auto continue to be one of our key growth businesses in the future in global housing we continue to be on track for another year of better than market returns with an annualised operating are we have nearly fifteen percent for the first nine months of this year this includes one hundred and thirty million dollars if should be waters which further demonstrates the superior returns of this differentiated business or counter cyclical underplays insurance business remains an integral part of the mortgage industry framework of us within lender places we were new existing clients and add new partners we will continue to enhance the experience to the ongoing ball out of our single source processing plant one or multifamily housing this is now supports over two point five million voters across the us and as more than doubled earning says twenty thirty two are strong partnership cigar affinity and property management company clients our investment in digital capabilities that is our cover three sixty property management solution continues to drive more value our partners and then enhanced customer experience overall we believe our portfolio of high growth be based capital light offerings and high return specially pnc businesses such as apart as a long term our performer and sustained value crater far shareholders but my retirement a year and i wanted to take this opportunity to thank all of our stakeholders that have supported a strategic vision and power over the last seven years most of all i'm humbled by or fifteen thousand employees who threw their dedication to serve our clients and are three hundred million customers worldwide have successfully transformed sure it together we have significantly strengthened our fortune three hundred company that she continued to deliver above market growth and superior cash flow with our president keep deming succeeding me a ceo in january i'm confident a sharp will accelerate our strategy and continue to differentiate are superior customer experience walk further deepening quiet relationships well now turn the call of at a key to have your key business highlights in greater detail for the quarter keep thank you alan and good morning everyone
spk_3: on behalf of our employees i wanted to express our sincere thanks to allen for his leadership as ceo
spk_2: i've been fortunate have had a front row seat and a role in supporting allen's vision and the transformation of assurance
spk_3: importantly he had continued to evolve the purpose of our company to drive value for all stakeholders customers employees communities and shareholders the impact he had an our people and the overall culture of our company has been exemplary and i appreciate allen's personal mentorship and partnership and wish him the very best news retirement as we build an assurance momentum over the long term i believe our kaolin and innovation will be critical factors to achieving success and growth especially if we focus more on the convergence around the connected consumer from a coward perspective assure and has developed a deep and diverse bench of internal leaders
spk_2: a few weeks ago i announced a refreshed management committee effective in january including to new leadership appointment illustrating are strong bench first keith meyer our current president of international will succeed gene margot meyer a chief operating officer a team will be retiring at year end
spk_3: gained significant contributions to assure and over the last thirty plus years including as feel all over his last five years have been instrumental in creating market leading position producing profit or growth and transforming the organization
spk_4: in fact feeding jane
spk_2: keep my or brings nearly twenty five years of experience that assurant to the feel a role since twenty sixteen as president of usher an international is driven growth across our global market most recently with strong success in asia pacific
spk_3: in his new role keep will be focused on advancing assurance business strategy and market leadership positions as well as identifying additional opportunity to deliver a superior customer experience jack dragon martin jones will become president of global automotive with over thirty years of experience he currently leads the transformation and growth strategy for auto it has been instrumental in our introduction of innovative new products like a be one or electric vehicle warranty protection in addition to emerging opportunities and innovation
spk_2: martin will be focused on driving growth and improving a customer experience including working with our partners to deliver best in class dealer training
spk_3: these two new appointments along with recent appointment of these you nair as president of connected living and manny by sarah as are cheap innovation officer as well if the other management committee members represent a strong team to help lead us into the future
spk_5: in addition of talent
spk_3: innovation is an important strength of the organization not only the development of new digital products and offerings for our clients but also through new path to grow and scale assurance businesses
spk_2: within connected living innovation with a significant theme this quarter through ongoing enhancement of our mobile service delivery options
spk_3: as part of the recently finalized multiyear contract extension with t mobile are expanding the services assured provide to continuously improve the customer experience for millions of t mobile customers as of november first usher in is partnering with t mobile to begin the nation wide rollout of in store device repair services to approximately five hundred stores provided by assurance industry certified repair experts in addition we have also transition all of the legacy spread protection subscribers to the new t mobile device protection offering as a result the significantly ads or mobile device count now at roughly sixty three million as of november first overall the expansion of of our service delivery option is critical to sustaining are competitive advantage
spk_2: we also recently signed a multiyear renewal with spectrum mobile continuing to provide a comprehensive and park a geek mobile assurance on device diagnostic tool
spk_3: with the renewal will also be expanding the offering to include park geek privacy which enables consumers to better protect and manage their personal information online through various features this is another example of how are able to grow by adding services and capabilities to existing client in addition the mobile business continues to see strong attachment rates given the increased reliance on mobile devices as well as rising device prices our feed driven trade in an upgrade business including the previous acquisitions of hyler and a leg ray have performed extraordinarily well already a this year as we enter the early innings of the five g upgrade cycle in fact almost a year after that spreads that can of highly closed i am happy to report the acquisition has performed better than expected ahead of the low teens forward iba the acquisition was valued on with the growling availability and popularity of five v enabled smartphones we expect to see our thirty plus trade in an upgrade programs continue to grow our progress is demonstrated through our ability to manage large scale programs with the perrier technology this is further supported by increasing our attach rates for trading programs at our client promotional efforts encourage consumers to upgrade
spk_2: overall we have process nearly eighteen million devices so far this year reducing ie waste and increasing digital access with high quality affordable phones to the scale and capabilities of our trade in an upgrade programs we benefit from it additional source of profit and improved client economics and customer retention
spk_3: this quarter or we are pleased to announce that we have signed a multiyear contract extension with eighty and he to manage their device trade program this includes providing analytics as well as device collection and processing for all of their sales channels including retail be to be dealer and direct to consumer eighteen t with a key client added with the heil acquisition and we look forward to continuing to do business with them specifically as we help support the growing adoption of five g enabled devices in global automotive policies increased by four million or eight percent year over year and production is well above pre pandemic levels as we continue to take advantage of our scale and talent so far this year the been has also benefited from strong used car growth which tends earn faster the new car sales this along with the fact that earning for the business or recognized over a multiyear period provide good visibility into future performance of the business as we drive innovation with an auto we continued the global rollout of easy one and electric vehicle and hybrid protection product of north america he be one has now been rolled out in seven countries while the electric vehicle market is still in it's infancy our a be one product will allow usher in an opportunity to better evaluate customer demand and leverage are learning to position as well for the expected increase electric vehicle adoption in the future or multifamily housing business group policy by seven percent year over year from growth in our affinity partners as well as our pmc relationships where we continue the rollout of are innovative cover three sixty product in addition we've seen other digital investments great opportunity for future growth our newly designed digital fails portal which makes it faster and easier for residents to sign up for a policy is driving significantly higher product attachment right our new portal has seen an increase in conversion rate or star legacy website to do was first introduced last year in summary our ability to strengthen assurance talent and innovation supported by critical and
spk_2: investments has and should continue to drive momentum for the future
spk_6: i will now turn the call our to richard to review the third quarter results and are twenty twenty one outlook richard thank you key and good morning everyone
spk_1: and thou and noted we are pleased with that their core performance and our results reflect strong growth across global lifestyle and solid earnings and global housing
spk_6: where the quarter we recorded net operating income per share excluding report booked ash be a two dollars and seventy three cents of five percent from the prior year period excluding cats net operating income and just needed a for the quarter each increased or percent to one hundred and sixty two million dollars and two hundred and sixty two million dollars respectively now it's to segment result starting the global lifestyle
spk_1: the segment reported net operating income of one hundred and twenty four nine dollars in the third quarter can you'd earnings expansion within connected livings mobile business
spk_2: and global automotive earnings increased eight million dollars or twenty one percent from continued global growth in our us national dealer and third party administrator channels including contributions from our a as a as an international oh e and channels
spk_6: that are loss experience in selecting celery products and higher investment income also supported earnings growth in the quarter connected live in earnings increased by six million dollars or nine percent year over year the increase was primarily driven by continued mobile subscriber growth in north america and better performance in asia pacific as well as higher trading volumes led by contributions from a high lack position and carrier promotions
spk_1: this quarter global automotive and connected living results also included a modest one time tax benefit that improved earnings
spk_6: but the quarter like thousand and just the even to increase seventeen percent to one hundred and seventy seven million dollars this reflects the segments increase emrys asian resulting from higher gear related intangibles for more recent transactions in mobile and global automotive i t depreciation expense also increase damage from higher investments as we look at revenues lifestyle revenues increased by one hundred and fifty eight million dollars or nine percent this was driven mainly by continued growth and connected living and global automotive within connected living revenue increased ten percent boosted by mobil to the income that was driven by strong trading volumes including contributions from hyler trading volumes were supported by new phone introduction and carrier promotions from the introduction of new five you devices i a revenue from growth in domestic mobile subscribers was offset by decline in run off mobile programs mobile subscribers were slightly year over year and flat near the day as mid single digits subscriber growth in north america these aren't said by declined from other geography it's mostly due to treat factors first with seven hundred and fifty thousand subscribers related to a runoff european baking program previously mentioned which is not expected to be a significant impact in our profitability
spk_1: second subscriber growth for existing programs moderating in asia pacific and third a slower than expected recovery from the endemic in latin america
spk_6: and global automotive revenue increased eight percent reflecting strong fire period sales of vehicle service contracts industry auto sales remained elevated in the third quarter and we benefit from this trend as reflected in the year over year growth of our net written premium by twelve percent we handle seeing this trend begin to normalize beginning into the fourth quarter for the full year lifestyle revenues are expected to increase modestly compared to last year seven point three billion dollars mainly driven by a global auto in connected live in growth
spk_1: for all of two thousand and twenty one we still expect global lifestyles net operating income to grow in the high single digits compared to two thousand and twenty
spk_6: adjusted either a for the segment is expected to grow double digits year over year which continues to grow at a faster pace than segment net operating income as previously reported we began our investment in the chemo in store with pair capability this quarter however do the timing of the rollout most of our associated start up costs will occur in the fourth quarter these cause i merely really did technician hiring and parts sourcing
spk_1: we do expect these costs the meaningfully in fact connected livings profitability as we and the year
spk_6: in addition we expect our effective tax rate to return to a more normal level approximately twenty three percent
spk_1: looking ahead to two thousand and twenty two we expect earning expansion to continue but more likely at more moderated levels as we continue to invest for grow including additional implementation startup costs for installer service and repair moving a global housing net operating income excluded catastrophe losses was eighty one million dollars for the third quarter
spk_6: including the seventy million dollars of pronounce catastrophe losses mainly from hurricane either net operating income totaled three million dollars
spk_1: excluding catastrophe losses earnings decrease nineteen million dollars you to anticipated higher nine cat losses which returned to levels more in line with historical averages
spk_6: as reminder they were all man cat losses in two thousand and twenty were not representative of historical trends and third quarter two thousand and twenty mark the lowest point of last year mainly driven by loss experience with in blender place and specialty products you over your earnings decline was nearly all driven by and they will not get lost experience from several factors largest driver which contributed close to half of the increase
spk_1: was from the expected normalization of the non cat loss ratio
spk_6: the balance of the decline was split relatively evenly between increased reserves way to our special be pnc offerings primarily in our on demand sharing economy business as well as higher claimed severity claim severity included moderate impacts from inflationary factors such as higher labor and material costs or there's always a lag if this trend continues we would expect higher loss cost of the outset fight increased rates overtime
spk_3: and multifamily housing underlying growth was offset by increased investment to further strengthen our customer experience including our digital first capability
spk_6: global has a revenue decreased slightly year over year alone especially pnc revenues as well as a cat reinstatement bring him resulting from hurricane either and lower real volumes in lender place this was partially offset by higher average and shirt values and premium rates and lender plates and growth in multifamily housing
spk_1: we continue to expect global housing net operating income excluding cats to be flat for the full year compared to two thousand and twenty
spk_6: but the fourth quarter and into two thousand and twenty two we would expect not get losses to continue to be about two thousand and twenty but in line with your date two thousand and twenty one experience which is consistent with long term trend we also continue to monitor the oreo precaution moratoriums and any additional extension that may be announced i corporate the net operating loss was twenty one million dollars and improvement of four million dollars compared to the third quarter two thousand and twenty this was driven by two items first lower employee related expenses and third party feed and second expense savings associated with reducing our real estate footprint in the fourth quarter with you and is at a higher loss due to the timing of span for the four year two thousand and twenty one we now expect the corporate net operating loss to be approximately eighty million dollars can buy favorable year to date results mainly from the one time tax and real estate joint venture benefit in the second quarter this compares our previous estimate of eighty five million dollars as we look forward to two thousand and twenty two we would expect their net operating loss incorporate to be closer to ninety million dollars more in line with historical trends during to the holding company liquidity including in the proceeds from the sale of printed in august we ended the third quarter with over one point three billion dollars while above our current minimum target level in the third quarter dividends from operating segments total one hundred and twenty seven million dollars in addition to our clearly corporate interests expenses we also had outflows from remain items three hundred and twenty three million dollars of share repurchases thirty nine million dollars and common stock dividends and eleven million dollars mainly related to a shrink ventures investments in addition to completing our two thousand and nineteen investor the objective of returning one point three five billion dollars the shareholders from two thousand and nineteen two thousand and twenty one we have also completed roughly one quarter of our objective to richard nine hundred million dollars in global prenuptial proceed
spk_1: through share repurchases
spk_3: for the your overall we continue to expect dividends to actually make segment earnings subject to the growth of the businesses rating agency and regulatory capital requirements
spk_1: and investment portfolio performance i also like to provide a quick update on assuring benchers or venture capital arm
spk_6: in the third quarter three investment in awkward boy went public the as backs we are pleased with the results as the reinvestment exceeded the seven times multiple on investment capital under their respective spec transaction terms these transactions combined with strong performance in the broader benchers portfolio lead to a seventy five million dollars after tax game blowing through net income in the quarter in addition to strong returns these investments also provide key insights into emerging technologies and capabilities women are connected consumer of businesses
spk_7: before during the una i too would like to take a minute to think alan or this partnership over the last five years in addition the positioning a sharp a long term success and growth he's created an environment of inclusion and community truly representative of our core values common sense and common decency
spk_6: alan i was ya the very best in retirement
spk_8: well deserved
spk_0: and with that operator with open the called for questions thank you the floors hello ben for questions at this time if you have a question or comment please press bar one on your touchstone phone if at any point your question is answered you may remove yourself from the queue by pressing the pound key
spk_9: again we do asked that while you post your question that you pick up your handset the provide of them off sound quality
spk_10: thank you have a first gosh ain is coming from balmy much joined with k b w a good morning
spk_2: hey monica as thanks for taking my question i say that that the transfer of sprinted scriber that you mentioned increased year cover devices by about twenty percent
spk_3: you talk about the revenue potential per device and kind of the bottom line profitability for those to new devices relative to your fifty three million force devices quarter and sure maybe i'll take that and in backup for just a second so first thing i'd is just the the strong partnership that we've had with t mobile for many years
spk_2: which is obviously scaled significantly over time the were extremely pleased to have reached a multi or extension and then the migration of the sprint customers on november first along with the ramping of same a repair inside of a five hundred t mobile story is obviously very exciting as we look to the sure
spk_3: it a as we discussed on previous calls it's not uncommon for us to forgo economics when we re contract with major client that's particularly true if a client scale dramatically over time which obviously the case
spk_2: i will t mobile as a result of the the new agreement going forward we do expect lower per unit economics but i would say that once we get same unit repair fully ramped and normalize our performance which will take some time we do expect overall to be able to more than offset the margin
spk_10: pressure with the addition of friend volume with economies of scale with in the business and obviously with the addition of the additional install repair services and we're really well positioned as partners as we look to continue to drive customer experiences and innovation for the future felt overall and you know really strategically important
spk_2: accomplishment for us not just the renewal but launching theme you repair i think is is critical as we looked accelerate our competitive advantage in a collective connected living business in this position does really well
spk_3: great thank him and and switching gears little that went with the twenty nineteen twenty twenty one capital plan you laid out the general target for capital allocation of twenty five percent reinvestment twenty five cent dividends and fifty percent share repurchases as earning fundamentally change that should lead us to expect anything different kind of going forward perhaps getting a sneak peak of the next three years
spk_2: not great question in and we're obviously planning an investor day in march of of next year so we'll talk more about our long term vision for the company in our capital management philosophy at a point in more detail but i would emphasize our our goal as it has been as to deliver long term profitable growth to increase our market leading position and really focus i'm long term value creation for our investors and we intend to maintain debited a discipline capital management philosophy but also looking to invest in growth organically and certainly somewhat inorganic as well but will come back in in day and share a broader vision around around the future
spk_8: yeah mrs allen though the one thing i would add to keep comments if you think about our company we've always had a great business that generates earnings at their business level that we can then upstream you the holding company and going back since our ip oh we've been very strong stewards of companies capital the last twenty years and he gets going to continue fully a
spk_0: under keep leadership as we go forward i don't see any major changes in the generate cash and than ten near me and kid appropriately shareholders
spk_11: yeah we do we do remain committed to return the balance of the nine hundred million from pre need that we've talked about previously so we intend for that to continue as planned and get that done within twelve months for the closer the pretty transaction as well
spk_12: and cat thank you our next question is coming from gary ran ranson read dowling and partners
spk_3: morning
spk_2: yes a good morning i also had a question of they cover devices i'm me you you we've had a period of a couple years were spent flattish covered devices and new you explain that on the you're prepared remarks now we got essentially in one month
spk_3: this twenty percent jump or so i'm i'm just trying to think through how that might roll forward it works are we getting an unusual share of it in this first step other roll out or i can you give us any color of how that might unfold going over the next the rest of this year and into next year
spk_2: yeah so we we migrated in all of the sprint customers
spk_12: effective november for sell all of that volume is now enrolled in insurance program going forward obviously will continue to see growth through the overall partnership as t mobile continues to win new customers in the marketplace and continued dad insurance i to those customers account for this this does create a
spk_3: a really interesting long term opportunity for growth and and as we've demonstrated over many years we continue to innovate not just around the products but services capabilities how can we invest more around delivering exceptional customer experience and certainly a partnership with t mobile that is now significantly more sky hailed we believe it's going to yield more opportunities to partner together for the future
spk_2: bo as we've talked about there's a trade in terms of economics between you know what's our per unit fee that we're going to get relative to a much larger base of customers
spk_12: right okay and it's is there any remaining drag from the other things you mentioned internationally where where things were running off or not growing as much no i think either we've seen a little bit of a slowdown in in growth if we're talking specifically about mobile just as we'd come out a of code and a couple of regents primarily latin america
spk_2: a little bit in europe is things about open back up but you know overall
spk_3: really really strong performance in in the us market and the japanese market and really do see good long term growth for that business overall in international as we continue to scale or time
spk_2: okay thank you and that the other the other counts as give his the autos covered in global automotive and know that was growing very well as
spk_3: and now again trying to think through how that might continue forward is there any anything that has momentum there that we might expect to see additional growth in those numbers going forward yeah i would say the the overall industry sales on the other side remain quite elevated as you saw you know are covered policy to increased a lot for million and a percent from last year but i would i would also highlight sales production was well above pre pandemic levels that worse
spk_12: being in a really really strong performance we achieved almost one point two billion of net written premium when you look at the quarterly results i would say that began to normalize a little bit from where we were in the first and second quarter but it was only modestly down from que to up twelve percent over twenty twenty and actually up twenty seven percent over twenty nineteen felt that would certainly expect to taper off going forward desire visually constraints around
spk_6: supply chain that's affecting new car sales bed those constraints have been more than offset by the volume and our quieter doing on the use side of the business or which has been very dramatic in an overall leading to elevate elevator love of the sales
spk_7: hum thank you and if i could squeeze in a couple of numbers questions are a couple items that were mentioned that he didn't really quantify ways that tax benefit that helped the numbers in global lifestyle you also mentioned in the in housing
spk_13: the reinstatement premium or those can you help quantify those at all
spk_12: data i get the my garrett's richard i'm yeah i'm in terms of the tax benefit
spk_6: about one million dollars ah and then it reinsurance the reinstatement premium i think that was and about ah seven million dollars
spk_14: but okay exactly
spk_15: and and just to be clear the ninety nine million a pretext cat does not include that reinstatement premium
spk_0: correct
spk_2: i bet in terms of the and the reinstatement premium know it it it actually does if you look at that that the numbers we have or attention of eighty million dollars and the total cat impact for us in the in the quarter was eighty seven million dollars so that the that that comes through on that ride
spk_16: i got it okay thanks
spk_2: thank you very make it taste game
spk_3: thank you our next question as from bomb shell from piper sandler a good morning dumb come on guys so i'm thinking about the rollout of here he be one product noticed the corresponding transition to the electric vehicle not given how do the attachment rates compare
spk_16: and for this product compared to the internal combustion engine you know there's a lot of a good amount of tech demos even cars but they do at less moving parts help you out of those dynamics of back the attachment race that you're saying it's a it's a great question it's i would say it really early in terms of scaling around electric vehicles in terms of the service contract programs you're correct there are there are less moving parts there's a lot of technology some of the part tend to be very expensive to get repaired so we may see lower frequency we may see higher severity is there's also a little less certain p
spk_2: he in the minds of consumers around the reliability of all of the technology so we do expect to see strong performance over time i would say the really early and it will evolve you know as as we start to see more and more he these and market and as we start to see our clients maturing around not just selling electric vehicles
spk_3: but a but attaching up my products and services or this will evolve i think over the next year's quite dramatically okay
spk_2: no inflation notes top of mine for insurance industry right now sure and operated businesses that have attracted more attention regard to inflation parts and labor costs in automotive ship shortages and mobile he only global housing
spk_6: housing is a risk based business where you have inflation exposure they can mitigate with rape but i think a lot of investors who look at assurance your typical insurance and duster and sometimes miss understand the extent to which the risk in mobile an automotive the see a doctor clients you know and how it operates on a feat feel like bases you know i think the best understand dynamic exists but not the degree which so maybe you could give us your thoughts barren out charges his position and are you know it's an increasingly inflationary environment yeah and maybe i'll offer opera couple comments and then and allies richard get his team's dla to work on this question but i think you're right and we think are risk is quite well insulated unmitigated based on the deal structures that we have on the lifestyle side of most of the deals their reinsured proper chaired not all of the deals bed and you know we've been pretty inflated and firms of seeing volatility there and then obviously as we look at housing as you talked about there are opportunities way his with rate increases in increasing insured values and then and then investment income will obviously be that a big driver as we go forward richards done for analysis to a kind of look at the
spk_16: the net overall so maybe talk about that richard
spk_17: shirt thanks thanks keep and and and i think you saw both it on the main points at me when we look at it i would say you know short term in his quarterly mention that severity were up a little bit probably a quarter of the whole change in the not get loss ratio yeah those to verities are really labor and and claims costs increasing their
spk_0: there and but over the long term i think we're we look at it you know maybe being slightly positive that least neutral on because what happens and keep mentioned that bed the reinsurance that we have with our clients on the fee based side so there's a large sharing a profitability on that side of the business
spk_2: but then on the pnc side where new housing whatever where we are ah taking on the claims and the risk
spk_18: and there's two things that would happen lender place we have aberdeenshire guys would go up prices of housing goes up go up with inflation we would see an increase in our in the premiums to the average insured value also over time we would he would be able to recover a large part if not all of that to irate rate filings so we feel that obviously insulators quite well and then finally when inflation over time we would anticipate that interest rates are would increase in we would get a yacht an uptick in our investment income so overall we're not looking at it as being any type of bugs gonna get significant negative if anything it's neutral could be could be a small positive
spk_3: okay thank you for your answers thank you thank you are an expression is coming from brian meredith with you b s with a good morning brian
spk_18: mourning mourning mourning so it just curious
spk_2: a global housing i know early on we are they can maybe we can increase employment rates you know towards the end of this year obviously forbearance and have you heard that now that's kind of what is your kind of use with respect placement right there we were in a few pick up the i think you know we we signaled a modest change in place for rate this quarter mainly driven by the mix i'd say it's broadly flat you know i would expect if we looked her maybe the back half of twenty two we'd start to see an increase modestly in the place and rates over time you know what to expect servicers to actively work with borrowers on loan modifications to keep the loans performing and there's so much strength generally in the housing market customers have you know positive equity in the home so i think a lot of that activity will delay some of the place and rate from blowing through and certainly same things true on a foreclosure side as well that will affect the oreo business self probably second half of twenty two would be our best estimate on when we might start to see that coming through the the portfolio great
spk_18: and then at sequestered just curious the reserve increases the happen in the quarter what was that related to the specialty pnc
spk_19: yeah this is alan maybe when we take i want to give a little bit of history on what we're doing there so in specialty we have a variety of products things like antique auto a little bit of the international property we right and we also a few years ago started to do a couple of on demand our products related to millie fall
spk_2: oh in the consumer as they only rant their home in their car and trying to really build off of our experience our rental on the franchise that we have their and what we're really doing today is where ensuring a short term transaction so think about your rent to your home or you're using your card make a food delivery and what we're excited about with that
spk_18: business and now answer the question directly both it's a new distribution channel for a simple think about we can embed some of our capabilities round rental into a rental the home and then what's particularly interesting is the gig economy and if you think about the workers who are now delivering food or you're using their car to provide services it's an interesting option for us to drive not dot product as much as are other products are service contracts are mobile capabilities are renters insurance so that really been the genesis of all we're doing their in terms of the reserve others quarter i know it's it's affecting our village maybe but five million dollars i think was the amount and it's really did
spk_2: element on prior reporting claims so think managed to catch up to align with all of our future expectations and then over the last couple years as we gained experience in this business we've been modifying our products structures probably to increase rates and we put in place extensive reinsurance so we'll never yeah we don't anticipate having any significant or material our losses from this business in fact it's been a very well performing business for said the last couple years gotcha and i see me to get a of reinsurance on it
spk_3: protect on it
spk_20: the we do we do we've got very strong structures they're and is really for us we're trying to do the same thing we doing odd on mobile generally which is make it into an administration and peterson is as we manage your around a consumer transaction
spk_3: great and then at a lot it was just curious so i take a look at it global like thousand lot of moving parts happening here i get going the fourth quarter when i think about protect margin on it doesn't have a seat additional such coming in at a lower kind of
spk_18: yeah web revenue for saab and then you've got the industry coming in
spk_21: we think about kind of march into that business declining here as we look into fourth quarter in and twenty twenty two
spk_8: i think as we look it over all profits in the in lifestyle and in connected living in our we do expect to see growth
spk_0: in queue for over queue for last year and and continue to see growth into twenty twenty one we had a you know as you saw a strong third quarter for connected live in
spk_2: up significantly over last year so i think that continues in queue for even with the additional investments that were need to make to to really not just stand up me to repair but make sure that we're executing in delivering
spk_22: you are really high standard and then as we think about twenty twenty two yeah we expect overall will see some moderation but we still expect to see you know strong growth across both a lifestyle and housing businesses to fix a good solid operating income growth still a baby's pressure more expected to top like growth to more than offset that like
spk_6: get your thing right correct yeah yeah the per unit economics are going to are gonna look a little lighter but the overall economics are going to be strong correct thanks much for the answers alabaster in your time around thank you
spk_23: and kill
spk_6: our next question is coming from michael phillips from morgan stanley a good morning make big money that and like tax money that that gets richer my when he talked about the impact in the fourth quarter from
spk_7: the rollout expenses from from t mobile i'm a day can the anyway covers quantify that meaningful impact in the end and be is it just a fork you were any that extend into the into one connection
spk_2: yeah thanks thanks for the question might be in in terms to quantifying it i guess i would say we've we've given sort of aggregate the and aggregate indication in terms of you know where we think our lifestyles gonna come in l o year
spk_3: and we talk about being a high single digit so if you really look at last year where we came in and look at high single digits to give you a pretty good view of where we thing to say where we think lifestyles going to come in for the full year and bar that decreases gonna is based on the the increase in in end we're setting up the service and retire and investments that will making by and connected living broadly
spk_22: so that will be in a fourth quarter and then we would anticipate some coming in on next year
spk_24: so i'm in
spk_2: in terms of rolling into next year they'll be some amount of big amount biggest amount i would say would be in the fourth quarter of this year we are thinking of few million and a ramp up quite a bit into that into that you and the fourth quarter so you know we are talking in terms of millions here
spk_6: in terms of doing it yeah i would i would just add you know in addition to the start up costs really wrapping doing all the recruiting the training the hiring and in getting all the build out done there is also just the ongoing evolution of the service that we're going into labor which inevitably will change and evolve over time as we continue to work with t mobile to optimize that experience so i do expect from investment in in twenty twenty two partly supporting you know the rollout to completion but also ramping execution and investing in in our technology to make sure that we're delivering services seamlessly as possible though you you definitely would expect it see some investment as weekend canada shape this is part of our business going forward
spk_22: look after them except guess some the
spk_2: it's more kind of click on playing offense
spk_3: he or on the labor and material coughs and and the severity there
spk_25: document are quite a bit i got to follow up with a written you said you know if things continue i think it said if things continue your of the that can be also the future by higher rates over time i'm done that mean you're currently pricing and for that or still kind of wait and see how that plays up
spk_8: he has some some of it's currently coming through on you know every year in our contracts we get an increase what we what i referred to as average shirt value sex embedded in contract we look at inflation
spk_26: man we do get some increase in the overall premiums from that when i was talking about the trends over time in the rate filing yeah one we can't put in a a filing for one quarter when we file rate is based on averages over a couple of years so that's really young for inflation that come in and he and be lasting and have any
spk_0: impact on the non cat loss ratio
spk_3: it would need to come we need to happen over time as is what i was was referring to their might arm and then we would put it in and then you get it so there's a lag but it would be offset overtime is what i was and
spk_27: okay that makes sense i'm not that i guess left left left when it with any impact in the in the quarter on your some more mobile phone numbers from
spk_3: the t mobile a cyberattack back honest
spk_2: now i would say nothing meaningful that that they were aware of our that we saw and then we had you don't we have a really strong basic customers and i don't think we thought anything of note that i'm aware of aka of like us thank you
spk_3: i we next question it's coming from mike you have a true as a securities
spk_27: can you get money march mark yeah thank you good morning in the congratulations and on and on the moon thresh me on the yeah revenue model for the in the store bakery the t mobile that the
spk_2: kind of time and material do that though repair per device the hourly reimbursement for that were
spk_27: yeah it's a great question it's i would think of it as being income oriented and we're getting paid for the labour that we perform and and then from from the management of the overall program we don't really have risk around
spk_6: i'm in or out how the business perform from a from a parts and labor other than we get stated fees and we've got a manage our cells within within those levels to dry profitability so i think it's a really really well structured financial deal and our interests are very aligned and it's very motivated around delivering an exceptional experience in the store so i feel really good about not just the deal that we put together but how are working together with with t mobile to really change the industry and are they going to be advertising it our customers going to know that the repair capability is available well we we obviously manage the plane process with and consumers and and now that's what the an entire base of t mobile subscribers sell will be directing customers as appropriate to take advantage of of really the best option that available to them to get repairs done so i think it'll be it'll be all largely true
spk_8: i'm our claim flow but also through t mobile awareness campaign that cetera
spk_28: the know richard i think you you old address this to a degree that any more agitated or maybe the number you might go and you're talking about twenty twenty two earnings expansion indicated continue though it more moderate level that you are
spk_29: also referred the strong growth and twenty twenty two anything else you honor and to them
spk_3: wow i wouldn't want to jump in and of investor day and and and when we talk about our our outlook next year i guess i would say two things i mean we're asking for during the color really really pleased with with where we are cross our set of businesses you know whether it be the growth that we're seeing in global otto
spk_2: ah that extension the contract with t mobile the quote other elsewhere domestically and the us in mobile in japan and mobile and also in that in the housing business than you know you see that we we do seem to be at a bottomless placement rates now when the bear
spk_3: friends and foreclosure period will end it'll be a slow take up i would continue to grow in multifamily housing so we think will well positioned for or two thousand and twenty two having said that it's keep mention we still need to continue to invest in ourselves and and and in our business and it's not like like will without headwinds in terms of some interest rate eggs or inflation or but i i really feel good about the aware we are as a business
spk_2: it will totally and id gallons put us in a good position to to succeed over the future under keys leadership thank you thank you
spk_18: our next question is coming from jap smith to frown million blair hey guy i am again orange up ah how much of the ah increase fee income and connected live he was due to highlight acquisition i'm obviously there's kind of are we comparison to good
spk_2: here's how much that it's sort of organic girl with teacher by the five to upgrade cycle vs you know i love being added to the max
spk_30: yeah i would i would say highlands been you know performing exceptionally well you know says we located on what's happened since close trading volumes are up significantly we've seen obviously not just the man from five g significant client promotions were trade ins are the main incentive being used in crew
spk_2: using attach rates and just i think pent up demand coming out of that pandemic so you know we talk about the performance of the of the acquisition fifty percent better than we modeled based on twenty one so we're thrilled with how it's going but more than that yeah really excited about the integration how well that's working are
spk_31: delhi to protect talent obviously a significant renewal
spk_8: have a major relationship with a p t and then as you think about the overall volumes process we talked about eighteen million devices so far this year that compares to fourteen million for full year twenty twenty and that overall in total combining hi lana sure and so yes highlands a big
spk_0: driver of the income but we've also seen growth on what i would call the legacy assurance side of the trade in business as well and and similar trends are happening you know across clients and across the market so it's a really strong time for
spk_32: for trade in in in the global market
spk_33: okay armed great and then the same day search capabilities if you've touched on that quite a bit rolling in our t mobile here few days ago account like it
spk_34: how much as far as you know those capabilities been affected by labour shortages right now actually catch on average just here's how humanity that under current environment me our teams done you know an incredible job we've been working on on this for many months i'm trying to acquire the right labour i in back markets around the country i would say i came and then the the recruiters that were partnered with
spk_35: you some of the incentives that we put in place that to get the best talent it's it's worked really well not to say there are challenges of course there are bad you know our teams of have partner really well with with third parties as well as with t mobile the make it happen
spk_34: okay i'm great thank you
spk_3: thank you
spk_2: our last question as coming from grace carter red bank of america a good morning grace
spk_36: hi
spk_34: i thought about structural tell when or attachment right
spk_37: and mobile device or one of them being rising prices i was wondering and have more inflationary environment that we're looking at it if the any sort of tangible impact from in inflation and and i
spk_2: driving up attachment right that on and that am he continued even have higher inflation if you think that that have any impact going forward yeah it's a great question i you know i would say maybe a little bit on on the auto side if you think about really mit more than next shift point so youth cars tend to a catch a slightly higher rate than new cars and we've also seen obviously accelerating value
spk_38: the used car side and which makes protecting the vehicle
spk_39: up a higher likelihood that we have seen a little bit of a makeshift their which is benefiting the overall attach rate i would say broadly though you know pretty steady pretty strong across the board so nothing that i would signal as being overly dramatic but certainly good strong
spk_2: results thank you and of time at quite a lot to that i mean least in attachment right across mobile devices and and cars going up over the past several years they do you think that there is an eventual feeling on how high attachment rate to go i mean what what kind of that long time target their i guess
spk_8: i think it varies by by market by geography
spk_28: we know some markets attach in a just based on consumer perception consumer demand at higher levels i i definitely think we're you know we've got robust levels of attach rates broad lady i think they could still go up over time certainly i think awareness for the programs the value proposition for our products continues to improve the service
spk_40: delivery and the options for consumers and in how much more convenient

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