Assurant, Inc.

Welcome to Assurance Second Quarter 2023 Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following management's prepared remarks. If you would like to ask a question at that time, please press star 1 on your touchtone 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 to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the floor over to Suzanne Shepard, Senior Vice President of Investor Relations and Sustainability. You may begin.

Thank you, Operator, and good morning, everyone. We look forward to discussing our second quarter 2023 results with you today. Joining me for Assurance Conference Call are Keith Demings, our President and Chief Executive Officer, and Richard Zazzo, our Chief Financial Officer. Yesterday, after the market closed, we issued a news release announcing our results for the second quarter of 2023. The release and corresponding financial supplement are available on Assurance.com. We'll start today's call with remarks from Keith and Richard before moving into a Q&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. For more details on these measures, the most comparable GAAP measures, and a reconciliation of the two, please refer to yesterday's news release and financial supplement. I will now turn the call over to Keith.

Thanks, Suzanne, and good morning, everyone. Our results in the second quarter were strong. and well ahead of our expectations, with adjusted EBITDA, excluding CATs, growing 21% year over year, or a total of 6% on a year-to-date basis. Results were largely driven by continued momentum in global housing, primarily from higher top-line growth and more favorable loss experience from prior period development on claims. 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, global 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, dramatically reducing non-core areas and our international catastrophe exposure, and aggressively deploying digital solutions to improve customer experience while driving greater operational efficiencies. This underscores our ability to quickly respond to ever evolving market dynamics, driving continuous improvement and better performance over time. During the first half of 2023, top line performance in our homeowner's business increased 18% year over year. This reflects higher average insured values and state approved rate increases to account for higher claim severities from inflationary factors in lender placed. Policy counts increased double digits this year from expanded loan portfolios of new and existing clients. While policy growth has been a contributor so far this year, we expected a level off from the first half of the year. In our renter's business, our property management company distribution channel has shown strong policy growth year to date, increasing 14% This has been driven by the ongoing rollout of our Cover360 solution, one of the many long-term investments we've made in renters that has consistently added value to our PMC partners and customers over the last several years. Our 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 2023. Turning to Global Lifestyle, underlying segment results were solid and demonstrated steady improvement from the second half of last year. Lifestyle earnings for the first six months of the year have increased $34 million, 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. Our focus 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, we've implemented 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 claim severity, we've seen an improvement in the second quarter loss ratio due to rate increases with several clients. In our global auto business, consistent across the industry, our repair costs have continued to increase from inflation. We've taken decisive action 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 earns through, although improvement may take several quarters to materialize. Overall, global lifestyle earnings were in line with our expectations for the first half of 2023. And while we work to create new vectors of growth for lifestyle, we now anticipate global lifestyles 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 primarily from Japan. Reflecting on the first half of 2023, 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 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 Assurance. 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. The 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 two years ahead of schedule. We increased our global gender diversity overall. We expanded coverage for electric vehicle protection products. And we repurposed 22 million mobile devices globally. Now let's turn to our enterprise outlook and capital. Given first half results and anticipated performance for the remainder of the year, we now expect adjusted EBITDA to grow high single digits, excluding CATs. This represents an increase 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 million of segment dividends during the quarter and $292 million year-to-date, nearly half of segment-adjusted EBITDA, including CATS. We ended the quarter with $495 million of holding company liquidity, a significantly higher level than at the end of the first quarter. As expected, we resumed share repurchases during the second quarter, repurchasing $20 million of common stock as well as an additional $10 million throughout July. For the remainder of the year, we would expect to gradually accelerate our level of buybacks with the majority weighted toward the fourth quarter, keeping in mind third quarter is hurricane season and we will look to preserve our capital flexibility. For 2023, we don't currently expect to exceed the 2022 underlying buyback activity of $200 million. 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. I'll now turn the call over to Richard to review second quarter results and our 2023 outlook in greater detail.