Assurant, Inc.

Welcome to Assurance second quarter 2025 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. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. It is now my pleasure to turn the floor over to Sean Mosier, Vice President of Investor Relations. You may begin.

Thank you, Operator, and good morning, everyone. We look forward to discussing our second quarter results with you today. Joining me for assurance conference call are Keith Demings, our President and Chief Executive Officer, and Keith Meyer, our Chief Financial Officer. Yesterday, after the market closed, we issued an earnings release announcing our results for the second quarter 2025. The release and corresponding financial supplement are available on Assurant.com. Also on our website is a slide presentation for our webcast participants. Some of the statements made today are forward-looking. Forward-looking statements are based upon our historical 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 the earnings release, presentation, and financial supplement on our website as well as in our SEC reports. During today's call, we will refer to non-GAAP financial measures, which we believe are important in analyzing the company's performance. For more details on these measures, the most comparable GAAP measures, and a reconciliation of the two, please refer to the earnings release, presentation, and financial supplement on our website. We'll start today's call with remarks before moving into Q&A. I will now turn the call over to Keith Demings.

Thanks, Sean, and good morning, everyone. We delivered a very strong second quarter with double-digit growth in both adjusted EBITDA and earnings per share, excluding reportable catastrophes. Our results were fueled by continued outperformance in global housing and growth in global lifestyle, reinforcing a strong first half of 2025. Through the first six months, adjusted EBITDA increased by 14%, and adjusted EPS rose 16%, both excluding CATS. Given our year-to-date performance, we're meaningfully increasing Assurance full-year 2025 growth expectations. Excluding catastrophes, we now expect full-year adjusted EPS growth to approach 10%, driven by mid to high single-digit growth in adjusted EBITDA. When excluding prior year reserve development, we expect to deliver double-digit underlying growth for both metrics. Additionally, our significant cash generation and balanced capital allocation continue to support long-term shareholder value. This year's performance reinforces our long-standing track record of success, driven by our powerful business model and the dedication of our global team. By combining innovative services with our protection and specialty insurance products, we deliver differentiated value through our unique B2B2C distribution channels in attractive lifestyle and housing markets. Our partnerships with the world's leading brands are powered by transparency, data-driven protection solutions, and value-added services. We've continued to be a leader in our markets by embedding technology into our client systems, enabling exceptional customer experiences, and optimizing performance. We are well positioned to achieve our ninth consecutive year of profitable growth in 2025. Our diversified business model enables us to perform consistently across a range of economic environments, often diverging from the broader industry trends. We believe this strength and resilience continue to differentiate Assurant from the broader P&C industry. Since 2019, we've delivered a compound annual growth rate of 12% in adjusted EBITDA and 18% in adjusted EPS, both excluding reportable CATs. Now, let me share some specific examples of the momentum we're seeing within our lifestyle and housing segments. Within global lifestyle, adjusted EBITDA growth accelerated in the second quarter, supporting our year-to-date performance. Through the first six months of the year, lifestyle earnings increased 2% on a constant currency basis, which was in line with our expectations. We're well positioned to deliver growth for the full year. In connected living, adjusted EBITDA increased 4% year-to-date on a constant currency basis. Sustained investments in our device care centers, automation, and technology platforms enhance our end-to-end solutions across the value chain. These capabilities add scale, simplicity, and flexibility tapping into new profit pools and accelerating growth and value creation for Assurant and our partners. This has enabled our success in growing mobile subscribers globally. Over the last year, we've added 2.4 million devices protected, bringing our total to 65 million subscribers. Our growth is led by new client programs and the continued expansion of our partner relationships. We continue to make investments related to new products, services, and programs, which we expect to roll out in the second half of this year. Following our acquisitions of cell phone repair, or CPR, in the U.S. and iSmash in the U.K., we recently acquired U Solutions in Japan to expand our local walk-in repair capability in the world's second largest mobile market. This acquisition strengthens our customer experience in the local market and unlocks future growth opportunities. In global automotive, earnings were up modestly, supported by year-over-year improvements in loss experience. Net written premiums have increased 8% year-to-date, achieved through rate increases over the last two years and new business wins driven by our scale and critical dealer services business. A key highlight is our recent partnership with Sioka Automotive, a fast-growing automotive group with more than 50 dealerships in New Jersey and Pennsylvania. Through Assurant Vehicle Care, we deliver vehicle protection products and comprehensive dealership operational support, including in-dealership training. Internationally, we recently completed the acquisition of Gestato in Brazil, expanding our automotive distribution network. diversifying our product portfolio, and reinforcing our presence in Latin America. Gestato's expertise aligns with our commitment to delivering excellent service and seeking continuous improvement. The acquisition presents exciting opportunities for future growth. Beyond new business wins and our expanding presence, we're renewing relationships across distribution channels, including dealership groups, OEMs, and other affinity partners. further reinforcing our client base and market position. We're driving innovation in automotive by investing in AI technologies. These advancements are transforming key areas from enhancing dealership training to enabling seamless digital claim processing. Turning to global housing, following two years of exceptional growth, the segment continues to outperform in 2025. Through the first six months of the year, adjusted EBITDA was up 25%, excluding reportable CATs. Our business continues to benefit from multiple growth levers, including increased demand for lender-placed insurance within homeowners, driven by hardening of the voluntary insurance market across the U.S., significant expense leverage across global housing, which has improved by over 700 basis points over the last two years, an increased scale from new business wins, including the third quarter rollout of a new mortgage servicing partner, which will add approximately 300,000 loans to our portfolio. In homeowners, we see meaningful opportunities to expand with new clients by leveraging our existing infrastructure. Ongoing technology investments further enhance efficiency as we process and digitize millions of insurance documents each year through our market-leading loan tracking solution. In renters, our tech-enabled services remain a key driver of growth. Our Covers 360 Plus platform in the Property Management Company, or PMC Channel, has delivered three consecutive years of double-digit premium growth. The platform continues to deliver higher penetration rates, client renewals, and new business wins. During the second quarter, we signed a top 15 PMC partner with over 100,000 units nationwide and completed multi-year renewals with two of our top four PMC partners. We've also increased our renters policies by 11% year to date, including a new renters book we added earlier this year. Overall, our growth within housing is underpinned by our attractive combined ratios, excluding prior year development we've achieved a year-to-date combined ratio of 87% with cats. We remain on track to deliver a mid-80s combined ratio for the full year, including our full-year cat assumption of $300 million. Innovation is deeply embedded in assurance DNA, and it continues to underpin our ability to generate future growth. As we look over the long term, we see significant opportunities across clients, products, and geographies, including expanding offerings and increasing attachment rates with existing partners, winning new clients across the globe by executing on opportunities already in our pipeline, increasing investments in core markets, including launching new products and services across the lifestyle and housing businesses, and entering attractive adjacent sectors through new product offerings. We're laser focused on executing on each of these opportunities as we continue to position Assurant for long-term growth, creating value for our partners and consumers and shareholders. I'll now turn it over to Keith Meyer to highlight our second quarter results and expectations for the remainder of the year.

Thanks, Keith, and good morning, everyone. We were very pleased with the growth in the quarter across both global housing and global lifestyle. Overall, second quarter growth was strong, with adjusted EBITDA increasing 13% and adjusted earnings per share growing 17%, both excluding CATS. Our year-to-day performance supports the increase to our full-year 2025 outlook, which I will cover shortly. Starting with capital, our holding company liquidity position at quarter end was $518 million. providing us with flexibility to drive future growth. Our robust cash flow is a key differentiator for Assurant. In the quarter, our businesses upstreamed over $230 million of cash flow to the holding company, which allowed us to return $105 million to our shareholders, including $62 million of share repurchases. Through August 1st, we repurchased an additional $25 million of shares and have now completed $150 million in repurchases so far this year. I'll now walk through our segment results in greater detail, beginning with global lifestyle. Second quarter adjusted EBITDA increased 6% compared to last year, or 7% on a constant currency basis. In connected living, earnings increased 9%, or 11% on a constant currency basis, led by our global mobile device protection programs and modest growth in our mobile trade-in programs. The strength in device protection was driven by strong subscriber growth from new mobile clients and programs that began last year. This is a prime example of our momentum given the important investments we made in 2024. Our device trading business saw improved profitability from higher volumes compared to prior year, including increased carrier promotions as well as consumer demand pull forward in the quarter. Based on historical trends, we anticipate lower sequential third quarter volumes given normal seasonality and a strong second quarter. Moving to global auto. Adjusted EBITDA was up modestly. In line with our expectations, We were pleased to see improved loss ratios in our vehicle service contract business and stable earnings overall. We continue to benefit from previous rate increases earning through our book and improvements to our claims processes while keeping us on track to grow for the full year. For global lifestyle, our net earned premiums, fees, and other income grew 8%, led by strong growth in connected living from mobile device protection and trade-in programs, as well as contributions from a new program within financial services launched late last year. Moving to global housing. Second quarter adjusted EBITDA was $214 million, which included $30 million of reportable catastrophe impacts. Excluding CATS, global housing delivered another quarter of strong double-digit growth. as adjusted EBITDA increased 18% to $244 million. Our homeowner's business continued to benefit from favorable non-catastrophe loss experience with lower claims frequencies and increases to lender place policies in force, benefiting from pressure in the voluntary insurance market. Results also increased from higher favorable prior period reserve development, which was $34 million in the quarter, compared to $17 million in the second quarter of 2024. Before moving to our 2025 outlook, I wanted to discuss Assurance's longstanding focus on leveraging technology to drive innovation for our partners and end consumers. We have invested in AI and related technologies to support our clients, delivering efficiencies and improving the customer experience. We also have an effective AI framework that allows us to create, evaluate, and scale use cases across our businesses. Artificial intelligence presents a powerful opportunity to further accelerate our capabilities and creates additional value for our clients. It enables us to improve productivity, enhance decision making, and upscale our employees, delivering simpler, faster, and more consistent outcomes. There are several areas throughout our businesses where we believe AI can continue to transform our operations and product offerings. In global lifestyle, our innovation and device care center near Nashville is increasing the use of robotics and AI to assess mobile device quality and process trade-ins with greater speed and consistency. This supports higher average selling prices and better value for clients and end consumers. We are also further embedding AI into our personal tech pro premium tech support services, which cover connected devices and appliances. This enables us to better assist customers in navigating technical challenges and inquiries with precision and ease. In housing, we recently deployed our generative AI solutions to enhance the speed and accuracy of document classification and processing across our loan tracking solutions with impressive early results. Looking ahead, technology-based solutions will play a critical role in extending client tenure and expanding market share. And our technology advantages will enable us to continue to differentiate Assurant against competitors in the market. Finally, I want to share some thoughts on our increased outlook for 2025. Driven by the strength of our first half results, including outperformance within global housing. We now expect enterprise full year adjusted EPS growth to approach 10% and adjusted EBITDA to grow mid to high single digits, both excluding caps. This represents a meaningful increase from our initial expectation of modest growth for both metrics. To put a finer point on the strength of our outlook, excluding favorable prior year development of $63 million in the first half of 2025, and $107 million for full year 2024, underlying growth trends are expected to deliver double-digit adjusted earnings and EPS growth. We now expect strong growth in global housing and continue to expect growth within global lifestyle, where both connected living and global automotive are expected to grow. For global lifestyle, growth is expected to be partially offset by investments in new partnerships and programs as well as unfavorable foreign exchange. As a reminder, through the first half of 2025, we've made approximately $5 million of strategic investments and would expect roughly $10 million in the second half of the year. These investments are directly tied to the programs and clients we are in the process of launching or expect to launch in the near future. Within global housing, we expect continued policy growth in lender place. As a reminder, Our outlook does not contemplate additional prior year reserve development beyond the $63 million seen in the first half of the year. We have considered and continue to monitor macroeconomic conditions within our outlook, including tariffs, inflation, foreign exchange, and interest rate levels, which may impact the pace and timing of growth. And finally, our capital objectives remain consistent given our position of strength as we focus on maintaining balance and flexibility to support new business growth while returning excess capital to shareholders. From a share repurchase perspective, given our confidence in our solid capital position, increased earnings outlook, and attractive share price, we now expect share repurchases for the year to be between $250 to $300 million, the upper end of our 2025 guidance. This is subject to M&A as well as market and other conditions. In conclusion, our year-to-day performance and increase in outlook for 2025 is a testament to the unique and differentiated nature of Assurant, as we continue to be well-positioned to grow earnings once again for the ninth consecutive year, while also navigating various macroeconomic environments. With that, operator, please open the call for questions.

Thank you. The floor is now open for questions. If you would like to ask a question, please click on the raise hand button which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk and then you will hear your name called. Please accept, unmute your audio and ask your question. We will wait one moment to allow the queue to form. Our first question will come from the line of Jeff Schmidt from William Blair. You may now unmute your audio and ask your question.

Good morning, everyone. Good morning, Jeff. So when I look at the overall benefit ratio in global lifestyle, it's around 23 to 24%, even up a little bit, I guess, from last year. Should we expect that to trend down as rate continues to earn through in global auto, or is this sort of a decent run rate? I mean, how should we think about the trend there?

Yeah, maybe I'll offer a couple of, overarching thoughts, and then Keith can talk about the trend line. I'd say, first of all, really pleased with the progress that you're seeing in the second quarter for global lifestyle overall. Certainly, connected living performed really well, up 11% constant currency. Auto, we're also seeing really nice stability there. And I think we're well positioned midway through the year, very much in line with our expectations and feel confident in the full year opportunity. to grow both housing, auto and connected living overall. But Keith, what would you add about the benefit level?

Yeah, I think, Jeff, overall, there's always a little bit of a mix shift in terms of the dynamics of the deal structures with the different clients within lifestyle. So the ones that we're really focused on is in auto. And I think what we're seeing there is the encouraging point this year where we're seeing the improvement in the vehicle service contract loss experience. And so I think that is really leading us to what we feel like is an inflection point this year for that business, which also allows us to feel good about our growth outlook for our auto business. And I think it sets us up for a nice run over the long term for our auto business.

Great. And then investment income from other investments was negative in the first half. What are those investments and what's driving the decline there?

Yeah, I think more than anything, Jeff, I would just start by saying, you know, our investment portfolio really continues to perform well. I think it reflects the quality and diversity of our investments. So, you know, overall, we're up year over year and for the quarter. And when you think about the other investments, you know, we have things like real estate transactions that take place during the year. So that can create a little bit of lumpiness from a quarter to quarter basis. But overall, I think we're in a good position. You know, our book yields overall are up to 5.33%. You know, that's 10 basis points over the first quarter. it's also 20 basis points better than the prior year. So I think our portfolio is performing well. And so I think from an overall position, I think we're in a good place for investment income. Overall, I think you can see us having a positive impact because of the higher average asset levels and then the positive yields in fixed income. And then that'll be offset a little bit by the the shorter term investments and our cash investments. So I think, but overall we see investment income being up for the year.

Thank you.

Welcome.

Our next question comes from Tommy McJoint with KBW. Tommy, please unmute your audio and ask your question.

Hey, good morning, guys. Thanks for taking our questions. Morning, Tommy. Yeah, so the first one here, just is there a way to think about any way to quantify any pull forward and consumer activity when we think about the number of devices that you guys reported or the number of protected vehicles that you guys had? Got the sense that there was a nice uplift in growth in the second quarter. So just trying to see if any of that was a pull forward of activity ahead of the tariffs.

Yeah, maybe we'll break it into two parts. I think when I look at connected living and mobile in particular, we probably saw a little bit of pull forward relative to trade-in. There was more activity in the marketplace in general, more switching activity, more promotional work. And I think some of that was pull forward relative to tariffs. But I do think that the bulk of the beat in connected living was driven by the growth in device protection. You see the sequential growth in subscribers up 700,000, 2.4 million year over year. That by far and away was the lion's share of the improved profitability in the quarter. Trade-in certainly helped, but it wasn't the biggest driver. And then in terms of auto, maybe I'll offer one thought and then Keith can jump in. I think when you look at the first half auto sales overall, it was a pretty strong and resilient auto market. You know, our results kind of followed that as well. So I think retail car sales are up six or seven percent year to date. You're seeing net written premiums up pretty significantly, eight percent for Assurant year to date. So some of that certainly is pulled forward. I don't think the car sales will maintain at that same level in the second half, but no impact on earnings because obviously that earns out over multiple years. But, you know, Keith, what else might you add?

Yeah, I think overall we were pleased with the momentum that we're building on our auto side for our sales growth. You know, Keith mentioned the written premiums up 8%. You know, I think that's a blend of some of the rate increases that we've had over the last couple of years. I think it's also driven by some new business wins that we highlighted a little bit earlier. And then I think there is a little bit of pull forward in demand in the early part of the quarter. But we also saw the production being pretty good as we went through the quarter. I think there's a little bit more promotional activity that the dealers are driving. And I think when there's promotional activity, I think that allows consumers to sometimes utilize some of those promotional dollars to by some of the additional services like the extended service contracts. So overall, I think we like the progress we're making and our protected vehicles are up nicely in the quarter as well. So overall, liking the momentum we see on the auto sales side.

Okay, got it. And switching over to the housing side, I'd like to look at the expense ratio within that segment. You guys have delivered a lot of operating leverage over the past few years. That expense ratio is now running in the high 30s. Can you talk about the opportunity to gain more leverage just as that business line continues to grow across both lender place, the voluntary market, as well as renters growth? Maybe perhaps it'd be helpful to think about what percentage of those costs are fixed versus more variable or commission based. Any insights around the expense side of that thing?

Yeah, I think a lot of the cost is the operational execution. Not a huge part of that is going to be commission. There's no commission in the lender place, which is obviously the biggest part of the housing business. And I think there is opportunity to continue to create leverage over time. And it's coming from a couple of different ways, Tommy. One, we're seeing obviously growth in the underlying lender place portfolio because of the hard market. We're also seeing growth because we're actually winning and gaining more market share with new clients. Some of our clients are onboarding new loans, et cetera. So there's natural growth coming through a couple of different ways. That naturally creates a lot of scale advantages. But then we're driving a tremendous amount of effort around technology, automation, driving more operational efficiency. Keith highlighted a couple of examples of how we're thinking about that. within all of the businesses. And I think all of those things together create continuous opportunity to drive that expense level down. We want to create as much efficiency as we can. It's good for consumers. It's good for our clients. Ultimately, it's good for getting the right rates in the marketplace. And we're going to continue to be as efficient as we can to create value. But Keith, what would you add?

Yeah. And I think along the lines of your question, Tommy, you know, you can think about selling and underwriting type expenses being about 20% of the overall. So that leaves us that other 80% to be able to leverage like he talked about. So we we do see a lot of opportunity as we, you know, as we continue to leverage, leverage our technology and scale.

And it's interesting, the investments that we make, they don't just make us more efficient, they make the solution set better, And it actually strengthens our competitive advantage in the marketplace. And it makes us more likely to win net new clients because we're just, you know, not only are we more efficient, but we're doing it in a way that's better from a consumer perspective.

Thank you.

You bet. You're welcome.

As a reminder, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your Zoom screen. Our next question comes from Mark Hughes with Truist. Mark, please go ahead with your question.

Good morning. Good morning. So prior to your development, Could you characterize where that is coming from in global housing?

Yeah, so I'd say it's really related to three main things, Mark. I would say one is the improvements in Florida due to a lot of the regulatory changes that took place. We're also seeing some lower frequencies. And then certainly the third thing is the inflation being lower than expected. And so, you know, I think that's just where we're really just reacting to those three elements that are driving our prior year of development.

Brett KenCairn, Then the tariffs. Brett KenCairn, Anything you observed so far your thoughts about what that might mean going forward and then how much cushion, you might have in your second half guidance for tariff impacts.

John Potter, yeah probably at the simplest level very limited impact in in the first half of the year that was also true specifically to the second quarter. As we looked at the outlook, we certainly included our best estimate based on the most current information. I think very manageable as we look at the balance of the year. And we are staying proactive as well as we think about inflation over time, not just with our inflation guard feature within lender placed, our ability to get rate with file products, and then our work with clients around service efficiency and rates and deal structures. So I feel like we're really well positioned. We try to be comprehensive in how we thought about the full year.

And then you talked about pressure in the voluntary market. And I think in earlier calls, you had maybe suggested that's helped retention, that when consumers get the lender placed, they may be more likely to keep it. Do I remember that properly? And is that dynamic still in place, you know, to the same degree?

Yeah, I think we're getting two things happening, right? We're seeing more policies placed because consumers are struggling to find coverage. And then we're keeping the policies longer. And it's meaningfully increased over time. And I think that's a function of the tough market. And our rates have become more competitive. And the product has been well received by consumers.

But what else would you add to that? customers are keeping our policies probably six to 12 months longer, Mark. And I think that just speaks to the things that we talked about earlier, where we're driving a lot of the expense leverage that can reduce the rate. So our products are looking, I think, more attractive and better to consumers than they've ever been before. So I think the price that we're delivering is good. And then we're also, you know, really delivering great service to the customers when they have needs as well. So I think that combination is serving us well.

Then I'll ask, when you look at the new business pipeline for lifestyle, you've mentioned a lot of kind of specifics, new programs, expansion of partnerships. How would you characterize the new business pipeline now versus 12, 24 months ago? And are there any Brett KenCairn, themes that you would highlight about what is. Brett KenCairn, You know, on the on the horizon for you.

Brett KenCairn, yeah a couple thoughts I think we've had a lot of momentum really the last couple of years across the board. Brett KenCairn, Whether that's in connected living in housing and auto I think you know we've seen some acceleration in in the pipeline, as we look forward. From here, there are some things that we're actively working on. We talked about the investments we made in the first half being around 5 million to support new business growth, specifically in connected living. We think that'll be more like an additional 10 in the second half. Hopeful to be able to talk more in November about some of the things that we're working on. But I would say we are very excited about some of the things that we're going to announce. And it's a nice combination of new client wins, adding additional services to expand relationships with major clients, and then also launching new products. So it's a nice mix of activity and very much focused on connected living. But we are seeing a lot of opportunity for growth in the rest of the company as well. We talked about a big win in the auto space earlier in the discussion. The pipeline in lender places is quite strong, and we've seen a lot of momentum in renters with you know, 12 consecutive quarters of double digit growth in the property management channel on top of a pretty significant book role. So lots of opportunity across the board. And certainly that's the priority focus for this company.

Thank you very much.

You bet. Thank you.

There are no further questions at this time. I will now hand back to management for closing remarks.

All right. Well, thanks, everybody, for joining the call. And we will certainly look forward to updating you again in November. And until then, hope everybody stays safe. Thanks very much.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.