The operator welcomes participants to Assurant's Third Quarter 2023 Conference Call and Webcast. Suzanne Shepherd, Senior Vice President of Investor Relations and Sustainability, introduces Keith Demmings, President and CEO, and Richard Dziadzio, CFO. The company's third quarter results were announced yesterday and are available on assurant.com. The call will include forward-looking statements and references to non-GAAP financial measures. Keith Demmings expresses satisfaction with the strong results, with adjusted EBITDA growing nearly 50% year-over-year.

Assurant's strong results were driven by momentum in Global Housing and their focus on executing their strategy. They exceeded their expectations for adjusted EBITDA growth and highlighted their competitive advantages in Global Housing and Global Lifestyle. The company has taken actions to improve results and strengthen the business, and has extended their restructuring plan to further enhance operational efficiency. In Global Housing, they have played a critical role in supporting policyholders impacted by natural disasters.

Global Housing's adjusted EBITDA has more than doubled year-over-year and increased 72% year-to-date, driven by growth in the homeowners business and improved loss experience. The company's ability to quickly make changes has led to higher in-force policies, average insured values, and state-approved rate increases. The combined ratio is 82% and the annualized ROE is 29%, demonstrating strong returns and cash generation. In the Renters business, policies in-force have grown double digits, and the company is seeing continued strength in its property management channel. In Global Lifestyle, third quarter earnings increased 7% year-over-year, and year-to-date adjusted EBITDA is down 6%, in line with expectations. The company is focusing on developing innovative offerings for its partners in the Connected Living segment.

Connected Living, particularly in the mobile protection business, is expected to see strong growth due to innovative offerings, customer experience expertise, and relationships with mobile carriers and cable operators. The company has taken action to mitigate macroeconomic headwinds and stabilize earnings in Europe. Investments are being made to advance product innovation and improve customer experience. In the Global Auto business, initial signs of claims improvement are being seen as a result of actions taken to improve performance. Assurant Vehicle Care, a new suite of vehicle protection products, has been launched at over 500 dealers.

Assurant Vehicle Care was created to help dealers improve their product design, pricing, training, and sales. It also provides consumers with a digital experience that offers more coverage, flexibility, and transparency. The company's outlook for the remainder of 2023 includes mid- to high-teens growth in adjusted EBITDA and higher earnings growth that offsets the increase in depreciation expense. The company has strong capital and plans to upstream $202 million in segment dividends during the third quarter. They also expect to accelerate share repurchases in the fourth quarter and have a more modest level of earnings growth in Global Housing in 2024.

Assurant is committed to maintaining a strong balance sheet and using capital for share repurchases and acquisitions. They will share their 2024 outlook in February and are focused on achieving their 2023 objectives. The company is dedicated to execution, innovation, and enhancing the customer experience. They have been recognized for their employee satisfaction, revenue growth, and sustainability efforts, and have recently introduced Carbon IQ to help clients reduce their carbon footprint. Now, Richard will review the third quarter results and the 2023 outlook.

In the third quarter of 2023, adjusted EBITDA for the company totaled $357 million, a 50% increase from the previous year. Adjusted earnings per share also saw significant growth of 67%. The Global Lifestyle segment reported an adjusted EBITDA of $192 million, with a 14% increase excluding a one-time client benefit. This growth was driven by higher investment income and mobile growth. Financial Services also contributed to the growth, while Global Auto saw a decline due to inflation and higher claims costs. Net earned premiums, fees, and other income also saw an increase.

In the third quarter, Lifestyle saw a 4% increase in net earned premiums, fees, and other income, driven by growth in Global Automotive and Connected Living. However, this growth was dampened by contract changes in the mobile program. For the full year, Lifestyle's adjusted EBITDA is expected to decline slightly due to unfavorable loss experience in Global Auto, but the company has taken steps to address this issue. In the fourth quarter, Lifestyle expects higher trade-in volumes in mobile, but also anticipates challenges in Japan and Europe. For the full year, Lifestyle's net earned premiums, fees, and other income are expected to remain consistent with year-to-date trends. In Global Housing, adjusted EBITDA was $165 million, which included $26 million in reportable catastrophes.

The adjusted EBITDA for Global Housing more than doubled to $191 million, driven by increased premium rates and policies, favorable loss experience, and higher investment income. The Renters and Others segment also saw modest earnings growth from prior period reserve development. For the full year 2023, Global Housing is expected to have significant adjusted EBITDA growth. Corporate had a modest year-over-year increase in adjusted EBITDA loss, mainly due to higher employee expenses. The holding company ended the quarter with $491 million in liquidity and received $202 million in dividends from operating segments.

The company's third quarter cash outflows included expenses for share repurchases, dividends, and repayment of notes. They expect to achieve full year share repurchases of $200 million and generate meaningful cash flows. The company is confident in their ability to achieve their objectives and the housing business is performing well. The policy growth in the housing business is not related to the economy or REO.

The placement rate for insurance policies has not been affected by economic conditions, but there has been a slight increase in policy count in California due to a harder market. Florida has seen flat growth. The company continues to adjust rates and sees sustained momentum in higher values and rates. Fee income in Lifestyle has increased, but device service fees have decreased due to higher value per device.

In the third quarter, there was a decrease in volumes and promotional activity, but a pickup in September after Apple's new product introduction. Operational efficiency and automation have improved, leading to higher sale prices and revenue in the secondary market. Global Housing saw 23% PFO growth, with a mix of inflation guard and rate and unit growth components contributing to the $103 million increase in revenue. Homeowners revenue was up 31%, driving overall performance.

The company saw an increase in underlying EBITDA of $67 million, with 2/3 of it being driven by rates and average insured values. The remaining 1/3 was split between policy growth and investment income. The increase in premiums was credited to expense discipline and leverage. In Global Lifestyle, the benefit ratio continued to rise, mainly due to auto. The team is pleased with the work done in the auto business.

The company has been making adjustments to rates in the past year and has been working closely with a few clients to improve profitability. They have also been focusing on claims adjudication and efficiency in repairs. While the cost of severity has increased, there has been a modest improvement in the underlying loss ratio. The company acknowledges that it will take time for these changes to fully impact their results, but they are seeing positive momentum in stabilizing the business.

The speaker discusses the progress and potential for growth in the Japanese market, highlighting its importance and the company's investments and relationships in the market. They expect stabilization and growth in EBITDA in 2024, but note that the market's future is uncertain.

The majority of the Japanese business is now on an evergreen policy, with only a small portion remaining on a 4-year policy. There has been some inflationary pressure in the Global Housing business, but the company has been able to offset it through rate actions and changes in insured values. The team has also been successful in controlling expenses in the Housing business.

The company has done well in controlling G&A costs and implementing digital initiatives. The outperformance is a result of multiple factors and not just one. During the call, the company mentioned consolidating mobile service centers in Texas and Tennessee, which are low-cost states. However, they are not actively considering relocating to cheaper areas in the US. The decision to consolidate was based on strategic reasons such as access to talent and logistics. The company will be scaling their facility in Nashville to support long-term growth.

Richard Dziadzio and John Barnidge discuss the company's efficiency in corporate real estate and the potential for reinsurance savings next year. Dziadzio mentions downsizing and eliminating offices as a way to reduce expenses, and Barnidge asks about the impact of reinsurance on earnings growth. Keith Demmings adds that the company has had a favorable cat year so far and hopes for a different environment in the renewal cycle. Dziadzio notes that the reinsurance market has stabilized and they are expecting better conditions.

The speaker explains that the company will continue with their consistent approach in the market, and they are entering the market as one of the "good guys." They have not increased their retention levels for cat reinsurance and will present a favorable position to reinsurers. The next question is about the growth of housing in 2024, and the speaker clarifies that they are expecting modest growth, excluding catastrophes. They had a successful year in 2023 and are confident in their momentum, but they also have to consider $40 million in prior year development before generating $1 of growth. They will provide a more detailed forecast in February.

The company is expecting moderate growth in the housing sector, but is confident in the trend lines and momentum. The Lifestyle sector saw challenges in the third quarter, but is still on track for modest growth this year and growth in 2024, driven by the strong U.S. Connected Living business. The Housing sector has been performing well, but the company will need to overcome a $40 million PYD next year. The company views their business as a multiyear journey and expects continued but slower growth in the future. The company is benefiting from favorable interest rates and yields, which are providing a tailwind for their investment income.

The company's investment income has increased by 50% or $40 million, with a larger component coming from the Lifestyle sector, particularly in Auto. This is due to higher fixed income yields and cash yields. The company expects continued growth in the housing sector next year, with improvements in loss and expense ratios. The underlying loss ratio looks positive and could potentially improve further as pricing actions continue to impact the book.

The speaker discusses the expectations for the top line of the business, taking into account factors such as inflation adjustment and industry consolidation. They mention a long-term combined ratio range of 86% to 91% and note that the current reported ratio is around 85% after adjusting for prior year development. They anticipate a moderate growth trend in policy count and believe they are well positioned to continue growing policies. The other speaker adds that they are keeping an eye on the combined operating ratio, which is a combination of top line growth, expense ratio, and other factors.

The speaker believes that the company's low loss ratio could continue, but may not be as low as it is now due to potential investments. They estimate a loss ratio of around 40-42% for the full year, but this could vary depending on weather conditions. The combined ratio, including catastrophe losses, is expected to be between 86-91%, with potential for improvement in the Renters book due to growth in the property management channel. However, it is too early to determine if there will be a significant increase in affinity partners due to changes in the auto insurance market.

The speaker thanks everyone for participating in the call and mentions that they will reconnect in February. They also remind listeners to reach out to Suzanne or Sean with any questions. The operator then ends the call.

This summary was generated with AI and may contain some inaccuracies.