The operator welcomes participants to Assurant's Fourth Quarter and Full-Year 2023 Conference Call and Webcast. The floor will be opened for questions after management's prepared remarks. The Vice President of Investor Relations, Sean Moshier, introduces the President and CEO, Keith Demmings, and the CFO, Keith Meier. The company's results for the fourth quarter and full-year 2023 were announced in a news release and are available on the company's website. The presentation will include forward-looking statements and non-GAAP financial measures. The call will begin with remarks from Keith Demmings before moving on to Q&A.

In 2023, Assurant had a successful year, with profitable growth for the seventh consecutive year. Adjusted EBITDA and EPS increased significantly, driven by the strength of the homeowners business and partnerships in the connected living sector. The company returned over $350 million to shareholders and received recognition for its culture and commitment to employees, customers, communities, and sustainability.

The dedication of Assurant's employees and leadership team has allowed the company to innovate, better serve clients, and create value for shareholders. The company has focused on strengthening its business portfolio, driving operational excellence, and accelerating innovation. This has led to growth in specialized markets and new client partnerships. Assurant has also made progress in streamlining its organizational structure and implementing digital initiatives. Technology innovation will continue to be a key driver of growth for the company. In 2023, Global Lifestyle earnings remained stable.

In 2023, connected living experienced a 3% increase in earnings, with high EBITDA growth in the US due to partnerships with carriers and cable operators. The company also expanded its trade-in programs and renewed partnerships with major OEMs. In Europe, earnings were stabilized through expense efficiencies, while in Asia-Pacific, a new partnership with Telstra was announced. However, the auto sector saw declines due to inflationary impacts on claims costs, but the company took action to address this and expects improvement in 2024.

In 2023, the Global Housing segment saw significant growth, particularly in the homeowners business. This was due to higher premiums, in-force policy growth, and favorable prior-year reserve development. The segment also demonstrated strong returns and cash flow. A new partnership with Bank of America in the lender-placed business further solidifies the company's competitive strength. In the renters and other category, earnings increased modestly, driven by growth in the property management channel and technology innovation. Overall, the company expects to continue its profitable growth in 2024.

The expected growth for Assurant in 2024 is lower than previous years, but still strong. The company's CFO, Keith Meier, has been with Assurant for over 25 years and is expected to drive profitable growth and allocate capital strategically. He will also prioritize driving growth and financial performance as CFO.

The CFO is focused on maintaining a strong capital position and driving profitable growth through innovation and expense efficiencies. The fourth quarter financial results showed strong performance in both the Housing and Lifestyle segments. The company returned $169 million to shareholders and saw growth in connected living and trade-in programs within the Global Lifestyle segment.

In 2023, we serviced over 25 million devices, with 7.5 million in the fourth quarter. Trade-in results were down slightly, but fee income increased from higher sale prices and new US trade-in programs. International subscriber declines in Japan were offset by stable performance in a tough economy. In global auto, adjusted EBITDA was flat due to higher claims costs, but there were positive signs in US loss trends. Lifestyle saw a 13% increase in net earned premiums, fees, and other income, with growth from global automotive and connected living. In 2024, we expect adjusted EBITDA to grow in Global Lifestyle, driven by connected living and global automotive, with continued expansion in the US and stable performance in Japan and Europe.

In 2024, Lifestyle's growth may be tempered by investments related to new client implementations, but these investments are important for long-term expansion. The company will also monitor external factors such as foreign exchange and interest rates. Global Housing had a strong year in 2023, with adjusted EBITDA increasing by nearly 50%. This was driven by favorable non-cat loss experience, reserve development, and top line growth. Earnings for renters and other were flat, but the company expects continued growth in homeowners in 2024.

The company expects growth in housing in 2024, despite a large reserve development in the previous year. They will be onboarding 1.8 million loans from Bank of America, which may impact overall placement rate trends. The company has transitioned to a single placement date for their cat reinsurance program, with increased program retention and risk protection. They anticipate modest cost savings in 2024 due to exiting their international property business and leveraging strong reinsurer relationships. Further updates on the reinsurance program will be provided in May.

Assurant's fourth quarter adjusted EBITDA loss increased due to higher employee expenses, but they expect to generate significant capital and continue to grow in 2024. They also plan to repurchase stock and believe their differentiated business model makes them an attractively valued company. Their B2B2C model and strong market positions contribute to their success in providing specialty insurance and services to clients and their customers.

Assurant's partnerships with industry leaders and its diverse capabilities have allowed it to generate significant scale and maintain a competitive advantage. The company's low capital intensity businesses and risk sharing structures reduce earnings volatility and allow for efficient growth. Assurant's portfolio simplification efforts have also improved its risk profile, and its catastrophe program limits retained risk. The company is able to adjust pricing to maintain targeted rates of return and has close alignment with its clients' financial results. This allows for the ability to adjust rates together to account for inflation impacts in the market.

Assurant has successfully implemented rate increases on new vehicle service contracts and has consistently delivered double-digit earnings and EPS growth since 2019. They have outperformed the S&P 1500 P&C index in adjusted earnings growth and believe their business model is strong and attractively valued. The placement rate for BofA is expected to be lower, possibly due to lower underlying placement rates or premiums not being transferred over.

Keith Demmings discusses the acquisition of a block of business with a lower placement rate than their current average. He congratulates the lender-placed team for their hard work in building a relationship and reaching this point. Mark Hughes asks about favorable reserve development in the homeowners business, to which Keith Meier explains that it was due to a higher inflationary environment. He also mentions that the non-cat loss ratio has been favorable and is expected to remain stable in the future. Keith Demmings adds that the non-cat loss ratio was modestly better in the quarter at 38%.

In response to a question about the increase in fee income in Lifestyle, Keith Meier explains that it was mainly due to higher trade-in volumes and the addition of new programs. He also mentions that the company has implemented an expense reduction program, which will result in savings in 2024, primarily through employee actions and facility efficiencies. Meier also notes that the company's expense ratio has improved due to investments in technology, which will continue to drive growth and expense leverage in the future.

The speaker expresses pride in the work done by their teams to lower costs and create advantages in the market. They use the example of a satisfied client, Bank of America, to illustrate why their company, Assurant, is a desirable business partner. The speaker also discusses the impact of elevated auto input costs on their underwriting results and the measures they have taken to address this issue. They mention that they have made significant rate adjustments and have strong relationships with their clients. They expect to see improvement in 2024 and beyond. There are also differences in the nature of their service contracts compared to those in the housing business.

Keith Demmings discusses the upcoming investments in the connected living mobile device business, specifically mentioning the onboarding of Telstra in Australia. He expects the launch to be in the first quarter and for it to be modestly EBITDA negative this year due to investments, but significantly improved in 2025. There are also other investments being made in building capabilities and rolling out new products and services. These investments will put pressure on the mid-single-digit growth for lifestyle.

In paragraph 18, Thomas McJoyntt asks about the potential for higher net investment income and its sensitivity to rate cuts. Keith Meier responds that they expect investment income to be relatively flat or slightly up next year, with a portfolio book yield of 4.99%. They anticipate offsetting any rate changes with the expected reduction in rates by the Fed. Keith Demmings adds that they are overcoming $54 million of PYD in housing and do not have significant tailwinds for investment income. They are confident in delivering strong growth despite these factors and their investments. Brian Meredith then asks a question, but the details are not provided in the paragraph.

Keith Meier discusses the current state of Japan's market and how it will affect their business. He mentions the pressure from expiring contracts in 2024, but also notes that they have launched new programs and have strong relationships with top mobile operators. He and Keith Demmings feel optimistic about the future of Japan and expect modest improvement in 2024. They do not anticipate any significant changes in the macroeconomic conditions.

In the final question of the conference call, Grace Carter from Bank of America asked about the impact of the BofA deal on cat load for the year. Keith Meier confirmed that the guidance for cat load did include the BofA deal. The call then ended with Keith Demmings thanking everyone and inviting them to reach out to the IR team for any further questions.

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