Assurant, Inc. (AIZ) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong First Half 2024 Results: Assurant reported a 20% increase in adjusted EBITDA and a 29% growth in adjusted EPS, excluding reportable catastrophes, driven by Global Housing and momentum in Connected Living.
• Global Lifestyle Stability: First half 2024 adjusted EBITDA for Global Lifestyle remained consistent at $397 million, with Connected Living adjusted EBITDA up by 6% or 8% on a constant currency basis.
• Innovative Offerings and Partnerships: Introduced new programs with Spectrum Mobile and onboarded Telstra's mobile subscribers, adding 1.6 million mobile subscribers. Secured long-term contract extensions with major U.S. mobile device protection clients, including T-Mobile.
• Global Housing Earnings Increase: Nearly 45% increase in Global Housing's earnings, excluding reportable catastrophes, demonstrating the strength of Assurant's business model.
• Increased Full Year 2024 Outlook: Assurant has raised its full year adjusted EBITDA growth expectations to high-single-digits and adjusted EPS growth to low-double-digits, excluding catastrophes.

Pessimistic Highlights

• Global Automotive Pressure: Ongoing inflation impacts on motor vehicle repair costs and elevated loss experience within the ancillary guaranteed asset protection (GAP) product are expected to continue affecting auto results in the second half of 2024.
• Investment in New Partnerships: Incremental spending related to new partnerships and programs, particularly in Connected Living, is expected to temper growth in the short term.

Company Outlook

• Global Lifestyle Modest Growth: Expected modest growth in 2024, with Connected Living driving growth despite elevated claims in Global Auto.
• Global Housing as Growth Driver: Anticipated strong growth within Global Housing, expected to lead enterprise growth for 2024.
• Continued Investments: Assurant plans to continue investments over the second half of the year to support long-term growth, particularly in Connected Living and the card benefits business with Chase.

Q & A Highlights

• Q: On the sustained impact of inflation on Global Auto and when it becomes less negative. (Mark Hughes, Truist Securities)

  A: Inflation from vehicle service contracts moderated in Q2, with GAP being the main challenge. Rates have been increased with clients, and the situation is expected to stabilize and improve modestly in the second half of the year. (Keith Meier)

• Q: On the opportunity in the card benefit business and its importance within Lifestyle. (Mark Hughes, Truist Securities)

  A: The agreement with Chase is a significant opportunity to expand the relationship and is expected to be EBITDA positive entering 2025, contributing to growth in Connected Living. (Keith Demmings)

• Q: On the auto business's recovery from inflation headwinds and the normalization of the used to new car mix. (Dan Lukpanov, Dowling & Partners)

  A: Loss cost trends have moderated, and rates are expected to improve performance. The used to new car mix has normalized to about 50:50. (Keith Meier and Keith Demmings)

• Q: On the profitability improvement in the U.S. financial services business. (Dan Lukpanov, Dowling & Partners)

  A: The improvement is a continuation of the growth in the financial services business, with the Chase win highlighting the momentum. (Keith Meier)

• Q: On the mix of the GAP business within auto revenue and the impact of higher investment income on auto's bottom line. (Jeff Schmitt, William Blair and Tommy McJoynt, KBW)

  A: GAP is a small part of the business and is becoming smaller as risk is transitioned. Investment income is a good position, with a duration of about five years on the investment portfolio. (Keith Meier)

• Q: On the long-term combined ratio guide for Global Housing and the impact of client transitions. (John Barnidge, Piper Sandler and Mark Hughes, Truist Securities)

  A: Mid-80s combined ratio is the target, with expense ratio improvements being sustainable. Client transitions in the second half of the year are expected to be offset by gains from other portfolios. (Keith Demmings and Keith Meier)