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

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary highlights strong financial performance, particularly in adjusted EPS and Global Housing. Despite challenges in Global Automotive, management expects improvement. The Q&A section indicates optimism about future growth and partnerships, particularly with Chase, and addresses inflation impacts. Shareholder returns through repurchases are positive. While some management responses were vague, the overall sentiment is positive, with strong financials and optimistic guidance. The absence of market cap data suggests a moderate reaction, leading to a positive prediction.

Key Financial Performance

Adjusted EBITDA (Q2 2024) $369 million, up 10% year-over-year, driven by strong performance in Global Housing and Connected Living.

Adjusted EPS (Q2 2024) $4.77, increased by 17% year-over-year, reflecting improved operational efficiencies and growth in key segments.

Global Lifestyle Adjusted EBITDA (Q2 2024) $190 million, down 4% year-over-year, primarily due to higher claims costs from inflation and losses in Global Automotive.

Global Automotive Adjusted EBITDA (Q2 2024) Decreased by 8% or $6 million, impacted by inflation and elevated losses from ancillary GAP products.

Connected Living Adjusted EBITDA (Q2 2024) Increased modestly on a constant currency basis, driven by subscriber growth and improved financial services results.

Net Earned Premiums, Fees, and Other Income (Global Lifestyle Q2 2024) Grew by $75 million, or 4%, with Connected Living increasing by 6% due to new mobile protection programs.

Global Housing Adjusted EBITDA (Q2 2024) $206 million, up 23% year-over-year, driven by growth in homeowners policies and operational efficiencies.

Corporate Adjusted EBITDA Loss (Q2 2024) Loss of $27 million, improved due to higher net investment income.

Segment Dividends (Q2 2024) Generated $142 million, with holding company liquidity increasing to $735 million from $622 million.

Share Repurchases (Q2 2024) Returned $80 million to shareholders, including $40 million in share repurchases.

Cash Flow Expectations (2024) Cash conversion to the holding company expected to approximate two-thirds of segment adjusted EBITDA.

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Operating Highlights

New Offerings: Rollout of two programs with Spectrum Mobile: anytime upgrade and repair and replace plan, adding 1.6 million mobile subscribers.

Partnerships: Onboarded pre and postpaid device protection subscribers of Telstra in Australia.

Contract Extensions: Completed long-term contract extensions with major U.S. mobile device protection clients, including T-Mobile.

New Client Partnerships: Expanded relationship with Chase to provide coverage for millions of cardholders.

New Service Launch: Signed partnership with the largest PMC in the U.S. to provide Assurant Tech Pro resident troubleshooting service.

Market Positioning: Transitioned sub industry index classification from multiline insurance to P&C insurance, reflecting a multi-year transformation.

Market Growth: Increased gross written premiums in the PMC channel by over 20%, marking eight straight quarters of double-digit growth.

Operational Efficiencies: Significant operational efficiencies achieved through technology investments and expense leverage.

Claims Management: Implemented 14 rate increases for clients to address inflation in auto claims.

Strategic Shift: Focus on capital efficient businesses within Lifestyle and Housing, enhancing risk profile.

Sustainability Initiatives: Published 2024 Sustainability Report outlining long-term ambitions for a thriving society and stable climate.

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Risk or Challenges

Inflation Impact on Auto Business: Ongoing inflation impacts on motor vehicle repair costs are expected to continue affecting auto results throughout the second half of 2024, particularly in the vehicle service contract business.

Elevated Loss Experience in GAP Products: Continued elevated loss experience within the ancillary guaranteed asset protection (GAP) product is anticipated, driven by declines in used car prices, higher interest rates, and increased total loss declarations by primary insurance carriers.

Regulatory and Economic Factors: The company is subject to regulatory scrutiny and economic factors that may impact its operations, including inflation and interest rates, which could affect growth and profitability.

Supply Chain Challenges: The company faces challenges related to supply chain disruptions that may impact the delivery of services and products.

Catastrophe Losses: The company expects Hurricane Beryl to be a reportable catastrophe in Q3 2024, with estimated losses between $30 million to $50 million.

Foreign Exchange Impact: Unfavorable foreign exchange rates have been a headwind impacting Lifestyle's adjusted EBITDA growth.

Client Portfolio Transitions: Ongoing client portfolio transitions are expected to impact placement rates and policies in-force, which are key drivers of earnings.

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Guidance & Outlook

Global Lifestyle Adjusted EBITDA: For the first half of 2024, adjusted EBITDA was $397 million, consistent with the first half of 2023, driven by growth in Connected Living.

Connected Living Growth: Adjusted EBITDA increased 6% or 8% on a constant currency basis, with year-to-date growth of 14% on a constant currency basis excluding first half investments of approximately $13 million.

Partnerships and Programs: New partnerships and programs, including with Spectrum Mobile and Telstra, added 1.6 million mobile subscribers.

Global Housing Growth: Global Housing's earnings increased nearly 45% for the first half of the year, demonstrating the importance of this business to the overall portfolio.

Sustainability Initiatives: Introduced a new sustainability vision focused on advancing a connected, respected, and protected world.

2024 Adjusted EBITDA Growth: Expect full year adjusted EBITDA to grow high-single-digits, an increase from initial expectations.

2024 Adjusted EPS Growth: Adjusted earnings per share expected to increase low-double-digits, also an increase from initial expectations.

Global Lifestyle Growth Outlook: Expect modest growth in 2024, with Connected Living driving growth despite ongoing elevated claims in Global Auto.

Global Auto Adjusted EBITDA Outlook: Expect adjusted EBITDA to be flat to modestly down due to inflation and elevated losses within ancillary GAP products.

Share Repurchase Program: Expect to be on the high end of the $200 million to $300 million share repurchase range for the year.

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Shareholder Return Plan

Segment Dividends: Generated $142 million of segment dividends in Q2 2024.

Share Repurchases: Returned $80 million to shareholders in Q2 2024, including $40 million of share repurchases.

Year-to-Date Share Repurchases: Completed $100 million in share repurchases so far in 2024.

Additional Share Repurchases: Repurchased $20 million of shares between July 1 and August 2, 2024.

Share Repurchase Range: Expect to be on the high end of the $200 million to $300 million share repurchase range for 2024.

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Key Q&A

Q:When do we kind of turn the corner on the sustained impact of inflation in Global Auto?

A:The first half this year was driven by inflation from vehicle service contracts in Q1, while in Q2, the challenges were mainly from GAP due to declining used car values and higher interest rates. We expect rates to stabilize and improve modestly in the back half of the year.

Q:Is the pain this year factored into your guidance for 2025?

A:Yes, it's definitely factored into our 2024 outlook, and we see an improvement going into the back half of the year.

Q:Can you talk about the opportunity in the card benefit business with Chase?

A:We've been growing our card benefits business successfully, and the agreement with Chase is a chance to expand our relationship and product lines. We expect it to be EBITDA positive as we enter 2025.

Q:Did you see any acceleration in improvement on the vehicle service contract side?

A:We saw loss cost trends moderate, and we expect rates to start improving sequentially.

Q:Do you see used to new car mix normalizing?

A:Yes, it's still around 50:50, and there's more new car volume going back into the system.

Q:What was the profitability improvement in the U.S. financial services business?

A:It's a continuation of the leading programs we've had in our financial services business.

Q:How much of the auto revenue mix is the GAP business?

A:GAP is a very small part of our business and is becoming even less significant as we transition risk.

Q:What is the growth expectation for the renters business?

A:We're seeing flat revenue year-to-date, but gross written premium is up 8%, indicating future growth.

Q:What is the long-term combined ratio target for Global Housing?

A:Mid-80s combined is the right way to think about the business.

Q:Can you quantify the level of investment for Telstra and Spectrum that impacted EBITDA?

A:We've talked about $13 million of incremental investment year-to-date, with $5 million in Q1 and $8 million in Q2.

Q:How much is higher investment income offsetting core weakness in the auto segment?

A:Our duration is about five years on our investment portfolio, and we feel good about our outlook in terms of investment income.

Q:Do you retain about a third of the risk across the Lifestyle book?

A:Yes, that's generally the right way to think about it, but we may retain a little less on the auto side.

Q:What gives you confidence to increase the outlook for repurchases?

A:Our strong capital position and cash flow generation give us confidence to increase the outlook for repurchases.

Q:Is there anything unusual about the strong fee income in Global Housing?

A:There was a reclassification between fee income and expense lines, with no bottom line P&L impact.

Q:What was the import of the client transition statement in Housing?

A:We expect some movement in policy counts due to ongoing activity within the lender-placed business, but overall, we expect stability.

Q:Review of Unclear Management Responses

A:Management appeared to avoid giving a direct answer regarding the specific percentage of auto revenue mix that is GAP business and the exact impact of investment income on the auto segment's bottom line. Additionally, there was a lack of clarity on the long-term growth expectations for the renters business, as management provided vague language without specific figures.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

AIZ Transcript

Assurant, Inc. (AIZ) Q3 2025 Earnings Call Transcript

Positive11-5

The earnings call highlighted strong financial performance with 15% YoY EBITDA growth and stabilized losses. The strategic partnerships and new program initiatives suggest future growth, while increased buyback guidance indicates strong capital deployment. The Q&A session showed management's confidence in countercyclical business benefits and new opportunities. Despite some uncertainties about future programs, the overall sentiment is positive, with expectations of continued growth and strategic investments.

Assurant, Inc. (AIZ) Q2 2025 Earnings Call Transcript

Positive8-6

The earnings call reveals strong financial performance, with significant growth in EBITDA across segments and new business wins. The Q&A highlights management's confidence in long-term growth, operational efficiencies, and minimal tariff impact. Although some concerns were not fully addressed, the overall sentiment is positive, driven by record high revenue in mobile subscribers and strategic expansion in various segments.

Assurant, Inc. (AIZ) Q3 2024 Earnings Call Transcript

Unknown11-6

The earnings call presents a mixed outlook. Financial performance shows strong growth in Global Housing and Connected Living, but challenges like unfavorable foreign exchange, catastrophe losses, and regulatory issues persist. The Q&A highlights management's optimism about future growth, particularly in Connected Living, but lacks clarity on investment impacts. Positive factors include a robust share repurchase plan and strong adjusted EPS growth. However, ongoing losses and regulatory challenges in Global Housing, along with GAAP losses in Auto, create uncertainty. Given these mixed signals, the stock price is likely to remain neutral in the short term.

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

Positive8-7

AIZ Slides

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2025-05-06

AIZ Report

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