Assurant, Inc. 5.25% Subordinat Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Delivered strong second quarter with double-digit growth in adjusted EBITDA and earnings per share excluding reportable catastrophes. Full year 2025 growth expectations meaningfully increased, with adjusted EPS growth expected to approach 10% excluding catastrophes.
• Global Housing continued to outperform in 2025 with adjusted EBITDA up 25% excluding reportable catastrophes in the first 6 months. Global Lifestyle saw adjusted EBITDA growth accelerate in the second quarter, with Connected Living supporting year-to-date performance.
• Invested in technology to drive innovation, including AI technologies in automotive and generative AI solutions in housing. Made acquisitions such as U-Solutions in Japan, Gestauto in Brazil, and others to expand business and unlock growth opportunities.
• Partnerships with leading brands and continued focus on B2B2C distribution channels to deliver differentiated value.

Segment Performance

• 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 year-to-date. Global Auto's adjusted EBITDA was up modestly, with net written premiums up 8% year-to-date. Net earned premiums, fees and other income in Global Lifestyle grew 8%, led by strong growth in Connected Living from mobile device protection and trade-in programs.
• Global Housing: Second quarter adjusted EBITDA was $214 million, including $30 million of reportable catastrophe impacts. Excluding cats, Global Housing delivered adjusted EBITDA of $244 million, up 18%. Through the first 6 months of the year, adjusted EBITDA was up 25% excluding reportable cats. Homeowners business benefited from favorable non-catastrophe loss experience and increased lender-placed policies in force. Renters business saw tech-enabled services drive growth, with Cover360 plus platform in PMC channel delivering double-digit premium growth for 3 consecutive years.

Guidance

• Excluding catastrophes, full year adjusted EPS growth expected to approach 10%, driven by mid- to high single-digit growth in adjusted EBITDA. Excluding prior year reserve development, double-digit underlying growth expected for both adjusted EBITDA and EPS.
• Share repurchases for the year expected to be between $250 million to $300 million, the upper end of 2025 guidance.
• Full year combined ratio for Global Housing expected to be in the mid-80s including a $300 million cat assumption.

Risks

• Macro-economic conditions such as tariffs, inflation, foreign exchange and interest rate levels may impact the pace and timing of growth. These factors are considered in the outlook but may cause actual results to differ from expectations.

Q: 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?

A: Yes. Pleased with progress in Global Lifestyle overall. Connected Living performed well, up 11% constant currency. Auto is seeing nice stability with improvement in vehicle service contract loss experience leading to an inflection point this year for the business.

Q: Investment income from other investments was negative in the first half. What are those investments? And what's driving the decline there?

A: Our investment portfolio performs well. Other investments include real estate transactions which can create lumpiness from quarter-to-quarter. Overall portfolio is performing well with book yields up to 5.33%, 10 basis points over first quarter and 20 basis points better than prior year.

Q: Is there a way to think about any way to quantify any pull forward in consumer activity when we think about the number of devices that you guys reported or the number of protected vehicles that you guys had?

A: In Connected Living, probably saw a little bit of pull forward relative to trade-in due to more switching activity and promotional work. In auto, retail car sales were up year-to-date, net written premiums up 8% for Assurant, with some pull forward in demand but earnings will earn out over multiple years.

Q: Could you characterize where the prior year development is coming from in Global Housing?

A: Related to improvements in Florida due to regulatory changes, lower frequencies, and inflation being lower than expected.

Q: Any thoughts about what the tariffs might mean going forward? And how much cushion you might have in your second half guidance for tariff impacts?

A: Very limited impact in the first half. Outlook includes best estimate based on current information, very manageable for the balance of the year, and we are proactive in addressing inflation.

Q: How would you characterize the new business pipeline for Lifestyle now versus 12, 24 months ago?

A: Have had momentum in recent years, pipeline has accelerated. Made $5 million in investments in the first half for new business growth, expecting $10 million in the second half. Excited about new client wins, additional services for clients, and new product launches across Connected Living and other segments