Assurant (AIZ) Q2 2025 earnings call transcript

Assurant Q2 2025 Earnings Transcript PARTICIPANTS Corporate Participants Keith Demmings – President & Chief Executive Officer, Assurant, Inc. Keith Meier – Executive Vice President, Chief Financial Officer, Assurant, Inc. Sean Moshier – Vice President, Investor Relations, Assurant, Inc. Other Participants Jeff Schmitt – Analyst, William Blair & Co. LLC Thomas McJoynt-Griffith – Analyst, Keefe, Bruyette & Woods Mark Hughes – Analyst, Truist Securities MANAGEMENT DISCUSSION SECTION Operator: Welcome to Assurant's Second Quarter 2025 Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following management's prepared remarks. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session.

It is now my pleasure to turn the floor over to Sean Moshier, Vice President of Investor Relations. You may begin. Sean Moshier, Vice President, Investor Relations, Assurant, Inc. Thank you, operator, and good morning, everyone. We look forward to discussing our second quarter results with you today. Joining me for Assurant's conference call are Keith Demmings, our President and Chief Executive Officer; and Keith Meier, our Chief Financial Officer. Yesterday, after the market closed, we issued an earnings release announcing our results for the second quarter 2025. The release and corresponding financial supplement are available on assurant. com. Also on our website is a slide presentation for our webcast participants. Some of the statements made today are forward-looking. Forward-looking statements are based upon our historical and current expectations and subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements.

Additional information regarding these factors can be found in the earnings release, presentation, and financial supplement on our website, as well as in our SEC reports. During today's call, we will refer to non-GAAP financial measures, which we believe are important in analyzing the company's performance. For more details on these measures, the most comparable GAAP measures and a reconciliation of the two, please refer to the earnings release, presentation, and financial supplement on our website. We'll start today's call with remarks before moving into Q&A.

Keith Demmings, President & Chief Executive Officer, Assurant, Inc. Thanks, Sean, and good morning everyone. We delivered a very strong second quarter with double-digit growth in both adjusted EBITDA and earnings per share, excluding reportable catastrophes. Our results were fueled by continued outperformance in Global Housing and growth in Global Lifestyle reinforcing a strong first half of 2025. Through the first six months, adjusted EBITDA increased by 14% and adjusted EPS rose 16%, both excluding cats. Given our year-to-date performance, we're meaningfully increasing Assurant's full year 2025 growth expectations. Excluding catastrophes, we now expect full year adjusted EPS growth to approach 10% driven by mid- to high single-digit growth in adjusted EBITDA. When excluding prior year reserve development, we expect to deliver double-digit underlying growth for both metrics.

Additionally, our significant cash generation and balanced capital allocation continue to support long-term shareholder value. This year's performance reinforces our long-standing track record of success, driven by our powerful business model and the dedication of our global team. By combining innovative services with our protection and specialty insurance products, we deliver differentiated value through our unique B2B2C distribution channels in attractive Lifestyle and Housing markets. Our partnerships with the world's leading brands are powered by transparency, data-driven protection solutions and value-added services. We've continued to be a leader in our markets by embedding technology into our client systems, enabling exceptional customer experiences and optimizing performance. We are well positioned to achieve our ninth consecutive year of profitable growth in 2025.

Our diversified business model enables us to perform consistently across a range of economic environments, often diverging from the broader industry trends. We believe this strength and resilience continue to differentiate Assurant in the broader P&C industry. Since 2019, we've delivered a compound annual growth rate of 12% in adjusted EBITDA and 18% in adjusted EPS, both excluding reportable cats.

Now let me share some specific examples of the momentum we're seeing within our Lifestyle and Housing segments. Within Global Lifestyle, adjusted EBITDA growth accelerated in the second quarter, supporting our year-to-date performance. Through the first six months of the year, Lifestyle earnings increased 2% on a constant currency basis, which was in line with our expectations. We are well positioned to deliver growth for the full year. In Connected Living, adjusted EBITDA increased 4% year-to-date on a constant currency basis. Sustained investments in our device care centers, automation and technology platforms, enhance our end- to-end solutions across the value chain. These capabilities add scale, simplicity and flexibility, tapping into new profit pools and accelerating growth and value creation for Assurant and our partners.

This has enabled our success in growing mobile subscribers globally. Over the last year, we've added 2.4 million devices protected, bringing our total to 65 million subscribers. Our growth is led by new client programs and the continued expansion of our partner relationships. We continue to make investments related to new products, services and programs, which we expect to roll out in the second half of this year. Following our acquisitions of Cell Phone Repair or CPR in the US and iSmash in the UK, we recently acquired U Solutions in Japan to expand our local walk-in repair capability in the world's second largest mobile market. This acquisition strengthens our customer experience in the local market and unlocks future growth opportunities.

In Global Automotive, earnings were up modestly supported by year-over-year improvements in loss experience. Net written premiums have increased 8% year-to-date achieved through rate increases over the last two years and new business wins driven by our scale and critical dealer services business. A key highlight is our recent partnership with Ciocca Automotive, a fast-growing automotive group with more than 50 dealerships in New Jersey and Pennsylvania. Through Assurant Vehicle Care, we deliver vehicle protection products and comprehensive dealership operational support including in-dealership training. Internationally, we recently completed the acquisition of Gestauto in Brazil, expanding our automotive distribution network diversifying our product portfolio and reinforcing our presence in Latin America. Gestauto's expertise aligns with our commitment to delivering excellent service and seeking continuous improvement.

The acquisition presents exciting opportunities for future growth. Beyond new business wins and our expanding presence, we're renewing relationships across distribution channels, including dealership groups, OEMs and other affinity partners, further reinforcing our client base and market position. We're driving innovation in automotive by investing in AI technologies. These advancements are transforming key areas from enhancing dealership training to enabling seamless digital claim processing.

Turning to Global Housing. Following two years of exceptional growth, the segment continues to outperform in 2025. Through the first six months of the year, adjusted EBITDA was up 25%, excluding reportable cats. Our business continues to benefit from multiple growth levers, including increased demand for lender-placed insurance within homeowners, driven by hardening of the voluntary insurance market across the U. S. , significant expense leverage across Global Housing, which has improved by over 700 basis points over the last two years and increased scale from new business wins, including the third quarter rollout of a new mortgage servicing partner, which will add approximately 300,000 loans to our portfolio. In Homeowners, we see meaningful opportunities to expand with new clients by leveraging our existing infrastructure.

Ongoing technology investments further enhance efficiency as we process and digitize millions of insurance documents each year through our market-leading loan tracking solution. In Renters, our tech-enabled services remain a key driver of growth. Our Cover360 Plus platform in the property management company or PMC channel has delivered three consecutive years of double-digit premium growth. The platform continues to deliver higher penetration rates, client renewals and new business wins. During the second quarter, we signed a top 15 PMC partner with over 100,000 units nationwide and completed multi-year renewals with two of our top 4 PMC partners. We've also increased our renters' policies by 11% year-to-date, including a new renters book we added earlier this year. Overall, our growth within Housing is underpinned by our attractive combined ratios.

Excluding prior-year development, we've achieved a year-to-date combined ratio of 87% with cats. We remain on track to deliver a mid-80s combined ratio for the full year, including our full year cat assumption of $300 million. Innovation is deeply embedded in Assurant's DNA and it continues to underpin our ability to generate future growth. As we look over the long-term, we see significant opportunities across clients, products and geographies, including expanding offerings and increasing attachment rates with existing partners, winning new clients across the globe by executing on opportunities already in our pipeline, increasing investments in core markets, including launching new products and services across the Lifestyle and Housing businesses and entering attractive adjacent sectors through new product offerings. We're laser-focused on executing on each of these opportunities as we continue to position Assurant for long-term growth, creating value for our partners, end consumers and shareholders.

I'll now turn it over to Keith Meier to highlight our second quarter results and expectations for the remainder of the year.

Keith Meier, Executive Vice President & Chief Financial Officer, Assurant, Inc. Thanks, Keith, and good morning, everyone. We were very pleased with the growth in the quarter across both Global Housing and Global Lifestyle. Overall, second quarter growth was strong with adjusted EBITDA increasing 13% and adjusted earnings per share growing 17%, both excluding cats. Our year-to-date performance supports the increase to our full- year 2025 outlook, which I will cover shortly. Starting with capital, our holding company liquidity position at quarter end was $518 million, providing us with flexibility to drive future growth. Our robust cash flow is a key differentiator for Assurant. In the quarter, our businesses upstreamed over $230 million of cash flow to the holding company, which allowed us to return $105 million to our shareholders, including $62 million of share repurchases.

Through August 1, we repurchased an additional $25 million of shares and have now completed $150 million in repurchases so far this year. I'll now walk through our segment results in greater detail beginning with 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, led by our Global Mobile device protection programs and modest growth in our mobile trade-in programs. The strength in device protection was driven by strong subscriber growth from new mobile clients and programs that began last year. This is a prime example of our momentum, given the important investments we made in 2024.

Our device trade-in business saw improved profitability from higher volumes compared to prior year, including increased carrier promotions as well as consumer demand pull forward in the quarter. Based on historical trends, we anticipate lower sequential third quarter volumes given normal seasonality and a strong second quarter.

Moving to Global Auto. Adjusted EBITDA was up modestly. In line with our expectations, we were pleased to see improved loss ratios in our vehicle service contract business and stable earnings overall. We continue to benefit from previous rate increases earning through our book and improvements to our claims processes while keeping us on track to grow for the full-year. For Global Lifestyle, our net earned premiums, fees, and other income grew 8%, led by strong growth in Connected Living from mobile device protection and trade-in programs, as well as contributions from a new program within financial services launched late last year.

Moving to Global Housing, second quarter adjusted EBITDA was $214 million, which included $30 million of reportable catastrophe impacts. Excluding cats, Global Housing delivered another quarter of strong double-digit growth as adjusted EBITDA increased 18% to $244 million. Our Homeowners business continue to benefit from favorable non-catastrophe loss experience with lower claims frequencies and increases to lender-placed policies in force benefiting from pressure in the voluntary insurance market. Results also increased from higher favorable prior-period reserve development, which was $34 million in the quarter compared to $17 million in the second quarter of 2024. Before moving to our 2025 outlook, I wanted to discuss Assurant's longstanding focus on leveraging technology to drive innovation for our partners and end consumers. We have invested in AI and related technologies to support our clients, delivering efficiencies and improving the customer experience.

We also have an effective AI framework that allows us to create, evaluate, and scale use cases across our businesses. Artificial intelligence presents a powerful opportunity to further accelerate our capabilities and creates additional value for our clients. It enables us to improve productivity, enhance decision-making, and upskill our employees, delivering simpler, faster, and more consistent outcomes. There are several areas throughout our businesses where we believe AI can continue to transform our operations and product offerings. In Global Lifestyle, our Innovation and Device Care Center near Nashville is increasing the use of robotics and AI to assess mobile device quality and process trade-ins with greater speed and consistency. This supports higher average selling prices and better value for clients and end consumers.

We are also further embedding AI into our Personal TechPro premium tech support services, which cover connected devices and appliances. This enables us to better assist customers in navigating technical challenges and inquiries with precision and ease. In Housing, we recently deployed our generative AI solutions to enhance the speed and accuracy of document classification and processing across our loan tracking solutions with impressive early results.

Looking ahead, technology-based solutions will play a critical role in extending client tenure and expanding market share, and our technology advantages will enable us to continue to differentiate Assurant against competitors in the market.

Finally, I want to share some thoughts on our increased outlook for 2025. Driven by the strength of our first-half results, including outperformance within Global Housing, we now expect enterprise full-year adjusted EPS growth to approach 10%, and adjusted EBITDA to grow mid- to high-single digits, both excluding cats. This represents a meaningful increase from our initial expectation of modest growth for both metrics. To put a finer point on the strength of our outlook, excluding favorable prior-year development of $63 million in the first half of 2025, and $107 million for full-year 2024, underlying growth trends are expected to deliver double-digit adjusted earnings and EPS growth. We now expect strong growth in Global Housing and continue to expect growth within Global Lifestyle where both Connected Living and Global Automotive are expected to grow.

For Global Lifestyle, growth is expected to be partially offset by investments in new partnerships and programs, as well as unfavorable foreign exchange. As a reminder, through the first half of 2025, we've made approximately $5 million of strategic investments and would expect roughly $10 million in the second half of the year. These investments are directly tied to the programs and clients we're in the process of launching or expect to launch in the near future. Within Global Housing, we expect continued policy growth in lender placed. As a reminder, our outlook does not contemplate additional prior-year reserve development beyond the $63 million seen in the first half of the year. We have considered and continue to monitor macroeconomic conditions within our outlook, including tariffs, inflation, foreign exchange, and interest rate levels, which may impact the pace and timing of growth.

And finally, our capital objectives remain consistent given our position of strength as we focus on maintaining balance and flexibility to support new business growth while returning excess capital to shareholders. From a share repurchase perspective, given our confidence in our solid capital position, increased earnings outlook, and attractive share price, we now expect share repurchases for the year to be between $250 million to $300 million, the upper end of our 2025 guidance. This is subject to M&A as well as market and other conditions. In conclusion, our year-to-date performance and increase in outlook for 2025 is a testament to the unique and differentiated nature of Assurant as we continue to be well positioned to grow earnings once again for the ninth consecutive year while also navigating various macroeconomic environments.

With that, operator, please open the call for questions.

Keith Demmings: Good morning, Jeff Jeff Schmitt, Analyst, William Blair & Co. LLC: So 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.

I mean, how should we think about the trend there? Keith Demmings: Yeah. Maybe I'll offer a couple of overarching thoughts and then Keith can talk about the trend line. I'd say, first of all, really pleased with the progress that you're seeing in the second quarter for Global Lifestyle overall. Certainly, Connected Living performed really well, up 11% constant currency. Auto, we're also seeing really nice stability there, and I think we're well positioned midway through the year, very much in line with our expectations and feel confident in the full-year opportunity to grow both Housing, Auto, and Connected Living overall. But Keith, what would you add about the benefit level?

Keith Meier: Yeah. I think, Jeff, overall, there's always a little bit of a mix shift in terms of the dynamics of the deal structures with the different clients within Lifestyle. The ones that we're really focused on is in Auto. And I think what we're seeing there is the encouraging point this year where we're seeing the improvement in the vehicle service contract loss experience. And so, I think that is really leading us to, what we feel like, is an inflection point this year for that business, which also allows us to feel good about our growth outlook for our Auto business. And I think it sets us up for a nice run over the long term for our Auto business.

And then investment income from other investments was negative in the first half. What are those investments and what's driving the decline there? Keith Demmings: Yeah. I think more than anything, Jeff, I would just start by saying, our investment portfolio really continues to perform well. I think it reflects the quality and diversity of our investments. So, overall, we're up year-over-year and for the quarter. And when you think about the other investments, we have things like real estate transactions that take place during the year, so that can create a little bit of lumpiness from a quarter-to-quarter basis. But, overall, I think we're in a good position. Our book yields overall are up to 5%, 5.33%, that's 10 basis points over the first quarter.

It's also 20 basis points better than the prior year. So I think we're – our portfolio is performing well. And so, I think from an overall position, I think we're in a good place for investment income. Overall, I think you can see us having a positive impact because of the higher average asset level and then the positive yields in fixed income, and then that'll be offset a little bit by the shorter-term investments and in our cash investments. So I think, but overall, we see investment income being up for the year.

Keith Demmings: Welcome.

Keith Demmings: Hey, Tommy.

Thanks for taking our questions.

Got the sense that there was a nice uplift in growth in the second quarter, and so just trying to see if any of that was a pull forward of activity ahead of the tariffs. Keith Demmings: Yeah. Maybe we'll break it into two parts. I think when I look at Connected Living and in mobile in particular, we probably saw a little bit of pull forward relative to trade-in. There was more activity in the marketplace in general, more switching activity, more promotional work, and I think some of that was pull forward relative to tariffs. But I do think that the bulk of the beat in Connected Living was driven by the growth in device protection. You see the sequential growth in subscribers up 700,000, 2.4 million year-over-year.

That, by far and away, was the lion's share of the improved profitability in the quarter. Trade-ins certainly helped, but it wasn't the biggest driver. And then in terms of Auto, maybe I'll offer one thought and then Keith can jump in. I think when you look at the first-half Auto sales overall, it was a pretty strong and resilient auto market. Our results kind of followed that as well. So I think retail car sales were up 6% or 7% year-to-date. You're seeing net written premiums up pretty significantly, 8% for Assurant year-to-date. So, some of that certainly is pull forward. I don't think the car sales will maintain at that same level in the second half. But no impact on earnings because obviously that earns out over multiple years.

But Keith, what else might you add?

Keith Meier: Yeah. I think overall, we're pleased with the momentum that we're building on our Auto side for our sales growth. Keith mentioned the written premiums up 8%, I think that's a blend of some of the rate increases that we've had over the last couple of years. I think it's also driven by some new business wins that we highlighted a little bit earlier. And, then I think there is a little bit of pull forward in demand in the early part of the quarter, but we also saw the production being pretty good as we went through the quarter. I think there's a little bit more promotional activity that the dealers are driving, and I think when there's promotional activity, I think that allows consumers to sometimes utilize some of those promotional dollars to buy some of the additional services like the extended service contracts.

So, overall, I think we like the progress we're making, and our protected vehicles are up nicely in the quarter as well. So overall liking the momentum we see on the Auto sales side.

You guys have delivered a lot of operating leverage over the past few years. That expense ratio is now running in the high-30s. Can you talk about the opportunity to gain more leverage just as that business line continues to grow across both lender placed, the voluntary market as well as Renters growth? And maybe perhaps it'd be helpful to think about, what percentage of those costs are fixed versus more variable or commission based. Any insights around the expense side of that thing? Keith Demmings: Yeah. I think, a lot of the cost is of the operational execution. Not a huge part of that is going to be commission. There's no commission in the lender placed, which is obviously the biggest part of the Housing business.

And I think there is opportunity to continue to create leverage over time, and its coming from a couple of different ways, Tommy. One, we're seeing, obviously, growth in the underlying lender-placed portfolio because of the hard market. We're also seeing growth because we're actually winning and gaining more market share with new clients. Some of our clients are onboarding new loans, et cetera, so there's natural growth coming through a couple of different ways. That naturally creates a lot of scale advantages, but then, we're driving a tremendous amount of effort around technology, automation, driving more operational efficiency. Keith highlighted a couple of examples of how we're thinking about that within all of the businesses, and I think all of those things together create continuous opportunity to drive that expense level down.

We want to create as much efficiency as we can. It's good for consumers. It's good for our clients. Ultimately, it's good for getting the right rates in the marketplace, and we're going to continue to be as efficient as we can to create value. But Keith, what would you add?

Keith Meier: Yeah. I think along the lines of your question, Tommy, you can think about selling- and underwriting-type expenses being about 20% of the overall. So, that leaves us that other 80% to be able to leverage like you talked about. So we do see a lot of opportunity as we continue to leverage our technology and scale.

Keith Demmings: Yeah. And it's interesting, the investments that we make, they don't just make us more efficient, they make the solution set better, and it actually strengthens our competitive advantage in the marketplace, and it makes us more likely to win net new clients because we're just – not only are we more efficient, but we're doing it in a way that's better from a consumer perspective.

Keith Demmings: You bet.

Keith Meier: You’re welcome.

Keith Demmings: Hi, Mark. Good morning.

Keith Meier: Yeah. So, I'd say, it's really related to three main things, Mark.

And then, certainly, the third thing is the inflation being lower than expected. And so, I think that's just – we're really just reacting to those three elements that are driving our prior-year development. Mark Hughes Analyst, Truist Securities: And then the tariffs, anything you observed so far, your thoughts about what that might mean going forward, and then how much cushion you might have in your second-half guidance for tariff impacts? Keith Demmings: Yeah. Probably at the simplest level very limited impact in the first half of the year. That was also true specifically to the second quarter. As we looked at the outlook, we certainly included our best estimate based on the most current information, I think very manageable as we look at the balance of the year.

And we are staying proactive as well, as we think about inflation over time, not just with our inflation guard feature within lender placed, our ability to get rate with filed products and then our work with clients around service efficiency and rates and deal structure.

Do I remember that properly? And is that dynamic still in place to the same degree? Keith Demmings: Yeah. I think we're getting two things happening, right? We're seeing more policies placed because consumers are struggling to find coverage, and then we're keeping the policies longer, and it's meaningfully increased over time. And I think that's a function of the tough market, and our rates have become more competitive, and the product has been well received by consumers.

Keith Meier: Yeah. I think the customers are keeping our policies probably 6 to 12 months longer, Mark. And I think that just speaks to the things that we talked about earlier, where we're driving a lot of the expense leverage that can reduce the rate. So our products are looking, I think more attractive and better to consumers than they've ever been before. So I think the price that we're delivering is good, and then we're also really delivering great service to the customers when they have needs as well. So I think that combination is serving us well.

Keith Demmings: Yeah. A couple of thoughts. I think we've had a lot of momentum, really, the last couple of years across the board, whether that's in Connected Living, in Housing, in Auto, I think we've seen some acceleration in the pipeline as we look forward from here. There are some things that we're actively working on. We talked about the investments we made in the first half being around $5 million to support new business growth, specifically in Connected Living, we think that'll be more like an additional $10 million in the second half, hopeful to be able to talk more in November about some of the things that we're working on. But I would say we're very excited about some of the things that we're going to announce, and it's a nice combination of new client wins, adding additional services to expand relationships with major clients, and then also launching new products.

So it's a nice mix of activity and very, very much focused on Connected Living. But we are seeing a lot of opportunity for growth in the rest of the company as well. We talked about a big win in the auto space earlier in the discussion. The pipeline in lender placed is quite strong, and we've seen a lot of momentum in renters with, 12 consecutive quarters of double-digit growth in the property management channel on top of a pretty significant book roll. So, lots of opportunity across the board, and certainly, that's the priority focus for this company.

Keith Demmings: You bet.

Keith Meier: Thank you.

Keith Demmings: All right. Well, thanks, everybody for joining the call, and we will certainly look forward to updating you again in November. And until then, hope everybody stays safe. Thanks very much.