Welcome to Assurant’s Third Quarter 2022 Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following management’s prepared remarks. [Operator Instructions] It is now my pleasure to turn the floor over to Suzanne Shepherd, Senior Vice President of Investor Relations and Sustainability. You may begin.

Thank you, operator, and good morning, everyone. We look forward to discussing our third quarter 2022 results with you today. Joining me for Assurant’s conference call are Keith Demmings, our President and Chief Executive Officer; and Richard Dziadzio, our Chief Financial Officer. Yesterday after the market closed, we issued a news release announcing our results for the third quarter of 2022. The release and corresponding financial supplement are available on assurant.com. We will start today’s call with remarks from Keith and Richard before moving into a Q&A session. Some of the statements made today are forward-looking. Forward-looking statements are based upon our historical performance 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 yesterday’s earnings release 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 evaluating the Company’s performance. For more details on these measures, the most comparable GAAP measures and a reconciliation of the two, please refer to yesterday’s news release and financial supplement that can be found on our website. I will now turn the call over to Keith.

Thanks, Suzanne and good morning, everyone. As we previewed last week our third quarter 2022 results came in below our expectations. This reflected a more challenging macroeconomic environment and lower contributions from Global Lifestyle. Following a very strong first half of the year where we grew Lifestyle adjusted EBITDA by 14% year-over-year this quarter had more significant headwinds internationally, including unfavorable foreign exchange, a modest uptick in claims and lower Connected Living program volumes. While disappointing our results don’t change our view of the inherent growth momentum in the Lifestyle business, we believe the actions we are taking to drive additional expense savings will also better mitigate potential further deterioration in macro conditions. Looking at Global Housing, the segments performance was in line with our expectations for the quarter. We are pleased with the progress we have made in not only increasing revenues through higher average insured values and rates, but also the transformation actions we have taken to simplify the business and drive future growth. Looking at the year-to-date performance to the first nine-months of 2022, Assurant’s reported adjusted EPS of $10.05 is up 7% for last year and adjusted EBITDA of $832 million is down 4%, both excluding reportable catastrophes. As we evaluate our progress this year we continue to believe we have a compelling strategy, strong fundamentals and momentum with clients as we continue to align with leading global brands and maintain market leading positions across our key lines of business. For example, we announced a further multi-year extension of our longstanding partnership with T-Mobile. This important contract extension provides us with increased long-term visibility in our U.S. mobile business. At the same time, it gives us greater opportunity to increase repair volumes through our over 500 cell phone repair locations with the ability to leverage this…

Thank you, Keith, and good morning, everyone. Adjusted EBITDA excluding catastrophes totaled $240 million down 11% from the third quarter of 2021. Our performance reflected weaker results in both Global Housing and Global Lifestyle. For the quarter, we reported adjusted earnings per share, excluding reportable catastrophes of $2.81 down 8% from the prior year period. Now let’s move to segment results, starting with Global Lifestyle. This segment reported adjusted EBITDA of $166 million in the third quarter, a year-over-year decreased to 6%, driven primarily by Connected Living. Excluding an $11 million one-time client contract benefit in Connected Living, Lifestyle earnings decreased by $22 million. The Connected Living decline of $18 million was primarily from four factors. First, $7 million of unfavorable foreign exchange, mainly from the weakening of the Japanese Yen. Second, lower margins in our device trade-in business from lower volumes. However, this is expected to improve starting in the fourth quarter, which we have already seen in October. Third, our Extended Service Contracts business was impacted by higher claims cost from wage and materials, and we did make some additional investments in Connected Home and lastly, softer international volumes for mobile particularly in Japan and Europe. The decline was partially offset by continued mobile subscriber growth in North America device protection programs from carrier and cable operator clients. In Global Automotive, earnings decrease $4 million or 6%, primarily from lower investment income and higher losses in Europe. Turning to revenue year-over-year Lifestyle revenue was up by $29 million or 1% driven by continued growth in Global Automotive. Global Automotive revenue increased 9% reflecting strong prior period sales of vehicle service contracts. On year-to-date basis, our net written premiums in auto were down 2%, demonstrating the resilience of the business relative to the broader U.S. auto market, which contracted…

The floor is open for questions. [Operator Instructions] And your first question comes from the line of Mike Phillips from Morgan Stanley. Your line is open.

Good morning, everybody. Thanks. I guess I wanted to touch on the comments on 2023. You mentioned you expect growth in those segments. And as I compare that to your stuff you gave in February. You are pretty specific with the financial objectives of numbers by segment of EBITDA growth. Hear I believe you said if you want to reevaluate that and it sounds like, you are also expecting a Lifestyle continue to hire claim calls. So kind of want to kind of marry those and make sure we are not reading too much into your wording of reevaluating 2023 growth, as compared to your objectives before?

Okay. Yes, maybe I can try to tackle that a couple of ways. So if you think about the outlook for 2022. If we just start with that, obviously, we are below what we expected originally from Investor Day, largely driven by the decline in the Housing business, as it relates to inflation, which we talked a lot about last quarter. We had also expected Lifestyle to even outperform our original expectations, when we think back to where we started the year and kind of what we signaled last quarter. Obviously, we saw a softer Q3 in Lifestyle. We still expect Lifestyle to generate strong growth, as we think about 2022. So we talked about high single-digit growth in Lifestyle, but that is over coming relatively significant foreign exchange rates. If you think about constant currency basis, we expect to be in the low double-digit range, which was underpinning our Lifestyle Investor Day commentary. I would say that, because Housing is behind and Lifestyle is sort of inline, but not outperforming as significantly as we had hoped last quarter and we can talk about the third quarter. We have said, it is prudent for us to close the year, evaluate how we finish, look at the trends as we think about 2023 and 2024. There is a tremendous amount of turmoil in the global economy and the macro environment. So trying to make sure we take all of that into account, to set our outlook for 2023 that will also be based on the expense actions which we are taking in the fourth quarter. We do expect international softness to continue. I think foreign exchange will be a pressure. Claims costs are rising. Not a huge part of the Lifestyle story, but still important. We are trying to take expense actions to offset that pressure, and I think prudent for us to revisit and think about those longer-term commitments to make sure that we are being as transparent as we can with the market.

Okay. Thank you. I think that makes sense. I guess when you looked at the - in this quarter, one of the segments in the Lifestyle was the mobile margins. And you talk about how that is not going to continue and can I revert, I guess you mean in fourth quarter. Can you talk about why that is?

Yes. So there is a couple things. So if I think about the third quarter for Lifestyle, we certainly expected results in the third quarter to be lower than what we saw in the first half. So that wasn’t surprising, but obviously they came in even lower than we were expecting. Maybe I will unpack why we would’ve thought they would’ve been lower to start with, and then what happened in the quarter. So I would say as we thought about Q3, we knew there would be more losses in mobile from seasonality. We tend to see higher claims in the summer months, particularly for the clients where we are on risk. So that certainly happened and we saw an elevated level of claims beyond what we were expecting in the third quarter. If you think about the first half of the year, we saw tremendous favorability around mobile losses. So frequency of claims is lower than historic levels. We have done a really good job managing severity, a lot of efficiency in our supply chain, but also leveraging walk-in repair as well to drive down severity of claims. And we thought that positive trend line would continue in third core. There is a little bit of a reversal mainly around the cost of acquiring devices when we had to do replacement devices and just the sort of the mix of inventory that we had. We expect to see that normalized more into the fourth quarter and beyond. When I think about mobile losses, year-to-date, pretty in line with what we would have expected at the beginning of the year, very much in line with what we saw in 2021. So choppiness between really strong favorability in the first half and then some softness in the third quarter. We also saw accelerated investments around the Connected Home in Q3, which we knew would continue and we had some favorability in the first half with investment income in auto, which we knew wouldn’t continue. So we certainly expected Q3 to be down, but in terms of the miss to our expectations, I would say 50% of that miss is broadly international, a combination of FX and softer volumes in a softer economy, particularly in Europe and Japan. And then about half of it was domestic trade in margins, which was probably more of a timing point in terms of devices being delayed to be received in our depots, and that will reverse itself in the fourth quarter. I talked about the mobile losses being another driver, and then we saw a little bit of loss pressure on the ESC portfolio. Not a huge number, but certainly there is inflation in the system and that is flowing through.

Okay. Thank you for all the color. I appreciate it.

You bet.

Your next question comes from the line of Tommy McJoynt from KBW. Your line is open.

So just maybe stepping back a little bit and thinking from a high level, just thinking about the step down, I guess, in this year’s guidance from perhaps I guess six-months ago, back in May, we have seen kind of two sequential steps down. So can you just kind of frame how much of that step down has come from it is expected lost cost, the claims inflation side versus perhaps just a lower demand for your products and services, I guess, over in Europe, and then a little bit domestically. So if you were just going to bucket into those two categories, the step down and guidance over the year, how would you do that?

Yes. I think, you know, when we sat here at the end of the second quarter, we certainly saw pressure in the Housing business. No question that was the driver of the step down last quarter, offset by really, really strong first half. When we think about Lifestyle, you know, record year in 2021 and then an incredibly robust first half, we projected that trend line would continue and that favorability would continue. I would say, you know, the adjustment that we are talking about now is entirely sort of backing out that favorability for the full-year from Lifestyle. So Lifestyle, like I said, it is going to come in very much in line with our original expectations from Investor Day, from the beginning of the year and the real impact is FX. If I think about Lifestyle overall, I would say domestic Connected Living will finish the year very much in line with what we had expected. So a really strong year, really robust growth. Global auto will be ahead of what we originally expected, mainly driven by investment income, which we have talked about being a nice tailwind for the auto business. That favorability in auto, I would say offset by softness in underlying international business results, mainly in Europe, a little bit of pressure in Japan, and then we have got FX layered on top of that. But again, ignoring FX, pretty much in line and I would say auto outperforming and offsetting softness internationally. And then Housing is very much in line with expectations. If we think about what we expected in the third quarter, you know, Housing came in very much in line. We have made tremendous progress to transform Housing. We have reacted with urgency. I’m really proud of the way the team has come together. We have simplified the focus. You saw the exit of sharing economy. We have signaled the exit of international Housing related cat business. We are implementing a new org design to delineate between our Housing risk and capital light to increase our focus, drive even more efficiency. And then just a tremendous amount of work on offsetting inflation not just with expense discipline and prudence, but the work with AIVs that, you know, has started to take hold a little bit this quarter. A lot of progress on rate 31 approved rates with states that are implemented in 2022, several more for early 2023. So just a lot of progress there and I would say Housing pretty much in line as we think about what we said last quarter.

Thanks. And to follow up on that, what gives you guys confidence that some of the weaker pressures over in Europe and Japan might not spill over into the North American side?

Yes, we have, you know, we certainly expect the pressure in Europe and in Japan to continue. I would say, you know, obviously they are both profitable markets for us. Japan has been an incredible success story. And I think even though there is some softness in the economy, we are very well positioned in the market and there is tremendous long-term opportunity for growth and our team is doing an incredible job. So I feel really good long-term about our position there. Europe’s even more challenged, obviously with the economy and with FX in that marketplace so that we are seeing some softness. I think that persists and continues. We are taking actions to make sure we are simplifying our focus, rationalizing our expense base, but nothing that we are going to do is going to destroy long-term value, disrupt what we do with clients or customers. And then in North America, we have actually seen really robust results. You know, our subscriber counts on mobile in North America postpaid are up sequentially. They are up year-over-year, obviously with the T-mobile acquisition of Sprint. But good momentum, our clients are growing. If you think about our device protection clients in the US on the postpaid side, they are gaining a lot of net adds. I think 70% of the net adds are coming through our client - the client partnerships that we have. So that bodes well for device protection and then trade-in continues to be strong as there is a lot of competition in the broader market, particularly domestically.

Got it. Thanks. And then just last one for me. In Housing, you recorded the prior period development of $24 million, but the full-year guidance for Housing didn’t change. So was that prior period development already anticipated in the guidance?

So I think, we certainly expected higher claims cost in the quarter and that came through in prior period development versus current accident quarter development and maybe Richard can share some highlights on that. But I would say that, the offset to the prior period development was the significance that we saw both in terms of rate. From AIVs a little bit, but mainly from all the rate adjustments that we have made over the course of last year and then policy growth. We have got 26,000 incremental LPI policies that came through in the quarter as well, which we can talk about. But maybe Richard talk a little bit about the prior period?

Yes, exactly. I think you nailed it. In terms of the prior period development, obviously, when we closed Q2, we put some prior period development in and the best number in our best estimate. On the other hand, when we were looking at our outlook. We said inflation is high, let’s just assume inflation is going to stay at a very high level. So we kind of I would say hedged our bets in terms of where the total loss ratio could go at the end of this year, call it, not really prior period development, but just all-in lost cost. So that came through and we are a decent place there and that was able to absorb some of the prior period development. Of the prior period development, I would say 14 was this year, so it is truly just a movement within the calendar year, and 10 for the prior years. And then as Keith said, our premiums were a little bit better. We are seeing AIVs. We are seeing some new business come on. And so that helped to offset any other variance with the prior year development that came in.

Got it. Thanks.

Your next question comes from the line of Mark Hughes from Truist. Your line is open.

Yes thank you good morning. The delay on the trading activity, I got some questions on that. What was the logistical cause of the delay?

Yes. At a high level, relatively simple, so a client - we expected a client to send additional devices to us towards the end of the third quarter and that was delayed for a variety of reasons still to be received in Q4. So it is really just a shift between three and four and it wasn’t so much the lack of volume from a margin perspective. It was the fact that we had staffed labor accordingly to be able to process and receive those devices. So there is a bit of a mismatch between the labor that we had in place in anticipation of the volume, and then the volume being delayed for some logistical reasons in terms of appliance getting us those devices. So something that we expect to ride the ship in the fourth quarter.

On the reinsurance, I think you had mentioned that, you were looking at taking up your attention. Could you refresh me the timing of your renewals, I think it renews it a couple of different times through the year. How you anticipate what your early thoughts say about the cost of that program for 2023 versus 2022? And then I guess I would ask from the timing. So just timing, cost retention, if you could address those?

Sure. And maybe Richard, you can start in terms of the timing, and then I can add some color at the end.

Yes. Great. Thank you, and, good morning, Mark. So when we think about our reinsurance program full-year, this year will probably be about a 190 million in total cost in it. And how do we looking at the reinsurance program? Really, we need to look at it in terms of total Housing prices. Starting with the total Housing prices and Housing prices have gone up. Inflation has been boosting them, other factors have been boosting them. So if you think about the insurance that we put on the properties, we are putting more insurance on. And then that obviously results in us needing to purchase more insurance. So really by a kind of just a function of the overall book of business growing, we will be placing more reinsurance on the premium will grow. If you think about it having a bigger book of business and more premiums means we do have more exposure at the lower levels and a higher probability that those lower levels will be touched. So as we look at it, it's more of a proportional position that we would take and say, "Okay, well, what's the right new level for our retention?" That's why we wanted to signal that, that lower layer will probably go up. It's just kind of a logical conclusion in terms of what's been happening in the market. I would say, as we said a number of times, we are getting rate increases. We are getting increases in average insured values. So we are getting premium increases, the rise in the reinsurance costs, and we are expecting some increase in reinsurance costs given the state of the reinsurance market. That would be an offset to some of the premium increases that we are getting. So I would say sort of logical in that sense. In terms of timing, we typically purchase about 2/3 of our reinsurance at the beginning of the year and then the rest of it at mid-year. We always look at that, that proportion could change as we get into the market and see the dynamics of it.

Yes. And maybe just one other comment. I think at the highest level, we certainly expect the reinsurance cost increase to be more than offset by additional rate. Both from the rate increases, but also from inflation guard the average insured value increases. So even with a harder reinsurance market, we have got really strong relationships across a wide range of reinsurers. We partner with over 40 different reinsurers, a strong performing business long term. We continue to simplify the portfolio, which I think helps us as we move forward. And then definitely rising costs, but we anticipate that our rate will be more than sufficient to offset that.

So it sounds like what you are seeing on rate in your judgment at this point will more than offset both the underlying inflation and the higher reinsurance costs. Is that right?

That is correct, yes. And if I think about Housing, even if we just look at the third quarter revenues are up 3% year-over-year. If you back out the reinstatement premium from the premium line, we would be up 8% year-over-year. So we had 35 million in reinstatement premium this year and eight million in Q3 last year. So that is pretty meaningful up 8%. I would say that is half from rate, very little of that is from this year’s AIV. So we put the AIV increase in July, we talked about double digit rate as a result of AIV. That is had three-months to have an effect, right. So it is really a 24-month cycle. We renew policies over 12-months and they take 12-months to earn. We are three months into that 24-month cycle. So very little of the improvement is from AIV. Most of it is from all of the rate action we have taken at the individual state level, and then from the policy growth that we saw in the third quarter. So that will just continue to build and accelerate as the full effect of AIV rate comes through the program.

Your SG&A in lifestyle was up a point sequentially, that number has been a little bit volatile, but any change in the economics of the agreements that you have got with the auto dealers or your carrier partners? I know you just renewed with T-Mobile. Is there maybe a little more sharing you are having to do with those partners these days?

No. So in terms of T-Mobile, you are correct. We did do a multi-year contract extension on top of the multi-year extension that we got a year ago. The deal structure has changed as we pivoted from the in-store repair to leveraging our 500 CPR stores. But in terms of the broad economics, I would say quite simply, we protected the financial integrity of the original deal that we had. So we have restructured the way it operates, but no impact to our EBITDA expectations for that business. And then we further extended the agreement to protect that relationship over time which is really significant in terms of giving us long-term visibility into the U.S. mobile market. So nothing there that would create any economic change to us. In terms of the balance of clients, I would say, you know, tremendous momentum still commercially with our clients. Lots of focus on driving growth, driving innovation, but no fundamental changes in deal structures and services provided. So if we think about the softness in the third quarter in Lifestyle, you know, other than pointing to the broader economy and some of the impacts that I discussed earlier, nothing related to client deal related changes. And then Richard, anything on expense?

Yes, thanks Keith. Yes, exactly, exactly. And no changes to client contracts, but I would say the increase in the overall SG&A is reflecting, you know, some increases in the business growth in the business, you know, particularly in the auto business, obviously there is distribution costs with regard to that. And we have been growing the business over the last year. So there is some commissions in there. Also in our prepared remarks, you heard us talk about some additional investments in our home solutions and, you know, yes, a chunk of that obviously is expensed in the quarter. So those would be the two main drivers Mark.

Thank you very much.

Your next question comes from a line of Gary Ransom from Dowling and Partners. Your line is open.

Good morning. I was wondering if you could add a little color on the exit from international Housing. I mean, what, how long will that take and what, you know, size the magnitude of what is being reduced and not, it is not clear to me whether that includes the Caribbean exposure as well, but could you talk about that a little bit?

Sure. And it does include the Caribbean exposure and really anything that we write internationally that is cat exposed homeowners related business, we have made the decision strategically to exit. I would say we will be done writing policies. Most of it will be done this year. There is a little bit that will finish at the end of the first quarter, but we won’t be writing new policies as of Q2 2023. And then depending on how some of the final discussions unwind, you know, maximum, we would have a 12-month runoff on those policies, in some cases shorter. So that is to be finalized and determined. But in terms of the scale of it, I would think about, you know, maybe $50 million in net earned premium in a year as being kind of typical probably takes 10% of our tower. So if you think about the tower that Richard talked about, our reinsurance tower, 10% of that goes to protect the international exposures. And strategically it is been a challenging market hard to get rate. There has been rising costs as we know of claims. We expect rising costs of reinsurance adds a lot of complexity to not only manage the business, but negotiate the reinsurance that backs it. And ultimately with modeled ALLs, fairly limited effect to all-in EBITDA, certainly EBITDA ex-cat, but all-in EBITDA with cat, not hitting our target levels of return risk adjusted. So we are making the decision to further simplify and focus in places, where we think we have clear competitive advantages and where we are differentiated. We are not just a risk taker, we are providing deeply integrated, more differentiated services. That wasn’t the case with this business and we weren’t able to get the returns we wanted.

Is some of this business coming through the LPI business as well?

No.

No, okay. It is all just separate homeowners business basically.

Yes, separate homeowners, some of it were a reinsurer, some of it were direct writer. But none of it connects to what we do in LPI. An LPI is really unique. It is an incredibly advantaged business in terms of how we operate, how we are integrated and we create much more value than just being a risk taker. And we are able to get rate and we are able to drive the right level of profitability over time in that business. So it is quite a different business to manage versus what we have been working within the international property side.

Great. Thank you very much. And I also wanted to ask about two acquisitions. I know you had the EPG acquisition, maybe it is a couple of years ago now. But do those all fit together? I mean, is there some consolidation potential. And just I wonder is that a market size that will be additive to the growth you are thinking about over the long run?

Yes, I think that is exactly right. If we think about the EPG acquisition and then the acquisition that we are talking about now, it is really to build on the strength that we have got in that market around commercial equipment, leased and finance equipment. We have had good results and strong growth. And we operate this business both in our Housing side and Lifestyle side. So we are going to evaluate how to drive more synergies through the organization, as we move forward. But absolutely, it is capital light fee income. We are talking about small tuck-in acquisitions of existing clients that are high performing. We are already underwriting the business and it is really just buying the administrative capability and the scale to drive that forward. So we definitely see growth in this line of business, and we think it can accelerate as we make some - what are really quite small acquisitions, but can add a lot of value to our franchise.

Yes. You said that, some of it is in Housing and some of it is in Lifestyle. I guess I sort of thought of it as, sort of similar to the auto business. But maybe I was wrong on that.

Very much. I think we write two different product lines when we think about heavy equipment and commercial equipment, some of it is service contracts, some of it is physical damage. Operates very consistently, really predictable strong profitability and that has been the legacy of how we have been set up as an organization. So one of the things that we are focused on now is, as I talked about some of the Housing realignment between risk-based homeowner’s business and fee income capital light is just thinking about how do we create maximum efficiency and effectiveness organizationally, how do we create clarity in terms of where we want to focus to drive growth? What is the mindset that we need leading various different products? And then make sure that, we have got the least amount of friction in how we are organized as possible. So more changes to come as we think about our go-to-market strategy longer-term.

Okay. Thank you very much. And actually just one more maybe a bigger picture question, when you are thinking about all these macro impacts inflation for exchange and then putting that in the context of how you were thinking about 2023 and 2024 before. I’m not even really asking whether you think about hitting the 2024 or not, but just how your thinking might have changed? And what - we have had these couple of disappointments in the second and third quarter. What did that do for your thinking about the outlook as we go into 2024 and maybe even longer?

Yes, I think it probably - we step back and reflect on just how uncertain and complicated the environment is. That is true for Assurant and it is true for most companies today. So there is a lot of market volatility, market uncertainty. Interest rates are moving quickly. The economy obviously is going to shift over the course of the coming quarters, and we will see how that lands. So there is just a recognition of the complexity. And then like I talked about earlier, we knew Housing was going to be weaker this year. We thought the outperformance in Lifestyle would make up that gap as we thought about 2024. We certainly expect to continue to see the Housing growth. It is no doubt going to grow as we think forward over the next couple of years. But the question mark is around can Lifestyle outperform at the level that we would have needed to in order to offset that Housing softness? And Housing is probably more of a delay than a pivot in terms of what our expectations are. It is really just that we are a year behind where we thought we would be. But we are seeing evidence of significant improvement. And I think right now, given the uncertainty is particularly in the international markets, just taking a step back, like I said, finish the fourth quarter, deliver on a really strong plan in terms of what we expect to accomplish in 2023 relative to expenses as well as driving the right outcomes with our clients. And then stepping back and revisiting what is possible as we think about the longer term and then providing some color on a more informed basis in February.

Terrific. Thank you very much.

You are welcome.

Your next question comes from the line of John Barnidge from Piper Sandler. Your line is open.

Good morning and thank you very much. You have had expanded partnerships in the lifestyle business announced this year. I had a couple of questions on that. In light of inflationary pressures, one, can you talk about how you manage that inflationary volatility? And then can you contrast that with - could that pressure actually lead to more partners looking to outsource more of their service management and refurbishment of mobile devices?

Yes, it is interesting. If I start with the second point first, just on outsourcing and this ebbs and flows over time, but I think as we think about a more challenging economy going forward, if we think about a recessionary environment, oftentimes, we will see clients focusing on core. And the same for us, how do we focus on the things where we can generate the greatest amount of return? How do we prioritize what is critically important to the company? I think clients do the same thing. So as clients reprioritize their focus, there may be opportunities for them to say, "Hey, is there someone else in the market that is better equipped to help me with something because it is just not the burning priority at the moment. So we will see how that evolves. That sort of happens over time, but it is certainly reasonable to expect as we continue to build scale and as we have better and better capabilities that are efficiently operated, we can provide a great source of value to our partners over time. So I think hopefully, that trend continues. In terms of the volatility in Lifestyle, from a macro environment, I think if you step back and look at the totality of the year, we have signaled some puts and takes around kind of the inflationary environment. You know, in lifestyle we see, you know, it is strong investment income, certainly flowing through the auto business, which is the biggest source of our portfolio. So that is a positive. We have seen mobile losses that I talked about earlier, performing quite well, not because of inflation, but because frequency of claims is reduced a little bit. And then how we are doing with controlling severity through walk and repair, et…

Thank you. That is helpful. And then following up on that, wanted to go back to, you know, the pre-announcement. You talked about simplifying the business portfolio. You talked about exiting commercial liability and international Housing catastrophe. Have you completed that simplification of the business portfolio or could there be additional niche lines you look to exit in the near to intermediate term?

Yes, great question. I would say, you know, we have, I think we have had a very successful track record of managing the portfolio, and you have seen us do that consistently over many years. You know, there is certainly more things that we will evaluate in terms of smaller product lines and making sure that we are investing in places where we have clear competitive advantages. I think about, you know, we need a strong right to win and the size of the prize needs to be meaningful. And there are probably other pockets where we could, where we could continue to refine the portfolio over time. And I think that will continue permanently. That is always going to be a part of our DNA, is to look to optimize and create more focus on things that can more significantly move the needle and try to limit the distraction for the company. Focusing energy on products that are smaller, don’t contribute significantly to the profitability of the company. If that effort can be better placed elsewhere to drive more meaningful growth, those are the choices and trade-offs that our management team is making on a regular basis.

Thank you very much. And my last question, you talked about $12 million in buybacks in October. Does that seem like a reasonable run rate for the fourth quarter given the M&A transactions?

Yes, maybe I will offer a couple thoughts and then certainly Richard can jump in. I think when we step back and think about capital management at the highest level, we have talked about, you know, our focus on continuing to be very disciplined in terms of how we think about our capital. We have indicated an interest in being balanced between share buybacks and M&A. If you think about where we sit year to date, we have done $567 million in share repurchases and then $80 million we have signaled in M&A. So repurchases has been a big part of the story this year nearly 90% of the capital that we have deployed in that respect. So I think we feel good about meeting our commitment on the Preneed return. We feel good about meeting our commitment to in a normal year to $200 million to $300 million of share repurchases. But we also recognize the market is really challenging. There is a lot of interest rate volatility and we want to be more prudent in terms of capital management. And it is really just about maintaining flexibility, protecting our financial strength and then looking for the market to stabilize and for visibility to improve. And then as we look toward the future, we see our stock price is extremely attractive. So as we think about future M&A, we will have to have a very high hurdle rate in terms of the M&A relative to what a share buyback looks like today. But Richard, is there anything else you would add?

Yes. I guess, just to add on to what you said, I mean, in terms of share repurchases this year, we are already through October at little than $550 million in addition to that, $113 million in dividends. So that brings us to about say $670 million. So we had targets at the beginning of the year. We wanted to make sure we hit them for the year. And I would say we have hit them, which is why we signaled we would be at the lower end of that $200 million to $300 we had talked about earlier in terms of repurchases outside of the Preneed proceeds that we repurchased. And as Keith said, it is uncertain market conditions, and we want to make sure we continue to invest in ourselves and we continue to do the right things and remain disciplined with capital. So no change in our philosophy, our capital philosophy, the discipline we have, keeping the balance sheet very strong. As Keith said, we have always said, we always look at deployment of capital between share repurchases and M&A and in these markets with the share price where it is, the share price obviously from our perspective is extremely attractive today. So that creates a higher bar for M&A.

Thank you very much for your answers.

Great. Thank you.

And your next question comes from the line of Jeff Schmitt from William Blair. Your line is open.

Good morning everyone. In Global Lifestyle, I understand the inflation impact being low on the claims side just because you don’t retain a ton of the risk. But what about for SG&A? How much of that is employee comp and what level of wage inflation are you seeing there kind of relative to last year?

I think we are generally doing a pretty good job of offsetting wage inflation automation and our digital efforts. So certainly paying our employees more is important in the war on talent, to make sure that we are staying competitive, but I think we are doing a really good job offsetting that with our efforts on driving automation through our operations.

Okay. And then in Global Housing, I’m just trying to understand the numbers. When I adjust for add back that reinstatement premium, brings that attritional loss ratio down to I think 38%. And then if you back out the unfavorable development, it brings it down quite a bit more, 33%, 34%. So I’m trying to understand, you are talking about the pressures that you are seeing there. I think you are pushing for double-digit rate increases. I guess where is that pressure being felt or I guess why is that sort of loss pick as low as it is?

Yes. Maybe, Richard, just talk - I think we don’t we don’t see it at that level. But maybe Richard just talk about our view on kind of the normalized loss ratio in the quarter.

Yes. And I would start, it is a great question, Jeff. I think - I would first start by - when we go in for rate increases, we are looking at it kind of bottom line. So you have to take in - you are looking at the non-cat loss ratio. I think you have to look at all-in. If you look at our combined ratio for the quarter with Hurricane Ian, it is over 100%, obviously. So that will be taken into account when we go and go for rate increases. And essentially, what we end up doing with our non-cat loss ratio, there are a couple of different moving parts. If you think about it from a net earned premium part, we have cats that the reinstatement premium, we have to add that back, but also from the incurred claims, we have to take out the prior year development. When we add back the cats and we get to kind of like from a 68% that you see in the supplement to about 45%, and then we take out the $24 million of prior period development, we get to about 40%. You are a little bit lighter. So there is maybe a numerator/denominator thing. But I think your point is a good one. You would say 40%, that looks low. But it is really the all-in cost, including cat, including the expenses, the tracking, et cetera, that are taken into account when we go for rates. So it is a bigger number on an all-in basis.

Alright, got t. okay, thank you.

Thank you.

And your final question comes from the line of Grace Carter from Bank of America. Your line is open.

Hello everyone. So I was wondering in the Lifestyle book, just given how much of that risk that you don’t retain, it seems like inflationary pressures have been a bit more persistent than maybe a lot of people originally hoped. I know that you had mentioned in the past that you hadn’t really been seeing too much pushback from your clients regarding your profit sharing and reinsurance arrangements. I was just wondering if given the persistency of inflationary pressures and that actually started to show a little bit in the results in the quarter, if those conversations had evolved any in the past few months?

No, I would say the clients that are currently in profit share and reinsurance structures, that is the preferred approach for those clients. Those programs are typically quite large, very sophisticated. The clients understand the program economics and there is a tremendous amount of transparency in those deals, and there is sufficient profitability in those structures that can absorb the inflationary pressure. So from a client perspective, no interest in moving away from those structures. And then clients where we are more on the risk, over time, we will certainly see discussions evolve and emerge as clients become more sophisticated and interested in taking on more of the risk. That may evolve over time. But generally speaking, it has been pretty steady. And I wouldn’t say it is a huge source of discussion with our teams.

Perfect, thank you. And I guess just kind of thinking of how the Lifestyle book has evolved over time, moving from sort of more of the protection in towards more fee-based services. I mean is the recent emphasis on growing fee-based services like trade-ins, upgrades, whatnot change the level of macro sensitivity today versus maybe what we have seen in downturns in the past or do you consider it to be pretty even?

I think it is pretty stable. I would say when you think about fee-based services, even what we do for clients that are reinsured, that doesn’t show up in fee income. So if you think about administrative fees and underwriting fees where we are not sitting on the risk, it still flows through outside of the fee income line, but it behaves a lot more like fee income. We get stated fees for providing insurance and related services. So that is still a significant driver of our overall economics, and that doesn’t show up in the fee income line. And then I think the thing we are excited about is the balance that we have today. We do a lot more work with partners across the value chain. So trade in related services are important to our clients and increasingly important and it gives us another way to add value for our customers. It is more defensible competitively, and then we can create other unique ways to drive value longer term because we are playing in a broader set of services across the ecosystem. So from that perspective, I think it is really favorable and it does create more balance, but the bulk of the economics on the parts where we don’t take the risk are also quite predictable. And that is evolved over time as well.

Thank you.

Wonderful. Well, thanks everybody. Just a couple of closing comments from me. We believe we have performed well in what is a really challenging macroeconomic environment and remain differentiated in terms of our business model with compelling long term earnings growth potential and cash flow generation capability. We look forward to closing the year strong, and we will talk to everybody on our fourth quarter call-in February. In the meantime, as usual, please reach out to Suzanne or Sean with any follow up questions and thanks everybody. Have a great day.

Thank you. This does conclude today’s teleconference. Please disconnect your lines at this time and have a wonderful day.