Welcome to Assurant's First Quarter 2024 Conference Call and Webcast. [Operator Instructions] It is now my pleasure to turn the floor over to Sean Moshier, Vice President of Investor Relations. You may begin.

Thank you, operator and good morning, everyone. We look forward to discussing our first quarter 2024 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 a news release announcing our results for the first quarter 2024. 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 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 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 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 the news release and supporting materials. We'll start today's call with remarks before moving into Q&A. I will now turn the call over to Keith Demmings.

Thanks, Sean and good morning, everyone. Our first quarter results represent a strong start to 2024 reflecting the position of strength from which Assurant continues to operate. Adjusted EBITDA grew 31% year-over-year to $384 million and adjusted EPS grew 42% year-over-year both excluding reportable catastrophes. Our first quarter results were driven by the continued strength of our Global Housing segment as well as growth in Global Lifestyle. Our ability to continue to drive financial performance and operational excellence has supported strong cash flow generation and a solid capital position. Before reviewing the highlights across our business segments, I'd like to take a moment to reiterate how our unique and differentiated business model has led us to consistently deliver financial results. Assurant holds market leadership positions across a variety of attractive specialized markets, where we benefit from both scale and deep integration with our B2B2C client base. Our competitive advantages across our businesses have allowed us to be flexible and agile in executing for our partners and for end consumers. Cost savings from targeted actions, such as our previously announced restructuring plan and ongoing technology innovation including digital-first and artificial intelligence have supported reinvestment in businesses where we have leadership positions. These high-return initiatives have enhanced our capabilities and supported new partnerships laying the groundwork for continued growth. The ultimate driver of our success is our people. In March, Assurant was recognized by Ethisphere as one of the world's most ethical companies in 2024. Operating ethically is foundational to protecting our clients' brands across the globe as well as our own. This recognition is a testament to the thousands of Assurant employees who champion our values every day. Collectively, our unique advantages have led to long-term profitable growth and shareholder value creation. We've continued to drive outperformance versus the broader P&C…

Thanks, Keith, and good morning, everyone. With our strong first quarter performance, we continue to focus on driving long-term shareholder value with thoughtful and decisive actions to continue to grow and outperform. To achieve this, we are committed to a deep understanding of our global partners and their end consumers' needs, executing on the opportunities identified as well as disciplined capital management to enable long-term growth. Now let's review the details of our first quarter results. In the first quarter, adjusted EBITDA grew 31% to $384 million and adjusted EPS increased by 42% to $4.97, both excluding reportable catastrophes. From a capital perspective, we generated $254 million of segment dividends in the first quarter, ending the quarter with $622 million of holding company liquidity, up from $606 million at year-end. Our strong capital position allowed us to return $77 million to shareholders in the quarter, including $40 million of share repurchases. In addition, we repurchased $10 million of shares between April 1 and May 3. Turning to our business segments. Let's begin with Global Lifestyle. For the quarter, adjusted EBITDA grew 4% to $208 million, or 5% on a constant currency basis. Year-over-year growth was driven by strong performance in Connected Living, particularly in the U.S., which was partially offset by lower results in Global Automotive. In Connected Living, earnings increased 14%, or $16 million, primarily driven by continued momentum in our U.S. mobile protection programs and higher investment income. Results were partially offset by investments in new capabilities and client partnerships. In the U.S. Connected Living growth also benefited from modest improvements in loss experience within extended service contracts, resulting from rate actions taken over the last 18 months to offset higher claim severities from inflation. Trade-in results were flat, as higher margins and contributions from new US programs…

The floor is now open for questions. [Operator Instructions] Thank you. Our first question comes from the line of Mark Hughes with Truist Securities. Your line is open.

Good morning, Mark.

Yes. Thank you very much. Good morning. In Connected Living, your EBITDA growth 14% super strong. When you look at your covered device count, it's relatively stable, trade-ins were stable but you're getting strong top line growth. How long can you continue to push the top line and profitability in an environment where covered devices seem to be relatively steady?

Yes. No, it's a great question. I think we're really pleased with certainly how Connected Living started the year, largely driven by the strength of the US Connected Living business overall. And we've talked about this in the past, but we've had double-digit growth in Connected Living for probably seven or so years pretty consistently. As I look at the first quarter results domestic Connected Living again was up double-digits, high-single last year. So, I think we feel incredibly well positioned. We did see a little bit of softness in the devices covered count. A little bit of that is in Japan which we've talked about although our margins have been quite stable in that market. A little bit in the prepaid side as well. But the bulk of our US postpaid business, which drives the lion's share of the economics clients are performing incredibly well and feel really well positioned longer term.

Your inflation guard in the homeowners business, when does that get updated? And what does it look like for this go around?

Yes. It will get updated July 1. It will be a very modest adjustment, roughly 1%. I think last year was a little north of 3%, and then the year before, it was in the low to mid-teens. So fairly normalized level, I think as we look forward this year.

And then the non-cat loss experience in housing was a good. How would you judge the weather of this quarter? It sounds like you're benefiting from rates better claims trends. How much of a weather impact do you think there was in Q1?

Yes. I think if you set aside the development, which we called out at $22 million in the quarter, the non-cat loss ratio was just under 39%. I'd say that was relatively in line with our expectations in line with what we would expect for the full year around that loss ratio factor. So I would say, certainly we've seen normalized severity levels as inflation has come down. And then to your point, obviously, a lot of impact in the business from rate but then a tremendous amount of leverage in terms of the operating expenses both with scale but also the efforts that we've made to continue to drive automation. And Keith, did you want to add anything?

Thank you.

Yes, sure. I think a good way to think about that Mark as well is, Keith mentioned, 39% non-cat loss ratio. We have an expense ratio of about 38%, combined is 77%. If you add in some cat coverage, you're probably in that mid to high-80s that we talk about on a normal basis. So I think it was pretty well in that line maybe a little bit better than that.

Understood. Appreciate the detail.

Great. Thanks Mark.

Our next question comes from the line with Brian Meredith with UBS. Your line is open.

Good morning, Brian.

Yes. Thanks. Good morning. A couple of questions here. First, I'm just curious onboarding expenses for Bank of America and maybe Telstra. Are those largely complete at this point? Or are we going to see some more of that going forward? Your expenses were quite below where I was expecting this quarter.

Yes. So on Bank of America, we've been ramping them up this -- over the last quarter. And so those loans are now being tracked. And then in the second and third quarter those policies should be coming online. And then by the end of the third quarter, we should be fully up and running on Bank of America. So, I think the outlook for Bank of America should be improving as we go through the year. And then with Telstra, we just launched the rest of the program -- the main part of the program earlier this month. And so we went through a lot of investment there. There's still more to come for Telstra, but we're in a really good place getting Telstra launched in terms of the main part of the program.

Maybe just add a little bit of color as well Brian in terms of the question about ongoing investments. So if I'm thinking about global Connected Living in the first quarter, I'd probably size $5 million of incremental investments in long-term growth in the quarter. We continue to think that will be 2% to 3% impact to the overall growth for the full year. So think about that trend line continuing as we move forward. And then it's just a question of at what pace and urgency do we deploy some of the solutions with not just the clients that we've talked about publicly but a number of clients and prospects that we're actively working on in real time which we'll disclose more on later in the year.

Great. And my second question related to Global Auto. I know historically you said it was a couple of clients maybe that were really the issues. I'm wondering if it's become more pervasive. And is there anything that you're kind of thinking about doing with contracts to maybe mitigate -- some of this inflationary aspects here going forward?

Yes. So it's that -- first part of your question it's unchanged. So the clients that we've been monitoring and working on based on the deal structures their profit share type arrangements if losses go over 100% it creates short-term pressure in our P&L and then we look to recover that contractually with rate adjustments. So it isn't more pervasive than it was. But obviously there's a little bit of elevation in terms of the severity around parts and labor costs in the auto sector which I think everyone is seeing. I do feel -- continue to feel real good about our long-term opportunity in auto. Clients are working with us incredibly well. We've taken a number of rate increases over the last 18 months, 20 months. We took more rate adjustments in the first quarter. We'll do more in the second quarter. So really it's about getting this business to the right spot over the long term. We talk about relative stability in the P&L at auto in 2024 and then progressively getting better as we enter 2025.

Great. Thank you.

You bet.

[Operator Instructions] We have another question comes from the line of Tommy McJoynt with KBW. Your line is open.

Hey, Tommy. Good morning.

Hey, Tommy.

Hey. Good morning, guys. Thanks for taking my questions. The first one can you talk about as the Bank of America portfolio comes on board and perhaps also considering any other service or client additions or deletions. Is there anything that we should expect in the placement rate or the average insured values that would be different than what we should just see in the broader economy in terms of tracking mortgage delinquencies and home price appreciation anything different that's kind of changing about the nature of your tracked portfolio?

Yes. So I think I mentioned in the opening remarks where we've got various changes that go on within our portfolio. Obviously, Bank of America we've talked about. We have another client that was added by another one of our clients. So that was a positive. We also have another client that was acquired by a third-party. So those loans will be coming off. So I think there's going to be a little bit of ups and downs. Some of those have lower placement rates than the average. Some of them have higher placement rates. But when you think about between now and the end of the year overall we should be up in our policy counts when you net those kind of movements within the quarters?

Yeah. And I think in a relatively stable placement rate as we exit the year Tommy, and it may bounce around a little bit. But to Keith's point, policy counts at the end of the year should be higher than where we sit today.

Okay. Got it. That's good color. And then switching over, can you talk about the current level and perhaps your expectations for trade-in programs and promotional activity from the carriers? And just whether or not you think that could be a swing factor in the bottom line of Connected Living as we proceed through the year?

Yeah. I think we've done a really good job maintaining overall margins in the trade-in side of the business. You think about the first quarter, obviously devices serviced were down. But as we signaled, margins are quite stable and we're making up some of that with additional volume with new clients as well. So I think we feel really good about how we're positioned. And to your point, the promotional activity was relatively light in the quarter. I think clients were focused on other things within their portfolios, and moving customers to higher tier premium rate plans et cetera and driving upgrades wasn't a huge priority in the market, but we still performed quite well financially. So I think we're well positioned. And the dynamic environment particularly with the big three mobile operators is hard to predict. And obviously, we're well positioned should that activity pick up here in the second quarter and beyond. So it's hard to predict right now Tommy, but I think we feel really well positioned.

Okay. Got it. And then last one, I think I may have missed it during the remarks. I think I heard you say that the reinsurance costs decreased. I didn't catch -- well, first off could you repeat those numbers? And then secondly, did you mention like what is happening to the per event retention if there were changes to that?

Yeah, sure. So well, I guess first of all, we're really pleased with the outcome of moving to the single placement. It's really simplified the program. I think it was well received by the reinsurers. We mentioned that the cost of the program was down year-over-year. So we're expecting it to be approximately $190 million this year versus $207 million from last year. And overall, our per event retention stayed at one in five probable maximum loss. So that was up from $125 million. The top end of the program we actually increased from $1.4 million to $1.63 million. So moving it from 1-in-225-year to 1-in-265 year event. So a lot of good protection and lower cost. So I think overall, moving the program to the 04/01 placement date was I think a very favorable move for us. And then also, just in general in terms of the rates, the rates were favorable online given the reinsurance market. And I think that was a reflection of the quality of our book and our overall performance.

Got it. Thanks for recapping that. Thank you.

Thank you.

There are no more further questions at this time.

Wonderful. Well, thanks everybody, and we'll look forward to the next quarter call. And please reach out to the IR team, if you have any questions. Have a great day.

Thank you.

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