Q3 2024 Assurant Inc Earnings Call
Financial Officer.
Speaker Change: Yesterday, after the market closed, we issued a news release announcing our results for the third quarter 2020-4. The release and corresponding financial supplement are available on assurance.com.
Also on our website is a slide presentation for our webcast participants.
Speaker Change: 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.
Speaker Change: On certainties and other factors that may cause actual results to differ materially from those contemplated by these statements.
Speaker Change: 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.
Speaker Change: During today's call, we will refer to non-gap financial measures, which we believe are important in evaluating the company's performance.
Speaker Change: For more details on these measures, the most comparable GAT measures, and a reconciliation of the two, please refer to the news release and supporting materials.
Speaker Change: will start today's call with remarks before moving into Q&A. I will now turn the call over to Keith Demmings.
Keith Demmings: Thanks Sean and Good Morning everyone. Our third quarter results further supported our strong year-to-date performance. Through the first nine months of the year, adjusted the EBITDA increased by 15 percent, and adjusted EPS grew by 21 percent, both excluding catastrophes.
Speaker Change: Results were led by sustained out performance within global housing, as well as underlying growth within our connected living business, which was muted by incremental investments in new partnerships and programs, and unfavorable foreign exchange.
Speaker Change: Our year-to-date momentum has positioned us to exceed our previous expectations.
Speaker Change: Exceeding catastrophes, we now expect adjusted EBITDA to increase low double digits for the second consecutive year. And adjusted earnings per share to increase mid to high teams, led by business growth and strong share reproduces.
Speaker Change: Once again, we've outperform the broader PNC industry, both short and long-term, reflecting the unique and differentiated nature of our combined housing and lifestyle business model.
Speaker Change: Let's begin with our year-to-date business highlights.
Speaker Change: In global lifestyle, year-to-date performance was relatively flat versus the prior period, reflecting elevated claims experience in global automotive as well as impacts from unfavorable foreign exchange of 2% or $10 million. Above our expectations from earlier in the year.
Speaker Change: Within connected living, you're today adjusted EBITDA, increased 3%, or 5% on a constant currency basis, as we continue to invest in new partnerships and programs to support future growth.
Speaker Change: Excluding investments of approximately $21 million for the first nine months of the year, connected living adjusted even to growth with strong at 11% on a constant currency basis.
Speaker Change: One prime example of those investments includes our new innovation and device care center located just outside of Nashville, supporting our mobile business.
Speaker Change: In addition to repurposing millions of devices per year, the new State of the Art Facility employs innovative ways to leverage automation, robotics, and AI. This will create greater value within our global supply chain while driving growth in the secondary device market.
Speaker Change: The Nashville facility demonstrates our investments in innovation, allowing us to continuously improve our customer experience as we operate through end-to-end partnerships with our mobile clients a critical competitive advantage for assurance.
Speaker Change: Within Financial Services, on October 1, we launched a new program with Chase Card Services in our growing card benefits business.
Speaker Change: The Getting At Program Launch, we're providing end-to-end delivery for approximately 15 travel and purchase protection benefits, including underwriting, claims processing, and benefits servicing to millions of chase car holders.
Speaker Change: We're excited about several new clients and programs targeted for 2025, adding to our growing portfolio. Similar to 24, these new opportunities may require incremental investments.
Speaker Change: Moving to Global Automotive, our auto business had experienced elevated claims costs in both our vehicle service contract business and our gap product throughout 2024.
Speaker Change: Over the past two quarters, we've started to see some positive early signs with the stabilization of underlying claim severity trends in our vehicle service contract business.
Speaker Change: The claims inflation impacts have begun to moderate and our last ratio is beginning to benefit from rating increases we've taken over the past two years.
Speaker Change: Within our gap product, elevated losses have continued as anticipated, but we continue to expect higher claims to be short-term in nature, in comparison to the vehicle service contract business.
Speaker Change: In addition, our proactive partnership with several clients to enable us to transition most of the risk and reduce a large portion of our claims exposure over time.
Speaker Change: We remain focused on driving actions to improve auto results while benefiting from moderating inflation impacts in 2025 and beyond. We're excited about the long-term trajectory of this business.
Speaker Change: Now let's turn to global housing.
Speaker Change: I want to begin by thanking all of our employees who supported policy holders impacted by recent weather events over the last several months, including multiple major hurricanes.
Speaker Change: We play an important role in safeguarding our policy holders as we process approximately 35,000 claims to date associated with these events.
Speaker Change: It's an important reminder of the critical role or lender-place product plays in the U.S. mortgage industry.
Speaker Change: Removing the risk of uninsured loss for lenders, investors and homeowners.
Speaker Change: It's crucial to provide all homeowners with access to insurance. For that reason, we continue to work closely with each state to offer coverage of protection to homeowners at appropriate rates.
Speaker Change: Looking at global housing's year to date results, we've demonstrated continued strong performance, particularly within our homeowner's business.
Speaker Change: Over the first nine months of the year, earnings increased 34% excluding reportable catastrophes.
Speaker Change: In our lender place business, we continue to benefit from key competitive advantages.
Speaker Change: utilizing various growth levers over the past two years to sustain results.
Speaker Change: including meaningful expense leverage, scale from new partners and product safeguards to address macroeconomic factors like inflation.
Speaker Change: Results were driven primarily by continued policy growth as the placement rate increased to 1.92% a 12 basis point improvement since year end and a 6 basis point improvement sequentially.
Speaker Change: Policy Growth has been led by several new partnerships and portfolios, as well as from states where it's become more difficult to secure voluntary homeowners coverage.
Speaker Change: Within Renters, adjusted EBITDA has also shown your date growth, supported by a continued expansion in our property management company or PMC channel.
Speaker Change: Growth in our PMC channel has been supported by technology innovation aimed at enhancing our digital customer experience.
Speaker Change: This is included the roll-outs of a Shurin Tech Pro and our cover 360 platform leading to higher penetration with a simplified, resident enrollment process.
Speaker Change: Overall, the housing business has benefited from our unique competitive advantages, throughout lender-placed and renters, showcasing its resiliency and outperformance over various macroeconomic environments.
Speaker Change: Turning to our Enterprise Outlook.
Speaker Change: As I mentioned earlier, given the strength of our Uniratered Results, we now expect full-year adjusted EBITDA to grow low double digits, and adjusted earnings per share to increase mid-to-high teens, both excluding catastrophes.
Speaker Change: This represents an increase to both metrics of Bob R. Expectations, demonstrating the continued strength of our financial performance.
Speaker Change: For the year, we continue to anticipate strong growth within global housing, with modest growth expected in global lifestyle, as we've found incremental investments in connected living.
Speaker Change: Our ability to sustain profitable growth year after year is a true reflection of our unique and advantage business model.
Speaker Change: A assurance performance is the result of a multi-year transformation, which is significantly enhanced our business mix, risk profile and market positioning.
Speaker Change: We've simplified and optimized this sharing to focus on specialized, attractive markets with long-term secular tailwinds within lifestyle and housing, while selling pre-need and employee benefits and exiting health and other non-core businesses.
Speaker Change: In the markets we operate in, we have leadership positions and competitive advantages through our protection solutions across devices, automobiles and homes.
Speaker Change: We are well positioned to win, due to our highly scaled and deeply integrated B2B-to-C partnerships, where we work with our clients to innovate and create flexible solutions for their end consumers.
Speaker Change: At the same time, we've enhanced the Shuren's risk profile by focusing on capital efficient businesses within lifestyle and housing.
Speaker Change: Through purposeful transformation, we've enhanced our ability to drive long-term performance and cash generation, attracting growth partnerships with large, sophisticated clients and becoming increasingly more capital efficient.
Speaker Change: I'm proud of the long-term out performance we've achieved against the broader P&C market.
Speaker Change: FLY 10 Demonstrates are historical out performance, including a five-year history of double-digit growth.
Speaker Change: Based on our current outlook for 2024, annual growth rates since 2019 are expected to average 11% for a Jusset EBITDA and 17% for a Jusset EPS, both excluding catastrophes.
Speaker Change: Given our historical performance and our unique and differentiated business model, we believe we have meaningful valuation upside in particular as compared to the S&P 1500 P&C index.
Speaker Change: A broad index of 32 members now including assurance.
Speaker Change: Overall, we see a compelling pass for growth ahead and believe a sureant represents an attractive investment.
Speaker Change: I'll now turn it over to Keith Meier to review our third quarter results and business trends impacting our 2024 outlook.
Keith Meier: and Good Morning everyone. This November marks the conclusion of my first year at CFO of Assurance.
Speaker Change: and I began this role, I outlined my key priorities, including driving growth and strong financial performance with the focus on innovation and product differentiation.
Speaker Change: These priorities have been supported by our continuous efforts to drive expensive efficiencies through automation, digital and AI technologies.
Speaker Change: While improving overall customer experience, as well as ensuring our capital position remains strong.
Speaker Change: providing us with the flexibility to create value and support long-term growth.
Speaker Change: Over the past year, we have made significant progress.
Speaker Change: First, looking at growth and financial performance, our B2B-to-C partnerships are the lifeblood of our business model and the primary driver behind our growth story.
Speaker Change: Over the past 12 months, we spotlighted several notable clients announcements, such as renewing all major US mobile clients, including three of the top five largest mobile carriers in the US.
Speaker Change: and the new program and capabilities with existing clients like Spectrum Mobile.
Speaker Change: and winning new partnerships with Chase, Alstrian Australia and another leading US Bank within our lender-place business.
Speaker Change: Second, we have focused on expense discipline as we've continued to drive efficiencies across the organization by utilizing automation, digital, and AI technologies.
Speaker Change: This is enabled us to deliver a better customer experience and invest in new capabilities while driving profitable growth.
Speaker Change: As an example, we believe our new device care center in Nashville, combined with the numerous investments we've made across the end-to-end mobile device lifecycle, will continue to support new growth opportunities in global lifestyle.
Speaker Change: and Global Housing, the scale we've achieved through growth and ongoing investing in our technology and compliance solutions have resulted in meaningful operational efficiencies and expense leverage, as seen in the compelling expense ratios we've achieved.
Speaker Change: Global Housing's expense ratio is at a sustainable level in the high-thirties.
Speaker Change: Improving by approximately 3% of points year to date, compared to full year 2023, and nearly 9% of points since 2022.
Speaker Change: All while we improve the customer experience.
Speaker Change: and lastly, amidst a fast-changing macroeconomic environment.
Speaker Change: as well as the year with multiple catastrophes. Our capital position has remained very strong.
Speaker Change: Despite higher than average cat losses, we expect to return $300 million to share holders through share repurchases in 2024.
Speaker Change: This is the top end of our anticipated range from the beginning of the year.
Speaker Change: The combination of our strong capital position, investments to support growth, and robust shareholder returns is a testament to our balanced capital management focus and the strong cash flows of our advantaged businesses.
Speaker Change: As we look ahead, my focus will be to continue to execute against these priorities to drive growth.
Speaker Change: Turning to our third quarter results.
Speaker Change: Adjusted EBITDA grew 8% to $385 million.
Speaker Change: and adjusted earnings per share increased by 9%, the $5.08. Both excluding reportable catastrophes.
Speaker Change: From a capital perspective, we generated over $160 million of segment dividends in the third quarter.
Speaker Change: and the quarter with $636 million of holding company liquidity.
Speaker Change: Our strong capital position allowed us to return $138 million to shareholders in the quarter, including $100 million of share repurchases.
Speaker Change: In addition, we've repurchased $20 million of shares during the month of October.
Speaker Change: This amounts to $200 million of Sherry purchases year to date.
Speaker Change: Looking at global lifestyle.
Speaker Change: I just did even a decreased 4%.
Speaker Change: In connected living, we saw another quarter of growth in global mobile protection programs, increasing devices protected by over 2 million subscribers from growth in US cable operators and new Asia-Pacific clients.
Speaker Change: This was offset by investments in the quarter of approximately $8 million in new capabilities and client partnerships that are expected to drive future growth.
Speaker Change: International results were impacted by unfavorable foreign exchange, a remains stable on a constant currency basis. As we focus on driving results across all regions.
Speaker Change: Creating results will largely flat as declines and carrier volumes and lower promotional activity were offset by volumes from newer programs.
Speaker Change: Turning into global auto.
Speaker Change: Hernings were down modestly year over year, mainly from elevated losses within our Ancillary Gap products, which was partially offset by higher investment income.
Speaker Change: Plains experience from inflation in our vehicle service contract business with stable, as previously implemented rating creases across our client base, have begun to moderate the impacts of higher auto repair costs.
Speaker Change: Moving to net-earn premiums fees and other income, Global Lifestyle grew by $144 million, or 7%.
Speaker Change: Wrote was primarily driven by connected living, which was up 13%. Benefitting from new trade and programs and additional mobile subscribers, including the rollout of new clients.
Speaker Change: We continue to expect global lifestyles that Justin Debitt has to grow modestly for the year, driven by connected living.
Speaker Change: Growth will be offset by lower results with Anglo-Ballado and unfavorable foreign exchange rates.
Speaker Change: For the fourth quarter, we expect a sequential increase in connected living from favorable seasonal trends, including higher mobile trade and volumes from new device introductions and carrier promotions.
Speaker Change: In addition, we anticipate higher contributions from new connected living partners and programs as they begin to earn.
Speaker Change: Global Auto earnings are expected to remain stable sequentially.
Speaker Change: Now let's move to global housing's third quarter performance.
Speaker Change: Third quarter adjusted EBITDA, including $137 million of reportable catastrophes, was $92 million.
Speaker Change: Excluding reportable cats, adjusted EBITDA increased 20% to $229 million, rowing $38 million.
Speaker Change: Global Housing Performance was mainly driven by policy growth due to higher placement rates from the net impacts of ongoing client and portfolio transitions and increased voluntary insurance market pressure.
Speaker Change: In addition, average premiums increased from higher and shared values year over year and filed rates.
Speaker Change: Lastly, results benefited from $30 million of favorable year over year prior period reserve development.
Speaker Change: This was comprised of a $45 million reserve reduction in the current quarter, compared to a $15 million reserve reduction in the third quarter of 2023.
Speaker Change: The increase in global housing was partially offset by a $28 million unfavorable non-run rate adjustment related to a change in earnings pattern assumptions.
Speaker Change: Within our renters business, we benefited from continued strong results in our PMC channel, where we drove double digit gross written premium growth.
Speaker Change: We continue to expect strong adjusted ebit aggrove in global housing for full year 2024, excluding catastrophes.
Speaker Change: We anticipate growth will be driven by continued top line momentum and homeowners, expense leverage, favorable non-cat loss experience, and lower catastrophe reinsurance costs.
Speaker Change: Lastly, as we look ahead to our fourth quarter results, we continue to settle claims and serve policy holders associated with Hurricane Milton.
Speaker Change: Early estimates indicate that impacts will range between 75 million to 110 million dollars.
Speaker Change: for Corporate.
Speaker Change: He adjusted even a loss in the third quarter was $30 million, and increased a $4 million year over year, given by higher third party and employee-related expenses.
Speaker Change: For the full year 2024, we now expect the corporate adjusted eBudaloss to be approximately $115 million.
Speaker Change: We generated significant deployable capital year-to-date.
Speaker Change: Upstreaming $556 million in segment dividends.
Speaker Change: Looking forward to the remainder of the year, we remain focused on maintaining balance and flexibility as we support new business growth and return excess capital to shareholders.
Speaker Change: Overall, we're very pleased with our strong year-to-date performance in 2024 and feel well positioned as we exit the year and move into 2025.
Speaker Change: With that operator, please open the call for questions.
Speaker Change: The floor is now open for questions. At this time, if you have a question or comment, please press star nine on your touch tone phone and star six to unmute your line. If at any point your question is answered, you may remove yourself from the queue by pressing star nine again.
Speaker Change: We do ask that while you pose your question that you pick up your hand set to provide optimal sound quality.
Speaker Change: Thank you, our first question will come from Brian Meredith with UBS.
Brian Meredith: Good morning.
Brian Meredith: is a couple of questions here for you. First one, perhaps on a global housing.
Brian Meredith: You know, all the catastrophe losses that we've been seeing, how you're thinking about pricing for that business when you head into 2025. And I'm assuming your cat re-insurance program since it doesn't appear you're going to have any.
Brian Meredith: and a retention, you know, get into the program. Should the benefits, it should be good in 2025, so maybe give it a little to call on that.
Speaker Change: Yeah, maybe I'll start and then keep Meier, can chip in. Obviously, we feel really good about the re-interence program that we have in place and your right is we look at.
Brian Meredith: The effect of Milton and the other storms he had through the year, it's been an active season, but we've not touched the re-insurance tower to this point.
Brian Meredith: I think that sets us up well in terms of favorability with our reinsurance partners. We've talked about having a panel of 40 reinsurers that have been very stable over time. So I think we feel good heading into...
Brian Meredith: and the next year we think about re-insurance costs and then as we think about...
Brian Meredith: and the rate process, obviously we'll look at...
Brian Meredith: from all of our losses over the course of the year, cat and non-cat expense levels, re-enturance cause. So, you know, we look at the pricing heading into next year being relatively stable to what we've seen this year. So, don't think there'll be a big shift in premium as we head into to 25.
Speaker Change: Yeah, and I think we're certainly continuing to evaluate our program structure for our reinsurance Kat Tower. We'll share more of the details of that in February with our 2025 outlook. But in general, we expect to continue to...
Brian Meredith: Thank you.
Brian Meredith: to approach our 1 in 5 probable maximum loss point for retention, which is $150 million this year.
Brian Meredith: And the good news is we haven't touched that tower this year, so we certainly think with it not hitting the tower that that should be a positive as we look forward to rates in 2025. And just as a reminder, you know, we've moved to an effective date of...
Brian Meredith: April 1st for our one-time placement for for our reinsurance programs as well.
Speaker Change: I was wondering if you could give us a little bit of a preview of what you're thinking about with 2025 and global lifestyles. You've got a bunch of these new programs.
Brian Meredith: you know hitting and I'm assuming they'll have a nice tailwind from a growth and margin perspective as we look at 2025 maybe a little bright big picture what we may be able to expect.
Speaker Change: Sure, yeah, I'll give you a few highlights as we think about 25 obviously
Brian Meredith: You know, we need to close out Q4 and see where the underlying performance comes in, look at the trends, etc. And then we will obviously provide detailed guidance in February, you know, but stepping back at the high level.
Brian Meredith: Certainly, we expect to accelerate global lifestyle growth in 2025.
Brian Meredith: I would say growth will certainly come in connected living. We've made a lot of investments in 24.
Brian Meredith: Those investments won't continue in 2025, and obviously we'll start to generate revenue and EBITDA from those client launches and the efficiency that we're driving. And then we've got good underlying strong momentum in the business overall.
Brian Meredith: And then as I think about auto, we definitely expect growth in auto in 25 as well. We expect the business will benefit from, you know, higher earnings from the rate increases that we've implemented over the last couple of years, and then stabilizing inflation levels.
Speaker Change: One thing I would mention, we do expect some additional incremental investments in 2025. There are a number of things that we're actively working on.
Brian Meredith: similar to 24, net new clients, net new program launches.
Brian Meredith: Things that have not yet been disclosed to the market. So we'll preview that as well in 25. So think about the 24 investments
Brian Meredith: really sunsetting the revenue in EBITDA flowing through and then hopefully if we have Continued great momentum with clients. We'll have some other big exciting things that we'll be bringing to market in in 25 as well
Brian Meredith: and then maybe I'll just touch on housing since...
Brian Meredith: We'll close out the 25 thoughts. I mean it's been an incredible 2024, really the last couple years.
Brian Meredith: in housing. As we think about 25, probably the simplest way to say it is net of the prior year development that we've seen, we do expect solid underlying growth in housing in 25.
Brian Meredith: and I'd say driven from the growth we've seen in terms of our policy counts, continued increases in average insured values, and then momentum around expense leverage in the business. So, you know, more to come in February, but those are a few of the high level thoughts.
Speaker Change: Thank you.
Speaker Change: You bet. Thank you.
Speaker Change: Our next question comes from Mark Hughes of Truist.
Mark Hughes: Morning, Mark. Morning. Yeah, thank you very much.
Mark Hughes: Good morning. The voluntary business that you're picking up, can you talk about that? Is the momentum still building in voluntary? The markets that you're seeing success are still dislocated? How do you see that trend?
Speaker Change: Yeah, I think, you know, we look at housing.
Speaker Change: Yeah, and really, you know, we're highlighting the impact around the placement rate. So we look at the
Speaker Change: The placement rate's up six basis points sequentially, it's up 18 basis points.
Speaker Change: year over year. So we've seen a lot of momentum with respect to that. And I would say it's probably equal parts growth in the underlying business. You know, we obviously onboarded a major new client earlier this year. We've seen growth within our existing client bases of acquired loans, acquired portfolios.
Speaker Change: and then the other half of that growth.
Speaker Change: is a result of additional policies being placed because homeowners are being more challenged to find traditional voluntary coverage. So we've talked about that hard market factor being part of the drivers for the placement rate growth, less so
Speaker Change: challenges more broadly in the economy, challenges in terms of delinquency and those types of things. Those are really not factoring in, at least at this point. So, that's what we've tried to highlight, is it's a function of the hard market that we're seeing around the country.
Speaker Change: In the device count, you had a nice acceleration this quarter. I think you talked about some new Asia-Pacific clients. Did they come over kind of en masse, or will this growth continue?
Speaker Change: The step change we saw earlier in the year, at this point in Q3, this is a more natural evolution, so we've seen continued steady growth.
Speaker Change: both.
Speaker Change: in our domestic business. We rolled out some new products earlier this year with one of our major cable partners that's generated a significant amount of momentum and then of course building as well in Asia-Pacific. But that was more of a natural evolution from the finish point at Q2 and those blocks had already sort of step changed earlier in the year.
Speaker Change: Yeah. And then on the gap, higher than expected, or the gap losses, when does that run through? When do you either reinsure that away or get enough price to offset the claims experience?
Speaker Change: Yeah, so, you know, we mentioned before that the the impact from GAP is shorter term in nature versus the vehicle service contracts, you know, those
Speaker Change: claims are usually heavier in the first 24 months or so.
Speaker Change: And we've been partnering with our clients to eliminate or reduce the risk on those businesses. And just as an example, from a written premium perspective, in 2020, to 40% of the business, we had some risk participation.
Speaker Change: and then in 2024, it's down to just 12%. So overall, you know, as we look into 2025,
Speaker Change: You know, with all the actions that we've taken across our vehicle service contracts and GAAP, you know, we expect auto to improve as we as we move forward. And I think overall, I think we get a sense that the pressure is declining, certainly for auto.
Speaker Change: Yeah, and maybe I'll just amplify, I think we talked about
Speaker Change: and of starting this process of looking at
Speaker Change: reshaping the the risk that we hold relative to gap you know going back you know two years ago so we started this process early and as Keith highlighted a pretty big reduction in the amount of risk that we're writing today so really it's just a question of running off the you know the unearned part of the business but as Keith said it's much shorter term in nature so it shouldn't be a headwind as we think about 25.
Brian Meredith: Thank you.
Speaker Change: Our next question comes from Tommy McJoint with KVW.
Speaker Change: Hey Tommy. Hello.
Tommy McJoint: Hey, good morning guys. Thanks for taking my questions.
Tommy McJoint: When we think about the subscribers that you guys are adding, I think largely calling out the cable operators and the Asian Pacific region, is the sort of monetization opportunity of those customers any different than, you know, the traditional sort of carrier customer that represented your end force for a long time?
Speaker Change: No, I think it's pretty well aligned. I mean, obviously, every every deal with clients, you know, work differently. But no, I'd say it's very much aligned with the standard operating model.
Speaker Change: you know obviously we're pleased to see the subscriber growth pretty pretty material year-over-year and then continuing to build certainly in the in the quarter but no I wouldn't I wouldn't say it's dramatically different than sort of the the average of the total Tommy
Tommy McJoint: Okay, got it.
Speaker Change: And then to clarify your comment around the investment spend and connected living, I think you called out $21 million of spend year-to-date. And it sounds like that investment spend is sunsetting this year, but then it's going to be replaced by sort of additional or new investment spend next year for new programs. Could you just clarify the comments around that?
Speaker Change: Yeah, that's that's exactly right. So we've got, you know, to your point, 21 million year to date, we had about 8 million that we called out in the third quarter, we'll see a little bit more.
Speaker Change: In the fourth quarter, probably moderating a little bit from kind of where we sit today as I think about
Speaker Change: 24, you know, two-thirds of that investment spend, I'm simplifying, is
Speaker Change: Related to new client launches, think about the launches with Telstra, Spectrum, Chase, some other things that that we probably haven't highlighted. And then a third of it is the, the work that we've done to really automate and invest in our new device care center. So.
Speaker Change: all of those programs are sort of.
Speaker Change: delivered this year. Those don't recur and then we get all the benefit in terms of revenue, EBITDA, and efficiency. And then to your point, we will have additional new investments.
Speaker Change: which I think is a really good thing, right? If we're making, and we're only calling out investments that are...
Speaker Change: meaningful and that are designed to launch net new things in the marketplace.
Speaker Change: that have strong payback.
Speaker Change: and that are going to generate EBITDA and revenue once they launch. So we'll size that again in February, Tommy, to give everyone a sense of how we think about that. But there's a lot of things in our pipeline. Our commercial momentum, particularly in connected living, is incredibly strong. So this would be a really good thing if we've got another bucket of investment similar to what we did this year.
Brian Meredith: Thanks. And then just lastly, in Connected Living, the fourth quarter guide seems to imply some pretty good strength there. What's sort of contemplated around trade-in volumes and perhaps a sensitivity around this iPhone upgrade cycle? Should we think of this as an unusually strong fourth quarter, or is this something that can repeat in kind of future years?
Speaker Change: Yeah, I probably, I probably say that, you know, when we look at the sequential.
Speaker Change: growth and connected living going into Q4.
Speaker Change: trade in seasonality and Keith can speak to it in a second. We definitely would expect to see that. We've got benefit from the new clients that we've launched a little bit moderating expenses but revenues flowing through.
Speaker Change: We also see seasonal loss improvements in the retail service contract business as well. So there's a few drivers that will create a sequential improvement in connected living, but maybe Keith, talk a little bit about trade-in.
Keith: Yeah, and I think, you know, as you think about trade-in, I think we saw a little bit of softness in trade-in and promotional activity offset by some newer programs in this quarter. You know, if you think about it, the iPhone 16 launched on September 20th
Speaker Change: But the first set of Apple intelligence features were rolled out on October 28th. So we certainly expect more promotional activity as we come into the fourth quarter. I think it was muted a little bit in the third quarter, but we expect that to pick up here in the fourth quarter.
Speaker Change: Thanks.
Speaker Change: Great, thank you.
Speaker Change: We have no one else in the queue.
Speaker Change: All right, wonderful. John Barnage from Piper Sandler just raised his hand. Oh, John, just in time.
John Barnage: Good morning. Yeah, good morning. Sorry. Yeah, I must not have captured the first star nine, but got a couple questions. Appreciate you fitting me in.
John Barnage: Given we've got past experience of improving profitability in global housing, I'm wondering if there are some lessons here that can be transferred to global auto. With rate increases having an impact on profitability, should we expect there to be a period of favorable reserve development in that business over time at all?
Speaker Change: Yeah, I mean, I think I probably say a couple things were, you know, we've we've been through
Speaker Change: Keith Moshier, Keith Demmings, Keith Meier
Keith Demmings: Auto is a little different because of the nature of the product. It's longer term in nature, so it takes a longer effort to kind of get it back to profitability where housing is an annual policy. But there's no doubt, the lessons learned through housing, if you'll think back to a couple of years ago,
Speaker Change: simplified the business, drove a tremendous amount of focus on the core.
Speaker Change: Demjohn
Speaker Change: and I think we're doing those same things on the auto side to work.
Speaker Change: addressing it in multiple ways. We're strengthening the business at a fundamental level as a result of some of the changes we're making, you know, and we feel confident that we'll create some longer-term tailwinds. I don't think they'll be...
Speaker Change: releases over time, but I'll let Keith speak to that.
Keith: I would say just in general, you know, these types of challenges just make us stronger in terms of the rigor and the and the actions that we take in that business. So I think that always does provide us some positive impacts.
Keith: as you look forward.
Keith: you know just if you think about for auto we implemented 16 now total rate changes with our clients so we've been working with our clients to do that and then we also redesigned products you know to make them more effective for the consumer and as well so
Keith: I think being able to pull all the levers that we have, I think, are examples of there's different levers, as Keith mentioned, in housing versus auto, but I think it's
Keith: It's a lot of that similar element. And so it's not so much the reserves for autos, it's more of the earnings of those rates that'll be coming through over the next few years that provides us, you know, the little bit of tailwind there for our auto business.
Speaker Change: And then my other question, you've had quite a lot of success taking wins in one business and winning in another business.
Speaker Change: I think Chase was a good example of that this year. Is there an opportunity to offer mobile coverage or other coverage to clients where you've won that global housing business? I know I get Hulu, Netflix, and Apple TV with my mobile device. Wondering if there can be a bundling in the card and housing of mobile.
Speaker Change: Yeah, I mean, it's definitely an interesting thought. And we always think about, you know, how do we leverage the relationships that we've got, and you think about the strength of assurance. Certainly, it's the B2B, to see nature of the business, but the fact that we operate across
Speaker Change: on a wide number of distribution channels.
Speaker Change: with major, major brands. So as clients are looking to reinvent how they bring services to market, I think we're well positioned to capitalize.
Speaker Change: on that. So I think the logic of your question makes perfect sense. Obviously, a dramatic amount of the scale has come through partnerships with mobile operators.
Speaker Change: If we look at the UK market, for example, though, we work with major banks in the UK that offer mobile protection as part of their package bank account. So, we definitely look for those opportunities where we think we're best positioned and we can deliver at scale.
Speaker Change: Yeah, I think it's definitely a positive.
Speaker Change: opportunity for us to leverage these relationships that we have with these large institutions like Chase.
Speaker Change: A good example is I was meeting with some of their executives when they were launching the program.
Speaker Change: last month, and they said they did check with their Chase counterparts and basically we're doing reference checks on Assurant and they came back very positive and so those types of things certainly can go a long way and are very positive for us to expand relationships.
Speaker Change: Thanks for the answers.
Speaker Change: Thank you, John. Thank you.
Speaker Change: There is no one else in the queue. I will pass it back to Keith for closing remarks.