Columbia Financial Q4 2021 Earnings Call Transcript

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Provided by Quartr
February 9, 2022

There are 11 speakers on the call.

Operator

Welcome to Assurant's 4th Quarter and Full Year 2021 Conference Call and Webcast. It is now my pleasure to turn the floor over to Suzanne Shepherd, Senior Vice President of Investor Relations and Sustainability. You may begin your conference.

Speaker 1

Participants are ready to begin.

Speaker 2

Thank you, operator, and good morning, everyone. We look forward to discussing our Q4 and full year 2021 results with you today. Joining me for Assurant's conference call are Keith Denning, 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 Q4 and full year 2021. Participants are prepared before moving into a Q and A session.

Speaker 2

Some of the statements made today are forward looking. Forward looking statements are based upon our historical performance and current expectations and are subject to risks, uncertainties and other factors that may cause actual results to differ materially 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 2, please refer to yesterday's news release and financial supplement. I will now turn the call over to Keith.

Speaker 3

Thank you, Suzanne, and good morning, everyone. As I begin my tenure as CEO, I'm extremely proud of the opportunity to lead our nearly 16,000 employees across the world as we support consumers' ever connected lifestyles. Participants have also significantly expanded the breadth of our offerings and our customer base. Today, Assurant represents a cohesive group of higher growth service oriented businesses serving more than 300,000,000 consumers globally. Collectively, our Connected Consumer and Specialty P and C Businesses participants have generated and are expected to drive continued profitable growth and strong returns.

Speaker 3

As we position Assurant for 2022 and beyond, participants are ready to take questions. We see compelling opportunities to sustain growth, particularly with the convergence of the connected consumer in the global markets and geographies in which we operate. Continued success will require us to deliver on our vision for the future to empower leading brands to connect, protect and support their customers' connected lifestyles. Ongoing investments in our people and capabilities will enable us to meet our customers participants are participating in the process of communicating our offerings through a superior customer experience, continuously adapting to the changing needs of the connected consumer will be critical to achieving our long term growth. Participants will continue to capture new opportunities, I believe success will require more than ever our focus on 5 priorities.

Speaker 3

1st, attracting, retaining and developing the best talent to unlock future potential 2nd, Delivering a superior digital first customer experience. 3rd, deepening our strong partnerships with major clients and prospects 4th, accelerating the pace of innovation and prioritizing the necessary investments across our operations and technology and finally, continuing to further embed and support sustainability and inclusivity for the benefit of all stakeholders and the communities in which we operate. And already this year, we've made progress in our continued objective to build a more sustainable Assurant. Participants are in the position of the CDP on our environmental impact and commitment and our continued inclusion in the corporate equality participants are in the range of $1,000,000 and $1,000,000,000 I want to take a moment to highlight our lifestyle and housing businesses participants are

Speaker 1

in the range of

Speaker 3

$1,000,000 and how we successfully executed our strategy throughout 2021. Within Connected Living, our mobile device lifecycle management solution has enhanced our ability to introduce value added services and capabilities to monthly device protection plans and trade in and upgrade programs. Participants are in the range of 63,000,000 mobile devices, a figure that's doubled since 2015 and increased 18% in 2021 alone. At year end, we launched a partnership with Deutsche Telekom in Germany to provide an innovative mobile phone device protection program and trade in program. Assurant has already been recognized by Deutsche Telekom for our commitment to sustainability with a hashtag greenmagenta label, participants are participating in the Q1 of 2019.

Speaker 3

We are also participating in the Q1 of 2019, highlighting how our products and services make a positive climate contribution and reflect a responsible use of resources. This is another example of further integrating ESG into Assurant's business operations and offerings worldwide to drive more value for our partners participants are participating in the process and for our consumers. Throughout the year, critical investments continue to drive growth and differentiate the customer experience. Our trade in and upgrade business now inclusive of Hyla Mobile drove exceptional performance processing over 25,000,000 devices participants are being recorded by the rollout of 5 gs, as well as our repair, asset disposition and technology capabilities. We recently expanded our long standing partnership with Telefonica to provide a comprehensive device trade in program participants are participating in the process of developing a new technology platform.

Speaker 3

We are also pleased to access our leading trade in technology. We also continue to integrate mobile service delivery options pertaining to our offerings through CPR's local same day capability and the come to you repair capability through our acquisition of fixed. Demonstrating our commitment to improving the customer experience, CPR by Assurant ranked 1st in the 2022 Entrepreneurial present the call to the operator for the Q1 of 2019. This is a testament to the success of our CPR franchisees participants are in the range of $1,000,000 and we successfully executed on the major rollout of the in store repair capability to nearly 500 T Mobile store locations nationwide, Showcasing our ability to adapt to rapidly changing consumer preferences. Over a period of 5 months, we recruited, participants will be participating in the Q1 of 2019.

Speaker 3

The in store repair rollout will continue in 2022 As we further enhance the overall experience for T Mobile customers. Turning to our global automotive business, where we also have a strong In 2021, we grew global protected vehicles by 10% to nearly $54,000,000 and increased net operating income by 21%. Participants are in the range of $1,000,000. The auto business is critical to the long term success of Asurion and we should continue to benefit in the future from increased scale through our alignment with industry leaders and our ability to support customers through digital channels. Turning to renters, participants are in the range of $1,000,000 in 2021, a testament to strong affinity and property management company channel relationships.

Speaker 3

We also secured multi year renewals with 2 top 10 property management companies. Technology and innovation are critical components to our success in this business and we'll continue to invest in our technology over the next several years participants will be participating in the Q1 of 2019. Investments in 2021 included the continued rollout for Cover 360, launching new customer facing sales portals and expanding self-service capabilities that leverage machine learning to enable automation of claim payments. Ultimately, our investments should increase policy attachment rates, which have not yet hit mature levels throughout the industry. Participants

Speaker 1

are participating in the Q1 of 2019.

Speaker 3

Additionally, in our attractive P and C offerings, including lender placed insurance, we have maintained our market leading position with large U. S. Servicers and banks As we look to 2022, we'll continue investments in operations such as our customer centric participants are participating in the process of using the same store as the new store, differentiating our tracking capabilities and improving efficiency. Overall, I'm pleased that our businesses have delivered on our commitments for 2021 as we delivered value for our clients and customers. Participants are in the process of executing the business model as we navigated the pandemic and manage inflationary pressures.

Speaker 3

Excluding reportable catastrophes, we generated 14% earnings per share growth on the high end of our expectations. Net operating income also excluding Katz grew by 11% to $672,000,000 making 2021 our 5th consecutive year of profitable growth. We're now seeing $29,000,000 in dividends participants are presenting approximately 100% of segment earnings. This allowed us to participants will be conducting a total of $1,000,000,000 in share repurchases and common stock dividends and complete our 3 year $1,350,000,000 capital return participants are in the range of $100,000,000 we committed to return through share repurchases as part of the sale of our preneed business. We anticipate returning to the next quarter.

Speaker 3

Participants will be available for the Q1 of 2019. Next, I'd like to review some initial thoughts for 2022. As we look ahead to sharing our long term vision, strategy and financial objectives at Investor Day in March, we can make an even more compelling case for the future. Q1. Given our ongoing shift to more service oriented fee based businesses, we believe adjusted participating income is a better representation of how to evaluate our operating performance for the enterprise and segments.

Speaker 3

Press release and the

Speaker 1

press release.

Speaker 3

In 2021, adjusted EBITDA excluding cats increased 9% to $1,100,000,000 participants are now driven by strong results in Global Lifestyle, particularly in Global Automotive and Connected Living, as well as a lower corporate loss. Participants will be available for the Q1 of 2019. In 2022, we expect growth in adjusted EBITDA ex cats of 8% to

Speaker 1

participants are now in

Speaker 3

the range of 8% to 10%, a reflection of the strong adjusted EBITDA to increase by low double digits, but likely not proceeds exceed the 12% growth we had in 2021. Segment growth will be driven by Connected Living, particularly mobile, even in the marketplace. Participants are in the range of $1,000,000. Within Global Housing, adjusted EBITDA excluding cats is expected to grow mid to high single digits participants are expected to generate a loss of approximately $105,000,000 of adjusted EBITDA, which is in line with our historical levels. Cash flow generation is also expected to remain strong and is a core component of Assurant's financial profile, allowing us to continue to invest in and transform this company.

Speaker 3

Participants are ready to take questions. As we look at our capital management priorities going forward, we'll continue to be strong stewards of capital. Our goal is to continue to industry through disciplined capital deployment, while also maintaining our investment,

Speaker 1

participants are

Speaker 3

in the range of $1,000,000 Given the attractive business opportunities we see ahead, we expect a more balanced capital deployment mix, participants are currently targeting compelling investments to drive long term M and A as well as ongoing participants will enable us to sustain above market profitable growth and generate significant value for our shareholders. Participants will be conducting a number of questions. We recognize that for periods of time, this may result in higher than average levels of holding company liquidity to ensure we have the flexibility to make investments participants will be conducting a number of key strategic initiatives that generate compelling returns, while also returning capital mainly through buybacks given the attractiveness of our stock. Participants are in the process

Speaker 1

of taking the call to questions. Lastly, I wanted to

Speaker 3

acknowledge and thank all who have supported my transition to CEO over the last several quarters. Your feedback and ongoing dialogue has been incredibly valuable as we collectively look to build upon the success of Assurant for the future. Participants are in the range of $1,000,000 and $1,000,000 and $1,000,000 and $1,000,000,000 in the quarter. I will turn the call over to Richard to review the Q4 results, our 20 2nd quarter results. Richard?

Speaker 4

Participants are ready to take questions. Thank you, Keith, and good morning, everyone. As Keith mentioned, we are pleased to announce our earnings in 2021, call to discuss the strength of earnings and cash flow generation of our businesses. For the Q4, we reported net operating income per share, excluding reportable consensus, up 21% from the participants are participating in the press release. Excluding GAAPs, net operating income for the quarter totaled $144,000,000 participants and adjusted EBITDA amounted to $245,000,000 a year over year

Speaker 1

participants will be in the

Speaker 4

range of 16% 8%, respectively. Now let's move to segment results starting with Global Lifestyle. The segment reported net operating income of $108,000,000 in the 4th 23%. Participants and the company's financial results were

Speaker 1

up $1,000,000 or

Speaker 4

range of $20,000,000. The increase is based on 3 main items, including: 1st, continued organic growth across distribution channels,

Speaker 1

participants are in the

Speaker 4

U. S. 2nd, better loss participants from select ancillary products and third, higher investment income. Connected Living's earnings increased by $9,000,000 participants are 21% year over year, more than offsetting the implementation costs associated with the initial deployment participants are in store device repair services with T Mobile. These costs are primarily related to technician hiring and part sourcing participants will further impact Connected Living's earnings in 2022 as we continue investing in our in store capabilities.

Speaker 4

The 4th quarter increase in Connected Living was primarily driven by 3 items: higher trade in volumes, including a full quarter of contributions from Hyla and Carrier Promotions and continued mobile subscriber growth participants are in North America, including growth from our cable operator partners. This quarter. Connected Living and Global Automotive results also included a modest tax benefit that improved earnings. Ready for the quarter. Lifestyle's adjusted EBITDA increased 16% to $159,000,000 projected EBITDA eliminates the segment's increased IT

Speaker 1

participants will be in the range of $1,000,000,000,000

Speaker 4

of depreciation from higher investments as well as amortization resulting from higher deal related intangibles from the more recent transactions in mobile and global automotive. As we look at revenues, participants are participating in the Q1 of 2019. Lifestyle revenues increased by $168,000,000 or 9%. This was driven mainly by continued growth in Global Automotive and Connected Living. Participants are in the range of $1,000,000 in global automotive revenue increased 12%, reflecting strong prior period sales of vehicle service contracts across all distribution channels.

Speaker 4

Participants are in the U. S, we saw continued expansion from our national dealer network and third party administrators, while we benefited internationally from higher volumes with OEMs. As expected, our net written premiums, a key sales metric, continue to normalize compared to the Q3, but remain elevated. We expect continued normalization into 2022. Within Connected Living, revenue increased 7%, primarily due to mobile fee income that was driven by strong trading volumes, participants are participating in the Q4, supported by new phone introductions and carrier promotions participants are in the range of 5 gs devices.

Speaker 4

Mobile subscribers was offset by declines in runoff mobile programs previously mentioned. For the year, mobile subscribers grew 18% to nearly 63,000,000 driven by growth in North America, continue to grow at a healthy pace and was up 8%, offsetting declines in other regions. Looking ahead to 2022, we participants expect Global Lifestyle adjusted EBITDA to increase by low double digits. Growth will be mainly driven by Connected Living and particularly mobile from continued global expansion in existing and new clients participants are in the

Speaker 1

process of providing a strong financial performance.

Speaker 4

Given the strategic investments we're making across Lifestyle to support new business opportunities, participants are participating in the Q1 of 2019. We do not anticipate growth to exceed the 12% growth rate we had in 2021. In Global Automotive, we expect adjusted EBITDA to be stable in 2022 participants are in

Speaker 1

the range of $1,000,000 compared

Speaker 4

to 2021 as we overcome headwinds in investment income and the participants are now in the range of $1,000,000,000. Net operating income was $80,000,000 for the 4th quarter compared to participants are in the range of 20 20, driven by

Speaker 1

participants are in the range of $1,000,000

Speaker 4

mainly due to higher non cat losses in our Specialty P and C offerings. Non GAAP losses, including run off claims within our small commercial

Speaker 1

participants will be available on the Investor Relations website.

Speaker 4

As a reminder, this book stopped adding policies in 2019 participants' growth in lender placed was off. Participants will recall certain factors in 2020 and the Q1 of 2021 temporarily depressed non cat loss levels participants will be represented by the end of the quarter. We expect our earnings growth in lender placement participants will be in line with the appropriate regulatory authorities participants are in place and claims processing efficiencies, which include the continued foreclosure moratoriums. In January, Q1 of 2019. We will now begin

Speaker 3

the Q1 of 2019. We will now begin

Speaker 4

the Q1 of 2019. We will now begin the Q1 of 2019. To continue placing reinsurance, covering multiple years to mitigate changes participants will be in the pricing of cat reinsurance in any one year. And similar to prior years, the remainder of our participants will be placed around mid year. We will continue to evaluate the risks and rewards purchasing additional reinsurance as well as alternatives participants are in the range of $1,000,000 that could more meaningfully reduce our risk.

Speaker 4

In Multifamily Housing, underlying growth in our Affinity and PMC channels was offset by increased expenses, primarily investments to further strengthen our customer experience, including our digital capabilities. Participants are in the range of $1,000,000,000 in the quarter. Global Housing revenue increased 2% year over year, mainly from higher average insured values and premium rates in Glend offset by lower specialty revenues participants

Speaker 1

are in the

Speaker 4

participants are in lender placed insurance from continued higher average insured value participants are experiencing foreclosure moratoriums throughout the year. Growth is expected participants are expected to be partially offset by the impact of higher labor and material costs. Including our digital first efforts focused on automation will have a positive impact, albeit partially offset by continued investment initiatives, particularly in multifamily housing and third, improved loss experience in our specialty offerings related to small commercial. Participants are in the range of $1,000,000 at corporate, the net operating loss was $24,000,000 an improvement of $3,000,000 compared to the Q4 of 2020. This participants are currently experiencing a significant amount of cash flow in the quarter from higher asset balances, participants are participating

Speaker 1

in the Q1 of 2019, including proceeds

Speaker 4

from the sale of Global Preneed. For 2022, we expect the corporate adjusted EBITDA loss to approximate $105,000,000 participants are now in line with historical levels. Turning to holding company liquidity. We ended the year with slightly over $1,000,000,000 primarily due to the proceeds from the sale of our preneed business. In the 4th quarter, participants are in common stock dividends and $5,000,000 related to Assurant Ventures investments into prior years.

Speaker 4

Participants are in the range of $1,000,000 with the transition to adjusted EBITDA, we expect segment dividends to be roughly 3 quarters of segment adjusted EBITDA, including catastrophes. This translates to approximately 100 percent of segment net operating income. As always, segment dividends are subject to the growth participants are participating in the business's rating agency and regulatory capital requirements and investment portfolio performance. As Keith mentioned, expect to provide additional color for 2022, including our outlook on a per share basis that aligns with adjusted EBITDA, As a result of the expected level of share repurchases, we wanted to note that we expect that our growth on a per share basis will significantly exceed our adjusted EBITDA growth. Participants are in the process of executing on our financial results.

Speaker 4

In closing, we are really excited to have met our objectives for 2021 despite the difficult operating conditions brought on by the pandemic, ready to take questions. And we're excited to be entering 2022 with the positive business momentum we've highlighted today. And with that operator, please open the call for questions.

Operator

The floor is now open for questions. Thank you. Our first question comes from the line of turn the call over to Tommy McJoynt from KBW.

Speaker 5

So could you guys start off and just talk about some of the impacts of inflation on your device repair and upgrade business? Obviously, there's different factors with replacement parts and higher labor and wages. So if you could just kind of touch on how you're managing those risks?

Speaker 3

Sure. And good morning. Maybe I'll start talk a little bit about mobile and then Richard, you can talk more broadly about inflation overall. I'd say, participants are on the mobile business, it's had a relatively neutral impact on our

Speaker 1

participants are looking to see the potentials.

Speaker 3

As we've talked about before, the business is largely reinsured and profit shared with our clients, so you do see a little bit of impact on loss ratios when we're on risk, but it's been fairly immaterial as we look over the course participants are in the last many months. I would also say, from our perspective, we also think about delivering service to the end consumer participants are ready to take questions. And making sure we've got the right levels of inventory, so that's equally important to make sure we're delivering. And we've done a really good job for stocking inventory, making sure we've got good lead time for parts delivery. From time to time, we do see delays in terms of claim fulfillment.

Speaker 3

Sometimes that means a repair might take a little longer or we might have to replace a device versus doing a repair. But overall, customer service has been excellent and NPS scores in terms of what customers are telling us have been really, really strong. So that's more from the parts side. I'd say in the labor market, no doubt remains challenging and this is true across all of the businesses around the world, I would say really proud of how the teams have navigated not just the labor market, but Really the pandemic overall with work from home. I think because we kept health and safety at the in front of everything that we did from a decision making perspective, we built an incredible culture within the organization and I think we haven't seen A lot of the great resignation that you hear about every day, we've done an incredible job kind of protecting our employee base.

Speaker 3

And in fact, we hired participants are in the range of 2,000 employees to staff the 500 T Mobile stores to do repairs and obviously including leadership positions participants did that extremely well in a very challenging market. So really proud of how we've navigated labor and I think one of our advantages is the talent that we have, but maybe Richard just a little bit more on macro inflation and as we think about the housing business as well.

Speaker 4

Sure. Thanks, Keith, and good morning, Tommy. Yes, just in terms of the housing business overall, we have seen some increase in claim costs, participants are in the range of $1,000,000,000. That's a little bit of a headwind. But on the other hand, we've as we talked about in our remarks, we have seen an increase in average insured value.

Speaker 4

So that's, to a certain extent, offset the pressure there. I guess the other thing I would say too is, participants are in the line with our expectations. While short term, we do feel some pressure from it, we have factored it into the comments we made today in terms of what we would consider to be the impact of inflation on our businesses in 2022 and the outlook that we gave And also positive will be rising interest rates that will flow through to investment income. So the higher rates will be helpful, participants are in the range of $0.05 on the cash that we have in hand today and also on new money coming in for premiums coming in as we invest it. So in the short term or actually as we go further off.

Speaker 4

Thank you.

Speaker 5

Thanks. Appreciate the feedback. And then just switching gears a little bit

Speaker 1

participants have been

Speaker 5

in the 10% to 11% range. When you kind of think of long term where EBITDA should go, do you think you should build in some for margin expansion on EBITDA or do you think that 10% to 11% is kind of a good long term rate?

Speaker 3

Yes. I guess a couple of comments. We will be Obviously, coming out at Investor Day in on March 24 with a longer term outlook. So we'll be coming to the market with 3 year longer term financial projections, so that will be a great time for us to lay out our vision for the future. And certainly, If you look at our outlook for 2022, strong EBITDA growth, we've signaled 8% to 10%.

Speaker 3

So continued strong momentum in terms of driving EBITDA growth and I would also say we're investing more as well organically to try and set up the future and will talk a lot more about some of those investments and how we think about long term growth trajectory emerging as we get back together in a few weeks.

Operator

Your next question comes from the line of Michael Phillips from Morgan Stanley. Your line is open.

Speaker 6

Thanks. Good morning. Actually, you just touched on it, but maybe a little bit deeper, if you could, Keith. Participants are on the guidance for EBITDA, I guess I was curious and again maybe nothing more than what you just said, but I'll see. Curious how much I guess overall investment we should think about is being done this year relative to say the amount that was done last year as we look at that 8% to 10% guide for EBITDA?

Speaker 3

Yes, I would say we expect to make more investments overall across the company in 2022 than 2021. We obviously had some material investments when you look at standing up, saving a repair with T Mobile. There was a significant lift participants are ready to go. To do that, obviously, converting the Sprint business. So there certainly were investments in 2021.

Speaker 3

I would signal a little bit more investment to drive organic growth And I would probably highlight a couple of areas. Certainly, we're going to continue to invest in service and repair capabilities, participants are really building out the platform, the technology and the integrations. We talked about investments in digital first in the prepared remarks, that's a really important priority for the organization. Obviously, it drives efficiency longer term, but it radically improves the customer experience. So that's a big priority.

Speaker 3

We've got several new client launches that are planned that obviously take a significant amount of energy to get right and make sure we execute and deliver. And then investment in longer term growth, new capabilities around the Connected Home, around innovation to drive new product bundles, new cross selling opportunities and I would say further scaling capability in Europe and Japan. So there's a lot of areas that we're trying to focus on. There's a significant amount of long term growth potential across all of our product lines. So I would say a pretty balanced set of opportunities.

Speaker 6

Okay, thanks. That's helpful. I'm sure we'll get lots more details in a few weeks. Participants are in the opening comments as well, maybe a little bit more detail here. The expenses that you've incurred from the T Mobile rollout that was kind pushed into 4Q and some are now into this year.

Speaker 6

Is that going to be more of a 1Q issue or that continue at that same level as we get past 1Q of 2022?

Speaker 3

Yes, I would say it will moderate from what we saw in the Q4. We did a great job. That was a lot working to work as you can imagine, staffing up 500 stores over the course of really 4 or 5 months and then training, onboarding all of our leadership, all of our technicians, just an incredible effort. I would first thing I would say it underscores our ability to not only adapt to changing consumer preferences, but then drive significant focus on execution as a company. And we did the same unit prepare launch while we were migrating all of the Sprint business and while we were staffing up to manage all of the Sprint business as well, separate from same unit repair.

Speaker 3

So a significant lift certainly in Q4. I would say it came in broadly in line with expectations in the quarter and it will certainly moderate as we get into the participants are in the 2020 2 as we look to the 1st and second quarter, we'll certainly see more investment going forward and it will taper as we get through the rest of the year.

Speaker 6

Okay. Thanks, Keith. One last one, I have more higher level question, if I could here. You continue to outpace the market and growth and renter policies Pretty significantly. Maybe you can talk about that.

Speaker 6

And is that something that you think you can continue to do over the long term? It's pretty significant, your growth there versus the rental market in general. So and you've done it for, clearly for quite a while, but I guess should we expect that to continue for the foreseeable future?

Speaker 3

Yes. I mean, we've been really pleased with the performance this year, but as you say, over time, really good strong consistent growth And also growing market share. If you look back over the years and we'll talk more about that, I'm sure, at Investor Day as well, but really strong overall share gains in the market and we've seen a lot of good trends as well. The product is the attachment rates on the products have gone up participants are in the business that we're investing significantly in trying to evolve how we deliver services, thinking about investments in technology, investments in customer experience, digital integration with our partners and then thinking about other services participants will continue as we move forward.

Speaker 1

Participants are ready to take questions.

Speaker 6

Thanks, Keith. Appreciate it.

Speaker 3

Great. Thank you.

Operator

Your next question comes from the line of Tom Shimp pick from Piper Sandler. Your line is open.

Speaker 1

Participants are ready.

Speaker 7

Hi, good morning. Congrats on the strong quarter. So, very strong growth in global automotive. In the past, you've spoken about the increase in attachment rates from the high 30s to the high 40s given the increase in prices and technology. Given the chip shortage, there's been a number of reports buyers paying over sticker for new cars and we've got used car prices up as much as 40%.

Speaker 7

So do you believe this is having an effect on for the cash flow is being recorded. And maybe you could just give some general thoughts on whether the pie is getting bigger or whether Assurant is getting a bigger piece of the pie or both?

Speaker 3

Yes, I think Assurant is definitely getting a bigger piece of the pie. I would say that attachment rates have probably drifted up More because of the mix business that we've seen a shift between new and used and we tend to see slightly higher attach rates on used vehicles. So if you think historically, we've had a fifty-fifty mix roughly between new and used cars. Today, it's probably 55 used, 45 new. Participating in the press release.

Speaker 3

I wouldn't say that it's significantly changed otherwise. We've seen good strong consistent performance and as always it's a focus for our clients. Market. We've gained market share, no doubt, in the market that we've seen a lot of consolidation in the industry. We're partnered with a lot of large publics, a lot of large dealer groups And they're gaining share through acquisition.

Speaker 3

I think we've seen more acquisitions in 2021 in terms of the big publics. And then also, our franchise dealers have been investing heavily in digital and also sourcing a lot more used car inventory directly from consumers. So a pretty significant improvement in terms of the performance of our clients. And then I'd say we've also won new clients as well in the market and it's a very fragmented market today, so there's still a lot of opportunity for share gain over time.

Speaker 7

Okay, great. Maybe moving to mobile, participants have a lot of moving pieces in 5 gs after what seemed like a delayed rollout. There's an uptick in 5 gs promotions and activity around that participants are in the range of potential catalysts, but then we recently had the delay in 5 gs implementation due to the FAA. So maybe you could frame for us how to think about the potential benefit from 5 gs, whether it's total covered mobile device count or trading volumes, how should we think about the cadence of the benefit to 'twenty two earnings in

Speaker 3

Yes. We had a significant success in 'twenty one certainly with trade in volumes, other factors, you point out the promotional activity from clients, obviously, the migration of 5 gs, We've seen clients put more focus and energy on trade in. Participants are interested in the sustainability benefits, which is really important. It also provides digital access to consumers at more affordable rates. So there's a lot of reasons why I would say trade in is generally And then in terms of 5 gs specifically, I'd say we're still fairly early in the cycle.

Speaker 3

You've got maybe 20% to 30% participants are in the key markets that we operate that have migrated to 5 gs networks. So there's still a lot more opportunity as consumers continue to consumers continue to upgrade devices and adopt 5 gs. So we'll see continued promote our thinking with our connected living participants are in the same store globally as this continues to get focused.

Speaker 7

Great. Thank you for your answers.

Speaker 1

Participants

Operator

are in the line of Mark Hughes from Truist Securities. Your line is open.

Speaker 8

Good morning, Mark. Yes, thank you. Good morning. You had mentioned that you're participants are looking to evaluate perhaps alternative risk strategies in global housing, maybe a Lay off a material portion of your catastrophe exposure. It is as I participants are in the line of questioning.

Speaker 8

I thought that had kind of been put to bed, but it sounds like you're still working on it, still evaluating it. Could you talk about What you are thinking is there? How curious that initiative might be?

Speaker 3

Sure. And maybe I'll start just reinforce a little bit about the business and then I'll address your question. I mean, I would just highlight, participants are in the range of $1,000,000,000. It's a really unique high performing business. If you think about the cash flows that generate participants are in the position of our housing business and the important role that we play in the mortgage value chain.

Speaker 3

So we're really proud of the business and the results it's delivered. And I would say if you look at Housing overall, we talk about targeting a 17% to 20% ROE after a normal cat load. If you look at 2021, we actually had $114,000,000 of cat losses, so more than what we would consider a normal cat load participants still delivered a 16.5% ROE. So broadly, really strong business, great ROEs and generates a ton of cash flow. So We really like the business.

Speaker 3

It's for a lot of different reasons. In terms of the comments around the cat exposure, I would say we're always looking for ways to optimize We've significantly grown parts of housing and then obviously lifestyle, which don't have much of any cat exposure at all. We've also dramatically reduced our per event exposure from $240,000,000 to $80,000,000 over the years And then a lot of other decisions around multiyear coverage, exiting certain non strategic cat prone markets, etcetera. So You've seen a lot of discipline that will no doubt continue as we move forward, but we are always looking to see if there are further ways to optimize. Participants are ready to take questions.

Speaker 3

Is there a risk reward trade off that we can work with reinsurance partners in a different way to further mitigate the risk, further mitigate the volatility

Speaker 1

participants are going to be able to

Speaker 3

provide the right most efficient optimal outcome and We're going to continue to look at that. I wouldn't say there's anything imminent that we're doing other than this is normal course for us And it's very important for us to be thinking about our reinsurance and our cat risk all the time.

Speaker 8

And then you had made, I think, a point of saying that you were looking for a balanced mix of investments in share buybacks. Participants are in the line with the simple person and said if you look at free cash flow for 2022, is it half share buybacks, participants have retained for investments or M and A. Yes.

Speaker 3

And we'll spend more time on for Capital Management certainly at Investor Day. I would say a couple of things. We're not trying to signal a dramatic shift in our philosophy. That's point number 1. We continue to be extremely disciplined as we think about capital management.

Speaker 3

So that's not going to change. And ultimately, we're trying to maximize returns. I think what we're more trying to signal is an interest in maintaining greater flexibility. There's lots of attractive opportunities in the market to drive growth and we want to have a little more flexibility to try and evaluate our expectations for capital deployment in a few weeks, but that would probably be the bigger takeaway for me.

Speaker 8

Yes. And then just one, if I might. You talked about expanding in the Connected Home. Does that suggest an appetite

Speaker 3

Where we play today around the connected home is more around the connected technology, the appliances, the electronics, participants are in that side of the business. We don't really have home warranty within our portfolio today. And that's a big competitive market. There are many strong players in that space. So I think there's an opportunity more uniquely for us as we think about building bundled subscription services is appropriate for Assurant and we'll talk more about that at Investor Day, but we definitely see interesting trends, a lot of Appetite from consumers, we operate with a broad range of distribution partners.

Speaker 3

So there's a lot of interesting bundled services that we think we can bring to bear for sort of the connected consumer of the future.

Speaker 8

Great. Thank you.

Operator

Your next question comes from the line of Brian Meredith from UBS Financial. Your line is open.

Speaker 3

Good morning, Brian.

Speaker 6

Good morning.

Speaker 9

A A couple of questions here. First, Latif, I'm just curious on the repair centers in T Mobile stores, is that an exclusive deal or could you roll that out to other customers and what has kind of been the inquiries you've received on doing that? I would think that a lot of the other customers would be really interested in that type of program.

Speaker 3

Yes, I think you're right and we've certainly you've seen it with our investments dating back a few years, right? We invested in and bought a company called CPR. We also bought Fix, so we have walk in repair facilities operated by Assurant. We've got I'm coming to you repair technicians as well and now for T Mobile operating within their store. Definitely think we'll see more and more interest from clients around the world as they think about the appropriate repair strategy and claims fulfillment strategy for each brand.

Speaker 3

So Definitely, it's client by client in terms of what's most appropriate and what vision do they want to create for servicing consumers. But I definitely

Speaker 9

Just curious one quick one on the catastrophe reinsurance program renewal. It sounds like fairly similar structure to the program. I would

Speaker 3

say we're really pleased with participants are in the line of the line of David and his team are in the line of David. And Richard, I know works closely on it. Maybe share a couple of thoughts, Richard?

Speaker 4

Yes. I think as we've said before on renewals in the beginning, we have to invest and then as we go along, we make profits over time. And it's gone really well, so to date, I mean, to date. Participants can deliver better solutions for our customers with what we're doing. So it's not just in service repair.

Speaker 4

I'd say today, we've covered most of it through the end of the year. We're probably about 2 thirds of the coverage being placed. And participants will place the rest of it in mid year, as you know. And we've had success in the pricing of we have a good stable reinsurers. Participants are in the market.

Speaker 4

We've had some reinsurers that have some insurers that had trouble placing. We placed 100%. We placed it at the low end of the market as well. Participants are in the range of $1,000,000

Speaker 1

to $1,000,000,000

Speaker 4

to 30% on reinsurance. So we've done a really good job.

Speaker 9

Got you. Got you. So towards the low end of the market. Great.

Speaker 4

Yes. Single I would put it in the kind of the mid- to high single digits overall, so in a really good place.

Speaker 9

Terrific. Good outcome. And then I guess just my last and maybe you'll be touching this Investor Day. When I think about your 8% to 10% EBITDA ex cat guidance, for 2022, should I think about that is more margin driven or revenue driven?

Speaker 3

I mean, we're certainly both. I mean, we're going to grow revenues as a company, But we're also expanding margins. If you think about the makeup of our business, we typically have grown profitability at a quicker pace than we've grown. So I do expect to see margin expansion in terms of the breadth of services that we deliver to clients over time. So Definitely growing revenue, but growing margins quicker than revenues, which has typically been the case.

Speaker 7

Great. Thank you.

Speaker 3

Participants are

Operator

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

Speaker 1

Participants are ready

Speaker 3

for questions. Good morning, Grace.

Speaker 10

Hi, good morning. I'm looking at the guidance for amortization of intangibles next year. I was wondering if we could participants are ready to take questions. And just given recent market participants are in the Lifestyle business and if valuations are any more attractive now than they were a few months ago?

Speaker 4

Keith, do you want to take the first part in terms of next year?

Speaker 1

Yes, perfect.

Speaker 4

Participants Yes. Just to start with the numbers, I mean, it doesn't the numbers that we've given in the earnings outlook really doesn't include any future acquisitions we buy, it's really the current acquisitions we've done and how it kind of rolls forward. Participants are ready to take questions. So I would just say, remember, we've done deals at the end of last year where we have Hila and AFAS, participants are going to be running through.

Speaker 3

Yes. And in terms of M and A, obviously, we're always looking in the market for Attractive opportunities and valuations certainly move around. We've seen really high expectations at times and more tempered at others. But participants are in acquiring strategic capabilities. You've seen us do, I think, some really good strong foundational acquisitions.

Speaker 3

If I think back to The Warranty Group, which was a big scale play, gave us a great overlap with our current geographies and really a global leading position around auto. The acquisition of Hyla that really scaled us as the global leader in trade in, right on the front edge of the 5 gs super cycle. Participants are ready to take questions. You saw the acquisition of AAFAS, which gave us real strength in the U. S.

Speaker 3

Auto market to complement the acquisition of the Warranty Group and then participants are interested in some of the mobile acquisitions I talked about CPR and fixed, really just important capabilities and set the foundation for what we're doing today with T Mobile. So I think we're going to continue to look for those types participants are in the range of acquisitions and we always try to find multiple ways to win. How do we get access to new clients or new distribution channels, new capabilities that can wrap around The services that we already provide and then clearly looking for low risk in terms of integration, execution and financial performance. So we're always looking for those types of deals. That's why we want to maintain flexibility.

Speaker 3

But as you've seen, we will continue to be disciplined and we will try to find really strategic opportunities to drive that growth.

Speaker 10

Thank you. And just another one, participating ongoing changes in the mix of business with multifamily participants are now looking kind of outgrowing lender placed.

Speaker 1

Participants are

Speaker 3

ready to take questions.

Speaker 4

Yes. I think the historical guidance that we give 86% to 90% is a long term measure, and I would kind of base things on that. Obviously, it depends on the mix we have within the business. And I think you're exactly right. As multifamily grows, that kind of comes into the waiting on it.

Speaker 4

But I think what's more important too is there's the one part which is the combined operating ratio, the 86 There's a second part, which is the premiums. And as we see markets changing over time, as we see, the forbearance moratoriums running off and we see the inflation average insured values and whatever, I think we're going to see premiums participants move up as well. So in terms of profitability, when we're talking about lender placed, for example, we are talking about looking at

Speaker 2

participants are ready to begin.

Speaker 3

Great. Thanks, Grace, and thank you everyone for participating in today's call. Participants are very pleased with our performance in 2021 and excited for another year of profitable growth in 2022. We're also looking forward to our upcoming virtual Investor Day on March 24, where we'll have the opportunity to share the Asurion vision, our strategy and multiyear financial objectives. So stay tuned for registration details coming out soon.

Speaker 3

And in the meantime, please reach out to Suzanne Shepherd and Sean Mosier with any follow-up questions. And thank you very much. Have a great day.

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Earnings Conference Call
Columbia Financial Q4 2021
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