Yahoo Finance Assurant Inc (AIZ) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...
Adjusted EBITDA: Grew 31% year-over-year to $384 million, excluding reportable catastrophes.
Adjusted EPS: Increased by 42% year-over-year to $4.97, excluding reportable catastrophes.
Segment Dividends: Generated $254 million in the first quarter.
Holding Company Liquidity: Ended the quarter with $622 million, up from $606 million at year-end.
Shareholder Returns: Returned $77 million to shareholders, including $40 million of share repurchases.
Global Lifestyle Adjusted EBITDA: Grew 4% to $208 million, or 5% on a constant currency basis.
Global Housing Adjusted EBITDA: Grew significantly by nearly 75%, excluding reportable catastrophes.
Enterprise Adjusted EBITDA Growth Outlook: Expected to grow by mid-single digits for 2024, excluding catastrophes.
Adjusted EPS Growth Outlook: Expected to approximate adjusted EBITDA growth for 2024.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Adjusted EBITDA grew 31% year-over-year to $384 million, and adjusted EPS grew 42% year-over-year, both excluding reportable catastrophes.
Global Housing segment significantly outperformed with earnings up nearly 75%, driven by strong market positions and operational efficiencies.
Continued growth in Global Lifestyle, with adjusted EBITDA up 4% year-over-year, led by the Connected Living business which delivered double-digit growth.
Successful new partnerships and program launches, such as with Telstra and Spectrum Mobile, enhancing market presence and customer offerings.
Strong capital position with $622 million of holding company liquidity, allowing for $77 million returned to shareholders through dividends and share repurchases.
Negative Points
Global Automotive segment faced challenges with a 9% decline in adjusted EBITDA due to persistent inflation impacts on vehicle parts and labor repair costs.
Investments in new partnerships and programs, while beneficial long-term, are expected to temper growth in Global Lifestyle in 2024.
Foreign exchange and broader macroeconomic conditions continue to pose risks, potentially impacting the pace and timing of growth.
Ongoing adjustments and rate increases required in the Global Automotive segment to address elevated claims inflation.
Operational expenses related to onboarding new clients like Bank of America and launching new programs with Telstra, although necessary, impact short-term profitability.
Q & A Highlights
Q: 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. A: Keith Warner Demmings, President, CEO & Director of Assurant, Inc. - We're really pleased with how Connected Living started the year, largely driven by the strength of the U.S. Connected Living business overall. We've had double-digit growth in Connected Living for about 7 years consistently. Domestic Connected Living was up double digits, high single last year. We feel incredibly well positioned despite some softness in the devices covered count.
Q: Your inflation guard in the homeowners business. When does that get updated? And what does it look like for this go around? A: Keith Warner Demmings, President, CEO & Director of Assurant, Inc. - It will get updated July 1. It will be a very modest adjustment, roughly 1%. Last year was a little north of 3%, and the year before, it was in the low to mid-teens. So fairly normalized level, I think, as we look forward this year.
Q: And then the non-cat loss experience in housing was 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? A: Keith Warner Demmings, President, CEO & Director of Assurant, Inc. - Setting aside the development, the non-cat loss ratio was just under 39%, in line with our expectations for the full year. We've seen normalized severity levels as inflation has come down. A lot of impact in the business from rate, but also a tremendous amount of leverage in terms of operating expenses, both with scale and efforts to drive automation.
: 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. A: Keith Roland Meier, Executive VP & CFO of Assurant, Inc. - On Bank of America, we've been ramping them up this quarter. Those loans are now being tracked, and policies should be coming online in the second and third quarter. By the end of the third quarter, we should be fully up and running on Bank of America. With Telstra, we just launched the main part of the program earlier this month. There's still more to come for Telstra, but we're in a really good place.
Q: 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? A: Keith Warner Demmings, President, CEO & Director of Assurant, Inc. - It's unchanged. 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. 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. We've taken a number of rate increases over the last 18, 20 months. We took more rate adjustments in the first quarter. We'll do more in the second quarter.
Q: 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? A: Keith Roland Meier, Executive VP & CFO of Assurant, Inc. - 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. 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.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
