Assurant Inc (AIZ) — Q3 2020 Earnings Call Transcript

Thank you, operator, and good morning, everyone. We look forward to discussing our third quarter 2020 results with you today. Joining me for Assurant’s conference call are Alan Colberg, our President and Chief Executive Officer; and Richard Dziadzio, our Chief Financial Officer. Yesterday, after the market closed, we issued a news release announcing our results for the third quarter 2020. The release and corresponding financial supplement are available on assurant.com. We will start today’s call with brief remarks from Alan and Richard before moving into a Q&A session. Some of the statements made today are forward-looking. Forward-looking statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in yesterday’s earnings release, as well as in our SEC report. During today’s call, we will refer to non-GAAP financial measures, which we believe are important in evaluating the company’s performance. For more details on these measures, the most comparable GAAP measures and a reconciliation of the two, please refer to yesterday’s news release and financial supplement. Now I'll turn the call over to Alan.

Thanks, Francesca. Good morning, everyone. We are pleased with our third quarter operating results, which demonstrate the continued resiliency and strength of our business portfolio. Our track record of delivering strong profitable growth not just this quarter, but over the past few years reinforces our strategic direction and our confidence in the future growth prospects of Assurant. Last week we made two announcements that underscore our focus on our market leading lifestyle and housing businesses while capitalizing on the convergence of the connected mobile device, car, and home. Our Connected Living, Global Automotive and multifamily housing businesses have a history of profitable growth and we believe compelling future growth potential. In addition, our specialty P&C offerings, including lender-placed insurance are extremely well positioned. The countercyclical nature and strong returns of the business continue to make it a critical part of our portfolio. Together lifestyle and housing should drive ongoing above-market growth and superior cash flow generation with the ability to outperform in any economic cycle and ultimately to create greater shareholder value over time. Our acquisition of HYLA Mobile, a leading provider of smartphone software and trade-in and upgrade services will strengthen our market position with increased scale, complementary client bases and favorable tailwinds in the global mobile market. We value HYLA at the multiple of low teens forward EBITDA. The combination of its patented software technology and trade-in capabilities with Assurant's end-to-end mobile device lifecycle management expertise will deliver three primary benefits. First, it will enhance the customer experience making it easier for consumers to get trade-in value for their used mobile devices without an in-person inspection. Second, it will improve program economics and performance for our partners including higher trade-in attachment rates. And finally, it will further strengthen Assurant's ability to take advantage of the 5G smartphone upgrade cycle. HYLA also has strong relationships with marquee partners complementary to Assurant's client base across our critical distribution channels and geographies, including leading U.S. and Japanese mobile carriers as well as major global OEMs. As we announced, we intend to fund our acquisition through a combination of cash on hand at the holding company and new debt issued prior to closing so that we can continue to optimize our capital structure while maintaining investment-grade ratings. To better align resources to the best market opportunities within lifestyle and housing we've also announced a review of strategic alternatives for Global Preneed including a potential sale. This decision was not an easy one given the strength of the business and the considerable value its employees brought to Assurant. Global Preneed is a strong business with over two million policyholders throughout the U.S. and Canada. It has delivered consistent growth while generating robust cash flow and above market returns. It has nearly $6 billion in investable assets and is relatively low risk compared to other life insurance-type products. However, we believe the business has been historically undervalued as part of Assurant. So a transaction should unlock significant value by allowing us to deepen our focus on consumers' connected lifestyle and our differentiated P&C businesses. We expect that any proceeds from a potential transaction will be deployed to fund business growth with excess funds returned to shareholders over time. In the months ahead, we will provide updates on our progress as appropriate. And as always during this time we will continue to honor our commitments to clients and policyholders while delivering exceptional service. Now I'll provide a few key highlights from the third quarter that affirm our continued progress within our lifestyle and businesses. Within Connected Living, we've grown earnings 22% year-to-date. As we focus on continuing to drive long-term growth, we are moving forward with the build-out of our full-service customer capabilities, to deliver superior customer service to our 54 million mobile subscribers. This quarter, we also acquired Fixt providing mobile customers increased choice through a come-to-you repair capability. This acquisition complements last year's purchase of Cell Phone Repair or CPR that delivers the same-day local repair option. Like HYLA these investments will support the acceleration of our strategy, by expanding our capabilities and offerings, as we anticipate the ever-evolving needs of connected consumers. We also recently launched Pocket Geek Home, which offers personalized tech support and bundled protection of at-home technology, including laptops, gaming systems, and other electronics from accidental damage and mechanical breakdown. While it is still early, we believe this offering is an important step in the development of future-connected lifestyle protection products. In Global Automotive, we remain focused on opportunities to leverage our leadership position to scale in key global markets. In the U.K., we recently launched a new product for electric and hybrid vehicles called EV One. This includes a new partnership with a London electric vehicle company that will cover their iconic London black cabs and electric van models. This supports the continued growth of our auto business globally, while also gaining further insights into the evolving electric vehicle market. And it supports the U.K.'s move toward EV as a standard by 2035. Within Global Financial Services, we are pleased to announce the launch of a new partnership in Canada with the Bank of Montreal, leveraging our omnichannel customer capabilities as we continue to reposition the business for profitable growth long-term. Moving to Global Housing, we extended our agreement with yet another client in the lender-placed business. We've now renewed 20 clients, representing more than 85% of our tracked loans since the beginning of 2019. Lender-placed is a critical part of the mortgage landscape in the U.S., and continues to be an important component of our long-term strategy. In multifamily housing, we grew revenue and policies by 8% and 9% respectively, year-over-year. Our Cover 360 property management solution continues to gain momentum, and drive higher penetration of renters insurance, with our property management company partners. The product, formerly known as Point of Lease, allows the customer to combine their payment of rent and insurance. The solution now includes insurance tracking, verification, and policy placement to eliminate coverage gaps. We're now tracking more than 335,000 rental units, which grew 40% since the second quarter. We also believe that our increased investments around the connected home and connected apartment will drive new opportunities to increase P&C penetration rates. Turning to our key financial metrics, we're pleased with our progress against our 2020 objectives. Through the first nine months, net operating earnings per share excluding catastrophes increased 25% year-over-year to $8.69. Net operating income, excluding catastrophes was up 21% to $527 million. COVID-19 did not have a material impact on year-to-date results. For the full year, we now expect our operating earnings per share, excluding catastrophes to grow between 17% to 21% compared to 2019, well ahead of our initial expectations. The revised outlook largely reflects Global Housing's favorable non-catastrophe loss experience through the first nine months of 2020, as well as continued growth in Connected Living and our disciplined expense management. Our capital position has remained strong throughout the pandemic. In the quarter, we resumed buybacks and we've now returned over 50% of our $1.35 billion objective from 2019 through the end of September. We expect to return the balance by the end of 2021 as we originally planned, primarily supported by the strong cash flow generated by our lifestyle and housing businesses. All of this is a reflection of the continued dedication of our 14,000-plus employees globally. They continue to do an outstanding job of managing through the COVID pandemic, while providing exceptional support to our customers, including those impacted by natural disasters this year. I'll now turn the call over to Richard to review third quarter results, recent trends, and our 2020 outlook in more detail.

Thank you, Alan, and good morning everyone. I'd like to start by saying that we're really pleased with our third quarter. We reported operating earnings per share, excluding catastrophe losses of $2.85, up 25% from the prior year period. Net operating income for the quarter also excluding catastrophe losses was $172 million, an increase of 22% from last year, largely due to more favorable non-cat loss experienced in Global Housing, continued momentum in Global Lifestyle and improved results in Global Preneed. Sales trends across the board have been improving from lows recorded in March and April at the height of the pandemic and we are seeing more normalized levels of COVID-related claims activity in Global Lifestyle and Global Housing. Now, let's review segment results in greater detail, starting with Global Lifestyle. This segment reported earnings of $107 million in the third quarter, up 4% compared to the prior year period. This increase was primarily driven by Connected Living, where we benefited from new mobile subscribers. Improved profitability within extended service contracts also contributed to growth in the quarter. Within Global Automotive results, reflected continued pressure from lower investment income and investments to support growth. Declines in Global Financial Services reflected lower card balances and volumes, as well as less favorable loss experience, some of which was attributable to COVID. We also incurred additional expenses to launch new client programs. Looking at total revenue, net earned premiums and fees grew by $56 million or 3%. The increase was driven primarily by 14% growth in Global Automotive, including prior period sales of vehicle service contracts. We're continuing to monitor sales trends, which has stabilized but still trail 2019 levels on a year-to-date basis, due to impacts from COVID. Global Lifestyle revenue growth was partially offset by lower revenue from mobile trade-in, primarily due to the contract change we disclosed last quarter. This change lowered revenues by $39 million, as we changed reporting from a gross sales basis per device to a flat fee per device. As a reminder, this change will remove some of the revenue and expense variability we have historically seen in our financial results, and mitigate supply and demand pricing risk. Overall for the full year 2020, we continue to expect Global Lifestyle to grow net operating income when compared to full year 2019. Looking ahead, we anticipate an uptick in trade-in activity in the fourth quarter, which will continue into the beginning of next year. Volumes will depend on the following: the timing and availability of devices for new phone introductions, the level of carrier promotions, and the growth from new business. Looking ahead to 2021, we expect earnings expansion within lifestyle to moderate from the strong 2020 levels, which benefited from three items. First, $16 million of one-time benefits year-to-date; second, lower claims during the first few months of the COVID pandemic; and finally, lower expenditures on categories such as travel, given the uncertainty around the pandemic. We also expect ongoing headwinds from low interest rates on investment income. Moving now to Global Housing. Net operating income for the third quarter totaled $13 million compared to $42 million in the third quarter of 2019. The decrease was primarily due to $51 million of higher reportable catastrophes. As we pre-announced, we incurred a total of $87 million of after-tax cat losses related to several hurricanes and wildfires in the U.S. Nearly half of the losses in the quarter were from Hurricane Laura, with the remainder primarily related to Hurricane Sally and Isaias, as well as wildfires in California and Oregon. Excluding catastrophe losses, earnings increased $23 million year-over-year, or 30% to $100 million. Approximately two-thirds of the increase was due to favorable non-cat loss experience across specialty products and lender-placed. This included $8 million of favorable experience that we don't expect going forward, including reserve releases related to runoff businesses. Improvements in underwriting and product changes also led to more favorable experience. We also benefited from continued growth in multifamily housing from affinity partners. Within lender-placed, the results also reflected higher premium rates. Growth was partially offset by the reduction in policies in force driven by declining REO volumes from the current foreclosure moratoriums and the previously disclosed financially insolvent client. Looking at placement rates. We recorded a two basis point sequential increase in the quarter to 1.58%. This was attributable to a shift in business mix. It's not an indication of a broader macro housing shift. Turning to Global Housing revenues. Net earned premiums and fees decreased 4%. Similar to last quarter, this was driven mainly by three items: the exit of small commercial, the insolvent lender-placed client and lower REO volumes. This decrease was partially offset by growth in our multifamily housing and specialty property businesses. Multifamily housing revenues increased, driven mainly by growth from our affinity partners. For the full year, we expect Global Housing's net operating income, excluding cats to increase year-over-year driven by favorable non-GAAP loss experience as well as improved results in each line of business. Looking ahead, we expect to see more normalized non-cat loss experience, lower REO volumes due to foreclosure moratoriums that have now been extended through the remainder of 2020, and lower investment income due to lower yields. Specifically in the fourth quarter, we also expect Hurricane Delta to be a reportable event likely in the range of $12 million to $20 million pre-tax subject to further claims analysis, and while still too early in the claims process to speculate, Hurricane Zeta will likely be a reportable event as well. We will provide an update prior to fourth quarter earnings if necessary. Now let's move to Global Preneed. Overall, the business continues to perform well. The segment reported net operating income of $13 million, an increase of $6 million year-over-year. The absence of the negative one-time accounting adjustment in the third quarter of last year was offset by lower investment income this quarter. While market mortality trends have fluctuated during the pandemic, the impact on mortality on earnings continued to be immaterial in the quarter. Revenue for pre-need was up slightly primarily due to continued growth in sales of our Final Need product and we are pleased to see a rebound in face sales since the second quarter, reflecting the reopening of funeral homes. Overall for Global Preneed, we expect 2020 earnings will approximate 2019 reported results. Moving to corporate. The net operating loss was $23 million, compared to $21 million in the third quarter of 2019. This was primarily due to lower investment income. For the full year, we expect 2020 corporate net operating loss to approximate $90 million mainly as the result of lower investment income and investments for growth. Turning to holding company liquidity. We ended September with $460 million or $235 million above our current minimum target level. In the third quarter, dividends from our operating segments totaled $245 million. In addition to our quarterly corporate and interest expenses we also had outflows from three items; first, we bought back $70 million of stock after resuming share repurchases in the quarter; second, we paid $42 million in common and preferred stock dividends; and finally, we had approximately $10 million of net cash outflows related to the acquisitions of Alegre and Fixt and the sale of our CLO platform. In the fourth quarter through October 30th, we repurchased an additional 330,000 shares for $41 million. Regarding the new debt issuance to support the financing of HYLA, we continue to target an overall debt-to-capital ratio of less than 30% and expect to remain within that target while also maintaining investment-grade ratings. For Global Preneed, we reported a $136 million goodwill impairment charge. This was related to the decision to explore strategic alternatives for this segment combined with the impact of the low interest rate environment. This is a non-cash charge and runs through net income. Moving forward, for the year, overall, we still expect dividends to approximate segment earnings subject to the growth of the businesses, rating agency and regulatory capital requirements, and the performance of the investment portfolio. In summary, we've delivered solid results and maintained a strong financial position throughout the pandemic. As we approach year-end, we remain focused on meeting our 2020 financial objectives and on building a stronger Assurant for the future. And with that operator, please open the call for questions.

Hey, good morning Mark.

Good morning Mark.

Good morning. Hope you all are well. On the vehicle business, the Global Automotive had a nice acceleration in earned premiums and fees up into the 13%, 14%. I think you had said that the new sales were still kind of lagging behind last year and year-to-date. Something is going on with the earned with the pickup there?

Sure. Let me start and then Richard can provide more details. In terms of the effects of COVID on the auto industry, we experienced a significant drop in sales during March and April. However, we have been in recovery since then. Looking at the current run rate, it is essentially at or above 2019 levels. We have not completely closed the gap in new sales for this year due to the earlier slowdown. Nevertheless, the momentum is strong and the business remains robust. Richard, would you like to share more about what's going on with NEP?

Yes. Exactly. And then again that's exactly right. The only other thing I would add is obviously some of the earned premium is what we've written historically not just this year in prior years too. So, from time-to-time, we've had seasonality where sales can be a little bit higher. So, the earnings can be a little bit higher. I always think relative to auto as in other lines of business it's good to look at it on a kind of a year-to-date basis and look over the last six months or year for trends.

Yes, the other thing I might add Mark is as we look to the future we feel very well-positioned going back to the reasons why we purchased the Warranty Group. And you heard in the prepared remarks we highlighted another step forward in electric which I think will position us to be one of the leaders around that as it grows in the market. So, well-positioned, performing well, and we look good as we look to the future for auto.

Just talk a little bit about the HYLA acquisition in terms of potential for customer expansion where they have relationships that you could perhaps build on.

Yes, what's interesting about HYLA is it really complements our business and what we do. So, we have our set of clients. We have end-to-end capabilities. What they have are generally different clients. So, they bring a variety of clients that we currently don't have a significant business with. So, they also bring a really superior software as a service and analytic capability that we can incorporate and drive into our programs over time. They've delivered strong double-digit growth over the past three years within their base. Now, they've started to expand. And together we'll have now more than 30-plus trade-in programs that are operating in key markets around the world and positions us well for the 5G megatrend. We don't know fully whether that will be a 2021 event or a 2022 event, but we'll be the partner of choice. I think for trade-in buyback around the world, after we close on HYLA.

And then finally your current thoughts on the lender-placed business, when you look at the non-serious delinquencies. What do you think is going to shape up on 2021?

Right now, our business is in a good place. Over the past few years, we've managed to maintain stable earnings, regardless of any business growth. With the evolution of our product and the efforts we've made over the last decade, we are now well integrated into the mortgage process. We've also been investing in our technology to enhance customer experience. However, in the short term, we are currently not experiencing any growth in our business placements. For instance, REO volumes are down significantly due to the foreclosure moratoriums. Nevertheless, we are well positioned if the market weakens next year. As mentioned earlier, we have renewed most of our tracked loans. While we cannot predict the housing market's movements, we anticipate that nothing significant will happen in the short term. If the housing market does weaken, we could see strong growth beginning in the second half of 2021.

Thank you.

Great. Thanks, Mark.

Thanks, Mark.

Hey, Good morning.

Thanks. Good morning. Good morning, everyone.

Good morning, Brian.

I have a couple of questions for you. First, regarding Global Lifestyle, did the Sprint deal have any impact on global covered devices in the quarter? Following that, could you provide more details on what you think the potential backlog is in terms of trade-ins? I understand you mentioned it picking up in the fourth quarter. Additionally, could you share a bit more context regarding the iPhone upgrade and the 5G upgrade cycle?

Yeah, Brian, thank you for the questions. On Sprint and T-Mobile, first of all, again I want to recognize the importance that we have of that relationship with T-Mobile. We've been their partner, supporting their innovation and disruption for the last decade. And that is really the driver of our then now participating in the growth of Sprint. We are starting from zero. And there really the program has just begun to get going. It took a couple of months after the closing before T-Mobile really began to convert the stores, as they wanted to make sure they didn't disrupt things during that conversion phase. So, we're starting to see some impact, but it's going to be a gradual ramp. We're also investing, as you might expect to help all the legacy Sprint stores be in a good position to sell our products, as people come in. So, not a lot of impact so far, but will be a significant growth driver over the next two to three years, as that program really ramps. In terms of the trade-in and buyback cycle, what we've seen in the last three or four years is that the volume really begins in the latter part of Q4. And then really into Q1. And that's again what we expect to see this year. We'll see some volume beginning in Q4, but the bulk of the volume in the last couple of years has been lagged into the first quarter of next year. And it really is driven by one that new iPhones are available. And if you noticed their announcement a couple of the new models were out right away, but a couple of the new models are still not out. And so, we'll see that over time. And I mentioned 5G earlier. This is the first year that the iPhones really have 5G capability, which is a real positive. But, when will consumers really get excited about 5G, we don't know for sure. But as we mentioned earlier, we're now well positioned to support our carrier partners with 5G when it happens.

Great. And then, two quick questions here on Global Housing. The first one, the underwriting initiatives that you guys implemented, maybe a little more color on what those were? And what the impact was on the underlying combined ratio, because I assume that's going to be sustainable here going forward.

Yes. Richard, do you want to take that one?

Good morning, Brian. The changes we made in underwriting affected a few different products. First, regarding small commercial, we initially entered that market but had a negative experience, so we decided to put it into runoff. We have no plans to re-enter that market, which is a positive outcome. In the sharing economy, we previously mentioned an unsatisfactory product with one client, but we've since seen good results and are moving forward positively. As for your question about what will persist, we’ve had some positives in the non-cat loss ratio this year that aren’t expected to repeat, such as around $8 million in reserve releases. We do not foresee those continuing. We’ve also experienced a good trend in lower frequency severity with incidents like theft and vandalism, but it’s uncertain whether that will continue in the future. So, there are aspects that will continue, some that likely won’t like the reserve releases, and then others where we’ll need to observe future developments.

It's been a busy year for catastrophe losses due to global warming and other factors, with some suggesting that this might become the norm. My question is whether a year like this one prompts you to reevaluate your reinsurance program, possibly considering adjustments such as increasing aggregate cover to help manage the volatility in the business.

Yes. Maybe I can offer a few thoughts and then Richard, you should offer a few more. I mean, if you look at the last few years, we've dramatically changed our exposure to cat. We've done things like taking the retention down to $80 million where it is today from $240 million five years ago. We've exited certain lines that we were participating in the Caribbean. We've reduced exposure by exiting the small commercial business. And so we do feel very good about the portfolio and it's performing well. If you look at through the third quarter even with an active cat year, our ROE in housing is something like 14% or 15%. And so it's still performing and delivering well. With that said, every year we revisit how we think about the risk-reward trade-offs on the cat program. And Richard maybe you want to comment a little more on how we're thinking about that in 2021?

Yes. Thank you. And I think Alan, you hit on a lot of the very key points which is part of cat is managing the exposure to cat. So we're very thoughtful in terms of what risk we're taking on. Obviously lender-placed, we have the exposure; we have given that flows through from the clients too to ourselves. But every year we look at it as Alan said. We look at what can we do to manage our exposure, whether it be bringing down our retention. Brian you'd mentioned buying in aggregate. That's obviously something that we look at every year. At the end of the day, there's economics around it and there's pricing in the market. So we look at that and say, "Is it thoughtful for us to buy more reinsurance, or is this a risk we're happy to hold given the pricing out there in the market?" As Alan said we can have a quarter like last quarter where we do get hit by natural catastrophes. But over a period of time and I would say just one year, our combined operating ratio ends up being well below 100 and the ROEs on this business are very positive. So we're managing around that, being thoughtful around that and where there are good economic opportunities to lower our exposure, we will definitely take that.

And Brian if I step back from housing and look at our overall portfolio at this point, we've delivered strong profitable growth. We expect to continue to deliver strong growth no matter what the market environment is. And it's really that combination of lifestyle and housing capabilities and products that does that. And as we look to the future and we mentioned briefly in the prepared remarks, Pocket Geek Home, we see a real convergence coming between lifestyle and housing and great opportunities around the connected home, the connected apartment and a whole new set of growth drivers for us as we look to the future. So we feel good about the portfolio. We'll always fine-tune our cat exposure. But we feel like we're in a pretty good place with that at the moment as well.

Great. Thanks.

Hi. Good morning, Mike.

Good morning, guys. Thanks for the questions. One more on the housing side. Not just the last two quarters, but probably looks like the last couple of years you've had a nice downdraft in the expense ratio. I guess maybe you can talk about what you're doing to make that happen. And should we expect that to continue, or are we kind of at a level you like it to be?

Yes. Maybe, again, I'll start and then, Richard, you should add into it. I mean, the business is in a good position today, as we've worked to drive efficiencies. We've, for example, been investing in improving various processes, using artificial intelligence and automation and that has helped us. We are in the middle of converting clients to our single-source processing platform, which really delivers over the next few years a much simpler and better customer experience. But I don't think we'll have continued improvement in that ratio. What I mean by that is, we've worked with our regulators to kind of agree a normal range combined ratio. And Richard, you may want to talk about that and how we think about that with our regulators. But we feel good about where it is today.

Yes, we do. And I think the team has done a great job in managing expenses. If we think about the last couple of years, we've seen the revenues come down and now they're coming down very little. I mean, we've talked about the financially insolvent client that put a little bit of headwind. But over the nine months, we're down not much at all, let's call it 5%. So in terms of the expense management I think we are at the bottom with the discipline we have and what we need to deliver to our customers which is obviously at the forefront of our thoughts. And with regard to the regulators, obviously, the regulators take into account the experience we have. So if there's years where the overall loss ratio is really high, we could go and ask for some pricing improvements. If it's too low, obviously, that gets taken into account. So, overall, I think even if the expense ratio though a lot lower, we would see that come through rate over time. I think where we're looking at the expense ratio, was from a competitive point of view to be able to operate and produce the most efficiency for our customers, so they get the best experience that we can offer them.

Okay. Thanks. That's helpful. You both mentioned and Richard did and I think Alan did, I know, it was in your press release. Improved profitability in the extended service contracts and maybe what's driving that and how you expect that to continue. Or where should we expect it to be as we get into next year?

Richard, do you want to take it?

Yes. I think first, it has had some good operations, good results in the beginning of the year here, in the last quarter in particular. That's really coming from lower client losses experienced last year. And now what we're seeing is, a little bit more normalized experience, so better experience this year. So we think now where we are, we're kind of in a more normalized place than we were in the past, if I can put it that way.

That's helpful. I have a question regarding the U.K. and electric vehicles. As cars become increasingly technology-driven, how will the business of extended service contracts and auto warranties evolve over time as we see a higher percentage of vehicles that are essentially computers on wheels compared to earlier models?

Yes. No you raised a great point. So as we think about the future, a couple of things happen with the car. One is the car just becomes a big connected device. So if you think about the early days of the car phone 25, 30 years ago, now in the future everything in the car is connected all the time, particularly once 5G gets rolled out. So there'll be a whole set of value that we can deliver through our service contract around keeping you connected. It's basically what we do in mobile today. And we see that coming to auto. So that's one thing. And then, if you think about electric vehicles, for example, you'll have fewer things that can go wrong, but you'll have much higher severity when something does go wrong. And so, we're learning. One of the reasons we've been pushing hard with electric, we've done a deal in China, we've now done the deal in the U.K. is to really develop the data and the learning, so that we can be the most compelling offer to support what we think for a consumer will be even a greater interest in the service contract, both because of the nature of the risk, but because of the connectivity of the car. And that really is an area where we feel our business being in both mobile and auto gives us a unique set of advantages in the market.

Okay. Makes sense. It sounds like interesting times in that regard. So I look forward to that. Thank you guys. Appreciate it.

Thanks, Mike.

Good morning Bose.

Good morning. I wanted to inquire about the Global Housing. Is there any update on the Bank of America RFP related to that?

No. We believe we have the best capabilities and the most value to offer our clients. This process is ongoing and confidential. As I have mentioned before, the incumbent always has a significant advantage. However, we are doing everything possible to present ourselves well in every market opportunity, and we truly believe we have a strong offering. We'll just have to wait and see how things unfold over time.

Okay great. And then actually switching over to your commentary on year-over-year growth in NOI. I mean there are quite a few moving pieces there but do you think you can do double-digit NOI growth in 2021?

Yes. Let me make a few comments on that. First of all, we'll provide an outlook in the Q4 earnings call in early February regarding our expectations for 2021. 2020 has been a very strong year for earnings growth, and I'm really proud of what our team has delivered for our customers, clients, and shareholders. However, the strong performance in 2020 presents some year-on-year challenges for 2021. Earlier this year, we had about $16 million in one-time benefits in lifestyle, and we have never assumed that a one-time benefit will recur. We also saw about $8 million from favorable experiences mentioned in Q3 in housing, which we do not expect will happen again. Additionally, we benefited from expense management actions, where we deferred some hiring and reduced travel, which will eventually come back. While we expect growth in 2021, we anticipate it will moderate compared to 2020. Overall, during our Investor Day, we mentioned that, on average, we would grow operating earnings, or NOI excluding capital, by 12% in 2020 and 2021. Initially, we thought growth in 2020 would be slightly lower than 12% and somewhat higher in 2021. With the stronger performance in 2020, we now expect growth to moderate a bit in 2021. Nonetheless, we still believe that the average EPS growth target of 12% for 2021 remains appropriate.

Okay, great. Thanks very much.

Hey, good morning Gary.

Good morning. I have a broader question about customer behavior. We've recently experienced a significant experiment in the United States regarding the impacts of economic shutdowns and how working from home has altered people's interactions with electronics and other products. I'm interested in understanding what changes might be lasting versus what might be temporary and revert back next year. I would like to know your thoughts on whether anything has been permanently accelerated or altered in your customer engagement practices.

Gary, thank you for the question. And as you imagine we've spent a fair amount of our time thinking about what are the long-term implications of COVID. I think for us the first thing I'd highlight is just how resilient our business is. It shows the value of kind of an embedded subscriber base a range of services that really allow consumers to stay connected. And one of the things that I think COVID has highlighted with the move to be at home more then move to some sort of hybrid working model and more likely post-COVID being connected is everything. And what we do around connecting your devices making sure everything your home is working that's really important. So I think that actually helps us even more as we look to the future. A couple of other things we see with COVID digital. Digital was obviously already a trend that we've been investing against for years. But I think the acceleration of digital is real and permanent. And we for example in the last six months or so we really upped our investment in digital everywhere. So today we feel like an example in rental multifamily, our digital capabilities are at or better than anybody's in the market. So we see digital kind of as an ongoing trend. And then, the other thing we're thinking about are, are there changes for example in global supply chain? So, we may think about that over time. But at the end of the day, I would highlight just how strong our business has performed through this uncertainty and just shows the value of what we're doing for our customers and how much they appreciate being able to stay connected and having everything in their home work the way they wanted it to.

Thank you for that. I also had a question on the HYLA comments about the higher attachment of trade-ins. And I just wanted to understand better, what it is that HYLA is doing to make the customer more interested in trading in rather than keeping their phone?

Yes there are a couple of things that are interesting that will be additive for us. One is their analytics are very impressive. So, they can give effectively through analytics you can offer a better price to the consumer. So that's one important item. Second, with their analytics and their capabilities often now, we can offer a quote without having to see the phone and have certainty that will be the quote for the consumer. And that also increases the attach rates. And then the other thing they've done well and we also do is work with our clients to really help them understand how trade-in can drive persistency and retention for their customers. So, it's a combination of all those things. But they've got a strong track record of being able to drive up the attachment of trade-in, which is still an opportunity to continue to get better at. But they've shown the ability to work on and improve it year-on-year for several years in a row now.

All right. Thank you very much. That’s it from me.

All right. Thanks, Gary.

Yes, thanks. One last just follow one last quick follow-up. On the preneed sale, any timing that you can kind of give us on kind of when you think the process may be done? And then also on that, any kind of thoughts on what the potential valuation would be?

Yes. Regarding the process and valuation, we are just beginning. I want to emphasize that we are still in the early stages, but we are exploring a variety of options. A useful reference is our experience with Employee Benefits, which took us approximately four or five months to reach an offer, followed by a similar timeframe to finalize the deal. While I can't predict if this timeline will apply here, it serves as a reasonable framework. Concerning the valuation, I won't speculate, but we believe it will be attractive for our shareholders. Recent life insurance transactions indicate a significant interest in assets like our preneed business, and we feel that it is not accurately valued in our stock. We anticipate that whatever action we take will create value for our shareholders over the next four to nine months as we navigate the process and aim for a successful closing.

Great. Thanks.

All right. Thank you. And I think that was the last question. So with that, I want to thank everyone for participating in today's call. In summary, we're very pleased with our year-to-date performance and believe the recent strategic announcements we've just made to focus even further on our lifestyle and housing offerings will ultimately increase our earnings momentum and cash flow and deliver value for our shareholders over time. We'll update you on our progress in the fourth quarter earnings call in early February. In the meantime, please reach out to Suzanne Shepherd or Sean Moshier with any follow-up questions. Thanks everyone.