Assurant Inc (AIZ) — Q1 2026 Earnings Call Transcript

Thank you, operator, and good morning, everyone. We look forward to discussing our first quarter results with you today. Joining me for Assurant's conference call are Keith Demmings, our President and Chief Executive Officer; and Keith Meier, our Chief Financial Officer. Yesterday, after the market closed, we issued an earnings release announcing our results for the first quarter 2026. The release and corresponding financial supplement are available on assurant.com. Also on our website is a slide presentation for our webcast participants. Some of the statements made today are forward-looking. Forward-looking statements are based upon our historical and current expectations and subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in the earnings release, presentation and financial supplement on our website as well as in our SEC reports. During today's call, we will refer to non-GAAP financial measures, which we believe are important in analyzing the company's performance. For more details on these measures, the most comparable GAAP measures and a reconciliation of the two, please refer to the earnings release, presentation and financial supplement on our website. We'll start today's call with remarks before moving into Q&A. I will now turn the call over to Keith Demmings.

Good morning, and thank you for joining us. Following a remarkable 2025, where we delivered our third consecutive year of double-digit earnings and EPS growth, we're pleased to share that 2026 is off to a strong start. The first quarter represents the strongest performance in Assurant's history, driven by record earnings in Global Lifestyle. We delivered 6% growth in adjusted EBITDA and 9% growth in adjusted EPS, both excluding reportable catastrophes. When excluding impacts from Global Housing's prior year reserve development, these metrics grew 8% and 12%, respectively. Once again, our diversified portfolio and disciplined execution supported strong performance in a dynamic operating environment. Our results this quarter reflect the momentum we've built across the enterprise, supported by the durability of our earnings. We leveraged the strength and flexibility of our capital position to accelerate share repurchases during the quarter given our compelling valuation. At the center of our performance is our talented workforce, leading with insight, challenging convention and delivering with discipline. Their commitment continues to help us and our clients win together, as we redefine protection and related services and create value across the markets we serve. The first quarter represents an exceptional start to the year, reinforcing our path to achieving our tenth consecutive year of profitable growth. Turning to Global Lifestyle. We delivered an exceptional first quarter with double-digit earnings growth in both Connected Living and Global Automotive. In Connected Living, earnings increased 18%, driven by expansion with existing clients and continued optimization of recently added programs. As our earnings benefit from the momentum we've built, we continue to execute on our compelling pipeline of new opportunities with 4 new mobile announcements this quarter. First, our long-term agreement with T-Mobile supports our leadership and innovation in this space. Following the success of our reverse logistics partnership, we deepened our relationship following T-Mobile's acquisition of U.S. Cellular, successfully migrating another large in-force mobile subscriber base and contributing to an increase in our total devices protected that now stands at nearly 69 million devices globally. Like our prior device protection migration with Sprint, this reflects our proven ability to quickly transition large, complex device protection portfolios with minimal disruption and low subscriber churn, a critical proof point for potential new clients. Taken together, these milestones reinforce the strength of our relationship with a leading U.S. carrier and highlight the strategic value of our integrated mobile protection, repair and logistics platform. Second, we're extending our leadership in reverse logistics through a new opportunity with another large U.S. carrier. This engagement expands our existing services to support all device return and disposition channels. Return devices will be repaired for circular usage, creating incremental value across their network. Devices will be processed through our highly automated Nashville device care center demonstrating how our investments in scaled infrastructure and operational excellence are enabling us to deepen relationships with key mobile partners and unlock new growth opportunities. Third, we recently expanded our partnership with Xfinity Mobile through a new rate plan that includes lifetime device protection for phones, tablets and watches, and includes a benefit that allows customers to receive a phone upgrade anytime. These benefits are embedded in Xfinity's Mobile Plus plan at a single bundled cost to customers. This milestone builds on our 10-year partnership with Xfinity and underscores our shared focus on long-term customer value. And finally, following last year's introduction of Verizon's Total Wireless Protect, we expanded the offering to now include a more comprehensive loss and theft product. In addition, we recently launched Straight Talk Protect. This collaboration represents our third prepaid brand with Verizon, and further strengthens our footprint with this major carrier. Our success over the last 2 years in mobile has built extraordinary momentum. Our embedded scalable model demonstrates mobile's multiple growth paths, deep client entanglement and our innovation-led operating model. Turning to Global Automotive. Following an inflection year in 2025, earnings increased 23% in the quarter, benefiting from higher investment income and continued loss improvement. Our performance this quarter positions the business for continued growth in 2026 as we remain focused on solidifying and expanding existing partnerships and winning new business across the globe. To support future growth, we're advancing capabilities utilizing AI across the business. Throughout 2026, we'll be introducing new products and capabilities fueled by AI, focused on enhancing dealership training, streamlining claims processing and improving customer experience while leveraging our scale to drive share gains with existing partners and win in the marketplace. Turning to Global Housing. Following 2025's performance, where we surpassed $1 billion in adjusted EBITDA, excluding catastrophes, our first quarter results position us for solid underlying earnings growth in 2026, excluding prior year development. Underlying performance in the quarter was driven by double-digit top line growth in homeowners. For the year, we continue to expect a combined ratio in the low to mid-80s. This excludes prior year development and reflects our full year catastrophe assumption of $185 million. We differentiate housing's performance through strong returns, client retention and renewal execution. During the first quarter, we completed 2 long-term renewals with large lender place partners representing over 5 million loans. As we look at the remainder of 2026, we see clear opportunities to further build upon our market-leading position as we execute on our robust new business pipeline. In renters, we continue to see strength in our property management company channel, supporting ongoing growth in policies and reinforcing the effectiveness of our strategy. This channel continues to grow premiums double digits as today, we serve 6 of the top 10 property management companies. Our partners are realizing significant benefits from our platform. Throughout 2026, we remain focused on scaling our latest version of Cover360, which is driving double-digit penetration in premium lift across our property management company client base. Assurant continues to differentiate our performance while reinforcing our attractive valuation and compelling investment profile. Our differentiated portfolio of lifestyle and housing businesses continues to deliver diversified earnings and cash flow, supporting strong returns, robust cash flow and attractive growth with lower volatility. Since 2020, we've grown adjusted EBITDA at an 11% compounded annual growth rate, while growing adjusted EPS at a 17% CAGR, both excluding catastrophes. This was supported by strong returns, generating an average ROE of approximately 14% and a return on tangible equity over 30%. Our outperformance against the broader S&P 1500 property and casualty group demonstrates our multiyear track record of differentiated results. Over the last 5 years, we've outperformed the group median for adjusted EBITDA and EPS, including catastrophes and in line or better when excluding catastrophes. Finally, I'll provide an update on Assurant Home Warranty. While we're still very early, the launch of our new long-term relationship with Compass International Holdings spanning 6 U.S. real estate brands continues to progress well. As we ramp, we're working closely with Compass to drive agent education, marketing, product penetration and a positive customer experience. We believe our Home Warranty Solutions are resonating in the market, reinforcing our confidence in both our strategy and our ability to scale over time. For Assurant overall, first quarter was a strong start to the year, supported by the durability of our earnings model, the strength of our partnerships and our disciplined execution across the enterprise. We are proud of the long-term performance we've continued to drive, delivering consistently, investing for growth and creating value for shareholders. I'll now turn the call over to Keith Meier to speak to the underlying growth levers of our business, including our updated 2026 outlook. With that, Keith, over to you.

Thanks, Keith, and good morning, everyone. 2026 is off to an excellent start. We're excited about our performance and our increased outlook for the full year. We're operating from a position of strength, reflecting our powerful B2B2C distribution strategy in both lifestyle and housing. We continue to embed innovation across everything we do, deploying technology enhancements including AI and automation to drive simpler, faster and more consistent outcomes for our clients and customers. Our results this quarter are the product of disciplined execution and our commitment to operational excellence as we deliver differentiated customer experiences and attractive returns for shareholders. Before reviewing our updated 2026 outlook, let me start by highlighting our strong first quarter results, beginning with Global Lifestyle. First quarter adjusted EBITDA increased 20% or $39 million compared to last year. Results included a $13 million real estate joint venture gain, of which $10 million was in Global Automotive. Within Connected Living, EBITDA growth was 18%, or $22 million, led by continued expansion with existing clients and optimization of recently added programs. Strong growth within our mobile device protection programs was supported by the addition of over 4 million subscribers across our U.S. and international partnerships, including T-Mobile's conversion of U.S. Cellular to Assurant. In Global trade-in and reverse logistics, we processed nearly 7.5 million devices, an increase of approximately 2 million, driven by our reverse logistics programs and underlying organic growth. In Global Automotive, adjusted EBITDA increased 23% or $17 million, including $10 million from the real estate gain. Excluding that gain, earnings in Global Auto increased 9% or $7 million. This growth was driven by continued improvement in loss experience following prior rate actions, enhancements to claims processes and product designs within our vehicle service contract offerings and improved performance in our guaranteed asset protection, or GAP, product. For Global Lifestyle overall, net earned premiums, fees and other income grew 11%, primarily driven by Connected Living growth from mobile trade-in and global protection programs as well as the recent launch of our partnership with Best Buy. Moving to Global Housing. First quarter adjusted EBITDA was $237 million, including $24 million of reportable catastrophes. Excluding catastrophes, adjusted EBITDA was $261 million. Absent the impacts of lower favorable prior period reserve development, underlying results were level year-over-year. First quarter results included a more normalized non-cat loss ratio of approximately 38%, excluding prior year development, aligned with our expectations. This compared to a loss ratio in the first quarter of 2025 that was lower than typical. Strong growth from higher in-force policies and average premiums in lender-placed allowed us to offset a more normalized loss ratio. Additionally, we saw growth from specialty products and higher investment income. Turning to our catastrophe reinsurance program. We are very pleased with the outcome of our 2026 program placement, which was finalized on April 1. Through our continued partnership with roughly 40 highly rated reinsurers, we secured strong coverage once again with more favorable terms than the prior year. Our program retention of $160 million is consistent with our retention from our 2025 program, representing a 1-in-5-year probable maximum loss, or PML. Our main U.S. program provides nearly $1.6 billion of loss coverage in excess of our retention, protecting Assurant and its policyholders against severe events for up to a 1-in-265-year PML. Our protection in Florida is even more robust with $1.8 billion of loss coverage in excess of our retention. In terms of costs, our 2026 catastrophe reinsurance premiums are estimated to be approximately $180 million, compared to approximately $200 million in 2025. The reduction reflects favorable market pricing, the strength of our portfolio and lower Florida exposures. Lastly, in Corporate and Other. First quarter adjusted EBITDA loss was $32 million, which includes investments made in our Home Warranty business. Turning to capital. Our liquidity position at quarter end was $836 million, providing flexibility to continue to invest in growth, return capital to shareholders and support future opportunities that enable Assurant to drive innovation for our clients and customers. This quarter, we returned $169 million to our shareholders, including $125 million of share repurchases and $44 million in dividends. Our strong capital position allowed us the flexibility to accelerate our repurchase plans during the first quarter. On May 1, we repurchased an additional $30 million. Over the remainder of the year, we'll continue to evaluate capital deployment opportunities using a disciplined and balanced approach. Let's move on to our outlook for 2026. We now expect full year adjusted EBITDA and earnings per share to grow low single digits, both excluding catastrophe, overcoming $94 million of lower favorable prior year reserve development. This includes $113 million in 2025 and $19 million in the first quarter of 2026. Excluding the impact of prior year development, we expect high single-digit underlying growth in both adjusted EBITDA and earnings per share, excluding catastrophes. Global Lifestyle is expected to lead the growth for Assurant. We're increasing our outlook for Lifestyle and now expect growth of approximately 10%, reflecting our strong first quarter results. Connected Living results for the year will benefit from continued optimization of new programs, expansion with existing clients and contributions from recently announced new programs and capabilities, demonstrating the returns we've achieved through previous investments. Global Auto is expected to grow from higher investment income, continued loss improvement and growth of global partnerships. Turning to Global Housing. Our outlook has improved, and we now expect earnings to decline only modestly excluding catastrophes. Absent prior year development, we continue to expect solid underlying growth for the full year. Consistent with our past approach, our 2026 outlook does not contemplate potential prior year reserve development for the remainder of the year. In lender-placed, we expect growth to be driven by higher tracked loans and in-force policy growth from expected new client wins and the continued hardening of the voluntary homeowners market. From a placement rate perspective, we anticipate some quarterly fluctuations from client loan movements during the year. From a capital perspective, our strong cash generation creates flexibility, enabling us to reinvest for growth, including M&A and return excess capital to shareholders. For 2026, we now expect share repurchases of $300 million to $350 million, which is at the high end of our initial range from the beginning of the year and is subject to M&A and other market conditions. Our first quarter results demonstrate the strength and consistency of Assurant's differentiated business model. We look forward to executing on our increased financial objectives while delivering results for our clients and shareholders throughout the year. With that, operator, please open the call for questions.

The Connected Living results are quite strong in the quarter. Can you talk about your longer-term view on that business up 18% earnings? You got a good slide on a lot of the new business wins and renewals. Are you thinking that that is a faster growth business? Or are we just hitting it at a good peak here where you're executing on the pipeline, but it may not be sustained at this level?

Yes. It's certainly a fantastic start to the year overall. If you look back the last 3 years or so, we've grown our EBITDA and EPS overall double digits and it's a fantastic way to start the year this year with significant performance, our best quarter story in history and Lifestyle, obviously delivering outstanding results. I think when I look at it, I'd probably highlight three big drivers. First is the scaling of our device protection subscriber counts. Over the last year, it's up 4.3 million subscribers year-over-year. That's a lot of hard work, a lot of innovation with partners. We've done incredible things with our cable partners. We've launched new clients like Total Wireless, which is contributing significantly. We've launched programs internationally with clients like Telstra. And then with U.S. Cellular and our relationship with T-Mobile, that's driving a lot of momentum across the board for our protection business. That's certainly the biggest driver of our overall outperformance in Connected Living. We're also maturing some of the non-mobile programs that we've announced to the market as well. Our relationship with Best Buy being one example, our relationship with Chase. These are two really important clients for us, and they're growing and contributing nicely. And then finally, you saw a lot of growth in device services, not just from our trade-in programs maturing and driving organic growth, but also the investments we've made in reverse logistics. So it does feel like we're in a great position. I feel great about how we look for the future.

I want to ask — I don't know if you think of it this way, but the market share that you have got, if you put the main Verizon and AT&T programs to the side — I'm sure that's within your target area. But if you look at the size of the market, aside from those two big pieces of business, how much share do you think you have? How much more opportunity is there for further growth?

Yes, I still think there's a lot of white space in this market, particularly as we think about the global opportunity. We're in more than 20 countries around the world. Programs continue to mature. I think the product set continues to evolve. We've got a really deep value chain that we deliver across a wide range of services. So I think there's a tremendous amount of upside. We're innovating, we're winning with new entrants and we're scaling in a way that's meaningful. I do feel really good about that. Keith, do you want to add?

When you think about Connected Living overall on top of that, we have opportunities in the extended service contract side, and you saw that with Best Buy. We also have our financial services business performing well with the addition of Chase and other marquee clients. So when you look at Connected Living, in terms of what the opportunities are in the future, I think there's a lot of white space and opportunities ahead.

Staying on the same topic here, you've had some really good success with those two largest carriers in the U.S. being Verizon and AT&T. Can you start off just rehashing reminding us all of the services that you're now providing for each of those carriers?

Happy to do it at a high level. We've been making progress across the board in the U.S. with every major operator. If you think back to the acquisition that we made of Hila back in 2020, a big part of that was they did a lot of great work with partners that we weren't necessarily doing as much with. With Verizon, the growth we've seen on the prepaid side is notable: we support their visible brand, their total brand and now Straight Talk Wireless, and it's a fantastic relationship. We're innovating and launching new products and we're excited there. We provide a range of supply chain-related services as well. With AT&T, we do a lot of work around the supply chain and historically we've been a big trade-in partner for them. Long-term opportunity is about building deep relationships, solving problems, building trust over time and finding creative ways to innovate.

Your remarks noted that these large carriers often have different prepaid brands, something I had admittedly overlooked. A similar dynamic exists on the postpaid side such that there could be an opportunity to win select postpaid segments for the big carriers? Or are those more of an all-or-nothing national program?

You could think of it that way. There are certainly opportunities if you separate consumer from enterprise, so you could have postpaid customers that are consumer-branded versus enterprise-branded small business, etc. But generally speaking, most of the postpaid is under a single brand and it's managed by a single provider. Not to say you couldn't have a variation to that over time, but that's typically how it works.

Could you talk about your growth strategy for the new Home Warranty business just in terms of building that out beyond the Compass partnership and how you plan on doing that? And are you building out the contractor network as well there?

We absolutely are building out the Home Warranty business and contractor network. We're happy with the partnership we have with Compass. We're still very early in the ramp and rollout, but there's complete alignment about the importance of delivering for customers, keeping the agents at the center of everything we do, and leveraging technology to integrate the offer naturally into the real estate process. Volumes are ramping, the agents continue to get educated about our solution, and our message and vision are resonating in the market. In terms of other opportunity, we're having many conversations with potential long-term partners, whether that's with current affinity clients that we do business with today, or additional opportunities to serve the real estate sector. There are multiple ways for us to drive growth and our solution is unique, so I'm optimistic about where we're headed. Keith, do you want to add?

When you think about the contractor network, we have clients like Best Buy and Lowe's where we do a tremendous amount of appliance and related home services. We have other programs that round out several of the other home warranty services. We have a very robust network that positions us in stronger and better ways than some of the traditional players and we're able to leverage that.

Remember, we've been working on this rollout for well over a year to bring this to market in terms of the product, the service network and the full solution set. This is not something we started three months ago, even though that's what it feels like in terms of the announcement in the market.

How much revenue is the new Best Buy legacy book adding in Global Lifestyle? And are those products typically multiyear contracts? How should we think about that ramp? Is it over one year, over a couple of years?

You should think about it as a mix of shorter-term and longer-term contracts, so they can range from a couple of years to five years. Those revenues earn over time. We also recorded the assumption in the fourth quarter as well, which will help some of those earnings come through faster than they would have otherwise. Overall, you should see that evolving over the coming several years.

On the new announcements in mobile, is there any sort of upfront spending you'd call out that we should think about as offsetting the strong growth in EBITDA in Lifestyle that you're experiencing? And more broadly, can you help dimension the impact, the ramp we should expect on those programs?

U.S. Cellular was a move of an in-force block, so that starts to contribute immediately. There's a little bit of investment upfront to bring that to life, but that's behind us at this point. I would suggest that's immediately accretive as we think about the run rate going forward. The other three examples will be accretive to EBITDA in aggregate, certainly this year. So there's not a big investment spend that I would call out. I think they'll contribute positively this year and then ramp more naturally over time; it's certainly not a drag as we think about 2026.

On auto, you're clearly starting to get better results. Do you feel like you're out of the woods on loss costs there? Written premiums were down a little bit in the quarter, and I'd imagine you're still fairly early days as far as being on risk on some of the policies that were underwritten in that inflationary 2022 time frame. Can you give us a sense on claims frequency of those vintages too?

Last year, we talked about being a bit of an inflection year for us, and we've seen that roll into this year. Auto had a good quarter. We had favorable loss experience continuing, and that is aided by our prior rate increases, the enhancements we've been making to the claims processes, and the product designs we've been working on with our clients. Overall, it really speaks to the success that our auto team has been having and working with our clients to arrive at mutually beneficial outcomes. We feel good about where that business is today.

Did you guys update your catastrophe outlook for the full year?

Our catastrophe assumption for this year is $185 million, up modestly from $175 million last year, mainly due to the growth of the business. We're pleased with our 2026 reinsurance placement. Our program costs are expected to be about $180 million, down about $20 million from $200 million last year. That reflects favorable market pricing, the strength of our portfolio and a bit lower Florida exposure. The program was placed on April 1 and, from a comparative rate standpoint from last year, we were down north of 20%. We stayed with a 1-in-5-year PML retention and about a 1-in-265-year PML at the top of the tower, pretty consistent with last year.

Should we think about the seasonality of your catastrophe load being a little different given the geographic shifts that you're speaking to?

As it has been historically, the latter half of the year with the hurricane season is typically where it's weighted more, mostly in the third quarter time frame.

On Global Housing, placement rates keep picking up. I'm assuming that's still a function of the tight homeowners market. It seems like the homeowners market is starting to loosen up in some states even outside of Florida. Do you expect the placement rate to peak and maybe trend downwards as the market opens up a bit?

As we think about the year, we expect to add additional loans to the portfolio and policy counts to go up over the balance of the year. We'll see some fluctuation in placement rate. It hasn't shown evidence yet of shifting away from the hard voluntary market. We're still seeing pretty strong growth in California and Texas, and Florida is relatively stable. So we haven't seen a major shift in that trend line yet, but we're watching closely. We feel good about our position for the full year and the pipeline of opportunities our teams are working on.

You talked about how AI will enhance customer experience and streamline processing functions. From a productivity perspective, how are you approaching it? Are there KPIs to look at for potential margin enhancement over the next couple of years from what you're doing with AI?

There's no doubt we can improve the customer experience and remove friction to serve customers better, which is great for business and our clients. That also comes with efficiency gains. There's phenomenal opportunities to upscale our talent and leverage them in new ways. We're leaning into more personalized services and doing a lot of work around robotics and automation in our facilities. This is going to be a game changer over time. We're focused on high-value use cases that we can bring to scale, and I think we're on a good track to deliver that. Keith?

A concrete example: in housing, our general expenses last year are up 2% while our net earned premiums, fees and other income are up 11%. You're seeing expense leverage driven by our technology. Those are the kinds of metrics to look at. Technology is helping from an efficiency and expense perspective, and it's also helping us differentiate against the competition and deliver great customer experiences. We win on both fronts, which is why we're passionate about technology and having global platforms.

The fee income in Lifestyle was quite strong. You talked about good momentum in the reverse logistics program growth. I assume that's a contributor to that. I think the number of devices in service was up quite strongly. Was that helped by any particular programs in the first quarter, recognizing there's some seasonality there, but there seem to be a lot of strength. I know there's timing on some of these programs that can influence that business. How should we think about the coming quarters?

It was driven by our trade-in and reverse logistics side of the business. Devices-in-service have been growing significantly, and that's where the fee income has been growing as well. There is some seasonality, and we had a very strong quarter related to the trade-in side. We're looking forward to continuing our progress with clients in providing reverse logistics and trade-in services as we go forward. We feel good about the momentum.

Was there anything unusually robust about Q1? Any special programs, or is this just normal seasonality and contributions across multiple programs?

It was mostly seasonality, plus contributions across multiple programs and some of the newer programs gearing up. So it was well balanced with seasonality and program contributions.

All right. I think that was the last question. Again, thanks for joining. We look forward to talking to everyone after the second quarter, and I know we'll see many of you at our mobile event in Nashville next week. We look forward to that. Thanks again. Have a great day.