Welcome to Assurant's Third Quarter 2021 conference call and webcast. At this time, all participants have been placed in a listen-only mode. The floor will be opened for questions following management's prepared remarks. If you would like to ask a question at that time, please press star one on your touchtone phone. Lastly, if you should require Operator assistance, please press star 0. It is now my pleasure to turn the floor over to Suzanne Shepherd, Senior Vice President of Investor Relations and Sustainability. You may begin.

Thank you, Operator, and good morning, everyone. We look forward to discussing our Third Quarter 2021 results with you today. Joining me for Assurant's conference call are Alan Colberg, our Chief Executive Officer, Keith Demmings, our President, and Richard Dziadzio, our Chief Financial Officer. Yesterday, after the market closed, we issued a news release announcing our results for the Third Quarter 2021. The release and corresponding financial supplement are available on assurant.com. We'll start today's call with remarks from Alan, Keith, 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 detail on these measures, the most comparable GAAP measures, and a reconciliation of the two, please refer to yesterday's news release and financial supplement. I will now turn the call over to Alan.

Thanks, Suzanne. Good morning, everyone. Our third quarter results were strong, driven by double-digit operating earnings growth in Global Lifestyle. The strength of our Global Automotive and Connected Living offerings continues to validate our long-term strategy of focusing on our higher growth, fee-based, and capital-light businesses. We continue to make progress in building a more sustainable Company for all stakeholders. During the quarter, a few key highlights included. For the first time, Assurant was awarded a bronze accreditation by EcoVadis, one of the largest sustainability ratings companies, ranking Assurant among the top 50% of all 75,000 participating companies. In addition, this quarter, we provided additional transparency to track our progress on our journey to build a more diverse and inclusive assurance. With the recent disclosure of our EEO-1 report, which provides gender, race and ethnicity data by job category for our U.S. based employees. We believe a diverse and inclusive workforce will best foster innovation, a key ingredient to sustaining our out-performance longer-term. Looking at our financial performance year-to-date, net operating income per share, excluding reportable catastrophes, was $8.75, up 12% compared to the first 9 months of last year. Net operating income and adjusted EBITDA, also excluding catastrophes, both increased by 10% to $528 million and $862 million respectively. These results support our full-year outlook of 10% to 14% growth in net operating income per share, excluding reportable catastrophes, marking our 5th consecutive year of strong, profitable growth. Given year-to-date results and our expectations for the fourth quarter, we would expect to end the year closer to the top half of this range. We've also now completed our 3-year $1.35 billion capital return objective from our 2019 Investor Day, a quarter ahead of schedule. Following the close of the sale of Global Preneed in August, we've also made meaningful progress in returning an additional $900 million to shareholders. Our 2021 EPS outlook is driven by at least high single-digit net operating income growth excluding catastrophe, as well as share repurchases. Turning to our business performance in Global Lifestyle, we are on track to grow adjusted EBITDA by double digits in 2021 from $637 million in 2020, driven by Global Automotive and Connected Living. We have benefited from the stable recurring revenue stream of our installed base of mobile subscribers. And our success in launching additional offerings and capabilities for mobile carriers, cable operators, OEMs, and retail clients globally. Additionally, our mobile trade-in and upgrade business and expanded service delivery options are increasingly important to our profitability and also in providing a differentiated and superior customer experience. Within Global Automotive, we've benefited from increased scale, growing the number of vehicles we protect by 20% to over 52 million since The Warranty Group acquisition in 2018. We believe auto will continue to be one of our key growth businesses in the future. In Global Housing, we continue to be on track for another year of better-than-market returns with an annualized operating ROE of nearly 15% for the first 9 months of this year. This includes $113 million of catastrophe losses, which further demonstrates the superior returns in this differentiated business. Our countercyclical lender-placed insurance business remains an integral part of the mortgage industry framework in the U.S. As we renew existing clients and add new partners, we will continue to enhance the experience through the ongoing rollout of our single-source processing platform. Our multifamily housing business now supports over 2.5 million ventures across the U.S. and has more than doubled earnings since 2015 through our strong partnerships with our affinity and property management Company clients. Our investments in digital capabilities, such as our coverage 360 property management solution, continue to drive more value for our partners and enhance the customer experience. Overall, we believe our portfolio of high-growth, fee-based, capital-light offerings and high-return Specialty P&C businesses sets us apart as a long-term outperformer and sustained value creator for our shareholders. With my retirement at year-end, I wanted to take this opportunity to thank all of our stakeholders that have supported Assurant's strategic vision and path over the last 7 years. Most of all, I'm humbled by our 15,000 employees who, through their dedication to serve our clients and our 300 million customers worldwide, have successfully transformed Assurant. Together, we have significantly strengthened our Fortune 300 Company that should continue to deliver above-market growth and superior cash flow. With our president, Keith Demmings, succeeding me as CEO in January, I'm confident Assurant will accelerate our strategy and continue to differentiate our superior customer experience while further deepening client relationships. I'll now turn the call over to Keith to review our key business highlights in greater detail for the quarter.

Thank you, Alan. And good morning, everyone. On behalf of our employees, I wanted to express our sincere thanks to Alan for his leadership as CEO. I've been fortunate to have had a front-row seat and a role in supporting Alan's vision and the transformation of Assurant. Importantly, he has continued to evolve the purpose of our Company to drive value for all stakeholders, customers, employees, communities, and shareholders. The impact he has had on our people and the overall culture of our Company has been exemplary. I appreciate Alan's personal mentorship and partnership and wish him the very best in his retirement. As we build on Assurant's momentum over the long term, I believe our talent and innovation will be critical factors to achieving success and growth, especially as we focus more on the convergence around the connected consumer. From a talent perspective, Assurant has developed a deep and diverse bench of internal leaders. A few weeks ago, I announced our refreshed management committee effective in January, including two new leadership appointments illustrating our strong bench. First, Keith Meier, our current President of International, will succeed Gene Mergelmeyer as Chief Operating Officer, as Gene will be retiring at year-end. Gene's significant contributions to Assurant over the last 30+ years, including as COO over his last 5 years, have been instrumental in creating market-leading positions, producing profitable growth, and transforming the organization. In succeeding Gene, Keith Meier brings nearly 25 years of experience at Assurant to the COO role. Since 2016 as President of Assurant International, he's driven growth across our global markets, most recently with strong success in Asia-Pacific. In this new role, Keith will be focused on advancing Assurant's business strategy and market leadership positions, as well as identifying additional opportunities to deliver a superior customer experience. Second, Martin Jens will become President of Global Automotive. With over 30 years of experience, he currently leads the transformation and growth strategy for auto and has been instrumental in our introduction of innovative new products like EV One, our electric vehicle warranty protection. In addition to emerging opportunities and innovation, Martin will be focused on driving growth and improving the customer experience, including working with our partners to deliver best-in-class dealer training. These two new appointments, along with recent appointments of Biju Nair as President of Connected Living, and Manny Becerra as our Chief Innovation Officer, as well as the other management committee members, represent a strong team to help lead us into the future. In addition to talent, innovation is an important strength of the organization. Not only the development of new digital products and offerings for our clients, but also through new paths to grow and scale Assurant's businesses. Within Connected Living, innovation was a significant theme this quarter through ongoing enhancements of our mobile service delivery options. As part of the recently finalized multiyear contract extension with T-Mobile, we're expanding the services Assurant provides to continuously improve the customer experience for millions of T-Mobile customers. As of November 1st, Assurant is partnering with T-Mobile to begin the nationwide rollout of in-store device repair services to approximately 500 stores provided by Assurant's industry-certified repair experts. In addition, we have also transitioned all of the legacy Sprint protection subscribers to the new T-Mobile device protection offering. As a result, this significantly adds to our mobile device count, now at roughly 63 million as of November 1st. Overall, the expansion of our service delivery options is critical to sustaining our competitive advantage. We also recently signed a multiyear renewal with Spectrum Mobile, continuing to provide a comprehensive device protection program, which includes trade-in, premium tech support, and Pocket Geek mobile, Assurant's on-device diagnostic tool. With the renewal, we will also be expanding the offering to include Pocket Geek Privacy, which enables consumers to better protect and manage their personal information online through various features. This is another example of how we’re able to grow by adding services and capabilities to existing clients. In addition, the mobile business continues to see strong attachment rates given the increased reliance on mobile devices, as well as rising device prices. Our fee-driven trade-in and upgrade business, including the previous acquisitions of Hyla and Alegre, have performed extraordinarily well already this year as we enter the early innings of the 5G upgrade cycle. In fact, almost a year after the transaction of Hyla closed, I'm happy to report the acquisition has performed better than expected ahead of the low-teens forward EBITDA that the acquisition was valued on. With the growing availability and popularity of 5G-enabled smartphones, we expect to see our 30-plus trade-in and upgrade programs continue to grow. Our progress is demonstrated through our ability to manage large-scale programs with superior technology. This is further supported by increasing our attach rates for trade-in programs as our clients’ promotional efforts encourage consumers to upgrade. Overall, we have processed nearly 18 million devices so far this year, reducing e-waste, and increasing digital access with high-quality, affordable phones. Through the scale and capabilities of our trading and upgrade programs, we benefit from an additional source of profits and improved client economics and customer retention. This quarter, we are pleased to announce that we have signed a multiyear contract extension with AT&T to manage their device trade-in program. This includes providing analytics, as well as device collection and processing for all of their sales channels, including retail, B2B, dealer, and direct-to-consumer. AT&T was a key client added with the Hyla acquisition, and we look forward to continuing to do business with them, specifically as we help support the growing adoption of 5G-enabled devices. In Global Automotive, policies increased by $4 million or 8% year-over-year and production is well above pre-pandemic levels as we continue to take advantage of our scale and talent. So far this year, the business has also benefited from strong used car growth, which tends to earn faster than new car sales. This, along with the fact that earnings from the business are recognized over a multiyear period, provides good visibility into the future performance of the business. As we drive innovation within auto, we continue the global rollout of EV One, an electric vehicle and hybrid protection product from North America. EV One has now been rolled out in 7 countries. While the electric vehicle market is still in its infancy, our EV1 product will allow Assurant an opportunity to better evaluate customer demand and leverage our learnings to position us well for the expected increase in electric vehicle adoption in the future. Our multifamily housing business grew policies by 7% year-over-year from growth in our affinity partners, as well as our PMC relationships, where we continue the rollout of our innovative Cover360 product. In addition, we have seen other digital investments create opportunities for future growth. Our newly designed digital sales portal, which makes it faster and easier for residents to sign up for a policy, is driving significantly higher product attachment rates. Our new portal has seen an increase in conversion rates versus our legacy website that was first introduced last year. In summary, our ability to strengthen Assurant's talent and innovation supported by critical investments has and should continue to drive momentum for the future. I will now turn the call over to Richard to review the third quarter results and our 2021 outlook.

Thank you, Keith. And good morning, everyone. As Alan noted, we are pleased with our third quarter performance as our results reflect strong growth across Global Lifestyle and solid earnings in Global Housing. For the quarter, we reported net operating income per share, excluding reportable catastrophes, of $2.73, up 5% from the prior year period. Excluding catastrophes, net operating income, and adjusted EBITDA for the quarter, each increased 4% to $162 million and $262 million, respectively. Now, let's move to segment results starting with Global Lifestyle. The segment reported net operating income of $124 million in the third quarter, a year-over-year increase of 16%. Growth was driven by Global Automotive and continued earnings expansion within Connected Living's mobile business. In Global Automotive, earnings increased $8 million or 21% from continued global growth in our U.S. national dealer and third-party administrator channels, including contributions from our AFAS and international OEM channels. Better loss experience in select ancillary products and higher investment income also supported earnings growth in the quarter. Connected Living earnings increased by $6 million or 9% year-over-year. The increase was primarily driven by continued mobile subscriber growth in North America and better performance in Asia-Pacific, as well as higher trade-in volumes led by contributions from our Hyla acquisition and carrier promotions. This quarter, Global Automotive and Connected Living results also included a modest one-time tax benefit that improved earnings. For the quarter, Lifestyle's adjusted EBITDA increased 17% to $177 million. This reflects the segment's increased amortization resulting from higher deal-related intangibles for more recent transactions in mobile and Global Automotive. IT depreciation expense also increased, stemming from higher investments. As we look at revenues, Lifestyle revenues increased by $158 million or 9%. This was driven mainly by continued growth in Connected Living and Global Automotive. Within Connected Living, revenue increased 10%, boosted by mobile fee income that was driven by strong trade-in volumes, including contributions from Hyla. Trade-in volumes were supported by new phone introductions and carrier promotions from the introduction of new 5G devices. Higher revenue from growth in domestic mobile subscribers was offset by declines in runoff mobile programs. Mobile subscribers were up slightly year-over-year and flat year-to-date as mid-single-digit subscriber growth in North America was offset by declines in other geographies, mostly due to three factors. First, the 750,000 subscribers related to a runoff European banking program previously mentioned, which is not expected to be a significant impact in our profitability. Second, subscriber growth for existing programs moderating in Asia-Pacific. And third, a slower-than-expected recovery from the pandemic in Latin America. In Global Automotive, revenue increased 8%, reflecting strong prior period sales of vehicle service contracts. Industry auto sales remained elevated in the third quarter and we benefited from this trend as reflected in the year-over-year growth of our net written premium by 12%. We have, however, seen this trend begin to normalize beginning in the fourth quarter. For the full year, Lifestyle revenues are expected to increase modestly compared to last year's $7.3 billion, mainly driven by global auto and Connected Living growth. For all of 2021, we still expect Global Lifestyle's net operating income to grow in the high single digits compared to 2020. Adjusted EBITDA for the segment is expected to grow double digits year-over-year, which continues to grow at a faster pace than segment net operating income. As previously reported, we began our investment in the T-Mobile in-store repair capability this quarter. However, due to the timing of the rollout, most of our associated start-up costs will occur in the fourth quarter. These costs primarily relate to technician hiring and parts sourcing. We do expect these costs to meaningfully impact Connected Living's profitability as we end the year. In addition, we expect our effective tax rate to return to a more normal level, approximately 23%. Looking ahead to 2022, we expect earnings expansion to continue but more likely at more moderated levels as we continue to invest for growth, including additional implementation start-up costs for in-store service and repair. Moving to Global Housing, net operating income excluding catastrophe losses was $81 million for the third quarter. Including that $78 million of pre-announced catastrophe losses, mainly from Hurricane Ida, net operating income totaled $3 million. Excluding catastrophe losses, earnings decreased by $19 million due to anticipated higher non-CAT losses, which returned to levels more in line with historical averages. As a reminder, favorable losses in 2020 were not representative of historical trends in the third quarter of 2020 which marked the lowest point of last year. Mainly driven by last experience within lender-placed and specialty products. The year-over-year earnings decline was nearly all driven by unfavorable non-CAT loss experience from several factors. Largest Trivor, which contributed close to half of the increase, was from the expected normalization of the non-GAAP loss ratio. The balance of the decline was split relatively evenly between increased reserves related to our specialty P&C offerings, primarily in our on-demand sharing economy business, as well as higher claims severity. Claims severity included moderate impacts from inflationary factors, such as higher labor and material costs. Where there is always a lag, if this trend continues, we would expect higher loss cost to be offset by increased rates over time. In multifamily housing, underlying growth was offset by increased investments to further strengthen our customer experience, including our digital-first capability. Global Housing revenue decreased slightly year-over-year from lower specialty P&C revenues, as well as account reinstatement premium resulting from Hurricane Ida and lower REO volumes in lender place. This was partially offset by higher average insured values and premium rates in lender-placed and growth in multifamily housing. We continue to expect Global Housing's net operating income, excluding catastrophes, to be flat for the full year compared to 2020. For the fourth quarter and into 2022, we would expect non-CAT losses to continue to be above 2020, but in line with year-to-date 2021 experience, which is consistent with long-term trends. We also continue to monitor the REO foreclosure moratoriums and any additional extensions that may be announced. At corporate, the net operating loss was $21 million, an improvement of $4 million compared to the third quarter of 2020. This was driven by two items. First, lower employee-related expenses, and third-party fees. And second, expense savings associated with reducing our real estate footprint. In the fourth quarter, we do anticipate a higher loss due to the timing of spend. For the full-year 2021, we now expect the corporate net operating loss to be approximately $80 million, driven by favorable year-to-date results, mainly from the one-time tax and real estate joint venture benefits in the second quarter. This compares to our previous estimate of $85 million. As we look forward to 2022, we would expect our net operating loss in corporate to be closer to $90 million, more in line with historical trends. Turning to the holding Company liquidity, including the net proceeds from the sale of Preneed in August, we ended the third quarter with over $1.3 billion, well above our current minimum target level. In the third quarter, dividends from operating segments totaled $127 million. In addition to our quarterly corporate and interest expenses, we also had outflows from three main items: $323 million of share repurchases, $39 million in common stock dividends, and $11 million mainly related to Assurant Ventures investments. In addition to completing our 2019 Investor Day objective, a returning $1.35 billion to shareholders from 2019 through 2021, we have also completed roughly one quarter of our objective to return $900 million in Global Preneed sale proceeds through share repurchases. For the year overall, we continue with a quick update on Assurant Ventures, our venture capital arm. In the third quarter, three investments in our portfolio went public via SPACs. We are pleased with the results, as the three investments exceeded a seven times multiple on investment capital under their respective SPAC transaction terms. These transactions, combined with strong performance in the broader Ventures portfolio, led to a $75 million after-tax gain growing through net income in the quarter. In addition to strong returns, these investments also provide key insights into emerging technologies and capabilities within our connected consumer growth businesses. Before turning to Q&A, I too would like to take a minute to thank Alan for his partnership over the last 5 years. In addition to positioning Assurant for long-term success and growth, he's created an environment of inclusion and community, truly representative of our core values, common sense, and common decency. Alan, I wish you all the very best in retirement. Well-deserved. And with that, Operator, please open the call for questions.

Thank you. The floor is now open for questions. Again, we do ask that while you pose your question that you pick up your handset.

new potential per device and just kind of the bottom-line profitability for those new devices relative to your $53 million in forced devices at quarter-end?

Sure. Maybe I will take that and back up for just a second. So, first thing I'd emphasize is just the strong partnership that we've had with T-Mobile for many years, which has obviously scaled significantly over time. We're extremely pleased to have reached a multiyear extension. And then the migration of the Sprint customers on November 1st along with the ramping of same-unit repair inside of 500 T-Mobile stores is obviously very exciting as we look to the future. As we've discussed on previous calls, it's not uncommon for us to forgo economics when we re-contract with major clients. That's particularly true if the client scales dramatically over time, which obviously is the case here.

As a result of the new agreement moving forward, we anticipate lower per unit economics. However, once we fully ramp up same-unit repair and normalize our performance, which will take some time, we expect to more than offset the margin pressure with the additional Sprint volume and economies of scale within the business, along with the addition of more in-store repair services. We believe we are well-positioned as partners to examine these details further. I want to highlight that our goal remains to deliver long-term profitable growth, enhance our market-leading positions, and focus on long-term value creation for our investors. We plan to maintain our capital management philosophy while also looking to invest in growth both organically and through other means. We will return at Investor Day to share a broader vision for the future.

Yeah, and this is Alan. The one thing I would add to Keith's comments is if you think about our Company, we've always had a great business that generates earnings. That business level that we can then upstream to the holding Company. And going back since our IPO, we've been very strong stewards of the company's capital over the last 20 years. I think that's going to continue fully under Keith's leadership as we go forward. I don't see any major changes in the ability to generate cash and then to manage it appropriately for shareholders.

And we do remain committed to returning the balance of the $900 million from Preneed that we've talked about previously. So, we intend for that to continue as planned and get that done within 12 months of the close of the Preneed transaction as well.

Great. Thanks, guys.

Thank you. Our next question is coming from Gary Ransom with Dowling & Partners.

Good morning.

Good morning. I also wanted to ask about the covered devices. We've seen a period of a couple of years with little change in covered devices, which you mentioned in your prepared remarks. Now, we’ve observed a 20% increase within just one month, and I'm trying to understand how that might progress as we continue rolling out. Do you have any insights on how this could evolve over the rest of this year and into next year?

Yeah. So, we migrated all of the Sprint customers effective November 1st, so all of that volume is now enrolled in Assurant's program going forward. Obviously, we'll continue to see growth through the overall partnership as T-Mobile continues to win new customers in the marketplace and continues to add insurance to those customers' accounts. So, this does create a really interesting long-term opportunity for growth. And as we've demonstrated over many years, we continue to innovate, not just around the products, but services, capabilities, and how we can invest more to deliver exceptional customer experience. And certainly, a partnership with T-Mobile that is now significantly more scaled, we believe it's going to yield more opportunities to partner together for the future. But as we've talked about, there's a trade in terms of economics between what's our per unit fee that we're going to get relative to a much larger base of customers.

Right. Okay. And is there any remaining drag from the other things you mentioned internationally where things were running off or not growing as much?

No. I think we've seen a little bit of a slowdown in growth, if we're talking specifically about mobile, just as we've come out of COVID in a couple of regions, primarily Latin America, a little bit in Europe as things have opened back up. But overall, really, really strong performance in the U.S. market and the Japanese market, and we do see good long-term growth for that business overall in international as we continue to scale over time.

Okay, thank you. And then the other count statistic you gave is the autos covered in the Global Automotive and that was growing very well. And again, trying to think through how that might continue forward. Is there anything that has momentum there that we might expect to see additional growth in those numbers going forward?

Yeah, I would say that the overall industry sales on the auto side remained quite elevated. As you saw, our covered policies increased a lot, $4 million and 8% from last year. But I would also highlight sales production was well above pre-pandemic levels, so we're seeing really, really strong performance. We achieved almost $1.2 billion of net written premium when you look at the quarterly results. I would say that began to normalize a little bit from where we were in the first and second quarter. But it was only modestly down from Q2, up 12% over 2020, and actually up 27% over 2019. So that would certainly expect to taper off going forward because obviously constraints around supply chain that's affecting new car sales. But those constraints have been more than offset by the volume that our clients are doing on the used side of the business, which has been very dramatic and overall leading to elevated levels of sales.

Thank you. I have a couple of questions about the numbers. You mentioned a tax benefit that contributed to the figures in Global Lifestyle and also talked about the reinstatement premium in housing. Can you provide more details on those?

Hi. Good morning, Gary. It's Richard. Yeah. I mean, in terms of the tax benefit, it was about $4 million and then the reinsurance, the reinstatement premium, I think that was about $7 million. Exactly.

And just to be clear, the $99 million of pretax cuts does not exclude that reinstatement premium, correct?

In terms of the reinstatement premium, no, it actually does. And if you look at the numbers we have, a retention of $80 million and the total cut impact for us in the quarter was $87 million. So that comes through on that for either.

I got it. Okay. Thanks very much.

Thanks, Gary.

Thank you. Our next question is from Tom Shimp from Piper Sandler.

Hey, good morning, Tom.

Hi, good morning. I'm curious about the rollout of your EV1 product in relation to the shift towards electric vehicles. How do the attachment rates for this product compare to those of internal combustion engines? There's quite a bit of technology in these EV cars, but they have fewer moving parts. How do these factors influence the attachment rates you're experiencing?

It's a great question. I would say it's really early in terms of scaling around electric vehicles, in terms of the service contract programs. You're correct that there are fewer moving parts. There's a lot of technology. Some of the parts tend to be very expensive to get repaired. So, we may see lower frequency, but we may see higher severities. There's also a little less certainty in the minds of consumers around the reliability of all of the technology. So, we do expect to see strong performance over time. I would say it's really early and it will evolve as we start to see more and more EVs in the market and as we start to see our clients maturing around not just selling electric vehicles but attaching F&I products and services. So, this will evolve, I think, over the next few years quite dramatically.

Okay. So, inflation is top of mind for insurance investors right now. Assurant operates in businesses that have attracted more attention regarding inflation, parts and labor costs, and automotive chip shortages in mobile and global housing. Housing is a risk-based business where you have inflation exposure that you can mitigate with rate, but I think a lot of investors who look at Assurant are your typical insurance investor and sometimes misunderstand to the extent of which the risk in mobile and automotive is ceded off to clients and how it operates on a fee-like basis. So, I think investors understand this dynamic exists but not the degree to which. So maybe you could give us your thoughts there and how Assurant is positioned in an increasingly inflationary environment.

Yeah. And maybe I'll offer a couple of comments and then I'll ask Richard, because his team's done a lot of work on this question, but I think you're right. I mean, we think our risk is quite well insulated, and mitigated based on the deal structures that we have on the lifestyle side. Most of the deals are reinsured or profit-shared. Not all of the deals, but we've been pretty insulated in terms of seeing volatility there. And then obviously, as we look at housing, as you talked about, there are opportunities with rate increases and insured values, and then investment income will obviously be a big driver as we go forward. Richard, stunning full analysis to look at the net overall. So maybe talk about that, Richard.

Thanks, Keith. You highlighted the main points well. In the short term for this quarter, we noted a slight increase in severities, which likely accounts for about a quarter of the change in our non-CAT loss ratio. These severities are mainly due to rising labor and claims costs. However, looking at the long term, we believe the outlook may be slightly positive, or at least neutral. As Keith mentioned, we have reinsurance agreements with our clients on the fee-based side, which allows for significant sharing of profitability in that area. On the P&C side, where we're taking on claims and risk, there are two key factors. First, with rising insured values due to increasing housing prices from inflation, we expect a rise in our premiums relative to the average insured value. Second, over time, we can recover a substantial portion, if not all, of that through our rate filings, which we believe gives us good insulation. Finally, with inflation, we anticipate interest rates to rise, leading to an increase in our investment income. Overall, we don't see this scenario as a significant negative impact; instead, it appears neutral or potentially slightly positive.

Okay. Thank you for your answers.

Thank you.

Thank you. Our next question is coming from Brian Meredith with UBS.

Hey. Good morning, Brian.

Morning, morning, morning. So, I'm just curious, in Global Housing, I know early on we were thinking maybe we'd see an increase in placement rates towards the end of this year. Obviously, forbearance kind of hurt that. Now that that's gone, what is your kind of views with respect to placement rates there? Will we ever see a pick-up?

Yeah, I think we signaled a modest change in placement rate this quarter, mainly driven by the mix. So, I'd say it's broadly flat. I would expect as we look to maybe the back half of '22, we'd start to see an increase modestly in the placement rates over time, expect servicers to actively work with borrowers on loan modifications to keep the loans performing. There's so much strength generally in the housing market, customers have positive equity in the home. So, I think a lot of that activity will delay some of the placement rate from flowing through. And certainly, the same thing is true on foreclosure side as well, which will affect the REO business. So probably second half of '22 would be our best estimate on when we might start to see that coming through the portfolio.

Great. And then second question, just curious, the reserve increases that happened in the quarter, what was that related to in the specialty PC?

This is Alan. Let me provide some background on what we're doing in specialty. We offer a range of products including antique auto and some international property. A few years back, we began developing on-demand products that align with consumer rental and ownership of homes and cars, leveraging our experience in this area. Currently, we are focused on enhancing your short-term transactions. For instance, if you're renting your home or using your car for food delivery, this is where our efforts are directed. We're excited about this business as it serves as a new distribution channel. We can integrate some of our rental capabilities into home rentals, which is particularly relevant in the gig economy. For workers delivering food or providing services with their cars, we see a great opportunity to promote not only this product but also our service contracts, mobile capabilities, and renters insurance. That sums up our strategy. Regarding the reserve this quarter, it's impacting around $5 million due to adjustments on previously reported claims, allowing us to better align with future expectations. Over the past couple of years, we've been refining our product structures based on our experiences, increasing rates, and implementing extensive reinsurance to avoid any significant losses. In fact, this segment has performed very well for us recently.

Got you. And I assume you would get a lot of reinsurance on it and protections on it.

We do. We've got very strong structures there and it's really for us; we are trying to do the same thing we do in Auto and Mobile generally, which is making it into an administrative and fee business as we manage around a consumer transaction.

Great. And then my last question, just curious, so I take a look at the Global Lifestyle, there's a lot of moving parts happening here, I guess going into fourth quarter when I think about kind of the pre-tax margin on that business and obviously the additional subs coming in at a lower revenue per sub, and then you've got the investment coming in. We think about margins in that business declining here as we look into fourth quarter in 2022?

And I think as we look at overall profits in Lifestyle and in Connected Living, we do expect to see growth in Q4 over Q4 last year and continue to see growth into 2021. We had, as you saw, a strong third quarter for Connected Living, up significantly over last year. So, I think that continues in Q4, even with the additional investments that we need to make to really not just stand up same-unit repair, but make sure that we're executing and delivering to a really high standard. And then as we think about 2022, yeah, we expect overall. We'll see some moderation, but we still expect to see strong growth across both the Lifestyle and housing businesses.

So good solid operating income growth still; it's just maybe some pressure on margins, but its top-line growth and more than offset that. It's what I think I hear you saying, right?

Correct. Yeah. The per unit economics are going to look a little lighter, but the overall economics are going to be strong.

Terrific. Thanks so much for the answers and all the best in your retirement.

Thank you.

Thank you. Our next question is coming from Michael Phillips from Morgan Stanley.

Hey, good morning, Mike.

Hey, good morning, everybody. Thanks. Good morning. Richard, when you talked about the impact in the fourth quarter from the rollout expenses from T-Mobile, I guess, anyway you can help us quantify that meaningful impact. And then B, is it just a 4Q or any of that extended into 1Q next year?

Thank you for the question, Mike. To quantify it, I would say we've provided a general indication of where we expect Lifestyle to perform this year, which is in the high single-digit range. If you compare this to last year's performance and consider the high single-digits, you'll get a clear picture of our expectations for Lifestyle for the full year. Part of the anticipated decrease is due to the costs associated with establishing the service and repair sector and the investments we are making in Connected Living more broadly, which will be reflected in the fourth quarter. We also expect some impact to carry over into next year. As we look ahead, the largest impact is anticipated in the fourth quarter of this year, with several million expected to ramp up significantly during that time. So, we are discussing amounts in the millions as we move forward.

Yeah. And I would just add, in addition to the startup costs really ramping, doing all the recruiting, the training, the hiring, and getting all the build-outs done, there is also just the ongoing evolution of the service that we're going to deliver which inevitably will change and evolve over time as we continue to work with T-Mobile to optimize that experience. So, I do expect some investments in 2022, partly supporting the rollout to completion, but also ramping execution and investing in our technology to make sure that we're delivering services as seamlessly as possible. So, you definitely would expect to see some investments as we continue to shape this part of our business going forward.

Okay, that makes sense. I have two more quick questions. Regarding labor and material costs and their severity, I wanted to follow up. Richard, you mentioned that if things continue as they are, that could potentially be offset in the future by higher rates over time. Does that indicate that you're currently factoring that into your pricing or are you still waiting to see how the situation develops?

Some of it is currently coming through. Every year in our contracts, we get an increase in what I refer to as average insured value, which is embedded in the contracts. We consider inflation, and as a result, we receive some increase in overall premiums. When discussing the trends over time and rate filings, we cannot file rates for just one quarter; instead, we base our filings on averages over a couple of years. This means that for inflation to have a lasting impact on the non-CAT loss ratio, it needs to develop over time. That is what I was referring to, Mike. Eventually, we would incorporate it, and then you would see the effect. There is a lag, but it would be balanced out over time, which I was indicating.

Okay. That makes sense. I guess last quick one. Was any impact in the quarter on your mobile subscriber numbers from the T-Mobile cyber attacks like on this?

No, I would say nothing meaningful that we're aware of or that we saw. I mean, we have a really strong base of customers and I don't think we saw anything of note that I'm aware of.

Okay. Thank you, guys.

Thank you. Our last question is coming from Mark Hughes with Truist Securities.

Good morning, Mark.

Mark.

Yes. Thank you. Good morning. Congratulations, Alan.

Thank you.

Can you refresh me on the revenue model for the in-store business that T-Mobile, is it kind of time and materials? Is it repair per device? Hourly reimbursement? How does that work?

It's a great question. I view it as focused on fee income, where we get compensated for the work we do. Regarding the overall program management, we don't carry risk related to how the business performs from our parts and labor, aside from the fixed fees we receive. We need to operate within those parameters to ensure profitability. Therefore, I believe this is a very well-structured financial arrangement, and our interests are closely aligned. It is strongly aimed at providing an exceptional in-store experience. I'm very pleased not only with the deal we've established but also with our collaboration with T-Mobile to truly transform the industry.

And are they going to be advertising it? How are customers going to know that the repair capabilities are available?

Well, we obviously manage the claim process within consumers and now that's what the entire base T-Mobile subscribers. So, we'll be directing customers as appropriate to take advantage of really the best option that's available to them to get repairs done. So, I think it will be largely through our claims flow, but also through T-Mobile awareness campaigns, etc.

And then Richard, I think you all have addressed this to a degree, but any more adjectives or maybe even numbers you might throw when you're talking about 2022. Earnings expansion to continue, though at more moderated levels. I think you also referred to strong growth in 2022. Anything else you want to add to that?

I wouldn't want to jump into the Investor Day, but regarding our outlook for next year, I would like to mention two things. As Steve noted during the call, we are very satisfied with our position across our various businesses, including the growth we are witnessing in Global Auto, the contract extension with T-Mobile, and growth in the U.S. and mobile markets in Japan. Additionally, in the housing sector, we appear to be at a bottom with placement rates. Although the forbearance and foreclosure period will conclude slowly, we are still experiencing growth in multifamily housing, which makes us feel well-prepared for 2022. That said, as Keith pointed out, we need to keep investing in ourselves and our business since we do face challenges such as interest rates and inflation. However, I feel optimistic about our overall business situation, and I believe Alan has positioned us for future success under Keith's leadership.

Thank you.

Thank you. Our next question is coming from Jeff Schmitt, from William Blair.

Hey, good morning, Jeff.

Good morning. How much of the increase in fee income in Connected Living was due to the Hyla acquisition? Obviously, there's a kind of a weak comparison to, but just curious how much of that is organic growth maybe driven by the 5G upgrade cycle versus Hyla being added to the mix?

I would say Hyla's been performing exceptionally well. So, as we look at what's happened since close, trading volumes are up significantly. We've seen obviously not just demand from 5G significant client promotions where trade-ins are the main incentive being used. Increasing attach rates and just I think pent-up demand coming out of the pandemic. So, we talked about the performance of the acquisition 50% better than we modeled based on '21. So, we're thrilled with how it's going, but more than that really excited about the integration, how well that's working, our ability to protect talent, obviously a significant renewal of a major relationship with AT&T. And then as you think about the overall volumes process, we talked about 18 million devices so far this year. That compares to 14 million for the full-year 2020, and that's overall, in total, combining Hyla and Assurant. So yes, Hyla as a big driver of fee income but we've also seen growth on what I would call the legacy Assurant side of the trading business as well. And similar trends are happening across clients and across the market. So, it's a really strong time for trading in the global market.

Okay, great. You mentioned the same-day service capabilities that have recently been rolled out with T-Mobile. How are those capabilities impacted by current labor shortages? I'm curious about how you are managing this situation.

Our team has done an incredible job. We've been working on this for many months, trying to acquire the right labor in various markets around the country. I would say our team, the recruiters that we're partnered with, some of the incentives that we've put in place to get the best talent. It's worked really well. Not to say there aren't challenges; of course, there are. But our teams have partnered really well with third-parties as well as with T-Mobile to make it happen.

Okay, great. Thank you.

Thank you. Our last question is coming from Grace Carter with Bank of America.

Hey, good morning, Grace.

Hi. We've talked a lot about structural tailwinds or attachment rates in mobile devices, one of them being rising prices. I was wondering, in kind of this more inflationary environment that we're looking at, if you've seen any sort of tangible impact from the inflation impact on pricing, driving up attachment rates at all, and to the extent that we continue to see a bit of higher inflation, if you think that that should have any impact going forward?

Yeah, that's a great question. I would say maybe a little bit on the auto side if you think about really more of a mix shift point. So, used cars tend to attach at slightly higher rates than new cars. And we've also seen obviously accelerating value on the used car side, which makes protecting the vehicle a higher likelihood. So, we have seen a little bit of a mix shift there which is benefiting the overall attach rate. I would say broadly though, pretty steady, pretty strong across the board. So, nothing that I would signal as being a really dramatic, but certainly good strong results.

Okay, thank you. And then just kind of a quick follow-up to that, we've seen attachment rates across mobile devices and cars going up over the past several years. Do you think that there is an eventual ceiling on how high attachment rates can go? I mean, what's kind of the long-term target there, I guess?

I believe attachment rates differ based on market and geography. In some areas, they are influenced primarily by consumer perception and demand at higher levels. Overall, we have strong attachment rates, which I think can increase over time. Awareness of our programs and the value of our products is improving, as is the convenience and importance of our services compared to a few years ago. All these factors could lead to higher attachment rates in the future, indicating potential for growth, especially in mature markets, while there is also significant growth potential in emerging markets.

Thank you and congrats to Alan.

All right, thank you Grace.

Thank you everyone for participating in today's call. In summary, we're very pleased with our year-to-date performance, and we're excited about the opportunities we have to serve our partners and our end consumers while delivering results for our shareholders. I look forward to officially taking the CEO role in January and updating you on our progress on the fourth quarter earnings call in February. We're also hard at work and anticipating Assurant's 2022 Virtual Investor Day, which we expect to hold on March 24th; more details will be forthcoming in the weeks and months ahead. In the meantime, please reach out to Suzanne Shepherd and Gene Mergelmeyer with any follow-up questions. Thank you all, and have a great day.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.