Assurant, Inc. Q2 FY2024 Earnings Call

Welcome to Assurant's Second Quarter 2024 Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following management prepared remarks. The operator provided instructions to participants on how to ask a question. It is now my pleasure to turn the floor over to Sean Moshier, Vice President of Investor Relations. You may begin.

Thank you, operator, and good morning, everyone. We look forward to discussing our second quarter 2024 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 a news release announcing our results for the second quarter 2024. 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 performance and current expectations and are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by those 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 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 the news release and supporting materials. We'll start today's call with remarks before moving into Q&A. I will now turn the call over to Keith Demmings.

Thanks, Sean, and good morning, everyone. Our strong first half 2024 results demonstrate continued outperformance from Global Housing and underlying momentum in Connected Living, positioning us to increase our full year 2024 growth expectations for Assurant overall. Excluding reportable catastrophes, adjusted EBITDA increased 20% year-to-date and adjusted EPS grew 29%. These results reflect the power of our combined housing and lifestyle business model. Starting with our first half business highlights. In Global Lifestyle, first half 2024 adjusted EBITDA was $397 million, consistent with the first half of 2023. Our year-to-date performance has been driven by continued growth and momentum within our Connected Living business, particularly in the U.S. In Connected Living, adjusted EBITDA increased 6% or 8% on a constant currency basis. As we previously discussed, 2024 includes incremental spending related to the implementation of new partnerships and programs that we expect will support long-term growth for Assurant. Excluding first half investments of approximately $13 million, year-to-date growth for Connected Living was 14% on a constant currency basis. One example of our innovative new offerings included the rollout of two programs with Spectrum Mobile: Anytime Upgrade and the Repair and Replace plan. Additionally, we onboarded the pre- and postpaid device protection subscribers of Telstra, our new partner in Australia. Combined, these new programs added 1.6 million mobile subscribers, driving strong sequential growth. This year, we've also completed long-term contract extensions with all of our major U.S. mobile device protection clients, including T-Mobile and two U.S. cable operators, continuing to strengthen our position in the market. In total, these renewals represent three of the top five largest U.S. carriers by subscribers. With T-Mobile, this included a multi-year contract extension to continue supporting their postpaid and prepaid consumers beyond 2030. The renewal of T-Mobile allows us to continue to invest in this critical partnership and drive innovation for the future. In financial services, we expanded our longstanding relationship with Chase by partnering with Chase card services within our growing card benefits business. We executed a multi-year contract to provide coverage to millions of Chase cardholders. This program will provide end-to-end delivery for approximately 15 travel and purchase protection benefits, including underwriting, claim processing, and benefit servicing. We expect continued investments over the second half of this year as we move toward program launch at the end of 2024. This represents a marquee win for our card benefits business, which has gained strong momentum over the last several years. Our relationship with Chase now spans across our Lifestyle and Housing businesses, reinforcing the depth of client partnerships that we drive across the Assurant enterprise. Moving to Global Automotive. Our first half earnings have continued to be pressured by ongoing inflation impacts on motor vehicle repair costs. We expect that the effects of inflation will continue to impact our auto results throughout the second half of 2024 in our vehicle service contract business. In addition, we expect continued elevated loss experience within our ancillary guaranteed asset protection, or GAP, product. Our longer-term outlook, however, is bright, as we've begun to see moderation of claims inflation on our vehicle service contract business given the rate actions taken over the past 24 months. Within our GAP product, we're experiencing elevated losses driven by the combination of continued declines in used car prices from pandemic highs, higher interest rates, and the increase in the number of vehicles declared total losses by the primary insurance carrier. We expect this impact to be shorter-term in nature relative to vehicle service contracts, as the majority of GAP claims are made within the first 24 months after vehicle purchase. In addition, over the past year, we've been proactively partnering with several clients to transition the risk on the GAP business, which will reduce a substantial amount of our claims exposure over time. Lastly, we believe the auto business will continue to benefit from our position as a market leader with scale and strong partnerships across multiple distribution channels. Now, let's turn to Global Housing. For the first half of the year, Global Housing's earnings increased nearly 45%, excluding reportable catastrophes. Housing's year-to-date results have demonstrated both the importance of the business to our overall portfolio and the power of our unique and differentiated business model, which has largely outperformed the broader P&C market. Our lender-placed insurance business safeguards homes that need insurance regardless of geography, while supporting the U.S. mortgage industry by removing the risk of uninsured loss for lenders, investors, and homeowners. We review rates with each state on a regular basis to ensure that they are appropriate and that homeowners are protected. This process allows us to work together to balance risk and reward with fair and adequate rates, while creating product safeguards to address macroeconomic factors such as inflation. In addition, we benefit from our strong track record, continued investments in customer experience, and our compliance expertise, our most critical competitive advantages. These efforts have allowed us to renew existing partnerships and win new clients, including Bank of America. This in turn has contributed to increased scale, which combined with technology investments has led to significant operational efficiencies. Ultimately, this creates meaningful expense leverage, which we'll continue to benefit from going forward. Our specialized product and client base provide Assurant with differentiated advantages compared to many traditional homeowners insurance carriers. Overall, these combined advantages have led to the recovery and growth of this business within a relatively short time frame. We believe we are well-positioned and we continue to believe there's an opportunity for the market to better value our specialized lender-placed business. In renters, we benefit from an attractive financial profile that is more capital efficient compared to traditional P&C businesses. We are focused on expanding our presence as a market leader within the Property Management Company, or PMC, channel while providing our partners with innovative new offerings. In the first half of the year, we increased gross written premiums in our PMC channel by over 20%, reflecting strong client demand for our Cover360 solution. This marks eight straight quarters of double-digit growth of gross written premium in the PMC channel. Following the initial launch of our Assurant Tech Pro resident troubleshooting service, we recently signed a partnership with the largest PMC in the U.S. to be the first to provide this service to the industry. We expect to begin rollout in the second half of this year. Turning to our enterprise outlook. Given the strength of our first half results, we now expect full year adjusted EBITDA to grow high-single-digits and adjusted earnings per share to increase low-double-digits both excluding catastrophes. This represents an increase from our initial expectation for both metrics. We anticipate strong growth within Global Housing, which is expected to lead our enterprise growth for 2024. In Global Lifestyle, we expect modest growth in 2024. Connected Living is expected to deliver another year of growth as we remain focused on driving long-term momentum through new partnerships and programs. Overall, we believe our first half performance and our increased 2024 outlook demonstrate the power of our differentiated business model with unique advantages which make Assurant attractively valued. Over time, we've enhanced Assurant's risk profile by focusing on our capital efficient businesses within Lifestyle and Housing, which are highly cash generative. We've established a track record of winning and delivering for B2B2C clients throughout both Lifestyle and Housing, many of whom are industry leaders and market disruptors across the globe. We've created leadership positions and amplified competitive advantages through our protection solutions across devices, automobiles, and homes. Together with our clients, we've seen these deliver mutual benefit from scale and deep integration, supporting innovative and flexible solutions to differentiate the customer experience. We focus on specialized, attractive markets with growth opportunities and long-term secular tailwinds. These factors contributed to long-term outperformance versus the broader P&C market, particularly the S&P Composite 1500 P&C index. We believe this comparison better reflects our current mix of businesses and offerings as we provide insurance solutions and fee-based services to our partners and their end consumers. In June, our sub-industry index classification under the Global Industry Classification Standard, or GICS, transitioned from multiline insurance to P&C insurance. This is a product of our multi-year transformation that included exiting pre-need, health, and life insurance related businesses. Before handing it over to Keith Meier, I wanted to highlight our recently published 2024 Sustainability Report, which demonstrates our progress in advancing our sustainability strategy and initiatives. We've introduced our new sustainability vision focused on advancing a connected, respected, and protected world. We've established long-term ambitions to support a thriving society, a circular economy, and a stable climate. We believe there's an important connection between our vision and ambitions and how we deliver value for our business and for our stakeholders. These priorities strengthen Assurant for the future, including how we attract, empower, and reward a diverse workforce to drive innovation, contribute to the development and adoption of sustainable products, and reduce the climate impact of Assurant operations and supply chain. Overall, we're excited about the progress we've made so far this year, continuing to drive attractive financial results and outperformance for the overall enterprise. As we look ahead, we believe we are well-positioned to continue to drive business momentum in the second half and beyond. I'll now turn it over to Keith Meier to review our second quarter results and business trends impacting our 2024 outlook.

Thanks, Keith, and good morning, everyone. We're proud of our second quarter performance as we continue to invest in value-added solutions for our clients and end consumers. We believe we are well-positioned to build upon our historical track record of growth, strong capital generation, and long-term shareholder value creation. Let's review the specifics of our strong second quarter results, which build upon the momentum from the first quarter. In the second quarter, adjusted EBITDA grew 10% to $369 million and adjusted earnings per share increased by 17% to $4.77, both excluding reportable catastrophes. From a capital perspective, we generated $142 million of segment dividends in the second quarter, ending the quarter with $735 million of holding company liquidity, up from $622 million at the end of the first quarter. Our strong capital position has provided flexibility to invest in future growth, while returning $80 million to shareholders in the quarter, including $40 million of share repurchases. In addition, we repurchased $20 million of shares between July 1 and August 2 and have now completed $100 million in repurchases so far this year. Turning to our business segments. Let's begin with Global Lifestyle. For the quarter adjusted EBITDA decreased 4% to $190 million, or 2% on a constant currency basis, driven by Global Automotive, which declined by 8% or $6 million. Results were impacted by higher claims costs due to inflation and elevated losses from ancillary GAP products. In Connected Living, earnings increased modestly on a constant currency basis, primarily driven by global mobile protection programs, including subscriber growth from U.S. cable operators and new Asia-Pacific clients, as well as improved U.S. financial services results. International results remain stable on a constant currency basis and have started to show signs of modest growth. Growth was partially muted by investments in new capabilities and client partnerships, which are expected to support long-term growth. Trade-in results were down from a decline in carrier volumes and business mix, including lower promotional activity. Unfavorable foreign exchange remains a headwind and impacted Lifestyle's adjusted EBITDA growth by 2 percentage points in the quarter. Turning to net earned premiums, fees, and other income. Lifestyle grew by $75 million, or 4%, and Connected Living increased 6%, benefiting from contributions from new trade-in and mobile protection programs, including the U.S. and Asia-Pacific. For full year 2024, we now expect Global Lifestyle's adjusted EBITDA to grow modestly, reflecting continued strong performance from Connected Living and ongoing elevated claims in Global Auto. We expect growth in Connected Living to be led by the continued expansion of our U.S. business. We expect investments related to new clients and programs, mainly in Connected Living, to temper Lifestyle growth by approximately 3% in 2024, but will be a critical driver for business growth over the long term. In Global Auto, we now expect adjusted EBITDA to be flat to modestly down due to continued loss pressures from inflation and elevated losses within ancillary GAP products. We continue to monitor foreign exchange impacts, inflation, and interest rates, which have and may continue to impact the pace and timing of growth. I'd like to take a moment to discuss our auto business and how we have addressed inflation headwinds. As we've discussed, we expect auto claims inflation to impact our performance over the remainder of this year. Toward the end of 2022, the industry began to see large spikes in motor vehicle repair costs, even as overall CPI trends began to stabilize. Exiting 2023, the auto industry began to see signs of inflation levels declining. However, in the beginning of 2024, motor vehicle repair costs increased once again, impacting performance in the first half of 2024. Our underwriting risk in auto is limited to just a few clients, as many of our clients choose to reinsure or share in the economics of the business, given auto's profitable returns over the long term. There are a total of five vehicle service contract clients where we retain a portion of the claims risk that will improve over time, which is a small subset of our overall client base. Since 2022, we have implemented a total of 14 rate increases for these impacted clients, with additional increases planned over the coming quarters. In addition to rate increases, we have made changes to enhance our claims adjudication process, adjusting the product and modifying deal structures with clients to ensure mutually beneficial outcomes. Even with these vehicle service contract clients, where we do retain some risk, we are profitable as we also earn investment income and receive fees for our administrative program support. Moving to Global Housing. Second quarter adjusted EBITDA, including catastrophes, was $161 million. During a quarter that included over 25 ISO events that impacted much of the P&C industry, we fared reasonably well with $46 million of reportable catastrophes across five events and no single event incurring more than $15 million in losses. Excluding reportable catastrophes, adjusted EBITDA increased by 23%, or $38 million to $206 million. The increase was driven by continued top-line growth in homeowners, primarily from an increase in the number of in-force policies from the onboarding of the newly added Bank of America portfolio and the net impact of ongoing client and portfolio transitions. Additionally, lender-placed policies increased due to impacts from hardening traditional insurance markets in certain states. Lender-placed continued to see average premium growth related to higher average insured values and increases in filed rates. Despite higher expenses from client portfolio onboarding and offboarding activity in the quarter, expense leverage from scale, technology investments and operational efficiencies remains a key driver of performance as reflected in the continued improvement in housing's expense ratio, which was 37% in the quarter. Underlying EBITDA growth was partially offset by the unfavorable year-over-year net impact of $11 million related to prior period reserve development. Second quarter 2024 had $17 million of favorable reserve development compared to $28 million in the second quarter of 2023. We continue to expect Global Housing's full year 2024 adjusted EBITDA, excluding catastrophes, to be the growth driver of our overall enterprise performance. We anticipate growth will be driven by continued top-line momentum in homeowners, expense leverage, and lower catastrophe reinsurance costs. Placement rate and policies in-force, both key drivers of earnings, are expected to be impacted by ongoing client portfolio transitions in the second half of the year. However, both are expected to have healthy growth overall for 2024. Lastly, we expect Hurricane Beryl to be a reportable catastrophe in the third quarter. While claims are still developing, our early indication is that estimated losses will be between $30 million to $50 million. We will provide an update prior to our third quarter earnings call as we finalize impacts. Moving to corporate, second quarter adjusted EBITDA loss was $27 million, which improved mainly due to higher net investment income from higher asset levels and yields. We continue to expect the 2024 corporate adjusted EBITDA loss to approximate $110 million, consistent with 2023. Turning to capital management. We generated significant deployable capital in the first half of the year, upstreaming $395 million in segment dividends. For 2024, we expect our businesses to continue to generate meaningful cash flow. Cash conversion to the holding company is expected to approximate two-thirds of segment adjusted EBITDA, including reportable catastrophes. Cash flow expectations assume a continuation of the current macroeconomic environment and are subject to the growth of the businesses, investment portfolio performance, and rating agency and regulatory requirements. As we look forward to the remainder of the year, we continue to be focused on maintaining flexibility to support new business growth and to return capital to shareholders. Given our strong capital position and robust reinsurance program, we expect to be on the high end of our $200 million to $300 million share repurchases range for the year. Our ultimate level of repurchases will depend on M&A opportunities, market conditions, and catastrophe activity. Overall, we've had a very strong first half of 2024, and we believe we are well-positioned to achieve our increased full year financial outlook while also supporting business growth and shareholder value creation over the long term. And with that, operator, please open the call for questions.

The floor is now open for questions. The operator provided instructions to participants on how to ask a question. Thank you. Our first question is coming from Mark Hughes with Truist Securities.

Good morning, Mark.

Good morning. Yes, thank you. On Global Auto, the sustained impact of inflation — when do we kind of turn the corner on that? When does it become less negative? Understanding that it will continue to be a drag for the foreseeable future, when does it become less of a drag?

Yes, Mark. I think the first half this year was kind of a tale of two different stories between the first quarter and the second quarter. The first quarter was really driven by inflation from our vehicle service contracts. In the second quarter, what we've seen is more on the GAP side; that was really what drove results, driven by used car values declining, higher interest rates, and more total losses declared by traditional insurers. So the vehicle service contract side moderated a bit in the second quarter, while GAP was the primary driver of the challenges in the quarter. As we look at the back half of the year, we expect the rate increases we've been putting into place with our clients to stabilize and improve modestly as we go through the remainder of the year. One other key point about the second quarter as it relates to the GAP product: over the past year we've been working to reduce and transition some of that risk with our clients. So we don't see GAP as something that's going to sustain over the long term. GAP should improve faster than vehicle service contracts, which should improve within the next couple of years, so less than two years. Overall, while auto is a near-term challenge, we view it as manageable and expect improvement over time.

And I would add that getting off a lot of that GAP risk started when GAP was performing well; we know it's a volatile product line. Our goal was to strategically reduce volatility and make that strategic decision. That's something we will continue to work on going forward. As Keith said, it's not something we expect to be a long-term pain point for the business.

So fair to think the pain this year is already factored into your guidance such that when we think about 2025 it would be less negative, i.e., positive year-over-year comparisons in this dimension?

Yes. It's definitely factored into our 2024 outlook. As we go through the year, we'll provide an update on 2025, but we certainly see an improvement going into the back half of the year.

And then in the card benefits business, could you talk a little bit more about the opportunity there? It sounds like an interesting agreement with Chase. How important is that within Lifestyle? Is that a new opportunity that could be a marginal contributor to growth?

Yes. We've been growing our card benefits business successfully over the last several years, particularly in the U.S. With Chase, it's a phenomenal opportunity to expand our relationship. We have a long-standing relationship around the lender-placed business with Chase that spans many years, and this is a chance to expand across product lines and segments within Lifestyle. We are investing in this launch; it's part of the investments we've discussed for 2024 that will ramp as the year progresses. We're converting all active Chase cardholders in the fourth quarter of the year, so there's a lot of work to stand that up. It will be EBITDA positive as we enter 2025 because it will be at a full natural run rate entering next year. We're excited and expect it to be one of several drivers of growth for Connected Living. These are the specific, discrete investments in long-term growth connected to new programs and products that are clear strategic growth levers for the business.

Appreciate it. Thank you.

Thanks, Mark.

Our next question comes from Dan Lukpanov with Dowling & Partners.

Good morning, Dan.

Good morning.

Hey guys, good morning. Going back to auto: we've been seeing traditional insurers report moderation in physical damage severity. Knowing your product largely covers physical damage and similar drivers of materials, just curious — I understand GAP was the negative in the quarter, but on the vehicle service contract side, did you see any acceleration in improvement? Did the loss cost trend year-to-date change your view on how fast you can recover the business?

Through the first couple of quarters, we saw the loss cost trends moderate. The CPI index for auto repairs went down modestly, about 9% year-over-year, so we're seeing moderation. We are in a good position to have the rates we put in place start to earn through and improve sequentially as we move forward.

To amplify, we've implemented 14 rate increases across five clients over the last couple of years. That is a meaningful amount of rate action. Combined with moderation on the inflationary side, that momentum builds over time. It doesn't fix itself as quickly as what we saw in the Housing business, but we saw progress in Q2 and we'll monitor the rest of the year.

Do you see used-to-new car mix normalizing? During the inflation cycle, there was more used car production; do you see that normalizing at all?

Yes. It's still in the range of about 50:50 used to new. It's definitely moderated; there is more new car volume returning to the system. It has normalized at this point and we have a pretty nice balance within the business.

If I may squeeze in one more: in financial services, you called out a profitability improvement in the U.S. business. Any more color on that?

That's a continuation of the leading programs in our financial services business. We've been growing that business over the last few years and the Chase win is another highlight of the momentum we're seeing in financial services.

Thanks, guys. I appreciate it.

Thanks, Dan.

Thanks, Dan.

Our next question comes from Jeff Schmitt with William Blair.

Hey Jeff.

Hey, Jeff.

Good morning. How much of the auto revenue mix is the GAP business? And how much is the handful of accounts where you share writing profits? Any details on what inflation is currently running at for those segments and your plans would be helpful.

GAP is actually a very small part of our business and it's continuing to become smaller as we've transitioned some of that risk over the last year. Some of what you're seeing now are programs already transitioned for future contracts, so we're working through existing contracts today. Overall it's not a big driver of our auto business, which is why it creates some volatility but we've been reducing that portion of the business. Regarding accounts where we share profits, it's only five clients. With our rate increases that's becoming a better performing piece of the business over time. We don't split that out specifically on a public basis, but the vast majority of our business reduces risk and shares risk with clients; the smaller portion is what you're hearing about in our commentary.

And on the renters business: a few years ago you expected growth in the high-single-digits, but it continues to run weaker. What's causing the weakness there? Are you getting rate in that business and at what level?

Rate levels are generally at a good place. Year-to-date revenue is relatively flat, up about 2%, and policies are up 4%. A leading indicator, gross written premium, is up 8% year-to-date. Within that, our PMC channel is up 20% year-to-date, which is significant growth. The affinity business is relatively stable and we expect it to improve slowly over time. The PMC momentum should continue; we've shown double-digit growth for eight straight quarters. We've been investing in products and platforms and are well positioned to participate as the market finds ways to drive growth.

Okay. Thank you.

You're welcome.

Thanks, Jeff.

Our next question comes from John Barnidge with Piper Sandler.

Good morning, John.

Hey, John.

Good morning. My first question is on the Global Housing combined ratio. How do you view the long-term combined ratio target? There's been consistent profitability achieved in that business, not just from underwriting improvements, but it appears expense leverage has been achieved over the last five quarters. How do you view the long-term combined ratio?

Mid-80s combined ratio is the right way to think about the business longer-term. Think about a non-cat loss ratio around 40%, about 7 points for catastrophe, and expenses in the high-30s. We've demonstrated discipline around expense management and efficiency through technology, and as a scale business, growth benefits flow through to expenses. Mid-80s combined is a reasonable longer-term target. We're proud of the business: policies are up 9% year-over-year, average insured values are up 11%, and we've delivered expense leverage of more than 200 basis points.

I would add the expense ratio story is sustainable and driven by scale, digital enhancements, AI investments, and integration platforms. Those investments have improved customer experience and differentiated us in the industry, which is why we're winning important new clients.

Thank you. My follow-up on Global Lifestyle: Telstra and Spectrum seemed to deliver strong unit growth — you called out 1.6 million. Ahead of program launch, there's a period of investment. Can you quantify the level of investment for Telstra and Spectrum that impacted EBITDA in the quarter for Connected Living?

We've quantified overall investment: about $13 million of incremental investment year-to-date — roughly $5 million in Q1 and $8 million in Q2 — and think about that trend maintained into the second half. That's the easiest way to think about it rather than on a client-by-client basis. We're excited about both opportunities and the step-up in subscriber counts. We took over the in-force business at Telstra, which provided a robust base. With Spectrum, part of the program is embedded in top-tier rate plans which gave a step up to existing subscribers in Q2 and now we're in a more normalized growth period. Even separating the 1.6 million incremental subscribers, we generated net growth following several quarters of declines, so we're pleased with the underlying subscriber performance and expect continued growth over time.

Thank you.

You're welcome.

Our next question comes from Tommy McJoynt with KBW.

Hey Tommy, good morning.

Good morning. How much is higher investment income offsetting the core weakness in the auto segment? What percentage of auto's bottom-line EBITDA is investment income? Also, given your investment duration, is there risk that if short-term rates come down meaningfully over the next year it could hurt auto's bottom line before rate changes fully earn through?

We're in a good position on investment income. Our portfolio duration is about five years and it's a very high-quality portfolio. Book yield was up 12 basis points over the last quarter to 5.16% and new money yields are slightly higher than that. We feel good about our outlook for the remainder of the year. Additionally, with certain clients we share investment income, so if interest rates decline somewhat, there's a natural offset with some clients. Overall, we don't see a material short-term negative impact.

Okay, got it. Thank you.

You're welcome.

Our next question comes from Grace Carter with Bank of America. Please unmute your line to ask a question.

Good morning. Can you hear me?

Yes, we can. Hi, Grace.

Thanks. On the auto risk question, historically you've said you retain about a third of the risk across the Lifestyle book. Is that still a useful way to think about the segment overall given the work you've done in the auto book over the past several quarters?

Yes, that's generally a good way to think about it at the Lifestyle level, though we may retain a little less on the auto side. Many deals are reinsured within the dealer business and by other clients. The auto issues are concentrated and relatively manageable because they involve a small number of clients. The 14 rate increases with five clients over the last couple of years is meaningful action to address performance.

You mentioned expecting higher repurchases for the remainder of the year and also gave a range for Hurricane Beryl losses. Given the forecast for an active hurricane season, what gives you the confidence to increase the repurchase outlook? Should we expect repurchases to be more weighted to Q4 rather than Q3?

The confidence comes from our strong capital position and our strengthened reinsurance program. We feel good about going into the back half of the year. Our businesses generate strong cash flow and we have a track record of deploying capital back to shareholders. We've completed $100 million of buybacks so far and expect to be at the higher end of the $200 million to $300 million range, subject to M&A opportunities, market conditions, and catastrophe activity. Our capital position allows us to operate from a position of strength.

Perfect. Thank you.

You're welcome.

Great. Thanks, Grace.

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

Hey Mark.

Hey Mark.

Thanks for taking the follow-up. In Global Housing, your fee income was quite strong this quarter. Anything unusual there? Is this elevated fee level going to continue? I think I saw $53 million, a big jump year-over-year — could you talk about that?

In fee income there was a business change that resulted in a reclassification between fee income and our expense lines. It had no bottom-line P&L impact, just a movement between expenses and the fee income line.

You talked about a client transition in Housing that could impact the second half. Can you expand on that?

There's a lot of ongoing activity in lender-placed. Portfolios sometimes roll off and other portfolios roll on as clients make acquisitions and move books of loans. We'll see some movement in the back half of the year, but overall policy counts are expected to be relatively stable in the second half. Any decreases from transitions should be offset by pickups in other portfolios.

Okay. Very good. Thank you.

Excellent. And if we have no other questions, maybe just one final comment from me and then we can wrap up. I want to emphasize we have a very strong track record of driving performance across various economic cycles. We're proud of what we've delivered so far this year and excited about the raised guidance. With the current guidance, we're poised to deliver 10% EBITDA growth on average since 2019, over the last five years, and to more than double absolute earnings per share with a 16% CAGR over that same five-year period. We're proud of the track record behind us. We have momentum in the business with new client launches and wins, and we're working on other initiatives we'll discuss in future quarters. We're excited to drive growth and create shareholder value. We'll look forward to getting back together in November after our third quarter. We really appreciate the time. Thanks very much.

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