Assurant, Inc. (NYSE:AIZ) Q4 2024 Earnings Conference Call February 12, 2025 8:00 AM ET

Company Participants

Sean Moshier – Vice President-Investor Relations
Keith Demmings – President and Chief Executive Officer
Keith Meier – Chief Financial Officer

Conference Call Participants

Mark Hughes – Truist
Jeff Schmitt – William Blair & Company
Tommy McJoynt – KBW
James Chmiel – Piper Sandler

Operator

Welcome to Assurant’s Fourth Quarter and Full Year 2024 Conference Call and Webcast. At this time all participants have been placed in a listen-only mode and the floor will be opened for your questions following management’s prepared remarks. [Operator Instructions] It is now my pleasure to turn the floor over to Sean Moshier, Vice President of Investor Relations.

You may now begin.

Sean Moshier

Thank you, operator, and good morning, everyone. We look forward to discussing our fourth quarter and full year 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 fourth quarter and full year 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 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 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.

Keith Demmings

Thanks, Sean, and good morning, everyone. 2024 represented another strong year for Assurant. I’m incredibly proud of the performance of our teams across the company, whose commitment to delivering for our clients and customers enabled us to achieve 15% adjusted EBITDA growth and 19% adjusted earnings per share growth, both excluding reportable cats.

Strategic investments in our people, client partnerships, technology and capabilities and targeted actions to drive improved performance across key areas of the business, position us to continue to outperform and deliver exceptional value through our products and services. Our people are at the center of everything we do, and our performance is made possible by our world-class culture. Our culture is how we attract and retain incredible talent to deliver for our customers.

We’re extremely proud of the recognitions we’ve received, highlighting our commitment to innovation and sustainability, while supporting and empowering our employees. Our competitive advantage comes from the ongoing dedication of our global workforce and leadership team to drive new business through innovative solutions while elevating the customer experience and deepening existing partnerships. In Global Lifestyle, we had an unprecedented year of client wins and renewals, particularly within Connected Living.

We continue to invest in new innovative client programs and leading-edge technology including the incorporation of automation, robotics and AI at our device care center outside of Nashville. We recently partnered to launch T-Mobile’s Protection 360 HomeTech product. This new offering provides protection for an unlimited number of WiFi-enabled devices and electronics, while providing premium tech support to consumers.

This critical new product represents another strategic growth vector and underscores the long-term opportunity presented by the convergence of broadband and mobile in the connected home. By prioritizing investments in programs and capabilities, we generated significant momentum and plan to execute on additional opportunities. In Global Automotive, we made progress in stabilizing earnings through targeted actions to address elevated claim costs in our vehicle service contract business and our guaranteed asset protection product.

We continue to be optimistic about the long-term outlook for this business. Before discussing Global Housing, I want to first share that our thoughts are with everyone who is impacted by the events of the last few months, including the California wildfires. In these times, we have a critical role to play in our customers’ journey.

In Southern California, we’re focused on making it quick and easy for policyholders to file claims online on the phone or in-person at mobile claims centers, accelerating customer payments. We remain proud of our role in removing the risk of uninsured loss for lenders, investors and homeowners through our housing offerings. As we look at housing’s results, we delivered sustained outperformance in 2024, benefiting from the strength of our homeowners and renters businesses, including the rollout of technology innovation to enhance our customer experience.

Leveraging the segment’s differentiated advantages and efficiency initiatives, we have more than doubled our adjusted EBITDA in the past two years, growing the business from just over $400 million in 2022 and to over $900 million in 2024, excluding cats. Even including cats, housing has outperformed the P&C industry. Over the past five years, we’ve achieved an average return on equity of over 22% and our increased scale and efficiency has driven a 10-year average combined ratio of 89%, compared to the broader P&C market of 95%.

With clear outperformance and expected growth ahead, the business has the opportunity to be better appreciated from a valuation perspective. 2024 was a remarkable year of commercial success across Assurant, marked by significant client momentum as we enter 2025. Strong execution enabled us to capture new opportunities while solidifying and extending key client relationships.

Across our global footprint, we had several key wins, including Australia’s largest mobile carrier and two major financial institutions in the U.S. We renewed client relationships and reinforced our position as a leader and preferred partner throughout our businesses. In our mobile business within Connected Living, we completed major renewals in 2024 that represent three of the top five largest mobile carriers in the U.S. More recently, we also secured a multiyear renewal with a large mobile carrier in Japan. We’ve now renewed our four largest mobile clients in the last year, who represent over 40 million mobile devices protected, a testament to our ability to execute mobile protection programs across the globe.

Within housing, we renewed 10 lender-placed clients, representing over 17 million loans tracked. And in renters, we completed renewals of 2 top 10 property management companies as we continue the rollout of key technology-enabled services like Cover360 and Assurant TechPro. These help increase policy attachment while enhancing the experience of our partners and renters.

Ultimately, the continuing demand for our offerings and solutions, combined with our strong competitive edge, creates commercial momentum that will extend into 2025 and beyond. We believe in the power of our unique business-to-business to consumer or B2B2C business model. At our core, we’re a premier global protection company that partners with the world’s leading brands to safeguard and service connected devices, homes and automobiles, utilizing data-driven technology solutions to provide exceptional customer experiences.

The common thread across our entire enterprise is our powerful B2B2C distribution strategy in both lifestyle and housing, where we have strong leadership positions in attractive markets. Through our differentiated distribution, strong public Fortune 500 company financials and unwavering emphasis on client transparency, we create deep partnerships with leading brands across the world. In addition, our commitment to continuously enhance customer experience through customized solutions that wrap around our protection products is built on decades of investment and ongoing innovation.

This allows us to deeply integrate our technology and platforms with clients, supporting long-tenured partnerships and exceptional customer experiences. Since 2019, we’ve increased adjusted EBITDA by over $630 million or a 12% compounded annual growth rate while growing adjusted EPS by over $11 per share or an 18% compounded annual growth rate, both excluding catastrophes. As we look at our performance versus the broader P&C industry, we’ve continued to outperform the S&P 1500 P&C index median, both excluding and including cats, when comparing across adjusted earnings and EPS growth.

Our compelling track record of outperformance includes eight consecutive years of profitable growth, demonstrating resiliency through various macroeconomic environments. In addition, our portfolio benefits from earnings and capital diversification across geographies and business lines, positioning us to continue to invest in and achieve future growth. We believe we’ll remain an attractive investment with a compelling path ahead, and we believe we should be valued at a premium to the S&P 1500 P&C index median.

Before turning it over to Keith Meier to share additional insights on our results and review business trends, I want to highlight our strong momentum heading into 2025 and how we plan to deliver future growth. First, we’ll focus on executing, optimizing and scaling significant new partnerships and program launches throughout lifestyle and housing, where we invested last year. Overall, we believe our 2024 investments should be fully earned back through 2025 with an attractive one-year payback.

Next, we’ll support incremental investments for new launches in our pipeline and accelerate emerging growth opportunities. In addition to our connected home product launch, we have new opportunities with several clients particularly in global lifestyle, and we look forward to sharing more details over the coming quarters. And finally, we’ll drive financial performance and operational excellence.

We believe we’re well positioned to meet our 2025 objectives given the commercial momentum we have within Connected Living, long-term tailwinds in Global Auto and sustained outperformance in Global Housing. Overall, our ability to deliver for our clients, drive efficiencies across our operations and focus on data-driven technology solutions should enhance our position as a leader in the businesses that we operate and extend our compelling track record of financial performance. I will now turn it over to Keith.

Keith Meier

Thanks Keith. And good morning everyone. I’m proud of what we achieved in 2024, including the financial results delivered by our incredibly strong team.

For the year, we increased adjusted EBITDA by 15% to over $1.5% billion, while growing adjusted earnings per share to over $20, both excluding cats. We have continued our long-term track record of growing earnings consistently demonstrating the power of Assurant. Our performance was highlighted by another exceptional year in Global Housing, where we delivered double digit earnings growth overall for the second consecutive year.

Within Global Lifestyle, Connected Living grew 9% excluding $25 million of investments and $12 million of unfavorable foreign exchange. More importantly, we set a solid foundation for growth as we enter 2025. In Global Auto, targeted actions in our vehicle service contract and GAP products stabilized earnings in the second half of 2024 and we are excited about the trajectory of the business as we move into 2025.

I’ll begin by highlighting key trends we saw in the fourth quarter. From there, I will walk through our 2025 outlook as we look to deliver our ninth consecutive year of profitable growth. Beginning with our fourth quarter enterprise results, adjusted EBITDA and earnings per share both increased 13% excluding cats led by Global Housing.

Looking at capital, Global Lifestyle and Global Housing continue to generate significant cash flow, as we up-streamed nearly $250 million from our segments in the fourth quarter and over $800 million for the full year. We returned $161 million of that cash to our shareholders in the fourth quarter, which puts our total capital returned to shareholders for the year in excess of $450 million, including $300 million of share repurchases. Our buyback level was at the top end of our expectations for the year.

At the same time, we ended the year in a strong capital position with $673 million of liquidity at the holding company. This past November, we increased our common stock dividend by 11%. The increase represented the 20th consecutive year we have raised our dividend since our IPO.

In addition, we were just added to the S&P High Yield Dividend Aristocrats Index earlier this month. We are incredibly proud of this achievement and expect our strong capital returns to continue as part of our balanced capital deployment framework. Turning to our segment results, beginning with Global Lifestyle, fourth quarter adjusted EBITDA was down 6% compared to last year or 5% on a constant currency basis.

In Connected Living, earnings were roughly flat on a constant currency basis. Fourth quarter results included $4 million of incremental investments related to new capabilities and client partnerships that are expected to drive future growth. Investments in 2024 are already paying off as earnings from recently launched clients, including card benefits within our Financial Services business have begun to contribute to Connected Living’s fourth quarter performance.

As Keith mentioned, we are now focused on scaling these partnerships for growth. These contributions were offset by lower U.S. trade-in programs. Year-over-year, trade-in results were impacted by business mix and lower volumes, however, we did see sequential trade-in growth as expected.

Turning to Global Auto, in the quarter, results were down 11% compared to last year. The year-over-year decline was largely driven by lower real estate joint venture partnership income of $13.8% million. Fourth quarter 2023 included a more significant real estate joint venture gain compared to a smaller gain this year.

Excluding this, results in Global Auto were largely flat as higher investment income was partially offset by elevated loss experience in both our GAP product and our vehicle service contract business compared to last year. Importantly, we continue to see claims experience remain stable from last quarter as previously implemented program changes and rate increases continue to earn through our book, leading to a sequential improvement in earnings. In terms of revenue, our net earned premiums, fees and other income for Global Lifestyle grew 2%, or approximately 6% on a constant currency basis.

And excluding $85 million of favorable non-run rate premium adjustments in Global Automotive in fourth quarter 2023. Moving to Global Housing, fourth quarter results were strong building on an exceptional performance for the year. Adjusted EBITDA was $225 million which included $50 million of cat losses largely from Hurricane Milton.

Excluding cats, adjusted EBITDA increased 32%. In the quarter, we saw a continuation of robust policy growth in homeowners from higher placement rates given voluntary insurance market pressure. As these additional policies are placed, we benefit from the significant expense leverage we have driven in this business from our technology investments.

Earnings growth in the quarter also included impacts from favorable non-catastrophe losses due to lower frequency as well as lower catastrophe reinsurance costs. While we had favorable prior period reserve development of $38 million in the quarter, it was relatively consistent with fourth quarter 2023 and did not impact year-over-year growth trends. Within our Renters business we continued to benefit from strong results in our PMC channel which achieved its tenth consecutive quarter of double digit gross written premium growth.

Now let’s discuss our outlook for 2025. We expect full year adjusted EBITDA and earnings per share to increase modestly, both excluding cats. Overcoming $107 million of favorable prior year reserve development in Housing’s 2024 results.

Excluding the significant favorable PYD in 2024, strong underlying growth trends are expected to deliver high single-digit earnings and EPS growth, both excluding cats. Our outlook includes our forward view of foreign exchange rates and interest rates, but does not factor in potential impacts from tariffs including those related to claims costs or consumer demand. While tariffs could potentially affect claims costs, we believe we are well positioned to react quickly to address potential impacts.

Over time, our business model has had a proven ability to deliver in the face of various economic environments and cycles. Looking at our segments for 2025, we expect Global Lifestyle growth driven by higher contributions from Connected Living and Global Automotive. Growth is expected to be partially offset by an unfavorable impact from foreign exchange rates, as well as investments in new partnerships and programs in 2025. Combined, we expect foreign exchange and incremental investments to mute growth by a few percentage points.

Turning to Global Housing, we expect EBITDA excluding cats to decline modestly, given the $107 million of favorable prior year reserve development seen in 2024. Excluding the impact of prior year development in 2024, on an underlying basis, we expect strong Global Housing EBITDA growth in 2025. As a reminder, our 2025 outlook does not contemplate additional year development.

Underlying growth is expected to be driven by our Homeowners business which will continue to benefit from lender placed policy growth and expense leverage. For the recent wildfires in California, we remain focused on settling claims and helping our policyholders navigate through the event. Reportable catastrophes from the California wildfires are expected to approach or slightly exceed our per event catastrophe reinsurance program retention of $150 million.

We’ll provide a further update in May as we learn more and continue to settle claims. In terms of other impacts to 2025, we are working through the placement of our catastrophe reinsurance program which will be effective on April 1. We expect a similar structure to our 2024 program, maintaining robust coverage at both the top and bottom end of our program.

As the program terms are finalized, we will also get greater insights into our expected cat load for the year. We will provide an update in May on expectations which will be inclusive of our California Wildfire estimates. Our capital objectives for 2025 are consistent with prior years’ as we focus on maintaining balance and flexibility to support new business growth, while returning excess capital to shareholders.

From a share repurchase perspective, our expected range for 2025 is between $200 million to $300 million subject to M&A, as well as market and other conditions. This range accounts for our estimated impact from the California Wildfires. Of course, we will continue to make sound capital allocation decisions over the course of the year as our track record has shown.

Through February 7 we we’ve repurchased $24 million of shares. We expect buybacks to be more consistent throughout the year compared to back-end weighted in prior years driven by our confidence in our strong capital position and cash flow generation. And finally, speaking of cash flow generation, we believe Assurant is differentiated compared to the broader P&C industry given our unique lifestyle and housing portfolio, which creates strong capital efficiencies and the ability to reinvest for growth.

In 2025, we expect to continue to generate meaningful cash flows aligned with our recent performance. Overall, we are proud of our consistent outperformance and feel well positioned to continue our growth trajectory in 2025. With that operator, please open the call for questions.

Operator

The floor is now open for questions. [Operator Instructions] Our first question comes from Mark Hughes with Truist. Please unmute your line and ask your question.

Keith Demmings

Good morning, Mark.

Mark Hughes

Good morning, Keith. I muted myself and then unmuted myself. Morning.

On the Homeowners business, the placement rate has been looking quite good. Can you talk about the – what is a voluntary versus the lender placed. And do you still see the same dislocation in those markets that’s been pushing the voluntary, presumably, how much momentum does that give you for 2025.

Keith Demmings

Yes. Great question, and thanks for that. So I would say a couple of things.

We’ve definitely seen really strong PIF growth on lender place throughout the year. That trend continues certainly in the fourth quarter. Year-over-year, we’re up 16% in terms of policies in force.

And if I simplified that, I’d probably say a third of that is client growth and loan movement within clients. A third of that is California due to the hardening market and then the other third is the rest of the country growth from a similar dynamic. So we’ve definitely still seen hard insurance markets, creating opportunity for policy growth on our book of business.

And we’ve seen a lot of diversification as well across geographies. So I think that likely continues. Certainly, the trend was pretty consistent in fourth quarter as we saw for the first three quarters.

So expect some continued growth there, probably not at the same level that we’ve seen, but certainly feel good about the momentum overall in housing.

Mark Hughes

Then in Global Lifestyle, how do we think about the top line growth. Just kind of broadly, you’ve given good guidance on EBITDA. You’ve given some thoughts about customer growth, that sort of thing, but how do we think about top-line growth maybe in 2025 or just more broadly in lifestyle.

Keith Demmings

Yes. I mean if I think about lifestyle, the first thing I would highlight, and we covered it in the prepared remarks, but we are particularly excited on the Connected Living side, securing our mobile clients is really, really important and so fundamental to the business long-term. It then allows us to focus more energy with our partners to drive growth, to launch new products, to optimize customer experience.

There’s a lot of energy around making sure we’re optimizing all the buy flows and touch points to serve consumers. So, I think that will be a catalyst for continued momentum certainly, on the Connected Living business, we saw Chase come on in the fourth quarter. That’s going to obviously drive financial services growth throughout the year.

So I do think we’re well positioned. We’ve had pretty consistent lifestyle growth in terms of the top-line for the last few years. I think that growth continues as we move forward.

And then in auto, it’s about the loss recovery and our ability to continue to see that mature and feel really good about how the second half of the year stabilized, obviously, more road to go, but feel like we’re well positioned. But Keith, anything else.

Keith Meier

No, I think it really speaks to the momentum that we have and the opportunities that we have as we look forward to 2025. We’ve talked about making some investments in 2024, and we certainly expect to do that again in 2025. It’s because of the momentum we’ve got in our markets, especially in Connected Living.

So we certainly look forward to sharing more of those updates as we go through the year.

Mark Hughes

And one final quick one. The ForEx headwind for 2025, I think you said, with ForEx and investments a few percentage points. How about ForEx specifically.

Keith Demmings

Yes. I think we’d probably say, foreign exchange, a couple of points of headwind. In terms of the investments, probably one to two points.

If you think about 2024, just to kind of create context, we had $25 million of incremental investments. Roughly $10 million of that was Depot automation that we’ve talked about and the other $15 million or so, roughly two-thirds was client-related launches. So as we look at 2025, probably somewhere maybe approaching a similar level of investment in clients maybe slightly below.

So we’ve got given the 1% to 2% headwind relative to lifestyle overall. But we do have some good things in the hopper with clients, new clients, existing clients, new product launches. And we’re certainly excited to update as we go through the year.

Mark Hughes

Thank you.

Operator

Our next question comes from Jeff Schmitt [William Blair & Company]. Please unmute your line and ask your question.

Keith Demmings

Good morning, Jeff.

Jeff Schmitt

Can you hear me.

Keith Demmings

Perfectly.

Jeff Schmitt

Hi good morning. So the placement rate in housing, just one more question on that. Are you seeing a lot of insurers fleet, California after the fires.

So could we maybe see that kind of jump in Q1.

Keith Meier

Yes. And I think overall for California, Jeff, there was a moratorium put on in California so that the insurers would not be leaving, the wildfires just taking place. So we think that will temper some of that for a while.

And then I’m sure that will open back up later. But for right now, in the short term, I would say, we don’t expect a lot of exits from the state.

Jeff Schmitt

Okay. And then in Global Auto, are you still seeing elevated losses in that GAAP book. And how much did that contribute to the loss ratio in the quarter.

Keith Meier

Yes. So from a GAAP perspective, Jeff, we’ve seen it stabilize. From the third quarter to the fourth quarter, it was flat to maybe slightly better.

So I think from that perspective, I think that also points to why we feel good about where we’re going for 2025, and that we’ve signaled that we see growth in auto as we go through this year.

Keith Demmings

Yes. And maybe just 1 add-on comment as we think about GAAP and we’ve talked about this, when we look at the written business we expect to put on in 2025 will largely be off of most – not quite all, but close to all of the risks that we write. So that will definitely change that dynamic longer term and create more stability in our approach.

Jeff Schmitt

Okay. Any sense on the size of that impact that we could have just in the quarter or the last two quarters really.

Keith Meier

I would say just maybe $1 million or $2 million better for this quarter, Jeff, but pretty stable.

Jeff Schmitt

Okay. All right. Thanks.

Operator

Our next question comes from Tommy McJoynt with KBW. Please ask your question.

Keith Demmings

Good morning. Tommy.

Keith Meier

Hi, Tommy.

Tommy McJoynt

Hey good morning. Yes, another question on the investment spend. You called out the $25 million last year.

And I just want to understand your comments about the payback period is effectively being one year. So are you saying that those new programs are generating $25 million of positive EBITDA in 2025 to fully out that really $25 million drag in 2024. Is that – am I understanding that right.

Keith Demmings

Perfectly. That’s exactly what we’re saying.

Tommy McJoynt

Okay. And the new investment spend for 2025, what types of programs are those. And are those related to the one last year, I think, related to Chase and travel benefits.

Or what can you say about the new plans.

Keith Demmings

Yes. I would say entirely separate from the clients that we signaled last year. And obviously, we had T-Mobile also roll [indiscernible] in the fourth quarter that we would have been investing in last year as well.

So we’re typically telling you about the things sort of after they become public in the market. But if we look at the potential for kind of one point to two points of headwind relative to those investments in 2025, it will be net new things that we haven’t discussed yet. With marquee brands and clients that I think you would very much recognize.

So we’re super excited. We don’t want to get in front of ourselves. There’s a lot of ongoing contracting with clients, launch plans, technology investment.

So there’s always a lot in the works, but we have a really, really strong pipeline in 2025. And I’d say it’s similar types of things with different clients, obviously in 2025.

Keith Meier

Yes. And I think, Tom, one thing you can expect is, just like we did last year, as we make those investments through 2025 we’ll be very transparent about what they were and the benefits in the clients that came as a result. So we’ll be sharing that with you and connecting that to the investments as we go through the year.

Tommy McJoynt

Okay. Got it. And then switching over to the Housing side.

With the higher placement rates and seemingly ever rising average matured value, that segment continues to generate a lot of scale. Does that increase scale. And I guess, just combined with really strong underlying performance on the underwriting side, does that change your outlook for the combined ratio in that segment.

Keith Demmings

Yes. I think what I would say, if we look at 2025, even with the California fires, and we size that at slightly less than or slightly more than $150 million of overall losses. We think we’re still going to be in that mid-80s combined for the full year of 2025 and we think that’s a really, really strong result.

Obviously, the dynamics changed. So we’ll see longer term what we think the right long-term target is for that. But feel really good.

And again, we’ll deliver north of 20% ROEs in that business as well. And to your point, not only have we seen a lot of growth, but we’ve created a lot of expense leverage, invested a lot in technology and that’s helped us deliver pretty strong outperformance. So we’ll kind of reassess as we go forward.

But if we look at 2025, we think rates will be relatively neutral to us this year. We’re not seeing big increases certainly in rate, but that will ebb and flow, and we’ll monitor that as we go.

Tommy McJoynt

Great. Thanks, Keith.

Keith Demmings

You bet, Tommy.

Operator

[Operator Instructions] Our next question comes from James Chmiel with Piper Sandler. Please ask your question.

Keith Demmings

Morning.

James Chmiel

Good morning.

Operator

James, please unmute your line and ask your question.

James Chmiel

Hello. Good morning. Thank you for the opportunity.

Keith Demmings

Good morning.

James Chmiel

How should we be thinking of reinsurance renewal cost and the ability to get additional rate through regulators in impacted geography.

Keith Demmings

So maybe, Keith will start on reinsurance, I’ll hit on rate.

Keith Meier

Yes. So from a reinsurance perspective, we were at about $186 million for 2024 that included in the first quarter a benefit when we went to the single placement of about $15 million. So that would move you to around $200 million for the reinsurance.

And then we’re going through the process right now, and we’re currently evaluating our program structure. And we expect to maintain a relatively consistent program retention, historically, a one in five probable maximum loss. So with the volumes being up a little bit, we think the pricing should be pretty favorable as well. So it will probably be up a little bit for the volumes from there, maybe slightly better on the, on level pricing.

But what we’ll definitely do for you is give more details on the final program as we get into our next earnings call.

Keith Demmings

Yes. And I think we’ve got a really, really strong track record. Our program has certainly outperformed the market generally for our reinsurance partners.

We’ve got a really diverse panel of reinsurers, and I think our relationships are incredibly strong. So expect that to continue as we go forward. And then as we think about rate and the ability to get rate on the housing side, I’d say we obviously file our rates at a state level.

Those rates are reviewed and approved, and we’ve had a really good track record of getting appropriate rates relative to the risk that we write no reason to believe that won’t continue to be true as we go forward. And I think we’ve had a long history of doing that. So not a point of concern and certainly a normal part of our process.

James Chmiel

Perfect. Thank you for the color. My follow-up question is regarding tariffs.

How does this impact your view on input costs for the businesses of lifestyle. And how should we be thinking of the FX impact in 2025. Thank you.

Keith Demmings

You bet. Thank you. So we haven’t baked anything into our guide for the year relative to tariffs just because of the uncertainty that surrounds it and it’s ever evolving.

So, but we did certainly think about foreign exchange. We thought about interest rates. We try to include assumptions around those elements, which obviously tariffs have an impact on.

So that’s certainly baked into our 2025 view. And then what I would say on tariffs is certainly the bigger effects for us would be longer term, is there a drop in consumer demand with elevated pricing, that’s something we’ll monitor. It will have a longer-term effect certainly in terms of financial impact.

The bigger short-term impact would be rising input costs around claims, parts and materials what I would highlight is we saw a significant amount of inflation in 2022 in housing and because our product is built with an automatic inflation guard feature, we’ve always got the ability to get rate. We took a lot of action around product and efficiency. The recovery from that has been quite strong in the last two years.

So I feel really good about our long-term ability to get to a good place. And then the other side would be the auto business. We’ve seen elevated CPI on auto repairs in the last couple of years.

We’ve built a really strong muscle with our clients in terms of regular reviews, monthly reviews around loss ratios, claims costs, by location, by geography, that will continue to be true. And if there’s elevated input costs around tariffs, we’ll continue to run the playbook that we’ve been running. It doesn’t change our long-term view around the strength of this business fundamentally.

But what would you add.

Keith Meier

Yes. And I think going through the inflation environments for auto and for housing has really helped us develop a tremendous amount of rigor around navigating any changes in inflation. A good example is in our housing business, we used to have an inflation guard adjustment that would be – that would take place once a year.

And now – and across all the 50 states now, we actually can do it quarterly, and we do it by state. So, I think those are the types of things that as you go through those times, you actually can come out of it stronger and better. And I think that’s a good example of what we’ve been able to do after the last couple of years.

Operator

Our last question will come from Mark Hughes with Truist. Please ask your question.

Keith Demmings

Hey Mark, you got back in.

Mark Hughes

Yes, thank you. Yes, I love it. The prior year development in the fourth quarter was the driver of that similar to what you saw earlier in the year.

Keith Meier

Yes. So I think the short answer is probably yes. The key thing Mark, is it really relates to a couple of things.

One, certainly, coming out of the inflationary environment for the last couple of years, that’s really what’s contributed to our prior our prior year development in 2024. And then I think there is also an element of – we also saw moments of frequencies being lower than expected. A good example is there was a quarter in the last couple of years, that was one of the lowest frequency quarters from a historical perspective for us. So there’s a couple of those dynamics that I would say we’re playing into the reserves for the last year or so.

But overall, I think we’re appropriately reserved and in a good position for the future.

Keith Demmings

Yes. And I think if you look at the housing business and you sort of walked out the $107 million of PYD this year and then you walked out the $54 million of PYD last year, you’re still at a 28% growth rate for the full year. So at every level, the housing business has outperformed, no matter how you look at it.

Mark Hughes

Am I right in thinking the fourth quarter ex-cat prior year development, loss ratio was very good. Do you assume that will continue into the in 2025. I know you said the mid-80s combined.

I assume that has – does that have cats in it or not. And should we think that 4Q. Is it something that you can run rate.

Or is that an anomaly.

Keith Demmings

Yes. I think our best view as we think about 2025 would be non-cat loss ratio in the high 30s an expense ratio in the high 30s and probably 10-ish points of cat given the California wildfires in the first quarter. So probably a little bit better non-cat loss ratio trend that we’ve seen a little bit higher cat load, probably gets you right back to a similar spot in mid-80s.

Keith Meier

Yes. And maybe just to add – I’m just going to say, maybe just to add the 10 points, just the way to think about it is, give or take, $150 million on the wildfires. Last year, we did $155 million cat load in.

So, we expect that to be a little higher this year with the growth. But if you add those together, we expect it to be somewhere in the low 300s, and we’ll finalize that more specifically on the next earnings call.

Mark Hughes

And then you talked about the opportunity to be better appreciated, Keith, in your opening comments, and I know you gave a lot of good statistics about your performance relative to industry metrics. Anything more specific you had in mind when you think about the opportunity to be better appreciated some action on your part or positioning of the company. Just that phrase my attention.

Keith Demmings

Yes. Yes, we probably used similar phrases in different ways at different times. I think certainly, the market appreciates the lifestyle business, it’s more capital-light, fee income, et cetera.

And I think what sometimes gets missed is the strength – the fundamental strength of the housing business and the housing franchise over the long term. It’s been a really, really strong performer. It’s well risk managed.

We’ve demonstrated considerable resiliency. It’s much less volatile. And we’re delivering – we talked about it on the prepared remarks, a 10-year combined ratio of 89% against any measure that is outperforming the market, the industry.

If you look at pure homeowner’s companies, it’d even be a more dramatic differential versus just looking at a wider cross-section across P&C. So I think the business is incredibly powerful. I think it scales well.

It’s deeply integrated and it’s not a traditional product. It’s the services that we deliver that complement the core insurance products that differentiate us. And I think it’s on Assurant to help tell that story and just further educate the secret sauce of what we do and how we create value because our story is consistent, whether it’s mobile, whether it’s auto or housing, how we add value for partners is really unique, super differentiated and hard to replicate.

And it scales incredibly well because we’re partnered with the who’s who, the leaders in the market and the market consolidator. So, we’ve got to continue to tell that story and that’s what we’ll do as we go forward.

Mark Hughes

Appreciate it. Thank you.

Keith Demmings

Thank you. And I think that was the last question. So we’ll go ahead and say thank you, everybody, for joining, and we’ll look forward to providing more updates on our next earnings call in May.

Thanks very much. Have a great day.

Keith Meier

Thank you.

Operator

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