Welcome to Assurant's Second Quarter 2017 Earnings Conference Call and Webcast. At this time, all participants are placed in a listen-only mode and the floor will be open for your questions following management’s prepared remarks. [Operator Instructions] It is now my pleasure to turn the floor over to Francesca Luthi, Chief Communication and Marketing Officer. You may begin.

Thank you, Dan and good morning, everyone. We look forward to discussing our second quarter 2017 results with you today. Joining me for Assurant's conference call are Alan Colberg, our President and Chief Executive Officer; and Richard Dziadzio, our Chief Financial Officer and Treasurer. Yesterday, after the market closed, we issued a news release announcing our second quarter 2017 results. The release and corresponding financial supplement are available at assurant.com. We'll start today’s call with brief remarks from Alan and Richard before moving into Q&A. Some of the statements made today may be forward-looking, and actual results may differ materially from those projected in these statements. Additional information on factors that could cause actual results to differ from those projected can be found in yesterday's news release, as well as in our SEC reports. On today's call, we will also refer to other 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 financial supplement available on assurant.com. On today's call, we also 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 financial supplement available on assurant.com. I will now turn the call over to Alan.

Thanks, Francesca and good morning, everyone. Overall, our second quarter results were solid and demonstrated ongoing progress toward achieving our financial commitments for 2017 and beyond. While global housing experienced higher non-catastrophe losses, our other business segments performed in line with our expectations. For the full year, we remain confident in our ability to maintain net operating earnings, excluding catastrophe losses at 2016 levels and to generate double digit earnings per share growth. This now reflects a revised outlook for our global housing and corporate segments, which Richard will discuss in greater detail. We are also well on our way to completing the $1.5 billion return of capital to shareholders by the end of 2017. As we progress through this year, we will continue to focus on leveraging our capabilities to expand in key housing life style markets to offset declines in our lender placed and legacy businesses. Let me now share a few recent highlights beginning with global lifestyle. Within connected living, we continue to strengthen our leadership position across the mobile ecosystem. Earlier this month, we launched a protection plan with Comcast for its Xfinity mobile. Going forward, Xfinity mobile customers can access a premier suite of protection, support and upgrade services for their mobile devices. It's one of the most comprehensive protection offerings available including coverage for accidental damage, loss and theft, as well as access to our technical support platform and self diagnostic tools. In addition, Xfinity iPhone users have full access to Apple Care Services. We are also continuing to expand our mobile franchise globally. As an example, we launched a new mobile and gadget protection offering in France with [indiscernible] and electronic retailer at more than 350 stores in France. This program helped consolidate our position in France as a leading provider of mobile…

Thank you, Alan and good morning. Let's start with a look at global housing. Earnings totaled $56 million compared to $57 million in the prior year period as declines in our lender placed insurance business were mostly offset by lower reportable catastrophe losses. While we did not have any reportable catastrophe losses in the quarter, we had a $10 million impact after-tax from a higher non-catastrophe loss ratio. This stemmed in part from wind and hail damage related to 15 ISO events, all of which fell below our reportable threshold. Looking at our key metrics, the combined ratio for our global housing risk-based businesses improved 30 basis points to 87%. This primarily reflects the absence of reportable catastrophe losses this quarter compared to $25 million pretax in the same quarter last year. This was partially offset by higher non-catastrophe losses and additional expenses to support new lender placed loans. The pre-tax margin for our fee-based capital light businesses increased to 11.7%, up 50 basis points from the prior year period. This was due to growth in multifamily housing, largely through expansion within our affinity channels. While the performance of our mortgage solutions business improved from earlier this year, second quarter results remain soft due to continued weak demand for new loan originations and field services. Actions taken in the first half of the year reduced expenses and helped mitigate margin pressure. Turning to revenue, second quarter net earned premiums and fees in global housing decreased 2%, primarily due to a 26 basis point year-over-year decline in the placement rate in our lender placed insurance business. We expect ongoing reductions to the placement rate in the range of 6 to 7 basis points per quarter through the end of 2017. This is driven by client mix, including a higher concentration of…

[Operator Instructions] Thank you. Our first question is coming from the line of Jimmy Bhullar with J.P. Morgan. Your line is now open.

So I had a few questions. First, given the sort of change in the makeup of your LPI book, how do you think about placement rates and if we stay in this type of a housing environment, barring a major correction, where do you think that rate will stabilize? I think you said at 1.8% to 2.1% in the past, but it seems like it will drift a little bit lower than that, partly given some of the new loans that you've taken on that have a naturally lower placement rate and then I have a couple of other ones as well?

All right. So Jimmy, let’s take that one and then we’ll come back and you can carry on with the question. So if you think about the 1.8% to 2.1% placement rate that we put out, we put that out at 0.11. And that was a three to five year outlook for where we thought placement rates would go. It's actually taken us six years to get into that range, given how the foreclosure crisis played out in the market. The way to think about it longer-term, this business is countercyclical. So as long as the housing market continues to improve, you'll see gradual declines in placement rates, although we do expect that to moderate as we get into 2018. And then if we do get into any kind of housing issues again in the future, we'll see placement rates growing. But for now, expect continued gradual declines in the placement rate moderating as we get into 2018.

Okay. And then on the mortgage solution results, they improved sequentially, but premium growth was still negative. So how much of it do you attribute just to lower originations versus maybe a loss of market share or lower demand for the type of services that you provide.

It’s Richard Dziadzio. Yeah. I think when we look at mortgage solutions, I would say we talked about the headlines - the headwinds that we had last time in the quarter. Certainly, we have continued headwinds in both the originations, field and asset services, but I would say we do feel that things have stabilized now. And in terms of quarter-to-quarter, we were up 15%. Part of that is just as I mentioned in my earlier notes, additional working days, but in addition to that, we are investing as we said in technology and operating efficiencies. So longer term, we're still feeling good about the area.

Okay. And then just lastly on capital deployment, I think if I look at your 1.5 billion capital deployment guidance for ’16 and ’17, it implies buybacks of roughly 175 million or so in the second half, so a slower pace than where you've been recently. Under what scenarios, what do you do less than that, seems unlikely, but under what scenario would you do less than that and likewise is there a possibility that as you go through this year, barring no additional deals that you end up doing more than the 175 or the 1.5 billion total?

So, Jimmy, I think I'd start by saying we are focused on delivering on our commitment to return $1.5 billion to shareholders through 2016 and 2017. That's our number one focus. We will always look at how much excess capital we have and what's the greatest value we can provide to our shareholders, either through investing in organic growth, selectively doing M&A as you've seen us doing or returning the capital and we’ll continue that philosophy. But our number one priority is to deliver on that commitment to return the 1.5 billion.

Our next question is coming from John Nadel with Credit Suisse. Your line is open.

I had a couple for you guys. Richard, I believe you mentioned, but I might have just missed it, the significant non-cat weather, I think you referred to $10 million. I'm not sure if that's a discrete higher level of losses in the second quarter or if that's just explaining the variance year-over-year. Can you give us a little bit more color?

In terms of the non-cat ratio, it was up and you are correct, we talked about it being up 10% in the quarter. And that's an after-tax, after-tax number. And in fact, what we saw and really what we see in the market is there was, I would call it, a lot of weather in Q2, but we didn't have such weather to the extent that any one storm came up to our reportable catastrophe level. So we didn't have any storms over $5 million that hit us. So really what you see when you look at our total combined operating ratio, you see we came in at 87% and that's against 87.3% last year. So I guess all-in, we’re kind of at the same level.

Yeah and that was going to be my next point, right. I think if I recall, I just want to confirm this. I think the target for the risk business there is 86 to 88. So that's inclusive of cat, so we're kind of there right?

Yes, you’re exactly right.

Next one just a housekeeping item, the onetime contract adjustment in the extended service contract business, I think you mentioned a favorable item related to a single contract. Was that of any note in terms of size?

It was relatively small, the onetime adjustment, you know, we talked about some last quarter, it was a true up, when we go back and we work with the clients and true things up. For this one, it was an extended service contract as I mentioned. And the amount of the impact was $2.6 million after tax.

And then I guess one bigger picture question, $100 million expense save target that I think you guys have talked about. I don't recall specifically the time frame, but can you give us an update on where you stand against that bogey, how we should think about the remainder of the delivery of that expense save over time?

So, the way to think about 100 million, we set that out in Investor Day last year as a 2020 target. So by 2020 we get to 100 million of gross savings run rate. And we have committed that at our next Investor Day which is likely early next year, we’ll give a lot more granularity on progress. But I think we feel good about the momentum there. You say some of the impact coming through in our corporate expense line that's one of the reasons why we were able to lower the corporate loss this year. You've seen our connected living margin expanding, it's up I think almost 300 basis points versus a year ago. That's part of that, we are also investing though in the short term. So for example this year we've been standing up and rolling out a procurement capability across Assurant and that's not going to generate any savings in the short term, but will be a significant driver or any net savings in the short term, but it will be a significant drive over time. So we feel like we're on track, but the majority of those benefits are going to flow through in the future years.

And then the last one for you, and I don't know how much you can or can't talk about this, but the Xfinity contract sounds really intriguing. I'm just curious whether you can give us any sense for the potential size of that contract over time in terms of impact to revenues or margins or how to think about that?

So first of all we're very excited to be in partnership with Comcast, it's a great addition to our client portfolio and we're well positioned to grow with them as they grow in this business. They have I think 15 million odd potential - I think that's a right number, but they have a large number of customers, so we have the potential to penetrate. And if we're successful, this could be a very meaningful program over time.

And I'm sorry, you said fifteen million?

Maybe 25, it's either 15 or 25, apologizes, but it’s a large number.

Either one is a good number, thank you.

[Operator Instructions] Our next question comes from the line of Seth Weiss with Bank of America Merrill Lynch. Please go ahead.

Most of my questions have been asked, but maybe just a couple of follow ups here. Just on the placement rate discussion in LPI, with the 6 to 7 basis points moderation, obviously it will come below that range. Can you just comment how much of that is a business mix issue in terms of taking on this lower pricing rate business and how much of that is perhaps what I would maybe categorize as the legacy portfolio coming in lower than what you originally anticipated.

Good morning, Seth. It’s Richard. I'll take the question. In fact what we've been talking about over time is the 4 to 5 basis point decline in the placement rate. And that I would say really is the reflection of market conditions and Alan mentioned it earlier in his comments about the improvement in the macroeconomic environment, in particular the housing market. What we're seeing today and mentioned earlier is we do have a mix of business, a different mix of business now. As you know, we brought on new clients at the end of last year and we talked about it at that time in terms of the overall placement rate being lower. So as we see that working through, we're really updating the placement rate from going from 4 to 5 per quarter to 6 to 7 per quarter for the rest of 2017. And then as Alan mentioned earlier in his talk, we do see that moderating in 2018.

Okay. So the moderation maybe going back to more of that historic 4 to 5 decline until we get a turn in the cycle. Is that fair to say or moderation maybe even -?

No. I think that's our current thinking is the 4 to 5 longer term, but again it's macroeconomic environment, business mix, et cetera.

Yeah. And as we get into our planning for next year and as always with Q4 earnings, we’ll provide a much more specific outlay of decline next year.

Okay. That's very helpful. And then just a big picture question on the ROE and the long term growth targets set back in early 2016 at the last Investor Day, you’ve revised that guidance, not that guidance, but you revised your general guidance a couple of times, particularly related to certain fee based type products in the subsequent quarters here. So in that light, can you just discuss what's gone better than expected from when you set that guidance in ’16, what's gone perhaps worse than expected and if you would still categorize the 15% long-term EPS goal as attainable?

Yes. So Seth, first of all, I don't think we've changed other than the adjustment for the client contract change, so we did raise the Connected Living margin because the client contract changed the group geography’s accounting. So we haven't changed our outlook from 2016 Investor Day that I'm aware of.

I meant some of the specific business lines in terms of the tweaks you give on a quarterly basis, but not unchanged to that longer term guidance obviously.

Okay. And the only one we even changed on those I think was Connected Living because of the change in client contract. But if I go to the broader issue, so the most important commitment in our mind is grow earnings. And this year, as we've said, we now expect to be flat and we're well positioned for profitable growth in 2018 and beyond. The second commitment was grow EPS by 15% on average. We didn't achieve it last year. We are on track this year to deliver double digit EPS growth and if we can grow earnings and continue capital deployment, we’ll be positioned to grow EPS over time. And then we talked about gradually improving ROE to 15% by 2020. That's really a combination of where we do have quite a bit of excess capital today, that's depressing the ROE in the short term combined with the growth in earnings, combined with the rotation as we add more lower capital intensive growth, we can see line of sight over time to that. And then the other major commitments we've made like the $1.5 billion capital return, we’re $1.3 billion through that at this point.

[Operator Instructions] Your next question comes from the line of Mark Hughes with SunTrust. Please go ahead.

It seems like the outlook iPhone shipments is robust as we go through the next few quarters, especially later this year, early next year. Is there anything you see in the channel that suggests more optimism, more potential for stepped up activity? Is that potentially a driver for the mobile business for you?

So Mark, the release of new phones is always a significant event for us. It's too early to tell exactly what Apple will release and when they'll release and when they'll have availability, but the good news for us is it will be a significant contributor, exactly when and how much, it's too early to say.

Right. And I'm sorry I missed the early part of the call. You had mentioned in the press release higher losses in the vehicle protection business, a less favorable experience. Could you talk that for a second? Is that just kind of variability in the business or are you seeing some underlying changes?

It's Richard. And yes, we did mention that in fact during the quarter, we had some increased losses from part of the - one of the products that we have in vehicle protection service business and it actually brought the loss ratio up to 97%. So we were at 92% last quarter. It didn't bring it up but I would say that our long-term expectation is that that business would be in the 96% to 98%. And we’re also seeing some good growth on the topline there as well.

How about new business trends in vehicle, is that low to mid, are you still seeing growth here in the new warranty?

We're still seeing growth really from a combination of things. Our business mix is as much on used cars as new cars. So, changes in new car sales don't immediately affect our business. The other thing about this business is the way it earns. So sales that we've made often don't start to show through our earnings for a period of time. Could be years depending on the nature of the program. So we've been expanding our market share both in the US and outside of the US and we've got good momentum and growth in that business which is continuing.

And we have no further questions at the time. I will now turn it back to the presenters for closing remarks.

Thanks Dan and thanks everyone for participating on today's call. To recap with another solid quarter, we’ve continued to execute our transformation and remain confident in our outlook for 2017. We look forward to updating you on our progress later this year. In the meantime, please reach out to Sean Moshier with any follow-up questions. Thanks everyone.

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