Welcome to Assurant's Fourth Quarter 2017 Earnings 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's prepared remarks. It is now my pleasure to turn the floor over to Suzanne Shepherd, Vice President of Investor Relations. You may begin.

Thank you, Kelly, and good morning, everyone. We look forward to discussing our fourth quarter and full year 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 results for the fourth quarter and full-year 2017. The release and corresponding financial supplement are available on assurant.com. We'll start today's call with brief remarks from Alan and Richard before moving into a Q&A session. Some of the statements made today may be forward-looking. Forward-looking statements are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in yesterday's earnings release, as well as in our SEC reports. Our previously announced acquisition of The Warranty Group is expected to close in the second quarter, subject to regulatory approval and other customary closing conditions. As such, the 2018 outlook provided on today's call does not include any contributions expected from The Warranty Group acquisition, nor the financing plan. 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 yesterday's news release and financial supplement available on assurant.com. I will now turn the call over to Alan.

Thanks, Suzanne, and good morning, everyone. We are pleased with our results for the fourth quarter and full-year 2017. We delivered on our financial commitments to shareholders, while also building a stronger Assurant for the future. Specifically, for full-year 2017, we generated net operating income growth of 9%, excluding reportable catastrophes, well ahead of our initial expectations, due to business growth and $12.5 million of net one-time benefits. Operating earnings per diluted share, excluding catastrophes, grew by 22%, surpassing our long-term average annual target of 15%. And we completed the return of $1.5 billion in capital to shareholders, as planned. In 2017, we also achieved key milestones in our multi-year transformation, which we believe position our company for continued profitable growth. We invested in our digital and data analytics areas and we also established capability centers for enterprise strategic account management, customer experience, robotics, and artificial intelligence. These are just a few examples of investments to strengthen our competitive advantage. Through our newly-formed enterprise procurement group and other initiatives, we've made good progress toward our $100 million gross expense savings target. These savings, largely sourced from third-party spending, have and will fund ongoing investments in the business, while expanding margins over time. We've also continued to manage capital prudently with the goal of enhancing shareholder value. Not only do we complete our return of $1.5 billion to shareholders, we also announced our acquisition of The Warranty Group. We believe this transaction positions us as a leading lifestyle provider with significant synergies, a platform for continued innovation, and a more predictable and diversified earnings stream. In January, following the enactment of U.S. tax reform legislation, we amended the transaction agreement to simplify the overall structure and optimize the financing plan. Importantly, tax reform provides meaningful savings to our operations which will…

Thank you, Alan, and good morning, everyone. Let's start with Global Housing. Net operating income for the fourth quarter totaled $90 million, exceeding our expectations. When compared to the prior year period, results benefited from $40 million of lower reportable catastrophes, the absence of $20 million of lender-placed regulatory expenses, and more income from processing a substantially higher volume of claims under the National Flood Insurance Program or NFIP following Hurricane Harvey. We've now closed more than 90% of our NFIP flood claims, so we do not expect this level of income to continue into 2018. In addition, fourth quarter 2017 results also reflected more favorable non-catastrophe loss experience. In the first half of 2018, however, we expect non-catastrophe losses to increase to more normalized levels, as well as reflecting typical winter and spring seasonality. Growth in multi-family housing and the new lender-placed loans on-boarded earlier this year also contributed to a strong fourth quarter. We will continue to see declines in the lender-placed portfolio in 2018 but at a slower pace. Looking at our key metrics, the risk-based combined portfolio for our lender-placed and manufactured housing businesses decreased to 75.2% from 105% in the prior-year period. Net reportable catastrophes in the quarter totaled $3.2 million pre-tax, a $62 million year-over-year decrease. Fourth quarter 2017 losses were mainly related to California wildfires and were partially offset by reduction in reinstatement premiums as claims for the third quarter hurricanes developed more favorably than initially expected. As a reminder, Hurricane Matthew occurred in the fourth quarter of 2016 which resulted in elevated claims. Excluding catastrophe losses, the risk-based combined ratio was 74.1%, down from 88.8% in the prior-year period. This improvement reflects the absence of regulatory expenses, higher than expected NFIP income, and better than average non-catastrophe loss experience. The pre-tax margin…

The floor is now open for questions. Thank you. Our first question is coming from Mark Hughes from SunTrust. Please go ahead.

Hey. Good morning, Mark.

Thank you. Good morning. Morning. In the Global Lifestyle, did I hear you properly that the Q1 smartphone sale is a little lower than originally forecasted? Is that correct? And then do you think those are pushed out? I know there have been plenty of headlines about the Apple's production schedule, that sort of thing. Do you think it will accelerate as we go through the year?

So, Mark, we started talking about this back on the last earnings call that we just weren't seeing the volume of smartphone sales that the industry had predicted. Both the combination of delay in the launch of some smartphones and then I think these consumers have not been really enamored (26:17) with the latest ones. So, I think the important thing though for us, our mobile business has continued to grow well. We've added significant new clients. But you're correct. We do not see a pickup in new smartphone sales in Q1, so that will mute that piece of our business in Q1.

Then the impact of tax savings – is that going to translate into higher cash flow or are there some more offsets in terms of the cash benefit? And then when you talk about the use of those savings, should we think of those as more capital expenses or operating expenses that might impact margins?

Good morning, Mark. It's Richard. We don't see a significant difference in sort of the GAAP tax rate and the tax cash rate going forward. I mean, there can be small differences, but we're not seeing anything significant, which then means it will be cash available for investing in the business, or dropping down to the bottom line, as Alan said in the remarks. We do envisage reinvesting about a third of that back into the business.

Yeah. And, Mark, think of those as OpEx. So, we have a very high hurdle as we do with everything on how we deploy those dollars, but they'll run through the P&L as OpEx.

And at least, as far as your 2018 plans, that's already contemplated in the guidance?

Yes.

Yes.

The mortgage solutions business, at least with respect to the slowdown in refis, it seems like we sort of – we're lapping, in Q1, Q2 we should lap the drop in refis after the election in 2016, after the interest rate spike. Is there something more to the weakness in mortgage solution or would you agree with the proposition that assuming refis are at least stable, purchase markets improving that the mortgage solutions business ought to stabilize and maybe start to grow again?

So, Mark, importantly, I think, there is some seasonality in that business. So, generally, the winter is not a time of a lot of activity relative to other parts of the year. Certainly, if we have a better-than-expected market environment for originations, that would benefit our business. Our outlook is still cautious about what the market is going to be, and we've adjusted our cost structure accordingly. But, certainly, if we had a more robust environment – also importantly, a large part of our business there is countercyclical. So, if we do have any kind of slowdown in housing that will benefit both mortgage solutions and our lender-placed business.

Then, a final question, the impact of the hurricanes on placement rates. It seems like there's been a lot of delinquencies in mortgages around the hurricanes in Texas and Florida. Did that benefit you at all in the quarter?

Yeah. Mark, it's Richard. We're really not seeing. If we look at the numbers and the placement rates and the change in those, we really haven't seen an impact from the hurricane and so forth weather-related events on moving that number. I mean, obviously, the policies that we have in place, those are the claims we're paying on those policies in place but we haven't seen an impact I would say sort of on the top line.

Thank you very much.

Thanks, Mark.

Thanks, Mark.

Our next question comes from Jimmy Bhullar from JPMorgan. Please go ahead.

Hi. Good morning. I had a few questions. First, just on free cash flow. Historically, it's been fairly close to your reported earnings. Do you expect a major change following tax reform? And then as you look in – clearly, buybacks are going to be lower in 2018. But as you look to 2019 and beyond, what's your thinking about investing into additional acquisitions versus buybacks and how should we – like what are the priorities for free cash flow deployment beyond 2018? And then I have a couple of follow-ups.

Yeah. Thank you, Jimmy. In terms of the impact, free cash flow, the tax reform, similar to the Mark's question, I think what we're seeing is as we go forward that effective tax rate is, if someone will be paying the cash taxes will be similar to that. So, we'll obviously benefit from the lower tax rate. That will increase our cash, but no longer-term expectations other than that. And then, moving into your question on capital and share repurchases, and then, sort of, longer-term 2019 and beyond so to speak, I think one thing that we've stressed and that we'll continue to do is to be extremely disciplined about our capital. And when we're looking at our capital and profits and cash flow, looking at what we need to invest in the business to keep growing and reinvest that growth, we'll be looking at obviously our dividend policy, we'll be looking at M&A and we'll be looking at the repurchase activity in there.

And then, on just the vehicle business. I think premiums and fees were up almost 20%. Was there any – and that's an acceleration from where you've been recently. So, what's driving that? And I realize the lag in accounting between when you book the business and when you earn it. But what's driving that and do you think the fourth quarter level is sustainable or was there something in there that might not repeat in the first quarter and beyond?

Yeah. Yeah. Thanks for the question. In terms of the vehicle protection services, obviously, it's a great business for us. It's had great historical track growth and we expect it to continue. Particularly with our acquisition of The Warranty Group, we're excited about this line of business. It's true. Quarter-over-quarter, there was an increase in 19%. I tend to look more on the year-over-year change. It was up 10%. And, as you say, there's the earnings we did in the past. So, we're seeing the growth in the past come through. And that growth should continue to come through as we've done well in the past periods. Quarter-to-quarter, it is spotty. Sometimes we get reporting that comes in and it's a little bit lumpy. So, that can change a quarterly number.

And then, just lastly on mortgage solutions, I think premiums and fees in that business are down almost 20%. So it didn't seem like the market for your products is down as much. So it seems like you've lost – obviously, the markets affected you as well. But it seems like you've lost share as well. So, just some color on what's going on in that business.

Yes. So, Jimmy, I think as we talked about in some of the earlier earnings call, we did have some issues as we implemented a new technology platform mid last year that caused us to lose a little bit of business and allocation. But since that, we're more tracking the market. And that's about the level of down we're seeing across the businesses that we play in at the moment.

Okay. Thank you.

Thank you.

Thank you.

All right. Well, I want to thank everyone for participating in today's call. We're very pleased with our performance in 2017. And in 2018, we're focused on delivering on our commitments and closing our acquisition of The Warranty Group. We look forward to updating everyone on our progress on our first quarter earnings call in May. In the meantime, please reach out to Suzanne Shepherd and Sean Moshier with any follow-up questions. Thanks, everyone.

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