Assurant's Home Warranty Bet: Big Losses to Win a New Market

Date of Call: Feb 11, 2026

Guidance:

• Full-year 2026 Adjusted EBITDA and EPS (excluding CATs) expected to be consistent with 2025 levels, representing mid-to-high single-digit growth excluding $113M favorable prior-year reserve development in 2025.
• Global Lifestyle expected to lead underlying growth with high single-digit earnings expansion.
• Connected Living growth driven by subscriber optimization, new programs, and scaling investments.
• Global Automotive growth from higher investment income, loss improvement, and partnership expansion.
• Global Housing expected solid underlying growth (excluding $113M prior-year reserve development); catastrophe reinsurance load estimated at $180-$185M.
• Corporate EBITDA loss expected at ~$140M, including major investments for Assurant Home Warranty.
• 2026 share repurchases expected in the range of $250M-$350M.

Business Commentary:

Profitable Growth and Financial Performance:

• Assurant reported a significant 11% increase in adjusted EBITDA and a 12% increase in adjusted earnings per share, excluding catastrophes, for 2025, with a total shareholder return of 93% over the last five years.
• This growth was driven by disciplined investment in innovation, strong market leadership, and earnings durability, particularly in the Global Lifestyle and Global Housing segments.

Global Lifestyle Segment Growth:

• The Global Lifestyle segment achieved mid-single-digit Adjusted EBITDA growth, with Connected Living and Global Automotive contributing notably.
• Growth was driven by increased momentum in mobile device protection, strategic partnerships, and investments in technology, including the expansion of device protection programs and reverse logistics agreements.

Global Housing Segment Performance:

• The Global Housing segment reported a double-digit increase in Adjusted EBITDA, excluding catastrophes, surpassing $1 billion in earnings.
• This was attributed to a strong underlying combined ratio, growth in lender-placed policies, and an increase in renters' policies, supported by technology-enabled services and strategic partnerships.

Home Warranty Market Entry:

• Assurant launched its home warranty business with a long-term agreement with Compass International Holdings, aiming for market leadership.
• The entry is driven by a proven track record in channel expansion, global capabilities in risk management and service networks, and a focus on delivering exceptional customer experiences.

Capital Management and Shareholder Returns:

• Assurant returned $300 million to shareholders through share repurchases in 2025, with an additional $30 million repurchased in early 2026.
• This reflects the company's strong cash generation and flexibility to reinvest in growth opportunities and return excess capital to shareholders.

Sentiment Analysis:

Overall Tone: Positive

• Management described 2025 as 'an exceptional year' and 'another outstanding year,' highlighting 'ninth consecutive year of profitable growth,' 'double-digit growth' in key metrics, and 'strength and resiliency.' Forward guidance anticipates strong momentum and market leadership, with excitement about new home warranty entry and strategic investments.

Q&A:

• Question from Charlie Lederer (BMO): Unpack Connected Living premium growth (accelerated to 48%) versus mid-to-high single-digit EBITDA guidance for Lifestyle. What offsets premium growth?
  Response: Momentum in revenue (e.g., multi-year contracts from new programs) is strong, but EBITDA growth is also driven by scaling results, subscriber growth, and ongoing investments, with earnings from new contracts maturing over time.

• Question from Charlie Lederer (BMO): How are you feeling about reserve confidence in housing and tailwinds for that KPI?
  Response: Confidence is very high in the reserve position; underlying housing growth is double-digit with strong top-line momentum, low-to-mid 80s combined ratios expected, and a resilient business.

• Question from Charlie Lederer (BMO): Have you seen any signs of the traditional home insurance hardening market trend abating?
  Response: Growth continues in California and the Midwest, offset by some softness in Florida; overall mix is positive, with growth in lower-risk regions.

• Question from Jeff Schmitt (William Blair): Discuss size and cadence of investments for home warranty in 2026, and investments in 2025.
  Response: Expect ~$15M-$20M incremental investment in 2026 ( Corporate EBITDA loss of ~$140M includes this); 2025 saw scaling investments also impacting Corporate line.

• Question from Jeff Schmitt (William Blair): What geographies are you starting home warranty in, and how are you building the contractor network/Salesforce?
  Response: Starting rollout across six real estate brands (e.g., Coldwell Banker) nationally; leveraging existing B2B partnership model, deep service network expertise, and technology integration.

• Question from John Barnidge (Piper Sandler): Is 140 a new level for home warranty combined ratio, or do you expect reversion lower as business scales?
  Response: The 2026 investment level is specific to this year; as the business scales, the profile will evolve, with long-term growth expected from the market entry.

• Question from John Barnidge (Piper Sandler): On the outlook, can you remind us how much favorable reserve development helped 2025 EPS and what 2025 EPS would be ex that development?
  Response: $113M of prior-year reserve development contributed to strong underlying growth; 2026 outlook is consistent with 2025 ex-development, requiring an EBITDA growth of over $130M to overcome this impact.

• Question from John Barnidge (Piper Sandler): How are you incorporating AI for top-line growth, beyond margins?
  Response: AI is used across customer experience, operational efficiency, product personalization, and service delivery (e.g., in premium support, auto sales, device processing) to drive revenue and enhance service.

• Question from Mark Hughes (Truist): When will home warranty become material enough to move from Corporate to Connected Living?
  Response: Early days; likely to move back into Lifestyle at some future point, but currently makes sense under Corporate led by Chief Innovation Officer.

• Question from Mark Hughes (Truist): Could you expand on interest from other partners in the warranty business?
  Response: Seeing significant interest from real estate and affinity partners; conversations ongoing to explore multiple partnership avenues in the fragmented market.

• Question from Mark Hughes (Truist): In Connected Living, will revenue grow faster or slower than EBITDA?
  Response: Expect high single-digit EBITDA growth for Lifestyle, with strong contributions from Connected Living and Auto, supported by revenue momentum.

• Question from Mark Hughes (Truist): On reverse logistics with other large carriers, is that new or previously discussed?
  Response: It would be with an additional client beyond T-Mobile; more details likely in May earnings call, representing another opportunity for market advantage.

• Question from Tommy McJoynt (KBW): Could state profit caps (e.g., New York) impact your housing business?
  Response: Regulatory scrutiny is present, but regular rate filings and formalized processes position the company well; no significant surprises expected.

• Question from Tommy McJoynt (KBW): How are you staying on the forefront of connected device evolution (e.g., AI in smart glasses)?
  Response: Protection evolves with products; partnerships with market leaders (e.g., T-Mobile, Best Buy) and R&D provide insight to define coverages for emerging technologies.

• Question from Bob Huang (Morgan Stanley/Dowling & Partners): For Global Lifestyle's 2026 high single-digit earnings, how much comes from new partnerships/policies vs. margin improvements?
  Response: Key drivers include mobile subscriber growth, optimization of new programs, earned-through benefits from prior rate increases in Auto, and broad expense discipline.

• Question from Bob Huang (Morgan Stanley/Dowling & Partners): What are long-term aspirations for home warranty in terms of growth/earnings profile?
  Response: Aspire to be market leader; business has good margin profile long-term and is expected to be a meaningful contributor, similar to other Lifestyle businesses.

• Question from Bob Huang (Morgan Stanley/Dowling & Partners): Who are main competitors in home warranty, and how fragmented is the market?
  Response: Market is fragmented with many players; Assurant aims to differentiate via B2B partnerships and superior customer experience, with potential to grow category beyond just share gain.

• Question from Bob Huang (Morgan Stanley/Dowling & Partners): Any opportunities outside real estate channel (e.g., retail)?
  Response: Will explore opportunities with affinity partners and clients in home-related industries; many conversations already underway.

• Question from Bob Huang (Morgan Stanley/Dowling & Partners): Can you add color on $29M restructuring costs and $11M loss on subsidiary sale?
  Response: Restructuring optimizes real estate and role reductions to drive efficiencies and fund strategic investments (AI, home warranty). Subsidiary sale disposes of old legacy long-term care business, fine-tuning portfolio focus.

• Question from Charlie Lederer (BMO): In the Midwest, is housing growth from hard market dynamics or new partnerships?
  Response: Combination of both; hard market trends and portfolio mix contribute.

• Question from Charlie Lederer (BMO): With high excess liquidity, what's keeping you from having upside to wider share repurchase range?
  Response: Strong capital position allows being 'on offense'—organically driving growth, executing M&A, and returning excess capital via dividends and buybacks, with increased repurchase guidance already.

Contradiction Point 1

Home Warranty Business Investment and Scaling Timeline

Contradiction on the timing and scale of investments for the new home warranty business.

What is the size and frequency of planned 2026 investments for the new home warranty business, and were there 2025 investments? - Jeff Schmitt (William Blair)

2025Q4: Investments for home warranty began scaling in 2025 and are expected to be $15–20 million incremental in 2026. - [Sean Moshier](Investor Relations)

Are there major investment projects planned for next year that could impact margin expansion across business lines? - Unknown Analyst (Calling for Tommy McJoynt, KBW)

2025Q3: A new program... will be a long-term growth vector. Corporate investment is expected to be higher in 2026. - [Keith Demmings](CEO), [Keith Meier](CFO)

Contradiction Point 2

Housing Segment's Prior Year Development (PYD) Outlook

Contradiction on whether favorable PYD development is expected to continue into the next year.

What is the outlook for Prior Year Development (PYD) in housing, and are the recent tailwinds still present? - Charlie Lederer (BMO)

2025Q4: The outlook for 2026 does not contemplate additional prior-year reserve development. - [Keith Meier](CFO)

What are the key drivers of recent housing results, and how will they contribute to future growth? - James Koehne (Morgan Stanley, Research Division)

2025Q3: Policy growth is the biggest driver, fueled by the hard voluntary market. AIVs are up but not dramatically... There are multiple growth levers, including adding new clients. - [Keith Demmings](CEO), [Keith Meier](CFO)

Contradiction Point 3

Home Warranty Business Scaling Timelines

Contradiction on the expected timeline for the home warranty business to move into the Lifestyle segment.

When will the home warranty business transition from corporate to Connected Living? - Mark Hughes (Truist)

2025Q4: The home warranty business is currently in the early rollout phase and remains in corporate for now... will likely move into Lifestyle as it scales. - [Sean Moshier](Investor Relations)

What is the trend in the Global Lifestyle benefit ratio (~23–24%) considering rate changes in Global Auto? - Jeffrey Paul Schmitt (William Blair & Company L.L.C.)

2025Q2: The inflection point in Global Auto, where improved vehicle service contract loss experience is driving stability and setting up nice long-term growth. - [Keith Warner Demmings](CEO)

Contradiction Point 4

Connected Living Segment Growth Outlook and Investment Payback Timeline

Contradiction on when new program investments will mature and contribute to EBITDA.

How does the 48% Connected Living written premium growth in Q4 align with mid-to-high single-digit EBITDA guidance for Global Lifestyle, and what factors (e.g., slower earn-in, lower-margin business, investments) are offsetting the premium growth? - Charlie Lederer (BMO)

2025Q4: The Lifestyle segment is expected to lead growth in 2026 with high single-digit EBITDA growth, driven by ... optimization of new programs... - [Sean Moshier](Investor Relations), [Keith Meier](CFO)

What is the current scale and frequency of investments in new partnerships and program launches, and when do you expect them to phase out this year? - Jeff Schmitt (William Blair & Company)

2025Q1: In 2024, ~$15M was invested in new client launches and ~$10M in device care centers, with a full one-year payback expected in 2025. - [Keith Demmings](CEO)