Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Assurant Inc (NYSE:AIZ)
Q3 2019 Earnings Call
Nov 6, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Assurant's Third Quarter 2019 Earnings Conference Call and Webcast. [Operator Instructions] 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 Suzanne Shepherd, Senior Vice President of Investor Relations. You may begin.

Unidentified Speaker

Thank you Jack and good morning everyone. We look forward to discussing our 3rd quarter 2019 results with you today. Joining me for Assurant conference call are Alan Colberg, our President and Chief Executive Officer and Richard Dziadzio, our Chief Financial Officer. Yesterday after the market closed we issued a news release announcing our results for the 3rd quarter 2019. 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 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. During today's call, we will refer to non-GAAP financial measures, which we believe are important in evaluating the company's --. 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. I will now turn the call over to Alan.

Alan B Colberg -- President/CEO

Thanks Suzanne, good morning everyone. Our 3rd quarter results were strong, driven by continued momentum in our Global Lifestyle business were earnings increased 30% year-over-year. Growth was mainly driven by mobile which benefited from new and existing clients. We now support 52 million mobile subscribers, an increase of 18% year-over-year. Supporting mobile carriers OEMs and cable and satellite operators as we look to further enhance the customer experience. Last week, we announced our acquisition of CPR, a leading provider of local device repair services. More than 700 franchise stores globally, this investment broadens our fulfillment options providing customers increased choice through same day repair options. Longer term, we believe we can drive incremental revenue growth and operational efficiencies as we cross sell protection programs and other services.

In Global Automotive we remain focused on identifying opportunities to leverage our leadership position, the scale in key global markets. In China, we've recently refocused our operations to capitalize on the sizable auto opportunity including the growing electric vehicle market. This includes a new partnership with a leading Chinese OEM focus solely on electric vehicles. This supports the expansion of our Auto business globally, we will also gaining further insights into the evolving electric vehicle market. Overall, our offerings in new partnership support our Investor Day objectives for Global Lifestyle. We believe that we can grow net operating income in the segment by at least 10% on average from 2019 to 2021 and continue to produce strong cash flows.

Moving to Global Housing, I'd like to start by thanking all of our employees who supported our policyholders during hurricane Dorian and tropical storm Imelda. As we pre-announced, we incurred $36 million of after-tax losses mainly related to those events. Our relentless focus on customer service remains a competitive differentiator. This quarter, within our lender placed business we renewed another 3 client partnerships accounting for 3 million track loans.

Looking at the past year, we've now renewed client relationships representing more than half of our track loans further solidifying the strength of our franchise. Overall for the segment, we are focused on continuing to deliver strong cash flows and better than market return on equity targeting between 17% to 20% return on equity with an average cat load. This will be supported by the expansion of our specialty property offerings including multifamily housing. Turning to Global Pre-need, we produced strong earnings excluding a one-time adjustment which Richard will detail later.

Pre-need assets were up 4% year-over-year reflecting growth in face sales. Additionally, we have seen just to a multi-payer mix of business, which will further strengthen our ability to sustain solid returns and cash flows. We remain confident that we can deliver above market operating return on equity of 13% long-term. Looking at our key financial metrics for the 1st 9 months of 2019, net operating income excluding catastrophes, was up 17% $435 million mainly from TWG's contributions including realized synergies as well as significant organic growth we also reported net operating earnings per share excluding catastrophes of $6.96, an increase of 9% year-over-year. This was driven by strong earnings growth, partially offset by the impact of shares issued last year for the PWG acquisition. At the end of September, holding company liquidity totaled $385 million after returning $103 million to shareholders in the quarter.

Through the end of the third quarter we returned a total of $279 million to shareholders. Year-to-date, we're pleased with our progress against our 2019 commitments. For the full year, we're still expect earnings-per-share growth between 6% to 10% compared to 2018. We remain confident in our ability to deliver on our Investor Day objectives to expand earnings by double-digits, drive strong cash flow and return $1.35 billion to shareholders through 2021.

The best is for that we deliver on these commitments were focused on a few critical multi-year priorities, our people, customer experience and innovation. Our people are and always will be central to our success and we will stay focused on finding ways to attract, retain and further develop our top talent and strengthen our culture around the world. Customer experience remains a key competitive differentiator for our organization. Our focus will be on finding new ways, whether through technology new offerings or other means to raise the bar on the experience we create and deliver to end consumers. Doing so will also result in deeper relationships with our key clients, particularly in Global Mobile, Auto and multifamily housing.

And lastly, innovation, we will put even greater emphasis on driving how we will innovate across our business to support the ever-connected lifestyle of consumers globally. I'll now turn the call over to Richard to review segment results in our 2019 outlook in greater detail. Richard?

Richard Dziadzio

Thank you, Alan and good morning everyone. Let's begin with Global Lifestyle segment reported earnings of $102 million for the 3rd quarter of $26 million year-over-year. As Alan noted, performance was driven by strong results in mobile which reflected continued subscriber growth from carriers in Asia Pacific in North America, including the launch of Metro by T-Mobile in July.

US traded volumes also increased year-over-year and Europe benefited from better operating performance. Global Automotive earnings were up $4 million reflecting organic growth, particularly in the US. Total revenue for this segment was up $208 million or 13%. The increase was driven by Connected Living growth, primarily mobile expansion across our suite of offerings for carrier OEMs and cable operators. The lesser extent we also saw growth we extended service contracts, auto revenue 4% relative to a strong quarter last year. Growth reflected prior period sales in our national dealer and TPA channels. As we have previously highlighted, we expect to accelerate investments to support growth particularly in mobile, in the 4th quarter, mainly reflecting initial program start-up expenses for new clients and our strong pipeline.

This should result in modestly lower earnings for Lifestyle, in the second half of 2019 compared to the first half, but in line with our original expectations. Looking ahead to "20 earnings expansion will moderate as we will grow up a much higher base in 2019, which benefited from a full year GWG contributions.

While growth may not be linear, we still expect earnings to increase at an average annual growth rate of 10% over the period 2019-2021. Moving to Global Housing, net operating income for the quarter totaled $42 million compared to $19 million in the 3rd quarter of 2018.

The increase was primarily due to $31 million of lower reportable catastrophes. Excluding reportable cats earnings declined $9 million. This reflected lower income from lender placed driven by year-over-year decline in placement rates and policies in force, as well as a less favorable non-cat loss ratio. Losses from our small commercial products improved from the first half of this year. In the quarter, we strengthened our reserves to account for a recent loss trends and we'll continue to monitor claims experience closely.

Turning to revenue, Global Housing net earned premiums and fees declined, reflecting the sale of mortgage solutions in August 2018. Excluding mortgage solutions revenue grew modestly driven by our multifamily housing and Specialty Property businesses, partially offset by declines in lender placed. Looking at lender placed in greater detail, the placement rate declined 6 basis points year-over-year and remained unchanged sequentially, consistent with the anticipated portfolio changes.

Looking ahead, due to the insolvency of one of our clients, we expect our track loan count to decline by approximately 600,000 over the next few quarters. This block of business represents approximately $70 million of annualized revenue and is expected to transition starting in the 4th quarter. For Global Housing overall, we continue to expect net operating income for 2019 to be down modestly excluding cat losses to the elevated small commercial losses incurred this year. Lender play Earnings excluding the higher cat reinsurance costs will likely be down slightly compared to 2018 rather than flat once we take into account higher non-cat losses and the reduction in loans referenced earlier. We expect sustained growth in multifamily housing and expense management partially mitigate the declines. Now let's move to Global Preneed. The segment reported $7 million of net operating income, a $9 million year over year decrease. The decrease was driven by an error in the calculation of our deferred acquisition costs over a 10-year period.

The charge was immaterial to any period but aggregated to $10 million in the 3rd quarter. Excluding the charge, earnings were up-- earnings were $17 million up modestly from the prior period, driven by both higher income from real estate joint venture partnerships and increased assets. Revenue in Pre-need was up 6% driven by continued growth in the US, including strong sales of our Final Need product. We now expect Global Pre-need earnings to decline due to the one-time accounting adjustment excluding the adjustment results would have trended in line with our original expectations for the year. At corporate, the net operating loss was $21 million up $2 million compared to the prior year period. This was a result of the lower tax rate to the net loss in the quarter. The net loss was primarily driven by investment in ecosystems here.

For the full year 2019 we still expect to approximate 2018 levels or roughly $85 million. As we announced in May, we began a process to explore strategic options for UK. In the quarter, we recorded $125 million charge to net income reflecting our intent to sell the asset. The charges, based on the current estimated value of our 40% ownership interest, the value of our put call option and the cumulative foreign currency losses, however, as the process is ongoing, there can be no guarantees that we will ultimately conclude a sale.

Turning to the holding company liquidity, we ended September with $385 million or about $160 million above our current minimum target level of $225 million. Dividends in the quarter from our operating segments, totaled $217 million. In addition to our quarterly corporate and interest expenses, key outflows included $65 million in share repurchases, $42 million in common and preferred dividends and $28 million mainly related to contingent payment for a block of flood policies acquired in 2016. In the quarter, we also had cash outflows of 39 million dollars. much related to expenses from refinancing debt at a lower interest rate. We are pleased we were able to secure new 10-year senior notes, an attractive coupon blowing up, lowering our overall interest cost to approximately $80 million after-tax on an annualized basis, while lengthening the maturity of our borrowings.

For the full year 2019, we expect dividends from our operating segments to approximate segment operating earnings. We've brought up nearly 90% of segment net operating earnings as dividends to the holding company through the first 9 months of the year. Overall, these dividend should provide flexibility to invest in our businesses, and return capital to shareholders. Market conditions. In summary, we've demonstrated strong performance in the quarter. We remain focused on delivering profitable growth and meeting our financial commitments for 2019 to serve as a stronger foundation for 2020 and beyond.

And with that, operator, please open the call for [Indecipherable].

Questions and Answers:

Operator

Floor is now open for questions. [Operator Instructions]. Our first question comes from the line of Mark Hughes with SunTrust. Your line is open.

Alan B Colberg -- President/CEO

Hey, good morning, Mark.

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Good morning, Alan. Good morning, Richard. Richard you would talk about the guidance, both of you did the 10% annual growth between 2019 and 2021. Did you make a commentary about the 2020 -- in the course of that?

Richard Dziadzio

Yeah, Mark. So as we will always do and have done in our fourth quarter earnings call in February, we will provide a lot more granularity on how we think about 2020 but we're still very confident in the view that we provided back at Investor Day of on average annual growth of 10% plus for Lifestyle, 12% plus for EPS. The challenge in 2020 for Lifestyle is we've had such a strong growth in 2019 that we have a much higher base and we had a full year of the TWG synergies, that's going to make it just harder to sustain that level of growth in 2020 but the business is well positioned and we feel our franchise is strong.

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Your point is, it will be hard to sustain this level of growth but--but you still feel confident in the guidance that you provided, is that it?

Richard Dziadzio

Yeah. Yeah, Mark, that's correct.

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Okay. And then the--from a TWG perspective, I think your outlook for cost, you said that there are cost efficiencies. You said at the higher end of the billion. Anything more any other opportunities you see on a go-forward basis either from the stand point of the cost efficiencies. The efficiency of your repair network that we might anticipate?

Richard Dziadzio

Yeah, I think if we step back we feel very good about the TWC acquisition and the integration as we said earlier this year. We've achieved our synergy commitment publicly ahead of plan. With that said we continue to look for growth opportunities. The thing I mentioned on the call about our new partnership in China this quarter on electric vehicles, we would never have achieved that without the warranty group and so over time, we're going to look for other opportunities like that, that will enable us to grow revenue not just improve their profitability. So I think we're well positioned and at this point we are a global market leader in Auto and we're trying to leverage that scale everywhere we can .

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

And then the last question on the lender placed business you held steady in terms of placement rate the placement rate, the last couple of quarters I think there has been some mix influence that. Can you talk about on an underlying basis seems like some of the data at least on early delinquencies as is suggesting an uptick and I wonder whether you are seeing any impact of that or what's the normal timing where you would see an impact on your if early stage delinquencies are starting to move up?

Richard Dziadzio

Yeah, I think it's fair to say we're not really seeing anything in our business at the moment. The reality is in that business, it is a big counter cyclical hedge we don't tend to place until it's later in the cycle, the loan is moved into serious delinquency foreclosure so if there is any slowdown starting to happen that will benefit us later.

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Thank you.

Richard Dziadzio

Thanks, Mark.

Operator

John Nadel with UBS. Your line is open.

Richard Dziadzio

Hey, good morning John [Indecipherable] John.

John Nadel -- UBS Group AG -- Managing Director

Thanks, good morning,Al and good morning, Richard. So I think this is-- this is the first quarter that the year-over-year comparison within Lifestyle is fully inclusive in both periods of The Warranty Group, Correct. So the revenue growth we're I think ex currency 14% to 14. 5% year-over-year. Is that, Alan as you think about 2020,is that the piece of the growth rate where you say probably a little bit more challenging to sustain that on a year-over-year basis and therefore that growth rate maybe slows down and that's the reason why earnings growth slows down or is it really just the fact that you've got such a faster pace of earnings

Growth in 2019 owing to things that you mentioned, like the expense synergies?

Unidentified Speaker

Yeah, John, appreciate the question. So the challenge with revenue is as we've talked about in prior quarters. If we change the contract structure which happens often with our clients, our revenue could go down or go up but it's has really no effect on our earnings, so we tend to focus much more on the NOI in that business and [Indecipherable]. As I mentioned, we've had such strong growth this year. We have a full year of The Warranty Group synergies. It's hard to build off of that at the same level that we've grown in 2019. We also we mentioned several new clients on this call, we have others we didn't mention on the call. We're continuing to invest in our pipeline remains very robust for Global Lifestyle overall.

John Nadel -- UBS Group AG -- Managing Director

Okay, that's helpful and then I just wanted to think in terms of order of magnitude, last quarter you guys appropriately sort of gave us some help on unexpected that Lifestyle earnings in the back half of ' 19 would be down modestly from the front half of ' 19, as you look at the 3rd quarter of Lifestyle is that was, was there anything that was sort of in that with your expectation there was that in line because there. I mean that's a pretty modest, I mean that is definitely a modest year-over-year decline, should you I guess--I know you don't want to give guidance for any single quarter but is that the kind of pace of decline, that's in that we should expect and as we look forward to the 4th quarter?

Richard Dziadzio

Yeah, I think that he John I think as we looked at it. We came into the first half of the year. We basically are looking at half years together, so we are looking, first half-second half and signaled that we thought the second half would be lower than the first half. I think as we sit here at the end of the 3rd quarter and are looking at the second half, it really is coming in line with our expectations. I think we've seen some of the trade in some of the trading volumes go down as we had anticipated. Given the strong first half of the year, we had at the same time we've seen strong growth in Asia-Pacific, the US improved profitability in Europe, which we had been planning on too, so our overall were in line with our expectations and as Alan said in his opening statements.

John Nadel -- UBS Group AG -- Managing Director

Okay and then I just had one more and it just escape me so I will I will requeue.

Richard Dziadzio

All right. Thanks, John

Alan B Colberg -- President/CEO

Thanks, John.

John Nadel -- UBS Group AG -- Managing Director

Thanks.

Operator

Michael Phillips with Morgan Stanley, your line is open.

michael phillips

Hey, good morning. Good morning, everybody. Good morning. I guess another crack at that. The prior question, with 4Q. If we look at your guidance for this year, you're kind of a little bit above the mid point right now and I guess if we couple of that with your, the last comment to have been a little bit less than one half Is and you know you don't give, I guess, I don't see the extra incremental expenses that you're putting into mobile on a quarterly basis and what you did this quarter, but should we expect the amount of investment expense in the 4th quarter to be accelerated from 3rd quarter now from what you did or headline to 3rd quarter? To think about kind of how we're how we're thinking about that range of 6 to 10 given where you already are today and what the extra expense might be in the 4th quarter?

Richard Dziadzio

I think it's fair to say in the 4th quarter, we're going to have accelerated investment, we are very encouraged by the new clients that we're ramping in the pipeline and we're investing to deliver future growth and profitability. So yes.

michael phillips

it's just to clarify, when you say accelerate. You mean on top of, not just first first half, but in top of 3rd quarter as well, correct?

Alan B Colberg -- President/CEO

Yes. And I think, in addition to that, when you say the 6-10%, you're really talking about Assurant overall EPS.

michael phillips

I mean, correct.

Alan B Colberg -- President/CEO

Yeah, yeah. We've talked about small commercial being out there some continued declines in Financial Services, so there are a couple of headwinds that were taking into account when we were giving that range to you

michael phillips

Okay, Okay, thank you. I guess just to kind of smaller ones real quickly, you mentioned the mobile growth specifically in Europe was strong. And can you talk about maybe what's kind of driving that?

Richard Dziadzio

Yeah so mobile growth has been strong in all regions. In Asia Pacific, especially Japan, it's really new clients and new programs. In Europe, it's really been a couple of things. We've leveraged our global supply chain capability out of the US to really strengthen our supply chain in Europe and that's been a big driver. We've also been very disciplined with expenses, which has helped NOI growth, but we're encouraged. We're seeing strong growth in effectively all regions of the world in mobile.

michael phillips

And just lastly, and this one doesn't get a lot of attention, but in Lifestyle the Global Financial Products I mean decline there was kind of more than expected, at least from expect from me. Any numbers in the quarter there and then kind of the margins continue to slip a little bit there. So any kind of color on that segment?

Richard Dziadzio

.

I think what we said before, Mike, is that the segment that that line of business is in run off domestically. There's probably a little thanks going on in there as well. So, yeah, it was, it was down in the quarter. You're right.

michael phillips

So we've kind of. Yeah, sure. All right, thank you.

Richard Dziadzio

Alright, thanks.

Operator

Christopher Campbell with KBW. Your line is open.

Christopher Campbell

Hi, good morning. I mean

Alan B Colberg -- President/CEO

The need for the change, which is the insolvency one of our clients and we see those loans transitioning away in the 4th quarter that will have an impact on us. And we've also seen year-over-year, a small increase but an increase in the non-cat loss ratio. So we're taking those 2 factors into account to kind of change the outlook in say before we had said that it would be flat, now we're saying it will be down a bit.

Christopher Campbell

Okay got it. So it's OK. So what we're seeing this quarter is not related to the loans that the competitor picked up but these are like additional loans that were a client insolvencies that the way to think of it?

Alan B Colberg -- President/CEO

Yeah, that's right Chris.

Christopher Campbell

Okay. great and then CPR I mean it sounds like it's small is going to be any revenue or EBITDA impact from that that we should be modeling in?

Richard Dziadzio

The way to think about CPR is we're in the business of delivering superior customer experiences and the way to evolving is our traditional people model the big facilities works really well for buyback and trade in and that's going to continue to be a very important driver but increasingly consumers are asking for same-day same store type repair CPR gives us that capability. So over time, it will be potentially significant growth driver for us but it's going to take us time to integrate build it into our offerings, get our clients to offer it but we're excited it gives us the capability to deliver yet another really superior customer experience.

Christopher Campbell

Got it and should we be thinking about incremental investment costs as you try to kind of unlock the synergies for that could impact Lifestyle segment?

Richard Dziadzio

Nothing more than we've already talked about. We expect to accelerate investments in Q4 but that alone is not going to be a big driver.

Christopher Campbell

Okay great and then I know you review the EK stake this time and took the charge. I mean, are there any other under-performing areas that you're kind of looking at across the portfolio of products that you know you're looking to prune to improve results?

Richard Dziadzio

So we go through a regular process with our Board, looking at everything we're doing and discussing whether we feel like it's still strategic or not. EK interesting company when we made that investment, 6 years ago now. It was really about growing to scale in Latin America with additional fee-based offerings over the last 6 years, our strong growth in Latin America and then The Warranty Group acquisition, we now have a much stronger franchise in Latin America, which is what led us to take the opportunity to reevaluate. It doesn't fit as well as it did 6 years ago so we'll continue to look for things but I think we feel very good about our portfolio at this point. You've also seen us be over the years, very disciplined stewards of the capital of our shareholders and we'll continue that as we go forward.

Christopher Campbell

Got it, and then there is to kind of unpacking the charge a bunch of it was FX and part of it was. Derivative so I guess was there like an underlie--I mean was the marks like all attributable to that or has the value of the EK franchise been materially impaired over the last few years?

Richard Dziadzio

Yeah, I think, I think that we can break that charge down into a couple of things. Total charge being 125 million. The first thing as you pointed out, Chris was $41 million is really related to the cumulative change in FX for the FX loss,I would say, the weakening of the peso since our acquisition, some 5 years ago.

So that's 41 million and the other [Indecipherable] of it was a deferred tax asset that we took down and then the other 80 million is really the difference between what we have up on our books for our 40% interest and the 60% interest obligation we have to buy the rest of the 60% and the market value should we sell the company. And again as I said in my opening comments, we are in the process we have advanced in the process, but we can't say today that we will conclude a process. So still still a ways to go there and we'll keep everyone up-to-date as we always do.

Christopher Campbell

Okay, Wonderful, thanks for all the answers. Best of Luck in the 4th quarter.

Richard Dziadzio

Okay, all right, thanks, Chris.

Operator

Gary Ransom with Dowling & Partners. Your line is open.

Richard Dziadzio

Hey, good morning, Gary.

Alan B Colberg -- President/CEO

Morning, Gary.

Gary Ransom -- Dowling & Partners

Hi, good morning. I wanted to follow up on the UK charge to just, when I look back at 5 years ago, you put it in 110 and probably a lot of things happened in between and now there is $125 charge. I assume there was some marking up along the way. And I just wondered if you could help me rationalize the beginning and end of the end of the 2 pieces?

Richard Dziadzio

Sure, sure. I think first of all, we just to level set everyone we talk about 110 million that was for the 40% interest that we had during the course of time. We haven't marked up the asset that we've kept it on the books, obviously through time, we've gotten income from the assets that have been dividends out from the asset so that has changed the book value, and really what we're coming to now is after 5 years and during that 5-year period there actually has been a pretty good weakening of the the Mexican pesos to the US dollar, $40 million such a 3rd of the charge. The other 2/3 are really one is one part is based on the 40% interest we have in the book value. We have today in our expectations of sale price for that and then the other is done on the 60%. We actually have a call put that we've talked about in the past and that's out of formula. So we're looking at the market value that we could have in sale versus what that formula gives us and that's the other part of the markdown.

Alan B Colberg -- President/CEO

And Gary, the only thing I would add is, when you look at the EK franchise. It remains strong and that's why we've had a process ongoing that we'll see where we end up, but it is a good company, just for us as we think about where best to deploy our capital It's not 100% certain. That's the best thing we should do.

Gary Ransom -- Dowling & Partners

Okay. So in other words, part of the charge really relates to the 60% you didn't actually buy yet that's feeding through this put call up option, yeah and then [Indecipherable]

Alan B Colberg -- President/CEO

That's exactly right, I mean we obviously, we have that that that might we called an options to put call option. Right. So, more and more or less an obligation to purchase it so as we've gone on and said, OK, now we're in the sales process that's given us visibility in terms of potential pricing. So we take into account what that is versus what we would sell it for net difference. We've put up in the book. So putting it at our best estimate today.

Gary Ransom -- Dowling & Partners

And that's been mark-to-market every year. Along the way. I mean, maybe not as thoroughly thinking about it and intend to sell, I realized that. Yeah, is that the value in there? [Indecipherable]

Richard Dziadzio

Yeah, well you just hit the nail on the head. Gary, I mean it's really we've been holding it until the 3rd quarter as an operating entity with the operations as Alan said, it's performed fairly well during our our period of ownership. It's really in this 3rd quarter that we've said we've advanced in a process. Now we have an intent to sell what's the sales price and and obviously we're in, we're talking about in Mexico in today and the environment and climate etc. So we take all of that into account in the current estimate.

Gary Ransom -- Dowling & Partners

And just one thing to make clear, this has no effect on your buyback and capital return. Correct?

Richard Dziadzio

Well, I would say if anything, it's, it could potentially be a net positive, because it could give us excess capital if we sell it, as remember, we've taken into account in our, in our Investor Day that we've, that we would hold it. So it would give us excess pos [Phonetic] cash and then we would see what we would do with that [Indecipherable] capital as we go forward, either return it or hold it.

Alan B Colberg -- President/CEO

Yeah, Gary. The one thing I would add is, we remain committed to our expectation of returning $1.35 billion to shareholders in 2021. As Richard said, if we do end up ultimately with excess capital you've seen our track record of returning it, but at this point it's too early to say anything other than we are still committed to our 1.35 billion through 2021.

Gary Ransom -- Dowling & Partners

All right, thank you. That's very helpful. At that I think I've got it. Now I wanted to go to one other topic on mobile, and just as you talk about all of the flow of business, the pipeline and I think we all know there is a delay, and how you invest and you launch the program and then you used to have customers starting to pay and it builds up over time. And I've, I'm just trying to think of the timing, if you have things in the, in the pipeline, is some of this actually going beyond our '19 to '21 window. Are we actually setting up, I know we keep talking about out through '21. But when I think about the timing. It feels like today's pipeline is actually

Richard Dziadzio

Partly beyond 2021, is that.

Gary Ransom -- Dowling & Partners

So can you give us a feel of that at the timing of all those things?

Richard Dziadzio

Gary, that's absolutely correct. When you think about it. So if you think about a new client that we're launching this quarter we start generally with no customers we have to invest to integrate into their systems to develop the marketing materials to train people etc and generally within a year or so, we start to turn profitable.

It generally takes 3 to 4 years for those programs to kind of reach maturity. To a program we're launching today probably doesn't reach maturity until 2022, 2023 and then a pipeline client we may close on next year or the year after, but we're making investments to proceed to set that up for the future. CPR is another example of something that will benefit us beyond the 21 period.

The last thing I'd say is if you look at the eventual 5G wave that's going to come, we didn't reflect that anywhere in the 20 year 21 outlook, because we think it's going to take a little while, but there is a whole wave of 5G activity coming in the out years for mobile.

Gary Ransom -- Dowling & Partners

Okay, well that's helpful. Thank you very much.

Richard Dziadzio

Thank you.

Gary Ransom -- Dowling & Partners

Thanks Guys.

Operator

[Operator Instructions] John Nadel with UBS. Your line is open.

Richard Dziadzio

Hey, John.

John Nadel -- UBS Group AG -- Managing Director

Hey, I think I'm recovering from a senior moment, so kind of along the same lines is Gary's question and I'll be a bit more specific and I think you already gave a little bit of color, but maybe you can give a little bit more.

So if you isolated on a single new client, I guess particularly with Connected Living how do we think about the sort of order of magnitude size of the upfront investment spending versus the leader in time ramp up in revenue and then break even period versus the sort of you know achieving targeted margin, if you will. Is there a way to break that down for us and give us a decent sense?

Richard Dziadzio

It's hard to generalize, because as we've talked about in Investor Day and since then, our programs could have anywhere between 1 in 7 products and services. And so the amount of investment will vary based on that, but all of those are priced to over a period of time generate a very attractive IRR for our shareholders.

So I think we feel good about these new programs that we're launching and ramping. You can see the benefit in the growth in mobile over time that's resulted from the prior programs that we've launched

John Nadel -- UBS Group AG -- Managing Director

Yeah, no question. And I think you mentioned in response to Gary, you talked about a roughly one-year time frame to the point where you actually start to turn profitable On the new client, is that about -- is that a reasonable way for us to think about it?

Richard Dziadzio

I think it's fair. I mean I generalize it with some risk to it, because every programs debt understudy spare that it takes a period of time and where the economics really start to flow through is when you get out into year two and tree and the programs begin to get closer to maturity.

John Nadel -- UBS Group AG -- Managing Director

Is a good example of that right now, KDDI?

Richard Dziadzio

Yes. Yeah, we launched that originally in late 2017 we're now heading into year three of that program.

John Nadel -- UBS Group AG -- Managing Director

All right, terrific. And then Richard just a housekeeping item, on a year-to-date basis through the end of September what's your after-tax loss from the small commercial business and also are you on track to effectively non-renew the vast majority of that business by the end of the year. So, very little if any contribution in 2020?

Richard Dziadzio

Yeah, I'll start by the second part of the answer is yes. We are, as we've talked about before John, we're kind of unwinding unplugging that business. So every quarter now the net earned premium, obviously what we've written in the past and what's earning out today is decreasing quite substantially. The first -- to answer first part of your question we said in the previous call, first two quarters of the year, we were, we lost about 6 million each quarter. This quarter, the portfolio performed better. Think about a couple of million dollars loss with that in this last quarter. And that represent --

John Nadel -- UBS Group AG -- Managing Director

Do you think fourth quarter would be more similar to the first half of the year or more similar to third or any sense there?

Richard Dziadzio

So, the business is the portfolio is getting smaller. So one would hope that the experience would mimic that. On the other hand who knows, there is some properties some liability what we could have some higher losses within that so to be seen, but we are winding it down in its winding down very quickly.

John Nadel -- UBS Group AG -- Managing Director

So probably fair to estimate that for the full year '19 somewhere between 15 and 20 probably closer to the 15. That's loss contribution that almost all of that or maybe all of that would not recur in 2020?

Richard Dziadzio

Yeah John what I would say is we are winding that business down quickly, we're cautiously optimistic that most of the losses are behind us. I wouldn't give a number for the year. But as I look at 2020 we obviously feel good about that this business will largely be behind us . We will have a benefit in 2020 because this a largely be behind us. We'll have some offset in housing in 2020 from that transition of loans away from the insolvent client. But in terms of the small commercial, hopefully it's largely behind us at this point right.

John Nadel -- UBS Group AG -- Managing Director

Yeah, understood. Thank you so much

Richard Dziadzio

Okay. Thanks, John.

Operator

Your last question comes from the line of Mark Hughes with SunTrust. Your line is open.

Richard Dziadzio

Hey Mark.

Alan B Colberg -- President/CEO

Mark.

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Yeah. The taxes in the Lifestyle business if I'm looking at it properly, have been about a point per quarter for 24 23 22% is a good go-forward tax rate for the Global Lifestyle business ?

Alan B Colberg -- President/CEO

It's in that range. I think we've said it's around 23 24% overall and it really is just reflecting the profitability of our business geographically and the tax rates in those various geographies.

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Okay. And then the placement rate on the 600,000 loans that you are going to be losing from the insolvent client, did you give some indication of what, whether those are above average, below average?

Alan B Colberg -- President/CEO

But in terms of the loans we talked about 600,000 and really revenues pegged a placement rate, but really the revenue is about $70 million in annualized NEP [Indecipherable]business .

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

And then Alan, you mentioned the 5 G wave in you anticipate that coming in the future. Could you just give us, as you look at the opportunity for Assurant? how do you kind of frame that up in your mind? who knows exactly when or the pace of it? but what should it mean for your business?

Alan B Colberg -- President/CEO

If you think about 5G from a consumer point of view when it ultimately rolls out dramatically improves latency, which creates all sorts of new applications, including autonomous vehicles really being driven by that which just since we made the investment in Auto.

The timing nobody really knows, but what will causes over a period of a couple of years you will see probably a big spike in handset activity which would benefit us, so again I don't think this is in the 2021 type timeframe, but longer term, we are trying to set up the business to be well positioned for that wave.

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Thank you.

Alan B Colberg -- President/CEO

Right. Thanks. Thanks everyone for participating in today's call. We're pleased with our year-to-date performance and believe we're well positioned to meet our financial objectives for the year. We look forward to updating you on our progress on our fourth quarter earnings call in February. In the meantime, please reach out to Suzanne Shepherd and Sean Moshier with any follow-up questions. Thank you.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Unidentified Speaker

Alan B Colberg -- President/CEO

Richard Dziadzio

Mark Hughes -- SunTrust Robinson Humphrey, Inc. -- Analyst

John Nadel -- UBS Group AG -- Managing Director

michael phillips

Christopher Campbell

Gary Ransom -- Dowling & Partners

More AIZ analysis

All earnings call transcripts

AlphaStreet Logo