And then, based on the nature of these service contracts, it takes a little longer for it to earn through than when you think about what happened within the housing, business. Those are annual policies. These are three, four or five, six year policies. So it’s a little bit different from that perspective. But I would say we feel really well positioned and certainly see improvement in 2024, and that should continuing to flow through in 2025 and beyond.
Operator: Our next question is coming from Tommy McJoyntt with KBW.
Thomas McJoyntt: Sounds like there’s a couple moving pieces related to the mobile side. So you called out some upcoming investments in that space. And you also have the onboarding of Telstra in Australia. Are you able to quantify some of the figures around that, in terms of the investment costs, the onboarding costs, and then what the run rate, either revenue or earnings contribution, from Telstra could be? We’re just trying to think about after the next 12 months, sort of what the earnings power of that connected living mobile device business might look like?
Keith Demmings: I’ll probably offer a couple of thoughts. Obviously, it’s a pretty exciting development. We’re super proud of the team in Australia. And it’s a great example of leveraging our capabilities and our global reach. It’s going to roll out in phases. We expect to launch in the first quarter, and then there’s a number of different phases to the rollout. So it’ll be, I would say, probably modestly EBITDA negative this year in terms of the investment to get that wrapped up. Obviously, I would expect it to be significantly improved certainly in 2025 – sorry, in 2025 over 2024. In terms of the size and scale of investments, so one thing I would say, Tommy, there’s quite a bit of investment going on with Assurant. Certainly, we talked about BofA, but even just on the lifestyle and connected living side, Telstra is one example.
Obviously, we’re talking about it publicly. But there are also a lot of other investments that we’re making, building out capabilities. And we’re in many, many discussions with different clients, different prospects, about rolling out new product, new services. So I would say we probably have more investment going on, even beyond Telstra, within connected living this year than we would in a normal average year. When we talk about mid-single-digit growth for lifestyle, you could probably think about the investment, putting pressure on that by a few points. So it would be more in the high single-digit range, if we weren’t making some of these – what for us are significant investments in the future.
Thomas McJoyntt: Appreciate you quantifying some of those numbers. You also separately reported some pretty high net investment yields across the various business lines this quarter and even for the full year. Is there any upside to the net investment income from here? And what’s the sensitivity of those various portfolios to potential rate cuts?
Keith Meier: Tommy, I think, one, in terms of our expectations for next year, we see investment income being relatively flat to slightly up. You mentioned the higher results for this quarter. We had our real estate joint venture sale. So, that contributed. We don’t think we’ll have as high of real estate sales into next year. But we do think it should be relatively positive going into next year. Right now, our portfolio book yield is at 4.99%, so just under 5%. New money rates will be a little bit higher than that. And so, we do expect as the year goes on, of course, the Feds expected to reduce rates through the year. So depending on the timing of some of those rate changes, those will be kind of offsetting the increase that you saw this year. So, overall, we think we’re in a pretty good place from an investment income standpoint, but probably slightly up for next year.
Keith Demmings: Tommy, just to add a little bit more color on how I’m thinking about that. When you look at the overall guide for the year, we’re overcoming $54 million of PYD in housing. And then, we don’t have material tailwinds on investment income. It might be modestly positive, but not like what we saw this year. So, obviously, being able to deliver strong growth on top of those two factors, we feel really good about, along with the investments that I mentioned earlier.
Operator: Our next question is coming from Brian Meredith with UBS.
Brian Meredith: A couple of them here. First one, I’m just curious. Keith, you mentioned that Japan was going to be relatively flat this year. I’m just curious kind of how we should think about that with respect to the contract kind of changes that are going on. Is that kind of ending in 2024? There’s still pressures there and you expect some growth? And then, also on that, kind of maybe you can tell us what your kind of baseline macro assumption is in your kind of outlook for 2024?
Keith Meier: Starting with Japan, we mentioned the four-year customer contracts that were running off, and then the new contracts were evergreen, that’s still going to be a bit of a pressure for us, not as much as 2023, but they’ll still be a pressure for us in 2024. I think that is offset a little bit by some new structures and new programs that we have launched in Japan. So that’s where that you’ll see that moderating. And I think longer term, I feel even better about Japan where, a few years ago, we only had a couple of relationships with the mobile carriers. Now you fast forward to today, we’ve got active business that we do with all of the four top mobile operators. And so, in our business, it’s not easy to win big clients, but when you can be an existing partner already, and then be able to grow that relationship from there, I think that puts us in a very good position and why we have a lot of optimism for the future of Japan.
But with some of those new programs coming up, I think that’s what’s allowed us to feel like we’ve gotten past some of those headwinds from before.
Keith Demmings: We certainly stabilized Japan here, if we look at the last couple of quarters, Q3 and Q4 in terms of the overall financial performance. So we feel good about that. And I would say as we look forward to 2024, expect to see some modest improvement over time. And then, to Keith’s point, longer term, still an exciting market for us.
