Q2 2020 Allstate Corp Earnings Call

August 5, 2020

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Ladies and gentlemen, thank you for standing by welcome to the Allstate second quarter 2020 earnings Conference call. At this time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During this session you'll need to press star one on your telephone as a reminder, today's program.

To me is being recorded I would now like to introduce your host for todays program Mark Nicholls Director of Investor Relations. Please go ahead Sir.

Thank you Jonathan Good morning, welcome everyone to Allstate second quarter 2020 earnings conference call. After prepared remarks, we'll have a question answer session yesterday. Following the close of the market. We issued our news release, an investor supplement filed their 10-Q close todays presentation, along with a reinsurance update on our website at <unk> investors like on our management team is here to provide.

Active on these results in further contact center strategy to grow personal property liability marketshare.

As noted in the first let it presentation art, especially will contain non-GAAP measures for which the reconciliations in the news release and Investor supplement and forward looking statements about health its operations.

I will say its results may differ materially from these statements. So please refer to our 10-K for 2019 and other public documents for information on potential risks.

Now I'll turn it was huh.

Hi, Good morning, Thank you for trying to stay current on all state.

Let's start on slide two all states strategy in our second quarter highlights.

Our purpose is to protect people lights, uncertainties and be a positive so good.

They know our strategy is to component increased personal property liability marketshare.

Any fans in Dallas, Texas.

Well, we care showing a school.

Pretty allstate brand customer in capability.

Both of those component.

Ah this energy that.

Got it occasion kroner virus pandemic like excellent operating in the second pool as shown on the right.

The enterprise customer experience core increase.

As employees and eight excellent job, we're looking remote and we benefited from leading on the shelf in place payback and healthy customer is another way.

Profitability was good with adjusted net income of $2 and 46, a share. We also made progress at our multiyear transformative growth plan.

Leveraging the direct sales capabilities to be sure arent and lowering.

Allstate Protection plan, which is you know we acquired three and a half years ago for <unk> point 4 billion art and high growth in high return.

Section plans and pool.

And at the end of.

17, and made adjusted net income of 35 million at quarter end $9 million for the first six months of 20 funny.

The performance based.

Where losses at the core juice reported net investment income despite solid whatever.

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For the group.

Our our profitable growth.

Independently.

Overall.

We moved to like Crazy.

Oh they quickly.

Excellent operating result.

Total revenues of 9.2 billion increase half a person right.

Well game.

In gross profit I see premiums earned were that more than offset declines in investor day.

Our unsafe Boston.

Net investment income of 1.2 billion increased 49% prayer border. So you can see from the middle of the table.

[laughter] market value.

Uh huh.

Joe.

100 eating Uh huh.

And about 2019.

Got to reinforce takes that share 12.8% rather.

You share purchase program.

I agree with.

With adjusted net income return I think that's important.

[laughter].

Liability.

Thanks, Tom Let's go to slide.

Let's go to slide four.

Where we'll discuss the strong performance of our property liability segment.

Premium and policy growth continued with excellent recorded an underlying profitability policies in force were 33.8 million at the ended the quarter and Allstate brand policies, reaching an all time high for auto at 20.5 million.

Underwriting income of 904 million increased by 537 billion compared to the prior year quarter.

The chart of the lower left shows the second quarter combined ratio of 89.8, and the impact striving to six point improvement over the prior year quarter.

Starting on the left the underlying loss ratio improved by 15.9 points on lower auto insurance losses from fewer accidents due to significant reduction miles driven.

Your line loss ratio on homeowners insurance also improved due to increased premiums and lower non catastrophe losses.

The underlying loss ratio improvements were partially offset by all states efforts to help customers during the pandemic.

This included the 15% shelter in place payback on auto.

Which totaled 8.3% of premiums across all lines of business.

Plus 8.5% premiums from increased bad debt expense due to building a flexibility related the Allstate special payment plan.

The chart on the right breaks down the expense ratio components.

The expense ratio was 23.0 and improved half a point compared to the prior year quarter, excluding the $738 million shelter in place pay back and bad debt expenses in the quarter.

As you know one portion of our transformative growth plan is to deliver better value to customers in part by reducing operating expenses.

<unk> expenses vary by quarter as you can see from this quarter. The long term trends, it's been down as you look at the adjusted numbers, which are 2.1 points below the 2018 expense ratio.

So, let's now move to slide five and discuss transformative growth in more detail.

The transformative growth plan will accelerate growth through three key levers expanding customer access enhancing customer value and investing in technology and marketing.

We're expanding customer access an increasing product availability by leveraging issuance is direct sales capabilities under the Allstate brand.

He shares brand will be sunset overtime, and the advertising spend will be concentrated on the Allstate brand.

This also includes improving online and call center sales flows.

We're enhancing customer value through continued cost structure improvements, which will make prices more competitive without reducing underwriting margins.

We recently announced changes in the personal property liability organization, which included combining our direct operations as well as consolidating Allstate brand field operations to further lower costs.

To improve customer value, we're also expanding telematics offerings and promoting our unique mile wise pay by mild product, which is appealing to customers right now as they're driving less during the pandemic.

The third component is investing in technology and marketing.

Technology investments are improving our customer experience, including the recent launch of Allstate one app.

Simplifies and combines digital access and telematics offerings in one place.

Launching the transformative growth plan also enhances our ability to adapt to a post corona virus operating environment.

Well at lower cost structure and more competitive prices.

We're also building the capacity to invest in new products marketing and technology, while maintaining strong margins. The new technology platform will allow us to be more connected with customers and give us greater flexibility to change products and processes going forward.

Now I'll turn it over to Mario to discuss the rest of our second quarter results.

Thanks, Glenn it.

Let's go to slide six which highlights investment performance for the second quarter.

We take a proactive and holistic approach to managing the investment portfolio.

After reducing public equity in the first quarter, we increased our allocation to investment grade corporate bonds this quarter.

The chart at a left shows net investment income totaled $409 million in the quarter, which was $533 million below prior year due to a decline in market based income and losses in the performance based portfolio.

Market based income shown in blue was below the prior year quarter by $77 million.

As interest rates have declined reinvestment rates are below the average interest bearing portfolio yield reducing portfolio income.

We recorded 200, and a 211 million dollar loss on our performance based investments in the second quarter as shown in great.

As you know we proactively adjusted valuations in the first quarter in response to the significant decline in equity markets in the second quarter. We followed her standard process for recording performance based results, which generally recognized as valuations on a one quarter lag.

Given this lagging income recognition the second quarter improvement in public equity markets did not have a positive impact on this portfolio in the quarter.

GAAP total returns are shown in the table on the right.

The second quarter return of 5%, primarily reflects tighter credit spreads and the impact of higher equity valuations on the 2.8 billion dollar public equity portfolio.

Year to date returns were 2.7% and the latest 12 months was 5.9%.

<unk> performance based investments had a 2.4% and 4.5% loss for the quarter and first half of 2020, respectively.

These investments are expected to generate higher returns in the market based portfolio and consequently, typically have higher volatility.

This portfolio has generated an annualized rate of return of 7.4% over the past five years.

As shown in the bottom right at the table.

Let's move to slide seven and review results for Allstate life benefits and annuities.

Allstate life shown on the left generated adjusted net income of $72 million in the second quarter, an increase of $4 million compared to the prior year quarter.

Life insurance mortality was elevated in the second quarter, driven by $25 million in identified Corona virus death claims. Excluding these claims mortality experience was favorable relative to expected levels.

Despite higher mortality from the pandemic Allstate life generated attractive returns as lower operating expenses supported an increase in adjusted net income for the second quarter.

[noise] Allstate benefits premiums declined 7.4%.

Compared to the prior year quarter, reflecting the nonrenewal of a large underperforming account in the fourth quarter of 2019, lower sales from increased competition and the economic impacts of the Corona virus, including higher employee turnover business closures and furloughs.

Allstate benefits adjusted net income of $5 million in the second quarter was $32 million below the prior year quarter, reflecting a $32 million after tax write off for software associated with billing system.

We are developing a technology strategy to build an end to end digital platform over time that modernizes more than just our billing system and enables us to maintain our strong position in the voluntary benefits marketplace.

Allstate annuities shown in the bottom right had an adjusted net loss of $111 million in the second quarter, primarily due to the lower performance based investment results that I discussed earlier.

Let's turn to slide eight to discuss the results of the service businesses.

Service businesses revenue, excluding the impact of realized gains and losses grew 15.4% to 440 and $57 million in the second quarter.

Policies in force continued to grow increasing 41.2% to 127.3 million in the second quarter largely due to growth in Allstate protection plans.

Allstate identity protection policies in force increased 1.1 million from the prior year quarter to 2.3 million and includes subscribers accepting our free service offer through the remainder of the year as a result of the pandemic.

Adjusted net income improved to $38 million in the second quarter of 2020, reflecting an increase of $22 million compared to the second quarter of last year, driven by growth of Allstate protection plans and improve profitability at Allstate roadside services.

Allstate protection plans has outperformed expectations across each acquisition measure of success established following the 1.4 billion dollar acquisition in 2017.

Those measures of success include rapidly growing new and existing domestic customers.

Raising profitability and returns on capital deployed and creating sustainable growth beyond us retail.

As you can see him the chart on the right Allstate protection plans has grown rapidly policies enforced increased four fold over the last three and a half years from less than 30 million policies in 2017 to more than 120 million in the second quarter of 2020, representing a compound annual growth rate of 53%.

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This growth trajectory reflects expansion within both the U.S. and international markets.

I'll say protection plans also began generating positive adjusted net income in the first quarter of 2018 and continues to experience upward trajectory with added scale generating $35 million of adjusted net income in the second quarter of 2020 and $96 million over the latest 12 months as.

You can see Allstate protection plan has consistently grown customers revenue and profits since the acquisition.

Slide nine highlights allstate's attractive returns and strong capital position.

Ill state capital position remained strong.

[noise] due to our diversified business model.

Stansell earnings capacity and proactive capital management.

We continue to generate strong returns on capital with an adjusted net income return on equity of 17.9% as at the end of the second quarter.

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We returned $563 million to common shareholders in the second quarter through a combination of $391 million and share repurchases and $172 million in common stock dividends.

Over the last year, we have repurchased 5.2% of outstanding shares as you can see from the table and as of June Thirtyth. There was $2.4 billion remaining on the 3 billion dollar share repurchase authorization that is expected to be completed by the end of 2021.

Book value per share of $79 in 21 cents was 17.7% higher than the second quarter of 29 team, reflecting strong net income and an increase in fixed income unrealized capital gains, partially offset by cash returned to shareholders.

Allstate stock valuation metrics, however has not kept pace with this continued strength and strong operating performance.

Moving to slide 10. This quarter. We also entered into an agreement to acquire National General. This acquisition is financially attractive and will create a platform to drive profitable growth in the independent agent channel.

National General will become Allstate's independent agent platform, we will essentially do a reverse merger of our encompass and Allstate independent agent businesses International General, which has a good technology platform broad distribution and imagine and a management team that has substantial acquisition integration experience.

The deal will increase all states total personalized market share by over one point and create a top five competitor in the independent agent channel personal lines market.

It also generates opportunities for growth and expense efficiencies.

It gives us a strong presence in higher risk nonstandard auto insurance.

All states expertise and standard auto and home insurance will be used to leverage national General's independent agent relationships by broadening the product offering.

The acquisition is expected to be accretive to earnings and returns in the first year.

We expect high single digit earnings accretion in the first year post close and adjusted net income return on equity is expected to increase by about 100 basis points.

These impacts anticipate cost synergies, but do not include the incremental revenue growth opportunity.

The transaction will have no impact on allstate's existing share repurchase program.

The second quarter was a busy one where we continued to address the impact of the pandemic earn good returns for shareholders and position all state for long term profitable growth.

With that context, let's let's open up the lines for questions.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and he'd like to remove yourself from the Q. Please press the pound keep our first question comes on line up year on cannot from Goldman Sachs. Your question. Please.

Thank you very much good morning, everybody.

So my first question is just looking at the expense ratio adjusted for bad debt and the payback.

Moving by 50 basis points I get a little more with when you adjust for the AD spend how much of that is from the transformative growth programming. How much is just simply curvature of it.

Uh huh.

Eric.

Yes can you hear me.

Yeah.

To that.

Tribute that.

Hi.

Tom I think we're having difficulty hearing you I was able to hear Mario and the others on the call, but I've not been able to really area.

<unk>.

I'm not sure Theres, probably on the longer from my line is open I can't hear you. Your line is open his line if it's definitely the phone is definitely not coming through clearly.

Okay Maria you would've been a now why do we had assignments and then let's say it Tom maybe if you could dialed back in.

Go ahead Maria.

You want me okay. Thanks around so so I guess, what I'd say as you know because we've talked about transformative growth.

I'll just remind you there's there's three core elements as Glen talked about there is expanding customer access enhancing the customer value proposition and continuing to invest in technology and marketing.

To support the broader transformative growth probably a program.

And improving our cost structure is a key part of how we're going to achieve that second objective of enhancing customer value.

We continue to make really good progress on this front.

You know underwriting expense ratio as you indicated is down half a point once you adjust out the Toronto virus impacts to 23.

In the quarter.

And it's down eight tenths of a point compared to last year and when you look at where the improvement came from it's a it's an acquisition related expenses and operating costs and that's an area that as we've talked about those are two in areas that we're obviously focused on taking cost out. So we've been at this now for for over a year and.

I'd say our cost reductions again, our core part of transformed have grown so I'd say, that's that's really what we're focused on you know I'm doing it as part of the plan and where we would expect to continue to.

To take cost out over time, and we'll we'll continue to look for ways to improve processes and enhance efficiency.

You know through through a variety of means that support the transformative growth program.

I guess, where as I was trying to get at its how how much of the improvement this quarter as sticky and how much of that is just you know reduction in Tiffany and an office costs given that that we were in a shelter in place environment.

Yeah, I guess I guess, what I'd say your own his work we're gonna look to continue to to drive cost out of the system. So I don't think you know the expense ratio may bounce around a little bit going forward as we invest in technology. You saw US you know we invested more in marketing and the corridor, but I guess the way we're thinking about it is our our intent is to drive you.

Spends ratio down overtime, and that's what we're going to do.

Okay. My second question.

I think in the past, you've said that you're not looking to cut rates.

We are seeing some of your competitors starting to cut more meaningfully here.

Favorable frequency experience probably also helps our you are you holding tier decision.

Yes, so I'll jump in and take that when it's Glenn but thanks for the question you're on.

You know I think first of all we're seeing is one competitor that took some meaningful action more broadly I don't think we're seeing a huge rush in that direction I for one our competitors have been of you know aggressive and it's a competitive environment, but not a rational.

And the second point I'd make is you know we manage this on a local level and I know I'm a broken record I say this every every quarter when we talk about how we manage the the both the margins and our pricing.

Over the course of the last 60 days, because you're getting could look like with our flat rate environment that in our product people just sort of in hanging around and waiting for something we've actually made 180 filings over the last two months and what we do is we're constantly in each state in each market looking.

Looking at how we pull and push levers to be competitive in the environment. It's why we saw sequential growth. We've continued to grow in spite of a tough environment.

And those filings or things like you know make new business, you know more competitive, making our telematics offering more competitive with some incentives in that area and it across all 50 states unit pulling different levers like that so.

So I would say that.

While we don't favour as you said sort of a broad base like we're just going to cut X amount everywhere, we do favor being very surgical very detailed and very thoughtful about how we manage our competitive position and our margin in each market and I think you know from.

Overtime that we react quickly whether it was the frequency spike back in 2015 or it's the frequency declined and now 2020 that we moved really quickly on these things and we have a very responsive system and a and we react to market by market and make sure that we returned a very good return to our shareholders but.

The same time, we stay competitive we're able to grow profitably.

Thank you best of luck.

Thank you. Our next question comes from a line of at least Greenspan from Wells Fargo. Your question. Please.

Hi, Thank you.

Give them.

Adults that you've been seeing on obviously pretty favorable frequency results in the quarter are there any plans for further we paid within on auto insurance book.

So this is Glenn thanks release, I'll take that as well.

I think what we're looking at now and as I mentioned in the last question do you are on I, we're looking at sort of sustainable and more sophisticated instruments were looking at how we get competitive with those as opposed to what I think was the right decision in a good way to go about it with the shelter in place pay back at the moment it needed.

Right and blunt instrument because of the big move in frequency at that time, but when you wrap in frequency and then the mix shift that moves severity and the expansion of coverage the increase of bad debt, because we get more flexible for customers and need you put all those things together.

Sure I think the go forward approach is going to be more in the lines of allowing our losses to flow into our rating. The as we always do and should be more precise on a state by state and market by market basis versus a broad sheltered paid place payback you know things.

It could change because depending on.

Well the frequency and how the virus moves and all all of that but our thinking right now is to be more well get more sustainable tools than a shelter in place payback on sport.

Okay. That's helpful and then my second question.

It depends how frequency and severity trends.

In July.

You know versus what you've done a second quarter on kind of on yeah, I suppose that started to go back to work.

We seem to change in Austin.

You know this as Mario out you know Glenn can talk about second quarter, but you know where we're not going to talk about July trends at this point.

Yes, so I'll talk about the second quarter, a little bit just say first of all of you. Thanks for mentioning frequency and severity 'cause it because they do agenda to move a in opposite directions with one another and and one thing I'll just proactively address is that yes, I know some of our competitors Ah report a.

Recorded number on severity, we report a paid number and paid calendar quarter is I think more transparent better metric to use in normal times, but we're in anything but normal times. So it's much much more volatile and subject to mix shifts so you'll see the number move more just.

Speaks to the mix of what's being paid inside the quarter, where you have fewer yeah short tail small claims being paid in the period and everything so that you'll see the two things move a little bit opposite one another.

What we saw true throughout the quarter and we did disclose that June was less of a a difference in gross cyvera first frequency excuse me then on than the other months in the quarter.

Is that it has come down it's starting to normalize in some places there's a lot more variation by state early on like what we would see in April and May is that while there were some variation pretty much all the states were down within a relatively close tolerance to one another.

That is started to diverge more a with a really rural state like you know Montana for example of was actually up slightly in a in the year over year and then you've got places that are more significantly down, particularly states that are more heavily concentrated with metro areas and that has had more spikes.

The virus, so we're watching things on a very local level and how they're moving.

Okay. Thank you I appreciate the color.

Thank you. Our next question comes from the line of Greg Peters from Raymond James.

Good morning out quite a pivot ER and I'd like to get an update on your homeowners business.

I was looking at some of the statistics that you provide like on page 17 up here.

Supplement and I was struck by the improvements and frequency both gross claim and paid claim frequency not just.

In the first and second quarters of this year, but it seems to be a longer term trend and I.

Well I'd be curious about your impressions about what's driving that and how we should think about those trends as we look.

Beyond just this year and think about next year.

Greg extensive and I'll ask I'll ask Glenn to answer it more detail and we've obviously work hard on her homeowners business over the last number of years and so we're pleased with the returns we're getting from that business, but Glen do you want to get into more specifics yep yep. So.

Absolutely Thanks Don.

So yeah as Don said, Yeah, I'm always hey, I always preach that you know look into long term and look at the recorded combined on home you know we've got you know year to date.

And 88.6 combined ratio recorded a our 12 month is 83 and a five year is 87. So yeah. We we've sustained that I think Greg the your point on the.

Frequency as Rick Hough, one because it changes almost every quarter because the weather drives so much of it. So you'll have you know more caught up in in a catastrophes and so it's sort of lower underlying frequency and then you'll have.

Maybe a good weather quarter and you have you you weather, driven and and and fewer cat. They move around a lot what else say recently and this is probably in underreported part of the co that impact is that we've seen a shift in frequency severity on the home side because.

And it's pretty logical is we're seeing fewer like death claims in break ins because everybody's home.

And those tend to be lower severity claims and yet we're seeing about the same number a fire claims and those tend to be high severity claims. So we start frequency go down in the quarter. Our severity you know average go up because the ones that went away or smaller claims and so we get into the details me look at all of those components, but I.

I wouldn't necessarily draw conclusion that theres something in whole driving long term frequency down that will be sustainable I think it's been different factors each quarter.

Got it thanks for that answer.

And then I guess I'll circle back you know your transformative growth plan and integrated services platform.

And as you guys know I always like to track your agency data that you provide on page nine of your supplement.

And so I was wondering if you could just from a big picture perspective, we're watching some directional changes and some of the numbers, whether it's you know a slight decrease until allstate agencies and Alice piece, but we're also seeing an increase in independent agencies and encompass independent agencies can you walk us through.

You know what your views on how that's going to change further as he is we continue to roll out. These plans that you mentioned previously.

Yeah like what do you go ahead.

Okay, great. So we it's yeah, you're always into the detailed break so could you definitely picked up on the right trends. There you know we're focused on growing a with agencies what can do invest in this ties back to something Mario talked about about to be expenses.

No it's not that our acquisition costs have gone down because we don't want grow when we don't want to invest in agents looking to grow they've gone down because we've moved to the money a really in a way that incentivizes growth and and it's more efficient but to do it that way so coming into this year, we moved some money.

That was incentivizing retention and we moved it to incentivize new business.

And or I should say renewal versus new business as opposed to retention cuts.

How it gets paid.

That's one change and that changed some agents, who wanted to invest in that way and some that didnt and and perhaps you know you know voted themselves out on that one.

We also increased our baseline performance requirements for I'll call. It our lowest producing agency and ER and required that you know books sort of be more open for business than than they have done and so that has driven the number down a little bit and the other thing is integrated service, which you mentioned in the.

A question that.

That number will start to look strange overtime, we had about 500 agents in there right now.

So those agents wont show staff members that are being augmented are provided by Allstate and so it kind of moves the number two different place because we don't reported and as part of the agency staff as license sales professionals, because we're doing the work on the back end for them in those centers. So there's a number of pieces moving it but.

I think the headline to take away is that we've grown in the agency plant you I mentioned in her prepared remarks that you know, we've all time high and Allstate brand auto policies in force. So the agency force is growing and we want to grow in all of our lines want to grow all state agents, we want to grow our independent agent channel with this pending acquisition.

Given that we've got but national general and we want to grow in direct which is the combination of insurance and Allstate direct.

Hey, guys sorry.

Hey, Greg This sounds Wilson, I'm, hopefully reconnected scenario it.

Okay, All right, let me highlight what Glenn just at a transformative cross sell as much as they can't do every new everybody. We can't so as I have more allstate agencies, who I have more independent agents with myself more act.

You will see overtime, some being <unk> Grace is and how much goes through each of those channels as we transition.

To a niche or <unk> model. So they in that client explained what we're doing on new business versus.

Our retention, but we're really work on different ways, we can get to customers, we may not need as much real estate in the future as we have today that age local offices are different so you'll see changes and you're seeing some of that change now because we're not.

We do Allstate agents at this point as we build out these new model. So it's really about.

Barry a distribution force.

Got it thank you for the answers.

Thank you. Our next question comes from online at Mikes Winski from Credit Suisse. Your question. Please.

Hey, good morning. Thanks.

Could you guys I've met and maybe I missed it did you guys touched on a auto severity I think you know we investors have expected it to increased during cobot, maybe you can discuss whether whether we should expect the severity we could talk about it so they can make better understand where whether a chicken chip.

Continue and I'm curious, whether like the underlying severity trend is still kind of higher for for a longer do the issues, we talked about pre called that or is there a change to that potentially.

This call that.

Mike Let me have Glenn answer that but give you a and overview first a in a time like this where the numbers are changing rapidly in terms of that number claims.

They eat this statistics in the in the method to use for any individual component of loss cost bounce around a lot. So it's it's the best thing to do is to look at overall loss costs and say are your loss gosh still the right percentage of your premiums. We obviously is on attribution on severity and Glenn can talk about that.

Yeah. So it's a great question, because as Tom said mean, they do bounce around a lot.

Overall, we feel very comfortable and confident with where we are on severity.

PD severity paid severity was reported at 20% up which you know number jumps off the page. Let me give you just an example of why that is on a paid severity number like that so paid severity is as you'd expect it's number clean just settle the close during that that calendar period divided by the total number.

Thanks, and you get your average well during the second quarter.

We settled just as many six month old claims as we would in any normal quarter because six months earlier, there was no coated and there was you know there was no drop in frequency. We settle just as many five month old claims and foremost those claims and three month old points.

Well, we settled a lot fewer three day old claims and.

When we called claims because they just weren't there, but they weren't happening with the same frequent.

And as you'd expect the claims you settle in three four and five days or are lower severity on average three quick they're easy.

And they're low cost the ones that are six months are typically ones that like they've gone through their own carrier subjugation comes over from that carrier they averaging much higher severity type of claim.

Where they've been a total loss it so they take longer process and so on so it's just a pure mix issue that drives that type of number when we get down underneath that we're able to look at the things that come in in the quarter. It how their resolving it are estimating practices and and what the true severity looks like.

It feels like normal inflation that we've seen in the single digits that that we're very comfortable with and you know the claims team's done and finance team a terrific job getting underneath the data. So we understand you know where and if we have any pressures but.

But we've seen it you know run very predictably.

Okay. That's very helpful and lastly, my follow up on services segment. It feels like driven by also protection continues to do I think better then.

As expected a and its actually kind of moving the needle little bit because these days.

You know you talked about diversifying a into outside of the last I mean, just since its growing so fast should we expect the rate of growth to to temper any any additional color there would be around what's going on would be helpful.

Let me provide that just said Oreo like why we talked about it and then Don can talk about a it's a future. So when we bought it a one of the things. We said was you know will come back and talk you about how we're doing.

Every so often and that's what we wanted to do here and a it's a it's meeting and exceeding our expectations. I think there never people are trying to understand why are we were into that space and you can see it's a huge growth and we've had huge growth both domestically and we're starting to get some guy.

Good growth internationally.

So it was really about coming back to you and thing Yeah. We we told you would come back in here, we are happy to be a good news story, which stock can talk about.

Yeah. Thank you so first thanks for noticing.

The service businesses I think in total have made a lot of progress and has improved the values that they provide to customers and.

And so I think across the board, they're doing a really good work more specifically around the Allstate protection plans I mean, marlim laid out the three goals, we set and how we're doing against them, but I'd remind you we set those goals. The first quarter. After we think the acquisition and we communicated doesn't.

Had been consisting of off one.

And we've had a really strong trajectory since we acquired.

Great trade, both on the topline and improvements in profitability along the way. This particular quarter was good but I'd remind you we expected to have the good 2020 to begin with.

And that's because we were continuing to pick up you customers.

We were doing a really good job working with our partners to make the products more available and accessible to their customers.

So we expected growth not only from request you business to business customers, but also.

More availability in existing customers and our international business continues to grow substantially. So we expect the 2020 to be good.

We have benefited from the virus in some ways and topline as one of them. When you look at the partners that we do our largest business will they tend to be the larger one stop shops, which as you know have been in favor <unk> in the retail world retails were.

Mix these days, but if you're a large a one stop shop.

We've done quite well and you categories that we are particularly in consumer electronics, and so forth and home office I'm also done very well.

So we benefited because of the buyers with the topline and then obviously the topline hasn't benefit to the bottom line.

With respect to scale.

Expenses and so forth. So we're very happy with their results. The results would have been strong even without the virus does have clearly been helped by the virus.

Both on the topline and bottom line, but we're still very happy with underlying performance as well.

The only thing I'd add is it's hard to tell what the impact of the virus is going to be going forward.

And you know, that's just going to depend on consumer behavior, where they buy what they buy so while we've benefited from impacts and the virus at this point targeting what's been happening with future, but all that said the underlying business has been and continues to be quite strange quite bullish on.

I guess.

Thank you. Our next question comes from the line, though Paul Newsome from Piper Sandler Your question. Please.

Sounds good morning, I wanted to ask about a bad debt trends within the quarter itself and I guess, I'm I'm wondering whether or not we could see more when the federal.

Somebody's room and plan to go away or maybe the bad debt is more.

Tied to symbolizes the a state liberal moratoriums on them.

But were in place just your thoughts on that'd be great.

Sorry, I do want to take that.

Sure Paul says as Mario So you know just to give you a little context of of the driver of bad debt as we mentioned earlier one of the ways that you know we we provided a you know additional benefits to our customers during the pandemic was to offer them be opportunity to opt into.

Special payment plan, which are essentially gives in 60 days of coverage.

Without having to make the payment on the policy that that started in March.

And we've you know as we've worked our way through the quarter, we've gotten more and more experience relative to how though that subset of customers.

Has performed and then the bad debt activity within that customer segment 'cause. It you know as much as we had historical context around offering similar type programs. During catastrophes. This was obviously much more.

Widespread and different and you see the impact in the quarter where.

Bad debt was $44 million will continue to get more and more experience on that customer set going forward. We'll continue to update our analysis and then we'll update the the numbers a you know into third quarter. If we if we need to but based on the experience we've seen.

So far through through the end of Q2 Ah that's what we recorded in the piano.

And Paul I would I would wrap that into just the overall pandemic impact right. So.

We've obviously had lower frequency whichever we've talked a lot about oh. This is a another cost associated with a pandemic and when we're thinking about what we're going to do in the future. We factor all this stuff and.

Makes sense second question I wanted to ask about whether or not you think the the regulators will take into account through the hopefully onetime in nature of the pandemic were if we put through when you put you refineries in the future will you couldn't have this.

You know, a a middle and pipe with place on kind of situation where the.

Unusual low frequency is embedded in what you can file for rates, respectively until that kind of rules off through the system.

Oh, it's always hard for us of course, so to speak for somebody else as to what they will do and of course it.

Varies by state, which often times relates to the political environment in that state.

What I can say is you know we were out early no regulator forces to shelter placed payback and or expand coverage and all the other things we Ted.

And you know so we got out ahead of it.

I think we got positive feedback from people that we were doing what was not required like no one had to come in and say you must do this.

So I feel like we're on a good basis to work through like what's the right price.

And the if you a frequency were to stay at age abnormal those obviously regulators customers and the competitive marker wouldn't have you charge. The same amount. The good news is our loss costs would be a lot better. So our focus really Paul is on maintaining our overall competitive position and our margins.

And we've been able to do that with regulators I think they'll be a whole bunch of stories, but and the good news is we have a we have good math oh in operating mile that adjusts locally.

In a way in which we can continue then grow profitably Glenn anything you would add to that.

No I think that covered it well.

Great. Thanks for your health and everyone's leasing business.

Thank you. Our next question comes from a line of David <unk> from Evercore. Your question. Please.

Hi, Good morning, just a question for Tom and Glenn just.

Thinking bigger picture I'm, just wondering how you guys are thinking about miles driven and accident frequency over the longer term.

And I know, there's a lot of uncertainty but.

Are you guys thinking how are you guys thinking about miles driven an accident frequency do you think that will ever get back to.

Levels that we were at pre coded, especially given what seems like increasingly prevalent adoption of remote working arrangements and.

And Relatedly, how are you guys going to adjust to potential lower frequency levels on a more sustained basis.

Let me, let me start Glenn and then a jump in a I'm going to start David the most macro which is but of course. Our strategy includes couple of different components. The top oval property liability and then the bottom although other stuff in the property liability stuff, there's auto big driver of that.

And as and that's a key part of our both revenue and profitability, but the other thing is we ever really profitable homeowners business are much more profitable than other people.

We're good at it where precise added we sell a bunch of other stuff and then they circuit protection selling things like the service plans and everything is about making sure. The company has multiple things we can sell to customers to protect them from whatever goes wrong in their life and leverage those customer bases. So we're we're dealing with.

Because he had the same question that was about same question about the future of auto was really around autonomous vehicles, three or four years ago and.

And so we've been on that path from a strategic standpoint as to how to how to deal with that and is of course, what's happened is actually pretty much have gone up not down in the last four or five years, which people are afraid nobody was kind of drive so it's really hard to predict what you can do is have multiple options and take advantage of those apps.

And and leverage your skills and capabilities as it relates to the auto insurance business.

Its you know you want to have a broad based approach and that's a transformative growth really is its you know improve the customer value proposition give people last back says connect the more make your products are simple.

And so you know we still have a lot of its share of that market, we can pick up.

And so even if you were to say fewer miles driven lower average premium we still think we can grow that business can you might want to have some that was I was sort of macro and longer term how would you react to the question on at a more really as it relates a personal property liability in a shorter term.

Yeah, and it's great question, because obviously, we think a lot about this it let me take into how the team works on this and I'll go like Tom did I'll go before even the on the virus.

You know we had Oh, we had built out a model and assumptions for the change in frequency driven purely by the change in the car fleet out in the market you know what does each component of Ada Es safety equipment on cars, what does each component due to change each.

Each type of loss like how many fewer sideswiped. So rear ends or intersection actions are we gonna have based on on the blind spot warning or based on this autonomous feature or someone.

And you add those up and you plan to your fleet and how the fleet is changing over time and we actually built you know we've built into the model our assumptions are what changes, but at the same time, we built the other side of it which is the scenario because all those cars getting into a.

Fewer accidents or heck a lot more expensive depicts when they have all that equipment on it. So it goes to what Tom said about you know really it's hard to predict but we go after it and you look at with as much specificity as we can to component parts. So now take that into the current scenario in the question, you're asking and we're looking at so what percentage of the Mark.

It.

Works in jobs that don't have to commute to work in a restaurant or your dental hygienist or like but you're going to have to can you because those things cannot be done remotely.

But there are a lot of jobs most of us have jobs that can be done more remotely than they have been historically. So you get that percentage then you look at well what percentage of people will do it and then what percentage of your accidents occur in like Hi drive time, and and you start making your assumptions and.

Next over what's going to change and and similarly that then changes severity because one other things. We've learned is that the losses that go away quickest.

Our the bumper to bumper accidents in high traffic and those tend to be low severity. So while you know a 10% decrease in frequency. It's great. It's not necessarily a 10% decrease in loss costs in the reason I'm getting into more micro since Tom took the macro I missed it and laid it out or is it hopefully just to.

Give you confidence if we look at this and it very detailed way and thoughtful way and our teams work through what the expectations are and then we're able to move quickly on the fly when were either above or below it with what our prediction is.

Great. Thanks, Thanks for that comprehensive answer I appreciate that and if I could just sneak in just one more on just a quick numbers question.

If I think about that 50 basis point improvement in the expense ratio, if I take out the onetime ish items.

In in Twoq, you and then I was roughly 80 basis points in the first half versus the first half last year is that and I know there were a lot of different moving pieces there.

But is that the sort of level of year over year improvement that we should expect to see going forward.

Yeah I would.

Say it transformative growth is about reducing expenses in part it's just one component it's about reducing expenses. So we can improve our customer value proposition with better prices without impacting our margins, but it's going to bounce around a lot by quarter. You know you got to advertising, we're in a way of new advertising, we're going to launch.

You have some technology spend but do you should expect the overall trend going down I don't think we could predict.

How much it will change by every quarter because of are set a target that way because then it at least <unk> unnatural consequences. So, but you should expect that keep going down yes.

No that's fair thank you.

Thank you. Our next question comes in the line that Sunny comment from Citi. Your question. Please.

Thanks, Good morning, I wanted to go back to the frequency benefit issue, if I could I get that you want to be more surgical in terms of how you're approaching this as opposed to more broad based which makes sense, but I guess. The question is do you are you comfortable are confident that you won't see an impact on policy growth to the extent that some of your.

Ah competitors are actually stick with much more of a broad based approach.

Well, it's always always hard to tell what customers will do we've always found that precision works for us on the long term.

And that those people who rush to.

Grow and not have precision could end up having to fix it later so if you look at homeowners yeah people trying to grow in homeowners are taking huge losses.

Like we just don't think that's the right way to build a business because you get the customer for a price it's not appropriate and then you either have to lose them or managing to a much higher price. So.

Well as I can say is what we'll do.

But it's it's a reasonably it's a highly competitive market, but it's a it's a thoughtful market right like people are not crazy in this market and trying to.

Use bad economic so all of our major competitors understand their business well.

And why they might make different beds at different times I feel like that the basis of competition is still gonna say same whoever is the smartest win.

Got it Okay, and then I just wanted to ask one on the National General deal if I could I see that you're still guiding to this I guess high single digit accretion I think was the original guidance, but when we were running the math just based on where expectations were for Allstate and Nat Gen. Based on consensus we were getting something close to.

Hi single digit I'm more in high single digits EPS accretion without factoring in any cost synergies. So I'm just trying to understand is there any health that you can give us in terms of what you're building in with respect to cost synergies I don't think you talked about on the last call but.

Any help there would be appreciated.

Yeah. It would I would say you know we don't own it yet so our projections hasn't really changed.

We do have cost saves a in then they love it that we figured out in terms of what we packaging and when we bought when we agreed to pay the price, we did and a and it did lead to accretion as you point out but right now we're working on Glenn and Berio working hard on you know what is.

The transition program, so as we get more specifics.

On things that we can lay out for you that are you know here's our measurable goals will do that but.

Right now, we're just like a month into it.

All right. Thanks, Tom.

The Q1 time I think we have time for one more question certainly that our final question for today comes from the line of Ryan Tunis from its research your question. Please.

Good morning. This maybe a question for Glenn but it seems like there's some decoupling between trends in miles driven and trends and frequency I guess the ladder.

Declining quite a bit more I guess my question is what indicators that you're seeing in your book do you think or actually the best predictive indicators of would freak. When she is doing in this current environment.

Oh, that's a tough question [laughter] Glen do that one [laughter] [laughter] [laughter]. Thanks, So yes, it's a good question and you're right about the decoupling. So I'll give you a little background on that not all miles are created equal or if you're driving in a high traffic environment you.

A much more likely to get an accident because.

You know, it's less forgiving you know you take your eyes off the road your distracted driving which by the way I don't really recommend to anytime, but if you're doing it and lose traffic you know when you make a mistake you are less likely to bump into somebody than when you're doing in high traffic. So what we're seeing is with computing miles being way down.

That has a little bit of an exponential effect on frequency or you know so if if miles came back to a new normal for non computing.

What were lower only on commuting it would have a disproportionate effect on the frequency so.

Hopefully that answers your question. It's we're looking at the data in that way and you know our are with the partnership with equity and and.

And the partnerships. They have with is you know a lot of the noninsurance companies out there and they get a lot of miles driven data on those.

And at what they do for us with our own data is extremely helpful in that.

Yeah right Elkins. Glens example, also is goes for rural and urban too right. So think of the same thing or not this time of day, but also so Montana. The frequency is not down as much as it is in urban areas that because there's fewer people is always.

Last congestion. So it is a difficult question, but you know the good news is we're on top of it I know you have all have another call. Thank you for participating and listening to our story well talking next quarter.

Thank you, ladies and gentlemen for your participation in todays conference. This does conclude the program you may now disconnect good day.

[noise].

[music].

Ladies and gentlemen, thank you for standing by welcome to the Allstate second quarter 2020, <unk> earnings Conference call. At this time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During this session you'll need to press star one on your telephone as a reminder, please.

Program is being recorded I would now like to introduce your host for todays program Mark Noble director of Investor Relations. Please go ahead Sir.

Thank you John.

Good morning, welcome everyone to Allstate second quarter 2020 earnings conference call. After prepared remarks, we'll have a question answer session.

The baseball in the called the market, which you'd our news release, an investor supplement.

Thank you close todays presentation, along with a reinsurance update on our website I don't think investors.

Our management team is here to provide perspective on these results and further contact center strategy to grow personal property liability marketshare.

As noted in first line.

Our discussion will contain non-GAAP measures are what star reconciliations in the news releases and its to supplement.

Forward looking statements about it operations.

I'll say its results may differ materially from these statements. So please refer to our 10-K for 2019, another public documents for potential risks.

I'll start with <unk>.

Oh good morning. Thank you Richard the same current on all state.

Let's start on slide two Allstate strategy in our second quarter highlights.

Our purpose is to protect people like Turkey and be a positive so good.

Our strategy has two components.

Or something like <unk> market share.

Fans in Dallas, Texas.

They're showing.

Okay.

Richard ill say brand customer capability.

Both component.

This energy.

And occasion <unk> endemic like excellent operating in the second.

As shown on the right.

The enterprise customers current score increase.

Employs an agent excellent job or working remote.

And we benefited from leading on the shelf earthquake payback and healthy customer it's another way.

Profitability was good weather adjusted net income of $2 46, a share. We also made progress that our multiyear transformative broke plan by leveraging a direct sales capabilities to be insurance and Lori.

Well see protection plan, which you know we acquired three and a half years ago <unk> point 4 billion art.

In high growth in high return.

Action plans as well.

And at the end of 2017 and made adjusted net income of 35 million a quarter and I'm married out for the first six months of 20 Twond.

The performance based.

Well a lot more guests reported net investment income despite salad or.

[music].

I grew up.

Our our profitable growth.

Depending on.

All right.

We moved to like free.

Okay quickly.

Excellent operating it's all.

Total revenues of 9.2 billion increase half a person right.

Okay.

In gross profit <unk> Ukrainian earned where they have more than offset declines in investor day.

Wow.

Nothing that's net income of 1.2 billion increased 45% prior border you can see from the middle of the table.

Mark Guy.

Yeah.

889.

Kinda talk 29.

[music].

Good afternoon.

Sure.

Like 8%.

Like you share repurchase program.

First I agree.

Adjusted net income or turn on it.

Uh huh.

Yeah.

[laughter].

I believe.

Thanks, Tom Let's go to slide.

Let's go to slide four where we'll discuss the strong performance of our property liability segment.

Premium in policy growth continued with excellent recorded an underlying profitability policies enforced were 33.8 million at the ended the quarter and Allstate brand policies, reaching an all time high for auto at 20.5 million.

Underwriting income of 904 million increased by 537 billion compared to the prior year quarter.

The chart of the lower left shows the second quarter combined ratio of 89.8, and the impacts driving the six point improvement over the prior year quarter.

Starting on the left the underlying loss ratio improved by 15.9 points are lower auto insurance losses from fewer accidents due to significant reduction miles driven.

The underlying loss ratio on homeowners insurance also improved due to increased premiums and lower non catastrophe losses.

The underlying loss ratio improvements were partially offset by allstate's efforts to help customers during the pandemic.

This included the 15% shelter in place payback on auto.

Which totaled 8.3% of premiums across all lines of business.

Plus 8.5% premiums from increased bad debt expense due to billing flexibility related the Allstate special plane Atlanta.

The chart on the right breaks down the expense ratio components.

The expense ratio was 23.0 and improved half a point compared to the prior year quarter, excluding the $738 million shelter in place pay back and bad debt expenses in the quarter.

As you know one portion of our transformative growth plan is to deliver better value to customers in part by reducing operating expenses.

While expenses vary by quarter as you can see from this quarter. The long term trend has been down as you look at the adjusted numbers, which are 2.1 points below the 2018 expense ratio.

So, let's now move to slide five and discuss transformative growth in more detail.

The transformative growth plan will accelerate growth through three key levers expanding customer access enhancing customer value investing in technology and marketing.

We're expanding customer access an increasing product availability by leveraging isheriff, just direct sales capabilities under the Allstate brand.

These shows brand will be sunset.

Overtime and the advertising spend will be concentrated on the Allstate brand.

This also includes improving online and call center sales flows.

We're enhancing customer value through continued cost structure improvements, which will make prices more competitive without reducing underwriting margins.

You improve customer value, we're also expanding telematics offerings and promoting our unique mile wise pay by mild product, which is appealing to customers right now is there driving less during the pandemic.

The third component is investing in technology and marketing.

Technology investments are improving our customer experience, including the recent launch of Allstate, one out that simplifies and combines digital access and telematics offerings in one place.

Watching the transformative growth plan also enhances our ability to adapt to a post corona virus operating environment, well at lower cost structure and more competitive prices.

We're also building the capacity to invest and new product marketing and technology, while maintaining strong margins. The new technology platform will allow us to be more connected with customers and give us greater flexibility to change products and processes going forward.

Now I'll turn it over to Mario discussed the rest of our second quarter results.

Thanks, Glenn it.

Let's go to slide six which highlights investment performance for the second quarter.

We take a proactive and holistic approach to managing the investment portfolio.

After reducing public equity in the first quarter, we increased our allocation to investment grade corporate bonds this quarter.

The chart. It left shows net investment income totaled $409 million in the quarter, which was $533 million below prior year due to a decline in market based income and losses in the performance based portfolio.

Market based income shown in blue was below the prior year quarter by $77 million.

As interest rates have declined reinvestment fleet are below the average interest bearing portfolio yield reducing portfolio income.

We recorded 200, and a 211 million dollar loss on our performance based investments in the second quarter as shown in great.

Given this lag in income recognition the second quarter improvement in public equity markets did not have a positive impact on this portfolio in the quarter.

GAAP total returns are shown in the table on the right.

The second quarter return of 5% primarily reflects tighter credit spreads.

Pack of higher equity valuations on the 2.8 billion dollar public equity portfolio.

Year to date returns were 2.7% and the latest 12 months was 5.9%.

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Performance based investments had a 2.4% and 4.5% loss for the quarter and first half of 2020, respectively.

These investments are expected to generate higher returns than the market based portfolio and consequently, typically have higher volatility.

This portfolio has generated an annualized rate of return of 7.4% over the past five years.

In the bottom right at the table.

Let's move to slide seven and review results for Allstate life benefits and annuities.

Allstate life shown on the left generating adjusted net income of $72 million in the second quarter, an increase of $4 million compared to the prior year quarter.

Life insurance mortality was elevated in the second quarter, driven by $25 million in identified Corona virus death claims.

Excluding these claims mortality experience was favorable relative to expected levels.

Despite higher mortality from a pandemic Allstate life generated attractive returns as lower operating expenses supported an increase in adjusted net income for the second quarter.

Allstate benefits premiums declined 7.4%.

Compared to the prior year quarter, reflecting the nonrenewal of a large underperforming accounts in the fourth quarter of 2019, lower sales from increased competition and the economic impact of the Corona virus, including higher employee turnover business closures and furloughs.

We are developing a technology strategy to build an end to end digital platform over time that modernize is more than just our billing system and enables us to maintain our strong position in the voluntary benefits marketplace.

All state annuities shown in the bottom right had an adjusted net loss of $111 million in the second quarter, primarily due to the lower performance based investment results that I discussed earlier.

Let's turn to slide eight to discuss the results of the service businesses.

Service businesses revenue, excluding the impact of realized gains and losses grew 15.4% to 440 and $57 million in the second quarter.

Policies in force continued to grow increasing 41.2% to 127.3 million in the second quarter largely due to growth in Allstate protection plans.

Allstate identity protection policies in force increased 1.1 million from the prior year quarter to 2.3 million and includes subscribers accepting our fleet service offer through the remainder of the year as a result of the pandemic.

All stay protection plans has outperformed expectations across each acquisition measure of success established following the 1.4 billion dollar acquisition in 2017.

Those measures of success include rapidly growing new and existing domestic customers.

Raising profitability and returns on capital deployed and creating sustainable growth beyond us retail.

As you can see in the chart on the right Allstate protection plan has grown rapidly.

Policies in force increased four fold over the last three and a half years from less than 30 million policies in 2017 to more than 120 million in the second quarter of 2020, representing a compound annual growth rate of 53%.

This growth trajectory reflects expansion within both the U.S. and international markets.

As you can see Allstate protection plan has consistently grown customers revenue and profits since the acquisition.

Slide nine highlights Allstate attractive returns and strong capital position.

All states capital position remains strong.

Due to our diversified business model substantial earnings capacity and proactive capital management.

We continued to generate strong returns on capital with an adjusted net income return on equity of 17.9% as of the end of the second quarter.

[music].

We returned $563 million to common shareholders in the second quarter through a combination of $391 million and share repurchases and $172 million in common stock dividends.

Book value per share of $79.21 was 17.7% higher than the second quarter of 2019, reflecting strong net income and an increase in fixed income unrealized capital gains partially offset by cash returned to shareholders.

I'll state stock valuation metrics, however has not kept pace with this continued strength and strong operating performance.

Additional general will become all states independent agent platform, we will essentially do a reverse merger of our encompass and Allstate independent agent businesses International General, which has a good technology platform broad distribution and imagine kind of management team that has substantial acquisition integration experience.

The deal will increase all states total personalized market share by over one point and create a top five competitor in the independent agent channel personal lines market.

It also generates opportunities for growth and expense efficiencies.

Gives us a strong presence in higher risk nonstandard auto insurance.

All states expertise and standard auto and home insurance will be used to leverage national General's independent agent relationships by broadening the product offering.

The acquisition is expected to be accretive to earnings and returns in the first year.

We expect high single digit earnings accretion in the first year post close and adjusted net income return on equity is expected to increase by about 100 basis points.

These impacts anticipate cost synergies, but do not include the incremental revenue growth opportunity.

The transaction will have no impact on all states existing share repurchase program.

The second quarter was a busy one where we continued to address the impact of the pandemic earn good returns for shareholders and position all state for long term profitable growth.

With that context, let's let's open up the lines for questions.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered anything to remove yourself from the Q. Please press the pound key our first question comes from the line up your on Konare from Goldman Sachs. Your question. Please.

Thank you very much good morning, everybody.

So my first question is just looking at the expense ratio adjusted for bad debt and the payback.

Moving by 50 basis points I get a little more with when you adjust for the AD spend how much of that as from the transformative growth programming. How much is just simply covance drug.

Well.

Aaron.

Yes can you hear me.

Yes.

To that.

Tribute that.

Hi.

Tom I think we're having difficulty hearing you I was able to hear Mario and the others on the call by I have not been able to really area.

<unk>.

I'm not sure Theres nobody on the line with my line is open I can't hear your line is open. His line is definitely the phone, it's definitely not coming through clearly.

Okay Mario.

On that.

Why don't we haven't assignments and then lets it Tom maybe if you could dial back in.

Go ahead Mark.

Oh, you want me okay.

It's around so so I guess, what I'd say as you know because we've talked about transformative growth.

I'll just remind you there's there's three core elements as Glen talked about there was expanding customer access enhancing the customer value proposition and continuing to invest in technology and marketing.

To support the broader transformed a growth probably a program.

And improving our cost structure is a key part of how we're going to achieve that second objective of enhancing customer value.

We continue to make really good progress on this front.

You know underwriting expense ratio as you indicated is down half a point once you adjust out the Toronto virus impacts to 23.

In the quarter.

And it's down eight tenths of a point compared to last year and when you look at where the improvement came from it's a it's an acquisition related expenses and operating costs.

That's an area that as we've talked about those are two in areas that we're obviously focused on taking cost out. So we've been assets now for for over a year and I'd say our cost reductions again, our core part a transformative growth. So I'd say, that's that's really what we're focused on Oh I'm doing it as part of the plan and.

We would expect to continue to.

To take costs out over time and will continue to look for ways to improve processes and enhance efficiency.

You know through through a variety of means that support the transformative growth program.

I guess, what I was trying to get at is how how much of the improvement this quarter as sticky and how much of that is just you know reduction TNT and an office costs given that that we were in a shelter in place environment.

Yes, I guess I guess, what I'd say your own is we're going to look to continue to to drive cost out of the system. So I don't think that'd be expense ratio may bounce around a little bit going forward as we invest in technology. You saw US you know we invested more in marketing and the corridor, but I guess the way we're thinking about it is our our intent is to drive the.

Spends ratio down over time, and that's what we're going to do.

Okay and my second question I.

I think in the past, you've said that you're not looking to cut rates.

But we are seeing some of your competitors starting to cut more meaningfully here.

Favorable frequency experienced probably also helps our you are you holding tier decision.

Yes, so I'll jump in and take that when it's Glenn but thanks for the question you're on.

You know I think first of all we're seeing you know there's one competitor that took some meaningful action more broadly I don't think we're seeing.

A huge rush in that direction I for one our competitors have been.

Aggressive and it's a competitive environment, but not irrational and the second point I'd make is yeah. We manage this on a local level and I know in the broken record I say. This every every quarter when we talk about how we manage the both the margins and our pricing.

Over the course of the last 60 days given could look like with our flat rate environment that in our product people just sort of been hanging around and waiting for something we've actually made 180 filings over the last two months and what we do wish we're constantly in each state in each market look.

Looking at how we pull and push levers to be competitive in the environment. It's why we saw sequential growth. We've continued to grow in spite of a tough environment.

And those filings where things like.

Making new business, a more competitive making our telematics offering more competitive with some incentives in that area and across all 50 states unit pulling different levers like that so.

So I would say that.

While we don't a favor as you said sort of a broad base like we're just going to cut X amount everywhere, we do favor being very surgical very detailed and very thoughtful about how we manage our competitive position and our margin in each market and I think you know from.

Overtime that we react quickly whether it was the frequency spike back in 2015 or it's the frequency decline now 2020 that we move really quickly on these things and we have a very responsive system and Oh, we react market by market make sure that we returned a very good return to our shareholders but.

The same time, we stay competitive and were able to grow profitably.

Thank you best of luck.

Thank you. Our next question comes from a line up at least Greenspan from Wells Fargo. Your question. Please.

Hi, Thank you.

Given the strong results that you've been seeing on obviously pretty favorable frequency results in the quarter are there any plans for further rebate within on auto insurance book.

So this is glenn thanks to lease I'll take that as well.

I think what we're looking at now and as I mentioned in the last question to you are on I, we're looking at sort of sustainable and more sophisticated instruments were looking at how we get competitive with those as opposed to what I think was the right decision in a good way to go about it with the shelter in place pay back at the moment if needed.

Yeah, I think the go forward approach is going to be more in the lines of allowing our losses to flow into our rating. The as we always do and should be more precise on a state by state and market by market basis versus a broad shelter and paid place payback you know things.

Could change because depending on.

Well the frequency and how the virus moves and all of all of that but our thinking right now it's to be more oh.

Look at more sustainable tools than a shelter in place payback going forward.

Okay. That's helpful and then my second question.

It depends upon frequency and severity trends.

In July.

First is what you saw in the second quarter.

So you kind of on both that started to go back to work.

We seem to change.

This does Mario <unk>, Glenn can talk about second quarter, but you know where we're not going to talk about July trends at this point.

Yeah, So I'll talk about the second quarter, a little bit just say first of all.

Thanks for mentioning frequency and severity 'cause it because they do tend to move in opposite directions with one another and and one thing I'll just proactively address is that yes, I know some of our competitors Ah report a recorded number on severity, we reported paid number and paid calendar quarter.

It is I think it more transparent and better metric to use in normal times, but we're in anything but normal times. So it's much much more volatile and subject to mix shifts. So you'll see the number move more just because the mix of what's being paid inside the quarter or where you have fewer.

Short tail small claims being paid in the period and everything so that you'll see the two things move a little bit opposite one another.

We saw true throughout the quarter and we did disclose that June was less of a a difference in gross cyvera first frequency excuse me then on than the other months in the quarter.

That has started to diverge more which are really rural state like Montana. For example of was actually up slightly into into the year over year and then you've got places that are more significantly down, particularly states that are more heavily concentrated with metro areas and that has had more spikes.

The virus, so we're watching things on a very local level into how they're moving.

Okay. Thank you I appreciate the color.

Thank you aren't next question comes on line of Greg Peters from Raymond James.

Good morning out I'm going to pivot and I'd like to get an update on your homeowners business.

I was looking at.

Some of the statistics that you provide like on page 17 up here.

Supplemented.

And I was struck by the improvements and frequency both gross claim and paid claim frequency not just.

In the first and second quarters of this year, but it seems to be a longer term trend and I.

Would be curious about your impressions about.

What's driving that and how we should think about those trends as we look.

Beyond just this year I'm thinking about next year.

Hi.

Greg extensive LSW I'll ask Glenn to answer that more detail. We've obviously worked hard on her homeowners business over the last number of years. So we're pleased with the returns we're getting from that business, but Glen do you want to get into more specifics yeah, yeah, absolutely. Thanks, Don So yes.

As Don said.

Yeah I'm always.

He's preach that look at the long term and look at the recorded combined on home.

Got you know year to date.

And 88.6 combined ratio recorded.

Our 12 month as 83 and five year is 87. So yeah. We we've sustained that I think Greg be your point on the frequency is a tough one because it changes almost every quarter because the weather drives so much of it so you'll have.

More caught up in in a catastrophes and so it's sort of lower underlying frequency and then you'll have a maybe a good weather quarter and you have you a few weather driven.

And and fewer cat they move around a lot without say recently and this is probably an under reported part of the co that impact is that we've seen a shift in frequency severity on the phone side because.

It's pretty logical is we're seeing fewer like death claims and break ins because everybody is home.

And those tend to be lower severity claims and yet we're seeing about the same number of fire claims and those tend to be high severity claims. So we saw higher frequency of go down in the quarter. Our severity average go up because the ones that went away or smaller claims and so we get into the new tells me look at all of those components, but I.

I wouldn't necessarily draw conclusion that theres something in whole driving long term frequency down that will be sustainable I think it's been different factors each quarter.

Got it thanks for that answer.

And then I guess I'll circle back your transformative growth plan and integrated services platform.

And as you guys know I always like to track your agency data that you provide on page nine of your supplement.

And so I was wondering if you could just from a big picture perspective, we're watching some directional changes and some of the numbers whether its.

A slight decrease until allstate agencies and Alice piece.

We're also seeing an increase in independent agencies and encompass independent agencies can you walk us through.

No what your view is on how that's going to change further as we as we continued rollout. These plans that you've mentioned previously.

Yes.

Why don't you go ahead.

Okay great.

So we it's yeah, you're always into detail Gregg said, you definitely picked up on the right trends. There you know we're focused on growing with agencies, what can do invest in this ties back to something Mario talked about about to be expenses.

It's not that our acquisition costs have gone down because we don't want growing we don't want to invest in agents looking to grow they've gone down because we've moved to the money.

Really in a way that incentivizes growth and and it's more efficient to do it that way so coming into this year. We moved some money that was incentivizing retention and we moved it to incentivize new business.

And or I should say renewal versus new business as opposed to retention kits.

How it gets paid.

Thats, one change and that change some agents, who wanted to invest in that way in some that didn't and perhaps you know you know voted themselves out on that one.

We also increased our baseline performance requirements for.

I'll call it our lowest producing agency and ER and required that you know books sort of be more open for business than than they have been and so that has driven the number down a little bit and the other thing is integrated service, which you mentioned in the question.

That number will start to look strange overtime, we would like 500 agents in there right now.

So those agents wont show staff members that are being augmented are provided by Allstate and so it kind of moves the number two different place because we don't reported and as part of the agency staff. This license sales professionals, because we're doing the work on the back end for them in those centers. So there's a number of pieces moving it but I.

I think that headline to takeaway is that we've grown in the agency plant I mentioned in the prepared remarks that we've all time high and Allstate brand auto.

Policies in force. So the agency force is growing and we want to grow in all of our lines want to grow Allstate agents, we want to grow our independent agent channel. This pending acquisition that we've got big National General and we want to grow in direct which is the combination of insurance and Allstate direct.

Hey, guys sorry.

Greg This sounds Wilson, I, I'm, hopefully reconnected scenario it.

Okay, Alright, let me highlight what Glenn just at a transformative cross sell as much as we can't do have to everybody. We again, so we want to have more allstate agencies I don't have more independent agents last out ward.

You will see overtime some being.

Grace is and how much goes through each of those channels as we transition.

Two in <unk> or <unk> model. So they in that Glenn explained what we're doing on new business versus.

Retention, but we're really work on different ways, we can get to customers, we may not need as much real estate in the future as we add today that means local offices are different. So you will see changes and you're seeing some of that change now because we're not.

We do Allstate agency at this point as we build out these new models. So it's really about.

Sorry distribution force.

Got it thank you for the answers.

Thank you. Our next question comes from aligned it might soon ski from credit Suisse. Your question. Please.

Hey, good morning. Thanks.

Can you guys made <unk> and maybe I missed that did you guys touch on auto severity I think you know we investors have expected it to increased during co bed.

Maybe you can discuss whether we should expect the severity we could talk about it. So we can make better understand where whether a chicken should continue and I'm curious whether like the underlying severity trend is still kind of higher for for longer due to issues, we talked about pre called that or is there a change to that potentially.

Let's call that.

Mike Let me have Glenn answer that but give you a and overview first a in a time like this where the numbers are changing rapidly in terms of that number claims.

They statistics in the in the method to use for any individual component of loss cost bounce around a lot. So it is the best thing to do is to look at overall loss costs and say are your loss cost still the right percentage of your premiums. We obviously is on attribution on severity in Glenn can talk about that.

Yeah. So it's a great question, because as Tom said I mean, they do bounce around a lot.

Overall, we feel very comfortable and confident with where we are on severity.

PD severity paid severity was reported at 20% up which number jumps off the page. Let me give you just an example of why that is on it paid severity number.

Like that so paid severity is as you'd expect it's number claimed just settled in close during that.

Calendar period divided by the total number claims and you get your average.

Well during the second quarter.

We settled just as many six month old claims as we would in any normal quarter because six months earlier. There was no Cove isn't there was you know there was no drop in frequency. We settle just as many five month old claims and four month old claims and three month old points.

Well, we settled a lot fewer three daily claims and.

When we called claims because they just weren't there they weren't happening with the same frequent.

And as you'd expect the claims you settle in three four and five days or are lower severity on average three quick they're easy.

And they're low cost the ones that are six months are typically ones that if like they've gone through their own carrier. The separation comes over from that carrier they average and much higher severity type of claim.

It feels like normal inflation that we've seen in the single digits that that we're very comfortable with and claims team's done and finance team a terrific job getting underneath the data that we understand where and if we have any pressures but.

But we've seen it.

Run very.

Predictably.

Got that that's very helpful and lastly, my follow up.

Services segment, it feels like driven by all ship protection continues to do I think better than.

As expected and.

It's actually kind of moving the needle little bit as these days.

You know.

You talked about diversifying into outside of the last I mean, just since its growing so fast should we expect the rate of growth to to temper any any additional color there would be around what's going on would be helpful.

Let me provide that just said Oreo like why we talked about it and then Don can talk about its future. So that when we bought it one of things. We said was you know will come back and talk you about how we're doing.

Every so often and that's what we wanted to do here and.

It's it's meeting and exceeding our expectations I think there a number of people.

Trying to understand why we were into that space and you can see it's a huge growth and we've had huge growth both domestically and we're starting to get some good growth internationally.

So it was really about coming back to you and thing.

We told you would come back and here, we are definitely be a good news story, which stock and talked about.

Yes. Thank you so first thanks for noticing.

Yes service businesses I think in total have made a lot of progress and has improved the values that they provide to customers.

So I think across the board Theyre doing a really good work.

More specifically around.

The I'll say protection plans I mean, marlim laid out the three goals, we set in how we're doing against them, but I'd remind you we set those goals.

First quarter. After we did the acquisition and we communicated those and we've been consistent about.

And we've had a really strong trajectory since we acquired.

Square in trade.

Both on the topline and improvements in profitability along the way.

This particular quarter was good but I'd remind you we expected to have a good 2020 to begin with.

And that's because we were continuing to pick up you customers.

We were doing a really good job working with our partners to make the products more available and accessible to their customers and so we expected growth not only from Lucas new business to business customers, but also.

A more availability in existing customers and our international business continues to grow substantially. So we expect the 2020 to be good.

We have benefited from the virus in somebody's and topline as one of them. When you look at the partners that we do our largest business will.

Tend to be the larger one stop shops, which as you would know has been in favor in the retail world Retails were mixed these days, but if you're a large.

A one stop shop done quite well only categories that we are particularly in consumer electronics, and so forth and home office have also done very well.

So we benefited.

Because of buyers with the topline and then obviously the topline hasn't benefit to the bottom line.

With respect to scale.

Expenses and so forth so.

Well very happy with good results. The results would have been strong even without the virus.

Clearly the helped to buys the virus.

Both on the topline and bottom line, but we're still getting happy with underlying performance as well.

The only thing I'd add is it's hard to tell what the impact is the virus is going to be going forward.

And you know, that's just going to depend on consumer behavior, where they buy what they buy on so while we've benefited from impacts and the virus at this point.

It's hard to tell what's going to happen in the future.

All that said the underlying business has been continues to be quite strongly quite bullish on.

I guess.

Thank you. Our next question comes from the line, though Paul Newsome from Piper Sam or your question. Please.

Good morning, I wanted to ask about bad debt trends within the quarter itself and I guess, I'm I'm wondering whether or not we could see more.

In the federal.

Some seats room and when they go away.

Maybe the bad debt is more tied to.

Similar to the state level moratoriums on them.

But were in place just your thoughts on that'd be great.

Mario do I'll take that.

Sure Paul says as Mario So just to give you a little context of of the driver of bad debt as we mentioned earlier one of the ways that you know we provided a additional benefits to our customers. During the pandemic was to offer them be opportunity to opt into.

[music] especial payment plan, which are essentially gives in 60 days of coverage.

Without having to make the payment on the policy that started in March.

And we've you know as we've worked our way through the quarter, we've gotten more and more experience relative to how though that subset of customers.

Widespread and different and you see the impact in the quarter where.

Bad debt was $44 million will continue to get more and more experience on that customer set going forward. We'll continue to update our analysis and then we'll update the the numbers you know into third quarter. If we if we need to but based on the experience we've seen.

So far through through the end of Q2, that's what we recorded in the piano.

And Paul I would I would wrap that into just the overall pandemic impact right. So.

We've obviously had lower frequency, which we've talked a lot about a this is a another cost associated with a pandemic and when we're thinking about what we're going to do in the future. We factor all this stuff.

Makes sense.

Second question I wanted to ask about whether or not you think the regulators will take into account so.

Hopefully onetime in nature of the pandemic were if we put through when you put you rate filings in the future will you kind of have this.

You know a a middle and pipe based on kind of situation where the.

Unusual low frequency is embedded in what you can file for rates, respectively until that kind of rules off through the system.

Oh, it's always hard for us of course, so to speak for somebody else as to what they will do and of course it.

Varies by state.

Often times relates to the political environment in that space.

What I can say is we were out early no regulator forces to shelter placed payback or expand coverage and all the other things we Ted.

And.

So we got out ahead of it I think we got positive feedback from people that we were doing what was not required like no one had to come in and so you must do this.

And so I feel like we're on a good basis to work through like what's the right price and the if you have frequency were to stay at age abnormal lows, obviously regulators customers and the competitive market wouldn't have you charge. The same amount. The good news is our loss costs would be a lot better so our focus.

Really Paul is on maintaining our overall competitive position and our margins and we've been able to do that with regulators I think there'll be a whole bunch of stories, but the good news is we have a we have good math.

Okay, and operating model that adjusts locally.

And it way in which we can continue then grow profitably Glenn anything you would add to that.

No I think that covered it well.

Great. Thanks for your health and loosely sickness.

Thank you. Our next question comes to my line of David Mcmahon from Evercore. Your question. Please.

Hi, Good morning, just a question for Tom and Glenn just.

Thinking bigger picture I'm, just wondering how you guys are thinking about miles driven and accident frequency over the longer term.

And I know, there's a lot of uncertainty but.

Are you guys thinking how are you guys thinking about miles driven an accident frequency do you think that will ever get back to.

Levels that we were at pre coded.

Especially given what seems like increasingly prevalent adoption of remote working arrangements and.

Unrelatedly, how are you guys going to adjust to potential lower frequency levels on a more sustained basis.

Let me, let me start Glenn and then jump in I'm going to start.

At the most macro which is.

But of course, our strategy includes couple of different components to topple property liability and then the bottom although other stuff in the property liability stuff, there's auto big driver of that and as and that's a key part of our both revenue and profitability, but the other thing is we ever relate.

Oh homeowners business are much more profitable than other people.

We're good at it were a precise added we sell a bunch of other stuff and then they serve both protection selling things like the service plans and everything is about making sure. The company has multiple things we can sell to customers to protect them.

I'm whatever goes wrong in their life and leverage those customer bases. So we're we're dealing with it because he had the same question that was about same question about the future of auto was really around autonomous vehicles, three or four years ago and.

And so we've been on that path from a strategic standpoint as to how to how to deal with that and is of course, what's happened is actually pretty much have gone up not down in the last four or five years, which people are afraid nobody was kind of drive so it's really hard to predict what you can do as have multiple options and take advantage of those apps.

And and leverage your skills and capabilities as it relates to the auto insurance business.

Its you know you want to have a broad based approach and that's a transformative growth really is its improve the customer value proposition give people lots back says connect more making products are simple.

And so we still have a lot of its share of that market, we can pick up.

And so even if you were to say fewer miles driven lower average premium we still think we can grow that business. Then you might want to have some that was I was sort of macro and longer term. How would you reaction to the question on at a more barely as it relates or personal property liability in a shorter term.

Yeah, and it's great question, because obviously, we think a lot about this and let me take into how the team works on this and I'll go like Tom did I'll go before even the on the virus.

You know we had Oh, we had built out a model and assumptions for the change in frequency driven purely by the change in the car fleet.

Out in the market you know what does each component of Ada Es safety equipment on cars, what does each component due to change each type of loss like how many fewer sideswipe. So rear ends or intersection actions are we going to have based on on the blind spot warning or based on this autonomous.

Feature or so on.

And you add those up and you plan to your fleet and how the fleet is changing over time and we actually built we built into the model our assumptions are what changes, but at the same time, we built the other side of it which is the severity because all those cars getting into a.

Pure accidents or heck, a lot more expensive to fix when they have all that equipment on it. So it goes to what Tom said about you know really it's hard to predict but we go after it and we look at with as much specificity as we can to component parts. So now take that into the current scenario in the question, you're asking and we're looking at so what percentage of the Mark.

It.

Works in jobs that don't have to commute to work in a restaurant or your dental hygienist or like but you're going to have to can you because those things cannot be done remotely.

But there are a lot of jobs most of us have jobs that can be done more remotely than they have been historically. So you get that percentage. Then you look at what percentage of people will do it and then what percentage of your accidents occur in like Hi drive time, and and you start making your assumptions and.

Six over what's going to change and and similarly that then changes severity because Miller things. We've learned is that the losses that go away quickest.

Our the bumper to bumper accidents in high traffic and those tend to be low severity. So while you know a 10% decrease in frequency. It's great. It's not necessarily a 10% decrease in loss cost in the reason I'm getting into more micro since Tom took the macro on this that and laid it out.

Is it hopefully just to give you confidence that we look at this in a very detailed way and thoughtful way and our teams work through what the expectations are and then we're able to move quickly on the fly when were either above or below it with what our prediction is.

Great. Thanks, Thanks for that comprehensive answer I appreciate that and if I could just sneak in just one more on just a quick numbers question.

Yes, I think about that 50 basis point improvement in the expense ratio, if I take out the onetime ish items.

And in Twoq, you and then I was roughly 80 basis points in the first half versus the first half last year is that and I know there are a lot of different moving pieces there.

But is that the sort of level of year over year improvement that we should expect to see going forward.

Yeah I would.

Say it transformative growth is about reducing expenses in part to just one component it's about reducing expenses. So we can improve our customer value proposition with better prices without impacting our margins, but it's going to bounce around a lot by quarter. You know you got to advertising, we're going to me of new advertising, we're going to launch.

You have some technology spend but do you should expect the overall trend going down I don't think we could predict.

How much it will change by every quarter because are set a target that way because then it at least unnatural consequences. So, but you should expect that keep going down yes.

No that's fair thank you.

Thank you. Our next question comes in the line. This any comment from Citi. Your question. Please.

Sure.

Competitors actually stick with much more of a broad based approach.

Well, it's always always hard to tell what customers will do we've always found that precision works for us on the long term.

And that those people who rush to.

Grow and not proceed into it a end up having to fix it later so.

If you look at homeowners people trying to grow in homeowners, you're taking huge losses.

We just don't think that's the right way to build a business because you get the customer for a price it's not appropriate and then you either have to lose them or manage them to a much higher price. So of wells I can say is what we'll do.

But it's it's a reasonably it's a highly competitive market, but it's a it's a thoughtful market right like people are not crazy in this market and trying to.

You bet economics, so all of our major competitors understand their business, well and why they might make different bets at different times.

I feel like that the basis of competition still gonna say same whereas the smartest win.

Got it Okay, and then I just wanted to ask one on the National General deal if I could.

I see that you're still guiding to this I guess high single digit accretion I think was the original guidance, but when we were running the math just based on where expectations were for Allstate and Nat Gen based on consensus.

We were getting something close to high single digit or in the high single digits EPS accretion without factoring in any cost synergies. So I'm just trying to understand is there any health that you can give us in terms of what you're building in with respect to cost synergies I don't think you talked about on the last call but.

Any help there what would be appreciated.

Yes, It would I would say you know we don't own it yet so our projections hasn't really changed.

We do have cost saves a in then they love it and that we figured out in terms of what we packaging and when we bought when we agreed to pay the price we did and the and it did lead to accretion as you point out but right now we're working on Glenn and Berio working hard on you know what is.

The transition program, so as we get more specifics on things that we can lay out for you that are you know here's our measurable goals will do that but.

Right now, we're just like a month into it.

Alright, Thanks, Tom.

The Q1, I think we have time for one more question certainly that our final question for today comes from the line of Ryan Tunis from its research your question. Please.

Good morning, I just wanted to your question for Glenn, but it seems like there's some decoupling between trends in miles driven and trends in frequency I guess the ladder.

Declining quite a bit more I guess my question is what indicators that you're seeing in your book do you think or actually the best predictive indicators of one frequency is doing in this current environment.

Oh, that's a tough question [laughter] Glen do that way [laughter].

[laughter]. Thanks, So yeah. It's a good question and you're right about the decoupling. So I'll give you a little background on that.

All miles are created equal.

If you're driving in a high traffic environment, you are much more likely to get an accident because.

You know it's less forgiving.

You take your eyes off the road your distracted driving which by the way I don't recommend any time, but if you're doing it and lose traffic. You know you make a mistake you are less likely to bump into somebody than when you're doing it and high traffic. So what we're seeing is with commuting miles being way down.

That has a little bit of an exponential effect on frequency.

So.

If miles came back to a new normal for non computing, but were lower only on commuting. It would have a disproportionate effect on the frequency so.

Hopefully that answers your question. It's we're looking at the data in that way and in our with the partnership with equity and.

In the partnerships they have with as you know a lot of the non insurance companies out there and they get a lot of miles driven data on those.

And at what they do for us with our own data is extremely helpful in that.

Right. Okay. Glens example, also is goes for rural and urban.

Urban too right. So think of the same thing or not this time of day, but also so Montana. The frequency is not down as much as it is in urban areas that because there's fewer people.

It's always less congestion. So it is a difficult question, but you know the good news is we're on top of it I know you have all have another call. Thank you for participating and listening to our story I will talk in next quarter.

Thank you, ladies and gentlemen for your participation in todays conference. This does conclude the program you may now disconnect good day.

Q2 2020 Allstate Corp Earnings Call

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