Q3 2020 Allstate Corp Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the <unk> third 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 the session you'll need to press star one on your telephone as a reminder, todays program is being recorded.
I would now like to introduce your host for today's program Mr. Mark Noble. Please go ahead Sir.
Thank you Jonathan Good morning, everyone and welcome to Allstate's third quarter 2020 earnings conference call. After prepared remarks, we will have a question and answer session.
But she has three components, you'll remember that expand customer access improve customer value, which includes improving our price physician and launching new products and then investing in marketing technology, you'll <unk> more about that from Glenn and then we'll and then Mario will go through the numbers.
Low interest rate environment carries forward and reduces future investment income over the next 20 plus years and that resulted in several charges for the reduced net income and Mario will go through a specific slide to show you how that works.
Allstate protection plans has continued to grow policies revenue and income while expanding its total addressable market or total addressable market.
Despite a tumultuous operating environment, we delivered great customer experiences growth excellent returns in progress on the transformative growth plan.
Please go to slide three let's do the numbers.
Our transformative growth insurance in Allstate financial results were combined beginning in the third quarter.
Property liability results were strong with excellent recorded and underlying profitability.
Growth was modest and lower than prior year quarter for auto insurance, but in the range that we expected as we build the foundation of transformative growth and let me go into some detail on that before continuing on this slide.
And I want to really excited about the growth prospects there after closing.
The cost reductions were implementing will enable us to further improve our competitive position in auto insurance and drive growth, while earning attractive returns and on the.
The homeowners side premium grew 2.6% from the prior year quarter.
This was due to policy growth of 1.2% and average premium increases, we're really well positioned for further growth in the homeowners business.
In total.
Yes, we believe that the foundation, we're building to be a major player in both the direct space and independent agents space that will add to our great exclusive agent channel that we already have will lead to transformative growth.
So now I'll go back to our slide and go to bullet to here.
Underwriting income was $753 million, increasing $16 million compared to the prior year.
Event.
If you go back to 2018.
Moving to slide five let's discuss our progress on transformative growth.
It's Tom covered transformative growth is a multiyear effort to accelerate growth through three components, expanding customer access improving customer value and investing in marketing and technology.
Customer access was expanded by.
Combining the direct sales capabilities under the Allstate brand, which enables us to leverage insurances capabilities with a stronger brand all states.
Do advertising campaign in September built on the belief that we all deserve to live life well protected as shown on the right side of the slide.
To campaign Repositions, our brand and updates the messaging to generate.
Business across a broader audience by showing the threat the product portfolio, we have including identity and songs protection.
The campaign also emphasizes Ah connected experience with telematics capabilities as customers behaviors needs are changing.
I will now turn it over to Mario to cover the rest of our results.
Thanks <unk>.
Let's go to slide seven which highlights investment performance for the quarter.
The chart on the left shows net investment income totaled $832 million and a quarter, which was $48 million below prior year due to a decline in market based income.
Market based income shown in blue was $68 million below the prior year quarter.
With lower interest rates are reinvestment rates remain below the average interest bearing portfolio yield which reduces income.
Performance based income total $210 million in the third quarter as shown in great.
Partially reversing valuation declines recorded and the first half of the year.
<unk> total returns are shown in the table on the right.
Year to date returns, where 4.4% and the latest 12 months was 5.7%, reflecting higher fixed income and public equity valuations.
Performance based investment return was 2.4% for the quarter, but remained negative your day.
Our performance based strategy has a longer term investment horizon with higher but more volatile volatile return expectations compared to the market based portfolio the.
The compound annual rate of return on the performance based portfolio is 7.2% over the past five years as is shown on the bottom right of the table.
Exceeding the market based return by 220 basis points.
Let's move to slide eight and review results for all state light benefits hand annuities.
All states annual review of assumptions and the expectation of lower longterm interest rates Unfavourably impacted y'alls take life benefits, an annuity segments in the third quarter.
The tax given the expectation that interest rates will remain low over the long duration of these liabilities and annuitants are living longer than originally anticipated.
While this reduced net income for the quarter it did not impact adjusted net income.
Now, let's turn to slide nine to discuss the Allstate annuities and the premium deficiency reserve in.
In a little more detail.
As you can see on the chart, we've been reducing our annuity business consistently over the last 15 years to manage risk adjusted returns.
It does continue to generate strong growth is policies in force increased 38.6% to 133 million in the third quarter driven by all state protection plans growth.
Revenue X, excluding the impact of realized gains and losses grew 16.9% to $484 million in the third quarter.
And just the net income of $40 million reflects an increase of $32 million compared to the third quarter of 2019 the.
The improvement continues to be driven by the growth of all state protection plans and improved profitability at all state roadside services.
Finally on slide 12, we want to highlight allstate's attractive returns and strong capital position.
Allstate generated strong returns on capital with an adjusted net income return on equity of 17.7% as we ended the third quarter.
We returned $967 million to common shareholders in the third quarter through a combination of $798 million in share repurchases and $169 million in common stock dividends.
Over the last year, we have reduced common shares outstanding by 6.4%, primarily as a result of our share repurchase program as you can see from the table.
Book value per share of $82.39 increased 18, 18% compared to the third quarter of last year, reflecting income generation and increased fixed income valuations, partially offset by cash returned to shareholders.
Allstate stock valuation metrics, however have not kept pace with this combined strength and strong operating performance.
With that context, we'll open up the line for questions.
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 you'd like to remove yourself from the queue. Please press the pound key our first question and we'd also like to remind everyone. Please limit yourself to one question and one follow up our first question comes in line of your own cannot from Goldman Sachs. Your question. Please.
Hi, good morning, everybody.
First question.
Is with regards to topline growth. So I understand there are lot of moving parts here and Youre still in early.
Early to maybe the end of the beginning of.
Of the transformative growth plan.
At what point do you think we actually do start seeing you.
The initiative and the various components, there, resulting in topline growth.
[noise] ear on this time.
So they you can't we can't really give you a quarter and eight years when that churn as they should buy the stock right before that so that.
Okay is really reflected terrible pop.
Because a number of things happening right. So we're trying to make sure we take care of our existing customers well and that requires as we change out some of the agents and the stuff and talked about we have to make sure we're doing that well with integrated service.
And and moving people to other agencies.
Second you know, there's obviously a competitive market in which we're in.
So part of it depends what happens with our competitors and what they do how much more.
Put into advertising how much they raise homeowners prices I think that I would I would say the focus seems to be narrowed down to just auto insurance.
And really transformative growth is about auto insurance is about home insurance, where we're getting growth.
Good growth and not as much as we think we can have but certainly higher than auto and then the circuit protection. So can't really call it by quarter, but I would say is you should expect as you see the components come into place.
We did expect to see a trajectory up from here, but we're not giving specific guidance on you know here's where we're gonna be X percent of market share gains.
Okay.
And then my second question somewhat related to the launch of the Allstate one Apple.
Are there any metrics you can share with us around that like how many applications have been downloaded take up rate.
And the ease of use for how long it takes to quote on the.
Well we have.
Obviously, we have a whole bunch of metrics and we don't give most of them out because we think we're starting to get in advantage.
Versus our competitors on it and we really don't want them copying what we doing that's in bulk stuff you're on to your point both on things like also in telematics that were really positive about what we've got going on there.
And that but where I would tell you that the insurance industry in general is not to the level that banks are always says we have a lot of potential to increase our connectivity and lower costs at the same time, Glenn anything you would add to that.
No I think that covers it.
Great. Thank you.
Thank you. Our next question comes online of Greg Peters from Raymond James Your question. Please.
Oh, good morning, everyone, so I'm going to stick with the transformative growth plan.
And I think in your second bullet point, you talked about improving customer value. So there's two pieces of that you know as we sit up upside looking in one is the expense ratio initiatives that you've highlighted.
The other one would be just twice tier customers. So.
You know can you give us an idea where you know the expense ratio will go to or what sort of objective you have in the context of your competition and then on price you know we have observed a number of your competitors starting to cut prices in the marketplace and in auto insurance and I'm curious.
About your posture with respect to up.
Great. Let me, let me start with the review.
Overview.
Transform of growth and then Glenn if you could jump into where we are on pricing we've.
So transparent growth is three components, you're right second one is improved customer value that is really two components to it but one is improve the competitive price position and with affordable products and.
Second is to launch new products, so things like my life. So the second piece is really about more differentiation.
Price the cost piece is really that the way the door you go through to get to that price piece. So they're not separate so and the reason we haven't put cost targets out there. We obviously have class card.
We also have a price competitive targets. The reason we haven't put those out there is there are tightly linked.
And we don't want to signal to our competitors, where we think we're going on price.
So it's not that we don't have targets, we do and we think we can reduce our cost which enables us to give customers better value called more affordable price without sacrificing attractive margin. So that's that's the path. We're on reduce expenses, if those expenses down turn that into a more.
Our order book price, which increases your close rate, which then drives growth. So so the first two it's really one component that you're talking about the second piece.
We'll take some time because you have to rebuild the whole technology stack, they're just a bunch of work that has to be done to.
To launch new products that'll that'll take a couple of years to really get done which is why we keep this is a multiyear initiatives Glen do you want to if Greg an update on on pricing and your thoughts there.
Yeah, you covered Tom well the.
Going forward, how we bring the cost down and keep margins, while being a better value for customers but.
I don't want to leave anybody the impression that we're not moving now because sometimes you can look at a like an investor supplement and say well it was zero rate, taking and think that that means there's zero rate action.
We have made hundreds of filings over the last quarter all across the country and I know you always hear me say correct, but you know we manage this aftermarket level. So we've got a really talented group of state managers I always talk about that you know they've got their hands on the lever they're looking at how how competitive are we to each competitor.
Her in this market, what's our close rate doing you know what what type of ships are we seeing in customers in quoting and and they're moving those levers all the time and working with regulators to do that so the hundreds of filings that we've made already.
Since the pandemic and through this this time have materially changed our competitive position in spite of that zero point zero you see on on total rate filing we've done things like improved our competitive position on telematic products.
Increased new business discounts changed pricing around for that type of people that are shopping and so the average person that's out there shopping for insurance is getting a lower price right now for us than they were six months ago or nine months ago.
Meaningfully lower and so this is how we stay competitive and it goes a little back back to your brands.
Comment or question on growth and.
I looked at it as why were building. This foundation like I mean, we're setting up the capability for us to be a major player in direct we're setting up the capability for us to be a major player in independent agent win with the acquisition, that's pending and why we're building that foundation.
I'd call. It we're holding our own like we actually grew policies year over year policies in force.
Minimally and auto more so in home, but we're doing a good job of keeping the fight going in and keeping our growth.
Engine going in spite of building that foundation.
Got it your answers makes sense I guess, the second question and it's just going to pivot to the other source of income would be investment income and you know just looking over the slide seven.
And considering mario's comments.
There's no there's obviously two pieces and it's been volatile this year, but.
You know it feels like because of the current interest rate environment that there's going to be downward pressure on your market based returns and therefore in investment earnings you generate off that for the next year or two and then.
And then also on the performance space you know.
The volatility is is interesting for us to try and model. So you can.
Can you frame it for us as we think about what the future performance might be of the performance based portfolio.
Let me let me go up and then John you can talk about the risk adjusted return and the volatility of the outperformance based so yeah.
As as well when we do our investment allocations, although at the time, we look at risk adjusted return based on economic capital per asset class and so earlier this year. When we sold 4 billion of our $6 billion public equities.
Wasn't because we saw the pandemic comment are we thought there was going to be a dip down and then a bump back up it was and we were going to avoid that volatility. It was just we didn't think the risk adjusted return was right. When we look at our market based results.
And you're right interest rates are coming down there at low rates are really low rates, you're probably not going to happen.
On those bonds issued.
Had historically and we looked at the risk adjusted return.
The performed space, we decided it was a better risk adjusted return on the performance is now obviously it comes with more volatility.
And particularly from quarter to quarter as you point out there. What we did is we matched those performance space the long liability.
Yes on dated annuities or capital, which we expect to have for a long time and so when you do that you can handle the interim volatility.
Because and that's why you get the higher risk adjusted return because you're taking on that dotcom and once you get past seven years.
If you're better off owning equity and bonds as you all know well just looking at pension fund.
And you get past 10 years and its like you get double that return and you actually have less risk an equity. So that's how we got to performance based equity and we're willing to accept that volatility either because they have liabilities or capital, which we know will have and will recoup the the incremental economic.
Quick return overtime before I turn off John Let me just one other thing as you look forward. What we do of course is when we're managing our auto business in particular.
We look at what underwriting margin do we need given what we think we're going to get in investment income.
To the extent investment income it goes down we can given our power in underwriting we're able to still make a good return for our shareholders, even with slightly lower interest rates. Unlike.
Some of the life companies, who have no other way to adjust their future premiums so.
John do you want to spend a few minutes talking about performance based.
Yes, sure Tom and Greg. Thanks for the question I'll pick up were Tom left off and you know when you think about performance based it can be volatile for periods of time and as Tom mentioned, we really match it off versus longer liabilities that we have if you take a longer term view and this is information that's that's in the supplement.
Then.
The over a 10 year period, the internal rate of return, which is a common way of measuring these assets is about 11.5%.
And whether you look at it in total.
Over 10 years or over five years relative to the public equity benchmarks that we think about owning these assets against.
They they're superior in terms of return so we're willing to take some some of that volatility relative to more to public markets. Because we think we've got a team that has skill and expertise that can extract value out of the marketplace isn't easy for other people to do.
I tend to think of it as you know we've got.
A lot of flash lights that we can shine and different corners of the market that maybe everyone else doesn't have to extract additional value no you're right to point out that has been a little bit bumpier.
During the course of this year and that does require some explanation, yes, I think we'd all agree this year is going to be pretty unique year and when you think about what releases income in performance space assets part of that is the deal flow itself.
You need to get we invested in a particular.
Entity, whether it's a fund or an individual investment.
It it improves in value over time, and then we tend to sell those investments so that generates income during that period of time when deal flow was down because people just clean traveled to do due diligence and that sort of thing.
It's normal to understand that that that income was reduced there was also and we disclosed this earlier in the year. We did have some watch we had about a $130 million in actual losses and that that plays in as well what we've seen this quarter is a beginning of returning to more normalized steel activity. So.
So.
We're not going to predict the future here, but there's there's reason.
If you look back relative to what we've experienced historically, we're starting to see a pattern that starts to fit in a little bit so long dated liabilities matches up well versus that we liked long run returns even though they are more volatile, but we think there is superior to what we can do in public markets when it comes to rates.
You you've seen us Greg you should this be proactive in the way that we think about investing.
In a market based portfolio.
And as Tom said, that's part of a larger.
Her price system, where we think about risk and return across the enterprise, whether its underwriting risk mortality risk or investment risk and return.
And we've made changes overtime to address for different micro market environments. So.
A good example of that is coming out of the global financial crisis, we will reduce interest rate risk as Ray speaking lower and we took more credit risk because we thought that it was that had a good risk return profile.
As rates start to increase in recent years Weve lengthened our duration, we take advantage of that and that's served us quite well as interest rates have fallen here and Weve subsequently in the beginning of the year, we saw less value on a risk adjusted basis for public equities and reduce that.
One thing that you may not be completely obvious is you know during the course of the year. This year. We've taken further actions you're not only are we helping buffer income by increasing duration, but we've also moved.
Some of that equity exposure and some of our pure government exposure into almost 10 billion of investment grade credit some high quality high yield and associated securities to help minimize the impact that the lower rates will have.
I mean, you're right if rates stay this low for a long period of time, there will be a reduction of income. It just kind of pure math would play out that way when I look at the slide seven of the presentation and you see those blue lines. It just doesn't happen that rapidly.
Part of our part of our investments are matched off versus longer liabilities. So their cash match and then part of that has to happen as a portfolio tends to roll off over periods of time. So it will happen if rates remain low for a long period of time it won't happen overnight and we're hopeful like most people are the inter.
Just rich will recover some ground as we pull out of the call.
The coal that coated induced a lower interest rate paradigm. We're currently in.
Thank you very much for the detailed answers.
The queue. Our next question comes from the line up Mike Zaremski from Credit Suisse. Your question. Please.
Hey, great good morning.
First.
Question.
You know looking through the deck I see.
One of the statements, saying improved online in call center sales flow and Allstate direct.
Can you give us a flavor for how much of your sales today I think the most they think of all to this agency basis, a seller of insurance, but how much is coming from direct and related I believe in the past you've you've said that you know is.
As part of the transformation program.
The offering.
Discount to existing customers to potentially use more of the direct platform versus the agency is that still part of the game plan.
Mike Let me.
Let me.
First start with an overview of medical claims glance I think Glenn if you want to talk about sort of sales flows what you've got going on sales. So we've.
We've put together the usage. So if you looked at our old stuff.
Last quarter, you would see insurance broken out and that was a 100% direct either online or through call centres. We did also sell some business.
Under the Allstate brand in the same manner, mostly to call centers, but a little bit on line.
And with the new format, we have we put those two together.
And so we're not planning on breaking out how much comes out direct and how much comes to agents.
You're correct in that if you buy direct.
Today, you get what you pay for it so you don't pay for an agent. So you don't.
Is it price is 7% lower if.
If you buy direct from the company, but that's for only for new customers, we're not going back to existing customers and saying Hey, how would you like a 7% price reduction because they are.
Happy with their existing relationships they bought from those agents they they have.
We cross sell into those agents. So there's no really need to go disrupt that were about giving it to people anyway. They want you want an agent you can call us and get an agent and will you call call Center, we'll get you an agent you can have a local agent. If you want to do self serve and you want to do it on line, we'll do that as well so.
They the strategy is to.
Really leverage the Allstate brand.
Take that he sharon's money, which was spent insurance advertising money, which with hundreds of millions of dollars a year intro then at the Allstate brand. So that we can compete more aggressively with geico and progressive in the direct space.
Not to talk about like sale slows and how you're making that work so.
Yeah. So you know the team that we've had that Rand insurance and has been put together as Allstate as a as Tom said with the Allstate group and you would think that it would be relatively easy to flip a switch and say hey, we're a direct company now and.
Joining me.
Play Big in this space, but you know, we literally have decades of connective tissue and and process built around everything is an off ramp for an agency system and so what we want to be and.
And aspire to be in the near term is a company that really goes to market in both ways. It's open access for a customer customer that you know.
He wants to click recall that we do that really effectively and we can compete with the biggest direct carriers out there.
In that space and think about that as a chain a full channel and.
And then it takes nothing away from the exclusive agent channel, we have which is outstanding they do an incredible job for customers that they've done a great job through the pandemic you can see it in our retention numbers and continue to grow that channel.
But the work they've done is really to pick and shovel work of of removing some of those pieces of connective tissue.
Between.
Channels, and really going to market as a direct business insurance was set up that way because it was a separate run operation. This now is its common product. It's it's you know common backend service that we have but it's a separate sales channel.
That's very helpful.
Last question circling back to the annuity business and we do appreciate all the color.
You know I think we all get asked a lot you know whether all say would entertain a transaction. So I I know you've answered had in the past, but maybe I'll try to ask it a different way. So you know you know you've pointed out very well that you know.
Sure you have moved a lot of the investments into kind of longer duration, hopefully higher yielding assets, which is one of the things that some of the private equity backed firms do its part of their right. There special sauce. So you know what.
When you say the lower interest rate environment combined with how you guys are positioned the portfolio kind of makes the bid ask spread of entering a transaction you know wider than it was a.
A year or so ago.
First Mike.
If you look at that the one slide we've taken I.
I knew it was down from $75 billion to 17 over a period time and we've done that with a couple of objectives in mind. When you want to make sure you take care of customers to you want to get a good deal for shareholders.
And so we've been kind of whittling away at it and these are the last two chunks we have left.
And we're open to different ways to do that.
And then we look at all different ways to do it all the time, so everything from reinsurance to sale everything else.
And so I don't think lower interest at lower interest rates, obviously are something any factor in its less important when you have that investment portfolio that you just mentioned.
In terms of what it does to the.
It helps fill the gap from low interest rates, because you're earning higher returns.
I think the other side to this is these are becoming more scarce properties.
As you've seen the asset managers.
Go out and.
They they like having what I would call captive asset.
So there's a whole host of new you're all familiar with that go out and want to buy annuity blocks.
So that they can have those assets to manage and then a separately the NAND.
The.
The purchase of the company part with their money part with other People's money.
As a way to build a better revenue stream themselves.
We're open to that thing as long as it meets our two objectives. One you got to take care of our customers.
So some of these customers are going to get paid for 30 plus years, we don't want to turn that somebody that's going to take it all in Las Vegas and put it on right.
And our customers are left holding the bag.
Secondly.
The we want to make sure. It's 50 per shareholders. So we're always looking at opportunities to further reduce.
The exposure I mean, you look at that trend line.
Ever slide that is.
And it there's theres no reason to expect that we would try to train change that trend line.
It will go down by itself so.
Like if they do roll off people do stop collecting payment.
Either because it turns up where they.
Passed away so.
But you should expect that keep going down if we can find the right way to do that for shareholders and customers and we do it.
Thank you.
Thank you. Our next question comes from the line of Bill Stefan <unk> from Deutsche Bank. Your question. Please.
Yeah, Thanks, and good morning up so what the sunsetting of the insurance brand were down to three brands now I guess in my mind part of the the transformative growth plan is a rally behind the Allstate brand. So I was hoping to strategically you could talk about the importance of encompass and answer financial a you know as we think.
About the the transplant transformative growth plan over time.
So it's Tom I think it's really one Brian.
As we have some names but.
But right now we have one what I would call consumer brands, there's obviously some brands amongst agents.
And so you see it leveraging the brand not just on direct but.
Allstate protection products.
I don't believe we would have gotten Walmart and driven to kind of growth we have without the allstate name on their end.
Ill state backing a same is true with home depot, which will be rolling out starting in January so it's really one brand.
There are you do point out to other ways to go to market. So Glenn could you talk about plans or the independent agent channel encompass with National General.
And then just touch on what you're doing with answer financial as well.
Yeah. So in the in the I A. space. It really is you know national General.
<unk>.
Get into the brand because I don't know if any decisions made in terms of exactly the brand, but as Tom said, it's more of a branding with agents than it is with customers in that channel, but with national General and encompass it's really about bringing those together in sort of a reverse integration because national General has a platform a technology platform that.
The ice love they have 42000 existing relationships with agency locations to go along with the 10000 that we have with Allstate and encompass.
And between the two companies.
We have a product set that goes from non standard all the way up through high net worth and everything in between and and what I always point out on this is I think maybe the most important part is our homeowners capability. The I a. space, they really need that the full stack and all the capabilities and we we clearly have.
You know.
At Premier homeowners capability at all state to put all that together and we will have the most capabilities of any carrier will be the number five in size as soon as the closing goes through in the <unk> space, but we will be number one in terms of overall top to bottom capabilities that won't be the day that we go live it won't be that.
Because we want to be able to integrate products and everything and push across but in short order will be able to bring those together and really go to that market and be a very major player in the independent agent space.
And then I forget if there was a second part to that.
Answer for now.
Oh, I'm, sorry answer financial thanks, Yeah. So on answer financial that that is it's a very different type of model that is that really is taking care of customers, who we we can't take care of in other ways. They sort of fall between the cracks have.
The always narrowing cracks actually at this point because we cover just about all different types of customers at this point, but the narrowing cracks there and it's a way to.
Monetize the exhaust from our expense.
Expense on marketing and make sure that anybody that comes to US. We can we can get to at some point and so answer financial from a branding standpoint is separate and they sell multiple carriers.
Got it thanks, and going back to the National General acquisition, we noticed in the Q that there was a note that you're currently contemplating the mix of cash and debt of where that purchase I was hoping you might be able to put a finer point on what your thoughts are there and just intertwined that into a you know a broader thoughts.
On a capital management and share repurchases.
Mark it that.
Sure Phil Thanks, Thanks for the question, Yes, we are.
When we announced the National General acquisition.
The the financing strategy all along was.
Part cash from from our deployable capital part excess capital within the National General structure and part debt. So that continues to.
To be the strategy in terms of how we'll fund.
National General so that part hasn't hasn't changed so we fully expect to two to execute across all three dimensions and the the close process is progressing.
On that acquisition.
In terms of broader capital management.
We I think Tom mentioned this early on.
We continue to think that the stock is undervalued and you know we have.
Ample capital and liquidity available to continue to buy back stock.
2.8, excuse me billion dollars, a holding company assets.
We got over almost $7 billion of readily available liquidity, our our debt to cap ratio is our below 20%. So we we feel really good about the financial strength of the organization and that's one of the reasons that combined with our view on the relative valuation of the stock is what led us.
To do this $750 million HSR in the fourth quarter, we got 7 million shares as part of that we still have a ways to go on the current share repurchase authorization. So we still have.
Just under $1.6 billion left and we'll continue to execute on that and I'm not the point that's worth mentioning is as we said from the beginning the National General acquisition doesn't impact the buyback program, we fully expect to complete that by the end of the year.
Thank you. Our next question comes in line of Josh Shanker from Bank of America. Your question. Please.
Yes. Thank you good morning, everybody.
In your press release for you, we're announcing a restructuring plan.
You made the comment that the.
The cost reductions and job reductions were necessary in order to maintain underwriting ratios I'm not really asking for guidance, but.
Obviously covert throws a little bit of curve ball things. When we think about 2019, I guess is there actually a possibility in your long term outlook that you think the type of underwriting margins, you're achieving on a covert normalized basis can be maintained into the into the years going out.
Given price gap options and given what your goals are.
Well that's the comp.
Gosh.
Because I'm not sure where cobot normalized.
But I think the I think the shortest way to answer that is we arent really attractive returns on auto insurance, we ask for.
Yeah.
14, 15 years, maybe longer are running.
And we have a system and an objective.
And goals that Weve achieved.
To continue that.
When I say cobot normalize what we don't really know is certainly of course, when the pandemic ends which is beyond your normalization, but I'm not sure what it will do to consumer behavior, particularly driving I think commuting is going to be viewed is overrated in.
And so given that about a third of the time people are in their cars. They are driving to and from work. So if even a small portion of people to 25% of people commute less that's a pretty big drop.
And we will react to that when we can I think what it does is says gives us more room to maintain the kind of returns we have while getting more competitive.
And so but you should assume will continue.
To be focused on earning attractive returns that comment in the press release was really about saying you know we didn't have to reduce costs, because we're not making money or a lot of people out there who today are airlines and other people who are you know having let people go because it gets in trouble were not in trouble, we're making really good money.
So we don't need to go for that reason, we also as we're talking about getting more competitive in auto insurance in particular, we don't want everybody moving to that conclusion, which you could if you took your question far there would be that we're going to do that by giving it away I'd say anybody can give it away at.
Its talented teams at both grow and make money and so we were just trying to point out that the point that any Greg mentioned earlier, which is that the cost in the price thing are tightly linked and I know a lot of you would like to have a dumb expense ratio target that you could put into your models.
But trust US we have a measure it's a good measure it's aggressive but it's tied to.
What we're trying to do on price. So we're not willing to talk about that publicly.
And just a quick one on square trade and growth.
Obviously been stuck to their homes, they've been buying a lot of stuff on Amazon and whatnot.
Do you think that 2020 with a record year for consumer electronics purchasing and that 2021 will face some headwinds and beating 2020 as our year for new policy at square trade or.
I come from Peter I'll take the second plant.
They have Don answer that and then just to a commercial before that which is a.
We are stronger being together with with square trade. Then then we were independent like both in terms of what it does for server protection and what we do for them and getting Walmart home depot, leveraging the Allstate brand a.
But I would say you put this up against any of the recent IPO that there. This thing is worth a whole lot more than we paid for it.
Doug do you want to talk about what happened.
Sure so.
So just first.
The trends have been strong for a long time, so it's not like this year all of a sudden square trade took off has been doing well since the acquisitions. It's been a combination of things that's driven that.
It's the growth in the existing customers, which they've been able to help drive with their customers. It's.
It's been additional customers that they've all the b to b customers additional retailers and then it seemed to Mario talked about which is just expanding their total addressable market.
So three years ago.
We're largely consumer electronics through U.S. retail, but since then it's been more than consumer electronics, it's now appliances. It smelt furniture. Its now international business is growing dramatically, it's cell carriers and so forth. So.
It's been kind of expansion across the board, which which has been consistent for the last three years. This year's results you're right we're impacted by Kogan there.
They were going to be strong regardless. So this was going to be a really great year.
We got the benefit of Colgate, but it wasn't just people buying online. It was the customers that we have is the places people are shopping in the categories that lend themselves to warranties are the ones that customers with them.
Purchasing so whether its setting up a home office or setting up a consumer electronics as you said.
So this year has been good and it's been positively impacted but I think it would be a big mistake to assume that wouldn't have been good anyway.
And then when you get into 2021.
Those underlying trends that I talked about that have been going for three years, we will continue.
And so.
We still expect them to continue to grow and do well.
I suspect at some point the lack of buying power and the economy will probably dampen retail sales across the board.
More hard to predict how that's going to happen when that's going to happen but.
But I think that's the.
That's on the margin the underlying trends will continue in the very strong.
Yes, that's correct.
Add to that is when you look forward in 2021 in Allstate protection plans. The mix of policy is going to change. Some so you'll see the policy growth come on but you'll see the revenues continue to accelerate as particularly as we get into bigger dollar amounts per policy. So just one thing to.
Ticket.
Warranty policy I pad, it's nothing for a washer dryer or or furniture.
Furniture show, you'll see you'll you should still see and we expect increased revenue growth, but you may see a slight take off the drop you know maintaining 51% company growth in policies gets hard as you move into bigger dollar policies.
I want to take one more question and then we'll wrap up.
Certainly our final question then for the day comes from the line of Paul Newsome from Piper Your question. Please.
I guess I was hoping you could just revisit a little bit you've already made some comments about driving behavior. That's endemic related.
What you're seeing is changing nothing terribly specific but you've had some peers are talking about.
These changes in driving.
For example to work and not.
Versus a regular driving and as well I was curious if you've seen.
Differences that material.
State basis again, nothing specific to state, but if there is easily insights into kind of what's happening from a dynamic perspective from an actual behavior perspective, I think they'd be very interesting.
Glenn why don't you you answer that I would say Paul the other part is.
With Aridi, we're tracking 26 million cars, we have.
10 times, the amount of miles driven that a company that recently went public.
And so we got lots of good math on this so Glenn can share with you.
What he's saying just in terms of miles driven and and what it impacted on frequency.
And all of these are things that were where I'm looking at in a granular level down to the state detail. So that as I mentioned before those you know the pricing actions, we take to go to market actions, we take our highly specific.
So thank you all for participating that we had an excellent quarter Mark is obviously available for any follow up questions things, we didn't get too and we'll talk to you and export it. Thank you.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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