Q1 2021 Allstate Corp Earnings Call
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Components, which is to increase personal property liability market share.
And then secondly to expand protection services, which are showing us two uncles and we made substantial progress and executing that this quarter uhm. Many that many of those things that will talk about it on the right hand side really year plus in the making but yeah you see it all coming together this quarter. So we closed on the acquisition match.
You'll general in January enhancing our competitive position and the independent agent distribution, we executed agreement to sell off that life insurance company and I'll say life insurance company in New York, two separate deals there and that will redeploy capital out of the lower growth and returned businesses and reduces our exposure to <unk>.
Interest rate risks. We also can make continued progress on great getting higher growth in our personal property liability business moving into phase three of transfer my gross.
Total revenues increased by 26.2% a quarter, which is a study number policies enforced increased by 26 per cent and of course, that's driven in large part by the National on General acquisition, and we'll talk a little bit more about that in a call on a long term approach to creating shareholder value in both the best thing in using.
For your insurance also benefited results. This quarter, we had substantial increase in performance based on income and reinsurance for peppers.
I'll I'll say protection planes continues its rapid growth, we launched home depot earlier this quarter.
We had strong operating results with adjusted net income of $1.9 billion or $6, an 11 censorship.
And that generated a return on equity over the last 12 months of 23.2 per cent and then share holders also benefited with at $765 million of dividends and share repurchases.
Starting to slide three and go through the first quarter financial results are revenues of 12.5 billion in the quarter increased 26.2 per cent of prior order and it reflects both the national General acquisition higher investment income and realized capped per game.
Property liability premiums earned and policies in force increased by 11 appointment for and 12, one for sound respectively.
Performance based on income was $378 million versus a loss in the first quarter of 2020, we did have a net loss of $1.4 billion that was recorded and a quarter, which there was a 4 billion dollar loss on the dispositions on those announced sales over to life insurance companies and that was not fully upset.
By the strong operating performance a strong operating performance charter did credit that adjusted net income of about 1.9 billion as you can see from the table on on the bottom.
The benefits of it.
Increased adjusted net income by $35 million.
We are integrating encompass on to the National General platform and are on pace to achieve our expense synergies.
We also expect to grow policies in force by broadening net product portfolio in the <unk> channel and of course that represents about a third of the total personal lines market.
AIA channel policies enforced for approximately six times larger after this transaction as.
As we add standard auto and homeowners insurance products for National General's offering.
Later this year that will drive even more growth, let me now turn it over to Mario to go through their first quarter results in more detail.
Thanks, Tom and good morning, everybody.
Let's go to slide five and delve a little deeper into property liability growth.
Property liability policies in force grew by 12, 1% compared to the prior year quarter National General, which includes encompass contributed growth of $3 9 million policies for.
The Allstate brand grew policies by <unk>, 5% due to growth in homeowners and other personal lines as you can see by the table on the left.
Allstate brand auto insurance was flat for the prior year as increased new business was offset by lower retention.
The chart on the lower right shows a breakdown of personal auto new issued applications compared to the prior year, which increased 64% in total primarily due to the incremental 526000 applications generated by National General.
The Middle section of the chart shows Allstate brand impacts by channel.
Which in total generated a five 4% increase in new business growth compared to the prior year.
Frequency in the corner.
Allstate brand auto property damage gross frequency remote remained below prior year levels, and 47 or 51, Geography's, which includes the district of Columbia.
On the chart on the lower left shows the impact of the pandemic on Allstate brand auto property damage gross frequency.
As you can see the onset of the pandemic and efforts to slow the spread of the virus had a large impact on frequency beginning at the end of the first quarter of last year, and then extending into the second quarter when Otto frequency was at its lows.
This timeframe coincides with all states shelter in place payback.
Yeah.
Following the second quarter of 2020 property damage frequency has trended below prete pandemic levels by approximately 28 per cent as you can see by the third and fourth quarter variances to 2019, and first quarter 2021 frequency showed a comparable decline relative to 2019.
Cause you can see from the chart on the bottom right. We continue to make progress in reducing our cost structure, enabling us to improve the competitive position of auto insurance, while maintaining strong returns.
The property liability expense expense ratio improved 2.5 points in the first quarter of 2021 compared to the prior year due to the absence of Corona virus related expenses incurred in 2020, such as the shelter in place payback as well as continued cost reductions. This was partially offset by a <unk>.
Significant increase in advertising investment.
The expense ratio, excluding corona virus related expenses restructuring charges and the amortization of purchased intangibles associated with the acquisition of natural General was 22.8 and improvement of 0.5 points compared to the prior year quarter.
In connection with the anticipated benefits associated with the future work environment, we expect to incur approximately $110 million and restructuring costs during 2021 with $33 million recognized in the first quarter, primarily related to real estate exit costs.
These restructuring costs and their future benefits are incremental to the $290 million of aggregate restructuring costs related to transformed of growth, which we announced in the third quarter of 2020 and of which we've recognized $256 million to date, including $17 million this quarter.
Let's move to slide seven to discuss our progress on building transformative growth business models.
So transformative growth as a multiyear initiative to build a low cost digital insure with broad distribution.
This will be accomplished by expanding customer access improving customer value, increasing marketing sophistication an investment in building new technology ecosystems.
A longitudinal plan segments transformative growth into five phases, starting with the conceptual design and ending with the retirement of the old business model.
We've completed phase, one and much a phase too.
In phase to the auto insurance competitive position has been improved leading to higher clothes rates.
This was supported by cost reductions.
Direct capabilities have been expanded and sales volumes are increasing.
New branding has been launched and marketing investment has been increased.
This combined with industry, leading telematics capabilities will increase growth.
We believe all state is among the leaders in telematics and is the largest pay per mile provider through mile Wise, which offers lower costs for customers who drive less.
We've also expanded independent agent distribution through the National General acquisition.
Looking forward, we are now into phase three and building the new operating model.
We will support the transition of Allstate agents to higher growth and lower cost models.
New agent models are also being tested to serve customers, who want a local Asia.
Improving customer acquisition costs relative to lifetime value lower costs.
Spence reductions will support increased investment and gross and technology the.
The new customer experience and product management technology ecosystems also get deployed in this phase.
Now, let's go to slide eight which highlights investment performance for the first quarter.
Net investment income totaled $708 million and a quarter, which was $462 million per brother above the prior year quarter driven by higher performance based income is shown on the chart on the left.
Performance based on income totaled $378 million in the first quarter as shown in gray, reflecting broad based valuation increases in private equity investments and sales of underlying real estate investments.
Market based income shown in blue was $6 million below the prior year quarter.
With lower interest rates are reinvestment rates remain below the average interest bearing portfolio yield reducing income.
Our first quarter GAAP total portfolio return was minus 0.2 per cent cause you can see on the bottom on the left chart, reflecting lower fixed income valuations.
Over the last 12 months. The total return was 8.8 per cent.
Has discussed previously are performance based strategy has a longer term investment horizon with higher but more volatile return expectations.
This volatility can be seen by the chart on the lower right.
I liked the one five and 10 year performance based internal rates of return.
For one year trend has been followed volatile throughout the pandemic with the two most recent quarters significantly higher than the returns experience during the middle of 2020.
Conversely, the five and tenure trends are stable and closer to our expected returns.
Moving to slide nine I'll stay protection plans continues to grow revenue and profit.
As you recall, we purchased Allstate protection plants for $1.4 billion and 2017 to broaden the protection solutions offered to customers. It.
It provides low cost protection with excellent service.
Products that are primarily sold for you S retailers and leverage they all state brand.
Since acquisition Allstate protection plants is experienced rapid top line growth and improve profitability.
Revenues have grown at a compound annual rate of 48 per cent over the last three years as you can see on the bottom left and we're more than $1 billion over the latest 12 months Ah.
Just the net income went from a loss of 22 million and 2017, two income of $148 million over the last 12 months.
Additional growth will be achieved by further expanding appliance furniture and mobile phone protection expanding the geographic footprint outside the U S and creating new innovative services such as two day appliance repair.
This acquisition has been an incredible success for us.
Now, let's move to slide 10, which highlights all states attractive returns and strong capital position.
Allstate continued to generate attractive returns with adjusted net income return on equity of 23.2% for the last 12 months, which was 5.7 points higher than the prior year.
Excellent capital management and strong cash flows have enabled allstate to return cash to shareholders, while simultaneously investing and gross.
We provided significant cash returns to share holders in the first quarter through a combination of $601 million in share repurchases and $164 million and common stock dividends.
The current $3 billion share repurchase program is expected to be completed by the end of 2021.
Given our growth strategy and sustainable earnings potential we announce a 50 per cent increase in the quarterly common shareholder dividend to 81 cents paid to shareholders on April 1st.
The total cash return provided to shareholders was 7.8 per cent of average market capitalization over the last 12 months.
With that context, let's open up line for questions.
Certainly maybe some gentlemen, if you have a question at this time, please press star than one on your Touchtone telephone if for your question has been answered and you'd like to move yourself from the queue. Please press the pound key our first question comes from the line of Joshing from Bank of America. Your question. Please.
Yeah. Thank you very much for taking my question. So it looks like there's very good success in the Allstate Dot Com direct model can we talk a little about whether we shuttered the purchasing through insurance and the sort of flows we're seeing on the new policy apps on.
On the all state Dot coms on.
Oh, Glenn do I'll take that.
Sure Yeah. So we have not completely shuttered insurance, what we've done is we've redirected our marketing dollars from the issuance Grand to the Allstate brand in in addition to that we've invested more in your state brand as well, so but part of that was being able to move that marketing.
So wow issuance has trailed down we're still taking advantage of the goodwill that we've you know paid for over a year's of that brand and the fact that people recognize it still find insurance out there and they have good products for a portion of our market. So we're still selling some there but the gross is.
Lately being driven by the I'll stay for and as you saw on the and the the supplement that or the queue for at 33 per cent increase in direct so business. So it's really taken off and we've got you know more capacity going into that system. Because you know a direct system is you know.
I won't say only limited, but Ah Ah main limiter would be your your capacity.
<unk> your sales capacity in there. So we're growing the contact centre, improving web flows and really growing state branded direct sales business.
And then I <unk> <unk> <unk> <unk> <unk> you go ahead.
And then for a second so uhm as you know is part of transformative growth. We're also building a new technology ecosystem, a product management system in a customer experience system is that gets rolled out we will.
Shut down the insurance system, and then we'll stop selling products under the insurance thing, but we we have some time to do that.
And the 278000, new policy apps at Allstate direct are those apples to apples with the 200 or so that you sold one year ago or was that was that part of a joint direct captive sort of relationship where where would direct with the lead generator or alright.
They can play apples to apples those two types of how to type for <unk> new application.
I'm glad you out a tech yeah sure yeah. It would it would be an apples to apples. It's it's basically just think about customers that come to us by either clicking or calling you know directly into an 800 number as opposed to the customers that come to US you know.
Through an agent so it would be it would be a apples to apples comparison.
And can we talk about national General encompass.
And all state brand through independent agents is income that's going to be called National General, even though the national general on encompass price are kind of a different art customer and what would be wrong with calling the product all states.
Oh, well, let me take the branding question then Glenn can fill in how we're doing the transition because it's different for encompass and it is for they all said independent nations, but first from a branding standpoint, we've decided that the Allstate brand and personal property liability will be on.
Business that we control both the sales and the service on it. So that's both the Allstate agents and then direct whether that web or call center for the independent agent business, we've rebranded National General So it's National Journal and Allstate Company.
And we launched yet I think beginning of January so that you get the relationship with Allstate, but that everybody understand that it's separate than that which you would get coming I'll say, we do not do that with you I'll save brand in a circle of protection.
So for example, we sell under the Allstate name at Walmart sell on there. They all say name at home depot at target, which gives us both increase exposure to customers enables us to for their leverage that capability and quite honestly has helped us dramatically expand I'll say protection products.
Because of the power of that brand so slightly different strategy from a branding standpoint inside the personal property liability markets and outside but we tried to leverage it ever really can provide make sure that that brand stands for certain things in different areas. Glenn do you want to talk about your plans to both.
<unk> integrate encompass and I'll save independent agents into National General and then it and suggest justice question on Brandy at the same time.
Yeah. So thanks, Josh because I think it's an interesting question because I think if you take from a legacy standpoint National General and what it was best that known for and encompass and what is the best that known for it would be different as he suggested but as Tom just pointed out national general at all.
State company, that's gonna be a different story.
We're launching middle market product, so think about basically the all state product capability in the middle market auto and home and and other personal lines on the National General platform and branded this national General Allstate company starting in the second half of this year and then really fast expansion so would be to all 50.
States within 18 months of.
Of the of the started that so before the end of next year. So really national General on all State company is going to be a company that is serving from nine standard up through mass affluent and everything in between it really is another national player in the independent agent space and we've got enough for now.
I dunno reaction from independent agents and and they're genuinely excited to have another significant player in with the capabilities of Allstate National General combined in that market and so we're position really well to grow with a lot of Greenfield ahead of us in the independent agent space.
And you see it cleared your income encompass name will disappear.
It will be at part of natural general on all State company correct Yep.
Oh wait on whether whether we grow the policies to a new policy or need the policy outstanding under the encompass name and.
Basically put national general stuff on top of it will just depend on the cost of it and a compass. It goes first in the Allstate Independent nation, which is all state brand products sold through independent agents in rural spaces.
It was not on economic to have a a captive agents, mostly there's a few places great day, Mark that way, but mostly uhm that will transition overtime as well.
Excellent. Thank you very much.
Thank you. Our next question comes on the line of Jimmy pulling from J P. Morgan on your question. Please.
Hi, Good morning, So first I guess for Glenn for Mario but the question on just the auto the auto business, how do you see the interplay between the frequency and pricing and it seems like everybody's got a very good margins and personal on over the last several quarters.
<unk> Ah for N D O Z, you sort of price and catch up to that.
And in that environment do you think if the market stays competitive are you still in a position do <unk> your <unk>.
Let me, let me provide an overview and then Glenn if you wanted to jump on to this one uhm. So first I'm Gonna go up a little bit first it's about how do we think about increasing market share in we'll use two words together profitable gross we put them together because that's what we want we do not believe.
Leave that gross.
It it with no profit is good for shareholder show the objective of courses maximize shareholder value.
I expected outcomes for our team or that they will balance between gross and profitability. Our strategy of course is Mario talked about it at first base second phase of transfer I go through is getting more competitive auto insurance product and we supported that <unk>.
Course, and where it's being successful by reducing our costs. So the first thing that we can control our costs and we can make sure that if we reduced prices to get more competitive we still maintain our margins. Obviously, we want to be smarter, whether that'd be how we price or how we acquire business in our marketing and we're also using tell them.
<unk> and then as we go forward with transformative gross it'll be by being faster with better technology, and having new products affordable simple and connected that are sold to that broad range distribution net Glenn was just talking about.
And from direct to Allstate agent Uhm, So Glenn do you Wanna jump in on the specifics.
Yeah. So so first uhm I'll talk about frequency a little bit and then and go to competitive position some of them frequency standpoint, you know what.
<unk> everybody has benefited from some lower frequency, but we've we've also looked at a deeper level at it and just sort of miles driven and the number of accidents coming out because there are differences by books and you see differences and competitors as to as to how much tailwind that's providing so you know we look.
At the fact that commuter driven or take it from rush hour losses are down about three points more than overall losses, and we look at you know rural driving is down about four or five points less than urban driving and so we look at these it or for.
Pretty deep level, and we were fortunate to work with equity and and have a lot of data on this for 10 years plus of telematics, we get pretty granular into how we're looking at it and understanding the the frequency picture.
So we've got we've got a tailwind with that so which takes me into competitive position because we've been moving our competitive position pretty aggressively like you see a minus 1.5 on average premium and that my feet.
<unk> or seems like but there's a lot underneath that we've moved new business pricing, we've moved telematic pricing, we've reduced the cost of our our mile Wise program. That's that's grown really nicely.
And all of that is inside of there so our competitive position on the price changes, we've made and that are still going into market have really improved and are close right. Sarah we're starting to see that was really positive signs of momentum across multiple states.
And then you put on top of that the fact that some of our competitors have already taken price increases you know some of those out there we've heard others say that they're gonna start taking bites at the Apple in terms of Friday price increases and you look at our position and obviously, we're in a position right now we continue to invest in gross we.
Can still put money into marketing, we could still put money into competitive price position because of where we're positioned which really puts us in a great spot to grow going forward.
And then just any comments on your views on if grill authentic the deep send you were able to quantify you'll give a range on oh I'm, assuming it should send higher later this year and into next year that you're implementing some of these initiatives indirect and an independent agency, but for whatever sixth and you can quantify you'll give us an idea.
And I'm gonna need your day.
<unk> <unk> <unk> <unk> <unk> <unk>, we don't get forecast uhm, if growth or frequency hers case task for you things you can't predict let me talk about growth of it because it is really important question that many <unk> and of course, it drives huge value in the market today and so we would start check first actually.
Rules matter and we had a great quarter, Maine over 25 per cent revenue growth at Pitt growth within the <unk> and we're headed towards increasing our market share for a significant land personal lines. This year, which is consistent with our strategy like absolutely set out to do.
You you'd have some naysayers to say well you know you bought it with the acquisition National Journal and that's of course true, but you know you always have to investigate market share in this case it Israel broke and we look at it that if we had taken the net price that we pay for National Journal and.
Throw it into marketing or higher commission or some kind of spit uhm it likely would have given us less gross and we got and certainly not the kind of profitability, we're getting from it.
Uhm, the same day, but but we did buy it but we did the same thing with Allstate protection plans right. We bought square trade, we repositioned it with our brand and they had acquired growth and turned into an organic gross platform Ah. We expect the same thing they have on with Nash on general the the differences we paid it slightly higher premiums.
For square trade, then we did for national Daniel as it relates to the all state brand, we have multiple ways to grow right. We got the Allstate agents and we're making a train helping them transition to a new model, we have the direct business, which we've launched and it's so by the way at a different price and two in a.
And because we believe customers should pay for what they get and if you get an agent and get that help you should be willing to pay for that and so overall, we feel like they all stay brand is positioned for longterm growth as well and so we we feel like we've got a overall plan to move forward.
It's got transferring to grow with and it's got real growth this quarter and it's got we're building quiet for himself will continue that gross come for it.
Okay. Thank you.
Thank you on our next question comes from the Law you know Greg Peters from Raymond James Your question. Please.
Good morning, all all <unk> all my first question will be on reinsurance.
Tom I was hoping you could just give us an overview of how reinsurance helped the company. This quarter and then I know you did file your reinsurance update peace and maybe talk about what's changing going for it I did note that the cost and the first quarter about 14 per cent.
Higher.
Vs. A year ago is that is that the type of cost for increase we should expect for the for Ya.
Uhm, Greg Let me, let me start with the strategic perspective on it and then for an either Mario or Glenn If you want to talk about order so uhm.
In two day I'm Gonna go back a long way, but in 2004 and five we had huge catastrophe losses, we weren't or in in any money on homeowners business. You know, we make some money one year and we would lose money. The next year when you're hooked edge over time, you know it is not a really good business. So we looked at getting out.
And we said you know what we if we were out we'd want to be in because it does our customers do on it. So maybe it's just this catastrophe rest for today.
Don't want so we created a very comprehensive catastrophe.
Catastrophe reinsurance program to basically divest certain portions of the risk we took on and that's that's evolved over time, we have a very sophisticated multiyear program. It's got.
You know just by state got different by event, it's got the aggregate in it.
And we bear that cost each and every quarter, obviously that comes through uhm.
And then it it sometimes it pays off and what you saw this quarter was the aggregate kicked in and so from losses some of the losses, which for last year showed up is Ah, reducing your cat task for the losses, this quarter, which were upgrade significantly and that helps smooth it out and we've.
Looked at that from what kind of return on capital do we give up for the reinsurers and we're quite comfortable giving up the return that they get to avoid the volatility that comes from it and so it's helped us reposition the homeowners business. So that now it's a very consistent source of profitability of course.
Is Irish tank and for your question, we don't believe in growth with.
It's like Brian homeowners above 100 is not a good plan and your net you're destroying value at that point with gross and we don't believe on that so we've used for insurance to help reposition the business. We did a whole bunch of other stuff, including you know changing the product and changing the way, we price and how we underwriting where.
We do our segmentation by you know down to specific risk codes.
So you know how we pay per roof. So there's a whole bunch of stuff we've changed underneath that over the last decade, but it's a really good business in reinsurance using their reinsurers helped us get there. So what you saw this quarter was a benefit which is more than was earned in this quarter, but it was paid for and a prior for.
So if you you know some people want it excluded from this year's quarter totally get that I'm like that's fine, but then you should not be counting all the costs and the other time Mario Glenn do you want to talk about the cost for reinsurance on the program going forward.
Sure I I can jump in on that Tom and just to give you a little color Greg on on the benefits in the quarter. You know, we recovered about $955 million and a quarter on a net basis. You know part of that was from our per occurrence nationwide program, where we routine.
On the first $500 million of an event and then we have coverage you know in our current program up to $5 billion and then as Tom mentioned, we also have an aggregate cover which is about $1 billion, which spans a 12 month period. We also had recovery's under that so combined it was about 955 million.
<unk> you know that's net of reinstatement premiums in the quarter and it was principally on to freeze events you know in Texas. So the free. The then on the net basis cost is $586 million and a quarter. Once you start peeling back the prior year component of that reinsurance recovery, which was about $150 million you'd get to a grow.
<unk> loss in Texas, North of 1.3 billion, so we benefited pretty significantly and a quarter from a reinsurance program. As you mentioned, we posted on our on our website. The we placed most of the nationwide program. This quarter and we still have a component of the name.
<unk> like program to do and then remember we have a separate Florida program the cost year over year cause. We've included National General in this year's program is gonna be you know slightly higher than it was a year ago. When you add up what we were spending on reinsurance on what national General we're spending on reinsurance but in turn.
Of what you saw on the first quarter you Gotta remember that still last year's program that was placed may 1st and what we saw last year was the increase we experienced was mainly in the Florida program and you're seeing that on a cycle through in the first quarter, we will start incurring the costs of this year.
His program when it in steps, which is on June 1st.
<unk>.
That was a thorough answer I appreciate it I'd like to pivot to the expense ratio on page six of your the presentation slides duck.
You know you're you're continuing every quarter to show improvement in almost every quarter and show improvement in your expense ratio and I guess you know when we think about you know the sustainability or more importantly, you know is this a trend that wish you continued to expect.
Trevor obviously I Don Thank you for your expense ratio zero, but the improvement is noteworthy and then just as a as an aside I did notice at the expense ratio was up and the Allstate protection home business. So I'm curious what if there was something unusual on that.
So oh overall, Greg you're right our strategy.
More competitive an auto insurance pricing, which is face to transfer them to <unk> included taken down on costs and as you know we did a large reduction for <unk> last year and about 3800 people you're starting to see that come through this year at the same time or advertising for his way up.
And so we try to balance between those two I don't think you could expect it to come down you know have a point every quarter from now till and and for an item you should know that our strategy is to both keep reducing costs every place. We can so that we can have a more affordable product for our customers in there for a better price so we get more of them.
And then but not to not invest in gross because it's a kind of a return on capital for getting any businesses, we should definitely be seeking more growth Mario do you Wanna talk more about what you this current quarter and what the ins and outs for.
Yeah.
Thanks, Greg So I guess you know, it's not mentioned, we're going to continue to focus on reducing our our cost structure and like we said really all along you know our focus on reducing our cost structure is not a margin expansion focus. It's one it's a growth focus and it's a growth focus because reducing.
Our cost enables us to invest more in gross and you saw it this quarter, where we invested more in marketing and the component of our underwriting expense ratio related to marketing actually increased by nine tenths of a point yeah. It was more than off set by the operating cost reductions.
On that Tom referenced from from last year, so you'd be the the real ins and outs work more investment in advertising more than offset by cost reductions and net net a half a point improvement and kind of be underlying expense ratio in the quarter and we're gonna continue to focus on.
On moving that number down the other thing I'd mention on expenses and it's it's not uhm obvious in our numbers is you know part of our focus on cost reduction has been on getting more efficient and claim handling and we've we've improved the efficiency and our last adjustment expense, which comes through the loss ratio.
Joe, but again, we consider it as a core part of our cost reduction efforts to improve to come by you know improve the the cost structure create capacity to invest and be able to grow more and continue to deliver excellent returns. So I think what you saw on the quarter was really you know kind of proof.
Of of how that strategy is playing out in terms of the homeowner expense ratio specifically, Greg I'd have to go back and take a look at what components stomach whether that whether it came through you know distribution costs or underwriting costs, whether it was like inspections and so on so let me take that one off line.
And I'll get back to you on that one.
Got it thank you for the answers.
Thank you. Our next question comes from a lot you know Paul Newsome from Piper Sandler for your question. Please.
Good morning, Thanks for the call congratulations on the corner.
I was hoping you could expand a little bit more about what it means to transition existing for agents to a different model can we get emails from agents all the time usually there for.
Worried about this for that.
Is this a transition that's really towards moving independent agent type structure with decorations or are we talking to something that's completely book or just <unk> to be determined.
Let me provide a little review and then Glenn can tell you some of the specifics of what we're doing but first thing I was based on that we're not we're not going to do the nationwide deal and turn them on it in an age on so we don't think that makes sense for my customer standpoint on customers come to us because they loved the Allstate brand we have a <unk>.
Strong brand long relationships. So we're not playing on turning them into something else and obviously that the fast pace of change has all of this on edge, whether you're a retailer anybody what's going on in the world and good news for our agents is that still on the majority of consumers.
<unk> on insurance professional help them by insurance and our agents are really good at it that that you know people are more comfortable with self service uhm simple items and at the end of technology enables a computer to do some of the work that used to be handled in by people in and it's still in some cases.
Is handled on low cost is so we we have to transition their model and go with a customer's going and so that includes you know maybe we don't have to use as much real estate as we use today, we certainly do not need to do as much service work in agent offices. So we have you on a little over 10000 <unk>.
Eight agents, there's probably 26 at 27000 people working in those agent. Some of those people are doing service work and we think we can do that either centrally at a lower cost and be more effective for our customers or just get the computer to do it nobody does it at all so we have to figure out how do we transition.
Those people in those offices to doing service work to doing sales work or if they can't transition those those license sales professionals have the agents buildup staff. They can moving to that so last year one of the things that Glenn at team did was a raise in new business commissions.
Two and sent to give people the opportunity to to invest more and sell more things to more people and get more people selling for them at to offset that and continue to make sure. We're.
Meeting our customers costs needs, we slightly reduced renewal commissions at you reflect that so you know if you're an agent and you're focused on new sales. That's a good thing you're excited about it you're off and ready to go if you've been focused more on service and not and gross then you know you're not gonna be as excited about the.
<unk> change because it changed your business model. So we have to help them transition from where they are to to the place where the customers want us to go which is they want help but they wanted to do it in a technologically proficient low cost way and we think that there's a good way to do it Glenn can give you some.
Some examples of what we're doing with our existing agents, we've already talked about what we're doing direct your share of our customers and then we're also trying some new models day Clinton can talk about that do the same thing which is used people to help people buy insurance in a local space per day, a low cost.
Glenn do you Wanna give him some more specifics on that yeah.
Yeah, absolutely and and Paul at half time hit a lot of the <unk> really important points here, but but a couple bear repeating so I know I'm being repetitive, but but it's really important so.
It's a hard no on the I E. P. So I'll just reiterate Assam set you know <unk>. This is we are dedicated to our exclusive agent model completely and we believe that there is a not only a meaningful place for a a huge place for exclusive agents to grow in the market because it's Tom said most.
Most consumers still want to work with an agent so in the in the presentation materials. It talked about higher growth lower cost models. So I'll just need a couple of things lower cost you know we've been really you know Greta set in the past to allow you know agents to consolidate locations or two even go in some cases with that.
Real estate or or reduce their real estate footprint. We we've been very focused on a model that is how many signs do you have across the country side and you know, we're we're gonna really weighing in to allowing agents to reduce costs and the way they run their business and Tom talked a bit about the service.
We started that in 2019, and we built it up a bit and everything, but we really have to get to a a centralized and and more efficient and effective way of serving customers in.
Separately across 10000 different location, so and we can we can take a lot of costs down to the system and reduce the cost for the agent. So that they can focus on growth from a higher gross standpoint, it's about leaning in on on the marketing that they do that we can help them do more effectively and efficiently as a as a large enterprise.
The lead management that they do compensating them more for new business as Tom mentioned also.
That's the existing agents and how we want to transition that to hire gross lower cost. The new models. For example, and we have several hundred of these already in place actually are we're learning from our Canadian operation actually in Canada. We have you know Allstate agents, who operate sort of independent.
Lee from one another it's not an agent with multiple staff, they're independent workers and producers and they work on sort of a balance between being in communities and driving leaves itself and getting leaks from the company and it's been very successful were or growing very fast and.
Candidates, we're leveraging that model and looking at.
Models with no real estate in local markets that are part of the community and are able to take leads and also generate they're only it's in that community and grow. So you know it's early in the process, but in the second half of the year, we're looking to ramp those up significantly.
Alright, I guess <unk> could you talk a little bit about any early looks on the pilot programs for you agent recruitment and if there's some different things that will be happening in the future.
Glenn do Wanna take that.
Eight Glenn do you Wanna take that maybe on mute on my apologies I did go out on me if there yeah. So we're we're focused on on those new models I just mentioned in terms of our recruitment right now and so we have been I think.
Oh, well, we have several hundred already and we have a lot more on the pipeline. So we're we're looking to grow with those new models, what we're really focused on with the existing agent for photo recruiting sung into the compensation program that that we have as opposed to what we called enhanced compensation program, which was a higher <unk>.
<unk> modeled before we're recruiting some into that is is more of what you would refer to as a traditional exclusive aged but the heavier emphasis on a recruiting is on those new models, where with our existing agents. We're really focused on investing to get more of those agents growing and wanting to grow.
The good news is they are growing right now, they're we have increased new business production with our existing established agents. So when you see the total that somebody referenced earlier of the slightly down on the overall agency for us that is driven by sort of a lack of new appointment for the existing agents.
New businesses you're over here.
And Glenn let me just say it at last point Uhm, which is that when you see that little Red bar on our crap that was an intentional choice on our part not a flaw on the system. So it's not like we decided that you know what we were hiring these new agents we required on they have.
Their own office for it prior to day of support staff to make that work. When you have no customers were paying 30 per cent upfront commissions, which then stayed high for it not at 30 per cent, but state higher than customers should have to pay for them for about five years, and we said you know that this is not the model of the future we could have.
Kept that going while we develop these new models and the the system would look like it would've been generating more growth than it is today, but we say you know economically that's just not smart thing to do like we're not using share holders money right and that's where we get into which the conversation we were talking to.
For his profit book Road.
Okay, if you're gonna get a a profitable longterm gross and so you have some bumps, but that's not about law on the system, that's about an intentional choice.
I appreciate it thank you very much.
Thank you on next question comes from the line of David moving from Evercore. Your question. Please.
Hi, Good morning, I I guess I wanted to just touch on retention I was surprised it fell a little bit here again.
Let's see I'll also especially given some of the right actions that you guys have taken I guess could you maybe just talk about how much of an impact the lapsing of any billing leniency you may have had on the retention and and what your expectations on.
<unk> for retention going forward like should we see a snap back here in the second quarter.
Yeah, I guess, that's just my question on retention.
David them, a uhm right on over you I'm glad you can take the impact of.
You know the pandemic billing stuff Uhm first I had to take for 10 years really hard to to do attribution on you know people leave for all different reasons and sometimes it's for price, sometimes it's because they move sometimes it's they bought a new car until it's difficult to get it we did get it down to precision too.
In a point what you do know is if your net promoter scores good day, and you're doing a better job for customers. They should stay around longer and if you're competitive in price and you're changing your price not only for new business, which we've done but also for your existing customers, which we've done so they have the better price than that.
<unk> they should also keep them, but there's lots of different variations. So it's <unk>, it's really hard to predict it Glenn do you Wanna talk about how you're feeling about retention this quarter and.
Again, we have a hard time, nobody really knows how to predict for attention.
Yeah absolutely.
So.
Tension is a lagging metric first of all I'll start there that wherever or whenever a customer decides to cancel move shipped uhm, we recorded and reported at the point of what would've been the renewal. So there's a bit of a lack to that so while we stop the special payment.
Plans during last year, they're still some of that trickling in so as.
Tom said attribution is difficult on this but there's a portion of it that's related to that no question. Secondly, though it is highly competitive market right. Now shopping is up advertising is up and there's some impact for them that is interesting when you look at national General as.
As an example, if you saw on and some of our disclosures like natural generals New business. It's it's really eye-popping because national general right a lot more new business to grow because they have a shorter cycle time.
As our business shifts and we look at overall protection business, and we're writing and more markets and we're writing direct and not just for exclusive agents.
That number will move around a little bit on retention, but our focus is to create a lot of new business [laughter]. We're gonna do that that's what transformative growth is about we're gonna create a lot of new business, so that the undulations of retention.
<unk> you are overall growth.
Got it thanks for that that that's helpful. And then maybe just on the new business side.
Yeah, obviously, great great gross especially on a direct side in new apps I guess I'm wondering maybe if you could just you would kind of mentioned it in your script, but wanted just a bit more details on the mile wise offering and how how how how did that did this quarter.
How big that is as a percentage of the entire book on was that really the driver behind direct gross that we saw on the corner.
Glenn you can take where we are with my wife and number states and Oh index. Yeah. If you guys pricing I would say, though when you just step all the way back.
Whereabout building, a digital insure and sometimes that gets lost as to how big and how successful we already given the size and scale of our company in total on sometimes people look at people, who only do that and assume that they're about to take over the market Ah. We're happy to compete we feel like we're really doing.
Well on here where for early in telematics. We think are a later on telematics and this is an example of a product where we were out early weird aggressively advertising it and it's resonating Glenn do you want to talk about what you've done to help it though.
Yeah, absolutely and.
To the question is it driving the direct gross I would say no direct road is is you know a majority that is not mile wise.
It's an interesting thing to look at it Tom said when you look at it inside a company like I'll State My Wise will look relatively small it's up you know this year something.
Something close to in autos policies I think are for and change times. What they were autos are six and change times, what they were a year. Prior so significant gross if this was a standalone startup sitting outside of a large insurance company like all state. It is the largest in the industry pay.
By Michael program, and it would look really big and really fast growing it really attractive inside of all state. It is it is helping our growth, but it is not driving or gross is the way I'd say that we're looking to expand oh overtime on the on my wise right now it's available.
To about 50 per cent of consumers across the country and we have more states lined up for that it does require the O B D Port, which I think everybody knows their trip shortages out there for you if not run into a problem, where we have to slow down on my on wild mile Wise at this point, but we are actively managing our supply chain.
On it because it is a popular product is and we're managing our our state expansion, they're looking at that so that we don't run into a supply chain issues.
Thank you for the questions I think we're at a time here at the top of their on we've tried to be respectful of your time, obviously, we appreciate your coming to spend time with us and hear about us that we had an excellent quarter the work and yourself on that first slide the amount of expertise and.
For it that went on to delivering all that for the corner wasn't just this quarter. It's what we do over time, but we feel good about where we're at two a great operating results as well. So thank you for your participation and we'll see you next for.
Thank you, ladies and gentlemen for your participation in today's conference. This to conclude the program you may now disconnect. Good day.
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