Q3 2023 Allstate Corp Earnings Call

November 2, 2023

Okay.

Thank you for standing by and welcome to all States third quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if your question has been answered.

And you'd like to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program Brent Pedro <unk> head of Investor Relations. Please go ahead Sir.

Yes.

Thank you Jonathan Good morning, welcome to Allstate's third quarter 2023 earnings conference call. After prepared remarks, we will have a question and answer session yesterday. Following the close of market, we issued our news release and Investor supplement filed our 10-Q and posted related materials on our website at Allstate investors Dot com.

Our management team is here to provide perspective on these results and our strategy as noted on the first slide of the presentation our.

Our discussion will contain non-GAAP measures for which there are reconciliations in the news release and Investor supplement.

And forward looking statements about allstate's operations Allstate's results may differ materially from these statements. So please refer to our 10-K for 2022 and other public documents for information on potential risks and now I'll turn it over to Tom.

Good morning, we appreciate your investment of time at Allstate.

Let's start with an overview of results and then Mario and Jess will walk through operating performance.

Again on slide two so our strategy has two components increased personal property liability market share and expand protection provided to customers, which is shown in the two hours on the left and the right hand side you can see the highlights of the quarter.

Made good progress in improving auto insurance profitability. There is more to be done, but you can see the improving trend again this quarter.

We decided to pursue a sale allstate's health benefits businesses.

After successful integration of all states voluntary benefits business with National General's group and individual health businesses. We've traded are really well positioned benefits biopharm and that strategy, which part of the National General acquisition plan. Our success now positions us to achieve additional growth potential.

Potential can be maximized by aligning this platform with a broader set of capital generate products distribution channels and capabilities, we anticipate completing a transaction in 2024.

We also made progress in executing transformative growth initiatives to set the stage for the personal property liability market share growth as margins improve.

The second part of our strategy to broad protection offerings also progress with Allstate protection plans growth.

Let's review the financial results on slide three.

<unk> is a $14 5 billion in the third quarter increased nine 8% above the prior year at $1 3 billion.

The increase was driven by higher property liability earned premiums in auto and homeowners insurance, primarily reflecting that 2022 and 2023 rate increases which has resulted in property liability earned premium growth of 10%.

Net investment income of $689 million reflects proactive portfolio actions, including extending fixed income duration and lowering public equity holdings to take advantage of higher fixed income yields.

Net loss of $41 million and adjusted net income of $214 million 81 per diluted share reflects improved property liability underwriting performance property liability recorded an underwriting loss of $414 million, which compares to $1 3 billion dollar loss in the third quarter of 2000.

22, while the improvement was encouraging loss cost trends remain elevated and require continued execution of auto insurance profit improvement plan, particularly in California, and New York and New Jersey.

Slide four provides an update on the execution of the four components of that plan.

Starting with rate the Allstate brand has implemented 26, 4% of rates since 2022, including 95% through the first three quarters of <unk>.

2023.

National General implemented rate increases at 10% in 2022, and an additional eight 8% through the first nine months in 2023, we will continue to pursue rate increases to restore auto insurance margins margins back to target levels.

Second reducing operating expenses is core to both the profit improvement plan and importantly, the transformative growth plan to become a low cost provider protection expenses are down and we have a path to further reductions.

Third we've restricted new business growth in areas in classes of business, where we're not achieving target returns.

Given the success, we've had in some areas where select them and we are moving these restrictions and some space in the segments.

Enhancing claim practices at a high inflationary and increasingly litigious environment are required to deliver customer value that includes accelerating the settlement of injury claims and increasing in person inspections.

Turning to slide five let's touch base on why we believe this profit improvement plan will work and the current competitive environment.

Allstate's capabilities and business model generated industry, leading auto insurance margins over the last 10 years with an average combined ratio of roughly 96, and a half and an average underwriting income of $800 million.

It represents approximately five five.

Five points outperformance in the industry, which generates an incremental profit of about $1 3 billion annually only a few of the other top 10 insurance companies have a similar record.

In the current competitive environment. These same capabilities will enable us to continue the progress made in improving auto insurance margins.

The rapid rise in auto claim severities have wrote in profits for the industry with most carriers are responding by increasing auto insurance prices and lowering expenses.

State Progressive Geico has significantly raised auto insurance prices since 2019.

Steve borrowers increases pricing prices to a lesser degree, but as a result appears to be incurring large underwriting losses.

Expense reductions are also being pursued by many companies, including lowering advertising spending which has moderated competition for new customers.

The impact on policies enforces dependent on each company's individual profit and growth plan.

As Mario will discuss the Allstate brand policies in force have declined particularly in four large states.

<unk> policies in force declined by a larger amount while progressive has grown.

Ill say its capabilities enable achievement of the profit improvement plan in this competitive environment.

Now, let's review the potential sale of the health and benefits business on slide six.

When we acquired National General was primarily to improve our position in independent agent channel for property liability insurance and we've exceeded our goals and that integration. The acquisition also gave us the opportunity to combine allstate's voluntary benefits business with National General's group and individual health businesses.

Successfully combining these into one business unit has created a strong benefits platform with substantial additional value can be realized by aligning with a broader set of product offerings distribution and capabilities such as medical network management.

Allstate health and benefits operates three successful businesses, which is shown in the middle there and the one trillion dollar employer benefit markets group and individual health when you add those all up.

We've been the preeminent voluntary benefits provided for 24 years with a comprehensive product offering that generates annualized premiums and contract charges of $1 billion.

And $300 million of new sales Nash.

National General's group health business targets, the small case size market and has $700 million premium and fee revenue and $400 million of new sales to individual health protection is provided through both proprietary and third party products, which generates both underwriting and fee income.

The health and benefits businesses have revenues of $2 $3 billion, which is 4% of total corporate revenues and adjusted net income of $240 million for the trailing 12 months, which you can see in this two pie charts on the bottom it's kind of spread between all of the businesses.

The employer voluntary benefits and group health businesses. When you add them up have roughly 48000 relationships ranging from fortune 50 companies to small businesses and over $4 3 million policies in force.

The growth potential of these businesses can be accelerated with greater alignment with a wide range of companies in the market and as shown on the right hand side.

With its attractive business profile and financial results, we expect the transaction to be completed in 2024.

In addition to improving profitability and strategically allocating capital we continue to implement the transformative growth initiatives to position the property liability market share gains as margins improve.

Find components initiative as shown on slide top of slide seven.

Affordable simple connected protection is at the heart of the strategy to further improve customer value customers will have access to high quality protection that better meets their needs at a low cost with hassle free experiences. However, they choose to access our broad distribution network. We're live in the market with the new business experience and further enhance the kind of active.

The Allstate App this week.

Mario will discuss our success in expanding customer access.

While each transfer on a growth element is at various stages of maturity for moving from phase III of building new model towards scaling it and face for us now.

Now I'll turn it over to Mario to goes through the property liability results. Thanks, Tom let's start on slide eight.

Our comprehensive auto profit improvement plan is improving margins.

Reliability earned premium increased 10% compared to the prior year quarter, driven by higher average premiums, which were partially offset by a decline in policies in force.

The underwriting loss of $414 million in the quarter improved $878 million compared to the prior year quarter due to the improvement in our auto loss ratio.

The chart on the right highlights the components of the 103 four combined ratio in the quarter, which improved eight two points. Despite a two eight point increase in the catastrophe loss ratio compared to prior year.

Prior year reserve re estimates, excluding catastrophes were $166 million unfavorable or a one four point adverse impact on the combined ratio in the quarter.

$82 million was attributable to the run off property liability annual Reserve review and $84 million in Allstate protection, primarily driven by National General personal auto injury coverages.

The underlying combined ratio of $91 nine improved by four five points compared to the prior year quarter, and one point sequentially versus the second quarter of 2023, Despite continued elevated severity inflation.

Now, let's move to slide nine to review Allstate's auto insurance profit trends.

The third quarter recorded auto insurance combined ratio of $102, one was $15 three points favorable to the prior year quarter, reflecting higher earned premium lower adverse prior year reserve re estimates and expense efficiencies.

As a reminder, we continuously assess claim severities as the year progresses. For example last year as 2022 developed we increased current report your ultimate severity expectations, which influenced the quarterly reported trends.

While loss cost trends remain historically elevated the pace of increase moderated in the third quarter as Allstate brand weighted average major coverage severity improved to 9% compared to the 11% estimate as of the end of last quarter.

The chart on the left shows the sequential improvement in quarter quarterly underlying combined ratios from 2022 through the current quarter with quarterly reported figures adjusted to the full year severity level for 2022 and 2023 adjusted for current severity estimates as of the third quarter.

Higher average premium and the continued execution of our profit improvement plan drove the sequential improvement in underlying combined ratio to $98 eight.

As reported or 105 in the bar graph when removing the one seven points of favorable impact on the third quarter from improved severity for claims reported in the first two quarters of the year.

The chart on the right portrayed how our comprehensive actions are resulting in a higher proportion of the portfolio progressing towards or achieving target levels of profitability.

Excluding the three large states, which generated 45% of Allstate brand auto underwriting loss in 2022, the Allstate brand auto insurance underlying combined ratio was 97 two.

Premiums from states with an underlying combined ratio below 100 improved to 59% of the portfolio in the third quarter doubling from the percentage at year end 2022, and up almost 10 points from 50% in the second quarter.

Slide 10 shows the impact on policies in force from actions to improve profitability.

Allstate brand rate increases have exceeded 26% over the last seven quarters.

New issued applications shown in the Middle chart declined 19, 5% compared to the prior year quarter, largely driven by actions to reduce growth in unprofitable states.

California, and New York, and New Jersey, combined declined 75% compared to the prior year.

Allstate brand auto policies enforced decreased by 6% in the third quarter compared to the prior year, partially driven by the lower new business and also driven by lower retention due to rate increases.

Elevated loss trends in Texas required implementation of rate increases of over 50% in the last 21 months as a result retention has declined while profitability has improved.

Policies in force in these four large states combined decreased by eight 7%, whereas the remaining states declined by four 7% compared to the prior year through the third quarter.

On slide 11, we take a deeper look at the National General Auto book.

While third quarter margins were impacted by $95 million of unfavorable non catastrophe prior year reserve re estimates primarily across liability coverages. The underlying combined ratio of 96 eight in the quarter and $95 seven year to date remains largely consistent with the prior year periods.

Reflecting higher loss cost expectations, given the reserve strengthening to date offset by higher average premiums and expense efficiencies.

The National General business as the product, including fee based revenue features and claims capabilities to excel in the non standard auto insurance marketplace.

As you can see in the chart on the right 75% of the written premium growth in the third quarter of 2023 is coming from non standard auto which is more profitable than the overall national General auto insurance business.

Our new middle market product customer 360 is now available in nearly one third of the U S market and is also contributing to growth while the legacy National General and encompass businesses, which will be run off as we implement customer 360 are having the lowest impact on growth.

Slide 12 covers homeowners insurance results, which incurred an underwriting loss in Q3, driven by higher catastrophe losses on.

On the left you can see net written premium increased 12, 1% from the prior year quarter, primarily driven by higher average gross written premium per policy in both the Allstate and National General brands and a <unk>, 8% increase in policies in force.

Allstate brand average gross written premium per policy increased by 13, 2% compared to the prior year quarter, driven by implemented rate increases throughout 2022, and an additional nine five points implemented through the first nine months of 2023 as well as inflation in insurance home replacement costs.

Yeah.

The underlying combined ratio of $72 nine improved by one two points compared to the prior year quarter, driven by higher earned premium lower frequency and a lower expense ratio, partially offset by higher severity.

We remain confident in our ability to generate attractive attractive risk adjusted returns in the homeowners business.

Slide 13 highlights progress on expanding customer access as part of transformative growth.

We continue to enhance capabilities across distribution channels and are the only major carrier with competitive offerings and branded agent independent agent and direct distribution.

The exclusive agent channel represents the majority of Allstate's U S personal lines premium at approximately $32 billion.

Roughly 22% market share in this channel.

Our exclusive agents continue to be a strength offering personalized local advice customers value in this $145 billion market.

While exclusive agent auto new business decreased by 5% overall applications per agency, excluding California, and New York and New Jersey has increased by 13, 4% so far this year.

In addition modifications to compensation have driven bundling at point of sale to an all time high of over 75%.

<unk> performance continues to improve as they adapt to new compensation programs.

We also have great growth potential through independent agents the acquisition of National General strategically positioned to Allstate to grow in the independent agent channel.

National General continues to profitably grow non standard auto while converting legacy encompass and Allstate independent agent business onto their platform.

Expanded non standard auto presence in 12 states represented 9% of National General's 12, 9% increase in policies in force during 2023.

As we leverage all states expertise in standard auto and homeowners. This channel should represent another source of profitable growth.

The direct channel had a significant decline in new business volume. This year. Since this was the most effective place to reduce new business volume and was the most impacted by the reduction in advertising.

We've improved our capabilities.

This channel so it will be another source of growth moving forward and now I'll hand, it over to Jeff to discuss the remainder of our results alright. Thank you Mario.

I'll start on slide 14 to discuss investment results, we proactively repositioned our investment portfolio based on continuous monitoring of changes in the economic environment current market conditions and enterprise risk and return considerations.

As shown in the chart on the left net investment income totaled $689 million in the quarter relatively flat to the third quarter of last year, but with a higher contribution from market from the market based portfolio market based income of 567 million shown in blue was $165 million above the prior year quarter.

Collecting repositioning of the fixed income portfolio into longer duration bonds reduction of public equity holdings and higher interest rates.

Not only reduced some losses as rates increase but it provided flexibility to reposition as yields increased.

Starting in the middle of last year, we began increasing duration as rates increased which is increased market based income.

On slide 15, let's take a closer look at our performance based portfolio, which offers diversification and enhances longer term returns.

Portfolio is anchored in private equity and real estate is diversified across infrastructure energy agriculture, and timber investments, we hold more than 400 names, including funds with multiple underlying positions across diversified vintage years.

These investments are focused on long term value creation, and we expect quarter to quarter income volatility as seen in the bars on the chart to the left where quarterly returns of range from a negative two 3% to positive eight 6% over the last five years.

The benefit from accepting this volatility as shown on the right with three and five year annualized returns of 19% and 12% the private equity portion of the portfolio has outperformed the public equity benchmarks over three five and 10 years.

Slide 16 covers the results of our protection services businesses.

Revenues in these businesses increased eight 9% to $697 million in the third quarter compared to prior year quarter increase was mainly driven by growth in Allstate protection plans, which increased 19, 2% prepared compared to the prior year quarter, reflecting expanded products and international growth.

In the table on the right you will see that adjusted net income of $27 million in the third quarter decreased $8 million compared to the prior year quarter, primarily due to the higher appliance and furniture claims severity and a higher mix of lower margin business as we invest in growth at Allstate protection plans.

These were partially offset by improved margins at Allstate roadside and lower expenses at Allstate identity protection.

Shifting to slide 17, our health and benefits business also had good results.

Both revenues and income increased significantly with the National General acquisition in 2021, as we added scale and capabilities for the third quarter of 2023 revenues of $587 million increased by $17 million compared to the prior year quarter, driven by an increase in premiums contract charges and other revenue in group.

Health, which was partially offset by a reduction in individual health and employer voluntary benefits adjusted net income of $69 million in the third quarter of 2023 increased $6 million compared to the prior year quarter, primarily due to increases in group and individual health revenue and lower operating expenses.

Now, let's move to slide 18, and discuss allstate's approach to capital management to clarify how this differs from traditional methods used to evaluate capital such as the ratio of premiums to statutory surplus.

On the left hand of this on the left hand of the slide we summarized three discrete components, we evaluate to establish target capital, which is the basis of our capital management framework.

Base capital at the bottom is the capital required to meet ongoing operating requirements.

Stress capital as an additional layer of capital needed to cover tail events or the occurrence of multiple negative impacts such as lower lower auto profitability and high catastrophe losses.

The contingent reserves for extremely low frequency high severity events, a severe breakdown in diversification benefits and also provides strategic flexibility.

We use a highly sophisticated model that breaks out individual risk types incorporates a regulatory and rating agency considerations and uses extensive simulations to determine the right amount of capital for each component. This is more sophisticated and comprehensive than the ratio of premiums to surplus to determine the right amount of capital for exam.

When calculating the premium to surplus ratio for the Allstate insurance company. The premiums for many of our subsidiary subsidiary companies are included but over $1 $6 billion of statutory capital is not included in the denominator.

This framework also better assesses the use of catastrophe reinsurance, particularly for large tail events.

A simple ratio.

Our sophisticated model and proactive actions provide flexibility to manage capital to maximize shareholder value creation.

To close lets turn to slide 19, and recap Allstate strategic priorities.

We continue making progress on our plan to return auto insurance profitability to targeted levels.

We will pursue the divestiture of our health and benefits business.

We're continuing to advance on our transformative growth initiatives.

Proactive investment management has increased income Allstate protection plans is expanding in these strategic priorities support value creation for Allstate shareholders with that context, let's open the lines for your questions.

Ladies and gentlemen, if you have a question at this time.

Please press star one on your telephone one moment for our first question.

Yes.

And our first question comes from the line of Gregory <unk> from Raymond James Your question. Please.

Well good morning, everyone I guess for the first question and there was a lot to unpack in your release.

And slide deck I'm going to focus on.

Slide seven which is the transformative growth strategy.

I was looking at your slide and it talks about building the new model and scaling the new model.

And I'm just curious if you're running elevated expenses at this point because you are running two separate models and as you roll out the model I'm curious about how its accounting for the nuances of different customers in that.

About the needs of preferred customers versus standard versus non standard.

Good morning, Greg Good question, let me so first the transfer of our growth is about increasing market share in personal property liability.

Got a couple of components at the core of that is being low cost insurance, but also about raising customer value and also about being available to people. However, they want to get to is back to your segment of customers.

So I would say at this point, we've proven out that the underlying assumptions that we had made going into at work. So we know that lower price raises close rates, we know thats true, we know that being available.

Through more people whether thats.

Two different.

Different bundling with exclusive agents.

Through independent agents.

Our direct also works and we can do that.

We know we can raise customer value each saw on the slide there.

I didn't go into it but the new sales processes really slick.

<unk> up with three.

Offers that are specifically for you you don't have to pick your deductible you don't have to go through a bunch of questions people don't pick the deductible for Ya.

It's fast it's like than the.

The renters piece, which is in the middle one takes less than a minute.

And we're finding great ways to attach more protection by making it simpler for our customers. We're also making it more connected which is in the right hand side.

And so we relaunched the App, we think that people are going to have fewer apps on their phone going forward. So having an app where people could just access either look at the bill will get there it.

It is helpful, but it's not compelling so we are expanding that so you'll see on their gas Buddy you can get figure out how to save money on buying gas, which is of course directly related to what we do we have a whole bunch of other things that we either added or going to Ed.

For example, we are really terrific and crash detection with our telematics experience through arity.

And to do that through like 360, and it's a terrific product. So there's a variety of things we're doing to expand that as it relates to expenses, we're continuing to invest in this I don't know that I would say it's over the expense side.

We have an objective we have to lower our overall expenses were after that but we're not backing off on investing in the new technology. One of the things that we've proved out the underlying assumptions was can we build the technology to do what you see and Thats, great and the answer is yes, we've built it it's out it's working it's rolling we need to scale it but we have.

High confidence that it's scalable so.

You should expect us to continue to find ways to reduce costs. They are into this but.

But I don't think like there is like.

We're riding hot inexpensive today because of that.

As it relates to the various segments of customers, we want to sell as many people as we can as much stuff as we can however, they wanted to come if you want an agent will give you an agent. We just have to make sure. It's cost is what you are prepared to pay and they do what you want.

Whether that's an exclusive Asia and an independent agent and if you want to buy direct for the company you want to buy through a call center they want to buy on the web.

Just want to make it as simple and easy issue can which we think is differentiated in the marketplace.

Well that makes sense I guess for my follow up I'm going to pivot to the pricing slides I'm thinking slides nine and 10.

And I was wondering if you could I know you provided detail on your comments, but if you could give us an update on the problematic states.

In slide nine you said, 41% of the of your business in auto is running above 100.

If we look forward to 2024, how do you think this chart might look.

Which charter Youre, referring to Greg I'm wondering why not.

Yes, yes.

Yeah.

Yes, I mean of course, it all depends Mario can give you some color as well, but it all depends what happens in California, New York, and New Jersey, but let me be very clear we are not going to continue to lose.

Four digits in millions.

Those three states.

So far you Mario talked about is getting smaller by not growing.

We've executed that.

The next step is to not be able to serve customers, who we want to serve because we can't afford to those 20 cents on the dollar.

Mark do you want to comment on.

We've been talking to it's not like this we just figured this out.

Or they're not aware of yet.

Well I'll give you a little a little additional color across the three states in Tom's right. We've been talking about this all year and we've taken pretty significant.

Significant actions to restrict.

New business volumes and its down like we've talked about earlier about 75%.

We've got three significant rates pending or rates pending across all three states. We have an auto rate in California that we filed back in May I believe 35%.

We've got a 29% file filing pending in new Jersey, we implemented rates in New York, ranging from high single digits to low double digits or low teens across our opening closed books middle of the year and we just filed for another 18, 3% in New York Auto So we've got significant rates pending.

With the department.

As Tom mentioned, where we're at now is we need action on those filings in the fourth quarter.

And if we cant then we believe the right thing to do for the customers and the other 47 states as well as for our shareholders is to take additional action to get smaller across all three of those states and Thats. What we would do beginning next year, if we can't get resolution on the rate filings that are currently pending.

Got it thanks for the detail.

Thank you one moment for our next question.

And our next question comes from the line of Alex Scott from Goldman Sachs. Your question. Please.

Good morning, it's Marley on for Alex.

You mentioned.

The prepared remarks prepared remarks that you were increasing in person inspections.

Overall claim costs could you touch on this a little bit more how impactful is this and then maybe how many of the current accidents or assess now in person versus remote and then how should we think about this for near term changes to loss Ali.

Hi, Mark This is Mario I'll answer your question, So I would where I would start is going back to the different components of our auto profit improvement plan.

Taking rate increases reducing cost restricting.

New business in states, where we arent achieving target levels of profitability.

And improving.

Operational processes and claims what youre describing around more in person inspections is a component of that fourth piece of improving operational processes.

We believe that by doing more physical inspections doing more oversight broadly of both in network and out of network shops.

As well as doing the same thing on the on the property side as well that we'll be able to identify opportunities.

What we owe but but also not pay for say things like pre existing damage or in total loss cases cars that could be repaired versus replace so we think doing more in person physical inspections. In addition to continued continuing to leverage <unk>.

Quick photo claim capabilities.

Is the right thing to do to best manage loss cost going forward and Thats, what we intend to do to ensure that we are operationally excellent in claims and again paying what we owe but eliminating any leakage in the system and we're prepared to invest in the claims organization.

To be able to execute on that so.

In terms of the expense ratio that ratio as part of our adjusted expense ratio, we're still committed to hitting.

The 23 by the end of next year the investments, we're making claims are inclusive.

That goal, we think we can do both.

Got it. Thank you and then I just wanted to get your thoughts on longer term severity drivers that youre seeing in terms of medical inflation and any impact from the UAW strike.

Sure.

I will start with medical inflation.

You'll you'll note that we talked about our severity expectations and auto being about 9% currently which is improved from the 11% we talked about last quarter all of that improvement came from physical damage coverages our outlook on.

Casualty and injury severity is unchanged it didn't get worse, but it.

It's consistent with where we were last quarter and the drivers behind that continue to be.

Medical inflation.

More attorney representation higher leverage levels of treatment being pursued.

You know kind of in all the components of both.

Economic and social inflation that have driven.

Injury severity is up.

Over time, though.

Those will continue to be headwinds for us, but as we again as I talked about on the physical damage side as we've adapted our claims processes.

To.

Take into account those inflationary trends.

Seen we've seen some good progress. So we're we're looking to settle claims earlier.

In the cycle and we've seen real improvement in terms of reduction in pending injury claims as well as faster settlement times, an injury claims we're using things like analytics and testing at AI models to identify accidents, where injuries are likely and those that have a higher likelihood of a potential.

Being represented by attorneys so that we can further accelerate.

Claim at contact time and get out ahead of the process.

And manage the overall claim process. So we're doing things proactively to help mitigate some of those inflationary impacts.

And we will continue to do that and like I said.

We did see some stability and injury severity trends during the quarter.

Thank you.

Yes.

Thank you one moment for our next question.

And.

Our next question comes from the line of at least Greenspan from Wells Fargo. Your question. Please.

Hi, Thanks.

Good morning, My first question.

During the quarter you guys spoke about looking to buy some additional <unk>.

Aggregate stop loss reinsurance.

Do you have any update on what youre doing on the on the reinsurance side.

In terms of looking to protect your capital position.

Yes. Thanks this is Jeff.

But we have talked a lot about our reinsurance program in general as you know we have a robust reinsurance program that reduces our overall capital levels.

And we've talked more recently about the aggregate cover at this point, we don't have any specific updates about the potential transaction as I've talked about a number of times, we're looking at whether or not we can economically reduce overall risk and targeted capital on to.

To the extent, we find a structure, where we can get that done we will do it and to the extent, we can't get it done economically.

We'll move on and look at other options. So I would say as it relates to this quarter no updates we continue to be interested in understanding what might be available to attract some new capital sources into the industry and make them available, but we don't have anything firm to talk about at this point on that.

Thanks, and then my second question. Thank you.

Guys highlighted that you're looking into a potential transaction with the benefits business were there any diversification credits that you guys.

From a capital perspective by owning the benefits business.

Of course, yeah, so they're there, but we factor that into our overall position yes.

Okay. Thank you.

Sure.

Thank you one moment for our next question.

And our next question comes from the line of Michael Zarefsky from BMO. Your question. Please.

Hey, Good morning, this is Jack on for Mike.

Just one question on changes to Allstate's captive distribution commission and fee structure.

You mentioned earlier, how we distribute greater bundling rates.

Im just wondering if it's also expect this change to impact overall organic growth levels do you expect a meaningful benefit to the company's expense ratio.

But I think what you would go all the way up to transformative growth.

Yes, we think that the whole package of staff growth drive market share growth that includes.

Making sure that the agents.

Do what customers want them to do and that they're supported in doing that with technology and everything else and marketing and that they are <unk>.

Compensated for what they do but yes. So there's various pieces emerge want to talk specifically about the comp changes, yes. So again I would characterize the most recent set of changes as a continuation of what we started really several years ago, which was intended to.

No.

Drive higher levels of productivity.

And the exclusive agent distribution system, but also reduce distribution costs over time and I think what we're seeing if you just particularly if you take out the impacts of the three large states, where we're purposefully driving reduced volume is.

<unk>, what we had hoped would happen so.

From an expense standpoint, you see in the quarter, we benefitted by two.

Two or three tenths from a distribution.

Cost perspective, so we're continuing to see the the impacts and benefits of lower distribution costs, but more importantly, the productivity of the exclusive agency system.

<unk> to improve so again, if you take out those three states.

Overall production was up seven 6% average productivity was up over 13% and when you look at our top tier of agents, we segment agents into three categories emerging pro an elite that elite group.

Their level of production was up 15% so that shows that agents continue to invest.

And their businesses and take advantage of increased shopping levels in the marketplace, but they are focused on driving the kind of growth.

That will certainly become a real asset for us as we begin to lean back into growth as different states hit target levels of profitability. So we're really encouraged both in terms of the performance of our agency channel how they've adapted and the fact that we've been able to take cost out of the distribution says.

At the same time.

Thank you.

Thank you one moment for our next question.

Yeah.

And our next question comes from the line of Josh Shanker from Bank of America. Your question. Please.

Yes, I think very much I have a model that goes pretty far back and historically, if you look at reserves and try and analyze them.

Harder to short tail lines, historically Allstate run at about 95% paid to incurred loss ratio.

For every dollar of lost you put five in the reserve for future losses.

And that's true in <unk> 'twenty three before the previous five quarters. It ran at astonishingly low 83% I know that you're trying to get the reserves right, but it does feel over this period of <unk>.

Elevated loss ratio.

<unk> put a lot more of its reserves.

Into reserve than any time in my model is there something different that have gone on over the past five quarters now.

Now that you are resuming a normal sort of paid to incur trend or is it just that.

That was unusual period and you needed to put more reserved.

Yeah.

Maybe I'll start and then Jeff can fill in here first Josh.

Josh Good morning, but we think the reserves are right and we put up what we think we need to put up.

We need to put it up as painful as it was last year.

We felt we needed to put it up.

When you look at the I don't know I'm not looking at specific numbers, but had been through reserves enough to know that.

Page bounce around a lot of it depends what happened in the pandemic.

Impending levels and we adjust for all that.

So I would say it just may have some other stuff, but I think.

Jess Brent could walk through your model with you and help you see it but.

But we just think the reserves right when we put them up.

Just anything no I would agree with that I also think you should keep in mind that that same period was a period of extreme acceleration in the loss cost trend, which you wouldn't see in over the historical periods right. So youre going to get a different paid to incurred ratio. When you have acceleration the way we've seen them you saw what are some.

Geraghty trend was last year, you've seen what it is this year, so I think a component.

A component of that clearly is just the time period that youre looking at and the acceleration of the underlying trends.

And if you'll indulge me. Another question also here for about 20 years has really changed its geographic footprint away from catastrophe and obviously with climate change people I haven't seen a lot of losses and maybe the severity trend over the long term for cat exposed property is up.

But how does the severity trend compare.

Between the.

The trend in generally non cat exposed property versus cat exposed property are states like Illinois, and a lot of the Midwest seeing a very different trend than than severity trends longer term from weather along the coast.

Yeah.

Let me start and then Mark.

Just if you guys want to jump in so first I would start with saying, we've built a really great business model and homeowners.

Just like we make more money than the industry.

On auto insurance were even better in homeowners.

And you see those results over 10 years, you do see this year a lot of catastrophes, which is likely to have an underwriting loss, which we preferred not to have that said catastrophes happen and that's why people buy insurance.

So we're comfortable that that will work when you look underneath that and say, okay, what's driving those cat losses.

Storms are more severe now so just the fact that you have a more severe storm will increase the severity of the losses that you have when the storms whether thats.

Hailstorm or tornado or a hurricane.

<unk> causes more damage.

Underneath both that in a traditional loss or just the normal inflationary pressures.

And so the cost of lumber goes up whether you burn your house down.

Or it gets knocked down by a hurricane it's that underlying it. So you would have kind of a compounding impact on catastrophes that said we are good at it we manage it by state. So you are correct, Illinois would have less pressure.

Because it would have less.

Catastrophe losses than perhaps the state along the east coast or in the South West Coast. So.

If we factor that all in.

And both of those things there, we do think though that we have seen the raise in prices.

That's been both of those factors have increased it so the dramatic increase in homeowners insurance prices has been driven by both those factors.

Only thing I would add Josh.

I think you take a step back and say what are the underlying drivers of the increase in homeowners severity.

And it's principally as Tom mentioned, it's labor costs and its material cost.

To repair homes.

And to the extent the rates of inflation vary across different parts of the country. Obviously that will have an influence on state specific severity I think it's more driven by that than any whether its cat exposed or not cat exposed because those costs just get amplified when theres, a large event and we've just tough to repair a lot.

Volume of homes.

Thank you for the long answer.

Okay.

Thank you one moment for our next question.

And our next question comes from the line of Tracy <unk> from Barclays. Your question. Please.

Thank you good morning.

And it is selling the health and benefits business really to unlock capital and to restore some of your contingency capital early statement today.

Some are more lean organization and focus more on core offerings.

Neither.

And nor was it in.

Relationship to any shareholder asking us to pursue a sale and a few of you wrote about.

Let me just tell you what it is so we're selling the businesses because it is the best way to capture the value created their terrific businesses, I mean make almost a quarter of $1 billion a year and again, it's a good platform they have low capital requirements and like we like the businesses. When we look forward to the future that we said, we think we can harvest more growth from it.

If we had more complementary distribution a broader set of products capabilities, such as network management of our health network like manage that those are things that we don't have today and we said we can build those.

It would take us time and money on the other hand, we could access those that already exist, but that requires us to let go of the success. We've created so we decided to choose the latter Pat.

Nothing to do with share.

Shareholder coming to us and saying you should sell this had nothing to do with made in the money that everything they do it. This is the right way to manage your company to optimize shareholder value, which is sometimes you have to let go of the success you have created.

Okay, but maybe as a byproduct of assuming you could take whatever valuation target range you have in mind.

It be early but would you have any kind of implied capital relief from your internal model from Michelle.

Yeah.

Are these are low capital businesses. So this.

First I would say on the price high would be the appropriate message I'd like you to carry out there.

Because we do like the business is a lot.

They are pretty low capital businesses. So.

The sale price is will generate additional capital and then we'll decide what we want to do with it when we get there we've got plenty of other growth opportunities, we're doing a lot with.

To grow market share in property liability, we don't need to make that decision right now so we're not going to.

Okay.

Or could it potentially move down to <unk>.

Our accelerate your path to resume buybacks down the road.

There is we have all of the options that you would have to use capital.

Organic growth.

To buying shares back all of those options are out there we have no set plans for the cat, but right now we're focused on this is a great business. We can help it be an even greater business by letting go of it. So that's what we're going to do.

And Tracy.

Our capitalization philosophy as you know we tend to keep the capital at the holding company to the extent that we can so I don't believe we have a capital need at AIC that would cause us to want to do that so I think we would remain with the philosophy of keeping the capital where it's at the holding company level to the extent.

We have capital management decisions to make as Tom said, we'll make them when the time comes but I don't think we have a need for capital and AIC. So I don't know why we would go away from the philosophy of keeping it up and holding company.

Got it and just quickly on your commentary of extending your asset duration now at four six years. I mean, you don't have a like this anymore you plan to divest our health and benefits business.

How are you thinking about the optimal asset duration relative to your pro forma duration of your remaining liabilities.

Well, we look at it from an enterprise risk and return standpoint. So the first thing we do is say how much capital do we want to allocate to the investment portfolio and then John and his team figure out how they best want to allocate that amongst amongst.

Amongst various asset classes.

John May want to make a comment on where we're at today I would point out that if you look at slide.

2014, we made the right calls at the right time.

Yes, I'd just add.

Debt.

Another thing to consider when one lengthens our duration is just to keep the appropriate amount of liquidity and flexibility in the portfolio and I can assure you that we are doing that between the cash that we hold short term position to other things that we can turn into cash in short order and just maturities by year end with close to 10 billion.

So we believe that we're both capturing the additional income that the market is giving us.

Turning out to preserve the capture of that income for a longer period of time building. Some resilience of the portfolio in case in case of economic environment would change while also providing adequate liquidity.

Okay. So it sounds like you feel comfortable the duration mismatch because of our strong liquidity position is that fair.

Well.

The property liability businesses, a little different than the life business in terms of.

Matching to liability.

In the life business of course, we have a set maturity date.

And factor in some stuff and you figure outlets match that are in the property liability business of course, the liabilities are much shorter, but then they're naturally recurrent. So you can pay off one claim and you get another one.

Is that a separate claim or an.

<unk> match it to that you'd be having here for 90 days for a physical damage claims. So it's really more about liquidity and overall risk management and I would also point out.

A large part of our part of our Stat capital is there in case, we mess up on.

Underwriting income and so that has a really long duration on it.

One other thing to add if you look at the.

The slide the Blue line depicts.

The duration, we've really just reverted back to what's been more of a long term average for us. So we're at a point in time, where we were in a.

A lower level of duration of lower level of interest rate exposure. We thought that was right given what was happening with the fed and interest rates in general now that rates have climbed back up pretty aggressively we want to go back to.

What has been the longest run central tendency for us.

Thank you.

Thank you one moment for our next question.

And our next question comes from the line of David <unk> from Evercore ISI.

Hey, good morning.

I just had a question on the frequency.

Rents that you guys saw in the third quarter could you just describe what you guys are seeing it sounded like that was up a little bit.

I was hoping you could put some numbers around it and sort of what you're what you're seeing especially as it looks like your.

Youre shrinking units I would think that there would be some.

Benefit from improving the mix of business, but I was hoping you could maybe just touch on that.

Yes, Hi, David It's Mario Thanks for the question I'll talk little more qualitatively about frequency since we now are disclosing more pure premium trends, which combined the overall loss trend. We just think it's a better way for for you all to look at it and think about auto profitability, but in terms of auto frequency the headline.

Is it continues to revert back to pre pandemic levels, but remains below where it was in 2019.

There is continues to be a tailwind when you think about the safety features embedded in vehicles that will continue to to help.

Improved frequency, we think from a long term trend going forward and then when you look at the other driver which is.

Driving activity when we look at our telematics data and we look at the number of miles.

A person is driving each day is up mid single digits compared to last year still skewing.

Les to rush hour.

Times, which benefit frequency and more to non <unk>.

Peak hours, but that trend has been pretty stable over the last several quarters.

And we feel like we're in a period of stability in terms of driving behavior. So net net frequency.

<unk> is up modestly it's a small component.

Of pure premium so just to give you a couple of numbers when you adjust out the entry year.

Impact in pure premium.

About nine 7% year over year in the quarter and we said severity was up nine so you can see the the modest impact of frequencies having.

Again as people drive a bit more than they were a year ago.

Got it and you are saying its a little bit more stable now. So you know maybe flattens out there at those levels and insurance.

Yes, David the trend has been pretty stable over the last several quarters in terms of when we look at miles driven for our book.

Got it thanks, and then for my follow up.

Just to add a question on slide 13, and I appreciate them.

This information on the distribution channels.

I was hoping you know it looks like you guys track the Tam by by channel pretty closely.

Within the exclusive agent channel, how is that Tam being growing.

And I guess I am under the impression that it's been it's been shrinking at the expense of the direct and independent agent channels.

Just given that backdrop I'm wondering if you're seeing signs that you think you can sort of buck that trend in and start to grow within your exclusive agency channel.

David maybe a couple of thoughts first.

There is.

Analysis of if people want to tend to like assume that its a straight line.

There is competition for that customer amongst all of those so our effort to reduce the cost that Mario talked about providing an agent is to give customers better value, which should take.

Share away from some of the other two.

The independent agents.

Also a good place to point come where they don't want to just buy from an insurance company they want somebody to shop around for them.

It doesn't do the work for it and the direct channel.

Say with increased connectivity the direct channel is certainly growing but it's also growing a lot because one.

Billions of dollars of advertising go into it. So it's a it's an overall ecosystem I guess I would say and so we look at it and like we want to be there are people want to have buy from a company like Allstate Allstate brand name why not go to that agent, we want to be there for that person with everything they have the same thing if they want someone to shopper.

<unk> don't want to do the work we wanted to be in that independent agent channel and then the direct channel if they want to buy directly then and what we are doing is using the technology between those various things to make it an even better value proposition. So we showed you that that cell phone, which had three offers in it.

I imagine in Asia, now being able to not have to ask you a whole bunch of stuff what your deductible kind of stuff, where we pre populated with here's what we think Davis deductible should be offered that David. This package. So you put them in a different position. So we look at it really is sort of organic.

And it moves between there and we want to be there for all of our customers. So it's not like we think one is going to win and the other is going to lose it just that constant competition to just do a better job for the customers that want to buy it that way.

Great I appreciate the color. Thanks.

Hey, Jonathan we'll take one more question.

Certainly.

Moment for our final question.

Okay.

And our final question for today comes from the line of Meyer Shields from K B W. Your question. Please.

Good morning, guys.

On Colombia.

Thank you for taking my question.

Most of my questions just one on the growth in 2020. Paul So what is your expectation and plan for next year is the non standard auto is still the key growth driver.

Any color on that would be great. Thank you.

Mario will give you some specifics I would say that.

The biggest impact so first we are starting to grow in the Allstate brand Mario has got a number of states where he is.

Starting to rollout a transfer and a growth in a more aggressive way.

Capture the market share growth. So we're comfortable there they independent agent business, we think will grow.

Through continued expansion of the non standard and the customer 368, Mario talked about I would say that the biggest.

The.

Driver is the biggest thing we're unclear on right now is what happens in New York.

New Jersey, and California that will be the biggest impact on policies in force that may be different than the growth measured youre talking about but.

Certainly we need to get properly priced in those states or else will get smaller in those states and given that there are a large percentage of our book of business. It will impact overall policy count Mario Thank you would it.

The only thing I would add.

As we look ahead as you know I think it's important to recognize that we manage the business on a local level that means state by state market by market risk segment by risk segment. That's been the approach we've taken to improve profitability and we're taking that same approach as we look forward.

In terms of growth and I think where we're at.

Is really two groupings of states emerging Tom talked about.

The three that we've just got to get more rate and get more profitable than before we can even.

Begin to think about growing and investing in growth.

Because it just economically doesn't make sense for us and that's.

California, New York, New Jersey, the rest of the states that you know if you divide them. There is a number of states that are all are already at target levels of profitability and we're beginning to do things like make local marketing investments.

Leverage a lot of the capabilities, we've been building with transformative growth and momentum we've gotten the exclusive agent channel. The improvements we've made in direct and the capabilities. We built there and what we're building an independent agent.

Channels with things like customer 360, and non standard auto so we feel like.

As a as a system.

Our much.

More effectively positioned to grow when the time is right for us to grow and as we look out into 2024, we think more states will fall into that ready to grow category in terms of target levels of profitability and we look forward to.

Continuing to invest in growth in those states and leverage the capabilities. We've been building with transformative growth. So let me close with four points, which summarized kind of conversation with pad, what's going to drive shareholder value profitability increases strategic cap allocation, great investment returns and then transfer arent growth.

Long term sustainable growth, we think those four things combined make us a great opportunity. Thank you very much we'll see you next quarter.

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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Thank you for standing by and welcome to Allstate's third quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if your question has been answered and you'd.

Like to remove yourself from the queue simply press Star one again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program Brent Pedro <unk> head of Investor Relations. Please go ahead Sir.

<unk> Com our management team is here to provide perspective on these results and our strategy as noted on the first slide of the presentation.

Our discussion will contain non-GAAP measures for which there are reconciliations in the news release and Investor supplement and forward looking statements about allstate's operations Allstate's results may differ materially from these statements. So please refer to our 10-K for 2022 and other public documents for information on potential risks.

And now I'll turn it over to Tom.

Good morning, we appreciate your investment of time at Allstate.

Let's start with an overview of results and then Mario and Jess will walk through operating performance.

Beginning on slide two so our strategy has two components increased personal property liability market share and expand protection provided to customers, which is shown in the two hours on the left on the right hand side you can see the highlights for the quarter.

Made good progress on improving auto insurance profitability. There is more to be done, but you can see the improving trend again this quarter.

We decided to pursue a sale of Allstate health benefits businesses.

After successful integration of Allstate's voluntary benefits business with National General's group and individual health businesses. We've traded are really well positioned benefits biopharm and that strategy, which part of the National General acquisition plan. Our success now positions us to achieve additional growth that potential can be maxim.

By aligning this platform with a broader set of complementary products distribution channels and capabilities, we anticipate completing a transaction in 2024.

We also made progress in executing transformative growth initiatives to set the stage for personal property liability market share growth as margins improve.

And second part of our strategy to broad protection offerings also progress with Allstate protection plans growth.

Let's review the financial results on slide three revenues of $14 5 billion in the third quarter increased nine 8% above the prior year at $1 3 billion in.

Net loss of $41 million and adjusted net income of $214 million.

At <unk> 81 per diluted share reflects improved property liability underwriting performance property liability recorded an underwriting loss of $414 million, which compares to $1 3 billion loss in the third quarter of 2022, while the improvement was encouraging loss cost trends remain elevated and require.

Continued execution of auto insurance profit improvement plan, particularly in California, and New York and New Jersey.

Slide four provides an update on the execution of the four components of that plan.

Starting with rate the Allstate brand has implemented 26, 4% of rates since 2022, including 95% through the first three quarters of 2023 National General implemented rate increases at 10% in 2022, and an additional eight 8% in the first nine months in <unk>.

'twenty three we will continue to pursue rate increases to restore auto insurance margins margins back to target levels.

Third we've restricted new business growth in areas in classes of business, where we're not achieving target returns.

Given the success we've had in some areas we're selectively removing these restrictions in some states and segments.

Turning to slide five let's touch base on why we believe this profit improvement that will work in the current competitive environment.

Allstate's capabilities and business model generated industry, leading auto insurance margins over the last 10 years with an average combined ratio of roughly <unk> 96, and a half and an average underwriting income of $800 million that.

Rents approximately a five.

Five <unk>.

Outperformance in the industry, which generates an incremental profit of about $1 $3 billion annually only a few of the other top 10 insurance companies had a similar record.

And the current competitive environment. These same capabilities will enable us to continue the progress made in improving auto insurance margins.

The ramp of Ryzen auto claims severities eroded profits for the industry with most carriers are responding by increasing auto insurance prices and lowering expenses.

State Progressive Geico had significantly raised auto insurance prices since 2019.

Steve borrowers increases pricing prices to a lesser degree, but as a result appears to be incurring large underwriting losses.

The expense reductions are also being pursued by many companies, including lowering advertising spending which has moderated competition for new customers.

The impact on policies enforces dependent on each company's individual profit and growth plan as Mario will discuss the Allstate brand policies in force have declined particularly in four large states.

<unk> policies in force declined by a larger amount while progressive has grown.

Allstate's capabilities enable achievement of the profit improvement plan in this competitive environment.

Now, let's review the potential sale of the health and benefits business on slide six.

When we acquired National General is primarily to improve our position independent agent channel for property liability insurance and we've exceeded our goals in that integration.

The acquisition also gave us the opportunity to combine allstate's voluntary benefits business with National General's group and individual health businesses.

I will state health and benefits operates three successful businesses, which is shown in the middle there and the one trillion employer benefit markets group and individual health when you add those all up.

We've been the preeminent voluntary benefits provided for 24 years with a comprehensive product offering that generates annualized premiums and contract charges of $1 billion.

And $300 million of new sales.

National General's group health business targets, the small case size market and has $700 million premium and fee revenue and $400 million in new sales to individual health protection is provided through both proprietary and third party products, which generates both underwriting and fee income.

The health and benefits businesses have revenues of $2 3 billion, which is 4% of total corporate revenues and adjusted net income of $240 million for the trailing 12 months, which you can see in this two pie charts in the bottom it's kind of spread between our businesses.

The growth potential of these businesses can be accelerated with greater alignment with a wide range of companies in the market and as shown on the right hand side.

With its attractive business profile and financial results, we expect a transaction to be completed in 2024.

Find components initiative as shown at the top of slide seven.

Affordable simple connected protection is at the heart of this strategy to further improve customer value.

Customers will have access to high quality protection that better meets their needs at a low cost with hassle free experiences. However, they choose to access our broad distribution networks were alive in a market with the new business experience and further enhance the connectivity of the Allstate App. This week.

Mario will discuss our success in expanding customer access.

Each transfer on a growth element is at various stages of maturity for moving from phase III of building new model towards scaling it in phase for us now.

Now I'll turn it over to Mario to goes through the property liability results. Thanks, Tom let's start on slide eight.

Our comprehensive auto profit improvement plan is improving margins.

Liability earned premium increased 10% compared to the prior year quarter, driven by higher average premiums, which were partially offset by a decline in policies in force.

The underwriting loss of $414 million in the quarter improved $878 million compared to the prior year quarter due to the improvement in our auto loss ratio.

The chart on the right highlights the components of 103, four combined ratio in the quarter, which improved eight two points. Despite a two eight point increase in the catastrophe loss ratio compared to prior year.

Prior year reserve re estimates, excluding catastrophes were $166 million unfavorable or a one four point adverse impact on the combined ratio in the quarter.

$82 million was attributable to the run off property liability annual Reserve review and $84 million in Allstate protection, primarily driven by National General personal auto injury coverages.

The underlying combined ratio of $91 nine improved by four five points compared to the prior year quarter and $1 sequentially versus the second quarter of 2023, Despite continued elevated severity inflation.

Now, let's move to slide nine to review Allstate's auto insurance profit trends.

The third quarter recorded auto insurance combined ratio of $102. One was 15 three points favorable to the prior year quarter, reflecting higher earned premium lower adverse prior year reserve re estimates and expense efficiencies.

Higher average premium and the continued execution of our profit improvement plan drove the sequential improvement in underlying combined ratio to $98 eight as reported or 105 in the bar graph when removing the one seven point favorable impact on the third quarter from improved severity for <unk>.

Claims reported in the first two quarters of the year.

The chart on the right portrays how our comprehensive actions are resulting in a higher proportion of the portfolio progressing towards or achieving target levels of profitability.

Excluding the three large states, which generated 45% of Allstate brand auto underwriting loss in 2022, the Allstate brand auto insurance underlying combined ratio was 97 two.

Slide 10 shows the impact on policies in force from actions to improve profitability.

Allstate brand rate increases have exceeded 26% over the last seven quarters.

New issued applications shown in the Middle chart declined 19, 5% compared to the prior year quarter, largely driven by actions to reduce growth in unprofitable states <unk>.

California, and New York, and New Jersey, combined declined 75% compared to the prior year.

Allstate brand auto policies in force decreased by 6% in the third quarter compared to the prior year, partially driven by the lower new business and also driven by lower retention due to rate increases.

Elevated loss trends in Texas required implementation of rate increases of over 50% in the last 21 months as a result retention has declined while profitability has improved.

Policies enforced in these four large states combined decreased by eight 7%, whereas the remaining states declined by four 7% compared to the prior year through the third quarter.

On slide 11, we take a deeper look at the National General Auto book.

While third quarter margins were impacted by $95 million of unfavorable non catastrophe prior year reserve re estimates primarily across liability coverages. The underlying combined ratio of 96 eight in the quarter and 95 seven year to date remains largely consistent with the prior year periods.

<unk> higher loss cost expectations, given the reserve strengthening to date offset by higher average premiums and expense efficiencies.

The National General business as the product, including fee based revenue features and claims capabilities to excel in the non standard auto insurance marketplace.

Slide 12 covers homeowners insurance results, which incurred an underwriting loss in Q3, driven by higher catastrophe losses on.

<unk>.

We remain confident in our ability to generate attractive attractive risk adjusted returns in the homeowners business.

Slide 13 highlights progress on expanding customer access as part of transformative growth.

We continue to enhance capabilities across distribution channels and are the only major carrier with competitive offerings and branded agent independent agents and direct distribution.

The exclusive agent channel represents the majority of all states U S personal lines premium at approximately $32 billion.

Roughly 22% market share in this channel.

Our exclusive agents continue to be a strength offering personalized local advice customers value in this $145 billion market.

While exclusive agent auto new business decreased by 5% overall applications per agency, excluding California, and New York and New Jersey has increased by 13, 4% so far this year.

In addition modifications to compensation have driven bundling at point of sale to an all time high of over 75%.

<unk> performance continues to improve as they adapt to new compensation programs.

We also have great growth potential through independent agents the acquisition of National General strategically positioned to Allstate to grow in the independent agent channel.

National General continues to profitably grow non standard auto while converting legacy encompass and Allstate independent agent business onto their platform.

Expanded non standard auto presence in 12 states represented 9% of National General's 12, 9% increase in policies in force during 2023.

As we leverage allstate's expertise in standard auto and homeowners. This channel should represent another source of profitable growth.

We have improved our capabilities in this channel. So it will be another source of growth moving forward and now I'll hand, it over to just to discuss the remainder of our results alright. Thank you Mario.

As shown in the chart on the left net investment income totaled $689 million in the quarter relatively flat to the third quarter of last year, but with a higher contribution from market from the market based portfolio market based income of $567 million shown in blue was $165 million above the prior year quarter.

Collecting repositioning of the fixed income portfolio into longer duration bonds reduction of public equity holdings and higher interest rates.

The chart on the right shows changes, we made to the duration of the bond portfolio in comparison to interest rates in 2021, we began reducing duration to reflect the belief that interest rates would rise this not only reduced some losses as rates increase but it provided flexibility to reposition as yields increased.

Starting in the middle of last year, we began increasing duration as rates increased which is increased market based income.

On slide 15, let's take a closer look at our performance based portfolio, which offers diversification and enhances longer term returns.

The portfolio is anchored in private equity and real estate is diversified across infrastructure energy agriculture, and timber investments, we hold more than 400 names, including funds with multiple underlying positions across diversified vintage years.

The benefit from accepting this volatility as shown on the right with three and five year annualized returns of 19% and 12%.

<unk> equity portion of the portfolio has outperformed public equity benchmarks over three five and 10 years.

Slide 16 covers the results of our protection services businesses revenues.

Revenues in these businesses increased eight 9% to $697 million in the third quarter compared to prior year quarter increase is mainly driven by growth in Allstate protection plans, which increased 19, 2% prepared compared to the prior year quarter, reflecting expanded products and international growth.

These were partially offset by improved margins in Allstate roadside and lower expenses at Allstate identity protection.

Shifting to slide 17, our health and benefits business also had good results.

On the left hand of this on the left hand of the slide we summarized three discrete components, we evaluate to establish target capital. This is the basis of our capital management framework.

Base capital at the bottom is the capital required to meet ongoing operating requirements.

Stress capital as an additional layer of capital needed to cover tail events or the occurrence of multiple negative impacts such as lower lower auto profitability and high catastrophe losses.

The contingent reserves for extremely low frequency high severity events, a severe breakdown in diversification benefits and also provides strategic flexibility.

We use a highly sophisticated model that breaks out individual risk types incorporates regulatory and rating agency considerations and uses extensive simulations to determine the right amount of capital for each component. This is more sophisticated and comprehensive than the ratio of premiums to surplus to determine the right amount of capital for exam.

This framework also better assesses the use of catastrophe reinsurance, particularly for large tail events.

On a simple ratio.

Our sophisticated model and proactive actions provide flexibility to manage capital to maximize shareholder value creation.

To close lets turn to slide 19, and recap Allstate strategic priorities.

We continue making progress on our plan to return auto insurance profitability to targeted levels.

We'll pursue the divestiture of our health and benefits business.

We're continuing to advance on our transformative growth initiatives.

Ladies and gentlemen, if you have a question at this time.

Please press star one on your telephone one moment for our first question.

And our first question comes from the line of Gregory Peters from Raymond James Your question. Please.

Well good morning, everyone.

I guess for the first question and there was a lot to unpack in your release.

And slide deck I'm going to focus on slide seven which is the transformative growth strategy.

I was looking at your slide it talks about building the new model and scaling the new model.

And I'm just curious if you're running elevated expenses at this point because youre running two separate models.

And as you rollout the model I'm curious about how its accounting for the nuances of different customers and that's what I'm thinking about the needs of preferred customers versus standard versus non standard.

Good morning, Greg Good question, let me so first the transfer of our growth is about increasing market share in personal property liability. It's got a couple of components at the core of that is being low cost insurance, but also about raising customer value and also about being avail.

Both to people however, they want to get to is back to your segment of customers.

Through more people whether that's.

Through.

Different bundling with exclusive agents through.

Through independent agents.

Our direct also works and we can do that.

We know we can raise customer value each saw on the slide there.

I didn't go into it but the new sales processes really slick.

<unk> up with three.

Offers that are specifically for you you don't have to pick your deductible you don't have to go through a bunch of questions people don't pick the deductible for Ya.

It's fastest slick then.

The renters piece, which is in the middle one it takes less than a minute.

And we're finding great ways to attach more protection by making it simpler for our customers. We're also making it more connected which is in the right hand side.

And so we relaunched the App, we think that people are going to have fewer apps on their phone going forward. So having an app where people could just access either look at their bill or get their I'd card is helpful. But it's not compelling. So we are expanding that so you'll see on their gas Buddy you can get figure out how to save money on buying gas, which is of course direct.

Related to <unk>, because we have a whole bunch of other things that we either added or are going to add.

For example, we are really terrific and crash detection with our telematics experience through arity.

And do that through like 360, and it's a terrific product. So there's a variety of things we're doing to expand that is it relates to expenses, we're continuing to invest in this I don't know that I would say it's over the expense side.

We have an objective we have to lower our overall expenses were after that but we're not backing off on investing in the new technology. One of the things that we've proved out the underlying assumptions was can we build the technology to do what you see on that screen and the answer is yes. We've built it it's out it's working it's rolling we need to scale it but we have.

High confidence that it's scalable so.

You should expect us to continue to find ways to reduce costs. They are into this but.

But I don't think like there is like.

We're riding hot inexpensive today because of that.

As it relates to the various segments of customers, we want to sell as many people as we can as much stuff as we can however, the amount of countless you want an agent will give you an agent. We just have to make sure. It's cost is what you are prepared to pay and they do what you want.

Whether that's an exclusive Asia and an independent agent and if you want to buy direct for the company you want to buy through a call center they want to buy on the web.

We just want to make it as simple and easy as you can which we think is differentiated in the marketplace.

Well that makes sense I guess for my follow up I'm going to pivot to the pricing slides I'm thinking slides nine and 10.

And I was wondering if you could I know you provided detail on your comments, but if you could give us an update on the problematic states.

I think in slide nine you said, 41% of the of your business in auto is running above 100.

If we look forward to 2024, how do you think this chart might look.

Yeah.

Which charter Youre, referring to Greg.

Yes, yes.

Yeah.

Yes, I mean of course, it all depends Mario can give you some color as well, but it all depends what happens in California, and New York and New Jersey.

Let me be very clear, we are not going to continue to lose.

Four digits in millions in those three states.

So far <unk> Mario talked about is getting smaller by not growing.

We've executed that then.

The next step is to not be able to serve customers, who we want to serve because we can't afford to those 20 cents on the dollar.

Mark do you want to comment on.

We've been talking to it's not like this is we just figured this out.

Are there they're not aware of.

Well I'll give you a little a little additional color across the three states and hence Tom's right. We've been talking about this all year and we've taken pretty.

Significant actions to restrict.

New business volumes and its down like we've talked about earlier about 75%.

We've got three significant rates pending our rates pending across all three states. We have an auto rate in California that we filed back in May I believe 35%.

<unk> got a 29% file filing pending in new Jersey, we implemented rates in New York, ranging from high single digits to low double digits or low teens across our opening closed books middle of the year and we just filed for another 18, 3% in New York Auto So we've got significant rates pending.

With the department.

As Tom mentioned, where we're at now is we need action on those filings in the fourth quarter.

Got it thanks for the detail.

Thank you one moment for our next question.

And our next question comes from the line of Alex Scott from Goldman Sachs. Your question. Please.

Good morning, it's Marley on for Alex So you mentioned.

The prepared remarks prepared remarks that you were increasing in person inspections to reduce overall claim costs could you touch on this a little bit more how impactful is this and then maybe how many of the current accidents or assess now in person versus remote and then how should we think about this for near term changes to loss Ali.

Hi, Mario This is Mario I'll answer your question, So I would where I would start is going back to the different components of our auto profit improvement plan.

Taking rate increases reducing costs restricting.

New business in states, where we arent achieving target levels of profitability.

And improving.

Operational processes and claims what youre describing around more in person inspections as a component of that fourth piece of improving operational processes.

We believe that by doing more physical inspections doing more oversight broadly of both in network and out of network shops.

As well as doing the same thing on the on the property side as well that we'll be able to identify opportunities.

What we owe but but also not pay for say things like pre existing damage or.

In total loss cases cars that could be repaired versus replace so we think doing more in person physical inspections. In addition to continued continuing to leverage our quick photo claims capabilities.

Is the right thing to do to best manage.

Loss cost going forward and Thats, what we intend to do to ensure that we are operationally excellent in claims and again paying what we owe but eliminating any leakage in the system and we're prepared to invest in the claims organization to be able to execute on that so.

In terms of the expense ratio that ratio as part of our adjusted expense ratio, we're still committed to hitting.

The 23 by the end of next year the investments, we're making claims are inclusive.

That goal, we think we can do bulk.

Got it. Thank you and then I just wanted to get your thoughts on longer term severity drivers that youre seeing in terms of medical inflation and any impact from the UAW strike.

Sure So we'll start with medical inflation.

Casualty and injury severity is unchanged it didn't get worse, but it is.

It's consistent with where we were last quarter and the drivers behind that continue to be.

Medical inflation.

More attorney representation higher leverage levels of treatment being pursued.

And all the components of both.

Kind of economic and social inflation that had driven injury severities up over time, those will continue to be headwinds for us, but as we again as I talked about on the physical damage side as we've adapted our claims processes.

Two two.

To take into account those inflationary trends, we've seen we've seen some good progress. So we're we're looking to settle claims earlier in the cycle and we've seen real improvement in terms of reduction in pending injury claims as well as faster settlement times.

An injury claims, we're using things like analytics and testing.

Models to identify accidents, where injuries are likely.

And those that have a higher likelihood of potentially being represented by attorneys. So that we can further accelerate claiming contact time and get out ahead of the process.

And manage the overall claim process. So we're doing things proactively to help mitigate some of those inflationary impacts.

And we will continue to do that and like I said.

We did see some stability and injury severity trends during the quarter.

Thank you.

Yes.

Thank you one moment for our next question.

And.

Our next question comes from the line of at least Greenspan from Wells Fargo. Your question. Please.

Hi, Thanks.

Good morning, My first question.

During the quarter you guys spoke about looking to buy some additional.

Aggregate stop loss reinsurance.

Do you have any update on <unk>.

What youre doing on that.

Reinsurance side.

In terms of looking to protect your capital position.

Yes. Thanks this is Jeff.

So we have talked a lot about our reinsurance program in general as you know we have a robust reinsurance program that reduces our overall capital levels.

We'll do it and to the extent, we can't get it done economically.

Thanks, and then my second question you guys highlighted that you're looking into a potential transaction with the benefits business were there any diversification credits that you guys got from a capital perspective by owning the benefits business.

Yeah.

Of course, yeah, so they're there, but we factor that into our overall position yes.

Okay. Thank you.

Thank you one moment for our next question.

Okay.

And our next question comes from the line of Michael Zarefsky from BMO. Your question. Please.

Hey, Good morning, this is Jack on for Mike.

Just one question on changes to Allstate's captive distribution commission and fee structure I think.

You mentioned earlier, how it has driven greater bundling rates.

I'm just wondering just also expect this change to impact overall organic growth levels do you expect a meaningful benefit to the company's expense ratio.

But I think what you go all the way up to transformative growth.

Yes, we think that the whole package of staff growth drive market share growth that includes <unk>.

Making sure that the agents do.

Do what customers want them to do that.

They're supported in doing that with technology, and everything else and marketing and that they are well compensated for what they do but so there is various pieces emerge won't talk specifically about the comp changes, yes. So again I would characterize the most recent set of changes as a continuation of what we saw.

Or is it really several years ago, which was intended to.

Drive higher levels of productivity.

The exclusive agent distribution system, but also reduce distribution costs over time and I think what we're seeing if you just particularly if you take out the impacts of the three large states, where we're purposefully driving reduced volume is.

Exactly what we had hoped would happen so.

From a from an expense standpoint, you see in the quarter, we benefitted by.

Two or three tests from a distribution.

Cost perspective, so we're continuing to see the the impacts and benefits of lower distribution costs, but more importantly, the productivity of the exclusive agency system.

<unk> to improve so again, if you take out those three states overall production was up seven 6% average productivity was up over 13% and when you look at our top tier of agents, we segment agents into three categories emerging pro an elite that elite group.

Their level of production was up 15% so that shows that agents continue to invest in.

In their businesses and take advantage of increased shopping levels in the marketplace, but they are focused on driving the kind of growth.

At the same time.

Thank you.

Thank you one moment for our next question.

Okay.

And our next question comes from the line of Josh Shanker from Bank of America. Your question. Please.

Yeah, thank very much.

If it goes pretty far back and historically.

Look at reserves and try and analyze them.

It's harder to short tail lines, historically Allstate, we run at about 95% paid to incurred loss ratio.

For every dollar of lost you put five in the reserve for future losses.

And that's true in <unk> 'twenty three before the previous five quarters. It ran at a astonishingly low 83% I know that you're trying to get the reserves right, but it does feel over this period of <unk>.

Elevated loss ratio.

<unk> put a lot more of its reserves.

Welcome into reserve than any time in my model is there something different that have gone on over the past five quarters now.

Now that you are resuming a normal sort of paid to incur trend or is it just.

That was unusual period and you needed to put more reserved.

Yeah.

Maybe I'll start and then Jeff can fill in here first Josh.

Josh Good morning, but we think the reserves are right and we put up what we think we need to put up.

We need to put it up as painful as it was last year.

We felt we needed to put it up.

When you look at the I don't know I'm not looking at specific numbers, but had been through reserves enough to know that.

Page bounce around a lot of it depends what happened in the pandemic with.

Impending levels and we adjust for all that.

So I would say it just may have some other stuff, but I think.

Jess Brent could walk through your model with you and help you see it but.

But we just think the reserves right when we put them up.

We've just had but I would agree with that I also think you should keep in mind that that same period was a period of extreme acceleration in the loss cost trend, which you wouldn't see in over the historical periods right. So youre going to get a different paid to incurred ratio. When you have acceleration the way we've seen them you saw what are some.

<unk> trend was last year, you've seen what it is this year, so I think a component.

A component of that clearly is just the time period that youre looking at and the acceleration of the underlying trend.

How does the severity trend compare.

Between the.

Yeah.

Let me start and then Mark.

Mario just if you guys want to jump is first I would start with say, we've built a really great business model and homeowners.

Just like we make more money than the industry.

On auto insurance were even better in homeowners.

And you see those results over 10 years, you do see this year a lot of catastrophes, which has led us to have an underwriting loss, which we preferred not to have that said catastrophes happen and that's why people buy insurance.

So we're comfortable that that will work when you look underneath that and say, okay, what's driving those cat losses.

Storms are more severe now so just the fact they have a more severe storm will increase the severity of the losses that you have when the storms whether thats.

Hailstorm or tornado or a hurricane.

<unk> causes more damage.

Underneath both that in a traditional loss or just the normal inflationary pressures.

And so the cost of lumber goes up whether you burn your house down.

Or it gets knocked down by a hurricane is that underlying until you have kind of a compounding impact on catastrophes that said we are good at it we manage it by state. So you are correct, Illinois would have less pressure.

Because it would have less.

Catastrophe losses than perhaps the state along the east coast or in the South West Coast. So.

If we factor that all in.

And both of those things there, we do think though that we have seen the raise in prices.

That's been both of those factors have increased it so the dramatic increase in homeowners insurance prices has been driven by both those factors.

Only thing I would add Josh.

I think you take a step back and say what are the underlying drivers of the increase in homeowners severity.

And it's principally as Tom mentioned labor costs and as material costs.

To repair homes.

Volume of homes.

Thank you for the long answer.

Okay.

Thank you one moment for our next question.

Our next question comes from the line of Tracy <unk> from Barclays. Your question. Please.

Thank you good morning.

And it is selling the health and benefits business really to unlock capital and to restore some of your contingency capital early statement today is to become a more lean organization and focus more on core offerings.

Neither.

And nor was it in.

Relationship to any shareholder asking us to pursue a sale of send out a few of you wrote about let.

Let me just tell you what it is so.

We're selling the businesses because it's the best way to capture the value created a terrific businesses make almost a quarter of $1 billion a year and again, it's a good platform they have low capital requirements and like we like the businesses well.

We look forward to the future of that when we said we.

We think we can harvest more growth from it if we had more complementary distribution a broader set of products capabilities, such as network management of our health network like manage that those are things that we don't have today and we said we could build those.

It would take us time and money on the other hand, we could access those that already exist.

But that requires us to let go of the success. We've created so we decided to choose the latter Pat it had nothing to do with <unk>.

Shareholder coming to us and saying you should sell this had nothing to do it made in the money that everything they do it. This is the right way to manage your company to optimize shareholder value, which is sometimes you have to let go of the success you've created.

Okay, but maybe as a byproduct of assuming you could take whatever valuation target range you have in mind it might be early but would you have any kind of implied capital relief from your internal model for Michelle.

Yeah.

These are low capital businesses. So this.

First I would say on the price high would be the appropriate message I'd like you to carry out there.

Because we do like the business is alive.

Secondly, they are pretty low capital businesses. So whatever the sale price is will generate additional capital and then we will decide what we want to do with it when we get there we've got plenty of other growth opportunities, we're doing a lot with that.

To grow market share in property liability, we don't need to make that decision right now so we're not going to.

Okay.

Or could it potentially move down to AIC.

Our accelerate your path to resume buybacks down the road.

There is we have all the options that you would have to use capital organic growth.

I would add Tracy, we and our capitalization philosophy as you know we tend to keep the capital at the holding company to the extent that we can so I don't believe we have a capital need at AIC that would cause us to want to do that so I think we would remain with the philosophy of keeping the capital where it's at the holding company level to the extent.

Got it and just quickly on your commentary of extending your asset duration now at four six years. I mean, you don't have a like this anymore you plan to divest our health and benefits business.

Are you thinking about the optimal asset duration relative to your pro forma duration of your remaining liabilities.

Well, we look at it from an enterprise risk and return standpoint. So the first thing we do is say how much capital do we want to allocate to the investment portfolio and then John and his team to figure out how they best want to allocate that amongst amongst.

Amongst various asset classes.

John May want to make a comment on where we're at today I would point out that if you look at slide.

2014, we made the right calls at the right time.

Yes, I would just add.

Net.

Another thing to consider when one lengthens out duration is just to keep the appropriate amount of liquidity and flexibility in the portfolio and I can assure you that we are doing that between the cash that we hold short term position to other things that we can turn into cash in short order and just maturities by year end, we have close to 10 billion.

So we believe that we're both capturing the additional income that the market's giving us lengthening out to preserve the capture of that income for a longer period of time building. Some resilience into the portfolio in case in case of economic environment would change while also providing adequate liquidity.

Okay. So it sounds like you feel comfortable the duration mismatch because of our strong liquidity position is that fair.

Well.

The property liability businesses is a little different than the life business in terms of.

<unk> liability.

In the life business of course, we have a set maturity date.

And factor in some stuff and you figure outlets matched that are in the property liability business of course, the liabilities are much shorter, but then they're naturally recurrent so you pay off one claim and you get another one.

Is that a separate claim or and so if you match it to that you'd be having here for 90 days for our physical damage claims. So it's really more about liquidity and overall risk management and I would also point out.

A large part of our part of our Stat capital is there in case, we mess up.

Underwriting income and so that has a really long duration not.

Tricia and one other thing to add if you look at the.

Slide the Blue line depicts <unk>.

For durations. So it really just reverted back to what's been more of a long term average for us. So we're at a point in time, where we were in a a.

The lower level of duration of lower level of interest rate exposure. We thought that was right given what was happening with the fed and interest rates in general now that rates have climbed back up pretty aggressively we want to go back to.

What has been our longest run central tendency for us.

Thank you.

Thank you one moment for our next question.

And our next question comes from the line of David Mcmahon from Evercore ISI.

Hey, good morning.

I just had a question on the frequency.

Rents that you guys saw in the third quarter could you just describe what you guys are seeing it sounded like that was up a little bit.

I was hoping you could put some numbers around it and sort of what you're what you're seeing especially as it looks like your youre shrinking units I would think that there would be some.

Benefit from improving the mix of business, but I was hoping you could maybe just touch on that.

Yes, Hi, David It's Mario Thanks for the question.

Little more qualitatively about frequency since we now are disclosing more pure premium trends, which combined the overall loss trend. We just think it's a better way for for you all to look at it and think about auto profitability, but in terms of of auto frequency. The headline as it continues to revert back to pre pandemic levels.

What remains below where it was in 2019.

There is continues to be a tailwind when you think about the safety features embedded in vehicles that will continue to to help.

Improved frequency, we think from a long term trend going forward and then when you look at the other driver which is.

Driving activity when we look at our telematics data when we look at the number of miles.

A person is driving each day is up mid single digits compared to last year still skewing or.

Less to rush hour.

Times, which benefit frequency and more to non <unk>.

Peak hours, but that trend has been pretty stable over the last several quarters.

And we feel like we're in a period of stability in terms of driving behavior. So net net frequency.

<unk> is up modestly it's a small component.

Of pure premium so just to give you a couple of numbers when you adjust out the entry year.

Impact in pure premium is up about nine 7% year over year in the quarter and we said severity was up nine so you can see the the modest impact on frequency is having.

Again as people drive a bit more than they were a year ago.

Got it and you are saying its a little bit more stable now. So you know maybe flattens out there at those levels and insurance.

Yeah, David the trend has been pretty stable over the last several quarters in terms of when we look at miles driven for our book.

Got it thanks, and then for my follow up.

Just to add a question on slide 13 and I appreciate.

This information on the distribution channels.

I was hoping you know it looks like you guys track the Tam by by channel pretty closely.

Within the exclusive agent channel how is that Tam been growing.

And I guess I.

I'm under the impression that it's been it's been shrinking at the expense of the direct and independent agent channels.

So just given that backdrop I'm wondering if you're seeing signs that you think you can sort of bucked that trend in and start to grow within your exclusive agency channel.

David maybe a couple of thoughts first.

There is a lot.

Analysis of if people want to tend to like assume that its a straight line.

Actually there is competition for that customer amongst all of those.

Our effort to reduce the cost that Mario talked about in providing an agent is to give customers better value, which should take share away from some of the other two.

The independent agents.

Also a good place viewpoint to come where they don't want to just buy from an insurance company they want somebody to shop around for them.

What that would do the work for it and the direct channel obviously with increased connectivity. The direct channel has certainly grown but it's also growing a lot because billing.

Billions of dollars of advertising go into it so.

It's it's an overall ecosystem I guess I would say and so we look at it and like we want to be there if people want to have buy from a company like Allstate Allstate brand name why not go to that agent, we want to be there for that person with everything they have the same thing if they want someone to shaft are on firm don't want to do the work we wanted to be an independent agent.

Channel and then there's a direct channel if they want to buy directly then and what we are doing is using the technology between those various things to make it an even better value proposition. So we showed you that that cell phone, which had three offers in it.

Imagine in Asia, now being able to not have to ask you a whole bunch of stuff what your deductible I'll kind of step when we pre populated with here's what we think David deductible should be offered that David. This package. So you put them in a different position. So we look at it really is sort of organic.

And it moves between there and we want to be there for all of our customers. So it's not like we think ones are going to win and the other is going to lose its just a constant competition to just do a better job for the customers that want to buy it that way.

Great I appreciate the color. Thanks.

Hey, Jonathan we'll take one more question.

Certainly.

One moment for our final question.

Yeah.

And our final question for today comes from the line of Meyer Shields from <unk>. Your question. Please.

Good morning, guys.

Gain on Colombia.

Thank you for taking my question.

Most of my questions just one on the growth in 2020. Paul So what is your expectation and plan for next year is the non standard auto is still the key growth driver.

Any color on that would be great. Thank you.

Mario will give you some specifics I would say that the.

The biggest impact so first we are starting to grow in the Allstate brand Mario has got a number of states where it is.

Starting to rollout transferring our growth in a more aggressive way.

Capture the market share growth. So we're comfortable there they independent agent business, we think will grow.

Through continued expansion of the non standard and the customer 368, Mario talked about I would say that the biggest.

The.

Driver is the biggest thing we are unclear on right now is what happens in New York.

New Jersey, and California that will be the biggest impact on policies in force that maybe different than the growth measured youre talking about but.

Certainly we need to get properly priced in those states.

We will get smaller in those states and given that there are large percentage of our book of business. It will impact overall policy count.

Thank you would add the only thing I would add.

As we look ahead as I think it's important to recognize that we manage the business on a local level that means state by state market by market risk segment by risk segment. That's been the approach we've taken to improve profitability and we're taking that same approach as we look forward.

In terms of growth and I think where we're at.

Is really two groupings of states emerging Tom talked about the three that we've just got to get more rate and get more profitable than before we can even.

Begin to think about growing and investing in growth.

Because it just economically doesn't make sense for us in.

California, New York, New Jersey, the rest of the states that if you divide them Theres a number of states that are all are already at target levels of profitability and we're beginning to do things like make local marketing investments.

Channels with things like customer 360, and non standard auto so we feel like.

As a as a system.

Much.

Profitability increases strategic capital allocation, great investment returns.

Transfer arent growth long term sustainable growth, we think those four things combined makes us a great opportunity. Thank you very much we'll see you next quarter.

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

Q3 2023 Allstate Corp Earnings Call

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