Q1 2024 Allstate Corp Earnings Call

Operator: Good day, and thank you for standing by. Welcome to Allstate's first quarter earnings investor call. Currently, all participants are in a listen-only mode.

Good day and thank you for standing by welcome to all States first quarter earnings Investor call. Currently all participants are in a listen only mode. After our prepared remarks, there will be a question and answer session.

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Operator: Please limit your inquiry to one question and one follow-up. As a reminder, please be aware that this call is being recorded. And now, I'd like to introduce your host for today's program, Brent Vandermause, head of investor relations. Please go ahead, sir.

Please limit your inquiry to one question and one follow up as a reminder, please be aware that this call is being recorded and now I'd like to introduce your host for today's program right Brandon.

Brandon: <unk> of Investor Relations. Please go ahead Sir.

Brent Vandermause: Thank you, Jonathan. Good morning, and welcome to Allstate's first quarter 2024 earnings conference call. Yesterday following the close of market, we issued our news release and investor supplement, filed our 10-Q, and posted today's presentation, along with our reinsurance update, on our website at allstateinvestors.com. Our management team is here to provide perspective on these results and our strategy. After prepared remarks, we'll have a question and answer session

Brandon: Thank you Jonathan Good morning, and welcome to Allstate's first quarter 2024 earnings Conference call yesterday, following the close of market, we issued our news release and Investor supplement filed our 10-Q and posted today's presentation, along with our reinsurance update onto our website at Allstate investors Dot com.

Brandon: Our management team is here to provide perspective on these results and our strategy. After prepared remarks, we will have a question and answer session. As noted on the first slide of the presentation. Our discussion will contain non-GAAP measures for which there are reconciliations in our news release and Investor supplement and forward looking statements about allstate's opt.

Brent Vandermause: 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. However, Allstate's results may differ materially from these statements, so please refer to our 10-K for 2023 and other public documents for information on potential risks. Before I turn the call over to Tom, I would also like to provide an update on our monthly financial disclosures.

Brandon: Operations Allstate's results may differ materially from these statements. So please refer to our 10-K for 2023 and other public documents for information on potential risks before I turn the call over to Tom I would also like to provide an update on our monthly financial disclosures since early 2020 to.

Brent Vandermause: Since early 2022, implemented rate actions from the prior month have been included in our monthly release and disclosed on our Investor Relations website to provide additional transparency on our proactive response to the rapid rise in loss costs. Going forward, our implemented rate disclosures for auto and homeowner's insurance will be disclosed on a quarterly basis instead of monthly within our investor supplement. And now, I'll turn the call over to Tom. Well, good morning.

Tom: Implemented rate actions from the prior month have been included in our monthly release and disclosed.

Tom: Our Investor Relations website to provide additional transparency on our proactive response to the rapid rise in loss cost going forward are implemented rate disclosures for auto and homeowners insurance will be disclose on a quarterly basis instead of monthly within our investor supplement and now I'll turn the call over to Tom.

Thomas Joseph Wilson: Thank you for investing your time and interest in exploring why Allstate is such an attractive investment opportunity. I'll begin with an overview of the results, and then Mario and Jess are going to walk through the operating performance. And then, as Brent mentioned, after that, we'll have time for Q&A. Let's begin on slide two.

Tom: Good morning, Thank you for investing your time and interest and explain why it all set such an attractive investment opportunity.

Tom: I'll begin with an overview of themselves and then Mario in jest, you're going to walk through the operating performance and then as Brent mentioned asset we will have time for Q&A.

Thomas Joseph Wilson: Allstate's strategy has two components, which are shown on the left there. Increased personal property liability market share and expanded protection provided to customers. On the right hand side, you can see the highlights for the quarter.

Tom: On slide two allstate's strategy has two components, which is shown on the left there increased personal property liability market share and expand protection provided to customers.

Tom: On the right hand side, you can see the highlights for the quarter. So we generated net income of $1 $2 billion in the first quarter.

Thomas Joseph Wilson: So we generated net income of $1.2 billion in the first quarter. The profit improvement was broad-based and reflected successful execution of the auto insurance profit improvement plan. Attractive Homeowners, Insurance Margins, and they also benefited from lower tax-free losses on this. That investment income was up almost 33%, reflecting that 2022 and 2023 repositioning into longer duration, higher fixed income yields, and then yields also went up some. And we had good performance-based valuations this quarter as well. Protection Services also had a good quarter, and that was led by Protection Plans and Roadside Service. If you go down to the bottom, what do we do from here?

Tom: The profit improvement was broad based reflects successful execution of the auto insurance profit improvement plan.

Tom: Attracting homeowners insurance margins and then also benefited from lower catastrophe losses in this quarter net investment income was up almost 33%, reflecting that 2022 and 2023 repositioning into longer duration higher fixed income yields and then yields also in that and we.

Tom: We had good performance space.

Tom: Our valuations this quarter as well protection services also had a good quarter and that was led by protection plans and roadside services.

Tom: If you go down to the bottom of what do we do from here, we have a broad approach to further increase shareholder value first improving auto profitability and underperforming states will increase returns.

Thomas Joseph Wilson: We have a broad approach to further increase shareholder value. First, improving auto profitability in underperforming states will increase returns. Secondly, we're focused on increasing policies and force under the Allstate brand while continuing to expand national general. Mario's going to talk about that in a few minutes.

Tom: Secondly, we're focused on increasing policies in force under the Allstate brand, while continuing to expand national General.

Tom: Mark I was going to talk about that in a few minutes Allstate integrated approach to investing has and will continue to create value for shareholders and expanding protection services will benefit both our customers and shareholders and then the sale of the health and benefits business to a buyer that can further leverage our successful create more shareholder value, although I would point out it will.

Thomas Joseph Wilson: Allstate's integrated approach to investing has and will continue to create value for shareholders. Expanding protection services will benefit both our customers and shareholders. And then the sale of the health and benefits business to a buyer that can further leverage our success will create more shareholder value, although I point out it will have a short-term negative impact on return on equity. Let's review the broad-based profit improvement on slide 3. Revenues were $15.3 billion in the first quarter, reflecting a 10.9% increase in property liability or premium.

Tom: Have a short term negative impact on return on equity.

Thomas Joseph Wilson: And that, of course, was primarily due to rate increases in both auto and homeowners insurance. Over the last 12 months, property liability rate improvements have increased by almost $5 billion on an annual basis. That investment income in the quarter was $764 million, or 32.9% of the prior year. And that reflects those higher fixed income yields and the duration extension I just mentioned. The strong profitability in the quarter generated adjusted adjusted income of $1.4 billion, or $5.13 per diluted share. Now, let me turn it over to Mario to go through the property liabilities. Thanks, Tom.

Tom: Let's review the broad based profit improvement on slide three so revenues were $15 3 billion in the first quarter, reflecting a 10, 9% increase in property liability earned premium.

Tom: And then of course was primarily due to keep rate increases in both auto and homeowners insurance.

Tom: Over the last 12 months property liability rate improvements have increased by almost $5 billion on an annual basis.

Tom: Net investment income in the quarter was $764 million or 32, 9% for the prior year and that reflects higher fixed income yields and the duration extension I just mentioned the.

Tom: The strong profitability in the quarter generated adjusted net income of $1 4 billion or $5 13 per diluted share now let me turn it over to Mario to go through property liability results.

Mario Rizzo: Let's start on slide four. Property liability earned premium increased 10.9% in the first quarter, driven by higher average premiums. Underwriting income was $898 million. The combined ratio of 93, which improved by 15.6 points compared to the prior year, was driven by higher premiums earned, improved underlying loss cost trends, lower catastrophe losses, and operating efficiency. The chart on the right depicts the components of the 93 combined ratio. Lower catastrophe losses of $731 million were 8.8 points favorable to the prior year quarter, reflecting milder winter weather.

Mario: Thanks, Tom let's start on slide four.

Mario: The liability earned premiums decreased 10, 9% in the first quarter driven by higher average premiums.

Mario: Underwriting income was $898 million.

Mario: The combined ratio of 93, which improved by 15 six points compared to prior year was driven by higher premiums earned improved underlying loss cost trends lower catastrophe losses and operating efficiencies. The chart on the right depicts the components of the 93 combined ratio.

Mario: Lower catastrophe losses of $731 million were eight eight points favorable to the prior year quarter, reflecting milder winter weather.

Mario Rizzo: The underlying combined ratio of 86.9 improved by 6.4 points compared to the prior year quarter. The improvement was driven by higher average premium and moderating loss cost increases; expense reduction programs also benefited results more than offsetting higher advertising spend. Prior year reserve re-estimates, excluding catastrophes, had only a small impact on results.

Mario: The underlying combined ratio of $86 nine improved by six four points compared to the prior year quarter. The improvement was driven by higher average premium and moderating loss cost increases expense.

Mario: Expense reduction programs also benefited results more than offsetting higher advertising spend.

Mario: Prior year reserve re estimates, excluding catastrophes had only a small impact on results favorable favorable development in personal auto and homeowners insurance largely offset increases in personal umbrella liability and commercial auto reserves for the transportation network contracts, we began exiting in late 2020.

Mario Rizzo: Favorable developments in personal auto and homeowners insurance largely offset increases in personal umbrella liabilities and commercial auto reserves for the transportation network contracts we began exiting in late 2022. Now, let's take a closer look at auto insurance profitability on slide five. The first quarter recorded an auto insurance combined ratio of 96, which improved by 8.4 points compared to the prior year quarter, showing that our profit improvement plan is working. The left chart shows quarterly underlying combined ratios.

Mario: Two.

Speaker Change: Now, let's take a closer look at auto insurance profitability on slide five.

Speaker Change: The first quarter recorded auto insurance combined ratio of 96% improved by eight four points compared to the prior year quarter showing that our profit improvement plan is working.

Mario: The left chart shows quarterly underlying combined ratios you will remember we showed this chart last year, which adjusts 2022, and 2023 quarterly reported figures to reflect the updated average severity estimates as of the end of each respective year.

Mario Rizzo: You will remember we showed this chart last year, which adjusts 2022 and 2023 quarterly reported figures to reflect the updated average severity estimates as of the end of each respective year. As you can see, the underlying combined ratio improved sequentially in each of the last five quarters to 95.1 in the first quarter of 2024. The chart on the right shows that in the first half of 2023, premium increases in dark blue were being offset by higher underlying losses and expenses.

Mario: As you can see the underlying combined ratio improved sequentially in each of the last five quarters to 95, one in the first quarter of 2024.

Mario: The chart on the right shows that in the first half of 2023 premium increases in dark blue.

Mario: Being offset by higher underlying losses and expenses.

Mario Rizzo: Profits began to improve in the third quarter of 2023 as premiums outpaced loss and expense increases, and this continued in this year's first quarter. The slight first quarter drop in underlying loss and expense reflects lower claim frequency that benefited from milder weather and improved operating efficiencies, partially offset by higher severity.

Mario: <unk> began to improve in the third quarter of 2023 as premiums outpace loss and expense increases and this continued in this year's first quarter.

Mario: The slight first quarter drop in underlying loss and expense reflects lower claim frequency that benefited from milder weather and improved operating efficiencies, partially offset by higher severity.

Mario Rizzo: Relative to the prior year quarter, average underlying loss and expense in the first quarter of 2024 were 6.7% higher, as you can see in the table. This reflects higher current year and current severity estimates, primarily driven by bodily injury coverage, which was partially offset by lower accident frequency and the favorable impact on current year severity of favorable prior year reserve development in the Allstate. Given the impact that good weather had on frequency in the quarter, favorable frequency may not persist as the year progresses.

Mario: Relative to the prior year quarter average underlying loss and expense in the first quarter of 2024 was six 7% higher as you can see at the top of the table.

Mario: This reflects higher current year incurred severity estimates, primarily driven by bodily injury coverage, which was partially offset by lower accident frequency and the favorable impact on current year severity of favorable prior year reserve development in the Allstate brand.

Mario: Given the impact that good weather had on frequency in the quarter favorable frequency may not persist as the year progresses.

Mario Rizzo: While auto margins have improved due to our profit improvement actions, we remain focused on ensuring that rate levels continue to keep pace with underlying cost trends and driving improved profitability in those states not yet achieving target margins. Slide 6 shows how Autoprop Improvement supports pursuing policy growth. As shown on the left, Allstate Brand implemented rate increases exceeding 16% in both 2022 and 2023. In the first quarter of 2024, we implemented rate increases of 2.4% to keep up with the cost trends and improve margins in states not achieving target margins. The chart on the right depicts the Allstate brand auto proportion of premium in states with an underlying combined ratio below 96, as shown by the dark blue bar.

Mario: While auto margins have improved due to our profit improvement actions, we remain focused on ensuring that rate levels continued to keep pace with underlying cost trends and driving improved profitability in those states not yet achieving target margins.

Mario: Slide six shows how auto profit improvement supports pursuing policy growth.

Mario: As shown on the left Allstate brand implemented rate increases exceeding 16% in both 2022 and 2023.

Mario: In the first quarter of 2024, we implemented rate increases of two 4% to keep up with the cost trends and improved margins in states not achieving target margins.

Mario: The chart on the right depicts the Allstate brand auto proportion of premium in states with an underlying combined ratio below 96 shown by the dark blue bars.

Mario Rizzo: As more states have achieved target returns, we have started to increase marketing investment both nationally and in those states. Slide 7 shows that while Allstate brand policies and force decreased compared to the prior year, albeit at a slower rate than last quarter, over half that decline was offset by growth at National General. On the left, you can see that total protection auto policies, of course, decreased by 2 percent compared to the prior year due to a decline of 5.2 percent in the Allstate brand, reflecting the continued impact of the auto insurance profit improvement actions.

Mario: As more states have achieve target returns, we have started to increase marketing investments both nationally and in those states.

Mario: Slide seven shows that while Allstate brand policies in force decreased compared to prior year, albeit at a slower rate than last quarter over half of that decline was offset by growth at national General.

Mario: On the left you can see that total protection auto policies in force decreased by 2% compared to prior year due it due to a decline of five 2% in the Allstate brand, reflecting the continued impact of auto insurance profit improvement actions.

Mario Rizzo: Underneath this decline is the positive impact of higher Allstate agent productivity and direct channel sales. Additionally, customer retention in the Allstate brand also continued to improve, and that improvement had a significant impact on growth trends. Allstate brand auto retention of 86 improved by 0.3 points compared to the prior year, as the negative impact of large rate increases in 2022 and 2023 begins to moderate. As we discussed last quarter, we received approval for rate increases in the profit-challenged states of California, New York, and New Jersey, which were effective this quarter. Renewal trends in those states were stable in the first quarter.

Mario: Underneath this decline is the positive impact of higher Allstate agent productivity and direct channel sales.

Mario: Customer retention in the Allstate brand also continued to improve and that improvement has a significant impact on growth trends Allstate brand auto retention of 86 improved by three points compared to prior year as the negative impact of large rate increases in 2022 and 2023 against <unk>.

Mario: Right.

Mario: As we discussed last quarter, we received approval for rate increases and the profit challenged States of California, New York, and New Jersey, which were affected this quarter.

Mario: Trends in those states were stable in the first quarter.

Mario Rizzo: But the full impact on customer retention has not yet been seen. Allstate brand new business also increased 7% versus the prior year, reflecting more advertising and increased Allstate agent productivity and direct sales. National General was another positive contributor to growth. Policies in force increased by 12.6% over the prior year due to an increase in non-standard auto insurance and the continued rollout of a new middle market standard and preferred auto insurance product also known as Custom 360.

Mario: Full impact on customer retention has not yet impacted growth.

Mario: Allstate brand new business also increased 7% versus the prior year, reflecting more advertising and increased allstate agent productivity and direct sales.

Mario: National General was another positive to growth policies in force increased by 12, 6% over the prior year due to an increase in non standard auto insurance and the continued rollout of our new middle market standard and preferred auto insurance product also known as customer 360.

Mario Rizzo: Slide 8 summarizes homeowners insurance profitability, which generated strong returns in the quarter. Homeowners Insurance provides a differentiated customer experience and represents an additional growth opportunity across channels. The chart shows the homeowners combined ratio over time, achieving a 10 year average of approximately 92.

Mario: Slide eight summarizes homeowners insurance profitability, which generated strong returns in the quarter.

Mario: Homeowners insurance provides a differentiated customer experience and represents an additional growth opportunity across channels.

Mario: The chart shows the homeowners combined ratio over time, achieving a 10 year average of approximately 90 to the.

Mario Rizzo: The first quarter combined ratio of 82.1 translated to $564 million of underwriting income and improved 36.9 points compared to the prior year, primarily driven by lower catastrophe losses. The underlying combined ratio of 65.5 also improved by 2.1 points due to higher average premium and lower non-catastrophe claim frequency. Allstate Protection Homeowners generated double-digit written premium growth compared to the prior year, reflecting higher average gross written premium for policies and policies in force growth of 1.4%.

Mario: The first quarter combined ratio of $82, one translated to $564 million of underwriting income and improved 36 nine points compared to prior year, primarily driven by lower catastrophe losses.

Mario: The underlying combined ratio of $65. Five also improved by two one points due to higher average premiums and lower non non catastrophe claims frequency.

Mario: Allstate protection homeowners generated double digit written premium growth compared to prior year, reflecting higher average gross written premium per policy and policies in force growth of one 4%.

Mario Rizzo: Allstate agents continue to bundle auto and homeowners insurance at historically high levels, and National General's Custom 360 product offers additional growth opportunities in the independent agent channel. Allstate has created an industry-leading business model, and we remain confident in our ability to generate attractive risk-adjusted returns. Moving to slide nine, let's discuss the property liability growth opportunities. Starting on the first row, improving customer retention remains key to improving our growth trajectory. Autoretention levels have stabilized and sequentially improved over the last two quarters, and homeowner retention improved 0.8 points compared to the prior year quarter.

Mario: Allstate agents continue to bundle auto and homeowner's insurance at historically high levels and National General's customer 360 product offers additional growth opportunities in the independent agent channel.

Mario: Allstate has created an industry, leading business model and we remain confident in our ability to generate attractive risk adjusted returns.

Mario: Moving to slide nine, let's discuss the property liability growth opportunities.

Mario: Starting on the first drove improving customer retention remains key to improving our growth trajectory.

Mario: Auto retention levels have stabilized and sequentially improved over the last two quarters and homeowners retention improved <unk> eight points to the prior year quarter or.

Mario Rizzo: Our agents and employees continue to guide customers through the renewal process by offering coverage options and ways to save through innovative programs and discounts like DriveWise and MileWise Telematics offerings. Growth can also be increased by easing new business restrictions. As rate adequacy has been achieved in more states, restrictive underwriting policies have been unwound in states representing more than 75% of Allstate brand auto premiums. Increased Allstate brand advertising is also expected to increase growth.

Mario: Our agents and employees continue to guide customers through the renewal process by offering coverage options and ways to save through innovative programs and discounts like dry wise and mile Wise telematics offerings.

Mario: Growth can also be increased by easing new business restrictions has rate adequacy has been achieved in more states restrictive underwriting policies have been unwound in states, representing more than 75% of Allstate brand auto premium.

Mario: Increased Allstate brand advertising is also expected to increase growth.

Mario Rizzo: The components of transformative growth are being implemented to create sustainable growth, and Improved Competitive Position will result from further expense reduction. Expanded customer access comes from increased Allstate agent productivity, enhanced direct distribution, and the expansion of Custom 360 to more independent agents. A new Allstate brand affordable, simple, and connected auto insurance product is available in nine states on the direct sale site. Online quote completion time has been reduced by 40% to less than three minutes within the new technology ecosystem.

Mario: The components of transformative growth are being implemented to create sustainable growth.

Mario: An improved competitive position will result from further expense reductions.

Mario: Expanded customer access comes it comes from increased Allstate agent productivity enhanced direct distribution and the expansion of customer 360 to more independent agents.

Mario: Our new Allstate brand affordable simple and connected auto insurance product is available in nine states on the direct sales side.

Mario: Online quote completion time has been reduced by 40% to less than three minutes within the new technology ecosystem.

Jess: This platform will be expanded to the Allstate agent channel this year and to more states and homeowners over the next several years. With these growth levers, Allstate is positioned to generate sustainable, profitable growth. Now, I'll turn it over to Jess to talk about other operating results. Thank you, Mario.

Mario: This platform will be expanded to the Allstate agent channel this year and to more states and homeowners over the next several years.

Mario: With these growth levers Allstate is positioned to generate sustainable profitable growth now I will turn it over to Jeff to talk about other operating results.

Jess: Moving to slide 10, let's discuss the increase in investment income. Before we get into specifics, let me reiterate that our active portfolio management includes comprehensive monitoring of economic conditions, market opportunities, interest rates, and credit spreads by rating sector and individual names. We seek to optimize return per unit of risk across the enterprise. This approach, Portfolio Management, continued to benefit results in court. Net investment income, shown in the chart on the left, totaled $764 million in the quarter, which is $189 million above the first quarter of last year.

Jeff: Thank you Mario and moving to slide 10, let's discuss the increase in investment income before we dig into specifics, let me reiterate that our active portfolio management includes comprehensive monitoring of economic conditions market opportunities interest rates and credit spreads by ratings sector and individual names, we seek to optimize return.

Mario: <unk> per unit of risk across the enterprise. This approach to portfolio management continued to benefit results in the quarter.

Mario: Investment income shown in the chart on the left totaled $764 million in the quarter, which is a $189 million above the first quarter of last year market based income of $626 million shown in blue was $119 million above the prior year quarter as the fixed income portfolio continues to benefit from <unk>.

Jess: Market-based income of $626 million, shown in blue, was $119 million above the prior quarter, as the fixed income portfolio continues to benefit from repositioning into longer duration and higher yielding assets that have sustainably increased income. Performance-based income of $201 million, shown in black, was $75 million above the prior year quarter due to higher valuation increases and was above the trend that we have seen in recent quarters, but lower than 2022. Performance-Based Portfolios Constructed to Enhance Long-Term Returns and Volatility on These Assets from Quarter to Quarter is Expected

Mario: Repositioning into longer duration, and higher yielding assets that have sustainably increased income.

Mario: Performance based income of $201 million shown in black was $75 million above the prior year quarter due to higher valuation increases and was above the trend that we've seen in recent quarters, but lower than 2022.

Mario: The performance based portfolio is constructed to enhance long term returns and volatility on these assets from quarter to quarter as expected.

Jess: Total portfolio returns of 0.5% for the quarter and 4.8% for the last 12 months, which is shown in the table below the left chart, indicate that a balanced approach to risk and return creates shareholder value. The chart on the right shows changes made to the bond portfolio duration in comparison to interest rates over time.

Mario: Total portfolio return, 0.5% for the quarter and four 8% for the last 12 months, which is shown in the table below the left chart indicate that a balanced approach to risk and return creates shareholder value.

Mario: The chart on the right shows changes made to the bond portfolio duration in comparison to interest rates overtime higher income this quarter reflects increases in duration as interest rates rose in 2022 and 2023.

Jess: Higher income this quarter reflects increases in duration as interest rates rise in 2022 and 2023. The table below the chart shows the fixed income portfolio earned yield was 4.1% at quarter end, a 0.7 point increase compared to 3.4% for the prior year quarter. Slide 11 breaks down the growth and profit performance of the protection service business. Revenues in these businesses increased 12.2% to $753 million in the first quarter compared to the prior year.

Mario: The table below the chart shows fixed income portfolio earned yield was four 1% at quarter end.

Mario: Zero seven point increase compared to three 4% for the prior year quarter.

Mario: Slide 11 breaks down the growth and profit performance of the protection service businesses.

Mario: And these businesses increased 12, 2% to $753 million in the first quarter compared to the prior year quarter. This result is mainly driven by growth in Allstate protection plans, which increased 25% compared to the prior year quarter, reflecting expanded product breadth and international growth.

Jess: This result is mainly driven by growth in Allstate Protection Plans, which increased 20.5% compared to the prior year quarter, reflecting expanded product breadth and international growth. In the table on the right, you will see adjusted net income of $54 million in the first quarter increased $20 million compared to the prior year quarter. The increase is primarily attributable to two businesses. Profitable growth in Allstate Protection Plans resulted in adjusted net income of $40 million, representing an increase of $12 million compared to the prior year quarter, as higher revenue and improved claims trends benefited the bottom line. Allstate Roadside had an adjusted net income of $11 million, driven by increased pricing, improved provider capacity, and lower costs.

Mario: In the table on the right you will see adjusted net income of $54 million in the first quarter increased $20 million compared to the prior year quarter increase was primarily attributable to two businesses profitable growth in Allstate protection plans resulted in adjusted net income of $40 million.

Mario: Representing an increase of $12 million compared to the prior year quarter as higher revenue and improved claims trends benefited the bottom line.

Mario: Allstate roadside had adjusted net income of $11 million, driven by increased pricing improved provider capacity and lower costs.

Jess: Shifting to slide 12, the health and benefits business continues to perform well. For the first quarter of 2024, revenues of $635 million increased by 52 million compared to the prior year quarter, driven by premium growth in individual and group health in addition to higher fees and other revenue in those businesses. Adjusted net income of $56 million in the first quarter was consistent with the prior year quarter as individual health fee income growth was offset by lower employer voluntary benefits income.

Mario: Shifting to slide 12, the health and benefits business continued to perform well for the first quarter of 2024 revenues of $635 million increased by $52 million compared to the prior year quarter, driven by premium growth in individual and group health. In addition to higher fees and other revenue in those businesses.

Mario: Adjusted net income of $56 million in the first quarter was consistent with prior year quarter as individual health fee income growth was offset by lower employer voluntary benefits income.

Jess: On slide 13, we'll wrap up our prepared remarks where we started by reiterating Allstate's strategy and opportunities to increase shareholder value by improving auto insurance profitability, and pivoting to growing auto and homeowners policies in force. Proactive Risk and Return Management of the Investment Portfolio, Expanding Protection Services, and Completing the Sale of Health and Benefits, which we expect to occur in 2024. With that in mind, let's open up the line for your questions. Certainly, and as a reminder, ladies and gentlemen, we ask that you please limit yourselves to one question and one follow-up. You may get back in the queue as time allows.

Mario: On slide 13, we will wrap up our prepared remarks, where we started by reiterating allstate's strategy and opportunities to increase shareholder value.

Mario: Improving auto insurance profitability pivoting to grow in auto and homeowners policies in force proactive risk and return management of the investment portfolio expanding protection services and completing the sale of health and benefits, which we expect to occur in 2024.

Speaker Change: With that context, let's open up the line for your questions.

Mario: Certainly and as a reminder, ladies and gentlemen, we ask that you. Please limit yourself to one question and one follow up you may get back in the queue. As time allows our first question comes from the line of Jimmy Bullard from Jpmorgan. Your question. Please.

Operator: Our first question comes from the line of Jimmy Bhullar from J.P. Morgan. Your question, please. Hey, good morning.

Jamminder Singh Bhullar: So my first question was just on your views on PIF growth, and I realize it's going to be challenging in the near term, just given price increases. But with the expense cuts and coming through, and once you're done with repricing, do you think that it's reasonable to assume that you'll have positive growth beginning sometime later this year or early next year in the auto business? Jimmy, we do believe that it's time to pivot to growth, that we had to restrict growth so we could get profitability up in the auto insurance business. We're not done with it yet, but we feel that the trajectory is Mario went through a long list of various ways you can do it.

Unknown Attendee: Hey, good morning. So my first question was just on your views on fifth growth and.

Mario: And I realize it's going to be challenging in the near term just given the price increases but.

Unknown Attendee: The defense cuts and coming through and once you're done with the re pricing do you think that it's reasonable to assume that you'll have positive growth beginning sometime later this year or early next year and the auto business.

Speaker Change: Jimmy we.

Speaker Change: We do believe that it's time to pivot to growth.

Speaker Change: That we had to restrict growth so it could get profitability up in the auto insurance business.

Speaker Change: We're not done with it yet, but we feel that the trajectory is good and we've got a path forward on that.

Thomas Joseph Wilson: First, of course, you just keep more of your existing customers. And then we have a bunch of other ways that we think we can grow new business. When that will actually happen by quarter will be dependent on what happens in the marketplace.

Speaker Change: Mario went through.

Speaker Change: The long list of various ways, we can do it first I'll caution you just keep more your existing customers.

Speaker Change: And then we have a bunch of other ways that we think we can grow new business.

Speaker Change: When that will actually turn by quarter will be dependent what happens in the marketplace.

Thomas Joseph Wilson: But it is, we believe, a really great opportunity to increase shareholder value. Because when you look at our valuation relative to a higher growth company like Progressive, there's a substantial discount. And we believe that this pivot to growth will drive more shareholder value. Mario, anything you want to add to that?

Speaker Change: But it is we believe.

Speaker Change: A really great opportunity to increase shareholder value because when you look at our valuation relative to a higher growth company like progressive.

Speaker Change: There is a substantial discount and we believe that this pivot to growth will drive more shareholder value Mario anything you want to add to that.

Mario Rizzo: No, I think that covers it, Tom. The only thing I'd say is, you know, in the Allstate brand, obviously, we continue to see the impact of the profit improvement plan that we implemented over the last couple of years. But we're starting to see, as Tom mentioned, some positive signs on retention, as well as an uptick in production. And, you know, first, we need to see sequential growth before we'll get to annual year-over-year growth.

Mario: No I think that covers it Tom the only thing I'd say is.

Mario: In the in the Allstate brand, obviously, we continue to see the impacts of the profit improvement plan that we've implemented over the last couple of years, but we're starting to see as Tom mentioned, some positive signs on retention as well as an uptick in production and.

Mario: First we need to see sequential growth before we'll get to annual year over year growth and then I think it's important to point out in National General we continue to see really strong growth in that business.

Jess: And then I think it's important to point out that at National General, we continue to see really strong growth in that business, along with really strong profitability that we're encouraged by. And we think most of that growth at National General is coming in the non-standard auto insurance business. We think there's an additive opportunity that we're going to continue to go after, as I mentioned, with Custom 360. So opportunities across all brands and all channels going forward.

Speaker Change: Along with really strong profitability that we're encouraged by it.

Speaker Change: We think there is.

Speaker Change: Most of that growth in national generals coming in the non standard auto insurance business. We think there's an additive opportunity that we're going to continue to go after as I mentioned with customer 360. So.

Speaker Change: Entity across all brands in all channels going forward.

Jess: And can you talk about progress on the benefits sale? Obviously, from the outside, we haven't seen any movement, but and then just how do you think about the deployment of the proceeds that come out of that sale? Unknown Speaker, Yes, Jimmy, this is Jeff.

Speaker Change: And can you talk about progress on the benefits sale, obviously from the outside we haven't.

Speaker Change: Seen any movement, but.

Speaker Change: And then just how.

Speaker Change: You think about the deployment of the proceeds that come out of that sale.

Speaker Change: Hey, Jamie this is Jeff.

Thomas Joseph Wilson: As it relates to the process, I would say things are progressing as expected on the pursuit of the divestiture. You'll remember we announced the intention to pursue the sale about six months ago, almost to the day. And, you know, as you might expect, there was robust interest from a large group of quality potential buyers, both strategic and financial. But, you know, diligence on a large, complex business takes some time.

Jeff: So as it relates to the process I would say things are progressing as expected.

Jeff: Pursuit of the divestiture of Youll remember, we announced the intention to pursue the sale of six months ago almost to the day.

Jeff: And as you might expect there was robust interest from a large group of quality potential buyers, both strategic and financial so.

Jeff: Diligence on a large complex business. It takes some time and so to selecting the right potential buyers to stay involved in the process. At this point, we're pleased with how the process is progressing and we're confident that we'll be in a position to select a buyer that sees the same potential in the business that we do and is aligned with our strategic rationale for the sale. So we continue.

Thomas Joseph Wilson: And so does selecting the right potential buyers to stay involved in the process. At this point, we're pleased with how the process is progressing, and we're confident that we'll be in a position to select a buyer that sees the same potential in the business that we do and is aligned with our strategic rationale for the sale. So we continue to pursue the divestiture, as we said, and obviously, we'll let you all know as soon as we have a definitive agreement in place and offer more details at that time.

Speaker Change: <unk> to pursue the divestiture as we said and obviously, we'll let you all know as soon as we have a definitive agreement in place and offer more details at that time, Jim and then make a comment about the capital since it came out you mentioned and it came up in a number of the.

Thomas Joseph Wilson: Jimmy, let me make a comment about capital since it came up. You mentioned that it came up in a number of the analyst's write-ups last night. So first, we're very well capitalized. We've made that point consistently over the last couple of years.

Jeff: For analyst write ups last night.

Jeff: <unk>.

Jeff: So first we're very well capitalized we made that point consistently over the last couple of years.

Thomas Joseph Wilson: Obviously, the divestiture of health and benefits would free up additional capital. But we're doing it because we believe it's the right way to harvest value, as Jess pointed out. We think this is a great business that's showing up, and people will be interested in buying it, but we also think that somebody else could do more with it than we can. When you look at capital utilization, I would say that it's embedded in kind of everything we do, like from our strategy to enterprise risk of return, to reinsurance, to how we price homeowners insurance in a local market. And a couple of things I would say: all those decisions are made with math, highly sophisticated math.

Jeff: Obviously, the divestiture of health and benefits would free up additional capital we're doing it because we believe it's right way to harvest value as Jeff pointed out. We think this is a great business, that's showing up in the people who are interested in buying it but we also think that somebody else could do more with it than we can do with it.

Jeff: When you look at catheter utilization I would say that it's embedded in kind of everything we do from our strategy to enterprise risk and return to reinsurance to how we price homeowners insurance in a local market.

Jeff: Couple of things I would say all of those decisions are made with math.

Jeff: Highly sophisticated match that sometimes I think that confuses some people when we have more sophisticated math entertainment type premium to surplus ratios.

Thomas Joseph Wilson: So sometimes I think that confuses some people when we have more sophisticated math than things like premium and surplus ratios. We look at a really wide range of alternatives. The first best opportunities are organic growth. Given the high returns in our auto and home protection plan businesses, we get really good returns there. And as I mentioned, we think that will drive increased valuation in the stock predominance. After that, you say, well, share repurchase.

Jeff: But when we do that we're looking at what the impact is economically and what the impact is on shareholder value.

Jeff: When we look at a really wide range of alternatives person.

Jeff: The first best opportunities for organic growth given the high returns in our auto home protection plan businesses, we get really good returns there.

Jeff: And as I mentioned, we think that will drive increased valuation in the stack predominant earnings.

Thomas Joseph Wilson: A number of people ask about share repurchases, so it's another thing that we look at. As you know, we've bought back a lot of stocks. Since we went public, we've bought back almost $42 billion worth of stock, which is 83% of shares outstanding. If you look over the last 10 years, it's about half the shares and about $20 billion. If you look over five years, that's a quarter of the shares and about $10 billion.

Jeff: After that you said will share repurchase the number of people asked about share repurchases.

Jeff: Another thing that we look at.

Jeff: As you know we bought back a lot of facts. Since we went public we've bought back almost $42 billion worth of stock, which is 83% of shares outstanding. If you look over the last 10 years, it's about half the shares about $20 billion with over five years, it's a quarter of the shares and about $10 billion. So we have no aversion to that.

Thomas Joseph Wilson: So we have no aversion to that. When you say, well, what kind of return do you get on that? Of course, it depends on what price you bought it at and what day you're marketing it for.

Jeff: When you say well what kind of return do you get out in that.

Thomas Joseph Wilson: At its low points, it tends to look like the cost of capital. Today, it looks like it's in the 10% to 14% range, depending on what period of time you look at. So that's a good return, one that we think benefits shareholders. But, on the other hand, it's not as good as that which we get from deploying it in those businesses. So deploying it in growth is why we believe that. We have a whole bunch of other things we look at.

Jeff: Of course, it depends on what price you bought it at.

Jeff: Good day, you're marking it to market.

Jeff: Its low points it tends to look like the cost of capital today. It looks like it's in the 10% to 14% range, depending on what period of time, we looked at it so.

Jeff: That's a good return one that we think benefits shareholders on the other hand, it's not as good as that which we get from deploying it in those businesses. So deploying getting growth is why we believe that we have a whole bunch of other things we look at.

Jeff: We could increase the equity allocation in investment portfolio as we've told you where we have a bimodal approach there about 60% is illiquid, we hang onto over ups and downs in.

Thomas Joseph Wilson: We could increase the equity allocation and investment portfolio. As we've told you, we have a bimodal approach there. About 60% is illiquid.

Thomas Joseph Wilson: We hang on to over the ups and downs, and 40% is liquid. We're down at the lowest level we've ever been in liquid equity securities, and we did it because we didn't like the risk in return. We're not trying to be a hedge fund, but we thought we had better places to put the money. We could decide we want to dial it up there. Sometimes we put opportune money in new capabilities, and arity. If you look at Areti, we've now got one and a half trillion miles of driving data.

Jeff: 40% is liquids.

Jeff: And at the lowest level, we've ever been in liquid equity securities and we did it because we didn't like the risk and return we're not trying to be a hedge fund, but we thought we had better places to put the money we could decide we want to dial up there <unk>.

Jeff: Times, we've put money in new capabilities <unk>.

Jeff: If you look at Arity, we've now got one five trillion miles of driving data with getting over $1 billion a week.

Thomas Joseph Wilson: We're getting over a billion a week. We're expanding that from just pricing people who are our customers to pricing people before they become customers, which makes you be more efficient in marketing and advertising. Sometimes we acquire companies, you know, so if you look at our protection plans business, it's like ten times its size, and we bought it for a billion four. If you look at National General, we paid 4.1 billion, I think, just for it, and that's like double its size.

Jeff: We're expanding that from just pricing people, who are customers to pricing people before they become customers, which makes you to be more efficient in marketing and advertising sometimes we.

Jeff: Prior companies. So if you look at our protection plans business, it's like 10 times its size when we bought it for $1 billion four and look at National General We paid $4 1 billion I think just.

Jeff: And that's like double its size. So we didn't haven't done as well harvesting the value out of our identity protection business, yet, but we are confident we got the right pick there that people are at greater risk recently and figure out how to grow it faster and make more money. So we have a whole bunch of.

Thomas Joseph Wilson: So we haven't done as well as harvesting the value out of our identity protection business yet, but we're confident we got the right pick there where people are at greater risk. We just need to figure out how to grow it faster and make more money. So we have a whole bunch of opportunities that we look at. So I don't think you should just automatically default to something that falls into an easy analysis of whether you have the extra money to share repurchases. No, we'll think about it hard.

Jeff: Opportunities that we look at so I don't think you should just automatically default to something that falls into an easy analysis have you got the extra money to do share repurchases no. We'll think about it hard we will do the right thing for shareholders and then we will make sure we're communicating with people.

Thomas Joseph Wilson: We'll do the right thing for shareholders, and then we'll make sure we're communicating with people. Thank you.

Speaker Change: Thank you.

Operator: One moment for our next question. And our next question comes from the line of Andrew Klingerman from TD Cowen. Your question, please. Hey, good morning.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Andrew <unk> from TD Cowen Your question. Please.

Andrew Scott Kligerman: Um, yeah, it seems like growth is right around the corner of pivoting down only 1.4% year over year. So I'm wondering about the Allstate brand. Your expense ratio on advertising is 2.2%. Historically, if I look back at 2017 to 19, it was roughly 2.5. So is there, you know, first question: is there much to go in terms of your ad campaigns? Or do you feel like you're kind of at a level, I'll let Mario talk about how he's reorganizing the business and really going to market in an integrated fashion to drive growth? As it relates to advertising, you know, we don't like to give those numbers out just because we've got, you know, other people out there doing their advertising as well.

Andrew: Hey, good morning.

Andrew: It seems like Youre Tiff growth is right around the corner.

Andrew: Pivoting down only one 4% year over year, So I'm wondering on the Allstate brand.

Andrew: Your expense ratio on that with Tyson was two 2% historically, if I look back at 2017 to 19, it was roughly $2 five so it's their first.

Andrew: First question is there much to go in terms of your AD campaigns or do you feel like youre kind of at a level.

Andrew: Where you need to take.

Andrew: I'll, let Mario talk about how is <unk>.

Mario: We are organizing the business it really go into market in an integrated fashion to drive growth.

Andrew: As it relates to advertising.

Andrew: Yeah.

Mario: We don't like to give those numbers out just because we've got other people out there doing their advertising as well.

Thomas Joseph Wilson: What I will point out is one of the key components of transformative growth was improving our sophistication of customer acquisition. So no matter what percentage it is, we want it to be more effective. Mario, maybe you should talk about how you're changing your go-to-market strategy. Yeah, thanks for the question, Andrew.

Mario: We'll point out is one of the key components of transformative growth was improving our sophistication of customer acquisition.

Mario: No.

Mario: No matter what percentage it is.

Mario: We want it to be more effective but mark maybe you should talk about how you are changing your go to market yes.

Mario Rizzo: I guess where I'd start, first, the good news, as we pointed out in the presentation, is more and more states are achieving rate adequacy. And right now, you know, in about 75% of the states we operate in, we've began to unwind underwriting restrictions and, to your point, investing in marketing to look to grow. The other thing we've done in anticipation of that opportunity, not only being there but continuing to expand, is we're organizing ourselves in what we call go-to-market teams that are local market focused, that are really intended to drive kind of bottoms-up opportunity identification and capture, again, at the local market level so that we can get the highest possible return on things like the marketing investments we're making, the continued expansion of distribution, as well as the growth opportunity that exists across channels in those states.

Mark: For the question, Andrew I guess, where I'd start first the good news as we pointed out in the presentation as more and more states are achieving rate adequacy in right now.

Mark: And about 75% of the states we operate in.

Mark: Began to unwind underwriting restrictions and to your point begin investing in marketing to look to grow the other thing we've done.

Mark: In anticipation of that opportunity there not only being there, but continuing to expand as we're organizing ourselves.

Mark: And what we call go to market teams that are local market focus that are really intended to drive kind of bottoms up opportunity identification and capture again at the local market level. So that we can get the highest possible return on things like the marketing investments, we're making that continued expansion.

Mark: Of distribution as well as the.

Mark: The growth opportunity that exists across channels in those states. So we're early days in that but we think we're putting behind our organization structure.

Mario Rizzo: So we're in the early days of that, but we're putting behind our organizational structure to be more focused on local market growth. And you remember, you know, we manage this business state by state, market by market. So having local market insight, intelligence, and the ability to move rapidly to capture opportunities is really going to be critical. And we think that, alongside the expanded investment we're making in growth, will create significant growth opportunities for us going forward. And we know that it works because we've used it for a long time.

Mark: To be more focused on local market growth and you remember we manage this business state by state market by market, So having local market insight intelligence and the ability to move rapidly to capture opportunities is really going to be critical and we think that alongside the expanded investment we're making in growth.

Mark: We will create significant growth opportunity for us going forward and we know that works because we use it for a long time.

Thomas Joseph Wilson: So, we dismantled some of it about two or three years ago when we were cutting expenses and didn't want to grow. And now that we're back into growth mode, we're just expanding what we know. That's very helpful. And then the second question, with regard to National General. Just trying to get my arms around it, how much growth potential is there? How much of the book right now is non-standard versus the Customs 360? Is the Customs 360 relatively small, and, you know, are those the right age?

Mark: So.

Mark: We dismantled some of it.

Mark: Two or three years ago, when we were.

Mark: Cutting expenses and didn't want to grow.

Mark: And now that we're back into growth mode. We're just expanding what we know works.

Speaker Change: That's very helpful. And then the second question with regard to National General just trying to get my arms around.

Speaker Change: How much growth potential there how much of the book right now is non standard versus the customer 360, as the customer 360 <unk>.

Speaker Change: Relatively very small end.

Speaker Change: Are those the right agents to generate big time growth.

Andrew Scott Kligerman: to generate big-time growth on the more traditional or more standard products. Well, we wouldn't give out that percentage in each, but you're correct, and that when we bought National General, it was mostly a non-standard company. And we bought it for the strategic opportunity to leverage our capabilities in what's called preferred auto and home insurance. And that's turning out to be true. Mario, maybe you want to talk about the success you're having with customers. Yeah.

Mark: On the more traditional or more standard products.

Speaker Change: Well, we wouldnt give out the percentage in each but you are correct and that is when we bought national in general It was mostly a non standard company.

Speaker Change: And we bought it for the strategic opportunity to leverage our capabilities in <unk>.

Speaker Change: It's called preferred auto and home insurance and that's turning out to be true.

Speaker Change: Mark maybe you want to talk about the success, you're having with customer 360, yeah. So Andrew I guess the place I'd start is first of all we're really happy with the acquisition of National General as Tom mentioned.

Mario Rizzo: So, Andrew, I guess the place I'd start is, first of all, we're really happy with the acquisition of National General. As Tom mentioned, we've effectively doubled the size of our independent agent business since we bought it in early 2021. And there are really three pieces to the business. There's the non-standard auto piece, which is by far the biggest component. And then there's what we call the legacy household business, which is, think about our Encompass business that we integrated into it, along with the legacy National General standard auto preferred and home business. And then there's Custom 360.

Mark: We've effectively doubled the size of our independent agent business since we bought it.

Mark: In early 2021, and there's really three pieces to the business. There is the non standard auto piece, which is by far the biggest component and then there's what we call the <unk>.

Mark: Legacy household business, which is think about our encompass business that we integrated into it along with the legacy National General standard auto preferred and home business and then there is customer 360 and cosmic 360.

Mario Rizzo: And Custom 360 is the new product offering. We're in about 17 states currently with the intent to expand pretty much into every state by the end of this year or into 2025. And we think that really represents an additive growth opportunity. The product offering itself is built on the Allstate product chassis.

Mark: Is the new product offering worrying about 17 states currently.

Mark: With the intent to expand pretty much into every state by the end of this year or into 2025.

Mark: And we think that really represents an additive growth opportunity the product offering itself is built on the Allstate product chassis, so think about.

Mario Rizzo: So think about the, you know, sophisticated rating plans that we have in standard and preferred auto in Allstate, the house and home product that we have in Allstate. So those are the products that we're launching in the independent agent channel. And really, to your point, there's a different distribution, a different segment of the independent agent distribution system that we're looking to engage with to really grow that product portfolio. We're in the early stages.

Mark: The sophisticated rating plans that we have in standard and preferred auto in all states the hosts and home product.

Mark: That we Havent Allstate. So those are the products that we're launching in the independent agent channel.

Mark: And really to your point there.

Mark: There was a different distribution.

Mark: Segment of the independent agent distribution system that we're looking to engage with to really grow that product portfolio. We're early stages as I said, we're in 17 States. We're really encouraged by the early growth that we're seeing in the states that we've rolled out and <unk>.

Mario Rizzo: As I said, we're in 17 states. We're really encouraged by the early growth that we're seeing in the states that we've rolled out. And, more importantly, the agency engagement that we're seeing on the IA side. We're going to continue to look to expand on that and leverage that going forward. But we're really optimistic about Custom 360 and the opportunity beyond non-standard auto in the IA. Thanks a lot.

Mark: More importantly, the agency engagement, we're seeing on the IAA side, we're going to continue to look to expand on that and leverage that going forward.

Mark: But we're really optimistic around customer 360, and the opportunity beyond non standard auto NAIA channel.

Speaker Change: Thanks, a lot.

Speaker Change: Okay.

Speaker Change: Thank you one moment for our next question.

Mark: Okay.

Andrew Scott Kligerman: Thank you. One moment for our next question. And our next question comes from the line of Gregory Peters from Raymond James. Your question, please. Good morning, everyone.

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

Gregory: Well good morning, everyone.

Gregory Peters: So, for the first question, I'd like you to comment on both frequency and severity, reporter, and sort of how you're thinking about severity for 2024, both inside the Allstate brand and also at NAC. Thanks, Greg. This is Mario.

Gregory: So for the first question.

Gregory: To just.

Gregory: Have you comment on both frequency and severity and frequency trends through the first quarter and sort of how youre thinking about severity for 2024, both inside the Allstate brand and also in that John.

Mario Rizzo: I'm going to make some comments on slide five that we showed you in the presentation, which really shows the, you know, starts with the average underlying loss and expense trend that we saw in the quarter. That number is about 6.7%. If you take out the expense component, it drops by over a point. So I'd say the loss trend we're seeing in the protection business is in the mid-fives. And that's made up of both frequency and severity. As we indicated, frequency relative to last year was favorable, just given the milder weather. And then the other component of it is severity.

Gregory: Thanks, Greg This is Mario.

Mario: To make some comments after slide off of slide five that we showed you in the presentation.

Mario: Which really shows the starts with the average underlying loss and expense <unk>.

Mario: <unk> that we saw in the quarter that number is about six 7%. If you take out the expense component it drops by over a point so the I'd say the loss trend we're seeing in the protection business is in the mid fives and Thats made up of both frequency and severity as we indicated frequency relative.

Mario Rizzo: So it's, I'd say, you know, favorable frequency more than offset by higher severity. In physical damage, we continue to see the benefit of things like lower used car prices, total loss severity continues to drop, but it continues to cost more to fix cars.

Gregory: Last year, just given the milder weather was favorable and then the other component of it.

Gregory: <unk> is severity. So it's I'd say favorable frequency more than offset by higher severity, but severity is continuing to moderate in terms of the the rate of increase that we're seeing.

Gregory: Maybe a little bit of color underneath severity broadly because really there is two different emerging stories, both in physical damage and an injury and physical damage. We continue to see the benefit of things like lower used car prices total loss severity continues to drop but it continues to.

Gregory: Costs more to fix cars and Thats made up of continually increasing parts prices and labor costs. So we've seen.

Mario Rizzo: And that's made up of continually increasing parts prices and labor costs. So we've seen increasing severity and physical damage for repairable vehicles, but not at the same rate we had been seeing before. That has moderated. The real ongoing severity pressure is on the injury side, which continues to run at higher than historical levels.

Gregory: Increasing severity and physical damage repairable for renewable vehicles, but not at the same rate we had been seeing before and that has moderated the real ongoing severity.

Gregory: Pressure is in beyond the injury site, which continues to run at higher than historical levels.

Mario Rizzo: That's driven by a lot of the things we've been talking about, you know, medical treatments, medical consumption, inflation. It's also being driven by the fact that more of our customers continue to get sued, and attorney representation levels continue to increase. And that's putting pressure on severity. But it's also resulting in higher costs for consumers, ultimately. The cost to settle injury claims going up at the level that it is is translating into higher insurance prices for consumers.

Gregory: It's driven by a lot of the things we've been talking about.

Gregory: Medical treatments medical consumption inflation, it's also being driven by the fact that more of our customers continue to get sued.

Gregory: An attorney representation levels continue to increase.

Gregory: And that's putting pressure on severity. It's also resulting in higher costs for consumers ultimately the cost to settle injury claims going up at the level that it is it's translating into higher insurance prices for consumers I pointed out a state like Florida, where last year, they passed meaningful tort reform.

Mario Rizzo: I point out a state like Florida, where last year they passed meaningful tort reform, and we're starting to see some positive impacts of that tort reform, which I think will bode well for consumers going forward. Georgia, the Georgia legislature just passed some tort reform, which, again, can be good for consumers going forward. And obviously, we're a strong proponent of that kind of reform broadening across more states going forward. States that we've reopened for growth and continue to pursue rates in states where we haven't achieved target profitability yet.

Gregory: And we're starting to see some positive impacts of that tort reform, which I think will bode well for consumers going forward, Georgia, just the Georgia legislature just passed.

Mario Rizzo: And that would be true both in the out-of-state brand and national general, for that detail. Um, I brought up rates, and I know you mentioned that you're not going to provide. I know if you go back to, You've called out three states. After you've reported for the fourth quarter, you still... Let Mario go into the three states, but I just want to clarify. We decided not to give it to you every month because we don't think you understand the drill. You know what we're doing. And we don't need to do it.

Gregory: Tort reform, which again can be a positive for consumers going forward and obviously.

Gregory: We're a strong proponent of that kind of reform broadening across more states going forward, but but Greg to your question positive frequency in the quarter hard to quantify with any degree of precision what the weather was work, but it was favorable.

Gregory: <unk> offset with severity levels that are running.

Gregory: Lower than they had been running but still at positive levels, which is why we're going to stay on top of.

Gregory: Pricing to make sure that our rates.

Gregory: Fully reflect loss trends and keep pace with loss trends in the states that we've reopened for growth and.

Gregory: And continue to pursue rates in states, where we haven't achieved target profitability, yet and that would be true both in the Allstate brand at National General.

Speaker Change: Thanks for that detail I guess.

Gregory: No.

Gregory: In conjunction with that answered you brought up right and I know you mentioned that youre not going to provide us.

Speaker Change: Updates on pricing going forward, because you are rate adequate I know if you go back to previous presentations, you've called out three states.

Speaker Change: And even.

Speaker Change: After you reported the fourth quarter you still work.

Speaker Change: I think new Jersey, and New York were kind of still in the question Mark period as there had been some updates there in those two states that you want to give us that.

Speaker Change: Are you to believe that there are rate.

Speaker Change: Rate adequate now too as well.

Speaker Change: Mario go into the three states, but I just wanted to clarify we decided not to give it to every month because we don't we think you will get the drilling we're doing and we don't need to do it we didn't say where rate adequate and so don't worry about it.

Speaker Change: We're focused on it.

Speaker Change: We just didn't think we needed to like burden people sending out every month excellent.

Mario Rizzo: We didn't say we're rate adequate. And so don't worry about it. We're always focused on it. We just didn't think we needed to burden people with sending them out every month. Yeah, Greg, Mario, I'll just give you a little more color on those three states. Remember, last quarter, we told you we had just gotten approval in the fourth quarter for auto rate increases in all three of those states. In California, and we implemented those rate increases this past quarter, in California, we feel comfortable with where the rate level is with the increase, and we've reopened California to new business.

Mario: Yes, Greg smarter.

Speaker Change: Give you a little more color on those three states Scott remember last quarter. We told you. We had just gotten approval in the fourth quarter for auto rate increases in all three of those states in California, and we implemented those rate increases this past quarter in California, we feel comfortable of where the right level.

Speaker Change: Is with the increase and we've reopened California for new business really no change in New York, and New Jersey in terms of our underwriting risk appetite, even with the rate approvals that we got late last year.

Mario Rizzo: Really, no change in New York and New Jersey in terms of our underwriting risk appetite; even with the rate approvals that we got late last year, we still don't feel like we're at the appropriate rate level to want to grow in those two states. The only update I can give you on one of the states is that New Jersey recently approved a 13.9% auto rate increase, which was one of the filings we had pending. That'll be effective in the second half of this year.

Speaker Change: We still don't feel like we're at the appropriate rate level to want to grow in those two states. The only update I would give you on one of the spaces, New Jersey recently approved <unk>.

Speaker Change: 13, 9% auto rate increase which was one of the the filings we have pending that will be effective.

Speaker Change: In the second half of this year.

Mario Rizzo: We're still gonna need more rates beyond that before we would look to reopen that market. And in New York, we're having ongoing conversations around a pending rate that's with the department, but really nothing new to report at this point. And in those two states, in particular, we have not lifted any of the underwriting restrictions that we have in place.

Speaker Change: We're still going to need more rate beyond that before we would look to reopen that market and in New York, We're having ongoing conversations around our pending.

Speaker Change: Right, that's with the department, but really nothing new to report at this point.

Speaker Change: And in those two states in particular, we have not.

Speaker Change: Lifted any of the underwriting restrictions that we have in place.

Mario Rizzo: Got it. Thank you for the detail. Thank you. One moment for our next question. And our next question comes from the line of Bob Jian Huang from Morgan Stanley. Your question, please. Hi, good morning.

Speaker Change: Got it thank you for the detail.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line, Bob Tien hung from Morgan Stanley. Your question. Please.

Jian Huang: Maybe just going back to the PIF growth and PIF growth and rates, for slide six. If we look at the states that are above 96% combined ratio, I know that you talk about New York, New Jersey, and California, but are there any other reasonably large states where you continue to need rates? And in those states, compared to your peers, is your loss ratio significantly above everyone else? Or in other words, if you were to raise rates in those states, do the customers have anywhere else to go? Well, that's all.

Bob Tien: Hey, good morning, maybe just.

Bob Tien: Going back to the <unk> growth.

Bob Tien: <unk> growth rate.

Bob Tien: For slide six.

Bob Tien: If we look at the states that are above 96% combined ratio I know that you've talked about New York, New Jersey, California, but are there any other reasonably large states, where you continue to need rates and in those states.

Speaker Change: Are you comparing to your peers your loss ratio significantly above everyone else.

Speaker Change: Other words if.

Speaker Change: If you're awarded raise rates in those states.

Bob Tien: Do the customers have anywhere else to go.

Bob Tien: Well.

Thomas Joseph Wilson: A complicated question, to see if I can address it. So in all states, when you have severities going up the way Mario described them, you're going to be increasing rates at levels above what is the general inflation rate. So we expect to continue to have to do that. If, you know, our customers quit getting sued every time they get in an accident, then, you know, maybe it'll back off some, but we're always moving rates up. You're really getting to where your competitive position is.

Speaker Change: Complicated question.

Speaker Change: Let me see if I can address it so.

Speaker Change: In all states. When you have severity is going up the way Mario described it.

Speaker Change: Going to be increasing rates.

Speaker Change: Levels above what is the general inflation rate. So we expect to continue to have to do that.

Speaker Change: If.

Speaker Change: Our customers great data soon at every time they get an accident then maybe it will back off but so were always.

Speaker Change: Moving right are you really getting to where is your competitive position.

Thomas Joseph Wilson: And I think it's difficult right now to determine where one's competitive position is in any individual state, given how rapidly rates are moving and how they're moving through books of business. And so that said, we're confident that with transformative growth, by reducing our expenses, we'll end up in a lower cost, more competitive position than when we started this, you know, four years ago, whatever it was. It's just this blip here where everyone's raising prices a lot, including us. As Mario pointed out, in the auto alone, it was 16% in each of the last two years. Homeowners is not, you know; it's slightly lower, but also has the same trends to it.

Speaker Change: And I think it's difficult right now to determine where one's competitive position is.

Speaker Change: In in any individual state given how rapidly rates are moving and how they're moving through books of business.

Speaker Change: Given out.

Speaker Change: So that said, we're confident that with transformative growth by reducing our expenses will end up in a lower cost more competitive position than when we started this.

Speaker Change: Four years ago whatever place.

Speaker Change: It's just this blip in here, where everyone's raising prices a lot, including us as Mario pointed out.

Speaker Change: An auto loan it was 16% in each of the last two years homeowners is not.

Speaker Change: Slightly lower but also has the same trends to it so we.

Thomas Joseph Wilson: So we feel confident that the product offering we have, the technology we have, the agents we have, and the broad set of distribution will enable us to grow. Price is clearly an important part of that. And we're focused on making sure we're competitive, but we're not going to lower rates so that we can grow. You know, one of our big competitors, State Farms, picked up almost a couple of points of market share over the last couple of years because they chose to run fairly large underwriting losses. That won't be us.

Speaker Change: We feel confident that.

Speaker Change: The product offering we have the technology, we have the agents we have.

Speaker Change: The broad set of distribution that will enable us to grow price is clearly an important part of that.

Speaker Change: And we're focused on making sure we're competitive but we're not going to.

Speaker Change: Not take rate so that we can grow.

Speaker Change: One of our big competitors state farms picked up almost.

Speaker Change: Almost a couple of points of market share over the last couple of years.

Speaker Change: Because they chose to run fairly large underwriting losses.

Speaker Change: Won't be us.

Jian Huang: Okay, thank you. That's very helpful. But just curious, are there any other relatively large states outside of New York, New Jersey, and California where you still need rates at this point in time? No, like if you go back to page six, where you mentioned that the top bar on the right, the 26%, the vast majority of that is those three states, California, New York, and New Jersey. And then both the light blue and the dark blue, when you kind of add those together, and we talked about unwinding underwriting restrictions in about three-quarters of the states.

Speaker Change: Okay. Thank you that's very helpful, but just curious.

Speaker Change: Are there any other relatively large states outside of New York, New Jersey, California, where you still need great at this point in time.

Speaker Change: No. It's like if you go back to page six that you mentioned that the bar on the right. The 26%. The vast majority of that is those three states, California, New York and New Jersey.

Speaker Change: And then the both the light blue and the dark Blue when you kind of add those together and we talked about unwinding underwriting restrictions and about three quarters of the states.

Jian Huang: Again, we base those decisions on rate adequacy versus kind of a backward-looking combined ratio, and we feel good about where we're positioned, the growth opportunity. And as we said a couple times, we're going to stay on top of the loss trend in those states, but the states that are in that top section are the ones that we're going to continue to push incremental rates through because we're not at target margin. Okay, excellent. Thank you. Thank you.

Speaker Change: Again, we base those decisions on rate adequacy versus kind of a backward looking combined ratio and we feel good about where we're positioned.

Speaker Change: The growth opportunity and as we said a couple of times, we're going to stay on top of the loss trends in those states.

Speaker Change: States that are in that top section are the ones that we're going to continue to push incremental rate through because we're not at target margins yet.

Speaker Change: Okay excellent. Thank you.

Operator: One moment for our next question. And our next question comes from the line of Elyse Greenspan from Wells Fargo. Your question, please. Hi, thanks. Good morning.

Speaker Change: Thank you one moment for our next question.

Elyse Beth Greenspan: And our next question comes from the line of at least Greenspan from Wells Fargo. Your question. Please.

Elyse Beth Greenspan: My first question is on the auto book, you know. I guess it's more on the underlying loss ratio. You know, I thought in the past that the first quarter would seasonally be a better quarter for just the auto book in general, but understanding, you know, rate increases that can earn in can kind of mask that as we go through the year. And then I'm also not sure if there was maybe some favorable non-CAT weather, you know, in the Q1 numbers. So just can you give us a sense of the cadence?

Elyse Beth Greenspan: Hi, Thanks. Good morning. My first question is on on the auto.

Elyse Beth Greenspan: No I guess, it's more on the underlying loss ratio.

Elyse Beth Greenspan: I thought in the past, the first quarter, which seasonally be a better quarter.

Elyse Beth Greenspan: For auto book in general, but understanding weight increases that can earn and can kind of mask that as we go through the year and then I'm also not sure. If there was maybe some favorable non cat.

Elyse Beth Greenspan: Whether in the Q1 numbers. So just can you give us a sense of the cadence would you expect on the underlying loss ratio within auto to improve as we go through the year given the rate to earn in or is there some seasonality or other factors that we need to consider.

Elyse Beth Greenspan: Would you expect the underlying loss ratio with an auto to improve as we go through the year, given the rate to earn in? Or is there some seasonality or other factors that we need to consider? Let me start, and you can jump in.

Speaker Change: Let me start and you can.

Speaker Change: Jump in.

Speaker Change: First you are correct in that first quarter is usually a better quarter in combined ratio in auto insurance.

Speaker Change: I'd like to summer months, when everybody is driving.

Thomas Joseph Wilson: First, you're correct in that the first quarter is usually a better quarter for combined ratio and auto insurance than the summer months when everybody's driving. To be able to do attribution of this current quarter versus other quarters and whether and how much, you know, what the sustainable is really difficult to get with any sort of precision. It's not that we don't try, and we look at it, and we come up with numbers, but they're not numbers that I would say would be for public consumption. What I would say is we feel really good about the trend in auto insurance profitability. As you point out, we have a lot more rates still coming through. We've gotten good control over our expenses.

Speaker Change: To be able to do attribution.

Speaker Change: Of this current quarter versus other quarters, and whether and how much what is sustainable.

Speaker Change: It's really difficult to get it with any sort of precision it's not that we don't try.

Speaker Change: When we look at it when we come up with numbers, but they're not numbers that I would say would be for public consumption.

Speaker Change: I'd say is we feel really good about the trend.

Speaker Change: In auto insurance profitability as you pointed out we got a lot more rates still coming through.

Thomas Joseph Wilson: We're working hard on claims to try to deal with the high inflationary environment and make sure we keep costs down and not just accept that, you know, they have to go up at high single digits. So we feel really good about the trend, at least. I don't know that one quarter makes a trend. I would say this first quarter's X percent was due to just some anomaly. Mario, anything you would add to that?

Speaker Change: We've gotten good control over our expenses, we're working hard on claim to try to deal with high inflationary environment make sure we keep costs down and not just except that they have to go up at high single digits. So we feel really good about the trend.

Speaker Change: I don't know that I feel like one quarter makes a trend and that I would say this first quarter X percent was due to just somewhat alloy Mario anything you would add to that yes.

Thomas Joseph Wilson: Well, I think at least the components you mentioned are the right ones. And while I can't, you know, I'm not going to give you the guidance on continually improving the loss ratio going forward. What we do know are a handful of things.

Speaker Change: At least the components you mentioned are the right ones and while I can't I'm not going to.

Speaker Change: To give you the guidance on continually improving loss ratio going forward of what we do know are a handful of things number one we took over 16 points of rate last year and another two four points in the first quarter, that's going to continue to earn through the book and Youre going to continue to see.

Mario Rizzo: Number one, we took over 16 points of rate last year and another 2.4 points in the first quarter. And that's going to continue to grow through the book, and you're going to continue to see average earned premium growth going forward. That's just based on the actions we've taken so far. I talked a little bit about the loss trend earlier and where that was running. We'll see how that plays out over the duration of the year. The only other piece I'd give you is the frequency component of that.

Speaker Change: Average earned premium growth going forward Thats, just based on the actions we've taken so far.

Speaker Change: A little bit about the loss trend earlier, and where that was running we will see how that plays out over the duration of the year. The only other piece I'd give you is the frequency component of that there clearly is a weather benefit we got difficult to quantify.

Mario Rizzo: There clearly is a weather benefit we got, difficult to quantify. So the frequency benefit may or may not persist going forward. That would be the only thing in addition to just the Q1 seasonality that exists.

Speaker Change: The frequency benefit may or may not persist going forward that would be the only thing. In addition to just Q1 seasonality that exists, but but we feel good about.

Speaker Change: Where the earned premium trend is going and then we're obviously going to watch both components of the loss trend and we're going to continue to push hard on expenses to drive cost out of the system, which will also help from a margin perspective.

Mario Rizzo: But we feel good about where the earned premium trend is going. We're obviously going to watch both components of the loss trend, and we're going to continue to push hard on expenses to drive costs out of the system, which will also help from a margin perspective. Thanks.

Elyse Beth Greenspan: And then my second question, you know, going back to earlier comments on the health and benefits transaction, is your plan still to expect to announce and close the transaction this year? And then, based on your comments to a prior question, you implied, correctly, that there were conversations with parties. It sounds like you're going down the route of one counterparty, instead of perhaps maybe multiple, but can you just confirm, I guess, that that's a thought as well, just to find one counterparty to, you know, buy the entirety of the business? You know, it's a normal process; at least we're not going to go through it, you know, blow by blow on it.

Speaker Change: Thanks, and then my second question.

Speaker Change: Going back to earlier comments on the health and benefits transaction is your plan is still to expect to announce and close the transaction. This year and then I think based on your comments to a prior question you implied that there with conversations with parties. It sounds like Youre going down the route of one counterparty.

Speaker Change: Instead of perhaps maybe multiple but can you just confirm I guess that that's that's a thought as well just define one counterparty to buy the entirety of the business.

Thomas Joseph Wilson: We still think we'll sell it this year. A lot of people are interested in the business, and we're confident we made the right choice. Thank you.

Speaker Change: It's a normal process.

Speaker Change: Not going to go through blow by blow on it.

Speaker Change: We still think we will.

Speaker Change: So this year a lot.

Speaker Change: A lot of people are interested in the business.

Speaker Change: Sure.

Speaker Change: Confident we made the right choice.

Speaker Change: Thank you.

Operator: One moment for our next question. And our next question comes from Yaron Kinar from Jefferies. Your question, please. I didn't ask, but I did want to take a little bit there. So I understand you have the customer, that segment's growth. I'll let Mario jump in.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Huron <unk> from Jefferies. Your question. Please.

Huron: Thank you. Good morning, most of my questions have been asked but I did want to take a little deeper into the Nat Gen. If I cut and the best growth there.

Huron: So I understand you have the.

Huron: 360 that should drive further growth at the same time or we also see maybe some.

Huron: Competitive pressures rising in nonstandard auto.

Huron:

Huron: Which may actually resulted in a little bit of a decrease in that segment's growth.

Huron: Maybe you can help us think through the two combined.

Yaron Joseph Kinar: I know you're probably referring to Kemper's, I'll let Mario jump in on a standard, but let me just mention something we talk about but I'm not sure it gets as much focus as I think it should, which is homelessness. The homeowner's business is a really attractive business for us. We're really good at it. We have, you know, an integrated business model that you can see. Mario showed the slide where, you know, we've earned a 92 combined ratio over a 10-year period.

Speaker Change: I'll, let Mario jump into I know, you're probably referring to kemper's numbers.

Speaker Change: I'll, let Mario jump in on that standard.

Mario: Just mentioned something that I think kind of we talked about but I'm not sure it gets as much.

Mario: Focus is I think it should which is homeowners.

Mario: The homeowners business is a really attractive business for us.

Speaker Change: We're really good at it.

Speaker Change: And integrated business model that you can see Mario showed the slide where we've earned a 92 combined ratio over 10 year period.

Thomas Joseph Wilson: The industry dynamics today, a lot of that business is sold through independent agents, about half of it. And the industry dynamics are right for us to leverage that position. There's a great interest in independent agents and having what they call markets, or we would call availability. And when you look at why that is, You know, this is the first customer risk that is increasing, right? Whether that's inflation and home values, whether that's demographic trends, people moving in the way of where there's severe weather or just increased severe weather.

Speaker Change: The industry dynamics today, a lot of that business is sold through independent agents about half of it.

Speaker Change: And industry dynamics are right for us to leverage that position, there's a great interest in independent agents and having.

Speaker Change: With a call markets or we would call availability.

Huron: And when you look at why that is.

Huron: This is the.

Huron: The.

Huron: First customer risks are increasing right, whether that's inflation in home values, whether it's demographic trends people moving in a way of where their severe weather or just increased severe weather. So there is increased need for risks and then at the same time the industry has lost money. So the industry lost money over the last three years last five years over the last 10 years.

Thomas Joseph Wilson: So there's an increased need for risks. And then at the same time, the industry's lost money. So the industry lost money over the last three years, the last five years. Over the last 10 years, it made money, but we made about three-quarters of that money. So it made about $10 billion over a 10-year period, and we made about 75% of that. So we're really good at it.

Huron: Made money, but we made about three quarters of that money.

Huron: So industry made about $10 billion over a 10 year period, and we made about 75% of that so we're really good at it and so we think that one of the ways to grow there is any.

Thomas Joseph Wilson: And so we think that one of the ways to grow there in the independent agent channel is by leveraging our homeowners. So we can obviously grow in homeowners in the Allstate agent channel. You see, with our bundling stuff, whether you look at any of the industry reports, we're really good at bundling there. And you see the PIF growth there even when auto growth is going down, which wasn't always the case.

Huron: In the independent agent channel is by leveraging our homeowners, where obviously it can grow in homeowners in the Allstate agent channel.

Huron: See that we are funded linked stuff, whether you look at any of the industry reports were really good at bundling there and you see the Pip growth there even when auto growth is going down.

Huron: Which wasn't always the case they used to trend more together, but we've got so much better at bundling. So that's I don't want to leave homeowners on the cutting room floor.

Thomas Joseph Wilson: They used to trend more together, but we've gotten so much better at bundling. So I don't want to leave homeowners on the cutting room floor as it relates to growth, both in the national general channel and the Allstate channel. Mario, do you want to talk about nonstandard?

Huron: As it relates to growth both in the National General Channel and the Allstate Channel Mario do you want to talk about non standard yes.

Mario Rizzo: Yeah, thanks for the question, Jeroen. Look, where I'd start is the national general nonstandard auto business is a really well-run business for us. And when we acquired NatGen several years ago, it allowed us to get into a business that Allstate was not in at that time in a particularly meaningful way. And we've been able to grow that pretty aggressively and grow it profitably over the last several years. Some of the ways we've been able to expand are that we've expanded geographically.

Mario: Thanks for the question your own look where I'd start is.

Mario: The National General non standard auto business is a really well run business for us and when we acquired net churn.

Mario: Several years ago, it allowed us to get into a business.

Mario: Allstate was not in at that time, and a particularly meaningful way.

Mario: And we've been able to grow that.

Mario: Pretty pretty aggressively and grow it profitably over the last several years.

Mario: Some of the ways, we've been able to expand as we've expanded geographically. So we're in a lot more states with non standard auto now than when we bought the business. We've also expanded from a channel perspective, we allow allstate agents to sell non standard auto through National General for.

Mario Rizzo: So we're in a lot more states with nonstandard auto now than when we bought the business. We've also expanded from a channel perspective. We allow Allstate agents to sell nonstandard auto through national general for business that's outside of Allstate's risk appetite.

Mario: <unk> business, that's outside of Allstate's risk appetite, we sell it direct to consumer so we've been able to expand the business both geographically.

Mario Rizzo: We sell it direct to consumers, so we've been able to expand the business both geographically as well as across channels. And, you know, the business has been subject to the same inflationary pressures that the standard and preferred auto business has been subject to. But we've stayed on top of rate needs. We've taken a lot of rate over the last couple of years, I believe over 15 points in the last 12 months.

Mario: As well as across channels.

Huron: And.

Huron: The business has been subject to the same inflationary pressures that the standard and preferred auto business has been subject to.

Huron: But we've stayed on top of rate need we've taken a lot of rate over the last couple of years I believe over 15 points in the last 12 months.

Mario Rizzo: So we've stayed on top of the rate need. It's a business where you can effectively reprice most of the book, almost every policy period, just given the defection rates. And we've been able to, over the last couple of years, take advantage of the competitive dislocation in nonstandard auto as a number of carriers have backed off from that business. We've taken advantage of that opportunity and benefited by leveraging our capabilities in that space.

Huron: So we've stayed on top of the rate need it's a business that you can effectively reprice most of the book almost every policy period, just given the the defection rates and we've been able to over the last couple of years to take advantage of the competitive dislocation in non standard auto has a number of carriers have backed off.

Huron: From that business, we've taken advantage of that opportunity and taken advantage by leveraging our capabilities in that space.

Mario Rizzo: And, you know, as much as the competition might be heating up there, we feel really good about our capabilities. And we're going to continue to look to grow that business as well as the standard preferred and homeowners that Tom talked about with Custom 360. Thank you very, very much.

Huron: And.

Huron: As much as the competition might be heating up there we feel really good about our capabilities and we're going to continue to look to grow that business as well as the standard preferred in homeowners.

Huron: Tom talked about it with customer 360.

Speaker Change: Thank you very very comprehensive.

Yaron Joseph Kinar: One moment for our next question. And our next question comes from the line of David Motemaden from Evercore ISI. Your question, please. Hi, thanks. Good morning.

Speaker Change: Thank you one moment for our next question.

Huron: And our next question comes from the line of David Mcmahon from Evercore ISI. Your question. Please.

David Kenneth Motemaden: I had a question just on the brand auto. So the brand auto PIF was down about a percent and a half compared to the fourth quarter. And I guess I'm wondering how, and that was for the entire book, the entire brand auto book. I guess I'm wondering how that Piff growth trended versus the fourth quarter in the 64% of the book that is at target margins that you showed on the slide. Are you guys growing pests in that part of the book? We wouldn't break those numbers out. When it's big enough, David, you could do math on it.

David Mcmahon: Hi, Thanks, good morning.

David Mcmahon: I had a question just on the brand auto test.

David Mcmahon: So the brand auto Perth was down about 1% in half.

David Mcmahon: Compared to the fourth quarter.

David Mcmahon: And I guess I'm wondering how that was for the entire book.

David Mcmahon: The entire brand auto book, I guess, I'm wondering how that Pip growth trended versus the fourth quarter and the 64% of the book that is at target margins that you showed on slide six are you guys growing test in that part of the book.

Speaker Change: We wouldn't break those numbers out for competitive reasons.

Thomas Joseph Wilson: So you could say, okay, here's when the turn is going to come. We would say it. But obviously, there are some markets; we're growing in other markets, we're not growing in some of those are markets, some of those are states. When we get to the point where you can do the math to show when I know what you're thinking, I totally get why you're where you're going because you want to figure out when your turn is.

David Mcmahon: When it's when it's big enough. So David you could do math on it. So you can say okay. Here is when that turn is going to come we would say it but obviously there are some markets. We're growing in other markets, we're not growing in some of those markets some of those states.

David Mcmahon: When when we get to the point, where you can do the math to show.

Speaker Change: I know.

Speaker Change: Totally get why Youre, where youre going when do you want to figure out when the turn is but.

Speaker Change: We don't like to show what states were growing in at higher rates than others. Because then that gets our competitors' interested and going to the states.

Speaker Change: And we'd rather we'd rather grow without without having them be aware right.

Thomas Joseph Wilson: But we don't like to show what states we're growing in at higher rates than others, because then that gets our competitors interested in going to those states, and we'd rather we'd rather grow without having them be aware of what we are. No, I understood. It was it was worth a shot.

Speaker Change: No I understood. It was it was worth a shot anyway.

David Kenneth Motemaden: Transcripts provided by Transcription Outsourcing, LLC. I have just one question on agent productivity. You gave some interesting stats last quarter.

Speaker Change: Yes.

Speaker Change: Just another question just on the agent productivity.

Thomas Joseph Wilson: That agent productivity was up. I'm just wondering how productivity did that improve significantly, or just how to think about that as potential growth. Let me go up to transformative growth and get Mario to talk about the specifics of your question. So, as part of transformative growth, we said we wanted to improve customer value, and that meant getting our agents to really focus on those things that customers really want them to do for them, which includes helping them buy insurance. It doesn't necessarily include having them there when they have to pay a bill for retention.

David Mcmahon: You gave some interesting stats last quarter.

David Mcmahon: That agent productivity was up 6%.

David Mcmahon: Excluding California, New York, New Jersey.

David Mcmahon: Just wondering how the productivity look this quarter did that improve significantly or just how to think about that.

David Mcmahon: As a potential growth driver.

Speaker Change: Let me go up to transformative growth and get harder to talk about the specifics of your question. So as part of transformative growth. We said, we want to improve customer value and that meant getting our agents to really focus on their where that those things that customers really want them to do for them, which includes helping them buy.

David Mcmahon: Insurance it doesn't necessarily include.

David Mcmahon: Having them there when they have to pay a bill for retention.

Thomas Joseph Wilson: They will pay for that, but they won't pay as much as they will when they get to new business. So we shifted our compensation program to move to lower our costs for customers and better align it with what customers want to pay for. As a result of that, we've both lowered distribution expense and had some agents who had built business models on higher retention leave us. So our overall agent capacity in the Allstate brand has gone down. But, to your point, productivity has gone up, and so our overall volume has been even better when you adjust for those three states that, you know, are not to be named. So, Mario, do you want to go there?

David Mcmahon: We'll pay for that but they wont pay as much as they will for.

David Mcmahon: When they get to new business, so we shifted our compensation programs to move to <unk>.

David Mcmahon: Lower our cost for customers and better align it with what customers wanted to pay for it.

David Mcmahon: As a result of that we both lower distribution expense and we've had some agents who had.

David Mcmahon: Had built business models on higher retention leave us our overall agent capacity in the Allstate brand has gone down that said.

David Mcmahon: To your point productivity has gone up and so our overall volume has been even better when you adjust for those three states that.

David Mcmahon: Are not to be named.

David Mcmahon: Mario do you want to go there yet.

Mario Rizzo: Yeah, thanks for the question. I think the short answer to your question is yes. We, you know, when you look at overall Allstate brand new business production, it is up about six and a half percent. It was up both in the Allstate exclusive agent channel as well as directly. And then you kind of carve out California, New York, and New Jersey because you have to remember the California rate wasn't effective until February.

Mario: Thanks for the question.

Mario: I think the short answer to your question is yes.

Mario: When you look.

Mario: Overall Allstate brand new business production is up about six 5%. It was up both in the Allstate exclusive agent channel as well as direct.

Mario: And then if you kind of carve out, California, New York, and New Jersey, because you have to remember the California rate wasn't effective until February. So we really didn't start opening things back up until the really the latter part of the quarter.

Mario Rizzo: So, we really didn't start opening things back up until the really latter part of the quarter. We're really pleased with how our agents are responding to the changes. We've made that Tom talked about continuing to invest in their businesses, continuing to drive higher levels of average productivity. And despite the fact that we have fewer agents and have restricted or have been restricting growth in three pretty significant states, overall productivity is increasing, and absolute production is up.

Mario: We're really pleased with how our agents are responding to the changes we've made that Tom talked about continuing to invest in their businesses continuing to drive higher levels of average productivity and despite the fact that we have fewer agents.

Mario: And have restricted or had been restricting growth and three pretty significant states overall productivity is increasing and absolute production is up so we're really happy with the productivity levels of our agents and as we look to accelerate growth going forward, they're going to be a core part of how we grow.

David Kenneth Motemaden: So, we're really happy with the productivity levels of our agents, and as we look to accelerate growth going forward, they're going to be a core part of how we grow prospectively in addition to things we've been talking about with independent agents and the direct channel. Got it. Thank you.

Mario: Prospectively in addition to things we've been talking about with independent agents and the direct channel.

Operator: We'll take one more question. Certainly. And our final question for today comes from the line of Mike Zaremski from BMO. Your question, please. Hey, great.

Speaker Change: Got it thank you.

Speaker Change: Thank you Jonathan we'll take one more question.

Speaker Change: Certainly.

Speaker Change: Anil question for today comes from the line of.

Anil: Mike Zaremski from BMO Your question please.

Michael David Zaremski: Thanks for putting me in. I guess just, I know there's been a lot of talk about growth, and, you know, the strategy has been clear. You guys have successfully kind of transformed your expense ratio, which would help grow a direct-to-consumer channel specifically. And I know Allstate has a ton of marketing expertise, but I'm just kind of curious, you know, the direct-to-consumer customer. My understanding is it's a bit different than the average current Allstate customer.

Michael David Zaremski: Okay, great. Thanks for putting me in I guess just.

Michael David Zaremski: I know theres been a lot of talk about growth.

Michael David Zaremski: This strategy has been clear investments successfully kind of transformed your expense ratio lower.

Michael David Zaremski: Would help grow our direct to consumer channel specifically.

Speaker Change: And also it has a ton of marketing expertise. So I'm just kind of curious the direct to consumer.

Speaker Change: Customer my understanding is a bit different than the average current allstate customer I'm sorry.

Michael David Zaremski: So, you know, are there any different strategies or, you know, maybe you kind of just go slow to learn as you kind of grow into D2C or anything you'd like to, you think we should be thinking about there?

Speaker Change: Or are there any different strategies or maybe you kind of just go slow to learn as you kind of grow into D C or anything you'd like you think we should be thinking about there.

Thomas Joseph Wilson: Unknown Speaker: Yes, the first thing is that the direct customer does have different needs. So they don't necessarily want to pay for someone to help them buy insurance, which is why we price our direct insurance under the Allstate brand, cheaper than Allstate branded insurance bought through an agent, because we're trying to do exactly what our customers want. They also have different ways they want to interact with us.

Thomas Joseph Wilson: And so we've, with our new, with Transform Our Growth, our new tech stack, everything from what's pre-populated into the thing to the offers it presents to you to the questions you're required to, as Mario talked about, we're down 40% in the quote time. And we've been able to add other products to that flow. And so we increase things like roadside services and sell more products, which lowers our acquisition costs. So it is; it is different.

Speaker Change: Yes.

Speaker Change: The direct customer does have different needs and so they don't necessarily want to pay for someone to help them by insurance, which is why we price our direct insurance under the Allstate brand cheaper than Allstate branded insurance bought through an agent because we're trying to do exactly what our customers want they also have different ways.

Speaker Change: They wanted to interact with us and so we've.

Speaker Change: With our new Retrans for growth in new Tech stack.

Speaker Change: It's really.

Speaker Change: Everything from what's pre populated into this thing to the offers that presents too to the questions Youre required to Mario's Mario talked about we're down 40%.

Speaker Change: Quote time.

Speaker Change: We've been able to add other products to them flow.

Speaker Change: And so increase things like roadside services and sell more products, which lowers our acquisition costs.

Speaker Change: So.

Speaker Change: It is.

Speaker Change: It is different.

Thomas Joseph Wilson: Although we are good at it, we could be better at it. And so we're working on getting better at it. About two years ago, we really reformed the business, put some new leadership in place, and then we are updating everything from the technology I talked about to also who we market to. So you mentioned, you know, they're direct customers, but some of the customers recognize who you go to. For example, if you go to people who shop all the time, then you will get higher-risk drivers because they shop all the time, as opposed to lower-risk drivers who don't shop as much. So it costs more to get the lower-risk drivers on board.

Speaker Change: Good at it we could be better at it and so we're working on getting better at it about two years ago.

Speaker Change: Really reform the business put some new leadership in place.

Speaker Change: And then are updating everything from the technology I talked about to also who you market to so you mentioned their direct customers, but some of the customers right because thats, where you go to like if you go to people who are shopping at all time, then you will get higher risk drivers because they shop all the time.

Speaker Change: As opposed to lower risk drivers don't shop as much so it costs more to get the.

Speaker Change: The lower risk drivers.

Thomas Joseph Wilson: So we're working through how to expand that. We believe that the direct channel has tremendous upside for us to serve those customers who want it that way. Not just car insurance, but things like home insurance and whether it's protection plans or what we're doing in, we've got some stuff going on in the commercial space with Direct. So we think it's just another way that consumers will interact. I'll often, you know, not a lot of homeowners are sold over direct. We'll see how successful we are. I believe we can.

Speaker Change: So we're working through how do we expand that.

Speaker Change: We believe that the direct channel has tremendous upside with us to serve those customers who want it that way.

Speaker Change: Not just in the auto insurance, but things like home insurance.

Speaker Change: And whether it's protection plans or what we're doing in.

Speaker Change: We've got some stuff going on in the commercial space with direct so we think it's just another way that consumers will interact.

Speaker Change: Not a lot of homeowners has sold over direct.

Speaker Change: We'll see how successful they are I believe we can I mean, you know people buy houses.

Thomas Joseph Wilson: I mean, you know, people buy houses directly. So I'm like, if you buy a house, you'll probably buy home insurance from us. And so there's a great upside. You will notice that when you look over the last couple of years, one of the first places we dialed down new business was in the direct channel. So it was down like 50 or 60%, I think, in 23 markets because we wanted to make sure we maintained our agent force levels of compensation because they have businesses to run, and this is the revenue that comes into their business.

Speaker Change: Like if you buy a house or probably by our home insurance from us.

Speaker Change: And so.

Speaker Change: There is great upside you will notice that when you look over the last couple of years.

Thomas Joseph Wilson: We said, okay, well, if this is a temporary window, it's easier for us to concentrate that reduction in new business in the direct channel than it is to spread it amongst a bunch of agents who are now also trying to get through a new comp plan. That turned out to be a good choice.

Speaker Change: One of the first places we dialed down.

Speaker Change: New business was in the direct channel side, it was down like 50, or 60% I think in 23 markets.

Speaker Change: Because we wanted to make sure we maintained our agent force levels of compensation because they are businesses right and this is the revenue that comes into their business. We said, okay. Well. If this is a temporary window, it's easier for us to concentrate their reduction in new business in the direct channel than it is to spread it.

Speaker Change: Amongst a bunch of agents, who are now also trying to get through a new comp plan.

Speaker Change: It turned out to be a good choice.

Thomas Joseph Wilson: It gave us the opportunity to build new capabilities, and now we're hitting the gas on expanding direct, so you should expect to see our direct volume go up higher as a percentage of new business than it has been in the past. Thank you all for joining us and investing your time in Allstate. We'll talk to you next quarter. This concludes the investor call. You can now disconnect. Good day, www.allstate.co.uk Unknown Executive, Unknown Attendee, Unknown Attendee, Unknown Attendee, [inaudible] [inaudible] For more information, visit www.

Speaker Change: It gave us the opportunity to build new capabilities.

Speaker Change: And now we are hitting the gas side expanding direct so you should expect to see our direct volume.

Speaker Change: Is go up higher as a percentage of new business than it has been in the past.

Speaker Change: Thank you all for joining us.

Speaker Change: Investing your time and I'll say that we will talk to you next quarter.

Speaker Change: This.

Speaker Change: <unk> Investor call you can now disconnect good day.

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