Q4 2024 The Allstate Corp Earnings Call

So it will be a question and answer session to ask a question. During this session you will need dress star one on your phone.

Your question has been answered and you wish to remove yourself from the queue simply press Star. One again, please limit your inquiry to one question and one follow up as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program Alastair Goldman.

Speaker Change: Of Investor Relations. Please go ahead Sir.

Alastair Goldman: Thank you Jonathan Good morning, welcome to Allstate's fourth quarter 2024.

Speaker Change: On the call yesterday.

Speaker Change: With the market, we issued our news release and Investor supplement and posted related material on our website that allstate's investors Dot com our management team will provide perspective on our strategy and then based on results. After prepared remarks, we will have a question and answer session.

Speaker Change: As noted on the first slide of the presentation. Our discussion will contain non-GAAP measures for which there are reconciliations in the news release and Investor supplement and forward looking statements about allstate's operations Allstate's results may differ materially from these statements. So please refer to our 10-K for 2023.

Speaker Change: <unk> and other public documents for information on potential risks.

Speaker Change: 10-K for 2024 will be published later this month and now I will turn it over to Tom.

Tom: Good morning, we appreciate you investing time at Allstate.

Mario: I'll start with an overview and then Mario adjusted go through the operating results.

Mario: Let's begin on slide two so as you know allstate's strategy has two components increased personal property liability market share.

Mario: And then expand protection provided customers, which are shown in two hours on the left hand side on the right hand, you can see Allstate strong performance in 2024 and the topics we're going to cover this morning.

Mario: Revenues were $16 5 billion.

Mario: For the quarter up 11, 3% compared to the prior year quarter.

Mario: <unk> generated net income of $1 9 billion in the fourth quarter and $4 6 billion for the full year.

Mario: Adjusted net income return on equity was 26, 8%, let me just repeat that 26, 8% over the last 12 months.

Mario: <unk> risk and return management resulted in excellent underwriting and investment results.

Mario: Transformative growth has strengthened our competitive position will spend a few minutes on that today, the sale of our group health and employee voluntary benefits to companies with greater strategic alignment will generate three in a quarter $1 billion of expected proceeds representing attractive valuation multiples.

Mario: Let's move on to slide three.

Mario: The operational execution produced excellent financial results in the quarter and for the full year revenues increased to $64 1 billion in 2024 property liability earned premiums were up 10, 6% in the quarter and 11, 2% for the full year.

Mario: Net investment income was up 37, 9% above the prior year and up almost 25% for the full year then.

Mario: Net income was $1 9 billion in the quarter and $4 $6 billion for the full year adjusted net income, which we make a few changes on the amortization of intangibles and things, which just can walk you through it go out with $7 67 per share for the fourth quarter.

Mario: On the lower right you can see the adjusted net income return on equity was 26, 8%. So 2024 was an excellent year for Allstate, both financially and strategically let's move on to talk strategically about transformative growth on slide four.

Mario: We launched this project in December of 2019, so five years have gone by so thats a good time to give you a five year look as to where we are and as you know there's five components of the plan to increase market share in property liability two of which we'll cover today improving customer value is.

Mario: <unk> requires us to lower our costs and provide differentiated product as you can see on the right hand side. The adjusted expense ratio, which excludes advertising cost has improved almost five points since 2019 by elimination, eliminating work outsourcing and digitizing activity using less real estate and lower.

Mario: Distribution expenses.

Mario: Lower cost enable us to offer more competitive prices without impacting margins.

Mario: Substantial progress has also been made in introducing products new products. So affordable simple connected auto insurance is now in 31 states and the new homeowners product is enforced states.

Mario: Differentiated customer 360, middle market standard and preferred auto and homeowners products have also been introduced the independent agent channel in 30 States.

Mario: One of the most significant changes is the expansion of customer access to improved growth. So this effort has three components improve allstate agent productivity expand direct sales and increased independent agent distribution all of which have been successful.

Mario: Agency productivity has increased enhancement.

Mario: Enhancements to direct capabilities lower pricing and increased advertising, it's tracking more self directed customers.

Mario: The National General acquisition significantly expanded our presence and capabilities in the independent agent channel as you can see on the right in 2019 more than three out of four new business policies came from the Allstate agents last year, New business was $9 7 million items, 76% higher than 2019 with Cigna.

Mario: Difficult contributions from each channel.

Mario: Policies enforced increased from 32 from $2 $37 3 million, despite the negative impact of post pandemic price increases.

Mario: Transfer of growth has positioned us for personal property liability market share growth, which you'll hear more about from Mario So now let me move on to Mario in property liability. Thanks, Tom Let's turn to slide five.

Mario: At the top of the table you can see fourth quarter property liability underwriting income of $1 8 billion improved by $507 million compared to the prior year quarter.

Mario: Auto insurance generated $603 million of underwriting income an improvement of $510 million compared to the prior year quarter and reflecting the successful execution of the profit improvement plan.

Mario: Owners insurance underwriting income was also strong at $1 1 billion. This was $99 million lower than the prior year quarter due to increased catastrophe losses.

Mario: On the bottom half of the table, you'll see the strong margins delivered during the quarter with a total property liability recorded combined ratio of $86 nine reflecting a two six point improvement compared to the prior year.

Mario: Aldo in homeowners combined ratios in the quarter were both better than the targets for those businesses of mid Ninety's for auto and low 90% for homeowners.

Policies enforced increased from 30 to set from that $237 3 million. Despite the negative impact of post pandemic price increases.

Mario: Now I will expand on the auto insurance margins on slide six where you can see how successful execution of the auto profit improvement plan has restored profitability back to target levels.

Transfer of growth has positioned us for personal property liability market share growth, which you'll hear more about tomorrow. So now let me move on to Mario in property liability.

Let's turn to slide five.

Mario: Fourth quarter Auto insurance recorded combined ratio of 93, five was five four points below prior year quarter as average earned premium outpaced loss costs.

At the top of the table you can see fourth quarter property liability underwriting income of $1 8 billion improved by $507 million compared to the prior year quarter.

Mario: As a reminder, we regularly review claims severity expectations throughout the year, if the expected severity for the current year changes we recorded the year to date impact in the current quarter, even though a portion of that impact is attributable to previous quarters.

Auto insurance generated $603 million of underwriting income an improvement of $510 million compared to the prior year quarter and reflecting the successful execution of the profit improvement plan.

Homeowners insurance underwriting income was also strong at $1 1 billion.

Mario: For 2022 through 2024, the bars in the graph reflects the updated average severity estimates as of the end of each of those years to remove the volatility related to intra year severity adjustments.

This was $99 million lower than the prior year quarter due to increased catastrophe losses.

On the bottom half of the table, you'll see the strong margins delivered during the quarter with a total property liability recorded combined ratio of $86 nine reflecting a two six point improvement compared to the prior year.

Mario: The table at the bottom of the graph shows actual reported combined ratios in.

Mario: In the fourth quarter of 2020 for the full year claims severity estimate went down so there was a benefit from prior quarters included in the fourth quarter's reported results.

Oh and homeowner combined ratios in the quarter were both better than the targets for those businesses of mid <unk> for auto and low 90% for homeowners.

Mario: This benefit was worth one five points in the fourth quarter with the adjusted quarterly combined ratio of 95% shown in the furthest bar to the right.

Now I will expand on the auto insurance margins on slide six where you can see how successful execution of the auto profit improvement plan has restored profitability back to target levels.

Mario: Let's turn to slide seven where you can see that homeowners insurance produced attractive returns and grew policies in force in 2024.

Fourth quarter Auto insurance recorded combined ratio of $93 five was five four points below prior year quarter as average earned premium outpaced loss costs.

Mario: With an industry, leading product advanced pricing underwriting and analytics.

Mario: <unk> distribution capabilities and our comprehensive reinsurance program, we will continue to win in the homeowners business.

As a reminder, we regularly review claims severity expectations throughout the year, if the expected severity for the current year changes we recorded the year to date impact in the current quarter, even though a portion of that impact is attributable to previous quarters.

Mario: On the left you can see some of the key factors that continued contributed to strong results, including increased written premium up 15, 3% in the fourth quarter compared to prior year, reflecting higher average gross written premium per policy and policy in force growth of two 4%.

For 2022 through 2024, the bars in the graph reflects the updated average severity estimates as of the end of each of those years to remove the volatility related to entry year severity adjustments.

Mario: For the full year 2020 for the homeowners insurance business recorded a combined ratio of 91 in line with our low Ninety's target.

The table at the bottom of the graph shows actual reported combined ratios.

In the fourth quarter of 2020 for the full year claims severity estimate went down so there was a benefit from prior quarters included in the fourth quarter's reported results.

Mario: All generating total underwriting profit of $1 3 billion.

Mario: The combined ratio for 2024 improved by 16, seven points, primarily driven by lower catastrophe losses and strong underlying loss performance.

This benefit was worth one five points in the fourth quarter with the adjusted quarterly combined ratio of 95 shown in the furthest bar to the right.

Mario: The chart on the right shows Allstate strong track record of profitability and homeowners insurance.

Let's turn to slide seven where you can see that homeowners insurance produced attractive returns and grew policies in force in 2024.

Mario: Allstate produced the recorded combined ratio of 92 over the past 10 years, which compares favorably to the industry, which experienced an underwriting loss and a combined ratio of 103 over that same time period.

With an industry, leading product advanced pricing underwriting and analytics.

<unk> distribution capabilities and our comprehensive reinsurance program, we will continue to win in the homeowners business.

Mario: Now, let's go to a homeowner pertinent topic on slide eight and discuss the California wildfires.

On the left you can see some of the key factors that continued contributed to strong results, including increased written premium up 15, 3% in the fourth quarter compared to prior year, reflecting higher average gross written premium per policy and policy in force growth of two 4%.

Mario: So Allstate responded quickly and empathetic Lee to help customers and communities after the tragic wildfires in southern California.

Mario: We deployed mobile claim centers and over 900 team members to assist customers.

Mario: Helping our customers recover from the fires as our principle priority.

For the full year 2020 for the homeowners insurance business recorded a combined ratio of 91 in line with our low Ninety's target.

Mario: The financial impact of the wildfires reflects the comprehensive risk and return approach, we've taken to managing the homeowners insurance business.

While generating total underwriting profit of $1 3 billion.

Mario: Allstate made the decision to reduce California exposure beginning in 2007.

The combined ratio for 2024 improved by 16, seven points, primarily driven by lower catastrophe losses and strong underlying loss performance.

Mario: Our homeowners market share has been reduced by over 50% since that time as you can see on the chart on the left.

While it is early and we have not been able to adjust many claims current gross losses are estimated at $2 billion, which includes loss adjustment expenses and an estimated California fair plan assessment.

The chart on the right shows Allstate strong track record of profitability and homeowners insurance.

Allstate produced a recorded combined ratio of 92 over the past 10 years, which compares favorably to the industry, which experienced an underwriting loss and a combined ratio of 103 over that same time period.

Mario: Reinsurance recoveries of $900 million.

Mario: Net of reinstatement premiums would reduce the net loss to $1 1 billion.

Now, let's go to a homeowner pertinent topic on slide eight and discuss the California wildfires.

Mario: Which will be reflected in first quarter 2025 earnings.

Mario: Each additional $100 million in gross losses above our current estimate would result in $10 million of net losses. Since we are above the reinsurance attachment point of $1 billion.

So Allstate responded quickly and empathetic Lee to help customers and communities after the tragic wildfires in southern California.

We deployed mobile claim centers and over 900 team members to assist customers.

Mario: We will continue to monitor the development of this event and provide any updates with our January catastrophe release, which we'll make on February 20th.

Helping our customers recover from the fires as our principle priority.

The financial impact of the wildfires reflects the comprehensive risk and return approach, we've taken to managing the homeowners insurance business.

Mario: Looking forward lets discuss policy enforced trends in the property liability business on slide nine.

Allstate made the decision to reduce California exposure beginning in 2007.

Mario: The chart to the left shows the composition of property liabilities $37 5 million policies in force.

Our homeowners market share has been reduced by over 50% since that time as you can see on the chart on the left.

Mario: Auto is the largest at $24 9 million and homeowners represents approximately 20% of policies in force.

While it is early and we have not been able to adjust many claims current gross losses are estimated at $2 billion, which.

Mario: As you can see on the right side of the page auto insurance policies in force declined by one 4%.

Which includes loss adjustment expenses.

Mario: A decline in customer retention, particularly in states with large recent rate increases more than offset a nearly 30% increase in new business applications in the quarter.

The estimated California Fair plan assessment.

Reinsurance recoveries of $900 million net.

Net of reinstatement premiums would reduce the net loss to $1 1 billion.

Auto policies in force did increase in 31 states, representing approximately 60% of countrywide written premium on a year over year basis.

Which will be reflected in first quarter 2025 earnings.

Each additional $100 million in gross losses above our current estimate would result in $10 million of net losses. Since we are above the reinsurance attachment point of $1 billion.

Mario: In the middle column on the right you can see that homeowners insurance policies in force increased by 173000, or two 4% driven by strong retention and a 25% increase in new business.

We will continue to monitor the development of this event and provide any updates with our January catastrophe release, which we'll make on February 20th.

Mario: Due homeowners as a growth opportunity across all distribution channels.

Looking forward lets discuss policy enforced trends in the property liability business on slide nine.

Mario: Our objective in 2025 is to grow property liability policies in force by both improving customer retention and continuing strong new business sales.

The chart to the left shows the composition of property liability to $37 5 million policies in force.

Auto is the largest at $24 9 million and homeowners represents approximately 20% of policies in force.

Mario: Our probe proactively contacting customers to lower the cost of protection to increase retention.

Mario: Completing the rollout of affordable simple and connected auto and homeowners products will also enable growth.

As you can see on the right side of the page auto insurance policies in force declined by one 4%.

Mario: In addition to improving the customer experience. These products contain our most sophisticated reading plant and telematics offerings, which will deliver profitable growth and position us to compete effectively in a market where more carriers are looking to grow.

A decline in customer retention, particularly in states with large recent rate increases more than offset a nearly 30% increase in new business applications in the quarter.

Auto policies in force did increase in 31 states, representing approximately 60% of countrywide written premium on a year over year basis.

We will also continue to invest in marketing and leverage broad distribution to grow property liability market share.

Mario: Alright transparency to investors on our progress on growth.

In the middle column on the brain you can see that homeowners insurance policies in force increased by 173000, or two 4% driven by strong retention and a 25% increase in new business.

Mario: We disclosure of policies in force will be provided beginning with our next month monthly release in a couple of weeks now I'll turn it over to Jeff Alright. Thank you Mario Slide 10 provides insights on investment performance and asset allocation I'm, taking a proactive approach to portfolio management Allstate Optimizes returns per unit of <unk>.

We view homeowners as a growth opportunity across all distribution channels.

Our objective in 2025 is to grow property liability policies in force by both improving customer retention and continuing strong new business sales.

Mario: Risk across the enterprise.

Jeff: This disciplined approach includes comprehensive monitoring of economic conditions market opportunities interest rates and credit spreads.

We are proactively contacting customers to lower the cost of protection to increase retention.

Jeff: Chart on the left shows the quarterly trend of net investment income and our fixed income earned yield market based income of $727 million, which is shown in blue was $123 million above the prior year quarter, reflecting a higher fixed income yield and increased assets under management.

Completing the rollout of affordable simple and connected auto and homeowners products will also enable growth.

In addition to improving the customer experience. These products contain our most sophisticated rating plans and telematics offerings, which will deliver profitable growth and position us to compete effectively in a market where more carriers are looking to grow.

Jeff: Fixed income yields shown below the chart has steadily increased as we repositioned into higher yielding longer duration assets, increasing 40 basis points from 4.0% to four 4% over the past year.

We will also continue to invest in marketing and leverage broad distribution to grow property liability market share.

Jeff: <unk> income of $167 million shown in black was $107 million above the prior year quarter, reflecting higher private equity and real estate investment results. As we've mentioned previously our performance based portfolio is intended to provide long term value creation and volatility on these assets from quarter to quarter is.

To provide transparency to investors on our progress on growth.

Speaker Change: Monthly disclosure of policies in force will be provided beginning with our next month monthly release in a couple of weeks now I'll turn it over to chest alright. Thank you Mario Slide 10 provides insights on investment performance and asset allocation.

Jeff: <unk>.

Jeff: The Pie chart on the right shows our asset allocation as of year end 2024, as you can see our portfolio is largely comprised of high quality liquid interest bearing assets public equity holdings were increased by $2 4 billion in the fourth quarter and now comprised $3 3 billion or approximately 5% of the total.

chest: Taking a proactive approach to portfolio management Allstate Optimizes returns per unit of risk across the enterprise disk.

chest: This disciplined approach includes comprehensive monitoring of economic conditions market opportunities interest rates and credit spreads. The chart on the left shows the quarterly trend of net investment income and our fixed income earned yield market based income of $727 million, which is shown in blue was $123 million above.

Folio.

Jeff: Fixed income duration was five three years, which is in line with the prior year quarter and up from $4 eight years at the end of last year.

chest: The prior year quarter, reflecting a higher fixed income yield and increased assets under management.

Turning to slide 11, and discuss protection plans business, which is a key component of protection services and advances our strategy to expand protection, while generating profitable growth.

chest: Fixed income yields shown below the chart has steadily increased as we repositioned into higher yielding longer duration assets, increasing 40 basis points from 4.0% of four 4% over the past year.

Jeff: Protection plans offers protection that repairs or replaces a wide range of consumer products, including electronics computers, and tablets Tvs mobile phones major appliances and furniture, they're going they're damaged or broken the products are distributed through strong retail relationships.

<unk> income of $167 million shown in black was $107 million above the prior year quarter, reflecting higher private equity and real estate investment results. As we've mentioned previously our performance based portfolio is intended to provide long term value creation and volatility on these assets from quarter to quarter is.

Jeff: Revenues of $528 million in the fourth quarter grew 23% to prior year, driven by both domestic and international expansion.

Jeff: Profitable growth growth resulted in adjusted net income for the quarter of $37 million.

chest: <unk>.

chest: The Pie chart on the right shows our asset allocation as of year end 2024, as you can see our portfolio is largely comprised of high quality liquid interest bearing assets public equity holdings were increased by $2 4 billion in the fourth quarter and now comprised $3 3 billion or approximately 5% of the total.

Jeff: Which is consistent with the prior year quarter, and an increase for the full year of $40 million to $157 million, reflecting the benefit of higher revenues and claims cost improvements.

Jeff: The business is profitably grown to approximately 160 million policies, adding 60 million since 2019 through broadened distribution and protection offerings as well as geographic expansion. Additionally.

chest: Folio.

chest: Fixed income duration was five three years, which is in line with the prior year quarter and up from $4 eight years at the end of last year.

Jeff: Revenue has increased to nearly $2 billion in 2024, reflecting 23, 9% and annual compounded growth since 2019, while generating more than three quarters of $1 billion and adjusted net income for 2019 to 2020 for this growth offsets expansion investments.

chest: Turning to slide 11, and discuss protection plans business, which is a key component of protection services and advances our strategy to expand protection, while generating profitable growth.

chest: Protection plans offers protection that repairs or replaces a wide range of consumer products, including electronics computers, and tablets Tvs mobile phones major appliances and furniture or damage to program. The products are distributed through strong retail relationships.

Jeff: We continue to invest in this driving business as evidenced by the recent acquisition of Kingfisher, which enhances our mobile phone protection capabilities.

Jeff: I would like to transition to slide 12, and discuss how the sale of the employer voluntary benefits and group health businesses create shareholder value as a reminder, the decision to pursue the sale of health and benefits was based on the assumption that these businesses and have greater strategic value to other companies and selling them would maximize shareholder value the transactions we've announced.

chest: Revenues of $528 million in the fourth quarter grew 23% to prior year, driven by both domestic and international expansion.

Profitable growth growth resulted in adjusted net income for the quarter of $37 million.

Jeff: This assumption and.

chest: Which is consistent with the prior year quarter, and an increase for the full year of $40 million to $157 million, reflecting the benefit of higher revenues and claims cost improvements.

Jeff: In August we agreed to sell the employer voluntary benefits system sustained core financial for $2 billion, we expect to close that in the first half of 2025.

Jeff: Last week, we marked another major milestone with our agreement to sell the group health business to nationwide for $1 $25 billion, which we expect to close sometime in 2025.

chest: Business as profitably grown to approximately 160 million policies, adding 60 million since 2019 through broadened distribution and protection offerings as well as geographic expansion.

Jeff: Both of these transactions are economically and financially attractive for our shareholders.

chest: Additionally, revenue has increased to nearly $2 billion in 2024.

Jeff: Proceeds of these sales or $3 $25 billion with an expected book gain of approximately $1 billion.

chest: <unk> 23, 9% and annual compounded growth since 2019, while generating more than three quarters of $1 billion and adjusted net income for 2019 to 2020 for this growth offsets expansion investments.

Jeff: Using trailing 12 months adjusted net income the combined estimated impact of the transactions on adjusted net income return on equity would have been a decrease of about 180 basis points due to lower income and higher equity, resulting from the gains on sale.

chest: We continue to invest in this thriving business as evidenced by the recent acquisition of Kingfisher, which enhances our mobile phone protection capabilities.

Jeff: As a reminder, the group health business as part of National General, which we acquired in January of $2021 4 billion.

chest: I would like to transition to slide 12, and discuss how the sale of the employer voluntary benefits and group health businesses create shareholder value as a reminder, the decision to pursue the sale of health and benefits was based on the assumption that these businesses and have greater strategic value to other companies selling them would maximize shareholder value.

Jeff: The proceeds from this divestiture combined with about $1 billion in dividends that we received from National General statutory legal entities represents a return of more than half of the original purchase price while the size of the National General property liability business has approximately doubled.

chest: Transactions, we've announced for this assumption.

Jeff: Touching briefly on the results of health and benefits for the quarter premium and contract charges for this segment increased three 2% or $15 million compared to the prior year quarter.

August we agreed to sell the employer voluntary benefits system sustained core financial for $2 billion, we expect to close that in the first half of 2025.

Jeff: Individual and group health business saw strong growth with premiums and contract charges up eight 4% and nine 8% respectively. This growth was partially offset by a modest decrease in employer voluntary benefits.

chest: Last week, we marked another major milestone with our agreement to sell the group health business to nationwide for $1 $25 billion, which we expect to close sometime in 2025.

chest: Both of these transactions are economically and financially attractive for our shareholders.

Jeff: Adjusted net income for the segment of $35 million in the third quarter was $25 million lower than the prior year quarter as increased benefit utilization across all three businesses impacted profitability underwriting and rate actions are being taken to quickly address the benefit ratio trends and restore margins to historical levels.

chest: And bind proceeds of these sales are $3 billion to $5 billion with an expected book gain of approximately $1 billion.

chest: <unk> trailing 12 months adjusted net income the combined estimated impact of the transactions on adjusted net income return on equity would have been a decrease of about 180 basis points due to lower income and higher equity, resulting from the gains on sale.

Jeff: Absence of individual health business, which has adjusted net income of $30 million for 2024 are being evaluated in the business will either be retained or combined with another company.

chest: As a reminder, the group health business as part of National General, which we acquired in January of $2021 4 billion.

Jeff: Let's close on slide 13 by reviewing allstate's strategy to create shareholder value.

chest: The proceeds from this divestiture combined with about $1 billion of dividends that we received from National General statutory legal entities represents a return of more than half of the original purchase price or the size of the national General property liability business is approximately doubled.

Jeff: On this page, we create value by delivering attractive financial returns.

Jeff: Excluding transformative growth increased property liability market share.

Expanding protection offerings.

Jeff: Completing the sales of employee voluntary benefits and group health businesses, So with that context, I would like to open up the lines for your questions.

chest: Touching briefly on the results of health and benefits for the quarter premium and contract charges for this segment increased three 2% or $15 million compared to the prior year quarter individual and group health business saw strong growth with premiums and contract charges up eight 4% and nine 8% respectively. This growth was partially offset by a modest decrease.

Speaker Change: Certainly and our first question for today comes from the line of Rob Cox from Goldman Sachs. Your question. Please.

Speaker Change: Hi, good morning, Thanks for taking my question.

Speaker Change: So first question for you.

Speaker Change: I had on advertising.

chest: And employer voluntary benefits.

Speaker Change: I think you all had previously said that you were pretty comfortable with the <unk> 24 level of advertising spend I was hoping you could talk about the decision to ramp it up here in the fourth quarter and I am curious what your measures of AD spend efficiency are telling you in the current environment and how does that compare to history.

chest: Adjusted net income for the segment of $35 million in the third quarter was $25 million lower than the prior year quarter as increased benefit utilization across all three businesses impacted profitability underwriting and rate actions are being taken to quickly address the benefit ratio trends and restore margins to historical levels.

chest: Options for the individual health business, which has adjusted net income of $30 million for 2024 are being evaluated in the business will either be retained or combined with another company.

Speaker Change: So Rob we're comfortable with our advertisers spending we adjusted.

Speaker Change: They buy quarter point out and it also depends which markets raptor, sometimes we do some heavy up tests.

chest: Let me close on slide 13 by reviewing allstate's strategy to create shareholder value.

Speaker Change: In particular months to see what the sensitivity is for increased advertising increased growth I can assure you we have state of the art analytics.

chest: See on this page, we create value by delivering attractive financial returns.

chest: Excluding transformative growth increased property liability market share.

chest: Expanding protection offerings.

Speaker Change: On that.

chest: Completing the sales of employee voluntary benefits and group health businesses, so with that context I'd like to open up the line for your questions.

Speaker Change: It's everything every kind of lead we bid on leads automatically we just to make sure. We were a good last year, we had a number of outside people come in and look at our analytics.

Speaker Change: Certainly and our first question for today comes from the line of Rob Cox from Goldman Sachs. Your question. Please.

Speaker Change: And we appear to be at least <unk>.

Speaker Change: Hi, good morning, Thanks for taking my question.

Speaker Change: Contemporary if not industry leading.

Speaker Change: Some of these are people who are buying ads from so they're not going to come tell you stupid.

Speaker Change: So first question for you.

Speaker Change: But when we look at it in total.

Speaker Change: On advertising.

Speaker Change: I think you all had previously said that you were pretty comfortable with the <unk> 24 level of advertising spend.

Speaker Change: We think we're really good at it.

And we have all kinds of allowable acquisition cost measures that look at everything from quote to close ratios to lifetime value.

Speaker Change: Hoping you could talk about the decision to ramp it up here in the fourth quarter and I'm curious what your measures of AD spend efficiency are telling you in the current environment and how does that compare to history.

Speaker Change: Okay.

Speaker Change: Got it thank you.

Speaker Change: Secondly, I wanted to ask a question on the comment in the press release about expecting growth in total proper property liability path in 2025.

Speaker Change: So Rob we're comfortable with our advertising spending we adjusted obviously by quarter point out and it also depends which markets rafter, sometimes we do some heavy up tests.

Speaker Change: Been thinking that you could certainly grow path in both home and auto in 2025 is there any reason why you would be hesitant to commit to growing in both of the segments or am I looking too deeply into that statement.

Speaker Change: Particular months to see what the sensitivity is.

Speaker Change: Increased advertising increased growth.

Speaker Change: Let me make a comment and then turn it over to Mario.

Speaker Change: I can assure you we have a state of the art analytics.

Speaker Change: So first as you know we don't give forward looking projections.

Speaker Change: On that.

Speaker Change: It's everything every kind of lead we bid on leads automatically.

Speaker Change: On Pip growth. So what we've said to help bring some clarity to it is we're just going to give you. The numbers every month like we do with cats and you can decide what you want to do with it.

Speaker Change: Just to make sure we were a good last year we had.

Speaker Change: Outside people come in and look at our analytics.

Speaker Change: And we appear to be at least a contemporary if not industry, leading some of these are people who are buying ads from so they're not kind of comes out you stupid.

Speaker Change: We're obviously already growing at home and we have plans and we talked a little bit in the press release on.

Speaker Change: Where we are growing in auto but in total we're not growing in auto. So Mario is working on that Mario you want to talk about what you got wrong, yes.

Speaker Change: But when we look at it in total.

Speaker Change: We think we're really good at it.

Speaker Change: And we have all kinds of allowable acquisition cost measures that look at everything from quote to close ratios to lifetime value.

Speaker Change: For the question Robyn look I'd say for US the objective of transformative growth is to grow policies in force and gain market share.

Speaker Change: Okay.

Speaker Change: The property liability business. That's our goal that's our objective having said that as Tom mentioned, we're currently growing the homeowners business. We think there's a real opportunity in the market and we're going to continue to lean in on that one.

Speaker Change: Got it thank you.

Speaker Change: Secondly, I wanted to ask a question on the comment in the press release about expecting growth in total proper property liability path in 2025, we've been thinking that you could certainly grow path in both home and auto in 2025 is there any reason why you would be hesitant to commit to.

Speaker Change: Because we've got really strong capabilities b there is disruption in the market that we can take advantage of and we like the prospects of continuing to grow homeowners on the auto side, we think despite the fact that policies are declining.

Speaker Change: <unk> growing in both of the segments or am I looking too deeply into that statement.

Speaker Change: We're really well positioned to lean into growth going forward for a variety of reasons I think the first as you have seen the new business momentum.

Mario: Let me make a comment and then turn it over to Mario.

Mario: So first as you know we don't give forward looking projections.

Speaker Change: Build over the course of 2024 in part due to.

Pip growth so what we've said to help bring some clarity to it as well just kind of give you. The numbers every month like we do with cats and you can decide what you want to do with it.

Speaker Change: Your first question our advertising investment that we've increased throughout the year, but we've also been doing things like unwinding underwriting restrictions.

Mario: We're obviously you're already growing at home and we have plans and we talked a little bit in the press release on.

And looking to accelerate growth across all distribution channels, we're going to continue to fully leverage our broad distribution capabilities alongside that marketing investments continue to rollout the new affordable simple and connected products.

Mario: Where we are growing in auto but in total we're not growing in autumn. So Mario is working on that Mark do you want to talk about what you got wrong, yes.

Speaker Change: Thanks for the question, Rob look I'd say the objective of transformative growth is to grow policies in force and gain market share.

Speaker Change: We are currently in 31 states will continue to expand that over the course of this year that is our most sophisticated pricing our most contemporary telematics.

Mark: In the property liability business. That's our goal that's our objective having said that as Tom mentioned, we're currently growing the homeowners business. We think there's a real opportunity in the market and we're going to continue to lean in on that one.

Speaker Change: <unk> included in that we're going to continue to leverage capabilities.

Speaker Change: On the Allstate side International General just talked about.

Mark: Because we've got really strong capabilities b there is disruption in the market that we can take advantage of and we like the prospects of continuing to grow homeowners on the auto side, we think despite the fact that our policies are declining.

Speaker Change: The growth that we've seen in national General, we're going to leverage middle market capabilities and Allstate to grow NAV.

Speaker Change: National General and a part of the market that they have less penetration and we're also going to use national general's capabilities in the non standard auto space and leverage the Allstate brand to begin to accelerate growth in that space. So we've got a lot of things.

Mark: Really well positioned to lean into growth going forward.

Mark: A variety of reasons I think the first as you have seen the new business momentum.

Speaker Change: Things that.

Mark: Build over the course of 2024 in part due to.

Speaker Change: We've both been doing and expect to do in 2025 to accelerate growth and really that was the genesis of the statement.

Your first question our advertising investment that we've increased throughout the year, but we've also been doing things like unwinding underwriting restrictions.

Speaker Change: Yes, one last point I should've brought up is retention, yes, everything I talked about was on the new business side.

Mark: Looking to accelerate growth across all distribution channels, we're going to continue to fully leverage our broad distribution capabilities alongside that marketing investments continue to rollout the new affordable simple and connected products.

Speaker Change: We've.

Speaker Change: <unk> seen the adverse impact of retention.

Speaker Change: As we've been having to raise prices over the last couple of years to improve margins. The good news is auto margins are back where we would want them to be in the mid Ninety's range. The downside of that is retention has taken a hit.

Mark: We are currently in 31 states will continue to expand that over the course of this year that is our most sophisticated pricing our most contemporary telematics.

Speaker Change: Some of that will come back as we are less active.

Speaker Change: In taking prices going forward because of where margins.

Mark: <unk> offerings included in that we're going to continue to leverage capabilities.

Speaker Change: But additionally, and more importantly, we're going to proactively leaned into reaching out to customers, helping them save money.

Mark: On the Allstate side International General just talked about the.

Mark: The growth that we've seen in national General, we're going to leverage middle market capabilities and Allstate to grow NAV.

Speaker Change: By making sure they're getting all the appropriate discounts they've got the right coverage levels that meet their specific needs.

Mark: National General and a part of the market that they have less penetration and we're also going to use national general's capabilities in the non standard auto space and leverage the Allstate brand to begin to accelerate growth in that space. So we've got a lot of things.

Speaker Change: The objective there is to improve affordability improve customer satisfaction and retention and that will be additive to our growth trends.

Speaker Change: Thanks, very much for the answers.

Mark: Things that.

Speaker Change: Thank you.

Mark: We both been doing and expect to do in 2025 to accelerate growth.

Speaker Change: Our next question comes from the line of Gregory <unk> from Raymond James Your question. Please.

Mark: Really that was the Genesis of the statement.

Speaker Change: Good morning, everyone.

Mark: One last point I should've brought up is <unk>.

Speaker Change: So for.

Speaker Change: My first question.

Retention, yes, everything I talked about was on the new business side.

Speaker Change: Piggyback on the last answer there Mario.

Mark: We.

Mark: Seeing the adverse impact of retention as we've been having to raise prices over the last couple of years to improve margins. The good news is auto margins are back where we would want them to be in the mid Ninety's range. The downside of that is retention has taken a hit.

Speaker Change: And you said on slide nine here for your auto policy. As you said that you are proactively contacting existing customers you mentioned that in your answer.

Speaker Change: Can you can you give us an updated perspective on how you think your pricing is on the competitive.

Mark: Some of that will come back as we are less active.

Speaker Change: Positioning basis versus your peer group and as you see.

And taking prices going forward because of where margin sets but.

Speaker Change: Shift gears and proactively contact existing customers does that mean that there's going to be some sort of a corresponding adjustment in agent compensation, that's going to give more waiting to retention versus just split out new sales.

Mark: <unk> and more importantly, we're going to proactively leaned into reaching out to customers, helping them save money.

Mark: Making sure they're getting all the appropriate discounts they've got the right coverage levels that meet their specific needs.

Speaker Change: Greg.

Mark: And it would be objective there is to improve affordability improve customer satisfaction and retention and that will be additive to our growth trends.

Speaker Change: The pricing what's complicated so I'm going to.

Speaker Change: Mario do that one.

Speaker Change: But I would make one point.

Thanks, very much for the answers.

Speaker Change: On the retention part.

Gregory Peters: Thank you and our next question comes from the line of Gregory Peters from Raymond James Your question. Please.

Speaker Change: I think having.

Speaker Change: Branded agents, who work exclusively with you is the.

Gregory Peters: Good morning, everyone.

Speaker Change: First is the best channels to be able to do what we're talking about so we've raised some people's prices, 30%, 40%, we had to do it quickly because we're losing money now we can go back in and help them get the absolute right coverage that could be deductibles it could be coverage limits that could easily telematics it could be a.

Gregory Peters: So for.

Gregory Peters: My first question.

Gregory Peters: Piggyback on the last answer there Mario.

Mario: And you said on slide nine here for your auto policy. As you said that you are proactively contacting existing customers. So you mentioned that in your answer.

Speaker Change: Pain differently. So there's lots of different ways, we can help them do that.

Mario: Can you can you give us an updated perspective on how you think your pricing is on the competitive.

Speaker Change: And that would be very difficult to do.

Mario: Positioning basis versus your peer group and as you.

Speaker Change: <unk> do an independent agent channel.

Speaker Change: It would be harder to do with direct channel because you don't have the skills and capabilities built into your call centers necessarily do that our agents and the Allstate agents are used to doing this all the time. They certainly did it when we were raising rates, but now Mario has a new program going on we should save program, which has specific.

Shift gears and proactively contact existing customers does that mean that there's going to be some sort of a corresponding adjustment in agent compensation, that's going to give more waiting to retention versus just flat out new sales.

Gregory Peters: Greg Let me add that.

Mario: The pricing what's complicated so I'm going to.

Speaker Change: If it goes the numbers, we are not planning on changing agent count.

Mario: Mario to that one.

Mario: Mario do you want to talk about competitive position yes.

Mario: But I would make one point.

Speaker Change: Yes.

Speaker Change: Thanks, Greg Uncompetitive position I'd say, a couple of things first when you look at the.

And the retention part.

Mario:

Mario: I think having <unk>.

Speaker Change: The ramp up in new business over the course of the year.

Mario: Branded agents, who work exclusively with you is the.

Speaker Change: And we made a comment that we're growing in 31 states currently I think thats indicative of having competitive prices.

The best is the best channels to be able to do what we're talking about so we've raised some people's prices, 30%, 40%.

Speaker Change: And being able to fully leverage the marketing investments that we're making it is a complicated question its hard to answer it on a national basis, because obviously, we compete market by market state by state and we're constantly looking at our competitive position and making tweaks to.

Mario: And to do it quickly because there's money now we can go back in and help them get the absolute rate coverage that could be deductible coverage limits could be using telematics it could be.

Mario: Pain differently. So there's lots of different ways, we can help them do that and.

Mario: And that would be very difficult to do in through an independent agent channel it.

Speaker Change: The tiers within our pricing plans.

Speaker Change: To adjust prices when we think it's appropriate to adjust prices. The good news is.

Speaker Change: It would be harder to do with a direct channel because you don't have the skills and capabilities built in your call centers necessarily do that our agents and the Allstate agents are used to doing this all the time. They certainly did it when we were raising rates, but now Mario has a new program going on which is safe program, which has specific.

Speaker Change: We've achieved target margins, so we're comfortable with where our rate level is currently and we would expect that we would need to take less price going forward, but when you look at our new business trends, we feel good about competitive prices, we've taken a lot of cost out of the system over the past several years as Tom mentioned earlier, which is helpful.

Mario: Vick Koelsch numbers, we're not planning on changing agent count.

Mario: Mario do you want to talk about competitive position yes.

Speaker Change: We're going to continue to pull that lever going forward, but we think we're priced competitively and we have the broad distribution capabilities to.

Speaker Change: Yes.

Craig: Thanks, Craig the uncompetitive position I'd say a couple of things.

Speaker Change: First when you look at.

Speaker Change: To continue to grow in the auto space. The only other point I'd make on your second question about the proactively contacting customers and agency compensation.

Craig: The ramp up in new business over the course of the year.

Craig: And we made a comment that we're growing in 31 states currently I think thats indicative of having competitive prices.

Speaker Change: A meaningful portion of agent compensation currently.

Craig: And being able to fully leverage the marketing investment that we're making it is a complicated question its hard to answer it on a national basis, because obviously, we compete market by market state by state and we're constantly looking at our competitive position.

Speaker Change: Rates to renewal so they've got a strong economic vested interest in retaining as many customers.

Speaker Change: They possibly can and as Tom mentioned.

Speaker Change: <unk> been doing that this is a way through the save program, where we're going to we're going to really scale it and do it much more broadly.

Craig: And making tweaks to that.

Speaker Change: To help drive retention proactively versus just relying on.

Craig: The tiers within our pricing plans.

Craig: To adjust prices when we think it's appropriate to adjust prices. The good news is we've achieved our target margin. So we're comfortable with where our rate level is currently and we would expect that we would need to take less price going forward, but when you look at our new business trends, we feel good about competitive prices.

Speaker Change: Less instability in the market.

Speaker Change: From rate increases.

Speaker Change: Thanks for that information.

Speaker Change: Tom.

Speaker Change: And as my follow up question, Tom in your opening comments.

Speaker Change: When you were going through the information on slide two you emphasize.

Speaker Change: ROE of 26, 8%, which is a couple.

Speaker Change: <unk> taken a lot of cost out of the system over the past several years as Tom mentioned earlier, which is helpful. We're going to continue to pull that lever going forward.

Speaker Change: I believe this is one of the best results I've seen from your company in recent history.

Speaker Change: Can you provide some view.

Speaker Change: But we think we're priced competitively and we have the broad distribution capabilities to.

Speaker Change: Of how you are thinking about the ROE going forward and maybe what the board how the board's viewing it I guess.

Speaker Change: To continue to grow in the auto space. The only other point I'd make on your second question about the proactively contacting customers and agency compensation.

Speaker Change: The reason why I'm asking is you.

Speaker Change: You've disposed of some underperforming assets.

Speaker Change: Over the last decade, and it feels like there's just a natural migration that the ROE objectives. The organization can be moving up certainly this result for last year sort of puts an exclamation point on that.

Speaker Change: A meaningful portion of agent compensation currently.

Speaker Change: Rates to renewal so they've got a strong economic vested interest and retain as many customers.

Speaker Change: They possibly can and as Tom mentioned.

Speaker Change: <unk> been doing that this is a way through the same program, where we're going to we're going to really scale it and do it much more broadly.

Speaker Change: Good question Greg.

Speaker Change: With longitudinal perspective on it so as you'll remember I don't remember how many years ago. It was at one time, we put out a <unk>.

Speaker Change: To help drive retention proactively versus just relying on.

Speaker Change: <unk> of 14% to 17%, but I would say that was a different company in a different time.

Speaker Change: Less instability in the market.

Speaker Change: From rate increases.

Speaker Change: It is a different company and that we had a life business. It was a different time and the interest rates for a lot lower than people were thinking it was local bond. Since then of course as you pointed out we've made a bunch of changes we saw at the life business, we bought back a substantial amount of stack, which takes some of our investment earnings down.

Speaker Change: Thanks for that information.

Speaker Change: Tom.

Speaker Change: And as my follow up question, Tom in your opening comments.

Speaker Change: When you were going through the information on slide two you emphasize the ROE of 26, 8%, which I believe is one of the best results I've seen from your company in recent history.

Speaker Change: Premiums are up substantially.

Speaker Change: Can you provide some view of how you are thinking about the ROE going forward and maybe what the board how the board's viewing it I guess.

Speaker Change: Not just because we've grown total policies, but also because there is just higher cost per policy, which I think the market hasn't really affected that includes requires more capital. So when you look all through it.

Speaker Change: The reason why I'm asking is you.

Speaker Change: You've disposed of some underperforming assets.

Speaker Change: We feel really good about where we're at.

Speaker Change: Over the last decade, and it feels like there's just a natural migration that the ROE objectives. The organization can be moving up certainly this result for last year sort of put some explanation point on that.

Speaker Change: We put that 14% to 17% out there it was really because investors, we're not sure given the time and given the nature of the company, what our returns would be and would they be acceptable when.

Speaker Change: We never said it was a cap.

Speaker Change: Good question Greg.

Speaker Change: And so obviously now we're doing much better than that I would say the most important thing for us to do now is to increase growth.

Speaker Change: With longitudinal perspective on it so as you'll remember I don't remember how many years ago. It was at one time, we put out a.

Speaker Change: Target of 14% to 17%.

Speaker Change: So increasing returns.

Speaker Change: Drive them, which more shares all the values will drive more shareholder value is growth.

Speaker Change: I would say that was a different company in a different time.

Speaker Change: It was a different company and that we had a life business. There was a different time in the interest rates for a lot lower people would think of it as well as the bonds are since then of course as you pointed out we've made a bunch of changes we saw at the life business.

Speaker Change: And we've obviously growing and are growing a bunch of our other businesses.

Speaker Change: So whether thats, our homeowners business, whether thats, we're growing premiums.

Speaker Change: People kind of get all focused in on auto and auto Pip is important and we're going to grow with it.

Speaker Change: Bought back a substantial amount of stack, which takes some of our investment earnings down.

Speaker Change: But when you look at just growth in premiums.

Speaker Change: Our premiums are up substantially.

Speaker Change: Our double digit single low teens percent, depending which measure you want to look at last year. So we feel good about overall growth we think.

Speaker Change: Not just because we've grown total policies, but also because.

Speaker Change: There is just higher cost per policy, which I think the market isn't really affected and that includes requires more capital. So when you look all through it.

Speaker Change: And the key to unlocking the value we've already created through growth is to get auto unit growth up.

Speaker Change: We feel really good about where we're at.

Speaker Change: We put that 14% to 17% out there it was really because investors who were not sure given the time and given the nature of the company, what our returns would be and would they be acceptable.

Speaker Change: Got it thanks for the answers.

Speaker Change: Thank you.

Speaker Change: Next question comes from the line of Michael Zielinski from BMO. Your question. Please.

Speaker Change: We never said it was a cap.

Michael Zielinski: Hey, Thanks, good morning.

Speaker Change: And so obviously now we're doing much better than that I would say the most important thing for us to do now is to increase growth.

Michael Zielinski: My first question is on the expense ratio and kudos to them.

Michael Zielinski: Kind of lowering it overtime and meeting your goal.

Michael Zielinski: Curious I think in the past recent past you've said that you have plans to.

Speaker Change: So increasing returns.

Speaker Change: Don't drive that much more shares all the values will drive more shareholder value is growth.

Michael Zielinski: To improve it even further.

Michael Zielinski: Maybe I missed maybe the expense ratio ex ad expense.

Speaker Change: And we've obviously growing and are growing a bunch of our other businesses.

Michael Zielinski: If thats. The case are you able to kind of elaborate on what the building blocks are going forward.

Speaker Change: So whether that's our homeowners business, whether that's for growing premiums.

Michael Zielinski: To continue the improvement.

Speaker Change: People kind of get all focused in on auto and auto Pip is important and we're going to grow out of it.

Michael Zielinski: So yes. So the answer is yes, we always expect that keep reducing expenses and we think we have an opportunity to even.

Speaker Change: But when you look at just growth in premiums.

Speaker Change: Double digit single low teens percent, depending which measure you want to look at last year. So we feel good about overall growth we think.

Michael Zielinski: Lower them farther from where they are we're not done I would say, maybe we were 60% of the OEM.

Michael Zielinski: And I would like to take that and multiply that by some percentage change I think as part of that percentage change just to be completely transparent as premiums have gone up faster than general inflation I would say.

Speaker Change: And the key to unlocking the value we've already created through growth is to get auto unit growth.

Speaker Change: Got it thanks for the answers.

Michael Zielinski: Can't count can't count that isn't as much.

Thank you.

Michael Zielinski: So we are constantly working on it I think the worries where after will be digitization.

Speaker Change: Question comes from the line of Michael Zaremski from BMO. Your question. Please.

Speaker Change: Yeah.

Michael Zaremski: Hey, Thanks, good morning.

Michael Zielinski: Leveraging the new technology platform, we built.

Michael Zaremski: My first question is on the expense ratio and kudos to them.

Michael Zielinski: They affordable simple connected is all designed around doing that increasing.

Michael Zaremski: It kind of lowering it overtime and meeting your goal.

Speaker Change: Curious I think in the past Tom recent past, you've said that you have plans to improve.

Michael Zielinski: Our marketing effectiveness, so even though we carve marketing out from that number that doesn't mean like we're just going to spend while that marketing.

Michael Zaremski: To improve it even further.

Michael Zielinski: It needs to have the same level of precision.

Speaker Change: And maybe I missed maybe the expense ratio ex ad expense.

Michael Zielinski: And two it that everything else says and we also still need to lower distribution costs.

Speaker Change: That's the case are you able to kind of elaborate on what the building blocks are going forward.

Michael Zielinski: The distribution costs are still higher than we would like them to be so we have work to do there as well.

Speaker Change: Continue the improvement.

Speaker Change: So the answer is yes, we always expect that keep reducing expenses and we think we have an opportunity to even.

Michael Zielinski: Great.

Michael Zielinski: My final follow up is just.

Michael Zielinski: More high level on the devastating tragedy in California, I know, it's kind of still a fluid situation but.

Speaker Change: Lower them farther from where they are we're not done I would say you know, maybe where 60% of the OEM.

Michael Zielinski: A few of your competitors.

Speaker Change: And I waited like take that and multiply that by some percentage change I think as part of that percentage change just.

Michael Zielinski: Hum.

Michael Zielinski: Suppressed because of that.

Michael Zielinski: They might need to retrench, even more.

Speaker Change: To be completely transparent is because premiums have gone up faster than general inflation, I'd say, you kind of can't count can't count that isn't as much.

Michael Zielinski: And California, given the payback the potential payback.

Michael Zielinski: On the losses are going to be many many many years curious do you think.

Speaker Change: So we are constantly working on that I think the whereas we're after will be digitization.

Michael Zielinski: This could cause Allstate also rethink.

Michael Zielinski: Ambitions.

Speaker Change: Leveraging the new technology platform, we built a affordable simple connected is all designed around doing that increasing.

Michael Zielinski: Growing.

Michael Zielinski: Or just.

Michael Zielinski: Overall growth in California.

Michael Zielinski: Mike turn a different direction.

Michael Zielinski:

Speaker Change: Our marketing effectiveness, so even though we carve marketing out from that number that doesn't mean like we're just going to spend while that marketing.

Michael Zielinski: Every state is different.

Michael Zielinski: We don't have any growth aspirations in homeowners in California at this point.

Speaker Change: It needs to have the same level of precision to it that everything else is and we also still need to lower distribution costs.

Michael Zielinski: And we haven't since 2007, we had a small window in there where we thought we had some arrangements where it would make sense for us to grow that didn't turn out to be the case. So we had turned off the spigot for new customers. We didnt go non renewed but what we just said, we're not going to add new customers starting in 2007.

Speaker Change: The distribution costs are still higher than we would like them to be so we have work to do there as well.

Mike: Okay, Great and then Mike.

Speaker Change: My final follow up is just.

Michael Zielinski: And then in about 2017, and 18, I think I'm looking at that.

More high level on the devastating tragedy in California, I know, it's kind of still a fluid situation, but I think a few of your competitors.

Michael Zielinski: We said, we think we can take on a few new customers. If we can get this debt that didn't turn out to be true. So we stopped that then in 2022, but we've been at this for a long time.

Speaker Change: Uh huh.

Pressed.

Speaker Change: They might need to retrench, even more.

Michael Zielinski: So we don't have any growth aspirations in California, right now that said, we're really good at homeowners, we make more than half of the industry's profits.

Speaker Change: In California, given the the payback the potential payback on on the losses.

<unk> going to be.

Michael Zielinski: We got a good business model, we think it is a great growth opportunity and it doesn't have to be the way. It is in California, So Texas is.

Speaker Change: Many many many years curious as you think.

Speaker Change: This could cause all states also rethink amber.

Speaker Change: <unk> ambitions.

Speaker Change: Just as many types and dollar amount of losses, as California does yet the homeowners market works there.

Speaker Change: Growing.

Speaker Change: Or just overall growth in California.

Speaker Change: My turn in a different direction.

Speaker Change: So we believe that there is a way to make that work, we'd like to work with a state to make it work because people want to ensure their homes that need to ensure their homes.

Speaker Change: So every state is different.

Speaker Change: We don't have any growth aspirations in homeowners in California at this point.

Speaker Change: And we just need to make sure. It's done on a basis that is fair to consumers, but also gives our shareholders an appropriate return for the risk. So for example, we don't want to have to do things like in California, Mario talked about the numbers, we have a substantial amount of reinsurance recoveries were a cost plus business.

Speaker Change: And we haven't since 2007, we had a small window in there where we thought we had some arrangements where it would make sense for us to grow that didn't turn out to be the case. So we had turned off the spigot for new customers. We didnt go non renewed but what we just said, we're not going to add new customers starting in 2007.

Speaker Change: We did not recoup the costs for that reinsurance that we just now got back to that lower losses, which means.

Speaker Change: Then in about 2017, and 18 I think I'm with you.

Speaker Change: We said, we think we can take on a few new customers. If we can get this.

Speaker Change: That we need to have a structure that department has talked about that they're open to that so I would say that these things.

Speaker Change: Didn't turn out to be true. So we stopped that then in 2022, but we've been at this for a long time.

Speaker Change: And so we don't have any growth aspirations in California, right now that said, we're really good at homeowners, we make more than half of the industry's profits.

Speaker Change: They happen over a long time and it takes a while for them to get fixed I don't think.

Speaker Change: Anything is going to change in the next it's not like in 12 months.

Speaker Change: We've got a good business model, we think it is a great growth opportunity and it doesn't have to be the way. It is in California, So Texas.

Speaker Change: Everybody is going to be rushing into California write homeowners. It just doesn't happen that fast.

Speaker Change: As just as many types and dollar amount of losses as California does.

Speaker Change: Thank you.

Speaker Change: <unk>.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line <unk>.

Speaker Change: The homeowners market works there.

Jim: Jim <unk> from Wells Fargo. Your question. Please.

Speaker Change: And so we believe that there is a way to make that work, we'd like to work with a state to make it work because people want to ensure their homes that need to ensure their homes.

Jim: Hi, Good morning. My first question is on retention I didn't see any retention numbers in the press release or supplement. So I was wondering if you could provide that and then would you say the majority of the headwinds on retention just from like I know you guys called out issuance migration and then the New York, California, and New Jersey rate hikes are those is the majority of that hedge.

Speaker Change: And we just need to make sure. It's done on a basis that is fair to consumers, but also gives our shareholders an appropriate return for the risk. So for example, we don't want to have to do things like in California, Mario talked about the numbers, we have a substantial amount of reinsurance recoveries.

Jim: Dissipated by now or do you expect some further had what's kind of been the first half.

Speaker Change: Or a cost plus business, we did not recoup the costs for that reinsurance that we just now got back to lower losses, which means.

Jim: I'll make a couple of comments and just may want to comment so.

Jim: First we pay a lot of attention to retention.

Speaker Change: That we need to have a structure that department has talked about that they're open to that.

Jim: More granularity than you just even mentioned whether its book of business. This state. This risk cover this whatever at this price changes were like we're all over retention.

Speaker Change: So I would say that these things.

Speaker Change: They have been over a long time and it takes a while for them to get fixed so I don't think.

Jim: Just made the decision that rather than give you the components.

Speaker Change: Anything is going to change.

Jim: Which are complicated and we spend a bunch of time, helping and you spent a bunch of time trying to fare well retention on this much and how much policy just said why don't I just give you the numbers.

Speaker Change: Next satellite in 12 months.

Speaker Change: Everybody is going to be rushing into California write homeowners. It just doesn't happen that fast.

Speaker Change: Thank you.

Just give you the Pip numbers every month, you'll know what the numbers are.

Speaker Change: Thank you and our next.

Speaker Change: Next question comes from the line, though.

Jim: You don't have to get caught up into what's your projections on new business, what your projections on retention for insurance policy. So.

Speaker Change: Christian <unk> from Wells Fargo. Your question. Please.

Speaker Change: Oh Hi, Good morning. My first question is on retention I didn't see any retention numbers in the press release. Your supplement. So I was wondering if you could provide that and then would you say the majority of the headwinds on retention just from like I know you guys called out issuance migration and then the New York, California, and New Jersey rate hikes are those is the majority of that.

Jim: Our goal in place to increase transparency.

Jim: And give you more information you can use to make your investment and recommendation decisions rather than less and doing it. So that's what we've set out to do maybe just.

Speaker Change: Talk about the retention and how you're feeling about it in other ways to measure it maybe I'll just touch on that round.

Speaker Change: Headwinds dissipated by now or do you expect some further head what's kind of been the first half.

Speaker Change: Round out some disclosure in our Marty you can talk about your thoughts I think the other thing to keep in mind is as Tom mentioned, we gave you a component a component we didn't even give you all of the components. We believe by giving you picked on a monthly basis Youll have more transparency recall, what we gave you was allstate brand.

Speaker Change: I'll make a couple of comments and just may want to comment so.

Speaker Change: First we pay a lot of attention to retention.

Speaker Change: In more granularity than you just even mentioned whether its book of business. This state. This risk cover this whatever you know this price changes were like we're all over retention.

Speaker Change: Allstate brand retention, rather so it was a piece of the puzzle and we spent a lot of time explaining movements between brands, which we wanted to move away from so I really believe that what we're giving you now on a monthly basis will be much clearer and actually reduce a lot of the complication that came from our disclosure and as Tom said puts you in a better <unk>.

Speaker Change: Just made the decision that rather than give you the components.

Speaker Change: Which are complicated and we spend a bunch of time, helping and you spent a bunch of time trying to fare well retention on this much of how much policy chip just said why don't I just give you the numbers.

Speaker Change: Just give you the Pip numbers every month, you'll know what the numbers are.

Speaker Change: <unk> to understand new business and retention trends and frankly, what the total policy in force trend is so it was definitely a move to increase transparency by taking away and really completing that move away from brand to line of business and distribution channel.

Speaker Change: Have to get caught up into what's your projections on new business, what your projection on retention for insurance policy. So.

Speaker Change: Our goal in place to increase.

Speaker Change: Increased transparency and give you more information you can use to make your investment and recommendation decisions rather than less and doing it. So that's what we've set out to do maybe just for you guys. When I talk about the retention and how you're feeling about it in other ways to measure it maybe I'll just touch on this.

Speaker Change: Yes.

Speaker Change: The thing I'd add on retention.

Speaker Change: It's important to take a step back and look at what we've really been saying over the last several years, which are principal focus I would say heading into 2024 was to improve auto margins. I think we were pretty clear on that that was our principle priority. We have to take prices up a lot to do that over 40% when you look over the past.

Lombardi: Round out the disclosure and Lombardi you can talk about your thoughts I think the other thing to keep in mind is as Tom mentioned, we gave you compose a component we didn't even give you all of the components. We believe by giving you picked on a monthly basis, you'll have more transparency recall, what we gave you was allstate brand.

Speaker Change: Several years.

Speaker Change: The good news is.

Speaker Change: Margins are back to where we.

Speaker Change: Want them to be and where they need to be.

Speaker Change: And.

Speaker Change: From a new business perspective, that's kind of played out you've seen us kind of lean back into the market.

For Allstate brand retention, rather so it was a piece of the puzzle and we spent a lot of time explaining movements between brands, which we wanted to move away from so I really believe that what we're giving you now on a monthly basis will be much clearer and actually reduce a lot of the complication that came from our disclosure and as Tom that puts you in a better <unk>.

Speaker Change: And really accelerate new business growth over the course of last year, the downside to that approach and that strategy is with retention as you mentioned.

Speaker Change: Which has stabilized in a number of states as we've cycled through what we needed to do to improve profitability, but as we've talked about before there were a handful of states that were a little later.

Lombardi: <unk> to understand new business and retention trends and frankly, what the total policy enforced trend is so it was definitely a move to increase transparency by taking away and really completing that move away from brand to line of business and distribution channel.

Speaker Change: To the game in terms of getting margins back to where they needed to be.

Speaker Change: We talked extensively about California, and New York, New Jersey.

Speaker Change: The good news is we've been making good progress in those three states.

Lombardi: Yes.

Lombardi: The thing I'd add on retention.

Speaker Change: We've been making it by implementing some pretty meaningful rate increases.

Lombardi: It is important to take a step back and look at what we've really been saying over the last several years, which are principal focus I would say heading into 2024 was to improve auto margins. I think we were pretty clear on that that was our principle priority. We have to take prices up a lot to do that over 40% when you look over the past.

Speaker Change: That is having a drag on retention as we cycle our way through that we should see that stabilize I will say, though in New York and New Jersey, We still got some work to do.

Speaker Change: Our margins are better.

Speaker Change: But they are not where we'd like them to be we're going to continue to pursue rate in those states.

Lombardi: Several years.

Lombardi: The good news is.

Speaker Change: But we believe we can we can overcome that because we've got a lot of growth opportunity in the rest of the country.

Lombardi: Margins are back to where we.

Lombardi: Want them to be and where they need to be.

Lombardi: And from a new business perspective, as the best kind of played out you've seen us kind of lean back into the market.

Speaker Change: Got you, thank you and going back to the California wildfire losses, I know you provided a $2 billion gross estimates you provided some sensitivity, but what are you assuming in terms of the industry losses. So we could like flex that sensitivity up or down depending on how the losses develop.

Lombardi: And really accelerate new business growth over the course of last year, the downside to that approach and that strategy is with retention as as you mentioned.

Lombardi: Which.

Speaker Change: Yes looking at this.

Lombardi: It has stabilized in a number of states as we've cycled through what we needed to do to improve profitability, but as we've talked about before there were a handful of states that were a little later.

Mario: As Mario the way I'd answer that question is obviously theres a lot of moving parts.

Mario: Our estimate we know our data with a lot of specificity because we have that we've made assumptions around.

Lombardi: For the game in terms of getting margins back to where they needed to be.

Mario: A fair plan assessment just given the.

Lombardi: We talked extensively about California, New York, New Jersey.

Mario: The magnitude of the losses, we've seen in also.

Lombardi: The good news is we've been making good progress in those three states.

Mario: When you when you look at the fair plan surplus level as at the end of the third quarter.

Lombardi: We've been making it by implementing some pretty meaningful rate increases.

Their reinsurance and their co participation in that we think it's pretty likely that theyre going to.

Lombardi: That is having a drag on retention as we cycle our way through that we should see that stabilize I will say, though in New York and New Jersey, We still got some work to do.

Mario: Kind of exceed their their surplus levels and there will likely be an assessment, we've got that in there.

Mario: And we are number includes a view of what the industry losses, I really don't want to kind of disclose what our view on that is but there is I will say, we've made certain assumptions to.

Lombardi: Our margins are better.

Lombardi: But they are not where we'd like them to be we're going to continue to pursue rate in those states.

Lombardi: But we believe we can we can overcome that because we've got a lot of growth opportunity in the rest of the country.

Mario: To come up with our number of bolts in terms of ourselves and.

Speaker Change: Got you, thank you and I'm going back to the California wildfire losses, I know you provided a $2 billion gross estimates you provided some sensitivity, but what are you assuming in terms of the industry losses. So we get like flex that sensitivity up or down depending on how the losses develop.

Mario: The fair plan, we'll keep looking at those because it is a pretty.

Mario: Fluid process, and we will update it as we get more information if we need to update.

Mario: So here's if you want a sensitivity.

Mario: Sure.

Mario: For every $100 million its 10 million Bucks.

Mario: For every 5% were off in total it cost us $10 million. So if we're off by 50%. So it's another $1 billion it cost us $100 million alright. So I don't think you need to worry about.

Lombardi: Yes look at this.

Lombardi: This is Mario the way I'd answer that question is obviously theres a lot of moving parts.

Lombardi: Our estimate we know our data with a lot of specificity because we have that we've made assumptions around.

Mario: Sensitivity on the gross loss.

Lombardi: A fair plan assessments just given the.

Mario: Thank you.

Lombardi: The magnitude of the losses, we've seen in also.

Speaker Change: Thank you and our next question comes from the line of <unk> from Jpmorgan. Your question. Please.

Lombardi: When you when you look at the fair plan surplus level is at the end of the third quarter.

Speaker Change: Hey, good morning, I had a question first on.

Lombardi: The reinsurance and their co participation in that we think it's pretty likely that theyre going to.

Speaker Change: Just the auto business you mentioned.

Lombardi: Kind of exceed their their surplus levels and there will likely be an assessment, we've got that in there.

Speaker Change: Turning positive in 31 States I think.

Speaker Change: And I'm, assuming what's unique about those states is just the fact that you are not raising prices as much and advertising more so if that is true.

Lombardi: Our number includes a view of what the industry losses, I really don't want to kind of disclose what our view on that is but I will say we've made certain assumptions.

Speaker Change: Then could you talk about of the remaining states that you are not growing and.

Lombardi: To come up with our number of both in terms of ourselves and the.

Speaker Change: Should that begin happened throughout the year gradually or is there more of a cliff event at some point later in the year when you lap those comps and youre not going to be raising prices just to sort of be the dose. That's been those stocks states will begin to show better growth.

Lombardi: The fair plan, we'll keep looking at those because it is a pretty <unk>.

Lombardi: Fluid process, and we'll update it as we get more information if we need to update it.

Lombardi: So here's if you want a sensitivity.

Lombardi: <unk>.

Lombardi: For every $100 million its 10 million Bucks.

Speaker Change: Jimmy I'll, let Mario talk about the pace, but I don't think he's going to give you an answer by Florida.

Lombardi: For every 5% were off in total it cost us $10 million. So if were off by 15%. So it's another $1 billion. It costs us to 109 right. So I don't think you need to worry about.

Speaker Change: Alright.

Speaker Change: Yes.

Speaker Change: Got it.

Speaker Change: Is.

Speaker Change: It's more complicated than just those two factors alright. So its not just are we not taken price and how much we advertising is whats everybody else doing.

Lombardi: Sensitivity on the gross loss.

Lombardi: Thank you.

Speaker Change: Thank you and our next question comes from the line of to be pure from J P. Morgan Your question. Please.

Speaker Change: What kind of coverage are we offering where are we with.

Speaker Change: Our ASC rollout where are we with our accustomed III C. So it's a really complicated machine that Mario is running.

Speaker Change: Hey, Good morning, I had a question first on <unk>.

Speaker Change: The auto business you mentioned.

Speaker Change: Before turning positive in 31 States I think.

Speaker Change: And but the goal is.

Speaker Change: Sometimes attributions helps explain why you are where you're on sometimes distribution leads to excuses.

Speaker Change: And I'm, assuming what's unique about those states is just the fact that you are not raising prices as much and advertising more. So if that is true then could you talk about of the remaining states that you are not growing and should that begin to happen throughout the year gradually or is there more of a blip events at some point theater in the yard.

Speaker Change: And we're not interesting excuses for interested in results, which is growth tomorrow, you can talk about how he's thinking about that maybe you want to talk about both the impact of retention and the impact of new business over the course of their but we can't give you obviously a per quarter number just watch for justice.

Speaker Change: When you lap those <unk>.

Speaker Change: And youre not going to be raising prices just to sort of be even though that's been those stocks states will begin to show better growth.

Speaker Change: Right.

Speaker Change: Yes, Jimmy Thanks. Thanks for the question look it at lower what I would say is like we want to grow in every state where it makes economic sense for us to grow and where we believe we can grow profitably that happens to be 31 States now we think the opportunity is beyond that level and as Tom mentioned, there is a lot of components that.

Speaker Change: I'll, let Mario talk about the pace, but I don't think he's going to give you an answer by Florida.

Speaker Change: All right.

Speaker Change: Yeah.

Speaker Change: Got it.

Speaker Change: Is.

Speaker Change: It's more complicated than just those two factors alright. So its not just are we not taken price and how much. We advertising is whats everybody else doing what kind of coverage already offering where are we with our ASC rollout where are we with our customer <unk>.

Speaker Change: Factor into our ability to grow.

Speaker Change: Price is part of it competitive position and where our price is relative to the competition. The growth investments, we're making are risk appetite. There is a lot of factors that.

Speaker Change: That plan to that retention is a key component of our ability to grow right. So what you saw in total this year was we had really good new business trends.

Mario: So it's a really complicated machine that Mario is running.

Speaker Change: And.

Speaker Change: The goal is sometimes.

Speaker Change: Sometimes attributions helps explain why you are where you're right, sometimes attributions leads to excuses.

Speaker Change: In the quarter.

Kind of peaked in 2024 and almost 30% yet despite that.

Speaker Change: And we're not interesting excuses for interested in results, which grows to Mario can talk about how he's thinking about that maybe you want to talk about both the impact of retention and the impact of new business over the course of their but we can't give you obviously a per quarter number just watch for Jeff as a monthly number right.

Speaker Change: Our units declined year over year because of the drag of retention.

Speaker Change: So we're focused through the save program on not just waiting for retention to bounce back because of less disruption in the system, we're going to proactively do things to work with customers help them save money and improve affordability.

Speaker Change: Yes, Jimmy Thanks. Thanks for the question look at lower what I'd say is like we want to grow in every state where it makes economic sense for us to grow and where we believe we can grow profitably that happens to be 31 States now we think the opportunity is beyond that level and as Tom mentioned Theres a lot of.

Speaker Change: And drive retention up we think doing that well alongside all the other things I mentioned earlier.

Speaker Change: New product rollout new technology distribution.

Speaker Change: And continued investments in marketing and all the things that helped us drive new business volume. That's the key that will drive growth broadly and Thats. The plan were executing on.

That factor into our ability to grow.

Speaker Change: And then maybe just following up on capital like the business is obviously profitable now I think youll make money, even with the California fires in.

Speaker Change: As part of its competitive position and where our price is relative to the competition. The growth investments, we're making are risk appetite. There is a lot of factors that play into that retention is a key component of our ability to grow right. So what you saw in total this year was we had really good new business trends.

Speaker Change: Q1and then you've got the money coming into the sales of the benefits.

Speaker Change: The health business. So how should we think and I'm assuming capital is not a constraint for growth given how much money youre going to get from the sales, but how should we think about that.

Speaker Change: And in the quarter.

Speaker Change: Kind of peaked in 2024.

Speaker Change: Capital deployment between growth M&A and share buybacks and is it unreasonable to assume that you wouldn't be in the market buying back stock at some point assuming results come in as expected over the course of this year.

Speaker Change: 30%, yet despite that our units declined year over year because of the drag of retention.

Speaker Change: So we're focused through the same program on not just waiting for retention to bounce back because of less disruption in the system, we're going to proactively do things to work with customers help them save money and improve affordability.

Speaker Change: But Jim if we consider proactive capital management to be a significant strength of allstate's.

Speaker Change: And it's added tremendous amounts of shareholder value, so and Youre right share repurchases are obviously one of those.

Speaker Change: And drive retention up we think doing that well alongside all the other things I mentioned earlier our new.

Speaker Change: And we've used that extensively but I would encourage you to hold US accountable as you started to mention on really a broader basis right. So there is organic growth there is risk and return on economic capital. There is inorganic growth and then there's capital structure, which includes the share repurchases.

Speaker Change: Product rollout new technology distribution.

Speaker Change: And continued investments in marketing and all the things that helped us drive new business volume. That's the key that will drive growth broadly and that's the plan we're executing on.

Speaker Change: And so let me just go through each of those first organic growth is a twofer.

Speaker Change: And then maybe just following up on capital like the business is obviously profitable now I think youll make money, even with the California fires.

Speaker Change: And.

Speaker Change: Based on the returns we're getting in our business today. It generates absolute dollar growth in earnings secondly, with that higher growth rate and we should have a higher p/e because if you look at our price earnings ratio versus any other insurer and.

Speaker Change: Q1and then you've got the money coming into the field that benefits them.

And the health business. So how should we think of the and I'm assuming capital is not a constraint for growth given how much money you're going to get from the sales, but how should we think about capital deployment between growth M&A and share buybacks and is it unreasonable to assume that you wouldn't be in the market buying back stock at some point assuming results come in as <unk>.

Speaker Change: And you look at our top line growth.

Speaker Change: Average premium growth is getting discounted and its basically all hung on auto unit growth you can decide whether that's right or wrong, but we think that that.

Speaker Change: Specced it over the course of this year.

Speaker Change: Yeah.

Speaker Change: The unlock of.

Speaker Change: And deploying capital to grow the property liability business, both in units and premiums.

Speaker Change: But Jim if we consider proactive capital management to be a significant strength of allstate's and it's added tremendous amounts of shareholder value, So and Youre right share repurchases are obviously one of those.

Speaker Change: We will drive growth. So we think that's really important.

Speaker Change: Talked a lot about that at this point, because I don't want to.

Speaker Change: We don't need to go back to that.

Speaker Change: And we've used that extensively but I would encourage you to hold US accountable as you started to mention on really a broader basis right. So there is organic growth there is risk and return on economic capital. There is inorganic growth and then there's capital structure, which includes the share repurchases.

Speaker Change: If you look at risk and return on economic capital, we have a really sophisticated way and just has talked about this a lot over the last couple of years of how we manage capital and associated risk in return on that that helps us do things like leverage our investment expertise and be proactive in managing our investments and that capability.

Speaker Change: And so let me just go through each of those first organic growth is a twofer.

Speaker Change: <unk> generates good returns.

Speaker Change: And.

Speaker Change: I think it needs to be valued in its own right.

Speaker Change: Based on the returns we're getting in our business today. It generates absolute dollar growth in earnings secondly, with that higher growth rate and we should have a higher p/e because if you look at our price earnings ratio versus any other insurer.

But for example, the duration calls we've made used additional economic capital we knew that we decided on it it was part of the enterprise decision.

Speaker Change: Clearly generate a good return same thing is true with the reinsurance in California, We look at all of those things that can aspect I think acquisitions also needs to be assessed in the actual return on capital, So national and general square screen or both of those lines.

Speaker Change: And you look at our top line growth.

Speaker Change: Average premium growth is getting discounting and it's basically all hung on auto unit growth you can decide whether that's right or wrong, but we think that there.

Speaker Change: Right.

Speaker Change: When you look at Nash.

Speaker Change: National General, it's more than double its size on apples to apples basis from when we bought three years ago square trade.

Speaker Change: The unlock of and deploying capital to grow the property liability business. Both in units and premiums is we'll drive growth. So we think that's really important.

Speaker Change: <unk> substantially bigger as maybe 10 times bigger and making 150 million Bucks a year paid $1 billion for not just when you look at what was it net cost of National General and square trade.

Speaker Change: We've talked a lot about that at this point, so I don't want to add.

Speaker Change: We don't need to go back to that.

Speaker Change: If you look at risk and return on economic capital, we have a really sophisticated way and just has talked about this a lot in the last couple of years, how we manage capital and associated risk in return on that that helps us do things like leverage our investment expertise and be proactive in managing our investments.

Speaker Change: How long would you take a look at it both of them. The net cost is about half of what we paid so as I had mentioned in my prepared remarks, we paid $4 billion for National General and when you add up the recently announced group health transaction and the dividends, we've been able to take out of the statutory entities, which are about $1 billion, we've reduced that.

Speaker Change: That capability generates good returns and I think it needs to be valued in its own right.

Speaker Change: Suffice to about $2 $25 billion so.

Speaker Change: But for example, the duration calls we've made used additional economic capital we knew that we decided on it it was part of the enterprise decision.

Speaker Change: The 175% or less than half the same would be true. If you look at square trade in the $1 $4 billion acquisition since owning it we've taken about half of that back in dividends based on earnings. While also and this is important investing in growth doing acquisitions. So we've gotten about half of it back and still invested in growth on square right.

Speaker Change: They generate a good return same thing is true with the reinsurance in California, We look at all of those things that can aspect I think acquisitions also needs to be assessed on the actual return on capital So national and general square screen.

Speaker Change: And then of course share share repurchases has been also thing, but you've got to really look at how you manage your capital stack better. So for example.

Speaker Change: I mean standpoint.

Speaker Change: When you look at <unk>.

Speaker Change: <unk> general it's more than double its size on apples to apples basis. When we bought three years ago square trade is substantially bigger as maybe 10 times bigger and making 150 million Bucks a year paid $1 44, and I just when you look at what was it net cost of National General.

Speaker Change: We issued perpetual preferred stock.

Speaker Change: I don't remember how many years ago, we issued $2 billion of stock we bought back 2 billion of common swaps.

Speaker Change: Fixed equity cost unless all of the remaining upside with our common equity.

Speaker Change: Preferred just hasn't caught up with current cost on the preferred way of three different issuances, Tom So our lowest is about 475% and then we have a tranche that was more recently issued at seven 375%. So is that a range, but most of it the largest issuance actually is a five 1% fixed for life. So.

Speaker Change: And square trade.

Speaker Change: How long would you take a look at it both of them. The net cost is about half of what we pay them. So as I had mentioned in my prepared remarks, we paid $4 billion for Nash.

Speaker Change: National General when you add up the recently announced group health transaction and the dividends, we've been able to take out of the statutory entities, which are about $1 billion, we've reduced that purchase price by about $2 25 billion to $1 75 or less than half. The same would be true. If you look at square trade in the $1 4 billion dollar acquisition since owning it.

Speaker Change: Obviously.

Speaker Change: And if the math is not exactly right because you've got GAAP cap oil and gas, but if you look at our returns on equity just actual market equity it's substantially above that so that's a good trade.

Speaker Change: We've taken about half of that back in dividends based on earnings while also and this is important and investing in growth doing acquisitions. So we've gotten about half of it back and still invested in growth on square right. So.

Speaker Change: We also look obviously look at dividends and.

Speaker Change: Share repurchases, we've done a lot of.

Speaker Change: So just you aren't just go through the numbers of what we've done on share repurchases in the past we have done a lot of times. So I took a look back and went all the way back to when Allstate when public since going public we've repurchased about $41 5 billion.

Speaker Change: And then of course share share repurchases has been also saying, but you've got to really look at how you manage your capital stack better. So for example.

Speaker Change: We issued a perpetual preferred stock.

Speaker Change: Our stock in.

Speaker Change: And that represents about 83% of the outstanding shares.

Speaker Change: Remember how many years ago, we issued 2 billion of stock we bought back 2 billion of common swaps.

Speaker Change: That timeframe in a little bit over the last 10 years. The number is closer to $17 5 million.

Speaker Change: Fixed equity at cost unless all of the remaining upside with our common equity.

Speaker Change: And.

Speaker Change: Half of the outstanding shares over the last 10 years, Brian and again five year period, seven 8 billion of repurchases.

Speaker Change: The preferred just hasn't caught up with current cost on the preferred.

Speaker Change: And with three different issuances, Tom So our lowest is about 475% and then we have a tranche that was more recently issued at seven 375%. So is that a range, but most of it the largest issuance actually is a five 1%.

Speaker Change: 5% of our outstanding shares and in all cases, and an average cost it's very attractive we even go through and look at the returns in all cases over any period, whether it's 30 years or five years that returns significantly above our cost of capital. So we've had really good returns and to your point, Tom buying back 83% since going public.

Speaker Change: Fixed for life. So obviously.

Speaker Change: And if the math is not exactly right because you got GAAP cap oil and gas, but if you look at our returns on equity just actual market equity it's substantially above that so that's a good trade.

Speaker Change: Public two shows our commitment to repurchase.

Speaker Change: We've got plenty of things, we do and I would just I don't I guess share repurchases are important I know, it's a number of analyst wrote that evening.

Speaker Change: We also look obviously look at dividends or.

Speaker Change: It's like when Youre going to be back and you should hold us accountable for managing our capital to drive shareholder value.

Speaker Change: Share repurchases went down a lot of.

Speaker Change: And so just you aren't just go through the numbers of what we've done on share repurchases in the past.

Speaker Change: And if that means growing faster and using our tampa grow faster than hold us accountable for that.

Speaker Change: We have done a lot of times. So I took a look back and went all the way back to when Allstate went public since going public we've repurchased about $41 5 billion.

Speaker Change: If we have extra capital, we don't hold onto it and.

Speaker Change: And we buy back stock because we think when you look at our R V.

Speaker Change: Our stock in.

Speaker Change: And that represents about 83% of the outstanding shares.

Speaker Change: Relative to our growth potential the size of our business.

Speaker Change: That timeframe in a little bit over the last 10 years, the number is closer to $17 $5 million.

E.

Speaker Change: We still think it's cheap.

Speaker Change: And about half of the outstanding shares over the last 10 years, Brian and again five year period, seven $8 billion of repurchases.

Speaker Change: It's still better to get those questions and questions about the adequacy of capital I guess looks like.

And those were those were thoughts.

Speaker Change: 5% of our outstanding shares and in all cases, and an average cost that is very attractive we even go through and look at the returns in all cases over any period was 30 years or five years and returns significantly above our cost of capital. So we've had really good returns and to your point in time buying back 83% since going public.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Thank you and our next question comes from the line.

Speaker Change: From Morgan Stanley Your question. Please.

Speaker Change: Yes, good morning.

Speaker Change: Stay away from capital. So the first question is on auto.

Speaker Change: Okay.

Speaker Change: Any investor Astutely pointed out that on your first quarter 'twenty 'twenty four slide you talked about a 64% of your total premiums or profitable. So fast forward today to today, then we're talking about about 60% of that premium is now growing is it fair to kind of make some type of causal.

Speaker Change: Public two shows our commitment to repurchase yeah. So I mean, we've got plenty of things, we do and I would just like.

Speaker Change: I guess share repurchases are important I know, it's a number of analyst brought that up over the evening of like when youre going to be back and Mike you should hold us accountable for managing our capital to drive shareholder value.

Speaker Change: And if that means growing faster and using our campo broadcaster that holds accountable for that.

Speaker Change: <unk>.

Speaker Change: Between the timing of our true profitability in the time that you start to grow the business in other words is it fair to say that.

Speaker Change: If we have extra capital, we don't hold onto it and.

Speaker Change: Six to nine months from now essentially, California, and New York and New Jersey.

Speaker Change: And we buy back stock because we think when you look at our our value relative to our growth potential the size of our business.

Speaker Change: Unable to grow and everything else should be growing in that rather than the 60% of total premium was growing probably call. It 80 or 90% of should be is that a fair way to think about this.

E.

Speaker Change: We still think it's cheap.

Speaker Change: It's still better to get those questions and questions about the adequacy of capital I guess, mostly.

Speaker Change: I think that construct is right I don't know if I would automatically extrapolate extrapolate that into the future.

Speaker Change: And those were those were thoughts [laughter].

Speaker Change: It is true when we were losing money, we shutdown advertising shutdown growth.

Speaker Change: Thank you.

Speaker Change: Thank you and our next question comes from the line of Bob.

Speaker Change: Big intentionally because we said there is really no sense going to get a bunch of new customers that we're going to have to raise their price by 15%.

Speaker Change: From Morgan Stanley Your question. Please.

Bob: Yeah. Good morning, I'm Gonna stay away from capital. So the first question is on auto.

Speaker Change: Relatively quickly.

Speaker Change: And I think any investor Astutely pointed out that on your first quarter, 2021st Slide you talked about.

Speaker Change: And maybe then lose them. So it was appointed to spend the money.

Speaker Change: And.

Speaker Change: It doesn't make any sense to getting a new customer it loose of a bunch of money on and you know you can lose money and so that was true and that's what he did.

Speaker Change: 64% of your total premiums were profitable so fast forward today to today when we're talking about about 60% of that premium is now growing is it fair to kind of make some type of causal correlation.

Speaker Change: Also note that by driving that and going aggressively that it was going to hurt retention and so now we're about so that it is a there are pieces you roll in I don't think you could automatically that go to say like.

Speaker Change: Between the time you achieve profitability in the time that you will start to grow the business in other words is it fair to say that six to nine months from now essentially California, New York, and New Jersey to only that Youre unable to grow and everything else should be growing in that rather than the 60% of total premium was growing probably call. It 80 or 90 per cent of should be.

Speaker Change: Like do an analysis of two line lines on a graph going up and they would follow each set each state is different each positions different.

Speaker Change: Is that a fair way to think about this.

Speaker Change: If if mario wish to get adequate prices in New York Tomorrow.

Speaker Change: I think that construct is right I don't know if I would automatically extrapolate extrapolate that into the future I mean.

Great Agency plant there.

Speaker Change: We have we've got pretty we've got huge share down in the New York area and.

Speaker Change: It is true when we were losing money, we shut down advertising shut down growth.

Speaker Change: And we could really leverage that to grow fast.

Speaker Change: When that will happen.

Speaker Change: <unk> intentionally because we said theres really no sense going to get a bunch of new customers that we're going to have to raise their price by 15%.

Speaker Change: So I think you should just hold us accountable for growing.

Speaker Change: Auto units and I keep coming back to auto units is the unlocked.

Relatively quickly.

Speaker Change: And maybe then lose them so what's the point is to spend the money.

Speaker Change: Anything else that grow and like so it is.

Speaker Change: It is an important part of our business, but we've got to get higher premiums that reserve balances are up to investment balances are up that's all driving increased income.

Speaker Change: And it.

Speaker Change: It doesn't make any sense getting a new customer that you lose a bunch of money on and you know you're going to lose money and so that was true and that's what he did.

Speaker Change: Protection plans is knocking it out of the park. So we got lots of growth opportunities. We are focused on the unlock of auto unit growth.

Speaker Change: We also know that by driving that and going aggressively that it was going to hurt retention.

Speaker Change: Got it that's helpful. If I can just have a follow up on that.

Speaker Change: So now we're about so that it is.

Speaker Change: There are pieces you roll in I don't think you could automatically go to say like.

Speaker Change: I don't know if you addressed this I apologize if you did.

Speaker Change: The question is really around adverse selection right as we go into 2025.

Speaker Change: Like do an analysis of two line lines on the graph going up and they would follow.

Speaker Change: More and more auto carriers are profitable on more and more auto carriers were talking about growth.

Speaker Change: Each said each state is different each positions different.

Speaker Change: Should we expect your current level of combined ratio to hold for auto as you headed into an environment, where everyone is looking for growth like how do you feel about the broader competitive environment as a whole.

Speaker Change: If so if mario wish to get adequate prices in New York Tomorrow.

Speaker Change: Have a great agency plant there.

Speaker Change: We've got pretty we've got huge share down in the in the New York area.

Speaker Change: And we could really leverage that to grow fast when that will happen who knows so I think you should just hold us accountable for growing.

Speaker Change: Well youre talking with the auto market has obviously been competitive.

Speaker Change: And both progressive Geico State farm, the big carriers that we compete with all the time have been out in the market and competitive this year. So people are advertising.

Speaker Change: Auto units that I keep coming back to auto units is the unlocked a lot of everything else it grow and client service.

Speaker Change: It is it is an important part of our business, but we've got to get higher premiums that reserve balances are up the investment balances are up that's all driving increased income.

Speaker Change: Last year in 2020 for us so it's not like it wasn't competitive and it suddenly turning into competition.

Speaker Change: We think we have the capabilities to compete and grow I would say thats a different market in homeowners, where most people are backing out there is a secular trend there.

Speaker Change: Protection plans is back in and out of the park. So we got lots of growth opportunities. We are focused on the unlock of auto unit growth.

Speaker Change: Got it that's helpful. If I can just have a follow up on that I don't know if you addressed this I apologize if you did.

Speaker Change: We have an opportunity to grow and as we look at capital one of the things we do.

Speaker Change: I'd like to do is get a higher valuation on our homeowners growth. So when you look at our homeowner business and I said, if you have a business that's growing.

Speaker Change: But the question is really around adverse selection right as we go into 2025.

Speaker Change: More and more auto carriers are profitable on more and more auto carriers were talking about growth.

Speaker Change: Revenues in the mid teens.

Speaker Change: Should we expect your current level of combined ratio to hold for auto you had it into an environment, where everyone is looking for growth like how do you feel about the broader competitive environment as a whole.

Speaker Change: It's picking up.

Speaker Change: Not huge market share, but its got real unit growth, it's an industry leading model. It's earned money good money 11 out of 12 years.

Speaker Change: And it has high returns on capital you probably wouldn't put it at the kind of pay that we have for our overall enterprise.

Speaker Change: Well, we're talking with the auto market has obviously been competitive.

Speaker Change: And both progressive Geico State farm, the big carriers that we compete with all the time have been out in the market and competitive issue. So people are advertising in the.

Speaker Change: And I suspect that if you actually.

Speaker Change: Looked at analysts they might even give it a lower fee than our total.

Speaker Change: So we need to figure out how to have that fully recognized in our valuation.

Speaker Change: Last year in 2024, so it's not like it wasn't competitive and it suddenly turning into competition.

Speaker Change: And it might mean doing something differently and reinsurance and lowering the volatility of that line, but just know that our goal is to increase shareholder value. Maybe close I think were at times. Our goal is to increase shareholder value, whether that's buying shares back grow manage our capital structure.

Speaker Change: We think we have the capabilities to compete and grow I would say that's a different market in homeowners, where most people are back out there is a secular trend there.

Speaker Change: We have an opportunity to grow and as we look at capital one of the things we like to do is get a higher valuation on our homeowners growth. So when you look at our homeowners business and I said jeez, if you have a business that's growing.

Speaker Change: <unk> figure out how to compete differently do more advertising, we're all about driving growth for shareholders. We think we have the tools and capabilities to do that and we have a track record that shows we know how to get it done. So thank you all we will say it exports.

Speaker Change: <unk> in the mid teens, it's picking up.

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

Speaker Change: Not huge market share it with you real unit growth, it's an industry leading model it's earned Bonnie.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Good money 11 out of 12 years.

Speaker Change: And it has high returns on capital you probably wouldn't put it at the kind of pay that we have for our overall enterprise.

Speaker Change: And I suspect that if you actually looked at analysts they might even give it a lower p/e than our total.

Speaker Change: So we need to figure out how to have that fully recognized in our valuation.

Speaker Change: And it might mean doing something differently and reinsurance and lowering the volatility of that line, but just know that our goal is to increase shareholder value. Maybe close I think were at times. Our goal is to increase shareholder value, whether that's buy shares back grow manage our capital structure.

Speaker Change: Differently figure out how to compete differently do more advertising, we're all about driving growth for shareholders. We think we have the tools and capabilities to do that and we have a track record that shows we know how to get it done so.

Speaker Change: So thank you all we will see it exports.

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

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Hum.

Speaker Change: [music].