Q2 2026 Allstate Corp Earnings Call

August 6, 2026

Speaker #1: After the prepared remarks, there will be a question-and-answer session. To ask a question during the session, you'll need to press *11 on your telephone.

Speaker #1: If your question has been answered and you'd like to remove yourself from the queue, simply press *11 again. Please limit your inquiry to one question and one follow-up.

Speaker #1: As a reminder, please be aware that this call is being recorded. And now I'd like to introduce your host for today's program, Alister Gobin, head of investor relations.

Speaker #1: Please go ahead, sir.

Speaker #2: So morning, everyone. Welcome to ALLSTATE's second quarter 2026 earnings call. Yesterday, following the close of the market, we issued our news release and investor supplement.

Alastair Gobin: Good morning, everyone. Welcome to Allstate's Q2 2026 earnings call. Yesterday, following the close of the market, we issued our news release and investor supplement and posted materials on our website at allstateinvestors.com. Today, our management team will discuss how Allstate is creating shareholder value. We will open up the line for your questions. As noted on the first slide of the presentation, our discussion will include non-GAAP measures for which reconciliations are provided in the news release and the investor supplement. We will make forward-looking statements about Allstate's operations. Actual results may differ materially from these statements, please refer to our 2025 10-K and other public filings for more information on potential risks. Now I'll turn it over to Tom.

Allister Gobin: Good morning, everyone. Welcome to Allstate's Q2 2026 earnings call. Yesterday, following the close of the market, we issued our news release and investor supplement and posted materials on our website at allstateinvestors.com. Today, our management team will discuss how Allstate is creating shareholder value. We will open up the line for your questions. As noted on the first slide of the presentation, our discussion will include non-GAAP measures for which reconciliations are provided in the news release and the investor supplement. We will make forward-looking statements about Allstate's operations. Actual results may differ materially from these statements, please refer to our 2025 10-K and other public filings for more information on potential risks. Now I'll turn it over to Tom.

Speaker #2: And posted materials on our website at allstateinvestors.com. Today, our management team will discuss how ALLSTATE is creating shareholder value. Then we will open up the line for your questions.

Speaker #2: As noted on the first slide of the presentation, our discussion will include non-GAAP measures, for which reconciliations are provided in the news release, and the investor supplement.

Speaker #2: We will make forward-looking statements about ALLSTATE's operations. Actual results may differ materially from these statements so please refer to our 2025 10-K and other public filings for more information on potential risks.

Speaker #2: And now, I'll turn it over to Tom.

Speaker #3: Good morning. Thank you for investing time at ALLSTATE. Before we begin, I'd like to welcome Chris Loan, who joined ALLSTATE this week as Chief Financial Officer.

Tom Wilson: Good morning. Thank you for investing time at Allstate. Before we begin, I'd like to welcome Chris Lown, who joined Allstate this week as Chief Financial Officer. He's an excellent addition to the Allstate team. You can look forward to hearing from him on the next call. We're choosing not to put him in the middle of heat with two days' work. I'd also like to thank John, for doing triple duty, leading investments, strategy, and being interim Chief Financial Officer. Let's begin on slide two. Allstate's strategy is to increase property liability market share and expand the protection we provide to customers by offering affordable, simple, and connected products through an extensive distribution network. Shareholder value is created through operational excellence, which generates attractive returns on capital, sustainable growth through the Property Liability Transformative Growth Initiative, and expanded protection.

Speaker #3: He's an excellent addition to the ALLSTATE team. You can look forward to hearing from him on the next call. We're choosing not to put him in the middle of the heat with, like, two days of work.

Speaker #3: I'd also like to thank John for doing triple duty, leading investments, strategy, and being interim Chief Financial Officer. Let's begin on slide two. ALLSTATE strategy is to increase property liability market share and expand the protection we provide to customers by offering affordable, simple, and connected products.

Speaker #3: Through an extensive distribution network. Shareholder value is created through operational excellence, which generates attractive returns on capital. Sustainable growth through the property liability transformative growth initiative and expanded protection.

Speaker #3: Capital generation, which funds organic growth, enables us to optimize risk-adjusted investment returns, pursue acquisitions, and provide significant cash to shareholders. Let's review second quarter results on slide three.

Tom Wilson: Capital generation, which funds organic growth, enables us to optimize risk-adjusted investment returns, pursue acquisitions, and provide significant cash to shareholders. Let's review Q2 results on slide three. Overall, Allstate increased property and liability growth and generated exceptional earnings. Starting with growth, total revenues grew to $18.6 billion, up 11.8% from the Q2 2025. Net premiums written increased 2.6%, which was supported by continued growth in auto and homeowners insurance and a 9.9% increase in issued applications. Total policies in force increased 3.8% to 215.9 million. That reflects 2.6% growth in property and liability and 4.1% growth in protection services. Net investment income increased 33.8% to $1 billion, reflects lengthening of the duration last year, a larger portfolio, and increased performance-based income. The increase in public equity investments last year also generated significant capital gains, which raised net income.

Speaker #3: Overall, ALLSTATE increased property liability growth and generated exceptional earnings. Starting with growth, total revenues greater than 18.6 billion dollars, up 11.8% from the second quarter of 2025.

Speaker #3: Net premiums written increased 2.6%, which was supported by continued growth in auto and homeowners insurance and the 9.9% increase in issued applications. Total policies in force increased 3.8% to 215.9 million.

Speaker #3: That reflects 2.6% growth in property liability and 4.1% growth in protection services. Net investment income increased 33.8% to a billion dollars, reflects lengthening of the duration last year, a larger portfolio, and increased performance-based income.

Speaker #3: The increase in public equity investments last year also generated significant capital gains, which raised net income. The property liability combined ratio was 4.5 points, improved to 86.6, while the underlying combined ratio was 79.4, in line with the prior year quarter.

Tom Wilson: The property liability combined ratio was 4.5 points improved, went to 86.6, while the underlying combined ratio was 79.4, in line with the prior year quarter. Net income was $3.2 billion and adjusted net income was $2.3 billion, or $8.99 a share. For the H1 of the year, adjusted net income was $5.1 billion or $19.65 per share. Adjusted net income return on equity is 44.2% over the last 12 months. Slide four provides a construct for our detailed discussion results. This year's growth in earnings are the result of operational excellence. Auto and homeowners insurance combined ratios are significantly better than the industry, which reflects precise pricing, expense control, and claims expertise. These capabilities also enable us to rapidly adapt to changes in external environment and competition. Our investment expertise generates first and second quartile results. All of this requires a highly sophisticated technology and analytics platform.

Speaker #3: Net income was 3.2 billion dollars, and adjusted net income was 2.3 billion, or 899 a share. For the first half of the year, adjusted net income was 5.1 billion, or 19 dollars and 65 cents per share.

Speaker #3: Adjusted net income return on equity is 44.2% over the last 12 months. Slide four provides a construct for our detailed discussion results. This year's growth and earnings are the result of operational excellence.

Speaker #3: Auto and homeowners insurance combined ratios are significantly better than the industry, which reflects precise pricing, expense control, and claims expertise. These capabilities also enable us to rapidly adapt to changes in external environment and competition.

Speaker #3: Our investment expertise generates first and second quartile results. All of this requires a highly sophisticated technology and analytics platform. Value is also created through sustainable growth.

Tom Wilson: Value is also created through sustainable growth. The Transformative Growth initiative is resulting in market share growth in auto and homeowners insurance. Broadening protection leverages our customer base, brand, distribution, and capabilities, so we protect consumers' electronics, appliances, furniture, roadside services, car warranties, and identity. Next up is deployment of ALLIE, Allstate's Large Language Intelligent Ecosystem. Allstate also generates significant capital, which funds a wide range of value creation opportunities. Over the last decade, we've increased organic growth, generated attractive returns from investments, acquired SquareTrade and National General, and provided significant cash to shareholders through dividends and repurchases. In that time, we've repurchased 39% of outstanding shares. The total cash return to shareholders through dividends and share repurchases over this 10-year period was equal to Allstate's 2015 market capitalization.

Speaker #3: The transformative growth initiative is resulting in market share growth in auto and homeowners insurance, broadening protection leverages our customer-based brand distribution and capabilities so we protect consumers' electronics, appliances, furniture, roadside services, car warranties, and identity.

Speaker #3: Next up is deployment of ALLIE, ALLSTATE's large language intelligence ecosystem. ALLSTATE also generates significant capital, which funds a wide range of value creation opportunities.

Speaker #3: Over the last decade, we've increased organic growth, generated attractive returns from investments, acquired SquareTrade and National General, and provided significant cash to shareholders through dividends and repurchases.

Speaker #3: In that time, we've repurchased 39% of outstanding shares. The total cash return to shareholders through dividends and share repurchases over this 10-year period was equal to ALLSTATE's 2015 market capitalization.

Speaker #3: ALLSTATE's annual free cash flow relative to market capitalization is far in excess of the S&P 500 and virtually all subsectors of the market. Let's turn to slide five, which provides an overview of how these outcomes are powered by sophisticated technology and analytics.

Tom Wilson: Allstate's annual free cash flow relative to market capitalization is far in excess of the S&P 500 and virtually all subsectors of the market. Let's turn to slide five, which provides an overview of how these outcomes are powered by sophisticated technology and analytics. We have a technology-driven strategy, not a strategy supported by technology. Now, the difference may sound subtle, but in execution, it's significant. A technology-driven strategy looks to technology first to determine how it can be leveraged to improve customer value and generate attractive returns. A strategy supported by technology starts with the go-to-market strategy and then says, How do we develop technology to implement that? In our case, this means advanced analytics are embedded into operations across the enterprise. That includes pricing, customer sales and support, claims, investments, and capital management.

Speaker #3: So we have a technology-driven strategy, not a strategy-supported by technology. Now, the difference may sound subtle, but in execution, it's significant. A technology-driven strategy looks at technology first to determine how it can be leveraged to improve customer value and generate attractive returns.

Speaker #3: Strategy supported by technology starts with the go-to-market strategy and then says, how do we develop technology to implement that? In our case, this means advanced analytics are embedded into operations across the enterprise.

Speaker #3: That includes pricing, customer sales, and support, claims, investments, and capital management. Over 250 highly sophisticated analytical models are used to make and support decision-making, using over 40 petabytes of data and 1.5 billion CPU compute hours.

Tom Wilson: Over 250 highly sophisticated analytical models are used to make and support decision-making using over 40 petabytes of data and 1.5 billion CPU compute hours. A few examples of what this enables us to do, generate over 100 million quotes, purchase 50 million leads, often with sub-second response times, and manage hundreds of millions of customer interactions. Now this platform is enabling us to build ALLIE, which will leverage agentic AI to improve customer value, lower costs, and increase growth. The architecture has eight integrated components that will enable agent-to-agent processing. For example, one component will handle all customer interactions. Each component is comprised of multiple agentic agents, which are built to be reused across the enterprise. The orchestration layer that we've built between the underlying systems for Transformative Growth is helping us accelerate the build and deployment of ALLIE.

Speaker #3: A few examples of what this enables us to do: generate over 100 million quotes, purchase 50 million leads, often with sub-second response times, and manage hundreds of millions of customer interactions.

Speaker #3: Now, this platform is enabling a stabiled ALLIE, which will leverage agentic AI to improve customer value, lower cost, and increase growth. The architecture has eight integrated components that will enable agent-to-agent processing.

Speaker #3: For example, one component will handle all customer interactions. Each component is comprised of multiple agentic agents, which are built to be reused across the enterprise.

Speaker #3: The orchestration layer that we built between the underlying systems for transformative growth is helping us accelerate the build and deployment of ALLIE. Transformative growth also included a number of organizational and process changes related to technology, which are enabling ALLIE.

Tom Wilson: Transformative Growth also included a number of organizational and process changes related to technology which are enabling ALLIE. We still have more capabilities to build, particularly in reimagining customer value and business processes, so we're enhancing our internal talent and expanding external relationships. ALLIE is another important step in executing a technology-driven strategy. Jess will now discuss property liability results.

Speaker #3: Now, we still have more capabilities to build, particularly in reimagining customer value and business processes. And so we're enhancing our internal talent and expanding external relationships.

Speaker #3: ALLIE is another important step in executing a technology-driven strategy. Jess will now discuss property liability results.

Speaker #2: All right. Thank you, Tom. Good morning, everyone. Let's start on slide six with how ALLSTATE's operational excellence consistently results in superior performance. This slide shows 10 years of combined ratios in both auto and homeowners insurance, as compared to the industry, as well as the results for our property liability business.

Jess Merten: All right. Thank you, Tom. Good morning, everyone. Let's start on slide six with how Allstate's operational excellence consistently results in superior performance. This slide shows 10 years of combined ratios in both auto insurance and homeowners insurance as compared to the industry, as well as the results for our property liability business. Starting with auto insurance on the left, over the last 10 years, Allstate's auto insurance business achieved target margins with a combined ratio of 95.2, while the industry did not make an underwriting profit. The same story exists in homeowners insurance, but Allstate's outperformance is greater at 10 points. There are obviously swings in individual products by year, but the third chart shows that in total, Allstate has generated significant underwriting margins over the last decade from our property liability business. To achieve these strong results, Allstate relies on pricing sophistication, disciplined underwriting, and a world-class claims team.

Speaker #2: Starting with auto insurance on the left, over the last 10 years, ALLSTATE's auto insurance business achieved target margins with a combined ratio of 95.2, while the industry did not make an underwriting profit.

Speaker #2: The same story exists in homeowners insurance, but ALLSTATE's outperformance is greater at 10 points. There are obviously swings in individual products by year, but the third chart shows that in total, ALLSTATE has generated significant underwriting margins over the last decade from our property liability business.

Speaker #2: To achieve these strong results, ALLSTATE relies on pricing sophistication, disciplined underwriting, and a world-class claims team. We manage volatility through risk selection and a robust reinsurance program that is part of our strategic risk and return management framework.

Jess Merten: We manage volatility through risk selection and a robust reinsurance program as part of our strategic risk and return management framework. Moving on to slide seven, the property and liability business increased growth in Q2 while generating attractive returns. Starting with the table on the left, net premiums earned increased 4% to $14.9 billion, driven by premium growth in both auto insurance and homeowners insurance. The property and liability combined ratio improved 4.5 points, 86.6. Auto insurance generated an 83.3 combined ratio, improving 2.7 points from the prior year. Homeowners insurance generated a 94.6 combined ratio, improving 7.4 points. The property liability underlying combined ratio remains strong at 79.4. Business generated $2 billion of underwriting income, an increase of nearly 57% from the prior year.

Speaker #2: Moving on to slide seven, the property liability business increased growth in the second quarter, while generating attractive returns. Starting with the table on the left, net premiums earned increased 4% to 14.9 billion dollars, driven by premium growth in both auto and homeowners insurance.

Speaker #2: The property liability combined ratio improved 4.5 points, 86.6. Auto insurance generated an 83.3 combined ratio, improving 2.7 points, from the prior year. Homeowners insurance generated a 94.6 combined ratio, improving 7.4 points.

Speaker #2: The property liability underlying combined ratio remained strong at 79.4. Business generated 2 billion dollars of underwriting income and increased of nearly 57% from the prior year.

Speaker #2: The chart on the right walks through the 4.5-point property liability combined ratio improvement from 91.1 in the second quarter of '25, 86.6 this quarter.

Jess Merten: The chart on the right walks through the 4.5 point property liability combined ratio improvement from 91.1 in Q2 of 2025 to 86.6 this quarter. The underlying loss ratio improved 1.1 points, lower catastrophe losses compared to the prior year contributed 2.4 points. Prior year reserve re-estimates contributed two points of the improvement. These drivers were offset by a one-point increase in the expense ratio, about half of which is higher advertising, with most of the remainder coming from non-recurring legal expenses. Overall, strong property liability performance drove another quarter of excellent returns and a combined ratio of 86.6. Moving now to slide eight, operational excellence also enables rapid adaptation to changing conditions. As most of you know, following the pandemic, supply chain constraints led to a nearly 60% increase in used car prices.

Speaker #2: The underlying loss ratio improved 1.1 points, and lower catastrophe losses compared to the prior year contributed 2.4 points. Prior year reserve reestimates contributed 2 points of the improvement.

Speaker #2: These drivers were offset by a 1-point increase in the expense ratio, about half of which is higher advertising, with most of the remainder coming from non-recurring legal expenses.

Speaker #2: Overall, strong property liability performance drove another quarter of excellent returns in a combined ratio of 86.6. Moving now to slide eight, operational excellence also enables rapid adaptation to changing conditions.

Speaker #2: As most of you know, following the pandemic, supply chain constraints led to a nearly 60% increase in used car prices. We also experienced increases in parts costs, longer repair times, and more severe accidents increased bodily injury severity.

Jess Merten: We also experienced increases in parts costs, longer repair times, and more severe accidents increased bodily injury severity. As a result, auto insurance returns deteriorated, necessitating price increases and restrictions on new business. The recent reserve changes highlight how quickly we were able to adapt. Auto claim reserve releases have totaled $1.5 billion this year. Approximately half of the bodily injury changes relate to 2023 and 2024. The recorded and underlying combined ratios for each year are shown on the top two rows of this chart. The bottom rows adjust for the impact of claim reserve releases on each year and shows what the combined ratio would have been with these changes. As you can see in 2023, the underlying combined ratio for auto insurance would have been 95.2, a 7.2-point improvement from 2022, which shows our rapid adaptation.

Speaker #2: As a result, auto insurance returns deteriorated, necessitating price increases and restrictions on new business. The recent reserve changes highlight how quickly we were able to adapt.

Speaker #2: Auto claim reserve releases have totaled 1.5 billion dollars this year. Approximately half of the bodily injury changes relate to 2023 and 2024. The recorded and underlying combined ratios for each year are shown on the top two rows of this chart.

Speaker #2: The bottom rows adjust for the impact of claim reserve releases on each year and shows what the combined ratio would have been with these changes.

Speaker #2: As you can see, in 2023, the underlying combined ratio for auto insurance would have been 95.2—a 7.2-point improvement from 2022—which shows our rapid adaptation.

Speaker #2: We also make changes to reserve reestimates within a year and did so in the second quarter. The reduction of expected costs for first quarter claims benefited the second quarter by 2.4 points, resulting in adjusted underlying combined ratio of 90.

Jess Merten: We also made changes to reserve re-estimates within a year and did so in Q2. The reduction of expected costs for Q1 claims benefited Q2 by 2.4 points, resulting in an adjusted underlying combined ratio of 90. The year-to-date underlying combined ratio was 88.5. Let's turn now to slide nine to discuss how Allstate has improved affordability, which increases growth while maintaining strong margins. The chart shows Allstate's auto premium per policy compared to the adjusted underlying loss and expense per policy. The dark blue line represents annualized average premium. The light blue line represents adjusted underlying loss and expense. The gap between the two results in strong auto insurance margins.

Speaker #2: The year-to-date underlying combined ratio was 88.5. Let's turn now to slide nine to discuss how ALLSTATE has improved affordability, which increases growth while maintaining strong margins.

Speaker #2: The chart shows ALLSTATE's auto premium per policy compared to the adjusted underlying loss and expense per policy. The dark blue line represents annualized average premium, the light blue line represents adjusted underlying loss and expense.

Speaker #2: The gap between the two results in strong auto insurance margins. On the right side of the chart, annualized premium per policy in the second quarter was $1,486, down slightly from the second quarter of 2025, reflecting strong margins and actions that we've taken to improve affordability for customers.

Jess Merten: On the right side of the chart, annualized premium per policy in Q2 was $1,486, down slightly from Q2 of 2025, reflecting strong margins and actions that we've taken to improve affordability for customers. Adjusted underlying loss and expense per policy was $1,337. The bottom of the slide shows the net implemented rate change over time. In Q2, rate increases and decreases were implemented in 36 locations with a net impact of zero. Allstate continues to manage auto insurance profitability with discipline, and the business is positioned to grow profitably. Now I'll pass it over to Mario.

Speaker #2: Adjusting adjusted underlying loss and expense per policy was $1,337. The bottom of the slide shows the net implemented rate change over time. In the second quarter, rate increases and decreases were implemented in 36 locations, with a net impact of zero.

Speaker #2: ALLSTATE continues to manage auto insurance profitability with discipline and the business is positioned to grow profitably. And now, I'll pass it over to Mario.

Speaker #3: Thanks, Jess. Turning to slide 10, transformative growth execution that has generated property liability market share growth. Looking first at the left side of the slide, advances in our acquisition sophistication expanded direct distribution and productivity of ALLSTATE Agent, agents allow us to economically increase ALLSTATE brand advertising.

Mario Rizzo: Thanks, Jess. Turning to slide 10, Transformative Growth execution is generating property liability market share growth. Looking first at the left side of the slide, advances in our acquisition sophistication, expanded direct distribution, and productivity of Allstate agents allow us to economically increase Allstate brand advertising. We have strong returns for marketing spend with advertising investment of $1.1 billion in H1 of the year. In the center of the slide, you can see how these investments are translating into new business growth in the Allstate agent and direct channels. In addition, independent agent volumes increased as well. The top chart shows auto insurance new business by channel for Q2 of 2023 and the most recent quarter.

Speaker #3: We have strong returns from marketing spend with advertising investment of 1.1 billion dollars in the first half of the year. In the center of the slide, you can see how these investments are translating into new business growth in the ALLSTATE Agent and direct channels.

Speaker #3: In addition, independent agent volumes increased as well. The top chart shows auto insurance new business by channel for the second quarter of 2023 and the most recent quarter.

Speaker #3: Auto insurance new business increased to 2.3 million items in the quarter versus 1.5 million three years ago. Which is balanced between all channels. ALLSTATE Agents, independent agents, and direct sales via phone or web.

Mario Rizzo: Auto insurance new business increased to $2.3 million items in the quarter versus $1.5 million three years ago, which is balanced between all channels, Allstate agents, independent agents, and direct sales via phone or web. The bottom chart shows a similar pattern in homeowners insurance, with new business increasing by 46.8% to 411,000 policies, many of which are bundled with auto insurance, particularly in the Allstate agent channel. Overall, new business growth highlights the benefits of having the broadest distribution in the industry and new products with sophisticated pricing and risk segmentation. Growth rates by year are shown on the right side of the slide. Auto insurance policy growth in Q2 turned positive last year after the pandemic-related growth restrictions and was 2.8% this quarter. In homeowners insurance, growth has been consistently positive and was 2.9% this quarter. The bottom line is that Transformative Growth is working.

Speaker #3: The bottom chart shows a similar pattern in homeowners insurance with new business increasing by 46.8% to 411,000 policies many of which are bundled with auto insurance, particularly in the ALLSTATE Agent channel.

Speaker #3: Overall, new business growth highlights the benefits of having the broadest distribution in the industry and new products with sophisticated pricing and risk segmentation. Growth rates by year are shown on the right side of the slide.

Speaker #3: Auto insurance policy growth in the second quarter turned positive last year after the pandemic-related growth restrictions, and was 2.8% this quarter. In homeowners insurance, growth has been consistently positive and was 2.9% this quarter.

Speaker #3: The bottom line is that transformative growth is working. Moving to slide 11, protection services is an important part of how ALLSTATE expands protection and leverages capabilities to create value in more parts of customers' lives.

Mario Rizzo: Moving to slide 11. Protection Services is an important part of how Allstate expands protection and leverages capabilities to create value in more parts of customers' lives. The segment has 177 million policies in force, contributing $3.4 billion to our top line and generating over $200 million in adjusted net income in the last 12 months. Protection Services extends Allstate's brand, customer relationships, distribution network, and technology capabilities into adjacent markets. Allstate Protection Plans are distributed through over 30 major retailers, such as Walmart, Costco, and Home Depot, as well as a growing presence in international markets. This gives us access to customers at the point of purchase and expands awareness of the Allstate brand. Dealer Services extends our reach in the vehicle purchasing journey through more than 1,100 dealership relationships. Products protect vehicle value and reduce the cost of unexpected repairs.

Speaker #3: The segment has 177 million policies in force, contributing 3.4 billion dollars to our top line and generating over 200 million dollars in adjusted net income in the last 12 months.

Speaker #3: Protection services extends ALLSTATE's brand customer relationships, distribution network, and technology capabilities into adjacent markets. ALLSTATE protection plans are distributed through over 30 major retailers such as Walmart, Costco, and Home Depot, as well as a growing presence in international markets.

Speaker #3: This gives us access to customers at the point of purchase and expands awareness of the ALLSTATE brand. Dealer services extends our reach into vehicle purchasing journey through more than 1,100 dealership relationships.

Speaker #3: Products protect vehicle value and reduce the cost of unexpected repairs. Parity demonstrates how ALLSTATE leverages data and analytics at scale. With over $2 trillion miles of driving data, mobility intelligence capabilities provide a better understanding of how people move, improve risk insights, and generate third-party revenue.

Mario Rizzo: Verity demonstrates how Allstate leverages data and analytics at scale. With over 2 trillion miles of driving data, mobility intelligence capabilities provide a better understanding of how people move, improve risk insights, and generate third-party revenue. Roadside assistance brings the Allstate brand to life through 1.75 million rescues each year, which strengthens customers through customer relationships. An exciting part of Transformative Growth is that the affordable, simple, and connected auto insurance shopping experiences are increasing bundled roadside sales. Allstate Identity Protection extends our promise of protection into another area of growing customer need. Identity protection helps 3.4 million customers prevent, detect, and recover from scams and identity-related events. By doing so, we expand Allstate's customer base. Taken together, these businesses reflect a broad strategic opportunity. Customers need protection in more aspects of their lives, and Allstate is uniquely positioned to meet those needs.

Speaker #3: Roadside assistance brings the Allstate brand to life through 1.75 million rescues each year, which strengthens customer relationships. An exciting part of transformative growth is that affordable, simple, and connected auto insurance shopping experiences are increasing bundled roadside sales.

Speaker #3: ALLSTATE identity protection extends our promise of protection into another area of growing customer need. Identity protection helps 3.4 million customers prevent, detect, and recover from scams and identity identity-related events.

Speaker #3: By doing so, we expand ALLSTATE's customer base. Taken together, these businesses reflect a broad strategic opportunity. Customers' need protection in more aspects of their lives and ALLSTATE is uniquely positioned to meet those needs.

Speaker #3: In summary, protection services expands our addressable market, broadens our distribution footprint, deepens customer relationships, and creates additional opportunities for growth. And now I'll turn it over to John.

Mario Rizzo: In summary, Protection Services expands our addressable market, broadens our distribution footprint, deepens customer relationships, and creates additional opportunities for growth. Now I'll turn it over to John.

Speaker #4: Thanks, Mario. Let's turn to slide 12 to discuss how strong investment performance supports earnings growth and shareholder value. Starting on the left, the portfolio is 80% interest bearing assets with equity securities and performance-based investments providing growth-oriented exposure.

John Dugenske: Thanks, Mario. Let's turn to slide 12 to discuss how strong investment performance supports earnings growth and shareholder value. Starting on the left, the portfolio is 80% interest-bearing assets with equity securities and performance-based investments providing growth-oriented exposure. This allocation supports recurring income generation while providing attractive risk-adjusted return on capital. Our investment performance is first and second quartile when benchmarked to the market for fixed income, private equity, and real estate. This is due to a terrific team of nearly 300 investment professionals and use of external managers when we don't have the expertise or scale in-house. Turning to the upper right, investment income is a growing contributor to earnings. Since 2022, investment income has increased over 57%, growing from $2.4 billion to nearly $3.8 billion on a trailing 12-month basis as of Q2 2026.

Speaker #4: This allocation supports recurring income generation while providing attractive risk-adjusted return on capital. Our investment performance is first and second quartile when benchmarked to the market for fixed income, private equity, and real estate.

Speaker #4: This is due to a terrific team of nearly 300 investment professionals and use of external managers when we don't have the expertise for scale in-house.

Speaker #4: Turning to the upper right, investment income is a growing contributor to earnings. In 2022, investment income or since 2022, investment income has increased over 57% growing from 2.4 billion dollars to nearly 3.8 billion dollars and a trailing 12-month basis as of second quarter of 2026.

Speaker #4: That has increased the contribution of investment income to roughly 11.5 dollars of adjusted net income per diluted share. Shareholder value is also created by using an enterprise risk and return lens to adjust investment allocations.

John Dugenske: That has increased the contribution of investment income to roughly $11.5 of adjusted net income per diluted share. Shareholder value is also created by using an enterprise risk and return lens to adjust investment allocations. We actively adjust portfolio positioning as market conditions, investment opportunities, and enterprise priorities evolve, enabling us to grow income, improve portfolio yields, and generate attractive long-term investment performance. For example, when Property-Liability margins declined at the beginning of the pandemic and the economic outlook was uncertain, we reduced equity holdings. Last year, with strong results, a strong economy, and additional deployable capital, the duration of the bond portfolio was lengthened and public equity holdings were increased by $7.1 billion. The benefit of these actions are higher investment income and mark-to-market equity gains in net income. The lower right shows overall returns on a GAAP-adjusted basis, which were 2.6% in the most recent quarter.

Speaker #4: We actively adjust portfolio positioning as market conditions investment opportunities and enterprise priorities evolve. Enabling us to grow income, improve portfolio yields, and generate attractive long-term investment performance.

Speaker #4: For example, when property liability margins declined at the beginning of the pandemic and the economic outlook was uncertain, we reduced equity holdings. Last year was strong results a strong economy and additional deployable capital the duration of the bond portfolio was lengthened and public equity holdings were increased by 7.1 billion dollars.

Speaker #4: Benefit of these actions are higher investment income and mark the market equity gains and net income. The lower right shows overall returns on a gap adjusted basis which were 2.6% in the most recent quarter.

Speaker #4: Now let's move to slide 13, which highlights how strong capital generation funds diversified value creation. Attractive returns on equity have enabled Allstate to generate substantial flexibility to invest in growth, strengthen our competitive position, and return capital to shareholders.

John Dugenske: Now let's move to slide 13, which highlights how strong capital generation funds diversified value creation. Attractive returns on equity have enabled Allstate to generate substantial capital, giving us the flexibility to invest in growth, strengthen our competitive position, and return capital to shareholders. The top half of the slide shows how we've deployed the capital generated over the last decade. We've nearly doubled Property-Liability premiums, increased investments, and completed acquisitions that have strengthened both our distribution capabilities and our protection offerings. At the same time, we've returned significant capital to shareholders through dividends and the repurchase of 39% of outstanding shares. Looking at the right-hand side of the chart, we see that these investments and shareholder returns were supported by attractive returns on equity. Over the past 10 years, Allstate's average return on equity matched the S&P 500 and ranked in the top quartile among peers.

Speaker #4: The top half of the slide show shows how we've deployed the capital generated over the last decade. We've nearly doubled property liability premiums increased investments and completed acquisitions that have strengthened both our distribution capabilities and our protection offerings.

Speaker #4: At the same time, we've returned significant capital to shareholders through dividends and the repurchase of 39% of outstanding shares. Looking at the right-hand side of the chart, we see that these investments in shareholder returns were supported by attractive returns on equity.

Speaker #4: Over the past 10 years, ALLSTATE's average return on equity matched the S&P 500 and ranked in the top quartile among peers. The bottom half of the slide highlights our continued commitment to returning capital to shareholders.

John Dugenske: The bottom half of the slide highlights our continued commitment to returning capital to shareholders. During the quarter, we returned $1.3 billion to shareholders, including a repurchase of $1 billion of common shares. $2.6 billion remain under the $4 billion repurchase authorization announced in February. We are in a strong capital position, with deployable capital at the holding company increasing to $9.5 billion, or approximately $37 per common share outstanding. Strong returns on equity have enabled us to invest in growth, build competitive advantages, and return substantial capital to shareholders.

Speaker #4: During the quarter, we returned 1.3 billion dollars to shareholders including a repurchase of 1 billion dollars of common shares. 2.6 billion remain under the 4.4 billion dollar repurchase authorization announced in February.

Speaker #4: We are in a strong capital position with deployable capital at the holding company increasing to 9.5 billion dollars or approximately 37 dollars for common share outstanding.

Speaker #4: Strong returns on equity have enabled us to invest in growth, build competitive advantage and return substantial capital to shareholders. Together, these actions have been a powerful driver of long-term shareholder value.

Tom Wilson: Together, these actions have been a powerful driver of long-term shareholder value. I'll wrap up quickly on slide 14, and in closing, Allstate's strategy is delivering strong results and creating shareholder value. Let's open up the floor to questions and answers. Thank you.

John Dugenske: Together, these actions have been a powerful driver of long-term shareholder value. I'll wrap up quickly on slide 14, and in closing, Allstate's strategy is delivering strong results and creating shareholder value. Let's open up the floor to questions and answers. Thank you.

Speaker #4: Now I'll wrap up quickly on slide 14 and in closing, ALLSTATE's strategy is delivering strong results and creating shareholder value. Now let's open up the floor to questions and answers.

Speaker #4: Thank you.

Speaker #1: Certainly. And as a reminder, ladies and gentlemen, we ask that you please limit yourself to one question and one follow-up. Our first question comes in the line of Gregory Peters from Raymond James.

Operator: Certainly. As a reminder, ladies and gentlemen, we ask that you please limit yourself to one question and one follow-up. Our first question comes from the line of Gregory Peters from Raymond James. Your question please.

Speaker #1: Your question, please.

Speaker #5: Hey, good morning everyone. So I'll focus on slide 5 and the technology piece for my first question. And I'm sure there's a lot of complexity to what's going on here, but maybe you could step back and give us some perspective on how you're managing the costs and measuring the ROI of all your various initiatives.

Gregory Peters: Hey, good morning, everyone. I'll focus on slide five and the technology piece for my first question. I'm sure there's a lot of complexity to what's going on here, but maybe you could step back and give us some perspective on how you're managing the costs and measuring your ROI of all your various initiatives. With these Large Language Models, I imagine protecting your data assets and your underwriting tools are top of mind. When we think about this technology investment, are we going to be getting to a point in the future where you're off all the legacy systems?

Speaker #5: And with these large language models, I imagine protecting your data assets and your underwriting tools are top of mind. And when we think about this technology investment, are we going to be getting to a point in the future where you're off all the legacy systems?

Tom Wilson: Greg, let me deal with that first three pieces. We did this slide to just show that artificial intelligence is just another step along the continuum that we've been on for a long time, which is we're a very technology and analytics-driven company, and AI will help further improve what we already know how to do. There are some companies that are less advanced than that. We don't say we're the most advanced. We just want you to know where we are, which is we're heavily into using technology. The expenses related with that, we look at all kinds of different ways as you would expect, but we're not having any barriers right now to investing money and getting good returns on that. As it relates to the long-term thing, I cynically say to our team sometimes, What's a legacy system? It's usually one you just turned on.

Speaker #3: Greg, let me deal with that first three pieces. We did this slide to just show that artificial intelligence is just another step along the continuum that we've been on for a long time which is we're a very technology and analytics-driven company.

Speaker #3: And AI will help further improve what we already know how to do. So there are some companies that are less advanced than that. We don't say we're the most advanced.

Speaker #3: We just want you to know kind of where we are, which is we're heavily into using technology. The expenses related to that, we look at all kinds of different ways, as you would expect, but we're not having any barriers right now to investing money and getting good returns on that.

Speaker #3: As it relates to the long-term thing, you're always I kind of cynically say to our team sometimes, what's a legacy system? And it's usually one you just turned on.

Tom Wilson: You're always adapting technology, you're always doing it. We are moving to what we call the Connected Customer Cloud, which is C3, to put a lot of our systems on the same basis, the same platform. With our orchestration layer, we don't need to get rid of all old technology. The orchestration layer, if you talk to people working on AI, that's one of the most difficult things to put in because it requires you to go in and take your legacy systems and make them accessible through APIs and other actions. We did that as part of transformative growth. We didn't do it knowing AI was coming. We just thought it made sense. It's positioned us to do ALI well. As it relates to token costs, I know a number of companies have talked about token costs. That's not an issue for us.

Speaker #3: So you're always adapting technology. You're always doing it. We are moving to what we call the connected customer cloud which is C3 to put a lot of our systems on the same basis, the same platform.

Speaker #3: But with our orchestration layer, we don't need to get rid of all old technology. The orchestration layer, if you talk to people working on AI, that's one of the most difficult things to put in because it requires you to go in and take your legacy systems and make them accessible through APIs and other actions.

Speaker #3: And we did that as part of transformative growth. We didn't do it knowing AI was coming. We just thought it made sense. But it's positioned us to do Ally well.

Speaker #3: And as it relates to token cost, I know a number of companies are talking about token cost. That's not an issue for us.

Speaker #5: And just to the other piece of it is just protecting your data assets and underwriting tools from the large language models. Do you have any perspective on that?

Gregory Peters: Just the other piece of it was just protecting your data assets and underwriting tools from the large language models. Do you have any perspective on that?

Speaker #3: Yeah. Cybersecurity obviously really important and more difficult now than it was two years ago and five years ago. So we spend a tremendous amount of time and effort on cybersecurity.

Tom Wilson: Yeah. Cybersecurity obviously really important and more difficult now than it was two years ago and five years ago. We spend a tremendous amount of time and effort on cybersecurity. I'm personally concerned about the large language models that now break out on their own and tell other agents how to do it on their own without getting caught. I think that's an issue that the country really needs to deal with. From our standpoint, we're aggressive. We've built up a great team. We know how to use LLMs internal. We don't use public LLMs to do any of our stuff, so we're not worried about our data being exfiltrated or scooped up in the knowledge of somebody else's LLM, so one of our competitors can use it. You're right to be focused on cybersecurity.

Speaker #3: I'm personally concerned about the large language models that now break out on their own and tell other agents how to do it on their own without getting caught.

Speaker #3: I think that's an issue that the country really needs to deal with. From our standpoint, we're aggressive. We've built up a great team. We know how to use LLMs internally.

Speaker #3: We don't use public LLMs to do any of our stuff. So we're not worried about our data being exfiltrated or scooped up in the knowledge of somebody else's LLM.

Speaker #3: So one of our competitors can use it. But you're right to be focused on cybersecurity. It's obviously important for our customers to make sure we keep their data safe and secure.

Tom Wilson: Obviously, it's important for our customers to make sure we keep their data safe and secure.

Speaker #5: Excellent. And then just a focus on slide 6, the where you ran through your 10-year record. And I'm particularly focused on the auto piece where I think through the six months you're running substantially below your 10-year average combined ratio.

Gregory Peters: Excellent. Just to focus on slide six, where you ran through your 10-year record. I'm particularly focused on the auto piece, where I think through the 6 months, you're running substantially below your 10-year average combined ratio. I'm reconciling slide nine, where your flat rate changed. Just curious about the competitive environment and when we might start to see that combined ratio drift up more towards the 10-year average.

Speaker #5: And I'm reconciling slide 9, where your flat rate change—just curious about the competitive environment and when we might start to see that combined ratio drift up more towards the 10-year average.

Speaker #3: Let me go up a little bit and answer growth because I know there'll be other people interested in growth as well. First, yeah, to have sustainable growth, you really need a multifaceted approach.

Tom Wilson: Let me go up a little bit and answer growth because I know there will be other people interested in growth as well. First, to have sustainable growth, you really need a multifaceted approach. It's not really just about cutting price because anybody can give it away. I sometimes feel like when people are doing analysis of us, they just look at price, they look at combined ratio, and they say, Oh, well, you're going to change your pricing, so your combined ratio is going to go way up. That certainly would be reflective of some people's view given our low PE today. We believe we can continue to operate and get rents better than the industry gets, which is why Jeff showed that slide of how we're better than the industry. We do that because we got this multifaceted approach to it.

Speaker #3: It's not really just about cutting price. Because anybody can give it away. And I sometimes feel like when people are doing analysis of us, they just look at price.

Speaker #3: They look at combined ratio and they say, oh, well, you're going to change your pricing so your combined ratio is going to go way up.

Speaker #3: That certainly would be reflective of some people's view of giving our low PE today. We don't we believe we can continue to operate and get rents better than the industry gets which is why I just showed that slide of how we're better than the industry.

Speaker #3: We do that because we got this multifaceted approach to it. And you'll really remember that is what transformative growth is which Mario talked about.

Tom Wilson: You'll really remember that is what transformative growth is, which Mario talked about. It starts with increasing customer value, which is more affordable prices and new products. That started, you'll remember, with reducing costs. We made a lot of progress for reducing costs over the last 6 years, but we have more to do there. The Q2 ratio, what I've just talked about half was advertising, a lot of the rest was a one-time legal accrual, which they tend to be bumpy. It's not systemic. I don't intend to get into why we did the accrual, but it's not systemic. I'm not concerned about where we are in the Q2, but we're also not done. Maybe Jess can talk later if somebody has a question about expenses, Jess can talk about what we're doing there. Claim effectiveness is also important.

Speaker #3: It starts with increasing customer value which is more affordable prices and new products. And so that started, you'll remember, with reducing costs. We made a lot of progress in reducing costs over the last six years.

Speaker #3: But we have more to do there. The second quarter ratio went up, Jess talked about it, about half was advertising. A lot of the rest was a one-time legal accrual.

Speaker #3: Which they tend to be bumpy. It's not systemic. I don't intend to get into why we did the accrual. But it's not systemic. So I'm not concerned about where we are in the second quarter.

Speaker #3: But we're also not done. And maybe Jess can talk later if somebody has a question about expenses. Jess can talk about what we're doing there.

Speaker #3: Claim effectiveness is also important. Mike Piato's team has done an excellent job of keeping our claims properly paid so that's not too little, not too much.

Tom Wilson: Mike Fiato's team has done an excellent job of keeping our claims properly paid, that's not too little, not too much. You can see from the reserve changes, our costs have come in a lot lower than we thought they would be. New products we've done well, which is another part of increasing customer value, broaden the access to Allstate's distribution channels, Mario talked about that, increasing sophistication in marketing. We have success there as well, but we're putting a new enterprise customer acquisition system into place, which we think will take us again, further towards driving growth without having to just reduce price and take less margin. The new tech ecosystem we talked about. There's a multifaceted approach to it.

Speaker #3: So you can see from the reserve changes, our costs have come in a lot lower than we thought they would be. New products, we've done well which is another part of increasing customer value.

Speaker #3: Broad and access to all distribution channels. Mario talked about that. Increasing sophistication in marketing. We have success there as well. But we're putting a new enterprise customer acquisition system into place.

Speaker #3: Which we think will take us again further towards driving growth without having to just reduce price and take less margin. The new tech ecosystem.

Speaker #3: We talked about. So there's a multifaceted approach to it. At this point in we're earning high returns and so it pays to drive shareholder value by reducing some of that margin and giving us some growth.

Tom Wilson: At this point, we're earning high returns, it pays to drive shareholder value by reducing some of that margin and giving up some growth. We don't like to have a plan to say, Oh, we're at X, and the right optimal point is to get to 94. We just do it every day. How we're going to grow as fast as we can and make as much money as we can.

Speaker #3: But we don't like to have a plan to say, oh, we're at X and the right optimal point is to get to 94. We just do it every day.

Speaker #3: How are we going to grow as fast as we can and make as much money as we can?

Speaker #5: Thank you for the information.

Gregory Peters: Thank you for the information.

Speaker #1: Thank you. And our next question comes from the line of Bob Huang from Morgan Stanley. Your question, please.

Operator: Thank you. Our next question comes from the line of Bob Huang from Morgan Stanley. Your question please.

Speaker #2: Hi. Good morning. My first one is around the competition within the broader space. If we look at the broader market, would you kind of give us a color on the competitive environment for auto personal auto only the model line business versus how the bundled home and auto competition is?

Bob Huang: Hi, good morning. My first one is around the competition within the broader space. If we look at the broader market, would you give us a color on the competitive environment for personal auto only, the monoline business, versus how the bundled home and auto competition is? Which side is more intense when it comes to competition, and is there a divergence between how the growth opportunity would look like going forward for those two specific lines?

Speaker #2: Which side is more intense when it comes to competition? And is there a divergence between how the growth opportunity would look going forward for those two specific lines?

Speaker #3: I'm going to go up a little bit, Bob, and then come down. So first, we think about it as the customer, how do we meet all their needs?

Tom Wilson: I'm going to go up a little bit, Bob, and then come down. First, we think about it as the customer, how do we meet all their needs? That's auto insurance, it's homeowners insurance, could be renters insurance. If they don't have a home, we'll sell them renters insurance. It could be their identity because everybody's got an identity. A lot of people have phones and TVs, and we kind of want to protect whatever it is they have, whichever way they can. We do that mostly under the Allstate brand, as you know. That brand sells well, and Mario talked about that in terms of our broad distribution as well. We start there.

Speaker #3: So that's auto insurance. It's home insurance. It could be renter's insurance. So if they don't have a home, we'll sell them renter's insurance. It could be their identity because everybody's got an identity.

Speaker #3: A lot of people have phones and TVs. And so we kind of want to protect whatever it is they have whichever way they can.

Speaker #3: We do that mostly under the Allstate brand, as you know. So that brand sells well. And Mario talked about that in terms of our broad distribution as well.

Speaker #3: So we start there. When you go down below that, then it's okay. On mono line auto, I would say all of those people who buy just auto insurance from us, there's other stuff I'd like to sell them too.

Tom Wilson: When you go down below that, it's okay, on monoline auto, I would say all of those people who buy just auto insurance from us, there's other stuff I'd like to sell them too. It doesn't just have to be auto. But if you're focused on what I would call the higher risk, non-standard, non-Robinsons, if that's what you're referring to, group. That's pretty competitive. National General really gave us a leg up in our expertise there. It also gave us a huge leg up in the independent agent channel. In the bundled product, we're obviously quite good there. Mario talked about the cross-line sales from our Allstate agents are really at all-time record highs. We're feeling good about that whole process, and we think we can sell even more stuff.

Speaker #3: It doesn't just have to be auto. But if you're focused on the what I would call the higher risk non-standard non-Robinsons if that's what you're referring to group.

Speaker #3: That's pretty competitive. National General really gave us a leg up in our expertise there. And it also gave us a huge leg up in the independent agent channel.

Speaker #3: In the bundled product, we're obviously quite good there. Mario talked about the cross line sales from our Allstate agents are really at all-time record highs.

Speaker #3: And so we're feeling good about that whole process. And then we think we can sell even more stuff. Jess could talk about what we're doing in individual markets because I think your focus really on product.

Tom Wilson: Jess could talk about what we're doing in individual markets, because I think you're focused really on product, but I'm saying focused on customer, that's important. Product, also important. There's also like, what are you doing in the local market in a state? Jess, maybe you can give an example of a state where how we're competing differently there than we were in the past.

Speaker #3: But I'm saying focus on customer. That's important. Product also important. But there's also what are you doing in the local market in a state?

Speaker #3: So Jess, maybe you can give an example of a state where how we're competing differently there than we were in the past.

Jess Merten: Yeah, absolutely. Thanks, Tom. It's hard to pick a state. We love all the states equally, but we're sitting here in Illinois, and I thought maybe I would pick Illinois, because Illinois is an interesting state. It's in focus because effectively, Illinois is a state where we're growing, but we're not growing as much as we think we could, right? We see opportunity and potential in the state to accelerate growth. We have go-to-market teams. I think we've talked with all of you about that. We have a go-to-market team that's focused on the state of Illinois, and they optimize across channels to make sure that we're really getting the most production, and as Tom said, meeting the most number of customers where they're at.

Speaker #4: Absolutely. Thanks, Tom. So I hard to pick a state. We love all the states equally. But we're sitting here in Illinois and I thought maybe I would pick Illinois.

Speaker #4: Because Illinois is an interesting state. So it's in focus because effectively Illinois is a state where we're growing but we're not growing as much as we think we could, right?

Speaker #4: So we see opportunity and potential in the state to accelerate growth. So we have go-to-market teams. I think we've talked with all of you about that.

Speaker #4: We have a go-to-market team that's focused on the state of Illinois. And they optimize across channels to make sure that we're really getting the most production and as Tom said, meeting the most number of customers where they're at.

Speaker #4: So we have a strong EA footprint in Illinois. But at the same time, they're focusing on direct. In a segmented way. So the go-to-market team has identified where can we win in the direct channel.

Jess Merten: We have a strong EA footprint in Illinois, but at the same time, they're focusing on direct in a segmented way. The go-to-market team is identifying where can we win in the direct channel, and we're investing marketing dollars where the returns are strong. At the same time in the state, you look at the independent agent channel, we have underwriting and pricing strategies that help those independent agents win. As Tom mentioned, it's not just that, it's product portfolio. We have Custom 360 products available for independent agents. We have really competitive both auto and home products that they can then bundle, provide that bundled solution to their customers, we think that affordable protection is differentiating.

Speaker #4: And we're investing marketing dollars. We're the returns are strong. At the same time, in the state, you look at the independent agent channel and we're providing we have underwriting and pricing strategies that help those independent agents win.

Speaker #4: As Tom mentioned, it's not just that. It's product portfolio. So we have custom 360 products available for independent agents. We have really competitive both auto and home products that they can then bundle provide that bundled solution to their customers.

Speaker #4: And we think that affordable protection is differentiating and we're because we have that product availability, we're going in and we're engaging and then in some cases re-engaging independent agents.

Jess Merten: Because we have that product availability, we're going in and we're engaging, and then in some cases, re-engaging independent agents so that we get more new business out of that channel. That doesn't mean we're not focused on the exclusive agent channel and accelerating growth there, from both a retention and a new business perspective. That can be things like coaching, pure benchmarking, but also providing tools so that they can serve more customers and identify more customer needs. Of course, they have a broad portfolio of solutions available to them. It's not just auto, home, landlords or renters, as Tom mentioned. This is life and retirement solutions, commercial solutions that exclusive agents can then bring to market. The go-to-market team helps them to identify where those opportunities exist, while also looking at footprint and things that we can do to make exclusive agents more productive.

Speaker #4: So that we get more new business out of that channel. That doesn't mean we're not focused on the exclusive agent channel and accelerating growth there.

Speaker #4: From both retention and new business perspective. So that can be things like coaching, peer benchmarking, but also providing tools so that they can serve more customers and identify more customer needs.

Speaker #4: Of course, they have a broad portfolio of solutions available to them. It's not just auto, home, landlords or renters as Tom mentioned. This is life and retirement solutions.

Speaker #4: Commercial solutions that exclusive agents can then bring to market. The go-to-market team helps them to identify where those opportunities exist while also looking at footprint and things that we can do to make exclusive agents more productive.

Speaker #4: The one other thing I would say is we also then take learnings from other states and apply them to a state like Illinois. So we're having great success in places like Missouri and Texas and Kansas.

Jess Merten: The one other thing I would say is, we also take learnings from other states and apply them to a state like Illinois. We're having great success in places like Missouri and Texas and Kansas, and we take those stories, we carry them forward into the local market, and we apply them across all three distribution channels. It's a really balanced way to identify where the best opportunities exist to grow, and that's where we are able to implement and execute through the go-to-market teams.

Speaker #4: And we take those stories. We carry them forward into the local market. And we apply them across all three distribution channels. So it's a really a really balanced way to identify where the best opportunities exist to grow.

Speaker #4: And that's where we are able to implement and execute through the go-to-market teams.

Speaker #2: Okay. Really appreciate that. So it's much more holistic. That's the right way to think about it, I think.

Bob Huang: Okay. Really appreciate that. It's much more holistic. That's the right way to think about it, I think.

Speaker #3: Yep. Holistic across the business. Not just the distribution channel product availability. Yeah. It's a complete system.

Jess Merten: Yes. Holistic across the business, not just the distribution channel product availability. It's a complete system.

Speaker #2: Okay. Thank you. My second question is really on if we think about severity development, right? Inflation is there. But it doesn't feel like it's showing up so problematically.

Bob Huang: Okay. Thank you. My second question is really on, if we think about severity development, right? Inflation is there, but it doesn't feel like it's showing up so problematically, if we look at severity over the last, call it, six months. Just given where the severity development has been so far, given the weather, given everything else, is it sort of fair to say, even if pricing were to continue to slow down, there is really not a lot of loss pressure that's pushing the combined ratio higher so far. Is it also safe to say that's going to continue for the rest of the year? Is that kind of a right way to think about where things are going forward?

Speaker #2: If we look at severity over the last call of six months, just given where the severity development has been so far, given the weather, given everything else, is it sort of fair to say even if pricing were to continue to slow down, there is really not a lot of loss pressure that's pushing the combined ratio higher so far?

Speaker #2: Is it also safe to say that's going to continue for the rest of the year? Is that kind of a right way to think about where things are going going forward?

Jess Merten: Bob, this is Jess. On severity, obviously we're not going to give you a forward look on what severity is going to be. We can talk about what's happening, and we try and isolate. Rather than isolating severity, we give you pure premium trends, and you saw that the pure premium trend was down for the quarter. That's some combination of frequency and severity. I think you have to, as you think about severity and what it's going to look like going forward, certainly there's inflation that will affect certain components of severity, particularly physical damage severity, but there's bodily injury severity and bodily injury severity trends that we have to keep an eye on. Those continue to be at relatively high levels, particularly as compared to the physical damage severities. I think the whole industry's seeing that.

Speaker #3: Bob, this is Jess. On severity, I mean, obviously we're not going to give you a forward look on what severity is going to be.

Speaker #3: We can talk about what's happening. And we try and isolate rather than isolating severity, we give you pure premium trends. And you saw that the pure premium trend was down for the quarter.

Speaker #3: So that's some combination of frequency and severity. I think you have to as you think about severity and what it's going to look like going forward, certainly there's inflation.

Speaker #3: That will affect certain components of severity, particularly physical damage. Severities. But there's bodily injury severity and bodily injury severity trends that we have to keep an eye on.

Speaker #3: And those continue to be at relatively high levels, particularly as compared to the physical damage severities. I think the whole industry is seeing that.

Speaker #3: So as you think about you can see it, again, what the pure premium trend was for the quarter. And you know sort of behind the scenes what we're doing to make sure that we're operationally excellent from a claims perspective.

Jess Merten: As you think about You can see it, again, what the pure premium trend was for the quarter. You know behind the scenes what we're doing to make sure that we're operationally excellent from a claims perspective. You really have to take a forward view on what's the inflation impact going to be on things like parts, what are we going to see on labor inflation, and then what's the bodily injury severity development going to look like in the back half of the year, where you can really form a view on what the overall pure premium trend is going to look like for the rest of the year and what that's going to mean to margins. Right now, though, the key point on the slide was, if you look at the average premium, the pure premium trend, we have really solid margins.

Speaker #3: But you really have to take a forward view on what the inflation impact is going to be on things like parts. What are we going to see in labor inflation?

Speaker #3: And then what's the bodily injury severity development going to look like in the back half of the year? Where you can really form a view on what the overall pure premium trend is going to look like for the rest of the year.

Speaker #3: And what that's going to mean for margins. Right now though, the key point on the slide was if you look at the average premium and the pure premium trend, we have really solid margins.

Speaker #2: Okay. Really appreciate it. Thank you.

Bob Huang: Okay. Really appreciate it. Thank you.

Speaker #1: Thank you. And our next question comes in line. Of Rob Cox from Goldman Sachs. Your question, please.

Operator: Thank you. Our next question comes from the line of Rob Cox from Goldman Sachs. Your question, please.

Speaker #5: Hey. Thanks. Good morning. Yeah. From my first question, I just want to ask on the deployable capital of $9.5 billion at the holding company.

Rob Cox: Hey, thanks. Good morning. Yeah, for my first question, I just want to ask on the deployable capital of $9.5 billion at the holding company. Just given that level of capital and even some normalization in underwriting profitability, it seems like you could repurchase shares at the current pace for quite some time. I'm just curious, is it prudent at this point in time to stop accelerating the buyback and hold onto some more cash to give some leeway for potential acquisitions? How are you all thinking about that?

Speaker #5: Just given that level of capital, and even some normalization and underwriting profitability, it seems like you could repurchase shares at the current pace for quite some time.

Speaker #5: So I'm just curious, is it prudent at this point in time to stop accelerating the buyback and hold on to some more cash to give some leeway for potential acquisitions?

Speaker #5: Or how are you all thinking about that?

Tom Wilson: Rob, it's Tom. We committed to do $4 billion. We're going to do $4 billion. John pushed that aggressively last quarter because we have plenty of capital, and so we're going to meet our commitment to get the $4 billion done. When you look above that and you say, okay, well, first, we generate a substantial amount of free cash flow. You say, how we manage it, we're pretty active in it. Obviously, organic growth, investing and leveraging our capabilities, whether that's things like protection services or we've had great investment results because we made some good changes there, or share repurchases. Also not included in the conversation there is, we're very active in sourcing capital.

Speaker #3: Rob, it's Tom. We committed to do 4 billion. We're going to do 4 billion. John pushed that aggressively last quarter. Because we have plenty of capital.

Speaker #3: And so we're going to meet our commitment to get 4 billion done. When you look above that, and you say, "Okay. Well, first, we generate a substantial amount of free cash flow.

Speaker #3: And you say, "How are we managing it?" We're pretty active in it. Obviously, organic growth, investing, and leveraging our capabilities, whether that's things like protection services, or—we've had great investment results because we made some good changes there.

Speaker #3: Or share repurchases. So also not included in the conversation there is we're very active in sourcing capital. So whether that's using 2 billion of preferred stock to take out common, what we do with reinsurance, we sold our life business and we sold our health and benefits businesses because we thought we could deploy the capital.

Jess Merten: Whether that's using $2 billion of preferred stock to take out common, what we do with reinsurance, we sold our life business, and we sold our health and benefits businesses because we thought we could deploy the capital at higher returns in other places, even though they're both really good businesses. We think about it holistically, and we use this capital management framework from an enterprise standpoint. That's the way we think about capital. Obviously, the best opportunity is increased organic growth when you look at our ROEs or our return on required capital, all of which are great. Investments is another place we've done really well. We've done exceptionally well with buying a couple of businesses, so Protection Plans, SquareTrade's more than 10 times its size. We paid $1.4 billion for it and made over $80 million the first six months of this year.

Speaker #3: If higher returns are available in other places, even though they're both really good businesses, we think about it holistically. And we use this capital management framework from an enterprise standpoint.

Speaker #3: So that's the way we think about capital. Obviously, the best opportunity is increased organic growth when you look at our ROEs or our return on required capital, all of which are great.

Speaker #3: Investments is another place we've done really well. We've done exceptionally well with buying a couple of businesses, so protection plans, SquareTrade's more than 10 times its size.

Speaker #3: We paid a billion four for it and made over $80 million the first six months of this year. National General, we paid 4 billion gross.

Tom Wilson: National General, we paid $4 billion gross. We sold some businesses, and it's more than double its size. When we see something that can help drive growth, we use shareholders' money to deploy it, and leverage those capabilities, which is what you're expected to. Obviously, share repurchases, John talked a lot about that. We're not afraid of share repurchases. It's better than sitting on it and not getting a good return. We look at all three of them and just think, What's the right thing to do from an enterprise standpoint? The good news is we generate enough capital that we can do many of these things at the same time.

Speaker #3: We sold some businesses. And it's more than double its size. So when we see something that can help drive growth, then we use shareholders' money to deploy it.

Speaker #3: And leverage those capabilities, which is what you would expect us to. Obviously, share repurchases, John talked a lot about that. We're not afraid to share repurchases.

Speaker #3: It's better than sitting on it and not getting a good return. But so we look at all three of them and just think, what's the right thing to do from an enterprise standpoint?

Speaker #3: And the good news is we generate enough capital that we can do many of these things at the same time.

Speaker #5: Yep. A lot of options. And I just wanted to follow up on Allie. It sounds like clearly there's a lot of exciting opportunities. Maybe you could just talk about how you expect the results of Allie to eventually show up in the income statement, particularly between expense, loss ratio, and growth over time.

Rob Cox: Yep. A lot of options. I just wanted to follow up on ALLIE. It sounds like clearly there's a lot of exciting opportunities. Maybe you could just talk about how you expect the results of ALLIE to eventually show up in the income statement, particularly between expense, loss ratio, and growth over time.

Speaker #3: Well, first, we haven't completely built it or deployed it. So some of this is just speculation. But I would say positive benefits to all those.

Tom Wilson: Well, first, we haven't completely built it or deployed it, some of this is just speculation. I would say positive benefits to all those. I think ALLIE should help us reduce our expenses. Jess has already got a lot of work going on to take work out of agent offices, which will reduce our distribution expenses. We think there's a bunch of other expenses it can help us reduce. We think it can help us be more accurate in pricing, more accurate in our claims. One of the things that agentic AI will help us do is connect the highly sophisticated individual things we do, whether that's buying leads, pricing, and which distribution channel a lead should get routed to, that it can help us be a lot more effective in growth. We think it's going to add just a really positive thing for us to do.

Speaker #3: I think Allie should help us reduce our expenses. Jess has already got a lot of work going on to take work out of agent offices, which will reduce our distribution expenses.

Speaker #3: We think there are a bunch of other expenses that can help us reduce. We think it can help us be more accurate in pricing, more accurate in our claims.

Speaker #3: We think it can one of the things that agentic AI will help us do is connect the highly sophisticated individual things we do. Whether that's buying leads, pricing, which distribution channel a lead should get routed to, it can help us be a lot more effective in growth.

Speaker #3: So, we think it's going to add just a really positive thing for us to do. I can't give you a specific number as to how much growth it's going to drive or how much it's going to add to expenses.

Tom Wilson: I can't give you specific numbers, how much growth it's going to do or how much it's going to do in expenses. Right now, we see lots of opportunity. We're very optimistic about where that'll take us.

Speaker #3: But right now, we see lots of opportunity. We're very optimistic about where that'll take us.

Speaker #5: Thanks, Tom.

Rob Cox: Thanks, Tom.

Speaker #1: Thank you. And our next question comes in the line of Pablo Singson from JP Morgan. Your question, please.

Operator: Thank you. Our next question comes from the line of Pablo Singzon from JPMorgan. Your question please.

Speaker #6: Hi. Good morning. I was wondering if you could provide perspective on new application growth and personal auto. So last year, apps grew about 25%.

Pablo Singzon: Hi. Good morning. I was wondering if you could provide perspective on new application growth in personal auto. Last year, apps grew about 25%. So far this year, I think you're tracking to high single digits. The question is, where do you think this moves given the current environment? Do you think you hold growth at that level, or is there a risk of degradation because of just increasing competition?

Speaker #6: So far this year, I think you're tracking to a high single digit. So the question is, where do you think this moves given the current environment, right?

Speaker #6: Do you think you hold growth at that level? Or is there a risk of degradation because of just increasing competition?

Speaker #3: Hey, Pablo. It's Jess Merten. I think, overall, we believe we can continue to fuel growth in new issued applications across all three channels. You saw we continue to have strength in direct, and that is because we're investing in sophistication, making sure that we get the right leads and that the close rates are effective.

Jess Merten: Hey, Pablo. It's Jess Merten. I think, overall, we believe we can continue to fuel growth in new issued applications across all three channels. You saw we continue to have strength in direct, that is because we're investing in sophistication, making sure that we get the right leads, and the close rates are effective. We will continue to invest in refining. We think there's opportunity in direct. As Tom mentioned, we're also working with our exclusive agent channel, to make sure that they're focused on the highest value work. We think that's going to result in continued increases in productivity. They do continue to be more productive than they've been in the past. The final piece of that, of course, is to keep the new issued application engine running as the independent agent channel.

Speaker #3: So, we will continue to invest in refining. We think there's opportunity in direct. As Tom mentioned, we're also working with our exclusive agent channel to make sure that they're focused on the highest value work.

Speaker #3: And we think that's going to result in continued increases in productivity. And they do continue to be more productive than they've been in the past.

Speaker #3: And the final piece of that, of course, is to keep the new issued application engine running as the independent agent channel. But we've had a lot of success there.

Tom Wilson: We've had a lot of success there. We think there's a lot of opportunity, particularly in the middle market where we're gaining some traction, with, as I mentioned, bringing products to market that they can bundle in auto and home together to drive affordability for the customer. It's a really great solution, and it's some of our best products. Overall, I feel confident in our ability to continue to drive new business going forward across all three channels.

Jess Merten: We've had a lot of success there. We think there's a lot of opportunity, particularly in the middle market where we're gaining some traction, with, as I mentioned, bringing products to market that they can bundle in auto and home together to drive affordability for the customer. It's a really great solution, and it's some of our best products. Overall, I feel confident in our ability to continue to drive new business going forward across all three channels.

Speaker #3: But we think there’s a lot of opportunity, particularly in the middle market, where we're gaining some traction with, as I mentioned, bringing products to market that customers can bundle—auto and home together—to drive affordability for the customer.

Speaker #3: But it's a really great solution, and it's some of our best products. So overall, I feel confident in our ability to continue to drive new business going forward across all three channels.

Speaker #6: Thanks, Jess. And I guess for my follow-up, I'm going to flip to the retention side, right? So many in the industry have talked about more customer shopping.

Pablo Singzon: Thanks, Jess. I guess for my follow-up, I'm going to flip to the retention side, right? Many in the industry have talked about more customer shopping. I guess the question is, can you talk about how personal auto retention has been trending for you? Have you seen any retention benefits from your push to provide your current customers greater value? Thank you.

Speaker #6: And I guess the question is, can you talk about how personal auto retention has been trending for you? And have you seen any retention benefits from your push to provide your current customers greater value?

Speaker #6: Thank you.

Speaker #3: Overall, we retention has stabilized for us recently. There are a lot of shoppers but that's been the case now for some time, right? Although I don't think it's more than it was, say, a year ago.

Jess Merten: Overall, retention has stabilized for us recently. There are a lot of shoppers. That's been the case now for some time, right, Pablo? I don't think it's more than it was, say, a year ago. They're shopping. We have invested, as you mentioned, in programs like SAVE. We think SAVE has had a retention benefit, certainly for the customers that we targeted. At this point, we're sort of feeling like we've got a stable retention trend now. Some of that, of course, you have to really look a little bit deeper by segment, by risk segment, by risk type, and frankly, by product type, to really understand what overall retention is. When we look at it at that granular level, we feel like retention trends are stable, and that SAVE was the right thing to do. It's working.

Speaker #3: But they're shopping. And so we have invested, as you mentioned, in programs like Save. We think Save has had a retention benefit. Certainly for the customers that we targeted.

Speaker #3: And at this point, we're sort of feeling like we've got a stable retention trend. Now, some of that, of course, you have to really look a little bit deeper—by segment, by risk segment, by risk type, and, frankly, by product type.

Speaker #3: To really understand what overall retention is. But when we look at it at that granular level, we feel like retention trends are stable and that SAVE was the right thing to do.

Speaker #3: It's working. Same is true for the things that we're doing to work with our exclusive agents. To invest in relationships, which we think will have retention benefits.

Tom Wilson: Same is true for the things that we're doing to work with our exclusive agents, to invest in relationships, which we think will have retention benefits. Overall, the retention trend feels stable.

Jess Merten: Same is true for the things that we're doing to work with our exclusive agents, to invest in relationships, which we think will have retention benefits. Overall, the retention trend feels stable.

Speaker #3: So, overall, the retention trend feels stable.

Speaker #6: Thank you.

Pablo Singzon: Thank you.

Speaker #1: Thank you. And our next question comes from the line of Alice Greenspan from Wells Fargo. Your question, please.

Operator: Thank you. Our next question comes from the line of Elyse Greenspan from Wells Fargo. Your question please.

Speaker #7: Hi, thanks. Good morning. For my first question, I guess I'm looking at slide 8, right? You guys provided some good disclosure on the adjusted underlying combined ratio, going back, I guess, to 2022.

Elyse Greenspan: Hi, thanks. Good morning. For my first question, I guess I'm looking at slide eight, right? You guys provided some good disclosure, right, on the adjusted underlying combined ratio going back, I guess, to 2022. Year to date, you guys are running at around an 88.5. Obviously well below, I think you guys say you target a mid-90s across the cycle in auto. Obviously, things have been favorable. How do you think about just where you are now relative to that mid-90s target when you think about prices slowing a bit? Obviously, frequency and severity will be what they will be. As you think out, not just this year, but over the next couple of years, how do you think about a normalization within profitability within the auto book?

Speaker #7: Year to date, right, you guys are running at around 88.5. Obviously, well below, right? I think you guys say you target a mid-90s across the cycle in auto.

Speaker #7: Obviously, things have been favorable. So how do you, I guess, think about just where you are now relative to that mid-90s target, when you think about, right, price is slowing a bit?

Speaker #7: Obviously, frequency and severity will be what they will be. But as you think out, not just this year, but over the next couple of years, how do you think about a normalization within profitability within the auto book?

Tom Wilson: Elyse, slide eight was really to show how quickly we can move when we need to. I would really focus on the far left-hand side. We moved the combined ratio by over seven points in a year in response to a huge increase in cost. As you know well, because we price on a lag basis, that is no small feat getting that done. What I would say is that same adaptability applies to the question you are raising. If you look at, Jess also showed the rate increases over a number of quarters. It has been flat for a while, and we are still making really good returns, and we are growing. We are always looking to grow as fast as we can. We are looking to earn good, attractive returns and be competitive, and we have been able to do that.

Speaker #3: Alice, why is 8 was really to show how quickly we can move when we need to. So I would really focus on the far left-hand side so we move the combined ratio by over 7 points in a year.

Speaker #3: In response to a huge increase in cost. And as you know well, because we price on a leg basis, that's no small feat getting that done.

Speaker #3: So what I would say is that same adaptability applies to the question you're raising. So, if you look at it, Jess also showed the rate increases over a number of quarters.

Speaker #3: And it's been flat for a while. And we're still making really good returns. And we're growing. So we are always looking to grow as fast as we can.

Speaker #3: And we're looking to earn good, attractive returns. And be competitive. And we've been able to do that. Whether that means we have to go up from the far right-hand side up to the mid-90s, we don't have a goal on that.

Tom Wilson: Whether that means we have to go up from the far right-hand side up to the mid-90s, we do not have a goal on that. What we said is, in the mid-90s, you are making a really attractive return on required capital. I think that is the message we would leave is we are growing and we are earning really, really attractive returns on capital. That should be good for shareholders.

Speaker #3: What we said is, in the mid-90s, you're making a really attractive return on required capital. So I think that's the message we believe is we're growing and we're earning really really attractive returns on capital.

Speaker #3: So that should be good for shareholders.

Speaker #7: Thanks. And then my follow-up question is just within policies enforced, right? Just trying to get a sense as you guys are looking at current growth trends.

Elyse Greenspan: Thanks. Then my follow-up question, just within policies in force, just trying to get a sense as you guys are looking at current growth trends, I guess, across both captive, your independent agent, and your direct business. Can you just give us a sense if there is different trends across any of the channels that you are currently seeing from an overall policy growth perspective?

Speaker #7: I guess across both captive—your independent agent—and your direct business, can you just give us a sense if there are different trends across any of the channels that you're currently seeing from an overall policy growth perspective?

Speaker #3: Well, you saw that we broke out the growth by channel, and it's very balanced. Maybe another way to answer the question is by discussing why consumers choose these various channels.

Tom Wilson: Well, you saw we broke out the growth by channel, and it is very balanced. Maybe another way to answer the question is about why do consumers choose these various channels? If you start with people when they are making a choice on insurance, they are first like, "Okay, how easy is it? And how comfortable do I feel buying insurance?" And then what is it cost, the relative cost. You have seen a growth in the direct channel, which are people who do not really want that much help buying it. They are really looking to do cost, and that has gotten easier over time. That channel is also growing a lot because there has been so much advertising going through it. I would not underestimate how much that moves people from one channel to another.

Speaker #3: So if you start with people, when they're making a choice on insurance, the first like, okay, how easy is it? And how comfortable do I feel buying insurance?

Speaker #3: And then what's it cost, the relative cost? So you've seen a growth in the direct channel, which are people who don't really want that much help buying it.

Speaker #3: They're really looking to do cost, and that's gotten easier over time. That channel is also growing a lot because there's been so much advertising going through it.

Speaker #3: So I wouldn't underestimate how much that moves people from one channel to another. In the independent agent channel, those are people who like, look, I don't really feel like dealing with this myself.

Tom Wilson: In the independent agent channel, those are people who are like, "Look, I don't really feel like dealing with this myself, don't really trust insurance companies that much, so I want somebody that can move around between those." You've seen we've grown rapidly there. That's a good value proposition as well, and people are prepared to pay more for that than they do direct. In between that is our exclusive agents, which are people who want some help, but they believe in a brand. They don't feel like they need to go out and shop around and have somebody look at a bunch of different companies. We've obviously, Jess can talk about what we've done to improve that channel.

Speaker #3: Don't really trust insurance companies that much. So I want somebody that can move around between those. And you've seen we've grown rapidly there. That's a good value proposition as well.

Speaker #3: And people are prepared to pay more for that than they do direct. And then in between that is our exclusive agents, which are people who want some help, but they believe in a brand.

Speaker #3: And they don't feel like they need to go out and shop around and have somebody look at a bunch of different companies. And we've obviously Jess can talked about what we've done to improve that channel.

Speaker #3: I would point out that we sell, in the direct channel, the same product we sell through our agents, but it's 7% cheaper in the direct channel because it doesn't come with an agent.

Tom Wilson: I would point out, we sell in the direct channel the same product we sell to our agents, but it's 7% cheaper in the direct channel because it doesn't come with an agent. People get that, our agents get it. We think it's really when you look at the customer segments, there's always going to be people in all those segments, and we just want to be available to all. In each of them, we have work to do to make sure we're as effective and efficient as we can. You've seen we've made huge progress in our direct channel, and you've seen that growing. I would say we're not done. We're still not industry-leading in terms of our effectiveness and efficiency in direct. In the exclusive agent channel, Jess, maybe you want to talk about the things we're doing there to improve effectiveness and efficiency.

Speaker #3: Can people get that? Our agents get it. So we think that, really, when you look at the customer segments, there’s always going to be people in all of those segments.

Speaker #3: And we just want to be available for all. In each of them, we have work to do to make sure we're as effective and efficient as we can be.

Speaker #3: So, you've seen we've made huge progress in our direct channel, and you've seen that growing. But I would say we're not done—we're still not industry leading in terms of our effectiveness and efficiency in direct.

Speaker #3: The exclusive agent channel—Jess, maybe you want to talk about the things we're doing there to improve effectiveness and efficiency.

Speaker #4: Yeah, absolutely. So our exclusive agents have been sort of foundational to our strategy for a long time. And so we're working with them to make them more efficient, more effective.

Jess Merten: Yeah, absolutely. Our exclusive agents have been sort of foundational to our strategy for a long time. We're working with them to make them more efficient, more effective, and really put them in a position to deliver what clients value, which we know they can do. Examples, we're taking routine service tasks off of their plate. People want those things done, but they don't need that done by their exclusive agent. That isn't value. We want them to do the things that reinforce their value proposition. We're giving them technology tools that serve up opportunities to engage with customers. It's sort of those moments that matter. We're putting them right in front of our agents so that they have an opportunity to shine and allow our customers to see the value that Allstate agents provide. Across the system, though, it's more than just that.

Speaker #4: And really put them in a position to deliver what clients value, which we know they can do. So, for example, we're taking routine service tasks off of their plate.

Speaker #4: People want those things done, but they don't need that done by their exclusive agent. That isn't value. We want them to do the things that reinforce their value proposition.

Speaker #4: We're giving them technology tools that serve up opportunities to engage with customers. It's those moments that matter—we're putting them right in front of our agents so that they have an opportunity to shine and allow our customers to see the value that Allstate agents provide.

Speaker #4: Across the system, though, it's more than just that. We're improving the quality of leads. So that they have better close rates. So that there's less duplication.

Jess Merten: We're improving the quality of leads so that they have better close rates, so that there's less duplication, which is important to our agents. Product breadth is another thing that we're really investing in to make sure that they can diversify the sources of revenue in their agencies. Going beyond auto and home, which they bundle at very high levels, as Tom mentioned, but also to specialty products like renters, landlords, boats, motorcycles, life and retirement, and commercial, as I mentioned before. We're making sure that our exclusive agents have the full portfolio where they want to meet that broader set of customer needs because we think they're certainly able to do that. The final thing I would say about what we're doing to support agents is really focusing on location flexibility.

Speaker #4: Which is important to our agents. Product breadth is another thing that we're really investing in to make sure that they can diversify the sources of revenue in their agencies.

Speaker #4: So that's going beyond auto and home, which they bundle at very high levels as Tom mentioned. But also to specialty products like renters and landlords and boats and motorcycles.

Speaker #4: Life and retirement and commercials, I mentioned before. So we're making sure that our exclusive agents have the full portfolio where they want to meet that broader set of customer needs.

Speaker #4: Because we think they're certainly able to do that. The final thing I would say about what we're doing to support agents is really focusing on location flexibility.

Speaker #4: We're giving them the choice on how to best run their small business, right? So if a physical location is important to their business, then they'll have physical locations.

Jess Merten: We're giving them the choice on how to best run their small business, right? If a physical location is important to their business, then they'll have physical locations. The flexibility means that in some cases, a shared location or no physical location at all works for an agent, and they can still successfully maintain that local presence and grow their business. We're trying to introduce tools that help them be effective, as well as options that allow them to lower their overall costs so that it can continue to be a really strong and productive channel for Allstate.

Speaker #4: But the flexibility means that in some cases, a shared location or no physical location at all, it works for an agent and they can still successfully maintain that local presence and grow their business.

Speaker #4: So, we're trying to introduce tools that help them be effective, as well as options that allow them to lower their overall cost, so that it can continue to be a really strong and productive channel for Allstate.

Speaker #7: Thank you.

Elyse Greenspan: Thank you.

Speaker #2: Thank you. And our next question comes from the line of Josh Shanker from Bank of America. Your question, please.

Operator: Thank you. Our next question comes from the line of Josh Shanker from Bank of America. Your question, please.

Speaker #5: Thank you very much for taking my question. Good morning, everybody. I know that monthly PIF reporting is going away, but as June is basically the last month we can do it, I did some back of the envelope calculations and it looks to me like that the homeowner's business in terms of policy count is growing faster than it has anytime since prior to Hurricane Katrina.

Josh Shanker: Thank you very much for taking my question. Good morning, everybody. I know that monthly PIF reporting is going away, as June is basically the last month we can do it, I did some back-of-the-envelope calculations, and it looks to me like that the homeowners business in terms of policy count has grown faster than it has any time since prior to Hurricane Katrina. I know over the past 20 years, you've learned a lot about catastrophe management, but you're growing really fast in property. Can you continue to grow at this speed without adding material cat load to your business? Can you talk a little bit about the capital requirements of growing auto home at the same pace and I guess, your appetite for monoline homeowners?

Speaker #5: And I know, over the past 20 years, you've learned a lot about catastrophe management. But you're growing really fast in property. Can you continue to grow at this speed without adding material cat load to your business?

Speaker #5: And can we talk a little bit about the capital requirements of growing auto, home, at the same pace? And I guess your appetite for monoline homeowners.

Speaker #3: Well, Josh, thank you for debunking the conspiracy theory that because we stopped doing monthly things, we had a problem. The and our growth is good.

Tom Wilson: Well, Josh, thank you for debunking the conspiracy theory that because we stopped doing monthly things, we had a problem. Our growth is good, and it was good in June, and we like where we're going. As Jess and Mario both said, we feel like we got plenty of room to pick up market share. We like what we're doing there. In terms of the growth in homeowners, we're really good at it. Other people will make changes that we've already made to try to catch up to us, and those all make sense to me. It's not like we're sitting around here saying, "Oh, geez, we've got everything figured out. Let's not continue to make changes." We have new rating plans coming out.

Speaker #3: It was good in June, and we like where we're going. So as Mario Rizzo said, we feel like we've got plenty of room to pick up market share.

Speaker #3: So we like what we're doing there. In terms of the growth in homeowners, we're really good at it. And other people will make changes that we've already made to try to catch up to us.

Speaker #3: And those all make sense to me. But it's not like we're sitting around here saying, "Oh, geez, we've got everything figured out. Let's not continue to make changes."

Speaker #3: We have new rating plans coming out. We have new, sophisticated analytics we're using with individual roofs, and we’ve got lots of stuff we’re doing to make sure we continue to grow in homeowners.

Jess Merten: We have new sophisticated analytics we're using with individual roofs, and we've got lots of stuff we're doing to make sure we continue to grow in homeowners. That starts with getting it priced most accurately for every individual house. We're good at that. On top of that, though, the question about catastrophe risk, we manage overall catastrophe risk well. We're probably the biggest, certainly the biggest US buyer of property liability catastrophe insurance. We've got a very complicated program. Chris is going to take that over. We don't have any restrictions on access to capital to help us manage volatility. Sometimes we choose not to use that capital because we don't think it's in shareholders' best interest, but that's not going to restrict our growth. Monoline homeowners, and we'll take people any way we can get them.

Tom Wilson: We have new sophisticated analytics we're using with individual roofs, and we've got lots of stuff we're doing to make sure we continue to grow in homeowners. That starts with getting it priced most accurately for every individual house. We're good at that. On top of that, though, the question about catastrophe risk, we manage overall catastrophe risk well. We're probably the biggest, certainly the biggest US buyer of property liability catastrophe insurance. We've got a very complicated program. Chris is going to take that over. We don't have any restrictions on access to capital to help us manage volatility. Sometimes we choose not to use that capital because we don't think it's in shareholders' best interest, but that's not going to restrict our growth. Monoline homeowners, and we'll take people any way we can get them.

Speaker #3: And that starts with getting it priced most accurately for every individual house, so we're good at that. On top of that, though, the question about catastrophe risk—we manage overall catastrophe risk well.

Speaker #3: We've got we're probably the biggest certainly the biggest US buyer of property liability catastrophe insurance. We've got a very complicated program. Chris is going to take that over.

Speaker #3: We don't have any restrictions on access to capital to help us manage volatility. Sometimes we choose not to use that capital because we don't think it's in shareholder's best interest.

Speaker #3: But that's not going to restrict our growth. And so, monoline homeowners — we'll take people in any way we can get them. But usually, if you own a home, you've got a car too.

Jess Merten: Usually if you own a home, you got a car, too, so we'd like to get both of those. We don't restrict people to say, "Geez, if you won't give us your car, we won't insure your home," because we want each product to stand on its own. We try to avoid subsidization between products, because when you do that, you end up, as you would expect, markets like water, it finds the open hole, and the open hole tends to be a low return. If you sell a product at a low return hoping you're going to get the other one, that's not usually a good plan. We feel good about the ability to grow both homeowners in the exclusive agent channel, which Mario talked about. Jess talked about Custom 360 in the independent agent channel.

Tom Wilson: Usually if you own a home, you got a car, too, so we'd like to get both of those. We don't restrict people to say, "Geez, if you won't give us your car, we won't insure your home," because we want each product to stand on its own. We try to avoid subsidization between products, because when you do that, you end up, as you would expect, markets like water, it finds the open hole, and the open hole tends to be a low return. If you sell a product at a low return hoping you're going to get the other one, that's not usually a good plan. We feel good about the ability to grow both homeowners in the exclusive agent channel, which Mario talked about. Jess talked about Custom 360 in the independent agent channel.

Speaker #3: So we'd like to get both of those, but we don't restrict people to say, geez, if you won't give us your car, we won't insure your home because we want each product to stand on its own.

Speaker #3: And we try to avoid subsidization between products because when you do that, you end up, as you would expect, markets like water and finds the open hole.

Speaker #3: And the open hole tends to be a low return if you sell a product at a low return hoping you're going to get the other one.

Speaker #3: That's not usually a good plan. And so we feel good about the ability to grow both homeowners in the exclusive agent channel, which Mario just talked about, and Custom 360 in the independent agent channel.

Speaker #3: And you should also I would notice as you see on the chart, we've done a lot better in the direct channel and as we improve our direct capabilities, we think that'll continue to grow too.

Jess Merten: You should also, I would notice as you see on the chart, we've done a lot better in the direct channel. As we improve our direct capabilities, we think that'll continue to grow, too.

Tom Wilson: You should also, I would notice as you see on the chart, we've done a lot better in the direct channel. As we improve our direct capabilities, we think that'll continue to grow, too.

Speaker #2: Thank you for all the answers.

Josh Shanker: Thank you for all the answers.

Speaker #1: Thank you. And our next question comes from the line of Andrew Gligerman from TD Cowan. Your question, please.

Operator: Thank you. Our next question comes from the line of Andrew Kligerman from TD Cowen. Your question, please.

Andrew Kligerman: Hey, thank you for taking my question. Good morning. I'm looking at the prior year reserve re-estimates in auto, and they've been fantastic. I mean, 6.6 points this quarter. Each of the last four prior quarters, you've had sizable releases. I think, Tom, you talked about claim effectiveness, the technology ecosystem. Maybe you could help us unpack what's generating these very favorable prior year reserve re-estimates and whether you think that can continue.

Speaker #6: Hey, thank you for taking my question. Good morning. I'm looking at the prior year reserve reestimates in auto and they've been fantastic. I mean, 6.6 points this quarter, each of the last four prior quarters, you've had sizable releases.

Speaker #6: I think, Tom, you talked about claim effectiveness and the technology ecosystem. Maybe you could help us unpack what's generating these very favorable prior year reserve reestimates, and whether you think that can continue.

Speaker #3: I'll start in a John can jump in if you want. First, I would say every quarter we think we got reserves as accurate as we can get them.

Jess Merten: I'll start, and then John can jump in if he wants. First, I would say every quarter we think we've got reserves as accurate as we can get them.

Tom Wilson: I'll start, and then John can jump in if he wants. First, I would say every quarter we think we've got reserves as accurate as we can get them.

Speaker #3: So we don't assume there'll be any more coming, ever, because we think it's as accurate as it can be. Sometimes the estimates you made are higher, and so then you have reserve releases.

Tom Wilson: We don't assume there'll be any more coming ever because we think it's as accurate as it can. Sometimes the estimates you made are higher, and then you have reserve releases, and that's generally a more favorable place to be relative to you all than in the negative. We've had the other issue as well. I think the difference is really that when the inflationary trends have started to come down in certain places, AKA Florida, where they put some tort reform in, we're very hopeful that those kinds of trends will continue. You might have noticed that Governor Hochul decided to take on increased costs for consumers on auto insurance because of litigation, where they passed some laws, it's got to turn into reality before it becomes an issue for a benefit we can give to customers.

Speaker #3: And that's generally a more favorable place to be relative to you all than in a negative. But we've had the other issue is I think the difference is really that one, the inflationary trends have started to come down in certain places.

Speaker #3: AKA Florida, where they put some tort reform in. We're very hopeful that those kinds of trends will continue. So you might have noticed that Governor Hochul decided to take on increased costs for consumers on auto insurance because of litigation.

Speaker #3: We're they passed some laws. It's got to turn into a reality before it becomes an issue for a benefit we can give to customers.

Speaker #3: But we're hopeful that those kinds of things that's happened in Georgia and Louisiana. So we're hoping that there's a trend towards tort reform and getting rid of billboard lawyers that will improve our customers' costs.

Tom Wilson: We're hopeful that those kinds of things, it's happened in Georgia and Louisiana, we're hoping that there's a trend towards tort reform and getting rid of billboard lawyers that will improve our customers' costs. Therefore, the estimates we've made might not be as high as we thought. John, what would you add to that?

Speaker #3: And therefore, the estimates we've made might not be as high as we thought. John, what would you add to that?

Speaker #4: I just had a couple of things, Tom. I look at the what we've gone through in the context of a it was a pretty if you look back over the last five years, it's a pretty volatile inflationary period.

John Dugenske: I'd just add a couple things, Tom. I look at what we've gone through in the context of a, if you look back over the last 5 years, it was a pretty volatile inflationary period. We're looking at coming out of post-COVID inflation period, used car prices that were going up in the upwards of 60%. A lot of other things, we've talked about bodily injury and the rest. It's not uncommon for any estimation process, as sound as it may be, to potentially just adjust aggressively. What we've seen since then, and if you look at the process, this is a consistent process. We have multiple auditors on the outside that double-check our work. We're continually responding to trends and new data as it comes in the marketplace and making the best estimate at the time that we have.

Speaker #4: So we're looking at coming out of post-COVID inflation period, used car prices that were going up in the upwards of 60%. A lot of other things we've talked about bodily injury and the rest.

Speaker #4: So it's not uncommon for any estimation process as soon as it may be to potentially just adjust aggressively. What we've seen since then and if you look at the process, this is a consistent process.

Speaker #4: We have multiple auditors on the outside that double check our work. We're continually responding to trends. And new data as it comes in the marketplace.

Speaker #4: And making the best estimate at the time that we have. We’ve felt comfortable adjusting numbers in recent quarters, partially because of our strong claims team and the good work that they’ve done.

John Dugenske: We've felt comfortable adjusting numbers in recent quarters, partially because of our strong claims team and the good work that they've done. We absolutely feel good about the numbers that we have at any quarter, and that's where we are now.

Speaker #4: But we absolutely feel good about the numbers that we have at any quarter. And that's where we are now.

Speaker #3: Okay. Thank you for investing your time with us. I would close with at this price, you can't get operational excellent sustainable growth or capital generation anywhere else.

Tom Wilson: Okay. Thank you for investing your time with us. I would close with, at this price, you can't get operational excellence, sustainable growth, or capital generation anywhere else. Thank you very much. Bye.

Speaker #3: Thank you very much. Bye.

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

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