The operator introduces the Allstate First Quarter Earnings Investor Call and reminds participants that the call is being recorded. Brent Vandermause, Head of Investor Relations, then introduces the management team and discusses the non-GAAP measures and forward-looking statements that will be discussed. He also provides an update on the company's monthly financial disclosures. The call is then turned over to Tom Wilson, who greets the audience.

The speaker thanks the audience for their interest in Allstate's investment opportunity and begins by giving an overview of the company's results. They mention two components of Allstate's strategy and highlight their successful execution in the first quarter, including increased net income and investment income. The company also had a good quarter in Protection Services. The speaker then discusses their plans for further increasing shareholder value, such as improving auto profitability and expanding protection services. They also mention the sale of the Health and Benefits business, which may have a short-term negative impact on return on equity.

The third paragraph discusses the overall profit improvement in the first quarter, with a focus on Property-Liability results. This was driven by an increase in earned premium and higher fixed income yields. The company generated adjusted net income of $1.4 billion and $5.13 per diluted share. Mario then goes into more detail about these results, including a 10.9% increase in earned premium, improved underlying loss cost trends, lower catastrophe losses, and operating efficiencies. There was also a 15.6 point improvement in the combined ratio, driven by higher premiums earned and expense reduction programs. Prior year reserve reestimates had a small impact on results.

The auto insurance profitability has improved in the first quarter of 2024, with a combined ratio of 96, showing the success of the profit improvement plan. Premiums have been outpacing loss and expense increases, leading to improved profits since the third quarter of 2023. The first quarter saw a slight drop in underlying loss and expense due to milder weather and operating efficiencies, but severity remains a concern. The company is focused on maintaining rate levels to keep pace with cost trends and achieve target margins in all states.

Slide 6 and 7 of the presentation show how Allstate's auto profit improvement has led to pursuing policy growth. The left chart on slide 6 shows rate increases implemented in 2022 and 2023, while the right chart shows the Allstate brand's auto proportion of premium in states with a combined ratio below 96%. Slide 7 shows a decrease in policies in force, but National General's growth offset over half of that decline. Allstate's customer retention and new business also showed improvement, with the impact of rate increases in certain states beginning to moderate. National General also contributed to growth.

The article discusses the increase in policies in force and profitability for Allstate's homeowners insurance in the first quarter of the year. The company's differentiated customer experience and bundling of auto and homeowners insurance have contributed to this growth. Allstate's business model is considered industry-leading and the company remains confident in its ability to generate attractive returns. The article also mentions the opportunities for growth in the property liability sector, with a focus on improving customer retention.

Allstate's agents and employees are helping customers with the renewal process by offering coverage options and discounts. Growth can also be increased by easing new business restrictions and implementing transformative growth strategies. The company is also focused on reducing expenses and expanding customer access through various channels. Allstate has launched a new auto insurance product in nine states and plans to expand it to more states and products in the future. The company is well-positioned for sustainable and profitable growth. In the meantime, the company's investment income has increased due to active portfolio management and optimization of returns.

The paragraph discusses the net investment income of Allstate Corporation in the first quarter, which totaled $764 million, an increase from the previous year. This increase was mainly due to higher market-based and performance-based income from repositioning the fixed income portfolio. The chart on the right shows changes made to the bond portfolio duration and the table below shows the fixed income portfolio's earned yield. The paragraph also mentions the growth and profit performance of the protection service businesses, which saw a 12.2% increase in revenues, driven by Allstate Protection Plans. Adjusted net income for these businesses also increased compared to the previous year.

In the first quarter of 2024, Allstate Protection plans saw profitable growth resulting in a $12 million increase in adjusted net income compared to the previous year. The Health and Benefits business also performed well with increased revenues and consistent adjusted net income. Allstate's strategy to increase shareholder value includes improving auto insurance profitability, growing policies in force, actively managing investments, expanding protection services, and completing the sale of health and benefits in 2024. In the near term, PIF growth may be challenging due to price increases, but with expense cuts and repricing, positive growth may be expected later this year or early next year in the auto business.

The Allstate Corporation is planning to pivot to growth in their auto insurance business after focusing on profitability. They believe this will increase shareholder value and have a positive impact on retention and production. The company is also seeing strong growth and profitability in their National General business, particularly in the nonstandard auto insurance sector. They are also pursuing opportunities with Custom 360. There has been no public progress on the sale of benefits.

The company is making progress on the divestiture of their health and benefits business, with a large number of potential buyers showing interest. They are confident in finding a buyer who shares their vision for the business. The sale will also free up capital, which the company believes is the right move to harvest value. The company's capital utilization is based on their strategy, enterprise risk, return, and pricing decisions, all of which are made using sophisticated math.

The speaker discusses the confusion some people may have when the company uses more sophisticated math to analyze their economic and shareholder value. They consider a wide range of alternatives, including organic growth opportunities, share repurchases, and increasing their equity allocation in their investment portfolio. The company has bought back a significant amount of stock since going public and has no aversion to share repurchases, but they believe that investing in their businesses provides a better return. They also mention their bimodal approach to their investment portfolio, with 60% being illiquid and 40% being liquid, and their decision to decrease their liquid equity securities due to risk.

The speaker is discussing Allstate's use of extra funds and potential investments. They mention their acquisition of companies and their expansion into new capabilities, such as Arity. They also address their decision-making process for using extra money and assure shareholders that they will communicate any decisions. The speaker also mentions Allstate's advertising expenses and their PIF growth. They question if there is room for improvement in their advertising campaigns.

Tom Wilson and Mario Rizzo discuss how the company is reorganizing and investing in marketing to drive growth. They do not disclose specific numbers, but emphasize the importance of customer acquisition and improving effectiveness. Mario explains that they are organizing into local market teams to identify and capture growth opportunities at the state and market level. This, along with increased investments in growth, is expected to lead to significant growth for the company.

Tom Wilson and Andrew Kligerman are discussing the success of using a certain strategy for growth, which they previously dismantled but are now expanding again. They then move on to discussing National General, which was mostly a non-standard insurance company when purchased, but has now doubled in size due to the success of leveraging preferred auto and home insurance capabilities. The company is also seeing success with Custom 360, a new product offering in 17 states with plans for expansion.

The paragraph discusses the product offering of Allstate and their plans to expand into the independent agent channel. They have seen early growth and engagement in the states they have rolled out in, and are optimistic about their Custom 360 product and its potential in the non-standard auto and IA channel. The following question asks about frequency and severity trends in the first quarter, to which the speaker responds by mentioning a 6.7% underlying loss and expense trend, with a mid-5s loss trend in the protection business due to both frequency and severity. They also note that frequency has been favorable compared to last year due to milder weather.

The severity component of insurance claims is being offset by favorable frequency, but is still causing some concern. In terms of physical damage, used car prices have decreased, but repair costs are increasing due to rising parts prices and labor costs. On the injury side, severity remains high due to factors such as increased medical treatments and lawsuits. This is resulting in higher insurance prices for consumers, but some states have implemented tort reform measures that could have a positive impact.

The speaker responds to a question about positive frequency in the quarter and mentions that the weather was favorable but offset by lower severity levels. They also mention staying on top of pricing to reflect loss trends and pursuing rates in states where target profitability has not been achieved. The speaker clarifies that they will no longer provide rate updates every month but will continue to focus on it. The other speaker asks for updates on New Jersey and New York, and the speaker responds by saying that they have received approvals for auto rate increases in those states and have implemented them in the past quarter.

The speaker discusses the company's rate levels and underwriting risk appetite in different states, specifically California, New York, and New Jersey. They mention a recent auto rate increase in New Jersey and ongoing conversations about a pending rate in New York. The company has not lifted any underwriting restrictions in these two states and expects to continue increasing rates due to rising severities.

The CEO explains that customers may be deterred from suing if they experience quick access to their insurance. However, rates are constantly increasing and it's difficult to determine the company's competitive position. Despite this, the company is confident that they will end up in a lower cost, more competitive position due to transformative growth and reducing expenses. The company is also focused on maintaining competitive pricing and mentions their competitors, State Farm, gaining market share due to their choice to run underwriting losses. The majority of rate increases are occurring in California, New York, and New Jersey, and the company plans to unwind underwriting restrictions in 3/4 of states.

The speaker discusses the decision-making process for setting rates in different states based on rate adequacy and combined ratio. They mention the states with the highest potential for rate increases and the need to monitor loss trends. The questioner asks about the underlying loss ratio in auto insurance and the potential for improvement throughout the year. The speaker acknowledges the seasonality of auto insurance and the difficulty in attributing current results to specific factors. They express confidence in the trend of profitability in auto insurance.

The company is pleased with their current financial trend, as they have gained control over expenses and are working to keep costs down in a high inflation environment. They have taken significant actions to improve their loss ratio and expect to see continued growth in earned premiums. They are also focused on reducing expenses to improve margins. The company plans to announce and close the Health and Benefits transaction this year.

The speaker discusses the potential sale of a business and confirms that they are looking for one counterparty to buy the entirety of the business. They also mention that there is interest from multiple parties and they are confident in their decision. The speaker then moves on to talk about NatGen and mentions the growth potential in their homeowners business. They believe they have a strong position in this market and are well-equipped to take advantage of industry dynamics.

The risk for customers is increasing due to factors such as inflation, demographic trends, and severe weather. The industry has also lost money in recent years, but Allstate has been successful in making a profit. They plan to continue growing in the independent agent channel by leveraging their homeowners business. The National General nonstandard auto business has been profitable for Allstate and has allowed them to expand geographically.

The company has expanded its business geographically and across channels, including allowing Allstate agents to sell nonstandard auto through National General. They have stayed on top of rate increases and have taken advantage of competitive dislocation in the nonstandard auto market. The brand auto PIF was down 15% compared to the fourth quarter, but the company is still growing PIF in the 64% of the book that is at target margins.

Tom Wilson, the CEO of Allstate, stated that they would not provide specific numbers on their growth in different markets for competitive reasons. He also mentioned that they are focused on improving customer value and have shifted their compensation program to align with what customers want. This has resulted in lower distribution expenses and some agents having to adjust their business models.

The overall agent capacity in the Allstate brand has decreased, but productivity has increased, resulting in overall volume growth. This growth is particularly strong when excluding the states of California, New York, and New Jersey. The company is pleased with the productivity of their agents and plans to continue investing in their businesses to drive growth. The direct-to-consumer channel is expected to benefit from the company's lower expense ratio and marketing expertise.

The speaker discusses the differences between direct-to-consumer customers and traditional Allstate customers, stating that the former have different needs and preferences. The company is focused on improving their direct-to-consumer strategy through technology and marketing efforts. They are also working on expanding their customer base to include lower risk drivers.

The company believes that the direct channel has great potential for growth, particularly in areas such as home insurance and commercial insurance. They have recently reduced new business in the direct channel to focus on maintaining agent compensation levels, but now plan to increase their direct volume. The call has now ended.

This summary was generated with AI and may contain some inaccuracies.