The operator introduces the Allstate Second Quarter Earnings Investor Call and the host, Brent Vandermause. The management team will discuss the company's strategy and results, followed by a Q&A session. The discussion will include non-GAAP measures and forward-looking statements. The host, Brent Vandermause, will be transitioning to a new role, and Investor Relations will be taken over by Alastair Gobin. The CEO, Tom Wilson, will provide an overview of results, followed by operating performance updates from Mario and Jess. The company's strategy focuses on increasing market share and expanding protection for customers. The highlights of the second quarter are shown on Slide 2.

In the second quarter, National General had a net income of $301 million despite elevated catastrophes, thanks to the successful execution of their auto profit improvement plan. The company's Homeowners business also saw improved results, with a higher net investment income and a profitable growth trajectory. Protection Services also had a good quarter, driven by growth in protection plans. Revenues increased to $15.7 billion, with higher property liability earned premiums and net investment income. Adjusted net income was $429 million. Mario Rizzo then covered Property-Liability results, with earned premiums increasing by 11.9% and an improved underwriting loss of $145 million due to better margins and lower catastrophes. The expense ratio was slightly higher due to increased advertising for growth investments.

The adjusted expense ratio for the quarter decreased by 1.6 points due to lower advertising costs and other non-core expenses. Catastrophe losses were favorable compared to the previous year, resulting in an underlying combined ratio improvement of 7.6 points. The company's profit improvement plan has been successful, with the auto insurance combined ratio improving by 12.4 points in the second quarter. Rate increases have pushed average premiums above underlying losses and expenses, leading to improved profitability. Compared to the previous year, average underlying loss and expense was 5.5% higher.

The fourth paragraph discusses the increase in incurred severity estimates for the current year, driven by bodily injury coverage and offset by lower accident frequency and higher advertising investments. Allstate's claims team is taking actions to mitigate the impact of inflation, such as identifying injuries earlier in the process. The underlying performance of Homeowners insurance has improved, with Allstate's combined ratio being lower than the industry average. The paragraph also mentions Allstate's multiyear strategy, Transformative Growth, and the progress made on its five components.

The company's transformation has resulted in tangible outcomes that improve the customer experience and support their goal of growing market share. Examples of these outcomes include a new affordable and connected auto insurance product and increased advertising investment. The multichannel distribution strategy allows the company to serve customers based on their preferences, with increased productivity and bundling rates in the agency channel. The National General acquisition has expanded the independent agent channel, resulting in a 90% increase in new business applications since 2020. This has allowed the company to better serve customers who prefer to engage with independent agents.

The $4 billion acquisition of National General by Allstate included multiple businesses and has significantly increased the number of customers protected through independent agents. National General is now one of the largest independent agent personal lines insurers and has shown attractive underwriting margins. Allstate plans to invest in growth opportunities for higher returns, resulting in a 17% increase in Personal Auto new business applications in the second quarter. This growth was driven by higher productivity, advertising investments, and enhancements to direct operations.

The last two green bars in the graph show growth in the non-standard auto business and sales volume from the Custom360 middle market offering. Total protection auto policies enforced decreased by 1.6% due to a decrease in Allstate brand policies, partially offset by growth at National General. Allstate brand retention improved slightly, but National General's growth offset most of the decrease. Profitable growth was also seen in Protection Services, with revenues increasing by 12.7% and adjusted net income increasing by $14 million compared to the prior year quarter. Allstate Protection Plans contributed to this growth with a $10 million increase in adjusted net income.

Allstate's acquisition of SquareTrade in 2017 has proven to be a successful growth platform, with strong profitability and partnerships with major retailers. The Allstate brand has helped to drive sales of protection plans for various products. In addition, the company's investment results have been positive due to active portfolio management and a focus on optimizing returns. Net investment income for the quarter was $712 million, with market-based income and performance-based income contributing to this result.

The paragraph discusses the annualized portfolio return and performance of the Health and Benefits business in the second quarter. It also mentions the decision to pursue a divestiture of these businesses and the progress of the process. The Allstate strategy and its impact on profitability and growth are also highlighted. The speaker expresses confidence in the strategy and opens the line for questions.

Tom Wilson discusses the strong increase in new issued applications and how it will drive increased policies in force in the auto insurance sector. He mentions National General as a key contributor to this growth and explains that their focus is on both selling more and keeping more customers. Mario will discuss specific actions being taken in different regions to achieve this growth. Retention has been slightly up in the past 12 months, but it's unclear how it will trend as rate increases decrease.

The speaker believes that the traditional economics of raising prices may not apply in their situation. They have recently raised prices and seen a decrease in retention, but it is difficult to determine the exact cause. They are focused on improving customer experience and have set a goal to increase customer interactions. They are also taking rate increases in certain states which may affect retention in the future.

The company is pleased with the recent trends in new business production, which they attribute to their auto profit improvement plan. They have been investing in growth in states where they have reached adequate profitability levels, resulting in a 17% increase in production. They will continue to focus on taking necessary rates in states where profitability is not yet at target levels, while also investing in growth in other states.

The speaker discusses the company's growth in terms of geography and new business, noting that they are seeing growth across brands and channels. They also mention increased advertising expenses in the second quarter and their confidence in increasing market share in personal property liability. The company is focused on reducing costs and believes there is still room for improvement through digitization and other measures.

The company has broken out advertising separately in order to avoid miscommunication about their stance on lowering advertising costs. They believe that investing in growth will lead to increased market share and a re-rating of their earnings multiple. In terms of competition in the Personal Auto market, the company is focused on having a differentiated product that appeals to customers, and they are comfortable investing in advertising and competing on price.

The speaker discusses the success of their new ASC Auto product, emphasizing the importance of having a strong brand, broad access, and effective advertising. They also mention the importance of precision in advertising and the use of technology, such as AI, to reach different segments and effectively price products. The speaker believes their company is good at advertising and is confident in their ability to compete with others in the market.

The speaker discusses how Arity and Telematics have allowed the company to track 15% of the US population and make decisions about driver capability without needing to use devices or apps. They believe that competition in advertising will increase, but they feel confident in their capabilities compared to other carriers. The speaker also mentions that profitability in the auto industry is improving, leading to less rate activity in the system and varying levels of rate changes among different companies and regions.

The speaker discusses the company's positioning and ability to increase growth investments in a competitive marketplace. They also mention the process of selling a benefit and the decision to work with other buyers, which has caused a delay but is expected to result in a better outcome for shareholders and the business.

The speaker is discussing the potential for transactions to be announced this year in the Health and Benefits segment. They confirm that the divestiture of this segment is still intended. The next question is about the Homeowners segment and the speaker explains that they have a strong track record in this area, despite challenges such as severe convective storms in 2018. They also mention that they are currently in a "hard market" for homeowners, but their business model is well-equipped to handle this.

The speaker discusses the company's profit pool and growth potential, stating that they have made money in the past 10 years and have a strong business model. They also mention their focus on customer satisfaction and cross line sales, attributing their success to a combination of factors. They advise against focusing too much on quarterly results and mention a potential lawsuit involving the SEC.

The speaker discusses the company's advertising strategy and compares it to the previous cycle. They mention that they have become more sophisticated in their approach and are investing in new customer acquisition. The company is focusing on both upper and lower funnel advertising, with an increase in TV advertisements.

The company uses various methods to reach potential customers and increase brand recognition. They have invested in both upper and lower funnel advertising, with a focus on the latter. They also use agents and direct channels for lead generation. The company closely monitors their strategies and adjusts as needed to stay ahead of their competition. Auto loss cost trends have been slightly lower compared to previous years.

During the earnings call, the speaker, Tom Wilson, mentions that the company is now seeing frequency benefits outweighing higher severity, which is a positive trend. He asks about the sustainability of this trend, considering last quarter's favorable weather. Mario Rizzo responds by stating that the company aims for mid-90s combined ratios and uses levers such as rates, pure premium, and expenses to manage the auto business. He also clarifies that the adjusted numbers for severity trend are slightly positive at 1%, despite a negative trend of -0.8% in the supplement.

The speaker discusses the impact of frequency and severity on loss trends in the first half of the year. They mention that while frequency has been favorable, severity has been higher, especially in bodily injury. They also mention that weather and risk segmentation have also played a role in frequency trends. The speaker emphasizes that they are focused on maintaining a mid-90s combined ratio profitability and will continue to manage the system despite fluctuations in frequency. A question is then asked about growth, and the speaker mentions that COVID has affected their growth plans.

The speaker is discussing the potential for growth in Allstate's Personal Insurance Fund (PIF). They note that PIF growth is a better measure of market share than premiums, and that Allstate's goal is to have higher PIF growth than the overall growth in assets in the United States. They mention National General as an example of a company with good growth and profitability.

The speaker is confident that the company will see revenue growth above 5% due to modest increases in premiums. They believe there is great potential for growth in the Allstate brand, especially now that they have improved their direct business. They are optimistic about the potential for higher earnings and valuation. They are also confident in their position regarding a DOJ lawsuit. The speaker does not believe there were any one-time or unsustainable factors driving the improvement in the auto underlying loss ratio.

The speaker is unsure how the company determines what is sustainable or unsustainable in terms of frequency. They give an example of how weather can affect car accidents and question the precision of their methods. They mention that they price based on what it is, not on changes in frequency. The speaker then asks about the company's ad spend and if they are holding back in any states.

The speaker discusses the complexity of determining which states are profitable for their insurance company. They have a target combined ratio and about two-thirds of states are meeting this goal, with another 10% on track to reach it. They are investing in marketing and rate increases in California, but are still managing their risk appetite in New York and New Jersey. Their ultimate goal is to be able to write in every state.

The speaker, Tom Wilson, mentions the need for attractive returns and profitability in order to expand their company's appetite across geographies. He also acknowledges that not all states will have the same success in the business, but believes that the gap between current growth and potential is smaller than the gap between their valuation multiple. The next question is about the new issued app mix and how customer appetite differs across channels, and how this may impact margins due to higher upfront expenses in direct channels.

Tom Wilson and Mario Rizzo discuss Allstate's target customer base, which includes all risk levels and locations. They have differentiated pricing between agency and direct channels, but generally write in standard and preferred risk segments. However, the acquisition of National General has allowed them to enter the nonstandard auto market, which has been a profitable growth opportunity due to the ability to quickly adjust pricing and attract shoppers. Overall, Allstate is positioned to write across channels, brands, and risk segments through National General.

The speaker discusses how their company, Custom360, is expanding their product offerings and positioning themselves to write policies across the entire system. They also mention their plans to accelerate growth in the profit liability business and expand protection offerings through platforms like Protection Plans. They thank the listeners and end the conference.

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