The paragraph is a transcript from Allstate's first quarter 2025 earnings investor call. It begins with the operator introducing the call and mentioning that it is in a listen-only mode initially, followed by a question-and-answer session after the prepared remarks. Allister Gobin, the Head of Investor Relations, then welcomes participants and outlines the agenda, mentioning the release of financial documents and the focus of the call on Allstate's strategy and shareholder value. Tom Wilson, presumably a key management figure, provides an overview of the company's results and transformative growth strategy during his segment, with other team members covering specific areas such as Property-Liability, investments, and Protection Services. The call includes discussions of non-GAAP measures and forward-looking statements, with a reference to Allstate's strategic goals of increasing market share in personal Property-Liability and expanding customer protection.

In the first quarter, Allstate reported strong financial performance with $16.5 billion in revenues, marking a 7.8% increase compared to the previous year. The company achieved a net income of $566 million and an adjusted net income of $949 million, translating to $3.53 per diluted share, with a return on equity of 23.7% over the past 12 months. Allstate's strategy focuses on enhancing shareholder value through attractive capital returns, expanding business segments, and maintaining a diversified investment portfolio. The company also emphasizes proactive risk management, including reinsurance and capital transactions. A recent sale of the Employer Voluntary Benefits business generated $2 billion and was highlighted, along with an increased quarterly dividend and a $1.5 billion share repurchase program. Additionally, efforts are underway to grow market share in the Property-Liability business by enhancing customer value and reducing costs.

The paragraph discusses Allstate's improvements in expense management, product availability, and growth strategies. By reducing costs through outsourcing elimination, digitization, and real estate optimization, Allstate has improved its expense ratio by 6.7%. New insurance products are available in multiple states, and customer access has expanded, leading to increased business compared to early 2024. Key strategies include boosting Allstate agent productivity, expanding direct sales, and enhancing independent agent distribution, with significant growth in personalized new business observed. The S.A.V.E. program aims to improve customer retention by enhancing customer interactions, contributing to market share growth.

The paragraph discusses Allstate's recent financial performance and strategic focus. It notes signs of growth in property liability policies, following auto price hikes and reduced new business activities in 2022 and 2023. Allstate aims to increase market share in Property-Liability. Mario Rizzo reports a $360 million underwriting income for the first quarter, despite a high combined ratio of 97.4 due to $3.3 billion in catastrophe losses, which were partially offset by reinsurance recoveries, higher premiums, and favorable loss trends. The auto sector showed a strong combined ratio of 91.3, while homeowners remained profitable. The paragraph concludes with a mention of Allstate's response to severe weather events in the first quarter.

The paragraph discusses a chart and table analyzing catastrophe losses and insurance policies. It highlights that 2025 was an outlier year for catastrophe losses due to California wildfires, with reinsurance recoveries totaling $1.1 billion. Despite quarterly volatility in the homeowners' insurance sector, it remains a growth opportunity due to effective risk and return management. The paragraph also notes that auto insurance represents two-thirds of policies, while homeowners' insurance, making up 20% of the total, saw growth, contrasting with a slight decline in auto policies. The discussion on Slide 6 addresses expanded access and its impact on growth.

The paragraph discusses the growth and development strategies in the Property-Liability sector, highlighting a 0.1% growth in policies for the quarter. There is an emphasis on expanding distribution across exclusive agents, direct channels, and independent agents to drive transformative growth. Auto new business applications increased by 31.2%, primarily through the direct channel, although an overall slight decline in auto policies in force was noted due to lower retention. Efforts are underway to enhance retention through increased value and improved customer interactions. Homeowners' new business grew by 10%, with exclusive agents bundling at high rates and progress being made in the direct channel. The section concludes with confidence in continued market share growth through expanded distribution and enhanced customer value. The next part of the document shifts focus to investments, where John Dugenske discusses a well-diversified portfolio designed for resilience and aligned with enterprise risk and return objectives.

The paragraph discusses the active management strategy of a portfolio, with 85% in publicly traded securities, allowing for dynamic risk management and opportunity seizing. Using a proprietary asset allocation process, the strategy aims to outperform passive approaches and build resilience. An example from late 2021 is provided: as auto insurance margins declined due to inflation and equity valuations seemed high, the portfolio's public equity exposure was reduced. Fixed income duration was decreased to mitigate inflation impacts, and later extended to capture higher yields. The portfolio is described as well-positioned against market uncertainties, with a significant portion in income-generating assets, delivering results consistent with top managers. The proactive approach enhances shareholder value, and Jess Merten is introduced to discuss growth platforms for Allstate.

The paragraph discusses Allstate's strategic partnerships and business growth in its Protection Services segment, notably through Allstate Protection Plans, acquired as SquareTrade in 2017. This segment offers product warranties and services like identity protection and roadside assistance, serving 162 million customers across 18 countries. Key partnerships with major retailers and five Fortune 40 companies have expanded Allstate's customer base. The Protection Plans business generated $162 million in adjusted net income over the past year, showcasing significant growth since the acquisition. Allstate's focus remains on creating shareholder value and leveraging strong underwriting capabilities for continued success and transformation in the Property-Liability sector.

The article focuses on the company's strategy of balanced investment in risk and return, aiming to build for the future through expanded protection offerings and excellent capital management to ensure long-term shareholder value. The company is confident in its strategy to deliver value to shareholders and customers, as evidenced by a strong first-quarter performance. In a subsequent Q&A session, JP Morgan's Jimmy Bhullar inquires about competition in personal auto insurance. Tom Wilson explains that although auto insurance rate increases have slowed down over the years, the industry maintains good profitability without aggressive rate cuts for growth. Mario Rizzo agrees with this assessment.

The paragraph discusses the positive trends in the market, highlighting improved margins due to favorable frequency and moderated physical damage severities. The speaker expresses confidence in their ability to grow, emphasizing a rational pricing market. Tom Wilson mentions writing 2.8 million new Property-Liability business pieces last quarter. They are not raising prices as aggressively, which should improve persistency. Increased marketing spend is expected to boost new business volume. Wilson notes the importance of acquiring new business and retaining existing customers, asserting that they have sustained significant new business levels due to broad distribution, competitive pricing, and advertising. They feel optimistic about new business and acknowledge that retention typically follows price trends.

The paragraph discusses the impact of rate changes on financial performance and customer retention, noting that effects are delayed. Retention has decreased year-over-year but has stabilized recently, partly due to reduced rate activities. To improve retention and customer interactions, the S.A.V.E. program is being implemented, targeting 25 million customers. This program aims to enhance affordability by ensuring customers have suitable coverage and discounts, and also focuses on improving customer experience through proactive engagement by employees and agency owners.

The paragraph is a conversation between Tom Wilson and Rob Cox about new issued applications in the current quarter and the potential for maintaining or increasing those levels. Tom Wilson explains that the current levels of new business are consistent with the end of last year and are sustainable without capacity constraints. He emphasizes their strategy to grow through advertising, rolling out affordable, simple, connected products, and expanding into more states. While they don't expect a continuous 27% growth rate, they do anticipate scalable growth through their distribution system. Rob Cox then inquires about potential unusual factors affecting the auto underlying loss ratio, such as tariffs.

In the paragraph, Tom Wilson and Mario Rizzo discuss the performance of their auto insurance segment. Wilson notes that while there was an increase in the underlying loss ratio in the first quarter compared to the fourth, the overall performance is strong, with returns on capital exceeding targets. He emphasizes that quarterly comparisons can be misleading due to factors like weather variations affecting frequency and severity of claims. Rizzo adds that the combined ratio is performing well across most states, and they are satisfied with their pricing and rate adequacy. The trend in profitability remains stable, benefiting from favorable conditions in frequency and severity and stabilized loss costs.

The paragraph discusses the company's focus on improving its expense ratio and overall profitability. There was a drop in pure premium year-over-year, contributing to improved auto insurance profitability and encouraging market expansion. Gregory Peters from Raymond James inquires about the company's goals for reducing its adjusted expense ratio over the next five years and mentions a sequential decline in advertising expenses. Tom Wilson responds by stating that while no specific target has been set, the company aims to continuously lower expenses both as a percentage and in absolute terms. He notes that they have made significant cuts and plan to continue efforts to further reduce expenses.

The paragraph discusses the company's excitement about their new technology platform and the potential to digitize and streamline processes for increased efficiency and cost savings for customers. It touches on their advertising strategy, emphasizing adaptability based on market opportunities and product launches. The company tested growth strategies in the fourth quarter and plans to continue spending on advertising if it proves economically viable, focusing on competitive pricing and margin confidence, especially in the auto and home sectors. Gregory Peters raises questions about the impact of a potential subrogation event related to wildfires and reinsurance updates, to which Tom Wilson responds, acknowledging their efforts in presentation slides.

In the paragraph, Mario Rizzo and Jess Merten discuss their organization's handling of California wildfire-related losses and reinsurance strategies. Mario explains that the gross losses reported do not account for reinsurance, but their previous disclosures included $1.1 billion in reinsurance recoveries, largely related to wildfires. He mentions the potential for subrogation recoveries from at-fault parties, especially with a new $15 billion California wildfire fund, though these are not yet reflected in their numbers. He highlights that any recoveries would benefit reinsurers and ultimately their customers. Jess Merten adds that they have expanded their reinsurance program, increasing their reinsurance purchase limit by $1.5 billion (21%) to ensure protection for single events up to $9.5 billion, from under $8 billion previously. This adjustment reflects changes in their risk profile and was based on their risk-return framework and economic capital model.

The paragraph discusses the company's strategy of splitting investments between traditional markets and catastrophe bonds or the ILS market, resulting in a reduced cost on a risk-adjusted basis, which helps protect against single-event risks. They plan to announce the rest of the program next quarter, including Florida and National General Lender reinsurance. The company has increased its insurance coverage limit due to growth in the homeowners' business, which is experiencing mid-teens revenue growth, despite not adding to the U.S. housing stock. Tom Wilson highlights this expansion as a positive but underappreciated aspect of their business, necessitating more reinsurance. Bob Huang from Morgan Stanley questions the company's capital position given their recent $100 million stock buyback amid market volatility.

In the paragraph, Tom Wilson expresses confidence in the current capital allocation and return strategy, emphasizing that the company is well-capitalized with a strong risk profile and good returns. They prioritize growth investments for higher returns on equity and return excess capital to investors when possible. The current $1.5 billion share repurchase program is underway with $100 million already repurchased. Tom and Jess Merten indicate no immediate changes to this strategy, preferring a steady approach without specific guidance on buyback timing. Bob Huang confirms his understanding that the company is not rushing buybacks in April.

The paragraph discusses the company's financial activities and market presence, particularly focusing on their performance in the first quarter, where they managed $100 million in about a month. Bob Huang asks about the potential impact on competitors, particularly in California's homeowner market faced with challenges. Tom Wilson acknowledges that competitors, especially State Farm, are struggling, impacting their auto business. He notes that this situation could alter the competitive environment and mentions past experiences in California and Florida, suggesting that while it affects short-term dynamics, it doesn't necessarily change their interest in expanding homeowners insurance in California. Despite challenges, they have recovered financially without regaining rates.

The paragraph discusses the challenges and strategies related to auto insurance in states like California, New York, and New Jersey. Mario Rizzo mentions that the company has made progress in California, achieving an underwriting profit and obtaining rate approval for increases, which will be implemented soon. The company aims to stay ahead of loss costs and is open to writing new auto business in California, positioning itself for profit and growth. Elyse Greenspan from Wells Fargo asks about the company's policy growth in March, specifically regarding any effects from potential pre-tariff car purchases, but Tom Wilson responds that it's difficult to determine such specifics from the available data.

The paragraph discusses the impact of pandemic-related inflation and potential tariffs on car prices, both new and used. Elyse Greenspan questions whether companies will absorb increased costs in their margins or raise prices. Tom Wilson explains that they aim to provide competitive pricing while ensuring shareholder returns, despite uncertainties about the exact impact of tariffs. He notes the previous rapid increase in used car prices due to the pandemic as a reference, acknowledging expected costs but lacks precise estimates. Ultimately, they plan to manage increased costs while maintaining business objectives.

The paragraph discusses the anticipated increase in costs for auto and home repairs, with auto-related expenses expected to rise more significantly. The company is focusing more on auto insurance and is hopeful that recent tort reforms, like those in Florida and Georgia, will help offset rising costs from minor accident claims. The company is willing to raise prices if necessary due to thin profit margins. In the Protection Services sector, some cost increases are expected, but these have been accounted for in pricing strategies. Despite these challenges, the company doesn't foresee significant changes in growth for Property-Liability services, though consumer demand influenced by inflation could affect growth in the Protection Services business.

The paragraph details a conversation during a conference call about international growth, tariff management, and portfolio balance. Elyse Greenspan thanks the speaker, and Alex Scott from Barclays asks a question about retention rates and the S.A.V.E. program, expressing concerns over worsening retention, particularly in package business and auto market competition. Tom Wilson responds, explaining that while they don't disclose specific retention numbers for Allstate's auto insurance, the main focus should be on overall growth in policies in force (PIF), which encompasses both new business and retention.

The paragraph discusses a company's focus on growing its non-standard market segment, acknowledging lower customer retention as a consequence. The company is concerned about customer defection due to price increases and negative experiences. Mario Rizzo outlines their strategy to address these issues by targeting the triggers of customer defection through various programs, including one called S.A.V.E., to improve retention and ultimately grow the business.

The paragraph discusses Allstate's strategies to improve affordability and customer experience, aiming to reduce customer defections. The focus is on offering the best coverage and pricing, enhancing customer interactions, and promoting bundling to increase relationship stickiness and retention. They note that high levels of bundling for new business and stability from less active rate adjustments contribute to these goals. The speaker, Alex Scott, acknowledges these efforts and asks about Allstate's financial position regarding premium to equity leverage, noting that it's higher than before the 2021 inflation period. He inquires about how Allstate assesses its capital capacity to handle potential adverse outcomes, given the uncertainty around tariffs and inflation.

Mario Rizzo discusses the company's robust capital position, emphasizing its capability to withstand high average premium increases due to inflation and its readiness to grow market share. He mentions having significant capital reserves both at the statutory and holding company levels, amounting to about $3 billion. Rizzo critiques the use of premium-to-surplus ratios as crude, advocating for more sophisticated capital assessments. He highlights the company's preparedness through running various scenarios, such as stagflation, and mentions their economic capital model comprises a base layer with additional stress capital to handle market volatility effectively. Overall, they feel confident in their capital strength and strategy for future growth.

The article discusses Allstate's strong capital position and its strategy for managing and growing its business. The company has rebuilt its financial cushion, allowing it to handle market uncertainties. Tom Wilson highlights the link between higher prices, loss costs, reserves, investments, and investment income, noting a growth opportunity in investment income. In a Q&A session, Mike Zaremski from BMO questions why Allstate doesn't trade off some return on equity for sustainable growth, given its high expected ROE. Tom Wilson responds by asserting that Allstate can achieve both profitability and growth, citing their historically better-than-average combined ratio in auto insurance compared to the industry.

The paragraph discusses a company's efforts to grow and improve its valuation multiples by leveraging economic rents and maintaining competitiveness in the market. The company believes that growth is key to enhancing its valuation, noting its success in the homeowners and auto insurance sectors. Despite current lower valuation multiples compared to competitors, the company remains optimistic about its business prospects. During a Q&A session, an analyst, Joshua Shanker, inquires about the company's advertising spend strategy, noting that it spent less in the first quarter compared to the fourth. The company representative, Tom Wilson, clarifies that their ad spend has not peaked and highlights that their advertising strategy is ongoing, although he cannot speak for competitors.

The paragraph discusses the company's strategy related to its advertising and business growth, particularly in the insurance sector. It highlights that the company tends to write more new business in the first quarter, similar to its competitors like GEICO and Progressive. The focus is on ensuring advertising leads to a positive return on equity (ROE), and the aim is to increase market share and expand beyond auto insurance into areas like renters insurance, even if the revenue impact is smaller. The company has a significant presence in the U.S. with hundreds of millions in policies and aims to grow in both Property-Liability and other protection services. The CEO, Tom Wilson, concludes by emphasizing the brand's capacity and future engagement plans.

The program has concluded, and you are free to disconnect. Good day.

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