ALLSTATE CORP Q3 FY2024 earnings call

Strategy Components - Increased personal Property-Liability market share and expanded protection provided to customers. ### Revenue and Profit - Total revenues $16.6B, up 14.7% YoY; net income $1.2B; adjusted net income $3.91 per share; ROE 26.1% over last 12 months. ### Property-Liability Business - Auto profit improvement plan restored margins; homeowners business has good returns and is growing; transformative growth initiatives for sustainable growth; proactive investing boosted income. ### Investment - Fixed income yield increased, portfolio book value up 14% since Q4 2021; net investment income $783M, 13.6% higher YoY. ### Protection Plans - Revenues up 23.1% YoY, acquired Kingfisher to enhance mobile device protection. ### EVB Sale - Finalized sale of Employer Voluntary Benefits business to StanCorp Financial, expected to close in H1 2025, with estimated $600M gain. ### Agent Compensation - Changed agency compensation structure to improve growth and agent productivity at lower distribution costs.

Total revenues were $16.6 billion, up 14.7% YoY. Property-Liability earned premiums were $13.7 billion, up 11.6% driven by higher average premiums. Underwriting income was $495 million, improved by $909 million YoY. Combined ratio was 96.4, with loss ratio 2.8 points higher YoY but underlying combined ratio 83.2, improved by 8.7 points. Net investment income was $783 million, 13.6% higher YoY. Protection Plans revenues were $512 million, up 23.1% YoY. Health and benefits premiums and contract charges increased 5.2% to $24 million, with individual and group health up 8.1% and 20.2% respectively, but EVB business saw a modest decrease.

Retention - Expect lower rate increases to translate into higher retention; every point of retention worth ~350,000 policies enforced annually. ### New Business - Expect to continue increasing volume in direct channel which now represents 31% of total auto new business; every 5% increase in new issued applications above current run rate increases policies in force by ~250,000. ### Capital Use - Prioritize organic growth; view growth opportunities as first and best place to maximize shareholder value; share repurchases considered but growth opportunities currently outweigh value; potential for acquisitions and equity allocation adjustments.

Competitive Environment - Risk of increased price competition and advertising from competitors impacting market share. ### Pricing Impact on Retention - Large rate increases in certain states have negatively impacted customer retention, though lower rate increases expected to help. ### Catastrophe Losses - Higher catastrophe losses in homeowners insurance, though favorable development in other lines offset some impact. ### Regulatory Approvals - Need for regulatory approvals for the sale of the Employer Voluntary Benefits business, which could impact the timeline and financial outcomes.

Q: Hi, good morning. So first, just had a question around your confidence and outlook for PIF growth in the auto business, and what you're seeing in terms of competitor behavior, both on prices and on advertising. Seems like most competitors are - shifting to a growth mode now that margins have recovered. But are you confident that we can see PIF growth turn positive over the next few quarters?

A: Jimmy, let me make a couple of comments and Mario can jump in. First, we don't give growth projections, so we're not going to comment on that. We obviously believe we can grow market share, which is what our whole strategy is about. When you look at the competitive environment, you continue to see progressive advertising aggressively GEICO has gotten back into the market, but perhaps not as aggressively as they have in the past. And State Farm continues to try to grow, but as you know, they have an underwriting profitability challenge that they're I suspect they will take out, but we'll only see. But I would also not just focus on those big players, but there's a whole bunch of other players that are more moderate size or smaller that either don't have the firepower in advertising to compete, or don't have the pricing sophistication. Mario, do you want to make comments about how you're feeling about growth?

Q: Good morning, everyone. I'd like to, for my first question, focus on Slide 8, which is your retention slide. And in your comments you mentioned changing of agent compensation. If I'm not mistaken, some time ago you lowered agent compensation on renewals. And I'm wondering if that's having any spillover effect on retention. Obviously, the new shoe daps are doing strong, so your competitive position looks good. Also, as part of transformative growth, I think you've been streamlining some claims costs, some claims functions. Curious if you're seeing any impact of that on retention?

A: Thanks, Greg. This is Mario. Let me take your questions in order. First, on retention, when we isolate and look at, we look at retention a whole bunch of different ways. When we look at retention in the agency channel, it's actually up year-over-year. So what's happening and what you see on Page 8 is predominantly a function of price increases, which I think have the biggest impact on retention. Just from an agent compensation perspective as you mentioned, we kind of changed and have been transforming the model for them to really align with what both we want to do strategically, but also the value that customers see from agent. So we've incented agents to drive more new business, deepen relationships with customers and we see that with kind of all-time high levels of bundling. And agents, we're really pleased with the performance of our agency force and how productive they are and they're going to be a key part of our growth plan going forward. But that's really not the driver of retention that you see on the page. In terms of the claims organization, that's an area where even though the -- when you look at the ratio, it's pretty flat, that's a function of just having higher average premium. We're investing in claims. We actually have been adding staff so that we can continue to build on our claims capabilities, pay what we owe, drive a higher level of customer satisfaction. And again, we look at those as growth levers every bit as much as profit and severity management levers, but nothing really from a claim standpoint driving the retention numbers. And as I said, as a matter of fact, we're adding resources and dollars in claims to help both support the growth that we want to achieve going forward, but enhance customer satisfaction and effectively continue to manage severity levels.