ALLSTATE CORP Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Strategy: Balanced priorities include generating attractive returns on capital, growing policies in Property-Liability and Protection Services, diversified investments, and proactive risk management.
• Transformative Growth in Property-Liability: Five components to increase market share, including lowering costs, improved products (auto in 36 states, homeowners in 6 states), expanded distribution across exclusive agent, direct, and independent channels, and the S.A.V.E. program to improve customer interactions.
• Catastrophe Results: Q1 2025 had high gross catastrophe losses due to California wildfires, but reinsurance recoveries of $1.1 billion helped mitigate impacts.
• Investment Management: Proactive approach to create value, with a resilient portfolio designed to support enterprise risk and return objectives across market conditions.
• Protection Services Growth: Strong growth in Protection Plans business with broad distribution partnerships, serving 162 million customers in 18 countries.

Segment Performance

• Property-Liability: Generated $360 million in underwriting income in Q1 2025. Combined ratio was 97.4, impacted by $3.3 billion in gross catastrophe losses. Auto combined ratio was 91.3, homeowners underlying combined ratio in low-60s. Policies in force: Auto down 0.4% year-over-year, homeowners up 2.5%, total up 0.1%. Auto new business applications up 31.2% year-over-year, homeowners new business up 10%.
• Investments: Portfolio designed for resiliency, 85% in public securities, proactive management to create value across varying market conditions.
• Protection Services: Closed sale of Employer Voluntary Benefits business for $2 billion on April 1. Protection Plans business has grown customer base over four times, serves 162 million customers in 18 countries, generated $162 million in adjusted net income in past 12 months.

Guidance

• Continued focus on growing policies in Property-Liability and Protection Services to increase earnings and improve valuation multiples.
• Maintain quarterly dividend of $1 per share and $1.5 billion share repurchase program.
• Confident transformative growth strategy will lead to Property-Liability market share growth through expanded distribution, differentiated products, and increased customer value.

Risks

• Catastrophe losses volatility, which can impact earnings.
• Potential impact of tariffs on auto insurance costs, affecting margins.
• Competitive dynamics that could affect retention and market share growth.

Question and Answer

Q: Views on competition in personal auto, pricing rationality?

A: Tom Wilson and Mario Rizzo stated the industry is operating with good profitability, competitive market is rational, and focus is on transformative growth to drive market share.

Q: New business applications sustainability, retention?

A: Tom Wilson and Mario Rizzo mentioned new business volume sustained by broad distribution, competitive pricing, and advertising; retention improved by the S.A.V.E. program to enhance customer interactions.

Q: Expense ratio target, advertising spend?

A: Tom Wilson said no specific target for expenses, expects them to continue decreasing, and advertising spend depends on growth opportunities and ROE analysis.

Q: Catastrophe losses subrogation, reinsurance program?

A: Mario Rizzo noted subrogation not reflected in numbers, and reinsurance limits increased by $1.5 billion to align with changed risk profile.

Q: Capital position, allocation?

A: Tom Wilson and Jess Merten stated strong capital position, comfortable with repurchase program, and focus on growth and returning value to shareholders.

Q: Tariff impact on auto margins?

A: Tom Wilson said Allstate will manage through tariffs, focusing on competitive pricing, growth, and returns while factoring in potential cost increases.

Q: Retention, S.A.V.E. program?

A: Mario Rizzo discussed focus on reducing defections through customer experience improvement, affordability, and bundling, with the S.A.V.E. program targeting these areas.

Q: Ad spend cadence?

A: Tom Wilson said ad spend continues as long as it drives positive ROE, focused on market share growth and expanding protection offerings.