Allstate Q4 2024 Earnings Report

Allstate EPS Results

• Actual EPS: $7.67
• Consensus EPS: $5.40
• Beat/Miss: Beat by +$2.27
• One Year Ago EPS: N/A

Allstate Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $16.23 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Allstate Announcement Details

• Quarter: Q4 2024
• Date: 2/5/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 9:00AM ET

Allstate (NYSE:ALL), together with its subsidiaries, provides property and casualty, and other insurance products in the United States and Canada. It operates in five segments: Allstate Protection; Protection Services; Allstate Health and Benefits; Run-off Property-Liability; and Corporate and Other segments. The Allstate Protection segment offers private passenger auto and homeowners insurance; other personal lines products; and commercial lines products through agents, contact centers, and online. The Protection Services segment provides consumer product protection; protection and insurance products, including vehicle service contracts, guaranteed asset protection, road hazard tire and wheel, and paintless dent repair protection; and roadside assistance, device and mobile data collection services, and analytic solutions using automotive telematics information, as well as identity theft protection and remediation services. This segment also offers its products under various brands, including Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside, Arity, Avail, and Allstate Identity Protection. The Allstate Health and Benefits segment provides life, accident, critical illness, short-term disability, and other health insurance products; stop-loss and fully insured group health products to employers; and short-term medical and medicare supplement insurance to individuals. The Run-off Property-Liability segment offers property and casualty insurance coverage that primarily relates to policies written during the 1960s through the mid-1980s. The Corporate and Other segment provides debt services, as well as non-insurance operations. It sells its products through agents, independent agents, call and contact centers, retailers, direct to consumer, wholesale partners, and affinity groups, as well as through online and mobile applications. The Allstate Corporation was founded in 1931 and is headquartered in Northbrook, Illinois.

Allstate Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to Allstate's Third Quarter Earnings Investor Call. At this time, all participants are in a listen only mode. After prepared remarks, there will be a question and answer session. As a reminder, today's program is being recorded.

[Operator]

And now I'd like to introduce your host for today's program, Alastair Gobin, Head of Investor Relations. Please go ahead, sir.

[Allister Gobin, Head of Investor Realtions at The Allstate Corporation]

Thank you, Jonathan. Good morning. Welcome to Allstate's fourth quarter twenty twenty four earnings conference call. Yesterday, following the close of the market, we issued our news release and investor supplement and posted related material on our website at allstatesinvestors.com. Our management team will provide perspective on our strategy and an update on results.

[Allister Gobin, Head of Investor Realtions at The Allstate Corporation]

After prepared remarks, we will have a question and answer session. As noted on the first slide of the presentation, our discussion will contain non GAAP measures for which there are reconciliations in the news release and investor supplement and forward looking statements about Allstate's operations. Allstate's results may differ materially from these statements, so please refer to our 10 K for 2023 and other public documents for information on potential risks. Our 10 K through 2024 will be published later this month. And now, I'll turn it over to Tom.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Good morning. We appreciate you investing time in Allstate. I'll start with an overview and then Mario and Jess will go through the operating results. Let's begin on Slide two. So as you know, Allstate's strategy has two components, increased personal property liability market share and then expand protection provided to customers, which is shown in the two ovals on the left hand side.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

On the right hand, you can see Allstate's strong performance in 2024 and the topics we're going to cover this morning. Total revenues were $16,500,000,000 in the fourth quarter, up 11.3% compared to the prior year quarter. Allstate generated net income of $1,900,000,000 in the fourth quarter and $4,600,000,000 for the full year. Adjusted net income return on equity was 26.8 percent. Let me just repeat that 26.8% over the last twelve months.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Successful risk and return management resulted in excellent underwriting and investment results. Transformative growth has strengthened our competitive position. We'll spend a few minutes on that today. The sale of our group health and employee voluntary benefits to companies with greater strategic alignment will generate $3,250,000,000 of expected proceeds representing attractive valuation multiples. Let's move on to Slide three, that shows the operational execution produced excellent financial results in the quarter and for the full year.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Revenues increased to $64,100,000,000 in 2024. Property liability earned premiums were up 10.6% in the quarter and 11.2% for the full year. Net investment income was up 37.9% above the prior year and up almost 25% for the full year. Net income was $1,900,000,000 in the quarter and $4,600,000,000 for the full year. Adjusted net income, which you know we make a few changes on amortization and intangibles and things which Jess can walk you through if you want, was $7.67 per share for the fourth quarter.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

On the lower right, you can see the adjusted net income return on equity was 26.8%. So 2024 was an excellent year for Allstate both financially and strategically. Let's move on and talk strategically about transformative growth on Slide four. We launched this project in December of twenty nineteen. So five years have gone by, so we thought it'd be a good time to give you a five year look as to where we are.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

And as you know, there's five components of the plan to increase market share and property liability,

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

two

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

of which we'll cover today. Improving customer value is requires us to lower our costs and provide differentiated products. As you can see on the right hand side, the adjusted expense ratio, which excludes advertising costs, has improved almost five points since 2019 by eliminating work outsourcing and digitizing activity, using less real estate and lowering distribution expenses. Lower costs enable us to offer more competitive prices without impacting margins. Substantial progress has also been made in introducing products, new products.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So affordable, simple connected auto insurance is now in 31 states and the new homeowners product is in four states. Differentiated custom three sixty middle market standard and preferred auto and homeowners products have also been introduced to the independent agent channel in 30 states. One of the most significant changes is the expansion of customer access to improve growth. So this effort has three components, improve Allstate agent productivity, expand direct sales and increase independent agent distribution, all of which have been successful. Allstate agency productivity has increased.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Enhancement to direct capabilities, lower pricing and increased advertising is attracting more self directed customers. The National General acquisition significantly expanded our presence and capabilities in the independent agent channel. As you can see on the right, in 2019, more than three out of four new business policies came from the Allstate agents. Last year, new business was 9,700,000.0 items, 76% higher than 2019 with significant contributions from each channel. Policies in force have increased from 30 to 37,300,000 despite the negative impact of post pandemic price increases.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Transformative growth has positioned us for personal profit liability market share growth, which you'll hear more about from Mario. So now let me move on to Mario on

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

property liability.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Thanks, Tom. Let's turn to Slide five. At the top of the table, you can see fourth quarter property liability underwriting income of $1,800,000 improved by $5.00 $7,000,000 compared to the prior year quarter. Auto insurance generated $6.00 $3,000,000 of underwriting income, an improvement of $510,000,000 compared to the prior year quarter and reflecting the successful execution of the profit improvement plan.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Homeowners insurance underwriting income was also strong at 1,100,000,000 This was $99,000,000 lower than the prior year quarter due to increased catastrophe losses. On the bottom half of the table, you see the strong margins delivered during the quarter with the total property liability recorded combined ratio of 86.9, reflecting a 2.6 improvement compared to the prior year. Auto and homeowner combined ratios in the quarter were both better than the targets for those businesses of mid-90s for auto and low 90s for homeowners. Now we'll expand on the auto insurance margins on Slide six, where you can see how successful execution of the auto profit improvement plan has restored profitability back to target levels. The fourth quarter auto insurance recorded combined ratio of 93.5 was 5.4 points below prior year quarter as average earned premium outpaced loss costs.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

As a reminder, we regularly review claims severity expectations throughout the year. If the expected severity for the current year changes, we record the year to date impact in the current quarter, even though a portion of that impact is attributable to previous quarters. For 2022 through 2024, the bars in the graph reflect the updated average severity estimates as of the end of each of those years to remove the volatility related to intra year severity adjustments. The table at the bottom of the graph shows actual reported combined ratios. In the fourth quarter of twenty twenty four, the full year claims severity estimate went down, so there was a benefit from prior quarters included in the fourth quarter's reported results.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

This benefit was worth 1.5 points in the fourth quarter with the adjusted quarterly combined ratio of 95 shown in the furthest bar to the right. Let's turn to Slide seven, where you can see that homeowners insurance produced attractive returns and group policies in force in 2024. With an industry leading product, advanced pricing, underwriting and analytics, broad distribution capabilities and a comprehensive reinsurance program, we will continue to win in the homeowners business. On the left, you can see some of the key factors that contributed to strong results, including increased written premium of 15.3% in the fourth quarter compared to prior year, reflecting higher average gross written premium per policy and policy in force growth of 2.4%. For the full year 2024, the homeowners insurance business recorded a combined ratio of 90.1 in line with our low 90s target, while generating total underwriting profit of $1,300,000,000 The combined ratio for 2024 improved by 16.7 points, primarily driven by lower catastrophe losses and strong underlying loss performance.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

The chart on the right shows Allstate's strong track record of profitability in homeowners insurance. Allstate produced a recorded combined ratio of 92 over the past ten years, which compares favorably to the industry, which experienced an underwriting loss and a combined ratio of 103 over that same time period. Now let's go to a homeowner pertinent topic on Slide eight and discuss the California wildfires. So Allstate responded quickly and empathetically to help customers and communities after the tragic wildfires in Southern California. We deployed mobile claim centers and over 900 team members to assist customers.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Helping our customers recover from the fires is our principal priority. The financial impact of the wildfires reflects the comprehensive risk and return approach we've taken to managing the homeowners insurance business. Allstate made the decision to reduce California exposure beginning in 02/2007. Our homeowners' market share has been reduced by over 50% since that time, as you can see on the chart on the left. While it is early and we have not been able to adjust many claims, current gross losses are estimated at $2,000,000,000 which includes loss adjustment expenses and an estimated California Fair Plan assessment.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Reinsurance recoveries of $900,000,000 net of reinstatement premiums would reduce the net loss to $1,100,000,000 which will be reflected in first quarter twenty twenty five earnings. Each additional $100,000,000 in gross losses above our current estimate would result in $10,000,000 of net losses since we are above the reinsurance attachment point of $1,000,000,000 We will continue to monitor the development of this event and provide any updates with our January catastrophe release, which we'll make on February 20. Looking forward, let's discuss policy and force trends in the property liability business on Slide nine. The chart to the left shows the composition of property liabilities 37,500,000 policies in force. Auto is the largest at $24,900,000 and homeowners represents approximately 20% of policies in force.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

As you can see on the right side of the page, auto insurance policies enforced declined by 1.4%. A decline in customer retention, particularly in states with large recent rate increases, more than offset a nearly 30% increase in new business applications in the quarter. Auto policies enforced did increase in 31 states, representing approximately 60% of countrywide written premium on a year over year basis. In the middle column on the right, you can see that homeowners insurance policies in force increased by 173,000 or 2.4% driven by strong retention and a 20.5% increase in new business. We view homeowners as a growth opportunity across all distribution channels.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Our objective in 2025 is to grow property liability policies in force by both improving customer retention and continuing strong new business sales. We are proactively contacting customers to lower the cost of protection to increase retention. Completing the rollout of affordable, simple and connected auto and homeowners products will also enable growth. In addition to improving the customer experience, these products contain our most sophisticated rating plans and telematics offerings, which will deliver profitable growth and position us to compete effectively in a market where more carriers are looking to grow. We will also continue to invest in marketing and leverage broad distribution to grow property liability market share.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

To provide transparency to investors on our progress on growth, monthly disclosure of policies in force will be provided beginning with our next monthly release in a couple of weeks. Now I'll turn it over to Chet.

[Jess Merten, EVP and CFO at The Allstate Corporation]

All right. Thank you, Mario. Slide 10 provides insights on investment performance and asset allocation. By taking a proactive approach to portfolio management, Allstate optimizes return per unit of risk across the enterprise. This disciplined approach includes comprehensive monitoring of economic conditions, market opportunities, interest rates and credit spreads.

[Jess Merten, EVP and CFO at The Allstate Corporation]

The chart on the left shows a quarterly trend of net investment income in our fixed income earned yield. Market based income of $727,000,000 which is shown in blue was $123,000,000 above the prior year quarter reflecting a higher fixed income yield and increased assets under management. Fixed income yields shown below the chart has steadily increased as we repositioned into higher yielding longer duration assets, increasing 40 basis points from 4% to 4.4% over the past year. Performance based income of $167,000,000 shown in black was $107,000,000 above the prior year quarter reflecting higher private equity and real estate investment results. As we've mentioned previously, our performance based portfolio is intended to provide long term value creation and volatility on these assets from quarter to quarter is expected.

[Jess Merten, EVP and CFO at The Allstate Corporation]

The pie chart on the right shows our asset allocation as of year end twenty twenty four. As you can see, our portfolio is largely comprised of high quality liquid interest bearing assets. Public equity holdings were increased by $2,400,000,000 in the fourth quarter and now comprised $3,300,000,000 or approximately 5% of the total portfolio. Fixed income duration was five point three years, which is in line with the prior year quarter and up from four point eight years at the end of last year. Let's turn to Slide 11 and discuss Protection Plans business, which is a key component of Protection Services and advances our strategy to expand protection while generating profitable growth.

[Jess Merten, EVP and CFO at The Allstate Corporation]

Protection Plans offers protection that repairs or replaces a wide range of consumer products, including electronics, computers and tablets, TVs, mobile phones, major appliances and furniture that are either damaged or broken. The products are distributed through strong retail relationships. Revenues of $528,000,000 in the fourth quarter grew 20.3% to prior year, driven by both domestic and international expansion. Profitable growth resulted in adjusted net income for the quarter of $37,000,000 which is consistent with the prior year quarter and an increase for the full year of $40,000,000 to $157,000,000 reflecting the benefit of higher revenues and claims cost improvements. The business has profitably grown to approximately 160,000,000 policies adding $60,000,000 since 2019 through broadened distribution and protection offerings as well as geographic expansion.

[Jess Merten, EVP and CFO at The Allstate Corporation]

Additionally, revenue has increased to nearly $2,000,000,000 in 2024, reflecting 23.9% in annual compounded growth since 2019, while generating more than $750,000,000 in adjusted net income from 2019 to 2024 as growth offsets expansion investments. We continue to invest in this thriving business as evidenced by the recent acquisition of Kingfisher, which enhances our mobile phone protection capabilities. I would like to transition to Slide 12 and discuss how the sale of the employer voluntary benefits and Group Health businesses create shareholder value. As a reminder, the decision to pursue the sale of Health and Benefits was based on the assumption that these businesses would have greater strategic value to other companies and selling them would maximize shareholder value. The transactions we've announced support this assumption.

[Jess Merten, EVP and CFO at The Allstate Corporation]

In August, we agreed to sell the employer voluntary benefits business to Stancorp Financial for $2,000,000,000 We expect to close that in the first half of twenty twenty five. Last week, we marked another major milestone with our agreement to sell the group health business to Nationwide for $1,250,000,000 which we expect to close sometime in 2025. Both of these transactions are economically and financially attractive for our shareholders. The combined proceeds of these sales are $3,250,000,000 with an expected book gain of approximately $1,000,000,000 Using trailing twelve months adjusted net income, the combined estimated impact of the transactions on adjusted net income return on equity was then a decrease of about 180 basis points due to lower income and higher equity resulting from the gains on sale. As a reminder, the Group Health business is part of National General, which we acquired in January of twenty twenty one for $4,000,000,000 The proceeds from this divestiture combined with about $1,000,000,000 in dividends that we received from National General statutory legal entities represents a return of more than half of the original purchase price, while the size of the National General Property Liability business has approximately doubled.

[Jess Merten, EVP and CFO at The Allstate Corporation]

Touching briefly on the results of health and benefits for the quarter, premium and contract charges for the segment increased 3.2% or $15,000,000 compared to the prior year quarter. Individual and group health business saw strong growth with premiums and contract charges up 8.49.8% respectively. This growth was partially offset by a modest decrease in employer voluntary benefits. Adjusted net income for the segment of $35,000,000 in the third quarter was $25,000,000 lower than the prior year quarter as increased benefit utilization across all three businesses impacted profitability. Underwriting and rate actions are being taken to quickly address benefit ratio trends and restore margins to historical levels.

[Jess Merten, EVP and CFO at The Allstate Corporation]

Options for the individual health business, which has adjusted net income of $30,000,000 for 2024, are being evaluated and the business will either be retained or combined with another company. Let's close on Slide 13 by reviewing Allstate's strategy to create shareholder value. As you can see on this page, we create value by delivering attractive financial returns, executing transformative growth to increase property liability market share, expanding protection offerings, completing the sales of employee voluntary benefits and group health businesses. So with that context, I'd like to open up the line for your questions.

[Operator]

Certainly. And our first question for today comes from the line of Rob Cox from Goldman Sachs. Your question please.

[Robert Cox, Vice President - Equity Research at Goldman Sachs]

Hi, good morning. Thanks for taking my question. So first question for you I had on advertising. I think you all had previous said that you were pretty comfortable with the 3Q twenty four level of advertising spend. I was hoping you could talk about the decision to ramp it up here in the fourth quarter.

[Robert Cox, Vice President - Equity Research at Goldman Sachs]

And I'm curious what your measures of ad spend efficiency are telling you in the current environment and how does that compare to history?

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So Rob, we're comfortable with our advertised spending. We adjusted obviously by quarter to point out and it also depends which markets we're after. Sometimes we do some heavy up tests in particular months to see what the sensitivity is for increased advertising, increased growth. I can assure you we have state of the art analytics on that. It's everything, every kind of lead, we bid on leads automatically.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

We just to make sure we were good last year, we had a number of outside people come in and look at our analytics and we appear to be at least contemporary, if not industry leading. Now some of these are people you're buying ads from, so they're not going to come tell you stupid. But when we look at it in total, we think we're really good at it. And we have all kinds of allowable acquisition cost measures that look at everything from quote to close ratios to lifetime value.

[Robert Cox, Vice President - Equity Research at Goldman Sachs]

Got it. Thank you. Secondly, I wanted to ask a question on the comment in the press release about expecting growth in total property liability PIF in 2025. We've been thinking that you could certainly grow PIF in both home and auto in 2025. Is there any reason why you would be hesitant to commit to growing in both of the segments?

[Robert Cox, Vice President - Equity Research at Goldman Sachs]

Or am I looking too deeply into that statement?

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Let me make a comment and then turn it over to Mario. So first, as you know, we don't give forward looking projections on PIF growth. So what we've said to help bring some clarity to it is we're just going to give you the numbers every month like we do with cats and you can decide what you want to do with that. We're obviously already growing at home and we have plans and we talked a little bit in the press release on where we're growing in auto. But in total, we're not growing in auto.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So Mario is working on that. Mario, you want

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

to talk about what you got going?

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Yes. Thanks for the question, Rob. Look, I'd say, look, the objective of transformative growth is to grow policies in force and gain market share in the property liability business. That's our goal. That's our objective.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Having said that, as Tom mentioned, we're currently growing the homeowners business. We think there's a real opportunity in the market and we're going to continue to lean in on that one. A, because we've got really strong capabilities. B, there's disruption in the market that we can take advantage of and we like the prospects of continuing to grow homeowners. On the auto side, we think despite the fact that policies are declining, we're really well positioned to lean into growth going forward for a variety of reasons.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

I think the first is you've seen the new business momentum build over the course of 2024 in part due to your first question, our advertising investment that we've increased throughout the year. But we've also been doing things like unwinding, underwriting restrictions and looking to accelerate growth across all distribution channels. We're going to continue to fully leverage our broad distribution capabilities alongside that marketing investment, continue to roll out the new affordable, simple and connected product. We are currently in 31 states. We'll continue to expand that over the course of this year.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

That has our most sophisticated pricing, our most contemporary telematics offerings included in that. We're going to continue to leverage capabilities on the Allstate side into National General. Jess talked about the growth that we've seen in National General. We're going to leverage middle market capabilities in Allstate to grow National General in a part of the market that they have less penetration in. We're also going to use National General's capabilities in the non standard auto space and leverage the Allstate brand to begin to accelerate growth in that space.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

So we've got a lot of things that we've both been doing and expect to do in 2025 to accelerate growth and really that was the genesis of the statement. Yes, one last point I should have brought up is retention. Yes, everything I talked about was on the new business side. We've seen the adverse impact of retention as we've been having to raise prices over the last couple of years to improve margins. The good news is auto margins are back where we would want them to be in the mid-90s range.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

The downside of that is retention has taken a hit. Some of that will come back as we are less active in taking prices going forward because of where our margins sit. But additionally and more importantly, we're going to proactively lean into reaching out to customers, helping them save money by making sure they're getting all the appropriate discounts. They've got the right coverage levels that meet their specific needs. And the objective there is to improve affordability, improve customer satisfaction and retention, and that will be additive to our growth trends.

[Robert Cox, Vice President - Equity Research at Goldman Sachs]

Thanks very much for the answers.

[Operator]

Thank you. And our next question comes from the line of Gregory Peters from Raymond James. Your question please.

[Gregory Peters, Managing Director - Equity Research at Raymond James Financial]

Good morning everyone. So for my first question, piggyback on the last answer there, Mario. And you said on Slide nine here for the auto policies, you said that you're proactively contacting existing customers. You mentioned that in your answer. Can you give us an updated perspective on how you think your pricing is on a competitive positioning basis versus your peer group?

[Gregory Peters, Managing Director - Equity Research at Raymond James Financial]

And as you shift gears and proactively contact existing customers, does that mean that there's going to be some sort of corresponding adjustment in agent compensation that's going to give more weighting to retention versus just flat out new sales?

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Greg, let me the pricing was complicated, so I'm going to let Mario do that one. But I would make one point on the retention part. I think having branded agents who work exclusively with you is the best channel to be able to do what we're talking about. So we've raised some people's prices 30%, forty %. We had to do it quickly because we were losing money.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Now we can go back in and help them get the absolute right coverage. That could be deductibles, it could be coverage limits, it could be using telematics, it could be paying differently. So there's lots of different ways we can help them do that. And that would be very difficult to do in through an independent agent channel. It would be harder to do with a direct channel because you don't have the skills and capabilities built in your call centers to necessarily do that.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Our agents, the Allstate agents are used to doing this all the time. They certainly did it when we were raising rates. But now Mario has a new program going on, which is SAVE program, which has specific goals and numbers. We are not planning on changing agent comp. Mario, do you want

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

to talk about competitive position?

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Yes. Thanks, Greg. On competitive position, I'd say a couple of things. First, when you look at the ramp up in new business over the course of the year, and we made a comment that we're growing in 31 states currently.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

I think that's indicative of having competitive prices and being able to fully leverage the marketing investment that we're making. It is a complicated question. It's hard to answer it on a national basis because obviously we compete market by market, state by state and we're constantly looking at our competitive position and making tweaks to the tiers within our pricing plan to adjust prices when we think it's appropriate to adjust prices. The good news is we've achieved target margins, so we're comfortable with where our rate level is currently. And we would expect that we would need to take less price going forward.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

But when you look at our new business trends, we feel good about competitive prices. We've taken a lot of cost out of the system over the past several years as Tom mentioned earlier, which is helpful. We're going to continue to pull that lever going forward. But we think we're priced competitively and we have the broad distribution capabilities to continue to grow in the auto space. The only other point I'd make on your second question about the proactively contacting customers and agency compensation, a meaningful portion of agent compensation currently relates to renewal.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

So they've got a strong economic vested interest in retaining as many customers as they possibly can. And as Tom mentioned, they've been doing that. This is a way through the save program, we're going to really scale it and do it much more broadly to help drive retention proactively versus just relying on less instability in the market from rate increases.

[Gregory Peters, Managing Director - Equity Research at Raymond James Financial]

Thanks for that information. Tom, as my follow-up question, Tom, in your opening comments, when you were going through the information on Slide two, you emphasized the ROE of 26.8%, which I believe is one of the best results I've seen from your company in recent history. Can you provide some view of how you are thinking about the ROE going forward and maybe what the board how the board is viewing it? I guess the reason why I'm asking is you've disposed of some underperforming assets over the last decade and it feels like there's just a natural migration that the ROE objectives for the organization can be moving up. Certainly, this result for last year sort of puts an exclamation point on that.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Good question, Greg, and with longitudinal perspective on it. So as you remember, I don't remember how many years ago it was, at one time we put out a target of 14% to 17%. But I would say that was a different company and a different time. It was a different company and that we had a life business. It was a different time and that interest rates were a lot lower, people were thinking it was low at the bond.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Since then, of course, as you point out, we've made a bunch of changes. We sold the life business. We bought back a substantial amount of stock, which takes some of our investment earnings down. Our premiums are up substantially, not just because we've grown total policies, but also because there's just higher cost per policy, which I think the market hasn't really factored in that that includes requires more capital. So when you look all through it, we feel really good about where we're at.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

When we put that 14% to 17% out there, it was really because investors were not sure given the time and given the nature of the company what our returns would be and would they be acceptable. We never said it was a cap. And so obviously now we're doing much better than that. I would say the most important thing for us to do now is to increase growth. So increasing returns won't drive that much more shareholder value.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

What will drive more shareholder value is growth. And we've obviously grown and are growing a bunch of our other businesses. So whether that's our homeowners business, whether that's we're growing premiums, which people kind of get all focused in on auto PIF. And auto PIF is important and we're going to grow auto PIF. But when you look at just growth in premiums, we're up double digit single low teens percent depending which measure you want to look at last year.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So we feel good about overall growth. We think and the key to unlocking the value we've already created through growth is to get auto unit growth up.

[Gregory Peters, Managing Director - Equity Research at Raymond James Financial]

Got it. Thanks for the answers.

[Operator]

Thank you. And our next question comes from the line of Michael Zaremski from BMO. Your question please.

[Michael Zaremski, Research Analyst at BMO Capital Markets]

Hey, thanks. Good morning. And my first question is on the expense ratio and kudos to the kind of lowering it over time and meeting your goal. Curious, I think in the past, Tom, recent past, you said that you have plans to improve it even further. Maybe that's the expense ratio ex ad expense.

[Michael Zaremski, Research Analyst at BMO Capital Markets]

If that's the case, are you able to kind of elaborate on what the building blocks are going forward to continue the improvement?

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So, yes, so the answer is yes. We always expect to keep reducing expenses and we think we have an opportunity to even lower them farther from where they are now. We're not done. I would say maybe we're 60% of the way done. And but I wouldn't like take that and multiply that by some percentage change.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

I think as part of that percentage change,

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

just

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

to be completely transparent, is because premiums have gone up faster than general inflation. So you kind of can't count that as much. So we are constantly working on it. I think the worries we're after will be digitization, leveraging the new technology platform we've built. With the affordable, simple connected is all designed around doing that increasing our marketing effectiveness.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So even though we carve marketing out from that number, that doesn't mean like we're just going to spend wild on marketing. It needs to have the same level of precision and to it that everything else does. And we also still need to lower distribution costs. The distribution costs are still higher than we would like them to be, so we have work to do there as well.

[Michael Zaremski, Research Analyst at BMO Capital Markets]

Great. And my final follow-up is just more high level on the devastating tragedy in California. I know it's kind of still a fluid situation, but I think a few of your competitors have expressed that they might need to retrench even more in California given the payback, the potential payback on the losses are going to be many, many, many years. Curious, do you think this could cause Allstate to also rethink its ambitions of growing or just overall growth in California might turn a different direction? Thanks.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Well, every state is different. We don't have any growth aspirations in homeowners in California at this point. And we haven't since 02/2007 really. We had a small window in there where we thought we had some arrangements where it would make sense for us to grow. That didn't turn out to be the case.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So we had turned off the spigot for new customers. We didn't go non renew people, but we just said we're not going to pick out new customers starting in 02/2007, then in about 2017, '20 '18, I think I'm looking at it right here. We said we think we can take on a few new customers if we can get this. That didn't turn out to be true, so we stopped that then in 2022. But we've been at this for a long time.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

And so we don't have any growth aspirations in California right now. That said, we're really good at homeowners. We make more than half of the industry's profits. We've got a good business model. We think it's a great growth opportunity and it doesn't have to be the way it is in California.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So Texas has just as many types and dollar amount of losses as California does, yet the homeowners market works there. And so we believe that there's a way to make that work. We'd like to work with a state to make it work because people want to insure their homes, they need to insure their homes, and we just need to make sure it's done on a basis that is fair to consumers, but also gives our shareholders an appropriate return for the risk. So for example, we don't want to have to do things like in California, Mario talked about the numbers, we have a substantial amount of reinsurance recoveries. We're a cost plus business.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

We did not recoup the cost for that reinsurance that we just now got back to lower losses, which means that we need to have a structure. The departments talked about that. They're open to that. So I would say that these things, they happen over a long time and it takes a while for them to get fixed. So I don't think anything is going to change in the next it's not like in twelve months, everybody is going to be rushing into California to write homeowners.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

It just doesn't happen that fast. Thank you.

[Operator]

Thank you. And our next question comes from the line of Christian Getzoff from Wells Fargo. Your question please.

[Hristian Getsov, VP - Equity Research (Insurance) at Wells Fargo]

Hi, good morning. My first question is on retention. I didn't see any retention numbers in the press release or supplement. So I was wondering if you could provide that. And then would you say the majority of the headwinds on retention just from like I know you guys called out insurance migration and then the New York, California, New Jersey rate hikes.

[Hristian Getsov, VP - Equity Research (Insurance) at Wells Fargo]

Are those is the majority of that headwind dissipated by now? Or do you expect some further headwinds kind of in the first half?

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

I'll make a couple of comments and Justin may want to comment. So first, we pay a lot of attention to retention in more granularity than you just even mentioned, whether it's just book of business, this state, this risk cover, this whatever, this price changes, we're like, we're all over retention. Just made the decision that rather than give you the components, which are complicated and we spend a bunch of time helping and you spend a bunch of time trying to figure out what retention on this much and how much policy is it.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Just so why don't I

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

just give you the numbers? Like I'll just give you the fifth numbers every month. You'll know what the numbers are. You don't have to get caught up into what your projections on new business, what your projection on retention for insurance policy. So our goal was to increase transparency and give you more information you can use to make your investment and recommendation decisions rather than less in doing this.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So that's what we've set out to do. Maybe Jess or Mario, you guys want to talk about the retention and how you're feeling about it and other ways to measure it?

[Jess Merten, EVP and CFO at The Allstate Corporation]

Maybe I'll just touch on the round out the disclosure and then Mario, you can talk about your thoughts. I think the other thing to keep in mind is, as Tom mentioned, we gave you a component. We didn't even give you all of the components. We believe by giving you PIF on a monthly basis, you'll have more transparency. Recall, what we gave you was Allstate brand PIF or Allstate brand retention rather.

[Jess Merten, EVP and CFO at The Allstate Corporation]

So it was a piece of the puzzle and we spent a lot of time explaining movements between brands, which we wanted to move away from. So I really believe that what we're giving you now on a monthly basis will be much clearer and actually reduce a lot of the complication that came from our disclosure. And as Tom said, puts you in a better position to understand new business and retention trends and frankly what the total policy enforced trend is. So it was definitely a move to increase transparency by taking away and really completing that move away from brand to line of business and distribution channel.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Yes. The only thing I'd add on retention, I think it's important to take a step back and look at what we've really been saying over the last several years, which our principal focus, I would say, heading into 2024 was to improve auto margins. I think we were pretty clear on that. That was our principal priority. We had to take prices up a lot to do that over 40% when you look over the past several years.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

The good news is margins are back to where we want them to be and where they need to be. And from a new business perspective, as that's kind of played out, you've seen us kind of lean back into the market and really accelerate new business growth over the course of last year. The downside to that approach and that strategy is with retention, as you mentioned, which has stabilized in a number of states as we've cycled through what we needed to do to improve profitability. But as we've talked about before, there were a handful of states that were a little later to the game in terms of getting margins back to where they needed to be. We talked extensively about California, New York, New Jersey.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

The good news is we've been making good progress in those three states. We've been making it by implementing some pretty meaningful rate increases. That is having a drag on retention as we cycle our way through that. We should see that stabilize. I will say though, New York and New Jersey, we still got some work to do.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

We're our margins are better, but they're not where we'd like them to be. We're going to continue to pursue rate in those states, but we believe we can overcome that because we've got a lot of growth opportunity in the rest of the country.

[Hristian Getsov, VP - Equity Research (Insurance) at Wells Fargo]

Got you. Thank you. And going back to the California losses, I know you provided a $2,000,000,000 gross estimate, you provided some sensitivity, but what are you assuming in terms of the industry losses, so we could like flex that sensitivity up or down depending on how the losses develop?

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Yes. Look, this is Mario. The way I'd answer that question is obviously there's a lot of moving parts in our estimate. We know our data with a lot of specificity because we have that. We've made assumptions around a fair plan assessment, just given the magnitude of the losses we've seen.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

And also, when you look at the fair plan surplus level as of the end of the third quarter, their reinsurance and their co participation in that, we think it's pretty likely that they're going to kind of exceed their surplus levels and there will likely be an assessment. We've got that in there. And our number includes a view of what the industry loss is. I really don't want to kind of disclose what our view on that is, but there's I will say we've made certain assumptions to come up with our number, both in terms of ourselves and the fair plan. We'll keep looking at those because it's a pretty fluid process and we'll update it as we get more information if we need to update it.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So here's if you want a sensitivity. For every $100,000,000 it's $10,000,000 So for every 5% we're off in total, it costs us $10,000,000 So if we're off by 50%, so it's another $1,000,000,000 it costs us $100,000,000 right. So I don't think you need to worry about sensitivity on the gross loss.

[Hristian Getsov, VP - Equity Research (Insurance) at Wells Fargo]

Thank you.

[Operator]

Thank you. And our next question comes from the line of Jimmy Bhullar from JPMorgan. Your question please.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Hey, good morning. I had a question first on just the auto business. You mentioned PIF turning positive in 31 states, I think. And I'm assuming what's unique about those states is just the fact that you're not raising prices as much and advertising more. So if that is true, then could you talk about of the remaining states that you're not growing in, should that begin happen throughout the year gradually?

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Or is there more of a cliff event at some point later in the year when you will lap those comps and you're not going to be raising prices just to sort of be able to assess when those stocks states will begin to show better growth.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Jimmy, I'll let Mario talk about a pace, but I don't think he's going to give you an answer by four.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

I'll try.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Yes. I got it. It's more complicated though than just those two factors, right? So it's not just are we not taking price and how much we're advertising, it's what's everybody else doing, what kind of coverage are we offering, where are we with our ASC rollout, where are we with our custom 3C. So it's a really complicated machine that Mario is running.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

And but the goal is sometimes attribution helps explain why you are where you're at. Sometimes attribution leads to excuses. And we're not interested in excuses, we're interested in results, which is gross. So Mario can talk about how he's thinking about that maybe you want to talk about both the impact of retention and the impact of new business over the course of the year, but we can't give you obviously a per quarter PIP number. Just watch for Jeff's monthly number.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

That's right.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Yes, Jimmy, thanks for the question. Look, where I'd stay is like we want to grow in every state where it makes economic sense for us to grow and where we believe we can grow profitably. That happens to be 31 states now. We think the opportunity is beyond that level.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

And as Tom mentioned, there's a lot of components that factor into our ability to grow price as part of it, competitive position and where our price is relative to the competition. The growth investments we're making, our risk appetite, there's a lot of factors that play into that. Retention is a key component of our ability to grow, right? So what you saw in total this year was we had really good new business trends. And in the quarter, they kind of peaked in 2024 at almost 30%.

[Mario Rizzo, President, Property-Liability at The Allstate Corporation]

Yet despite that, our units declined year over year because of the drag of retention. So we're focused through the SAID program on not just waiting for retention to bounce back because of less rate disruption in the system. We're going to proactively do things to work with customers, help them save money, improve affordability and drive retention up. We think doing that well alongside all the other things I mentioned earlier, new product rollout, new technology, distribution and continued investments in marketing and all the things that helped us drive new business volume. That's the key that will drive growth broadly and that's the plan we're executing on.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

And then maybe just following up on capital, like the business is obviously profitable now. I think you'll make money even with the California fires in 1Q and then you've got the money coming in through the sales of the benefits and the health business. So how should we think and I'm assuming capital is not a constraint for growth given how much money you're going to get from the sales, but how should we think about capital deployment between growth M and A and share buybacks? And is it unreasonable to assume that you wouldn't be in the market buying back stock at some point assuming results come in as expected over the course of this year?

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Look, Jim, we consider proactive capital management to be a significant strength of Allstate's and it's added tremendous amounts of shareholder value. So and you're right, share repurchases are obviously one of those and we've used that extensively. But I would encourage you to hold us accountable as you started to mention on really a broader basis, right. So there's organic growth, there's risk and return on economic capital, there's inorganic growth and then there's capital structure, which includes the share repurchases. And so let me just go through each of those first.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Organic growth is a twofer. And based on the returns we're getting in our business today, it generates absolute dollar growth in earnings. Secondly, with that higher growth rate and we should have a higher PE, Because if you look at our price earnings ratio versus any other insurer and you look at our top line growth, the average premium growth is getting discounted and it's basically all hung on auto unit growth. You can say whether that's right or wrong, but we think that the unlock of and deploying capital to grow the property liability business, both in units and premiums, is will drive growth. So we think that's really important.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

And we talked a lot about that this morning, so I don't want to we don't need to go back through that. If you look at risk and return on economic capital, we have a really sophisticated way and just has talked about this a lot in the last couple of years of how we manage capital and associate a risk and return on that. That helps us do things like leverage our investment expertise and be proactive in managing our investments. And that capability generates good returns. And I think it needs to be valued in its own right.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

But for example, the duration calls we made used additional economic capital. We knew that, we decided on it. It was part of the enterprise decision and it's clearly generated good returns. Same thing is true with the reinsurance in California. We look at all those things economically.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

I think acquisitions also need to be assessed on the actual return on capital. So National General and SquareTrade, both go on a standpoint. When you look at National General, it's more than double its size on apples to apples basis from when we bought it three years ago. SquareTrade is substantially bigger, maybe 10 times bigger and making $150,000,000 bucks a year and we paid $1,440,000,000 And just when you look at what was the net cost of National General and SquareTrade?

[Jess Merten, EVP and CFO at The Allstate Corporation]

Tom, when you take a look at both of them, the net cost is about half of what we paid. So as I mentioned in my prepared remarks, we paid $4,000,000,000 for National General. And when you add up the recently announced group health transaction and the dividends we've been able to take out of the statutory entities, which were about $1,000,000,000 we've reduced that purchase price by about $2,250,000,000 so to $1,750,000,000 less than half. The same will be true if you look at SquareTrade and the $1,400,000,000 acquisition. Since owning it, we've taken about half that back in dividends based on earnings, while also, and this is important, investing in growth, doing acquisitions.

[Jess Merten, EVP and CFO at The Allstate Corporation]

So we've gotten about half of

[Jess Merten, EVP and CFO at The Allstate Corporation]

it back and still invested in growth on SquareTrade.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So and then of course share repurchases is also a thing, but you have to really look at how you manage your capital stack better. So for example, we issued perpetual preferred stock, I don't remember how many years ago. We issued $2,000,000,000 of stock, we bought back $2,000,000,000 of common, swapped fixed equity cost and left all the remaining upside with our common equity. The preferred just has a what's occurred cost on the preferred.

[Jess Merten, EVP and CFO at The Allstate Corporation]

We have three different issues, Tom. So our lowest is about 4.75% and then we have a tranche that was more recently issued at 7.375%. So we've got a range, but most of it, the largest issuance actually is a 5.1% fixed for life

[Jess Merten, EVP and CFO at The Allstate Corporation]

preferred stock.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

So obviously and the math is not exactly right because you've got GAAP capital on that. But if you look at our returns on equity, on just actual market equity, it's substantially above that. So that's a good trade. We also obviously look at dividends and everything else.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Share repurchases, we've done a lot of. And so just you want to just go through the numbers of what we've done on share repurchases in the past?

[Jess Merten, EVP and CFO at The Allstate Corporation]

We have done a lot

[Jess Merten, EVP and CFO at The Allstate Corporation]

of times. So I took a look back and went all the way back to when Allstate went public. Since going public, we've repurchased about $41,500,000,000 of our stock, and that represents about 83 percent of the outstanding shares. If you bring that timeframe in a little bit, over the last ten years, the number is closer to $17,500,000,000 and about half of the outstanding shares over the last ten years. Bringing in again, five year period, dollars 7,800,000,000.0 of repurchases, about 25% of our outstanding shares.

[Jess Merten, EVP and CFO at The Allstate Corporation]

And in all cases, in an average cost, it's very attractive. We even go through and look at the returns. In all cases over any period, whether it's thirty years or five years, that return is significantly above our cost of capital. So we've had really good returns. And to your point, Tom, buying back 83% since going public just shows our commitment to repurchases.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Yes. So I mean, we've got plenty of things we do. And I would just like don't like yes, share repurchases are important. I know it's a number of analysts wrote that up over the evening of like when you're going to be back. And Mike, you should hold us accountable for managing our capital to drive shareholder value.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

And if that means growing faster and using our capital to grow faster, then hold us accountable for that. If we have extra capital, we don't hold on to it. And we buy back stock because we think when you look at our value relative to our growth potential, the size of our business, our PE, we still think it's cheap.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

It's still better to get those questions than questions about adequacy of capital, I guess. So we'll see.

[Jess Merten, EVP and CFO at The Allstate Corporation]

Yes. I thought those were thoughts.

[Jimmy Bhullar, Equity Research Analyst at JP Morgan]

Thank you.

[Operator]

Thank you. And our next question comes from the line of Bob Huang from Morgan Stanley. Your question please.

[Jian (Bob) Huang, Executive Director at Morgan Stanley]

Yes, good morning. I'm going to stay away from capital. So the first question is on auto. And an investor astutely pointed out that on your first quarter twenty twenty four slide, you talked about 64% of your total premiums were profitable. So fast forward to today, then we're talking about 60% of that premium is now growing.

[Jian (Bob) Huang, Executive Director at Morgan Stanley]

Is this fair to kind of make some type of causal correlation between the time you achieve profitability and the time that you start to grow the business? In other words, is it fair to say that six to nine months from now, essentially California, New York, New Jersey, the only state you're unable to grow and everything else should be growing and that rather than the 60% of total premium is growing, probably call it 80% or 90% of should be. Is that a fair way to think about this?

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

I think the construct is right. I don't know if I would automatically extrapolate that into the future. I mean, it is true when we were losing money, we shut down advertising, shut down growth intentionally because we said there's really no sense going to get a bunch of new customers if we're going to have to raise their price by 15% relatively quickly and maybe then lose them. So what's the point of spending the money? And

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

it doesn't make

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

any sense getting a new customer to lose a whole bunch of money on and you know you're going to lose money on. So that is was true and that's what we did. We also know that by driving that and going aggressively that it was going to hurt retention. And so now we're about so it is there are pieces you roll in. I don't think you could automatically go to say like do an analysis of two lines on a graph going up and they would follow each state is different, each position is different.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

If Mario was to get adequate prices in New York tomorrow, we have a great agency plant there. We have we got pretty we got huge share down in the New York area, and we could really leverage that to grow fast. When that will happen, who knows? So I think you should just hold us accountable for growing auto units. And I keep coming back to auto units is the unlock.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Everything else is growing. And it's like, so let's it is an important part of our business, but we've got we got higher premiums, the reserve balances are up, the investment balances are up, that's all driving increased income. So protection plans is knocking it out of the park. So we got lots of growth opportunities. We are focused on the unlock of auto unit growth.

[Jian (Bob) Huang, Executive Director at Morgan Stanley]

Got it. No, that's helpful. If I can just have a follow-up on that. I don't know if you'll address this, so apologies if you did. The question is really around adverse selection, right?

[Jian (Bob) Huang, Executive Director at Morgan Stanley]

As we go into 2025, more and more auto carriers are profitable and more and more auto carriers are talking about growth. Should we expect your current level of combined ratio to hold for auto as you headed into an environment where everyone is looking for growth? Like how do you feel about the broader competitive environment as a whole?

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

Well, you're talking the auto market has obviously been competitive, and both Progressive, GEICO, State Farm, the big carriers that we compete with all the time have been out in the market and competitive this year. So people are advertising it's last year in 2024. So it's not like it wasn't competitive and it's suddenly turning into competition. We think we have the capabilities to compete and grow. I would say that's a different market in homeowners where most people are backing out.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

There is a secular trend there where we have an opportunity to grow. And as we look at capital, one of the things we like to do is get a higher valuation on our homeowners growth. So when you look at our homeowner business and I said, geez, if you have a business that's growing revenues in the mid teens, It's picking up not huge market share, but it's got real unit growth. It's an industry leading model. It's earned money, good money, 11 out of 12 years.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

And it has high returns on capital, you probably wouldn't put it at the kind of PE that we have for our overall enterprise. And I suspect that if you actually looked at analysts, they might even give it a lower PE than our total. So we need to figure out how to have that fully recognized in our valuation. And it might mean doing something differently in reinsurance and

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

lowering the volatility of that line.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

But just know that our goal is We may be close, I think we're at time. Our goal is to increase shareholder value, whether that's buy shares back, grow, manage our capital structure differently, figure out how to compete differently, do more advertising. We're all about driving growth for shareholders. We think we have the tools and capabilities to do that and we have a track record that shows we know how to get it done. So thank you all.

[Tom Wilson, Chairman, President and CEO at The Allstate Corporation]

We'll see you next quarter.

[Operator]

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Participants

Executives

• Allister Gobin, Head of Investor Realtions
• Tom Wilson, Chairman, President and CEO
• Mario Rizzo, President, Property-Liability
• Jess Merten, EVP and CFO

Analysts

• Robert Cox, Vice President - Equity Research at Goldman Sachs
• Gregory Peters, Managing Director - Equity Research at Raymond James Financial
• Michael Zaremski, Research Analyst at BMO Capital Markets
• Hristian Getsov, VP - Equity Research (Insurance) at Wells Fargo
• Jimmy Bhullar, Equity Research Analyst at JP Morgan
• Jian (Bob) Huang, Executive Director at Morgan Stanley