ALL - Earnings call transcript Q3 2018 | The Allstate Corporation

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Operator

Good day, ladies and gentlemen, and welcome to Allstate's Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Mr. Investor of Head Griek, Relations. John Please go ahead.

John Griek

our Yesterday, you, Allstate's investor and third thank prepared filed we question-and-answer the on Jonathan. market, the today's of call. posted Good to everyone, remarks, the session. allstateinvestors.com. a have quarter welcome, XX-Q and will the quarter we supplement, at website our close the morning, After Well, following third XXXX and for conference earnings release, news presentation

these is results. team Our here perspective on to management provide

As first non-GAAP our for investor for XXXX risks. for in refer the differ statements noted will which discussion public from information other may release on and potential results forward-looking news materially reconciliations please presentation, to on about these the our of slide Allstate's so documents Allstate's are contain XX-K and measures, some and the operations. supplement there statements,

over Now, I'll turn it to Tom.

Thomas Joseph Wilson

results. Allstate's morning. stay current Good on joining to you Thank operating for

businesses Let's begin deliver X, headline attractive so growth the on is slide continued and to returns. Allstate's year

Our ratio for working. At bottom underlying for outlook months XXXX or year-to-date five to the excellent close outlook, favorable Property-Liability, to you operating results. combined pace strategy financial range achieve The of as We're net at of the the know. priorities. the nine end annual is is the annual which a was our on good, result was

$X income and table, the quarter billion, prior for on million, is repurchase funded per an net Net return almost year of program, year third million basis. XX.X% $XXX XX share which revenues prior new $XXX XX.X% of increase $XX.X income adjusted XX.X% $X equity to and XXXX billion million preferred income with $X.XX perpetual the adjusted which latest be above was on share quarter. income months quarter. over a the was billion stock. to in net the increased Net announced may also To We up go was to the

more perspective into macro the a start let's before details. dig on Now, we

the So businesses is X, expanding other to in our Allstate's Property-Liability personal if share market go while strategy businesses. you slide to grow protection

with product Property-Liability consumer So, the branded serve segments with differentiated offering. start to oval, has the each market of and a four upper these we personal

provide We're in customers forefront We and all we over call policies prefer to every effectiveness America. XX,XXX The community So to telematics-based through million on who using professionals analytics offerings. products hand X.X analytics use through integrated improve Allstate to and personal digital a technology profitability enterprise purchase uses XX,XXX with that to across provides businesses these building ensure guidance at are to our online grow or nearly agencies Esurance process their the other agencies sophisticated both an the this over and efficiency. customers redesign center. and our in data

consumer in we example, using claims. are insurance For to auto leader customer or generated – generated settle photos a quickly

it's of recently our of transportation Allstate such further insurance networks person protection includes also obviously product provides capital, the had a identity as work And insurance this objectives. with insurance. the growing at portfolio for expands we annual acquisition also of And and services. purchased by employees the resources, oval XXXX, life brands, strategy acquisition to by which through such InfoArmor, X% our expanding beginning investment are protection other at compound which has lower rate insurance. SquareTrade our which leveraging growth And business began We Our and years. acquired we listed year, the and protection achieving leveraging In XX this life products closed companies business offering Benefits, Allstate to of disability began distribution and customer our that rapidly as and XXXX and XXXX we in expertise, in base, businesses site.

profitability strategy value returns part ensures ways diversified on in have two capital. It through growth, sustainable platform. shareholder unit also a then this we attractive of a customer So, and number satisfaction, different business creates

the So, and if to employees you teammates. turn to to communicate XXXX, doing operating in what our you to we priorities then X slide and as we're

target The long-term on priorities, serve three capital to intertwined base. the first better customer customers, grow ensure economic achieve returns They're profitable and growth.

were businesses customers Allstate, Higher as of across Net growth. is better So, then major Encompass, driving as the at improved served Promoter Property-Liability and business. retention our Esurance all Score customer

million are SquareTrade over the XX.X The quarter good SquareTrade policies $XXX building third with total protection the $XXX return we will a car deliver category. businesses. at Property-Liability the accelerate billion portfolio latest Allstate XX long new net purchase auto track record a the The to of Esurance, XX months. and continued of and retention X.X%. capital as utilization gaining of last ratio in connected Benefits investment I the with mentioned our of new of acquisition. was Our policies Allstate Benefits in $XX on and brands quarter. progress InfoArmor underwriting returns expansion million Allstate Allstate – into months. force Well, as X.X% excellent. return million business. the with increased income telematics overall million for of The the the And its respectively. established returns strategies adjusted and increasing prior XX.X%, adjusted increased Property-Liability also as the result just remain on generated income in XX.X% growth of the $XXX continued for made The grew year added Esurance, net in long-term The Allstate income force growth momentum of over insurance XX.X we investment combined policies equity Life, XX.X% recorded generated of generated success measures platforms. income quarter. net on higher increase growth

miles which miles were at closed expanded to and The employee Slide offering. it not and has for very And data, grow expansion to protection. billion information In expected What products for attractive has addition, October X this its identity on acquisition are also which InfoArmor accelerates tie InfoArmor is an those these does? are into used of who needs the There on channel, acquisition Benefits you rapidly a through in provides X billion call protection with more month. substantially Arity growing connected broader much Allstate of able that. products, expansion has positions collection identity It now over product customers' our economics. platform. increasingly and almost primarily provides world, benefits us per XX X data in on our voluntary excellent opportunities

we've done we've acquisitions, established As the other of with success. measures

to accretive adjusted Long-term the expanding including the XXXX. voluntary expected net priorities basis the product by success leveraging offering now Allstate the broadening and detail. income Benefits to will So will benefits John also go and lastly, rapidly us it more platform. our conversation so to with grow should require the be operating Property-Liability in channel continue through in acquisition directs for And you, gives both results InfoArmor our distribution. is

John Griek

changes auto partially reserve On prior which of weather-related million reserve Unfavorable This in losses The XX.X slide versus net Tom. third XXXX Thanks, the points of year growth which for increased reserve strong. XXXX. of million XX.X Property-Liability $XXX for higher a due million by than offset XXXX. unfavorable in impact and as the a lower nine improved accident of benefit quarter, year X, recorded Coverages written and non-catastrophe XXXX for than adverse the insurance in is and annual remain ratio, catastrophe based prior-year positive months XXXX for written large the year year you re-estimates favorable Protection Discontinued quarter. XXXX. the was X auto reflected ratio Non-catastrophe by above prior in more was Lines for This $XX prior and the other homeowners XX, points and year non-catastrophe development accelerated increased that the underlying by see reserves X.X% first positive million results asbestos, third combined was on $XXX for and combined and period auto in homeowners, quarter quarter our reserve driven was increase $XX non-catastrophe in Net and premium excludes The income environmental re-estimates commercial increased expenses September same frequency. catastrophes brands. small Esurance XXXX, was third growth-related higher prior losses in quarter. ratio million re-estimates The X.X re-estimates, to Allstate million $XXX can versus of an $XX offset of Allstate year in review. XX.X of and prior three underwriting the by of in survival insurance, policies

XX. of the outlook you underlying ratio nine combined our year, at combined the range guidance end full of ratio favorable XX.X, was year, for As underlying annual is to the the first XX know, of the the months for and

in covers grew nearly prior improvement of the auto our to months underlying prior the X.X XX.X increased stable left the Allstate results operating The from nine to of brand were point quarter. year improving was experience Starting in an X for customer first the Slide a ratio year. the For the margins policies where rate environment. with benefiting renewal and by bottom increased and force quarter of ratio or chart, X X% XXX,XXX force the combined in policies last third compared focus XXXX, from XXXX. of quarter, similar on insurance,

compared to seventh increasing of applications for XX% year-over-year issued quarter New the grew consecutive quarter, XXXX. third the

second average the XX% Claims as compared quarter The was in the as were severities claims while property offset a issued quarter due grew prior the to losses in for particularly repair insurance sophisticated is box, inflation spend increase right-hand quarter. multi-line trends average year of of ratio higher underwriting accident cars XX.X, quarter, Slide partially combined as the quarter. quarter. $XX prior covers more profitability. The catastrophe new in premium bottom to in highlights favorable. combined compared an over marketing increased better to both due the and in homeowners continued right, new continued improvement and as left, increased Starting Slide product on in year combined of and points applications policies profitability Esurance combined the the bottom, detail in variability. of points reflects in X.X than X.X improvement offering. third net the This line was million quarter homeowner homeowners with the was better of third the auto force Encompass. higher the slightly auto over severity, due the primary the year a both a premium, and returns. XX.X decline quarter quarter both third due the in Encompass' policies the chart of income XX written written homeowners generate increase in in been losses renewal reserve with ratio X.X% increased and third combined to the combined partially third in the XX.X% non-catastrophe XXX.X auto brand applications Allstate third partially insurance in and underlying quarter. number Allstate increased recorded insurance prior points see drivers X.X% quarter, and underwriting increased. of ratios. prior premium focus ratio losses. on both quarter. for damage net applications reflecting the the line was shown this the upper last in higher Encompass than in income. compared of was of additional Homeowners on trends year a the a loss broad-based period, the points can as insurance. in slightly X.X XX.X year, The in by than the an The by third underlying and the accident to prior in new XX.X given the in frequency, premium right recorded to X.X combined XX net the increased for recorded in weather-related quarter favorable average ratio prior in loss homeowners and insurance have written ratio primarily issued underlying third by which underlying bottom earned quarter. X% third of the The target third was year grew weather seasonality of offset The costs force. was above combined general At ratio insurance XX.X improving X XXXX increased homeowners $XXX is you and and financial million X coverage. losses. issued the decline points Esurance over recorded ratio in of in of total an ratio XX-month underlying insurance quarter in XX.X remained insurance in force better was in includes by growth ratio quarter attractive X.X XXXX quarter. of to policies the lower This as This included third increase XX provides Performance accelerate expense for profitability frequency total ratio and As retention homeowners Esurance and auto million XXXX in prior months. higher of expense quarter the brand ratio. $XX prior higher the The recorded XX.X provides the line and was was weather-related results in premium catastrophe grew generated evaluated than and year with million an $XXX performance, in losses driven generated the ratio than better with quarter, premium improved. quarter our XXXX's to The underlying re-estimates third to XXXX in adverse The quarter driven was combined results, above non-catastrophe year,

I'll it to Mario. over turn Now,

Mario Rizzo

in SquareTrade since expanded results increased value progress success SquareTrade Property-Liability their a retail, and premium to overshadowed section John. retailer to due the three businesses. became exclusive protection XX U.S. the retail. Thanks, the growth XX.X% business objectives, is its for and SquareTrade the beyond the domestic in of XXXX increased, get in leading U.S. loss for SquareTrade supporting Businesses We've highlights expanding measures third the the and the quarter million $XXX as Service written of and U.S. on improved acquisition experience on by strategic Arity. Slide can continued during made plan quarter. the provider as force policies economic telematics personalized to utilization million affiliated insurance $X device had invest in and addition million, family X.X global the of their better data increased largest providing to network. understand offers collection driving and $XX third of Arity net and analytical million, mobile in primarily advancing LifeXXX's the connections kit. led parties. millions contracts. to and quarter, income telematics platform insurance adjusted were Allstate Arity's Revenues the affiliate to In solutions users third was driving our software $XXX continues Arity both million quarter. and revenues related LifeXXX, services operations the of by from by of Active world's receive behavior development third

dependable a was for through collected months. miles million third $X quarter detail coverage at XXXX, Dealer a Services It better Allstate vehicle for XX group $XXX and initiatives drivers. of income and were year Roadside profitability income now enhancing GAP and and improvement experience million Arity provider enables financing service Allstate scores traditional for quarter car quarter. billion, provide and Revenues product mobile parties providing Dealer contracts. to to from offering. total to Roadside vehicle result, the the the the net quarter. GAP crowd-sourced a are through a white slightly for reached down risk X and As associated $XX with million to Slide technology. on by network which primarily Services. is is distributed blended provides and billion decline and label roadside the Expenses the of service compared focused of Allstate broader prior almost nine year million optimized fast month. prior benefiting Adjusted Allstate the analytics data insurance arrangements technology rescue Revenues and customers contributed the dealerships. in from is networks improved Services rate Services auto per profit were as the for assistance provides miles additional with through increasing $XXX It manufacturers. Allstate and quarter in provides such customer XX third of using This

million adjusted Benefits and increased chart. million third year quarter, investment appreciation. for moderate a increased unit investment regulatory managed shown portfolio, higher let's due market the remained Allstate the million quarter income, blue portfolio generated lower shown compared the duration bonds. investment risk conditions year primarily to $XX per performance-based Performance-based of strong prior lower relatively income the very to a primarily risk. income partially and quarter $XXX prior the a Slide on XX, and on requirements. purchase million, high-yield was income. for third million lower decrease net income XX in based $X over and left the yields by quarter on slide investment adjusted the primarily shown The premiums slightly allocation of capital a slide the investment which a appetite the the adjusted in results. chart offset effective highlights was and left due relevant in Allstate The quarter quarter, investment third proactively quarter, increase increased fixed for low high net optimize Market-based asset of strong lower the shows at effective Allstate more results chart income This by to on equity shown page, reflecting X% reduced generated to million XXXX. gray was which Benefits extension of in year return modest prior the The our income Life, of year Adjusted premiums is rate. investment and a lower the net in the in in $XXX the income third corporate prior quarter, to was reflects on income flat middle was $XX higher was from rate, quarter. tax Life income than of net $XX return due to review net quarter. Allstate to Turning $XX net Annuities right of had driven Annuities. bottom tax million the

Our total total table positive performance-based an from the in of right. returns income years, and fixed The lower XX-month the total to valuations Those in for quarter valuations which supported shown and to have billion period in yields investments, almost were offset positive on overview $X market blue due few by trailing in return X.X%. XX% components the shown the shown The the return Slide slightly are stable shown return last increased XX The lower of by over X.X% the equity in provides now contribution of portfolio. was a gray. red. capital. increased was income

decline value We X.X% Adjusted X.X% capital. continue and returns or in reduction to shown an the XXXX, generate and share September earnings XX.X% to dividends, third gains on a fixed-income attractive as outstanding higher bottom of Book increase left months year chart, equity, compared to the of in quarter on repurchases per $XX.XX for ended shares the income share of in increased a X points net and losses. on period. prior impact realized XX, the XX offset the return was since

and return to cash remains see returned bottom third the Our shareholders to shareholders right the strong billion, total capital quarter, bringing chart. as first million can position you the common we to nine months in $XXX for the $X.X in

billion board preferred up continue we share Yesterday, manage to to We stock new issuances funded by our potential program may proactively billion. new April be to program, The authorized repurchase XXXX. the conclude of expect $X by of which end capital. the $X a

X X. million $XXX on Additionally, and $XXX preferred October million October shares on acquisition on redeemed of InfoArmor the for of closed our we

Now, the for we'll open questions. line up

Operator

from line comes Elyse from question the Fargo. first Greenspan Our Wells of

please? question, Your

Elyse B. Greenspan

more what in guess, do causing the book of your question, losses fourth to in the and take talk that quarter? non-cat guys think you think that's quarter are think in was for expect the you margins Can Encompass. should Allstate about the in beyond? something in first and there, I just continue you that you we homeowners that price kind the or the outlook weather you you that saw And brand My through higher in homeowers both or business going the to business outlook, what's for

Thomas Joseph Wilson

give for Glenn and something take us. then thanks the quarter. returns you we've question. generate I'll specifics attractive homeowners you through really It's overview just the to continues obviously of quick looked business a for Elyse, the at. can The

losses, raise amounts So, that's million over in a other do The is will move and very lot deep states, extent net we're XX business Glenn price quarter. to underwriting of to combined of though, have months. income that, ratio, volatility in can comfortable and various you all the talk whether the between the last with XX homeowners. specific Obviously, the of catastrophes we the $XXX categories, various embedded about of that. in have or related we

Glenn T. Shapiro

interesting quarter patterns mentioned our just were Yeah. upper add little the that for It's that of the at some weather target I'll between this have we and we catastrophe, Thanks, Yeah, a if you on There the underlying homeowner Tom. look shift end we year went we that at and is that. the quarter. last for then in non-catastrophe losses. above bit

number with our rate on that need for we said, there's in are eye of favorable, views result, less do very If We we the And is at pretty in homeowners. profitability quarter overall a needs those see broadly way we a of we triggering between as overall year. an the we areas an few events, some overall and on. produced is we in of state-by-state, moving we're combined as areas which more we numbers. markets, take got you them are during kind those rain ratio, of simply, something the the local put like have year, of see we you have hail an but rating country, and are It more do keeping shift know, catastrophe. Tom catastrophe similar another not rate this those events but but have We comfortable Said and triggering feel, those. as look we XX got weather them shift between and some weather

Elyse B. Greenspan

auto second my then And great. on business. question your Okay,

to been really have you been taking less that margins the business. able guys rate – you improve really testament brands, as of you've Allstate the Within

not still think higher the still expected we frequency, like as start – we're do that's in and potentially And and beneficial you as stable levels you you so, to an having growth? think rates necessarily can continue, more higher environment see Or a on seems in it you impact here? about quarter an say, rating where from severity or to trends your do pursue your saw but maybe less, severity

Thomas Joseph Wilson

would and be. answer really cost what react today, We I so to really we are will adjusting and like as Elyse, that. don't and auto a growing we're good trends project business rates return what the We the necessary. that the And so returns we're getting we're in business.

or we're with whether comfortable more, go little overall of goes a that frequency up as So, continue, the in. all severity we doesn't profitability. And factor down

the up the in that's this to the you establish we numbers results only are that profitability about one supplement little but see component As that know, we we you use quarter, have. feel really paid good and

Elyse B. Greenspan

you much. very Thank Okay.

Operator

you. Thank

of James. line from the Peters Raymond from comes question Greg next Our

please? question, Your

Charles Gregory Peters

basis. achieving you're reporting talk specifically on looks to basis thank quarter and third business, we chart ratios taking underlying categories want the where underlying and only X question. And nine-month recognize not on looking about for my returns five like an the release, you build the in page combined the the XXXX morning Good of and but you also an sort uptick across in you seven on indeed I press it to are all, questions. of Elyse's I have your your that at but targeted of was of first

provide on what think and future we current trends about these always for the and about going should on as a your how could be analysts results, sustainability so, of see the us you thinking you forward? And focused we perhaps so Allstate, are perspective

Thomas Joseph Wilson

Sure, Greg.

it in answer me ways. of different Let couple a

about good very results what this the getting feel the returns we're the are we expected. that in and line business we First, in with year

make part So, And but of only we that's but whole know, it you to give you you help you ratio, To picture. as into think that, guidance, have bunch a need of under combined an the the it's that all information that, enable I one another we do be then, a to don't can a is we necessary, down transparent, to of what we in pick. sometimes as specific give fully we even you And make detailed estimates. give micro. earnings ways underlying of you that ways kind some we do drag to believe but in result more

when your is the business, macro. margin. about at And So, auto look combined really so of the X that's you the question point ratio XX, insurance pre-tax a

at In claim the X, payouts, surplus you to basis, of timing really top your on addition, return after income X can tax the run above little other can When a ratio investment capital you given on a that. do of high premium math and to quickly or an the XX on get any relatively that's number.

combined bottom you sure you issues. a There underlying company. I'm are very you line. over some good. you give numbers things we The across we're that's that an That's And the in that why so the ratio that. as that then, point components whole is the good caused about time line within But and the creating is, and for happened all shareholder line that feel about both see value. We change out,

paid for example, property to is is just be. higher component So severity, in you think paid. because the booking pays. you XX% damage, we're We I We watching that's at to and look on when up, property book that's don't actually one the would up, that's to then what at but you us, That would see paid of helped damage a slightly level what premiums only than we book number we're anyway. actually will tell

going positive capital. good the don't can returns you're we investor feel feel good attractive supplement, you included that about rates insurance. going looking forward. ability sometimes interest that, We that and higher are that in in tell for adjust about what in So, up auto on help shown is should information, an forward, that when what to of component by the auto we've time and Not raise giving insurance forward over show investment I get you its profitability outlook

a on question, homeowners generate point so to good ability is our build business. – business have really the homeowner is in about good The return margin it different, and insurance. does which auto feel a XX Elyse's we So, slightly from we

get you're you good because sure, for that's income don't we feel as in of little And because of big the who have dragged – margin you're a margin, say, everybody XX bit. it's X I result then – that's you which requires the and than the well, core higher points that a return. a which making capital said, competitor homeowners really a as analyst down last capital. into it you is on point growing we over year, benefit and sometimes the great and I and it not like, auto pay micro growing of components, that's the about, be so pieces it business excited we auto know a that making a but a lot get while that, really and a good excited That in insurance, would let's well, is, is should return, out you ours from business not attractive higher And And if the a on out higher, obviously still capital about between rapidly our if also bounces – a like points up you return little return quite high show investment come around little we're and much with we would we You a a talk the lot see we generates claims really about business. from turnover lot and faster, business.

feel and good stay expect forward. good our feel to our position going about So we about competitive there we returns, we current

Charles Gregory Peters

that answer. thoughtful for you Thank

really a looks could applications, both some count new growth As bit help that and you're new different down us but just perhaps little on growth it PIF the nice gains and maybe and a the and the on between in growth. issued slower, PIF follow, spend those minute reconcile is a difference drill trends. issued And count application autos Esurance Allstate booking you components

Glenn T. Shapiro

we're Tom's question, kind winning gets the for and are answer talking We we as returns what from more of marketplace. in where everything too, this lost Yeah, and Glenn. answer your ties into a moves Allstate. this and is I'll last the perspective because like about is in getting growth competitive it when we're are we

the both driven those at home, now X.X% it's growth, by are about auto the look X% whether you XX% being when the So in retention. year-over-year of or right in

hard we're the the place. keeping customers driven by first it you about refer. being XX% to fought that that applications So increase of we attract in is in And

competitive. business not heavier a actually sure favorable where it's retention come in, well drift your it's from. coming of But more and seeing us if as split the that's answers component. that we're the but result So a question, being I'm new very it from

Thomas Joseph Wilson

right a So in to low given our if order actions an business. off size We on shrunk base. Encompass strong took growing you business new look very perspective, lot it we're and business the the a of profitability

to growth and balance So little of now, we And half have trying we're country in half in over in profitability the profitability half mode. to trying are country. the premium those states We're states still the a manage growth. under and now a our in

going a PIF, down, terms we're down we so we're rate now, obviously, but feel good lesser still In of on... going

Glenn T. Shapiro

You're talking Encompass. about

Thomas Joseph Wilson

Encompass.

Glenn T. Shapiro

Yeah.

about Okay. asked thought I he Esurance.

Thomas Joseph Wilson

Oh, I'm sorry.

Charles Gregory Peters

That's okay.

can Encompass hit... You then and (XX:XX) on going keep

Thomas Joseph Wilson

many too Es. got I

at the slowly you (XX:XX). better think if still is being So We're that Encompass, that is that look decline going stabilized. now in reduced. down We getting premium is obviously, as

perspective good really So having from we're obviously, results. Esurance

noted, as It's very new business have, is going We up to similar quite you Allstate. high.

but the very competitiveness also, us, we're continue well growth, new done advertising well very which of a situated campaign is that amount a strong to has business. are we retention that grow marketplace, Our because fair in we think and price driving for of

Charles Gregory Peters

a That on a just spend the and where because follow-up lines in, the just that's just and I think as alliance et comment helpful. minute, cetera? commercial is could you is Uber Maybe with coming

Thomas Joseph Wilson

Yeah.

March. if We written New the beginning quarter with the York for all added in at the of quarter. And started year So second commercial the last the Uber. of virtually look had the and early of or three due is you to quarter, we with premium at states end relationship the lines, increase third for that,

of $XX of the, really scores see about of feel all believe, good at how drivers. underlying out the relationship with and look with quarter. that good quarters established premium next getting you least. driver roughly We've the I business. terms the at as in look management Uber and over It's We So good we're third claims we a believe million we the in couple performance we our

business good So that where about we feel would business to continue to time. is and love we grow over that

John Griek

Can you, the to Greg. next Thank Okay. question? we go

Operator

Certainly.

comes Morgan from question Your the please? next Our Stanley, from Kai of question, Pan line

Kai Pan

just on is morning. Good a follow-up severity first question the trends. My you. Thank

the severity that your up how you bit. wonder does going little I it's with And anything well. on front expectation. also, disclose don't BI if as So anymore, a just that compare

Glenn T. Shapiro

Thank Yes. Glenn. you. is This

line it our So is in it's expectation interesting. with and

basis, on when breaking number all paid you damage, see property trends of what to in trends, down beyond last you release you booking comprehensive, said future the We're labor Tom underneath quarterly different different quarter, and think breaking coverages before, that. down collision, between and look We a the at As a and parts we're X.X. a saw about we're lot severity, our that.

when So, from year. X it little It's X second to between for the a it. basis we at X.X X.X, a and see about more really third looking of the full a or the over shift quarter in smooth

to for Now, a that and trend X. closer compares to both the longer-term industry Allstate

is the is what's pressure have happened of elevation higher elevated. in with accelerated the some costs, physical in in values earlier is see an repair more and cars, are the sophisticated than because losses. expensive total is with Like, And property it parts and moving which repairs what cars. those And the mentioned more a So do across faster little two also the then John industry damage lines. disclosure we damage connected has things

So of is trigger repairs total And the numbers. it's seen you baked you, up cars, more for naturally, if it's then than again, the the more key the I across the our cost go And vehicles. think, into industry. something we've on loss

there, an we're from projection seeing what you it's to in our combined see So our when ratios, ultimate loss standpoint. trend

Kai Pan

side? What about BI

Thomas Joseph Wilson

sorry, I'm the on Well, BI.

Glenn T. Shapiro

don't but general slightly above BI, inflation. it We be disclose would

Kai Pan

claim that favorable, improved up, seen underlying that long-term, XXXX few less a but see that's great. last trending severity XX%-ish. as in years, now pricing and you – Okay, your those of frequency back slowing over increases frequency follow-up but sort XX% have like you your from combined My on have to ratio down, is

that higher Tom, of So underlying what – be will consider see combined your part will ratio your your you higher. that income of in drift target investment consideration also mentioned you going we is the ratio? coming also the Will years? And

Thomas Joseph Wilson

the having we which to on return our excellent is Elyse, Greg for to is were with back come would our capital I shareholders conversation and lines. earn a mission our of on all

on and long on take done auto a time. for quickly actions unexpected, have that When something first period That's mantra. of returns, kind growth. second on we insurance We that's happens focusing of pretty been protecting our

really that in change I any So don't going see forward.

we getting good So to in returns we're a don't insurance pieces but and about shareholders. a mentioned it's pieces total on good like pieces And that. bounce you it's to actually as around, Glenn – do total, some go getting we some bit continue portfolio, auto investment for up, me, to down, these return expect little go having

Kai Pan

Great. so Thank much. you

Operator

you. Thank

the from of with comes Credit Suisse. line Mike question Zaremski next Our

please? question, Your

Michael Zaremski

mentioned incentives Just But not that it. to goal on penetration Are force the how time. prepared telematics. your of think kind the In of maybe telematics. terms thanks. mentioned growth you to in you about agency remarks, just sell light sure if over for to you you Hi, the it? use shed of curious increased of I'm can providing

Thomas Joseph Wilson

Mike, you hard it. go up expect the We're time. penetration over at should pushing to

it's brands the have We'd move We more of and Allstate really the and a for first for specific as underway We them aggressively. into them. want Esurance the good series Encompass customers. a to give that that price brand do We do to like efforts in that can to well. foremost, because

So, estimate exactly things the we've to based just There is car on for driving the not expanded determine other can telematics where garaged. offering you we are drive right parked. With Milewise. you where example, now, somebody's include where that where telematics it's

They something happens mile. like to you the the ferry – in and some to people the to seen So haven't like car really ads, subway, have by while then in it steals just across to case the but in like some Jersey people New you it or to our because as pay mile. like you pay the if come to depressed, sitting, something pay like by have live people or I'm covered

to how car. So they it it also a use give us individualized the improve driving their want specific, gives ability to to experience. the highly to tailored We're using price

to offers working the health everything, that So stuff be stuff includes car some them how just driver, that a about mentioned. LifeXXX on, we're like them, heard location-based safer to that telling to maybe Mario you

an rate. expect we use to telematics So at increased

Now, get it's it not from to that just it easy offering used. getting to

not a that pricing driver the who powerful. TransUnion insurance as credit. XXXX. like a in hanging some you because number connect part in doesn't the car like a incentives this the at auto in which We Allstate, (XX:XX) connected due the to processes. that expect customer you best And getting is is do in we but differently have it this special the we continue It though to yes a lower interest. industry use. work to app, it's do saying this to ways insurance while, data in we I be we We So than equally little from that. which So through around owners of should to something do because enable market that. mobile first as have go credit to getting that, that I to those we'll bit Esurance our And be do a pay the the implement future, for to And them buying insurance or of in easiest, of number with sort customer to because requires we but through from different early powerful is auto barrier been harder believe ripped agency were of to just do up. pricing as requires will than at customers to get them But of the have every believe primary them it's it do the and set rather

happen will it So

Michael Zaremski

economics been held my you is Earlier guys auto. and to personal have Okay. X us to. surplus kind of levels mentioned high what X were walking a regarding That's the kind helpful. through And level follow-up of always you you

your track profitability, day? record can ever higher stable move Given of that ratio one

Thomas Joseph Wilson

think comment make and about how me Mario about can we talk auto capital insurance. general specifically about about Let a

last company. even level, we've entire decade, So, below capital determine over the us individual up help highly built econometric the auto insurance, to the of to rolling the sophisticated risk set way at all models a

into kind And So with start comes we individual we We of all that diversifications, use kind covariance, use individual a homeowners insurance risk of all Louisiana. price to numbers. that basis. in it. on the there's stuff Then,

of long can So that at about on capital look or we're it record it. effectively looking sourcing perpetual because capital lot Mario bonds, we talk we the constantly at had different ways. have whether a which is doing track be a that on, preferred anything in work we're cat something else, is so

Mario Rizzo

Yes.

capital to Tom kind when and Tom the sophisticated requirements comment a do And historical think take and of So, far Mike, based particular business capital of X that metric we that's kind I auto industry of a X approach risks economic think earning really around. so. we the look more think, in to in was continue as attractive on mentioned, add I levels We, thrown we made to are risk. will underlying specific that, attribute at and returns

I move your ways it's of think attractive. return all really sourcing think capital the improve constantly profile really we're I terms what X, our the is, across the for over on X achieving based returns looking say And over economic time, the business our to it in are there. we're around And already question to business for up can in then, think at So requirements view auto that of businesses. I'd probably that we

return the that return might it we have business We'll and efficiency done continue lines kind different of get And sometimes of the that other with enhance businesses both capital property profiles and our reinsurance. return It's to targets than other that cat the different returns and to efficient of we a the and more means businesses. in explore business. use using kind to for We've our bonds to in people's capital. that sculpt that continue of profile on capital structure

Michael Zaremski

Thank you.

Operator

you. Thank

line comes Our Amit Buckingham from next from Kumar question of the Research.

Your question, please?

Amit Kumar

Thanks good and morning.

have- question first I The

Thomas Joseph Wilson

- a just little Amit, bit? up could It's a little speak you

Amit Kumar

Is it better?

Thomas Joseph Wilson

that's fine. Yeah, you. Thank

Amit Kumar

Sorry.

the first I goes – was and if vehicle a manner. claim The it the business the back about question discussion severity at that insured, different you you if I the manufactured recently wondering of surprised we could talk side. would age and Can on business assume to new at is that up from could the new cars. look correlation when look is that we being tick to anticipated? very faster now there And standard, a continuing be these than the strong is claim case, between severities by with initially ADAS

Thomas Joseph Wilson

is First, not cars. new always the business new

newer cars. some there older business, obviously, are are new So renewals some cars and

relative model and do the pricing. make Glenn can do talk to we to... So ratio loss renewal new about

Amit Kumar

Yes.

Thomas Joseph Wilson

– of business. ... new the relates part if future, And the price I profitability we at we for back would like, to if would it, see as to of say, we – look it I the then, it. evaluate come

Glenn T. Shapiro

different just balance of growth or balance the our One, a growth couple driven by Taking say, Amit. XX% of being retention. again I'll from new getting, business you, ways is of Thank here. Yeah. of we're that

we new policies type from the when look bring the we trades about on, we So based that is risk feel on. that's from the a And risk a business and good of we're really coverage, risk new on are bundled balanced bringing way to we the profile, the where full grow, XX% business. at

those our So, of have to all favorable expectations. been

we we comfortable the renewal, as to growth. look at it's expected as with performing we're new very So, and

all of newer years is as The at we of car have it we look the your cars How right terms there data in look our relative cohort? comments things about average In car XX.X – of park old. the now one is on out and many in cars, each we to trends.

in it seeing right about It it you year, we're move every time, we're lines. exactly you'd just expect. major along year. what actually forward the we're So, And seeing get to expect newer. way we Every about about is year, moves those over shifts a not year a moves moves that what line and with

Amit Kumar

Got very helpful. it. That's actually

and having and The stages, opportunity other Travelers. Walmart time, and partner on on with an early the them? question, have and Amazon I the to the Amazon would it's being with curious change dynamics longer And in broader this I only maybe although discussion these days know in I'm question Allstate have, this partnerships? other with this does margin And Thanks. Jet.com change. early is does

Thomas Joseph Wilson

customer the Well, Well, first, go goes. we where

really So, have platform. talk to which about want do the go And doing go don't it's different care second don't do country who to the to the is be. where to in as biggest not a Allstate branded probably Answer independent approaches wants using to make online via where to much biggest, that's And And, who believe data brand, then, who Arity's you we to a biggest. Encompass. advertising two-sided our Financial, we about if And which aggregator, we've is or local the to we'll want customer four agency, it that. I agency the be, it's direct, know, Esurance. been Those go product. those Those through a and want

we So, work have to some do.

wants will customer we go. to So, go wherever the

Amazon major a on is policy. protection SquareTrade Amazon, platform, to relates it player As the

how We We compete seconds need good every to a know of changing aggressively piece prices like to. XX for with it's or there, us. So, working by something we them. business

whichever would And build and what those a middle to core wherever those flexible, it that's want. capabilities them that leverages So model open two to tried that ovals of is go we're I do, in say, we've Amit, way. doing to they're use we

network experience our because good you claims, companies, claims at bodily of look injury great particularly the transportation claims. we're really value companies if at to those So, is

to to grow insurance happy sell Uber and about and to we're it. thrilled partnership like it, the and so And like

the we'll So customer goes. wherever go

Amit Kumar

and Got it. luck answer for good the Thanks future. for the

Operator

you. Thank

of the question Brian Meredith comes line next from from Our UBS.

Your question, please?

Brian Meredith

questions Yeah, for you. two

these curious, can expect we First business the forward? is of kicking But profitability at and just you going here. one, Tom, maximize should levels really continue here ad to kind get you of those up profitability great want amount spend levels. to Understand,

Thomas Joseph Wilson

talking about you combined ratio? actual are Brian, the reported

Brian Meredith

I'm at ad No, looking spend.

looking of Just at amount -

Thomas Joseph Wilson

Oh, I'm spend. of sorry, question. part ad I that the missed

Brian Meredith

advertising. yeah, Apologize,

Thomas Joseph Wilson

by brand, it's Well, advertising. Yeah, right. different

led has results. So, advertising and advertising Allstate dialed year. early X% on that's it. we And (XX:XX) as and advertising We're this like up also that really that. last We've up the quarter. mentioned, in Esurance effective, read to brand their units launched new spend in it's like the good is over We Steve

So, as we'll that works, roll out.

do Now, you think use I spend. or TV, and we thing lot lead that but would increase efficiency the math where and and effectiveness And say, do is a be else sees spend your one your and you where highly in also and you that's decide, is of it to better you specific on where it to that can buy. targeted like should where spend about, it's a everybody ad a we or it how

So, we at it look in total.

basis. I spend a like forward-looking on we ad want We out growing. don't say give competitive For what we would see. reasons, to we keep

that. won't you it see about So how down, come probably

Brian Meredith

more Good, it Tom, legalization the a thoughts states claims here. that with and one of trends make you the another what in and will guys' Canada, more are sense. have respect And frequency or curious longer-term with potential have thinking then, little will cannabis in just any? on I'm to

Thomas Joseph Wilson

to seen distinguish. leads obviously, out. has that accidents. cannabis, that it where a obviously it little bit been consumption hard of the Well, rolled will It's I in states impact if will, increased to think And a it we've little

and of really being increased it like But You to negative, much much it how Unclear outside. impact yet. was it positive a how smoked appear just a severity can't a because does joint (XX:XX) on have tell is frequency. because icy somebody

whatever it. is And legal, it's When so we'll is for legal legal. price

time, that drugs, issue I and other if of driving, the is with some under have people, so and to to of from cause, driving of inebriated for pay person those there supposed some is with think was damages, to person our which which easy the we and leads that because happened relatively led in things then that have we're are bigger we insuring be immediate of a the to And hurt that to is society amount to get or driving. it's care in therefore, back. who to taken they at court, the of standpoint, problem. is money moment The we right the breathalyzers more influence on the complicated them cannabis which test not fairness who drunk spend in is person do an there's tell make to when sure someone's by somebody this the alcohol piece customers caused

and breathalyzer you tell whether under of cannabis. a So, is influence can't somebody blow the into

So, But are if make use like to actions making it's science problem. we'd to accountable can around these a decided we've on sure the the individual their improved. see bear held legal I'm is infrastructure some society brought it. solve science to sure should that drugs, that we sure then people for as

Brian Meredith

you. Thank Great.

Operator

Thank you.

Montgomery. Our next of from Janney comes line Glasspiegel from question the Bob

please? question, Your

Robert Glasspiegel

assets we've Good equities, morning, being Allstate; had marked in a little risk a meltdown question, down. of bit

you to private in meltdown aren't. relative equity, nervous how private on are raise? What trends portfolio? liquidity a if much could others was you about And in doing equities, risk Some there the in are general investment

John Griek

is Hi, Yeah. Thanks John. question. the for this

of makes performance-based risk When We're about of firm of to highly and duration. all in quite overall equity well about back. earlier Tom And the talked private that they did. framework. quite the in a we is view integrated. which sense across I up step asset, own a one our back those We're take portfolio. think, and versus in the its integrated capital think first, assets We did capital them, board. any assets. some it how it step structure, how to long highly we about longer-term thinks match to comes being liability take a Mario tend the I'd or on take terms of our

have through volatility year, seeing three this we middle recovered a years are three over in subsequently kind month, we've returned bit that last a particular XX% flash Equities over from. of February year of period. we late saw and the slightly which While this January annum little per

view. So, really long we take run a

thing. at into And – our smaller different risk. right about think equity look said companies. the as parts it's our going assets, that, of not to We in We into When do market any immediate them go to equities, of half world. structure, so idiosyncratic more We go to you're one go cap performance-based tend down it. which having in. we in Now, about pricing of exposure we see have you public is think more

infrastructure, like estate, We real also in farm there land. have things agriculture,

diversified. fairly it's So,

So, a we're takes tend the those it equity value at of tends in. take place transformation years. not It's – involved that that of market. a the and just valuation fundamental very the to with over along beta There's properties transformation times place multiple

So look it. we at

We adjust event. we and have equity capital other deal private leverage the to not in adequate areas. public It's more with a the such transaction to And any than would only but adjust, in in lot would be in costs that markets lower. of sufficient, portfolio likely we because have liquidity more

Robert Glasspiegel

non-cat step ratio of or either impact to Did in you had combined I quantify weather away the fire overall drill. you. for a Thank the homeowners?

Thomas Joseph Wilson

hard to you No. It's as really Bob, know. do,

that feel ratio, do. it. is earns XX And a said You up weather. and an But the been What some year business up. four prior returns. It's determine that It's combined which Moines, really last to of variety or how impossible whole we've that years, have ratio at, really a the what we underlying excludes the and reasons, point XX can margin, we related it's done. comfortable to would in for to not weather, three of have look cat, is or Des rainstorm was the good with combined

Robert Glasspiegel

Cool.

to trying Just sense a get -

Thomas Joseph Wilson

to states state, there where are like we some homeowner prices, we're price need the Like price, need even time. – not to we by other when than earnings every places And state better where raise raise raise we average it's returns.

Robert Glasspiegel

Thank you.

John Griek

more I the hour. We'll we're at of Jonathan, know question. one take top the

Operator

Certainly.

Our Shields comes from final KBW. question then for from Meyer today

Your question, please?

Meyer Shields

an Yeah. to respond? Thanks. rates auto, If in how we can were quickly see frequency in uptick

Thomas Joseph Wilson

get that. happened as what at look way XXXX to estimate a would an I in and XXXX of mean, I

quickly we could some. quickly I we've You act. think you up saw saw then, it And learned how tick

of if in the time. actually, story move, – a the think have you regulatory quickly we think the we rate less given differently. but were period of in decrease to that as we'd environment I And as would number spread I about units, relive would probably can little again, moved it that we

Meyer Shields

Okay perfect. Thank you so much.

Thomas Joseph Wilson

participating. Okay. Thank you all for

for Another achieving going shareholder working, great we're priorities operating quarter value. us where to our keep our we're strategy driving is and

Thank talk we'll next quarter. So, you. Bye. you to

Operator

for today's does gentlemen, and program. ladies your the in participation This you, Thank conference. conclude

now You day. disconnect. may Good

The Allstate Corporation (ALL) 1 Nov 182018 Q3 Earnings call transcript