Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Allstate Corp (ALL, Financial) reported a 14.7% increase in total revenues, reaching $16.6 billion for the third quarter.
- The company achieved a return on equity of 26.1% over the last 12 months, indicating strong financial performance.
- The auto profit improvement plan successfully restored auto margins, positioning the property-liability business for growth.
- Homeowners insurance generated an underwriting profit of $249 million for the first nine months of 2024, despite significant catastrophe losses.
- The protection plans business saw a 23.1% increase in revenues, driven by growth in international markets and a recent acquisition to enhance mobile phone protection capabilities.
Negative Points
- The auto insurance policy growth is challenged by a decline in customer retention, which fell to 84.7%, 0.2 points below the prior year quarter.
- The catastrophe loss ratio increased by 2.8 points compared to the prior year quarter, impacting overall profitability.
- The expense ratio increased by 0.3 points due to higher advertising costs as the company accelerates growth investments.
- The Health and Benefits segment saw a $32 million decrease in adjusted net income due to increased benefit utilization across all three businesses.
- Retention in the auto insurance segment has been negatively impacted by significant rate increases, leading to a decline in policies in-force.
Q & A Highlights
Q: Can you discuss your confidence in the outlook for policy-in-force (PIF) growth in the auto business and competitor behavior?
A: Thomas Wilson, CEO, stated that while they don't provide growth projections, Allstate believes it can grow market share, which is central to their strategy. Mario Rizzo, President of Property-Liability, added that improving customer retention and increasing new business are key. They expect less rate increases, which should positively impact retention, and are taking proactive actions to improve customer experience and affordability.
Q: How should we think about uses of capital as profitability recovers and the sale of the Benefits business closes?
A: Thomas Wilson, CEO, emphasized that organic growth is the primary focus due to high returns. While Allstate has historically engaged in share repurchases, current growth opportunities are prioritized over buybacks. They also consider potential acquisitions and increasing equity allocations as other uses of capital.
Q: Regarding retention, how are changes in agent compensation and claims functions affecting it?
A: Mario Rizzo, President of Property-Liability, explained that retention in the agency channel is up year-over-year, driven by price increases rather than compensation changes. The claims organization is investing in resources to enhance customer satisfaction and manage severity, which are seen as growth levers.
Q: With the current auto combined ratio, is Allstate ready to ramp up growth, or do you need further improvement?
A: Thomas Wilson, CEO, confirmed that the auto profit improvement plan is complete, and they are investing significantly in advertising to drive growth. While some states may still require adjustments, overall, Allstate is positioned for growth.
Q: Can you comment on the timing of retention ratio improvements and the impact of rate increases?
A: Thomas Wilson, CEO, noted that while they expect retention to improve with fewer rate increases, they are actively working on enhancing customer experience and pricing precision. The focus is on operational excellence to retain more customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
