Allstate Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jimmy Bhullar - JP Morgan - Analyst : Hey, good morning. So I had a couple of questions, but maybe first starting with just your views on competition in personal auto. Frequency has been pretty favorable for you guys for many of your peers as well. And are you seeing that result in companies getting a little bit more aggressive on pricing? Or do you feel competition fairly rational overall?

Question: Jimmy Bhullar - JP Morgan - Analyst : And then on the PIF count, obviously, you're not raising prices to the same extent as you were before, which means that your persistency should remain good or get better. And then just with more marketing spending, that should help new business volume, which sort of implies that it sort of turned that you've seen in PIF should sustain, but any reasons to believe that the recent improvement would not continue?

Question: Rob Cox - Goldman Sachs - Analyst : Hey, thanks. My first question, maybe a similar line of questioning, but the new issued applications, as you mentioned, accelerated meaningfully in the quarter. I'm just curious if you think this level of new apps is being flattered by an unusually high amount of shopping or if you think this level or higher can actually be maintained with further advertising investment and product rollout?

Question: Rob Cox - Goldman Sachs - Analyst : Got it. And then maybe following up on the auto underlying loss ratio. I was just wondering if there's anything unusual embedded, maybe any tariff impacts or anything like that contemplated in the loss ratio. I noticed it was kind of one of the first quarters in a long time that the underlying loss ratio actually went up in the first quarter versus the fourth quarter.

Question: Greg Peters - Raymond James & Associates - Analyst : Morning, everyone.I would like to pivot to slide 3 of your presentation where you highlight the improvement in the adjusted expense ratio since 2018. And I'm just trying to understand what your objective will be, say, for the next five years. Do you anticipate bringing this down below 20%? And inside the expense ratio for the first quarter, we did note that the -- it looks like the advertising expense is down sequentially a little bit. So I know that's outside of the adjusted expense ratio, but maybe you can tie in with your answer or perspective on advertising expense.

Question: Greg Peters - Raymond James & Associates - Analyst : Okay. I guess for my follow-up question, I'll pivot to the slide 5, which is the catastrophe loss slide. I thought your chart there on the left is interesting in the context of framing what goes beyond the one standard deviation and two standard deviations. So inside that disclosure, a couple of things. First of all, it looks like there could be some material subrogation event for you on the wildfire. So I'm just curious how that might change your perspective on whether this is a two standard deviation or a three standard deviation event? And then secondly, in your first quarter supplement, you provided a reinsurance update, and it looks like you raised some of the limits, so maybe you can talk a little bit about that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 1:00PM, ALL.N - Q1 2025 Allstate Corp Earnings Call

Question: Greg Peters - Raymond James & Associates - Analyst : Thanks for the additional detail.

Question: Bob Huang - Morgan Stanley - Analyst : Hey, yes, good morning. So maybe one real quick on how we should think about essentially the capital position, right? So you bought back about $100 million of stock this quarter. Just given the market volatility, your fairly stable capital position, I'm curious how you should think about capital allocation, but also capital return at this point of the junction given market has been volatile, your shares have been moving around.

Question: Bob Huang - Morgan Stanley - Analyst : Okay. No, that's very helpful. So it's not -- you're not front-loading April for buybacks, I guess, is what I'm trying. Is that right?

Question: Bob Huang - Morgan Stanley - Analyst : Okay. No, thank you. Okay. So my second question, just maybe thinking about California, obviously, some competitors are facing more challenges in the homeowner environment. If homeowner competitors were to pull back, does that disrupt their bundling strategy in your view? Do you think the current environment in California changes the competitive environment there and then consequently maybe makes an opening for you? I understand that California previously has been a challenge, but maybe just any color there.

Question: Bob Huang - Morgan Stanley - Analyst : Excellent, really appreciate it and congrats on the quarter.

Question: Elyse Greenspan - Wells Fargo Securities - Analyst : Good morning. My first question is, I guess, on the March policy growth, right? You guys obviously turned the corner with growth in the first quarter. My question is specific to auto. Did you guys observe perhaps any pull forward? Were there perhaps cars being purchased in advance of tariffs? And did that impact any of the numbers in March from a policy growth perspective?

Question: Elyse Greenspan - Wells Fargo Securities - Analyst : Okay. And then my follow-up, I guess, is on the tariffs, right? It seems like it will be about a mid-single-digit increase to severity. As you guys think about that potential increase, and my sense is probably we'll start to see it over the summer, correct me if I'm wrong. But as you guys think about that increase and where your margins are today in your auto book, are you going to either absorb it with -- potentially absorb it in your margins? Or would you look to take additional price to offset any increase that we potentially see from the tariffs?

Question: Elyse Greenspan - Wells Fargo Securities - Analyst : Thank you.

Question: Alex Scott - Barclays - Analyst : Hey, good morning. First one I had is just on retention to see if you could dig a little more into what you're seeing and also the S.A.V.E. program. And I guess, specifically, I guess we don't have the exact numbers necessarily, but we can kind of calculate proxies and so forth. I mean it looks like it's still about as bad as it's got in terms of retention. How much of that is associated with packaged business, maybe still some shut-in of business versus more competition in the auto market in certain states versus running through price in certain states. Can you help me think about like how quickly you expect that to come back and what the S.A.V.E. initiative will do to help that?

Question: Alex Scott - Barclays - Analyst : Got it. Okay. That's all really helpful. Next question I had is sort of a follow-up on some of the loss trend comments you made around tariffs. And I appreciate there's a ton of uncertainty right now and there's a wide range of outcomes. But when I think about your financial position in terms of just like premium-to-equity leverage, which I know is very crude, not necessarily the way you look at it. But at a high level, you're sort of sitting at a much higher level than you were prior to the 2021 inflationary period. You're still buying back stock. I'm just trying to understand how do you think about your capital capacity to deal with the more adverse outcomes that you described? And are there sort of offsets or things I'm not thinking about that are more fine-tuned than just looking at that premium to equity now versus then?

Question: Alex Scott - Barclays - Analyst : Yeah, all good points. Thank you.

Question: Mike Zaremski - BMO Capital Markets - Analyst : Okay, great, thanks for fitting me in. My first question is a high-level question. So looking at consensus, I'm not saying this is necessarily correct, but expected to earn -- Allstate has a 23% ROE in the coming years. That's obviously well above Allstate's long-term average and your cost of equity. You spent significant time and effort building out additional sales channels in recent years. So I guess just why not write at a slightly worse combined ratio, trade-off some ROE for enable more sustainable organic growth since it seems growth has been all the focus on a go-forward basis?

Question: Joshua Shanker - Bank of America - Analyst : Well, thank you for fitting me in. I appreciate it. In terms of the cadence of advertising spend, I noticed you spent less money in the first quarter than you did in the fourth quarter. Historically, looking at when GEICO and Progressive added business, they were more first half year weighted policy addition businesses. I don't know if something has changed about the industry. But has the ad spend already peaked? And you talked in this back half of last year about ad spending for future growth. Can you talk about how that works and whether it's all playing out as the design sets up?