Allstate Corp Q3 2024 Earnings Call Summary

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

Question: Jimmy Bhullar - JPMorgan - Analyst : So first, just had a question around your confidence and outlook for PIF growth in the auto business and what you're seeing in terms of competitor behavior, both on prices and on advertising. It seems like most competitors are turn -- shifting to a growth mode now that margins have recovered. But are you confident that we can see PIF growth turn positive over the next few quarters?

Question: Jimmy Bhullar - JPMorgan - Analyst : Okay. And then on capital, obviously, your balance sheet is a lot stronger with the improved profitability. You've got the pending sale of the Benefits business as well. How should we think about uses of capital as profitability continues to recover and once the sale closes between your priorities for acquisitions, potential buybacks, dividends?

Question: Greg Peters - Raymond James. - Analyst : I'd like to, for my first question, focus on slide 8, which is your retention slide. And in your comments, you mentioned changing of agent compensation. If I'm not mistaken, some time ago, you lowered agent compensation on renewals. AND I'm wondering if that's having any spillover effect on retention? And obviously, the new apps are doing strong, so your competitive position looks good. Also, is part of Transformative Growth. I think you've been streamlining some claims costs, some claims functions. Curious if you're seeing any impact of that on retention?

Question: Greg Peters - Raymond James. - Analyst : I guess as my follow-up question, just looking at the homeowners business, it looks like it's really performing well at a 62.1% underlying combined ratio. I'm -- you're growing that business. I assume you're not growing just a stand-alone homeowners business with the policy in-force growth. It's part of a bundle, but maybe you can provide us some perspective on how you're able to grow that business considering all the rate you've thrown in that line of business?

Question: Yaron Kinar - Jefferies - Analyst : I actually have two on renewal ratios. First, maybe conceptually, just looking at the slide 8. As the company grows in nonstandard auto and in direct, two areas where I think -- and then correct me if I'm wrong, renewal rates as for the industry have tend to be a bit lower. Is it fair to think of a run rate renewal rate that would be a bit lower than the, call it, through cycle 87.5 or so that I see in the slide?

Question: Yaron Kinar - Jefferies - Analyst : Great. And then just thinking about the renewal ratio from here on. I think at times, you see a little bit of a breakdown of that inverse correlation between rate increases and the renewal ratio. And we saw a little bit of that a bit earlier in this current cycle. Obviously, we're seeing that pick up now. But I guess, bottom line, is there a bit of a lag currently between the rate increases and the renewal ratio, one that we -- I don't think was as pronounced in prior years?

Question: Yaron Kinar - Jefferies - Analyst : But I guess what I'm trying to get at here is I think the big rate increases that we saw in the beginning of the year were really first quarter weighted, California, New York, New Jersey. I would have thought that the full impact of the -- those rates taking effect in the first quarter would have been in the second quarter. And by the time we came out of the third quarter, call it, August, September, we'd see a little less of that pressure?

Question: Bob Huang - Morgan Stanley - Analyst : My question also follows around that line of business. So if we think about your combined ratio and growth, right? In auto, you typically target a mid-90 combined ratio. Understanding that pricing has a lagging effect and then retention and growth also does. But if we just look at the combined ratio, is the current level good enough for you to really step on the gas for growth? Or do you feel you probably need 1 or 2 point more on the auto combined ratio side before you're fully comfortable with fully ramping up that growth going forward?

Question: Bob Huang - Morgan Stanley - Analyst : Okay. That's super helpful. Second question is around the homeowner side. I understand that you said there are a few competitors now. The technology really makes it easier potentially for homeowner insurance to really grow from here. But isn't it fair to say that the states where there are opportunities, there are also states where people are trying to pull out? So growth -- wouldn't that be geography related? Can you maybe talk about what regions do you think it's more attractive on the homeowner front? Or where do you think the opportunity lies in the growth on that space?

Question: Hristian Getsov - Wells Fargo Securities, LLC - Analyst : Mario, you said 75% to 80% of your auto premiums are currently open for new business. So is it safe to assume that auto policies grew quarter over quarter in those states in the Q3?

Question: Hristian Getsov - Wells Fargo Securities, LLC - Analyst : Got you. And then -- so with the auto retention being down 1 point sequentially and then PIFs were down 50 bps, this is auto. Like is the majority of the declines in those metrics driven by California, New York, New Jersey, just given like the big rate increases we saw that were implemented -- I guess, approved in December, they were implemented throughout the year. And then when would you expect -- I guess, excluding those three states, right, did PIF improve quarter over quarter? Just trying to get a sense of how big of a drag those three states have.

Question: David Motemaden - Evercore ISI - Analyst : I was wondering if you could just comment on your expectations for the timing of the retention ratio improvements? I know that you mentioned leveling off of rate increases should help retention. So I'm wondering, are you seeing any evidence of that here in October? Or is it still too early to tell?

Question: David Motemaden - Evercore ISI - Analyst : Got it. And it definitely feels like you guys are pretty confident around just -- or feel optimistic that the tempering rate increases should help improve that retention. I mean, from your standpoint, is it really just we're just having this timing impact from these REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 1:00PM, ALL.N - Q3 2024 Allstate Corp Earnings Call three big states that need to just work their way through and like we're on the cusp here of a turn? Or I mean, I'm just trying to understand how you guys are thinking about it internally.

Question: Josh Shanker - BofA Global Research - Analyst : Two questions, one whimsical and one numbers. You talked about cracking the code on how to get people to buy homeowners insurance online. How far away are we from being able to call Allstate and getting into an AI conversation with Dennis Haysbert or Dean Winters that knowledgeable about what you can do to save money by switching to Allstate and the way you can do for your policy?

Question: Josh Shanker - BofA Global Research - Analyst : And then the numbers, look, ad spend is way up as you look to grow the business. I'm multiplying your number on that by premium and seeing it's up substantially. You also gave us a lot of data around new issued applications and we can make some guesses around gross new customers. The ad spend is up significantly more than the new customer acquisition. Can you talk a little bit about what is sensible acquisition cost per customer, how we should think about it? And clearly, are you getting the tack on new business that you can make a return