Yahoo Finance Allstate Corp (ALL) (Q1 2024) Earnings Call Transcript Highlights: Strong Financial Performance ...
Net Income: $1.2 billion in Q1.
Net Investment Income: Increased by 33% to $764 million.
Revenue: $15.3 billion, up 10.9% driven by Property-Liability earned premium.
Earnings Per Share (EPS): Adjusted net income of $1.4 billion or $5.13 per diluted share.
Property-Liability Earned Premium: Increased by 10.9% in Q1.
Underwriting Income: $89 million with a combined ratio of 93%.
Auto Insurance Combined Ratio: Improved to 96, showing profitability increase.
Homeowners Insurance Combined Ratio: 82.1, translating to $564 million of underwriting income.
Allstate Brand Auto Rate Increases: Exceeded 16% in both 2022 and 2023; 2.4% in Q1 2024.
Protection Service Revenues: Increased by 12.2% to $753 million.
Health and Benefits Revenue: $635 million, up by $52 million from the prior year.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Allstate Corp (NYSE:ALL) reported a net income of $1.2 billion in the first quarter, indicating a broad-based profit improvement.
Net investment income increased by almost 33%, benefiting from strategic repositioning into longer duration, higher fixed income yields.
Property-Liability earned premium rose by 10.9% due to rate increases in auto and homeowners insurance.
The auto insurance combined ratio improved by 8.4 points compared to the prior year quarter, reflecting the success of the profit improvement plan.
Homeowners insurance profitability was strong, with a combined ratio of 82.1, translating to $564 million of underwriting income.
Negative Points
Despite overall growth, Allstate brand policies in force decreased compared to the prior year, affected by profit improvement actions in auto insurance.
The sale of the Health and Benefits business is expected to have a short-term negative impact on return on equity.
In certain states, auto insurance profitability is still below target margins, necessitating further rate increases.
Customer retention could be challenged by the large rate increases implemented in 2022 and 2023.
There are ongoing needs for rate increases in key states like New York and New Jersey to achieve target profitability levels.
Q & A Highlights
Q: What are your views on PIF growth, especially considering the recent price increases? A: Thomas Joseph Wilson, Chairman of the Board, President & CEO of The Allstate Corporation, expressed optimism about pivoting to growth in the auto insurance business. He highlighted that while profitability improvements are still underway, the trajectory looks promising. Mario Rizzo, President of Property & Liability at Allstate Insurance Company, added that Allstate brand is beginning to see positive signs in retention and new business uptick, although sequential growth is needed before year-over-year growth can occur. He also noted strong growth and profitability in National General, particularly in the nonstandard auto insurance business.
Q: Can you discuss the progress on the sale of the Health and Benefits business and the deployment of the proceeds? A: Jesse Edward Merten, Executive VP & CFO of The Allstate Corporation, mentioned that the divestiture process is progressing as expected, with robust interest from potential buyers. Thomas Joseph Wilson added that the sale is part of a strategy to harvest value, emphasizing that the business is strong and a new owner might leverage it better than Allstate could.
Q: How is the PIF growth trending in states that have achieved target margins? A: Thomas Joseph Wilson explained that they do not disclose growth rates by state for competitive reasons. He assured that there are markets where Allstate is experiencing growth and others where it is not, depending on local conditions and competitive dynamics.
Q: What are the expectations for auto insurance severity and frequency trends for 2024? A: Mario Rizzo noted that the first quarter showed favorable frequency due to milder weather, which may not persist throughout the year. He discussed ongoing pressure from severity trends, particularly from bodily injury coverage, driven by higher medical costs and increased litigation. Rizzo emphasized the importance of staying on top of pricing to reflect these trends.
Q: Could you provide insights into the growth potential and strategy for National General, especially regarding the nonstandard auto segment and Custom360? A: Mario Rizzo highlighted the success and expansion of National General's nonstandard auto business and the rollout of Custom360, a product built on Allstate's standard and preferred auto offerings. He mentioned plans to expand Custom360 to more states, aiming to engage a different segment of the independent agent distribution system to drive growth.
Q: What is the strategy for the direct-to-consumer channel, considering the different needs of direct customers compared to traditional Allstate customers? A: Thomas Joseph Wilson discussed the distinct needs of direct customers, who prefer not to pay for agent assistance and seek a more streamlined buying process. He mentioned that Allstate is enhancing its technology and marketing strategies to better serve this customer segment, aiming to expand direct sales significantly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
