Allstate at Raymond James Conference: Strategic Growth and Financial Insights

On Tuesday, 04 March 2025, Allstate Corp (NYSE: ALL) participated in the Raymond James & Associates’ 46th Annual Institutional Investors Conference. CFO Jess Merten provided a comprehensive overview of Allstate’s 2024 financial performance and strategic priorities for 2025. The company reported robust revenue growth and emphasized transformative initiatives aimed at increasing market share, despite challenges in certain regional markets.

Key Takeaways

• Allstate reported a 12.3% increase in total revenue for 2024, reaching $64.1 billion.
• The company authorized a $1.5 billion share repurchase agreement and increased the dividend by 8.7%.
• Strategic priorities for 2025 include expanding market share and leveraging technology for growth.
• Allstate is cautious about the California homeowners insurance market due to regulatory and environmental challenges.
• The company is adapting to market changes, including the impact of electric vehicles and AI in claims processing.

Financial Results

Allstate’s financial performance in 2024 was strong, with total revenue increasing by 12.3% to $64.1 billion. Net income reached $4.6 billion, and the adjusted net income return on equity stood at a robust 26.8%. The property liability earned premium rose by 11.2% to $53.9 billion, while net investment income saw a significant increase of nearly 25% for the year. The adjusted net income per share was reported at $18.32. Auto insurance underwriting income was $1.8 billion, and homeowners insurance underwriting income was $1.3 billion, with the latter showing a 16.7-point improvement in its combined ratio compared to the previous year.

Operational Updates

Allstate’s transformative growth initiative, launched in 2019, aims to increase personal property liability market share by enhancing customer value, expanding access through multiple channels, and leveraging technology. Since 2019, the company has improved its adjusted expense ratio by nearly five points, thanks to streamlined operations and digitization. Policies in force increased to 37.3 million, with new business items growing by 76% compared to 2019. The company continues to expand its product offerings, with new auto and homeowners products available in multiple states.

Future Outlook

Looking ahead to 2025, Allstate plans to grow its total property liability policies by improving customer retention and maintaining strong new business sales. The company aims to complete the rollout of its affordable auto and homeowners products and continue investing in marketing. Capital management remains a priority, with a $1.5 billion share repurchase agreement and an increased dividend highlighting Allstate’s commitment to shareholder value. In California, Allstate is cautiously observing market conditions, waiting for stabilization before expanding its homeowners insurance offerings.

Q&A Highlights

During the Q&A session, Allstate addressed several key topics. The company is seeking additional rate approvals in New York and New Jersey and is not expanding new business until rate adequacy is achieved. In California, Allstate has paused new business due to market instability. The company is prepared to adapt to the rise of electric vehicles and the competitive auto insurance market. Additionally, Allstate is utilizing AI to improve claims processing and customer retention strategies.

For a detailed examination of Allstate’s strategic initiatives and financial performance, please refer to the full transcript below.

Full transcript - Raymond James & Associates’ 46th Annual Institutional Investors Conference 2025:

Greg Peters, Insurance Analyst, Raymond James: morning, everyone. Greg Peters here with Raymond James. I’m the insurance analyst. And, you know, for as long as I’ve been here at Raymond James, one of the companies I followed, Allstate, has been a willing participant in Guinea pig in coming with coming to the conference for us. So we appreciate their continuing support and participation in our conference.

So, today, we have the management team, including Jess Merton, who’s the CFO, and I’m gonna turn it over to Jess to give us, some opening comments.

Jess Merten, CFO, Allstate: Alright. Thanks, Greg. So good morning, everyone. It’s great to be back at the Raymond James Conference in Florida. We’re back again this year and ready to talk about the year and, take a look forward and take some questions.

So I’m gonna I’m gonna start out with an overview of Allstate’s strategy and our recent results. That’ll help create some context about why we think Allstate’s an attractive investment. And I think it’ll set a good foundation for the, balance of the time we have to set, some questions. So, you know, first off, got the clicker. Here we go.

I wanna remind you that I’m gonna be using forward looking statements in reference to non GAAP measures, evaluate my remarks in the context of all the information that we provide, including information on potential risks in our recently filed 10 ks for 2024 and the other public documents that we issue. This presentation and more specific information is available on our website at allstateinvestors.com. Many of you are familiar with Allstate’s strategy, but some of you may not be. So I wanna provide a high level overview before I go through results in more detail. Allstate’s strategy has two components, increasing personal property liability market share while expanding protection services that we provide to customers.

On the right, you can see a summary of financial results for 2024, as well as our strategic priorities for 2025. Twenty ’20 ’4 was an excellent year for Allstate, both financially and strategically. Total revenue increased 12.3% to 6 to $64,100,000,000 with net income of $4,600,000,000 Adjusted net income return on equity was strong at 26.8%. We’re confident that successful execution of the four priorities that you see here are going to generate shareholder value. We’re going to deliver attractive financial returns through a disciplined execution of our strategy.

We’re going to remain focused on executing transformative growth, which is our multiyear initiative to increase personal property liability market share. Expanding protection services is going to allow us to build stronger customer relationships and meet more customer needs. Lastly, as we demonstrated with our dividend and share repurchase announcement last week, we will proactively manage capital to create value for our shareholders. Now let’s dive a little bit deeper into our financial results for 2024. Property liability earned premium of $53,900,000,000 was up 11.2% and was primary a primary driver of the 12.3% increase in total revenue, for last year that I mentioned on the previous slide.

Net investment income was up almost 25% for the full year, reflecting the benefit of higher rates in portfolio growth. Adjusted net income was $4,900,000,000 for the full year, which represented about $18.32 per share. Our approach to managing risk and return delivered exceptional results with a 26.8 adjusted net income return on equity that was driven by strong performance both in underwriting and in investments. Before I move off off this page, I wanna remind you of the progress that we’ve made on our strategic decision to sell our health and benefits businesses. We previously announced the sale of the employee voluntary benefits business for $2,000,000,000 to the standard, and we expect that to close in the first half of the year.

The group health business, will be sold for $1,250,000,000 to Nationwide, and we expect that to close later this year as well. These sales are both financially attractive and will generate approximately $2,500,000,000 of additional capital to the corporation. Before I move on and go a little bit deeper in results, I do want to spend some time on transformative growth, which as I mentioned before, is our multiyear initiative that we launched in 2019 to grow personal property liability market share. Yeah. That’s right.

Sorry. I wanna make sure I’m on the right slide. Transformative growth includes five components, and the objective of this program is to increase market share. As I said, the five components are to increase customer value, expand customer access, increase the sophistication of customer acquisition, develop new technology, and drive organizational transformation. I’m gonna focus on two of those today just so that we can get to questions and take time.

First, our focus on improving customer value required us to lower cost and provide differentiated products. Our adjusted expense ratio, which excludes advertising expense and includes claims expense, has improved nearly five points since 2019. While the reduction is help was helped by higher average premium increases, we’ve substantially changed our cost structure through streamlined operations, digitization, real estate reductions, and lower distribution costs. This has allowed us to have more competitive pricing without impacting margins. Substantial progress has also been made on enhancing products to create more value for our customers.

Affordable, simple, and connected auto insurance, which is our new auto product, is available in 31 states, and our new ASC homeowners product is available in four states. Custom three sixty is our middle market standard and preferred auto and homeowners product, which is available in the independent agent channel, and it’s been introduced in 30 states. If you look at the bottom half of the slide, one of the most significant changes that we made with transformative growth is the expansion of customer access through all distribution channels. The effort has three components, improving agent productivity, expanding direct sales, and increasing independent agent distribution, all of which have been successful. As you can see on the right, in 2019, more than three out of every four new business policies came through Allstate agents.

Last year, new business was 9,700,000 items, which is 76% higher than 2019 with significant contributions coming from each channel. Policies in force have increased to $37,300,000 37,300,000 items, despite the negative impact of the post pandemic price increases. There’s a lot more to transformative growth that I don’t have time to cover, but we’re confident that successful execution of this strategic initiative has positioned us for property liability market share growth. So now if I turn back to results, the property liability business delivered excellent results in 2024. As you can see in the table on the left, auto insurance generated 1,800,000,000 of underwriting income, and homeowners contributed an additional $1,300,000,000 both significant improvements compared to the prior year.

We show auto margins in the top right of the chart, and you can see how the successful execution of our auto profit improvement plan has restored profitability back to target levels. Twenty twenty four finished the year with a combined ratio of 95, which is squarely within our mid nineties combined ratio target. In the bottom right chart, you can see the homeowners insurance business achieved a 90.1 combined ratio, again, meeting our low nineties target for that line of business. And this represents a 16.7 improvement when compared to 2024, which reflects lower catastrophes as well as stronger underlying performance in the homeowners line. It’s important to evaluate our homeowners business, over a longer term period and extended time frame because catastrophe losses create volatility period to period.

You can see that over a ten year period, our track record is very, very good. We had a combined ratio of 92 from the ten year period of 02/2014 to 2,023, which outperformed the industry’s combined ratio of one zero three, and the industry’s underwriting loss for that same period. So we have a long track record of successful execution in homeowners. We have an industry leading product, advanced pricing, underwriting and analytics, broad distribution capabilities, as well as a comprehensive reinsurance program, all that allow us to win in the homeowners business, and it’s a line we continue to wanna grow. Now I’ll shift to a topic that many of you may be more focused on, which is growth.

The property liability business has 37,400,000 policies in force with auto representing 24.8 or two thirds and homeowners comprising about 20% of that total. As of January 31, we introduced a new disclosure, and you could see that auto policies enforced declined by 1.3 as lower attention, particularly in states with large rate increases, outweighed the increases in new business applications. However, at year end, we did see policies in force increase on a year over year basis in 31 states, representing approximately 60% of countrywide premium. For the year, homeowners insurance policies in force increased by a 80,000 or about 2.5%, which was driven by strong retention and increases in new business and homeowners. As I mentioned before, we view homeowners as a growth opportunity across all distribution channels.

For 2025, our objective is to grow total property liability policies by improving customer retention, maintaining strong new business sales at the same time. On the bottom of the page, you can see what we’re doing and what we’re deploying as regards to tactics to achieve policy growth. First, we’re proactively contacting customers to review their needs and lower the cost of protection by making adjustments to their policies. We believe that a proactive approach is gonna help us retain more customers. Second, we’re completing the rollout of our affordable, simple, and connected auto and homeowners products.

As I mentioned before, We believe that rollout will enable growth. The new products include our most sophisticated rating plans and improved customer experience that includes telematics offerings that will help customers save money. Lastly, we continue to invest in marketing and develop products that allow us to leverage our broad distribution network and grow property liability market share. I do want to touch briefly on investment performance and asset allocation. Through our proactive portfolio management, we optimize return per unit of risk across the enterprise with a comprehensive monitoring process of economic conditions, market opportunities, interest rates, and credit spreads.

Investment income for the year increased 3.1 increased to $3,100,000,000 in 2024, which was 24.8% above the prior year, due to repositioning into higher yielding fixed income securities, portfolio growth, and stronger performance based results. Market based investment income increased two point increased to $2,700,000,000, which was 23.2% above the prior year due to higher fixed income yields and higher investment balances. Our fixed income yield shown below the chart has steadily improved from 4% to 4.4 over the past year as we repositioned again into higher yielding longer duration assets. Performance based investments increased to $618,000,000 income, increased to $618,000,000 or 23.8% above prior year, primarily due to private equity valuation increases. We make these investments for long term value creation.

We do expect quarter to quarter net net investment income volatility from these investments. The pie chart on the right shows our asset allocation as of the year end 02/2024. Our portfolio is largely comprised of high quality liquid interest bearing assets. Public equity holdings did increase by $2,400,000,000 in the fourth quarter to $3,300,000,000 representing 5% of the total portfolio. Fixed income duration stands at five point three years, which is unchanged from the prior quarter and up from four point eight years at the end of twenty twenty three.

Before I wrap up and move to questions, I do wanna discuss how our proactive approach to capital management, supports growth and provides strong return to shareholders. Allstate’s diversified portfolio of businesses has a proven history of generating substantial cash flow from operations, and we generate significant value for shareholders at target margins as evidenced by our 26.8% return on equity for 2024. Over the past several years, Allstate has also created shareholder value through the acquisitions of National General and SquareTrade, which we now call protection plants. And these transactions support a strong track record of successfully evaluating and integrating companies that bring capabilities to Allstate to complement our strategy to grow market share and expand protection to customers. We also have a long history of returning cash to our shareholders.

As we announced last week, the board authorized a $1,500,000,000 share repurchase agreement that represents most of the additional capital that will generate through the divestiture of the employee voluntary benefits business. At the same time, we announced an increase of 8.7% to our quarterly common dividend, which is now $1 per share. And since 02/2015, Allstate has returned $24,500,000,000 to shareholders through 17,400,000,000.0 in share repurchases and 7,100,000,000.0 in dividends. The dividend increase combined with the new share repurchase program demonstrates our commitment to proactively managing capital to create value. Our balanced approach creates both immediate returns and long term value, which I believe positions us well for years ahead.

Before we go to questions, I do always like to end where we start, which is reiterating our strategic priorities for 2025. Allstate’s gonna create shareholder value by delivering financial attractive financial returns, executing our transformative growth initiative to increase property liability market share, expanding protection offerings, and by proactively managing risk and return in capital. So with that as context, let’s move to questions and answers, Greg. How’s that sound? We’ll leave the good hands up.

That’s a good way to add. Go ahead. What? I’ll just repeat the question. I’ll repeat the question.

Got it. So the question was, can I comment on New York, New Jersey rate approvals and new product filings? We do need additional rate in both of those states, which is why we’re not growing new business in New York and New Jersey. It’s hard to say exactly when we’re gonna get the approvals that we need to get to rate adequacy, but I you did touch on an important dimension in the question, which was the new new products that we have filed. New products are filed on a rate adequate basis.

Right? So to the extent that the the new products are approved and implemented in the market, those will be rate adequate. So we won’t have to file additional rate to get those where they need to be. They’ll be in market at rate adequate levels. And so we’ll be able to turn on new business in a measured way in those states when the new, when our affordable, simple, and connected products are filed, approved and in place in those states.

That will help with some of the profitability issues we have on the older policies. Yeah. So the the question is, talk about California, how are we looking at the market. We have disclosed the fire loss, and so I think that’s all out there. I think the bigger question, Greg, is about the market itself.

Right? And so if you look, Allstate stopped writing new business in 2022 in California. We started getting smaller in 02/2007, which is part of why our market share looks like it does right now. So effectively, we have a lot of customers, homeowners customers in California. We write new auto business in the state, but, you know, really, we’ve gotten smaller, and it’s because you have to make an adequate return on capital.

I think right now, the market is in a state of turmoil. Right? And we wanna engage with the commissioner and the state to get to get to a point where carriers can write new business and make an adequate return on the homeowners line. And so there’s been things that we’ve talked about that the commissioner has has embraced, conceptually at least. So wildfire modeling needs to be part of rate making.

We have to be able to pass along the cost of reinsurance. But we also need to get, you know, to the extent we can do that, we have to get rates approved on a timely basis so that we can make return. There’s a lot of, you know, there’s a lot of details still to be worked out. I think in general, there’s still you know, you’ve got other carriers making decisions in the market that are creating some significant turmoil. I won’t comment on that, but that’s all adding to what feels like a very tumultuous homeowners market.

You have a lot of folks that are on the FAIR plan. The FAIR plan is making assessments. It’s just there’s a lot going on in California. So the way that I’m looking at it is I think we’re still early days in seeing what the market’s gonna be, and I think a lot of carriers, and Allstate included, are gonna sit back and wait before you would even think about something that looks like new business in that state until you’re really sure that you could earn adequate returns. And so, you know, we’re focused, we’re engaged, we want to be part of the solution because we do have a lot of customers in the state, But we’re also approaching it with a cautious lens because I do think there’s a lot of work to be done to get the market back where it needs to be and get it to a point where quite honestly citizens in the state can get the insurance that they need to protect their homes.

That’s the most important thing. I was wondering if auto is the EV population increases. Is that good news or bad news? So in auto, question is if the greater number of EVs in the auto fleet is good news or bad news. I would say we’re neutral to the method of propulsion of a vehicle.

Right? Allstate underwrites automobiles, whether they’re internal combustion, hybrid, or fully electric. So more you know, there’s unique dimensions to an EV versus an ICE, and there’s different repair costs. There’s different things that have to be repaired. That’s what we’ve done for years.

Right? So we can adjust and adapt to that dimension and we can price for that. So all in, I would say we’re we’re neutral on it. We embrace EVs the same way we embrace embrace every other car and we know, you know, we can work with collision repair centers to get them fixed just the same way. When I say we adjust and adapt, isn’t it on a lag?

We have a lot of history and a lot of data on repairing vehicles in general. Everything that insurance companies do is on a lag. I don’t think the difference in the cost to repair those vehicles is so dramatic that it’s a lag that that would be notable in our results. Because the reality is a lot of the expensive parts set aside the battery are parts that are on every vehicle including ICE vehicles. Right?

It’s the parking sensors. It’s the the, you know, the sensors for cruise control. Like, there’s just a lot of technology that’s built into every vehicle. And so we’re pricing for that on a, you know, on a current basis as it is. Yes.

Yeah. So there, I’ll summarize that into two questions. Can I talk about the competitive environment and tariffs? Good. Competitive environment, certainly, because carriers across the industry are seeing profitability in auto insurance return to target margins is heating up.

From from Allstate’s perspective, what I’m encouraged by is we started investing in transformative growth, as I said, you know, in 2019 to position us for this growth cycle by lowering our cost structure so they have more competitive prices, by broadening distribution so that people can come to us however they want. EA, IA direct, people can come and get Allstate. So I feel like we’re well positioned. Certainly, as profitability comes back, you will see ad spend go up. You will see customer acquisition go up because people want to grow.

We’re very disciplined in the day to day operation and function of how we look at marketing spend. So we understand what the value of leads are if you’re talking lower funnel, and we’re very disciplined about what we’re willing to pay for that based on what we’re seeing day to day, the results that we’re seeing. So we’ll remain disciplined. But what I’m really encouraged by is that we’ve made the investments so that we’re well positioned competitively in that environment while we stay disciplined. So I’m excited about our growth prospects even into a competitive environment, which is undoubtedly more competitive than it’s been in the past as others have returned to profitability.

As it relates to tariffs, it’s difficult. I’ll I’ll start with it’s difficult to predict the future. These things change on a pretty routine basis. We’ve seen some tariffs go in today. I’m also I was hearing, well, maybe there’ll be some exceptions for autos.

Like, we’ll have to see how all that plays out. Right? I think what what I’ve been focused on is it’s less about trying to predict exactly what’s gonna happen and what the effect is gonna be. I think at one point, we we said, well, if you do the math, it could be low single digits, mid single digits type of effect to Allstate’s underlying loss costs. What we learned through the last inflationary cycle was you have to react quickly.

You have to watch trends. You have to react very quickly to those trends. So what we’re gonna do is run the same play that we ran through that period where you look and say, okay, what are you actually seeing come through loss cost? How do you make sure that’s reflected in pricing? Because you’re gonna have offsetting impacts.

As you noted, profitability is good in the industry, so there are some favorable loss cost trends that fed that. This is gonna offset some of that. So what we have to do is get really tactical about the way that we think about the loss cost trend going forward, pricing for that, and just make sure that we’re staying on top of small rate increases to reflect the potential impacts. And to the extent that those impacts get larger because of the tariffs, we’ll adjust. You know, I’ll end with it’s a complicated system that isn’t just the tariff impact on the part that goes into the vehicle.

We’re very dependent on what that does to used car values because used car values determine whether we we call a car a total loss. So there’s a lot, labor inflation matters a lot to us as well. So I think there’s just a number of dimensions to that question that can affect us. So what we’re going to do is just get really laser focused on what’s coming through in actual claims and adjust for that. Yes.

So two questions. Where are we seeing AI use cases in claims? And are we seeing fewer claims because people are either paying cash and not wanting to submit a claim or it doesn’t make sense? Anecdotally, I’ve I’ve heard I don’t have data to support exactly that people are paying claims, you know, more because they’re not submitting. What’s happening is people are adjusting deductibles up.

And so if you think I was on a panel yesterday and we were talking. A $500 deductible twenty years ago is very different than a $500 deductible today. And the reality is you can there’s almost nothing that you can get, from a collision perspective that’s gonna be less than $500. Right? And so I think what you’re seeing is $6,700 repairs.

People are weighing making that claim and they’re in a lot of cases, they’re not. Right? And they also have increased deductibles because people have looked and said, okay, the cost of insurance is going up. What we need to do one way to offset that is to increase deductibles. So you’re seeing that as well.

So I think what that does result in is there’s probably a few more folks that are paying cash. Again, I I don’t have the actual statistics. The collision repair centers, again, do, and and they’re a little closer to it. But I’ve definitely heard that feedback coming from both investors and others within the industry that it is up a bit. Your second question was AI use cases.

There’s a lot of things that you can do in claims to make both the experience better. So there’s simple things like allowing someone to tell their story effectively and, like, what happened. Just talk and speak it into your phone and AI can go through and summarize that. It can pull out the key details that we need for a claim for a, you know, first notice of loss, which is it’s great. It’s great for the for our customers.

It’s great for us. There are other use cases post claim where we can use AI to go through and better identify both what happened in the claim and potentially flag we need to follow-up on this because, you know, this individual mentioned something that we didn’t catch in, you know, sort of the intake process. But there’s higher risk in the claim, and so we’ll go in and we’ll make sure that, the claim adjuster goes back. So AI is complementing our claims adjusters because the claims adjusters are still critically important to getting the process right, but there’s a real complement that you can have there. AI also can do really neat things like if you submit a photograph of the of the accident, we can use AI to go in and check to make sure there’s consistency because and it’s not that we think people are trying to deceive us necessarily, but if you get into an accident, sometimes you’re a little shaken up and you have to answer a question about was someone else in the vehicle or did the other vehicle’s airbag deploy and you may or may not know.

You can use AI to tell. Like, it’s not right? You can AI can go in and say, they are regulated for sure. And so we’re trying to use tools like that to make our claims adjusters and our claims processes better for for both them, but our customers as well. Yeah.

So the question is we I mentioned in my comments that we’re going and trying to help customers save money to improve retention. What that looks like is we’re reaching out to a significant number of people many times through their agent, Greg, many times through call centers if you came to us direct. Like, we’re gonna reach out to every customer, not just those that came to us through our exclusive agents. But our exclusive agents are fantastic at this. They’ve done it for a very long time.

So what what it looks like is those agents, either are gonna have a relationship or are gonna have an opportunity to build a relationship with their customer and reach out and just say, I know the cost of your premium has gone up a lot. Let’s look at your overall coverage needs. Let’s look at whether we can make adjustments to potentially save you some money. To us, it’s risk neutral. It’s good for the customer, right, because there’s a business outcome that any discount that we give drives, even something as simple as how you pay, you get an easy pay discount.

I promise you, agents will be calling and saying, Hey, you have an opportunity here. That’s good for us because if you use that method of payment, we have better retention, like the economics work. So there’s little things that we can do. In some cases, people will pay more premium, I suspect, because they’ll do a coverage review and say, I need more coverage here. In many other cases, they’ll identify an opportunity to adjust limits, change deductibles as we talked about.

They may have a $500 deductible and say, I can easily have a higher deductible than that. And it’s all focused on engaging better with our customers and helping them save, you know, their hard earned money from a premium perspective, all in a risk neutral way as possible. We’re excited about it. That’s it. That went fast.

Greg Peters, Insurance Analyst, Raymond James: So we’ll, mix your time on the breakout session downstairs and,

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