Logo of jester cap with thought bubble.

Image source: The Motley Fool.

DATE

Thursday, April 30, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

  • Chair, President, and Chief Executive Officer — Thomas J. Wilson
  • President, Property-Liability — Mario Rizzo
  • Chief Financial Officer — Jesse E. Merten
  • President, Investments and Financial Products — John Dugenske

TAKEAWAYS

  • Total Revenues -- Allstate (ALL +2.32%) reported $16.9 billion, an increase of 3%, driven by growth across multiple lines.
  • Investment Income -- $938 million, up 9.8%, with a $17 billion increase in portfolio book value to support results.
  • Property-Liability Combined Ratio -- 82.0%, with underlying combined ratio at 80.3%, marking a 2.8-point year-over-year improvement.
  • Total Policies in Force -- Up 2.5%, with property-liability segment policies rising 2.3%.
  • Net Income -- $2.4 billion, supporting strong return on equity of 48.4% for the past twelve months.
  • Adjusted Net Income -- $2.8 billion, or $10.65 per diluted share, largely reflecting favorable underwriting and investment results.
  • Auto Insurance Market Share -- Gained in 29 states encompassing 57% of countrywide premiums, with 4.3% growth in policies in force in those markets.
  • Homeowners Insurance Market Share -- Gained share in 41 states, representing 83% of the U.S. market, with 4.1% growth in policies in force.
  • Auto Insurance Underlying Combined Ratio (excluding catastrophes and reserve changes) -- 89.5%, a 1.7-point improvement versus the prior year.
  • Property-Liability Underwriting Income -- $2.7 billion, reflecting better than targeted profitability in both auto and homeowners insurance.
  • Protection Services Revenue -- Up 7.2%, led by a 13.5% increase in Allstate Protection Plans; adjusted net income for this segment totaled $47 million.
  • Shareholder Capital Return -- $881 million returned through dividends and repurchases; launched a new $4 billion repurchase program, with $3.6 billion remaining authorized, equating to 7% of shares and approximately 40% of holding company assets.
  • Auto Insurance Rate Actions -- Rate changes in 39 states for a net neutral impact; 23 states saw decreases, 16 saw increases, and 10 had both actions applied to segments.
  • Homeowners Insurance Expense Ratio -- Increased due to higher commissions associated with policy bundling, but management states this aligns with higher customer lifetime value.
  • Equity Holdings -- Portfolio equity allocation has doubled since September, now comprising approximately 12% of the total investment portfolio, reflecting a dynamic but governed capital allocation approach.
  • Technology Ecosystem Investment -- Implementation of advanced analytics and the Allstate Large Language Intelligent Ecosystem (ALLIE) is expanding use of agentic AI for operational improvements.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

  • Homeowners insurance expense ratio has increased due to higher bundling commissions.
  • Restructuring at Arity led to higher losses in the quarter as a result of workforce reductions.
  • Management stated, "We believe that California still has a significant number of changes to make for the homeowners market to be accurately priced with easing availability for our consumers."

SUMMARY

Management cited a record increase in new business written across all distribution channels, supporting expansion in both auto and homeowners lines. Rate actions were selectively implemented at the state level, resulting in a net neutral change, as management leverages granular analytics to balance growth and margin. Prior year reserve releases of $840 million in auto insurance contributed significantly to profitability. Deployment of capital highlighted a focus on organic growth, active investment portfolio management, and accelerated repurchase activity using a dynamic yet historically consistent approach. New technology platforms—including generative and agentic AI—are intended to further improve expense management and support agents, with real-time analytics and customer engagement tools already in limited market use.

  • John Dugenske emphasized, "Returns in our performance-based portfolio have been below longer-term historic averages over the last 1 and 3 years at 7.6% and 5.9%, respectively, but remain above industry benchmarks."
  • John Dugenske outlined that, "Over the last 3 years, $3 billion of economic capital was utilized to support premium growth," underscoring a capital deployment focus on core businesses.
  • Allstate Protection Plans revenue increased eightfold since acquisition, generating $175 million in adjusted net income over the past 12 months.
  • Auto insurance profitability for 2023 and 2024 was adjusted downward from original estimates as claims settled more favorably than projected, improving stated combined ratios for those years.
  • The company completed its prior $1.5 billion share repurchase program and accelerated repurchases within the new $4 billion authorization during the quarter.

INDUSTRY GLOSSARY

  • Combined Ratio: A measure of underwriting profitability, calculated as the sum of incurred losses and expenses divided by earned premiums; ratios below 100% indicate underwriting profit.
  • Underlying Combined Ratio: The combined ratio excluding catastrophe losses and impacts from prior year reserve development, used to reflect core underwriting performance.
  • Agentic AI: Artificial intelligence systems capable of proactively initiating actions, making real-time decisions, and engaging with other AI agents or users to optimize complex processes.

Full Conference Call Transcript

Thomas Wilson: [Audio Gap] Reinforces a simple message, check all state first. And the third, which debuted this week is our newest campaign, if it's important to you, it's important Allstate, which demonstrates our commitment our pure for customers and the breadth of our offering. These same themes apply to investors. You can avoid Mayhem by investing in Allstate, which has proven has a proven ability to generate consistent results. If you should call Allstate first, if you're investing in protection companies, we are affordable, particularly at this PE ratio. If it's important to shareholders, it's important to Allstate. We're going to touch on these same themes this morning. So let's review first quarter results starting on Slide 2.

I'll say we had excellent operating results in the first quarter. As you know, our strategy has 2 components that are shown on the left. Increase personal property-liability market share and expand protection provided to customers. On the right, our performance highlights for the first quarter. An important part of today's conversation is that Allstate competes using a broad set of tools, not just lowering price. This enables us to maintain attractive margins while accelerating growth. We also broadened protection offerings for customers, investment income increased and shareholders higher dividends and accelerated share repurchases. The financial results are shown on Slide 3. Total revenues increased to $16.9 billion, up 3% for the first quarter of 2025.

Investment income increased nearly 10% to $938 million. The property-liability recorded combined ratio was 82% and the underlying combined ratio is 80.3%, a 2.8 point improvement from the prior year. Total policies in force increased by 2.5% and property-liability policies in force increased by 2.3%. Net income was $2.4 billion, and adjusted net income was $2.8 billion or $10.65 per diluted share. Net income return on equity was 48.4% over the last 12 months. Slide 4 provides a construct to answer the question, how are you generate attractive returns by growing if that includes more affordable price.

The answer is that while prices are extremely important, transformative growth has created a broad set of competitive levers to enable us to grow, as you can see on the left. More affordable prices are supported by lower expenses and effective claims processes. We also use sophisticated analytics, new products, expanded benefits and bundled offerings to better serve customers. Compelling marketing and broad distribution increase new business, which fuels growth. This flywheel results in market share increases. Some examples are shown on the right. Affordable prices and lower expenses are enhanced with sophisticated pricing plans and better customer experiences. New products and benefits create value for customers.

The Allstate brand affordable, simple and connected products for both auto and home insurance are now available in 45 and 36 states, respectively. And Custom 360 auto and homeowners insurance products for independent agents are now available in 40 states. We also routinely expand or improved benefits. For example, we recently added free identity protection, so customers think beyond price, and we execute the strategy of broadening protection. Allstate agents bundle auto and homeowners insurance at high rates, making it easier for customers and lowering acquisition costs per policy. Marketing acquisition economics have improved this year.

We distribute the Allstate agents, independent agents, company call centers and over the web, which provides the right level of service for customers at the best value. In the first quarter, all distribution channels had increase in the new business and the total was a record which increased growth. Mario will now cover how this translates into market share growth while earning attractive returns. Jesse will then review more specifics on the Property-Liability business and John is going to cover protection services investments in capital.

Mario Rizzo: Thanks, Tom. Let's start with the market share growth on Slide 5. Starting on the left, Whole State increased auto insurance market share in 29 states in 2025 that comprise 57% of countrywide premiums. Looking down below in the 29 states where share increased policies in force increased by 4.3% over the prior year and outpaced vehicle registration growth in those states. That means we increased our share of insurable vehicles in those states. Which we view as a better indicator of sustainable share growth than the traditional premium-based market share metric. In the remainder of the country, policies in force decreased by 0.5% versus an increase in vehicle registration of 0.6%.

The decline is heavily impacted by 2 large states where we have intentionally been reducing share because of profitability challenges. If you look at which companies this growth comes from by dividing the market into the top 5 market share leaders and the rest of the market, slightly more comes from the medium-sized and smaller carriers. The broad set of competitive tools that Tom referenced also drives growth in homeowners insurance. Homeowners insurance market share grew at 83% of the U.S. market. [Audio Gap] This was in 41 stage, which had policy in force growth of 4.1% in 2025 over the prior year.

We have a broad competitive advantage over the companies we compete with in the homeowners insurance market as demonstrated by our ability to profitably gain share. Moving to Slide 6. Allstate's business model enables us to consistently generate strong returns. On the chart, the blue bars represent the auto insurance underlying combined ratio, which averaged 94 -- 95% and 94% over the last 5 and 10 years, consistent with our mid-90s target. There was obviously an increase in the combined ratio in 2022 post-pandemic, which required significant price increases as shown by the light blue line in the middle of this chart.

Since then, we have returned to levels at or below our mid-90s target and with more modest price increases needed to generate and sustain attractive returns. In the first quarter of 2026, rate changes were implemented in 39 states, which included a mix of both rate increases and decreases. These changes had a net overall neutral implemented rate impact across the book. Improving affordability will increase policy in force growth and raised shareholder value as long as the combined ratio continues to perform at or better than target levels. Let me note that these are underlying combined ratios that were reported for these years.

And as Jesse will cover in a few minutes, favorable subsequent reserve development shows that results for several of these years are actually better than what is shown on the chart. Moving to Slide 7. You can see a similar story in the homeowners insurance business, which also generates strong returns. Homeowners insurance over the last 5 and 10 years had a recorded combined ratio of 93.5 and 92, respectively. And has generated underwriting income of $3.9 billion and $7.9 billion in those same periods. In the first quarter, the combined ratio was 83.5 and at average premiums increased 5.7% compared to the prior year quarter, keeping pace with loss costs.

As you saw this quarter, we also posted the disclosure related to the placement of our comprehensive nationwide reinsurance program, which enhances the risk and return profile in the homeowners business by reducing capital requirements associated with catastrophe loss tail risk and dampening earnings volatility. The homeowners insurance business remains a competitive advantage and growth opportunity for Allstate. Now let me turn it over to Jesse.

Jesse Merten: All right. Thanks, Mario. Let's look at the property liability results in total on Slide 8. Auto insurance policy growth of 2.6% and homeowners insurance policy growth of 2.5% and drove an increase of 2.3% in total policies in force in written premiums. Earned premiums increased by 5.5%. The Property-Liability combined ratio was 82.0 as both auto and homeowners insurance profitability was better than our targeted levels. This result was due to strong underlying performance as well as lower catastrophes and favorable prior year reserve releases. Excluding the benefit of reserve changes and lower catastrophes, the auto insurance underlying combined ratio was 89.5, which is 1.7 points better than prior year.

Property liability underwriting income was $2.7 billion in the first quarter. Now turning to Slide 9. As Mario referenced in his comments, auto insurance profitability improved faster than original estimates in 2023 and 2024. The top of the stack bar is the underlying combined ratio as originally reported. The green bars represent the impact of subsequent prior year reserve adjustments. The light bars represent the adjusted underlying combined ratio, including the subsequent changes in our estimates of loss costs. As you can see, prior year losses developed more favorably than originally estimated. Reserving is as an iterative process with strong governance and oversight.

We use consistent practices, multiple analytical methods and include external reviews by independent actuaries to ensure reserve adequacy. As more claims settle, however, estimates each year are revised to reflect actual loss experience. In recent quarters, actual loss experience has outperformed initial expectations. This results in the release of reserves from prior years. The auto combined ratio in 2023 is now estimated at 95.4, and 2024 is estimated at 90.0. Auto insurance profitability improved faster than originally estimated. Slide 10 highlights how we expect to continually improve our strong performance and enhance competitive position. Transformative growth builds a comprehensive competitive model. This included new software and adapted legacy systems to build a connected technology ecosystem.

The system enables the use of artificial intelligence to improve customer experience and lower costs. We're leveraging this technology platform in building Allstate's Large Language Intelligent Ecosystem, which we call ALLIE, to harness the power of a genic AI. With that, I'll turn it over to John.

John Dugenske: Thanks, Jesse. Good morning, everyone. Moving to Slide 11, the Protection Services business grew to grow -- continue to grow profitably. This segment is comprised of 5 businesses shown on the left. Detection plans, dealer services, roadside, Arity and identity protection. The largest business in this segment is Allstate Protection Plans, which grew revenue 13.5% versus the prior year quarter. This business provides protection for mobile phones, consumer electronics, major appliances and furniture. Protection plans generated $41 million in adjusted net income for the first quarter, down slightly due to higher claims costs. Arity is a global intelligence business. The higher loss this quarter reflects restructuring charge related to a reduced employee count.

In total, Protection Service businesses increased revenue 7.2% and from the first quarter of 2025 and generated $47 million in adjusted net income. Let's turn to Slide 12 to discuss the investment portfolio. Investment income of $938 million increased $84 million or 9.8% compared to the prior year quarter. As shown on the chart on the left, net investment income has grown as the portfolio grew. Since the first quarter of 2024, portfolio book value has increased 24% or approximately $17 billion. The increase reflects higher average investment balances from a 15% increase in earned premiums strong underwriting income and improved fixed income yields. The table on the right side highlights the strength and consistencies of returns across asset classes.

Over the last 12 months, the portfolio generated a 4.2% return. Fixed income results over the last 5 years are top quartile. Returns in our performance-based portfolio have been below longer-term historic averages over the last 1 and 3 years at 7.6% and 5.9%, respectively, but remain above industry benchmarks. These results underscore the effectiveness of our active investment management approach. As a result, we increased the capital allocated to the investment portfolio in the first quarter, some of which is carried at the holding company. Let's move to Slide 13 to show that proactive capital management creates shareholder value.

Allstate deploys capital in multiple ways, which are shown on the left axis, organic growth, enhancing existing businesses, growth acquisitions and cash provided to shareholders. Using capital for organic growth leverages Allstate's capabilities and market presence with well-understood and attractive risk and return opportunities. This is why we're focusing on increasing market share in the property liability business. In addition, increasing market share should raise valuation multiples. Over the last 3 years, $3 billion of economic capital was utilized to support premium growth. As we just discussed, Allstate also deploys capital to support the investment portfolio to generate attractive risk-adjusted returns.

Capital is also used to strengthen existing businesses such as investments we made in our technology ecosystem or enhancing our independent agent business through the acquisition of National General. SquareTrade was a growth acquisition that leveraged the Allstate brand and capabilities. It also expanded protection offerings to execute the second part of our strategy and brought strong retail distribution partnerships. Since it was acquired, revenues have increased eightfold, and the business generated $175 million of adjusted net income over the last 12 months. Allstate also has a long track record of returning capital to shareholders. In the first quarter, $881 million is returned to shareholders, repurchases and dividends.

We completed the former $1.5 billion share repurchase program and launched a new $4 billion share repurchase program, accelerating the pace of repurchases. $3.6 billion remains on the current share repurchase authorization, which represents approximately 40% of holding company assets as of March 31 and 7% of outstanding shares. It's an interesting observation, if you bought all of Allstate 10 years ago, you would have received 99% of the purchase price back in cash and would have a company that generated $12 billion in net income over the last 12 months. Wrapping up on Slide 14. In summary, Allstate's broad set of competitive levers delivered strong results in the first quarter. Now let's move to questions.

Operator: Certainly. And our first question for today comes from the line of Mike Zaremski from BMO. Your question.

Francis Matten: This is Jack on for Mike. Just first one on the pricing outlook. Given how strong reported loss ratios are across your portfolio. I'm wondering how you're thinking about the opportunity to lean in more aggressively on pricing this year? And does that chunks differ materially across auto, homeowners and bundled customers?

Thomas Wilson: I would go back to the slide we talked about in terms of growing. We have a wide range of ways in which we grow price is certainly important, but it's not the only one. And I know there's a question for menu. So let me maybe let's spend a minute to -- because it's what you described, we do it obviously by product. We do it by state. We do it by coverage. It's highly complicated. If we think bundled customers, lower acreage costs we give them a discount if they bundle. So yes, we do all that. But let me go up. So price is obviously important, and it's a key driver of profitability.

As a result, we've built a system of, call it, operational levers, organizational accountability and sophisticated analytics. And our goal, of course, is to earn attractive margins and grow. And there's always a plan on prices that looks forward 6 to 12 months. We're going to talk about what that plan is here because it's competitive, and it changes all the time. And -- but it's based on what operational levers we think we can pull. So Jesse will describe the system for you and give you a couple of examples of how it works. The conclusion, however, is that the system works.

It works for auto and it works for homeowners, and you can see that on Slide 6 and 7. our auto combined ratio was 94 to 95 over the last 5 and 10 years. Homeowners insurance ratio of 92 to 93.5 over the last 5 and 10 years. So the system itself works while price is important in just 1 component. Jesse, why don't you talk about how it works here and then give a couple of examples.

Jesse Merten: Got it. So we think about the system like a cube that has 3 elements. And Tom alluded to the 3 elements. The operational levers, if advanced analytics and then organizational roles and responsibilities. And it's a bit like a Rubik's cube where it gives us multiple ways to both identify and address profit and growth opportunities that we have. What I'll do quickly is go through each component, and I'll give a couple of examples of what's going on, a couple of state examples about how the system works. So if you start with the operational element of our cube, we kind of covered this on Slide 4, Tom went through it.

You have new products, broad distribution marketing effectively, we employ these operational levers at the state individual market and product level. It's very granular. If I move to the advanced analytics element, we have a highly sophisticated rating plans that have billions of price points per state. We analyze data by submarket within each state and by product, by coverage by risk segment. And we link that between the signals that we're seeing in current claims trends to price at a very granular level. So we're bringing, again, this interconnected system together. These marketing analytics that are terrific, they enable us to price lead purchases in real time, determine effectiveness of programs by media channel and message.

And then the claims team is using a massive amount of data to assess the effectiveness of controlling severity and executing the claims function. Centralized. We have a centralized reserving team, of course, and we've talked about that. That's separate from our actuarial pricing team that gives us another set of eyes on loss costs and loss cost trends. The point of all this is that we have a lot of people looking at profitability and growth from a number of different perspectives to the advanced analytic lens. The final element, as Tom mentioned, was organizational roles and accountability.

We have a matrix organization structure that enables us to bring all of our expertise to bear to decide how to pull various levers in this system. That includes price changes in total or by territory or by coverage, or customer risk segment and includes adjusting underwriting guidelines. Another dimension to that would be marketing investment. We can look at the price number of sales leads to purchase by market. and then determine distribution priorities alongside those other decisions. So the system that's working together again like a Rubik's Cube to drive profitable growth.

The team in this -- the overall team, as we look at it, includes state managers that are responsible for profitability by product line, territory and coverage. We have a chief actuary who have oversized analytics, pricing trends across the country and by state and has a research and development function. We have go-to-market teams that are out there each day, bringing all of their expertise and all of this expertise together to manage growth and profitability by local market. And then we have distribution leads for Allstate agents, independent agents in our direct operations who can assess and evaluate performance on a real-time basis.

They can expand or shrink distribution and set priorities and compensation to make sure, again, that we're optimizing across the system. So the 3 elements work together in a continuous planning cycle is the way that I think of it. We create a forward-looking plan looks at expected rate changes for the next 6 to 12 months by state by line, by company, as Tom referenced. It factors in things like likely regulatory timing and what the response will be, and we build up a countrywide matrix then of underlying profitability and growth that we can evaluate the forward-looking trajectory.

In line to execution of all of the operational levers with the goal of earning attractive returns and growing in 2027 and 2028. The sort of make what is -- what turning the dimensions of this Rubik's Cube look like come live, I thought I would talk about a couple of examples. So in states where we have share that we would say is below our national average, and our underlying combined ratio is better than target, they were running at 88 underlying combined ratio. State managers will identify an opportunity to lower rates with an eye towards staying within those targeted ranges in coming quarters and in coming years.

It's a forward-looking view so that we change rates in a sustainable way. They then work within the system that I referenced to utilize the broad set of tools that we discussed in our prepared remarks, to drive profitable growth by market. So that's optimizing distribution and is working with the marketing team to make sure that where we have opportunity to grow, we're leaning into that. On the other hand, so the other state example would be a state where our underlying combined ratio is above target or on a trajectory to go above our target. And we began taking modest rate increases to get ahead of the trend.

And if needed, we'll restrict new business through underwriting guidelines and other operational levers again that we have to make sure that we manage profitability in that state. In states where we don't have ASC. Now we do have ASC in 40 plus states at this point. We'll limit new business until that product is available because we want the most contemporary and most accurately priced product in market. So we'll make sure that ASC gets approved and then relook at growth on a forward-looking basis. So we get the best product in market and again, look across the system to make sure that we're appropriately adjusting for a state that is not meeting our targeted returns.

To make a couple of examples come alive, I thought I would just end with the system at work. You saw in the supplement that we changed auto rates in 39 locations and that netted to effectively no change in rate. If you scale that back, there were 23 states where we lowered rates. There are 16 states of increased rates. And because of our rating sophistication and segmentation, 10 of those states, we did both. So we had an increase in a decrease.

So this is more than just a high-level analysis, it shows the depth and the breadth of what we're doing to pull the operational levers and all the levers that in the Rubik's Cube to optimize and deliver profitable growth.

Francis Matten: That's helpful perspective. And maybe just a follow-up on California, where they recently comatose reforms to the intervener process. I guess wondering is does also do that change along with other recent game changer longer term, especially on the homeowner side, where I think historically, you've been reluctant to grow market share?

Thomas Wilson: We believe that California still has a significant number of changes to make for the homeowners market will be accurately priced with easing availability for our consumers.

Operator: And our next question comes from the line of Josh Shanker from Bank of America.

Joshua Shanker: So in the first quarter, you had about $840 million of net favorable prior year development in the auto line. Obviously, I would imagine the majority of that comes from last year, which tells me you made a lot more money in auto last year than the combined ratio indicates. But it also arguably suggests that year-over-year, the margins are deteriorating. I mean they will. They're incredible right now. They have to deteriorate at some point. I'm wondering if you can talk about the trajectory of what you think is happening right now to help us better understand that.

Thomas Wilson: Josh, if you go to Slide 9. You can see how we spread that. So actually, most of the change as it relates to the combined ratio came in 2023 and 2024, very little in 2025. And that's in part because '25 hasn't completely developed. Like we make these changes. We obviously do an estimate we started settling claims as we settle claims, we figured out what we're having to pay people figure out how severe they are. And then we adjust our estimates. So we obviously overshot the mark in 2023 and 2024. We have not concluded that for 2025, where you take our reserves properly stated.

I'd also point out, we really didn't overshoot the mark much in 2023. So it happened to be those really concentrated in those 2 years. Going forward, we feel good about profitability. We've been able to earn better than industry average combined ratios in auto insurance for a long time, and we expect to continue to do that. will it -- will we still be at 89. I think when you look at the math on it, to the extent we can drive growth and give up some margin that works to improve the shareholders' valuation multiples. That said, like we're okay earn what we have right now.

Like we think we're competitive in the market, but we think we can grow faster.

Joshua Shanker: Obviously, 2023 was a very strange year. But is there something in your process that says that you want to be more conservative on the most recent accident years that the confidence interval on your reserving is more conservative for the most recent year in that programmatically. If you're doing things correctly, you would have this type of reserve release action going forward in '27 as we look back to '25.

Thomas Wilson: No. We apply the same statistical standards to every year. I would say one of the things we're hopeful about is with advanced computing power that we can increasingly get more specific on what's in the reserves. Of course, the reserves are like you have a bunch of losses in a year, then you have to -- you say, well, how much do we pay out? And then you're kind of doing it and the residual value basis. What we paid out determines what we have left for all the claims that we still have yet to settle.

We think with advanced analytics, we may be able to get another angle just looking at all the individual cases, which is really complicated. You got 900-page medical files, you get like lots of stuff to turn and figure out what that claim will settle in. But -- so it's the same process, same standards, and I would say, always getting better as we go forward. Of course, what you never really know is what's going to happen with legal trends or anything else.

Operator: Our next question comes from the line of Alex Scott from Barclays.

Taylor Scott: First one, I wanted to ask you about just prioritization of the holdco cash, which has grown to a pretty significant amount at this point. how would you think about prioritizing that? Are there different verticals within services that you'd look to expand or other things beyond obviously the larger buyback that you've been doing?

Thomas Wilson: That's an important question, Alex. Let me try to build up a little -- start a little bit above where John went and then talk about some specifics underneath that. John, feel free to jump in here. So, the first thing I can is you can get a great return on what you got. And we had a 44% adjusted net income return on capital. So all of our capital, there's no hiring stuff off, no separate closed books or anything like that. We've got a 44%. That's a good thing. And when you look at the S&P 500, it's probably half of that. I don't know what it is this quarter, but typically, it's in the low 20s.

And so we feel good about that return. Particularly when you're buying it at this kind of PE. Then you say, okay, well, what else can we do and John went through the order organic growth, you're just leveraging our existing capabilities, great scale to it, just put more volume through the system. Obviously, that's something we're focused on. But you got to make money at. You don't want to end up losing money or give yourself a short-term sugar high of growth and a long-term hangover called low profitability. So we manage that, as Jesse talked about, very aggressive in the Property-Liability business. We also think there's plenty of ways we can expand and leverage our existing capabilities.

Whether that John talked about expanding our property-liability businesses or our investment using our investment capabilities, which we put a little more money into earlier this year because we think we're good at it, and the results show we're good at it, and we thought we saw some opportunities in the marketplace. And from an enterprise risk and return perspective, we had room to do that. So we look at it in total, we manage capital. And then there's a variety of other ways we can do it. In general, we look at it and say, we have to be a better owner of a business. Like why would our ownership make this business better.

And that's where you look to grow stuff when you look at -- when we bought SquareTrade, putting our brand on it and that kind of retail distribution. We really ran the table on that business. I feel really good about it. Those don't come along that often. But you're always looking for ways in which you can enhance your capabilities. John, anything you would add to that?

John Dugenske: I think you covered most of it, Tom, maybe just a couple of things to point out that it really is a system decision. We're looking both outside of the firm in opportunities, but then also in the firm, what's the best trade-off of how that mix comes together. I would point out that sometimes it's harder to see some of the investments that we're making such in technology or even in the investment portfolio, those can be fairly consumptive in terms of capital. it might be more difficult for you to actually see that versus a transaction?

And then I guess I'd end up on the fact that I know some of you picked up on it and it's in the queue, but we actually accelerated our share repurchase program throughout the quarter. And that wasn't just a onetime thing. We continue to accelerate it. So one way to look at repurchases is what the quantum is, but also the pace matters, too.

Taylor Scott: Got it. All very helpful. Second question, I actually want to circle back on artificial intelligence, specifically and I know you guys have had a strategy over time to improve the expense ratio, so you could get even more competitive in the market and spur some growth. Could you talk about how I expand on that, what you're planning to do? And sort of how you see yourself positioned relative to some of your peers, one of which I think has begun to roll it out more aggressively and reduce their workforce more.

Thomas Wilson: Let me start with a competitive position and then come back up to how we're doing our focus on both expenses, aka, generative and effectiveness called the agentic AI. I think it's really hard to tell where everybody is. Everybody is out doing something. We don't talk about everything we're doing because we don't want everybody know we're doing and we'll let them see in the marketplace. The -- but -- so I think it's hard. So what I can say is that the -- from our standpoint, our capabilities continue to grow exponentially. The opportunities we see continue to get bigger.

And we're figuring out how to address and deal with some of the implementation and deployment issues because it's not simple. I can't tell you that it's all in market today. It's -- stuff is complicated. But if you can pull it off, it works really well. The easiest way thing to do is generative AI, which is, I think last time I called it the you might remember [ Ken ] sneakers. It's they run faster, jump higher strategy. It's good. It cuts out expenses, you can cut out call center people. Well, that's good. We're working on that. We do a bunch of it does millions of e-mails for us, people want to spend time doing it.

It's all really good. I think the real benefit from this will come from a agentic AI, where agents are talking to agents and making decisions in subsecond real-time response rate that people then can't compete with you. We're building that. It's really complicated building an ecosystem. You got to get the right governance around it, you got to make sure you set up whatever metrics you've given, it will go get. So you have to make sure measurement science is really important. So we're working hard on that. We're excited about it. We think it offers potential to really build off of what we did in transform to growth. We don't have the issue that some companies do.

I don't know what our competitors' issues over, but I know other companies that I'm not talking to, have some issues in accessing legacy technology. We don't have that for many of our systems. We do for some, but not many of them, which gives us an ability to accelerate the agentic or ALLIE work.

Operator: And our next question comes from the line of Yaron Kinar from Mizuho.

Yaron Kinar: My first question is on the homeowners book. Why was the expense ratio up year-over-year? And would you still expect improvement for the full year.

Thomas Wilson: We reallocate expenses from time to time. There's slightly higher commissions related with bundling on that. So while it looks expensive, it's good lifetime value. So let me put it that way because we had the same question. I like it a like where this point go? And so it relates to how we're driving value. And we try to do it, so it's accurately flex what each product gets and not just spread those costs by commission. We love the homeowners business. We think it's great. We think it's an underappreciated growth asset, not just given the market share numbers that Mario talked about. But if we just think about severe weather, and you're looking for trends.

People need more for their homes, the worse the weather it gets. And so -- and we're really good at that business. So we like that business. I think it has great potential.

Yaron Kinar: And just to clarify here. So the reallocation of expenses, is that something that's going to flow through throughout the year? Or do you still expect to see year-over-year improvement.

Thomas Wilson: We don't forecast expenses. But it takes sense we're spending the money to increase bundling. We like that, yes. And so it would be higher, but we're still learning a great return. So I wouldn't -- homeowners is a little less price sensitive than auto insurance would be the other point I would just add to you as you're thinking this one through.

Yaron Kinar: All right. And then my second question, I realize it may still be relatively early, but so we've had the closure in the rate of use for 2 months now. Do you expect gasoline prices and supply chain disruptions related to the closure to impact frequency and/or severity in both auto and home.

Thomas Wilson: We don't know would be the answer. When you look at -- I can give you some facts around it. About 1/3 of driving is discretionary. About 1/3 is for like going to work and about 1/3 is for like doing stuff, you got to do both the grocery store so if that. So you're basically talking about 1/3 of things people decide they want to go on a shorter vacation or whatever. That obviously takes some time to factor in. Gas prices are $5 or $6, people don't go as far. Maybe they share their card on writing to work. maybe they don't go to the grocery store as often.

And so there's various things that higher gas prices do result in fewer miles driven, which then lowers frequency. But it's not a straight line. You can't just say Strait of Hormuz is here. Gas prices -- it's $110 a barrel for oil. Therefore, we're going to have a 0.5 point change in frequency. You just don't know. And there's a million different variables to that. What we do know is we pay attention to frequency. We keep track of free, we do our claims. We do clean counts impact our reserving and we get claim counts every day. So to the extent they're changing, we're already looking at it.

But then you have to decide how long will it be there. And even when you have higher prices, you might get a temporary drift down, drop down and then it goes back up. And then we track 50 million cars every day, every 15 seconds. So we know who's driving when.

Yaron Kinar: That's on the frequency side. And what about the severity side?

Thomas Wilson: Severity, again, in general, higher petroleum prices roll through everything from plastic parts on cars to shingles. And so it has an upward impact on it. What happens to our cost. We don't see anything right now in severity, increasing severity of parts and some of that. And then it's a competitive market, so you just see what happens. So we're not concerned about the price of oil and its impact right now on our profitability.

Operator: And our next question comes from the line of Paul Newsome from Piper Sandler.

Jon Paul Newsome: Good morning. Thanks for the call. Maybe a revisit to the competitive environment a little bit and talking about some of the states that have been not as attractive. Any thoughts about those states turning or some of the other states that were in between turning to a more positive environment? Or is there any color you could get, I think, would be helpful and interesting.

Thomas Wilson: Paul, just to read that question about the regulatory and operating environment, I think, rather than competitive is the way I'm hearing the question, but let me make sure I get it right before I answer.

Jon Paul Newsome: Well, I guess it's either one, right? If it's regulatory, then that's the thing to focus on is it's competitive, and that's another thing. But I guess investors to hear more of the competitive piece than regulatory piece of...

Thomas Wilson: Yes, I'll go to both of them. Let's start with regulatory. Obviously, there were 3 large states we called out last year that we struggled to find a way in which we could earn an adequate return for our shareholders, give customers a good price and grow. And so we didn't. And some of those are getting better. I'm really excited about what might happen in New York with Governor Hochul doing it will be a blow for freedom or insurance consumers to take the cost out of unnecessary, what I call, fender bender litigation, that could be a huge benefit because New Yorkers pay a lot for insurance because there's a lot of these benefits being served on.

Certainly, when people get hurt, their car gets wrecked, their bodies get bent up and stuff they should be totally in favor of that. And that's what we do, that's what we'd like to do. Sometimes, the system gets a little out of whack. it needs to be course corrected. So we're thrilled about what they're planning to do or hoping to do in New York. And if that happens, that would open a giant growth market for us. We have a big share in New York, particularly in the 7 boroughs. We've been really strong there for a long time. We have a great agency force. It's got tight media markets. So our direct operations work really well there.

We have good independent agent relationships. That would be a great place for us, and we hope that they can do that because it will be good for our customers and consumers in general. The -- if I just go to up to the competitive environment, it continues to be highly competitive in auto insurance, as Mario talked about. The top 5 continue to battle it out. You see some of the -- they're not small, but they're not in the top 5. Some of the independent agent carriers have had volumes go down, particularly a couple of big independent agent commercially focused companies have lost some share there.

So we feel good about our competition in auto insurance against the top 5 where we're really starting to pick up some momentum against competition is in the homeowners business. Mario talked about at 81% of the country. And some of those top 5 either don't really sell their own product and have underwriting margin to work on in that space or haven't had as good a result as they would like. And so they're being less aggressive in that space. So we think there's great potential to grow in the homeowners business given that competitive set. Anything Mario or anybody would add to that?.

Mario Rizzo: No, I think you nailed it, Tom. The only thing I'd say is we -- it's a highly competitive market, as Tom said, when you look at our results, and we continue to generate new business at historically high levels it's across distribution channels. We're leveraging all the capabilities Tom talked about early on, and we're competing effectively both in the auto and the homeowner space. And we like our chances to be able to continue to do that going forward.

Jon Paul Newsome: That's great. As a second question, maybe turning to the Home business. I cover a lot of little companies that are talking about this is moving margin to more excess and surplus lines for homeowners trends. Any thoughts about that trend, if you think it's just kind of a temporary thing? Or it's a part of what matters for you imagine, given your very middle of the road new product for home insurance. It's not a huge piece, but just curious.

Thomas Wilson: Not a huge piece of excess and surplus lines for us or for...

Jon Paul Newsome: Yes. I would imagine it's pretty small for new folks.

Thomas Wilson: Yes. We have an excess and surplus lines business it's north light. It's grown reasonably well. Just to help educate everybody else who's not -- it was indeed, Paul -- excess surplus lines are where there's not enough availability in the market and the customer goes out to like 2 or 3 companies can't get an offer. And so then somebody can offer them an excess and surplus lines company, which is, I'm going to call it lightly regulated as it relates to price as opposed to tightly regulated in homeowners. We have that -- we have a company that does that. We prefer to do it in the regular lines.

And if we can't sell it in the regular lines, we don't necessarily use our excess and surplus lines if it -- because we don't -- it's because we don't like the market. Occasionally, that we might use excess and surplus lines for a really well-priced risk. But in general, if we don't like the state for homeowners, we probably don't like it for excess and surplus lines either. We do want it so that we can be available for customers they have it. And then on top of that, we're probably the biggest broker of homeowners insurance in the country because we serve our Allstate Asian customers well.

When we can't offer a product in Florida or California, something like that, we have arrangements with other companies that we can sell their product for it. And that's -- that's kind of number with a B on it in terms of how much product we sell there right.

Operator: And our next question comes from the line of Tracy Benguigui from Wolfe Research.

Tracy Benguigui: You started earnings call by giving a demo on your ad campaign. How should we think about ad spend budget this year versus last? And any expense ratio impacts and PIF growth prospects as a result.

Thomas Wilson: We're obviously -- it's a highly competitive market. We've dialed up advertising significantly over the last 4 years. We dialed that up with increased sophistication. So there's upper and lower funnel upper funnel being the stuff you saw lower funnel being very specific. We've find first shopping for insurance, and we like give her an ad at the moment on your addressable TV or on the web or something like that. So there's upper and lower funnel. We've increased our lower funnel advertising this year, which is better.

It's easier to do metrics on it, like run ad on the super volume who's watching it do they buy anything from it was not as easy to find out whether that's economic as -- so we've shifted more to a lower funnel. But we spend relative to where our economics we have economic measures. But we don't spend all the way up like -- recently, we were looking at should we spend more. And sometimes, you just want to make sure the system works really hard. So you don't want to advertising to be the only thing you do to drive growth because you end up in a system period where we spend more, progressive spends more.

So leads go up in costs, so we spend more. So they spend more. So you have to be careful you don't feed a beast, you don't want to feed. So we're highly precise, I guess, I would say, and disciplined about it. That then when we think we can advertise and if we think we can spend more money and grow more and get a great combined ratio, we will. And right now, we like our economics. So our economics are better this year than they were last year. Some of that is just getting better at executing Isn't that the market's really changed some has gotten better at close rates.

Tracy Benguigui: Excellent. Shifting gears, can we talk about asset allocation. You doubled your equity holdings since September. So it's about 12% of your total portfolio. What is that relative to your equities asset allocation target?

Thomas Wilson: I'll let John answer that. It is also part of what he does besides our Chief Financial Officer. We tried to make sure everybody don't release 2.5 jobs. And -- but I would just say we see probably wouldn't want to say to self that were really good investments. We manage it around. We're proactive. We think about it from an enterprise standpoint. You can see the numbers on the chart. And so we have good confidence that we can generate good returns on capital, and you see it flow through our P&L, particularly this quarter.

John Dugenske: Yes. It's thanks for the question, Tracy. The way I think about it, if I take a step back and really go back to the presentation, think about how we think about capital allocation in general, we have a lot of different things we can do. We think about the overall enterprise context as we do it. And we also think about what's going on in the market environment at any part in time. You've seen us in our portfolio, change our allocation probably more than most of our peers, whether that's equity or whether that's fixed income, changing our exposure to rate via duration and the rest.

Because we're active -- I don't know that I could point you to a specific asset allocation target. There's a range that's defined by past behaviors. It probably gives you a pretty good idea of what we're likely to operate within. When we do put more money to work, particularly in equities, we try and take a mid- to longer-range view on it. We are economic investors, we're not just trying to manage to a yield target at any point in time. We think by delivering economic value that does accrue to increase net investment over time. And it's a more cerebral way of going about it.

But we're not necessarily trying to measure that quarter-by-quarter and we're taking a longer look. The amount that we put to work recently has that in mind. If you look back, say, 6 months ago, the environment was a little less certain. We had a number of things going on. We have a little bit more clarity and felt good about putting money to work. And we'll see how it turns out in the coming quarters and years.

Tracy Benguigui: Okay. So it sounds like your approach is more dynamic than static. So could we foreseeably see that percentage growing if you like, that asset.

John Dugenske: I would say that. It's dynamic, but it's well governed. And you could probably gauge most of the range of our future activities by the way that we've conducted ourselves in the past. Yes. So we're not likely to have an 80% equity allocation.

Operator: And our next question comes from the line of Pablo Singzon from JPMorgan.

Pablo Singzon: Just one for me. I wanted to shift to AI again, but this time as it relates to your distribution strategy and how you reach customers. I presume it helps direct distribution, but how do you think it affects your agents, whether captive or independent, there's an argument that it makes them productive, but do you think Issues away from them?

Thomas Wilson: Sorry, what makes the agents more productive at?

Pablo Singzon: Just the use of AI Yes, that's sort of like the targeting...

Thomas Wilson: The 2 probably most talked about letters in these days. So AI can help them in a whole bunch of ways. First, it can help us have a better product. and better pricing and deliver better service for people. That's in general, just -- it will help us be a better company. Secondly, as it relates to their specific work, we think it will remove a lot of service work out of agents offices. So things they had to do before they won't have to do any more. So we're actively working to get that work out of their offices.

Secondly, it will help them be smarter and on behalf of agents who provide more advice and do less individual work. Let's say we were going to do an insurance review view. An agent might have to go pull your record, see what you've got, see what your kids are with, both advanced computing, what you want to call it, machine-based learning, AI, whatever, we can help them do their work ahead of time, so they're really delivering the work, and it's like they have an analyst working for them to help them. The other thing that AI can do is really in the moment.

And so we have in market today, something called customer engagement side kick that helps you really do a better job of engaging with customers. Because you might have a few doing 50 calls a day or something like that, it's always good to have somebody, "Hey, this is what I'm kind of hearing maybe you should go here. Here's the tonality we're talking about." So we think it will help them do a much better job for those people who want somebody in between them. The AI can also just sell directly. And we're live in the market doing that right now on a particular product. It's more of a learning, but it's doing it in 3 states.

It's closing policies. And so we're just seeing what we learn from that. So it all -- you just have to be there to meet the customers. And so I think that will help those agents who have good relationship with people improve their relationships. It will help other agents build more relationships. And then those people who just don't feel like dealing with it and we would just soon deal with the computer, we'll be there for them too. Is that last question Okay. So thank you all for -- we obviously had a great quarter. We had strong earnings increased growth with transformative growth. We think it's showing up. We went through the market share gains.

So we look forward to your engagement with Allstate, and we'll be working to create more shareholder value. Thank you.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.