• Total Revenue: $16.5 billion in Q4, up 11.3% year-over-year.
• Net Income: $1.9 billion in Q4; $4.6 billion for the full year 2024.
• Adjusted Net Income Return on Equity: 26.8% over the last 12 months.
• Property-Liability Earned Premiums: Up 10.6% in Q4 and 11.2% for the full year.
• Net Investment Income: Up 37.9% year-over-year in Q4.
• Property-Liability Underwriting Income: $1.8 billion in Q4, improved by $507 million year-over-year.
• Auto Insurance Underwriting Income: $603 million in Q4, improved by $510 million year-over-year.
• Homeowners Insurance Underwriting Income: $1.1 billion in Q4, $99 million lower due to increased catastrophe losses.
• Combined Ratio: Total Property-Liability combined ratio of 86.9% in Q4, a 2.6 point improvement year-over-year.
• Auto Insurance Combined Ratio: 93.5 in Q4, 5.4 points below the prior year quarter.
• Homeowners Insurance Combined Ratio: 90.1% for the full year 2024.
• Protection Plans Revenue: $528 million in Q4, up 20.3% year-over-year.
• Protection Plans Adjusted Net Income: $37 million in Q4, consistent with the prior year quarter.
• Proceeds from Sale of Group Health and Employee Voluntary Benefits: Expected $3.25 billion.
• Policies in Force: Increased to 237.3 million.
• Homeowners Insurance Policies in Force Growth: 2.4% increase in 2024.
• Auto Insurance Policies in Force: Declined by 1.4%.

• Warning! GuruFocus has detected 4 Warning Sign with STE.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Allstate Corp (NYSE:ALL) reported a significant increase in total revenues, reaching $16.5 billion in the fourth quarter, up 11.3% compared to the prior year quarter.
• The company achieved a strong adjusted net income return on equity of 26.8% over the last 12 months.
• Successful execution of the auto profit improvement plan resulted in a substantial increase in auto insurance underwriting income, improving by $510 million compared to the prior year quarter.
• Homeowners insurance produced attractive returns with a combined ratio of 90.1% for the full year 2024, in line with the company's low 90s target.
• The sale of group health and employee voluntary benefits businesses is expected to generate $3.25 billion in proceeds, representing attractive valuation multiples.

Negative Points

• Increased catastrophe losses led to a $99 million decrease in homeowners insurance underwriting income compared to the prior year quarter.
• Auto insurance policies in force declined by 1.4% due to a decrease in customer retention, particularly in states with large recent rate increases.
• The California wildfires resulted in estimated gross losses of $2 billion, with net losses expected to be $1.1 billion after reinsurance recoveries.
• Retention has been adversely impacted by significant rate increases over the past few years, particularly in states like New York and New Jersey.
• Despite strong new business trends, overall auto units declined year-over-year due to retention challenges.

Q & A Highlights

Q: Can you discuss the decision to increase advertising spend in the fourth quarter and how you measure its efficiency? A: Mario Rizzo, President of Property-Liability, explained that Allstate adjusts advertising spending based on market targets and tests to gauge sensitivity to increased advertising. They employ state-of-the-art analytics to ensure efficiency and have had external reviews to confirm their approach is industry-leading. They use various metrics, including quote-to-close ratios and lifetime value, to measure ad spend efficiency.

Q: What are Allstate's plans for growing Property-Liability policies in force (PIF) in 2025, particularly in auto and home segments? A: Thomas Wilson, CEO, stated that while they don't provide forward-looking PIF projections, they will disclose monthly numbers for transparency. Mario Rizzo added that they are currently growing in the homeowners segment and see opportunities in the auto segment despite current declines. They plan to leverage distribution capabilities, roll out new products, and improve customer retention to drive growth.

Q: How does Allstate view its competitive pricing position in the auto insurance market, and will there be changes in agent compensation to focus on retention? A: Mario Rizzo noted that Allstate is competitively priced, as evidenced by new business growth in 31 states. They constantly adjust pricing based on market conditions. Regarding agent compensation, a significant portion is already tied to renewals, incentivizing retention. They plan to scale retention efforts through the SAVE program without changing agent compensation.

Q: With a return on equity (ROE) of 26.8%, how does Allstate view its ROE targets moving forward? A: Thomas Wilson highlighted that past ROE targets were set in a different context. The focus now is on growth rather than just increasing returns, as growth will drive more shareholder value. They aim to unlock value through growth in various segments, particularly in auto units.

Q: What are Allstate's plans for capital deployment, considering the sales of the Benefits and Health businesses? A: Thomas Wilson emphasized Allstate's proactive capital management, which includes organic growth, risk and return on economic capital, acquisitions, and share repurchases. They aim to drive shareholder value through these avenues, with a focus on growth and efficient capital use.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.