Allstate Corporation (The)

Good day, ladies and gentlemen, and welcome to the Allstate First Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. If anyone should require assistance during the program, please press star, then zero on your touchtone telephone. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, John Creek, Head of Investor Relations. Please go ahead, sir.

Thank you, Jonathan. Good morning and welcome everyone to Allstate's first quarter 2019 earnings conference call. After prepared remarks, we will have a question and answer session. Yesterday, following the close of the market, we issued our news release and investor supplement, filed our 10Q and posted today's presentation, along with our reinsurance update on our website at allstateinvestors.com. Our management team is here to provide perspective on these results. Jess Merton, our Chief Risk Officer, has joined us today to discuss how we evaluate risk and return decisions and use economic capital to allocate resources and establish performance targets. As noted on the first slide of this presentation, our discussion will contain non-GAAP measures for which there are reconciliations in the news release and investor supplement and forward-looking statements about all states' operations. Allstate's results may differ materially from these statements, so please refer to our 10-K for 2018 and other public documents for information on potential risks. Now I'll turn it over to Tom.

Well, good morning. Thank you for joining us to stay current on Allstate. Let's begin on slide two with Allstate's strategy to profitably grow market share and protection products. Starting with the upper oval, the personal property liability market hits four consumer segments and provides protection by insuring automobiles, homes, and other property. We use four brands, differentiated products, sophisticated analytics, telematics, and are building an integrated digital enterprise to grow market share in this protection space. Our strategy also includes expanding by protecting people from a range of other uncertainties, such as shown in the bottom oval, by leveraging our brands, customer base, investment expertise, distribution, claims capabilities, and capital. Collectively, these businesses on the bottom oval have tremendous value, which often gets overlooked by investors who focus only on the property liability businesses or on earnings per share. Our strategy creates shareholder value through customer satisfaction, unit growth, and attractive returns on capital. It also ensures we have sustainable profitability and a diversified business platform. Moving to slide three, this strategy is driving growth and attractive returns. Policies enforce increase for the Allstate and insurance brands, property liability businesses. Square Trade had outstanding growth. Total policies enforced now exceed $123 million. The property liability underlying combined ratio was 84.2 in the first quarter. Total return on the investment portfolio was strong at 4.7% for the last 12 months, but reported income declined this quarter. due to lower valuations and limited partnership portfolio. Net income was $1.26 billion, as you can see from the chart on the bottom, reflecting strong operating results and significant capital gains under the accounting policy where equity valuations are reflected in net income. Adjusted net income was $776 million, or $2.30 per diluted share in the first quarter. Adjusted net income return on equity was 13.5%, which is a broader measure of how we do from an overall return standpoint than just the underlying combined ratio. Let's turn to slide four. We had a good start on 2019's operating priorities. The first three priorities, better serve customers, achieve target economic returns and capital and grow the customer base, are intertwined to ensure profitable long-term growth. Customers were better served as the enterprise net promoter score improved, and customer retention increased across our three underwriting brands. Returns remained strong, both in total and for our individual businesses, as Jess will discuss. The All-State Insurance Brands Group policies enforced by 2.3% and 10.9% respectively, which resulted in the property liability policies increasing by $833,000 compared to the prior year quarter. When you combine that then with the significant growth at Square Trade, total policies, of course, now exceed $123 million. The $84 billion investment portfolio total return was 4.7% for the last 12 months. Net investment income for the quarter was adversely affected by lower performance-based results reflecting lower private equity asset valuations. The performance-based portfolio did generate $57 million of capital gains this quarter. We continue to make progress building long-term growth platforms, expanding our relationship with the transportation network to 15 states. We're growing telematics usage, and Square Trade is adding capabilities and expanding markets while achieving its acquisition goals. Mario will now go through the segment results in more detail.