Allstate Corporation (The)

Ladies and gentlemen, thank you for standing by, and welcome to the Allstate Third Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 1 on your telephone. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr. John Greek, Head of Investor Relations. Please go ahead, sir.

Well, thank you, Jonathan. Good morning and welcome, everyone, to Allstate's third 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 10-Q, and posted today's presentation on our website at allstateinvestors.com. Our management team is here to provide perspective on these results and discuss the strength and leading competitive position of Allstate's homeowners insurance business. As noted on the first slide of the 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 Allstate's 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. Beginning in the fourth quarter of 2019, Allstate plans to announce catastrophe losses every month removing the current $150 million reporting threshold. The enhancement to our catastrophe announcement process increases transparency for analysts and shareholders. As many of you know, this will be my final earnings call as the leader of our investor relations team as I've transitioned to a new role in our P&C finance area. I'm leaving investor relations in the capable hands of Mark Nogle, who will be a great partner for all of you going forward. 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. So our strategy has two components, increase personal property liability market share, and then expand into other protection businesses. Starting with the upper oval, the personal property liability market provides consumers protection. We ensure their autos, their homes, motorcycles, boats, personal liability. We use differentiated products, sophisticated pricing, claims expertise, and are building an integrated digital enterprise to lower costs, which I'm sure will come up later. We're also diversifying our businesses by expanding our protection offerings, and that's highlighted in the bottom oval. Allstate offers customers a circle of protection. It's a wide range of products from Allstate Life, workplace benefits, commercial insurance, roadside services, car warranties, protection plans, and identity protection. These growth platforms have extremely broad distribution, including major retailers, insurance brokers, worksites, auto dealers and manufacturers, telcos, and directly to consumers. They now comprise about 75% of our policies in force, although a much smaller percentage of our overall premiums. We leverage the Allstate brand, customer base, and capabilities to drive growth in these businesses. Some of these businesses also support the property liability businesses. This strategy creates shareholder value through customer satisfaction, unit growth, and attractive returns on capital. It also ensures that we have both sustainable profitability and a diversified business platform. If you move to slide three, Allstate's strategy is delivering growth and attractive returns. Revenues exceeded $11 billion in the third quarter of 2019. Property liability earned premiums grew 5.6%. Strong operating capabilities enabled us to generate net income of $889 million in the quarter. Adjusted net income was $946 million, or $2.84 per diluted share, as you can see on the bottom of the slide. Returns were also attractive with adjusted net income return on equity of 14.2%. If we turn to slide four, we also did really well on all of our 2019 operating priorities. And we have five of those, as you know. They focus on both near-term performance and long-term value creation. The first three priorities, better serve customers, grow the customer base, and achieve target returns at capital, are all intertwined to ensure profitable long-term growth. Customers were better served as the enterprise net promoter score improved. Property liability policies increased by $664,000 from the prior year quarter to $33.6 million as the Allstate and insurance brands grew 1.9% and 5.9% respectively. Allstate protection plans, which of course was formerly Square Trade, grew to $89.8 million. Total policies in force now exceed $136 million, an increase of 40.7% compared to the prior year quarter. Returns remained excellent, with most individual businesses performing well. The $89 billion investment portfolio had excellent total returns and generated $880 million in net investment income in the quarter. Shareholder value is also being created by building long-term growth platforms. We increased telematics usage in the property liability businesses, and that's supported by having industry-leading insurance solutions from Arity. Allstate Protection Plans is achieving the acquisition goals we established two years ago, and sales in Europe are growing. Allstate Identity Protection, which we acquired about a year ago, is integrating its products into our customer value propositions. Mario will now discuss our results by segment in more detail.