Allstate Corporation (The)

Good morning, everyone. Thank you for standing by and welcome to the All-State First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. And to ask a question during the session, you will need to press star 1 on your telephone. And we kindly ask to please limit yourselves to one question. And please be advised that today's conference is being recorded, and if you need any further assistance, you may press star zero. I would now like to hand the conference over to your speaker today, Mr. Mark Nogle.

Thank you, Kirby. Good morning, and welcome to Allstate's first quarter 2022 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 report, insurance update on our website at allstateinvestors.com. Our management team is here to provide perspective on these results. 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 will differ materially from these statements, so please refer to our 10-K for 2021 and other public documents for information on potential risks. Before I hand it off to Tom, I want to share that we will be We look forward to the additional engagement later this quarter, and we'll share further information soon. And now I'll turn it over to Tom.

Well, good morning, and thank you for investing your time in Allstate today. Let's start on slide two. So Allstate's strategy to deliver transformative growth and higher valuation has two components, increased personal profit liability market share and expand protection services, which are shown in the two ovals on the left. We're building a low-cost digital insurer with broad distribution to transformative growth. We're also diversifying our business by expanding protection offerings, as shown in the bottom level. In the first quarter, we made progress in three key areas to execute this strategy. We're six months into a multifaceted plan to address the negative impact of inflation, which is largely in auto insurance. This begins with aggressively raising prices. We're doing this surgically and raising prices more for new or shorter tenured customers with less profitability, and less for longer tenured profitable customers. Progress was also made in executing programs to reduce expenses and manage lost costs. We also shifted our asset allocations by reducing the interest rate exposure of our bond portfolio in the fourth quarter of last year, which lowered the overall enterprise impact from higher inflation by $800 million. Secondly, we continue to make progress on transformative growth, by expanding customer access, increasing pricing sophistication, and building new technology ecosystems. Protection Services also continues its profitable growth trajectory with revenue growth of almost 14% above the prior year. Moving to slide three, let's discuss first quarter performance in more detail. Property liability premiums earned increased 6.1% due to higher average premiums and a 2.1% growth in policies in force. Net investment income of $594 million, with 16.1% below the prior year quarter, reflecting lower fixed-income reinvestment rates, the impact of reducing the bond portfolio duration, and strong performance-based portfolio income, but that was in comparison to an exceptional prior year quarter. Net income of $630 million in the first quarter compares to a $1.4 billion loss in the prior year, which included losses related to the disposition of the life and annuity businesses. Adjusted net income of $726 million, or $2.58 per diluted share, declined compared to the nearly $1.9 billion generated in the prior year quarter due to lower underwriting income. You'll remember last year's first quarter reflected low auto accident frequency because of the pandemic, and inflation loss costs had not yet been realized. We provided over a billion dollars in cash returns to shareholders in the quarter and have reduced outstanding shares by 8.1% over the last 12 months. Moving to slide four, you can see how income from homeowners insurance, investments, protection services, and health and benefits mitigated the negative impact as inflation hit on auto insurance. Insurance underwriting margins provided $267 million of after-tax adjusted net income, or 95 cents a share. Auto insurance generated a slight underwriting loss with a recorded combined ratio of 102. Our industry-leading homeowner's insurance business generated underwriting income that contributed $335 million of adjusted net income, or $1.19 per share. And although performance-based investment income declined from the record highs in 2021, results were still strong in the first quarter, with property liability and non-investment income contributing $1.56 per share. Protection services and health and benefits income more than offset the losses in auto insurance. Now let me turn it over to Glenn to discuss the property liability results in more detail.