Allstate Corporation (The)

Good day. Thank you for standing by. Welcome to Allstate's third quarter investor call. At this time, all participants are in listen-only mode. After prepared remarks, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. Please limit your inquiry to one question and one follow-up. As a reminder, please be aware that this call is being recorded. And now I'd like to introduce your host for today's program, Mr. Mark Nogle, head of investor relations. Please go ahead, sir.

Thank you, Jonathan. Good morning, and welcome to Allstate's third quarter 2022 earnings conference call. After prepared remarks, we'll 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. 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 2021 and other public documents for information on potential risks. Additionally, we will be hosting our next Special Topic Investor Call on December 2nd, focusing on Allstate's auto and home insurance claims practices and reserving process. And now, I'll turn it over to Dom.

Well, good morning. Thank you for investing your time with Allstate today. As you know, we pre-released earnings several weeks ago and reported the net loss for the quarter. That reflected a small underlying underwriting margin that was offset by increases in reserves for prior years and a mark-to-market loss on public equity securities. Mario and Jess will go through the details of the quarter and the reserve changes after I set some context. So let's start on slide two. Allstate's strategy to increase shareholder value has two components, increase personal and property 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 through transformative growth to increase market share. We're also broadening protection offerings and leveraging the Allstate brand, customer base, and capabilities with expanded distribution. In the third quarter, we made progress executing the strategy while we continue to implement a comprehensive approach to improve auto profitability, as is shown in the right-hand panel. That includes broadly raising auto insurance rates, which you've seen in our disclosures. Operating expenses were lowered, including advertising and more permanent reductions in the operating cost structure. Underwriting guidelines have been adjusted to reduce new business volume where we're not earning adequate returns. Our claims operating processes are being modified to manage the lost costs in a high inflation environment. And we believe this plan will return auto insurance profitability to historical levels. While the current environment requires focus on improving margins, we continue to advance transformative growth strategy to gain market share when profitability improves. In addition, the protection services businesses are generating profitable growth. Investment returns were negative for the quarter and year to date, but better than the overall declines in the bond and equity markets. This reflects risk reductions implemented late last year. You'll remember we reduced the bond portfolio duration to lower exposure to high interest rates, which enabled us to avoid about $2 billion in losses in the bond portfolio. Our capital position is strong, and as a result, we were able to deliver attractive returns to shareholders. Justin is going to discuss capital in his section, but let me provide a few summary points since this was covered in some of the reports issued last night. First, we have plenty of capital, and there's $4.5 billion of deployable capital at the holding company level. Secondly, the significant reduction in risk with the sale of the life and annuity operations occurred last October, and that needs to be considered. This divestiture reduced assets by $34 billion and freed up capital. Thirdly, we use a really sophisticated approach to determining required capital that goes far beyond statutory capital and premium surplus ratios. For example, if you just use statutory capital as a measure, the life company equity would be included in capital historically, which we did not believe was appropriate, so we never included it. So our methodology has led to strong results. We did decide to complete the remaining $1.4 billion stock repurchase over more than the next six months, which was our prior target we had disclosed to you. But we still expect to complete it in the second or third quarter of next year. So in summary, you know, we're really well capitalized, and this year's results have not changed our strategy or earnings power. Let's move to slide three to go through the third quarter performance in detail. Total revenues of $13.2 billion, or 5.8% of the prior year quarter, as property liability premiums earned increased by about $1 billion, or 9.8%, which reflected higher average premiums in policy growth. Lower net investment income and net losses on investments and derivatives negatively impacted the year-over-year consideration through our comparison there. A net loss of $694 million and an adjusted net loss of $420 million in the third quarter reflected a decline in underwriting income due to an increase in property liability prior to your reserve estimates, which was $875 million. That excludes catastrophes and increased loss costs in the current year. Looking forward beyond improving profits in auto insurance, If you go to slide four, you'll see the flywheel of growth that will increase personal profit liability market share. So this is a multi-year initiative designed to build a low-cost digital insurer with broad distribution that will be accomplished by delivering on five key objectives, improving customer value, expanding customer access, increasing sophistication and investment in customer acquisition, deploying new technology ecosystems, and enhancing organizational capabilities. We made significant progress on all these components, and we're well on the way to really being in a position where we can dial up growth quite rapidly when profitability improves. Now let me turn it over to Mario, and he'll go through our property liability results.