Allstate (NYSE:ALL) Q2 2026 Earnings Call

0:00 New business by channel for the second quarter of twenty twenty three and the most recent quarter. Auto insurance new business increased to 2,300,000 items in the quarter versus one point five million three years ago, which is balanced between all channels, Allstate agents, independent agents and direct sales via phone or web. The bottom chart shows a similar pattern in homeowners insurance with new business increasing by 46.8% to 411,000 policies, many of which are bundled with auto insurance, particularly in the Allstate agent channel. Overall, new business growth highlights the benefits of having the broadest distribution in the industry and new products with sophisticated pricing and risk segmentation.

0:49 Growth rates by year are shown on the right side of the slide. Auto insurance policy growth in the second quarter turned positive last year after the pandemic related growth restrictions and was 2.8% this quarter. In homeowners insurance, growth has been consistently positive and was 2.9% this quarter. The bottom line is that transformative growth is working. Moving to slide 11, protection services is an important part of how Allstate expands protection and leverages capabilities to create value in more parts of customers' lives. The segment has 177,000,000 policies in force, contributing $3,400,000,000 to our top line and generating over $200,000,000 in adjusted net income in the last twelve months.

1:42 Protection services extends Allstate's brand, customer relationships, distribution network and technology capabilities into adjacent markets. Allstate protection plans are distributed through over 30 major retailers, such as Walmart, Costco and Home Depot, as well as a growing presence in international markets. This gives us access to customers at the point of purchase and expands awareness of the Allstate brand. Dealer services extends our reach into vehicle purchasing journey through more than 1,100 dealership relationships. Products protect vehicle value and reduce the cost of unexpected repairs. Parity demonstrates how Allstate leverages data and analytics at scale.

2:30 With over 2,000,000,000,000 miles of driving data, mobility intelligence capabilities provide a better understanding of how people move, improve risk insights and generate third party revenue. Roadside Assistance brings the Allstate brand to life through 1,750,000 rescues each year, which strengthens customer relationships. An exciting part of transformative growth is that the affordable, simple and connected auto insurance shopping experiences are increasing bundled roadside sales. Allstate Identity Protection extends our promise of protection into another area of growing customer need. Identity Protection helps 3,400,000 customers prevent, detect and recover from scams and identity related events.

3:19 By doing so, we expand Allstate's customer base. Taken together, these businesses reflect a broad strategic opportunity. Customers need protection in more aspects of their lives, and Allstate is uniquely positioned to meet those needs. In summary, protection services expands our addressable market, broadens our distribution footprint, deepens customer relationships, and creates additional opportunities for growth. And now I'll turn it over to John. Thanks, Mario. Let's turn to Slide 12 to discuss how strong investment performance supports earnings growth and shareholder value. Starting on the left, the portfolio is 80% interest bearing assets with equity securities and performance based investments providing growth oriented exposure.

4:06 This allocation supports recurring income generation while providing attractive risk adjusted return on capital. Our investment performance is first and second quartile when benchmarked to the market for fixed income, private equity and real estate. This is due to a terrific team of nearly 300 investment professionals and use of external managers when we don't have the expertise for scale in house. Turning to the upper right, investment income is a growing contributor to earnings. In 2022, investment income, or since 2022, income has increased over 57% growing from $2,400,000,000 to nearly $3,800,000,000 on a trailing twelve month basis as of second quarter twenty twenty six.

4:53 That has increased the contribution of investment income to roughly $11.5 of adjusted net income per diluted share. Shareholder value is also created by using an enterprise risk and return lens to adjust investment allocations. We actively adjust portfolio positioning as market conditions, investment opportunities, and enterprise priorities evolve, enabling us to grow income, improve portfolio yields, and generate attractive long term investment performance. For example, when property liability margins declined at the beginning of the pandemic and the economic outlook was uncertain, we reduced equity holdings. Last year was strong results, a strong economy and additional deployable capital.

5:41 The duration of the bond portfolio was lengthened and public equity holdings were increased by $7,100,000,000 Benefit of these actions are higher investment income and mark to market equity gains in net income. The lower right shows overall returns on a GAAP adjusted basis, which were 2.6% in the most recent quarter. Now let's move to slide 13, which highlights how strong capital generation funds diversified value creation. Refractive returns on equity have enabled Allstate to generate substantial capital, giving us the flexibility to invest in growth, strengthen our competitive position, and return capital to shareholders. The top half of the slide shows how we've deployed the capital generated over the last decade.

6:28 We've nearly doubled property liability premiums, increased investments and completed acquisitions that have strengthened both our distribution capabilities and our protection offerings. At the same time, we've returned significant capital to shareholders through dividends and the repurchase of 39% of outstanding shares. Looking at the right hand side of the chart, we see that these investments and shareholder returns were supported by attractive returns on equity. Over the past ten years, Allstate's average return on equity matched the S and P 500 and ranked in the top quartile among peers. The bottom half of the slide highlights our continued commitment to returning capital to shareholders. During the quarter, we returned $1,300,000,000 to shareholders, including a repurchase of $1,000,000,000 of common shares.

7:21 2,600,000,000 remain under the billion dollars repurchase authorization announced in February. We are in a strong capital position with deployable capital at the holding company increasing to $9,500,000,000 or approximately $37 per common share outstanding. Strong returns on equity have enabled us to invest in growth, build competitive advantages, and return substantial capital to shareholders. Together, these actions have been a powerful driver of long term shareholder value. And now I'll wrap up quickly on slide 14. And in closing, Allstate strategy is delivering strong results and creating shareholder value. Now let's open up the floor to questions and answers. Thank you.

8:07 Certainly. And as a reminder, ladies and gentlemen, we ask that you please limit yourself to one question and one follow-up. Our first question comes from the line of Gregory Peters from Raymond James. Your question please. Hey, good morning, everyone. So I'll focus on slide five and the technology piece for my first question. And I'm sure there's a lot of complexity to what's going on here, but maybe you could step back and give us some perspective on how you're managing the costs and measuring the ROI of all your various initiatives. And with these large language models, I imagine protecting your data assets and your underwriting tools are top of mind.

8:56 And when we think about this technology investment, are we gonna be getting to a point in the future where you're off all the legacy systems? Greg, let me deal with that first three pieces. We did this slide to just show that artificial intelligence is just another step along the continuum that we've been on for a long time, which is we're a very technology and analytics driven company. And AI will help further improve what we already know how to do. So there are some companies that are less advanced than that. We don't say we're the most advanced, we just want you to know kind of where we are, which is we're heavily into using technology. The expenses related with that, we look at all kinds of different ways, as you would expect. But we're not having any barriers right now to investing money and getting good returns on that.

9:52 As it relates to the long term thing, you're always I kind of cynically say to our team sometimes, what's a legacy system? And it's usually one you just turned on. So you're always adapting technology. You're always doing it. We are moving to what we call the connected customer cloud, which is c three to put a lot of our systems on the same basis, the same platform. But with our orchestration layer, we don't need to get rid of all ex old technology. The orchestration layer, if you talk to people working on AI, that's one of the most difficult things to put in because it requires you to go in and take your legacy systems and make them accessible through APIs and other actions.

10:44 And we did that as part of transformative growth. We didn't do it knowing AI was coming. We just thought it made sense. But it's positioned us to do ALLi well. And as it relates to like token costs, I know a number of companies have talked about token costs. That's not an issue for us. On just the other piece of it was just protecting your data assets and underwriting tools from the large language models. Do you have any perspective on that?

11:14 Yeah, cybersecurity, obviously, really important and more difficult now than it was two years ago and five years ago. So we spent a tremendous amount of time and effort on cybersecurity. I'm personally concerned about the large language models that now break out on their own and tell other agents how to do it on their own without getting caught. I think that's an issue that the country really needs to deal with. From our standpoint, we're aggressive. We've built up a great team. We know how to use LLMs internally. We don't use public LLMs to do any of our stuff. So we're not worried about our data being exfiltrated or scooped up in the knowledge of somebody else's LLM.

12:00 One of our competitors can use it. But you're right to be focused on cybersecurity. It's obviously, it's important for our customers to make sure we keep their data safe and secure. Excellent. And then just to focus on slide six, you ran through your ten year record. And I'm particularly focused on the auto piece where I think through the six months you're running substantially below your ten year average combined ratio. And I'm reconciling Slide nine where your flat rate change. Just curious about the competitive environment and when we might start to see that combined ratio drift up more towards the ten year average?

12:56 Let me go up a little bit and answer growth, because I know there'll be other people interested in growth as well. First, to have sustainable growth, you really need a multifaceted approach. It's not really just about cutting price because anybody can give it away. And I sometimes feel like when people are doing analysis of us, they just look at price, they look at combined ratio and they say, oh, well, you're gonna change your pricing so your combined ratio is gonna go way up. That certainly would be reflective of some people's view given our low PE today. Believe we can continue to operate and get rents better than the industry gets, which is why I just showed that slide of how we're better than the industry. We do that because we get this multifaceted approach to it.

13:42 And you'll really remember that, that is what transformative growth is, which Mario talked about. It starts with increasing customer value, which is more affordable prices and new products. And and that started, you'll remember with reducing costs. We've made a lot of progress for reducing costs over the last six years, but we have more to do there. The second quarter ratio went up, just talked about, about half was advertising, a lot of the rest was a one time legal accrual, which they tend to be bumpy. It's not systemic. I don't intend to get into why we did the accrual, but it's not systemic. So I'm not concerned about where we are in the second quarter, but we're also not done. And maybe Jess can talk later if somebody has a question about expenses. Jess can talk about what we're doing there. Claim effectiveness is also important. Mike Fiato's team has done an excellent job of keeping our claims properly paid. So that's not too little, not too much.

14:41 So you can see from the reserve changes, our costs have come in a lot lower than we thought they would be. New products, we've done well, which is another part of increasing customer value. Broaden access to all distribution channels, Mario talked about that, increasing sophistication in marketing. We have success there as well, but we're putting a new enterprise customer acquisition system into place, which we think will take us again further towards driving growth without having to just reduce price and take less margin. The new tech ecosystem we talked about. So there's a multifaceted approach to At this point in, we're earning high returns. And so it pays to drive shareholder value by reducing some of that margin and giving up some growth. But we don't like to have a plan to say, oh, we're at x. And the right optimal point is to get to 94. We just do it every day.

15:39 How are going to grow as fast as we can and make as much money as we can. Thank you for the information. Thank you. And our next question comes from the line of Bob Hwang from Morgan Stanley. Your question please. Hi, good morning. My first one is around the competition within the broader space. If we look at the broader market, would you kind of give us a color on the competitive environment for auto personal auto only, the monoline business, versus how the bundled home and auto competition is. Which side is more intense when it comes to competition? And is there a divergence between how the growth opportunity would look like going forward for those two specific lines?

16:32 I'm gonna go up a little bit, Bob, and then come down. So first, we think about it as the customer, how do we meet all their needs?

16:43 So that's auto insurance, it's home insurance, could be renters insurance. So if they don't have a home, we'll sell them renters insurance. It could be their identity because everybody's got an identity. A lot of people have phones and TVs. And so we kind of want to protect whatever it is they have, whichever way they can. We do that mostly under the Allstate brand, as you know. So that brand sells well. And Mario talked about that in terms of our broad distribution as well. So we start there. When you go down below that, then it's okay, on monoline auto, I would say all of those people who buy just auto insurance from us, there's other stuff I'd like to sell them too. It doesn't just have to be auto. But if you're focused on the, what I would call the higher risk non standard, non Robinsons, if that's what you're referring to group, That's pretty competitive.

17:36 National General really gave us a leg up in our expertise there. And it also gave us a huge leg up in the independent agent channel. In bundled product, we're obviously quite good there. Mario talked about the cross line sales from our Allstate agents are really at all time record highs. And so we're feeling good about that whole process. And then we think we can sell even more stuff. Jess could talk about what we're doing in individual markets because I think you're focused really on product. But I'm saying focus on customer, that's important. Product also important. But there's also like, what are you doing in the local market in a state? So Jess, maybe you can give an example of a state where how we're competing differently there than we were in the past. Yeah, absolutely. Thanks, Tom. So I hard to pick the state. We love all the states equally. But we're sitting here in Illinois and I thought maybe I would pick Illinois.

18:38 Because Illinois is an interesting state. So it's in focus because effectively Illinois is a state where we're growing, but we're not growing as much as we think we could, right? So we see opportunity and potential in the state to accelerate growth. So we have go to market teams. I think we've talked with all of you about that. We have a go to market team that's focused on the state of Illinois and they optimize across channels to make sure that we're really getting the most production. As Tom said, meeting the most number of customers where they're at. So we have a strong EA footprint in Illinois, but at the same time, they're focusing on direct in a segmented way. So the go to market team is identifying where can we win in the direct channel and we're investing marketing dollars where the returns are strong.

19:25 At the same time in the state, you look at the independent agent channel and we're providing, we have underwriting and pricing strategies that help those independent agents win. As Tom mentioned, it's not just that, it's product portfolio. So we have Custom three sixty products available for independent agents. We have really competitive both auto and home products that they can then bundle, provide that bundled solution to their customers. And we think that affordable protection is differentiating and because we have that product availability, we're going in and we're engaging and then in some cases re engaging independent agents so that we get more new business out of that channel.

20:04 That doesn't mean we're not focused on the exclusive agent channel and accelerating growth there from both retention and new business perspective. So that can be things like coaching, pure benchmarking, but also providing tools so that they can serve more customers and identify more customer needs. Of course, they have a broad portfolio of solutions available to them. It's not just auto, home, landlords or renters. As Tom mentioned, this is life and retirement solutions, commercial solutions that exclusive agents can then bring to market. The go to market team helps them to identify where those opportunities exist, while also looking at footprint and things that we can do to make exclusive agents more productive. The one other thing I would say is we also then take learnings from other states and apply them to a state like Illinois.

20:51 So we're having great success in places like Missouri and Texas and Kansas. And we take those stories, we carry them forward into the local market and we apply them across all three distribution channels. So it's a really, you know, a really balanced way to identify where the best opportunities exist to grow. And that's where we are able to implement and execute through the go to market teams. Okay. Really appreciate that. So it's much more holistic. That's the right way to think about it, I think. Holistic across the business, not just the distribution channel product availability. Yeah. It's a complete system. Okay. Thank you. My second question is really on if we think about severity development, Like inflation is there, but it doesn't feel like it's showing up so problematically if we look at severity over the last call it six months.

21:48 Just given where the severity development has been so far, given the weather, given everything else, is it sort of fair to say even if pricing were to continue to slow down, there is really not a lot of loss pressure that's pushing the combined ratio higher so far. Is it also safe to say that that's going to continue for rest of the year? Is that kind of a right way to think about where things are going, going forward? Bob, this is Jess. On severity, I mean, we're not gonna give you a forward look on what severity is going to be. We can talk about what's happening and we try and isolate, rather than isolating severity, we give you pure premium trends. Saw that the pure premium trend was down for the quarter. So that's some combination of frequency and severity. I think you have to, as you think about severity and what it's going look like going forward, certainly there's inflation that will affect certain components of severity, particularly physical damage severities, but there's bodily injury severity and bodily injury severity trends that we have

22:51 to keep an eye on. And those continue to be at relatively high levels, particularly as compared to the physical damage severity. I think the whole industry is seeing that. So as you think about, you can see it again, what the pure premium trend was for the quarter. And you know sort of behind the scenes what we're doing to make sure that we're operationally excellent from a claims perspective. But you really have to take a forward view on what's the inflation impact and it'd be on things like parts, what are we going see in labor inflation, and then what's the bodily injury severity development going look like in the back half of the year, where you can really form a view on what the overall pure premium trend is going to look like for the rest of the year and what that's going to mean to margins. Right now though, the key point on the slide was, if you look at the average premium, the pure premium trend we have really solid margins.

23:42 I really appreciate it. Thank you. Thank you. Our next question comes from the line of Rob Cox from Goldman Sachs. Your question please. Hey, thanks. Good morning. Yes, for my first question, I just want to ask on the deployable capital of $9,500,000,000 at the holding company. Just given that level of capital and even some normalization in underwriting profitability, it seems like you could repurchase shares at the current pace for quite some time. So I'm just curious, is it prudent at this point in time to stop accelerating the buyback and hold on to some more cash to give some leeway for potential acquisitions?

24:30 Or how are you all thinking about that? Rob, it's Tom. We committed to do $4,000,000,000 We're going to do $4,000,000,000 John pushed that aggressively last quarter because we have plenty of capital. And so we're going to meet our commitment to get billion done. When you look above that and you say, okay, well, first we generate a substantial amount of free cash flow. And you say, how we manage it? We're pretty active in it. Obviously, organic growth, investing and leveraging our capabilities, whether that's things like protection services, or we've had great investment results because we've made some good changes there, or share repurchases.

25:16 So also not included in the conversation there is we're very active in sourcing capital. So whether that's using $2,000,000,000 of preferred stock to take out common, what we do with reinsurance, we sold our life business and we sold our health and benefits businesses because we thought we could deploy the capital at higher returns in other places, even though they're both really good businesses. So we think about it holistically and we use this capital management framework from an enterprise standpoint. So that's the way we think about capital. Obviously, best opportunity is increased organic growth when you look at our ROEs or our return on required capital, all of which are great. Investments is another place we've done really well. We've done exceptionally well with buying a couple of businesses.

26:04 Protection plans, SquareTrades, more than 10 times its size, we paid $1.4 for it and made over $80,000,000 the first six months of this year. National General, we paid $4,000,000,000 gross, we sold some businesses and it's more than double its size. So when we see something that can help drive growth, then we use shareholders money to deploy it and leverage those capabilities, which is what you would expect us to. Obviously share repurchases, John talked a lot about that. We're not afraid to share repurchases. It's better than sitting on it and not getting a good return. But so we look at all three of them and just think like what's the right thing to do from an enterprise standpoint. And the good news is we generate enough capital that we can do many of these things at the same time.

26:55 Yep, a lot of options. And then I just wanted to follow-up on Alley. It sounds like clearly there's a lot of exciting opportunities. Maybe you could just talk about how you expect the results of ALLi to eventually show up in the income statement, particularly between expense, loss ratio and growth over time? Well, first we haven't completely built it or deployed it. Some of this is just speculation, but I would say positive benefits to all those. I think ALS should help us reduce our expenses. Jess has already got a lot of work going on to take work out of agent offices, which will reduce our distribution expenses.

27:44 We think there's a bunch of other expenses that can help us reduce. We think it can help us be more accurate in pricing, more accurate in our claims. We think it can one of the things that agentic AI will help us do is connect the highly sophisticated individual things we do, whether that's buying leads, pricing, which distribution channel a lead should get routed to, it can help us be a lot more effective in growth. So we think it's going to add just a really positive thing for us to do. I can't give you specific numbers how much growth it's going to do or how much it's going do to expenses. But right now, we see lots of opportunity.

28:31 We're very optimistic about where that'll take us. Thanks, Tom. Thank you. And our next question comes from the line of Pablo Singzin from JPMorgan. Your question, please. Hi, good morning. I was wondering if you could provide perspective on new application growth in personal auto. So last year apps grew about 25%. So far this year, I think you're tracking to high single digits. So the question is, do you think that moves given the current environment? Right? Do you think you hold growth at that level or is there a risk of degradation because of just increasing competition?

29:11 Hey, Pablo. It's Jess Martin. I think, overall, we believe we can continue to fuel growth in new issued applications across all three channels. You saw, we continue to have strength in direct and that is because we're investing in sophistication, making sure that we get the right leads and the close rates are effective. So we will continue to invest and refine. We think there's opportunity in direct. As Tom mentioned, we're also working with our exclusive agent channel to make sure that they're focused on the highest value work. And we think that's gonna result in continued increases in productivity. And they do continue to be more productive than they've been in the past. And the final piece of that, of course, is to keep the new issued application engine running as the independent agent channel. We've had a lot of success there, but we think there's a lot of opportunity, particularly in the middle market where we're gaining some traction with, as I mentioned, bringing products to market that they can bundle an auto and home together to drive affordability for the customer, but it's a really great solution and it's some of our best products.

30:19 So overall, I feel confident in our ability to continue to drive new business going forward across all three channels. Thanks, Jess. And I guess for my follow-up, I'm going to flip to the retention side, right? So many in the industry have talked about more customer shopping. And I guess the question is, can you talk about how personal auto retention has been trending for you? And have you seen any retention benefits from your push to provide your current customers greater value? Thank you. Overall, has stabilized for us recently. There are a lot of shoppers, but that's been the case now for some time, right? Well, I don't think it's more than it was say a year ago, but they're shopping. And so we have invested as you mentioned in programs like SAVE.

31:05 We think Save has had a retention benefit certainly for the customers that we targeted. And at this point, we're sort of feeling like we've got a stable retention trend. Now some of that, of course, you have to really look a little bit deeper by segment, by risk segment, by risk type and what frankly by product type to really understand what overall retention is. When we look at it that granular level, we feel like retention trends are stable and that save was the right thing to do. It's working. Same is true for the things that we're doing to work with our exclusive agents to invest in relationships, which we think will have retention benefits. So overall, the retention trend feels stable. Thank you. Thank you. And our next question comes from the line of Elyse Greenspan from Wells Fargo.

31:56 Your question please. Hi, thanks. Good morning. For my first question, I guess I'm looking at Slide eight, right? You guys provided some good disclosure, right, on the adjusted underlying combined ratio, right, going back, I guess, to 2022. Year to date, right, you guys are running at around an 88.5%. Obviously, well below, right, I think you guys say you target a mid-90s across the cycle in auto. Obviously, things have been favorable. So how do you, I guess, think about just where you are now relative to that mid-90s target when you think about, right, prices slowing a bit? Obviously, frequency and severity will be what they will be. But as you think out, not just this year, but over the next couple of years, how do you think about a normalization within profitability within the auto book?

32:57 At least, slide eight was really to show how quickly we can move when we need to. So I would really focus on the far left hand side. So we move the combined ratio by over seven points in a year in response to a huge increase in costs. And as you know well, because we price on a leg basis, that's no small feat getting that done. So what I would say is that same adaptability applies to the question you're raising. So if you look at Jess also showed the rate increases over a number of quarters, and it's been flat for a while. And we're still making really good returns and we're growing. So we are always looking to grow as fast as we can and we're looking to earn good attractive returns and be competitive. And we've been able to do that.

33:54 Whether that means we have to go up from the far right hand side up to the mid-90s, we don't have a goal on that. What we said is in the mid-90s, you're making a really attractive return on required capital. So I think that's the message we believe is we're growing and we're earning really, really attractive returns on capital. So that should be good for shareholders. Thanks. And then my follow-up question, just within policies in force, just trying to get a sense as you guys are looking at current growth trends, I guess, across both captive, your independent agent and your direct business. Can you just give us a sense if there's different trends across any of the channels that you're currently seeing from an overall policy growth perspective?

34:49 Well, you thought we broke out the growth by channel and it's very balanced. Maybe another way to answer the question is about why do consumers choose these various channels? So if you start with people when they're making a choice on insurance, they're first like, okay, how easy is it? And how comfortable do I feel buying insurance? And then what's the cost, the relative cost? So you've seen a growth in the direct channel, are people who don't really want that much help buying it. They're really looking to do cost and that's gotten easier over time. That channel is also growing a lot because there's been so much advertising going through it. So I wouldn't underestimate how much that moves people from one channel to another. In the independent agent channel, those are people who like, look, I don't really feel like dealing with this myself. Don't really trust insurance companies that much, so I want somebody that can move around between those.

35:54 And you've seen we've grown rapidly there. That's proposition as well. And people are prepared to pay more for that than they do direct. And then in between that is our exclusive agents, which are people who want some help, but they believe in a brand. And they don't feel like they need to go out and shop around and have somebody look at a bunch of different companies. And we've obviously, Jessica talked about what we've done to improve their channel. I would point out we sell in the direct channel the same product we sell to our agents, but it's 7% cheaper in the direct channel because it doesn't come with an agent. Like, can people get that? Our agents get it. So we think there's it's really when you look at the customer segments, there's always gonna be people in all those segments, and we just wanna be available from all. In each of them, we have work to do to make sure we're as effective and efficient as we can. So you've seen we've made huge progress in our direct channel, and you've seen that growing. But I would say we're not done. We're still not industry leading in terms of our effectiveness and efficiency in direct. The exclusive agent channel, Jess, maybe you wanna talk about the things we're doing there to improve effectiveness and efficiency. Yeah, absolutely. So exclusive agents have been sort of foundational to our strategy for a long time. And so we're working with them to make them more efficient, more effective, and really put them in a position to deliver what clients value, which we know they can do. So examples, we're taking routine service tasks off of their plate.

37:24 People want those things done, but they don't need that done by their exclusive agent. That isn't value. We want them to do the things that reinforce their value proposition. We're giving them technology tools that serve up opportunities to engage with customers. It's sort of those moments that matter. We're putting them right in front of our agents so that they have an opportunity to shine and allow our customers to see the value that Allstate agents provide. Across the system though, it's more than just that. We're improving the quality of leads so that they have better close rates, so that there's less duplication, which is important to our agents. Product breadth is another thing that we're really investing in to make sure that they can diversify the sources of revenue in their agencies. So that's going beyond auto and home, which they bundle at very high levels as Tom mentioned.

38:12 But also to specialty products like renters and landlords and boats and motorcycles, life and retirement and commercial as I mentioned before. So we're making sure that our exclusive agents have the full portfolio where they want to meet that broader set of customer needs because we think they're certainly able to do that. The final thing I would say about what we're doing to support agents is really focusing on location flexibility. We're giving them the choice on how to best run their small business, right? So if a physical location is important to their business, then they'll have physical locations. But the flexibility means that in some cases, a shared location or no physical location at all works for an agent, they can still successfully maintain that local presence and grow their business.

38:58 So we're trying to introduce tools that help them be effective as well as options that allow them to lower their overall cost, so that it can continue to be a really strong and productive channel for Allstate. Thank you. Thank you. And our next question comes from the line of Josh Shanker from Bank of America. Your question please. Thank you very much for taking my question. Good morning, everybody. I know that monthly PIF reporting is going away. But as June is basically the last month we can do it, I did some back of the envelope calculations and it looks to me like that the homeowners business in terms of policy count is growing faster than it has any time since prior to Hurricane Katrina and I know over the past twenty years you've learned a lot about catastrophe management, but you're growing really fast in property.

39:57 Can you continue to grow at this speed without adding material cat load to your business? And can you talk a little bit about the capital requirements of growing auto home at the same pace? And I guess your appetite for monoline homeowners? Well, Josh, thank you for debunking the conspiracy theory that because we stopped doing monthly things, we had a problem. Our growth is good and it was good in June and we like where we're going. It's just in Mario both said, we feel like we got plenty of room to pick up market share. So we like what we're doing there.

40:50 In terms of the growth in homeowners, we're really good at it. And other people will make changes that we've already made to try to catch up to us. And those all make sense to me. But it's not like we're sitting around here saying, geez, we've got everything figured out. Let's not continue to make changes. We have new rating plans coming out. We have new sophisticated analytics we're using with individual roofs. And we've got lots of stuff we're doing to make sure we continue to grow in homeowners. And that starts with getting it priced most accurately for every individual house. So we're good at that. On top of that, though, the question about catastrophe risk, we manage overall catastrophe risk well. We're probably the biggest certainly the biggest US buyer of property liability catastrophe insurance. We've got a very complicated program.

41:43 Chris is going to take that over. We don't have any restrictions on access to capital to help us manage volatility. Sometimes we choose not to use that capital because we don't think it's in shareholders' best interest, but that's not going to restrict our growth. And so monoline homeowners, it will take people any way we can get them. But usually if you own home, you've got a car too. So we'd like to get both of those. But we don't restrict people to say, jeez, if you won't give us your car, we won't insure your home because we want each product to stand on its own. And we try to avoid subsidization between products because when you do that, you end up, as you would expect, markets like water, it finds the open hole and open hole tends to be a low return. If you sell a product, have low return hoping you're gonna get the other one.

42:37 That's not usually a good plan. And so we feel good about the ability to grow both homeowners in the exclusive agent channel, which Mario talked about. Just talked about Custom three sixty in the independent agent channel. And you should also, I would notice as you see on the chart, we've done a lot better in the direct channel. And as we improve our direct capabilities, we think that'll continue to grow too. Thank you for all the answers. Thank you. And our next question comes from the line of Andrew Kligerman from TD Cowen. Your question please. Hey, thank you for taking my question. Good morning. I'm looking at the prior year reserve reestimates in auto and they've been fantastic, I mean 6.6 points this quarter, each of the last four prior quarters, you've had sizable releases.

43:39 I think Tom, you talked about claim effectiveness, the technology ecosystem, maybe you could help us unpack what's generating these very favorable prior year reserve reestimates and whether you think that can continue? I'll start and then John can jump in if he wants. First, I would say every quarter we think we get reserves as accurate as we can get them. So we don't assume there'll be any more coming ever because we think it's as accurate as it can. Sometimes the estimates you made are higher and so then you have reserve releases and that's generally a more favorable place to be relative to you all than in a negative.

44:30 But we've had the other issue is, think the difference is really that when the inflationary trends have started to come down in certain places, AKA Florida, where they put some tort reform in. We're very hopeful that those kinds of trends will continue. So you might have noticed that Governor Hochul decided to take on increased costs for consumers on auto insurance because of litigation. Passed some laws, it's got to turn into a reality before it becomes an issue for a benefit we can give to customers. But we're hopeful that those kinds of things that's happened in Georgia and Louisiana. So we're hoping that there's a trend towards tort reform and getting rid of billboard lawyers that will improve our customers' costs. And therefore, the estimates we've made might not be as high as we thought.

45:33 John, what would you add to that? I just had a couple of things, Tom. I look at what we've gone through in the context of a, was a pretty, if you look back over the last five years, was a pretty volatile inflationary period. So we're looking at coming out of post COVID inflation period, used car prices that were going up in upwards of 60%, a lot of other things we've talked about, bodily injury and the rest. So it's not uncommon for any estimation process, sound as it may be, to potentially just adjust aggressively. What we've seen since then, and if you look at the process, this is a consistent process. We have multiple auditors on the outside that double check our work.

46:19 We're continually responding to trends and new data as it comes into the marketplace and making the best estimate at the time that we have. We've been, felt comfortable adjusting numbers in recent quarters, partially because of our strong claims team and the good work that they've done. But we absolutely feel good about the numbers that we have at any quarter and that's where we are now. Okay, thank you for investing your time with us. I would close with, at this price, you can't get operational excellence, sustainable growth or capital generation anywhere else. Thank you very much. Bye. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program.

47:04 You may now disconnect. Good day.