Mario Rizzo: Yeah. Hi, Elyse. It’s Mario. So most of the growth that we have been experience in the National General has been in the non-standard auto space. And as you know, that’s a part of the market that’s had a lot of disruption competitively where a lot of carriers have really pulled out or certainly slowed their growth. With National General, we have taken the same approach from a profit improvement perspective as we have in Allstate, we have taken almost 23 points of rate over the last two years in National General. The non-standard auto book intends to turnover quickly, so you can reprice the book on a continual basis. And so we have stayed in that market, we generated meaningful growth in non-standard auto and we are comfortable with the margins that we are experiencing in that in that book of business and look to continue to grow that.
On top of that, as I said earlier, we are rolling out the Customer 360, which is going up market. In the IA channel to write standard preferred auto and homeowners. Again, early stages there. The good news is, that product is in 16 states, we are getting good traction and it accounts for in the fourth quarter, it was about 70% of our standard auto and preferred new business production in the IA channel. We will expand that into additional states throughout the course of 2024 and into 2025. So we think that will be an additive opportunity in the IA space. But we are comfortable with what we have been writing non-standard auto and National General, we think there’s an additive opportunity as we look to really leverage Allstate’s capabilities in the middle-market to expand National General in that space in the IA channel.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Bob Huang from Morgan Stanley. Your question please.
Bob Huang: Hi. Good morning. Just a quick question on the capital side, obviously, your capital now, it seems to be very sufficient. Curious as to how you think about the path to resuming buybacks, especially given the material rebound in capital levels so far?
Tom Wilson: So — hi. This is Tom. I am going to start. Our capital is always been sufficient. So it should like reiterate what the position we have had. As it relates to buybacks when we are looking at capital regenerate. We start with, first, making sure we have enough capital to run the business and to grow the business and we have — had put aside more capital for growth, given the dramatic increase in premiums and the risk and we think by transformative growth. We will continue to have opportunities to deploying capital and high ROEs in fact growth. So that’s the first thing we do is like how do you drive shareholder value. And so, I think, looking forward with those opportunities, we will have less capital than it’s for share buybacks that we had historically.
That said, we have a strong track record of buying shares back. I think, I don’t know, since I have been CEO, maybe it’s $30 billion worth of shares we bought back. Like, if we don’t have a good use for the capital. Then we will give it back to shareholders, because there’s no sense holding onto extra capital. But between growth in the Property-Liability business, growth in some of our Protection Services, they tend to be a little lighter in terms of capital needs. And then our investment portfolio we derisked our investment portfolio last year, because of what we didn’t see as great market opportunities and if we saw there was opportunities to put more risk into that portfolio that would be another use of capital. So I think — the think about capital we are always trying to manage and maximize shareholder value and we will do that — do whatever form that is best.
Bob Huang: All right. Thank you. That’s very helpful and apologies for misstating the capital side of things.
Tom Wilson: Okay. That’s fine. So my second question really is on the expense. So one thing we hear typically from litigation lawyers is that, well, social inflation is an issue because insurance companies, carriers tend to under underfunded claims departments and often have inexperienced claim staffing. As you think about expense save going forward and as we think about re-pivoting back to growth, can you maybe help us think about what areas within expenses are you cutting and what are the areas where it is very critical and then things that are you are not going to cut on the expense side, is it possible to provide some colors?
Tom Wilson: Let me maybe address the litigation fees. Mario, can talk about expenses in claims. And then if you want, we can go above that in claims, already share just folks on claims. I am not shocked that lawyers would say that the only reason they exist is because we don’t have good people settling claims. That’s just not true. We — bodily injury claims are where our customers get into an accident and hurt somebody else, we take those very seriously. We try to resolve those quickly. We try to make sure people get a fair amount. So I don’t think I have seen any systemic changes either in the way we do it or the way the industry does it. I will say there have been a couple of things that have led to increased number of suits and litigation.
First is, there’s just more severe accidents. So during the pandemic, people started driving faster. They keep driving faster. And so when you look at the severity of the accidents, severity is up, and when severity is up, people tend to get hurt more, and when people get hurt more, they tend to have more damages, and that leads to a greater increase in the use of lawyers to help them resolve their claims. So that part seems completely natural to me. There’s, obviously, been a big change in the way those litigation firms go to market. I don’t know, obviously, but if you look at their advertising spend today, it’s over $1 billion a year. So they are out looking for customers. Some of those are people who need their help because they have been in severe accidents and there are more of them.
Some of them are people that maybe don’t need as much help. They have also gotten much more sophisticated in the use of data and analytics, and trying to hunt down claimants and possible clients. Some of that would be good. Some of that — we are not so sure they are actually doing what they are supposed to be doing. So I think it’s just a process, like, we want to make sure people get the right amount, we don’t want them to get too little and we don’t want them to get too much, we work to do that. You saw, we mentioned in the release for sure that we have also been settling claims faster. I guess we mentioned it in a presentation as well. So to counter that, what we have found is that if we can put more resources on a claim, settle it faster, then people are less likely to feel they need to go get a lawyer.
They are happy, we are happy and it’s cheaper for everybody because nobody has to pay the 30% to attorneys. Mario, do you want to talk more about claims, maybe bodily injury, other claim expenses?
Mario Rizzo: Yeah. I guess where I start is, as we talked over the last really couple of years about our profit improvement plan, it’s multidimensional, and one dimension that we have continued to focus on is just improving claim operational execution. The fact is, as much as continuing to reduce our cost structure improves our competitive position, really operational excellence and claims is another way to make sure that, we pay what we owe, but that also will translate into better competitive position over time. So we are focused on really, I would say, all elements of the claim process. It’s people, it’s process, it’s technology, analytics. And we are going to invest in the claims process moving forward across all those dimensions to just continue to invest in terms of people, making sure we have the right adjuster capacity.
We went through a pretty significant turnover. It was really in 2022. That has largely subsided. So we have much more stability in terms of claim staffing, but we are focused on training claim staff and providing them the tools, both in bodily injury and in physical damage to operate in a way that, again, we pay what we owe, but we ensure that we eliminate any leakage in the system and again, that’s been a core part of the profit improvement plan going forward. We are investing in people to provide more oversight, get more eyes on cars in the physical damage side, do a much more effective job in terms of total loss evaluation on the injury side. Tom mentioned we are paying claims faster. We have reduced our pending inventory on the casualty side to the lowest level it’s been since well before the pandemic.
We think that continues to reduce reserve risk going forward. So I would say, really, the answer is, we are going to continue to invest in claims broadly, because we just do believe it’s a core part of enabling us to be more competitive and ultimately translate into growth.
Tom Wilson: Let me link this to Greg’s question as well, because I think sometimes when we set goals out there and we talk about specific line items in the P&L, we don’t always show the subtleties of how they are linked together. So we clearly have a goal to reduce expenses related to transformative growth so we can be a low cost provider. That said, we — that’s not our primary goal. Our primary goal is to treat our customers really well, to build a great long-term business platform and to settle our claims and run our business properly. So if it means we have to spend more money on claims personnel, so that we lower, so loss costs come down and we think that’s in the best interest of our shareholders and our customers, then we are going to do that even if the expense number goes up. So we put those numbers out there to help you say we are let you know we are managing them, but we are not captured by just that one-line item.
