Earnings Call Transcript
ALLSTATE CORP (ALL)
Earnings Call Transcript - ALL Q4 2024
Operator, Operator
And thank you for standing by. Welcome to The Allstate Corporation's third quarter earnings investor call. At this time, all participants are in a listen-only mode. To ask a question during this session, you'll need to press star one one on your phone. If your question has been answered and you wish to remove yourself from the program, it is being recorded. And now I'd like to introduce your host for today's program, Alastair Gobin of investor relations. Please go ahead, sir.
Alastair Gobin, Investor Relations
Thank you, Jonathan. Good morning. Welcome to The Allstate Corporation's fourth quarter 2024 earnings conference call. Yesterday, following the close of the market, we issued our news release and investor supplement and posted related material on our website at allstateinvestors.com. Our management team will provide perspective on our strategy and an update on results. After prepared remarks, we will have a question and answer session. 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 The Allstate Corporation's operations. Allstate's results may differ materially from these statements, so please refer to our 10-K for 2023 and other public documents for information on potential risks. Our 10-K for 2024 will be published later this month. And now, I'll turn it over to Tom.
Tom Wilson, CEO
Good morning. We appreciate you investing time at The Allstate Corporation. I'll start with an overview, and then Mario and Jess will go through the operating sales. Let's begin on slide two. As you know, Allstate's strategy has two components: increased personal property liability market share and then expand protection provided to customers. On the right hand, you can see Allstate's strong performance in 2024 and the topics we're gonna cover this morning. Total revenues were $16.5 billion in the fourth quarter, up 11.3% compared to the prior year quarter. Allstate generated net income of $1.9 billion in the fourth quarter and $4.6 billion for the full year. Adjusted net income return on equity was 26.8%. Successful risk return management resulted in excellent underwriting and investment. Transformative growth has strengthened our competitive position. We'll spend a few minutes on that today. The sale of our group health and employee voluntary benefits to companies with greater strategic alignment will generate $3.25 billion of expected proceeds representing attractive valuation multiples. Moving on to slide three, you'll see the operational execution produced excellent financial results in the quarter and for the full year. Revenues increased to $64.1 billion in 2024. Property liability earned premiums were up 10.6% in the quarter and 11.2% for the full year. Net investment income was up 37.9% compared to the prior year and up almost 25% for the full year. Income was $1.9 billion in the quarter and $4.6 billion for the full year. Adjusted net income was $7.67 per share for the fourth quarter. On the lower right, you can see the adjusted net income return on equity was 26.8%. So 2024 was an excellent year for Allstate both financially and strategically. Let's move on to strategic transformative growth at slide four. We launched this project in December of 2019. So five years have gone by, and it’s a good time to give you a five-year look at where we are. Improving customer value requires us to lower our costs and provide differentiated products. As you can see on the right-hand side, the adjusted expense ratio, which excludes advertising cost, has improved almost five points since 2019 by eliminating work outsourcing and digitizing activities using less real estate and lowering distribution, which enables us to offer more competitive prices without impacting margins. Substantial progress has also been made in introducing new products such as affordable simple connected auto insurance, which is now in thirty-one states. The new homeowners product is in four states. Differentiated custom three sixty middle market standard and preferred auto and homeowners prices have also been introduced to the independent agent channel in thirty states. One of the most significant changes is the expansion of customer access to improve growth. This effort has three components: improve Allstate agent productivity, expand direct sales, and increase independent agent distribution, all of which have been successful. Allstate agency productivity has increased. Enhancements to direct capabilities, lower pricing, and increased advertising are attracting more self-directed customers. The National General acquisition significantly expanded our presence in and capabilities in the independent agent channel. As you can see on the right, in 2019, more than three out of four new business policies came from Allstate agents. Last year, new business was 9.7 million items, seventy-six percent higher than 2019, with significant contributions from each channel. Policies in force have increased from thirty to thirty-seven point three million despite the negative impact of pandemic price increases. Transformative growth has positioned us for personal profit liability market share growth, which you'll hear more about from Mario.
Mario Rizzo, CFO
Thanks, Tom. Let's turn to slide five. At the top of the table, you can see fourth quarter property liability underwriting income of $1.8 billion, improved by $507 million compared to the prior year. Auto insurance generated $603 million of underwriting income, an improvement of $510 million compared to the prior year quarter, reflecting the successful execution of the profit improvement plan. Homeowners insurance underwriting income was also strong at $1.1 billion, which was $99 million lower than the prior year quarter due to increased catastrophe losses. The bottom half of the table shows the strong margins delivered during the quarter. With the total property liability recorded combined ratio of 86.9 reflecting a 2.6 point improvement compared to the prior year. Auto and homeowner combined ratios in the quarter were both better than the targets for those businesses of mid-nineties for auto and low nineties for homeowners. Now let's expand on the auto insurance margins on slide six. Here, you can see how the successful execution of the auto profit improvement plan has restored profitability back to target levels. The fourth quarter auto insurance recorded combined ratio of 93.5 was 5.4 points below the prior year quarter as average earned premium outpaced loss costs. As a reminder, we regularly review claims severity expectations throughout the year. If the expected severity for the current year changes, we record the year-to-date impact in the current quarter, even though a portion of that impact is attributable to previous quarters. For 2022 through 2024, the bars in the graph reflect the updated average severity estimates as of the end of each of those years to remove the volatility related to entry year severity adjustments. The table at the bottom of the graph shows actual reported combined ratios. In the fourth quarter of 2024, the full year claims severity estimate went down, and there was a benefit from prior quarters included in the fourth quarter's reported results. This benefit was worth 1.5 points in the fourth quarter, resulting in an adjusted quarterly combined ratio of 95 shown in the furthest bar to the right. Let's turn to slide seven, where you can see that homeowners insurance produced attractive returns and group policies in force in 2024. With an industry-leading product, advanced pricing, underwriting, and analytics, broad distribution capabilities, and a comprehensive reinsurance program, we will continue to win the homeowner's business. On the left, you can see some of the key factors that contributed to strong results, including increased written premium of 15.3% in the fourth quarter compared to the prior year, reflecting higher average gross written premium per policy and policy enforced growth of 2.4%. For the full year 2024, the homeowners insurance business recorded a combined ratio of 90.1 in line with our low nineties target while generating total underwriting profit of $1.3 billion. The combined ratio for 2024 improved by 16.7 points, primarily driven by lower catastrophe losses and strong underlying loss performance. The chart on the right shows Allstate's strong track record of profitability in homeowners insurance. Allstate produced a recorded combined ratio of 92 over the past ten years, which compares favorably to the industry, which experienced an underwriting loss with a combined ratio of 103 over that same time period. Now let's discuss a pertinent topic regarding homeowners on slide eight: the California wildfires. Allstate responded quickly and empathetically to help customers and communities after the tragic wildfires in Southern California, deploying mobile claim centers and over nine hundred team members to assist customers. Helping our customers recover from the fires is our principal priority. The financial impact of the wildfires reflects the comprehensive risk and return approach we've taken in managing the homeowners insurance business. Allstate made the decision to reduce California exposure beginning in 2007. Our homeowners market share has been reduced by over fifty percent since that time, as you can see on the chart on the left. While it is early and we have not been able to adjust many claims, current gross losses are estimated at $2 billion, which includes loss adjustment expenses and an estimated California fair plan assessment. Reinsurance recoveries of $900 million net of reinstatement premiums would reduce the net loss to $1.1 billion, which will be reflected in first quarter 2025 earnings. Each additional $100 million in gross losses above our current estimate would result in $10 million of net losses since we are above the reinsurance attachment point of $1 billion. We will continue to monitor the development of this event and provide any updates with our January catastrophe release, which we'll make on February twentieth. Looking forward, let's discuss policy and force trends in the property liability business on slide nine. The chart to the left shows the composition of property liabilities, thirty-seven point five million policies in force—auto is the largest at twenty-four point nine million, while homeowners represents approximately twenty percent of policies enforced. As you can see on the right side of the page, auto insurance policies in force declined by 1.4%. A decline in customer retention, particularly in states with large recent rate increases, more than offset a nearly thirty percent increase in new business applications in the quarter. Auto policies enforced did increase in thirty-one states, representing approximately sixty percent of countrywide written premium on a year-over-year basis. In the middle column on the right, you can see that homeowners insurance policies enforced increased by one hundred seventy-three thousand or 2.4%, driven by strong retention and a 20.5% increase in new business. We view homeowners as a growth opportunity across all distribution channels. Our objective in 2025 is to grow property liability policies while continuing strong new business sales. We are proactively contacting customers to lower the cost of protection and to increase retention. Completing the rollout of affordable, simple, and connected auto and homeowner products will also enable growth. In addition to improving the customer experience, these products contain our most sophisticated rating plans and telematics offerings, which will deliver profitable growth and position us to compete effectively in a market where more carriers are looking to grow. To provide transparency to investors on our progress on growth, we will provide monthly disclosure of policies in force beginning with our next monthly release in a couple of weeks. Now I'll turn it over to Jess.
Jess Merten, CRO
Alright. Thank you, Mario. Slide ten provides insights on performance and asset allocation. By taking a proactive approach to portfolio management, Allstate optimizes return for the risk across the enterprise. This disciplined approach includes comprehensive monitoring of economic conditions, market opportunities, interest rates, and credit spreads. The chart on the left shows a quarterly trend of net investment income and our fixed income earned yield. Market-based income of $727 million, shown in blue, was $123 million above the prior year quarter, reflecting a higher fixed income yield and increased assets under management. Fixed income yields shown below the chart have steadily increased as we repositioned into higher yielding longer duration assets, increasing forty basis points from point zero percent to 4.4% over the past year. Performance-based income of $167 million, shown in black, was $107 million above the prior year quarter, reflecting higher private equity and real estate investment results. We've mentioned previously, our performance-based portfolio is intended to provide long-term value creation and volatility on these assets from quarter to quarter is expected. The pie chart on the right shows our asset allocation as of year-end 2024. As you can see, our portfolio is largely comprised of high-quality, liquid, interest-bearing assets. Public equity holdings were increased by $2.4 billion in the fourth quarter and now comprise $3.3 billion or approximately 5% of the total portfolio. Fixed income duration was 5.3 years, which is in line with the prior year quarter and up from 4.8 years at the end of last year. Let's turn to slide eleven and discuss protection plans business, which is a key component of protection services and advances our strategy to expand protection while generating profitable growth. Protection plans offer coverage for replacing a wide range of consumer products, including electronics, computers and tablets, TVs, mobile phones, major appliances, and furniture that are either damaged or broken. The products are distributed through strong retail relationships. Revenues of $528 million in the fourth quarter grew 20.3% compared to the prior year, driven by both domestic and international expansion. Profitable growth resulted in adjusted net income for the quarter of $37 million, which is consistent with the prior year quarter, and an increase for the full year of $40 million to $157 million, reflecting the benefit of higher revenues and claims cost improvements. The business has profitably grown to approximately 160 million policies, adding 60 million since 2019 through broad distribution and protection offerings as well as geographic expansion. Additionally, revenue has increased to nearly $2 billion in 2024, reflecting 23.9% in annual compounded growth since 2019 while generating more than three quarters of a billion dollars in adjusted net income from 2019 to 2024 as growth offsets expansion investments. We continue to invest in this driving business as evidenced by the recent acquisition of Kingfisher, which enhances our mobile phone protection capabilities. I would like to transition slide twelve to discuss how the sale of the employer voluntary benefits and group health businesses create shareholder value. As a reminder, the decision to pursue the sale of health and benefit was based on the assumption that these businesses would have greater strategic value to other companies and selling them would maximize shareholder value. The transactions we've announced support this assumption. In August, we agreed to sell the employer voluntary benefits business to Stancorp Financial for $2 billion. We expect to close that in the first half of 2025. Last week, we marked another major milestone with our agreement to sell the group health business to Nationwide for $1.25 billion, which we expect to close sometime in 2025. Both of these transactions are economically and financially attractive for our shareholders, with combined proceeds of these sales totaling $3.25 billion and an expected book gain of approximately $1 billion. Using trailing twelve months adjusted net income, the combined estimated impact of the transactions on adjusted net income return on equity will see a decrease of about 180 basis points due to lower income and higher equity resulting from the gains on sale. As a reminder, the Group Health business is part of National General, which we acquired in January of 2021 for $4 billion. The proceeds from this divestiture, combined with about a billion dollars in dividends that we received from National General statutory legal entities, represents a return of more than half of the original purchase price while the size of the National General Property Liability business approximately doubled. Touching briefly on the results of health and benefits for the quarter, premium and contract charges for the segment increased 3.2% or $15 million compared to the prior year quarter. The individual and group health business saw strong growth with premiums and contract charges up 8% and 9.8% respectively. This growth was partially offset by a modest decrease in employer voluntary benefits. Adjusted net income for the segment of $35 million in the third quarter was $25 million lower than the prior year quarter as increased benefit utilization across all three businesses impacted profitability. Underwriting and rate actions are being taken to quickly address benefit ratio trends and restore margins to historical levels. Options for the individual health business, which has adjusted net income of $30 million for 2024, are being evaluated, and the business will either be retained or combined with another company. Let's close on slide thirteen by reviewing Allstate's strategy to create shareholder value. As you can see on this page, we create value by delivering attractive financial returns, executing transformative growth to increase property liability market share, and expanding protection offerings by completing the sales of employee voluntary benefits and group health businesses. So with that context, I'd like to open up the line for your questions.
Operator, Operator
Certainly. And our first question for today comes from the line of Rob Cox from Goldman Sachs. Your question, please?
Rob Cox, Analyst
Hi. Good morning. Thanks for taking my question. First question for you, I had on advertising. I think you all had previously said that you were pretty comfortable with the 3Q 2024 level of advertising spend. Was hoping you could talk about the decision to ramp it up here in the fourth quarter. And I'm curious, what your measures of ad spend efficiency are telling you in the current environment, and how does that compare to history?
Tom Wilson, CEO
So, Rob, we're comfortable with our advertising spending. We adjusted it obviously by quarter to point out, and it also depends on which markets we're after. Sometimes we do some heavy tests in particular months to see what the response is. I can assure you we have state-of-the-art analytics on that. It's everything—every kind of lead we bid on leads automatically. We had a number of outside people come in and look at our analytics. And we appear to be at least contemporary, if not industry-leading. But when we look at it in total, we think we're really good at it. We have all kinds of allowable acquisition cost measures that look at everything from quote to close ratios to lifetime value.
Rob Cox, Analyst
Got it. Thank you. Secondly, I wanted to ask a question on the comment in the press release about expecting growth in total property liability policies in force in 2025. We've been thinking that you could certainly grow policies in force in both home and auto in 2025. Is there any reason why you would be hesitant to commit to growing in both segments, or am I looking too deeply into that statement? Let me make a comment and then turn it over to Mario.
Tom Wilson, CEO
So first, as you know, we don't give forward-looking projections on policies in force growth. What we've said to help bring some clarity is we're just going to give you the numbers every month like we do with catastrophes, and you can decide what you want to do with that. We're obviously already growing in homeowners, and we have plans we talked about in the press release on where we're growing in auto. But in total, we're not growing in auto. So Mario is working on that. Mario, you want to talk about what you’ve got going?
Mario Rizzo, CFO
Yeah. Thanks for the question, Rob. Look, I'd say the objective of transformative growth is to grow policies in force and gain market share in the property liability business. That's our goal. Having said that, as Tom mentioned, we're currently growing the homeowners business. We think there’s a real opportunity in the market. We're going to continue to lean into that one because we have really strong capabilities. There’s disruption in the market that we can take advantage of, and we like the prospects of continuing to grow homeowners. On the auto side, we think despite the fact that policies are declining, we're really well positioned to lean into growth going forward for a variety of reasons. The first is, we've seen new business momentum build over the course of 2024, in part due to our advertising investment that we’ve increased throughout the year. We're also unwinding underwriting restrictions and looking to accelerate growth across all distribution channels. We're going to continue to leverage our broad distribution capabilities alongside that marketing investment and continue to roll out new affordable, simple, and connected products. We are currently in thirty-one states. We’ll continue to expand that over the course of this year. That contains our most sophisticated pricing and our most contemporary telematics offerings. We're going to continue to leverage capabilities on the Allstate side. As you mentioned, National General just talked about the growth we've seen in National General. We're going to leverage middle market capabilities in Allstate to grow National General in a part of the market that has less penetration. We're also going to use National General's capabilities in the nonstandard auto space and leverage the Allstate brand to begin to accelerate growth in that space. We've got a lot of things that we've both been doing and expect to do in 2025 to accelerate growth, and really, that was the genesis of the statement. One last point: I should have emphasized retention. Everything I talked about was on the new business side. We've seen the adverse impact on retention as we've had to raise prices over the last couple of years to improve margins. The good news is auto margins are back where we want them to be in the mid-nineties range. The downside of that is retention has taken a hit.
Rob Cox, Analyst
Thank you very much for the answers.
Operator, Operator
Thank you. And our next question comes from the line of Gregory Peters from Raymond James. Your question, please?
Gregory Peters, Analyst
Good morning, everyone. So for my first question, feedback on the last answer there, Mario. You said on slide nine that for auto policies, you mentioned that you're proactively contacting existing customers. Can you give us an updated perspective on how you think your pricing is on a competitive positioning basis versus your peer group, and as you shift gears and proactively contact existing customers, does that mean that there's going to be some sort of corresponding adjustment in agent compensation that's going to give more weighting to retention versus just flat-out new sales?
Tom Wilson, CEO
Right. Let me point out that pricing is complicated, so I'm going to let Mario handle that one. But I want to make one point on retention: I think having branded agents who work exclusively with you is the best channel to be able to do what we're talking about. We've raised some people's prices thirty, forty percent. We had to do it quickly because we were losing money. Now we can go back in and help them get the absolute right coverage. That could be deductibles, it could be coverage limits, it could be using telematics, it could be paying differently. So there are lots of different ways we can help them do that. It would be very difficult to do through an independent agent channel or through a direct channel because you don't have the skills and capabilities built in your call centers necessarily to make those adjustments. Our Allstate agents are used to doing this all the time.
Mario Rizzo, CFO
Yes. Thanks, Greg. On the competitive position, a couple of things: first, when you look at the ramp-up in new business over the course of the year, and we made a comment that we're growing in thirty-one states currently, I think that's indicative of having competitive prices and being able to fully leverage the marketing investment we’re making. It’s a complicated question; it's hard to answer it on a national basis because we compete market by market, state by state, and we’re constantly looking at our competitive position and making tweaks to the tiers within our pricing plan to adjust prices when we think it’s appropriate. The good news is, we've achieved target margins, so we're comfortable with where our rate level is currently. We would expect that we would need to take less price going forward. But when you look at our new business trends, we feel good about competitive prices. We've taken a lot of cost out of the system over the past several years, as Tom mentioned earlier, which is helpful. On the second question about proactively contacting customers and agent compensation, a meaningful portion of the agent compensation currently relates to renewal, so they've got a strong economic vested interest in retaining as many customers as possible. As Tom mentioned, they've been doing that.
Gregory Peters, Analyst
Thanks for that information. Tom, in your opening comments, when you were going through the information on slide two, you emphasized an ROE of 26.8%, which I believe is one of the best results I've seen from your company in recent history. Can you provide some view of how you're thinking about the ROE going forward and maybe how the board's viewing it? The reason why I'm asking is, you've disposed of some underperforming assets over the last decade, and it feels like there’s a natural migration that the ROE objectives for the organization can be moving up certainly, this result for last year sort of puts an explanation point on that.
Tom Wilson, CEO
Good question, Greg. With longitudinal perspective on it, at one time we put out a target of fourteen to seventeen percent, but I would say that was a different company and a different time. We’ve made a bunch of changes; we sold the life business, we bought back a substantial amount of stock. Our premiums are up substantially. When you look at it, we feel really good about where we're at. When we put that fourteen to seventeen percent out there, it was really because investors weren't sure where our returns would be and would they be acceptable. We never said it was capped. Obviously, now we're doing better than that. The most important thing for us is to increase growth; increasing returns won't drive that much shareholder value. What will drive more shareholder value is growth, which we're obviously growing in a bunch of our businesses.
Gregory Peters, Analyst
Got it. Thanks for the answers.
Operator, Operator
Thank you. And our next question comes from the line of Michael Zaremski from BMO. Your question please.
Michael Zaremski, Analyst
Hey. Thanks. Good morning. My first question is on the expense ratio. Kudos to lowering it over time and meeting your goal. I'm curious. I think in the past, Tom, you said that you have plans to improve it even further. Maybe I'm mistaken—that's the expense ratio x advertising expense. If that’s the case, are you able to elaborate on what the building blocks are going forward to continue the improvements?
Tom Wilson, CEO
So yes, so the answer is yes. We always expect to keep reducing expenses, and we think we have an opportunity to lower them further. We're not done. I would say maybe we're sixty percent of the way done. But I wouldn't take that and multiply that by some percentage change because part of that percentage change is because premiums have gone up faster than general inflation. So we are constantly working—to digitization, leveraging the new technology platform we built. Increasing our marketing effectiveness is critical, and we also still need to lower distribution costs.
Michael Zaremski, Analyst
Great. And my final follow-up is just more high level on the devastating tragedy in California. I know it's a fluid situation, but several of your competitors have expressed the view that they might need to retrench even more in California given the potential payback on the losses that could take many years. Curious if you think this could cause Allstate to rethink its ambitions in California or just overall growth in the state?
Tom Wilson, CEO
Well, every state's different. We don't have any growth aspirations in homeowners in California at this point, and we haven't since 2007, really. We had a small window where we thought we had some arrangements to grow, but that didn’t turn out to be the case, so we turned off the spigot for new customers. We’ve been at this a long time, and we don’t have any growth aspirations in California right now. That said, we're really good at homeowners. We make more than half of the industry's profits. We've got a good business model. We think it’s a great growth opportunity. But we just need to ensure it’s done on a basis that is fair to consumers, while also giving our shareholders an appropriate return for the risk.
Michael Zaremski, Analyst
Thank you.
Operator, Operator
Thank you. And our next question comes from the line of Christian Getzoff from Wells Fargo. Your question, please?
Christian Getzoff, Analyst
Hi. Good morning. My first question is on retention. I didn't see any retention numbers in the press release for supplements. I was wondering if you could provide that. You mentioned the majority of the headwinds on retention came from the migration from Esurance and from rate hikes in New York, California, and New Jersey. Is the majority of that headwind paid off now, or do you expect some further headwinds in the first half?
Tom Wilson, CEO
Let me make a couple comments, then Jess may want to comment. We’ve paid a lot of attention to retention in more granularity than you mentioned, whether it's this book of business, this state, price changes, etc. We've decided that rather than give you complicated components, why don’t I just give you the aggregate numbers? So why don't I just give you the numbers every month? You’ll know what they are without getting caught up in projections on new business or retention policies. Our goal was to increase transparency and give you more information to make your investment recommendations, rather than less.
Jess Merten, CRO
I really believe that by giving you a top number monthly, you'll have more transparency. Recall, what we gave you was Allstate brand retention rather. We wanted to move away from just brand performance, so this move should simplify things and position you to understand new business and retention trends clearly.
Mario Rizzo, CFO
The only thing I'd add on retention is to take a step back: our principal focus heading into 2024 was improving auto margins. We were clear that we would need significant price increases for that—over forty percent over the past several years. The good news is margins are back to where we need them to be. We've been making progress in several states, but we still need to do more in New York and New Jersey. We're actively pursuing rate increases in those states, but we believe we can overcome these challenges and tap into growth opportunities in the rest of the country.
Christian Getzoff, Analyst
Gotcha. Thank you. And going back to the California wildfire losses: I know you provided a $2 billion gross estimate with some sensitivity. What are you assuming in terms of the industry losses so we could flex that sensitivity up or down depending on how the losses develop?
Mario Rizzo, CFO
Look, there are a lot of moving parts in our estimate. We know our data with a lot of specificity because we have it. We’ve made assumptions about a fair plan assessment given the magnitude of the losses we’ve seen. Our number includes our view of what the industry loss is. I would rather not disclose our view, but we’ve made specific assumptions to come up with our estimate. We'll keep monitoring it as it’s a fluid process and will update as more information comes in.
Tom Wilson, CEO
To give you a sensitivity, for every hundred million, it’s ten million bucks. For every five percent off total, it costs us ten million dollars. If we’re off by fifty percent—that's another billion dollars; it costs us a hundred million. I don't think you need to worry about sensitivity on the gross loss.
Christian Getzoff, Analyst
Thank you.
Operator, Operator
Thank you. And our next question comes from the line of Timmy Peller from JPMorgan. Your question please?
Timmy Peller, Analyst
Hey. Good morning. I had a question first on just the auto business. You mentioned policies in force turning positive in thirty-one states. I'm assuming what's unique about those states is that you're not raising prices as much and advertising more. So if that's true, could you talk about whether the remaining states that you're not growing in will begin to show improvement gradually, or is there a more abrupt change coming later in the year once the comparisons allow for you to not raise prices?
Tom Wilson, CEO
Timmy, I’ll let Mario talk about the pace, but I don't think he’s going to give you an answer by quarter. It’s more complicated than just those two factors. It involves what everybody else is doing, the kind of coverage we’re offering, our ASC rollout, etc. It’s a really complicated machine we're running here. But our goal is to ensure effective results, not excuses.
Mario Rizzo, CFO
Timmy, thanks for the question. Look, we want to grow in every state where it makes economic sense, and we believe we can grow profitably. Currently, that includes thirty-one states, but we think the opportunity exists beyond that. There are numerous components that factor into our ability to grow: price, competitive positioning, growth investments, risk appetite—all play a role. Retention is crucial to our growth as well. Despite achieving robust new business trends this year, we saw unit declines due to retention challenges. We’re actively working on improving retention and implementing strategies to drive growth.
Timmy Peller, Analyst
And then maybe just following up on capital: the business is obviously profitable now. I think you'll make money even with the California fires in Q1, and then you've got the money coming in through the sales of the benefits and health business, so how should we think about capital deployment between growth, M&A, and share buybacks?
Tom Wilson, CEO
Timmy, we consider proactive capital management to be a significant strength of Allstate, and it has added tremendous amounts of shareholder value. Share repurchases are one such area where we've utilized capital extensively. However, we encourage broader accountability regarding capital deployment. There’s organic growth, which generates dollar growth in earnings, and we believe with a higher growth rate, comes a higher price to earnings ratio.
Jess Merten, CRO
I can say when looking at the returns and valuation, both National General and SquareTrade acquisitions show significant growth since they were acquired. The net cost of National General is about half of what we paid, with dividends received providing a substantial return.
Tom Wilson, CEO
For us, managing our capital is vital, whether that's growth investments, acquisitions, or share repurchases. We do not want to hold onto excess capital; we’re eager to utilize it effectively to grow or buy back stock when appropriate.
Timmy Peller, Analyst
Thank you.
Operator, Operator
Thank you. And our next question comes from the line of Bob Huang from Morgan Stanley. Your question please.
Bob Huang, Analyst
Yeah. Good morning. I'm going to stay away from capital. The first question is on auto. An investor pointed out that in your first quarter 2024 slide, you talked about 64% of your total premiums being profitable. Fast forward to today, we’re talking about about 60% of that premium now growing. Is it fair to correlate the time you achieve profitability with the time you start to grow the business? In other words, is it fair to say that in six to nine months from now, California, New York, and New Jersey will be the only states where you’re unable to grow, and everything else should be growing, rather than just 60% of total premium? Is that a reasonable assumption?
Tom Wilson, CEO
I think the construct is right. It’s true that when we were losing money, we shut down advertising and growth intentionally. However, it’s important to remember that each state has unique circumstances, and we cannot automatically extrapolate trends. For instance, if we achieve adequate prices in New York tomorrow, we could quickly leverage our agency presence for strong growth. But predicting that timeline is uncertain.
Bob Huang, Analyst
Got it. If I can just have a follow-up on that: the question is around adverse selection. As we enter 2025 and more auto carriers talk about growth should we expect your current level of combined ratio to hold for auto as the competitive environment changes?
Tom Wilson, CEO
The auto market has obviously been competitive. Both Progressive, GEICO, and State Farm have been aggressively marketing and competing this year. This isn't new; we already have a competitive environment. However, we believe we have the capabilities to remain competitive in this landscape. The homeowners market is different, and we see a secular trend there that provides an opportunity for us to grow.
Bob Huang, Analyst
Got it. That's helpful.
Tom Wilson, CEO
Thank you all. We’ll see you next quarter.
Operator, Operator
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.