As a reminder, please be aware this call is being recorded. Now I'd like to introduce your host for today's program, Mr. Mark Nogal, Head of Investor Relations. Please go ahead, sir. Thank you, Jonathan. Good morning, and welcome to Allstate's first special topic investor call. This morning, we'll discuss the current auto insurance operating environment. After prepared remarks, we'll have a question-and-answer session. Our management team is here to provide perspective on the topic. We will not be covering first quarter operating results or trends within our other lines of business, so please hold those questions until the first quarter earnings call in May. The slide presentation and webcast can be found on our website at allstateinvestors.com. As noted on the first slide of the presentation, our discussion will contain non-GAAP measures 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. We are recording this call and a replay will be available following its conclusion. I'll be available to answer any follow-up questions you may have after the call. Now I'll turn it over to Tom. Well, good morning and thank you for joining us today. Let's start on slide two, which highlights Allstate's strategy. This is our like you are here slide. You know, if you go in a shopping mall and you're looking at the big map, and then there's a little dot. This is the big map, and it shows our strategy has two components, both to increase personal property-liability market share, and then expand protection solutions. Those are in the two ovals on the left of that slide. On the right-hand panel, you can see our five operating priorities, which focus on both near term performance and then long-term value creation. Achieving target auto insurance profitability while growing is a key component of delivering on those priorities on the right. The bottom part of the slide lays out where the conversation will go in today's call. We'll begin with an overview of auto insurance profitability, then we'll discuss the plan to improve auto insurance margins and conclude on how we expect to measure progress. Now let me turn it over to Glenn. Thanks, Tom. Let's start on slide three, which highlights Allstate's historical auto insurance profitability and impact of increased loss costs on the second half of 2021. First, we have a thorough process for allocating capital to risk in order to generate attractive risk-adjusted returns. This is done by line of business, geography, and risk class. In auto insurance, we target a mid-90s combined ratio to create value and achieve profitable growth. We have a history of generating industry-leading returns in auto insurance, as shown in the graph on the bottom left. It's a result of strong operating capabilities and execution. Allstate's auto insurance combined ratio, represented by the blue line, has been favorable to the industry 6.7 points on average from 2017 through 2020. The pandemic, we know, created volatility for the insurance industry, and you can see that from the decline in combined ratios in 2020 versus 2021 with stay-at-home orders that resulted in reduced accident frequency that led to strong profitability in 2020 and early 2021. Then loss costs rapidly increased in the second half of 2021, driven by inflationary pressure on severity. To put that shift into perspective, you can see from the chart on the bottom right that we generated auto insurance underwriting income of $1.7 billion during the first half of 2021, but an underwriting loss of $459 million in the second half of the year. Moving to slide four, you can see that the challenge is across the industry, meaning we're addressing margins at the same time as our competitors. Industry loss ratios escalated in 2021, as shown by the chart on the top right, and the impact was widespread with each of the top four market shareholders seeing loss ratios rise at least 8 points from the third quarter of 2019 to the third quarter of 2021. It's important to note here that, you know, since we're using statutory data, year-end 2021 isn't available yet. In response to all that, you know, the entire industry has started to take rate increases, and that's shown in the last column on the lower right. Now, of course, each company has their own unique starting point, timing, and key determinants of price, and you can see that from the various increases and decreases over time throughout the table. Remember, we're only showing the changes in rates, not the absolute price level. The absolute price level is the most important factor in growth. Let's go to slide five, and we'll go deeper into frequency. Allstate brand auto property damage frequency remained below 2019 levels by 13.3% in the fourth quarter and 19.8% for the full year. Miles driven have rebounded from the lows that we saw early in the pandemic, and you can see that in the chart on the bottom left. Driving patterns, and thus claims, have shifted. The chart on the right shows claims during traditional commuting hours have remained pretty well below pre-pandemic levels, but non-rush hour claims have essentially reverted to historical norms. The increased portion of miles driven during times with less road congestion is likely one of the leading causes of a larger proportion of high-impact accidents and increased injuries. Let's move to slide six, and we'll discuss severity there. Auto severity has increased significantly, as we all know. It reflects inflationary impacts across coverages. Physical damage coverage has been impacted by an unprecedented rise in used car values. They're up 68% from the end of 2018, and that's shown on the bottom of the page. Repair costs have also moved up with supply chain disruptions and higher labor costs. The harder impacts I mentioned are also leading to increased vehicle damage and more severe injuries, which is driving a shift to more complex and costly treatments in casualty claims, as well as greater attorney representation. On slide seven, we'll talk about the comprehensive approach we have to return auto margins to the targeted mid-90s combined ratio. There are three areas of focus. One, raising rates. Two, managing loss costs through claims effectiveness. Three, continued focus on reducing expenses. Starting with rates, we began pursuing rate actions in the third quarter of 2021, which manifested in meaningful rate increases in the fourth quarter and the first two months of this year. Over the past five months, the gross annualized impact of implemented rates is about $1.2 billion on premiums written. Now, increasing rates is definitely core to restoring margins, but we can moderate the impact for customers through claims excellence and reducing expenses. Eric Brandt, our Chief Claims Officer, will cover how we're leveraging claims expertise and scale to drive accuracy and operational efficiency in claims later in this presentation. As for expenses, as we all know, our Transformative Growth efforts include a goal of reducing costs about 6 points from 2018 to 2024 to improve customer value. So far, we've achieved about half of that with planned savings of an additional 3 points expected over the next three years. On the bottom of the slide, you can see that we have an operating system that includes a broad set of strategic capabilities that have supported our long-term, very strong auto returns. With that, let me turn it over to Julie Parsons. She's Chief Operating Officer of our Property-Liability business, and she'll discuss our pricing strategy and capabilities. Thank you, Glenn. Moving on to slide eight, let's start the conversation with how we implement pricing changes in auto insurance. We use both traditional rate plans and telematics to be highly precise, so we treat customers fairly and achieve Allstate's growth and return objectives. Starting with our traditional rate plans, Allstate has a long history of being one of the industry leaders in pricing sophistication. Who you are, where you drive, what you drive, and your coverage selections are different for each customer, and combined, create an almost limitless number of unique price points. We continually invest in new data and contemporary variables to extract meaningful insights related to pricing risk, and as a result, have over a decade of telematics experience. This decade-long investment in telematics, our claims data, our scaled connections, and our partnership with Arity provide pricing segmentation advantages. The chart on the right shows an example of how adding telematics scoring can enhance traditional rating variables. The horizontal axis represents risk levels with safer driving habits on the left and higher risk habits as you move to the right. The dashed blue line represents a loss ratio relativity of 1.0. If a rate plan has the same loss ratio relativity for a higher risk driver as a lower risk driver, then the pricing has been tailored to the risk, resulting in a loss ratio relativity of 1. Now, as you can imagine, with the number of rating factors in traditional plans, this is hard to do, particularly for the higher and lower ends of the risk spectrum. The solid black line shows the loss ratio relativity has historically been lower for safer drivers when using only traditional rating variables and higher for more risky driving behaviors. Telematics pricing enhances those traditional rate plan factors to better match price to risk. As I said, it's particularly important in pricing for drivers exhibiting behaviors on the low and high ends of the safety spectrum. Our telematics data enables us to be closer to the line, represented by the illustrative dashed orange line, by leveraging the continuous connections in Drivewise and Milewise, our unique pay-per-mile product. The newest version of Drivewise provides an incentive for safe driving by offering discounted rates based on how you drive and discourages higher risk driving. Milewise offers customers the ability to manage their total insurance costs in the face of higher rates. Now let's turn to slide nine to discuss how Allstate's expertise enables us to move beyond just risk selection and pricing to optimize rate changes within local markets. Foundational to this process is our state management function, which enables us to optimize profitable growth at the local level. This involves expertise and depth in managing competing priorities and integrating various teams and business initiatives to achieve each state's defined objectives. Our scale, data, and analytics enable responsiveness to local market trends and the perspective to discern noise from true and sustained signals. Market dynamics are influenced by internal and external factors. Examples of internal factors are types of risks, distribution capacity, and mix between agent and direct sales, claims trends, and local marketing tools and effectiveness. External factors include macroeconomic trends, market opportunity, and competitor actions which impact shopping rates and overall market growth. Our increasingly sophisticated models predict loss and expenses at a refined segment level, and our proprietary competitive intelligence tools provide insights on our absolute competitive position. State managers incorporate all of these factors to build an execution plan that is differentiated by risk segment and distribution preference. Underwriting criteria and decisions are refined for local market risk selection so we can receive an adequate price for the risk. Execution also involves developing strong relationships with state regulators and their teams. We take pride in the transparency and completeness of our filings, which includes explaining how market conditions are changing and impacting trends and rates. Our go-to-market system is designed to maximize lifetime value creation, and our operating system is built for rapid adaptation and execution. In addition, the new technology being built for Transformative Growth is already enhancing our adaptability and execution speed. Slide 10 shows another way we look at the portfolio of risks and returns at the state level. While state profitability can vary from year to year, we manage the portfolio to target a mid-90s combined ratio. The charts on the bottom of the slide show the Allstate brand auto underlying combined ratio from our portfolio of 50 states plus D.C. segmented into different groupings. The chart on the left shows the number of states at different underlying combined ratio levels, and the chart on the right shows the premium distribution for the states in each grouping. At Allstate, we have a wide geographic distribution where no one individual state represents more than 12% of our premium, as published in our most recent 10-K. Historically, most states operate at an underlying combined ratio below 96. For example, in the lower left, the second bar shows the results for 2017 through 2019 before the pandemic impacted returns. As you can see, all but four states had an underlying combined ratio below 96. In the 2015 to 2016 time frame, there was a spike in accident frequency, and approximately half our states had an underlying combined ratio at 96 or above. In today's environment, the state distribution is similar to the 2015 and 2016 period, with a higher proportion of states in the greater than 100 combined ratio level, representing approximately 55% of our written premium. We anticipate our comprehensive approach, including rates, will restore auto profitability to targeted levels. Now let's move to slide 11 to discuss our current rate actions. The chart on the lower left provides a view into 2021 and year-to-date rate actions. We implemented rate decreases in early 2021 to reflect reduced frequency during the pandemic and to a lesser degree, Allstate's lower expense ratio. However, as the year progressed and inflation escalated, rates were increased beginning in the third quarter. In the first two months of 2022, rates were increased in 16 locations at an average increase of 9.1% and a weighted Allstate brand auto premium impact of 2.2% year-to-date. This includes the February-implemented auto rates we released this morning, which includes average rate of 9.7% across 11 locations with a weighted impact of 1.6%. The chart on the right shows the estimated annual impact to written premium from implemented rate in each quarter. Note that 2022 represents year-to-date data through February. To relate these two views, the 2.2% increase implemented in the first quarter to date through February that you see on the left table relates directly to the bar of $530 million in estimated annual written premium on the right chart. While the rate will obviously help our margin, it will take time to be realized. There's an inherent time lag between when rates are implemented, when they are reflected in written premium, and when they are ultimately earned. Approximately 95% of Allstate's auto insurance premium in the U.S. is from policies with a six-month term, and it takes that length of time for all policies to renew at the new rate with the annualized written premium impact fully reflected after 12 months. We are confident in our ability to restore auto profitability to targeted levels. Now I'll hand it over to Eric for a deeper dive on our claims expertise. Thanks, Julie. Let's begin on slide 12 to discuss claims excellence. Auto insurance loss costs over the past five years are comprised of approximately 60% physical damage and 40% casualty claims, as represented by the pie chart in the middle of the page. Physical damage includes collision, property damage, and comprehensive coverage. While casualty is comprised of bodily injury liability, medical reimbursement, and uninsured/underinsured motorist coverages. Since 2019, higher physical damage severity contributed approximately 6 points to the increase in the underlying combined ratio. This can be broken out into three broad categories, used car values, higher impact accidents, and parts and labor. We've seen a dramatic rise in the value of used cars, contributing to about 60% of the physical damage combined ratio increase on a pure severity basis. Higher speed accidents have resulted in more severe impacts, placing more cars in the total loss category, which contributes to another about 20% of the increase in physical damage severity. This combination of higher used car values and harder hits has led to a shift in more total losses and a substantial increase in total loss severity. Lastly, supply chain shortages, along with a competitive labor market, have increased the price of car repairs, representing the remainder of the increase in physical damage severity. Casualty severity has also increased over the two-year time period, leading to a 4-point increase in the combined ratio. This is the result of more severe injuries, medical inflation, and the legal environment. The higher impact accidents we see in physical damage severity result in more severe injuries, driving up casualty severity. Higher medical reimbursements reflect more costly treatments and increased consumption of medical care. Lastly, the legal environment continues to factor into casualty costs. Increased attorney advertising, attorney representation rates, and backlogs in the court system are all combining to lead to increased payouts for bodily injury. Now let's move to slide 13 to discuss how Allstate's scale and expertise help mitigate cost increases for customers. We utilize predictive models on the first report of a claim to quickly and more accurately determine which vehicles are repairable and which ones should be totaled or sold for salvage. Our data scientists have used our own proprietary data to improve total loss predictability at first notice of loss by 200% over the past 12 months. Low complexity claims are determined up front and routed for low touch and low cost claim handling. On the casualty side, claims that have a higher likelihood for bodily injury, legal risk, or even potential fraud are determined early in the process with higher skilled and more sophisticated resources engaged. We also utilize strategic partnerships with repair facilities and parts suppliers, which leverage Allstate's scale. We have a countrywide network in both parts and vehicle repair. We're also in more than 30 markets with our own proprietary parts supplier. Of course, we're countrywide with our Good Hands Repair Network of body shops. For repairable vehicles, our estimating technology locates high quality, cost-effective replacement crash parts. Nearly half of repairable vehicle costs stem directly from replacement crash parts, making incremental improvement a meaningful benefit to physical damage severity trends. This system is enhanced by a claim data science organization, which is dedicated to claims. We've been investing in and growing this dedicated team, and we expect a 125% increase in staff over the two-year period starting in 2020. We also have on-staff medical doctors that provide expertise when reviewing complex medical records to better establish technical defenses on bodily injury claims brought against our policyholders. An expert in-house legal team of more than 1,400 professionals leverages this entire system to mitigate bodily injury liability costs for our customers. Now let's turn to slide 14 and discuss how leveraging technology within claims has both reduced expenses and improved the customer experience. As you know, Allstate has a history of investments and innovation. We've seen greater customer adoption of our digital claim tools while reducing loss adjustment expenses by 1.2 points since 2018. This represents an approximate financial impact of half a billion dollars to our income statement in 2021 based on earned premium levels. We will continue to design and implement digital solutions which reduce costs, eliminate waste, and improve customer value. The exhibit on the bottom half of this page shows what we've pioneered, such as being the first U.S. property casualty company to offer instant claim payments. We quickly followed this with virtual estimating through QuickFoto Claim, where customers can submit photos through the Allstate app, and Virtual Assist, where body shops can video chat with adjusters real-time. We continue to pioneer in the claims space today with a focus on digital communication, self-service options, and fully digital claim reporting. We're excited about the innovations to come and look forward to continuing our track record of leading the industry in claim settlement processes. With that, I'll hand it over to Mario. Thanks, Eric, and good morning, everybody. Let's move to slide 15 and discuss the final lever we're utilizing to achieve our target combined ratio, and that's to continue to improve our cost structure through Transformative Growth. The chart on the bottom left of the slide shows the adjusted expense ratio, which is a metric we introduced a couple quarters ago. This starts with our underwriting expense ratio, excluding restructuring, coronavirus-related expenses, amortization and impairment of purchased intangibles, and investments in advertising. It then also adds in our claims expense ratio, excluding costs associated with settling catastrophe claims, because catastrophe-related costs tend to bounce around quarter to quarter. We believe this measure provides the best insight into the underlying expense ratio trends within our property-liability business. Through innovation and strong execution, we've achieved 3.2 points of improvement when comparing 2021 to 2018. Over time, we expect to drive an additional three points of improvement from current levels, achieving an adjusted expense ratio of approximately 23 by year-end 2024. This represents approximately a 6-point reduction compared to 2018, enabling an improved competitive price position relative to our competitors while maintaining attractive returns. We continue to implement actions to reduce costs, and the additional three points of expense ratio improvement we expect to achieve over the next three years will come from three major buckets: digitization, sourcing, and operating efficiency, and the reduction in distribution-related costs. Moving to slide 16, let's discuss how our additional financial disclosures will provide a way to assess our progress on auto insurance profit improvement and provide additional transparency for investors. The timing of when operational actions will restore auto profitability to target levels is largely dependent on the relative growth of premiums compared to the future trajectory of loss costs. It is not possible to predict when the auto combined ratio will achieve our targets. However, here's a general rule of thumb that may help in your projections. To the extent that written premium growth exceeds loss cost increases by 1% for the year, the improvement on the combined ratio is approximately 0.4 points in year one with an additional 0.5 points in for the next full year. This simplified example demonstrates the lagging impact from written premium to average earned premium and assumes 100% of the rate applied affects each policy without modifications to deductibles or limits, which would influence premium and loss factors. It also shows that increasing premium by a full point above the loss trend results in less than a full point improvement in the combined ratio due to factors such as variable premium related expenses like commissions and premium taxes. As we discussed on our fourth quarter earnings call, we have already begun providing monthly implemented auto rate disclosures in addition to quarterly reporting. Rate increases will continue throughout 2022 as we address rising loss costs, and we will disclose rates implemented each month so you can have real-time line of sight into our progress on increasing rates to improve auto margins. It's also important to note that the implemented rate increases we disclose reflect premium changes that are currently in market and do not include pending or expected future rate increases. In addition to this new disclosure, starting with first quarter results, we plan to further enhance our auto insurance disclosures. The first is a change in the property damage severity metric we provide from a calendar year paid variance to a report year incurred variance. We will also add a similar metric for the bodily injury coverage as well. We are making this change to provide further transparency on results as report year severity aligns with how losses are recorded in our income statement and reflects our best estimate of the ultimate cost per claim that is reported in the current calendar year. Please note that this measure does not include prior report year impacts, incurred but not reported or IBNR reserving, or benefits from subrogation and salvage. Lastly, we will begin grouping states based on underlying combined ratio level in our disclosures, similar to what Julie discussed earlier. Grouping states into these profitability bands provides additional insight on our progress over time in restoring auto target margins. These disclosures will provide meaningful information and allow investors to track our progress as we restore auto insurance profitability. If we flip to Slide 17, now looking back to similar challenging environments, you can see we have a demonstrated track record of addressing past profit challenges. When we faced deteriorating auto insurance margins in 2015 and 2016, we were able to quickly adapt. In response to rising frequency during that time period, we implemented a comprehensive profit improvement plan, which included implementing rate increases in excess of $2.5 billion across all of our underwriting brands, modifying underwriting guidelines to target underperforming segments and geographies, executing on claims operational excellence, and pursuing cost reductions to improve the combined ratio. These actions enabled us to quickly restore profitability to target levels and put us in a position to adapt to the higher loss cost environment and shift our focus to growth. Back in 2005, we saw a similar scenario of deteriorating margins, but this time in our homeowners business. It started with significant hurricane activity and was followed by an increase in severe weather from 2008 to 2011. We completely repositioned our homeowners business to adapt to this environment, reducing policies enforced by about 25% through risk reduction along the coast. We introduced new products, specifically our House & Home product, which includes a graduated roof schedule and differing prices by roof type to ensure we receive the appropriate premium for the risks we were writing. In locations where we do not have adequate returns, we began brokering business through our Ivantage company. Leveraging traditional and capital markets reinsurance, we were able to limit large loss exposure in the business. All of these efforts have contributed to Allstate generating the industry-leading homeowners returns we deliver currently. We have a proven track record and a proven history of addressing profitability challenges, and we will continue to demonstrate that capability in today's auto insurance environment. With that, let me hand it back to Tom. Thank you, Mario. Let's turn to slide 18, and before we get to Q&A, and discuss how the story at Allstate is more than just improving auto insurance margins. The Transformative Growth initiative we talked about before supports both profit improvement and sustainable growth. It's a multiyear initiative, and it's focused on increasing property-liability and market share by building a low-cost digital insurer with broad distribution. It has five components to it: improve customer value, expanding customer access, increasing sophistication and investment in customer acquisition, deploying new technology ecosystems, and then enhancing our organizational capabilities so we can do all that above. Starting at the top of the flywheel, we reduce expenses, as Glenn mentioned, to improve customer value. That then enables us to offer a lower, more competitive price while maintaining attractive returns. That should increase close rates and drive better retention. We're building simple and connected protection solutions that are competitively differentiated, and that should increase pricing power and customer retention as well. When with a lower price and differentiated products, we need to increase quotes. Which will be accomplished by enhancing and expanding distribution and then increasing our marketing sophistication and investment. The new technology platforms, we need to launch new products to lower cost to support the protection offerings and improve our service and speed to market some of the items that, Eric talked about. This comprehensive approach is like a flywheel that creates a sustainable competitive advantage leading to market share growth. While we're currently focused on making sure we get auto insurance margins done, we haven't let up at all on Transformative Growth. You can see in the bottom of the page, we have five phases of that, and we're in phase III, which is in the middle, which is built in the new model and starting to move into scaling that new model. Let's end the prepared remarks with slide 19, which highlights why Allstate is a better investment option. The table shows Allstate's performance across key financial metrics over the last five years compared to our peers, and compared to the S&P 500. The insurance peers are those that have a market cap of over $4 billion. As you can see from the measures on the top, the first three measures, operating EPS, operating growth, operating return on equity and cash yield, Allstate is consistently ranked in the top three amongst our peers. In the case of cash yield to common shareholders, Allstate's in the top decile compared to the S&P 500. If you move down a row, Allstate's top line revenue growth relative to peers in the S&P 500 is in the middle of the pack, which is why we're focused so much on Transformative Growth because it's another way to increase shareholder value. Despite our progress and our history of success, Allstate continues to be attractively priced, which you can see from the rankings down at the bottom. With that context, Jonathan, let's open it up for questions. Certainly. Our first question comes from the line of Jimmy Bhullar from J.P. Morgan. Your question, please. Hi, good morning. I had a couple of questions. First, just in terms of expectations for getting price hikes in California, I think they have not granted many price hikes, and I'm wondering where California stands in the slide that you showed on page 10 on margins by state. If it is in the sort of 100%+ category or in the 95%+ category, what's your confidence that you will start getting price hikes there? What is it that they're looking for before they can start approving price hikes? First, let me make a couple of comments, and then Julie can take it, which is, it's a long-term game, so we don't feel like we need to get everything yesterday, although we're at it quite quickly with most states, and some states just take longer to work with. We don't give out state-by-state combined ratios. And as Julie mentioned, California is not. It's a significant state for us, but no state is such a big portion of our performance that it's gonna stop us from getting to our overall targets. With that, Julie, do you want to talk about any states in particular? Sure. I'll go ahead and build on that specifically for California. I mentioned in my remarks that we place a really high priority on building strong relationships with regulators. This is a core responsibility for our state managers and their extended teams. This is also true for California. Getting directly to the question, we do not currently have an Allstate brand personal lines of auto filing under consideration in California. We do have a pending commercial auto filing, and we do have filings for National General. Just in general, rate filings in California take longer for approval than in other states, given their approval requirements. In the past, filings could take as little as two months for approval and up to two years, depending on the complexity and nature of the filing. We will continue to work with the California regulators as we always do, and we'll always strive to have a positive relationship. In terms of having the filing, are you waiting till you have enough data to be able to get a filing through to put one there? Because I'm assuming margins in California would have weakened as well given the increase in used car prices. Julie, do you want to follow up on that? Yeah. Sure. You know, that's starting to get into forward-looking information on state-specific details, so we won't address that in this call. Okay. Just on growth, I think there was a lot of optimism before margins really got pressured for the industry and for you guys as well in the second half of last year. There's a lot of optimism about this growth improving given your initiatives on the direct side and in an independent agency. How do you think about like when we should expect to see an uptick in PIF growth? Has that sort of expectation been pushed back a little bit given the price hikes that you're implementing? Let me address that. We haven't stopped anything on Transformative Growth. Whether it's expanding distribution, improving our direct capabilities, leveraging National General, as Mario talked about, further reducing expenses, launching new technology, that's all proceeding apace, and we haven't backed off at all on that because of what we're doing in auto insurance margins. We can do both of those at the same time. It does obviously change the external environment, and in some ways makes it more difficult, in other ways, gives us more opportunity. The way it makes it more difficult is when we increase prices, of course, then customers have a choice of whether they go to us or somebody else. With our competitive rating tools, with our multiple offerings in terms of Drivewise products, we have lots of ways to try to keep those customers, but there's obviously increased risk if they shop and we will lose them. There is some retention risk that's there. At the same time, with more people shopping and the same tools in the same position, we believe we ought to be able to pick up more of the people who are shopping than we have historically. We saw that in 2020 and 2021 as we improved our competitive price position. It may create a wider range on what we get, but we still think the trend is up. Thank you. Thank you. Our next question comes from the line of Elyse Greenspan from Wells Fargo. Your question, please. Good morning. My first question, you know, on the rating disclosures, you guys pointed to that you got 5% rate on 53% of your book since the beginning of the Q4. As you know, work through, you know, getting back to, you know, the mid-nineties and your target within auto, what percentage does that need to be? I mean, I guess this goes back to the question a little bit in terms of if some regulators, you know, just you're not able to get rate, can you get back to that target margin? Where does that 50% need to be in your minds? Let me make an overall comment, and then Julie can take it. Elyse, I would go back to say, you know, like we've had a history of being able to work with regulators, with our customers, our own expenses, and get to combined ratios, which are in the mid-90s, which you saw from that chart. We try to do that by state. We try to do it by risk class. We try to do it by type of customer, not just on risk. We try to slice and dice it a bunch of ways because it leaves more sustainable growth and sustainable profitability. We don't really have like, oh, we need to get to 80% and we'll be there. Julie, do you wanna... What would you fill in there? Sure. I'll just add a little bit on that, Tom. We are moving deliberately and making great selections based on the performance of each state. As you can see from the exhibit, in general, we are taking more rate in a single filing than we have in the past, given the very sharp increase in severity and returning frequency. We are addressing the needs at the local market level as they develop. Our state management operating system will continue to allow us to operate in this environment and adapt as we need to. As Tom said, we don't have a specific number overall we need to get to. My second question is on the loss trend side. Could you just give us a sense, you know, what loss trend you guys are assuming for 2022 and 2023 as you think about getting back to these target margins? Would you say it's above or below 10%, you know, when we think about, you know, the combination of frequency and severity? Well, we don't predict future severity 'cause we can't predict inflation and number of accidents and hard hits and legal suits and all that stuff. What we can do is talk to you about the underlying drivers, and Eric can touch on that, and then Julie maybe talk about how you think about the trends as it relates to future pricing. Yeah, Tom, this is Eric. Thanks for the question. As we discussed, the buckets of loss cost impact fall broadly into auto physical damage and bodily injury, and we broke out bodily injury separate from auto physical damage. I'll just touch on a couple of the things that we see moving on auto physical damage and bodily injury. Auto physical damage, obviously, it's used car prices, which are a function of total loss settlements, and then the changes in parts supply chain and labor pressure. On the bodily injury side, we track at a very granular level what we call the inputs to social inflation. What's important to understand about social inflation is that it's a broad constellation of factors that describes increased severity in the casualty lines that's superimposed on CPI. We break that out into medical risk and legal risk. Medical changes are showing up in the form of more severe diagnosis types and cost of the overall medical care, both on a per unit basis and count of units consumed. Legal risk is showing up in increased attorney advertising, more attorney involvement, and continued backlogs in the court system. Now, what's important to recognize is that we've made continuous investments in how it is we address these rising inputs to loss cost. We've talked about dedicated teams of medical doctors. That was established in 2021. Literally dozens of medical doctors dedicated towards technical medical defenses, and that investment has doubled, almost tripled since that time. We have a mature team of data scientists. That team has also increased by about 30% last year, and we plan another 70% investment this coming year. Of course, a large, well-established team of legal professionals all come together as a system to help us combat the rising cost of loss costs. It's also important to go back to what we said about making these investments while continuing to reduce expenses overall. A 1.2% decrease in loss adjustment expenses while developing new digital products and making investments, the more sophisticated claim capabilities. I will talk briefly about how we make our loss selections for our rate indications, sort of from a methodology perspective. When actuaries are setting prices, they want to balance stability and responsiveness. In times when circumstances and conditions in the market are changing rapidly, we want to lean more heavily towards responsiveness. I think everyone's aware that we all companies use their historical data, which we indeed do, but we supplement it with external data so that we ensure that we are reflecting the latest conditions in the marketplace. There's a broad set of information that is used and documented in our rate filings when we submit them to regulators. What this does is it allows us to be very responsive now as the trends are increasing. It will also be the same methodology that allows us to respond as the market conditions change in the future. Let me maybe go up just one to the enterprise level and also help you think about it from the whole company standpoint. As it relates to inflation, we never bought into the transitory view, transitory being either absolute dollars, which of course, once they get in, they never go away, or the rate of change. From an enterprise risk and return standpoint, last year, when we took a hit because of inflation, auto insurance profitability, we decided to reduce the inflation risk in other parts of the company. As we showed in our 10-K, we did a significant reduction to our interest rate exposure in the sort of late November, early December time period. We managed the inflation risks for total shareholder value over a period of time. Okay, thank you for the color. Thank you. Our next question comes from the line, Michael Phillips from Morgan Stanley. Your question, please. Thanks. Good morning. First question, you took the reserve charge in 4Q that you talked about, obviously on the conference call then, on the casualty side. You showed in these slides kind of how your loss experience is pretty comparable to Progressive. Curious how, you know, the reserves that they took in January was pretty big on severity. Maybe just talk about how you think that we shouldn't expect something similar from your results in the near term. Well, Mario can take that. I would say every company is unique. I don't know how Progressive does their reserves. We do our reserves so that we think we've got the right number, and we do it monthly, and we're looking at all kinds of trends, and it's like three different groups of people looking at it. Mario, do you want to talk about the reserve change from last year, and then how you think about reserving going forward? Sure. Michael, thanks for the question. Look, you know, we've said this in the past. I think our reserving practices are really comprehensive and thorough. We use those practices to come up with, you know, what we believe is a conservative view of both a point estimate for reserves as well as a range of possible outcomes, just given the different factors that could impact reserves. You know, as you talked about in Q4, as we went through that analysis, we increased prior year reserves by about $187 million, and that was mainly in personal auto. There was also a component of that in our shared economy business on the commercial side. You know, based on that change, as well as looking at current year reserve levels and severity levels, you know, we're comfortable with where our reserve position was at year-end. You know, as we've always done, we'll reevaluate that on a monthly basis. We'll take a look at reserves this quarter, and to the extent there's any change in reserve levels, we'll talk about that with first quarter earnings. We feel comfortable, you know, as of year-end in terms of where our reserve position is. Okay, thanks. Second question. I like how you give the kind of the breakdown on slide 12 of the severity components and percents of the increase. The middle one there on the higher impact accidents. Given where frequency is starting to move back up, have you seen any decline on that piece of the severity, the higher impact accidents? Kirk, do you want to handle that? Yeah. Thanks, Tom. Thanks for the question, Michael. The way we think about higher impact accidents and the measurement mechanisms for that is really twofold. One of the useful measures that we use is related to impact on the vehicle, and that's generally referred to as an impact which renders the vehicle non-drivable. Non-drivable vehicle crashes have been elevated for the industry for 2020 and 2021, you know, it's between 12% and 15% compared to pre-pandemic, depending upon if you're looking at 2018 or 2019. The second thing we take a look at, and this is relative to the casualty side, is crashes which result in impacts which discharge airbags, which is a data element that we look at, exposure of customers to more high impact crashes. Airbag deployments are elevated as well. We don't forecast non-drivable vehicles and airbag deployment, but we do have ability to be able to see that to prepare for a persistency at these levels or declining or even increases. That's where it goes back to the investments that we've made to be able to combat this rising inflation. They are elevated, but what's important is the ability to be able to make those investments. Obviously control loss costs to ensure that we are matching the right capability to the right risk. Thanks, Michael. Okay, thank you. Thank you. Our next question comes from the line of Michael Zaremski from Wolfe Research. Your question, please. Hey, good morning. Thanks for all the color. First question, I guess more high level. In terms of all the initiatives Allstate's been working on and continues to work on to lower the expense ratio and LAE ratio. You know, I guess, you know, we understand it's a long run to become more competitive and maybe I'm putting words in your mouth, but probably pass along a good amount of that savings to customers in order to grow faster. Maybe that's not correct. You know, Allstate maybe in the short run can decide to keep some of those expense savings in order to kind of get margins to where you'd like them to be. Is that a fair way to think about things? Mike, let me answer the top line, then have Glenn jump into it. First, everything we do, of course, goes to customers 'cause we're cost plus pricer. Whether it's you know, expenses or loss costs or whatever we do is manage to give our customers better price. How that turns into what they pay next week or next month or next year is, of course, we balance between both what we want our underlying profitability to be and what we want growth to be and what we think the trends are. It's not really one for one that you say, oh, they get it or we get it. It's really they get all of it, but then what we get from that is sustained profitability. Glenn, do you wanna talk about expenses and your thinking going forward? Yeah. Yeah. Just, you know, building on Tom's response there, I'll give you two time frames. If you think about a little over a year ago, we had, you know, historically low frequency. We'd just come off of, you know, some meaningful improvements in expenses, and we were running, you know, a combined ratio in the last part of 2020, you know, in the low 80s, let's say, maybe even high 70s at some point there. At that point, you clearly aren't going to, you know, in your words or, you know, keep the money towards margins. It was in the pricing. We took prices down. We reduced prices in spite of knowing that some loss costs were coming up while we clearly didn't know the level of inflation that was gonna come up in the middle of the year. Where we sit right now with combined ratios above our target, we're taking price increases until we get back to our target. It's all sort of in there, it's in the soup, if you will, that the price is in there, to Tom's point. It all goes back to the customer. When we get to a 95, let's say, combined ratio, doing that with a point less in expenses means that's a point less that we had to take in rate from customers to get to that level. In terms of how we're going after, and Mario talked about this earlier, you know, we're continuing to look at every level of efficiency in our business, every level of cost from distribution to our cost of doing business from an efficiency standpoint. Some of the things that were referenced in the prepared remarks about self-service capabilities and digital are sort of a win-win. They're better for customers, they're an improved customer experience, and they generate a lower cost that allows us to pass that savings along. Okay, great. That's helpful. My last follow-up question is kind of going back to some of the helpful disclosure and color in the deck, and I think it was touched upon earlier, on the severity side, you talked about more attorney involvement. Just curious, is that a secular trend? I know it's tough to predict loss costs, and there's lots of different factors, but is that a secular trend. It feels like some other peers have talked about attorney involvement increasing measurably over the last five to 10 years. It seems to be kind of coming off the back of increased advertising too. Just curious if any views there. Well, it's an interesting perception of, you know, how does that system work? As we said, Mike, we don't predict it, but it also doesn't mean we accept it. We work aggressively to make sure that the number of customers or not customers of claimants who really somebody our customers had feel that they need an attorney is lower. Eric can talk about what he does to manage representation rates. Yeah. Thanks, Tom, and thanks for the question. This all goes back to our investments in a series of well-placed bets on what it is we think will help us to be able to control rising inflationary trends to, of course, control loss costs and you know, have that flywheel effect of you know, better price in the market for our customers and hitting our profitability targets. As you go to the attorney representation piece specifically, I'll go back to you asked if it was cyclical in nature, and what I'll say is there's normal CPI and then superimposed on that in the casualty lines, there's that social inflation piece. That has been rising at a pace on a multi-year basis. I think what we called out is that within social inflation, there's those two elements that we're tracking and identifying changes in historical patterns that's both on the medical and the legal side. Again, we can't forecast what will happen from an attorney representation perspective. What we do is we leverage exceptionally granular data to track everything from, like I said, advertising rates, spot TV purchasing, clusters or density of attorney involvement. Then what that does is it causes us to go back to our investments and say, "Well, what matters are at risk, you know, for certain elevated outcomes, and how do we detect that early and activate systems and methods that best mitigate that risk?" That's where the data scientists and the medical doctors and the legal investments have come into play. With regard to forecasting it, you know, probably not possible, but definitely with regard to getting ahead of it, I mean, that's what we've done, and that's evidenced here in the investments and the capabilities. You know, not every company has our scale and our depths of data. Every company deploys their own systems and methods, but not every company's made these investments or has the historical data. That's what we've been focusing on. Let me tie it to what Julie was talking about. It varies by state, too. You know, each state has its own particular legal structure. They have their own set of attorneys. The advertising for, you know, claimants in Florida, I think, might be $100 million a year. When Julie's state managers are worried of thinking about Florida, they have a different point of view than if you're in a state that doesn't have that kind of court system. Of course, that translates into what customers have to pay in that state. Thank you. Thank you. Our next question comes from the line of David Motemaden from Evercore. Your question please. Hi, good morning. Tom, I just had a question, and I know, you know, you guys don't wanna comment on when you think you'll get back to the mid-90s underlying combined ratio, but I'm just wondering if you could just help us think about when we should start to see the loss ratio stabilize in the personal auto line, and if you think that should happen in 2022. You know, we don't have a prediction for it, and we're not—we don't do, obviously, earnings forecasts or we used to give underlying combined ratio by year with some range, because, you know, it varies. You have frequency changes, you have severity changes, and so there's always a range on what we think we'll do. We don't give that out anymore. I think just you follow the stuff that Mario gave you, and that'll give you a sense to come up with your own view. You'll be able to look at the top line, make some projections as to how much of that $1.2 billion gets into actual written premiums, and then earned premiums. You'll be able to then look at the severity. You'll be able to look at expenses. You'll be able to see it coming, I guess, would be the sense I would say. Okay, great. That's helpful. You know, one other question. Just something that caught my eye, I think it was slide 9, where it shows that direct prices are 7% below agency channel prices, which I guess is intuitive, just given the expense structure. I'm wondering if you are seeing within your book some of your existing agency channel customers going to Allstate brand direct. Maybe if you could just talk about how that is reflected in direct new apps. Is that considered a new app if it's kind of like a mix shift between the channels? I'll let Glenn handle direct and how that works. The logic, you're correct, is if you get what you pay for at Allstate. If you want and need an agent, and many people do, then that comes with the package. If you don't, and you're willing to do it all by yourself, then it comes through direct. We've had good success in doing that. Glenn, do you wanna talk about this specific question? Yeah. So first I'll go to the expense differential. You're right. It is an expense differential, and it's a good example of going back to you know Mike's question earlier about how we think about expenses. That was a case where you know we included it with the customer pricing. We gave it back to the customer so to speak and said like we're gonna run these at the same overall combined ratio or roughly the same overall combined ratio by you know moving the expense out on it. The scenario that you described that's really not. We don't quote active customers for new business 'cause they're an active customer and the pricing doesn't work exactly that way. What we tend to see is the people that come to us online often really want a direct relationship. It's why we're in the direct market. Sometimes they start online and then feel like they need more guidance, and they get brought over to an agency. We have people coming to us in multiple different ways. They click, they call, they go to an agent, they go to an agent's website, they call an agent. There's multiple ways you can click and call even within the system, and it really is a way that we have expanded customer access, and we can meet customers wherever they wanna be. It isn't binary of how people are thinking about it, but we have significantly increased the direct business and how much we're writing. Almost one out of every three cars is at 30% right now of our new business are coming in through the direct channel. That really reflects the fact, similar to the market, and direct is about 30% of the market, that there's people out there that wanna do that. Now, 70% of people want an agent. We are in the exclusive agent channel in a big way, and our agents continue to be the backbone of our business. We are now, with National General, meaningfully in, and we'll grow that more, in the IA channel with an endorsed brand of National General and Allstate companies. Really, any way a customer wants to come and get protected by Allstate, they can come to us. The specific scenario you laid out, we really don't re-quote as new business existing customers. Well, thank you all for participating. Let me close with just a couple of comments. First, we have one thing you know about Allstate is we have a history of execution, whether that's short term and returning auto margins to where they have historically been, whether that's maintaining our leading position in homeowners, whether that's executing a Transformative Growth of the various components of that or the growth of our protection services businesses, all will generate shareholder value going forward. We think we're still a highly attractive price, particularly when you look at those rankings. Thank you all for this, and we will talk to you on first quarter earnings. Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.