Thank you for standing by and welcome to the Allstate Third Quarter 2021Eearnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Mark Nogal, Head of Investor Relations. Please go ahead, sir.

Thank you, Jonathan. Good morning. Welcome to Allstate's Third Quarter 2021 Earnings Conference Call. After prepared remarks, we will have a question-and-answer session. Yesterday following the close of the market, we issued our news release and investor supplement and we posted related materials to our website @allstateinvestors.com. our management team is here to provide perspective on these results. As noted on the first slide of the presentation, our discussion will contain non-GAAP measures for which there are reconciliations in the news release and the investor supplement and forward-looking statements on Allstate's operations. Allstate's results may differ materially from these statements, so please refer to our 10-K for 2020 and other public documents for information on potential risks. And now, I'll turn it over to Tom.

Well, good morning and thank you for investing your time with us today. Let's start on Slide 2. This is Allstate strategy on the left-hand side, which we've talked about before. We have two components; increased personal profit liability market share, and expanded protection solutions. And those are the two ovals you see on the left with the intersection between. The key third quarter results are highlighted on the right-hand panel. Property-liability policies and force increased by 12.5%. Allstate Protection Plans continue to grow rapidly by both broadening its product offering and expanding the network of retail providers. As a result, we now have almost a 192 million policies force across the [Indiscernible]. Financially, the results were more mixed. Revenues were up substantially, but net income and adjusted net income declined from the prior year quarter. Underwriting income declined primarily due to higher loss costs of settling auto insurance claims. We've implemented price increases to proactively respond to the sharp rise in loss costs and transformative growth continues to position us for long-term success, both of which we'll talk about in a couple of minutes. This was partially offset by the benefits from our long-term risk and return program that includes significant reinsurance recoverable, they were primarily related to Hurricane Ida, and a substantial increase in performance-based investment income. Capital deployment results were excellent with a billion-and-a-half dollars in cash return to shareholders in the quarter. We also completed the divestitures of our two largest life and annuity businesses, one in October and then one just earlier this week. So let's go to Slide 3. Revenues of $12.5 billion in the quarter increased 16.9% compared to the prior-year quarter. And that reflects both the higher earned premiums in National General acquisition. Allstate brand homeowners premium growth, and higher net investment…

Thanks, Tom. Let's move to Slide 5 to review property-liability margin results in the third quarter. The recorded combined ratio of 105.3 increased 13.7 points compared to the prior year quarter. This was primarily driven by increased underlying losses, as well as higher catastrophe losses and non-catastrophe prior year reserve re-estimates. The chart at the bottom of the slide quantifies the impact of each component in the third quarter compared to the prior year quarter. As you can see, the personal auto underlying loss ratio drove most of the increase, due to higher auto accident frequency and the inflationary impacts on auto severity. Higher catastrophe losses shown in the middle of the chart, had a negative 1.4 impact on the combined ratio, as favorable reserve re-estimates recorded in 2020 from wildfires subrogation settlements, positively impacted the prior year quarter. Gross catastrophe losses were higher, but were reduced by nearly $1 billion of net reinsurance recoveries following Hurricane Ida, demonstrated the benefits of our long-term approach to risk and return management of the homeowners insurance business and our comprehensive reinsurance program. Non-catastrophe prior-year reserve strengthening of a $162 million in the quarter drove an adverse impact of 0.8 points, primarily from increases in auto and commercial lines. This also included $111 million of strengthening in the quarter related to asbestos, environmental, and other reserves in the runoff property-liability segment, following our annual comprehensive reserve review. This was partially offset by a lower expense ratio when excluding the impact of amortization of purchased intangibles, primarily due to lower restructuring and related charges compared to the prior-year quarter. Moving to Slide 6, let's go a bit deeper on auto insurance profitability. Allstate brand auto insurance underlying combined ratio finished at 97.5 for the quarter and 89.7 over the first 9 months of 2021.…

Thanks Mario. Moving to Slide 11, protection services continues to grow revenue and profit. Revenues, excluding the impact of realized gains and losses, increased 23.3% to $597 million in the third quarter. Protection Plans, net written premium increased by a $139 million due to the launch of the Home Depot relationships, focusing on appliances. Our quarterly net written premium is now 5.5 times the level of when the Company was acquired in 2017. Already expanded revenues due to the integration of LeadCloud and Transparently., which were acquired as part of the national general acquisition, as well as increased device sales driven by growth in the milewest product. Policies and force increased 12.5% to a 150 million driven by growth in Allstate Protection Plans and Allstate identity protection. Adjusted net income was $45 million in the third quarter, representing an increase of $5 million compared to the prior-year quarter, driven by higher profitability at Allstate identity protection in Arity. This was partially offset by higher operating costs and expenses related to investments and growth. Now let's shift to Slide 12, which highlights our investment performance. Net investment income totaled $764 million in the quarter, which was $300 million above the prior year quarter, driven by higher performance-based income as shown in the chart on the left. Performance-based income totaled $437 million in the quarter, as shown in gray, reflecting increases in private equity investments. As in prior quarters, several large idiosyncratic contributors had a meaningful impact on our results. These results represent a long-term and broad approach to growth investing, with nearly 90% of year-to-date performance-based income coming from assets with inception years of 2018 and prior. Market-based income, shown in blue, was $6 million below the prior-year quarter. The impact of reinvestment rates below the average interest-bearing portfolio yield, was…

[Operator Instructions]

Our first question comes from the line of Josh Inc. from Bank of America. Your question, please.

Yes. Thank you. I want to talk about bundles and homeowners in the pricing of the dual engine of homeowners and auto together. I guess there's two things I want to understand. One is when a customer sees their overall bundled price going up, what does the conversation like, especially if you're trying to more centralized your business with a greater direct relationship with your customers. And 2, given Allstate's geographic footprint, can Allstate add incoming customers for homeowners without changing its cap footprint.

Good morning, Josh is Tom, I'll start and then Glenn can jump in first as you know, we've long been focused on bundling auto and homeowners because those are good, stable, long-term customers. You do get a discount for putting those two together. So there's an advantage to the customer from buying it and putting it all in one place besides just having 1 point of contact. And we've been good at that. If you look at our growth in Homeowners this year. It's higher than our growth in auto insurance. And data appears to be because we are doing more bundling of individual customers, it a little hard to get the exact attribution, but we feel good about what our agents are doing to drive that. As it relates to the Gross event. We've been we've repositioned as business over multiple years back in the middle -- late 2 thousand decade of 2,000, we've made of course a bunch of money since over the last eight or nine years, I think almost $9 billion of underwriting income on homeowners which you need to do because we don't believe that a 4 point margin is attractive for homeowners for a couple of reasons. One is you don't get much investment income. Secondly, you got to put up more capital because the results are more volatile and you have the big tail losses. So as we seek to grow it, we bring all of that math to bear. On individual states is where we grow. And so if there's a state where even if there's a fair amount of catastrophe exposure but we think we can get a good return, that's got a margin on it that compensates us for the capital we have to put up and the reinsurance we have to buy, then we'll do that. And we're highly sophisticated in the way we run it. So the geographic focus is really -- we have a much highly sophisticated model into it. On the direct business, you don't sell as much direct homeowners right now, we still need to crack the code on that. Before I -- Glenn will have some view on how we can continue to run the table in homeowners as we have so far. But the -- an upcoming thing that Glenn might want to touch on, is what we're doing in the independent agent channel because of the National General platform gives us, with our products, our expertise, our pricing, our claims management. And our reinsurance programs gives us the ability to really serve a lot of customers. [Indiscernible]

Glenn, where [Indiscernible] I just want to say, can you address retention and cat footprints as well?

Yeah. Glenn, mind if you take both of those?

Sure. So a few comments on homeowners leading into it, but we got a really strong home care business and so we want to grow it, and we want to handle it as Tom said. So, over the course of the past year, we've deepened bundling discounts. So we've made it more attractive for customers across 30 states. We've shifted our agency competition over the last couple of years to where it's more attractive for them to bundle. And the same is true in direct, as Tom said, we're looking to crack the code right board there. Were writing some, We want to write more, and so some of the incentives for our direct team around cross quoting and bundling. To the point around that footprint, We're in good shape. Like, if you look at our ability to write business, we can write it pretty broadly. We can write in some CAT-prone areas, but we tend to offset it and create the diversity of our book by writing in other areas. I mean, right now, we're on a 12-month view right now, we're at 93.8 combined ratio made about $400 million underwriting profit in the last 12 months, in spite of having some really big CAT quarters. Though it's a good business that we're able to consistently make money in, and so we're looking to grow it. But as Tom said, we have -- we have pretty stringent guidelines, that where we write, how we write so that we don't overgrown in CAT prone areas. But we're able to grow without that and Tom mentioned something that I want to come back to. In terms of the breadth of our distribution and growing and that would be into our IA channel. You know, the IA channel is a huge opportunity. Independent agents where a lot of homeowners and our National General and Allstate's Company, as it will be branded, is adding our middle market products, both auto and home. And we have sort of a whole new Greenfield there to run in. And that would be a broad geographic spread, not just the cat prone areas.

Hey [Indiscernible] let me just ask that because I think I understand why you're trying to triangulate between what's going on in the industry. First, we don't have a catastrophe exposure problem. We don't have a profitability problem. We believe in homeowners. We only made about -- we lost about $16 million bucks and $7.3 billion so far this year. So we'd like to make more money, but as Glenn pointed out, when you look over a longer period of time, we've had a fair amount of ups and downs, but we still make underwriting profit sense of 12-month basis. So we don't have a catastrophe problem. So we don't have to restrict stuff and end up with -- what you're poking at is retention issues. We have been there and done that though And it was called the repositioning we did in the latter part of the decade I mentioned. And when you call a customer and say, I used to have -- you used to be insured with us and now I am not going to insure your thoughts and we were one of the biggest brokers have homeowners insurance products. I think in the country and maybe Vegas. And through our advantage in even when you say to people, here's another Company. It has some impact on your auto business. So because people are like, Well, I'll take my business someplace else or competitors decide they want to, they want to bundle and they'll go get those customers as well. We had some issues with auto growth when we were downsizing. We went down by 2 million policies in the homeowner's business over a 4, 5 year-period. It does hurt. It's manageable. I can't speak for what our competitors are going to do. What I do know is what Glenn said, which is we got a good business, we know how to run it. We have growth opportunities, and we're looking forward to serving more customers and make more money for our shareholders along the way.

Thank you.

Thank you. Our next question comes from the line of Greg Peters from Raymond James. Your question, please.

Good morning. I'd like to turn your attention to Page 7, and I was particularly struck by your chart where you've identified the rate increases you've deployed, and then ones that you're going to be implementing. And I was wondering if you could provide us some perspective on -- given the fact that severity has been so substantial, where you think that's going to go with other states? It feels like this is going to be an ongoing reset of pricing as we go through most of next year. And against that backdrop, just how you think about your competitive positioning when most of the industry is going to be raising rates.

Let me -- maybe -- let me start and then, Glenn, why don't you jump in on what you are doing individually. I think you are right about that. There seems to be this -- a threat going through the markets today. And this is kind of a once and done. And we don't necessarily see it that way. I mean, I think there's never bold enough to decide in claim, we're ahead or of anybody else. Because firstly, I'd assumes everybody is in the same place. Secondly, assumes the same trends are going to happen and third is that those trends are going to end and the answer is we don't know when they will do. What we do know is what we can do differently. And we do know that some of our competitors had frequency increases sooner than we did so that you would expect them to raise prices sooner than we did. We do think that we have a good plan in place and Glenn can take you through that, which is to make sure we get attractive returns in auto insurance, which is a key component of what we do in terms of delivering value for shareholders. We are all over that and we will go -- where -- how that will move forward in terms of competitive position. And that's also hard to tell, what I do know is that I'm really glad we started transformative growth 2 years ago. And the cost reductions we already have in place certainly have benefited us. It's positioned us to be able to grow through many different venues, so we can dial growth up if we choose to do that. I'm really glad we are where we are and we're positioned to take share in the future, which of course, our strategy. But we want to do that profitably. Glenn, do you want to talk about your plans getting the auto insurance returns back to where they have been historically?

Yes. Absolutely. So thanks, Greg. And you hit a couple of important points that you're right about that everyone or close to everyone is going to have to take rate. When you talk about competitive position. So we think about that as part of process. But this is broad and this is going to be around for a while, like everything you look at in terms of what the root causes of severity, which is in its simplest terms, is the price of used cars. I would like to talk about collision coverage as it's a coverage that doesn't really have a policy limit that's dated other than the value of the vehicle itself. So in real turn, our policy limit on that coverage went up by 40% plus with no change in premium. And that experience happened to everybody across the industry. So it's a rarity where you have something is Clean and clean as that that is a root cause to your severity changes. So we think it will be around for a bit and we're going after rate to address that has one of the levers and we've talked about our claims capabilities and certainly our expense reductions as other ones. So in the third quarter, we took 12 price increases that went effective in the third quarter and other 8 in the fourth quarter so far with more to come. So this is broad and we'll be doing it just about everywhere. And I think the key from a competitive position is that we made a lot progress. So our starting point, we made significant progress over the last year with the expenses we've taken out, and therefore the competitive position we were in improved significantly. Our close rates improved significantly, leading to some of the greater new business that you saw. And so as we take rates and other due. It's our goal certainly keep that competitive position gain that we've made. But the primary goal is to get our margins back to where they need to be. And that's why we're going after rate, we're doing it pretty proactively.

Great. Thanks for the color on that. I wanted to pivot to Slide 8, which is, I think another really important slide in your presentation. And just to step back and recognize the long-term objective that you've introduced is pretty striking. I feel like when we get to 2024, if you've achieved that objective, that will put you clearly among the leaders in terms of a lowest adjusted expense ratio in the marketplace. I'm sure a lot of thought went into this. Can you give us some more color on where the improvement, where you're going to get the most leverage in terms of the expense ratio improvements, where it's going to come from. And then maybe also include some comments on the advertising expense because that's not included in this.

Mario, do you want to start with the components of the cost reduction and now come back to advertisement?

Sure. So Greg, thanks for the question and the acknowledgement of the progress we've made. I guess, why it start is maybe to just kind of go up a level and reiterate again what our objective in reducing costs really is, which is to enhance customer value by improving our competitive price position. And we're going to do that by continuing to drive down the expense component of our combined ratio, which is inclusive of both underwriting and claim expenses and to your point, we've made really good progress over the past several years. And in addition to the progress we've made, we've created plans and have line of sight to the additional 3-point objective that we've got by 2024, by focusing on things like digitizing processes to improve efficiency by continuing -- as we do that, create opportunity to retire legacy technology to capture the synergies associated with the National General acquisition, to continue to drive down distribution costs as we've talked about creating a more productive but lower-cost distribution model. So we've got opportunity in both the -- from an operating cost perspective and both the underwriting and the claim side. And we've got a plan on how to get there, and that's why we established a goal and we think once we can get the additional 3 points out of our cost structure, it's really going to position us well relative to our competitors, to have a more competitive price point, to deliver higher customer value and really position ourselves to accelerate growth.

So let me go to advertising then. Let me start with we didn't do transformative growth because of the pandemic, but boy, I am sure glad we got started on transformative growth when we did because we were able to reposition the brand. We invested over $250 million in repositioning the brand, do advertising, testing out new, more sophisticated ways to do it. And we did it when frequency was low, so we were able to use some of that reduction in frequency, the margin it's created, to invest in long-term growth by repositioning the brand. When you look at transfer on breast for a simple right, you get a more competitive price, you have more places to buy it. You let people know about that the increase in advertising, that or restocking that. What we do in the future will be depending how much we want to grow. So as we move forward, I think our advertising will be flat or come down some, because we want to make sure we've got the pricing right. The point that came up earlier about the longevity of the how long will severity keep come up. You want to make sure you've got that pricing right before you go out and get that flywheel going by doing more advertising. That said, we're always going to do a lot of advertising because as you know, it is a marketing war really out there between some of the large players. But the other part that's not as well known is it's getting every bit as sophisticated as auto insurance in home prices. You really got to be good with your math and whether it's upper funnel, lower funnel, getting the right price to the right customer, at the right time, in the right space is complicated. And so the other thing we've been working on is building out the sophistication, so that every dollar of advertising investment we spend is well done. The reason we took it out of the expense ratio guidance was because it is more volatile and it has penned down on what kind of growth we're looking to achieve in that quarter. And this is a measure of really how effectively running the business, like how are you keeping your costs down for your customers see can't hit at competitive price.

Thank you for your answers.

Thank you. Our next question comes from the line of a Elyse Greenspan from Wells Fargo. Your question, please.

All right, thanks. Good morning. My first question was on the growth in new business that you guys saw in direct in the quarter. I know from commentary, you guys started to take price during the quarter and then more is on the [Indiscernible], but I was a little bit surprised with the level of growth you saw there, given the increase, the loss trend that you're mentioning. Can you expand upon that? And would you expect a new business growth on the direct side to slow as you push for additional ways through this system?

Elyse, let me give that to Glenn and just -- but Glenn and his team have done a fabulous job in getting us better at direct. Some of the growth that you see is because of the advertisement we talked about, some of the growth you see is we're just getting a lot better at it. And so once we put the Allstate brand on in Glenn study to combine capabilities. We've just -- we're getting much more effective at what we've closed on, and what we've closed in the cost. Glenn when you want to talk about the prospects for address?

Yeah. I agree there any Tom just said I think we've got really nice prospect because I would say we're making up ground in dog years because we have what we're 20 years newer at doing directed the Allstate brands and some of our competitors. But we're making up chunks of that capability as we move a year-and-a-half into the launching with Allstate brand in direct. The effectiveness of our sales, whether it be our call centers, or on the web, etc., our marketing sophistication, our partners with marketing, all of those things getting better and that helps move it up. The other thing is, actually in this price environment that's going to be disrupted, we're really likely to see some tailwind in new business, but some headwind in retention. Because if we were in a situation where we're the only ones taking rate, you might expect the opposite. But with a whole bunch of people having to take rate that will create a lot of shoppers, we'll create shoppers of our own too, because it disrupts our own customers. And when people shop, they often find a better price for situation. Even in a rising environment like this. So there will be a lot of customers shopping, ours, and other companies. And so, it's an opportunity as Tom said, to leverage what we did and say we're really happy we did transformative growth when we did because we have more ways for customers to buy when that disruptive market happens.

Thanks. And then my second question on, just in terms of rate, I believe the majority of your auto policies is six months, so correct me if I'm wrong there, but as we think about the rate going to this system, what you've done in the third quarter, the fourth quarter, and expectations for next year. How long would you -- do you think it will take to get back to your target margins, is it kind of a 6 month to 12 months situation? I know you don't have a specific target margins for Property-liability. We've gone to an overall awry, but we think about putting your margins at an acceptable level that we think that that would come over the next 6 to 12 months or can you give us the time range there?

I don't think you can do a time range on it, because I don't think we can predict what's going to happen in the future on the inflationary pressures. What we can do is say, we're going to go at this aggressively as soon as we can get there. That will be -- we're going to hustle as Glenn to get it. Well, as he said, his priority is auto insurance margins on that part of the business. We got lots of other priorities to look at. But when you look at inflation, I'm not in the camp that the inflationary, like used car prices are suddenly going to go back down. I think you buy a car for $14,000 and use a cost of $10,000, Like, you're not thinking it's worth $10,000 no matter what the Fed and everybody else thinks about it being transitory. I think the same thing is true with when you look at parts prices. Parts prices, it's not like the oil market where prices are -- the system is built to go up and down everyday, it gets embedded in there. The dealers buy inventories, people, distributors buy inventory, they price that. So we don't really see that being transitory and coming down. How long it will take to work all the way through the system, what opportunities the OEs will take to push prices farther up Is really unknown at this part. So it's hard to determine when they will cross, what you do know is at least in it's half-life, just going to keep going up. As long as we see movement in the bottom line. And it will keep going up until the bottom-line plans out, that being the bottom line is being lost cost. And that top-line then will keep going past their point in time until we get back to the margins. But when we get back to the same underwriting margin on a dollar basis, or a percentage basis on auto insurance. You can't really predict until you can have a better handle on where frequency [Indiscernible]. Glenn, anything you would add to that?

I know that the only thing I would add would be that the tactical answer on the rates, because completely agree. We don't know what the bottom line will do exactly, so we'll have to keep moving those and adjust. But the tactical answer on the rates, you're correct, Elyse, its 6 months in almost all of our states and all of our policy. So it's about 6 months from the effective date to get all customers paying that. And then another 6 months from the point they start paying it to where the full premium has been earnings for one policy period. So you really start to see the effect of the rates starting at the beginning of the year, but more impactfully in the second and third quarters of next year.

Okay. Thanks for the color.

Thank you, our next question comes from the line of Michael Phillips from Morgan Stanley. Your question, please.

Thanks, good morning, everybody. I think Glenn answered this question, but just want to be sure. I'm going to ask First Quarter, Second Quarter you were taking some targeted rate costs and now you're not. And I think Glenn said rate increases that are going to continue are going to be I think you said just about everywhere. I Just want to confirm that because I guess the question would be, how much of an overlap would there be in states where you took previous rate cuts -- pretty recent rate cuts, and now moving upward in those same states, is there overlap there in those states? I'm asking because of what that means to consumer impact on maybe retentions, seeing gyrations down and back up again. And then also if there is overlap there, what it means for, just something that Tom said, make sure we have pricing rates to confidence around our current rates.

Glenn do you want to take that?

Sure. So the short answer to your question would be yes, there will be increases in places where there were modest decreases. I do think we waited a little while to really see what was happening with the frequency and ensure that it was long-standing and has remained a long-standing benefit before taking them. And we were modest and we've done some pretty significant givebacks into shelter in place, get it back, which were one-time and not sort of durable discount. Actually changing rates and moving them down, we were more subtle with and more modest with. I don't think people will see a wild swing down and backup, but they will see it in same-state. And the simple fact is, as you saw on the chart, I believe just on page -- bottom page 7, that used car prices spiked dramatically in the second quarter. And those spike, and then people start having claims. And then those claims start to be paid, working their way into the loss costs, and you have this hyper inflationary environment on auto physical damage lines. So it's just the appropriate response at the appropriate time for it. And we'll do everything we can to maintain our retention. It's one of the wonderful things -- one of the many wonderful things about our agency force. Our agency force do a really good job of building relationships and talking customers through changes in their policies, and helping us through things like this.

Okay. Thank you very much for that. The second question, a different one on Arity. I guess I'm curious how you think about Arity. Do you think of it as either a more of a use it for our own pricing and telematics business, or that plus [Indiscernible] it off to others and having more of a income-generating machine? It's still not giving you a lot of lift on that second piece, but do you think of it more that way longer-term? And we've seen more and more Companies go the route. You are about the only one that isn't. the go the route of farming that business off, Hartford just announced that recently were they farmed it off, and more and more companies are doing that. So how do you think about Arity? Is it more just for your own pricing or do you want to have it be more of a, again, an income generating machine as well?

Michael, thank you for asking about something other than auto insurance margins, because we have a lot of good things going on, one of which is Arity, which a significant value has been created with Arity, both in the insurance business and outside the insurance business. And I don't think that's been reviewed by any analysts as if it was a separate Company. I mean, we have 600 billion miles of data. We risk scoring the operation. We help people do marketing, more effectively and efficiently. And so we're really building quite a platform that will do a number of things. One is it does exactly what you've talked about, which is -- and the way we started, it was telematics as a service for us. We needed somebody to collect the data. We needed to get a mobile app up. We needed to put it in files and be able to do something with it. And so rather than do that inside the insurance Company, we decided to do it outside the insurance Company because we said this is -- at the point, we said this is Basically a service at other insurance companies will need and we can provide to them and we do. So. Arity provides that service to some other insurance companies, and we're working to try to expand that effort for them. But it moved beyond what I would just call telematics as a service, help me pull data in to figure out all my customers are doing too. We started collecting more data from ourselves and built a rating service organization so that we can help other insurance companies use telematics to price the insurance. We believe that they're going to get their capability anyway. So we think that we might as well do…

Okay Tom. Thank you very much.

Thank you. Our next question comes from the line of David Motemaden from Evercore ISI. Your question, please.

Hi, thanks. Good morning. I had a question on, I think it was Slide 7, where you show the around a 7% rate increase that you are asking for. I guess that feels high to me, especially considering that the loss ratio, if I take out the reserve charge, was only about 1.5 points higher than the third quarter of 2019. And then also, considering the expense initiatives that you guys have taken to-date, I guess my thought was -- I thought that the expense plan would maybe help reduce the amount of rate that you guys would need to take. I guess -- is that the right way of thinking about it or is it too uncertain at this time and you guys just want to get in front of what might be coming down the road in terms of future loss cost increases?

Well, it's an accurate call-out, David, that the future expense reductions will certainly help us manage profitability. But we're increasing the price is now because we do want to grow profitably. But being unclear as to where this inflation will sort out, we're being what we think is fair and appropriate, as opposed to overlay aggressive in increasing prices now. As to the extent in the future, we don't need that as much in our expenses come down. Then we can improve our competitive position, which we've been -- we've improved our competitive position pretty significantly in 2021. and we don't want to give that up. And we'd like to continue to improve it as so we get that flywheel of growth going. But in this case, we're using the expense reductions for future competitive price improvement as opposed to saying, we don't need to raise prices because loss costs are [Indiscernible] Glenn or Mario anything you would add to that?

The only thing I'd add is, it is -- it is pretty easy to get negative rates in approved and in market very quickly. And as we talked about in one of the prior answers, it takes time for them to earn in. So we're projecting future loss costs out over the course of the next year and years and taking rate that we think best reflects our best estimates of what we're going to need to deliver the right returns. So it would be a good situation to get into to where we were we slightly overshot and could dial it back. But as Tom said, there's a lot of questions still on where this severity will -- Inflation for severity will end.

At some point, Glenn. Look, we need to make money in auto insurance, David, and we're going to do that. I think we're out of time, so let me just say as we move forward, you should expect us, as you've heard throughout this call, to focus on improving returns in auto insurance. At the same time, we're not letting up on any of the components of increasing our market share and personal property-liability, or expanding circle of protection. All of which we've had really good progress and success on this year and in this quarter, so you should expect us to continue to focus on a broad-based approach to increasing shareholder value. So thank you for your engagement with us again, and we will talk to you next quarter.

Thank you, ladies and gentlemen for your participation at today's conference. This does conclude the program. You may now disconnect. Good day.