We're very pleased to have Tom Wilson, Chairman and CEO of Allstate, as our next presenter. By the way, I'm Alison Jacobowitz, in case I haven't met somebody out there. Tom has been with Allstate for over 20 years, and he's been CEO since 2007. Under Tom's leadership, Allstate has emerged as a leading innovator in the personal lines industry, and the company continues to evolve in reaction to the changing consumer appetite. With that, Tom has been a regular presenter here, and we always look forward to his comments, so I'm going to turn the podium over to him.
Thank you, Alison. Good morning. Thank you for investing your time to catch up on Allstate. Joining me today is John Griek, who leads our investor relations. We'll have time to talk to you. Jay will ask you some questions, and off we'll go. Before we begin, let me do our surgeon general warning here. This statement says we're going to use a bunch of forward-looking statements. Some of it's non-GAAP. If you want more specific stuff, you can go to our website. I want to start today talking about the Allstate story. I feel like sometimes we get into a conversation with investors about underlying combined ratio, which is mostly about auto insurance, and it kind of drags us down a little bit. As an investor, what you're really trying to buy is a story.
I thought I would start with a story and start with our strategy. We'll go wherever you'd like to go. Our strategy really is to grow by protecting people from life's uncertainties. If you start with the upper oval, the personal property liability market, we serve four consumer segments there, and we provide protection. We insure autos, homes, boats, personal liability. We use differentiated products, we use sophisticated analytics, telematics, and we're building what we call an integrated digital enterprise to grow market share in that protection segment. Our strategy also includes protecting people from a range of other uncertainties, which are shown in the bottom oval. Importantly, the intersection between the two, we want to leverage our brands, our customer base, our investment expertise, our distribution, and our capital.
The other oval began in 1957 with life insurance. In 1999, we acquired Allstate Benefits, which provides protection products such as life and disability to employees at the worksite. We purchased SquareTrade in 2017. We started really a commercial insurance offering for transportation network companies last year. That's growing quite rapidly. We recently closed the acquisition of InfoArmor. That strategy creates value through customer satisfaction, unit growth, attractive returns on capital. It also ensures we have sustainable profitability and a diversified business platform. Underlying theme between all of this is innovation and using technology and analytics to drive our business forward. Last year, we were recognized as one of the top 10 companies in the world on innovation by The Wall Street Journal and the Drucker Institute. Also on that list in the top 10, Amazon, Apple, DuPont, Alphabet, Intel, and Microsoft.
I'm hoping to get their PE someday. Fortune also named us one of the 50 companies out to change the world in each of the last two years based on our work in QuickFoto Claim and telematics. Today, I'm going to focus on the innovations and how we're driving growth in the property liability businesses and the other services businesses. In some cases, we're actually trying to create new businesses. Before I go through those initiatives, let me set the stage by reviewing our current businesses. Allstate had strong operating results in 2018. We both currently and building for the future. We achieved all of our operating priorities, we have five every year. Our return on equity on adjusted net income last year was 14.8%.
If you go to the table at the bottom, our revenue was $40.7 billion when you exclude capital gains and losses. Adjusted net income was $2.9 billion or $8.07 a share. That gives our current stock price a last year earning multiple of 11.5 times. A key driver of that success is obviously the property liability business, which had good returns and growth last year. You can see in the left box, a net written premium grew to $33.6 billion or 6%, which generated $2.1 billion of underwriting income. Policies in force grew by 2.4% to 33.3 million. It was driven by two areas, really, 2.7% unit growth in the Allstate brand auto, a slightly smaller growth in the Allstate brand home insurance, and then a 10.4% increase at Esurance, which is our direct business.
If you move over to the right, you can see our written premium growth is higher than the increase in policies in force, obviously, because we raised prices a little bit. Esurance is now almost a $2 billion business, over 2.5 times the size it was when we bought it seven years ago. That's by leveraging those things in the middle, capabilities, expertise, technology. The table on underwriting income, which is down at the bottom there on the right, shows we continue to earn great returns on homeowners insurance despite the wildfires in California and Hurricane Michael. If we move to the bottom oval, you can see that on this slide, the life and benefits businesses also generate both good returns and growth for us.
Allstate Life, shown on the left, generated adjusted net income of $289 million last year, which is up 14% from the prior year. Some of that was just a lower tax rate because we benefited from the reduction of corporate taxes, growth in premiums did offset increases in contract charges. Allstate Benefits provides financial protection against the risk of people having accidents or illnesses or mortality, we enroll people through the workplace. We go to the workplace, they sign up, pay us biweekly. The premiums and contract charges in that business have grown at 7% annually for 18 consecutive years. Allstate Benefits had adjusted net income of $119 million in 2018. That business now is 4 times the size it was when we bought it 19 years ago because we leveraged our brand, our capabilities, and our capital.
Allstate Annuities, shown on the right, is a discontinued block of business that has a low return on equity because we choose to invest to optimize the long-term economics versus current returns. About $12 billion of those liabilities are very long-dated, so we invest as if it's a pension liability. That requires us to put a lot more equity in the portfolio, which requires more capital than if we had just invested in fixed income. But it's the right thing to do because it maximizes long-term shareholder economics. The service businesses, which account for the rest of the protection products at the bottom oval, are growing rapidly but are not yet generating meaningful income because we're investing in innovation and growth. SquareTrade provides consumer protection plans on tablets, cell phones, computers, televisions, and other electronic items, and we sell largely through retail relationships.
SquareTrade, we acquired it for $1.4 billion at the beginning of 2017. Since then, policies in force have grown from under 30 million to over 68.5 million at the end of the year, which is 129% increase in two years. SquareTrade written premium increased to $773 million in 2018. A portion of that is due to an accounting change, but policies in force have increased 77% last year because we got a new large retail distribution partner. We've also been expanding with our other partners, and we're growing a European cell phone insurance business. This acquisition is achieving the three milestones we set out when we did the acquisition to show the shareholders that we can make it economically attractive. Arity is our telematics platform company, which I'll discuss in a few minutes.
We also further expanded into identity protection, which we believe is an underserved market, so we acquired InfoArmor in October of last year. At the Consumer Electronics Show in January in Las Vegas, we announced a new innovative approach to protection that we've been working on for three years, and that'll be rolled out through InfoArmor as well. What I'd like to do now is talk about innovation and go into telematics, specifically its impact on our insurance business and how we're using our skills to see if we can build a platform serving the personal transportation industry. We're creating additional value in auto insurance through telematics. We've been investing in telematics for nine years, almost a decade, to increase auto insurance pricing sophistication, to improve the customer value proposition, and leverage our capabilities and data to create a new source of growth and profit.
Let me start with what we do now. We began to use telematics in auto insurance in the market in 2010, and now we have a whole suite of products. Drivewise and DriveSense are the telematics-based offerings from Allstate and Esurance and represent the bulk of our proprietary connections. We either use a customer's mobile phone or we put a little OBD port, onboard diagnostic port, that goes in under your dashboard to establish a connection with the car. We launched Milewise in 2016 and expanded to more states last year, which allows customers to pay for insurance by the mile. Streetwise is offered through our online insurance aggregator, Answer Financial, in conjunction with Arity to enable other insurance companies to benefit from telematics-based insight.
Arity is the telematics service provider to Allstate and all of our insurance companies, but it's a separate and distinct company from our insurance operations. The reason this is really good for insurance is auto insurance pricing will eventually be driven largely by telematics information because it's just better than existing approaches. Let me explain what that is. From a pricing standpoint, auto insurance policies today are priced on who you are, such as your age or your gender, or where you live which is really where you garage the car, which is kind of a proxy for how you drive and where you drive. Telematics enables pricing to be based on how you actually drive. It's also based on where, when, and how much you drive. It leads to increased pricing accuracy, lower subsidization between risks, and a highly personalized risk-based price.
Telematics will be required to effectively compete in auto insurance in the future. We're also using it to improve the customer value proposition by staying connected with customers. We call that swimming upstream. If you think about insurance, you don't have that much connection with them. You sell them the policy, they pay you the bill, and then they hope they don't have an accident. What we're trying to do is extend that relationship and have a more connected relationship. We give people rewards for safe driving. We have safe driving tips that can lower their premium, and then we give maintenance information on the car if they use the OBD port device.
We can tell you specifically what's wrong with your car, no more idiot maintenance required lights, how serious it is, what it should cost to repair it, and where you can go and give you a link to get it fixed. Given these benefits, we believe telematics will be integrated into auto insurance business models. As a result, we created Arity outside the insurance company so we could create more value for shareholders. In 2015, we said, "Well, we want it to be a platform company." What is a platform anyway? It's one of those things where everybody talks about it, but nobody really knows what it is, and if you're going to build one, you ought to really figure out what it is.
We came up with our own definition, and we said a strategic platform is a system of capabilities, assets, information, and shared intelligence. Platforms are broad and flexible. They have lots of people who participate in them, not just your own company, so you have to bring non-proprietary people into it. You create multiple uses for a wide range of customers and partners. For example, in our definition, we would consider Apple, Facebook to be platform companies. Amazon's Marketplace we would consider to be a platform business. I don't really know about their web services. Companies that generate control strategic platforms generate really high returns. Those returns reflect a couple of things. First, you have reduced friction between companies, which lowers cost. Then you get improved returns because the increased knowledge and intelligence through analytics makes you smarter and helps you make more money.
Platforms are also highly scalable because they're mostly digital and data. The transportation system can benefit from a telematics platform. A telematics platform can enable companies to increase their speed to market in a connected car world. That's, of course, insurance companies, because if you want to price auto insurance with telematics, you got to have data. If you're going to get in, you got to have some data to get started. You can't just have one customer and have one subset of data. Ridesharing companies can use Arity data to help them select how risky their drivers are, because we can help them decide using our data how they are. As more and more companies and industries use Arity, the breadth and depth of the shared intelligence grows.
More data on the platform allows companies to refine and customize their models to specific business units, and it becomes this virtuous circle. Just like with credit scoring data, we believe it's inefficient to have every company out collecting their own telematics information. We decided to build Arity as a telematics platform to capture a portion of these additional economic benefits. It doesn't really have much downside to us, because we need to do it for ourselves because nobody was doing it, and because we were so far ahead of the industry. Today, Arity has 12.5 million active connections, of which more than 1.5 million are through Allstate. We analyze over 300 trips per second, and we create a proprietary driving score that can be used by insurers or shared mobility companies. It's a rating services organization, so it can sell that information to other people.
As its scale continues to grow, right now we're adding 10 billion miles of driving data per month. It has created substantial advantages for our insurance operations today. We're actively working with other insurers to help them utilize telematics and auto insurance pricing. We'll keep their information confidential because we don't want to give them ours or they give us ours. That said, we can all benefit from the network impact of putting our data together and having a large, consistent data set. In addition to capturing the economic benefits for our own businesses, it gives us a new source of revenue from the transformation of the personal transportation industry. Innovation in telematics is a core component to our ways to grow in all of our businesses. At the core of our insurance operations is data, so our innovation doesn't stop there.
We have a number of places we're doing. I'll give one other example, which is we're building what we call an integrated digital enterprise or IDE, and that's the combination of data analytics, technology, and process redesign, importantly to focus on process redesign, to profitably deliver innovative products and services. Advanced technologies such as telematics, of course, one of those, but we also are doing it in other places in our business, pricing, risk selection, but also claims settlement. I'm going to give you a couple examples on claims settlement. One of our early examples of wins is in claims, which is either QuickFoto Claim or Virtual Assist in the way we're doing property claims. I'll talk through all three of those.
QuickFoto Claims is customers, they take six to 22 pictures of their car, they send us their pictures of their car, and we can adjust their claim. We used to have 937 drive-ins, used to have to have an adjuster drive to a body shop and come look at your car and all kind of stuff. We don't have to do a lot of that anymore. Right now, over half of our drivable claims are done using QuickFoto Claims. It's so popular with customers. We have an advertisement on it. You think about what it does, no more drive-ins, fewer people driving around, so we can use our adjusters' talent more because their productivity goes way up, and we settle claims in hours instead of days at a lower cost.
Virtual Assist kind of came out of that's a video collaboration tool for times when repair shops find hidden damage that you can't see from the pictures or even when someone's out looking at the car. If an adjuster drives their body shop, they don't necessarily can't see everything, so they go away, and then they rip the fender off, and they find something else broken. What do they do? The old days, you used to have to call us or somebody would drive to the repair shop, and you have to leave it on the rack while they had. Today, we have something called Virtual Assist, which ties into a claim system. They can tie it to kind of like FaceTime for your car.
It enables them to keep going on the car, not take it off the rack, improves the repair time, lowers cost, valuable for everybody. It gives lower cost, faster speed. Given our large footprint with collision shops, we're working to make this available to other insurers, we capture additional profitability. We're also leveraging satellite imagery, fixed-wing aircraft, and drones to expedite property claims, it improves our speed to market. Eventually, when you capture all these images, your computer can adjust the claim as opposed to an individual. We're moving closer and closer to giving our customers a seamless digital experience. More broadly, we're looking to find how can we do that to add other value by being in the marketplace. The Allstate story is one of strong operating performance in returns and value creation through innovation.
At the same time, we returned $2.8 billion to shareholders last year through dividends, which is about a 2% yield today, and we repurchased 7% of our outstanding stock. With that, we'll go wherever you want to go, Jay or Alison, who's leading.
Any questions for Tom? If you have a question, just raise your hand, and we'll bring a mic around. I'll start with a couple. The presentation has evolved very nicely, by the way. Every year you come with something new, and story has evolved. On telematics, let me just start there. Cell phone versus an OBD port device. Is there a big difference in the accuracy of the data you're capturing in a cell phone versus something you stick in the car?
Yes. With Drivewise, you can just do it on your phone. Like we'll do it on your phone, or you can put this device in your car. You can do telematics with a car. Cars can also be connected themselves, whether it's OnStar or something else. They go up in level of accuracy when you go from cell phone to OBD port to the actual car because of the information you collect. That said, we're getting better and better on the mobile stuff. It's actually gotten a whole lot better than it used to be. For example, we can tell whether you're driving or not. We can tell whether your phone's in your right hand or your left hand. We can tell whether you've been texting. If you were on it, Jay, I could tell you exactly how many texts you did and when you did text.
There's lots of information we're being able to use to make it better. I would say at the just base level, all of it, when you get to the high risk and the low risk drivers, is a lot better in predicting the accurate price than existing models. All of it's better, and I think it'll evolve over time.
Well, kind of on that topic, you're constantly getting more and more data. Unlike the traditional model, you get an application every six months or a year, and you can change your price. Here, you're getting consistent information throughout the life of a policy, if you will, which arguably suggests maybe you could change your price more quickly than you might have in the past. Are you changing your pricing methodologies as you get more data? Is it kind of this feedback loop that you're using?
Yes, we can do it faster. You're of course, constrained somewhat by two things, one of which is not our making, one of which is our making. You're constrained in part by the regulatory environment because regulators don't want you just changing the price every hour because you think you can, because they don't necessarily trust you or you're not going to pay attention to rules. That one you can't do much about. The other one is technology. We're redoing our technology stack, the product management platform, so that we can do that, which, if you want, I think is going to be important because when we go to a shared car bit model, which I think will also happen, you need to be able to price faster and in sub-second response time.
My last question was, especially with that first slide where you list all of the products, it's almost like you're redefining the company. I'm going to make this too simplistic, and I know this isn't the case, but going from we insure cars, homes, lives to we solve many problems somebody could have, like identity theft as the most recent example. Am I misreading that? Are you redefining the company as you see it?
No, I think you're reading it accurately. It's something we've been working on for 12 years. When I became CEO in 2007, I was President Chief Operating Officer, it wasn't like I wasn't working on anything. In 2006, we decided we would change and start saying we want to protect people from life's uncertainties. That was really the beginning of it, Jay. We started broadening out. That led us to say, "Hey, how come we're not in the cell phone business? How come we're not" Before that, we didn't really think about it. What you're seeing today is the outcome of that 12-year path. You don't yet see that, certainly don't see it in profitability today. You're starting to see it in revenues today, and you definitely see it in policies in force.
Last year, at the end of the year, 113.8 million policies in force, 33 million of which are property liability. We have 30% organic growth in policies in force last year, heads up, no acquisitions, nothing, 30%. Some of these are small policies. If I'm insuring your tablet, it's not $1,000 a year or $1,200 a year. You're starting to see it, but it will move through the math. The good news for us is, for example, we now sell SquareTrade policies in one big retailer. We sell it under the Allstate brand. We're starting to also transform it in the way that consumers see it. I think what you're seeing is it'll just move through there. It's not like we just started, but you're starting to now see the tangible outcome of actually executing that concept.
On the newer products, obviously they're not making a lot of money yet or even losing money. It feels as if the top-line growth is so significant that relatively soon you will kind of cross a line where all of a sudden it goes from very little contribution to a far more significant contribution. Am I misreading that, or do you keep investing in the business?
No, that's the plan.
Okay.
I would also say we like to segment, like we're insurance people, and we like to split and segment data. The other thing we do is, Jay, we look at the total, which you're talking about, but we also segment below it. SquareTrade, while they don't make much money in total, I know all the policies we're putting on. By vintage year, we look at the profitability, and we know they're going to make money. We're trying to ensure that we get to that what you're describing, which is in total goes up. The same thing is true with Esurance. People will say to me, "Esurance, when is it going to get to target combined ratio?" I'm like, "It's been its target combined ratio since we own it." What you don't see is we keep fueling the growth.
We had a 10% increase in policies in force last year at Esurance, because I was willing to invest in advertising, because I know that the business for writing is going to generate returns. We segment it. You'll start to see it come through, but we're not just hoping the bottom line gets there. We're making sure the components get there.
Got it.
There's, I think, some in the back too.
Just to follow up on that a little bit. What does the environment look like for acquisition of a new customer? Is the cost going up or down? Is the advertising going up or down? With more and more people sort of dropping off of their TV and going to streaming, the TV budget's going to come down at some point. How is that all kind of playing out?
Well, it varies by business. Okay? I'll answer it as auto insurance, which is, I think, where you were headed. I'll talk about some of the other businesses, because acquisition costs and thinking about it are really important to the business model and the way you choose to go to market. In auto insurance, for Esurance specifically, its acquisition costs have come down because we've gotten smarter about where we're advertising and how we're doing it. Whether that's the content or doing it on social media or TV, so that's all changing. We got all kinds of math and models, and we're highly sophisticated in how we do it.
It's hard to say how sophisticated, because all the people we buy social media ads from tell us we're very sophisticated, but, like, I'm a customer, so they're not going to tell me we're stupid. We appear to be in amongst the leaders in managing that. I do think that for Esurance in particular, one of the things we need to do is improve its brand strength. When you look at a funnel, are they aware of you? Will they consider you? All the way down to do they hit the bid and execute the ticket? We lose more at the top, so we spend more money at the top. We're okay at the bottom. We have to figure out how we improve the brand strength of Esurance. Don't have that issue with Allstate, obviously, because Allstate's ubiquitous and everybody knows it.
We toggled back a little bit last year because at one year, we went up to $250 million. I pushed it on advertising. That was too much. Like, we didn't have the capacity in the marketplace to do it. Today, I feel like we're in a good place to keep growing, and as I said, we grew at 10% last year. Acquisition costs are really important in other places, and let me take you to identity protections. You're looking for growth areas, you want to find places to grow through, kind of protect people from life's uncertainty. Like, your identity is at more risk today than a bunch of other stuff, we'd like to sell into that. The traditional model for there has been to advertise, do it on TV, have them call you and hope they stay.
We bought InfoArmor because they sell it at the work site. No advertising required, which is a much lower acquisition model, which means your economics are a lot better, which means you can give customers a better deal, and provide more services. We also think we can lower our acquisition costs there by how do we provide identity protection to the 33 million policyholders in the Allstate brand? How about the 70 million SquareT rade? We're trying to think about acquisition costs, not just as a product and a channel, but also holistically as a company. Are we where we want to be? No. We're not 12 years into Jay's history. We're like two or three years into that piece. I think we'll continue to get better and better at driving our costs down.
Thanks. Perhaps this is a little bit of an elementary question, but I'm curious to your thoughts. It sounds like this is the wave of the future of telematics and putting these meters in the cars and what not. On one hand, from an actuarial standpoint, it sounds great because the more data, the more accurately you can price risk, so on and so forth. I would imagine this really upends your entire pricing model in a lot of ways. Be it that if drivers drive a lot safer than you originally expected in your current actuarial models, it could be a decline in profitability, a decline in margins. Just curious your thoughts on just transforming the way you price risk based upon having all this data now.
Secondly is just a privacy concern that do you envision that there will be a lash back in some of the kind of privacy? You start to see that with Facebook already and just general sentiments in the market. Are we just so far in that direction that as a society, we're going to have to get used to this? Thanks.
I think telematics will help us maintain and have greater stability and, if we choose, increase our margins as opposed to the transition being we'll have to give up margin. The reason I say that is if you were to look at the value of telematics, and we were to take a group of drivers, 100 drivers, and put them into deciles, what you would find is that telematics is really powerful for the two least risky deciles and really powerful to highest risk deciles. That means 40% of the market you can reprice, and some you can give a lower price, some you have to get a higher price. That gives you the flexibility to implement it in a way that enables you to maintain your overall book of business. I feel good about that.
In terms of the privacy and the backlash, one of the reasons we got into identity protection is I believe that the market for individual data should change. First, we can protect you, and that'll be helpful. By the way, you are exposed today. I mentioned this new product we've created. Most identity protection is about remediation. You'll get hacked, and I help you figure out how to get new credit cards and not to charge more than $50 and stuff like that. What we're doing is trying to swim upstream. We're going to help you. We launched this product to help you figure out what your digital platform is. Our digital footprint, you sign up with us, and we'll tell you who and how many people are tracking you. For example, I did. The average person is 152 people.
Now, they don't all have location stuff, but 152 people have doors to your identity. For example, I found Advance Auto Parts was on there. I'm like, "What the hell? I don't even drive a car." It happened to be one of my daughters who lived in L.A. who needed a battery at some point. I got on their website. We're going to give you the tool to help manage your identity and your profile. What we also want to do is try to figure out how do we help give you control over the value of your data? This is long-term vision. We're going to make money on identity protection. We're going to sell more at the worksite. We're going to sell more through Allstate Benefits.
We're going to try to figure out how to get Allstate customers up, we will make money on remediation and helping them swim upstream. Longer term, your privacy question, I think as the market needs to develop as it relates to privacy in America, you need to have control of your information, you should be controlling what it's worth. I think it's a little bit like beads for gold. When the Europeans came to America, nobody had beads, so the Indians were happy to sell gold in Manhattan for beads, right? Because it had no value. When we first got started in this path on giving up our data, it was just curated access to the internet, you just gave up your data. Now Facebook makes $20 per subscriber, you know by segments that they make more than $20 on some people.
That's just Facebook. Your data is very valuable. You have no way to control it. You have no way to help monetize it. What we're thinking we can do with identity protection, swim upstream, make money helping them protect themselves, I think we can help you make money off your data. It's going to take us a decade or so to do that, but if we can do it, we can make lots of money. It'll be like Arity, a platform company. In the meantime, we're going to just make a whole bunch of money off identity protection. As to your current privacy, you don't have any anyway, I wouldn't worry about it.
Why don't we end it here? Join me in thanking Tom. Thank you.