My name is Mike Zaremski. I'm the property casualty insurance analyst here at Goldman Sachs. We're pleased to have Allstate joining us today, continuing tradition of participating in our financials conference, as we appreciate Tom Wilson's participation every year. Allstate is the second largest writer of personal lines in the U.S. and the largest publicly traded personal lines insurer, with a market cap of over $25 billion. Representing Allstate is Tom Wilson, Allstate's chairman and CEO, along with Steve Shebik, the company's CFO. This year marks Tom Wilson's 21st anniversary at Allstate. Tom Wilson was appointed CEO in 2007, a relatively innocuous year, followed by a not so innocuous year in Tom Wilson's second year as CEO. We've seen a variety of environments over that period of time.
From that start, Tom has taken Allstate and made several changes, acquisitions, divestitures, sort of molding the company into what it is today. With that, I'll turn it over to Tom, he'll make a few comments, we'll move into Q&A. Here we go, Tom. Thanks so much.
Thank you, Mike. Good morning, everybody. Thank you for taking the time to learn more about Allstate and why it's a good investment alternative for you. I'm going to use a handful of slides to set some context, then Mike and I will have a conversation with you. Steve Shebik and John Dugenske are here with me. Let me begin with this forward-looking statement that says I will be making some statements that are references to non-GAAP measures. You can get all that presentation, the slides and stuff, off our IR website. Just by way of background, we serve over 60 million consumer households today. That does not include SquareTrade. With a wide range of businesses, the largest of which is our personal property liability insurance for auto and homes.
We have a number of other businesses which leverage our capabilities, our brands, customer relationships, and distribution. Last week, we announced our intention to purchase SquareTrade, which I'll talk more about in a couple of minutes. Our total revenues are almost $36 billion over the last 12 months as of the third quarter. Operating Earnings Per Share were $4.32 for the latest 12 months, which gives us a Price-to-Earnings Ratio of 16. Our strategy within personal lines is to provide a unique value proposition for each of the four segments of the personal property casualty market. We have different brands for each of those segments, which you can see up on that slide. These businesses use a wide range of distribution relationships to ensure that the customer is served when, how, and where they'd like to interact with us.
Our operating priorities are shown on the right-hand side. Those are the priorities for 2016. We use these to both direct our business and to provide transparency to you as investors. If you look at the first three, they're all related. We've made good progress on the second by improving returns on our auto insurance business. This had a negative impact on customer satisfaction and resulted in a small decline in policies in force. Our investment returns have been strong all year. To create additional long-term growth, we unveiled a broader strategy for Arity, which is in the connected car space. Last week, we announced our intention to acquire SquareTrade.
Our personal property liability insurance strategy is to segment the consumer market on their desire for advice and assistance, which is shown on that horizontal axis, and their perception of insurance, which is shown on the vertical axis. We have unique value propositions for each segment to best meet the needs and preferences of each of those customer groups. We're the only company with a presence in each of those segments. Customers in the lower left-hand segment want local advice and believe that you get what you pay for in life, that is, that a brand has value. They prefer to have one insurance relationship for all of their protection needs, and therefore, they tend to bundle their purchases together.
These customers are served by the Allstate brand value proposition, which includes a wide range of products and the 36,000 highly engaged Allstate exclusive agency owners, financial specialists, and licensed sales professionals that work for us each and every day. This is our largest and most profitable customer segment. Represents just over 90% of total premiums. We compete primarily with State Farm, Nationwide, and Farmers for customers in this segment. To further strengthen our competitive position in this segment, we're positioning Allstate agencies as trusted advisors by changing processes, technology, products, and compensation plans. Allstate says we don't want them to be human modems. A human modem is you pick up the phone, you put it to your ear, and you type something in a computer. Our agencies need to add more value than that so that it compensates customers for the additional cost of that infrastructure.
In the lower right-hand segment, customers prefer to bundle their own insurance needs and use technology and tools to help inform them versus using a local agency. We've invested heavily in expanding Esurance, and as a result, we've doubled the size of the business since we acquired it five years ago, and premiums are now about $1.6 billion. In addition to strong auto growth, we've expanded the product portfolio to include homeowners, renters, and motorcycles. We compete in this segment, as you would expect, with GEICO, Progressive, Direct, and USAA. Our strategy for the Encompass brand, which is in that upper left segment, includes using local advisors in a differentiated product. These customers tend to be highly price sensitive since they believe that most insurance companies are the same.
We target the mass affluent market with a packaged auto insurance and home insurance relationship, and premiums are about $1.2 billion a year. Answer Financial, in the upper right, is the largest direct agency in the U.S. It represents about 25 third-party insurance companies to serve customers who want self-service and are brand neutral. We don't take any underwriting risk in this segment. Across all of these offerings, we leverage our analytics capabilities, our technology, and of course, our claim expertise. Allstate has a long track record of earning attractive and industry-leading returns in the personal lines insurance business, which is shown on this slide. The left-hand graph shows auto insurance combined ratios for Allstate in the industry for a five-year and on a one-year basis.
The green bars show we've successfully earned more margin than the industry, and Allstate, GEICO, and Progressive kind of operate around the same level of profitability. This lower than industry combined ratio is worth about $750 million a year in after-tax operating income. The blue bars show the combined ratio increased last year as a result of increased frequency in the severity of auto accidents, which is something I'll talk about on the next slide. We also outperform in the homeowners business, as shown in the graph on the right. Our performance versus the industry resulted in about an additional $400 million of operating income per year. The key message from this slide is we know how to operate profitably in a highly competitive personal lines space. Improving auto profitability at historical levels is well underway and will generate additional shareholder value.
Auto insurance profitability declined beginning in 2015, which resulted largely from an increase in the frequency of accidents and an increase in the average cost associated with those accidents, which led to the increase in the loss ratio, which you can see in the upper left-hand graph. As a result, we implemented a broad-based four-part auto profit improvement plan. It included raising prices, lowering growth through tightened underwriting standards, focusing on claims process excellence, and reducing our expenses. We did that for Allstate, Esurance, and Encompass because they each have their own plans that are unique to their competitive position. The approved gross auto price increases are approximately $2.3 billion across all three underwriting brands over the last seven quarters, were the highest in over 10 years.
While not all of those increases turn into realized revenue, you can see the increase in average annualized premium growth on the blue line in the chart on the top right. We'll continue to pursue price increases going forward until our returns get back to historical levels. The quarterly margin between the blue line and the total cost, which is the red line, has begun to increase and rebound, as you can see as those two slides widen out. In addition to broad price increases, our market operating committees use their local knowledge to address specific underperforming segments of the business that vary from state to state through tighter underwriting standards, which has had the impact of lowering new business and total policies in force, which is why I mentioned our third objective for 2016 of growing policies in force.
We've achieved that largely through growth in Allstate Benefits business, but our auto business has gotten slightly smaller. Our claims organization is also responding to higher severity by ensuring we control claim costs while demand for repair services has increased. We've also decreased spending on advertising, since if we're lowering growth in new business, it really doesn't make any sense to continue to advertise at really high levels, but we didn't reduce some key long-term things like investing in technology or other initiatives. In summary, we reacted quickly, broadly, and precisely to the uptick in the auto combined ratio, and as a result of our actions, auto margins, which are shown there in that top right graph, are improving. Last week, we announced our intention to acquire SquareTrade, which is a rapidly growing consumer protection plan provider.
The purchase price of $1.4 billion will be funded through debt issuance and holding company cash. The acquisition of SquareTrade expands our consumer protection offerings with additional products and new distribution. It'll join a growing list of high-growth businesses, which are shown on the bottom left. The strategic benefits of those are shown on the right-hand side of this slide. SquareTrade's branded protection plans covers a wide range of electronic products and personal devices, computers, televisions, cell phones, appliances. These plans are largely sold through retailers such as Costco, Sam's Club, Target, Staples, Office Depot, and Toys 'R' Us or through electronic retailers like Amazon and eBay. Retail distribution is important for these types of protection plans because that's where consumers are actively thinking about buying it. In addition, it's easier to underwrite the condition of the device at the point of sale.
Their exceptional customer service, highly innovative product design, analytics, and supply chain logistics has led to a fourfold increase in revenue over the last five years. This acquisition will expand Allstate's customer relationships with over 25 million active protection plans, putting our total items in force over 70 million. The transaction is economically attractive for Allstate shareholders, despite the fact that we paid the purchase price multiples are high, and that's of course typical for a high-growth business. It will be dilutive to operating income by about 2% next year, but it will be accretive to earnings after three years. We take a proactive approach to building long-term strategic value, and we've been evaluating the best way to expand our protection offering into connected device for several years. We're excited about SquareTrade joining Allstate. We also take a proactive approach to investing.
We balance risk and return and focus on long-term shareholder value creation. The investment portfolio is managed on a segmented basis, which is represented on this slide. Of course, you can split a portfolio 1,000 different ways. This is just one way we do it. It looks at the primary source of return and how actively the assets are traded. The vertical axis is a spectrum of what primarily drives return, the overall market or the specific asset. The horizontal spectrum is how much trading is done of the assets. The market-based core, which is in the upper left, accounts for 82% of the portfolio. That is a stable, highly liquid, high-quality fixed income portfolio. Holdings in this portfolio are primarily public and private fixed income assets, commercial mortgages, and some passively managed equities. Market-based active in the upper right is 11% of the portfolio.
Our goal here is to outperform the market through active management by leveraging our capabilities in public markets. We also pursue some tactical strategies that benefit from increased market volatility. In the performance-based portfolios on the bottom, we focus more on total return and idiosyncratic investing. These portfolios typically generate more short-term reported earnings volatility, but much higher overall returns. It typically shows up as limited partnership income in the income statement. We believe this approach to investing delivers better risk-adjusted returns, and our total return for this large portfolio was 5.2% for the first three quarters of the year. To summarize, Allstate represents an attractive investment opportunity for a number of reasons. We're focused on improving auto margins and expanding our share of the auto profit pool through focused value propositions. A one point increase in the auto margins is worth $137 million annually.
We have the ability to expand our market presence in four personal lines consumer segments. We have an $81 billion investment portfolio that generates attractive long-term returns. We are proactive and focused on creating economic value for our shareholders. And on a longer-term basis, we're leveraging our brand, our capabilities, our market position for growth through our connected cars through platform like Arity, and other high growth businesses like Allstate Benefits and Square Trade. Now, Mike will facilitate a conversation with us.
Great. Thanks so much, Tom. I'll move over. There we go. True fireside. So I guess first question, we had a presentation this morning, a conversation about severity trends continuing in the fourth quarter in auto. I'd just be curious to get your thoughts on what's happening in the auto book at Allstate, where are trends and how you're thinking about how we should be thinking about whether the rate taking that you've done so far is enough, or we should expect more rate taking to come.
First, I won't make a comment about the fourth quarter since we're only two-thirds of the way through it. Maybe just talk about it from a longer-term standpoint. It really started to pop in 2015, you have to really think about it as a system. More people working means more people driving to work. More economic activity means more commercial trucks on the road. More people driving means more accidents. More accidents, and also more congestion leads to more accidents. That's clearly, as miles driven have gone up, that has led to more accidents. I do think there's something in distracted driving. In part, with more congestion, your reaction time is actually less.
If there are fewer cars on the road and you're looking down to do a text, you have a little more time to react than when it's all jammed up and you're in traffic. Through Drivewise, where we have 1.1 million customers signed up today, we're also seeing a little more higher speed accidents on the highway, and we're trying to sort out why that would be. It could be gas prices, could be people taking vacations. It's a little hard. Think of it as a system. That system also impacts severity. There's a couple things going on there. One is more cars get wrecked, then there's more demand at the body shop, so they can charge more. People charge more for parts. A typical supply-demand piece. As well as the cars have gotten more sophisticated, it's gotten more expensive to repair them.
A hood ornament used to be $50 when nothing was on it. Now, if you put a sensor on it, that hood ornament can be over $1,000. Some kid rips it off. The same thing is true with your side view mirror. You kind of had this accumulation of facts, which all just kind of came to bear in 2015, and you saw this rapid increase in severity and frequency in the auto insurance business. We got on it fast, and we'll stay on it as long as it goes up. We've now been at it for, I guess-
Seven quarters.
seven quarters, probably six quarters.
Yes.
About 18 months. I talked about the amount of money. We're just raising prices. Eventually, it ought to moderate, because you wouldn't expect frequency to continue to go up at 4%-5% a year. We'll just keep increasing price and restricting our business so we can get our returns back to where they are until such time. When it does, it'll be time to grow again.
Has litigation been a factor? Have you noticed that as a component of the cost of incidents has risen over the past year or 18 months, or has it more been on the traditional BI?
Well, there's bodily injury, right? Let's maybe circle our way down.
Yep, sure.
Out of $1.00 on the dollar of insurance premiums, bodily injury is probably 20%-25% of your expenses. It gets a lot of focus.
Yep.
To answer your specific question, I haven't seen litigation as one single driver. Bodily injury is really hard to get your hands around using one statistic. The reason is a lot of people like to use average severity for bodily injury claims. The problem is the severity of a bodily injury claim can go anywhere from $1,000 from a sprained neck to $100,000 or $1 million for a broken back. You have this wide dispersion of the actual amounts. As well, the timing is off because it takes about four years. Any shift in timing has a big impact. We went after major medical about three years ago, four years ago.
Yeah. Three years.
I saw some lawsuits I didn't like about three or four years ago. Right. We completely redid our major medical processes about three years ago.
Right.
Takes about a year to get through everything. You saw some bouncing around in our average severity as we did that, but I'm not seeing increased lawsuits like a trend. There's always lawyers out there advertising, so I'm not saying that be new. Some of that just comes to how good you are at handling claims. We haven't had that problem. You might see it on a localized basis, but it hasn't really changed from what it's historically been on a national basis. Got it. Great. Thanks for that. Maybe shifting gears a bit to the acquisition that you talked about, Tom, maybe if you could give us a little bit of background on how that came to pass.
Had you decided that you wanted to look at some sort of tangent consumer products that maybe had some opportunity or gave Allstate an opportunity to leverage distribution? Had you thought about partnerships, or really, if you could just give us some indication of how this process of SquareTrade acquisition came to pass. Sure. Yeah. I'll tell you the story without trying to make it a Harlequin romance or anything like that. Okay. First, we want to go where your customers go, right? Our customers have all these things they'd like to insure, and we weren't doing it for them. I wanted us to do it for them. Could be cell phones, could be computers, could be TVs. We've been trying to figure out a way to get into that business, and particularly the cell phone business I was pretty interested in.
I felt like with our brand and our value proposition, we could make some progress here. Only about 30% of the people who have cell phones have insurance, I felt like it could go higher, and we could do a better job. We've been working on it for a couple of years. That's actually how we came into contact with SquareTrade, is by working with them on a partnership to do that. We got closer to it and worked more with them, we thought it would be a better opportunity. We'd be stronger together than apart. We worked with Bain, who controlled the ownership of the company. It wasn't an auction or anything like that, and did it over, well, what were we like, a couple of months? Three months.
We had known them for a long time. You might say, "Okay, why would you buy it versus just do a deal with them?" Yep. First, we do want to insure these things for our customers, and to the extent we broaden our product portfolio, we can make it available lots of different ways. Secondly, we are stronger together. I think our brand will be helpful to them. They're taking a branded approach in the store. Most of the other people are not really taking a branded approach, we did a bunch of work on our brand. When we bought Esurance and we said Esurance, an Allstate company, the trust level in it and the consideration level went way up.
We're trying to figure out exactly how to do it with SquareTrade, I believe it will raise its take rate at the retailers to do it. Third, we think we can offer some of that directly to consumers. We know how to do that through Esurance, so we're good at expanding the business. We also have the, I'll just say, size and scale that makes this business work. We can provide the capital. They've been renting capital from Starr and CNA, so we can provide that capital. When you go to some of the big retailers, they've had a tremendous track record of winning because they're highly innovative in the way they settle their customers' claims, and they have really high customer sat levels. This is not a giant company.
It doesn't have a huge balance sheet, it's going to people like Costco and Sam's Club and saying, "Hey, do business with us." With us behind it, we think it'll be a lot more successful. We're really excited about it. I think it'll be a win for us. Just the economics of just partnering, and maybe testing distribution, the view was better to own versus. I don't think they really wanted to do it. Why would they want to put us in the direct cell phone business? Mm-hmm. They wanted to do it themselves. They were willing to do some stuff, and there's a way we could get in, it would take us years. They got 25 million policies out there. You got to price it, you got to figure out the data, you got to figure out how to settle the claims.
You got to build a claim network to do it. They are very clever on the way they do claims. TV repairs, typically for a TV repair, it takes two visits by a TV repair guy. They've got it down to one. I don't have to go through all the logistics with you, but that's a huge cost savings. Makes the customers a lot happier. If the customers are happy, the retailers are happy because they're not going back and complaining to Costco where they bought the TV. As you look, the earnings impact not being significant, the view is sort of a vision of what Allstate can be down the road by leveraging this. Are there other areas that you see, whether in the consumer sphere that would round out whatever view you have of what Allstate will be, where you would consider other acquisitions?
Yeah, there are. Just think of whatever customers own, and if they'd like it protected, we'd like to do it for them. A couple of things I'd be interested in, travel insurance is interesting to us. I think identity theft, but not the way it's done today. Identity theft today is basically just like help you do some processing on your credit card stuff. That's not really protection. That's a little bit of administrative work that you pay for upfront. I'm interested in it. There's nobody in that identity protection space, I think, that really has a good, compelling product today. Anything related there. I'd like to figure out how we could further expand our connected car offering. Arity is a huge opportunity for us. We're one of the leaders, but that business is moving fast and there are some capabilities we could use there.
I'd like to figure out on the upper half of our chart, so we got that four square. If I go like this around the company, everybody knows what we're talking about. It's not a religious thing, that's the four square. The upper part where customers don't care that much about who the insurance company is, I'd like to figure out how we could win up there. We're okay up there. I don't think we're dominating or winning. We're really strong down in the branded side. I'd like to figure out how we do something up there.
Okay, great. Audience questions? Sure. Why don't we start up here in front?
Since you're raising your prices on auto, presumably to capture the trends in severity and frequency, why are you reluctant to grow at this time?
First, you have to catch up, right? Because we're a lag pricer, while we raise the price, it takes a while to get there. You can say, "Geez, you can see it coming." We're not sure exactly when the frequency and severity will tail off. If it keeps going up, we'll keep raising price, but you're still behind the eight ball. We'd like to do that. Secondly, it helps us. New business you usually lose money on, from a loss ratio standpoint. Not over 100, but it's not as good as your existing business. We wanted to manage the overall P&L that way.
Over here. You hear the OEMs talk a lot about lightweighting of vehicles. Are you seeing any connection to that, to your severity issues?
That's a good question. Lightweighting of vehicles. I don't know if it's related to the materials they use to lightweight it. To the extent the materials would be carbon composites, in a car accident, they'd probably be more expensive to repair.
Okay.
Some carbon composites, so you can just, like on a plane, they can just cut a hole in it and take a hairdryer and put the new fill in the hole. I guess I would say that in general, the increasing sophistication of the cars, which will eventually lead to decline in frequency of auto accidents today, is leading to increased repair costs, and we need to recover that in our prices.
Can you talk a bit more about how potentially changing economic and interest rate and inflationary environment could potentially impact pricing, growth, returns?
Yeah, that's a good question. I'll take a shot at it and see if you should jump in. I think part of it depends where the inflation comes from. If it's oil prices, it's different than if it's medical costs, it's different than if it's interest rates. Oil prices, fewer people drive, means frequency goes down, but the cost to repair cars go up because there's so much petrochemicals associated with the production of a car. If it was medical inflation, you'd have an impact on your bodily injury reserves that we're talking about. Those are monies you put up, and then you'd have to subsequently raise the returns. Last, if it was interest rates, it would have different impacts.
Obviously, in the property liability portfolio, we manage that to a total return basis, it would reduce the value of our bonds, we shorten the duration. When did we shorten it, three years ago?
About three years and two years.
Yeah. It's like three. We shortened the duration on that portfolio just because we didn't like the risk and return. How much did we give up on operating income?
A couple hundred million USD.
We took the hit to the P&L.
Okay.
When we took the gains into the balance sheet because we thought it was just the right thing to do.
Yeah.
We try to manage it on economics. If interest rates go up in that portfolio, we'd have a small decline in the value of the portfolio, but we'd probably hold those bonds because they're mostly two, three years. Then we'd reinvest at a higher rate, that would drive operating income up. In the other half of the portfolio, about half of it is for the annuity and life business.
Okay.
We're short duration there, higher interest rates should lead to increased economic value. I'm not sure that'll translate into higher stock price, by the way, because so many people buy it on book value, because the book value will go down because we don't mark the liabilities to market. We've been short in that portfolio for at least four years.
Yeah, we shortened it last December in the annuity-
Right
portfolio. Last fall, I guess.
I think it's all manageable. I guess I would say maybe if you go above all of it, from a risk management standpoint, we're really precise. We manage this stuff. We look at it all the time. We make trade-offs. What you should assume is we will have information about it. We'll know what its impact on us will be, and we will make a decision. Doesn't mean every decision will be right, but we will make a proactive decision to do something based on what we think is right economics.
Can you talk about the operational integration of SquareTrade? What's the plan for that? I hear you talking a lot about the growth opportunities, I assume, is there any savings opportunities?
We're going to run it like we run Esurance. It'll be a separate business. I love Amit. He's a great executive. He's really built up a fabulous business. I told him, "Here's the way we'll do it. Come to Northbrook. You're going on a shopping trip. You can buy anything you want. If you don't buy it, you still have to meet our needs, which are we got to have good numbers from you and that kind of stuff." It's not like folding it in. There are some places we can be quite helpful to them. They've grown so rapidly. We know how to process stuff in a lot of stuff. We have hundreds of millions of transactions we do. We have really good continuous improvement processes. We can help him do that, put what I would call institutional-grade strength behind his operating processes.
It's basically going to be run as is because it's quite successful.
Just on SquareTrade, you seem confident that longer term, this is going to be an attractive acquisition for Allstate. You mentioned Allstate shareholders. I think a lot of shareholders thus far are a little bit skeptical. Is there a way that you can prove to them that it is an attractive acquisition, i.e., maybe provide a little more color on how creative it might be longer term, A? B, is there a way for shareholders to track, to grade you, in other words, on how well this acquisition is proving to be accretive and successful for shareholders?
Yeah. Well, in the second piece, when we own it and we actually know how much goodwill there is and how much we have to write off for earnings and that kind of stuff, because as you know, with amortized, you have intangibles you have to amortize. When we get that all sorted out, we'll break it out and shareholders will be able to see how well we're doing, be able to see how well we grow. Just like Esurance is twice its size, Allstate Benefits is four times its size. We provide that information that should give people a chance to decide. I always find it interesting that shareholders think it's okay for them to pay a high multiple, but it's not okay for us to pay a high multiple. It's a good business. It's growing rapidly. We like it.
We have a track record of doing the right thing for our shareholders. It sound like watch and see. You can't like providing five-year projections. We only provide one year underlying combined ratio guidance. We don't give five-year projections for any of our businesses. We're probably not going to do it on SquareTrade.
Go ahead. What's the connected car opportunity?
Connected car opportunity is huge. The personal transportation industry is going to change dramatically. Everything you invest in will change because of it. That's the single biggest economic opportunity in America. 20% improvement in the cost of personal transportation is a 5% increase in the household income across America, $250 per month per household, $3,000 a year. America's love affair with the car will go away for $3,000 for every household in America. It's the reason you can get 20% effectiveness is the capacity utilization of the U.S. car fleet, even at peak hours, is 34%, 70% of the time on personal cars. There's going to be more shared cars, more autonomous cars, more pods. It's going to be all kinds of stuff. The technology exists. We're going to find a way to do that. It is an economically dispersed system, though.
If it's a manufacturing plant and you invest in that, you'd shut this thing down, you'd wait 2 years, and you'd start it all up, and we'd all be cheaper and have more money. You can't do that. Whether you're a parking lot operator, a mass transit producer, all that stuff's going to change. That will change auto insurance, and we think we are positioned to do that. With Arity, we give customers a more accurate price with our Drivewise stuff. We can give a more accurate price, which means we can gain share even if the number of auto insurance goes down. We're also figuring out if with shared cars, the way in which you assess liability will change. We're working on that.
We're also building a connected car platform outside of our insurance companies where we have a company, Arity, which provides services to our insurance companies to get the cars connected, to accumulate the data, to help manipulate the data, to do relationships with other people. When we go to our customers, we can give them a better value proposition because they have Drivewise. We're making that available to other insurance companies, and we're making it available to governments and other businesses. For example, with Arity, we could turn every road in America into a toll road, which is going to be an issue for governments when they have to replace $54 billion worth of gas tax and toll charges as the efficiency goes up. We're taking that Arity piece, and we think it's a huge opportunity for us. We're going to have to learn a lot.
We don't have all the skills and capabilities to do it, but we do have a customer base that we have 1 million, one of them connected today. We think that gives us a way into the car. We're competing with people like Verizon Hum. They charge you $19 a month to do it. Ours, you just get a cheaper insurance price. There's less friction for the customer. We think we have that opportunity. Whether we can seize that opportunity and turn it into revenue and profit, it's something we'll have to see over the next 5 to 7 years.
All right. I think that wraps up the session. Tom, Mario, thanks so much for your time.
Thanks, everyone, for your attention.