Earnings call transcript: Allstate’s Q2 2025 earnings soar past expectations

Allstate Corp (ALL) reported a remarkable second quarter of 2025, with earnings per share (EPS) significantly surpassing forecasts. The company posted an EPS of $5.94, well above the expected $3.32, marking a 78.92% surprise. Revenue also exceeded expectations, reaching $16.6 billion compared to the forecasted $15.22 billion, leading to a positive market reaction. Following the earnings announcement, Allstate’s stock rose by 6.76%, closing at $192.28. According to InvestingPro data, the company maintains a GREAT financial health score of 3.1, reflecting its strong operational performance and market position as a prominent player in the insurance industry.

Key Takeaways

• Allstate’s Q2 EPS of $5.94 exceeded forecasts by 78.92%.
• Revenue reached $16.6 billion, surpassing estimates by 9.07%.
• Stock price increased by 6.76% in post-earnings trading.
• New product innovations and technology investments highlighted.
• Strong performance in auto and homeowners insurance.

Company Performance

Allstate demonstrated robust performance in the second quarter of 2025, with a 5.8% increase in revenue compared to the previous year. The company’s net income stood at $2.1 billion, with an adjusted net income of $1.6 billion. This growth is attributed to strategic product innovations and an expanded distribution network. The company also reported a 4.2% increase in policies in force, reaching 37.7 million.

Financial Highlights

• Revenue: $16.6 billion (up 5.8% YoY)
• Net Income: $2.1 billion
• Adjusted Net Income: $1.6 billion ($5.94 per share)
• Investment Income: $754 million
• Policies in Force: 37.7 million (up 4.2%)

Earnings vs. Forecast

Allstate’s EPS of $5.94 far exceeded the forecasted $3.32, resulting in a substantial 78.92% earnings surprise. Revenue also surpassed expectations by 9.07%, with actual figures reaching $16.6 billion against a forecast of $15.22 billion. This marks a significant achievement for Allstate, outperforming its historical trends.

Market Reaction

Following the earnings release, Allstate’s stock surged by 6.76%, closing at $192.28. The stock’s upward movement reflects investor confidence in the company’s strong quarterly performance and strategic initiatives. The stock is now closer to its 52-week high of $213.18, indicating positive market sentiment. InvestingPro’s Fair Value analysis suggests Allstate remains undervalued despite the recent price appreciation. For deeper insights into undervalued opportunities, explore the Most Undervalued Stocks list.

Outlook & Guidance

Looking ahead, Allstate remains focused on transformative growth strategies, expanding protection services, and proactive investment management. The company anticipates continued growth in its product offerings and potential expansion in the California homeowners market. Allstate’s forward guidance projects an EPS of $18.29 for FY2025 and $21.9 for FY2026. With a strong return on equity of 21% and a sustainable dividend yield of 2.08%, the company demonstrates solid fundamentals. Access comprehensive analysis and additional ProTips through the detailed Pro Research Report, available exclusively on InvestingPro.

Executive Commentary

CEO Tom Wilson emphasized the company’s commitment to growth, stating, "We are completely committed to growth and believe that transformative growth is working today and will continue to build momentum." COO Mario Rizzo highlighted the positive impact of favorable frequency on loss cost trends.

Risks and Challenges

• Potential impact of increased speed limits on insurance claims.
• Retention challenges in competitive markets.
• Tariff impacts on loss cost trends.
• Macroeconomic pressures affecting consumer spending.
• Regulatory changes in key markets.

Q&A

During the earnings call, analysts inquired about the impact of potential speed limit increases and retention challenges. Allstate addressed these concerns, highlighting its strategic initiatives to mitigate risks and enhance customer retention. The company also discussed growth opportunities in roadside assistance and the implications of tariffs on loss cost trends.

Full transcript - Allstate Corp (ALL) Q2 2025:

Conference Operator: Thank you for standing by and welcome to the Allstate Second Quarter twenty twenty five Earnings 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. As a reminder, today’s program is being recorded. And now I’d like to introduce your host for today’s program, Alistair Gammen, Head of Investor Relations.

Please go ahead, sir.

Tom Wilson, CEO, Allstate: Good morning, everyone. Welcome to Allstate’s second quarter twenty twenty five earnings call. Yesterday, following close of the market, we issued our news release and investor supplement, filed our 10 Q, and posted related material on our website at allstateinvestors.com. Today, management team will share perspective on our strategy and how Allstate is creating shareholder value. Then we will open up the line for your questions.

As noted on the first slide of the presentation, our discussion will include non GAAP measures for which there are reconciliations are provided in the news release and investor supplement. We will also make forward looking statements about Allstate’s operations. Actual results may differ materially from those statements, so please refer to our twenty twenty four ten ks and other public filings for more information on potential risks. And now, I’ll turn it over to Tom. Good morning.

Thank you for investing time in Allstate. We’ll start with second quarter results and Allstate’s strategy to create shareholder value. Then we’ll have time to address your questions. So let’s start with slide two. So Allstate’s strategy has two components that’s shown on the left, increased personal property liability market share and expand protection provided to customers.

On the top right is an overview of second quarter results. Revenues were $16,600,000,000 in the second quarter, a 5.8% increase compared to the 2024. Total policies in force increased $2.00 8,000,000 to 4.2% over the prior year, and it’s being led by Allstate Protection Plans. Personal Property Liability policies in force increased by eight tenths of a point. Net income was $2,100,000,000 and adjusted net income was $1,600,000,000 or $5.94 per diluted share.

Adjusted net income return on equity was 28.6% over the trailing twelve months. And we create shareholder value by delivering excellent operating results as you see up top, growing the personal property liability business through the Transform and Grow strategy, expanding protection services and proactively investing our $77,000,000,000 portfolio. So let’s go through those three points starting on slide three. Transformative growth has five phases and we’re now solidly in Phase four with progress in each of the five subcomponents. New Allstate branded auto insurance products, which are more affordable, simple and connected are being implemented.

The new auto insurance product is available in 40 states and we’re rolling out the same type of product for homeowners and we’re in 16 states now. New products are also available in the independent agent channel in 34 states, expanding our risk appetite from National General’s strong non standard auto risk position. Underwriting expenses have been reduced, supporting more competitive pricing while maintaining margins. Increased sophistication of pricing plans and marketing programs have helped increase new business through expanded distribution. Claims processes have been enhanced following the pandemic related inflation, which is helping us control claim severity.

And then our new technology systems have been deployed, which position us to leverage advanced computing and large language models. Customer access has also been significantly expanded, as you can see in the middle of the slide. New business is almost double five years ago, reaching 10,800,000 policies over the last twelve months. This is the broadest distribution platform in the industry with new business spread almost evenly between Allstate agents, independent agents and directly through call centers or over the web, as you can see from that first set of pie charts on the left. Total policies in force have increased to $37,700,000 reflecting the highly successful acquisition of National General and rapid growth in direct sales.

Property Liability business is a terrific business with $56,000,000,000 of annual earned premiums and excellent underwriting results. Turning to Slide four, Protection Services, while smaller, is still a really significant business with $170,000,000 policies in force, dollars 3,200,000,000.0 of revenue and a quarter of a billion dollars of income over the last twelve months. It’s comprised of five businesses, protection plans, auto dealer protection offerings, roadside assistance, arity and identity protection. Revenues were $867,000,000 in the quarter, which generated $60,000,000 of income, most of which is from protection plans, which is described in the bottom section of the slide. Protection Plans sells protection for consumer electronics, mobile devices, appliances and furniture.

This protection is basically embedded in the sales processes of a broad group of exceptional distribution partners. Revenues increased by 16.6% over the prior year quarter, reflecting rapid growth in appliance protection over the last several years and success in expanding internationally. Adjusted net income was $51,000,000 due to higher revenue, moderating claims and support costs and operational efficiencies. Each of the protection services business has their own success story. Arity, for example, has 2,000,000,000,000 miles of driving data, is now expanding its services to insurance companies and making inroads into mobility intelligence.

Turning to slide five, shareholder value is also created by proactively managing the $77,000,000,000 investment portfolio. Is really an integrated component of our enterprise risk and return decision making. Investment income was $754,000,000 in the quarter, representing a total return of 1.4% for the quarter and 5.4% for the last twelve months. This diversified portfolio of fixed income and growth assets leverages top investment talent to deliver top quartile performance as shown in the table on the right. The largest part of the portfolio is in fixed income securities, which provides consistent cash flow and high liquidity.

Our strong credit skills and active management generated first and second quartile performance. We reduced the public equity holdings in the second quarter given the increased risk of inflation due to the new trade policies. As the impact of this becomes clear, we’ll adjust that position. We also have strong results in the performance based portfolio of private equity real estate investments, which is a combination of fund participation, co investments and direct transactions. The higher returns on these investments is more than attractive despite the greater variability in reported income.

Now I’ll pass it over to Mario.

Mario Rizzo, Chief Operating Officer, Allstate: Thanks, Tom. Let’s take a look at second quarter Property Liability results on slide six. The Property Liability business delivered strong results, generating nearly $1,300,000,000 of underwriting income this quarter as average premium increases exceeded moderating costs. The combined ratio of 91.1 was a 10 improvement from the prior year quarter, driven by improved underlying trends and $376,000,000 in favorable prior year non catastrophe reserve reestimates. Shifting to auto insurance on the top right, the combined ratio was 86% in the quarter, a 9.9 improvement from the 2024 due to improved frequency and moderating severity trends.

Over the past several quarters, we’ve seen the favorable impacts of our comprehensive auto insurance profit improvement plan in our financial results. Our auto book of business is now broadly profitable, including in previously profit challenged markets like California, New York and New Jersey, and we are focused on investing in profitably growing auto market shares. Homeowners results are shown in the bottom right graph. Underlying margins remained strong in the homeowners business, with an underlying combined ratio of 58.6%, but were offset by $1,600,000,000 in catastrophe losses, leading to a combined ratio of 102% in the quarter. While quarter to quarter results can be volatile in the homeowners business due to catastrophe losses, we continue to have strong conviction around our ability to grow homeowners and generate excellent long term returns on capital, as demonstrated by a combined ratio of approximately 92 over the past ten years.

Allstate’s homeowner capabilities represent a competitive advantage in the industry. Turning to slide seven, let’s discuss growth trends in the Property Liability business. In the chart to the left, you can see the composition of Allstate’s $37,900,000 Property Liability policies in force, with growth results for the quarter shown at the bottom of the chart. Auto insurance with 25,200,000 policies in force, shown in dark blue, accounts for two thirds of total property liability policies, and year over year growth turned positive during the quarter, ending the second quarter at plus 0.5% above prior year. The homeowners business accounts for approximately 20% or $7,600,000 property liability policies and continued to grow in the second quarter, increasing 2.3% relative to the prior year quarter.

To the right, we provide more detail for auto and homeowners insurance growth rates by brand. We underwrite auto and homeowners insurance business through Allstate agents and direct to consumer using the Allstate brand. For higher risk direct channel customers, we also use the Direct Auto brand, which we acquired with National General. We provide those same products in the independent agent channel using the National General brand. Collectively, these represent what we call our active brands in market.

Auto policies in force in active brands increased 2.4 compared to the prior year quarter. Allstate brand policies in force were negatively impacted by declines in New York and New Jersey, where we continue to focus on profit improvement as our primary operating objective. Approval of pending requests for our new affordable, simple and connected auto insurance products in these states would open these markets for growth, as margins have improved significantly over the course of 2025. Excluding New York and New Jersey, Allstate brand increased over the prior year quarter. National General and Direct Auto continued to grow at 11.322.8%, respectively, reflecting our strong capabilities in the nonstandard auto insurance market in both the direct and independent agency channels.

As part of transformative growth, we decided to sunset the Esurance brand and use the Allstate brand in both the exclusive agent and direct channels. And as the new National General Custom three sixty product is rolled out across states, we discontinued offering Encompass policies for new business. The continued decline in policies in force in these two inactive brands has created a drag on auto and homeowners insurance growth rates. In homeowners insurance, we continue to see steady growth in policies in force in the Allstate brand, as Allstate agents continue to bundle at historically high rates, and we deliver strong new business growth in the direct channel. Moving to slide eight, let’s dive deeper into how expanded distribution generated a 21% increase in personal property liability new business in the second quarter.

Auto insurance new business in the middle of the chart increased by 24.8% over the prior year quarter and was distributed almost evenly across distribution channels. New business was strong across all three channels as Allstate agents were more productive, and both the direct and independent agent channels continued to deliver strong new business growth. Homeowners insurance new business growth was driven by the exclusive agent and direct distribution channels. Independent agent production declined as we focused on rate adequacy across a number of states, but we expect to resume homeowners expansion plans in rate adequate markets going forward in this channel. While new business growth is encouraging, retention remains an essential focus to accelerate and sustain growth.

We continue to execute our SAVE program to show Allstate customers value every day. Employees and Allstate agents are working to improve 25,000,000 customer interactions this year, including proactively reaching out to customers to ensure that they have the right protection at the most affordable price. This program is designed to deliver an industry leading customer experience while enhancing affordability for our customers. We will continue to execute our transformative growth strategy and investments in expanded distribution, pricing sophistication, marketing and technology, all focused on delivering sustainable and profitable market share growth. Now I’ll turn it over to Jess.

Jess, CFO, Allstate: Thank you, Mario. Let’s move to slide nine for an overview of how Allstate’s capital management strategy creates shareholder value. Strong earnings resulted in an adjusted net income return on equity of 28.6% for the latest twelve months. We completed the divestitures of the employee voluntary benefits business on April 1 and the group health business on July 1 for a combined 3,250,000,000 That represented a 25 time multiple of the latest twelve month earnings for those businesses. The transactions position the businesses for success and allow us to reallocate capital to Allstate’s strategic growth opportunities.

We continue to return capital to shareholders through share repurchases and dividends. In the past year Allstate paid $1,100,000,000 of common and preferred shareholder dividends. Earlier this year, the quarterly common stock dividend was increased 9% to $1 per share. We’ve also returned cash to shareholders by repurchasing $445,000,000 of common stock in connection with the $1,500,000,000 share repurchase authorization we announced in February. Let’s wrap up on slide 10.

Allstate delivered excellent financial results in the second quarter. We’re serving our growing customer base of two zero eight million policies in force with broad protection offerings under an exceptional brand with extensive distribution. Transformative growth execution is positioning Allstate for profitable personal property liability growth. Protection Services segment led by Allstate Protection Plans continues to grow rapidly and broaden Allstate’s customer base. A proactive approach to managing the investment portfolio is aligned with enterprise risk and return objectives, and sound capital management will continue to deliver value for shareholders.

Allstate remains committed to executing our strategy and is well positioned to grow property liability market share, expand protection for customers and deliver value for our shareholders. With that, let’s open up the line for questions.

Conference Operator: Certainly. Our first question comes from the line of Jimmy Bhull from JPMorgan. Your question please.

Jimmy Bhull, Analyst, JPMorgan: Hey, good morning. I had a couple of questions. First, just on PIF growth. Can you talk about the sort of potential tailwinds and headwinds for growth? I would assume that the inactive brands are going to continue to decline, although the impact of that on your overall results should diminish over the next few quarters.

And then it seems like at some point, you’ll be in a growth mode in New York, New Jersey. Overall, you’re not raising prices as much as you were, but just talk about sort of what the headwinds, tailwinds are to growth in personal auto FIPS so that one gets a better idea on where it’s headed from the level in the last couple of quarters, couple of months?

Tom Wilson, CEO, Allstate: Hey, Jimmy, let me start with the growth one, a little higher level, and then I’ll ask Mario to go into auto. So first, why do you want growth? I want growth because we’re in 28% return on equity. And they say you can grow, you can deploy capital, and then your PE goes up. And then you’re like, okay, what kind of growth do you want?

In the personal property liability business, we obviously have had huge growth in revenues. And that translates into not just higher absolute dollar earnings per share, but it also translates into higher investment income, which you can see because the investment portfolio goes up. And then of course, you also want to have PIF growth, as you point out. And there’s PIF growth in homeowners you see has been terrific, particularly when you take out the inactive brands. And then Mario will talk about what we’re doing in auto insurance.

But we are completely committed to growth and believe that transformative growth is working today and we’ll continue to build momentum there. Then you can go a little broader and say, how are doing in growth in protection services? And you can see that’s been a terrific growth story as well. So we have a variety of ways that we’re focused on continuing to leverage our capital. Mario, you want to jump into auto insurance?

Mario Rizzo, Chief Operating Officer, Allstate: Yes. Thanks for the question, Jimmy. So maybe I’ll start with the inactive brand comment you made, which is spot As the business in those brands because we’re not writing any new business in those brands continues to decline, we would expect the rate of decline to diminish going forward. So I think you’re exactly right on that one. Then maybe I’ll jump to the tailwinds.

And I think Tom touched them all when he talked about transformative growth. I think all the components of transformative growth, whether it’s the new product offering with affordable, simple, connected, Custom three sixty in the IA channel, new technology, higher and more sophisticated marketing, our broad distribution capabilities, the improvements in competitive position, all the components of transformative growth have created tailwinds for us that are really generating significant amounts of new business, and we’re going continue to leverage and build on those capabilities going forward. And then I’ll end with New York and New Jersey. The punch line in those two states is we’re now generating an underwriting profit both in New York and New Jersey. We’ve been working closely with the two insurance departments over the last several years to get our rates to an adequate level, and we feel confident that we’re at a point where we are rate adequate given the rates we’ve received approval for, including upcoming rates in New York that are going to be effective in August.

So we feel good about the positioning. The last domino that we need to fall is we’ve made filings for our new affordable, simple and connected auto product in both of those states. As soon as we get regulatory approval, we think we can broaden our risk aperture a bit in those states and look to lean in and start to grow in those. So we’re optimistic that that’ll happen here in the second half of the year.

Jimmy Bhull, Analyst, JPMorgan: Okay, thanks. And then how do you think about the lifetime profitability of the business that you’re putting on in independent agency and direct versus the captive business, which obviously wasn’t growing in the past, but was highly profitable. So I think last year, there are concerns you weren’t growing. Now there are concerns you’re making too much money and maybe the profitability of the newer growth isn’t as great, but just talk about sort of the margin profile of independent agency and direct

Tom Wilson, CEO, Allstate: that you’re writing versus captive agents. Jimmy, I’ll start and then Martin might want to jump in as well. So everything we write, we like the right lifetime value of. We have a very sophisticated analytical system, which looks at marketing costs, distribution expenses, lifetime value, not just by channel, but by risk level, by expected retention. And so we feel really good about lifetime value.

We have a really good clean book. Our

Conference Operator: next question comes from the line of Gregory Peters from Raymond James. Your question, please.

Gregory Peters, Analyst, Raymond James: Good morning, everyone. So I guess the first question, I’ll focus on frequency and technology. Can you talk a little bit about the frequency trends? And one of the things that seems to be popping up more and more is the embedded technology and accident avoidance technology that’s specifically going into cars and the longer term consequences of autonomous driving and just curious for your updated views on that.

Tom Wilson, CEO, Allstate: Let me start and then Mario, maybe you can jump into current results on frequency, if that makes sense. So, well, good morning, Greg. So first on autonomous driving, I think fifteen years ago, fourteen years ago, we did some scenario planning on autonomous driving and said, what impact will it have on auto insurance. And the conclusions we came to then are still pretty much applicable today. It was that there is an engineering issue to be solved, but then there’s also an economic issue to be solved.

I believe the John Zucinski and I were just out at Waymo, I believe the engineering problem has been solved. And that the economic issue is still in front of it. That’s called two eighty million cars in The United States that have a value of over $4,000,000,000,000 And if you want to fix the whole system, you got to turn over that whole fleet. It will happen over time. Those economic barriers will come down.

But in the meantime, what we’ve seen is what we thought would happen, which is that frequency kind of gradually comes down as that fleet turns over. But the cost of repairing cars goes up as those cars get more expensive when side view mirrors are worth $1,000 now instead of $200 because they got those little flashers on them. So you’ve seen that play out. We think that will be a continued trend. That’s one of the reasons why we are leaning in heavily into Arity and telematics, which is as cars get connected, not only will it change how often they get in an accident and how much it costs to fix that, but it will help improve the overall efficiency of the personal transportation system.

And while we don’t talk much about it from a strategy standpoint, we believe that we’ve got great optionality with Arity to leverage it today. Mario, do you want to talk about current frequency? I think Greg might be also like just current results. Yes, sure. Thanks, Greg,

Mario Rizzo, Chief Operating Officer, Allstate: for the question. So look, I think broadly on frequency, what we and the industry have experienced really over the last, call it, six quarters or so is kind of a continuation of maybe the trend prior to COVID of this downward trend in auto frequency. Obviously, there was a lot of noise during COVID and post COVID as driving behavior shifted around quite a bit. We’re seeing favorable frequency, and it’s driven by the kinds of things Tom talked about from a technology perspective, whether it’s blind spot monitoring, lane departure warnings, other advanced safety features that are in vehicles that I think are showing up in improved auto frequency for the industry. The other data point I’d use is as we look at our Arity telematics data over the last year or so, we’ve seen miles per operator drop around 3% or so, which is likely also contributing to favorability and frequency.

But favorable frequency is certainly a component of the loss cost trend that we’ve seen. And you saw in the supplement pure premium is down almost 3% year over year. That’s mainly favorable frequency kind of partially offset with higher severity, particularly in the injury coverages. Favorable frequency trends that have persisted over a long period of time.

Gregory Peters, Analyst, Raymond James: Thanks for that detail. I’m going to pivot for my follow-up question to the reinsurance program. You put up some details on how the reinsurance structure has changed this year. And you didn’t really talk about it during your prepared remarks, but probably worth covering. It looks like you have more limit this year versus last year.

Maybe you can just walk us through some of the decisions and how the program looks this year versus last year.

Tom Wilson, CEO, Allstate: I’ll let Jess go through that. I would just point out that we look at reinsurance really as a source of capital. And so when Jess is managing capital, whether that’s we use preferred instead of common or we’re using debt or any other source of capital. Reinsurance is just a way for us to get capital.

Jess, CFO, Allstate: Yeah, thanks for the question, Greg.

Tom Wilson, CEO, Allstate: I think so a couple

Jess, CFO, Allstate: of things. One reminder, as you pointed out, we do post a relatively robust supplement that everyone can go through to understand the program. And I won’t go through each and every detail, but what we did add was some scenarios so that you can understand better how the reinsurance programs all work together in the event that there’s a catastrophe. As Tom said though, the reinsurance program and what we ended up placing is always rooted in our economic capital framework and risk and return decision making that allows us to mitigate risk on both a per event and aggregate basis. So if I take it to the highest level, and again, I won’t go through all of the individual components, our total catastrophe reinsurance limit that we purchased this year across all programs was just over $11,000,000,000 That’s up $2,000,000,000 from last year.

And we saw about a 10 risk adjusted decrease in the cost. So that’s a very good outcome. We got more coverage for less on a risk adjusted basis. And we had really good support from both the reinsurance and catastrophe bond markets And that demonstrates really the strength of our program. Our renewal placement process began just after the LA wildfires, literally while they were being extinguished.

And we still had strong support from, again, both traditional reinsurers and the cat bond partners that we work with to place the program. So we renewed during the most recent period, we did renew the Florida program and we did add some aggregate limit on US homeowners. And I think you probably saw that we added $325,000,000 of limit on an aggregate basis. So if you think of the overall program, we now have $825,000,000 of cat ag limit that’s placed about 58,000,000 to be clear has already been utilized for expected recoveries, but that leaves us with $767,000,000 of remaining aggregate limit on top of our very robust per occurrence. So that’s I think a high level summary of what we did, the changes that we made and really again just going back to all of these placements are done through a risk and return lens that we understand, as Tom noted, how are we effectively using this alternative capital source to lower our capital requirements and manage risk.

Gregory Peters, Analyst, Raymond James: Got it. Thanks for the answers.

Conference Operator: Thank you. And our next question comes from the line of Rob Cox from Goldman Sachs. Your question, please.

Rob Cox, Analyst, Goldman Sachs: Hey. This is Jack on for Rob. I guess I was looking at the strong exclusive growth that is kind of supporting the auto PIF growth there. As you look at that strong exclusive agency growth kind of over the past four quarters, has that really been driven by either bundling, increased entrepreneurial efforts on the agents?

Bob Jian Huang, Analyst, Morgan Stanley: Or are

Rob Cox, Analyst, Goldman Sachs: you seeing any shift in customer preferences toward maybe the A force versus IA or direct?

Mario Rizzo, Chief Operating Officer, Allstate: Rob, this is Mario Rizzo. I’ll jump in on that question. So just to give you some more context, again, with respect to our transformative growth strategy and the Allstate exclusive agent channel, we’ve been on a multiyear transformation journey with our agents where we’re looking to drive an increased level of productivity in the agency channel and reduce distribution costs and really focus agents on delivering value that consumers want with a relationship with a local agent. And we’ve been really successful as we’ve executed on that strategy. We’ve segmented agents into different tiers depending on performance.

We provide support. Depending on those tiers, we’ve made a number of changes to the compensation program over time. And we’ve been working on delivering tools to our agents that enable them to live into what customers really value, as I said, with an agent relationship. The net result of that is when you look back over the last several years, we have fewer total agents, but our agents are as productive as they’ve ever been. And you see that once again this quarter with productivity increases up over 20%.

And our agents continue to invest in their small businesses. And as we do things like invest more in marketing and roll out new products and deliver new technology, all the things we talked about with transformative growth, it’s showing up as a more productive agency system and higher levels of new business. And we’re going to continue to leverage those capabilities. Our objective function is to grow across all channels. We think there’s certainly more opportunity just given the composition of our book in the direct and in the independent agent channels, but that doesn’t mean we’re going to deemphasize the Allstate agency channel.

We’re going to look to continue to grow the way that customers want us to grow in any way that they want to engage with us.

Rob Cox, Analyst, Goldman Sachs: Got it. And then a quick question on the Canadian business. A peer of yours recently announced it was exiting Canada, highlighting some verticalized distribution of the top market shareholders. Could you guys just provide us some insight on the performance of your Canadian business and any updates on kind of your long term view of that market?

Tom Wilson, CEO, Allstate: We like Canada, we think we can win there. I can’t speak for why people are doing what they’re doing. Everyone’s got their own idiosyncratic issues, but we expect to win in Canada.

Conference Operator: Thank you. And our next question comes from the line of David Motleyn from Evercore ISI. Your question, please.

David Motleyn, Analyst, Evercore ISI: Hey, thanks. Good morning. The piece of monthly auto PIF growth, if I just look at number of units added, that slowed a bit over the course of the second quarter, positive, but it slowed a bit.

Jess, CFO, Allstate: I was wondering if you could just discuss some of

David Motleyn, Analyst, Evercore ISI: the moving pieces there, seasonality, anything else that’s impacting that and how we should think about the cadence as we get into the back half of the year?

Tom Wilson, CEO, Allstate: Good morning, David. I don’t think we could I know we can’t give you an answer on a monthly number that would give you confidence in how to make judgments for July, August, September, all kinds of stuff. I would go up a level and say, let’s just look at transformative growth. And is transformative working? Mario went through that.

It has five components to it. We’re five phases. We’re clearly in the middle of phase four. And all the underlying assumptions we thought were true turned out to be true and we’re actually executing on them. Because you say you’re going to build a new tech ecosystem doesn’t mean it’s going to work.

And just because you say you can improve the effectiveness and invest more in marketing doesn’t mean it will work. And we’ve proven and done all that. So we feel highly confident that the growth trajectory will keep going up. But I think looking at it by month, I don’t think it’s going to tell you much different things happen, different programs happen, we’re rolling out different jobs, different states happen, people on vacation. Would just be giving you anecdotal information, which wouldn’t really help you forecast.

David Motleyn, Analyst, Evercore ISI: Got it, no, helpful. I appreciate that. And then just maybe for my follow-up, just on the inactive brands within the auto business, could you just remind me when that process started of not writing new business and that drag. I think inactive brands are a little under five percent of the PIF count now in auto. I guess, how much longer until we really start lapping those headwinds?

Just sort of level setting that.

Tom Wilson, CEO, Allstate: I’ll let Mario talk about maybe the future. I mean, I don’t think we’re not going to do forecasts by insurance policies and stuff, because we’ve got a customer, we’d like to keep the customer. We sometimes offer them alternatives inside the house. But I’ll just go back to when we started transferring growth, it was a little over five years ago. One of the things we said was, we’re spending 200,000,000 $250,000,000 a year on the Esurance brand to sell to direct customers.

And we said, we’re and when we started that, GEICO was spending maybe, I don’t know, maybe it was $750,000,000 or $1,000,000,000 So we had a chance to develop a second brand that would be for direct that was in 2011. Over time, they and Progressive kept driving up their spending. And so we get to 2019. And we’re like, you know what, like we could keep pouring money at insurance, and we’re never going to have the brand Allstate has. So let’s get rid of the insurance brand.

Let’s take that incremental money that’s still behind the Allstate brand. Let’s sell Allstate brand direct, which we had not done aggressively at that point. And let’s sell it at a lower price than we sell to Allstate agents. So you can buy Allstate branded ASC product direct over the web at 7% to 8% cheaper than you would buy through an agent. And that’s because when you buy through an agent, you get the help of an agent.

And if you get help, you should be prepared to pay for it. So that was the concept behind what we did. Encompass was slightly different. Encompass was we wanted to have a stronger platform in independent agent business. National General had that platform.

It was built on nonstandard insurance, but it had a good tech platform. And so we went to nonstandard and we said, look, we’re not as successful. We want to be in the IA channel. So we have to decide whether we’re in or out. With Encompass, we’ve decided to sell Encompass.

There’s only one difference is we want to buy you first. And then we’re going to give Encompass to you, and you’re going to fold it into your business and drive growth. And that has been incredibly successful as well. So those were the that was the logic behind it. Mario, do you want to talk about sort of maybe just like the recent

Mario Rizzo, Chief Operating Officer, Allstate: Yes, and maybe I’ll break up Esurance and Encompass separately, because I think there’s two different stories there. So we really over the last couple of years have stopped selling new business in Esurance. And what you see as that brand runs off is natural attrition in policies, but also in a number of states. As Tom mentioned, we’re looking to proactively offer insurance customers a different policy. And sometimes that’s effective, sometimes it’s not.

But that’s really both contributing to what’s happening in insurance, and that’ll continue to run off over time. With Encompass, as we roll out the Custom three sixty product, which is now in 34 states, once that product is in market, we shut off the Encompass brand for new business. And we also shut off what I would call the legacy national general middle market brand, and only write Custom three sixty. So again, once we’re in a state with Custom three sixty, it essentially becomes a renewal book that attrites over time. So that’s the approach we’re taking.

And as those books get smaller, the impact should diminish.

Tom Wilson, CEO, Allstate: Yeah, it’s a really good point. If you look at the slide on the inactive brands, and you look at homeowners, you’ll see that impact on national general homeowners is down because specifically what Mario said, which is we got a much better product with Custom three sixty. We’re really good at home orders. We know we can grow aggressively in that channel. But you see National General is down because we’re doing that transition still.

David Motleyn, Analyst, Evercore ISI: Got it. Makes sense. Thank you.

Conference Operator: Thank you. And our next question comes from the line of Bob Jian Huang from Morgan Stanley. Your question, please.

Bob Jian Huang, Analyst, Morgan Stanley: Hi, good morning. So maybe first one on competitive environment, and this is something we kind of anecdotally addressed. But as you grow in this environment, it feels like more and more competitors are in that, call it, 80s and 90s combined ratio for personal auto. And then everyone is talking about pivoting to growth. Just curious to how you think about just new business retention, ad spending efficiency as we head into this environment where more and more folks are ready to fight with you?

Tom Wilson, CEO, Allstate: Well, first, let me just I think the summary would be we think we’re extremely well positioned to grow and earn attractive returns for shareholders given what we’ve done with the business. That’s and obviously, we have some competitors who are tougher competitors than others, but we feel competent to be able to address all of those and win. So we say, well, why do you say that? Well, look at our distribution. We’ve got the broadest distribution and we can go direct, we can go independent agent and we go all stage.

And as Mario talked about the productivity standard performance in those, we’re feeling really good about the ability for those business to deliver. Why are they delivering? Well, because we have good prices and we’ve got good new products. So they’re not just out selling it because they like us, they’re selling it because it makes sense for them. And so we’ve got this improving customer value, whether that was reducing our expenses to make sure we could have more competitive prices and still maintain margins as you point out, because we don’t believe that just cutting price to grow makes sense.

Now we have reduced prices in some states and maybe Mario want to talk about that, given where margins are. But we don’t think that’s going to take us to a place where we’re writing bad business. Have high standards is how we did. The last piece I would leave you with is from an advertising standpoint, we’ve done quite well on that. And that’s also fueling our growth.

Mario Rizzo, Chief Operating Officer, Allstate: Yes, the other thing I’d add, Bob, well, just to close out the question, Bob. As we think about the growth investments we’re making, have been making, and will be making going forward, we tend to focus a lot on the marketing investment because it is so important. But Tom mentioned rate adjustments. Now that we’ve been in market with the new Affordable Simple Connected product and with Custom three sixty, we go back and continually refine prices as we get more data. And we’ve improved pricing in a number of states in those products.

Those are investments that help drive growth. We continue to refine underwriting guidelines and standards as our profitability has improved. And again, those show up as investments in the business. And then we’re doing a number of things on retention. I talked about during the prepared remarks, our SAVE program and how critically important retention is.

We would expect, given that the book is well priced and margins are strong, less need for rate going forward, which will certainly help. But we’re doing things proactively with both employees and the Allstate agents to proactively reach out to customers and improve retention. So really, it’s kind of a surround sound approach to drive growth going forward.

Bob Jian Huang, Analyst, Morgan Stanley: Okay, thank you. My second question, it’s a little bit more hypothetical. Earlier in the year, there were about seven states that are considering increasing speed limit. And then New York is one of those states. Obviously, you’ve talked about achieving profitability in New York State.

Just curious about as we think about increasing speed limit in interstate highways from 65 to 70, will that have an impact on your frequency or severity, especially given that you just recently achieved profitability in New York? Like how should we think about that? Does that matter at all? Just kind of curious.

Tom Wilson, CEO, Allstate: Well, of course, first thing I do is make sure your customers are safe. And so if the public sector decides they want to increase the speed limit for whatever reasons as it is, that’s the way it happens. You obviously don’t prospectively price and say because the speed limit went from 65 to 70, we’re going to raise prices. I would just say I’m incredibly comfortable with the precision, with the data we have to be able to price accurately for every individual customer. That’s where this is really heading, whether that’s telematics, other data we have on people, it’s really about giving the right price for each individual person.

And we’re well down that path. So whether it’s it changes in the public sector and that whether it’s autonomous driving or whether it’s increased competition, we’re really good. And it doesn’t mean any of it’s going to get easier or we’re not going to have these kind of issues. I would just say we’re getting better all the time.

Bob Jian Huang, Analyst, Morgan Stanley: Okay, got it. Thank you.

Conference Operator: Thank you. And our next question comes from the line of Mike Zaremski from BMO. Your question please.

Mike Zaremski, Analyst, BMO: Hey, thanks. Good morning. A question specifically on the direct to consumer strategy in, personal lines. Do you expect that engine to be very different or much larger over time? I’m kind of thinking kind of macro level.

And if yes, would that lead to a a higher advertising expense or a meaningfully higher advertising expense? Or just be kind of I know you guys have explained, like, there’s different funnels and terminology. I don’t know as much, but it would be a more of a shift in terms of the type of advertising spend.

Tom Wilson, CEO, Allstate: Good question, Mike. On direct, it’ll be as big as many people want to buy from it. So I could say that like, that’s the way we’re positioned. If you want to buy direct from us or over the web, we got it. If you want to buy from an independent agent who represents multiple companies because you don’t really know or trust insurance companies or you want to buy direct from us through our agents because you want help, but you believe in the Allstate brand, we’re there in all different ways.

You see the I think it will grow as part of the book just because when you look at the new business. So it’s a third of new business, but it’s less than a third of the current policy. So over time, you would expect to see that shift as we grow overall market share. So I’m feeling very good about that. As it relates to advertising, know a couple of people brought this up in their write ups last night.

So let me maybe go into advertising for a second, because I think it’s important. It’s one of the five components of transformative growth. So remember, one of them was increased sophistication and investment in customer acquisition. That’s all about marketing. And we’ve done that.

We’ve both increased our sophistication and we’ve increased our investment. I think there was a little bit of confusion when you looked at the numbers. Was it down? Was it up? When you look for the first six months of this year, we’re spending more money in marketing.

And I can tell you that the economics of that spending are really good and they’re better than they were last year because we’re more sophisticated and our brand consideration is higher. So we like that part of it. But it doesn’t work just in your point, it’s interesting because it doesn’t just work with that. Two other parts of transform growth are expand customer access, that’s called distribution, and improve customer value. So expand distribution, you see it in what we’ve got with a third of the business coming through each of those three channels.

So that’s clearly working. So you do more advertising, it gets more directed. That direct advertising also helps in the Allstate agent channel. And then improved customer value is really about the cost reductions we’ve taken, some of which show up in the Esurance and Encompass piece, but also what we’ve done with the new ASC product. The marketing pieces work in the other piece.

And so when you look at the breadth of that, we feel highly confident that the overall total will grow and it will grow the way customers want to buy. You want Allstate agent, we got that. You want to go through an independent agent, we’re there for you. You want to buy direct and we’ll take as much of the market we can get. And we still got about 90% of the market to go capture.

So I’m not worried about tapping out in any of those.

Mike Zaremski, Analyst, BMO: That’s helpful. My follow ups on more home insurance specifically, based on kind of data we continue to see, it looks like competitors, mostly independent agency competitors are trying to play catch up to kind of your results and tweaking their terms and conditions, etcetera. I’m just, you know, I’m curious, you are you do you agree that there’s just kind of the winds at your back because of the competitive environment, more so than it has been historically as as as the industry is pivoting or Or is that statement kind of not true and the healthy growth that you’ve seen over the last year, the acceleration has just kind of been due to other items?

Tom Wilson, CEO, Allstate: Let me make three overall comments and let Mario fill in the details. One, we are really, really good at homeowners. Two, I think the competitive environment has gotten out, people have gotten in and are trying to follow us. But three, we are getting better every day. And we don’t expect our competitive advantage to diminish as we go forward, even though other people are doing some of the things that we did five or seven years ago.

Mario Rizzo, Chief Operating Officer, Allstate: Yeah, Mike, the only thing I’d add is, I think if you look back twelve, eighteen months, there was less competition, I would say, the homeowner market. I think the market has gotten a bit more competitive recently. But all the capabilities that Tom mentioned are the reason we never backed away from the homeowner market and stayed and we were able to take advantage of the competitive environment. And I think it’s those same capabilities that position us to continue to be able to grow in homeowners and grow effectively. And when you look at the things that we’re delivering to really build on the strength that we have in homeowners, Our new affordable, simple and connected homeowner product, which is in 16 states, is another step forward, I think, that differentiates our product pricing and underwriting capabilities relative to our competitors.

It’s a much more digitally focused products, our product with a much better customer experience from a sales perspective. We’re going to continue to leverage that going forward. And our distribution capabilities play in this space. Our Allstate agents are bundling at rates that are at all time highs around 80%. And you saw really good growth in the direct channel, and we’re going to continue to build on that growth.

And we think we have additive growth opportunity in the independent agent channel with Custom three sixty. So we love our capabilities in homeowners. We’ve been able to grow that business and grow it profitably over the long term, and we’re going to continue to take advantage of those capabilities.

Tom Wilson, CEO, Allstate: So if you can again go to PIF numbers, because I know you’re all focused on PIF, even though growth comes in many forms called protection services, investment income, everything else. The overall PIF growth in homeowners 2.3%, over 4% in the Allstate brand, which is what Mario was just talking about. We’re getting smaller in National General and Encompass. And quite honestly, I’m fine with that because they weren’t any good returns back to the lifetime value conversation. This is about increasing lifetime value, not just one measure called FIS.

It’s about driving overall shareholder value growth.

Jess, CFO, Allstate: Thank you.

Conference Operator: Thank you. And our next question comes from the line of Alex Scott from Barclays. Your question, please.

Tom Wilson, CEO, Allstate0: Hey, good morning. I had a follow-up on retention and just wanted to see if you could shed a little more light on what you’re seeing across the channels. Just trying to understand is it the exclusive agent network and retention associated with maybe more people going online or something, or is it maybe, you know, some churn in the direct to consumer and, you know, some of the policies you’ve grown into more recently, maybe just have a quicker, duration to them? I just want to better understand retention and just in light of it being a critical driver of PIP right now.

Mario Rizzo, Chief Operating Officer, Allstate: Yes. Thanks, Alex. This is Mario. I’ll give you a little color on retention. I think the headline on retention for us is really over the last couple of quarters, we’ve seen retention levels stabilize, but they’re still down relative to where they were a year ago.

And I think when you look at retention broadly, it’s certainly going to vary by risk segment, by customers that shop more frequently and maybe shop direct to consumer versus those that use an exclusive agent or an independent agent. But I think the broader issue with retention is the issue of affordability in the industry. As we and the industry had to raise prices to combat what was historically high levels of inflation, I think what we’ve seen is more customers shop and more customers switch and defect from their current insurance carrier. And on the one hand, that creates tailwinds from a new business perspective because you got more people out there shopping, but it certainly creates challenges and opportunities, quite honestly, from our perspective to improve retention going forward. And as I said earlier, we’re not sitting back and waiting for retention to get better.

We’re doing things proactively around reaching out to customers, making sure that they have all the potential discounts that are available to them, that they have the right protection, the right product, the right coverage levels and limits and those kinds of things to make sure that we can offer them the most affordable price possible. That’s really at the heart of the SAVE program. And then I think additive to that, as I mentioned earlier, just given where our margins are and the profitability of the book broadly, we would anticipate just needing less rate in the near term, which certainly causes less disruption in the book. But we’re focused on leaning in and doing things proactively to change the trend line on retention. And when we’re successful doing that, I think that’ll generate sustainable and profitable growth for us.

Tom Wilson, CEO, Allstate0: Got it. That’s helpful. Second question I had is on California and the homeowners market there. Would just be interested if you could give us an update on how you’re thinking about that market and maybe additionally, if there’s any action that you feel will be necessary as some of those moratoriums kind of sunset, and you’re able to take action if you need to.

Tom Wilson, CEO, Allstate: Let me address homeowners availability specifically. Mario can talk about what we’re doing in California. First, with increased severe weather in most of America’s network tied up in the houses, it’s really important that they have homeowners insurance, which is why you see availability being such an issue. In California, it doesn’t work today, but it could. It works in Texas.

Texas has the same number. It actually has more catastrophe losses both in types and in gross dollars than does California. Yet it’s got a homeowner’s market that’s pretty functional and we like it and other people like it. So it can work. You just need assistance to that.

California is on a path to try to create a sustainable insurance. Whether they get all the way there or not will be dependent on what they do and what other companies do. So I want to talk about California.

Mario Rizzo, Chief Operating Officer, Allstate: Yes. The only thing I’d add, Alex, is in California, and I think there’s a recency here, last week Commissioner Lara and the department announced really the last component of this sustainable insurance strategy, which related to using wildfire models. They had previously come out with how they were thinking about recouping reinsurance costs. We think that’s a constructive approach by the department and certainly a step forward relative to where we were before, which was you just couldn’t recoup the cost of doing business in homeowners marketing in California. And that’s one of the reasons that we stopped writing new business over a long period of time.

We’re reviewing the details of that release and at some point we’ll make a sustainable insurance strategy filing with the department. Too early to kind of tell you which way we’ll fall on that one. For now, it’s the status quo. We’re not writing new business in California. But we’ll take a look at what the details are, and we’ll do a filing, and then we’ll let you know what we decide.

Tom Wilson, CEO, Allstate0: Got it. Thank you.

Conference Operator: Thank you. And our next question comes from the line of Josh Shanker from Bank of America. First question, please.

Tom Wilson, CEO, Allstate1: Yeah, thank you very much. Sort of offbeat, there’s a huge surge in the number of policies in Allstate roadside assistance. I’m wondering, is that a solution for persistency if you could cross sell them with the roadside assistance? Are the captive agents selling that more persistently around what’s happening there and why is it happening?

Tom Wilson, CEO, Allstate: So, you’re right, the more things you sell people, the more opportunity you have to make them happy. And the frequency of use of roadside is greater than the frequency of use of auto insurance. And so it makes people happy. Sure, and do you want to

Tom Wilson, CEO, Allstate2: talk about what we’re doing? Yeah, I think you hit it. We are also bundling roadside with auto policies that an agent sells. So that’s one of the reasons also we’re seeing a upsurge in number of policies that we’re selling. So it’s a good product bundled with auto, it adds added value for our customers and which is really important.

Tom Wilson, CEO, Allstate1: Can you talk about your success rate on bundling right now broadly with maybe how the business running five years ago? Is bundling more successful as a strategy right now? Or is it hard to get people to buy multiple items?

Tom Wilson, CEO, Allstate: I would say in total, Josh, Mario talked about the bundling and homeowners. Sharon just talked about bundling there. We’re doing much better. Our tech stack is much better to enable us to do that. But we think there’s tremendous opportunity ahead of us, whether that’s renters, we need to take a run at renters and do better at renters, boats.

I could go down the list of other stuff that we have great potential that previously we had some operational barriers and technology barriers to doing it with the new tech system. Those have kind of gone away.

Tom Wilson, CEO, Allstate1: All right. Thank you very much.

Conference Operator: Thank you. And our next question comes from the line of Christian Gitsup from Wells Fargo. Your question, please.

Tom Wilson, CEO, Allstate3: Hi, good morning. How do you expect the drag on auto PIF growth from New York and New Jersey to be in the balance of the year? Because even if you reopen for new business in the second half, you get the rate increases you currently filed? I’m guessing you might see some retention headwinds that kind of offset that. Or are most of the retention issues in the past just given the large rate hikes over the last couple of quarters, and these are a little bit more muted?

Tom Wilson, CEO, Allstate: We’re committed to growth in total. It wouldn’t really help you much to give you sort of what we think is going to happen in New York and New Jersey. Just look at the breadth of the new business, look at what we’re doing in total, talk about the Save program. Our goal is to increase market share on personal property liability. We’re already doing it in home.

I just point that out, and we think auto is coming.

Tom Wilson, CEO, Allstate3: And then for my follow-up, in respect to tariffs, you’ve talked about a mid single digit impact to loss cost trends previously. Can you provide an update on your expectations given a few more changes in recent weeks? And can you potentially quantify percent of your premiums would be outside of your target profitability if we assume those increased costs materialize today? Because I’m just trying to get a sense of, like, what percent of your premiums you may receive a little bit more regulatory scrutiny for getting rate hikes just given you’re potentially running at a much better profitability versus the mid-90s for auto?

Jess, CFO, Allstate: So

Tom Wilson, CEO, Allstate: I would just answer, we’re going to manage through whatever the impact of tariffs are, and we’ll manage through it profitably. This is not we don’t see this the same as the pandemic related increase where used car prices went up 60% in eighteen months. If in fact tariffs have an impact on the cost to either replace or repair parts, which we think is likely given all the trends that are going on, it’s totally manageable. And we factored it into how we’re running the business today. We factored in the prospect and stuff because we don’t settle every claim today.

It takes us sometimes three, four months to get some cars fixed. We’re in good shape.

Tom Wilson, CEO, Allstate3: Thank you.

Tom Wilson, CEO, Allstate: Let’s do one more question.

Conference Operator: Okay, great. Our final question then for today comes from the line of Jing Li from KBW. Your question, please.

Tom Wilson, CEO, Allstate4: Hi. Thank you for taking my question. I have a follow-up question on retention. So Allstate implemented on the safe retention program. Can you add more details on maybe the impact of these initiations versus the natural improvement from smaller rate cuts?

Tom Wilson, CEO, Allstate: So the SAVE program is an enterprise wide effort to improve customer interactions, 25,000,000 in total, dollars 10,000,000 in personal property liability, price related reductions more than 5%. So it’s a highly some of the 25 is also obviously property liability. We’ve already achieved our $25,000,000 goal, but we are slightly behind on the $10,000,000 for that. So we’re going to do better than the $25,000,000 and we still have a goal to get to debt.

Tom Wilson, CEO, Allstate4: Got it. Thank you. My follow-up is on the affordable, simple, connected auto product. So now they’re available in 40 states and representing a significant expansion for the rollouts. Can you provide some more details on the new business conversion rate or retention of these products versus the traditional products?

Yeah.

Tom Wilson, CEO, Allstate: We don’t break out retention and new business, I would just say, look, started with affordable, simple and connected because that’s what customers want. We’ve made great progress on affordable. This product is much better on simple. We’re able to really clean up the whole acquisition process. I think we still have some room to go on connected.

And so it’s a journey, not an end thing. We really like the new product. We like its close rates. We like its profitability. We like the customer satisfaction, but we don’t break out the specifics.

But rolling out a new auto product across this company and as fast as we did is really a tremendous accomplishment and we feel really good about the impact that will have on growth. Let me thank you very much for tuning in. We went a little long, but thank you for investing in Allstate, and we’ll talk to you next quarter.

Conference Operator: Thank you, and thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.

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