Earnings call transcript: Allstate’s Q3 2025 earnings beat forecasts, stock rises

Allstate Corp (ALL) reported robust third-quarter earnings, surpassing analyst expectations with an earnings per share (EPS) of $11.17 against a forecast of $7.43. This 50.34% surprise was complemented by revenue figures of $17.3 billion, exceeding the forecasted $15.69 billion. The strong financial performance has led to a 3.07% increase in Allstate’s stock price in premarket trading, now at $200.73.

Key Takeaways

• Allstate’s EPS and revenue significantly exceeded forecasts.
• Premarket stock price rose by 3.07% following the earnings release.
• AI initiatives are driving operational efficiencies and cost reductions.
• Property liability premiums and net investment income saw notable growth.
• The company is focusing on expanding international protection services.

Company Performance

Allstate demonstrated strong financial performance in Q3 2025, with total year-to-date revenues reaching $50.3 billion, up 5.8% year-over-year. The company’s net income for the quarter was $3.7 billion, with an adjusted net income of $3 billion. The growth in property liability premiums and net investment income contributed significantly to these results, alongside strategic advancements in AI technology.

Financial Highlights

• Revenue: $17.3 billion, surpassing the $15.69 billion forecast.
• Earnings per share: $11.17, compared to the $7.43 forecast.
• Return on equity over the past 12 months: 34.7%.
• Property liability premiums increased by 6.1% in Q3.

Earnings vs. Forecast

Allstate’s Q3 results exceeded expectations with an EPS of $11.17, a 50.34% surprise over the forecasted $7.43. Revenue also beat estimates, achieving $17.3 billion against a forecast of $15.69 billion, marking a 10.26% surprise. This significant beat underscores Allstate’s effective strategies in cost management and revenue growth.

Market Reaction

Following the earnings announcement, Allstate’s stock price saw a 3.07% increase in premarket trading, reaching $200.73. This rise reflects positive investor sentiment and confidence in the company’s future growth prospects. Despite the increase, the stock remains below its 52-week high of $215.7, indicating potential room for further growth.

Outlook & Guidance

Looking forward, Allstate plans to focus on increasing its property liability market share and expanding its international protection services. The company is also committed to further developing its AI capabilities, which have already contributed to cost reductions and improved customer service. Potential mergers and acquisitions are being considered as part of its growth strategy.

Executive Commentary

CEO Tom highlighted the strategic importance of their AI initiative, ALLI, stating, "ALLI will position us for continued growth in market share." He also emphasized the company’s focus on increasing policies in force, saying, "We make money. We want to increase policies in force." Executive John addressed risk management, stating, "We’re not a hedge fund. We just look at it in total and say, ’How do you manage risk?’"

Risks and Challenges

• Reduction in the agent network could impact customer service levels.
• The sunset of the Encompass brand might affect brand diversity.
• Competitive pressures from major players like Progressive and State Farm.
• Macroeconomic conditions and inflation could impact future profitability.
• Execution risks related to the expansion of AI capabilities.

Q&A

During the earnings call, analysts inquired about Allstate’s AI strategy and its impact on operations. The company’s capital allocation approach and pricing strategies were also discussed, providing insights into how Allstate plans to navigate inflationary pressures and competitive challenges in the market.

Full transcript - Allstate Corp (ALL) Q3 2025:

Conference Operator: Hey, and thank you for standing by. Welcome to Allstate’s third quarter earnings investor call. At this time, all participants are in a listen-only mode. After prepared remarks, there will be a question-and-answer session. To ask a question during this session, you’ll need to press star one-one on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press star one-one again. Please limit your inquiry to one question and one follow-up. As a reminder, please be aware that this call is being recorded. Now I’d like to introduce your host for today’s program, Allister Gobin, Head of Investor Relations. Please go ahead, sir.

Allister Gobin, Head of Investor Relations, Allstate: Good morning, everyone. Welcome to Allstate’s third quarter 2025 earnings call. Yesterday, following the close of the market, we issued our news release and investor supplement, filed our 10Q, and posted related material on our website at allstateinvestors.com. Today, our management team will discuss how Allstate is creating shareholder value. We will open the line for your questions. As noted on the first slide of the presentation, our discussion will include non-GAAP measures for which their 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 2024 10K and other public filings for more information on potential risks. Now I’ll turn it over to Tom.

Tom, CEO, Allstate: Good morning. Thank you for investing time in Allstate today. Let’s start with slide two. Allstate’s strategy has two components, which are shown on the left: increased personal and profit liability market share and expand protection provided to customers. Our strong operating results in the third quarter are shown on the right. Revenues increased to $17.3 billion. Policies in force increased to $209.5 million as we broadened our protection offerings and grew the property liability business. Net income was $3.7 billion. Adjusted net income was $3 billion, or $11.17 per share. That resulted from a number of things: strong property liability results, modest catastrophe losses, higher investment income, and favorable insurance reserve releases. The return on equity for the last 12 months was 34.7%. The drivers behind these outstanding results include operational excellence, which is really good at protection.

The transformative growth initiative is increasing profitable growth. Enterprise risk and return management for investments creates additional value. All of that just generates substantial capital. Let’s cover transformative growth and how that positions us for continued success. Turn to slide three. Transformative growth is the initiative we started about six years ago, and it was designed to increase property liability market share. It has five components and five phases. We’re now in phase four, which is rolling out the new system. The price for protection is obviously critically important to customers, so we reduced costs so that we could provide more value without impacting margins. We reduced the expense ratio by 6.7 points, but we’re not done yet. To increase market share, we also need to expand customer access by broadening distribution beyond Allstate agents.

This year, auto insurance new business is evenly split between Allstate agents, independent agents, and direct from the company. All three channels have increased, like we didn’t get there by making one channel smaller. Increasing customer value with new, affordable, and simple connection products has also been a driver of growth. Significant progress has also been in improving customer service. We have improved over 46 million customer interactions this year. A high priority for us is to further expand the SAVE program for auto and home insurance customers, which has helped over 5 million customers reduce their premiums by more than 5%. These four elements require increased sophistication and investment in customer acquisition, and we’re really good at that, and a new technology ecosystem. The new technology ecosystem is going to enable us to use applied artificial intelligence, which is shown on slide four.

This begins with generative AI, which helps improve the efficiency and effectiveness of operations. I like to describe this as the Keds sneakers commercial. You might remember it’s run faster or jump higher, which is quite a good thing. As you can see, there are many examples where that’s adding value today. It’s being used to simplify billing explanations for customers and reducing the number of billing inquiries we get. In the claims operation, all adjuster emails are generated or reviewed by AI. 15% of our coding is done by AI. It’s also being implemented and used in actuarial and financial work to reduce costs and accelerate our go-to-market strategies. The next frontier is at the top of the slide, which is agentic AI. That holds even greater promise.

It allows us to reimagine customer value across the entire business model, from the offerings, the service, the communications, how we make growth investments, and how we settle claims. Now, to make that a reality, we’re designing and building Allstate’s large language intelligent ecosystem, or ALLI. We wanted to name it and personify it because these agents are like employees. They’re capable of reasoning and resolving tasks, lower costs, and improving customer experience. ALLI will position us for continued growth in market share and expansion of protection provided to customers. Now, Mario will cover third quarter results in more detail.

Mario, Executive, Allstate: Thanks, Tom. Let’s turn to slide five for an overview of third quarter results. Allstate’s strong operating capabilities delivered profitable growth and excellent returns in the quarter and through the first nine months of 2025. Total year-to-date revenues increased 5.8% from the prior year to $50.3 billion, driven by strong performance across the enterprise, including property liability premiums that were up 6.1% the third quarter and 7.4% for the first nine months of the year, reflecting higher average premiums and policy-in-force growth. Protection services profitably grew with premiums up 12.7% compared to the third quarter of 2024, driven by protection plans. Net investment income was $949 million in the third quarter, representing a 21.2% increase over the prior year quarter. Total policies in force grew to $209.5 million, an increase of 3.8% compared to the prior year quarter. In the third quarter, net income was $3.7 billion.

Through the first nine months of 2025, net income applicable to common shareholders was $6.4 billion. Adjusted net income was $3 billion, or $11.17 per diluted share in the third quarter, reflecting strong property liability underwriting profit and higher investment income. Adjusted net income return on equity was 34.7% over the last 12 months. Moving to slide six, let’s discuss our objective of consistently delivering attractive risk-adjusted returns for shareholders. As a reminder, we manage profitability by line and by market. In auto insurance, we target a mid-90s recorded combined ratio. Over the last decade, outside of the unprecedented inflationary period the industry experienced following the COVID-19 pandemic, Allstate has consistently achieved these targeted levels of profitability. We have responded quickly and decisively to periods of increased loss cost inflation, like higher auto accident frequency in 2015 and 2016, and higher post-COVID severity.

As a result, the combined ratio has averaged 94.9 over the last 10 years. The homeowners business is a competitive advantage for Allstate. In homeowners insurance, we target a low-90s recorded combined ratio and an underlying combined ratio in the low- to mid-60s. We have a differentiated model with advanced risk selection, new products, pricing sophistication, and efficient claims handling. While there can be short-term volatility associated with catastrophes, these capabilities have delivered sustained success, as you can see over the last 10 years with a recorded combined ratio of 92.3. Turning to slide seven, let’s discuss protection services. The protection services business is comprised of five businesses: protection plans, auto dealer, roadside assistance, Arity, and identity protection. It has 171 million policies in force, generates $3.3 billion in revenue, and had $211 million of income over the last 12 months.

Policy growth was 4.4% over the prior year quarter, led by protection plans. Protection plans continue to expand both domestically and internationally, as you can see on the lower right. Revenues increased by 15% over the prior year quarter, with a 10% increase in domestic revenue and a 32% increase in international revenue. The business generated $34 million in adjusted net income this quarter, a decrease of $5 million from the prior year quarter due to increased claims. Year to date, however, earnings increased by 8% from 2024. Now I’ll turn it over to Jess.

Tom, CEO, Allstate: Thank you, Mario. Moving to slide eight, you can see the impact of transformative growth execution on property liability growth. The map on the left side of the slide shows the 38 states where Allstate is growing policies in force in dark blue. Investments in expanded distribution, pricing sophistication, marketing, and technology are generating policy in force growth in the auto and home insurance businesses. To the right, we provide more detail by brand. We underwrite auto and home insurance business through Allstate agents and direct to consumers 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 2.8% compared to the prior year quarter.

National General and Direct Auto continued to grow at 12% and 22.9% respectively, reflecting our capabilities in the non-standard auto insurance market in both the direct and independent agent channels. As part of transformative growth, we decided to sunset the Encompass insurance brand and use the Allstate brand in both the exclusive agent and direct channels. In the independent agent channel, as the new National General Custom 360 product is made available, we stopped offering the Encompass policies for new business. While some customers of the inactive brands end up in new business of active brands, growth in the active brand shows the strength of those customer value propositions. Homeowners policies in force in active brands increased 3% compared to the prior year quarter.

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’ve delivered strong new business growth in the direct channel. Transformative growth is delivering profitable policy growth. Turning to slide nine, customer retention remains a key focus. On the left, you can see auto insurance shopping is at historically high levels. Through the first nine months of the year, shopping activity across the industry has increased 9.3% compared to the same period in 2023, driven by higher advertising and industry-wide rate increases in 2022 and 2023. In this high shopping environment, Allstate is capturing a higher proportion of shoppers with new business increasing 26.2% for the same period in 2023 compared to 2022.

Allstate’s market share gains in non-standard auto insurance, largely through the independent agent and direct channels, also have a negative impact on overall retention, even though these policies are attractive economically. To improve retention, we’re lowering prices while maintaining attractive margins and reaching out to customers through the SAVE program. In addition, customers are being transitioned to our new auto and home insurance products, which have higher retention levels. Finally, product bundling is increasing, particularly through Allstate agents supporting deeper customer relationships. Increasing retention will be additive to growth created through higher increases in new business. Now I’ll turn it over to John.

Mario, Executive, Allstate: Thanks, Jess. Turning to slide 10, let’s discuss how we proactively manage our investment portfolio to deliver meaningful shareholder value. This chart shows net investment income and portfolio growth over five years. Since Q1 2021, the portfolio’s book value has increased by 39%, or $23 billion. Since 2021, asset growth in part reflects the large increase in average auto and homeowner’s insurance. Growth in assets and higher yields have benefited net investment income. Net investment income for the last 12 months equates to $10 per share, up from less than $9 in 2021. Moving to slide 11, let’s discuss how Allstate takes a proactive approach to managing its investment portfolio within the context of overall enterprise risk and return. The table on the left illustrates how investment decisions consider enterprise factors and market conditions. The blue boxes indicate favorable conditions, and the orange boxes indicate unfavorable.

For example, in 2022, the property liability combined ratio was elevated, and both macroeconomic and market dynamics were unfavorable. We had adequate capital to handle this, but decided to reduce the capital supporting investment risks. As you can see on the right-hand graph, this was implemented by lowering interest rate risk by reducing duration, shown in the green line. This was a good decision because we then increased duration as rates increased in 2023 and 2024. The combination of these actions protected portfolio values as yields rose and then captured those higher yields to support higher income. We used the same approach to equity holdings, which were reduced in 2023 and 2024, primarily reflecting an outlook for higher inflation.

By year-end 2024, when profitability was restored and economic and market dynamics were more favorable, we increased the economic capital allocation to investment risk and have selectively been adding growth exposure back to the portfolio. Moving to slide 12. The chart on the left shows the change in GAAP shareholders’ equity from year-end 2024 to the end of the third quarter. At the end of 2024, shareholders’ equity was $21.4 billion. Strong income, gains on the sale of voluntary benefits and group health businesses, and an increase in unrealized net capital gains on investments further strengthened capital. This was partially offset by common share repurchases and dividends to shareholders. This year, Allstate has returned $1.6 billion to shareholders on a GAAP basis through common shareholder dividends and share repurchases. Overall, GAAP shareholders’ equity increased to $27.5 billion as of the third quarter of 2025.

Over the last 12 months, adjusted net income return on equity was 34.7%. Increasing property liability market share at target levels will create additional shareholder value. In addition to growth initiatives, Allstate deploys capital through the investment portfolio, which generates attractive returns and provides a diversified source of income. Allstate has a long history of returning cash to shareholders through both dividends and share repurchases. Over the last 12 months, Allstate has returned $1.8 billion to shareholders, which is 3.5% of the average market value of common equity. Over the last five years, $11.5 billion has been returned to shareholders, representing approximately 22% of common outstanding shares. Now let’s move to questions.

Conference Operator: Certainly. As a reminder, ladies and gentlemen, we ask that you please limit yourself to one question and one follow-up. Our first question comes from the line of Robert Cox from Goldman Sachs. Your question, please.

Hey, thanks. Good morning. Just the first question on capital. Obviously, a significant amount of capital generated this quarter, and you all stated in the presentation you’re in a favorable capital position. Can you just talk us through how you’re thinking about holding company liquidity and how quickly we could see you guys normalize that level of deployable assets at the Holdco?

Tom, CEO, Allstate: Sure. Let me start up the top. First, we have a very sophisticated way that we think sophisticated in a way—the way in which we manage capital. It is not as simple as sort of your premium to surplus ratio. It has served us well for a long period of time. We keep doing that. Our assessment would be similar to yours, which is we have plenty of capital today. The list of options are pretty straightforward as to what we could do with it. Let me maybe address your specific question that came up to the more contemporary assessment of what the options are. As it relates to the holding company, we put as much money as we can into the holding company because it is flexible. We can put it back into the insurance company if we want.

We can use it for share repurchases. We use it to buy a company. We can use it to do a variety of different things. We prefer the flexibility to have it up in the holding company as opposed to in the insurance company. The movements from one to another tend to be really related to where we are with our regulatory approvals on moving it and what the rules are on moving it up, as opposed to, "Oh, we took money out of the insurance company because we thought we had enough down there." We’ve always had enough down there. We have plenty of capital there, so we’re not worried about that. As it relates to the uses of capital, it’s the same options that you all know. If you sort of said, "Well, where are we today?

What would be the best uses for it? Obviously, with the kind of returns we’re getting in our business, just growing that business and keeping investing in that business is a great return and a good way to go. To the extent we can further grow the business, we get the twofer, not only of higher income but earnings multiple re-rate. That is our key and primary focus. John talked about what we could do in investments and what we do with investments as to how to make extra returns. That is another option for us. We obviously could buy other companies which leverage our skills and capabilities, whether that is National General, SquareTrade, which were both terrific transactions. We still have some work to do on identity protection. I feel confident. I feel confident I will take that call. We will see.

We still have work to do to make that one be what it can be, and it will get there. Obviously, there are all kinds of things you can do with shareholders, your dividends, your share repurchases. John talked about that too. We have never held back on that, but we prioritize stuff where it is the most return for shareholders.

Okay. Awesome. Thanks for the comprehensive answer. And then just on pricing, appreciate that you guys back out the New York, New Jersey growth from your new PIF growth, which is very helpful. But just wondering if you could talk about where pricing was, excluding New York and New Jersey, and maybe just more broadly where you think pricing is headed into 2026.

Mario, Executive, Allstate: Yeah. So Robert, in terms of overall pricing, obviously, you can see how strong the margins are in auto insurance. The rate need has certainly diminished. I would say the book is broadly rate adequate at this point. In the quarter, we did implement some rates in New York and New Jersey that had to be approved earlier in the year but implemented in the quarter. That shows up in what we show you in the supplement, which is not a meaningfully high number. I think it was 0.6 percentage points. You take those two out, and it gives you a real sense for how little rate is needed in the book. As we look at loss trends, the loss trends in pure premium look good. Our margins are strong. Frequency is a big contributor to that, and that’s a bit of a wild card.

As we think about 2026, what I’ll tell you is we’ll respond accordingly to whatever the trends are. If that means they continue to be benign and the book doesn’t need rate, then we won’t take rate. To the extent we see loss costs tick up, we’re going to stay out ahead of it and target that mid-90s combined ratio that we’ve been able to achieve over the last decade.

Thank you.

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

Gregory Peters, Analyst, Raymond James: Good morning, everyone. I’m going to start. First of all, in the slide deck on page four, you provided an interesting slide regarding your approach to artificial intelligence. I feel like there’s probably a lot of information behind that slide. When we’ve asked other companies, they’ve given us some ideas about what their tech budget looks like, how much is going to maintenance systems versus new initiatives. When I look at this slide here, I guess what I’m particularly interested in is where are you in this life cycle? You introduced ALLI. I’m just curious what that looks like when you get to a more complete phase. Just additional color on what’s going on and what your end goal is with the technology.

Tom, CEO, Allstate: Let me start at the end, Greg. By the way, you’re now Gregory. It’s like a fancy name. Let me start with the end. Then come back into some of your questions, not all of which we have answers to at this point. Let me be open and transparent about that. First, I think this technology has the opportunity to help us really reimagine the whole way we go to market and do a terrific job for our customers at a lower price with better service. In fact, I believe it can help us add things that we don’t currently do because they’re too expensive. Not only will it help us reduce costs, I think it’ll help us improve the value proposition. Now, that’s easy to say and hard to do. What we’re doing is working with generative AI today to.

Mostly get more effective and more efficient at what we currently do. I’ll give you an example of that on the list. When somebody sues our customers, there’s a bunch of work they have to do to keep your customers safe and not have to lose a bunch of money. It includes things like reading a 900-page medical file that used to be done by doctors. Today, that is done by a computer. It’s helping us be better and more effective. Both reduce our just administrative costs for doing that, but also then presumably make us smarter and give us better decisions with a human in the loop. The agentic AI really is a chance to do it completely differently.

For example, how we communicate to you, what mode of communication we use, what we communicate to you is dependent on who you are and what your relationship with us has been. That’s hard to put all that knowledge in the brain of one individual who’s on a phone at that point in time. It’s not that hard to put it in the hands of an agent, which can process stuff with advanced computing power very quickly. We believe there’s, throughout the whole business chain, ways in which we can do it. We’ve come up with a plan to try to build ALLI. It’s got, just like we did Transformative Growth, components and phases. We’re not ready to roll that out to everybody because we’re in what I would call design and build phase.

It is our belief that the opportunity is so large that we should move quickly on this as opposed to wait to see if somebody else can develop it first. As it relates to cost, it is going to cost more. We are just going to manage our way through it.

Gregory Peters, Analyst, Raymond James: Thank you for that answer. I guess related to that, you talked about, on retention on slide nine, personalizing experiences. You also mentioned how your business mix is changing a little bit. How is technology going to help you improve your retention? And when I read this bullet point as a personalizing experiences, to me, that sounds more labor-intensive, not less labor-intensive.

Tom, CEO, Allstate: I actually think. To do it well, it’ll be less labor-intensive. The computer can help you do it. Today, for example, if you get on our web stuff, we have three offerings that we give you: good, better, best. It’s possible with technology to help figure out exactly what should Greg’s offers be. Today, it’s not done that way, but it could be done that way. I believe there’s plenty of opportunity to improve this. Retention, I would say retention, we have just other things we can work on. I mean, Justin can give you some sense of what we’re doing on retention because that’s, I would say that’s not really ALLI. ALLI is really redoing the whole business model. Retention is something we just need to work on each and every day. Ron, just go through.

Mario, Executive, Allstate: Yeah, Greg. So it’s Justin. We are very focused, as I said in the presentation, on the SAVE Program and reaching out in the point of customization to make sure that we’re providing customers with the opportunity to tailor their coverage and save money. As you saw, we’ve saved a significant number of customers, more than 5%. That’s going and looking for opportunities for discounts like EasyPay or Paid in Full, encouraging customers to use telematics and truly tailor their coverage options to best meet their needs. I think technology allows us to do that and to better reach out and identify where customers have needs and where opportunities exist for us to save them money, which naturally improves retention. I think that we’re continuing to focus on what we can do to increase value for our customers.

It relates to lowering prices and enhancing experiences.

Gregory Peters, Analyst, Raymond James: Makes sense. Thanks for the detail.

Conference Operator: Thank you. Our next question comes from the line of Andrew Klingerman from TD Cowen. Your question, please.

Hey, good morning. My first question is around the exclusive agent channel within Allstate Brands. I am wondering how that has progressed in terms of agent count and retention year to date. How has that played out? How do you see that playing out over the next couple of years?

Tom, CEO, Allstate: Andrew, it’s a good question. Let me give you an overview of where we’ve come from or two, and I’ll give Mario an opportunity to talk about where we’re going. When we started Transformative Growth, we had over 10,000 Allstate agents, and today we have 6,000. We are writing more business today than we were then. Productivity is way up. That’s not just because we’re doing more advertising. They’re actually doing a terrific job of leaning into this. The team we have in place is doing great work. They’re also extremely good at bundling auto and home, which builds in sustainability. We feel like there was some question from some shareholders and analysts when we got started on TG. What will happen with the Allstate agents? We think the Allstate agent network is stronger today than it was then.

We have added independent agent and direct response and expanded that. We are feeling good about where we are. Mario can talk about where we are going.

Mario, Executive, Allstate: Yeah. I think, Andrew, I would plus up what Tom said in terms of the performance of the agency system. When you look at our production and the fact that it’s pretty equally distributed across all three channels, the Allstate agency channel is a core part of that. This is not about not wanting to grow in that channel. We’re very much interested in continuing to grow in the Allstate agency channel, and the productivity of the channel is off the charts, and they continue to invest in their businesses. In terms of where we go from here, number one, it’ll continue to be a key part of our strategy because we believe there’s a significant percentage of people that are going to want to interact with a human. On the other side, and in our case, that would be an Allstate exclusive agent.

We’re going to ask our agents to continue to adapt going forward, just as they’ve adapted over the last five or six years as we’ve implemented Transformative Growth, with a real focus on continuing to build new relationships, which you see through productivity, but also to cultivate those relationships, leveraging the tools that Tom talked about with artificial intelligence and data and analytics to be able to engage with their customers more frequently to deepen relationships and sell a broader array of protection products and services going forward. Allstate agents, key part of our growth strategy going forward. We will continue to expand their role going forward, and we’re bullish on the future.

Got it. Thank you for that. My follow-up goes back to slide four. It certainly, the transformative growth seems pretty awesome. Tom’s comment that ALLI is an opportunity so large that you don’t want to wait to see if someone else can do it. My question is around if you could share this, because I haven’t seen slides like this with a number of your competitors. Where are you versus the competition? Is there any way that you can share a benchmark with us that kind of puts Allstate in one place and the large bulk of the competition elsewhere?

Tom, CEO, Allstate: Nobody knows, really. I can’t speak for where they’re at. I’m guessing most people are using generative AI. It’s easy to do. I’m sure even if it’s not an organized program like ALLI is, I’m sure our competitors are using that. I can’t speak for what they’re doing strategically to try to redo the business model. We’ve been working on this for a while. We kind of felt like now it’s about time to start talking about what we’re doing without going into specifics because nobody wants to give somebody else a roadmap as to how you’re going to do it. I’m guessing they’re all good. We have good competition. They’re smart people, good companies. I’m sure they’re working on it and doing it. Everybody has different outcomes, I would say.

I was with a group of CEOs who were talking about the problems they have with data. In transformative growth, the target state architecture that we put in place has a particular way in which we move and use data. That has really set us up to do this. If you ask me, did we know exactly that was going to work that way five or six years ago? No. Did we think it made sense? Yes. Does technology follow the rules of logic? Yeah. We could not have predicted that you were going to have agentic AI, but we are really happy we have what we have.

Awesome. Thanks so much.

Conference Operator: Thank you. Our next question comes from the line of Paul Newsom from Piper Sandler. Your question, please.

Good morning. Thanks for the call. A couple of big picture questions I was hoping you could address. The biggest pushback I get for Allstate is concerns from investors that competition is going to lower prices quickly in response to recent profitability, and that Allstate is lowering prices, and those will squeeze margins such that you’re sort of at peak earnings. Two-part question, and I’ll leave it at that. Could you just talk a bit about how you see the market dynamic evolving over time? You guys have been through a number of years and seen a lot of history. Then relatedly, can you talk about how you sort of really think about the trade-off that you’re talking about between pricing and PIF growth and mechanically how you do it and why we can be confident that it’s a good trade-off?

Tom, CEO, Allstate: Let me go up for a minute, and then I’ll come down to your specific question around trade-off between. Maybe I’ll start with PIF growth and economics. First, we make money. Okay? We want to increase policies in force. We know that that generates increased returns for shareholders. We know that it could lead to a re-rating of the PE. Unless we’re making money, we’re not doing it, whether that’s advertising or anything else. We treat our shareholders’ capital dearly, and we make money on it. Let me go to the overall competitive stuff. I’ll give you some observations. We’re one team on the field and in the league, so I can give you some observations in there. I can give you some specifics about our performance. It’s already a highly competitive environment.

It’s not like it’s about to become a highly competitive environment. We’re banging it out every day in the marketplace, whether that’s competing for leads, getting the right pricing sophistication, doing our claims well. It’s a highly competitive market. My answer to the people who doubt it would be like, "Well, you can see how we’ve done in that market for the last decade. Can I predict every play is going to be we’re not going to give up more than a yard?" No. In the end, when you look at our combined ratios and the value we’ve created for shareholders in a bunch of different ways, we’ve done quite well. When you look at the specific competitors, Progressive is a really strong competitor in auto. They have great capabilities. I expect them to stay strong in auto.

I think State Farm has picked up share in the last couple of years. They used their capital position to do that, which meets their objectives. I think they achieved what they set out to do. They do not seem to be dialing up advertising as much as Progressive, but that is anecdotal. I do not have a set of facts from some TV-watching service to prove that. GEICO lost a couple of points of share because they had written a bunch of business prior to that, which was not profitable. They decided to not have that business anymore. They have turned on the old model. Whether that works in the current competitive environment with the current set of defenses out on the field, it is not clear. I am not saying it is not.

It’s just they seem to be turning on the model that they’ve used historically, which did enable them to pick up share. I think they’re on the field. Others, I think, are struggling to keep up. If you look at Allstate’s performance in that environment, and let’s just make it contemporary, just showed you some numbers. Our new business is up higher than the shopping stuff. We’re able to compete there in customer acquisition. That’s a highly competitive and sophisticated market. We’re already working on some new plays for next year on what we’re going to do in the lower funnel stuff. That’s highly competitive. Pricing and auto insurance, we’re good. We continue to roll out new programs. We’ll continue to roll out new programs. Retention, it’s kind of flat over the last. It depends which channel and which risk category and stuff.

It’s kind of flat over the last couple of quarters. We have an opportunity to increase that by competing for customers that are already in-house, as opposed to going out and competing to get new customers. That’s a different kind of competition. We’re kind of competing against ourselves and their expectations. If you move beyond auto insurance, we have lots of other ways to grow too. If you look at our homeowners insurance business, we believe it’s picking up share because we don’t think there’s more than 3% new homes in the United States when you just look at PIF. That’s just a really strong business. If it was a standalone company, and I’m not suggesting it is, by the way, if it was standalone, people would be rocking about that business. Specialty lines, we got one of the best renters products in the market.

We have some work to do on motorcycle and boats and stuff like that. That said, our share is below what it should be, so another place to grow. If you go beyond that, the protection plans, we have a terrific position in embedded insurance in the retail channel. In the United States, we’re not taking that internationally. We’ve struggled to find a way into the big cell carriers to get into cell phone insurance. We’ve been kind of fighting away. That said, we’re not going to give up. There’s a way to find those customers. We haven’t figured out how yet, but we’re after it. We have lots of ways to grow. There are some things we have that other people don’t have. If you look at our growth.

Just talking about growth in non-standard share, we took the National General capabilities and we put that into the Allstate flow of business. You can see that we’ve picked up real share in the non-standard auto customers. We like that. Now what we do is have to flip that and take that same approach and pick up standard customers in the independent agent channel with standard auto and homeowners. We’ll have to see whether we get that done, but we have plenty of ways to grow the business.

Fantastic, Tom. Appreciate the help and the patience.

Conference Operator: Thank you. Our next question comes from the line of Elise Greenspan from Wells Fargo. Your question, please.

Hi, thanks. Good morning. My first question is on auto retention. I was hoping to get some more color on how it’s trended for just active brands and when we should think about retention inflecting up both for your active brands and just also on an overall basis.

Tom, CEO, Allstate: Okay, Elise. It’s a good way to split the question between active and inactive brands because some of those inactive brands, the decline in retention is intentional. Because we want to move them from those brands to the other brands. Another thing that will impact retention as we’re going forward, and Jess can talk about some of the specific things we’re doing, but we didn’t really highlight a lot is, I think, just talking about moving people from classic to the ASC products would be some additional insight that you haven’t given already.

Yeah, absolutely. In addition to what I mentioned earlier, Elise, we are going through and we give our customers an opportunity to move into the affordable, simple, and connected product as we roll that out by state. You have seen how many states that we have rolled out for the ASC product. We are able to have our agents both in the call center and in the exclusive agencies reach out to customers and give them an opportunity to move into our most contemporary product with the most contemporary pricing. We think that is a real opportunity to improve retention. It does two things. One, it gives them an opportunity to save money, but it also allows agents to engage differently and add value and deepen the relationship by offering our best products.

We will continue to implement that and move folks to our best and most contemporary products in this quarter and into the coming year. We think that will have a real impact on retention.

Thanks. Then my second question is just on capital. You guys, I think it’s building upon one of the earlier questions, right? There’s excess at the parent. You guys, given the strong results this year, right, did start to take dividends out of AIC in the quarter. I guess given that, I mean, I was a little bit surprised the buyback perhaps wasn’t higher given that there’s more capital at parent. If you could just help me think about just balancing the buyback versus, I guess, now having more excess at parent. Are you guys holding on to capital there for M&A? If that’s part of the answer, where would potential M&A transactions be concentrated?

The share buyback program was an approved $1.5 billion. It had a set time on it. We are just buying it back according to the period of time we had it and the amount. There is nothing magic. It is not like we have a good month and we decide we are going to buy more shares back or something like that because we have always had plenty of capital. When we put up a $1.5 billion share repurchase program, that means we think we have more than $1.5 billion of additional capital. We do not set the target based on what we will earn. We set the share buyback on what we have, factoring in that maybe the future will not be as good as you think it is. We have always felt great about that program.

When that program’s done, then we’ll decide what we do with the next one. That’ll be done sometime next year. That is still coming. In terms of what we use the money for, it’s organic and we’re on the open field. If we find something we like to do, we do it. There is on the open field. We do know that trying to grow our property liability business faster is the cleanest and best shot to improve shareholder value. Other than that, we make a decision when we get to that point in time. We do not kind of sequester it and hold stuff back. It is what it is. With this kind of return on equity, there’s no harm, no foul.

Thank you.

Conference Operator: Thank you. Our next question comes from the line of Vikram Gandhi from HSBC. Your question, please.

Hi, good morning, and thank you for the opportunity. My first question is around the auto PIF, where it appears that the growth was to a large extent driven by non-standard customers. Just wondered if you had any updated thoughts on how we should be thinking about the longevity and, more importantly, the profitability of this cohort, so expense ratio and loss ratio impact from this cohort. Thank you.

Tom, CEO, Allstate: I don’t think I can give you specific attribution to help you do a loss ratio or expense ratio forecast. I think the numbers just move around too much. What I can say, which may be the underlying question there, is it’s all economic. We like the business. It doesn’t last as long, but we make good money on it. We make good money on it relative to what it costs us to get it, even though it has a shorter life. We don’t have a targeted, "Only get this customer if they last for 7.2 years or something like that." We just say, "Can we make money on this customer for the period of time they will have us?" We like what we’re doing. It’s all economic. It does, because it has. They shop more, higher risk customers because they pay more.

That’s why they shop more. It does have a negative impact on retention, but that’s not a negative economic impact. That’s just a math problem in terms of trying to do the overall retention number.

Okay. That’s really helpful. Thank you. The second question I had was a really simple one on commercial lines. It’s something that we don’t talk about quite often, but are we at a definitive inflection point? Can we comfortably say that the adverse prior year development is highly unlikely going forward? In short, have we sorted most of the backbook issues?

In commercial lines. In all our reserves, actually, by category, we think we’re adequately reserved when we put the quarter. Sometimes we get surprised. You’re right. In commercial lines, we’ve had some negative surprises over the last couple of years. We didn’t this quarter, so we feel good about that. We think we’re always appropriately reserved.

Thank you.

Conference Operator: Thank you. Our next question comes from the line of Bob Cheong Kwong from Morgan Stanley. Your question, please.

Yeah. Hi, good morning. First question is revolving around slide 11, where you provided some outlooks in terms of various key metrics. Curious is your view on inflation going forward. I think if we had this conversation six months ago, inflation and tariffs potentially would have been a larger topic. Just curious how you think about inflation as we go forward. Is it much more under control in your view today? Do you think that will become evolve into a bigger problem? Just curious your thoughts on that.

Tom, CEO, Allstate: Let me make some comments and then toss it to John to give you his perspective. Inflation impacts many parts of our business, right? There is inflation in what it costs to fix and repair a car, which could be driven by tariffs, could not be driven by tariffs. It all depends what happens there. There is inflation in bodily injury costs, which is driven more by litigation environments, which if anybody wants to talk about Florida, happy to talk about that at some point. There is inflation just in our operating expenses, what it costs to have people and stuff. There is inflation, which has a large impact on our investment portfolio. We think about it from an enterprise standpoint. John can give you an answer as to how we think about inflation and where we are today relative to our risk and return profile.

Yeah. Thanks, Bob. Great question. What I would say is let’s start with the investment portfolio and the use of it. One of the takeaways from today’s presentation is really how it complements the rest of the business and how we can use it as an additional tool to help balance out risks that we might be seeing across the business. As you’ve seen, we’ve done that by adjusting our interest rate exposure. That allows us to buffer other things that might be taking place, as Tom just mentioned. In terms of what’s going on with inflation, let’s take a market view right now. If you go back, coming out of COVID, there was a lot of changes in supply chain, a lot of uncertainty. You get into the beginning of this year, there’s some changes in policies in Washington. That created a lot of uncertainty.

What we’ve seen play out throughout this year is not that inflation has completely gone, but some of what we would call the left-tail risk or the uncertainty associated with that is gone. Therefore, markets have calmed down a little bit. We think it’s a little bit more understood. This can be evidenced somewhat by even the posture of the Fed. The Fed has moved from a tightening cycle to an easing cycle. They too are seeing more of a balance between growth and inflation. We’re acting accordingly. As you noted in the quarter, looking at the investment portfolio, we’ve extended duration a little bit. That’s a sign that we think maybe some of the big increases in yields are over and we can capture that additional income for the benefit of shareholders. We’ll keep a watchful eye on it. We just don’t know for certain.

This is a pretty big stone that was thrown in the pond, and you’re not quite sure how all the ripples will play out. We are watching it carefully. We have got a lot of monitors, both on the underwriting side and the investment side. We will stay tuned.

Okay. Let me also jump into bodily injury inflation because I know some of our competitors have talked about changes there. Just let me give an example of talking about Florida. We really applaud the political leadership in Florida for taking on an important issue that’s a difficult issue, which is how do you lower suits against our customers for fender-bender accidents? Their courage is really helping Florida consumers save billions of dollars a year. We’re happy, of course, because our customers are saving money. We will charge them less, but we’re very happy about the fact that they’re having to pay less. At a time when voters are clearly voting with their pocketbooks, this is really a golden opportunity for other states to lean in on that. You’ve seen Georgia recently picked up and joined the parade.

Support reform may seem arcane from an inflation standpoint, but it has the potential to really help consumers deal with increased inflation and other stuff. It is just a terrific way to help customers.

Great. Thank you. Really appreciate that detailed answer. Staying on slide 11, which, by the way, is a wonderful slide. If we think about just interest rate and the duration of your fixed income portfolio, right, it feels like kind of like in your prior remarks, you made a strategic move to increase that duration. As the Fed fund rate potentially comes down more, is there a need to move further to the higher duration part of your fixed income portfolio, or do you feel that your current duration is pretty good? Regardless of what the interest rate environment goes, five-year duration feels appropriate.

Let me just deal with one word and then let John pick up on that. There’s never a need to do anything on one specific piece of the portfolio where there’s duration, equity, ownership, or anything else. There’s opportunity is the way we look at it as to how we scope risk across the company. You want to talk about how you’re looking forward?

Yeah. Bob, again, I would look at kind of the mosaic that you see on the left-hand side of the page. These are the things that we will consider when that time comes. One of them is market posture, but there are a bunch of other things that we’ll consider too in terms of what’s ultimately in the best interests of the entire enterprise and our shareholders. I’ll also focus a little bit on your word need. I think sometimes people think when they think of insurance asset managers and portfolio management, there’s a need to kind of chase yield in a portfolio. We fundamentally look at it differently. We’re really trying to find the best economic overall return for our shareholders. That doesn’t always mean chasing, having to maintain a certain book yield level in the portfolio.

We’re going to look at all the things that we can do in the portfolio, whether it’s public fixed income, private fixed income, public equity, private equity, figure out at a point in time in concert with what’s going on at the enterprise, what’s the best combination of actions to take to position the portfolio. I think you’ve seen that play out over time as we move things around in response to all these factors.

In fact, when you look at competition, I would say we’re unique in this way. When one of the big firms comes in and does, "Here’s what everybody else has done, and here’s what they’ve changed." I think their comment was, "If it wasn’t for you guys, we wouldn’t have to come in every year because other people don’t change that much." That doesn’t make us always right. It doesn’t make us—we’re not a hedge fund or anything like that. We just look at it in total and say, "How do you manage risk? You manage it for the whole enterprise.

Got it. Really appreciate the color. Thank you very much. Again, love the slide. Thank you.

Conference Operator: Thank you. Our next question comes from the line of David Mokman from Evercore ISI. Your question, please.

Hey, thanks. Good morning. I just had a question just how you guys are thinking about advertising spend. When I look at the efficiency of ad spend in the third quarter, it looks like it went down quite a bit if I just am looking at new auto apps versus just dollars spent on advertising. Clearly, you guys are gaining your fair share of the shoppers out there, but just wondering how you’re thinking about continuing to ramp that, especially as efficiency looks like it’s declining a bit.

Tom, CEO, Allstate: David, that’s probably not the best measure of efficiency, I would say. Let me dissect that a little bit. You have both upper funnel and lower funnel advertising. Upper funnel is really more mass, streaming, TV, stuff like that, where you’re getting brand consideration. Our brand consideration is up substantially this year, or significant amount of substantial, but it’s up, and we like it. On the lower funnel, our efficiency is actually up this year versus last year. Last year, in the fourth quarter in particular, we were a little heavy and our efficiency dropped a little bit, but we’re still liking it. I’m not sure exactly the math you’re looking at, but we think our economic returns on advertising were terrific. We like them. They’re up from last year. That said, as I mentioned earlier, this is a game. It’s a highly analytical, scale game.

You’re buying leads in subseconds. And making decisions. The computer’s making decisions to do that. We feel good about the system we have. That said, it’s just like pricing in auto insurance. Every year, there’s some new plan you got to do. We’re working right now. Elizabeth and her team spent four hours yesterday working on a new plan. To take it to add some new stuff to take it to a new level.

Got it. Okay. Understood. Thanks for that context. And then just my follow-up. Where are we just in New York and New Jersey on the new product filing, and maybe opening that up to new business? I think it’s obviously you guys are putting through rate increases there, implemented in the third quarter. That’s going to continue to work through the book. I think you guys put through another increase in New Jersey. You guys are obviously getting hit on that, but I guess you guys are still not in the market for new business. I’m wondering, is there a point where you just say, "Hey, we’re just not going to wait for this new ASC product to get approved and just continue with our existing product and try to open up to new business"?

I’ll make a general comment that Mario can jump in on the specifics of where we’re standing right today. I would say we are hopeful. That we hope that the regulators see that this is a better product for customers. Just like Florida took a stand to do something good for customers, we’d like to see New York and New Jersey take a stand for customers by approving it as opposed to thinking they’re doing us some sort of favor. Mario, what would you?

Yeah. First thing, David, what I’d say is we’re making money in both of the states. We’re generating underwriting profits both in New York and New Jersey. That’s a great place to start. We’ve already gone beyond the point that you referenced. We actually are writing some new business, not as much as we were, but we’re not completely shut down in both of those states because we’re not waiting for the ASC approval to open back up. We’re going to continue to look at our risk appetite with our existing product. If it makes sense for us to open up underwriting guidelines even further, we’ll do that. Our agents are continuing to invest in their agencies to have capacity.

We’re hopeful that the approval of ASC will just take us to the next level in terms of our ability to write even more in New York and New Jersey. We’ve started that process. Obviously, those two states are still a drag. You saw that on the slide to overall policy counts. We’re profitable, which is a much better position to be in. We are writing some new business. We’ll evaluate if we can and should be writing more. As Tom said, we will continue to work with the regulators and get ASC approved and then open back up fully.

Thank you for your time this morning. We’ll keep working on shareholder value by embracing change and being the best at what we do. We’ll talk to you next quarter.

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

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.