Is Allstate a Compelling Buy After an 11% Surge? A Value Investing Perspective

The recent 11% surge in Allstate's stock price has sparked renewed interest among value investors, particularly as the insurer's Q3 2025 results underscore a dramatic turnaround in profitability and risk management. With a tripled net income, reduced catastrophe losses, and a forward P/E ratio significantly below industry peers, Allstate appears to offer a compelling case for long-term, risk-adjusted returns. However, a deeper analysis of its valuation metrics and competitive landscape-especially when compared to Motley Fool's alternative picks-reveals nuances that warrant careful consideration.

Allstate's Q3 2025 Performance: A Catalyst for Value Investors

Allstate's third-quarter results were nothing short of transformative. The company reported a net income of $3.7 billion in Q3 2025, a 208% increase from $1.2 billion in Q3 2024. This surge was driven by a 6.1% year-over-year rise in Property-Liability earned premiums to $14.5 billion, fueled by higher average premiums and a growing policy count. Notably, catastrophe losses-a persistent drag on insurance profitability-plummeted to $558 million in Q3 2025, down from $1.7 billion in the prior-year period. This reduction directly bolstered underwriting income, with the Property-Liability segment posting $2.9 billion in underwriting income, compared to $495 million in 2024.

The homeowners insurance segment, historically vulnerable to catastrophe-driven losses, saw a particularly striking improvement. Its combined ratio dropped by 26.7 points to 71.5, translating to an underwriting profit of $1.1 billion in Q3 2025 versus a mere $60 million in 2024. Such resilience in a sector prone to volatility underscores Allstate's enhanced risk management and pricing discipline.

Valuation Metrics: A Discounted Opportunity?

Allstate's forward P/E ratio of 8.68 as of 2025 positions it as a clear discount relative to the industry average of 27.56X and competitors like The Progressive Corporation (17.81X) and Travelers (12.78X). This valuation gap suggests the market may be underappreciating Allstate's operational improvements and consistent cash flow generation. Additionally, the company's 1.9% dividend yield-while modest compared to peers like MetLife-provides a steady income stream for long-term investors, particularly in a low-growth environment.

From a value investing lens, Allstate's combination of a low P/E and stable dividends aligns with the principles of compounding and margin of safety. As Warren Buffett once noted, "Price is what you pay; value is what you get." Allstate's ability to generate robust earnings while maintaining a conservative balance sheet with a Zacks Rank of #2 and a Value Score of A further strengthens its appeal.

Comparing Alternatives: Markel and MetLife

Motley Fool's alternative picks-Markel (MKL) and MetLife (MET)-offer contrasting profiles. Markel, with a P/E ratio of 12.84 trades at a premium to Allstate but lacks a dividend, relying instead on capital appreciation. While its diversified insurance and investment operations are attractive, its higher valuation leaves less room for error in a sector prone to cyclical swings.

MetLife, on the other hand, presents a higher-yield alternative with a 5.88% yield as of September 2025 but with mixed underwriting performance. While its Group Benefits segment saw a 230-basis-point improvement in non-medical health loss ratios in Q3 2025, its second-quarter adjusted earnings declined by 25% due to unfavorable underwriting in life and health products. This inconsistency raises questions about the sustainability of its risk-adjusted returns.

Risk-Adjusted Returns: Balancing Growth and Stability

Allstate's reduced catastrophe losses and disciplined underwriting practices position it as a lower-risk option compared to peers. For instance, its homeowners segment's underwriting profit of $1.1 billion in Q3 2025 demonstrates resilience in the face of natural disasters, a critical factor for long-term stability. Meanwhile, MetLife's exposure to volatile markets and its reliance on non-core segments (e.g., life insurance) introduce greater uncertainty.

However, Allstate's low P/E ratio may reflect lingering concerns about its growth potential. While its 6.1% premium growth in Q3 2025 is commendable, it lags behind the 13.1% growth in homeowners written premiums. Investors must weigh this against the company's strategic focus on digital transformation and divestitures, which aim to enhance long-term profitability.

Conclusion: A Compelling Buy for Patient Investors

Allstate's Q3 2025 results and valuation metrics present a compelling case for value investors seeking risk-adjusted returns. Its tripled net income, reduced catastrophe losses, and low P/E ratio-coupled with a modest but reliable dividend-align with the principles of compounding and margin of safety. While alternatives like Markel and MetLife offer distinct advantages, Allstate's operational discipline and defensive characteristics make it a more balanced choice for long-term portfolios.

As the insurance sector navigates macroeconomic uncertainties, Allstate's ability to adapt-through pricing power, risk mitigation, and strategic reinvestment-positions it as a durable holding. For investors with a multi-year horizon, the 11% surge may represent not a peak, but a foundation for compounding gains.