Allstate Cuts Premiums for 7.8 Million — Profitability Rises Anyway

Date of Call: Feb 5, 2026

Financials Results

• Revenue: $17.3B for Q4; $67.7B for the year
• EPS: $14.31 per common share for Q4; $34.83 per share for the year

Business Commentary:

Financial Performance and Shareholder Returns:

• The Allstate Corporation reported total revenues of $17.3 billion for the fourth quarter and $67.7 billion for the year. Net income applicable to common shareholders was $3.8 billion for the quarter and $10.2 billion for the year, with adjusted net income per share of $14.31 for the fourth quarter and $34.83 for the year.
• The growth was driven by better underwriting losses, lower catastrophes, and reserve releases from prior years.

Auto and Homeowners Insurance Affordability:

• Allstate improved auto and homeowners insurance affordability by reducing premiums for 7.8 million customers by an average of 17% through the SAFE program.
• The company lowered auto insurance rates in 32 states with an average reduction of 9%, and expanded direct purchase options, which have lower prices.

Property-Liability Business Growth:

• Premiums earned increased by 4.4% in Auto Insurance and 15% in Homeowners Insurance. The auto combined ratio improved by 10 points compared to the prior year.
• The growth was due to strong underlying performance, lower catastrophes, and favorable prior year reserve releases.

Investment Portfolio Performance:

• Net investment income rose to $3.4 billion in 2025, more than $350 million higher year-over-year. The total portfolio carrying value increased from $73 billion to $83 billion.
• The increase was due to operating and investment cash flows combined with higher fixed income yields.

Protection Services Segment Expansion:

• The Protection Services segment grew policies in force by 3.3% to $172 million, while revenue increased by 11.7% to $3.3 billion for the year.
• Growth was led by protection plans, with domestic revenue increasing by 8.1% and international revenue by 39.7%.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted strong financial results, market share gains, and strategic initiatives. Quotes include: 'Allstate improved auto and homeowners insurance affordability for millions of customers in 2025. Results benefited from the transformative growth initiatives, which generated strong financial results and increasing growth of the Property-Liability policies in force.' and 'We feel very good about the investment... we're seeing the results of investing in transformative growth.'

Q&A:

• Question from Charles Peters (Raymond James): Could you provide color on how the regulatory environment might change over the next 24 months regarding rate relief?
  Response: Management hopes regulatory attention will focus on reducing bodily injury costs through tort reform, citing Florida's success, and believes cost reduction is key, not targeting 'excess profits'.

• Question from Charles Peters (Raymond James): Can you discuss the competitive landscape in auto and home?
  Response: Management sees a highly competitive market but believes transformative growth initiatives—differentiated products, pricing, broad distribution, and marketing—are helping them gain share, with growth in 20 states representing over 70% of premium.

• Question from Yaron Kinar (Mizuho): Does Slide 11 include the drag from nonactive brands (legacy and Encompass), and when will that drag end?
  Response: Slide 11 includes total growth, including inactive brands. The drag will lessen as they roll out new products (like Custom 360) and shift policies to active brands, focusing on state-level share gains.

• Question from Yaron Kinar (Mizuho): Is a 2- or 3-year look back to determine excess profitability too short?
  Response: Management argues against the concept of 'excess profit,' stating that strong profitability in homeowners is due to better products and cost control, not unsustainable rents, and that cost reduction, not profit limitation, is the solution.

• Question from Robert Cox (Goldman Sachs): How has the new business penalty trended, and will margins normalize quicker due to new apps growth?
  Response: New business penalty is reduced due to pricing sophistication, but depends on business mix. Management is comfortable growing market share while maintaining target margins, managing it granularly by state.

• Question from Robert Cox (Goldman Sachs): What are the primary drivers of the improvement in new apps within the independent agent channel?
  Response: Growth is driven by productivity gains, expansion in non-standard business, and the rollout of new products like Custom 360. Future focus is on engaging independent agents in mainstream segments.

• Question from Jian Huang (Morgan Stanley): What is your view on autonomous driving's pace and impact on personal auto?
  Response: Autonomous driving may reduce accident frequency (lowering physical damage costs) but could increase severity from higher-speed accidents. Management sees it as a manageable curveball, with hardware turnover being a slower process.

• Question from Elyse Greenspan (Wells Fargo): What is the priority for using excess capital—share repurchase vs. M&A?
  Response: Priority is organic growth, then strategic M&A where Allstate is a better owner. Share repurchases are a way to return capital to shareholders, especially given a low stock valuation.

• Question from Elyse Greenspan (Wells Fargo): Why did average gross premiums written per policy turn negative in auto in Q4 despite positive price?
  Response: The decline reflects a mix of rate reductions, coverage adjustments, and state-level factors. Management focuses on affordability while maintaining target margins, with combined ratio improvements supporting profitability.

• Question from Joshua Shanker (BofA): Is lower premium per policy due to coverage changes, and does that affect retention?
  Response: Coverage adjustments (like the SAFE program) lower premiums and aim to improve retention by aligning policies with customer needs. Retention is not considered weak, but shopping is up due to increased affordability and flexibility.

• Question from Michael Zaremski (BMO): Where are you in the journey of auto claims process improvements, and is it proprietary?
  Response: Improvements are in the middle innings, with proprietary processes and AI-enabled tools. It's an ongoing effort to control costs, not outsourced, and provides a competitive advantage.

• Question from Michael Zaremski (BMO): Are there legislative changes that could materially change industry strategy?
  Response: Tort reform is a key legislative change that could rapidly improve affordability by reducing bodily injury costs, with some states like Florida already showing benefits.

• Question from David Motemaden (Evercore ISI): How are New York and New Jersey performing, and what's the update on underwriting guidelines and product approvals?
  Response: The company is making money in these states but not growing. Growth depends on approvals for the affordable, simple and connected (ASC) product; New Jersey received approval, while New York is awaiting it to return to growth.

Contradiction Point 1

Capital Deployment Priority

Contradiction on the primary use of excess capital—share repurchases vs. organic growth.

Is the priority now returning capital via buybacks or is M&A still a focus? - Elyse Greenspan (Wells Fargo)

2025Q4: Priority is: 1. Organic growth... 2. Acquisitions... 3. Share repurchases to return capital to shareholders. - Thomas Wilson(CEO)

How are you managing holdco liquidity, and how quickly can deployable assets at the holdco be normalized? - Robert Cox (Goldman Sachs)

2025Q3: The holding company holds flexible capital... The priority for capital deployment is to grow the business for shareholder value. - Thomas Wilson(CEO)

Contradiction Point 2

Outlook on New York/New Jersey Market

Contradiction on the strategic stance and timeline for returning to growth in New York and New Jersey.

Okay, let's see. The user wants me to rewrite the earnings call question into a concise one. The original question is: "How are New York and New Jersey performing? Are they still a drag? Are you considering further opening underwriting guidelines there?" First, I need to make sure I understand what's being asked. The user is asking about the performance of two states, whether they're still a financial burden (a drag), and if there are plans to adjust underwriting guidelines. The goal is to condense this into one question without any extra fluff.The key points are: performance of NY and NJ, their status as a drag, and consideration of opening underwriting guidelines. The challenge is combining these three points into a single question. Maybe start with "How are New York and New Jersey performing..." then add if they're still a drag, and if the company is considering opening underwriting guidelines there. I need to check the original question's structure. The first part is a general performance check. The second part is a follow-up on whether they're still a drag. The third is about considering opening guidelines. Combining these into one question might involve using "and" or "and are you..." to link them. Also, the user mentioned "further opening underwriting guidelines," so maybe "further" is important here.Let me try: "How are New York and New Jersey performing, and are you considering further opening underwriting guidelines there?" Wait, the original has three questions. The user wants to condense all three into one. The second part is "Are they still a drag?" So maybe include that as well. Hmm. The original has three questions. To combine them, maybe: "How are New York and New Jersey performing, are they still a drag, and are you considering further opening underwriting guidelines there?" But that's a bit long. The user wants it concise. Maybe rephrase "are they still a drag" as "still a drag?" and combine the three parts. Alternatively: "How are New York and New Jersey performing, and are you considering further opening underwriting guidelines there?" That combines the first and third questions but leaves out the second. The user might want all three points addressed. But the original input had three separate questions. However, the user's example output might combine them into one. Let me check the example given in the problem. The input is three questions, and the output is a single question. So maybe the answer should be a single question that encapsulates all three parts. Wait, the user's example output might be something like: "How are New York and New Jersey performing, and are you considering further opening underwriting guidelines there?" But the original also asks "Are they still a drag?" which is a separate question. So perhaps the rewritten question should include that. But how to combine all three into one. Maybe: "How are New York and New Jersey performing, are they still a drag, and are you considering further opening underwriting guidelines there?" That's three parts but connected with commas and "and". However, the user wants it concise. Maybe "Are they still a drag" can be rephrased as "still a drag?" in the question. Alternatively, maybe the original question can be condensed by implying that the drag is part of the performance. For example, "How are New York and New Jersey performing, and are you considering further opening underwriting guidelines there?" but that leaves out the "still a drag" part. Wait, the original question is: How are NY and NJ performing? Are they still a drag? Are you considering further opening underwriting guidelines there? So the user is asking for performance, whether they are still a drag (i.e., still causing negative impact), and if they are considering opening guidelines. The rewritten question needs to include all three. Maybe: "How are New York and New Jersey performing, are they still a drag, and are you considering further opening underwriting guidelines there?" But the user wants it concise. Let me check the strict output constraints again. The user says output only the rewritten question, no explanations, no analysis. So I need to make sure that the rewritten question includes all three elements but is concise. Alternatively, perhaps combine the first two parts: "How are New York and New Jersey performing, and are they still a drag? Are you considering further opening underwriting guidelines there?" But that's two questions. The user wants one question. Hmm. The original input is three questions. The user wants it rewritten as a single concise question. So perhaps the answer is: "How are New York and New Jersey performing, and are you considering further opening underwriting guidelines there?" But that leaves out the second question about being a drag. Wait, maybe "Are they still a drag?" can be incorporated into the first part. For example, "How are New York and New Jersey performing, and are you considering further opening - David Motemaden (Evercore ISI)

2025Q4: Both states are profitable but not growing. Underwriting restrictions have been loosened... New Jersey received ASC auto approval in February; implementation to follow. New York is awaiting ASC product approval. - Jesse Merten(President of Property-Liability)

Should the company continue using the existing product and pursue new business instead of waiting for the new ASC approval? - David Motemaden (Evercore ISI)

2025Q3: The company is... not entirely shut to new policies. It will evaluate opening underwriting guidelines further based on risk appetite. - Mario Rizzo(COO)

Contradiction Point 3

Growth Outlook and Profitability for New York & New Jersey

Contradiction on whether states are growing or still profitable but stagnant.

How are New York and New Jersey performing, and are you considering further opening underwriting guidelines there? - David Motemaden (Evercore ISI)

2025Q4: Both states are profitable but not growing. - Jesse Merten(Executive VP & President of Property-Liability)

What are the potential tailwinds and headwinds for personal auto PIF growth, and how does the lifetime profitability profile of business written through independent agency (IA) and direct channels compare to that of captive agency channels? - Jamminder Singh Bhullar (JPMorgan)

2025Q2: Allstate is now profitable in these states and has filed for new **Affordable, Simple, and Connected Auto products**. ... growth can resume. - Thomas Wilson(CEO)

Contradiction Point 4

Timeline for Headwinds from Inactive Brands

Contradiction on the expected duration of the negative impact from inactive brands.

Does Slide 11 include the drag from inactive brands (e.g., Encompass)? When will that drag end? Is a 2- or 3-year look-back period for determining excess profitability too - Yaron Kinar (Mizuho Securities)

2025Q4: The drag will end as old brands are phased out and business is transitioned to the Allstate brand. Custom 360 rollout (now in 36 states) is replacing the Encompass brand. - Jesse Merten(Executive VP & President of Property-Liability)

What caused the Q2 auto PIF growth slowdown, and how should we expect the cadence for the back half of the year? Additionally, how long will inactive brand headwinds persist? - David Kenneth Motemaden (Evercore ISI)

2025Q2: The headwinds from **Esurance and Encompass** will diminish as these brands run off. ... Encompass will be shut off for new business as the Custom360 product rolls out in states, with the brand phasing out over time. - Thomas Wilson(CEO)

Contradiction Point 5

Characterization of Retention Trends

Contradiction on whether retention is "weak" or stable/stabilized.

Is the decline in premium per policy due to customers buying down coverage, and does this impact already weak retention? - Joshua Shanker (BofA Securities)

2025Q4: Retention is not 'weak' compared to competitors; shopping behavior has changed, leading to more frequent shopping. - Thomas Wilson(CEO)

Could you clarify retention trends across channels and any updates on the California homeowners market as moratoriums sunset? - Taylor Alexander Scott (Barclays)

2025Q2: Retention has stabilized but remains below levels from a year ago, impacted by industry-wide affordability issues. - Thomas Wilson(CEO)