Allstate's Q3 2025 Earnings Call: Contradictions Emerge on Inactive Brand Impact on PIF Growth, Auto Retention, Advertising Efficiency, and Competitive Dynamics

Date of Call: None provided

Financials Results

• Revenue: $17.3B (Q3); total YTD revenue $50.3B, up 5.8% YOY
• EPS: Adjusted net income $3.0B, or $11.17 per diluted share (Q3); GAAP net income $3.7B

Guidance:

• Target auto recorded combined ratio: mid-90s.
• Target homeowners recorded combined ratio: low-90s; underlying homeowners combined ratio: low- to mid-60s.
• No automatic rate actions: will refrain from rate if loss trends remain benign; will take rate if loss costs rise.
• Continue rollout of ASC product and migrate customers to improve retention and pricing.
• Invest in ALLI/AI and technology to lower operating costs and improve customer experience.
• Prioritize organic PIF growth, continued capital returns and opportunistic M&A.

Business Commentary:

• Revenue Growth and Profitability:
• Allstate reported revenue of $17.3 billion for Q3 2025, up compared to the previous quarter.

• Net income stood at $3.7 billion, with adjusted net income being $3 billion or $11.17 per share, reflecting strong property liability results, higher investment income, and favorable insurance reserve releases.

• Investment Income and Shareholder Returns:

• Net investment income in Q3 2025 was $949 million, representing a 21.2% increase over the prior year quarter.

• Allstate returned $1.6 billion to shareholders through dividends and share repurchases on a GAAP basis for the year.

• Policy Growth and Market Share Expansion:

• Policies in force increased to 209.5 million, reflecting a 3.8% increase compared to the prior year quarter.

• This growth was driven by expanding protection offerings, increasing property liability business, and expanding distribution beyond Allstate agents.

• Technology and Innovation Initiatives:

• Allstate is investing in artificial intelligence, specifically generative AI, which is reducing billing inquiries and enhancing operational efficiency.
• The company is developing a new technology ecosystem, ALLI, to reimagine customer value across various business models, leveraging agentic AI for future growth.
  
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted strong results: "Net income was $3.7 billion," "Adjusted net income $3.0B, or $11.17 per share," and a 12‑month adjusted ROE of 34.7%. Leadership emphasized continued capital flexibility ("we have plenty of capital") and growth investments (ALLI/AI) to expand market share and lower costs.

Q&A:

• Question from Robert Cox (Goldman Sachs): Can you talk through holding company liquidity and how quickly deployable assets at the Holdco could normalize?
  Response: Allstate has ample capital; management prefers holding flexibility at the parent to redeploy for repurchases, acquisitions, or reinvestment and will move funds subject to regulatory approvals.

• Question from Robert Cox (Goldman Sachs): Where was pricing excluding New York and New Jersey and how do you see pricing heading into 2026?
  Response: Outside NY/NJ the book is broadly rate-adequate with diminished rate need; if loss trends stay benign they will not raise rates, but will act ahead if loss costs increase to defend a mid-90s combined ratio.

• Question from Gregory Peters (Raymond James): Where are you in the ALLI/AI lifecycle, what does the end state look like and what are costs/timing implications?
  Response: ALLI is in design and build; generative AI is already reducing costs and improving operations, agentic AI will reimagine the business; investment will increase but is prioritized given the large potential returns.

• Question from Gregory Peters (Raymond James): How will technology personalize experiences to improve retention without becoming more labor‑intensive?
  Response: Technology enables scalable personalization (targeted offers, tailored products, SAVE outreach) that reduces manual labor while improving retention and customer value.

• Question from Andrew Klingerman (TD Cowen): How has the exclusive Allstate agent channel progressed in agent count, productivity and retention, and outlook for next years?
  Response: Agent count has declined from ~10,000 to ~6,000 while productivity and bundling are materially higher; agents remain core to strategy and will continue to be expanded and supported with AI tools.

• Question from Andrew Klingerman (TD Cowen): Where do you sit versus competitors on AI/technology — any benchmarking you can share?
  Response: Management believes competitors are using generative AI but cannot assess their strategic programs; Allstate's earlier platform and data architecture position it favorably to deploy ALLI, though specifics are not disclosed.

• Question from Paul Newsom (Piper Sandler): How do you view competitive pricing risk and the trade-off between lowering prices to grow PIF versus protecting margins?
  Response: Allstate pursues PIF growth only when economically accretive; they believe disciplined pricing and underwriting plus diversified growth avenues (homeowners, protection plans) mitigate competitive pricing risk and support shareholder value.

• Question from Elise Greenspan (Wells Fargo): How has auto retention trended for active brands and when should retention inflect up?
  Response: Retention varies by brand; moving customers into ASC products and SAVE outreach should improve retention as ASC is rolled out state by state and agents engage to offer contemporary pricing.

• Question from Elise Greenspan (Wells Fargo): Why was the buyback not larger given excess capital at the parent; are you holding capital for M&A and where would deals be targeted?
  Response: Share repurchases follow approved program limits and timing; management prioritizes highest shareholder return—organic PIF growth is primary, but opportunistic M&A remains possible when attractive.

• Question from Vikram Gandhi (HSBC): Auto PIF growth was driven by non‑standard customers — thoughts on longevity and profitability of this cohort and effects on loss/expense ratios?
  Response: Non‑standard customers are shorter‑lived but economically attractive over their tenure; they increase shopping and lower retention metrics but are profitable on an economic basis.

• Question from Vikram Gandhi (HSBC): On commercial lines, have prior‑year adverse developments been resolved and are reserves now adequate?
  Response: Management believes reserves are adequate across categories, commercial surprises have eased and they feel appropriately reserved though they monitor for surprises.

• Question from Bob Cheong Kwong (Morgan Stanley): How do you view inflation going forward across repair/labor/bodily injury and investment implications?
  Response: Inflation risk varies by component; markets have calmed, Fed posture easing supports portfolio actions; investment team adjusts duration and exposures to complement underwriting and buffer enterprise risk.

• Question from Bob Cheong Kwong (Morgan Stanley): With potential Fed cuts, should you increase fixed‑income duration further or is current duration sufficient?
  Response: Duration decisions are made holistically for enterprise risk/return; they’ve lengthened duration as appropriate but will evaluate all portfolio levers (public/private fixed income and equity) to optimize returns.

• Question from David Mokman (Evercore ISI): Ad spend efficiency appeared down when comparing new auto apps to dollars spent — how are you thinking about ramping advertising given changing efficiency?
  Response: Upper‑funnel (brand) spend rose but lower‑funnel efficiency improved year‑over‑year; overall ad economics remain strong and marketing is continuously optimized with new tactics.

• Question from David Mokman (Evercore ISI): Status of ASC product filing and new business in New York and New Jersey — will you reopen fully or use existing products?
  Response: Allstate is already writing some new business in NY/NJ and is profitable there; ASC approval would enable higher growth, but they will manage underwriting with existing products and expand as regulators approve ASC.

Contradiction Point 1

Inactive Brand Impact on PIF Growth

It involves the expected impact of inactive brands on PIF growth, which affects the company's financial performance projections and investor expectations.

How has Allstate Brands' exclusive agent channel progressed in agent count and retention year to date? - Andrew Klingerman(TD Cowen)

2025Q3: We have reduced our Allstate agent count from over 10,000 to 6,000, but they are more productive. We are writing more business today. - Tom(CEO)

What are the potential tailwinds and headwinds for growth? How will inactive brands impact PIF growth? - Jamminder Singh Bhullar(JPMorgan Chase & Co)

2025Q2: Inactive brands will continue to decline but at a diminishing rate due to no new business being written. - Mario Rizzo(CFO)

Contradiction Point 2

Auto Retention Trends and Impact of ASC Products

It involves the expected impact of the rollout of ASC products on auto retention, which is critical for customer loyalty and company revenue projections.

How has auto retention trended for active brands, and when is improvement expected? - Elise Greenspan(Wells Fargo)

2025Q3: The rollout of ASC products should also positively impact retention, allowing agents to engage more deeply with customers. - Tom(CEO)

How do you assess new business retention and ad spending efficiency in a competitive environment? - Hristian Getsov(Wells Fargo Securities, LLC, Research Division)

2025Q2: We continue to see customers deeper in the funnel who are very engaged with their Allstate products. - Mario Rizzo(CFO)

Contradiction Point 3

Advertising Efficiency and Market Dynamics

It addresses the effectiveness and efficiency of advertising spend, which impacts marketing strategy and financial performance.

How are you assessing advertising spend efficiency with the rise in shoppers and market share? - David Mokman (Evercore ISI)

2025Q3: Our upper funnel advertising is effective, and lower funnel efficiency is up. We are continuously refining our plans to improve economic returns on advertising. The market is highly analytical, with decisions made in subseconds. - Tom(CEO)

Is the increase in the auto underlying loss ratio due to unusual factors or tariff impacts? - Rob Cox (Goldman Sachs)

2025Q1: We are, of course, always working to refine our advertising strategy, to improve the efficiency of our advertising, but we're really pleased with the effectiveness of our upper funnel advertising and the efficiency of our lower funnel advertising. - Tom(CEO)

Contradiction Point 4

Competitive Market Dynamics

It reflects differing perspectives on the competitive landscape and pricing strategies, which are crucial for business strategy and financial planning.

How are competitive market dynamics evolving, and how do you balance pricing with PIF growth? - Paul Newsom (Piper Sandler)

2025Q3: We operate in a highly competitive environment already, with strong competitors like Progressive and State Farm. Our performance shows we compete well. We prioritize profitable growth and maximize shareholder value through pricing and PIF growth. We are confident in our strategy, and there are opportunities for strategic pricing. - Tom(CEO)

What are your views on competition in personal auto insurance, particularly aggressive pricing? Is it rational? - Jimmy Bhullar (JP Morgan)

2025Q1: There's a reduction in the rate of price increases in auto insurance this year, showing that the industry is at good profitability levels. The market is rational, with no aggressive rate reductions anticipated. Profitable growth remains the focus. - Tom Wilson(Chair, President and CEO)

Contradiction Point 5

Auto Retention Strategy

It reveals changes in the company's strategy for improving auto retention, which is essential for sustainable growth and customer loyalty.

How has auto retention trended for active brands, and when is retention expected to start increasing? - Elise Greenspan(Wells Fargo)

2025Q3: Retention data is influenced by intentional declines in inactive brands. We are moving customers to better products, which will help retention. The rollout of ASC products should also positively impact retention, allowing agents to engage more deeply with customers. - Tom(CEO), Jess(COO)

Can you share retention numbers and address remaining headwinds from previous rate hikes? - Hristian Getsov(Wells Fargo)

2024Q4: Our focus was on improving auto margins through price increases, which impacted retention. All states are different, but we've stabilized retention where margins are improved. Some states like New York and New Jersey still need work, but we expect to stabilize retention as margins improve. - Mario Rizzo(CMO)