The Allstate Corporation (ALL) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reflects a positive outlook with strong revenue growth, robust profitability, and strategic market expansion. The Q&A session highlights effective use of technology and AI, stable retention rates, and competitive positioning. Despite some concerns about competition and inflation, management's confidence in their strategies and profitability, especially in challenging markets, suggests a positive sentiment. The additional insights from the Q&A do not significantly alter the positive outlook. Overall, the strategic initiatives and financial health indicate a likely positive stock price movement.
Key Financial Performance
Revenue Revenues increased to $17.3 billion in Q3 2025, a 5.8% increase year-to-date from the prior year, driven by strong performance across the enterprise, including Property-Liability premiums up 6.1% in Q3 and 7.4% for the first 9 months of the year.
Net Income Net income was $3.7 billion in Q3 2025, and $6.4 billion year-to-date, reflecting strong Property-Liability results, modest catastrophe losses, higher investment income, and favorable insurance reserve releases.
Adjusted Net Income Adjusted net income was $3 billion or $11.17 per share in Q3 2025, driven by strong Property-Liability underwriting profit and higher investment income.
Return on Equity Return on equity for the last 12 months was 34.7%, attributed to operational excellence, transformative growth, and enterprise risk and return management for investments.
Net Investment Income Net investment income was $949 million in Q3 2025, a 21.2% increase over the prior year quarter, driven by growth in assets and higher yields.
Protection Services Revenue Protection Services revenue increased by 12.7% in Q3 2025 compared to Q3 2024, driven by protection plans, with domestic revenue up 10% and international revenue up 32%.
Protection Services Adjusted Net Income Adjusted net income for Protection Services was $34 million in Q3 2025, a decrease of $5 million from the prior year quarter due to increased claims, but year-to-date earnings increased by 8% from 2024.
Policies in Force Total policies in force grew to $209.5 million in Q3 2025, a 3.8% increase compared to the prior year quarter, driven by growth in auto and homeowners insurance policies.
Auto Policies in Force Auto policies in force in active brands increased 2.8% compared to the prior year quarter, with National General and Direct Auto growing at 12% and 22.9%, respectively, reflecting capabilities in the nonstandard auto insurance market.
Homeowners Policies in Force Homeowners policies in force in active brands increased 3% compared to the prior year quarter, driven by bundling through Allstate agents and strong new business growth in the direct channel.
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Operating Highlights
New affordable and simple connection products: These products have been a driver of growth, increasing customer value.
ALLIE (Allstate's Large Language Intelligent Ecosystem): A new technology ecosystem designed to use applied artificial intelligence to improve efficiency, reduce costs, and enhance customer experience.
Property-Liability market share: Increased market share through transformative growth initiatives, including expanded distribution and pricing sophistication.
Protection plans: Expanded both domestically and internationally, with a 15% revenue increase over the prior year quarter.
Expense ratio reduction: Reduced by 6.7 points to provide more value to customers without impacting margins.
Generative AI implementation: Used to simplify billing explanations, reduce billing inquiries, and improve claims operations.
Transformative Growth Initiative: A long-term strategy to increase Property-Liability market share, now in Phase 4, focusing on rolling out a new system and broadening distribution.
Investment portfolio management: Proactively managed to deliver shareholder value, with a 39% increase in portfolio book value since Q1 2021.
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Risk or Challenges
Regulatory and Compliance Risks: Forward-looking statements about Allstate's operations indicate potential material differences in actual results, highlighting regulatory and compliance risks.
Market Competition: Allstate faces competitive pressures in the auto and homeowners insurance markets, particularly in nonstandard auto insurance, which could impact retention and profitability.
Economic and Macroeconomic Risks: Unfavorable macroeconomic and market dynamics in 2022 led to reduced capital allocation to investment risks, indicating sensitivity to economic uncertainties.
Claims and Loss Costs: Increased claims in the Protection Services segment and higher post-COVID severity in auto insurance highlight challenges in managing loss costs.
Retention Challenges: High auto insurance shopping levels and market share gains in nonstandard auto insurance negatively impact overall customer retention.
Catastrophe Risks: Short-term volatility in homeowners insurance due to catastrophes poses a risk to profitability.
Technology and Operational Risks: The rollout of new systems and reliance on advanced technologies like AI and ALLIE could face implementation challenges, impacting operational efficiency.
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Guidance & Outlook
Transformative Growth Initiative: The initiative is in Phase 4, focusing on rolling out a new system to increase Property-Liability market share. This includes reducing costs to provide more value without impacting margins, expanding customer access through broader distribution channels, and increasing customer value with affordable and simple connection products. The initiative also emphasizes improving customer service and expanding the SAVE program to help customers reduce premiums.
Technology Ecosystem and AI: The company is leveraging generative AI to improve operational efficiency and effectiveness. AI is being used in billing explanations, claims operations, coding, actuarial, and financial work. The next phase involves Agentic AI, which will reimagine customer value across the business model. The ALLIE system is being developed to enhance market share growth and customer protection.
Auto Insurance Profitability: The company targets a mid-90s reported combined ratio for auto insurance. It has consistently achieved this target outside of inflationary periods and is responding to increased loss cost inflation with pricing adjustments and operational improvements.
Homeowners Insurance Profitability: The company targets a low 90s reported combined ratio and an underlying combined ratio in the low to mid-60s. Advanced risk selection, new products, pricing sophistication, and efficient claims handling are expected to sustain profitability.
Protection Services Growth: Protection plans are expanding domestically and internationally, with revenues increasing by 15% year-over-year. Domestic revenue grew by 10%, and international revenue grew by 32%. Policy growth was 4.4% over the prior year quarter.
Customer Retention and Market Share: The company is focusing on improving customer retention by lowering prices while maintaining margins, transitioning customers to new products with higher retention levels, and increasing product bundling. New business increased by 26.2% year-over-year, driven by higher advertising and industry-wide rate increases.
Investment Portfolio Management: The company is proactively managing its investment portfolio to deliver shareholder value. It has increased portfolio book value by 39% since 2021 and adjusted investment strategies based on market conditions to capture higher yields and support income growth.
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Shareholder Return Plan
Dividends to Shareholders: Allstate has returned $1.6 billion to shareholders on a GAAP basis through common shareholder dividends and share repurchases in 2025. Over the last 12 months, $1.8 billion has been returned to shareholders, representing 3.5% of the average market value of common equity.
Historical Dividend Returns: Over the last 5 years, $11.5 billion has been returned to shareholders, representing approximately 22% of common outstanding shares.
Share Repurchase Program: Allstate has a long history of returning cash to shareholders through share repurchases. In 2025, share repurchases were part of the $1.6 billion returned to shareholders. Over the last 5 years, share repurchases contributed to the $11.5 billion returned to shareholders.
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Key Q&A
Q:Can you discuss your approach to holding company liquidity and the deployment of capital?
A:The company prefers to keep as much money as possible in the holding company for flexibility. This allows them to reinvest in the insurance company, conduct share repurchases, acquire companies, or pursue other opportunities. They prioritize investments that yield the highest returns for shareholders, such as growing the business, leveraging skills through acquisitions, and maintaining strong margins.
Q:What is the outlook for pricing in auto insurance, excluding New York and New Jersey?
A:The book is broadly rate adequate, with strong margins and diminished rate needs. Loss trends and pure premium look good, with frequency being a wildcard. The company will adjust rates based on trends, targeting a mid-90s combined ratio.
Q:Can you elaborate on your approach to artificial intelligence and the ALLIE initiative?
A:The ALLIE initiative aims to reimagine the business model, improve customer value propositions, and reduce costs. Currently in the design and build phase, the company is leveraging generative AI to enhance efficiency and decision-making. They believe the opportunity is significant and are moving quickly to develop the technology.
Q:How will technology help improve retention and personalize customer experiences?
A:Technology will enable personalized offers and communication, reducing labor intensity. The company is focused on tailoring coverage, offering discounts, and using telematics to enhance customer value and retention. The S.A.V.E program is a key initiative in this effort.
Q:What is the status and future of the exclusive agent channel within Allstate brands?
A:The exclusive agent channel has seen a reduction in agent count from over 10,000 to 6,000, with increased productivity and business growth. The company plans to continue growing this channel, leveraging technology and data analytics to deepen customer relationships and expand protection products.
Q:How does Allstate compare to competitors in terms of AI and transformative growth?
A:While competitors are likely using generative AI, Allstate has been working on transformative growth for years, supported by a robust data architecture. The company believes it is well-positioned but acknowledges that competition is strong and evolving.
Q:What is your response to concerns about competition lowering prices and squeezing margins?
A:The company emphasizes its ability to compete in a highly competitive market, citing strong combined ratios and shareholder value creation. They focus on profitable growth and have multiple avenues for expansion, including homeowners insurance, specialty lines, and protection plans.
Q:What is the outlook for auto retention and the impact of transitioning customers to new products?
A:Retention is stable, with efforts to move customers to the affordable, simple, and connected (ASC) product. This transition aims to offer contemporary pricing and deepen customer relationships, which is expected to improve retention.
Q:Why wasn't the share buyback higher given the strong capital position?
A:The share buyback program is based on available capital and is executed over a set period. The company prioritizes shareholder returns and evaluates future buyback programs based on capital availability and strategic needs.
Q:What is the profitability and longevity of nonstandard auto customers?
A:Nonstandard auto customers are profitable despite shorter policy durations. The company focuses on economic returns rather than specific retention metrics, ensuring profitability for the period customers remain with them.
Q:Have the issues with adverse prior year development in commercial lines been resolved?
A:The company believes it is adequately reserved across all categories, including commercial lines. While there have been negative surprises in the past, they did not occur this quarter, and the company feels confident in its current reserves.
Q:What is your view on inflation and its impact on the business?
A:Inflation affects various aspects of the business, including repair costs, bodily injury claims, operating expenses, and investment portfolios. The company monitors inflation closely and adjusts its strategies to manage risks and returns effectively.
Q:How are you managing advertising spend and its efficiency?
A:The company differentiates between upper funnel (brand consideration) and lower funnel (lead acquisition) advertising. Efficiency in lower funnel advertising has improved, and the company continues to refine its strategies to maximize returns.
Q:What is the status of new product filings and business in New York and New Jersey?
A:The company is profitable in both states and has resumed some new business. They are working with regulators to approve the ASC product, which is expected to enhance their ability to write more business in these markets.
Q:Review of Unclear Management Responses
A:Management avoided directly answering questions about their competitive position in AI relative to peers, citing a lack of specific knowledge about competitors' strategies. Additionally, they provided limited details on the timeline and specifics of the ALLIE initiative, as well as the exact impact of inflation on different business segments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI coding
AI efficiency
AI promise
AI work
ALLIE agent
ALLIE market
Agentic
Allstate agent
Allstate brand
Investor
Liability market
Protection Services
SAVE program
auto home
auto homeowner
billing
brand Allstate
brand National
channel National
customer value
date
detail
driver
force brand
home insurance
income month
income share
increase income
initiative
insurance Allstate
mids
model
number
protection plan
protection result
shopping
sophistication
success
technology ecosystem
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Frequently Asked Questions
Where does this earnings call transcript come from?
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Why do some answers appear as “Unclear” or “Inaudible”?
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
