With ~$840M of favorable auto prior-year development, doesn't that imply last year was more profitable than reported and that margins must deteriorate from here?

Wilson directed to Slide 9, noting the favorable development was concentrated in 2023 and 2024 (auto CRs now 95.4 and 90.0) with very little in 2025, which hasn't fully developed. He expressed confidence in continuing to earn better-than-industry combined ratios but acknowledged margins would normalize from current highs, and that trading some margin for growth is accretive to the valuation multiple. “to the extent we can drive growth and give up some margin that works to improve the shareholders' valuation multiples. That said, like we're okay earn what we have right now.”

How should investors think about prioritizing the growing holding-company cash — services expansion, other uses, or larger buybacks?

Wilson built up from the 44% adjusted return on capital (double the S&P), through organic P-L growth (with a caution against short-term growth 'sugar highs'), leveraging existing capabilities and investing in the portfolio and technology, to selective 'be a better owner' acquisitions like SquareTrade. Dugenske added that some capital-consumptive technology and portfolio investments are less visible than transactions, and emphasized the accelerated and continuing buyback pace. “we actually accelerated our share repurchase program throughout the quarter. And that wasn't just a onetime thing. We continue to accelerate it. So one way to look at repurchases is what the quantum is, but also the pace matters, too.”

How is Allstate expanding AI to improve the expense ratio, and how is it positioned versus peers, one of which has cut workforce more aggressively?

Wilson said it is hard to gauge peers and that Allstate does not disclose everything for competitive reasons. He distinguished near-term generative-AI expense cuts (call-center reductions, automating millions of emails) from the larger agentic-AI opportunity (ALLIE), stressed the difficulty of building the ecosystem and governance, and claimed an edge from not having significant legacy-technology access constraints across most systems. “The easiest way thing to do is generative AI... It cuts out expenses, you can cut out call center people... I think the real benefit from this will come from a agentic AI, where agents are talking to agents and making decisions in subsecond real-time response rate that people then can't compete with you.”

ALL

ALLSTATE (ALL) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Financials· Apr 30, 2026

Source: earnings call transcript

Executive summary

The Allstate Corporation Q1 FY26 — profitable share gains across auto and homeowners with accelerated buybacks

Allstate framed the quarter around a message that it can grow share while holding attractive margins by pulling a broad set of competitive levers — pricing sophistication, expense and claims efficiency, new products, marketing and distribution — rather than simply cutting price, and Q1 rate action netted to roughly neutral across the book even as underlying profitability ran well ahead of targets. The forward stance is offensive: lean into organic property-liability growth (especially an under-appreciated homeowners book where it profitably gains share against a soft competitive set), keep investing in the ALLIE agentic-AI ecosystem to lower cost, and accelerate capital return via the new $4B buyback. Management was candid that today's sub-target combined ratios are flattered by favorable reserve development and will normalize, positioning share gains — even at slightly lower margin — as the value-accretive trade.

Highlights

Property-liability recorded combined ratio of 82.0% with underlying combined ratio of 80.3%, a 2.8-point YoY improvement; auto underlying combined ratio (ex-reserve, ex-cat) of 89.5%, 1.7 points better YoY
Adjusted net income of $2.8B ($10.65 per diluted share); net income return on equity of 48.4% over the last 12 months and 44% adjusted net income return on capital
Total policies in force up 2.5% (property-liability +2.3%, auto +2.6%, homeowners +2.5%) with record new business across all distribution channels; earned premiums up 5.5%
Investment income up 9.8% to $938M; portfolio book value up ~24% (~$17B) since Q1 2024 with 4.2% total return over the last 12 months
Launched a new $4B share repurchase program ($3.6B remaining, ~7% of shares) after completing the prior $1.5B program; $881M returned to shareholders in the quarter

Concerns

Management flagged that current auto margins (running well above target) will normalize/deteriorate over time from favorable prior-year reserve releases concentrated in 2023 and 2024
Homeowners expense ratio rose YoY on higher bundling-related commissions; management declined to forecast full-year expense improvement
Allstate Protection Plans adjusted net income of $41M was down slightly YoY on higher claims costs; Arity posted a higher loss on a restructuring charge tied to reduced headcount
Performance-based investment portfolio returns of 7.6% (1yr) and 5.9% (3yr) remained below longer-term historical averages
Auto policies in force in the remainder of the country fell 0.5% versus vehicle-registration growth of 0.6%, driven by intentional share reduction in two large states with profitability challenges; California homeowners market still needs further reform

Guidance & targets

Category	Target	Timeline	Confidence
Capital return / share repurchase	New $4B share repurchase program with $3.6B remaining; accelerated repurchase pace high materiality	New authorization, open-ended	High
Underwriting margin target (auto)	Mid-90s underlying combined ratio target for auto insurance high materiality	Ongoing / medium-term	High
Growth trajectory	Goal of earning attractive returns and growing in 2027 and 2028 medium materiality	2027-2028 · FY27	Medium
Expense / margin (homeowners)	Higher homeowners expenses expected to persist due to bundling investment, while still earning strong returns; no formal expense forecast given low materiality	FY26	Low
Investment allocation	Equity allocation to stay dynamic but well-governed within historical ranges; will not approach an 80% equity allocation low materiality	Ongoing	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Property-Liability (total) Both auto and homeowners profitability were better than targeted levels, aided by strong underlying performance, lower catastrophes, and favorable prior-year reserve releases. Total policies in force growth: 2.3%Auto policies in force growth: 2.6%Homeowners policies in force growth: 2.5%Underwriting income: $2.7B	—	Written premiums +2.3%; earned premiums +5.5%	—	Recorded combined ratio 82.0%; underlying combined ratio 80.3% (2.8 pts better YoY); underwriting income $2.7B
Auto insurance Auto profitability improved faster than originally estimated in 2023/2024; management expects current strong margins to normalize over time. Q1 rate changes in 39 locations netted to no change (23 down, 16 up, 10 both). Underlying combined ratio: 89.5%Prior-year re-estimated combined ratio: 95.4 (2023), 90.0 (2024)Rate action: net neutral across book	—	Policies in force +2.6%	—	Underlying combined ratio 89.5% (ex-reserve, ex-cat), 1.7 pts better YoY; 5yr/10yr underlying avg ~95%/94%
Homeowners insurance Management called homeowners an under-appreciated growth asset; expense ratio rose YoY on higher bundling commissions. A comprehensive nationwide reinsurance program was placed to reduce cat-tail capital and dampen earnings volatility. Recorded combined ratio: 83.5%Average premium change: +5.7% YoY (keeping pace with loss costs)Underwriting income (5yr/10yr): $3.9B / $7.9B	—	Policies in force +2.5%; average premiums +5.7%	—	Recorded combined ratio 83.5%; 5yr/10yr recorded avg 93.5/92
Protection Services (total) Comprised of five businesses: protection plans, dealer services, roadside, Arity, and identity protection. Continued profitable growth. Adjusted net income: $47MRevenue growth: 7.2%	—	Revenue +7.2%	—	Adjusted net income $47M
Allstate Protection Plans Largest business in the segment; protects mobile phones, consumer electronics, major appliances, and furniture. Net income down slightly on higher claims costs. Revenue growth: 13.5%Adjusted net income: $41M	—	Revenue +13.5%	—	Adjusted net income $41M (down slightly YoY)
Arity Global intelligence business; higher loss this quarter reflects a restructuring charge related to reduced employee count.	—	—	—	Higher loss YoY

ALL operating KPIs by quarter

ALL operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Mar 2025 Q1 FY25	Jun 2025 Q2 FY25	Sep 2025 Q3 FY25	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Combined ratio Property-Liability	86.9% On the bottom half of the table, you see the strong margins delivered during the quarter with the total Property-Liability recorded combined ratio of 86.9%, reflecting a 2.6 point improvement compared to the prior year. Source: earnings call transcript	97.4% The combined ratio of 97.4% was 4.4 points above the prior year quarter, primarily due to a $3.3 billion in gross catastrophe losses during the quarter, which was significantly higher than the first quarter of last year. Source: earnings call transcript	91.1% The combined ratio of 91.1% was a 10-point improvement from the prior year quarter, driven by improved underlying trends and $376 million in favorable prior year non-catastrophe reserve reestimates. Source: earnings call transcript	—	82% The property-liability recorded combined ratio was 82% and the underlying combined ratio is 80.3%, a 2.8 point improvement from the prior year. Source: earnings call transcript	—	—
Combined ratio Auto insurance	—	—	86% Shifting to Auto Insurance on the top right, the combined ratio was 86% in the quarter, a 9.9 point improvement from the second quarter of 2024 due to improved frequency and moderating severity trends. Source: earnings call transcript	—	—	83.3% Auto insurance generated an 83.3% combined ratio, improving 2.7 points from the prior year. Source: earnings call transcript	—
Policies in force Property-Liability	37.5M The chart to the left shows the composition of property liabilities 37.5 million policies in force. Source: earnings call transcript	37.7M In the chart to the left, you can see the composition of Property-Liability's 37.7 million policies in force. Source: earnings call transcript	37.9M In the chart to the left, you can see the composition of Allstate's 37.9 million Property-Liability policies in force with growth results for the quarter shown at the bottom of the chart. Source: earnings call transcript	—	—	—	+0.5%
Policies in force Auto	24.9M Auto is the largest at 24.9 million and homeowners represents approximately 20% of policies in force. Source: earnings call transcript	25.1M Auto insurance in the dark blue makes up 2/3 of total policies and ended the quarter with 25.1 million policies in force, which was down 0.4% compared to last year. Source: earnings call transcript	25.2M Auto insurance with 25.2 million policies in force, shown in dark blue, accounts for 2/3 of total property liability policies and year-over-year growth turned positive during the quarter, ending the second quarter at plus 0.5% above prior year. Source: earnings call transcript	—	—	—	+0.4%
Policies in force Homeowners	—	7.5M Homeowners with 7.5 million policies is about 20% of the total and continued to grow this quarter, increasing 2.5% versus prior year. Source: earnings call transcript	7.6M The homeowners business accounts for approximately 20% or 7.6 million property-liability policies and continued to grow in the second quarter, increasing 2.3% relative to the prior year quarter. Source: earnings call transcript	—	—	—	+1.3%
Policies in force Protection Services	—	—	170M Protection Services, while smaller, is still a really significant business with 170 million policies in force, $3.2 billion of revenue and $0.25 billion of income over the last 12 months. Source: earnings call transcript	171M It has 171 million policies in force, generates $3.3 billion in revenue and had $211 million of income over the last 12 months. Source: earnings call transcript	—	177M The segment has 177 million policies in force, contributing $3.4 billion to our top line and generating over $200 million in adjusted net income in the last 12 months. Source: earnings call transcript	—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
ALLIE (Allstate Large Language Intelligent Ecosystem)	roadmap	In development / building
Customer engagement sidekick (AI agent tool)	milestone	In market today
Direct AI sales product	milestone	Live pilot in 3 states
Free identity protection benefit	update	Recently added
Comprehensive nationwide homeowners reinsurance program	milestone	Placed this quarter (disclosed Q1 FY26)

Deals & partnerships

SquareTrade acquisition (past / growth acquisition)

Growth acquisition that leveraged the Allstate brand and capabilities, expanded protection offerings, and brought strong retail distribution partnerships.

National General acquisition (past)

Acquisition cited as strengthening the independent-agent business within the property-liability franchise.

Reinsurers (unnamed) reinsurance program

Comprehensive nationwide homeowners reinsurance program placed and disclosed this quarter.

Third-party homeowners carriers (unnamed) brokerage arrangement sales 'a number with a B on it'

Allstate describes itself as likely the biggest broker of homeowners insurance in the country, placing other carriers' products for its agency customers where it cannot offer its own (e.g., Florida, California).

Risks & headwinds

Auto margin normalization from currently elevated levels Ongoing / future accident years

Auto underlying combined ratio of 89.5% is well below the mid-90s target; favorable reserve development concentrated in 2023 (now 95.4) and 2024 (now 90.0)

Mitigation:Consistent statistical reserving standards, external actuarial reviews, and willingness to trade some margin for growth to lift the valuation multiple

Homeowners expense ratio increase Likely to persist through FY26

Expense ratio up YoY on higher bundling-related commissions (not quantified)

Mitigation:Higher spend drives good lifetime value; homeowners is less price-sensitive than auto

Protection Plans higher claims costs Q1 FY26

Adjusted net income of $41M down slightly YoY despite 13.5% revenue growth

Arity restructuring / operating loss Q1 FY26

Higher loss reflecting a restructuring charge tied to reduced employee count (not quantified)

Performance-based investment returns below historical average Trailing 1yr / 3yr

7.6% (1yr) and 5.9% (3yr), below longer-term averages

Mitigation:Returns remain above industry benchmarks; active management approach

Regulatory environment in difficult states (California, and two large auto states) Ongoing

Unquantified; auto PIF in remainder of country -0.5%, driven by intentional share reduction in two large states

Mitigation:Intentional share reduction until adequate returns are achievable; optimism on New York litigation reform and California still needing further homeowners changes

Oil/gas price impact on auto frequency and severity (Strait of Hormuz) Uncertain / near-term

Unquantified; ~1/3 of driving is discretionary; higher petroleum prices flow through parts and shingles

Mitigation:Daily claim-count tracking and telematics (50M cars every 15 seconds); no current severity increase observed; not concerned about profitability impact

Legal/litigation trend uncertainty on reserves Ongoing

Unquantified; 'what you never really know is what's going to happen with legal trends'

Mitigation:Centralized reserving team separate from pricing actuaries; advanced analytics to get more granular on individual case reserves

Catastrophe tail risk in homeowners Ongoing

Unquantified; addressed via nationwide reinsurance program

Mitigation:Comprehensive nationwide reinsurance program reduces cat-tail capital and dampens earnings volatility

Q&A highlights

Given strong loss ratios, is there an opportunity to lean into pricing more aggressively this year, and does it differ across auto, homeowners, and bundled customers?

Wilson and Merten reframed away from price as the sole lever, describing the three-element 'Rubik's Cube' system (operational levers, advanced analytics, organizational accountability) that manages profit and growth granularly by state/product/coverage. They pointed to the net-neutral Q1 rate action (23 states down, 16 up, 10 both) as evidence of depth, and declined to disclose the forward 6-12 month rate plan for competitive reasons.

“You saw in the supplement that we changed auto rates in 39 locations and that netted to effectively no change in rate. If you scale that back, there were 23 states where we lowered rates. There are 16 states of increased rates. And because of our rating sophistication and segmentation, 10 of those states, we did both.”

asked by Jack (on for Mike Zaremski) · answered by Jesse Merten

4 min read 7 chapters

Detailed narrative

Financial results and profitability

Total revenues rose 3% to $16.9 billion. The property-liability recorded combined ratio was 82.0% and the underlying combined ratio was 80.3%, a 2.8-point YoY improvement, with both auto and homeowners running better than targeted levels aided by strong underlying performance, lower catastrophes, and favorable prior-year reserve releases.

Net income was $2.4 billion and adjusted net income was $2.8 billion, or $10.65 per diluted share. Net income return on equity was 48.4% over the trailing twelve months, and management cited a 44% adjusted net income return on capital — roughly double the typical S&P 500 return — at what it called an attractive PE multiple.

Property-liability underwriting income was $2.7 billion.

Growth strategy and competitive levers

Management's core message was that Allstate competes with a broad set of tools — sophisticated analytics, new products, expanded benefits, bundled offerings, marketing and broad distribution — not just lower price, allowing it to grow while maintaining attractive margins. Jesse Merten described the pricing engine as a 'Rubik's Cube' of three interlocking elements: operational levers, advanced analytics (billions of price points per state), and organizational roles/accountability via a matrix structure of state managers, a chief actuary, and distribution leads.

In Q1, rate changes were implemented in 39 states/locations netting to effectively no overall change — 23 states lowered rates, 16 raised them, and in 10 states the company did both. All distribution channels posted higher new business, a record in aggregate.

Market share gains in auto and homeowners

Allstate grew auto market share in 29 states in 2025, representing 57% of countrywide premiums, where policies in force grew 4.3% and outpaced vehicle-registration growth. In the remainder of the country PIF fell 0.5% versus registration growth of 0.6%, driven heavily by two large states where Allstate is intentionally reducing share on profitability challenges.

Slightly more of the share gain came from medium and smaller carriers than from the top-5. In homeowners, Allstate grew market share across 83% of the U.S. market — in 41 states that had 4.1% PIF growth in 2025 — a book management repeatedly called an under-appreciated growth asset given a soft competitive set and rising severe-weather demand.

Reserve development and margin normalization

Favorable prior-year reserve development showed auto profitability improved faster than originally estimated: the 2023 auto combined ratio is now estimated at 95.4 (vs. 'not overshooting much') and 2024 at 90.0, with very little re-estimation yet in 2025 as that year has not fully developed.

An analyst cited roughly $840 million of net favorable prior-year development in auto. Management applies the same statistical standards to every accident year and expects advanced computing to let it get more granular on individual case reserves. It signaled current sub-target combined ratios (e.g., the 89.5% auto underlying) are unusually strong and will normalize over time, and that it is comfortable trading some margin for faster growth to lift the valuation multiple.

Protection Services and investment portfolio

Protection Services grew revenue 7.2% YoY and generated $47 million of adjusted net income across its five businesses. Allstate Protection Plans, the largest, grew revenue 13.5% but posted $41 million of adjusted net income, down slightly on higher claims costs; Arity recorded a higher loss on a restructuring charge tied to reduced headcount.

Investment income rose 9.8% to $938 million as portfolio book value grew ~24% (~$17 billion) since Q1 2024. The trailing-12-month portfolio return was 4.2%; performance-based returns of 7.6% (1yr) and 5.9% (3yr) were below longer-term averages but above benchmarks. Equity holdings were roughly doubled since September to about 12% of the portfolio.

AI strategy — ALLIE and agentic AI

Allstate is building ALLIE (Allstate Large Language Intelligent Ecosystem) to harness agentic AI on top of its transformative-growth technology platform. Management distinguished generative AI (near-term expense reduction — automating call-center work and millions of emails) from agentic AI (agents transacting with agents in sub-second real time), which it views as the larger prize.

It claimed a competitive edge because, unlike some peers, it lacks major legacy-technology access constraints across most systems. Customer-facing tools cited include a 'customer engagement sidekick' now in market and a product where AI is selling directly and closing policies in three states as a pilot.

Regulatory environment and capital deployment

Management said California still needs significant changes before its homeowners market can be accurately priced with easing availability, despite recent intervener-process reforms. It was optimistic about potential New York reform of 'fender bender' litigation costs under Governor Hochul, which it said would open a large auto growth market given Allstate's strong position in the seven boroughs.

On capital, the company framed a hierarchy: earn high returns on existing capital (44%), deploy into organic P-L growth ($3 billion of economic capital over three years supporting premium growth), strengthen the business (technology, National General, investment portfolio), pursue selective growth acquisitions (SquareTrade), and return the rest to shareholders.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.