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    ALL
    Earnings call· Jun 2025(Q2 FY25)

    ALLSTATE Q2 FY25 earnings call ALL

    Jul 31, 2025 Source

    Executive summary

    Allstate Q2 FY25 — Strong Underwriting, Profitable Growth, and Capital Returns

    Allstate delivered strong Q2 FY25 results, driven by significant underwriting improvements in its Property-Liability segment and continued growth in Protection Services. The company's transformative growth strategy is yielding profitable market share expansion across diverse distribution channels, supported by new product offerings and enhanced pricing sophistication. While homeowners faced elevated catastrophe losses, management remains confident in long-term returns and is actively managing its investment portfolio and capital allocation to maximize shareholder value.

    Highlights

    5

    • Revenues increased by 5.8% to $16.6 billion in Q2 FY25 compared to Q2 FY24.

    • Adjusted net income was $1.6 billion or $5.94 per diluted share, with a trailing 12-month adjusted net income return on equity of 28.6%.

    • Property-Liability combined ratio improved by 10 points to 91.1% from the prior year quarter, driven by improved underlying trends and $376 million in favorable prior year non-catastrophe reserve reestimates.

    • Auto insurance combined ratio was 86% in Q2 FY25, a 9.9 point improvement YoY, with auto policies in force in active brands increasing 2.4%.

    • Protection Plans revenue grew by 16.6% over the prior year quarter, contributing $51 million in adjusted net income.

    Concerns

    3

    • Homeowners business experienced $1.6 billion in catastrophe losses, leading to a combined ratio of 102% in Q2 FY25.

    • Allstate brand policies in force were negatively impacted by declines in New York and New Jersey, where regulatory approval for new products is pending.

    • Independent agent production for homeowners declined as the company focused on rate adequacy across a number of states.

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Property-Liability (Total)
    Strong results driven by improved underlying trends and favorable reserve reestimates.
    Combined ratio: 91.1%Combined ratio improvement: 10 points YoYFavorable prior year non-catastrophe reserve reestimates: $376 million
    		———$1.3 billion underwriting income
    Auto Insurance
    Broadly profitable, including in previously challenged markets. Favorable frequency trends contributing to improved results. Focus on profitably growing market share.
    Policies in force: 25.2 millionPolicies in force growth (active brands): 2.4% YoYPolicies in force growth (Allstate brand excluding NY/NJ): positive YoYPolicies in force growth (National General): 11.3%Policies in force growth (Direct Auto): 22.8%Pure premium: down almost 3% YoY (due to favorable frequency partially offset by higher severity)
    		—9.9 point improvement in combined ratio—86% combined ratio
    Homeowners Insurance
    Underlying margins remained strong, but results were offset by significant catastrophe losses. Strong conviction in long-term returns and growth capabilities.
    Underlying combined ratio: 58.6%Catastrophe losses: $1.6 billionPolicies in force: 7.6 millionPolicies in force growth: 2.3% YoY10-year combined ratio: approximately 92%
    		———102% combined ratio
    Protection Services
    Significant business with rapid growth, particularly in Protection Plans. Comprised of Protection Plans, Auto Dealer protection, Roadside assistance, Arity, and Identity Protection.
    Policies in force: 170 millionRevenue (LTM): $3.2 billionIncome (LTM): $0.25 billion
    		$867 million——$60 million income
    Protection Plans (within Protection Services)
    Rapid growth in appliance protection and international expansion, with moderating claims and support costs.
    		increased 16.6% YoY——$51 million adjusted net income

    Operational metrics

    29
    Adjusted net income
    $1.6 billion
    Q2 FY25

    Reported alongside GAAP net income of $2.1 billion.

    Adjusted net income return on equity
    28.6%
    trailing 12 months

    Reflects strong operating results.

    Investment income
    $754 million
    Q2 FY25

    From $77 billion investment portfolio.

    Investment portfolio size
    $77 billion
    Q2 FY25

    Proactively managed as an integrated component of enterprise risk and return decision-making.

    Quarterly common stock dividend
    $1.00increased 9%
    quarterly

    Increased earlier this year.

    Common and preferred shareholder dividends paid
    $1.1 billion
    past year

    Part of capital return strategy.

    Share repurchase authorization
    $1.5 billion
    FY25

    Authorization for share repurchases.

    Share repurchases executed
    $445 million
    Q2 FY25

    Under the $1.5 billion authorization.

    Total policies in force
    $37.7 millionincreased 208 million (4.2%) YoY
    Q2 FY25

    Reflecting successful acquisition of National General and rapid growth in direct sales.

    Personal property-liability policies in force growth
    0.8%YoY
    Q2 FY25

    Led by Allstate Protection Plans.

    New business policies
    10.8 millionalmost doubled 5 years ago
    last 12 months

    Spread almost evenly between Allstate agents, independent agents, and direct channels.

    Property-Liability annual earned premiums
    $56 billion
    annual

    Described as a terrific business with excellent underwriting results.

    Protection Plans revenue growth
    16.6%YoY
    Q2 FY25

    Reflecting rapid growth in appliance protection and international expansion.

    Arity driving data
    2 trillion
    cumulative

    Expanding services to insurance companies and mobility intelligence.

    Miles per operator drop (Arity data)
    3%drop
    last year or so

    Likely contributing to favorability in auto frequency.

    Auto insurance new business growth
    24.8%YoY
    Q2 FY25

    Distributed almost evenly across distribution channels.

    Exclusive agent productivity increase
    20%up over
    Q2 FY25

    Result of multi-year transformation journey in the agency channel.

    Esurance brand annual spend (historical)
    $200 million - $250 million
    annual (prior)

    Historical spend on Esurance brand before its sunsetting, cited as context for strategic shift.

    GEICO annual marketing spend (historical)
    $750 million - $1 billion
    annual (prior)

    Competitor marketing spend cited as context for Esurance brand strategy.

    Allstate brand direct product pricing vs agent
    7% to 8%
    current

    Allstate branded ASC product sold directly over the web is cheaper than through an agent, reflecting the value of agent assistance.

    Cars in the United States
    280 million
    current

    Context for discussion on autonomous driving and fleet turnover.

    Value of cars in the United States
    $4 trillion
    current

    Context for discussion on autonomous driving and fleet turnover.

    Cost of side view mirror (current)
    $1,000up from $200
    current

    Due to embedded technology and increased complexity, contributing to higher repair costs.

    Cost of side view mirror (prior)
    $200now $1,000
    prior

    Prior cost of side view mirror, now significantly higher due to technology.

    Remaining market share opportunity
    90%
    current

    Management's view on the portion of the market Allstate has yet to capture.

    Customer interactions to improve (SAVE program)
    25 million
    FY25

    Target for the SAVE program to improve customer value and retention.

    Personal property-liability price-related reductions (SAVE program)
    10 million
    FY25

    Specific target within the SAVE program for price-related customer value improvements.

    SAVE program goal achievement
    exceeded 25 million goal
    FY25 YTD

    The company has already achieved its 25 million goal for customer interactions, but is slightly behind on the 10 million price-related reductions.

    Allstate agents bundling rate (homeowners)
    80%all-time highs
    current

    Reflects strong bundling success by exclusive agents.

    Industry KPIs

    9
    MetricValueDetails
    Combined ratio91.1%%
    Capital returns$445 million repurchased; $1.1 billion dividends paidUSD
    ROE operating ROE28.6%%
    Catastrophe losses$1.6 billionUSD
    Net investment income$754 millionUSD
    Retention persistencystabilized
    Net premiums written earned$56 billionUSD
    Statutory regulatory capital$11 billionUSD
    Prior year reserve development$376 millionUSD

    Product announcements

    5
    ProductTypeDetails
    New Allstate branded auto insurance productslaunch
    New Allstate branded homeowners insurance productslaunch
    National General Custom360 productlaunch
    Esurance branddiscontinuation
    Encompass branddiscontinuation

    Deals & partnerships

    2
    nullDivestiture of Employee Voluntary Benefits businesspart of combined $3.25 billion

    Completed on April 1.

    nullDivestiture of Group Health businesspart of combined $3.25 billion

    Completed on July 1.

    Risks & headwinds

    7
    Catastrophe losses in homeowners businessQ2 FY25

    $1.6 billion

    Mitigation: Strong underlying margins (58.6% underlying combined ratio), robust reinsurance program ($11B limit, $825M Cat Ag limit), and long-term conviction in homeowners profitability (92% combined ratio over 10 years).

    Declining policies in force in inactive brands (Esurance, Encompass)Ongoing

    Continued decline in policies in force

    Mitigation: Phasing out these brands and replacing them with Allstate brand direct and National General Custom360 products; impact expected to diminish as books get smaller.

    Regulatory challenges in New York and New Jersey for auto growthQ2 FY25, expected to improve in H2 FY25

    Allstate brand policies in force were negatively impacted by declines

    Mitigation: Achieved underwriting profitability in both states; awaiting regulatory approval for new Affordable, Simple, and Connected auto products to broaden risk aperture and lean into growth.

    Increased risk of inflation due to new trade policiesQ2 FY25 (impact on investment portfolio)

    Reduced the public equity holdings

    Mitigation: Proactive management of the investment portfolio, adjusting positions as impact becomes clearer.

    Increased cost of repairing cars due to embedded technologyOngoing

    Side view mirrors are worth $1,000 now instead of $200

    Mitigation: Leveraging Arity and telematics to improve overall efficiency of personal transportation system; pricing accurately for each individual customer with sophisticated data.

    Affordability issues leading to customer churnRecent quarters

    Retention levels stabilize, but they're still down relative to where they were a year ago

    Mitigation: SAVE program to proactively reach out to customers, ensure discounts, and offer affordable prices; less need for rate increases in the near term.

    California homeowners market availabilityOngoing

    Stopped writing new business over a long period of time

    Mitigation: Reviewing details of the sustainable insurance strategy and wildfire models announced by Commissioner Lara; will make a filing and reassess.

    What to watch in Q3 FY25

    5

    Auto PIF growth in New York and New Jersey

    second half of the year
    Currentnegatively impacted by declines
    Targetresume growth

    Why it matters

    These states were previously profit-challenged and are now profitable; growth here would signal successful regulatory engagement and product rollout, expanding the addressable market.

    Approval of pending requests for our new Affordable, Simple and Connected auto insurance products in these states would open these markets for growth as margins have improved significantly over the course of 2025. So we're optimistic that, that will happen here in the second half of the year.

    Q&A highlights

    7

    Seeking clarity on the drivers of future auto PIF growth, considering declining inactive brands and potential growth in previously challenged states.

    Management expects the decline from inactive brands to diminish. Transformative growth components (new products, technology, marketing, distribution) are creating tailwinds. New York and New Jersey are now profitable, and regulatory approval for new products is expected to open these markets for growth in H2.

    “The punchline in those two states is, we're now generating an underwriting profit, both in New York and New Jersey. We've been working closely with the two insurance departments over the last several years to get our rates to an adequate level, and we feel confident that we're at a point where we are rate adequate given the rates we've received approval for, including upcoming rates in New York that are going to be effective in August.”

    asked by Jamminder Bhullar · answered by Mario Rizzo

    2 min read7 chapters

    Detailed Narrative

    01

    Transformative Growth Strategy Progress

    Allstate is in Phase 4 of its five-phase transformative growth strategy, implementing new, more affordable, simple, and connected auto insurance products in 40 states and homeowners products in 16 states. The strategy also includes expanding risk appetite through National General, reducing underwriting expenses for competitive pricing, increasing pricing sophistication and marketing, enhancing claims processes, and deploying new technology systems leveraging advanced computing and large language models.

    02

    Expanded Customer Access and Distribution

    The company has significantly expanded customer access, with new business almost doubling over the last five years to 10.8 million policies over the last 12 months. Distribution is broad, with new business spread almost evenly across Allstate agents, independent agents, and direct channels (call centers/web), leading to total policies in force of 37.7 million.

    03

    Investment Portfolio Management

    Allstate proactively manages its $77 billion investment portfolio, which generated $754 million in income for the quarter, representing a total return of 1.4% for the quarter and 5.4% for the last 12 months. The portfolio is diversified across fixed income and growth assets, with public equity holdings reduced in Q2 due to increased inflation risk from new trade policies.

    04

    Auto Insurance Profitability and Growth

    The auto book of business is now broadly profitable, including in previously challenged markets like California, New York, and New Jersey. The company is focused on investing in profitably growing auto market share, with auto policies in force in active brands increasing 2.4% YoY. Management expects to resume growth in New York and New Jersey once regulatory approval for new products is secured.

    05

    Homeowners Business Resilience

    Despite $1.6 billion in catastrophe losses in Q2 FY25, the homeowners business maintains strong underlying margins (underlying combined ratio of 58.6%). The company has strong conviction in its ability to grow homeowners and generate excellent long-term returns, citing a 10-year combined ratio of approximately 92%. New Affordable, Simple, and Connected homeowner products are rolling out in 16 states, and Allstate agents are bundling at historically high rates (around 80%).

    06

    Capital Management and Shareholder Returns

    Allstate completed divestitures of its Employee Voluntary Benefits and Group Health businesses for a combined $3.25 billion, reallocating capital to strategic growth opportunities. The company returned $1.1 billion in common and preferred shareholder dividends over the past year, increased the quarterly common stock dividend by 9% to $1 per share, and repurchased $445 million of common stock under a $1.5 billion authorization.

    07

    Reinsurance Program Enhancement

    Allstate's total catastrophe reinsurance limit purchased this year is over $11 billion, up $2 billion from last year, with a 10% risk-adjusted decrease in cost. The program includes $825 million of Cat Ag limit, with $767 million remaining after expected recoveries, demonstrating a robust approach to managing risk and capital requirements.

    AI-generated summary of the company’s earnings call. Not investment advice.