ALLSTATE (ALL) Q4 FY25 earnings call: guidance and Q&A

How will the regulatory environment change over the next 24 months regarding rate relief, especially given proactive approaches in some states?

Tom Wilson stated that affordability is a countrywide issue, and the focus should be on reducing costs, not process. He highlighted tort reform in Florida (leading to 5.9% rate reductions) and efforts in Louisiana and Georgia as positive examples. He expressed hope that states would address litigation costs, which drive up bodily injury claims.

“I'm hopeful that what this will do is put the attention on that needs to change. Like people don't need to be paying for lawyers and for fender bender lawsuits.”

asked by Gregory Peters · answered by Thomas Wilson

With Allstate lowering prices for 7.8 million customers and other companies becoming aggressive, what is the current competitive landscape in auto and home?

Tom Wilson emphasized Allstate's long-standing presence in competitive markets and its differentiated product, attractive pricing, strong brand, broad access, and sophisticated advertising. He noted that transformative growth has helped Allstate gain market share, with 20 states growing policies by over 4%. Jesse Merten added that investments in affordability, expense reduction, claims focus, and broad distribution (EA, IA, direct) position Allstate competitively across product lines.

“We've always been in a highly competitive market in all of our products. So this is nothing new.”

asked by Gregory Peters · answered by Thomas Wilson

Does Slide 11 (auto PIF growth) include decreases from legacy and Encompass policies, and when will the drag from non-active brands end?

Jesse Merten confirmed that Slide 11 includes the impact of inactive brands. Tom Wilson clarified that the focus is on state-level growth rather than brand-specific drag, aiming to convert "red states" (not growing) to "blue states" (growing). Jesse added that the rollout of Custom 360 (in 36 states) effectively replaces the Encompass brand.

“We hold ourselves accountable for total growth. We're not -- I mean, we do show the active brands because people found that interest using active brands up 3.3%. But we should be accountable for our overall growth.”

asked by Yaron Kinar · answered by Jesse Merten

Is a 2- or 3-year look back too short to determine "excess profitability" in insurance?

Tom Wilson stated that "excess profits" is not a concept he supports, especially in homeowners where the industry often loses money. He argued that Allstate's better profitability in homeowners reflects superior operations, not excess. He reiterated that the focus should be on reducing underlying costs, as insurance is a "cost-plus" product.

“I don't think that's excess, I just think we're better. And so we have better products, better costs, better -- and so I'm sort of not in the camp of people should be thinking about excess profits.”

asked by Yaron Kinar · answered by Thomas Wilson

How has the new business penalty trended, and should margins normalize quicker due to new apps growth?

Tom Wilson explained that increased pricing sophistication generally leads to less new business penalty. While acquisition costs exist, the math works to grow and achieve target margins. Jesse Merten added that the company evaluates new business penalty state-by-state, considering mix (e.g., non-standard business is priced to be profitable immediately) and overall profitability management.

“The system works like the math works to grow and handle whatever the new business penalty is whether that's non standard or standard.”

asked by Robert Cox · answered by Thomas Wilson

What is Allstate's view on the pace of autonomous driving development and its potential impact (threat or opportunity) on personal auto insurance?

Tom Wilson stated Allstate has been watching autonomous driving for 15 years, viewing it as "safer driving." He noted that while it reduces frequency, it increases severity due to expensive equipment. Allstate's telematics data (over 2 trillion miles) helps them adapt. He believes the pace of change is slower than software due to the $4 trillion hardware turnover, allowing time to adapt.

“Autonomous driving is, think of it as almost like safer driving. And so you have fully autonomous might be the safest because we take people completely out of it.”

asked by Jian Huang · answered by Thomas Wilson

What inning is Allstate in regarding auto claims process improvements, and are the benefits proprietary or will the industry catch up?

Jesse Merten described Allstate as being in the "middle innings" of its claims journey, with ongoing efforts in AI-enabled technologies and quality focus. He asserted that these improvements are proprietary to Allstate, driven by internal operational excellence, and not easily replicable by competitors through third-party vendors.

“I would put us middle innings in the journey, certainly not early innings, but not done.”

asked by Michael Zaremski · answered by Jesse Merten

How do New York and New Jersey fit into the policy growth buckets, and what is the status of opening up underwriting guidelines and new product approvals there?

Jesse Merten stated that Allstate is profitable in both states but not growing. New Jersey recently approved the ASC Auto product for implementation in February, which is a positive step for growth. New York is still awaiting ASC product approval, though Allstate is actively engaged with regulators. The company has loosened some underwriting restrictions in both states.

“New Jersey, we recently got approval for implementation of the ASC product, ASC Auto product in February. So we're going to be with the new product in market.”

asked by David Motemaden · answered by Jesse Merten