The Allstate Corporation (ALL) Q4 2025 Earnings Call Transcript

New auto and homeowners insurance products: Rolled out affordable, simple, and connected auto insurance in 43 states and new homeowners insurance in 31 states. ASC renters available in 30 states. Custom 360 auto and homeowners insurance available in 36 states.

Market expansion in Protection Services: Protection Services segment grew policies in force by 3.3% to 172 million, with revenue increasing 11.7% to $3.3 billion. Domestic revenue increased 8.1%, and international revenue grew 39.7%.

Geographic growth in auto insurance: Auto insurance policies grew in 38 states, representing over 70% of countrywide written premium. 20 states experienced policy growth of at least 4%.

Expense reduction and pricing precision: Reduced adjusted expense ratio by 6.6 points since 2018, enabling lower prices while maintaining margins. Enhanced pricing models for accuracy.

Claims process improvements: Optimized inspection methods, adjuster training, and advanced computing for physical damage claims. Redesigned injury claims model to accelerate payments and control liability.

Transformative growth initiative: Increased personal lines new business from 5.5 million in 2019 to 11.6 million in 2025. Policies in force rose from 33.5 million to 38.1 million. Expanded distribution channels and marketing investment to $2.1 billion.

Shareholder returns: Returned $2.2 billion to shareholders in 2025 through dividends and share repurchases. Authorized a $4 billion share repurchase program.

Insurance Affordability: Challenges in improving affordability due to rising physical damage costs (47% increase over 5 years), bodily injury claims (52% increase), and uninsured/underinsured motorist costs (72% increase). These are driven by inflation, higher settlements, and lack of enforcement of insurance coverage laws.

Litigation Costs: Increased litigation, particularly in states like New York, where bodily injury settlements are twice the national average, adds to costs. Efforts to reduce litigation through tort reform are ongoing but not uniformly effective.

Regulatory and Legislative Challenges: Changes in laws or regulations that force insurance companies to operate at a loss at the underwriting level could destabilize the market and reduce affordability for consumers.

Supply Chain and Inflation Impact: Rising costs for vehicle repairs and replacements, driven by used car price inflation during the pandemic, have increased insurance costs. Although inflation is reversing, it remains a challenge.

Operational Execution Risks: The transition to new platforms and decommissioning of legacy systems under the transformative growth initiative could pose risks to operational stability and efficiency.

Market Competition: Efforts to expand market share through competitive pricing and new product offerings require significant investment, such as the $2.1 billion marketing spend in 2025, which could pressure margins if not managed effectively.

Economic Uncertainty: Broader economic conditions, including a tighter capital and liquidity backdrop, could impact investment returns and financial stability.

Insurance Affordability: Allstate is addressing insurance affordability by focusing on cost reductions and leveraging legislative changes. Physical damage costs are expected to decrease as inflation reverses, and tort reform in states like Florida, Louisiana, and Georgia is anticipated to reduce litigation costs. The SAFE program reduced premiums for 7.8 million customers by 17% on average in 2025. Auto insurance rates were reduced in 32 states with an average reduction of 9%.

Transformative Growth Initiative: Allstate is in Phases 4 and 5 of its transformative growth initiative, focusing on rolling out new platforms and retiring legacy systems. The initiative has reduced the adjusted expense ratio by 6.6 points since 2018, enabling lower prices while maintaining margins. New products, such as affordable, simple, and connected auto and homeowners insurance, are being expanded across multiple states. Marketing investments have increased to $2.1 billion in 2025, driving customer acquisition and policy growth.

Protection Services Segment: The Protection Services segment is projected to grow, with policies in force increasing by 3.3% to 172 million in 2025. Revenue is expected to continue its upward trend, with domestic revenue increasing by 8.1% and international revenue by 39.7% in 2025. The segment is focusing on expanding protection plans both domestically and internationally.

Property-Liability Business: The Property-Liability business is expected to sustain strong growth, with auto insurance premiums projected to grow by 4.4% and homeowners insurance premiums by 15%. Auto policy growth is expected to continue at 2.3%, and homeowners policy growth at 2.5%. The auto insurance combined ratio is expected to remain around 90%, and the homeowners insurance combined ratio is targeted in the low 90s, with an underlying combined ratio in the low to mid-60s.

Investment Portfolio: Net investment income is projected to rise further, following a $350 million increase in 2025. The total portfolio carrying value increased from $73 billion to $83 billion, driven by operating and investment cash flows. Market-based assets generated a 6.1% total return, and performance-based investments delivered a 5.8% return in 2025.

Shareholder Returns: Allstate plans to return significant cash to shareholders, with a $4 billion share repurchase program authorized for 2026. The quarterly stock dividend will increase by 8% to $1.08 per share, payable in April 2026. Over the last 5 years, Allstate has repurchased 18% of common shares outstanding, and 39% over the last 10 years.

Cash returns to shareholders: In 2025, Allstate paid over $2.2 billion in common shareholder dividends and share repurchases.

Quarterly stock dividend increase: The quarterly stock dividend will increase by 8% to $1.08 per share, payable in cash on April 1, 2026, to stockholders of record at the close business on March 2 of 2026.

Share repurchase program: A $4 billion share repurchase program has been authorized and execution will begin upon completion of the existing $1.5 billion share repurchase program, which will be completed in the first quarter of 2026.

Historical share repurchase: In the last 5 years, Allstate has purchased 18% of common shares outstanding. In the last 10 years, Allstate has purchased 39% of shares outstanding.