Q4 2024 Earnings Summary
- Allstate has a strong track record of returning capital to shareholders through significant share repurchases. Since going public, Allstate has repurchased approximately $41.5 billion of its stock, representing 83% of outstanding shares. Over the last ten years, it repurchased $17.5 billion, about half of outstanding shares, demonstrating commitment to shareholder value.
- Successful acquisitions have generated substantial value for Allstate. For example, National General has more than doubled in size since acquisition, and SquareTrade has grown tenfold, now earning $150 million a year after being acquired for $1.4 billion. The net cost of these acquisitions has been significantly reduced through dividends and sales.
- Focus on organic growth is driving earnings and potential valuation increases. Allstate's efforts to grow the Property-Liability business in units and premiums are generating absolute dollar growth in earnings. With higher growth rates, the company believes it should have a higher price-to-earnings ratio, enhancing shareholder value.
- Declining Customer Retention Affecting Growth: Allstate's auto policies in force declined by 1.4% despite a nearly 30% increase in new business applications, due to a decline in customer retention. Management acknowledged that "despite that, our units declined year-over-year because of the drag of retention". This could negatively impact future revenue growth.
- Uncertainty in Resuming Share Repurchases: Management indicated that capital deployment priorities may not include share buybacks in the near term, focusing instead on organic growth and other uses of capital. This could disappoint investors expecting capital returns via buybacks. They stated, "if we have extra capital, we don't hold on to it, and we buy back stock... but you have to really look at how you manage your capital stack better".
- Limited Growth Prospects in Key Markets: Allstate has no growth aspirations in California homeowners insurance, a significant market, due to risk exposure from wildfires. CEO Tom Wilson stated: "We don't have any growth aspirations in homeowners in California at this point... So we don't have any growth aspirations in California right now". This limitation could restrict Allstate's growth potential in substantial markets.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Up 11% (from $14.832B in Q4 2023 to $16.506B in Q4 2024) | Increased premium growth and revenue expansion across business segments—primarily driven by higher auto and homeowners premiums that built on improvements from the previous period—supported by favorable market conditions and strategic pricing initiatives. |
Operating Income | Up 34% (from $1.827B in Q4 2023 to $2.449B in Q4 2024) | Improved underwriting performance and enhanced cost management boosted profitability, reflecting operational efficiencies and stronger margins compared to the prior period. |
Net Income | Up 30% (from $1.487B in Q4 2023 to $1.928B in Q4 2024) | Better profitability stemming from improved underwriting and expense control contributed to a substantial rise in net income, building on the gains seen in previous quarters. |
Basic EPS | Up nearly 29% (from $5.56 in Q4 2023 to $7.16 in Q4 2024) | EPS improved in line with net income growth, reflecting efficiency gains and stronger overall performance as the company managed to lower costs and better leverage revenue enhancements from prior period improvements. |
Net Investment Income | Over 100× increase (from $24M in Q4 2023 to $2.746B in Q4 2024) | Dramatic surge due to a strategic portfolio repositioning into higher-yielding fixed income securities and favorable market conditions, marking a stark contrast from the very low baseline of the previous period. |
Other Revenue | Spiked (from $23M in Q4 2023 to $1.839B in Q4 2024) | Extraordinary growth driven by expanded revenue streams from protection services and increased advertising revenues—reflecting successful product diversification and strategic channel enhancements compared to the prior period. |
Net Gains/Losses | Reversed (from +$15M in Q4 2023 to –$244M in Q4 2024) | Worsening investment performance resulted in substantial net losses on derivatives and securities, indicating that valuation losses and unfavorable market moves offset previous gains, thereby highlighting increased market volatility relative to the previous quarter. |
Auto Revenue | Up nearly 9% (from $8.566B in Q4 2023 to $9.348B in Q4 2024) | Higher rate increases and an uptick in earned premiums—reflecting adjustments in pricing and underwriting that built on prior improvements—propelled auto revenue growth despite ongoing challenges in market dynamics. |
Homeowners Revenue | Up about 15% (from $3.077B in Q4 2023 to $3.548B in Q4 2024) | Elevated average premiums and inflation-driven replacement cost increases, along with effective bundling strategies, boosted homeowners revenue beyond the levels observed in the previous period. |
Commercial Lines | Down roughly 28% (from $183M in Q4 2023 to $131M in Q4 2024) | A strategic retreat from less profitable segments—including discontinuing new business and non-renewals in certain markets—led to a significant decline, reflecting a deliberate shift toward improved underwriting quality relative to the previous period. |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Share repurchases and capital returns | Q2 2024: Not discussed. Q1 2024: Emphasized history of buybacks (83% of shares repurchased), ~10–14% return. | Q4 2024: Highlighted $41.5B in total repurchases, representing 83% of outstanding shares. | Reemerged in Q4 after no Q2 mention, reinforcing strong capital return strategy |
Acquisitions (National General, SquareTrade) | Q1 2024: National General doubled size of independent agent business; SquareTrade grown 10x. Q2 2024: National General added 1.7M policies; strong growth in SquareTrade. | Q4 2024: National General more than doubled; SquareTrade now 10x bigger, $150M annual earnings. | Consistent discussion across periods, highlighting successful expansions and ROI |
DOJ lawsuit regarding National General | Q1 2024: No mention. Q2 2024: Briefly referenced a lender-placed insurance lawsuit, minimal impact on business. | Q4 2024: No mention of the lawsuit. | Mentioned only in Q2, no updates in Q4 |
Organic growth in policies and premiums | Q1 2024: Auto policies -2%, homeowners +1.4% PIF growth. Q2 2024: Auto new business +17%, earned premium +11.9%. | Q4 2024: Policies in force 237.3M, +10.6% earned premium in Property-Liability. | Consistent mention; Q4 indicates continued premium growth |
Customer retention challenges | Q1 2024: Auto retention at 86%, slight improvement. Q2 2024: Retention ~85.7%, flat due to rate hikes. | Q4 2024: Still impacted by large rate increases; proactive affordability measures. | Ongoing issue with some improvement efforts |
Advertising and marketing spend (AI, etc.) | Q1 2024: 2.2% expense ratio, improved quote times, telematics integration. Q2 2024: +$300M spend, AI-driven segmentation. | Q4 2024: State-of-the-art analytics; comfortable ad spend, leveraging telematics and digitization. | Consistent focus on digital/AI-driven campaigns |
Competition in auto insurance | Q1 2024: Focus on profitability vs. market share gains, significant rate hikes. Q2 2024: Advertising battles intensify, less new rate activity. | Q4 2024: Competitive environment with major carriers; Allstate comfortable with current rates and profitability. | Stable approach, maintaining profitability amid strong competition |
Rate adequacy and underwriting restrictions | Q1 2024: Achieved adequacy in ~75% states, unwinding restrictions. Q2 2024: Two-thirds of states at targets; cautious in CA/NY/NJ. | Q4 2024: No direct mention of rate adequacy or underwriting restrictions. | Not mentioned in Q4, previously a key focus |
Homeowners insurance profitability, CA | Q1 2024: 82.1% combined ratio, limiting CA expansion. Q2 2024: Underlying ratio 63.5, still cautious in CA. | Q4 2024: Combined ratio ~90.1%, profitability strong, limited CA growth. | Consistent strong results, restricted CA growth |
Rising bodily injury severity, litigation | Q1 2024: Elevated severity from attorney representation, higher litigation costs. Q2 2024: Severity above inflation, no specific litigation cost details. | Q4 2024: No mention. | No current references; previously noted concern |
Expansion of direct-to-consumer, digital | Q1 2024: Quoting times down, new tech ecosystem, cheaper DTC products. Q2 2024: 92% jump in direct new business; strong AI usage. | Q4 2024: Emphasis on cost savings through digitization, new product in 31 states. | Continual expansion and tech-driven development |
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Growth in Auto and Homeowners Insurance
Q: When will Allstate see growth in auto policies?
A: Allstate aims to grow auto policies in every state where it's economically sensible and profitable. Currently, they're growing in 31 states and believe there's opportunity beyond that. They've built new business momentum through increased advertising, unwinding underwriting restrictions, and rolling out new products. Retention is key, and they're proactively improving it through customer engagement programs like SAVE. -
Capital Management and Share Buybacks
Q: Will Allstate resume share buybacks soon?
A: Allstate views proactive capital management as a significant strength and has a history of substantial share repurchases, having bought back 83% of outstanding shares since going public. While they acknowledge the importance of share repurchases, they're focused on managing capital to drive shareholder value through organic growth, risk and return on economic capital, inorganic growth, and capital structure. They will continue to assess the best ways to deploy capital, including potential share buybacks. -
Retention and Rate Increases
Q: Have retention headwinds from rate hikes dissipated?
A: Retention has stabilized in several states as Allstate has completed necessary rate increases to improve profitability. However, states like New York and New Jersey still require further rate adjustments. Allstate is proactively working to improve retention by helping customers save money and ensuring they receive appropriate discounts, aiming to enhance affordability and customer satisfaction . -
Impact of California Wildfires
Q: Will Allstate retrench further in California post-wildfires?
A: Allstate has no growth aspirations in California homeowners insurance currently and hasn't since 2007. They're not planning any changes despite the recent wildfires. While they believe there's a way to make the market work, significant changes aren't expected in the short term. -
Expense Ratio Improvements
Q: Can Allstate further lower the expense ratio?
A: Allstate expects to continue reducing expenses and believes they can lower the expense ratio even further. They're focusing on digitization, leveraging new technology platforms, increasing marketing effectiveness, and reducing distribution costs. They've made significant progress and believe they're about 60% of the way done but see more opportunities ahead. -
Competitive Positioning and Pricing
Q: How is Allstate's pricing compared to peers?
A: Allstate feels competitive on pricing and has seen new business momentum build over 2024, partly due to increased advertising and adjusting pricing tiers. They compete state by state and continuously assess their competitive position, making necessary pricing adjustments. They've taken costs out of the system, which helps them offer competitive prices. -
Return on Equity (ROE) Expectations
Q: What are Allstate's views on future ROE?
A: Allstate reported an ROE of 26.8%, one of their best results in recent history. While they don't provide specific forward-looking ROE targets, they believe increasing growth is key to driving shareholder value rather than solely boosting returns. They've made changes like selling the life business and buying back stock, which have impacted their ROE. -
Advertising Spending and Efficiency
Q: Why did Allstate ramp up advertising in Q4?
A: Allstate adjusts advertising spending by quarter and market, sometimes conducting heavy-up tests to assess sensitivity to increased advertising. They're confident in their state-of-the-art analytics and believe they're industry-leading in measuring ad spend efficiency. They have measures that evaluate acquisition costs, quote-to-close ratios, and lifetime value.