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This Week's Bonus Story
Allstate’s Comeback Is Turning Into a Profit MachineSubmitted by Peter Frank. First Published: 6/8/2026. 
Key Points
- Allstate’s turnaround is being driven by stronger underwriting, higher premiums, and growing investment income.
- Profitability has improved dramatically after losses in 2022 and 2023, helped by pricing and underwriting changes.
- Severe weather remains the biggest risk that could quickly pressure earnings and investor sentiment.
- Special Report: Elon Musk already made me a “wealthy man”
Big insurance companies often post big numbers—sometimes in a good way, sometimes not. Just ask Allstate (NYSE: ALL). Less than four years after reporting massive losses, Allstate just delivered a powerful turnaround with strong underwriting, rising premiums, growing investment income and a higher dividend. Net income applicable to common shareholders rose more than fourfold from a year earlier. Earnings per share were nearly 50% above expectations.
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But the company has yet to fully convince investors. Even as profitability surges, shareholders still have to weigh one unavoidable risk: a couple of bad storms can quickly change the story. Allstate Engineered a Convincing RecoveryTo understand why Allstate's first-quarter results are so striking, it helps to remember where the company was not long ago. Like many major property and casualty insurers, Allstate spent 2022 and 2023 under pressure. Repair costs for autos and homes shot up with inflation. State regulators pushed back against large rate increases. Allstate lost $1.4 billion in 2022 and $316 million in 2023. Its stock fell by about a third over that period, to roughly $100 per share. Allstate responded with the tools insurers have at their disposal. It raised rates where it could, pulled back in markets where it could not and tightened underwriting standards to improve the quality of its business. By 2025, that strategy produced $9.3 billion in adjusted net income, up 90% from the previous year, and $67.4 billion in total revenue for the year, an increase of nearly 6%. Strong Growth Continued Into 2026The first quarter of 2026 extended that momentum. In the first three months, Allstate earned $2.4 billion in net income, equal to $10.65 per share, more than $3 above analysts' expectations. That compared with net income of $566 million in the year-ago quarter. Total revenue climbed 3% to $16.9 billion. Policies in force reached 212 million. Each of its lines showed improvement. Earned auto insurance premiums rose 2.1% to $9.5 billion, while earned homeowners premiums grew 13.9% to $4.2 billion. As of March 31, Allstate had 25.8 million auto policies, up 2.6%, and 7.7 million homeowners policies in force, an increase of 2.5%. Although it is the smallest segment by revenue, the company’s various protection plans and services make up the vast majority of its more than 200 million policies. That segment contributed $922 million in revenue for the quarter, up 7.2% from the year-earlier period. A Lower Combined Ratio Is Driving ProfitabilityBeyond growth in the business, the number that explains much of these positive results is known in insurance as the combined ratio. This ratio measures how much Allstate pays out in claims and expenses for every $100 it collects in premiums. The lower the number, the better. Underwriting strategy and management efficiencies can explain much of the improvement, but weather and disasters must also cooperate. In the first quarter of 2026, Allstate saw a dramatic improvement in its overall property-liability combined ratio, which fell to 82 from 97.4 a year earlier. That extra money also boosts the funds it can hold and invest, and those investments are generating higher returns in the current rate environment. Allstate earned $938 million from its investment portfolio in the quarter, up nearly 10% from $854 million a year earlier. Catastrophe Losses Remain the Biggest ThreatGiven these numbers, Allstate’s stock has remained remarkably flat over the past year, similar to some of its publicly traded competitors such as Travelers (NYSE: TRV) and well ahead of Progressive (NYSE: PGR). In May, investors were reminded why that caution may be warranted. On May 21, just weeks after announcing its outstanding first-quarter results and days after its stock reached a 52-week high, Allstate disclosed that estimated catastrophe losses in April reached $870 million before taxes, caused by 10 separate wind and hail events across the country. About 70% of that total, the company said, came from two storms. Although the company entered storm season from a position of financial strength, no matter how disciplined its underwriting is, it cannot price away tornado season. Analysts Still See Moderate UpsideInsurance investors and analysts are well aware that some losses are inevitable. Still, of the 21 analysts following Allstate, 11 rate the company a Buy. Nine suggest Hold and only one recommends Sell. Overall, the average rating is a Moderate Buy, with a 12-month average price target of $241.67, which is comfortably above the stock's current price. The company also has a consistent track record of dividends. After a nearly 9% increase in February, Allstate’s quarterly dividend is currently $1.08 per share, continuing its 13% annualized five-year dividend growth. The Stock's Future Depends on Managing RiskWhether Allstate deserves a place in a portfolio of financial services stocks depends on the investor. The P&C insurance business is not going to change. It will have great years and bad years. Allstate appears ready to handle both. For income investors, the dividend yield is not especially compelling, but the steady increases are appealing. For value investors, whether Allstate has much room to run remains to be seen. The company’s stock has roughly doubled since its recovery began in mid-2023. How much further it will go, and how quickly it gets there, may depend on the winds. |
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