Allstate posted significantly higher net and underwriting income for the fourth quarter and full year. With affordability top of mind, that leads to questions about excessive profits.
Similar to Chubb’s earnings call, analysts asked Allstate CEO Tom Wilson to comment on the potential of extra attention from regulators. Some states have excess-profit laws.
Related: Allstate Doubles Q4 Net Income While Auto Underwriting Income Triples
A realization of the issue may have led Wilson to begin a statement on the insurer’s latest earnings with that fact that premiums were reduced for 7.8 million Allstate auto and homeowners customers by an average 17% in 2025.
During the call Wilson acknowledged premium increases, “accelerated by the pandemic and physical damage” with an underlying factor of higher bodily injury costs driven in large part by litigation.
Wilson said physical damage costs have increased 47% over the last five years due, in part, to higher used car prices during the pandemic. That inflationary dynamic “has started to reverse, which will improve affordability,” but bodily injury claims have increased 52% over the last five years “due to attorney involvement and higher settlements.”
The litigation reform enacted by some states (Florida, New York, Louisiana and Georgia were specifically call out by Wilson) has shown benefits. “Other states are starting to get this,” Wilson said.
“I’m hopeful that what this will do is put the attention on what needs to change,” Wilson said during the call. “People don’t need to be paying for lawyers for fender-bender lawsuits. This is really an issue everywhere in the country.”
“There’s been a long-standing discussion between us, regulators, and the trial attorneys as to what’s fair and right, and we obviously think that our customers should pay less for litigation against them,” Wilson added. “We’d like to see everybody take this on.”
Turning to homeowners, Wilson said debates of affordability or excess profits are complicated by catastrophe losses. The CEO said the industry loses money in the homeowners business, which is “not the right way to go.”
“You can’t ask companies to give up more of their capital to support lower prices. That’s not sustainable because they only have so much capital.” Wilson told analysts.
“Then you look at us and say we do better than the industry in profitability in homeowners. I don’t think that’s excess. I just think we’re better,” Wilson added. “We earn every dollar legitimately that we make in homeowners because we’re good at it. And our customers still get great value.”
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