Allstate Corp. "Peak margins limits multiple expansion; Downgrade to Neutral"

Research evidence excerpt

Allstate Corp. "Peak margins limits multiple expansion; Downgrade to Neutral"

ALL could post an earnings beat relative to consensus in 2Q26 on better than

Q1 10.67 10.67 0 10.65

expected underlying combined ratios (both Auto and Home), favorably impacting stock

Q2E 4.37 5.26 20 5.15

performance. Moreover we expect growth in BVPS to remain strong given ALL's high Q3E 6.26 6.61 6 5.85

teens ROE's. That said, we see underlying underwriting margins peaking in 2H26 and Q4E 7.06 7.12 1 8.58

earnings declining in 2027/28 as margins trend to normalized levels which should 12/26E 28.36 29.66 5 30.10

mitigate multiple expansion. We calculate ALL's normalized earnings power by 12/27E 24.37 25.01 3 26.14

assuming underlying margins converge toward pre-pandemic averages across 12/28E 24.90 24.91 0 25.60

homeowners/auto, which suggests potential downside to consensus. On normalized

Brian Meredithearnings, ALL would be trading at approx. 11x 2027E P/E, above historical average of

Analyst

10x in the last 15y, suggesting a less compelling valuation amid a softening auto

brian.meredith@ubs.com

insurance cycle. We are currently 70 bps above consensus on our auto underlying loss +1-212-713 2492

ratio and ~5% below consensus operating EPS for 2027E/28E, on average.

Leandro Leite

Associate Analyst

The auto insurance market is increasingly competitive leandro.leite@ubs.com

The personal auto market is becoming more competitive, with rate filings now flat to +1-212-882 5559

down. Auto Insurance CPI turned negative in May 2026 for the first time since 2021.

Justin Tucker

Meanwhile, the key inflationary drivers of personal auto claims severity continue to run Associate Analyst

in the mid to high-single digits, with bodily injury costs increasing at a double-digit rate, justin.tucker@ubs.com