The Allstate Corporation (ALL.N): Downgrade to Sell as Valuation Likely to Trend Lower with ROEs

Research evidence excerpt

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11 Aug 2026 05:00:00 ET │ 25 pages

The Allstate Corporation (ALL.N)

Downgrade to Sell as Valuation Likely to Trend Lower with ROEs

CITI'S TAKE

We are downgrading the shares of Allstate to Sell from Neutral. The key

fundamental questions are what is the company’s normalized return and

growth rate (and what are those worth)? We believe Allstate is significantly

over-earning today, while we are cautious growth can improve further. In

addition, headline risk related to homeowners’ affordability (as opposed to

auto) could be increasing. Finally, a normalized multiple book value, based

on segment capital consumption and returns, implies the prevailing stock

price exceeds its fundamental value over the next 12 months.

Normalized returns lower than short-term performance — We estimate that

Allstate has over-earned by ~3X over the last 12 months, which has created

significant excess capital that has been returned through buybacks. Meanwhile,

next 12-month returns appear ~30% above normalized levels. We expect returns to

trend down over the next 48 months as pricing and average premium tailwinds

wane. Meanwhile, growth risks appear to be to the downside rather than upside.

Regulatory risk could spread to homeowners — While investors are well-aware and

increasingly comfortable with state-level auto insurance reforms (which have

resulted in both lower premiums for consumers and have failed to hinder unit-level

profitability for insurers), investors have not focused on potential regulatory risk in

homeowners’ insurance. A recent letter to five insurance CEOs (including Allstate’s)

highlights this potential risk.

n

Sell ↓ from Neutral

Price (10 Aug 26 16:00)

US$269.67

Target price

US$240.00↑

from US$226.00

Expected share price return

-11.0%

Expected dividend yield

1.7%

Expected total return

-9.3%

Market Cap

US$68,188M

Price Performance

(RIC: ALL.N, BB: ALL US)

Risks focused on buyback velocity with catalysts related to growth and pricing —

If non-recurring items such as development and low catastrophe drive incremental

capital generation, it could result in increased buybacks and positive EPS revisions.

…