Allstate (ALL): the overlooked auto insurer

2026-06-29 · By Lubin Danilo, founder of Lubin Investment

Allstate is the second-largest US auto insurer, with a Cash ROCE of 32% and free cash flow per share growing 25% per year over five years. Its Q1 2026 result crushed forecasts by 44%. The valuation is attractive compared to rival Progressive (10/10), making it a textbook case of quality at a reasonable price.

What Allstate does (and how it compares to Progressive)

If you have spent time in the United States, you have probably seen the Allstate ads: "You're in good hands." Allstate is the second-largest auto and home insurer in America, behind State Farm and ahead of Progressive. It insures millions of American households against car accidents, home damage, and the uncertainties of daily life. The model is simple: you pay a monthly premium, and if something happens, Allstate pays.

The most frequently compared competitor in my analysis is Progressive (PGR), which I rate 10/10. The natural question is: why does Progressive score higher? The answer comes down to two criteria: the combined ratio (underwriting discipline) and premium growth rate. Progressive excels on both. Allstate is solid, but less precise. That is the difference between a 10/10 and a 9/10.

How I analyze quality

I always separate two questions. First: is this a good business? Second: is this the right price? To judge quality, I look at objective criteria: profitability, free cash flow growth, balance sheet discipline, share buybacks. Allstate scores 9 out of 10 in my framework. Not perfect, but a very strong business.

The numbers that make Allstate a solid company

Allstate's Cash ROCE (return on capital employed) stands at 32%. This ratio measures how much cash the company generates for every dollar invested in its operations. A 15% threshold is often cited as excellence. Allstate is more than double that. It is a sign that capital allocation is rigorous.

Free cash flow per share has grown at 25.5% per year for five years. For a traditional insurance company, that is remarkable. The free cash flow margin stands at 16.9%. And in Q1 2026, results crushed expectations: earnings per share of $10.65 versus the consensus estimate of $7.36, a 44% beat. This reflects a structural improvement in profitability after several difficult years on claims.

Allstate also buys back its own shares, at a modest pace (around 1.4% of the float per year) but consistently. It is a sign that management does not waste available cash.

• Allstate (ALL): 9/10, P/FCF 5.5×, Cash ROCE 32%, FCF/share growing 25%/year, attractive valuation
• Progressive (PGR): 10/10 in my framework, higher P/FCF, superior underwriting discipline, analysis available on this site
• Kinsale Capital (KNSL): 10/10, specialty E&S insurance, premium valuation, different sector focus

Why the market prices this at only 5.5 times free cash flow

To measure whether a stock is cheap or expensive, I use the P/FCF ratio: the stock price divided by free cash flow per share generated annually. Allstate trades at roughly 5.5 times. For context, rival Progressive trades around 7 to 8 times, and the average for equity markets is 15 to 25 times. Allstate is very cheap.

The discount reflects a difficult recent history. Allstate suffered several tough years between 2021 and 2023: natural disaster claims, auto repair inflation, and market share losses. The market retained that memory. But management actions (rate increases, stronger underwriting discipline) are now bearing fruit, as Q1 2026 results showed.

What I am watching in the August 5 earnings

On August 5, 2026, Allstate reports Q2 results. Consensus expects earnings per share of $5.17. This is well below Q1 ($10.65), reflecting more cautious expectations. For me, what matters is the combined ratio trend (claims costs plus operating expenses divided by premiums) and the premium portfolio trajectory. If the combined ratio stays below 100% and premiums keep growing, the thesis strengthens.

The full Allstate analysis, with all updated metrics, is available at lubin-investment.com/analyse/ALL. Written by Lubin Danilo, founder of Lubin Investment, self-taught investor who has beaten the S&P 500 for three years running.

FAQ

What is Allstate's business?

Allstate is the second-largest US auto and home insurer. Its model is simple: customers pay regular premiums, and Allstate pays out on claims. Revenue is recurring by nature: insurance policies renew every year, often automatically.

Why is Allstate cheaper than Progressive?

Allstate (P/FCF around 5.5×) trades cheaper than Progressive (P/FCF around 7 to 8×) because the market has less confidence in its underwriting discipline and growth consistency. Progressive has historically had a lower combined ratio and stronger premium growth.

Why did Allstate's Q1 result beat estimates by so much?

Q1 2026 EPS came in at $10.65 versus $7.36 estimated (a 44% beat). This reflects the combined effect of rate increases implemented since 2022-2023 and an improvement in the loss ratio. Markets had underestimated the magnitude of the rebound.

Is Allstate threatened by insurtech startups?

Insurtechs (Lemonade, Root) have taken some market share among younger digital customers, but remain very small. Allstate is investing heavily in digital tools. Its physical distribution network remains a durable advantage in smaller local markets.

Is Allstate stock a good investment in 2026?

This is not investment advice. Quality is high (9/10), valuation is low (P/FCF 5.5×), but Allstate has a history of elevated claims in natural disaster years. The August 5 earnings will be an important test. Do your own research.

Voir l'analyse ALL sur Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).