# How Allstate makes money

CXProWealth Business Lens · Allstate (ALL) · Q2 FY2026

Read from the 10-Q for the period 2026-04-01 to 2026-06-30, filed 2026-08-05 with the SEC (accession 0000899051-26-000118): https://www.sec.gov/Archives/edgar/data/899051/000089905126000118/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $18.6B (+11.8% on the year)
- Operating income: — (operating margin —)
- Net income: $3.3B (net margin 17.6%)
- Gross margin: not reported (the company reports expenses by nature: no cost of revenue or gross profit line exists)
- Free cash flow: $2.6B (13.9% of revenue)
- Cash conversion (operating cash flow / net income): 0.81x
- Capital expenditure: 0.2% of revenue

## Where the money goes (Q2 FY2026)

- Total revenues → Total costs and expenses: $14.5B
- Total costs and expenses → Interest expense: $96.0M
- Total costs and expenses → Restructuring and related charges: $7.0M
- Total costs and expenses → Policyholder benefits and claims incurred net: $9.9B
- Total costs and expenses → Operating costs and expenses: $2.3B
- Total costs and expenses → Amortization of purchased intangibles: $46.0M
- Total costs and expenses → Amortization of deferred policy acquisition costs: $2.2B
- Total costs and expenses → Accident, health and other policy benefits: $72.0M
- Pension and other postretirement remeasurement (gains) losses → Total costs and expenses: $146.0M
- Total revenues → Income from operations before income tax expense: $4.1B
- Income from operations before income tax expense → Income tax expense: $871.0M
- Income from operations before income tax expense → Net income: $3.3B
- Net income → Net income attributable to Allstate: $3.3B

## Where the revenue comes from

### Segments (Reportable Segments - Schedule of Reportable Segments Revenue Information (Details))

| Member | Value | Share |
|---|---:|---:|
| Protection Services | $961.0M | 5.2% |
| Corporate | $139.0M | 0.7% |
| Allstate Health and Benefits | $0 | 0.0% |

The members do not sum to total revenue.

### ConsolidationItems (Reportable Segments - Schedule of Reportable Segments Revenue Information (Details))

| Member | Value | Share |
|---|---:|---:|
| Operating segments | $961.0M | 5.2% |
| All other | $161.0M | 0.9% |
| Intersegment eliminations | -$35.0M | -0.2% |

The members do not sum to total revenue.

## Key insights

### Equity gains supplied a quarter of pretax profit

A year earlier this line lost money; equities valued at market prices can subtract in a weak quarter as easily as they added.

Net gains on investments and derivatives were $1,055M in the quarter, against a loss of $144M a year earlier. They equal 25.5% of pretax income of $4.14B. The filing attributes them primarily to valuation gains on equity investments, slightly offset by losses on sales of fixed income securities, derivatives used to manage duration, and credit losses. _(from the filing)_
The comparison carries a one-off in the other direction: pretax income of $2.70B a year earlier included an $890M gain on the disposition of operations, 32.9% of that figure, and this quarter had none. Pretax income still rose 53.2%. _(from the filing)_
Operating cash flow was $2.63B in the quarter, 80.5% of net income of $3.27B. _(from the filing)_
Analysis: valuation gains raise reported profit without bringing in cash, which is one reason profit ran ahead of operating cash this quarter. Because equity holdings pass through net income at market prices, the same line can turn negative in a falling market. Reading the insurer on its own terms means setting this line aside and looking at underwriting. _(analysis)_

### Auto prices fall as home prices climb

Allstate is giving up auto price to win volume while raising home prices to keep pace with replacement costs.

The Allstate brand average auto premium was $819 against $850 a year earlier, 3.6% lower, which the filing ties to "a shift in product mix towards affordable, simple and connected protection." Auto policies in force reached 25.95 million at the end of June. _(from the filing)_
The Allstate brand average homeowners premium rose 5.8% to $2,399 from $2,267, which the filing attributes to rate increases and inflation in insured home replacement costs. Homeowners policies in force reached 7.82 million. Average premiums cover a policy term, typically six months for auto and twelve months for homeowners, so the two levels are not directly comparable. _(from the filing)_
In the same quarter operating costs rose 8.4% to $2,315M and amortized acquisition costs rose 6.1% to $2.20B. The filing names higher advertising and legal expenses as the reason its insurance expense ratio worsened, while new issued applications rose in every channel. _(from the filing)_
Analysis: a lower auto price works only if the simpler products cost less to sell and serve, or attract drivers with smaller claims. So far the expense lines are rising, not falling, so the saving the strategy depends on is not yet visible in the figures. _(analysis)_

### Claims fell even as the policy count grew

Fewer catastrophes and releases from earlier-year reserves cut claims, two sources the filing names that need not repeat.

Claims and claims expense were $9.86B against $10.25B a year earlier, 3.8% lower, and fell to 53.0% of total revenue from 61.6%. Auto policies in force reached 25.95 million and homeowners policies 7.82 million, both higher than a year earlier. _(from the filing)_
The filing attributes the improvement to lower catastrophe losses and to the benefit of releasing reserves set aside for earlier years, mostly in auto injury coverages, where it reports improved prior period loss development and better than expected claim outcomes. _(from the filing)_
Analysis: revenue this quarter includes the investment gains, so part of the fall in the claims share reflects a larger denominator rather than lower claims alone. Reserve releases mean earlier estimates were cautious; they lift today's profit but are not a recurring source of it. _(analysis)_

## For members

Signed-in members read, on the page: the investor's and the founder's views of Allstate (its fundamentals against its peers, where the profit is made, how the model works, where every $100 of revenue goes against the industry, the path to scale), its performance over time with every line as filed, and the edge and the risks. Membership is free.

## Member research

Signed-in members read, on the page: what Allstate's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Allstate 10-Q for the period to 2026-06-30: https://www.sec.gov/Archives/edgar/data/899051/000089905126000118/ (2026-08-05)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-03 · as of 2026-11-03