Allstate's (ALL) underlying underwriting margins are expected to deteriorate over the next six months, a shift that may send earnings lower, increase the chances of modest profit misses, and leave the stock trailing the broader property and casualty insurance sector, UBS Securities said Tuesday in a report.

Reported EPS currently exceeds Allstate's sustainable earnings power as auto and homeowners loss ratios remain well below normalized levels, UBS said.

The company still may deliver a Q2 earnings beat on better-than-expected underlying combined auto and home ratios, which might support near-term stock performance, UBS said.

Margins are expected to peak in H2 with earnings deteriorating in 2027 and 2028, partly as competitive pressures, moderating pricing, and normalizing claims frequency push underwriting results back toward historical levels, the report said.

UBS downgraded Allstate's stock rating to neutral from buy and lifted its price target to $261 from $255.

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