ALLSTATE CORP - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number 1-11840

THE ALLSTATE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

36-3871531

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

3100 Sanders Road, Northbrook, Illinois 60062

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 402-5000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value $.01 per share	ALL	New York Stock Exchange Chicago Stock Exchange
5.100% Fixed-to-Floating Rate Subordinated Debentures due 2053	ALL.PR.B	New York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 5.625% Noncumulative Preferred Stock, Series G	ALL PR G	New York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 5.100% Noncumulative Preferred Stock, Series H	ALL PR H	New York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 4.750% Noncumulative Preferred Stock, Series I	ALL PR I	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 17, 2022, the registrant had 265,209,574 common shares, $.01 par value, outstanding.

The Allstate Corporation

Index to Quarterly Report on Form 10-Q

September 30, 2022


Part I Financial Information		Page

Item 1. Financial Statements (unaudited) as of September 30, 2022 and December 31, 2021 and for the Three Month and Nine Month Periods Ended September 30, 2022 and 2021

	Condensed Consolidated Statements of Operations	1
	Condensed Consolidated Statements of Comprehensive Income (Loss)	2
	Condensed Consolidated Statements of Financial Position	3
	Condensed Consolidated Statements of Shareholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
	Report of Independent Registered Public Accounting Firm	45

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Highlights	46
	Property-Liability Operations	51
	Segment results
	Allstate Protection	53
	Run-off Property-Liability	62
	Protection Services	65
	Allstate Health and Benefits	67
	Investments	69
	Capital Resources and Liquidity	77
	Recent Developments	79
	Forward-Looking Statements	80

Item 4. Controls and Procedures		80

Part II Other Information
Item 1. Legal Proceedings		81
Item 1A. Risk Factors		81
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		81

Item 6. Exhibits		82

Condensed Consolidated Financial Statements

Part I. Financial Information

Item 1. Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Operations (unaudited)


($ in millions, except per share data)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Revenues
Property and casualty insurance premiums	$	11,661	$	10,615	$	34,004	$	31,366
Accident and health insurance premiums and contract charges	463		460		1,398		1,362
Other revenue	561		536		1,684		1,585
Net investment income	690		764		1,846		2,446
Net gains (losses) on investments and derivatives	(167)		105		(1,167)		818
Total revenues	13,208		12,480		37,765		37,577

Costs and expenses
Property and casualty insurance claims and claims expense	10,073		8,264		27,262		21,514
Shelter-in-Place Payback expense	—		—		—		29
Accident, health and other policy benefits	263		277		801		771
Amortization of deferred policy acquisition costs	1,682		1,582		4,913		4,650
Operating costs and expenses	1,842		1,890		5,594		5,304
Pension and other postretirement remeasurement (gains) losses	79		40		91		(404)
Restructuring and related charges	14		23		27		145
Amortization of purchased intangibles	90		109		264		267


Interest expense	85		69		251		246
Total costs and expenses	14,128		12,254		39,203		32,522

(Loss) income from operations before income tax expense	(920)		226		(1,438)		5,055

Income tax (benefit) expense	(237)		20		(377)		1,008

Net (loss) income from continuing operations	(683)		206		(1,061)		4,047

Income (loss) from discontinued operations, net of tax	—		325		—		(3,272)

Net (loss) income	(683)		531		(1,061)		775

Less: Net loss attributable to noncontrolling interest	(15)		(7)		(34)		(7)

Net (loss) income attributable to Allstate	(668)		538		(1,027)		782

Less: Preferred stock dividends	26		30		79		87

Net (loss) income applicable to common shareholders	$	(694)	$	508	$	(1,106)	$	695

Earnings per common share applicable to common shareholders
Basic
Continuing operations	$	(2.58)	$	0.62	$	(4.04)	$	13.31
Discontinued operations	—		1.11		—		(10.98)
Total	$	(2.58)	$	1.73	$	(4.04)	$	2.33

Diluted
Continuing operations	$	(2.58)	$	0.62	$	(4.04)	$	13.11
Discontinued operations	—		1.09		—		(10.81)
Total	$	(2.58)	$	1.71	$	(4.04)	$	2.30

Weighted average common shares - Basic	268.7		293.1		273.5		298.1
Weighted average common shares - Diluted	268.7		297.9		273.5		302.6

See notes to condensed consolidated financial statements.

Third Quarter 2022 Form 10-Q 1

Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)


($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net (loss) income	$	(683)	$	531	$	(1,061)	$	775

Other comprehensive loss, after-tax
Changes in:
Unrealized net capital gains and losses	(789)		(336)		(3,525)		(1,352)
Unrealized foreign currency translation adjustments	(88)		(21)		(135)		10
Unamortized pension and other postretirement prior service credit	(8)		(15)		(38)		(44)
Other comprehensive loss, after-tax	(885)		(372)		(3,698)		(1,386)

Comprehensive (loss) income	(1,568)		159		(4,759)		(611)
Less: Comprehensive loss attributable to noncontrolling interest	(21)		(7)		(60)		(8)
Comprehensive (loss) income attributable to Allstate	$	(1,547)	$	166	$	(4,699)	$	(603)

See notes to condensed consolidated financial statements.

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Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Financial Position (unaudited)


($ in millions, except par value data)	September 30, 2022		December 31, 2021
Assets
Investments
Fixed income securities, at fair value (amortized cost, net $45,468 and $41,376)	$	41,715	$	42,136
Equity securities, at fair value (cost $4,652 and $6,016)	4,723		7,061
Mortgage loans, net	833		821
Limited partnership interests	7,907		8,018
Short-term, at fair value (amortized cost $4,031 and $4,009)	4,030		4,009
Other investments, net	1,798		2,656
Total investments	61,006		64,701
Cash	786		763
Premium installment receivables, net	9,150		8,364
Deferred policy acquisition costs	5,273		4,722
Reinsurance and indemnification recoverables, net	9,961		10,024
Accrued investment income	389		339
Deferred income taxes	492		—
Property and equipment, net	1,008		939
Goodwill	3,502		3,502
Other assets, net	6,109		6,086


Total assets	97,676		99,440
Liabilities
Reserve for property and casualty insurance claims and claims expense	36,529		33,060
Reserve for future policy benefits	1,276		1,273
Contractholder funds	909		908
Unearned premiums	22,026		19,844
Claim payments outstanding	1,196		1,123
Deferred income taxes	—		833
Other liabilities and accrued expenses	10,212		9,296
Long-term debt	7,967		7,976


Total liabilities	80,115		74,313
Commitments and Contingent Liabilities (Note 12)
Equity
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 81.0 thousand shares issued and outstanding, $2,025 aggregate liquidation preference	1,970		1,970
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 266 million and 281 million shares outstanding	9		9
Additional capital paid-in	3,765		3,722
Retained income	51,490		53,294

Treasury stock, at cost (634 million and 619 million shares)	(36,518)		(34,471)
Accumulated other comprehensive income:



Unrealized net capital gains and losses	(2,927)		598
Unrealized foreign currency translation adjustments	(150)		(15)
Unamortized pension and other postretirement prior service credit	34		72
Total accumulated other comprehensive income (“AOCI”)	(3,043)		655
Total Allstate shareholders’ equity	17,673		25,179
Noncontrolling interest	(112)		(52)
Total equity	17,561		25,127
Total liabilities and equity	$	97,676	$	99,440

See notes to condensed consolidated financial statements.

Third Quarter 2022 Form 10-Q 3

Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity (unaudited)


($ in millions, except per share data)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021




Preferred stock par value	$	—	$	—	$	—	$	—

Preferred stock additional capital paid-in
Balance, beginning of period	1,970		2,170		1,970		1,970
Acquisition	—		—		—		450

Preferred stock redemption	—		(200)		—		(450)
Balance, end of period	1,970		1,970		1,970		1,970

Common stock par value	9		9		9		9

Common stock additional capital paid-in
Balance, beginning of period	3,740		3,668		3,722		3,498
Forward contract on accelerated share repurchase agreement	—		—		—		113
Equity incentive plans activity	25		32		43		89
Balance, end of period	3,765		3,700		3,765		3,700

Retained income
Balance, beginning of period	52,412		52,464		53,294		52,767

Net (loss) income	(668)		538		(1,027)		782
Dividends on common stock (declared per share of $0.85, $0.81, $2.55 and $2.43)	(228)		(236)		(698)		(726)
Dividends on preferred stock	(26)		(30)		(79)		(87)


Balance, end of period	51,490		52,736		51,490		52,736






Treasury stock
Balance, beginning of period	(35,858)		(32,394)		(34,471)		(31,331)
Shares acquired	(665)		(1,227)		(2,142)		(2,390)
Shares reissued under equity incentive plans, net	5		17		95		117
Balance, end of period	(36,518)		(33,604)		(36,518)		(33,604)

Accumulated other comprehensive income
Balance, beginning of period	(2,158)		2,290		655		3,304

Change in unrealized net capital gains and losses	(789)		(336)		(3,525)		(1,352)
Change in unrealized foreign currency translation adjustments	(88)		(21)		(135)		10
Change in unamortized pension and other postretirement prior service credit	(8)		(15)		(38)		(44)


Balance, end of period	(3,043)		1,918		(3,043)		1,918
Total Allstate shareholders’ equity	17,673		26,729		17,673		26,729

Noncontrolling interest
Balance, beginning of period	(91)		(15)		(52)		—
Acquisition	—		—		—		(14)
Change in unrealized net capital gains and losses	(6)		—		(26)		(1)
Noncontrolling loss	(15)		(7)		(34)		(7)
Balance, end of period	(112)		(22)		(112)		(22)
Total equity	$	17,561	$	26,707	$	17,561	$	26,707

See notes to condensed consolidated financial statements.

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Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


($ in millions)	Nine months ended September 30,
	2022		2021
Cash flows from operating activities
Net (loss) income	$	(1,061)	$	775

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and other non-cash items	646		818
Net (gains) losses on investments and derivatives	1,167		(1,011)

Pension and other postretirement remeasurement (gains) losses	91		(404)
Amortization of deferred gain on reinsurance	—		(5)


Loss on disposition of operations, net of tax	—		3,754
Changes in:
Policy benefits and other insurance reserves	3,520		2,771
Unearned premiums	2,256		1,490
Deferred policy acquisition costs	(562)		(492)
Premium installment receivables, net	(1,022)		(606)
Reinsurance recoverables, net	56		(1,973)
Income taxes	(559)		31
Other operating assets and liabilities	(381)		(903)

Net cash provided by operating activities	4,151		4,245
Cash flows from investing activities
Proceeds from sales
Fixed income securities	25,577		22,610
Equity securities	8,767		3,151
Limited partnership interests	786		574

Other investments	1,034		696
Investment collections
Fixed income securities	526		1,965
Mortgage loans	92		747
Other investments	144		421
Investment purchases
Fixed income securities	(30,103)		(22,682)
Equity securities	(7,613)		(1,790)
Limited partnership interests	(860)		(927)
Mortgage loans	(104)		(97)
Other investments	(269)		(1,470)
Change in short-term and other investments, net	1,094		854
Purchases of property and equipment, net	(352)		(286)

Acquisition of operations, net of cash acquired	—		(3,481)
Other	—		4
Net cash (used in) provided by investing activities	(1,281)		289
Cash flows from financing activities

Redemption and repayment of long-term debt	—		(422)

Redemption of preferred stock	—		(450)
Contractholder fund deposits	102		741
Contractholder fund withdrawals	(31)		(1,036)
Dividends paid on common stock	(698)		(650)
Dividends paid on preferred stock	(79)		(87)
Treasury stock purchases	(2,150)		(2,257)
Shares reissued under equity incentive plans, net	61		108

Other	(52)		(12)
Net cash used in financing activities	(2,847)		(4,065)
Net increase in cash, including cash classified as assets held for sale	23		469
Cash from continuing operations at beginning of period	763		311
Cash classified as assets held for sale at beginning of period	—		66
Less: Cash classified as assets held for sale at end of period	—		156
Cash from continuing operations at end of period	$	786	$	690

See notes to condensed consolidated financial statements.

Third Quarter 2022 Form 10-Q 5

Notes to Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)


Note 1			General

Basis of presentation

The accompanying condensed consolidated financial statements include the accounts of The Allstate Corporation (the “Corporation”) and its wholly owned subsidiaries, primarily Allstate Insurance Company (“AIC”), a property and casualty insurance company with various property and casualty and investment subsidiaries (collectively referred to as the “Company” or “Allstate”) and variable interest entities (“VIEs”) in which the Company is considered a primary beneficiary. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The condensed consolidated financial statements and notes as of September 30, 2022 and for the three and nine month periods ended September 30, 2022 and 2021 are unaudited. The condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods.

These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. All significant intercompany accounts and transactions have been eliminated.

Subsequent Events

The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”)

The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures have moderated, but new variants of the Coronavirus could result in further economic volatility. The Company continues to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to its operations, but the effects have been and could be material.

Pending accounting standard

Accounting for Long-Duration Insurance Contracts In August 2018, the Financial Accounting Standards Board (”FASB”) issued guidance revising the accounting for certain long-duration insurance contracts. As disclosed in Note 3, the Company sold substantially all of its life and annuity business in scope of the new standard. The Company’s reserves and deferred policy acquisition costs (“DAC”) for certain voluntary and individual life and accident and health insurance products are subject to the new guidance.

Under the new guidance, measurement assumptions, including those for mortality, morbidity and policy terminations, will be required to be reviewed at least annually, and updated as appropriate. The effects of updating assumptions other than the discount rate are required to be measured on a retrospective basis and reported in net income. In addition, reserves under the new guidance are required to be discounted using an upper-medium grade fixed income instrument yield that is updated through other comprehensive income (“OCI”) at each reporting date. Current GAAP requires the measurement of reserves to utilize assumptions set at policy issuance unless updated current assumptions indicate that recorded reserves are deficient.

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Notes to Condensed Consolidated Financial Statements

The new guidance also requires DAC and other capitalized balances currently amortized in proportion to premiums or gross profits to be amortized on a constant level basis over the expected term for all long-duration insurance contracts. DAC will not be subject to loss recognition testing but will be reduced when actual lapse experience exceeds expected experience.

The new guidance is effective for financial statements issued for reporting periods beginning after December 15, 2022 and restatement of prior periods presented is required. The new guidance will be applied to affected contracts and DAC on the basis of existing carrying amounts at the earliest period presented.

In July 2022, the FASB issued an Exposure Draft of an Accounting Standards Update (“Exposure Draft”) that would provide reporting entities with an accounting policy election to not apply the new guidance to insurance contracts in-force on the January 1, 2021 transition date but sold prior to the January 1, 2023 effective date provided certain conditions are met.

The Company will adopt the new guidance effective January 1, 2023, using the modified retrospective approach and make the accounting policy election to not apply the new guidance to insurance contracts in-force on the transition date but sold prior to the effective date. The total impact on equity of implementing the new guidance is expected to be a decrease of between $250 million and $350 million. The expected decrease in equity includes the anticipated decrease in AOCI of between $235 million and $315 million primarily attributable to a change in the discount rate used in measuring the liability for future policy benefits for traditional life contracts and other long-term products with guaranteed terms from a portfolio-based rate at contract issuance to an upper-medium grade fixed income-based rate. The expected decrease in equity also includes the anticipated decrease in retained income of between $15 million and $35 million which primarily relates to certain long-term contracts with guaranteed terms with net premium ratios that are required to be adjusted at the transition date. The impact on equity, AOCI, and retained income excludes sold contracts that would meet the conditions included in the Exposure Draft.

The estimated impact to AOCI at transition date is expected to decline significantly at the effective date due to the increase in the discount rate between the transition date and effective date.

Third Quarter 2022 Form 10-Q 7

Notes to Condensed Consolidated Financial Statements


Note 2			Earnings per Common Share

Basic earnings per common share is computed using the weighted average number of common shares outstanding, including vested unissued participating restricted stock units. Diluted earnings per common share is computed using the weighted average number of common and dilutive potential common shares outstanding.

For the Company, dilutive potential common shares consist of outstanding stock options, unvested

non-participating restricted stock units and contingently issuable performance stock awards. The effect of dilutive potential common shares does not include the effect of options with an anti-dilutive effect on earnings per common share because their exercise prices exceed the average market price of Allstate common shares during the period or for which the unrecognized compensation cost would have an anti-dilutive effect.


Computation of basic and diluted earnings per common share
(In millions, except per share data)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Numerator:
Net (loss) income from continuing operations	$	(683)	$	206	$	(1,061)	$	4,047
Less: Net loss attributable to noncontrolling interest	(15)		(7)		(34)		(7)
Net (loss) income from continuing operations attributable to Allstate	(668)		213		(1,027)		4,054
Less: Preferred stock dividends	26		30		79		87
Net (loss) income from continuing operations applicable to common shareholders	(694)		183		(1,106)		3,967
Income (loss) from discontinued operations, net of tax	—		325		—		(3,272)
Net (loss) income applicable to common shareholders	$	(694)	$	508	$	(1,106)	$	695

Denominator:
Weighted average common shares outstanding	268.7		293.1		273.5		298.1
Effect of dilutive potential common shares (1):
Stock options	—		3.1		—		2.9
Restricted stock units (non-participating) and performance stock awards	—		1.7		—		1.6
Weighted average common and dilutive potential common shares outstanding	268.7		297.9		273.5		302.6

Earnings per common share applicable to common shareholders
Basic
Continuing operations	$	(2.58)	$	0.62	$	(4.04)	$	13.31
Discontinued operations	—		1.11		—		(10.98)
Total	$	(2.58)	$	1.73	$	(4.04)	$	2.33

Diluted (1)
Continuing operations	$	(2.58)	$	0.62	$	(4.04)	$	13.11
Discontinued operations	—		1.09		—		(10.81)
Total	$	(2.58)	$	1.71	$	(4.04)	$	2.30

Anti-dilutive options excluded from diluted earnings per common share	2.4		0.6		1.6		1.3
Weighted average dilutive potential common shares excluded due to net loss applicable to common shareholders (1)	2.9		—		3.3		—

(1)As a result of the net loss reported for the three and nine month periods ended September 30, 2022, weighted average shares for basic earnings per share is also used for calculating diluted earnings per share because all dilutive potential common shares are anti-dilutive and are therefore excluded from the calculation.

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Notes to Condensed Consolidated Financial Statements


Note 3			Acquisitions and Dispositions

Acquisitions

National General On January 4, 2021, the Company completed the acquisition of National General Holdings Corp. (“National General”), an insurance holding company serving customers predominantly through independent agents for property and casualty and accident and health products.


Assets and liabilities recognized in the National General acquisition (1)
($ in millions)	January 4, 2021
Assets
Investments	$	4,962
Cash	400
Premiums and other receivables, net	1,539
Deferred acquisition costs (value of business acquired)	317
Reinsurance recoverables, net	1,212
Intangible assets	1,199
Other assets	734
Goodwill (2)	1,038
Total assets	11,401

Liabilities
Reserve for property and casualty insurance claims and claims expense	2,765
Reserve for future policy benefits	186
Unearned premiums	2,245
Reinsurance payable	363
Debt (3)	593
Deferred tax liabilities	162
Other liabilities	776
Total liabilities	$	7,090

(1)The amounts reflect allocation of assets acquired and liabilities assumed.

(2)$675 million, $20 million and $343 million of goodwill were allocated to the Allstate Protection, Protection Services and Allstate Health and Benefits segments, respectively, and is non-deductible for income tax purposes. Goodwill is primarily attributable to expected synergies and future growth opportunities.

(3)Subsequent to the acquisition, the Company repaid $100 million of 7.625% Subordinated Notes and $72 million of Subordinated Debentures on February 3, 2021 and March 15, 2021, respectively. As of September 30, 2022, the Company had principal balance remaining of $350 million 6.750% Senior Notes due in 2024, with a fair value adjustment of $31 million.

SafeAuto On October 1, 2021, the Company completed the acquisition of Safe Auto Insurance Group, Inc. (“SafeAuto”), a non-standard auto insurance carrier focused on providing state-minimum private-passenger auto insurance direct to consumers with coverage options in 28 states for $267 million in cash.

Dispositions

Life and annuity business On October 1, 2021, the Company closed the sale of Allstate Life Insurance Company of New York (“ALNY”) to Wilton Reassurance Company for $400 million. On November 1, 2021, the Company closed the sale of Allstate Life Insurance Company (“ALIC”) and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including a pre-close dividend of $1.25 billion paid by ALIC.

In 2021 and prior periods, the assets and liabilities of the businesses were reclassified as held for sale and results were presented as discontinued operations.

Third Quarter 2022 Form 10-Q 9

Notes to Condensed Consolidated Financial Statements


Financial results from discontinued operations
	Three months ended September 30,		Nine months ended September 30,
($ in millions)	2021		2021
Revenues
Life premiums and contract charges	$	331	$	1,007
Net investment income	427		1,251
Net gains (losses) on investments and derivatives	4		193
Total revenues	762		2,451

Costs and expenses
Life contract benefits	411		1,207
Interest credited to contractholder funds	127		371
Amortization of DAC	27		84
Operating costs and expenses	45		151
Restructuring and related charges	7		30
Total costs and expenses	617		1,843

Amortization of deferred gain on reinsurance	1		5

Income from discontinued operations before income tax expense	146		613

Income tax expense	38		131

Income from discontinued operations, net of tax	108		482

Loss on disposition of operations	89		(4,048)
Income tax benefit	(128)		(294)
Loss on disposition of operations, net of tax	217		(3,754)

Income (loss) from discontinued operations, net of tax	$	325	$	(3,272)


Cash flows from discontinued operations
	Nine months ended September 30,
($ in millions)	2021
Net cash provided by operating activities from discontinued operations	$	888
Net cash used in investing activities from discontinued operations	(405)


Note 4			Reportable Segments

Measuring segment profit or loss

The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Run-off Property-Liability segments and adjusted net income for the Protection Services, Allstate Health and Benefits and Corporate and Other segments.

National General results are included in the following segments:

•Property and casualty - Allstate Protection

•Accident and health - Allstate Health and Benefits

•Technology solutions - Protection Services

Underwriting income is calculated as premiums earned and other revenue, less claims and claims expenses (“losses”), Shelter-in-Place Payback expense, amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges as determined using GAAP.

Adjusted net income is net income (loss) applicable to common shareholders, excluding:


•			Net gains and losses on investments and derivatives
•			Pension and other postretirement remeasurement gains and losses
•			Business combination expenses and the amortization or impairment of purchased intangibles
•			Income or loss from discontinued operations
•			Gain or loss on disposition of operations
•			Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years
•			Income tax expense or benefit on reconciling items

A reconciliation of these measures to net income (loss) applicable to common shareholders is provided below.

10 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Reportable segments financial performance
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Underwriting income (loss) by segment
Allstate Protection	$	(1,170)	$	(421)	$	(1,749)	$	1,670
Run-off Property-Liability	(122)		(113)		(127)		(118)
Total Property-Liability	(1,292)		(534)		(1,876)		1,552

Adjusted net income (loss) by segment, after-tax
Protection Services	35		45		131		150
Allstate Health and Benefits	54		33		172		160
Corporate and Other	(104)		(95)		(322)		(330)

Reconciling items
Property-Liability net investment income	632		710		1,696		2,314
Net gains (losses) on investments and derivatives	(167)		105		(1,167)		818
Pension and other postretirement remeasurement gains (losses)	(79)		(40)		(91)		404

Business combination expenses and amortization of purchased intangibles (1)	(29)		(34)		(86)		(124)
Business combination fair value adjustment	—		—		—		6
Gain (loss) on disposition of operations	(5)		—		6		—
Income tax benefit (expense) on reconciling items	246		(14)		396		(990)
Total reconciling items	598		727		754		2,428

Income (loss) from discontinued operations	—		235		—		(3,435)
Income tax benefit from discontinued operations	—		90		—		163
Total from discontinued operations	$	—	$	325	$	—	$	(3,272)

Less: Net loss attributable to noncontrolling interest (2)	(15)		(7)		(35)		(7)

Net (loss) income applicable to common shareholders	$	(694)	$	508	$	(1,106)	$	695

(1)Excludes amortization of purchased intangibles in Property-Liability, which is included above in underwriting income.

(2)Reflects net loss attributable to noncontrolling interest in Property-Liability.

Third Quarter 2022 Form 10-Q 11

Notes to Condensed Consolidated Financial Statements


Reportable segments revenue information
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Property-Liability
Insurance premiums
Auto	$	7,545	$	6,912	$	21,974	$	20,604
Homeowners	2,776		2,522		8,065		7,325
Other personal lines	540		521		1,616		1,545
Commercial lines	296		204		874		590
Allstate Protection	11,157		10,159		32,529		30,064
Run-off Property-Liability	—		—		—		—
Total Property-Liability insurance premiums	11,157		10,159		32,529		30,064
Other revenue	364		365		1,066		1,071
Net investment income	632		710		1,696		2,314
Net gains (losses) on investments and derivatives	(123)		94		(988)		763
Total Property-Liability	12,030		11,328		34,303		34,212

Protection Services
Protection plans	330		295		961		834
Roadside assistance	50		50		152		144
Finance and insurance products	124		111		362		324
Intersegment premiums and service fees (1)	39		46		118		133
Other revenue	84		85		269		263
Net investment income	13		10		34		32
Net gains (losses) on investments and derivatives	(13)		4		(56)		20
Total Protection Services	627		601		1,840		1,750

Allstate Health and Benefits
Employer voluntary benefits	257		251		780		769
Group health	96		90		285		260
Individual health	110		119		333		333
Other revenue	90		85		277		248
Net investment income	17		18		50		56
Net gains (losses) on investments and derivatives	(6)		(1)		(25)		5
Total Allstate Health and Benefits	564		562		1,700		1,671

Corporate and Other
Other revenue	23		1		72		3
Net investment income	28		26		66		44
Net gains (losses) on investments and derivatives	(25)		8		(98)		30
Total Corporate and Other	26		35		40		77

Intersegment eliminations (1)	(39)		(46)		(118)		(133)
Consolidated revenues	$	13,208	$	12,480	$	37,765	$	37,577

(1)Intersegment insurance premiums and service fees are primarily related to Arity and Allstate Roadside and are eliminated in the condensed consolidated financial statements.

12 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Note 5			Investments


Portfolio composition

($ in millions)	September 30, 2022		December 31, 2021
Fixed income securities, at fair value	$	41,715	$	42,136
Equity securities, at fair value	4,723		7,061
Mortgage loans, net	833		821
Limited partnership interests	7,907		8,018
Short-term investments, at fair value	4,030		4,009
Other investments, net	1,798		2,656
Total	$	61,006	$	64,701


Amortized cost, gross unrealized gains (losses) and fair value for fixed income securities
($ in millions)	Amortized cost, net		Gross unrealized				Fair value
			Gains		Losses
September 30, 2022
U.S. government and agencies	$	8,756	$	1	$	(313)	$	8,444
Municipal	6,486		4		(461)		6,029
Corporate	27,614		3		(2,885)		24,732
Foreign government	933		—		(43)		890
ABS	1,679		4		(63)		1,620
Total fixed income securities	$	45,468	$	12	$	(3,765)	$	41,715

December 31, 2021
U.S. government and agencies	$	6,287	$	12	$	(26)	$	6,273
Municipal	6,130		279		(16)		6,393
Corporate	26,834		688		(192)		27,330
Foreign government	982		9		(6)		985
ABS	1,143		14		(2)		1,155
Total fixed income securities	$	41,376	$	1,002	$	(242)	$	42,136


Scheduled maturities for fixed income securities
($ in millions)	September 30, 2022				December 31, 2021
	Amortized cost, net		Fair value		Amortized cost, net		Fair value
Due in one year or less	$	2,429	$	2,398	$	1,105	$	1,111
Due after one year through five years	26,566		24,992		21,039		21,291
Due after five years through ten years	11,356		9,738		13,808		14,079
Due after ten years	3,438		2,967		4,281		4,500
	43,789		40,095		40,233		40,981
ABS	1,679		1,620		1,143		1,155
Total	$	45,468	$	41,715	$	41,376	$	42,136

Actual maturities may differ from those scheduled as a result of calls and make-whole payments by the issuers. ABS is shown separately because of potential prepayment of principal prior to contractual maturity dates.


Net investment income
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Fixed income securities	$	323	$	279	$	889	$	870
Equity securities	30		24		100		51
Mortgage loans	8		9		25		31
Limited partnership interests	325		438		841		1,467
Short-term investments	30		1		42		3
Other investments	38		50		120		139
Investment income, before expense	754		801		2,017		2,561
Investment expense	(64)		(37)		(171)		(115)
Net investment income	$	690	$	764	$	1,846	$	2,446

Third Quarter 2022 Form 10-Q 13

Notes to Condensed Consolidated Financial Statements


Net gains (losses) on investments and derivatives by asset type
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Fixed income securities	$	(166)	$	86	$	(644)	$	355
Equity securities	(239)		6		(1,222)		322
Mortgage loans	1		—		—		19
Limited partnership interests	(49)		(15)		(224)		1
Derivatives	299		46		889		54
Other investments	(13)		(18)		34		67
Net gains (losses) on investments and derivatives	$	(167)	$	105	$	(1,167)	$	818


Net gains (losses) on investments and derivatives by transaction type
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Sales	$	(175)	$	80	$	(605)	$	441
Credit losses	(6)		(12)		(30)		2

Valuation change of equity investments (1)	(285)		(9)		(1,421)		321
Valuation change and settlements of derivatives	299		46		889		54
Net gains (losses) on investments and derivatives	$	(167)	$	105	$	(1,167)	$	818

(1)Includes valuation change of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities.


Gross realized gains (losses) on sales of fixed income securities
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Gross realized gains	$	19	$	104	$	112	$	460
Gross realized losses	(181)		(18)		(748)		(106)

The following table presents the net pre-tax appreciation (decline) recognized in net income of equity securities and limited partnership interests carried at fair value that are still held as of September 30, 2022 and 2021, respectively.


Net appreciation (decline) recognized in net income
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Equity securities	$	(209)	$	(20)	$	(771)	$	170

Limited partnership interests carried at fair value	(36)		137		8		415
Total	$	(245)	$	117	$	(763)	$	585

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Notes to Condensed Consolidated Financial Statements


Credit losses recognized in net income
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Assets
Fixed income securities:

Corporate	$	(2)	$	—	$	(6)	$	—
ABS	(2)		—		(2)		1
Total fixed income securities	(4)		—		(8)		1
Mortgage loans	1		—		—		17
Limited partnership interests	(1)		—		(4)		—
Other investments
Bank loans	(2)		(13)		(18)		(16)
Agent loans	—		1		—		—
Total credit losses by asset type	$	(6)	$	(12)	$	(30)	$	2

Liabilities
Commitments to fund commercial mortgage loans and bank loans	—		—		—		—
Total	$	(6)	$	(12)	$	(30)	$	2


Unrealized net capital gains and losses included in AOCI
($ in millions)	Fair value		Gross unrealized				Unrealized net gains (losses)
September 30, 2022			Gains		Losses
Fixed income securities	$	41,715	$	12	$	(3,765)	$	(3,753)
Short-term investments	4,030		—		(1)		(1)
Derivative instruments	—		—		(3)		(3)
Equity method of accounting (“EMA”) limited partnerships (1)							7
Unrealized net capital gains and losses, pre-tax							(3,750)
Other unrealized net capital gains and losses, pre-tax (2)							32
Deferred income taxes							791
Unrealized net capital gains and losses, after-tax							$	(2,927)

December 31, 2021
Fixed income securities	$	42,136	$	1,002	$	(242)	$	760
Short-term investments	4,009		—		—		—
Derivative instruments	—		—		(3)		(3)
EMA limited partnerships (1)							(1)
Unrealized net capital gains and losses, pre-tax							756
Other unrealized net capital gains and losses, pre-tax (2)							5
Deferred income taxes							(163)
Unrealized net capital gains and losses, after-tax							$	598

(1)Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of EMA limited partnerships’ OCI. Fair value and gross unrealized gains and losses are not applicable.

(2)Includes amounts recognized for the reclassification of unrealized gains and losses related to noncontrolling interest and the amount by which the amortization of DAC would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.


Change in unrealized net capital gains (losses)
($ in millions)	Nine months ended September 30, 2022
Fixed income securities	$	(4,513)
Short-term investments	(1)
Derivative instruments	—
EMA limited partnerships	8
Total	(4,506)
Other unrealized net capital gains and losses, pre-tax	27
Deferred income taxes	954
Decrease in unrealized net capital gains and losses, after-tax	$	(3,525)

Third Quarter 2022 Form 10-Q 15

Notes to Condensed Consolidated Financial Statements


Carrying value for limited partnership interests
($ in millions)	September 30, 2022						December 31, 2021
	EMA		Fair Value		Total		EMA		Fair Value		Total
Private equity	$	5,287	$	1,280	$	6,567	$	4,905	$	1,434	$	6,339
Real estate	881		38		919		823		97		920
Other (1)	421		—		421		759		—		759
Total	$	6,589	$	1,318	$	7,907	$	6,487	$	1,531	$	8,018

(1)Other consists of certain limited partnership interests where the underlying assets are predominately public equity and debt securities.

Short-term investments Short-term investments, including money market funds, commercial paper, U.S. Treasury bills and other short-term investments, are carried at fair value. As of September 30, 2022 and December 31, 2021, the fair value of short-term investments totaled $4.03 billion and $4.01 billion, respectively.

Other investments Other investments primarily consist of bank loans, real estate, policy loans and derivatives. Bank loans are primarily senior secured corporate loans and are carried at amortized cost, net. Policy loans are carried at unpaid principal balances. Real estate is carried at cost less accumulated depreciation. Derivatives are carried at fair value.


Other investments by asset type
($ in millions)	September 30, 2022		December 31, 2021
Bank loans, net	$	748	$	1,574
Real estate	774		809
Policy loans	119		148
Derivatives	48		12
Other	109		113
Total	$	1,798	$	2,656

Portfolio monitoring and credit losses

Fixed income securities The Company has a comprehensive portfolio monitoring process to identify and evaluate each fixed income security that may require a credit loss allowance.

For each fixed income security in an unrealized loss position, the Company assesses whether management with the appropriate authority has made the decision to sell or whether it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If a security meets either of these criteria, any existing credit loss allowance would be written-off against the amortized cost basis of the asset along with any remaining unrealized losses, with incremental losses recorded in earnings.

If the Company has not made the decision to sell the fixed income security and it is not more likely than not the Company will be required to sell the fixed income security before recovery of its amortized cost basis, the Company evaluates whether it expects to receive cash flows sufficient to recover the entire amortized cost basis of the security. The Company calculates the estimated recovery value based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the security’s current effective rate and is compared to the amortized cost of the security.

The determination of cash flow estimates is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the security. All reasonably available information relevant

to the collectability of the security is considered when developing the estimate of cash flows expected to be collected. That information generally includes, but is not limited to, the remaining payment terms of the security, prepayment speeds, the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. Other information, such as industry analyst reports and forecasts, credit ratings, financial condition of the bond insurer for insured fixed income securities, and other market data relevant to the realizability of contractual cash flows, may also be considered. The estimated fair value of collateral will be used to estimate recovery value if the Company determines that the security is dependent on the liquidation of collateral for ultimate settlement.

If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed income security, a credit loss allowance is recorded in earnings for the shortfall in expected cash flows; however, the amortized cost, net of the credit loss allowance, may not be lower than the fair value of the security. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If the Company determines that the fixed income security does not have sufficient cash flow or other information to estimate a recovery value for the security, the Company may conclude that the entire decline in fair value is deemed to be credit related and the loss is recorded in earnings.

16 www.allstate.com

Notes to Condensed Consolidated Financial Statements

When a security is sold or otherwise disposed or when the security is deemed uncollectible and written off, the Company removes amounts previously recognized in the credit loss allowance. Recoveries after write-offs are recognized when received. Accrued interest excluded from the amortized cost of fixed income securities totaled $359 million and $311 million as of September 30, 2022 and December 31, 2021, respectively, and is reported within the accrued investment income line of the Condensed Consolidated Statements of Financial Position. The Company monitors accrued interest and writes off amounts when they are not expected to be received.

The Company’s portfolio monitoring process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. The process also includes the monitoring of other credit loss indicators such as ratings, ratings downgrades and payment defaults. The securities

identified, in addition to other securities for which the Company may have a concern, are evaluated for potential credit losses using all reasonably available information relevant to the collectability or recovery of the security. Inherent in the Company’s evaluation of credit losses for these securities are assumptions and estimates about the financial condition and future earnings potential of the issue or issuer. Some of the factors that may be considered in evaluating whether a decline in fair value requires a credit loss allowance are: 1) the financial condition, near-term and long-term prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices; 2) the specific reasons that a security is in an unrealized loss position, including overall market conditions which could affect liquidity; and 3) the extent to which the fair value has been less than amortized cost.


Rollforward of credit loss allowance for fixed income securities
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Beginning balance	$	(10)	$	(2)	$	(6)	$	(3)
Credit losses on securities for which credit losses not previously reported	(2)		—		(2)		—
Net (increases) decreases related to credit losses previously reported	(2)		—		(6)		1
Reduction of allowance related to sales	1		—		1		—
Write-offs	—		—		—		—



Ending balance (1) (2)	$	(13)	$	(2)	$	(13)	$	(2)

(1)Allowance for fixed income securities as of September 30, 2022 comprised $11 million and $2 million of corporate bonds and ABS, respectively. Allowance for fixed income securities as of September 30, 2021 comprised $1 million and $1 million of corporate bonds and ABS, respectively.

(2)Includes $1 million of credit loss allowance for fixed income securities that were classified as held for sale as of September 30, 2021.

Third Quarter 2022 Form 10-Q 17

Notes to Condensed Consolidated Financial Statements


Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position
($ in millions)	Less than 12 months					12 months or more					Total unrealized losses
	Number of issues	Fair value		Unrealized losses		Number of issues	Fair value		Unrealized losses
September 30, 2022
Fixed income securities
U.S. government and agencies	137	$	6,980	$	(231)	53	$	1,428	$	(82)	$	(313)
Municipal	3,880	5,508		(400)		289	341		(61)		(461)
Corporate	2,611	21,603		(2,305)		515	2,879		(580)		(2,885)
Foreign government	80	744		(27)		42	141		(16)		(43)
ABS	269	1,484		(58)		62	36		(5)		(63)
Total fixed income securities	6,977	$	36,319	$	(3,021)	961	$	4,825	$	(744)	$	(3,765)
Investment grade fixed income securities	6,313	$	32,385	$	(2,346)	902	$	4,474	$	(643)	$	(2,989)
Below investment grade fixed income securities	664	3,934		(675)		59	351		(101)		(776)
Total fixed income securities	6,977	$	36,319	$	(3,021)	961	$	4,825	$	(744)	$	(3,765)

December 31, 2021
Fixed income securities
U.S. government and agencies	112	$	5,451	$	(24)	4	$	72	$	(2)	$	(26)
Municipal	767	1,213		(15)		2	14		(1)		(16)
Corporate	1,197	9,725		(176)		22	130		(16)		(192)
Foreign government	51	415		(6)		4	3		—		(6)
ABS	80	500		(2)		53	8		—		(2)
Total fixed income securities	2,207	$	17,304	$	(223)	85	$	227	$	(19)	$	(242)
Investment grade fixed income securities	1,993	$	15,391	$	(188)	71	$	183	$	(8)	$	(196)
Below investment grade fixed income securities	214	1,913		(35)		14	44		(11)		(46)
Total fixed income securities	2,207	$	17,304	$	(223)	85	$	227	$	(19)	$	(242)


Gross unrealized losses by unrealized loss position and credit quality as of September 30, 2022
($ in millions)	Investment grade		Below investment grade		Total
Fixed income securities with unrealized loss position less than 20% of amortized cost, net (1) (2)	$	(2,422)	$	(439)	$	(2,861)
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost, net (3) (4)	(567)		(337)		(904)
Total unrealized losses	$	(2,989)	$	(776)	$	(3,765)

(1)Below investment grade fixed income securities include $419 million that have been in an unrealized loss position for less than twelve months.

(2)Related to securities with an unrealized loss position less than 20% of amortized cost, net, the degree of which suggests that these securities do not pose a high risk of having credit losses.

(3)No below investment grade fixed income securities have been in an unrealized loss position for a period of twelve or more consecutive months.

(4)Evaluated based on factors such as discounted cash flows and the financial condition and near-term and long-term prospects of the issue or issuer and were determined to have adequate resources to fulfill contractual obligations.

Investment grade is defined as a security having a National Association of Insurance Commissioners (“NAIC”) designation of 1 or 2, which is comparable to a rating of Aaa, Aa, A or Baa from Moody’s or AAA, AA, A or BBB from S&P Global Ratings (“S&P”), or a comparable internal rating if an externally provided rating is not available. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Unrealized losses on investment grade securities are principally related to an increase in market yields which may include increased risk-free interest rates or wider credit spreads since the time of

initial purchase. The unrealized losses are expected to reverse as the securities approach maturity.

ABS in an unrealized loss position were evaluated based on actual and projected collateral losses relative to the securities’ positions in the respective securitization trusts, security specific expectations of cash flows, and credit ratings. This evaluation also takes into consideration credit enhancement, measured in terms of (i) subordination from other classes of securities in the trust that are contractually obligated to absorb losses before the class of security the Company owns, and (ii) the expected impact of other structural features embedded in the securitization trust beneficial to the class of securities

18 www.allstate.com

Notes to Condensed Consolidated Financial Statements

the Company owns, such as overcollateralization and excess spread. Municipal bonds in an unrealized loss position were evaluated based on the underlying credit quality of the primary obligor, obligation type and quality of the underlying assets.

As of September 30, 2022, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost basis.

Loans The Company establishes a credit loss allowance for mortgage loans and bank loans when they are originated or purchased, and for unfunded commitments unless they are unconditionally cancellable by the Company. The Company uses a probability of default and loss given default model for mortgage loans and bank loans to estimate current expected credit losses that considers all relevant information available including past events, current conditions, and reasonable and supportable forecasts over the life of an asset. The Company also considers such factors as historical losses, expected prepayments and various economic factors. For mortgage loans the Company considers origination vintage year and property level information such as debt service coverage, property type, property location and collateral value. For bank loans, the Company considers the credit rating of the borrower, credit spreads and type of loan. After the reasonable and supportable forecast period, the Company’s model reverts to historical loss trends.

Loans are evaluated on a pooled basis when they share similar risk characteristics. The Company monitors loans through a quarterly credit monitoring process to determine when they no longer share similar risk characteristics and are to be evaluated individually when estimating credit losses.

Loans are written off against their corresponding allowances when there is no reasonable expectation of recovery. If a loan recovers after a write-off, the estimate of expected credit losses includes the expected recovery.

Accrual of income is suspended for loans that are in default or when full and timely collection of principal and interest payments is not probable. Accrued income receivable is monitored for recoverability and

when not expected to be collected is written off through net investment income. Cash receipts on loans on non-accrual status are generally recorded as a reduction of amortized cost.

Accrued interest is excluded from the amortized cost of loans and is reported within the accrued investment income line of the Condensed Consolidated Statements of Financial Position.


Accrued interest
($ in millions)	September 30,		December 31,
	2022		2021
Mortgage loans	$	3	$	2
Bank Loans	4		4

Mortgage loans When it is determined a mortgage loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as using collateral value less estimated costs to sell where applicable, including when foreclosure is probable or when repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. When collateral value is used, the mortgage loans may not have a credit loss allowance when the fair value of the collateral exceeds the loan’s amortized cost. An alternative approach may be utilized to estimate credit losses using the present value of the loan’s expected future repayment cash flows discounted at the loan’s current effective interest rate.

Individual loan credit loss allowances are adjusted for subsequent changes in the fair value of the collateral less costs to sell, when applicable, or present value of the loan’s expected future repayment cash flows.

Debt service coverage ratio is considered a key credit quality indicator when mortgage loan credit loss allowances are estimated. Debt service coverage ratio represents the amount of estimated cash flow from the property available to the borrower to meet principal and interest payment obligations. Debt service coverage ratio estimates are updated annually or more frequently if conditions are warranted based on the Company’s credit monitoring process.


Mortgage loans amortized cost by debt service coverage ratio distribution and year of origination
	September 30, 2022														December 31, 2021
($ in millions)	2017 and prior		2018		2019		2020		2021		Current		Total		Total
Below 1.0	$	—	$	—	$	—	$	—	$	—	$	18	$	18	$	—
1.0 - 1.25	35		—		—		10		—		22		67		46
1.26 - 1.50	13		5		103		—		—		7		128		160
Above 1.50	77		101		136		41		217		54		626		621
Amortized cost before allowance	$	125	$	106	$	239	$	51	$	217	$	101	$	839	$	827
Allowance													(6)		(6)
Amortized cost, net													$	833	$	821

Third Quarter 2022 Form 10-Q 19

Notes to Condensed Consolidated Financial Statements

Mortgage loans with a debt service coverage ratio below 1.0 that are not considered impaired primarily relate to situations where the borrower has the financial capacity to fund the revenue shortfalls from the properties for the foreseeable term, the decrease in cash flows from the properties is considered

temporary, or there are other risk mitigating factors such as additional collateral, escrow balances or borrower guarantees. Payments on all mortgage loans were current as of September 30, 2022 and December 31, 2021.


Rollforward of credit loss allowance for mortgage loans
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Beginning balance	$	(7)	$	(30)	$	(6)	$	(67)

Net (increases) decreases related to credit losses	1		2		—		39
Write-offs	—		—		—		—

Ending balance (1)	$	(6)	$	(28)	$	(6)	$	(28)

(1)Includes $21 million of credit loss allowance for mortgage loans that were classified as held for sale as of September 30, 2021.

Bank loans When it is determined a bank loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as the present value of the loan’s expected future repayment cash flows discounted at the loan’s current effective interest rate.

Credit ratings of the borrower are considered a key credit quality indicator when bank loan credit loss allowances are estimated. The ratings are either received from the Securities Valuation Office of the NAIC based on availability of applicable ratings from rating agencies on the NAIC credit rating provider list or a comparable internal rating. The year of origination is determined to be the year in which the asset is acquired.


Bank loans amortized cost by credit rating and year of origination
	September 30, 2022														December 31, 2021
($ in millions)	2017 and prior		2018		2019		2020		2021		Current		Total		Total
NAIC 2 / BBB	$	—	$	—	$	7	$	5	$	37	$	—	$	49	$	86
NAIC 3 / BB	9		—		7		3		262		14		295		656
NAIC 4 / B	8		16		18		18		271		30		361		768
NAIC 5-6/ CCC and below	21		10		40		8		11		5		95		125
Amortized cost before allowance	$	38	$	26	$	72	$	34	$	581	$	49	$	800	$	1,635
Allowance													(52)		(61)
Amortized cost, net													$	748	$	1,574


Rollforward of credit loss allowance for bank loans
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Beginning balance	$	(56)	$	(52)	$	(61)	$	(67)

Net increases related to credit losses	(2)		(14)		(18)		(10)
Reduction of allowance related to sales	6		2		27		13
Write-offs	—		—		—		—

Ending balance (1)	$	(52)	$	(64)	$	(52)	$	(64)

(1)Includes $7 million of credit loss allowance for bank loans that were classified as held for sale as of September 30, 2021.


Note 6			Fair Value of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on the Condensed Consolidated Statements of Financial Position at fair value are categorized in the

fair value hierarchy based on the observability of inputs to the valuation techniques as follows:

Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access.

Level 2: Assets and liabilities whose values are based on the following:

20 www.allstate.com

Notes to Condensed Consolidated Financial Statements

(a)Quoted prices for similar assets or liabilities in active markets;

(b)Quoted prices for identical or similar assets or liabilities in markets that are not active; or

(c)Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect the Company’s estimates of the assumptions that market participants would use in valuing the assets and liabilities.

The availability of observable inputs varies by instrument. In situations where fair value is based on internally developed pricing models or inputs that are unobservable in the market, the determination of fair value requires more judgment. The degree of judgment exercised by the Company in determining fair value is typically greatest for instruments categorized in Level 3. In many instances, valuation inputs used to measure fair value fall into different levels of the fair value hierarchy. The category level in the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company uses prices and inputs that are current as of the measurement date, including during periods of market disruption. In periods of market disruption, the ability to observe prices and inputs may be reduced for many instruments.

The Company is responsible for the determination of fair value and the supporting assumptions and methodologies. The Company gains assurance that assets and liabilities are appropriately valued through the execution of various processes and controls designed to ensure the overall reasonableness and consistent application of valuation methodologies, including inputs and assumptions, and compliance with accounting standards. For fair values received from third parties or internally estimated, the Company’s processes and controls are designed to ensure that the valuation methodologies are appropriate and consistently applied, the inputs and assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded. For example, on a continuing basis, the Company assesses the reasonableness of individual fair values that have stale security prices or that exceed certain thresholds as compared to previous fair values received from valuation service providers or brokers or derived from internal models. The Company performs procedures to understand and assess the methodologies, processes and controls of valuation service providers.

In addition, the Company may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third-party valuation sources for selected securities. The Company performs ongoing price validation procedures such as back-testing of actual

sales, which corroborate the various inputs used in internal models to market observable data. When fair value determinations are expected to be more variable, the Company validates them through reviews by members of management who have relevant expertise and who are independent of those charged with executing investment transactions.

The Company has two types of situations where investments are classified as Level 3 in the fair value hierarchy:

(1)Specific inputs significant to the fair value estimation models are not market observable. This primarily occurs in the Company’s use of broker quotes to value certain securities where the inputs have not been corroborated to be market observable, and the use of valuation models that use significant non-market observable inputs.

(2)Quotes continue to be received from independent third-party valuation service providers and all significant inputs are market observable; however, there has been a significant decrease in the volume and level of activity for the asset when compared to normal market activity such that the degree of market observability has declined to a point where categorization as a Level 3 measurement is considered appropriate. The indicators considered in determining whether a significant decrease in the volume and level of activity for a specific asset has occurred include the level of new issuances in the primary market, trading volume in the secondary market, the level of credit spreads over historical levels, applicable bid-ask spreads, and price consensus among market participants and other pricing sources.

Certain assets are not carried at fair value on a recurring basis, including mortgage loans, bank loans and policy loans and are only included in the fair value hierarchy disclosure when the individual investment is reported at fair value.

In determining fair value, the Company principally uses the market approach which generally utilizes market transaction data for the same or similar instruments. To a lesser extent, the Company uses the income approach which involves determining fair values from discounted cash flow methodologies. For the majority of Level 2 and Level 3 valuations, a combination of the market and income approaches is used.

Summary of significant inputs and valuation techniques for Level 2 and Level 3 assets and liabilities measured at fair value on a recurring basis

Level 2 measurements

•Fixed income securities:

U.S. government and agencies, municipal, corporate - public and foreign government: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads.

Third Quarter 2022 Form 10-Q 21

Notes to Condensed Consolidated Financial Statements

Corporate - privately placed: Privately placed are valued using a discounted cash flow model that is widely accepted in the financial services industry and uses market observable inputs and inputs derived principally from, or corroborated by, observable market data. The primary inputs to the discounted cash flow model include an interest rate yield curve, as well as published credit spreads for similar assets in markets that are not active that incorporate the credit quality and industry sector of the issuer.

Corporate - privately placed also includes redeemable preferred stock that are valued using quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, underlying stock prices and credit spreads.

ABS: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, collateral performance and credit spreads. Certain ABS are valued based on non-binding broker quotes whose inputs have been corroborated to be market observable. Residential MBS, included in ABS, use prepayment speeds as a primary input for valuation.

•Equity securities: The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets in markets that are not active.

•Short-term: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads.

•Other investments: Free-standing exchange listed derivatives that are not actively traded are valued based on quoted prices for identical instruments in markets that are not active.

Over-the-counter (“OTC”) derivatives, including interest rate swaps, foreign currency swaps, total return swaps, foreign exchange forward contracts, certain options and certain credit default swaps, are valued using models that rely on inputs such as interest rate yield curves, implied volatilities, index price levels, currency rates, and credit spreads that are observable for substantially the full term of the contract. The valuation techniques underlying the models are widely accepted in the financial services industry and do not involve significant judgment.

Level 3 measurements

•Fixed income securities:

Municipal: Comprise municipal bonds that are not rated by third-party credit rating agencies. The primary inputs to the valuation of these municipal bonds include quoted prices for identical or similar assets that are not market observable, contractual cash flows, benchmark yields and credit spreads. Also included are municipal bonds valued based on non-binding broker quotes where the inputs have

not been corroborated to be market observable and municipal bonds in default valued based on the present value of expected cash flows.

Corporate - public and privately placed and ABS: Primarily valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable. Other inputs for corporate fixed income securities include an interest rate yield curve, as well as published credit spreads for similar assets that incorporate the credit quality and industry sector of the issuer.

•Equity securities: The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets that are not market observable.

•Short-term: For certain short-term investments, amortized cost is used as the best estimate of fair value.

•Other investments: Certain OTC derivatives, such as interest rate caps, certain credit default swaps and certain options (including swaptions), are valued using models that are widely accepted in the financial services industry. These are categorized as Level 3 as a result of the significance of non-market observable inputs such as volatility. Other primary inputs include interest rate yield curves and credit spreads, and quoted prices for identical or similar assets in markets that exhibit less liquidity relative to those markets supporting Level 2 fair value measurements.

•Other assets: Includes the contingent consideration provision in the sale agreement for ALIC which meets the definition of a derivative. This derivative is valued internally using a model that includes stochastically determined cash flows and inputs that include spot and forward interest rates, volatility, corporate credit spreads and a liquidity discount. This derivative is categorized as Level 3 due to the significance of non-market observable inputs.

•Assets held for sale: Comprise municipal, corporate and ABS fixed income securities and equity securities. The valuation is based on the respective asset type as described above.

•Liabilities held for sale: Comprise derivatives embedded in certain life and annuity contracts which are valued internally using models widely accepted in the financial services industry that determine a single best estimate of fair value for the embedded derivatives within a block of contractholder liabilities. The models primarily use stochastically determined cash flows based on the contractual elements of embedded derivatives, projected option cost and applicable market data, such as interest rate yield curves and equity index volatility assumptions. These are categorized as Level 3 as a result of the significance of non-market observable inputs.

22 www.allstate.com

Notes to Condensed Consolidated Financial Statements

Assets measured at fair value on a non-recurring basis

Comprise long-lived assets to be disposed of by sale, including real estate, that are written down to fair value less costs to sell.

Investments excluded from the fair value hierarchy

Limited partnerships carried at fair value, which do not have readily determinable fair values, use NAV provided by the investees and are excluded from the

fair value hierarchy. These investments are generally not redeemable by the investees and generally cannot be sold without approval of the general partner. The Company receives distributions of income and proceeds from the liquidation of the underlying assets of the investees, which usually takes place in years 4-9 of the typical contractual life of 10-12 years. As of September 30, 2022, the Company has commitments to invest $215 million in these limited partnership interests.


Assets and liabilities measured at fair value
	September 30, 2022
($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Counterparty and cash collateral netting			Total
Assets
Fixed income securities:
U.S. government and agencies	$	8,424		$	20		$	—					$	8,444
Municipal	—			6,010			19						6,029
Corporate - public	—			16,751			68						16,819
Corporate - privately placed	—			7,842			71						7,913
Foreign government	—			890			—						890
ABS	—			1,572			48						1,620
Total fixed income securities	8,424			33,085			206						41,715
Equity securities	4,092			304			327						4,723
Short-term investments	928			3,096			6						4,030
Other investments	—			107			2			$	(59)		50
Other assets	14			—			104						118
Total recurring basis assets	13,458			36,592			645			(59)			50,636
Non-recurring basis	—			—			23						23
Total assets at fair value	$	13,458		$	36,592		$	668		$	(59)		$	50,659
% of total assets at fair value	26.6		%	72.2		%	1.3		%	(0.1)		%	100.0		%

Investments reported at NAV													1,318
Total													$	51,977
Liabilities
Other liabilities	$	(9)		$	(32)		$	—		$	(7)		$	(48)
Total recurring basis liabilities	(9)			(32)			—			(7)			(48)

Total liabilities at fair value	$	(9)		$	(32)		$	—		$	(7)		$	(48)
% of total liabilities at fair value	18.7		%	66.7		%	—		%	14.6		%	100.0		%

Third Quarter 2022 Form 10-Q 23

Notes to Condensed Consolidated Financial Statements


Assets and liabilities measured at fair value
	December 31, 2021
($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Counterparty and cash collateral netting			Total
Assets
Fixed income securities:
U.S. government and agencies	$	6,247		$	26		$	—					$	6,273
Municipal	—			6,375			18						6,393
Corporate - public	—			16,569			20						16,589
Corporate - privately placed	—			10,675			66						10,741
Foreign government	—			985			—						985
ABS	—			1,115			40						1,155
Total fixed income securities	6,247			35,745			144						42,136
Equity securities	6,312			400			349						7,061
Short-term investments	1,140			2,864			5						4,009
Other investments	—			34			2			$	(22)		14
Other assets	1			—			65						66
Total recurring basis assets	13,700			39,043			565			(22)			53,286
Non-recurring basis	—			—			32						32
Total assets at fair value	$	13,700		$	39,043		$	597		$	(22)		$	53,318
% of total assets at fair value	25.7		%	73.2		%	1.1		%	—		%	100.0		%

Investments reported at NAV													1,531
Total													$	54,849
Liabilities
Other liabilities	$	(3)		$	(12)		$	—		$	7		$	(8)
Total recurring basis liabilities	(3)			(12)			—			7			(8)

Total liabilities at fair value	$	(3)		$	(12)		$	—		$	7		$	(8)
% of total liabilities at fair value	37.5		%	150.0		%	—		%	(87.5)		%	100.0		%

Quantitative information about the significant unobservable inputs used in Level 3 fair value measurements (1)

September 30, 2021

($ in millions)

Fair value

Valuation
technique

Unobservable
input

Range

Weighted
average

Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options

(455)

Stochastic cash flow model

Projected option cost

1.0 - 4.2%

2.90%

(1) These were included in the liabilities held for sale as of September 30, 2021.

The embedded derivatives are equity-indexed and forward starting options in certain life and annuity products that provide customers with interest crediting rates based on the performance of the S&P 500. If the projected option cost increased (decreased), it would result in a higher (lower) liability fair value. These life and annuity products were included in the sales of ALIC, ALNY and certain affiliates.

As of September 30, 2022 and December 31, 2021, Level 3 fair value measurements of fixed income securities total $206 million and $144 million, respectively, and include $70 million and $41 million, respectively, of securities valued based on non-binding broker quotes where the inputs have not been

corroborated to be market observable and $17 million and $16 million, respectively, of municipal fixed income securities that are not rated by third-party credit rating agencies. As the Company does not develop the Level 3 fair value unobservable inputs for these fixed income securities, they are not included in the table above. However, an increase (decrease) in credit spreads for fixed income securities valued based on non-binding broker quotes would result in a lower (higher) fair value, and an increase (decrease) in the credit rating of municipal bonds that are not rated by third-party credit rating agencies would result in a higher (lower) fair value.

24 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended September 30, 2022
	Balance as of June 30, 2022		Total gains (losses) included in:				Transfers																Balance as of September 30, 2022
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3		Purchases			Sales			Issues			Settlements
Assets
Fixed income securities:
Municipal	$	18	$	—	$	—	$	2	$	(1)		$	—		$	—		$	—		$	—	$	19
Corporate - public	77		—		(2)		—		—			—			(7)			—			—		68
Corporate - privately placed	73		1		1		—		—			18			(22)			—			—		71
ABS	18		—		—		—		—			30			—			—			—		48
Total fixed income securities	186		1		(1)		2		(1)			48			(29)			—			—		206
Equity securities	372		(16)		—		—		—			8			(37)			—			—		327
Short-term investments	8		—		—		—		—			—			—			—			(2)		6
Other investments	2		—		—		—		—			—			—			—			—		2
Other assets	108		(4)		—		—		—			—			—			—			—		104
Total recurring Level 3 assets	676		(19)		(1)		2		(1)			56			(66)			—			(2)		645
Liabilities
Total recurring Level 3 liabilities	$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	—		$	—	$	—


Rollforward of Level 3 assets and liabilities held at fair value during the nine month period ended September 30, 2022
	Balance as of December 31, 2021		Total gains (losses) included in:				Transfers																Balance as of September 30, 2022
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3		Purchases			Sales			Issues			Settlements
Assets
Fixed income securities:
Municipal	$	18	$	—	$	1	$	2	$	—		$	—		$	—		$	—		$	(2)	$	19
Corporate - public	20		—		(6)		—		—			66			(10)			—			(2)		68
Corporate - privately placed	66		20		(1)		—		—			32			(46)			—			—		71
ABS	40		1		—		—		(28)			37			—			—			(2)		48
Total fixed income securities	144		21		(6)		2		(28)			135			(56)			—			(6)		206
Equity securities	349		13		—		—		—			10			(45)			—			—		327
Short-term investments	5		—		—		—		—			23			—			—			(22)		6
Other investments	2		—		—		—		—			—			—			—			—		2
Other assets	65		39		—		—		—			—			—			—			—		104
Total recurring Level 3 assets	565		73		(6)		2		(28)			168			(101)			—			(28)		645
Liabilities
Total recurring Level 3 liabilities	$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	—		$	—	$	—

Third Quarter 2022 Form 10-Q 25

Notes to Condensed Consolidated Financial Statements


Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended September 30, 2021
	Balance as of June 30, 2021		Total gains (losses) included in:				Transfers				Transfers to (from) held for sale										Balance as of September 30, 2021
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3				Purchases		Sales		Issues		Settlements
Assets
Fixed income securities:
Municipal	$	18	$	—	$	(1)	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	17
Corporate - public	20		—		—		—		—		(1)		—		—		—		—		19
Corporate - privately placed	84		1		1		—		(22)		(2)		104		(7)		—		(5)		154
ABS	33		—		—		1		—		—		5		—		—		(30)		9
Total fixed income securities	155		1		—		1		(22)		(3)		109		(7)		—		(35)		199
Equity securities	405		31		—		—		—		—		27		(87)		—		—		376
Short-term investments	—		—		—		—		—		—		14		—		—		—		14
Other investments	3		—		—		—		—		—		—		(1)		—		—		2
Assets held for sale	164		1		—		—		(20)		3		—		—		—		(2)		146
Total recurring Level 3 assets	727		33		—		1		(42)		—		150		(95)		—		(37)		737
Liabilities
Liabilities held for sale	(490)		15		—		—		—		—		—		—		(9)		5		(479)
Total recurring Level 3 liabilities	$	(490)	$	15	$	—	$	—	$	—	$	—	$	—	$	—	$	(9)	$	5	$	(479)


Rollforward of Level 3 assets and liabilities held at fair value during the nine month period ended September 30, 2021
	Balance as of December 31, 2020		Total gains (losses) included in:				Transfers				Transfers to (from) held for sale										Balance as of September 30, 2021
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3				Purchases		Sales		Issues		Settlements
Assets
Fixed income securities:
Municipal	$	17	$	—	$	—	$	—	$	—	$	—	$	3	$	—	$	—	$	(3)	$	17
Corporate - public	67		1		(2)		—		—		(7)		13		(53)		—		—		19
Corporate - privately placed	63		—		2		8		—		14		103		(31)		—		(5)		154
ABS	79		1		—		—		(32)		—		57		(42)		—		(54)		9
Total fixed income securities	226		2		—		8		(32)		7		176		(126)		—		(62)		199
Equity securities	304		63		—		—		—		101		40		(132)		—		—		376
Short-term investments	35		—		—		—		—		—		14		—		—		(35)		14
Other investments	—		—		—		—		—		—		3		(1)		—		—		2
Assets held for sale	267		3		—		5		(13)		(108)		3		(6)		—		(5)		146
Total recurring Level 3 assets	832		68		—		13		(45)		—		236		(265)		—		(102)		737
Liabilities
Liabilities held for sale	(516)		46		—		—		—		—		—		—		(25)		16		(479)
Total recurring Level 3 liabilities	$	(516)	$	46	$	—	$	—	$	—	$	—	$	—	$	—	$	(25)	$	16	$	(479)


Total Level 3 gains (losses) included in net income
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Net investment income	$	4	$	6	$	17	$	(1)
Net gains (losses) on investments and derivatives	(23)		26		56		66

26 www.allstate.com

Notes to Condensed Consolidated Financial Statements

Transfers into Level 3 during the three and nine months ended September 30, 2022 and September 30, 2021 included situations where a quote was not provided by the Company’s independent third-party valuation service provider and as a result the price was stale or had been replaced with a broker quote where the inputs had not been corroborated to be market observable resulting in the security being classified as Level 3.

Transfers out of Level 3 during the three and nine months ended September 30, 2022 and 2021 included situations where a broker quote was used in the prior period and a quote became available from the Company’s independent third-party valuation service provider in the current period. A quote utilizing the new pricing source was not available as of the prior period, and any gains or losses related to the change in valuation source for individual securities were not significant.


Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of September 30,
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Assets
Municipal	$	—	$	1	$	—	$	—

Corporate - privately placed	1		—		1		—

Total fixed income securities	1		1		1		—
Equity securities	$	(16)	$	9	$	11	$	22

Other assets	(4)		—		39		—

Assets held for sale	—		1		—		3
Total recurring Level 3 assets	$	(19)	$	11	$	51	$	25
Liabilities
Liabilities held for sale	$	—	$	15	$	—	$	46
Total recurring Level 3 liabilities	—		15		—		46
Total included in net income	$	(19)	$	26	$	51	$	71

Components of net income
Net investment income	$	3	$	6	$	16	$	(1)
Net gains (losses) on investments and derivatives	(22)		4		35		23
Total included in net income	$	(19)	$	10	$	51	$	22

Assets
Municipal	$	—	$	(1)	$	1	$	—
Corporate - public	(3)		—		(6)		(1)
Corporate - privately placed	(1)		1		(2)		1


Total recurring Level 3 assets	$	(4)	$	—	$	(7)	$	—
Changes in unrealized net capital gains and losses reported in OCI	$	(4)	$	—	$	(7)	$	—


Financial instruments not carried at fair value
($ in millions)		September 30, 2022				December 31, 2021
Financial assets	Fair value level	Amortized cost, net		Fair value		Amortized cost, net		Fair value
Mortgage loans	Level 3	$	833	$	779	$	821	$	853
Bank loans	Level 3	748		738		1,574		1,634



Financial liabilities	Fair value level	Carrying value (1)		Fair value		Carrying value (1)		Fair value
Contractholder funds on investment contracts	Level 3	$	52	$	52	$	55	$	55
Long-term debt	Level 2	7,967		7,383		7,976		9,150
Liability for collateral	Level 2	2,201		2,201		1,444		1,444

(1)Represents the amounts reported on the Condensed Consolidated Statements of Financial Position.

Third Quarter 2022 Form 10-Q 27

Notes to Condensed Consolidated Financial Statements


Note 7			Derivative Financial Instruments

The Company uses derivatives for risk reduction and to increase investment portfolio returns through asset replication. Risk reduction activity is focused on managing the risks with certain assets and liabilities arising from the potential adverse impacts from changes in risk-free interest rates, changes in equity market valuations, increases in credit spreads and foreign currency fluctuations.

Asset replication refers to the “synthetic” creation of assets through the use of derivatives. The Company replicates fixed income securities using a combination of a credit default swap, index total return swap, options, or a foreign currency forward contract and one or more highly rated fixed income securities, primarily investment grade host bonds, to synthetically replicate the economic characteristics of one or more cash market securities. The Company replicates equity securities using futures, index total return swaps, and options to increase equity exposure.

Property-Liability may use interest rate swaps, swaptions, futures and options to manage the interest rate risks of existing investments. These instruments are utilized to change the duration of the portfolio in order to offset the economic effect that interest rates would otherwise have on the fair value of its fixed income securities. Fixed income index total return swaps are used to offset valuation losses in the fixed income portfolio during periods of declining market values. Credit default swaps are typically used to mitigate the credit risk within the Property-Liability fixed income portfolio. Equity index total return swaps, futures and options are used by Property-Liability to offset valuation losses in the equity portfolio during periods of declining equity market values. In addition, equity futures are used to hedge the market risk related to deferred compensation liability contracts. Forward contracts are primarily used by Property-Liability to hedge foreign currency risk associated with holding foreign currency denominated investments and foreign operations.

The Company also has derivatives embedded in non-derivative host contracts that are required to be separated from the host contracts and accounted for at fair value with changes in fair value of embedded derivatives reported in net income.

When derivatives meet specific criteria, they may be designated as accounting hedges and accounted for as fair value, cash flow, foreign currency fair value or foreign currency cash flow hedges.

The notional amounts specified in the contracts are used to calculate the exchange of contractual payments under the agreements and are generally not representative of the potential for gain or loss on these

agreements. However, the notional amounts specified in credit default swaps where the Company has sold credit protection represent the maximum amount of potential loss, assuming no recoveries.

Fair value, which is equal to the carrying value, is the estimated amount that the Company would receive or pay to terminate the derivative contracts at the reporting date. The carrying value amounts for OTC derivatives are further adjusted for the effects, if any, of enforceable master netting agreements and are presented on a net basis, by counterparty agreement, in the Condensed Consolidated Statements of Financial Position.

For those derivatives which qualify and have been designated as fair value accounting hedges, net income includes the changes in the fair value of both the derivative instrument and the hedged risk. For cash flow hedges, gains and losses are amortized from AOCI and are reported in net income in the same period the forecasted transactions being hedged impact net income.

Non-hedge accounting is generally used for “portfolio” level hedging strategies where the terms of the individual hedged items do not meet the strict homogeneity requirements to permit the application of hedge accounting. For non-hedge derivatives, net income includes changes in fair value and accrued periodic settlements, when applicable. With the exception of non-hedge derivatives used for asset replication and non-hedge embedded derivatives, all of the Company’s derivatives are evaluated for their ongoing effectiveness as either accounting hedge or non-hedge derivative financial instruments on at least a quarterly basis.

In connection with the sale of ALIC and certain affiliates, the sale agreement includes a provision related to contingent consideration that may be earned over a ten-year period commencing on January 1, 2026 and ending January 1, 2035. The contingent consideration is determined annually based on the average 10-year Treasury rate over the preceding 3-year period compared to a designated rate. The contingent consideration meets the definition of a derivative and is accounted for on a fair value basis with periodic changes in fair value reflected in earnings. As of September 30, 2022, the Company recorded $104 million in other assets related to this derivative. For the three and nine months ended September 30, 2022, the Company recorded a loss of $4 million and a gain of $39 million, respectively, in operating costs and expenses related to valuation of this contingent consideration.

28 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Summary of the volume and fair value positions of derivative instruments as of September 30, 2022
($ in millions, except number of contracts)		Volume (1)
	Balance sheet location	Notional amount		Number of contracts	Fair value, net		Gross asset		Gross liability
Asset derivatives


Derivatives not designated as accounting hedging instruments
Interest rate contracts



Futures	Other assets	n/a		45,626	$	14	$	14	$	—
Equity and index contracts
Options	Other investments	n/a		1,309	44		44		—
Futures	Other assets	n/a		336	—		—		—



Foreign currency contracts
Foreign currency forwards	Other investments	$	39	n/a	(4)		—		(4)
Embedded derivative financial instruments	Other investments	750		n/a	—		—		—
Contingent consideration	Other assets	250		n/a	104		104		—
Credit default contracts
Credit default swaps – buying protection	Other investments	79		n/a	3		3		—






Total asset derivatives		$	1,118	47,271	$	161	$	165	$	(4)

Liability derivatives


Derivatives not designated as accounting hedging instruments
Interest rate contracts




Futures	Other liabilities & accrued expenses	n/a		2,969	$	(1)	$	—	$	(1)
Equity and index contracts
Options	Other liabilities & accrued expenses	n/a		1,210	(16)		—		(16)
Futures	Other liabilities & accrued expenses	n/a		3,674	(8)		—		(8)




Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	$	689	n/a	49		60		(11)





Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	55		n/a	(1)		—		(1)



Total liability derivatives		744		7,853	23		$	60	$	(37)
Total derivatives		$	1,862	55,124	$	184

(1) Volume for OTC and cleared derivative contracts is represented by their notional amounts. Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded. (n/a = not applicable)

Third Quarter 2022 Form 10-Q 29

Notes to Condensed Consolidated Financial Statements


Summary of the volume and fair value positions of derivative instruments as of December 31, 2021
($ in millions, except number of contracts)		Volume (1)
	Balance sheet location	Notional amount		Number of contracts	Fair value, net		Gross asset		Gross liability
Asset derivatives



Derivatives not designated as accounting hedging instruments
Interest rate contracts

Futures	Other assets	n/a		1,181	$	1	$	1	$	—
Equity and index contracts
Options	Other investments	n/a		61	5		5		—
Futures	Other assets	n/a		113	—		—		—



Foreign currency contracts
Foreign currency forwards	Other investments	$	2	n/a	—		—		—
Embedded derivative financial instruments	Other investments	750		n/a	—		—		—
Contingent consideration	Other assets	250		n/a	65		65		—
Credit default contracts
Credit default swaps – buying protection	Other investments	33		n/a	(1)		—		(1)
Credit default swaps – selling protection	Other investments	250		n/a	6		6		—




Total asset derivatives		$	1,285	1,355	$	76	$	77	$	(1)

Liability derivatives


Derivatives not designated as accounting hedging instruments
Interest rate contracts


Futures	Other liabilities & accrued expenses	n/a		36,668	$	(2)	$	—	$	(2)
Equity and index contracts

Futures	Other liabilities & accrued expenses	n/a		1,260	(1)		—		(1)



Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	$	715	n/a	16		23		(7)


Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	70		n/a	(4)		—		(4)
Credit default swaps – selling protection	Other liabilities & accrued expenses	5		n/a	—		—		—

Total liability derivatives		790		37,928	9		$	23	$	(14)
Total derivatives		$	2,075	39,283	$	85


Gross and net amounts for OTC derivatives (1)
($ in millions)			Offsets
	Gross amount		Counter-party netting		Cash collateral (received) pledged		Net amount on balance sheet		Securities collateral (received) pledged		Net amount
September 30, 2022
Asset derivatives	$	60	$	(64)	$	5	$	1	$	—	$	1
Liability derivatives	(16)		64		(71)		(23)		—		(23)

December 31, 2021
Asset derivatives	$	23	$	(24)	$	2	$	1	$	—	$	1
Liability derivatives	(10)		24		(17)		(3)		—		(3)

(1)All OTC derivatives are subject to enforceable master netting agreements.

30 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Gains (losses) from valuation and settlements reported on derivatives not designated as accounting hedges
($ in millions)	Net gains (losses) on investments and derivatives		Operating costs and expenses		Total gain (loss) recognized in net income on derivatives
Three months ended September 30, 2022
Interest rate contracts	$	260	$	—	$	260
Equity and index contracts	9		(8)		1
Contingent consideration	—		(4)		(4)
Foreign currency contracts	40		(6)		34
Credit default contracts	(10)		—		(10)


Other contracts	—		(1)		(1)
Total	$	299	$	(19)	$	280

Nine months ended September 30, 2022
Interest rate contracts	$	734	$	—	$	734
Equity and index contracts	65		(55)		10
Contingent consideration	—		39		39
Foreign currency contracts	84		(8)		76
Credit default contracts	6		—		6


Other contracts	—		(1)		(1)
Total	$	889	$	(25)	$	864

Three months ended September 30, 2021
Interest rate contracts	$	18	$	—	$	18
Equity and index contracts	10		(3)		7

Foreign currency contracts	15		—		15
Credit default contracts	1		—		1
Total return swaps - fixed income	2		—		2

Total	$	46	$	(3)	$	43

Nine months ended September 30, 2021
Interest rate contracts	$	19	$	—	$	19
Equity and index contracts	2		27		29
Foreign currency contracts	23		—		23
Credit default contracts	6		—		6
Total return swaps - fixed income	4		—		4

Total	$	54	$	27	$	81

The Company manages its exposure to credit risk by utilizing highly rated counterparties, establishing risk control limits, executing legally enforceable master netting agreements (“MNAs”) and obtaining collateral where appropriate. The Company uses MNAs for OTC derivative transactions that permit either party to net payments due for transactions and collateral is either pledged or obtained when certain predetermined exposure limits are exceeded.


OTC cash and securities collateral pledged
($ in millions)	September 30, 2022
Pledged by the Company	$	5
Pledged to the Company (1)	71

(1)No collateral was posted under MNA’s for contracts containing credit-risk-contingent provisions that are in a liability provision.

The Company has not incurred any losses on derivative financial instruments due to counterparty nonperformance. Other derivatives, including futures and certain option contracts, are traded on organized exchanges which require margin deposits and guarantee the execution of trades, thereby mitigating any potential credit risk.

Counterparty credit exposure represents the Company’s potential loss if all of the counterparties concurrently fail to perform under the contractual terms of the contracts and all collateral, if any, becomes worthless. This exposure is measured by the fair value of OTC derivative contracts with a positive fair value at the reporting date reduced by the effect, if any, of legally enforceable master netting agreements.

Third Quarter 2022 Form 10-Q 31

Notes to Condensed Consolidated Financial Statements


OTC derivatives counterparty credit exposure by counterparty credit rating
($ in millions)	September 30, 2022							December 31, 2021
Rating (1)	Number of counter- parties	Notional amount (2)		Credit exposure (2)		Exposure, net of collateral (2)		Number of counter- parties	Notional amount (2)		Credit exposure (2)		Exposure, net of collateral (2)

A+	4	$	500	$	25	$	—	1	$	199	$	7	$	—
A	1	232		24		—		1	367		9		—



Total	5	$	732	$	49	$	—	2	$	566	$	16	$	—

(1) Allstate uses the lower of S&P’s or Moody’s long-term debt issuer ratings.

(2) Only OTC derivatives with a net positive fair value are included for each counterparty.

For certain exchange traded and cleared derivatives, margin deposits are required as well as daily cash settlements of margin accounts.


Exchange traded and cleared margin deposits
($ in millions)	September 30, 2022
Pledged by the Company	$	162
Received by the Company	3

Market risk is the risk that the Company will incur losses due to adverse changes in market rates and prices. Market risk exists for all of the derivative financial instruments the Company currently holds, as these instruments may become less valuable due to adverse changes in market conditions. To limit this risk, the Company’s senior management has established risk control limits. In addition, changes in fair value of the derivative financial instruments that the Company uses for risk management purposes are generally offset by the change in the fair value or cash flows of the hedged risk component of the related assets, liabilities or forecasted transactions.

Certain of the Company’s derivative transactions contain credit-risk-contingent termination events and cross-default provisions. Credit-risk-contingent termination events allow the counterparties to terminate the derivative agreement or a specific trade on certain dates if AIC’s financial strength credit ratings by Moody’s or S&P fall below a certain level. Credit-risk-contingent cross-default provisions allow the counterparties to terminate the derivative agreement if the Company defaults by pre-determined threshold amounts on certain debt instruments.

The following table summarizes the fair value of derivative instruments with termination, cross-default or collateral credit-risk-contingent features that are in a liability position, as well as the fair value of assets and collateral that are netted against the liability in accordance with provisions within legally enforceable MNAs.


($ in millions)	September 30, 2022		December 31, 2021
Gross liability fair value of contracts containing credit-risk-contingent features	$	11	$	8
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs	(11)		(7)
Collateral posted under MNAs for contracts containing credit-risk-contingent features	—		—
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	—	$	1

Credit derivatives - selling protection

A credit default swap (“CDS”) is a derivative instrument, representing an agreement between two parties to exchange the credit risk of a specified entity (or a group of entities), or an index based on the credit risk of a group of entities (all commonly referred to as the “reference entity” or a portfolio of “reference entities”), in return for a periodic premium. In selling protection, CDS are used to replicate fixed income securities and to complement the cash market when credit exposure to certain issuers is not available or when the derivative alternative is less expensive than the cash market alternative. CDS typically have a five-year term. As of September 30, 2022, there were no open CDS positions.

32 www.allstate.com

Notes to Condensed Consolidated Financial Statements


CDS notional amounts by credit rating and fair value of protection sold
($ in millions)	Notional amount
	AAA		AA		A		BBB		BB and lower		Total		Fair value









December 31, 2021
Single name
Corporate debt	$	—	$	—	$	—	$	—	$	5	$	5	$	—


Index
Corporate debt	2		4		46		190		8		250		6
Total	$	2	$	4	$	46	$	190	$	13	$	255	$	6

In selling protection with CDS, the Company sells credit protection on an identified single name, a basket of names in a first-to-default (“FTD”) structure or credit derivative index (“CDX”) that is generally investment grade, and in return receives periodic premiums through expiration or termination of the agreement. With single name CDS, this premium or credit spread generally corresponds to the difference between the yield on the reference entity’s public fixed maturity cash instruments and swap rates at the time the agreement is executed. With a FTD basket, because of the additional credit risk inherent in a basket of named reference entities, the premium generally corresponds to a high proportion of the sum of the credit spreads of the names in the basket and the correlation between the names. CDX is utilized to take a position on multiple (generally 125) reference entities. Credit events are typically defined as bankruptcy, failure to pay, or restructuring, depending on the nature of the reference entities. If a credit event occurs, the Company settles with the counterparty, either through physical settlement or cash settlement.

In a physical settlement, a reference asset is delivered by the buyer of protection to the Company, in exchange for cash payment at par, whereas in a cash settlement, the Company pays the difference between par and the prescribed value of the reference asset. When a credit event occurs in a single name or FTD basket (for FTD, the first credit event occurring for any one name in the basket), the contract terminates at the time of settlement. For CDX, the reference entity’s name incurring the credit event is removed from the index while the contract continues until expiration. The maximum payout on a CDS is the contract notional amount. A physical settlement may afford the Company with recovery rights as the new owner of the asset.

The Company monitors risk associated with credit derivatives through individual name credit limits at both a credit derivative and a combined cash instrument/credit derivative level. The ratings of individual names for which protection has been sold are also monitored.

Third Quarter 2022 Form 10-Q 33

Notes to Condensed Consolidated Financial Statements


Note 8			Variable Interest Entities

Consolidated VIEs, of which the Company is the primary beneficiary, primarily include Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer (together “Reciprocal Exchanges”). The Reciprocal Exchanges are insurance carriers organized as unincorporated associations. The Company does not own the equity of the Reciprocal Exchanges, which is owned by their respective policyholders.

The Company manages the business operations of the Reciprocal Exchanges and has the power to direct their activities that most significantly impact their economic performance. The Company receives a management fee for the services provided to the Reciprocal Exchanges. In addition, as of September 30, 2022 and December 31, 2021, the Company holds interests of $123 million in the form of surplus notes included in other liabilities and expenses on the Statement of Assets and Liabilities of the Reciprocal Exchanges that provide capital to the Reciprocal Exchanges and would absorb any expected losses. The Company is therefore the primary beneficiary.

In the event of dissolution, policyholders would share any residual unassigned surplus but are not subject to assessment for any deficit in unassigned surplus of the Reciprocal Exchanges. The assets of the Reciprocal Exchanges can be used only to settle the obligations of the Reciprocal Exchanges and general creditors have no recourse to the Company.

The results of operations of the Reciprocal Exchanges are included in the Company’s Allstate Protection segment and generated $39 million and $122 million of earned premiums for the three and nine months ended September 30, 2022, respectively, compared to $47 million and $137 million for the three and nine months ended September 30, 2021, respectively.

Claims and claims expenses were $31 million and $91 million for the three and nine months ended September 30, 2022, respectively, compared to $38 million and $105 million for the three and nine months ended September 30, 2021, respectively.


Assets and liabilities of Reciprocal Exchanges
($ in millions)	September 30, 2022		December 31, 2021
Assets
Fixed income securities	$	302	$	324
Short-term investments	12		30
Deferred policy acquisition costs	20		15
Premium installment and other receivables, net	41		42
Reinsurance recoverables, net	119		114
Other assets	89		82
Total assets	583		607
Liabilities
Reserve for property and casualty insurance claims and claims expense	200		226
Unearned premiums	174		175
Other liabilities and expenses	327		265
Total liabilities	$	701	$	666


Note 9			Reserve for Property and Casualty Insurance Claims and Claims Expense

The Company establishes reserves for claims and claims expense on reported and unreported claims of insured losses. The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions.

When the Company experiences changes in the mix or type of claims or changing claim settlement patterns, it applies actuarial judgment in the determination and selection of development factors to be more reflective of the new trends. For example, the Coronavirus has had a significant impact on driving patterns and auto frequency. Supply chain disruptions

have resulted in higher parts costs, used car values and longer time to claim resolution, which have combined with labor shortages to increase physical damage loss costs. Medical inflation, treatment trends, attorney representation, litigation costs and more severe accidents have contributed to higher third-party bodily injury loss costs. These factors may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability. Generally, the initial reserves for a new accident year are established based on actual claim frequency and severity assumptions for different business segments, lines and coverages based on historical relationships to relevant inflation indicators. Reserves for prior accident years are statistically determined using several different actuarial estimation methods. Changes in auto claim frequency may result from changes in mix of business, driving behaviors, miles driven or other macroeconomic factors. Changes

34 www.allstate.com

Notes to Condensed Consolidated Financial Statements

in auto current year claim severity are generally influenced by inflation in the medical and auto repair sectors, the effectiveness and efficiency of claim practices and changes in mix of claim types. The Company mitigates these effects through various loss management programs. When such changes in claim data occur, actuarial judgment is used to determine appropriate development factors to establish reserves.

As part of the reserving process, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process.

Because reserves are estimates of unpaid portions of losses that have occurred, including incurred but not reported (“IBNR”) losses, the establishment of appropriate reserves, including reserves for catastrophes, Run-off Property-Liability and reinsurance and indemnification recoverables, is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates.

The highest degree of uncertainty is associated with reserves for losses incurred in the initial reporting

period as it contains the greatest proportion of losses that have not been reported or settled as well as heightened uncertainty for claims that involve litigation or take longer to settle during periods of rapidly increasing loss costs. The Company also has uncertainty in the Run-off Property-Liability reserves that are based on events long since passed and are complicated by lack of historical data, legal interpretations, unresolved legal issues and legislative intent based on establishment of facts.

The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in reserve estimates, which may be material, are reported in property and casualty insurance claims and claims expense in the Condensed Consolidated Statements of Operations in the period such changes are determined.

Management believes that the reserve for property and casualty insurance claims and claims expense, net of recoverables, is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the Condensed Consolidated Statements of Financial Position based on available facts, laws and regulations.


Rollforward of the reserve for property and casualty insurance claims and claims expense
	Nine months ended September 30,
($ in millions)	2022		2021
Balance as of January 1	$	33,060	$	27,610
Less recoverables (1)	(9,479)		(7,033)
Net balance as of January 1	23,581		20,577
National General acquisition as of January 4, 2021	—		1,797
Incurred claims and claims expense related to:
Current year	25,792		21,579
Prior years	1,470		(65)
Total incurred	27,262		21,514
Claims and claims expense paid related to:
Current year	(14,020)		(12,539)
Prior years	(9,850)		(8,098)
Total paid	(23,870)		(20,637)
Net balance as of September 30	26,973		23,251
Plus recoverables	9,556		10,035
Balance as of September 30	$	36,529	$	33,286

(1)Recoverables comprises reinsurance and indemnification recoverables.

Incurred claims and claims expense represents the sum of paid losses, claim adjustment expenses and reserve changes in the period. This expense included losses from catastrophes of $2.33 billion and $2.81 billion in the nine months ended September 30, 2022 and 2021, respectively, net of recoverables.

Catastrophes are an inherent risk of the property and casualty insurance business that have contributed to, and will continue to contribute to, material year-to-year fluctuations in the Company’s results of operations and financial position.

Third Quarter 2022 Form 10-Q 35

Notes to Condensed Consolidated Financial Statements


Prior year reserve reestimates included in claims and claims expense (1)
	Non-catastrophe losses				Catastrophe losses				Total
($ in millions)	2022		2021		2022		2021 (2) (3)		2022		2021
Three months ended September 30,
Auto	$	643	$	77	$	(11)	$	(5)	$	632	$	72
Homeowners	51		14		4		3		55		17
Other personal lines	(2)		(66)		(3)		—		(5)		(66)
Commercial lines	63		24		1		1		64		25
Run-off Property-Liability (4)	120		113		—		—		120		113
Protection Services	—		—		—		—		—		—
Total prior year reserve reestimates	$	875	$	162	$	(9)	$	(1)	$	866	$	161

Nine months ended September 30,
Auto	$	1,069	$	31	$	(58)	$	(28)	$	1,011	$	3
Homeowners	95		12		82		(168)		177		(156)
Other personal lines	(18)		(69)		4		(14)		(14)		(83)
Commercial lines	174		55		1		3		175		58
Run-off Property-Liability (4)	124		115		—		—		124		115
Protection Services	(3)		(2)		—		—		(3)		(2)
Total prior year reserve reestimates	$	1,441	$	142	$	29	$	(207)	$	1,470	$	(65)

(1)Favorable reserve reestimates are shown in parentheses.

(2)Included approximately $40 million and $240 million of estimated recoveries related to Nationwide Aggregate Reinsurance Program cover for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, for the three and nine months ended 2021, respectively, which primarily impacted homeowners reestimates.

(3)Included approximately $110 million favorable subrogation settlements arising from the Woolsey wildfire, which primarily impacted homeowners reestimates, for the nine months ended 2021.

(4)The Company’s 2022 and 2021 annual reserve reviews, using established industry and actuarial practices, resulted in unfavorable reestimates of $118 million and $111 million, respectively.

Unfavorable reserve reestimates for personal auto are primarily from bodily injury and physical damage coverages. Increases in injury coverages reflect recent data and updated assumptions related to severity of third-party bodily injury claims, increased claims with attorney representation, litigation costs and higher medical inflation. Increases in physical damage reflect the ongoing inflationary factors and supply chain shortages impacting used vehicle and parts prices, labor rates and length of claim resolution. Delays in the receipt of third-party carrier claims also contributed to the adverse development of claims reported in prior years.


Note 10			Reinsurance and Indemnification


Effects of reinsurance ceded and indemnification programs on property and casualty premiums earned and accident and health insurance premiums and contract charges
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Property and casualty insurance premiums earned	$	(479)	$	(442)	$	(1,362)	$	(1,488)
Accident and health insurance premiums and contract charges	(12)		(17)		(29)		(65)


Effects of reinsurance ceded and indemnification programs on property and casualty insurance claims and claims expense and accident, health and other policy benefits
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Property and casualty insurance claims and claims expense (1) (2)	$	(925)	$	(1,458)	$	(1,300)	$	(3,209)
Accident, health and other policy benefits	(5)		(13)		(21)		(68)

(1)Ceded losses incurred included $100 million and $525 million related to the Michigan Catastrophic Claims Association for the nine months ended September 30, 2022 and 2021, respectively, and $305 million of expected reinsurance recoveries related to the Florida Excess Catastrophe Reinsurance Program for Hurricane Ian for the three and nine months ended September 30, 2022.

(2)Included approximately $1.40 billion and $185 million of ceded losses related to the Nationwide Catastrophe Reinsurance Program and the National Flood Insurance Program, respectively, for the nine months ended September 30, 2021.

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Notes to Condensed Consolidated Financial Statements

Reinsurance and indemnification recoverables


Reinsurance and indemnification recoverables, net
($ in millions)	September 30, 2022		December 31, 2021
Property and casualty
Paid and due from reinsurers and indemnitors	$	264	$	391
Unpaid losses estimated (including IBNR)	9,556		9,479
Total property and casualty	$	9,820	$	9,870

Accident and health insurance	141		154
Total	$	9,961	$	10,024


Rollforward of credit loss allowance for reinsurance recoverables
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Property and casualty (1) (2)
Beginning balance	$	(66)	$	(60)	$	(66)	$	(59)
Increase in the provision for credit losses	(5)		(6)		(5)		(7)
Write-offs	9		—		9		—
Ending balance	$	(62)	$	(66)	$	(62)	$	(66)

Accident and health insurance
Beginning balance	$	(8)	$	(1)	$	(8)	$	(1)

Increase in the provision for credit losses	—		—		—		—
Write-offs	—		—		—		—
Ending balance	$	(8)	$	(1)	$	(8)	$	(1)

(1)Primarily related to Run-off Property-Liability reinsurance ceded.

(2)Indemnification recoverables are considered collectible based on the industry pool and facility enabling legislation.


Note 11			Company Restructuring

The Company undertakes various programs to reduce expenses. These programs generally involve a reduction in staffing levels, and in certain cases, office closures. Restructuring and related charges primarily include the following costs related to these programs:

•Employee - severance and relocation benefits

•Exit - contract termination penalties and real estate costs primarily related to accelerated amortization of right-of-use assets and related leasehold improvements at facilities to be vacated

The expenses related to these activities are included in the Condensed Consolidated Statements of Operations as restructuring and related charges and totaled $14 million and $23 million during the three months ended September 30, 2022 and 2021, respectively, and $27 million and $145 million during the nine months ended September 30, 2022 and 2021, respectively.

Restructuring expenses during the third quarter and first nine months of 2022 are primarily due to the

future work environment and employee costs. The Company continues to identify ways to improve operating efficiency and reduce cost which may result in additional restructuring charges in the future.


Future work environment
($ in millions)
Expected program charges	$	110
2021 expenses	(131)
2022 expenses	(13)
Change in estimated program costs	44
Remaining program charges	$	10

These charges are primarily recorded in the Allstate Protection segment. Exit costs of this program reflect real estate costs primarily related to accelerated amortization of right-of-use assets and related leasehold improvements at facilities to be vacated. The Company expects that the majority of these actions will be completed in 2022.

Third Quarter 2022 Form 10-Q 37

Notes to Condensed Consolidated Financial Statements


Restructuring activity during the period
($ in millions)	Employee costs		Exit costs		Total liability
Restructuring liability as of December 31, 2021	$	14	$	7	$	21
Expense incurred	18		17		35
Adjustments to liability	(8)		—		(8)
Payments and non-cash charges	(6)		(17)		(23)
Restructuring liability as of September 30, 2022	$	18	$	7	$	25

As of September 30, 2022, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled $19 million for employee costs and $140 million for exit costs.


Note 12			Guarantees and Contingent Liabilities

Shared markets and state facility assessments

The Company is required to participate in assigned risk plans, reinsurance facilities and joint underwriting associations in various states that provide insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers.

The Company routinely reviews its exposure to assessments from these plans, facilities and government programs. Underwriting results related to these arrangements, which tend to be adverse, have been immaterial to the Company’s results of operations in the last two years. Because of the Company’s participation, it may be exposed to losses that surpass the capitalization of these facilities or assessments from these facilities.

Guarantees

In the normal course of business, the Company provides standard indemnifications to contractual counterparties in connection with numerous transactions, including acquisitions and divestitures. The types of indemnifications typically provided include indemnifications for breaches of representations and warranties, taxes and certain other liabilities, such as third-party lawsuits. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business based on an assessment that the risk of loss would be remote. The terms of the indemnifications vary in duration and nature. In many cases, the maximum obligation is not explicitly stated and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur. Consequently, the maximum amount of the obligation under such indemnifications is not determinable. Historically, the Company has not made any material payments pursuant to these obligations.

Related to the sale of ALNY on October 1, 2021, AIC agreed to indemnify Wilton Reassurance Company in connection with certain representations, warranties and covenants of AIC, and certain liabilities specifically excluded from the transaction, subject to specific contractual limitations regarding AIC’s maximum obligation. Management does not believe these indemnifications will have a material effect on results of operations, cash flows or financial position of the Company.

Related to the sale of ALIC and Allstate Assurance Company on November 1, 2021, AIC and Allstate Financial Insurance Holdings Corporation (collectively, the “Sellers”) agreed to indemnify Everlake US Holdings Company in connection with certain representations, warranties and covenants of the Sellers, and certain liabilities specifically excluded from the transaction, subject to specific contractual limitations regarding the Sellers’ maximum obligation. Management does not believe these indemnifications will have a material effect on results of operations, cash flows or financial position of the Company.

The aggregate liability balance related to all guarantees was not material as of September 30, 2022.

Regulation and compliance

The Company is subject to extensive laws, regulations, administrative directives, and regulatory actions. From time to time, regulatory authorities or legislative bodies seek to influence and restrict premium rates, require premium refunds to policyholders, require reinstatement of terminated policies, prescribe rules or guidelines on how affiliates compete in the marketplace, restrict the ability of insurers to cancel or non-renew policies, require insurers to continue to write new policies or limit their ability to write new policies, limit insurers’ ability to change coverage terms or to impose underwriting standards, impose additional regulations regarding agency and broker compensation, regulate the nature of and amount of investments, impose fines and penalties for unintended errors or mistakes, impose additional regulations regarding cybersecurity and privacy, and otherwise expand overall regulation of insurance products and the insurance industry. In addition, the Company is subject to laws and regulations administered and enforced by federal agencies, international agencies, and other organizations, including but not limited to the Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority, the U.S. Equal Employment Opportunity Commission, and the U.S. Department of Justice. The Company has established procedures and policies to facilitate compliance with laws and regulations, to foster prudent business operations, and to support financial reporting. The Company routinely reviews its practices to validate compliance with laws and regulations and with internal procedures and policies. As a result of these reviews, from time to time the Company may decide to modify

38 www.allstate.com

Notes to Condensed Consolidated Financial Statements

some of its procedures and policies. Such modifications, and the reviews that led to them, may be accompanied by payments being made and costs being incurred. The ultimate changes and eventual effects of these actions on the Company’s business, if any, are uncertain.

Legal and regulatory proceedings and inquiries

The Company and certain subsidiaries are involved in a number of lawsuits, regulatory inquiries, and other legal proceedings arising out of various aspects of its business.

Background These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities, including the underlying facts of each matter; novel legal issues; variations between jurisdictions in which matters are being litigated, heard, or investigated; changes in assigned judges; differences or developments in applicable laws and judicial interpretations; judges reconsidering prior rulings; the length of time before many of these matters might be resolved by settlement, through litigation, or otherwise; adjustments with respect to anticipated trial schedules and other proceedings; developments in similar actions against other companies; the fact that some of the lawsuits are putative class actions in which a class has not been certified and in which the purported class may not be clearly defined; the fact that some of the lawsuits involve multi-state class actions in which the applicable law(s) for the claims at issue is in dispute and therefore unclear; and the challenging legal environment faced by corporations and insurance companies.

The outcome of these matters may be affected by decisions, verdicts, and settlements, and the timing of such decisions, verdicts, and settlements, in other individual and class action lawsuits that involve the Company, other insurers, or other entities and by other legal, governmental, and regulatory actions that involve the Company, other insurers, or other entities. The outcome may also be affected by future state or federal legislation, the timing or substance of which cannot be predicted.

In the lawsuits, plaintiffs seek a variety of remedies which may include equitable relief in the form of injunctive and other remedies and monetary relief in the form of contractual and extra-contractual damages. In some cases, the monetary damages sought may include punitive or treble damages. Often specific information about the relief sought, such as the amount of damages, is not available because plaintiffs have not requested specific relief in their pleadings. When specific monetary demands are made, they are often set just below a state court jurisdictional limit in order to seek the maximum amount available in state court, regardless of the specifics of the case, while still avoiding the risk of removal to federal court. In Allstate’s experience, monetary demands in pleadings bear little relation to the ultimate loss, if any, to the Company.

In connection with regulatory examinations and proceedings, government authorities may seek various

forms of relief, including penalties, restitution, and changes in business practices. The Company may not be advised of the nature and extent of relief sought until the final stages of the examination or proceeding.

Accrual and disclosure policy The Company reviews its lawsuits, regulatory inquiries, and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for such matters at management’s best estimate when the Company assesses that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company does not establish accruals for such matters when the Company does not believe both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company’s assessment of whether a loss is reasonably possible or probable is based on its assessment of the ultimate outcome of the matter following all appeals. The Company does not include potential recoveries in its estimates of reasonably possible or probable losses. Legal fees are expensed as incurred.

The Company continues to monitor its lawsuits, regulatory inquiries, and other legal proceedings for further developments that would make the loss contingency both probable and estimable, and accordingly accruable, or that could affect the amount of accruals that have been previously established. There may continue to be exposure to loss in excess of any amount accrued. Disclosure of the nature and amount of an accrual is made when there have been sufficient legal and factual developments such that the Company’s ability to resolve the matter would not be impaired by the disclosure of the amount of accrual.

When the Company assesses it is reasonably possible or probable that a loss has been incurred, it discloses the matter. When it is possible to estimate the reasonably possible loss or range of loss above the amount accrued, if any, for the matters disclosed, that estimate is aggregated and disclosed. Disclosure is not required when an estimate of the reasonably possible loss or range of loss cannot be made.

For certain of the matters described below in the “Claims related proceedings” and “Other proceedings” subsections, the Company is able to estimate the reasonably possible loss or range of loss above the amount accrued, if any. In determining whether it is possible to estimate the reasonably possible loss or range of loss, the Company reviews and evaluates the disclosed matters, in conjunction with counsel, in light of potentially relevant factual and legal developments.

These developments may include information learned through the discovery process, rulings on dispositive motions, settlement discussions, information obtained from other sources, experience from managing these and other matters, and other rulings by courts, arbitrators or others. When the Company possesses sufficient appropriate information to develop an estimate of the reasonably possible loss or range of loss above the amount accrued, if any, that estimate is aggregated and disclosed below. There

Third Quarter 2022 Form 10-Q 39

Notes to Condensed Consolidated Financial Statements

may be other disclosed matters for which a loss is probable or reasonably possible, but such an estimate is not possible. Disclosure of the estimate of the reasonably possible loss or range of loss above the amount accrued, if any, for any individual matter would only be considered when there have been sufficient legal and factual developments such that the Company’s ability to resolve the matter would not be impaired by the disclosure of the individual estimate.

The Company currently estimates that the aggregate range of reasonably possible loss in excess of the amount accrued, if any, for the disclosed matters where such an estimate is possible is zero to $178 million, pre-tax. This disclosure is not an indication of expected loss, if any. Under accounting guidance, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event or events occurring is slight.” This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate. The estimate does not include matters or losses for which an estimate is not possible. Therefore, this estimate represents an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Company’s maximum possible loss exposure. Information is provided below regarding the nature of all of the disclosed matters and, where specified, the amount, if any, of plaintiff claims associated with these loss contingencies.

Due to the complexity and scope of the matters disclosed in the “Claims related proceedings” and “Other proceedings” subsections below and the many uncertainties that exist, the ultimate outcome of these matters cannot be predicted and in the Company’s judgment, a loss, in excess of amounts accrued, if any, is not probable. In the event of an unfavorable outcome in one or more of these matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to it, management believes that the ultimate outcome of all matters described below, as they are resolved over time, is not likely to have a material effect on the financial position of the Company.

Claims related proceedings The Company is managing various disputes in Florida that raise challenges to the Company’s practices, processes, and procedures relating to claims for personal injury protection benefits under Florida auto policies. Medical providers continue to pursue litigation under various theories that challenge the amounts that the Company pays under the personal injury protection coverage, seeking additional benefit payments, as well as applicable interest, penalties and fees. There is a pending putative class action, Revival Chiropractic v. Allstate Insurance Company, et al. (M.D. Fla., filed January 2019; appeal pending, 11th Circuit Court of

Appeals), where the federal district court denied class certification and plaintiff’s request to file a renewed motion for class certification. In Revival, on June 2, 2022, the 11th Circuit certified to the Florida Supreme Court Allstate’s appeal of the federal district court’s interpretation of the state personal injury protection statute. The 11th Circuit is holding determination on plaintiff’s class certification appeal pending the outcome of the Florida Supreme Court certification. The Company is also defending litigation involving individual plaintiffs.

The Company is defending putative class actions in various courts that raise challenges to the Company’s depreciation practices in homeowner property claims. In these lawsuits, plaintiffs generally allege that, when calculating actual cash value, the costs of “non-materials” such as labor, general contractor’s overhead and profit, and sales tax should not be subject to depreciation. The Company is currently defending the following lawsuits on this issue: Perry v. Allstate Indemnity Company, et al. (N.D. Ohio, filed May 2016); Lado v. Allstate Vehicle and Property Insurance Company (S.D. Ohio, filed March 2020); Maniaci v. Allstate Insurance Company (N.D. Ohio, filed March 2020); Ferguson-Luke et al. v. Allstate Property and Casualty Insurance Company (N.D. Ohio, filed April 2020); Clark v. Allstate Vehicle and Property Insurance Company (Circuit Court of Independence Co., Ark., filed February 2016); Mitchell, et al. v. Allstate Vehicle and Property Insurance Company, et al. (S.D. Ala., filed August 2021); Sims, et al. v. Allstate Fire and Casualty Insurance Company, et al. (W.D. Tex. filed June 2022); and Thompson, et al. v. Allstate Insurance Company (Circuit Court of Cole Co., Mo. filed June 2022). No classes have been certified in any of these matters. A settlement-in-principle has been reached in Thaxton v. Allstate Indemnity Company (Madison Co., Ill., filed July 2020) and Hester v. Allstate Vehicle and Property Insurance Company (St. Clair Co., Ill. filed June 2020).

The Company is defending putative class actions pending in multiple states alleging that the Company underpays total loss vehicle physical damage claims on auto policies. The allegedly systematic underpayments result from one or more of the following theories: (a) the third party valuation tool used by the Company as part of a comprehensive adjustment process is allegedly flawed, biased, or contrary to applicable law; (b) the Company allegedly does not pay sales tax, title fees, registration fees, and/or other specified fees that are allegedly mandatory under policy language or state legal authority; or (c) after paying for the value of the loss vehicle, then the Company allegedly is not entitled to retain the residual salvage value, and the Company allegedly must pay salvage value to the owner (or if the loss vehicle is retained by the owner, then the Company allegedly may not apply any offset for the salvage value).

The following cases are currently pending against the Company: Olberg v. Allstate Insurance Company, Allstate Fire and Casualty Insurance Company, and CCC Information Services, Inc. (W.D. Wash., filed April 2018); Bloomgarden v. Allstate Fire and Casualty Insurance

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Notes to Condensed Consolidated Financial Statements

Company (S.D. Fla., filed July 2018, dismissed August 2019, refiled on September 2019, remanded to 17th Judicial Circuit, Broward Co. October 2020); Erby v. Allstate Fire and Casualty Insurance Company (E.D. Pa., filed October 2018); Kronenberg v. Allstate Insurance Company and Allstate Fire and Casualty Insurance Company (E.D.N.Y., filed December 2018); Durgin v. Allstate Property and Casualty Insurance Company (W.D. La., filed June 2019); Williams v. Esurance Property and Casualty Insurance Company (C.D. Cal., filed September 2020); Cotton v. Allstate Fire and Casualty Insurance Company (Cir. Ct. of Cook Co. Ill., Chancery Div., filed October 2020); Romaniak v. Esurance Property and Casualty Insurance Company (N.D. Ohio, filed December 2020); Rawlins v. Esurance Property and Casualty Insurance Company (E.D. Mo., filed February 2021); Bass v. Imperial Fire and Casualty Insurance Company (W.D. La., filed February 2022); Cummings v. Allstate Property and Casualty Insurance Company (M.D. La., filed April 2022); Slaughter v. Esurance Property and Casualty Insurance Company (Cir. Ct. of Cook Co, Ill., Chancery Div., filed September 2022); Kanak v. Allstate Fire and Casualty Insurance Company (Cir. Ct. of Cook Co., Ill., Chancery Div., filed September 2022).

None of the courts in any of the pending matters has ruled on class certification.

Other proceedings The Company is defending against an investigatory hearing before the California Insurance Commissioner concerning the private passenger automobile insurance rating practices of Allstate Insurance Company and Allstate Indemnity Company in California. The investigatory hearing is captioned: In the Matter of the Rating Practices of Allstate Insurance Company and Allstate Indemnity Company. Pursuant to the Notice of Hearing issued by the California Insurance Commissioner, the California Insurance Commissioner is investigating: (1) whether Allstate has potentially violated California insurance law by using illegal price optimization; (2) how Allstate implemented any such potentially illegal price optimization in its private passenger auto insurance rates and/or class plans; and (3) how such potentially illegal price optimization impacted Allstate’s private passenger auto insurance policyholders. Fact discovery has been completed in the investigatory hearing. The hearing is expected to be set for a date in December 2022.

In re The Allstate Corp. Securities Litigation is a certified class action filed on November 11, 2016 in the United States District Court for the Northern District of Illinois against the Company and two of its officers asserting claims under the federal securities laws. Plaintiffs allege that they purchased Allstate common stock during the class period and suffered damages as the result of the conduct alleged. Plaintiffs seek an unspecified amount of damages, costs, attorney’s fees, and other relief as the court deems appropriate. Plaintiffs allege that the Company and certain senior officers made allegedly material misstatements or omissions concerning claim frequency statistics and the reasons for a claim frequency increase for Allstate

brand auto insurance between October 2014 and August 3, 2015.

Plaintiffs further allege that a senior officer engaged in stock option exercises during that time allegedly while in possession of material nonpublic information about Allstate brand auto insurance claim frequency. The Company, its chairman, president and chief executive officer, and its former president are the named defendants. After the court denied their motion to dismiss on February 27, 2018, defendants answered the complaint, denying plaintiffs’ allegations that there was any misstatement or omission or other misconduct. On June 22, 2018, plaintiffs filed their motion for class certification. The court allowed the lead plaintiffs to amend their complaint to add the City of Providence Employee Retirement System as a proposed class representative and on September 12, 2018, the amended complaint was filed. A class was certified on March 26, 2019, vacated by the U.S. Court of Appeals for the Seventh Circuit on July 16, 2020 and remanded for further consideration by the district court. On December 21, 2020, the district court again granted plaintiffs’ motion for class certification and certified a class consisting of all persons who purchased Allstate common stock between October 29, 2014 and August 3, 2015. Defendants’ petition for permission to appeal this ruling was denied on January 28, 2021. Following the close of discovery defendants moved for summary judgment on March 23, 2022. On July 26, 2022 the court entered its order granting summary judgment in part (as to plaintiffs’ claims relating to certain statements made in October 2014) and denying it as to the remainder of plaintiffs’ claims. The court held a conference on August 24, 2022, ordering the parties to submit a joint pre-trial order by January 10, 2023. A pre-trial conference was also scheduled for February 3, 2023.

The Company is continuing to defend two putative class actions in California federal court, Holland Hewitt v. Allstate Life Insurance Company (E.D. Cal., filed May 2020) and Farley v. Lincoln Benefit Life Company (E.D. Cal., filed Dec. 2020), following the sale of ALIC. No classes have been certified in these matters. Also pending is an individual action in California state court, Gilmore v. Lincoln Benefit Life Company (San Diego Co., Cal., filed October 29, 2021). In these cases, plaintiffs generally allege that the defendants failed to comply with certain California statutes which address contractual grace periods and lapse notice requirements for certain life insurance policies. Plaintiffs claim that these statutes apply to life insurance policies that existed before the statutes’ effective date. The plaintiffs seek damages and injunctive relief. Similar litigation is pending against other insurance carriers. In August 2021, the California Supreme Court in McHugh v. Protective Life, a matter involving another insurer, determined that the statutory notice requirements apply to life insurance policies issued before the statutes’ effective date. The Company asserts various defenses to plaintiffs’ claims and to class certification.

Third Quarter 2022 Form 10-Q 41

Notes to Condensed Consolidated Financial Statements


Note 13			Benefit Plans


Components of net cost (benefit) for pension and other postretirement plans
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Pension benefits
Service cost	$	22	$	27	$	79	$	78
Interest cost	59		47		157		145
Expected return on plan assets	(85)		(112)		(295)		(338)
Amortization of prior service credit	(2)		(13)		(27)		(38)

Costs and expenses	(6)		(51)		(86)		(153)
Remeasurement of projected benefit obligation	(254)		(25)		(1,427)		(292)
Remeasurement of plan assets	335		68		1,563		(99)
Remeasurement (gains) losses	81		43		136		(391)
Pension net cost (benefit)	$	75	$	(8)	$	50	$	(544)

Postretirement benefits
Service cost	$	—	$	—	$	1	$	1
Interest cost	3		2		7		6
Amortization of prior service credit	(7)		(5)		(19)		(18)

Costs and expenses	(4)		(3)		(11)		(11)
Remeasurement of projected benefit obligation	(2)		(3)		(45)		(13)
Remeasurement of plan assets	—		—		—		—
Remeasurement (gains) losses	(2)		(3)		(45)		(13)
Postretirement net benefit	$	(6)	$	(6)	$	(56)	$	(24)

Pension and postretirement benefits
Costs and expenses	$	(10)	$	(54)	$	(97)	$	(164)
Remeasurement (gains) losses	79		40		91		(404)
Total net cost (benefit)	$	69	$	(14)	$	(6)	$	(568)

Differences in actual experience and changes in other assumptions affect our pension and other postretirement obligations and expenses. Differences between expected and actual returns on plan assets affect remeasurement (gains) losses.

Pension and other postretirement service cost, interest cost, expected return on plan assets and

amortization of prior service credit are reported in property and casualty insurance claims and claims expense, operating costs and expenses, net investment income and (if applicable) restructuring and related charges on the Condensed Consolidated Statements of Operations.


Pension and postretirement benefits remeasurement gains and losses
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Remeasurement of projected benefit obligation (gains) losses:
Discount rate	$	(284)	$	(32)	$	(1,289)	$	(271)
Other assumptions	28		4		(183)		(34)
Remeasurement of plan assets (gains) losses	335		68		1,563		(99)
Remeasurement (gains) losses	$	79	$	40	$	91	$	(404)

Remeasurement losses for the third quarter of 2022 are primarily related to unfavorable asset performance compared to expected return on plan assets, partially offset by a reduction in the projected benefit obligation due to an increase in the liability discount rate. Remeasurement losses in the first nine months of 2022 are primarily related to unfavorable asset performance compared to expected return on plan assets, partially offset by a reduction in the projected benefit obligation due to an increase in the liability discount rate and changes in other assumptions, primarily related to an increase in the long-term lump sum interest rate.

The weighted average discount rate used to measure the benefit obligation increased to 5.72% at September 30, 2022 compared to 4.92% at June 30, 2022, 3.97% at March 31, 2022 and 2.93% at December 31, 2021 resulting in gains for the third quarter and first nine months of 2022.

For the third quarter and first nine months of 2022, the actual return on plan assets was lower than the expected return due to higher interest rates, widening credit spreads and weak equity market performance.

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Notes to Condensed Consolidated Financial Statements


Note 14			Supplemental Cash Flow Information

Non-cash investing activities include $111 million and $31 million related to mergers and exchanges completed with equity and fixed income securities, bank loans, real estate, limited partnerships and modifications of other investments for the nine months ended September 30, 2022 and 2021, respectively.

Non-cash financing activities include $65 million and $52 million related to the issuance of Allstate common shares for vested equity awards for the nine months ended September 30, 2022 and 2021, respectively.

Cash flows used in operating activities in the Condensed Consolidated Statements of Cash Flows include cash paid for operating leases related to amounts included in the measurement of lease liabilities of $127 million and $137 million for the nine

months ended September 30, 2022 and 2021, respectively. Non-cash operating activities include $17 million and $96 million related to right-of-use assets obtained in exchange for lease obligations for the nine months ended September 30, 2022 and 2021, respectively.

Liabilities for collateral received in conjunction with the Company’s securities lending program and OTC and cleared derivatives are reported in other liabilities and accrued expenses or other investments. The accompanying cash flows are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows along with the activities resulting from management of the proceeds, as follows:


($ in millions)	Nine months ended September 30,
	2022		2021
Net change in proceeds managed
Net change in fixed income securities	$	(473)	$	—
Net change in short-term investments	(285)		(579)
Operating cash flow (used)	(758)		(579)
Net change in cash	1		12
Net change in proceeds managed	$	(757)	$	(567)

Cash flows from operating activities
Net change in liabilities
Liabilities for collateral, beginning of period	$	(1,444)	$	(914)
Liabilities for collateral, end of period	(2,201)		(1,481)
Operating cash flow provided	$	757	$	567

Third Quarter 2022 Form 10-Q 43

Notes to Condensed Consolidated Financial Statements


Note 15			Other Comprehensive Income (Loss)


Components of other comprehensive income (loss) on a pre-tax and after-tax basis
($ in millions)	Three months ended September 30,
	2022						2021
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets	$	(1,161)	$	246	$	(915)	$	(343)	$	73	$	(270)
Less: reclassification adjustment of realized capital gains and losses	(159)		33		(126)		84		(18)		66
Unrealized net capital gains and losses	(1,002)		213		(789)		(427)		91		(336)
Unrealized foreign currency translation adjustments	(112)		24		(88)		(26)		5		(21)
Unamortized pension and other postretirement prior service credit (1)	(9)		1		(8)		(19)		4		(15)
Other comprehensive (loss) income	$	(1,123)	$	238	$	(885)	$	(472)	$	100	$	(372)

	Nine months ended September 30,
	2022						2021
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets	$	(5,081)	$	1,080	$	(4,001)	$	(1,350)	$	288	$	(1,062)
Less: reclassification adjustment of realized capital gains and losses	(602)		126		(476)		367		(77)		290
Unrealized net capital gains and losses	(4,479)		954		(3,525)		(1,717)		365		(1,352)
Unrealized foreign currency translation adjustments	(171)		36		(135)		13		(3)		10
Unamortized pension and other postretirement prior service credit (1)	(47)		9		(38)		(56)		12		(44)
Other comprehensive (loss) income	$	(4,697)	$	999	$	(3,698)	$	(1,760)	$	374	$	(1,386)

(1) Represents prior service credits reclassified out of other comprehensive income and amortized into operating costs and expenses.

44 www.allstate.com

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

The Allstate Corporation

Northbrook, Illinois 60062

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated statement of financial position of The Allstate Corporation and subsidiaries (the “Company”) as of September 30, 2022, the related condensed consolidated statements of operations, comprehensive income (loss) and shareholders’ equity for the three-month and nine-month periods ended September 30, 2022 and 2021, and cash flows for the nine month periods ended September 30, 2022 and 2021, and the related notes (collectively referred to as the “condensed consolidated financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of the Company as of December 31, 2021, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 18, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived.

Basis for Review Results

These condensed consolidated financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of the condensed consolidated financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

November 2, 2022

Third Quarter 2022 Form 10-Q 45

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as “we,” “our,” “us,” the “Company” or “Allstate”). It should be read in conjunction with the condensed consolidated financial statements and related notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporation annual report on Form 10-K for 2021, filed February 18, 2022.

Further analysis of our insurance segments is provided in the Property-Liability Operations and Segment Results sections, including Allstate Protection and Run-off Property-Liability, Protection Services and Allstate Health and Benefits, of Management’s Discussion and Analysis (“MD&A”). The segments are consistent with the way in which the chief operating decision maker reviews financial performance and makes decisions about the allocation of resources.

Subsequent event

On October 18, 2022, Allstate closed the sale of its headquarters for $232 million resulting in a gain of approximately $99 million, pre-tax in the fourth quarter of 2022. $16 million of the gain will be classified in Property-Liability net gains and losses on investments and derivatives and $83 million will be classified as other income within the Corporate and Other segment, but excluded from adjusted net income, the measure of segment profit or loss. The sale will reduce real estate expenses and further advance Allstate’s multi-year Transformative Growth initiative.

The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”)

The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures have moderated, but new variants of the Coronavirus could result in further economic volatility. We continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to our operations, but the effects have been and could be material.

Certain growth and profitability comparisons to the prior year were impacted, in part, by the effects the Coronavirus had on our prior year results. Beginning in March 2020, when shelter-in-place orders and other restrictions were initiated, and throughout 2021, we experienced lower auto accident claim frequency and different claim patterns than historically experienced. Total auto claim frequency has increased through the first nine months of 2022 and during 2021, but remains below pre-pandemic levels.

The Coronavirus has affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity. The impact from the pandemic should be considered when comparing the current period to the prior period, including:

•Sales of new and retention of existing policies

•Rate changes and average gross premiums

•Supply chain disruptions and labor shortages increasing the cost of settling claims

•Premium for transportation network products

•Driving behavior and auto accident frequency

•Hospital and outpatient claim costs

•Investment valuations and returns

•Bad debt and credit allowance exposure

•Consumer utilization of Milewise®, our pay-per-mile insurance product

•Retail sales in Allstate Protection Plans

This list is not inclusive of all potential impacts and should not be treated as such. Within the MD&A we have included further disclosures related to the impacts of the Coronavirus on our 2022 results.

Russia/Ukraine Conflict

The Russia-Ukraine war and related sanctions imposed as a result of this conflict have increased global economic and political uncertainty, including inflationary pressures and an increased risk of cybersecurity incidents. Allstate does not have operations or direct investments in Russia, Belarus or Ukraine, but we could experience significant indirect impacts on the investment portfolio, financial position, or results of operations.

Corporate Strategy

Our strategy has two components: increase personal property-liability market share and expand protection offerings by leveraging the Allstate brand, customer base and other core capabilities.

Transformative Growth is about creating a business model, capabilities and culture that continually transform to better serve customers. This is done by providing affordable, simple and connected protection through multiple distribution partners. The ultimate objective is to create continuous transformative growth in all businesses.

In the personal property-liability businesses this has five key components:

•Expanding customer access

•Improving customer value

•Increasing customer acquisition sophistication

•Modernizing the technology ecosystem

•Enhancing organizational capabilities

46 www.allstate.com

Protection services businesses are being expanded by leveraging enterprise capabilities and resources such as distribution, brand, analytics, claims, investment expertise, talent and capital.

Acquisitions and Dispositions

Acquisitions On January 4, 2021, we completed the acquisition of National General Holdings Corp. (“National General”), significantly enhancing our strategic position in the independent agency channel. The transaction increased our market share in personal property-liability by over one percentage point and enhanced our independent agent-facing technology.

Discontinued operations and held for sale On October 1, 2021, we closed the sale of Allstate Life Insurance Company of New York (“ALNY”) to Wilton Reassurance Company for $400 million. On November 1, 2021, we closed the sale of Allstate Life Insurance Company (“ALIC”) and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including a pre-close dividend of $1.25 billion paid by ALIC.

In 2021 and prior periods, the assets and liabilities of the businesses were reclassified as held for sale and results were presented as discontinued operations.

See Note 3 of the condensed consolidated financial statements for further information on acquisitions and dispositions.

Measuring segment profit or loss

Underwriting income is calculated as premiums earned and other revenue, less claims and claims expense (“losses”), amortization of deferred policy acquisition costs (“DAC”), operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, as determined using accounting principles generally accepted in the United States of America (“GAAP”). We use this measure in our evaluation of results of operations to analyze profitability.

Adjusted net income is net income (loss) applicable to common shareholders, excluding:


•			Net gains and losses on investments and derivatives
•			Pension and other postretirement remeasurement gains and losses
•			Business combination expenses and the amortization or impairment of purchased intangibles
•			Income or loss from discontinued operations
•			Gain or loss on disposition of operations
•			Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years
•			Income tax expense or benefit on reconciling items

Third Quarter 2022 Form 10-Q 47

Highlights

Consolidated net income

($ in millions)


Consolidated net loss applicable to common shareholders was $694 million and $1.11 billion in the third quarter and first nine months of 2022, respectively, compared to income of $508 million and $695 million in the third quarter and first nine months of 2021, respectively, primarily due to higher losses, excluding catastrophes, and equity valuation decreases, partially offset by increased Property-Liability premiums earned and the loss on the sale of the life and annuities business in the first nine months of 2021. For the twelve months ended September 30, 2022, return on Allstate common shareholders’ equity was (1.6)%, a decrease of 14.8% from 13.2% for the twelve months ended September 30, 2021.

Total revenue

($ in millions)


Total revenue increased 5.8% to $13.21 billion and increased 0.5% to $37.77 billion in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021. The increase in both periods is due to increases of 9.9% and 8.4% in property and casualty insurance premiums earned in the third quarter and first nine months of 2022, respectively, partially offset by net losses on investments and derivatives in 2022 compared to net gains in 2021 and decreases in net investment income. Insurance premiums earned increased for Property-Liability and Protection Services.

Net investment income

($ in millions)


Net investment income decreased $74 million to $690 million in the third quarter of 2022 and decreased $600 million to $1.85 billion in the first nine months of 2022 compared to the same periods of 2021. The decrease in both periods was primarily due to lower performance-based investment results, mainly from limited partnerships, partially offset by higher market-based fixed income portfolio yields.

48 www.allstate.com

Financial highlights

Investments totaled $61.01 billion as of September 30, 2022, decreasing from $64.70 billion as of December 31, 2021.

Allstate shareholders’ equity As of September 30, 2022, Allstate shareholders’ equity was $17.67 billion.

Book value per common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $58.35, a decrease of 31.0% from $84.62 as of September 30, 2021, and a decrease of 28.4% from $81.52 as of December 31, 2021.

Return on average Allstate common shareholders’ equity For the twelve months ended September 30, 2022, return on Allstate common shareholders’ equity was (1.6)%, a decrease of 14.8 points from 13.2% for the twelve months ended September 30, 2021. The decrease was primarily due to lower net income applicable to common shareholders for the trailing twelve-month period ending September 30, 2022.

Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement losses of $79 million in the third quarter of 2022, primarily related to unfavorable asset performance compared to expected return on plan assets, partially offset by a reduction in the projected benefit obligation due to an increase in the liability discount rate.

We recorded losses of $91 million in the first nine months of 2022, primarily related to unfavorable asset performance compared to expected return on plan assets, partially offset by a reduction in the projected benefit obligation due to an increase in the liability discount rate and changes in other assumptions, primarily related to an increase in the long-term lump sum interest rate.

Summarized consolidated financial results


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Revenues
Property and casualty insurance premiums	$	11,661	$	10,615	$	34,004	$	31,366
Accident and health insurance premiums and contract charges	463		460		1,398		1,362
Other revenue	561		536		1,684		1,585
Net investment income	690		764		1,846		2,446
Net gains (losses) on investments and derivatives	(167)		105		(1,167)		818
Total revenues	13,208		12,480		37,765		37,577

Costs and expenses
Property and casualty insurance claims and claims expense	(10,073)		(8,264)		(27,262)		(21,514)
Shelter-in-Place Payback expense	—		—		—		(29)
Accident, health and other policy benefits	(263)		(277)		(801)		(771)
Amortization of deferred policy acquisition costs	(1,682)		(1,582)		(4,913)		(4,650)
Operating, restructuring and interest expenses	(1,941)		(1,982)		(5,872)		(5,695)
Pension and other postretirement remeasurement gains (losses)	(79)		(40)		(91)		404
Amortization of purchased intangibles	(90)		(109)		(264)		(267)

Total costs and expenses	(14,128)		(12,254)		(39,203)		(32,522)

(Loss) income from operations before income tax expense	(920)		226		(1,438)		5,055

Income tax benefit (expense)	237		(20)		377		(1,008)

Net (loss) income from continuing operations	(683)		206		(1,061)		4,047

Income (loss) from discontinued operations, net of tax	—		325		—		(3,272)

Net (loss) income	(683)		531		(1,061)		775

Less: Net loss attributable to noncontrolling interest	(15)		(7)		(34)		(7)

Net (loss) income attributable to Allstate	(668)		538		(1,027)		782

Preferred stock dividends	(26)		(30)		(79)		(87)

Net (loss) income applicable to common shareholders	$	(694)	$	508	$	(1,106)	$	695

Third Quarter 2022 Form 10-Q 49

Segment highlights

Allstate Protection underwriting loss was $1.17 billion in the third quarter of 2022 compared to underwriting loss of $421 million in the third quarter of 2021. Underwriting loss totaled $1.75 billion in the first nine months of 2022 compared to underwriting income of $1.67 billion in the first nine months of 2021. The decrease in both periods was primarily due to higher losses and unfavorable reserve reestimates, both excluding catastrophes, primarily for auto insurance, partially offset by increased premiums. We are executing a comprehensive plan to improve profitability, including broadly raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and executing claims operating actions to manage loss costs.

At this time, we will no longer write new homeowners and condominium business in the state of California, although we will offer continuing coverage to existing customers. Additional actions are likely in personal auto insurance.

Commercial insurance is being exited in five states and coverage to transportation network companies will not be offered unless it utilizes telematics-based pricing. We expect these actions will negatively impact premiums starting in the fourth quarter.

Catastrophe losses were $763 million and $2.33 billion in the third quarter and first nine months of 2022, respectively, compared to $1.27 billion and $2.81 billion in the third quarter and first nine months of 2021, respectively.

Premiums written increased 9.8% to $12.04 billion and 10.5% to $34.31 billion in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, reflecting higher premiums in both Allstate and National General brands.

Protection Services adjusted net income was $35 million in the third quarter of 2022 compared to $45 million in the third quarter of 2021, primarily due to a prior year restructuring benefit and higher current year technology expenses at Allstate Identity Protection. Adjusted net income was $131 million in the first nine months of 2022 compared to $150 million in the first nine months of 2021, primarily related to investments in growth at Allstate Protection Plans and lower revenue at Arity.

Premiums and other revenue increased 8.7% or $47 million in the third quarter of 2022 and 11.4% or $179 million in the first nine months of 2022 compared to the same periods of 2021, primarily due to Allstate Protection Plans.

Allstate Health and Benefits adjusted net income was $54 million in the third quarter of 2022 compared to $33 million in the third quarter 2021, primarily due to lower individual health and employer voluntary benefits claims as well as lower restructuring charges compared to the prior year quarter. Adjusted net income was $172 million in the first nine months of 2022 compared to $160 million in the first nine months of 2021, primarily due to increases in group health and employer voluntary benefits revenues, partially offset by higher group and individual health claims utilization.

Premiums and contract charges increased 0.7% to $463 million in the third quarter of 2022 and 2.6% to $1.40 billion in the first nine months of 2022 compared to the same periods of 2021, primarily due to growth in group health and employer voluntary benefits.

50 www.allstate.com

Property-Liability Operations

Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Run-off Property-Liability. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources.

We do not allocate Property-Liability investment income, net gains and losses on investments and derivatives, or assets to the Allstate Protection and Run-off Property-Liability segments. Management reviews assets at the Property-Liability level for decision-making purposes.

GAAP operating ratios are used to measure our profitability to enhance an investor’s understanding of our financial results and are calculated as follows:

•Loss ratio: the ratio of claims and claims expense (loss adjustment expenses), to premiums earned. Loss ratios include the impact of catastrophe losses and prior year reserve reestimates.

•Expense ratio: the ratio of amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges and Shelter-in-Place Payback expense, less other revenue to premiums earned.

•Combined ratio: the sum of the loss ratio and the expense ratio.

We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between periods. The impacts are calculated by taking the specific items noted below divided by Property-Liability premiums earned:

•Effect of catastrophe losses on combined ratio: includes catastrophe losses and prior year reserve reestimates of catastrophe losses, included in claims and claims expense

•Effect of prior year reserve reestimates on combined ratio

•Effect of amortization of purchased intangibles on combined ratio

•Effect of restructuring and related charges on combined ratio

•Effect of Shelter-in-Place Payback expense on combined and expense ratios

•Effect of Run-off Property-Liability business on combined ratio: includes claims and claims expense, restructuring and related charges and operating costs and expenses in the Run-off Property-Liability segment

Premium measures and statistics are used to analyze our premium trends and are calculated as follows:

•PIF: policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy. Commercial lines PIF counts for shared economy agreements typically reflect contracts that cover multiple rather than individual drivers.

•New issued applications: item counts of automobile or homeowner insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate brand.

•Average premium-gross written (“average premium”): gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line.

•Renewal ratio: renewal policy item counts issued during the period, based on contract effective dates, divided by the total policy item counts issued generally 6 months prior for auto or 12 months prior for homeowners.

•Implemented rate changes: represents the impact in the locations (U.S. states, the District of Columbia or Canadian provinces) where rate changes were implemented during the period as a percentage of total brand prior year-end premiums written.

Frequency and severity statistics, which are influenced by driving patterns, inflation and other factors, are provided to describe the trends in loss costs. Our reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine our best estimate of recorded reserves. We use the following statistics to evaluate losses:

•Gross claim frequency is calculated as annualized notice counts, excluding counts associated with catastrophe events, received in the period divided by the average of PIF with the applicable coverage during the period. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed with a payment or closed without payment).

•Report year incurred claim severity is calculated by dividing the sum of recorded estimated incurred losses and allocated loss adjustment expenses, excluding catastrophes, by the reported notice counts during that report year. Report year incurred claim severity does not include incurred but not reported (“IBNR”) losses or benefits from subrogation and salvage.

Third Quarter 2022 Form 10-Q 51

Property-Liability Operations

•Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period.

•Percent change in frequency or paid claim severity statistics are calculated as the amount of increase or decrease in gross claim frequency or paid claim severity in the current period compared to the same period in the prior year, divided by the prior year gross claim frequency or paid claim severity.

•Percent change in report year incurred claim severity statistic is calculated as the amount of increase or decrease in report year incurred claim severity recorded in the year-to-date period divided by the current estimate of the prior report year incurred claim severity.


Underwriting results
	Three months ended September 30,				Nine months ended September 30,
($ in millions, except ratios)	2022		2021		2022		2021
Premiums written	$	12,037	$	10,966	$	34,307	$	31,057
Premiums earned	$	11,157	$	10,159	$	32,529	$	30,064
Other revenue	364		365		1,066		1,071
Claims and claims expense	(9,934)		(8,145)		(26,867)		(21,193)
Shelter-in-Place Payback expense	—		—		—		(29)
Amortization of DAC	(1,414)		(1,346)		(4,117)		(3,968)
Other costs and expenses	(1,390)		(1,477)		(4,285)		(4,115)
Restructuring and related charges (1)	(14)		(15)		(24)		(113)
Amortization of purchased intangibles	(61)		(75)		(178)		(165)
Underwriting (loss) income	$	(1,292)	$	(534)	$	(1,876)	$	1,552

Catastrophe losses
Catastrophe losses, excluding reserve reestimates	$	772	$	1,270	$	2,304	$	3,018
Catastrophe reserve reestimates (2)	(9)		(1)		29		(207)
Total catastrophe losses	$	763	$	1,269	$	2,333	$	2,811

Non-catastrophe reserve reestimates (2)	875		162		1,444		144
Prior year reserve reestimates (2)	866		161		1,473		(63)

GAAP operating ratios
Loss ratio	89.0		80.2		82.6		70.5
Expense ratio (3)	22.6		25.1		23.2		24.3
Combined ratio	111.6		105.3		105.8		94.8
Effect of catastrophe losses on combined ratio	6.8		12.5		7.2		9.4
Effect of prior year reserve reestimates on combined ratio	7.7		1.6		4.6		(0.3)
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio	(0.1)		—		0.1		(0.7)
Effect of restructuring and related charges on combined ratio (1)	0.1		0.1		0.1		0.4
Effect of amortization of purchased intangibles on combined ratio	0.6		0.8		0.5		0.5
Effect of Shelter-in-Place Payback expense on combined and expense ratios	—		—		—		0.1
Effect of Run-off Property-Liability business on combined ratio	1.1		1.2		0.4		0.4

(1)Restructuring and related charges for the third quarter and first nine months of 2022 primarily related to future work environment and employee costs. See Note 11 of the condensed consolidated financial statements for additional details.

(2)Favorable reserve reestimates are shown in parentheses.

(3)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.

52 www.allstate.com

Allstate Protection Segment Results

Allstate Protection Segment


Underwriting results
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Premiums written	$	12,037	$	10,966	$	34,307	$	31,057
Premiums earned	$	11,157	$	10,159	$	32,529	$	30,064
Other revenue	364		365		1,066		1,071
Claims and claims expense	(9,814)		(8,032)		(26,743)		(21,078)
Shelter-in-Place Payback expense	—		—		—		(29)
Amortization of DAC	(1,414)		(1,346)		(4,117)		(3,968)
Other costs and expenses	(1,388)		(1,476)		(4,282)		(4,112)
Restructuring and related charges	(14)		(16)		(24)		(113)
Amortization of purchased intangibles	(61)		(75)		(178)		(165)
Underwriting (loss) income	$	(1,170)	$	(421)	$	(1,749)	$	1,670
Catastrophe losses	$	763	$	1,269	$	2,333	$	2,811

Underwriting loss was $1.17 billion in the third quarter of 2022 compared to underwriting loss of $421 million in the third quarter of 2021. Underwriting loss totaled $1.75 billion in first nine months of 2022 compared to underwriting income of $1.67 billion in the first nine months of 2021. The decrease in both periods was primarily due to higher losses and unfavorable reserve reestimates, both excluding catastrophes, primarily for auto insurance, partially offset by increased premiums. We are executing a comprehensive plan to improve profitability, including broadly raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and executing claims operating actions to manage loss costs.

Change in underwriting results from prior year period - three months ended

($ in millions)

Change in underwriting results from prior year period - nine months ended

($ in millions)

Third Quarter 2022 Form 10-Q 53

Segment Results Allstate Protection


Underwriting income (loss) by brand and by line of business
	Allstate brand				National General				Allstate Protection
($ in millions)	2022		2021		2022		2021		2022		2021
Three months ended September 30,
Auto (1)	$	(1,222)	$	(123)	$	(93)	$	(36)	$	(1,315)	$	(159)
Homeowners (2)	268		(208)		(23)		(69)		245		(277)
Other personal lines	(3)		47		(7)		(7)		(10)		40
Commercial lines	(116)		(54)		(1)		—		(117)		(54)
Other business lines (3)	24		27		—		—		24		27
Answer Financial	—		—		—		—		3		2
Total	$	(1,049)	$	(311)	$	(124)	$	(112)	$	(1,170)	$	(421)

Nine months ended September 30,
Auto (1)	$	(1,937)	$	1,444	$	(103)	$	118	$	(2,040)	$	1,562
Homeowners (2)	504		61		(35)		(77)		469		(16)
Other personal lines	20		112		(1)		—		19		112
Commercial lines	(280)		(81)		6		—		(274)		(81)
Other business lines (3)	70		82		—		—		70		82
Answer Financial	—		—		—		—		7		11
Total	$	(1,623)	$	1,618	$	(133)	$	41	$	(1,749)	$	1,670

(1)2021 results include certain National General commercial lines insurance products.

(2)2021 results include National General packaged policies, which include auto, and commercial lines insurance products.

(3)Other business lines represents commissions earned and other costs and expenses for Ivantage and non-proprietary life and annuity products.

Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends. Premiums written is the amount of premiums charged for policies issued during a fiscal period. Premiums are considered earned and are included in the financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired term of the policies is recorded as unearned premiums on our Condensed Consolidated Statements of Financial Position.


Premiums written by brand and by line of business
	Allstate brand				National General				Allstate Protection
($ in millions)	2022		2021		2022		2021		2022		2021
Three months ended September 30,
Auto	$	6,704	$	6,153	$	1,156	$	1,018	$	7,860	$	7,171
Homeowners	2,803		2,452		483		552		3,286		3,004
Other personal lines	564		543		42		41		606		584
Commercial lines	233		207		52		—		285		207

Total premiums written	$	10,304	$	9,355	$	1,733	$	1,611	$	12,037	$	10,966

Nine months ended September 30,
Auto	$	19,386	$	18,165	$	3,506	$	2,836	$	22,892	$	21,001
Homeowners	7,488		6,492		1,332		1,317		8,820		7,809
Other personal lines	1,609		1,519		110		120		1,719		1,639
Commercial lines	718		608		158		—		876		608

Total premiums written	$	29,201	$	26,784	$	5,106	$	4,273	$	34,307	$	31,057

54 www.allstate.com

Allstate Protection Segment Results


Premiums earned by brand and by line of business
	Allstate brand				National General				Allstate Protection
($ in millions)	2022		2021		2022		2021		2022		2021
Three months ended September 30,
Auto	$	6,416	$	6,009	$	1,129	$	903	$	7,545	$	6,912
Homeowners	2,350		2,080		426		442		2,776		2,522
Other personal lines	505		481		35		40		540		521
Commercial lines	246		204		50		—		296		204

Total premiums earned	$	9,517	$	8,774	$	1,640	$	1,385	$	11,157	$	10,159

Nine months ended September 30,
Auto	$	18,742	$	18,059	$	3,232	$	2,545	$	21,974	$	20,604
Homeowners	6,841		6,120		1,224		1,205		8,065		7,325
Other personal lines	1,511		1,432		105		113		1,616		1,545
Commercial lines	722		590		152		—		874		590

Total premiums earned	$	27,816	$	26,201	$	4,713	$	3,863	$	32,529	$	30,064


Reconciliation of premiums written to premiums earned
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Total premiums written	$	12,037	$	10,966	$	34,307	$	31,057
(Increase) decrease in unearned premiums	(852)		(672)		(1,709)		(1,264)
Other	(28)		(135)		(69)		271
Total premiums earned	$	11,157	$	10,159	$	32,529	$	30,064


Policies in force by brand and by line of business
	Allstate brand		National General		Allstate Protection
PIF (thousands)	2022	2021	2022	2021	2022	2021
Auto	21,853	21,951	4,278	3,703	26,131	25,654
Homeowners	6,599	6,496	638	642	7,237	7,138
Other personal lines	4,637	4,560	293	288	4,930	4,848
Commercial lines	204	212	106	107	310	319

Total	33,293	33,219	5,315	4,740	38,608	37,959

Auto insurance premiums written increased 9.6% or $689 million in the third quarter of 2022 compared to the third quarter of 2021 and 9.0% or $1.89 billion in the first nine months of 2022 compared to the first nine months of 2021, primarily due to the following factors:

•Increased average premiums driven by rate increases. In the nine months ended September 30, 2022, rate increases of 14.7% were taken for Allstate brand in 52 locations, resulting in total Allstate brand insurance premium impact of 10.8%, and 9.1% were taken for National General brand in 36 locations, resulting in total National General brand insurance premium impact of 5.9%, to improve underwriting results. Allstate expects to continue to pursue rate increases for the balance of 2022 and into 2023 to improve auto insurance profitability

•Renewal ratio decreased 0.2 in the third quarter and increased 0.3 points in the first nine months of 2022, respectively, compared to the third quarter and first nine months of 2021

•PIF increased 1.9% or 477 thousand to 26,131 thousand as of September 30, 2022 compared to September 30, 2021 due to growth in National General, including the SafeAuto acquisition

•The impact of the ongoing rate actions may have an adverse effect on the renewal ratio and future PIF growth

•Increased new issued applications driven by direct channel, including the acquisition of SafeAuto, and growth in the independent agency channel

Third Quarter 2022 Form 10-Q 55

Segment Results Allstate Protection


Auto premium measures and statistics
	Three months ended September 30,						Nine months ended September 30,
	2022		2021		Change		2022		2021		Change




New issued applications (thousands)
Allstate Protection by brand


Allstate brand	933		932		0.1	%	2,856		2,787		2.5	%
National General	648		516		25.6	%	2,038		1,553		31.2	%
Total new issued applications	1,581		1,448		9.2	%	4,894		4,340		12.8	%

Allstate Protection by channel
Exclusive agency channel	624		610		2.3	%	1,842		1,843		(0.1)	%
Direct channel	535		447		19.7	%	1,737		1,337		29.9	%
Independent agency channel	422		391		7.9	%	1,315		1,160		13.4	%
Total new issued applications	1,581		1,448		9.2	%	4,894		4,340		12.8	%





Allstate brand average premium	$	667	$	604	10.4	%	$	646	$	604	7.0	%
Allstate brand renewal ratio (%)	87.0		87.2		(0.2)		87.3		87.0		0.3

Homeowners insurance premiums written increased 9.4% or $282 million in the third quarter of 2022 compared to the third quarter of 2021 and increased 12.9% or $1.01 billion in the first nine months of 2022 compared to the first nine months of 2021, primarily due to the following factors:

•Higher Allstate brand average premiums from inflation in insured home replacement costs and implemented rate increases, combined with policies in force growth. National General premiums and policies in force declined in the third quarter of 2022 as we improve underwriting margins to targeted levels

•Increased new issued applications driven by growth in the independent agency channel in the third quarter and first nine months of 2022 and direct channel in the first nine months of 2022 compared to the same periods of 2021

•Growth is being reduced in states and lines of business that are underperforming. At this time, we will no longer write new homeowners and condominium business in the state of California, although we will offer continuing coverage to existing customers. We expect this action will negatively impact premiums starting in the fourth quarter


Homeowners premium measures and statistics
	Three months ended September 30,						Nine months ended September 30,
	2022		2021		Change		2022		2021		Change




New issued applications (thousands)


Allstate Protection by brand
Allstate brand	267		259		3.1	%	765		737		3.8	%
National General	41		28		46.4	%	108		77		40.3	%
Total new issued applications	308		287		7.3	%	873		814		7.2	%

Allstate Protection by channel
Exclusive agency channel	219		225		(2.7)	%	642		646		(0.6)	%
Direct channel	24		24		—	%	74		62		19.4	%
Independent agency channel	65		38		71.1	%	157		106		48.1	%
Total new issued applications	308		287		7.3	%	873		814		7.2	%





Allstate brand average premium	$	1,635	$	1,443	13.3	%	$	1,596	$	1,406	13.5	%
Allstate brand renewal ratio (%)	87.4		87.1		0.3		86.9		87.1		(0.2)

Other personal lines premiums written increased 3.8% or $22 million in the third quarter of 2022 compared to the third quarter of 2021 and increased 4.9% or $80 million in the first nine months of 2022 compared to the first nine months of 2021, primarily due to increases in landlords, condominiums and personal umbrella premiums for Allstate brand.

Commercial lines premiums written increased 37.7% or $78 million in the third quarter of 2022 compared to the third quarter of 2021 and increased

44.1% or $268 million in the first nine months of 2022 compared to the first nine months of 2021, primarily due to higher miles driven and increased average premium in our shared economy business in part due to higher rates. Commercial insurance is being exited in five states and coverage to transportation network companies will not be offered unless it utilizes telematics-based pricing. We expect these actions will negatively impact premiums starting in the fourth quarter.

56 www.allstate.com

Allstate Protection Segment Results

GAAP operating ratios include loss ratio, expense ratio and combined ratio to analyze our profitability trends. Frequency and severity statistics are used to describe the trends in loss costs.


Combined ratios by line of business
	Loss ratio		Expense ratio (1)		Combined ratio
	2022	2021	2022	2021	2022	2021
Three months ended September 30,
Auto	95.3	76.9	22.1	25.4	117.4	102.3

Homeowners	66.9	85.9	24.3	25.1	91.2	111.0
Other personal lines	76.1	64.9	25.8	27.4	101.9	92.3
Commercial lines	120.6	104.4	18.9	22.1	139.5	126.5



Total	88.0	79.0	22.5	25.1	110.5	104.1
Impact of amortization of purchased intangibles	—	—	0.6	0.8	0.6	0.8

Impact of restructuring and related charges	—	—	0.1	0.2	0.1	0.2


Nine months ended September 30,
Auto	86.1	67.7	23.2	24.7	109.3	92.4
Impact of Shelter-in-Place Payback expense	—	—	—	0.1	—	0.1

Homeowners	69.9	75.9	24.3	24.3	94.2	100.2
Other personal lines	74.4	67.0	24.4	25.8	98.8	92.8
Commercial lines	112.0	91.5	19.4	22.2	131.4	113.7



Total	82.2	70.1	23.2	24.3	105.4	94.4
Impact of amortization of purchased intangibles	—	—	0.5	0.5	0.5	0.5
Impact of Shelter-in-Place Payback expense	—	—	—	0.1	—	0.1
Impact of restructuring and related charges	—	—	0.1	0.4	0.1	0.4
Impact of Allstate Special Payment plan bad debt expense	—	—	—	(0.1)	—	(0.1)

(1)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.


Loss ratios by line of business
	Loss ratio		Effect of catastrophe losses (1)		Effect of prior year reserve reestimates		Effect of catastrophe losses included in prior year reserve reestimates
	2022	2021	2022	2021	2022	2021	2022	2021
Three months ended September 30,
Auto	95.3	76.9	4.4	2.9	8.4	1.0	(0.1)	(0.1)
Homeowners	66.9	85.9	14.1	38.0	2.0	0.7	0.2	0.1
Other personal lines	76.1	64.9	5.7	19.6	(0.9)	(12.7)	(0.6)	—
Commercial lines	120.6	104.4	3.4	4.9	21.6	12.3	0.4	0.5

Total	88.0	79.0	6.8	12.5	6.7	0.4	(0.1)	—

Nine months ended September 30,
Auto	86.1	67.7	2.2	1.9	4.6	—	(0.3)	(0.1)
Homeowners	69.9	75.9	21.0	29.8	2.2	(2.1)	1.0	(2.3)
Other personal lines	74.4	67.0	8.4	14.4	(0.9)	(5.4)	0.2	(0.9)
Commercial lines	112.0	91.5	2.1	4.2	20.0	9.8	0.1	0.5

Total	82.2	70.1	7.2	9.4	4.2	(0.6)	0.1	(0.7)

(1) The ten-year average effect of catastrophe losses on the total combined ratio was 7.5 points in the third quarter of 2022.

Third Quarter 2022 Form 10-Q 57

Segment Results Allstate Protection

Auto loss ratio increased 18.4 points in both the third quarter and first nine months of 2022 compared to the same periods of 2021, primarily due to:

•Higher gross claim frequency in all coverages, as miles driven has rebounded toward pre-pandemic levels. While total frequency increased relative to the prior year quarter, it remains below pre-pandemic levels

•Increased severity for all coverages, driven by inflationary pressures in both physical damage and bodily injury claims

•Unfavorable prior year reserve reestimates, excluding catastrophes, in both bodily injury and physical damage coverages

The impacts of the Coronavirus affect frequency and severity statistics including:

•Supply chain disruptions and labor shortages

•Value of total losses due to higher used car prices

•Labor and part cost increases

•Unemployment levels

•Changes in commuting activity

•Driving behavior (e.g., speed, time of day) impacting severity and mix of claim types

Property damage gross claim frequency for Allstate brand increased 3.5% and 9.1% in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021 due to factors including:

•Increases in miles driven compared to 2021 which was impacted by the pandemic

•While gross claim frequency has rebounded from the low in 2020, it is 13.8% and 15.0% below pre-pandemic levels of 2019 for the third quarter and first nine months of 2022, respectively

Collision gross claim frequency for Allstate brand increased 0.1% and 6.2% in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021. While gross claim frequency has rebounded from the low in 2020, it is 9.3% and 10.0% below pre-pandemic levels of 2019 for the third quarter and first nine months of 2022, respectively.

Property damage estimated report year 2022 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased approximately 17% compared to report year 2021 and also increased approximately 27% compared to the 2021 recorded severity as of September 30, 2021.

Collision estimated report year 2022 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased approximately 17% compared to report year 2021 and also increased approximately 20% compared to the 2021 recorded severity as of September 30, 2021.

The increase in estimated report year 2022 incurred claim severity for both coverages is geographically widespread and is due to rising inflationary factors and supply chain shortages impacting both repairable vehicles and total losses,

including higher used car values, replacement part costs and labor rates and length of time to claim resolution.

Bodily injury estimated report year 2022 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased approximately 12% compared to report year 2021 and also increased approximately 16% compared to the 2021 recorded severity as of September 30, 2021. The increase is due to recent data and updated assumptions related to more severe accidents, increased claims with attorney representation, litigation costs, higher medical consumption and inflation.

Homeowners loss ratio decreased 19.0 points and 6.0 points in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to lower catastrophe losses and increased premiums earned, partially offset by higher severity.


Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses)
(% change year-over-year)
Three months ended September 30, 2022
Gross claim frequency	(2.9)	%
Paid claim severity	18.8

Nine months ended September 30, 2022
Gross claim frequency	(2.8)	%
Paid claim severity	22.1

Gross claim frequency decreased in the third quarter and first nine months of 2022 compared to the same periods of 2021 primarily due to a decline in the wind/hail and water perils. Paid claim severity increased in the third quarter and first nine months of 2022 compared to the same periods of 2021 due to inflationary loss cost pressure driven by increases in labor and materials costs and time to repair. Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the quarter.

Other personal lines loss ratio increased 11.2 and 7.4 points in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to higher losses, excluding catastrophes, partially offset by lower catastrophe losses and increased premiums earned.

Commercial lines loss ratio increased 16.2 and 20.5 points in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to higher unfavorable prior year reserve reestimates, excluding catastrophes, primarily in commercial auto bodily injury coverage, and higher auto severity, partially offset by increased premiums earned.

58 www.allstate.com

Allstate Protection Segment Results

Catastrophe losses decreased 39.9% or $506 million in the third quarter of 2022 compared to the third quarter of 2021. Catastrophe losses decreased 17.0% or $478 million in the first nine months of 2022 compared to the first nine months of 2021. Hurricane Ian estimated gross catastrophe losses, excluding National Flood Insurance Program (“NFIP”) claim expenses, totaled $671 million, pre-tax, which will be reduced by $305 million in anticipated reinsurance recoveries for a net estimated loss of $366 million. Approximately 75% of Hurricane Ian net estimated losses relate to auto coverages. Auto policyholders generally have coverage for physical damage due to flood if they have purchased optional auto comprehensive coverage. Homeowners policies specifically exclude coverage for losses caused by flood.

Reinsurance recoveries in 2021 related to the Nationwide Aggregate Reinsurance Program for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, which primarily impacted homeowners prior year reserve reestimates.

We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes.

We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.

Loss estimates are generally based on claim adjuster inspections and the application of historical loss development factors. Our loss estimates are calculated in accordance with the coverage provided by our policies. The establishment of appropriate reserves, including reserves for catastrophe losses, is an inherently uncertain and complex process. Reserving for hurricane losses is complicated by the inability of insureds to promptly report losses, limitations placed on claims adjusting staff affecting their ability to inspect losses, determining whether losses are covered by our homeowners policy (generally for damage caused by wind or wind driven rain) or specifically excluded coverage caused by flood, exposure to mold damage, and the effects of numerous other considerations, including the timing of a catastrophe in relation to other events, such as at or near the end of a financial reporting period, which can affect the availability of information needed to estimate reserves for that reporting period. In these situations, we may need to adapt our practices to accommodate these circumstances in order to determine a best estimate of our losses from a catastrophe.

Over time, we have reduced our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes, limited by our participation in various state facilities.


Catastrophe losses by the type of event
	Three months ended September 30,						Nine months ended September 30,
($ in millions)	Number of events	2022		Number of events	2021(2)		Number of events	2022		Number of events	2021(2)
Hurricanes/Tropical storms (1)	1	$	378	5	$	747	1	$	378	6	$	754
Tornadoes	—	—		1	9		3	148		2	26
Wind/Hail	32	446		35	389		78	1,712		68	1,650
Wildfires	4	19		4	49		8	50		4	48
Freeze/other events	—	—		—	—		1	16		1	605
Prior year reserve reestimates		(4)			38			44			30
Prior year aggregate reinsurance recoveries		(5)			(38)			(15)			(237)
Current year aggregate reinsurance recoveries		—			(11)			—			(65)
Prior quarter reserve reestimates		(71)			86			—			—
Total catastrophe losses	37	$	763	45	$	1,269	91	$	2,333	81	$	2,811

(1)2022 includes $12 million of claims expenses related to the National Flood Insurance Program.

(2)Includes $173 million and $256 million of reinstatement premiums for the three and nine months ended September 30, 2021, related to the Nationwide Catastrophe Reinsurance Program, primarily due to Hurricane Ida.

Third Quarter 2022 Form 10-Q 59

Segment Results Allstate Protection

Catastrophe reinsurance The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the third quarter and first nine months of 2022 was $211 million and $528 million, respectively, compared to $109 million and $345 million in the third quarter and first nine months of 2021, respectively. Catastrophe placement premiums reduce net written and earned premium with approximately 73% related to homeowners.

Prior year reserve reestimates Unfavorable reserve reestimates were $746 million and $1.35 billion in the third quarter and first nine months of 2022, respectively, primarily due to strengthening of reserves, excluding catastrophes, in personal auto, primarily from bodily injury and physical damage coverages. Increases in injury coverages reflect recent data and updated assumptions related to severity with third-party bodily injury claims, increased claims with

attorney representation, litigation costs and higher medical inflation. Increases in physical damage reflect the ongoing inflationary factors and supply chain shortages impacting used vehicle and parts prices, labor rates and length of claim resolution. Delays in the receipt of third-party carrier claims also contributed to the adverse development of claims reported in prior years.

Unfavorable reserve reestimates for homeowners were driven by losses, excluding catastrophes. Unfavorable reserve reestimates for commercial auto during the third quarter were primarily from bodily injury coverage.

For a more detailed discussion on reinsurance and reserve reestimates, see Note 9 of the condensed consolidated financial statements.


Prior year reserve reestimates
	Three months ended September 30,						Nine months ended September 30,
	Reserve reestimates (1)				Effect on combined ratio (2)		Reserve reestimates (1)				Effect on combined ratio (2)
($ in millions, except ratios)	2022		2021		2022	2021	2022		2021		2022	2021
Auto	$	632	$	72	5.6	0.7	$	1,011	$	3	3.1	—
Homeowners	55		17		0.5	0.1	177		(156)		0.6	(0.5)
Other personal lines	(5)		(66)		—	(0.6)	(14)		(83)		—	(0.3)
Commercial lines	64		25		0.6	0.2	175		58		0.5	0.2

Total Allstate Protection	$	746	$	48	6.7	0.4	$	1,349	$	(178)	4.2	(0.6)

Allstate brand	$	702	$	40	6.3	0.4	$	1,292	$	(176)	4.0	(0.6)
National General	44		8		0.4	—	57		(2)		0.2	—
Total Allstate Protection	$	746	$	48	6.7	0.4	$	1,349	$	(178)	4.2	(0.6)

(1)Favorable reserve reestimates are shown in parentheses.

(2)Ratios are calculated using Allstate Protection premiums earned.

60 www.allstate.com

Allstate Protection Segment Results

Expense ratio decreased 2.6 and 1.1 points in the third quarter and first nine months of 2022, respectively, compared to the third quarter and first nine months of 2021, primarily due to lower advertising costs and the impact of amortization of DAC. The expense ratio for the first nine months of 2022 was partially offset by higher operating costs, primarily due to employee-related costs.


Impact of specific costs and expenses on the expense ratio
	Three months ended September 30,						Nine months ended September 30,
($ in millions, except ratios)	2022		2021		Change		2022		2021		Change
Amortization of DAC	$	1,414	$	1,346	$	68	$	4,117	$	3,968	$	149
Advertising expense	191		325		(134)		787		949		(162)
Amortization of purchased intangibles	61		75		(14)		178		165		13
Other costs and expenses, net of other revenue	833		786		47		2,429		2,111		318
Restructuring and related charges	14		16		(2)		24		113		(89)
Shelter-in-Place Payback expense	—		—		—		—		29		(29)
Allstate Special Payment plan bad debt expense	—		—		—		—		(19)		19
Total underwriting expenses	$	2,513	$	2,548	$	(35)	$	7,535	$	7,316	$	219

Premiums earned	$	11,157	$	10,159	$	998	$	32,529	$	30,064	$	2,465

Expense ratio
Amortization of DAC	12.7		13.2		(0.5)		12.7		13.2		(0.5)
Advertising expense	1.7		3.2		(1.5)		2.4		3.2		(0.8)
Other costs and expenses	7.4		7.7		(0.3)		7.5		7.0		0.5
Subtotal	21.8		24.1		(2.3)		22.6		23.4		(0.8)
Amortization of purchased intangibles	0.6		0.8		(0.2)		0.5		0.5		—
Restructuring and related charges	0.1		0.2		(0.1)		0.1		0.4		(0.3)
Shelter-in-Place Payback expense	—		—		—		—		0.1		(0.1)
Allstate Special Payment plan bad debt expense	—		—		—		—		(0.1)		0.1
Total expense ratio	22.5		25.1		(2.6)		23.2		24.3		(1.1)

Third Quarter 2022 Form 10-Q 61

Segment Results Run-off Property-Liability

Run-off Property-Liability Segment


Underwriting results
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021



Claims and claims expense
Asbestos claims	$	(34)	$	(64)	$	(34)	$	(64)
Environmental claims	(56)		(40)		(56)		(40)
Other run-off lines	(30)		(9)		(34)		(11)
Total claims and claims expense	(120)		(113)		(124)		(115)

Operating costs and expenses	(2)		—		(3)		(3)
Underwriting loss	$	(122)	$	(113)	$	(127)	$	(118)

Annual reserve review In the third quarter of 2022 and 2021, we performed our annual reserve review using established industry and actuarial best practices. The annual review resulted in unfavorable reserve reestimates totaling $118 million and $111 million in 2022 and 2021, respectively. The reserve reestimates are included as part of claims and claims expense.

The reserve reestimates in 2022 primarily related to new reported information and defense costs for asbestos and higher than expected reported losses for environmental and other run-off exposures.

The reserve reestimates in 2021 primarily related to new reported information for asbestos and

environmental and higher than expected reported losses for environmental and other run-off exposures.

We believe that our reserves are appropriately established based on available facts, technology, laws, regulations, and assessments of other pertinent factors and characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. However, as we progress with the resolution of disputed claims in the courts and arbitrations and with negotiations and settlements, our reported losses may be more variable.


Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance
($ in millions)	September 30, 2022		December 31, 2021
Asbestos claims
Gross reserves	$	1,231	$	1,210
Reinsurance	(394)		(382)
Net reserves	837		828
Environmental claims
Gross reserves	342		273
Reinsurance	(69)		(47)
Net reserves	273		226
Other run-off claims
Gross reserves	442		433
Reinsurance	(65)		(66)
Net reserves	377		367
Total
Gross reserves	2,015		1,916
Reinsurance	(528)		(495)
Net reserves	$	1,487	$	1,421

62 www.allstate.com

Run-off Property-Liability Segment Results


Reserves by type of exposure before and after the effects of reinsurance
($ in millions)	September 30, 2022		December 31, 2021
Direct excess commercial insurance
Gross reserves	$	1,152	$	1,050
Reinsurance	(407)		(363)
Net reserves	745		687
Assumed reinsurance coverage
Gross reserves	628		617
Reinsurance	(58)		(56)
Net reserves	570		561
Direct primary commercial insurance
Gross reserves	151		168
Reinsurance	(62)		(75)
Net reserves	89		93
Other run-off business
Gross reserves	1		1
Reinsurance	—		—
Net reserves	1		1
Unallocated loss adjustment expenses
Gross reserves	83		80
Reinsurance	(1)		(1)
Net reserves	82		79
Total
Gross reserves	2,015		1,916
Reinsurance	(528)		(495)
Net reserves	$	1,487	$	1,421


Percentage of gross and ceded reserves by case and IBNR
	September 30, 2022				December 31, 2021
	Case		IBNR		Case		IBNR
Direct excess commercial insurance
Gross reserves (1)	60	%	40	%	61	%	39	%
Ceded (2)	66		34		67		33
Assumed reinsurance coverage
Gross reserves	32		68		33		67
Ceded	34		66		38		62
Direct primary commercial insurance
Gross reserves	58		42		53		47
Ceded	81		19		71		29

(1)Approximately 64% of gross case reserves as of September 30, 2022 are subject to settlement agreements.

(2)Approximately 68% of ceded case reserves as of September 30, 2022 are subject to settlement agreements.

Third Quarter 2022 Form 10-Q 63

Segment Results Run-off Property-Liability


Gross payments from case reserves by type of exposure
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022	2021
Direct excess commercial insurance
Gross (1)	$	9	$	12	37	$	46
Ceded (2)	(3)		(6)		(13)	(21)
Assumed reinsurance coverage
Gross	14		11		25	33
Ceded	—		(1)		(1)	(4)
Direct primary commercial insurance
Gross	1		(1)		4	5
Ceded	—		2		(1)	(1)

(1) In the third quarter and first nine months of 2022, 75% and 82% of payments related to settlement agreements.

(2) In the third quarter and first nine months of 2022, 88% and 90% of payments related to settlement agreements.

Total net reserves as of September 30, 2022, included $769 million or 52% of estimated IBNR reserves compared to $733 million or 52% of estimated IBNR reserves as of December 31, 2021.

Total gross payments were $25 million and $66 million for the third quarter and first nine months of 2022, respectively, primarily related to asbestos claims, mainly from settlement agreements reached with

several insureds on large claims where the scope of coverages has been agreed upon. The claims associated with these settlement agreements are expected to be substantially paid out over the next several years as qualified claims are submitted by these insureds. Reinsurance collections were $6 million and $27 million for the third quarter and first nine months of 2022, respectively.

64 www.allstate.com

Protection Services Segment Results

Protection Services Segment


Summarized financial information
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Premiums written	$	657	$	651	$	1,957	$	1,926

Revenues
Premiums	$	504	$	456	$	1,475	$	1,302
Other revenue	84		85		269		263
Intersegment insurance premiums and service fees (1)	39		46		118		133
Net investment income	13		10		34		32

Costs and expenses
Claims and claims expense	(141)		(122)		(392)		(334)
Amortization of DAC	(236)		(206)		(685)		(581)
Operating costs and expenses	(214)		(209)		(645)		(610)
Restructuring and related charges	(1)		1		(1)		(12)

Income tax expense on operations	(13)		(16)		(41)		(43)

Less: noncontrolling interest	—		—		1		—

Adjusted net income	$	35	$	45	$	131	$	150

Allstate Protection Plans	$	29	$	32	$	108	$	119
Allstate Dealer Services	10		7		27		25
Allstate Roadside	1		1		4		7
Arity	(2)		1		(4)		4
Allstate Identity Protection	(3)		4		(4)		(5)
Adjusted net income	$	35	$	45	$	131	$	150

Allstate Protection Plans					134,700		141,809
Allstate Dealer Services					3,888		3,980
Allstate Roadside					523		533
Allstate Identity Protection					2,968		3,197
Policies in force as of September 30 (in thousands)					142,079		149,519

(1)Primarily related to Arity and Allstate Roadside and are eliminated in our condensed consolidated financial statements.

Adjusted net income decreased 22.2% or $10 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to a prior year restructuring benefit and higher current year technology expenses at Allstate Identity Protection. Adjusted net income decreased 12.7% or $19 million in the first nine months of 2022 compared to the same period of 2021, primarily driven by investments in growth at Allstate Protection Plans and lower revenue at Arity.

Premiums written increased 0.9% or $6 million in the third quarter of 2022 and increased 1.6% or $31 million in the first nine months of 2022 compared to the same periods of 2021, primarily due to international growth at Allstate Protection Plans, partially offset by a decrease in North American sales at both Allstate Protection Plans and Allstate Dealer Services.

PIF decreased 5.0% or 7 million as of September 30, 2022 compared to September 30, 2021 primarily related to a decline in Allstate Protection Plans.

Other revenue decreased 1.2% or $1 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to lower Arity revenue. Other revenue increased 2.3% or $6 million in the first nine months of 2022 compared to the same period of 2021, reflecting growth at Allstate Identity Protection partially offset by lower revenue at Arity.

Intersegment premiums and service fees decreased 15.2% or $7 million in the third quarter of 2022 and decreased 11.3% or $15 million in the first nine months of 2022 compared to the same periods of 2021, driven by decreased Arity device sales due to a shift from Drivewise® devices to a mobile program.

Third Quarter 2022 Form 10-Q 65

Segment Results Protection Services

Claims and claims expense increased 15.6% or $19 million in the third quarter 2022 compared to the third quarter of 2021, primarily due to higher claim severity at Allstate Protection Plans. Claims and claims expense increased 17.4% or $58 million in the first nine months of 2022 compared to the same period of 2021, primarily due to higher levels of claims at Allstate Protection Plans driven by growth in the business and higher severity at both Allstate Protection Plans and Allstate Roadside.

Amortization of DAC increased 14.6% or $30 million in the third quarter of 2022 and increased 17.9% or $104 million in the first nine months of 2022 compared to the same periods of 2021, driven by Allstate Protection Plans and Allstate Dealer Services business growth.

Operating costs and expenses increased 2.4% or $5 million in the third quarter of 2022 and increased 5.7% or $35 million in the first nine months of 2022 compared to the same periods of 2021, primarily due to investments in technology and geographic and product expansion at Allstate Protection Plans and Allstate Identity Protection, partially offset by lower expenses at Arity.

Restructuring and related charges increased $2 million in the third quarter of 2022 compared to the same period of 2021. Restructuring and related charges decreased $11 million in the first nine months of 2022 compared to the same period of 2021, primarily due to a facility closure at Allstate Identity Protection in the first quarter of 2021 and accelerated lease costs at Allstate Protections Plans in the third quarter of 2021.

66 www.allstate.com

Allstate Health and Benefits Segment Results

Allstate Health and Benefits Segment


Summarized financial information
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Revenues
Accident and health insurance premiums and contract charges	$	463	$	460	$	1,398	$	1,362
Other revenue	90		85		277		248
Net investment income	17		18		50		56

Costs and expenses
Accident, health and other policy benefits	(263)		(277)		(801)		(771)
Amortization of DAC	(32)		(30)		(111)		(101)
Operating costs and expenses	(207)		(206)		(594)		(582)
Restructuring and related charges	1		(8)		(1)		(9)

Income tax expense on operations	(15)		(9)		(46)		(43)
Adjusted net income	$	54	$	33	$	172	$	160

Benefit ratio (1)	55.1		58.5		55.5		54.8

Employer voluntary benefits (2)					3,799		3,835
Group health (3)					405		126
Individual health (4)					116		417
Policies in force as of September 30 (in thousands)					4,320		4,378

(1)Benefit ratio is calculated as accident, health and other policy benefits less interest credited to contractholder funds of $8 million for both the three months ended September 30, 2022 and 2021, and $25 million for both the nine months ended September 30, 2022 and 2021, divided by premiums and contract charges.

(2)Employer voluntary benefits include supplemental life and health products offered through workplace enrollment.

(3)Group health includes health products and administrative services sold to employers.

(4)Individual health includes short-term medical and other health products sold directly to individuals.

Adjusted net income increased $21 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to lower individual health and employer voluntary benefits claims as well as lower restructuring charges compared to the prior year quarter. Adjusted net income increased $12 million in the first nine months of 2022, compared to the same period of 2021, primarily due to increases in group health and employer voluntary benefits revenues, partially offset by higher group and individual health claims utilization.

Premiums and contract charges increased 0.7% or $3 million in the third quarter of 2022 and increased 2.6% or $36 million in the first nine months of 2022 compared to the same periods of 2021, primarily due to growth in group health and employer voluntary benefits.


Premiums and contract charges by line of business
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Employer voluntary benefits	$	257	$	251	$	780	$	769
Group health	96		90		285		260
Individual health	110		119		333		333
Premiums and contract charges	$	463	$	460	$	1,398	$	1,362

Other revenue increased $5 million and $29 million in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to an increase in group health administrative fees.

Accident, health and other policy benefits decreased 5.1% or $14 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to lower benefit utilization in individual health and

employer voluntary benefits. Accident, health and other policy benefits increased 3.9% or $30 million in the first nine months of 2022 compared to the same period of 2021, primarily due to increased benefits utilization for group and individual health products, offset by employer voluntary benefits.

Benefit ratio decreased to 55.1 in the third quarter of 2022 compared to 58.5 in the third quarter of 2021, primarily due to a lower benefit ratio for individual

Third Quarter 2022 Form 10-Q 67

Segment Results Allstate Health and Benefits

health products and lower life mortality in employer voluntary benefits. Benefit ratio increased to 55.5 in the first nine months of 2022 compared to 54.8 in the same period of 2021, primarily due to a higher benefit ratio in group and individual health, partially offset by lower accident and health claims in employer voluntary benefits.

Amortization of DAC increased 6.7% or $2 million in the third quarter of 2022 and increased 9.9% or $10 million in the first nine months of 2022 compared to the same periods of 2021, primarily related to employer voluntary benefits and individual health.


Operating costs and expenses
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Non-deferrable commissions	$	77	$	80	$	230	$	231
General and administrative expenses	130		126		364		351
Total operating costs and expenses	$	207	$	206	$	594	$	582

Operating costs and expenses increased $1 million and $12 million in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to growth and higher employee related expenses.

Analysis of reserves


Reserve for future policy benefits
($ in millions)	September 30, 2022		December 31, 2021
Traditional life insurance and other	$	314	$	313
Accident and health insurance	962		960
Reserve for future policy benefits	$	1,276	$	1,273

68 www.allstate.com

Investments


Portfolio composition and strategy by reporting segment (1)
	September 30, 2022
($ in millions)	Property-Liability			Protection Services			Allstate Health and Benefits			Corporate and Other			Total
Fixed income securities (2)	$	34,944		$	1,713		$	1,551		$	3,507		$	41,715
Equity securities (3)	3,963			132			70			558			4,723
Mortgage loans, net	732			—			101			—			833
Limited partnership interests	7,899			—			—			8			7,907
Short-term investments (4)	3,442			118			61			409			4,030
Other investments, net	1,677			—			119			2			1,798
Total	$	52,657		$	1,963		$	1,902		$	4,484		$	61,006
Percent to total	86.3		%	3.2		%	3.1		%	7.4		%	100.0		%

Market-based	$	43,769		$	1,963		$	1,902		$	4,482		$	52,116
Performance-based	8,888			—			—			2			8,890
Total	$	52,657		$	1,963		$	1,902		$	4,484		$	61,006

(1) Balances reflect the elimination of related party investments between segments.

(2) Fixed income securities are carried at fair value. Amortized cost, net for these securities was $38.17 billion, $1.88 billion, $1.77 billion, $3.65 billion and $45.47 billion for Property-Liability, Protection Services, Allstate Health and Benefits, Corporate and Other, and in total, respectively.

(3) Equity securities are carried at fair value. The fair value of equity securities held as of September 30, 2022, was $71 million in excess of cost. These net gains were primarily concentrated in the technology, consumer goods and banking sectors. Equity securities include $1.11 billion of funds with underlying investments in fixed income securities as of September 30, 2022.

(4) Short-term investments are carried at fair value.

Investments totaled $61.01 billion as of September 30, 2022, decreasing from $64.70 billion as of December 31, 2021, primarily due to lower fixed income and equity valuations, common share repurchases and dividends paid to shareholders, partially offset by positive operating cash flows.

Portfolio composition by investment strategy We utilize two primary strategies to manage risks and returns and to position our portfolio to take advantage of market opportunities while attempting to mitigate adverse effects. As strategies and market conditions evolve, the asset allocation may change.

Market-based strategy seeks to deliver predictable earnings aligned to business needs and take advantage of short-term opportunities primarily through public and private fixed income investments and public equity securities.

Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity, including infrastructure investments, and real estate, most of which were limited partnerships. These investments include investee level expenses, reflecting asset level

operating expenses on directly held real estate and other consolidated investments.

Macroeconomic impacts Supply chain disruptions, labor shortages and other macroeconomic factors have increased inflation, which may have an adverse impact on investment valuations and returns. Over the past several quarters, inflation continued to remain elevated, which led to increases in interest rates by the Federal Reserve and a widening of credit spreads reflecting ongoing recession concerns. Many governmental authorities and central banks have begun to respond to inflationary pressure, generally through more restrictive monetary policy, such as increasing target interest rates. These actions and other ongoing impacts from the pandemic could create significant economic uncertainty. Market volatility resulting from these factors has and may continue to impact our investment valuations and returns.

Investments in Russia and Ukraine As of September 30, 2022, we do not have any direct investments in Russia, Belarus or Ukraine. We have indirect exposure of less than $1 million in Russia and Ukraine through broad-based, global funds managed by external asset managers.

Third Quarter 2022 Form 10-Q 69

Investments


Portfolio composition by investment strategy
	September 30, 2022
($ in millions)	Market- based			Performance-based			Total
Fixed income securities	$	41,606		$	109		$	41,715
Equity securities	4,283			440			4,723
Mortgage loans, net	833			—			833
Limited partnership interests	421			7,486			7,907
Short-term investments	4,030			—			4,030
Other investments, net	943			855			1,798
Total	$	52,116		$	8,890		$	61,006
Percent to total	85.4		%	14.6		%	100.0		%

Unrealized net capital gains and losses
Fixed income securities	$	(3,750)		$	(3)		$	(3,753)
Limited partnership interests	—			7			7
Short-term investments	(1)			—			(1)
Other	(3)			—			(3)
Total	$	(3,754)		$	4		$	(3,750)

Fixed income securities


Fixed income securities by type
	Fair value as of
($ in millions)	September 30, 2022		December 31, 2021
U.S. government and agencies	$	8,444	$	6,273
Municipal	6,029		6,393
Corporate	24,732		27,330
Foreign government	890		985
Asset-backed securities (“ABS”)	1,620		1,155
Total fixed income securities	$	41,715	$	42,136

Fixed income securities are rated by third-party credit rating agencies or are internally rated. The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”) evaluates the fixed income securities of insurers for regulatory reporting and capital assessment purposes. The NAIC assigns securities to one of six credit quality categories defined as “NAIC designations”. In general, securities with NAIC designations of 1 and 2 are considered investment grade and securities with NAIC designations of 3 through 6 are considered below investment grade. The rating is either received from the SVO based on availability of applicable ratings from rating agencies on the NAIC Nationally Recognized Statistical Rating Organizations (“NRSRO”) provider list, including Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”), Fitch Ratings (“Fitch”), or a comparable internal rating.

As a result of time lags between the funding of investments, the finalization of legal documents, and the completion of the SVO filing process, the portfolio includes certain securities that have not yet been designated by the SVO as of each balance sheet date and the categorization of these securities is based on the expected ratings indicated by internal analysis.

As of September 30, 2022, 89.4% of the consolidated fixed income securities portfolio was rated investment grade. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds.

Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Our initial investment decisions and ongoing monitoring procedures for fixed income securities are based on a due diligence process which includes, but is not limited to, an assessment of the credit quality, sector, structure, and liquidity risks of each issuer.

Fixed income portfolio monitoring is a comprehensive process to identify and evaluate each fixed income security that may require a credit loss allowance. The process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. For further detail on our fixed income portfolio monitoring process, see Note 5 of the condensed consolidated financial statements.

70 www.allstate.com

Investments

The following table presents total fixed income securities by the applicable NAIC designation and comparable S&P rating.


Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating
	September 30, 2022
	NAIC 1				NAIC 2				NAIC 3
	A and above				BBB				BB
($ in millions)	Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)
U.S. government and agencies	$	8,444	$	(312)	$	—	$	—	$	—	$	—
Municipal	5,705		(427)		309		(33)		—		—
Corporate
Public	4,891		(384)		10,664		(1,219)		1,125		(168)
Privately placed	1,767		(153)		3,065		(359)		1,626		(289)
Total corporate	6,658		(537)		13,729		(1,578)		2,751		(457)
Foreign government	889		(43)		1		—		—		—
ABS	1,544		(54)		13		(2)		9		(1)
Total fixed income securities	$	23,240	$	(1,373)	$	14,052	$	(1,613)	$	2,760	$	(458)

	NAIC 4				NAIC 5-6				Total
	B				CCC and lower
	Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)
U.S. government and agencies	$	—	$	—	$	—	$	—	$	8,444	$	(312)
Municipal	8		—		7		3		6,029		(457)
Corporate
Public	139		(22)		—		—		16,819		(1,793)
Privately placed	1,304		(260)		151		(28)		7,913		(1,089)
Total corporate	1,443		(282)		151		(28)		24,732		(2,882)
Foreign government	—		—		—		—		890		(43)
ABS	—		—		54		(2)		1,620		(59)
Total fixed income securities	$	1,451	$	(282)	$	212	$	(27)	$	41,715	$	(3,753)

Municipal bonds, including tax-exempt and taxable securities, include general obligations of state and local issuers and revenue bonds.

Corporate bonds include publicly traded and privately placed securities. Privately placed securities primarily consist of corporate issued senior debt securities that are negotiated with the borrower or are issued by public entities in unregistered form.

ABS includes collateralized debt obligations, consumer and other ABS. Credit risk is managed by monitoring the performance of the underlying collateral. Many of the securities in the ABS portfolio have credit enhancement with features such as overcollateralization, subordinated structures, reserve funds, guarantees or insurance. ABS also includes residential mortgage-backed securities and commercial mortgage back securities.

Equity securities of $4.72 billion primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments.

Mortgage loans of $833 million mainly comprise loans secured by first mortgages on developed commercial real estate. Key considerations used to manage our exposure include property type and geographic diversification. For further detail on our mortgage loan portfolio, see Note 5 of the condensed consolidated financial statements.

Limited partnership interests include $6.57 billion of interests in private equity funds, $919 million of interests in real estate funds and $421 million of interests in other funds as of September 30, 2022. We have commitments to invest additional amounts in limited partnership interests totaling $2.69 billion as of September 30, 2022.

Other investments include $748 million of bank loans, net, and $774 million of direct investments in real estate as of September 30, 2022.

Third Quarter 2022 Form 10-Q 71

Investments


Unrealized net capital gains (losses)
	September 30,		December 31,
($ in millions)	2022		2021
U.S. government and agencies	$	(312)	$	(14)
Municipal	(457)		263
Corporate	(2,882)		496
Foreign government	(43)		3
ABS	(59)		12
Fixed income securities	(3,753)		760
Short-term investments	(1)		—
Derivatives	(3)		(3)
Equity method of accounting (“EMA”) limited partnerships	7		(1)
Unrealized net capital gains and losses, pre-tax	$	(3,750)	$	756

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Investments


Gross unrealized gains (losses) on fixed income securities by type and sector
	September 30, 2022
($ in millions)	Amortized cost, net		Gross unrealized				Fair value
			Gains		Losses
Corporate
Consumer goods (cyclical and non-cyclical)	$	6,185	$	—	$	(692)	$	5,493
Technology	3,098		—		(353)		2,745
Banking	4,487		—		(368)		4,119
Capital goods	2,322		—		(269)		2,053
Communications	2,403		—		(297)		2,106
Utilities	2,423		—		(241)		2,182
Financial services	2,110		—		(218)		1,892
Energy
Midstream	1,645		—		(138)		1,507
Independent/upstream	341		1		(33)		309
Integrated	68		—		(6)		62
Other	209		—		(16)		193
Total energy	2,263		1		(193)		2,071
Basic industry	1,008		1		(96)		913
Transportation	951		1		(89)		863
Other	364		—		(69)		295
Total corporate fixed income portfolio	27,614		3		(2,885)		24,732
U.S. government and agencies	8,756		1		(313)		8,444
Municipal	6,486		4		(461)		6,029
Foreign government	933		—		(43)		890
ABS	1,679		4		(63)		1,620
Total fixed income securities	$	45,468	$	12	$	(3,765)	$	41,715



	December 31, 2021
($ in millions)	Amortized cost, net		Gross unrealized				Fair value
			Gains		Losses
Corporate
Consumer goods (cyclical and non-cyclical)	$	6,817	$	176	$	(42)	$	6,951
Technology	2,947		80		(23)		3,004
Banking	3,975		54		(31)		3,998
Capital goods	2,615		75		(12)		2,678
Communications	2,077		58		(21)		2,114
Utilities	2,009		43		(28)		2,024
Financial services	1,936		41		(14)		1,963
Energy
Midstream	1,132		37		(4)		1,165
Independent/upstream	312		18		(1)		329
Integrated	119		6		—		125
Other	224		6		(1)		229
Total energy	1,787		67		(6)		1,848
Basic industry	1,249		56		(6)		1,299
Transportation	976		35		(5)		1,006
Other	446		3		(4)		445
Total corporate fixed income portfolio	26,834		688		(192)		27,330
U.S. government and agencies	6,287		12		(26)		6,273
Municipal	6,130		279		(16)		6,393
Foreign government	982		9		(6)		985
ABS	1,143		14		(2)		1,155
Total fixed income securities	$	41,376	$	1,002	$	(242)	$	42,136

In general, the gross unrealized losses are related to an increase in market yields which may include increased risk-free interest rates and wider credit spreads since the time of initial purchase. Similarly, gross unrealized gains reflect a decrease in market yields since the time of initial purchase.

Third Quarter 2022 Form 10-Q 73

Investments


Equity securities by sector
	September 30, 2022						December 31, 2021
($ in millions)	Cost		Over (under) cost		Fair value		Cost		Over (under) cost		Fair value

Capital Goods	$	198	$	(20)	$	178	$	376	$	37	$	413
Basic Industry	57		6		63		119		30		149
Utilities	73		7		80		122		23		145
Transportation	51		14		65		74		22		96
Energy
Midstream	34		(1)		33		39		7		46
Independent/upstream	29		10		39		44		5		49
Integrated	40		15		55		62		8		70
Other	8		4		12		14		3		17
Total energy	111		28		139		159		23		182
Other (1)	1,790		245		2,035		3,413		811		4,224
Funds
Fixed income	1,227		(116)		1,111		1,108		24		1,132
Equities	1,125		(92)		1,033		645		75		720
Other	20		(1)		19		—		—		—
Total funds	2,372		(209)		2,163		1,753		99		1,852
Total equity securities	$	4,652	$	71	$	4,723	$	6,016	$	1,045	$	7,061

(1)Other is comprised of communications, REITs, financial services, banking, technology and consumer goods sectors.


Net investment income
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Fixed income securities	$	323	$	279	$	889	$	870
Equity securities	30		24		100		51
Mortgage loans	8		9		25		31
Limited partnership interests	325		438		841		1,467
Short-term investments	30		1		42		3
Other investments	38		50		120		139
Investment income, before expense	754		801		2,017		2,561
Investment expense
Investee level expenses	(17)		(12)		(47)		(36)
Securities lending expense	(10)		—		(13)		—
Operating costs and expenses	(37)		(25)		(111)		(79)
Total investment expense	(64)		(37)		(171)		(115)
Net investment income	$	690	$	764	$	1,846	$	2,446

Property-Liability	$	632	$	710	$	1,696	$	2,314
Protection Services	13		10		34		32
Allstate Health and Benefits	17		18		50		56
Corporate and Other	28		26		66		44
Net investment income	$	690	$	764	$	1,846	$	2,446

Market-based	$	406	$	353	$	1,100	$	1,064
Performance-based	348		448		917		1,497
Investment income, before expense	$	754	$	801	$	2,017	$	2,561

Net investment income decreased $74 million and $600 million in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to lower performance-based results, mainly from limited partnerships, partially offset by higher market-based fixed income portfolio yields.

74 www.allstate.com

Investments


Performance-based investment income
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Private equity	$	311	$	400	$	688	$	1,282
Real estate	37		48		229		215
Total performance-based income before investee level expenses	$	348	$	448	$	917	$	1,497

Investee level expenses (1)	(13)		(11)		(40)		(33)
Total performance-based income	$	335	$	437	$	877	$	1,464

(1)Investee level expenses include asset level operating expenses reported in investment expense.

Performance-based investment income decreased $102 million and $587 million in the third quarter and first nine months of 2022, respectively, compared to strong results in the same periods of 2021, primarily due to lower valuation increases, partially offset by net gains on the sale of underlying investments. Three individual investments generated 97% of the performance-based investment income in the third quarter.

Performance-based investment results and income can vary significantly between periods and are

influenced by economic conditions, equity market performance, comparable public company earnings multiples, capitalization rates, operating performance of the underlying investments and the timing of asset sales. The company typically employs a lag in recording and recognizing changes in valuations of limited partnership interests due to the availability of investee financial statements.


Components of net gains (losses) on investments and derivatives and the related tax effect
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Sales	$	(175)	$	80	$	(605)	$	441
Credit losses	(6)		(12)		(30)		2
Valuation change of equity investments - appreciation (decline):
Equity securities	(206)		14		(1,061)		333
Equity fund investments in fixed income securities	(33)		(8)		(161)		(11)
Limited partnerships (1)	(46)		(15)		(199)		(1)
Total valuation of equity investments	(285)		(9)		(1,421)		321
Valuation change and settlements of derivatives	299		46		889		54
Net gains (losses) on investments and derivatives, pre-tax	(167)		105		(1,167)		818
Income tax benefit (expense)	35		(21)		251		(179)
Net gains (losses) on investments and derivatives, after-tax	$	(132)	$	84	$	(916)	$	639

Property-Liability	$	(98)	$	74	$	(776)	$	595
Protection Services	(10)		4		(43)		16
Allstate Health and Benefits	(5)		(1)		(20)		4
Corporate and Other	(19)		7		(77)		24
Net gains (losses) on investments and derivatives, after-tax	$	(132)	$	84	$	(916)	$	639

Market-based	$	(156)	$	74	$	(1,238)	$	659
Performance-based	(11)		31		71		159
Net gains (losses) on investments and derivatives, pre-tax	$	(167)	$	105	$	(1,167)	$	818

(1)Relates to limited partnerships where the underlying assets are predominately public equity securities.

Net losses on investments and derivatives in the third quarter and first nine months of 2022 related primarily to lower valuation on equity investments and losses on sales, partially offset by increased valuation change and settlements of derivatives.

Sales in the third quarter and first nine months of 2022 related primarily to sales of fixed income securities in connection with ongoing portfolio management.

Valuation change and settlements of derivatives of $299 million and $889 million in the third quarter and first nine months of 2022, respectively, primarily comprised of gains on interest rate futures used as part of an interest rate risk reduction strategy to mitigate the impact of increases in interest rates and gains on foreign currency contracts due to the strengthening of the U.S dollar.

Third Quarter 2022 Form 10-Q 75

Investments


Net gains (losses) on performance-based investments and derivatives
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2022		2021		2022		2021
Sales	$	(10)	$	(5)	$	40	$	79
Credit losses	(3)		(3)		(10)		(3)
Valuation change of equity investments	(38)		23		(43)		60
Valuation change and settlements of derivatives	40		16		84		23
Total performance-based	$	(11)	$	31	$	71	$	159

Net losses on performance-based investments and derivatives in the third quarter of 2022 primarily related to decreased valuation of equity investments, partially offset by increased valuation change and settlements of derivatives. Net gains on performance-based investments and derivatives in the first nine months of 2022 primarily related to increased valuation change and settlements of derivatives and gains on sales, partially offset by decreased valuation of equity investments.

76 www.allstate.com

Capital Resources and Liquidity

Capital resources consist of shareholders’ equity and debt, representing funds deployed or available to be deployed to support business operations or for general corporate purposes.


Capital resources
($ in millions)	September 30, 2022			December 31, 2021
Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items	$	20,716		$	24,524
Accumulated other comprehensive (loss) income	(3,043)			655
Total Allstate shareholders’ equity	17,673			25,179
Debt	7,967			7,976
Total capital resources	$	25,640		$	33,155

Ratio of debt to Allstate shareholders’ equity	45.1		%	31.7		%
Ratio of debt to capital resources	31.1			24.1

Allstate shareholders’ equity decreased in the first nine months of 2022, primarily due to net unrealized capital losses on investments in 2022 compared to gains at December 31, 2021, common share repurchases, a net loss and dividends paid to shareholders. In the nine months ended September 30, 2022, we paid dividends of $698 million and $79 million related to our common and preferred shares, respectively.

Debt maturities We do not have any scheduled debt maturities in 2022.


Debt maturities for each of the next five years and thereafter (excluding issuance costs and other)
($ in millions)

2023	$	750
2024	350
2025	600
2026	550
2027	—
Thereafter	5,741
Total long-term debt principal	$	7,991

Common share repurchases As of September 30, 2022, there was $1.16 billion remaining in the $5.00 billion common share repurchase program. We expect the program to be completed after March 31, 2023, as we moderate the pace of share repurchases.

During the first nine months of 2022, we repurchased 17.0 million common shares, or 6.1% of total common shares outstanding at December 31, 2021, for $2.14 billion.

Common shareholder dividends On January 3, 2022, April 1, 2022 and July 1, 2022 we paid a common shareholder dividend of $0.81, $0.85 and $0.85 respectively. On July 19, 2022, we declared a common shareholder dividend of $0.85 payable on October 3, 2022.

Financial ratings and strength Our ratings are influenced by many factors including our operating and financial performance, asset quality, liquidity, overall portfolio mix, financial leverage (i.e., debt), exposure to risks such as catastrophes and the current level of operating leverage. The preferred stock and subordinated debentures are viewed as having a common equity component by certain rating agencies

and are given equity credit up to a pre-determined limit in our capital structure as determined by their respective methodologies. These respective methodologies consider the existence of certain terms and features in the instruments such as the noncumulative dividend feature in the preferred stock.

In May 2022, Moody’s affirmed The Allstate Corporation’s (the “Corporation’s”) debt and short-term issuer ratings of A3 and P-2, respectively, and the insurance financial strength rating of Aa3 for Allstate Insurance Company (“AIC”). The outlook for the ratings is stable.

In June 2022, S&P affirmed the Corporation’s debt and short-term issuer ratings of A- and A-2, respectively, and the insurance financial strength rating of AA- for AIC. The outlook for the ratings is stable.

In August 2022, A.M. Best affirmed the Corporation’s debt and short-term issuer ratings of a and AMB-1+, respectively, and the insurance financial strength rating of A+ for AIC. The outlook for the ratings is stable.

Liquidity sources and uses We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions. Liquidity is managed at both the entity and enterprise level across the Company and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across the Company to enhance flexibility.

The Corporation is party to an Amended and Restated Intercompany Liquidity Agreement (“Liquidity Agreement”) with certain subsidiaries, which includes, but is not limited to AIC. The Liquidity Agreement allows for short-term advances of funds to be made between parties for liquidity and other general corporate purposes. The Liquidity Agreement does not establish a commitment to advance funds on the part of any party. AIC serves as a lender and borrower, certain other subsidiaries serve only as borrowers, and the Corporation serves only as a lender. The maximum

Third Quarter 2022 Form 10-Q 77

Capital Resources and Liquidity

amount of potential funding under each of these agreements is $1.00 billion.

In addition to the Liquidity Agreement, the Corporation also has an intercompany loan agreement with certain of its subsidiaries, which includes, but is not limited to, AIC. The amount of intercompany loans available to the Corporation’s subsidiaries is at the discretion of the Corporation. The maximum amount of loans the Corporation will have outstanding to all its eligible subsidiaries at any given point in time is limited to $1.00 billion. The Corporation may use commercial paper borrowings, bank lines of credit and securities lending to fund intercompany borrowings.

Parent company capital capacity Parent holding company deployable assets totaled $4.47 billion as of September 30, 2022, primarily comprised of cash and investments that are generally saleable within one quarter. The earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation.

As of September 30, 2022, we held $13.38 billion of cash, U.S. government and agencies fixed income securities, and public equity securities which we would expect to be able to liquidate within one week.

Intercompany dividends were paid in the first nine months of 2022 between the following companies: AIC, Allstate Insurance Holdings, LLC (“AIH”), the Corporation, American Heritage Life Insurance Company (“AHL”) and Allstate Financial Insurance Holdings Corporation (“AFIHC”).


Intercompany dividends
($ in millions)
AIC to AIH						4,203
AIH to the Corporation						4,201
AHL to AFIHC						50
AFIHC to the Corporation						47

Based on the greater of 2021 statutory net income or 10% of statutory surplus, the maximum amount of dividends that AIC will be able to pay, without prior Illinois Department of Insurance approval, at a given point in time through February 2023 is estimated at $5.51 billion, less dividends paid during the preceding twelve months measured at that point in time. As of September 30, 2022, we paid dividends of $4.20 billion.

Dividends may not be paid or declared on our common stock and shares of common stock may not be repurchased unless the full dividends for the latest completed dividend period on our preferred stock have been declared and paid or provided for. We are prohibited from declaring or paying dividends on our Series G preferred stock if we fail to meet specified capital adequacy, net income or shareholders’ equity levels, except out of the net proceeds of common stock issued during the 90 days prior to the date of declaration. As of September 30, 2022, we satisfied all the requirements with no current restrictions on the payment of preferred stock dividends.

The terms of our outstanding subordinated debentures also prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions. In the first nine months of 2022, we did not defer interest payments on the subordinated debentures.

Additional resources to support liquidity are as follows:

•The Corporation and AIC have access to a $750 million unsecured revolving credit facility that is available for short-term liquidity requirements. The maturity date of this facility is November 2026. The facility is fully subscribed among 11 lenders with the largest commitment being $95 million. The commitments of the lenders are several and no lender is responsible for any other lender’s commitment if such lender fails to make a loan under the facility. This facility contains an increase provision that would allow up to an additional $500 million of borrowing, subject to the lenders’ commitment. This facility has a financial covenant requiring that we not exceed a 37.5% debt to capitalization ratio as defined in the agreement. This ratio was 21.6% as of September 30, 2022. Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior unsecured, unguaranteed long-term debt. There were no borrowings under the credit facility during 2022.

•To cover short-term cash needs, the Corporation has access to a commercial paper facility with a borrowing capacity limited to any undrawn credit facility balance up to $750 million.

•As of September 30, 2022, there were no balances outstanding for the credit facility or the commercial paper facility and therefore the remaining borrowing capacity was $750 million.

•The Corporation has access to a universal shelf registration statement with the Securities and Exchange Commission that expires in 2024. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 634 million shares of treasury stock as of September 30, 2022), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.

78 www.allstate.com

Recent Developments

The following updates the regulation disclosures included in Part I, Item 1. Regulation in our annual report on Form 10-K for the year ended December 31, 2021.

Climate disclosures. In March 2022, the Securities and Exchange Commission (“SEC”) released its climate-related proposed regulation, requiring registrants to provide certain climate-related information in their registration statements and annual reports. The proposed rule would require information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks. In addition, under the proposed rule, certain climate-related financial metrics would be required in a registrant’s audited financial statements. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures.

Cybersecurity risk management. The SEC issued a proposed rule in March 2022 to mandate cybersecurity disclosures, including information such as: management's and the board’s role and oversight of cybersecurity risks, policies and procedures and how risks and incidents are likely to impact the financial statements. Additionally, certain incidents would have mandatory reporting on a Form 8-K. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures.

Share repurchase disclosure modernization. The SEC issued two proposed amendments in December 2021 that could impact both the administration of 10b5-1 plans used in part to execute the Company’s stock repurchases and disclosure of activity under those plans. The proposals involve potential daily reporting of share repurchase activity, cooling off periods for both individual and corporate 10b5-1 plans (120 and 30 days, respectively) and a number of new 10-Q and 10-K disclosures that would be subject to SOX Section 302 Certifications. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures.

Inflation Reduction Act of 2022. The Inflation Reduction Act of 2022 (“Act”), which contains several tax-related provisions, was signed into law in August 2022. The Act creates a 15% corporate alternative minimum tax on certain large corporations and an excise tax of 1% on stock repurchases by publicly traded U.S. corporations, effective for repurchases after December 31, 2022. The excise tax on stock repurchases will be classified as an additional cost of the stock acquired included in treasury stock in shareholders' equity. The Company is evaluating the anticipated impacts of the enacted legislation.

Third Quarter 2022 Form 10-Q 79

Forward-Looking Statements

This report contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe, exposure management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation, and reserves. We believe that these statements are based on reasonable estimates, assumptions and plans. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments. In addition, forward-looking statements are subject to certain risks or uncertainties that could cause actual results to differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements include risks related to:

Insurance and Financial Services (1) unexpected increases in claim frequency and severity; (2) catastrophes and severe weather events; (3) limitations in analytical models used for loss cost estimates; (4) price competition and changes in regulation and underwriting standards; (5) actual claims costs exceeding current reserves; (6) market risk and declines in credit quality of our investment portfolio; (7) our subjective determination of fair value and amount of credit losses for investments; (8) our participation in indemnification programs, including state industry pools and facilities; (9) inability to mitigate the impact associated with changes in capital requirements; (10) a downgrade in financial strength ratings;

Business, Strategy and Operations (11) competition in the industries in which we compete and new or changing technologies; (12) implementation of our transformative growth strategy; (13) our catastrophe management strategy; (14) restrictions on our subsidiaries’ ability to pay dividends; (15) restrictions under terms of certain of our securities on our ability to pay dividends or repurchase our stock; (16) the availability of reinsurance at current levels and prices; (17) counterparty risk related to reinsurance; (18) acquisitions and divestitures of businesses; (19) intellectual property infringement, misappropriation and third-party claims;

Macro, Regulatory and Risk Environment (20) conditions in the global economy and capital markets, including the economic impacts from the recent military conflict between Russia and Ukraine; (21) a large-scale pandemic, the occurrence of terrorism, military actions or social unrest; (22) the failure in cyber or other information security controls, as well as the occurrence of events unanticipated in our disaster recovery processes and business continuity planning; (23) changing climate and weather conditions; (24) restrictive regulations and regulatory reforms, including limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (25) losses from legal and regulatory actions; (26) changes in or the application of accounting standards; (27) loss of key vendor relationships or failure of a vendor to protect our data, confidential and proprietary information, or personal information of our customers, claimants or employees; (28) our ability to attract, develop and retain talent; and (29) misconduct or fraudulent acts by employees, agents and third parties.

Additional information concerning these and other factors may be found in our filings with the Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, the principal executive officer and the principal financial officer concluded that our disclosure controls and procedures are effective in providing reasonable assurance that material information required to be disclosed in our reports filed with or submitted to the Securities and Exchange Commission under the Securities Exchange Act is made known to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting. During the fiscal quarter ended September 30, 2022, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

80 www.allstate.com

Other Information Part II.

Part II. Other Information

Item 1. Legal Proceedings

Information required for Part II, Item 1 is incorporated by reference to the discussion under the heading “Regulation and compliance” and under the heading “Legal and regulatory proceedings and inquiries” in Note 12 of the condensed consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A in our annual report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities


Period	Total number of shares (or units) purchased (1)	Average price paid per share (or unit)		Total number of shares (or units) purchased as part of publicly announced plans or programs (2)	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (3)
July 1, 2022 - July 31, 2022
Open Market Purchases	1,847,253	$	122.30	1,846,288

August 1, 2022 - August 31, 2022
Open Market Purchases	1,871,433	$	123.09	1,870,760

September 1, 2022 - September 30, 2022
Open Market Purchases	1,667,939	$	125.88	1,664,478

Total	5,386,625	$	123.68	5,381,526	$	1.16	billion

(1)In accordance with the terms of its equity compensation plans, Allstate acquired the following shares in connection with the vesting of restricted stock units and performance stock awards and the exercise of stock options held by employees and/or directors. The shares were acquired in satisfaction of withholding taxes due upon exercise or vesting and in payment of the exercise price of the options.

July: 965

August: 673

September: 3,461

(2)From time to time, repurchases under our programs are executed under the terms of a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934.

(3)In August 2021, we announced the approval of a common share repurchase program for $5 billion which is expected to be completed after March 31, 2023. The Inflation Reduction Act, enacted in August 2022 imposes a 1% excise tax on stock repurchases occurring after December 31, 2022. The excise tax on stock repurchases will be classified as an additional cost of the stock acquired included in treasury stock in shareholders’ equity. See the Recent Developments section for further details.

Third Quarter 2022 Form 10-Q 81

Item 6. Exhibits

(a)Exhibits

The following is a list of exhibits filed as part of this Form 10-Q.

Incorporated by Reference

Exhibit

Number

Exhibit Description

Form

File

Number

Exhibit

Filing

Date

Filed or

Furnished

Herewith

The Allstate Corporation hereby agrees to furnish to the Commission, upon request, the instruments defining the rights of holders of each issue of long-term debt of it and its consolidated subsidiaries

Voluntary Retirement Agreement dated August 18, 2022, between Glenn T. Shapiro and Allstate Insurance Company

8-K

1-11840

August 18, 2022

Acknowledgment of awareness from Deloitte & Touche LLP, dated November 2 , 2022, concerning unaudited interim financial information

31(i)

Rule 13a-14(a) Certification of Principal Executive Officer

31(i)

Rule 13a-14(a) Certification of Principal Financial Officer

Section 1350 Certifications

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

82 www.allstate.com

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	The Allstate Corporation
	(Registrant)



November 2, 2022	By	/s/ John C. Pintozzi
		John C. Pintozzi
		Senior Vice President, Controller and Chief Accounting Officer
		(Authorized Signatory and Principal Accounting Officer)

Third Quarter 2022 Form 10-Q 83