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Published: 2023-11-01 00:00:00 ET

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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, 2023

☐ 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 5.100% 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
Depositary Shares represent 1/1,000th of a share of 7.375% Noncumulative Preferred Stock, Series J	ALL PR J	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 16, 2023, the registrant had 261,687,064 common shares, $.01 par value, outstanding.

The Allstate Corporation

Index to Quarterly Report on Form 10-Q

September 30, 2023


Part I Financial Information		Page

Item 1. Financial Statements (unaudited) as of September 30, 2023 and December 31, 2022 and for the Three Month and Nine Month Periods Ended September 30, 2023 and 2022

	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	51

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

	Highlights	52
	Property-Liability Operations	56
	Segment results
	Allstate Protection	58
	Run-off Property-Liability	66
	Protection Services	69
	Allstate Health and Benefits	71
	Investments	73
	Capital Resources and Liquidity	80

	Forward-Looking Statements	83

Item 4. Controls and Procedures		83

Part II Other Information
Item 1. Legal Proceedings		84
Item 1A. Risk Factors		84
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities		84
Item 5. Other Information		84
Item 6. Exhibits		85

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,
	2023		2022		2023		2022
Revenues
Property and casualty insurance premiums	$	12,839	$	11,661	$	37,482	$	34,004
Accident and health insurance premiums and contract charges	463		463		1,379		1,396
Other revenue	592		561		1,750		1,684
Net investment income	689		690		1,874		1,846
Net gains (losses) on investments and derivatives	(86)		(167)		(223)		(1,167)
Total revenues	14,497		13,208		42,262		37,763

Costs and expenses
Property and casualty insurance claims and claims expense	10,237		10,073		32,290		27,262

Accident, health and other policy benefits (including remeasurement (gains) losses of $0, $(4), $0 and $(4))	262		252		785		785
Amortization of deferred policy acquisition costs	1,841		1,683		5,374		4,909
Operating costs and expenses	1,771		1,842		5,273		5,594
Pension and other postretirement remeasurement (gains) losses	149		79		56		91
Restructuring and related charges	87		14		141		27
Amortization of purchased intangibles	83		90		246		264

Interest expense	88		85		272		251
Total costs and expenses	14,518		14,118		44,437		39,183

Loss from operations before income tax expense	(21)		(910)		(2,175)		(1,420)

Income tax benefit	(17)		(236)		(475)		(374)

Net loss	(4)		(674)		(1,700)		(1,046)

Less: Net income (loss) attributable to noncontrolling interest	1		(15)		(23)		(34)

Net loss attributable to Allstate	(5)		(659)		(1,677)		(1,012)

Less: Preferred stock dividends	36		26		99		79

Net loss applicable to common shareholders	$	(41)	$	(685)	$	(1,776)	$	(1,091)

Earnings per common share:
Net loss applicable to common shareholders per common share - Basic	$	(0.16)	$	(2.55)	$	(6.76)	$	(3.99)
Weighted average common shares - Basic	261.8		268.7		262.6		273.5
Net loss applicable to common shareholders per common share - Diluted	$	(0.16)	$	(2.55)	$	(6.76)	$	(3.99)
Weighted average common shares - Diluted	261.8		268.7		262.6		273.5

See notes to condensed consolidated financial statements.

Third Quarter 2023 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,
	2023		2022		2023		2022
Net loss	$	(4)	$	(674)	$	(1,700)	$	(1,046)

Other comprehensive loss, after-tax
Changes in:
Unrealized net capital gains and losses	(667)		(789)		(257)		(3,527)
Unrealized foreign currency translation adjustments	(14)		(88)		64		(135)
Unamortized pension and other postretirement prior service credit	(5)		(8)		(14)		(38)
Discount rate for reserve for future policy benefits	30		52		29		232
Other comprehensive loss, after-tax	(656)		(833)		(178)		(3,468)

Comprehensive loss	(660)		(1,507)		(1,878)		(4,514)
Less: Comprehensive loss attributable to noncontrolling interest	(1)		(21)		(21)		(60)
Comprehensive loss attributable to Allstate	$	(659)	$	(1,486)	$	(1,857)	$	(4,454)

See notes to condensed consolidated financial statements.

2 www.allstate.com

Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Financial Position (unaudited)


($ in millions, except par value data)	September 30, 2023		December 31, 2022
Assets
Investments
Fixed income securities, at fair value (amortized cost, net $49,979 and $45,370)	$	46,771	$	42,485
Equity securities, at fair value (cost $2,393 and $4,253)	2,419		4,567
Mortgage loans, net	830		762
Limited partnership interests	8,363		8,114
Short-term, at fair value (amortized cost $3,369 and $4,174)	3,368		4,173
Other investments, net	1,608		1,728
Total investments	63,359		61,829
Cash	860		736
Premium installment receivables, net	10,102		9,165
Deferred policy acquisition costs	5,824		5,442
Reinsurance and indemnification recoverables, net	9,083		9,619
Accrued investment income	525		423
Deferred income taxes	816		382
Property and equipment, net	909		987
Goodwill	3,502		3,502
Other assets, net	6,196		5,904
Total assets	101,176		97,989
Liabilities
Reserve for property and casualty insurance claims and claims expense	40,659		37,541
Reserve for future policy benefits	1,309		1,322
Contractholder funds	884		879
Unearned premiums	24,518		22,299
Claim payments outstanding	1,480		1,268

Other liabilities and accrued expenses	9,933		9,353
Debt	7,946		7,964
Total liabilities	86,729		80,626
Commitments and Contingent Liabilities (Note 14)
Equity
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 82.0 thousand and 81.0 thousand shares issued and outstanding, $2,050 and $2,025 aggregate liquidation preference	2,001		1,970
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 262 million and 263 million shares outstanding	9		9
Additional capital paid-in	3,811		3,788
Retained income	48,491		50,970
Treasury stock, at cost (638 million and 637 million shares)	(37,149)		(36,857)
Accumulated other comprehensive income (loss):
Unrealized net capital gains and losses	(2,512)		(2,255)
Unrealized foreign currency translation adjustments	(101)		(165)
Unamortized pension and other postretirement prior service credit	15		29
Discount rate for reserve for future policy benefits	28		(1)
Total accumulated other comprehensive loss	(2,570)		(2,392)
Total Allstate shareholders’ equity	14,593		17,488
Noncontrolling interest	(146)		(125)
Total equity	14,447		17,363
Total liabilities and equity	$	101,176	$	97,989

See notes to condensed consolidated financial statements.

Third Quarter 2023 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,
	2023		2022		2023		2022




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

Preferred stock additional capital paid-in
Balance, beginning of period	2,001		1,970		1,970		1,970

Preferred stock issuance, net of issuance costs	—		—		587		—
Preferred stock redemption	—		—		(556)		—
Balance, end of period	2,001		1,970		2,001		1,970

Common stock par value	9		9		9		9

Common stock additional capital paid-in
Balance, beginning of period	3,786		3,740		3,788		3,722

Equity incentive plans activity, net	25		25		23		43
Balance, end of period	3,811		3,765		3,811		3,765

Retained income
Balance, beginning of period	48,766		52,412		50,970		53,288

Net loss	(5)		(659)		(1,677)		(1,012)
Dividends on common stock (declared per share of $0.89, $0.85, $2.67 and $2.55)	(234)		(228)		(703)		(698)
Dividends on preferred stock	(36)		(26)		(99)		(79)


Balance, end of period	48,491		51,499		48,491		51,499






Treasury stock
Balance, beginning of period	(37,131)		(35,858)		(36,857)		(34,471)
Shares acquired	(26)		(665)		(333)		(2,142)
Shares reissued under equity incentive plans, net	8		5		41		95
Balance, end of period	(37,149)		(36,518)		(37,149)		(36,518)

Accumulated other comprehensive income (loss)
Balance, beginning of period	(1,914)		(2,209)		(2,392)		426
Change in unrealized net capital gains and losses	(667)		(789)		(257)		(3,527)
Change in unrealized foreign currency translation adjustments	(14)		(88)		64		(135)
Change in unamortized pension and other postretirement prior service credit	(5)		(8)		(14)		(38)
Change in discount rate for reserve for future policy benefits	30		52		29		232
Balance, end of period	(2,570)		(3,042)		(2,570)		(3,042)
Total Allstate shareholders’ equity	14,593		17,683		14,593		17,683

Noncontrolling interest
Balance, beginning of period	(145)		(91)		(125)		(52)

Change in unrealized net capital gains and losses	(2)		(6)		2		(26)
Noncontrolling income (loss)	1		(15)		(23)		(34)
Balance, end of period	(146)		(112)		(146)		(112)
Total equity	$	14,447	$	17,571	$	14,447	$	17,571

See notes to condensed consolidated financial statements.

4 www.allstate.com

Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


($ in millions)	Nine months ended September 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(1,700)	$	(1,046)

Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, amortization and other non-cash items	539		646
Net (gains) losses on investments and derivatives	223		1,167

Pension and other postretirement remeasurement (gains) losses	56		91

Changes in:
Policy benefits and other insurance reserves	3,068		3,464
Unearned premiums	2,216		2,255
Deferred policy acquisition costs	(385)		(567)
Premium installment receivables, net	(934)		(1,022)
Reinsurance recoverables, net	534		99
Income taxes	(532)		(555)
Other operating assets and liabilities	(82)		(381)
Net cash provided by operating activities	3,003		4,151
Cash flows from investing activities
Proceeds from sales
Fixed income securities	17,443		25,577
Equity securities	4,755		8,767
Limited partnership interests	590		786

Other investments	153		1,034
Investment collections
Fixed income securities	1,384		526
Mortgage loans	66		92
Other investments	76		144
Investment purchases
Fixed income securities	(23,708)		(30,103)
Equity securities	(2,316)		(7,613)
Limited partnership interests	(639)		(860)
Mortgage loans	(138)		(104)
Other investments	(234)		(269)
Change in short-term and other investments, net	851		1,094
Purchases of property and equipment, net	(196)		(352)
Proceeds from sale of property and equipment	19		—


Net cash used in investing activities	(1,894)		(1,281)
Cash flows from financing activities
Proceeds from issuance of debt	743		—
Repayment of debt	(750)		—
Proceeds from issuance of preferred stock	587		—
Redemption of preferred stock	(575)		—
Contractholder fund deposits	99		102
Contractholder fund withdrawals	(23)		(31)
Dividends paid on common stock	(692)		(698)
Dividends paid on preferred stock	(71)		(79)
Treasury stock purchases	(335)		(2,150)
Shares reissued under equity incentive plans, net	17		61

Other	15		(52)
Net cash used in financing activities	(985)		(2,847)
Net increase in cash	124		23
Cash at beginning of period	736		763
Cash at end of period	$	860	$	786

See notes to condensed consolidated financial statements.

Third Quarter 2023 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 (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, 2023 and for the three and nine month periods ended September 30, 2023 and 2022 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, 2022. 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.

To reflect the application of the new guidance to all in-scope long-duration insurance contracts, certain amounts in the condensed consolidated financial statements and notes for 2022 have been recast.

Subsequent event

On November 1, 2023, the Company announced that it is pursuing the sale of the Allstate Health and Benefits businesses. A sale would likely be completed in 2024.

Adopted accounting standard

Accounting for Long-Duration Insurance Contracts Effective January 1, 2023, the Company adopted the Financial Accounting Standards Board (”FASB”) guidance revising the accounting for certain long-duration insurance contracts using the modified

retrospective approach to the transition date of January 1, 2021.

Under the new guidance, measurement assumptions, including those for mortality, morbidity and policy lapses, are required to be reviewed at least annually, and updated as appropriate. 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. Additionally, deferred policy acquisition costs (“DAC”) for all long-duration products are amortized on a simplified basis. Also, the Company’s reserve for future policy benefits and DAC are subject to new disclosure guidance.

In addition, the Company met the conditions included in Accounting Standards Update No. 2022-05, Transition for Sold Contracts, and elected to not apply the new guidance for contracts that were part of the 2021 sales of Allstate Life Insurance Company (“ALIC”) and Allstate Life Insurance Company of New York (“ALNY”).


After-tax cumulative effect of change in accounting principle on transition date

($ in millions)	January 1, 2021

Decrease in retained income	$	21
Decrease in accumulated other comprehensive income (“AOCI”)	277
Total decrease in equity	$	298

The decrease in AOCI was primarily attributable to a change in the discount rate used in measuring the reserve 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 at the transition date. The decrease in retained income primarily related to certain cohorts of long-term contracts whose expected net premiums exceeded expected gross premiums which resulted in an increase in reserves and a decrease in retained income equal to the present value of expected future benefits less the present value of expected future premiums at the transition date.

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Notes to Condensed Consolidated Financial Statements

Transition disclosures The following tables summarize the balance of and changes in the reserve for future policy benefits and DAC on January 1, 2021 upon the adoption of the guidance.


Impact of adoption for reserve for future policy benefits
($ in millions)	Accident and health		Traditional life		Total
Pre-adoption 12/31/2020 balance (1)	$	728	$	311	$	1,039

Adjustments:
Effect of the remeasurement of the reserve at upper-medium grade fixed income-based rate (2)	232		153		385

Adjustments for contracts with net premiums in excess of gross premiums (3)	77		—		77
Total adjustments	309		153		462
Post-adoption 1/1/2021 balance	1,037		464		1,501
Less: reinsurance recoverables (4)	159		3		162
Post-adoption 1/1/2021 balance, after reinsurance recoverables	$	878	$	461	$	1,339

(1)Traditional life includes $11 million in reserves related to riders of traditional life insurance products reclassified from contractholder funds.

(2)Adjustment reflected with a corresponding decrease to AOCI.

(3)Adjustment reflected with a corresponding decrease to retained income.

(4)Represents post-adoption January 1, 2021 balance of reinsurance recoverables. Adjustments to reinsurance recoverables for accident and health products increased January 1, 2021 AOCI by $33 million due to the remeasurement of the reserve at upper-medium grade fixed income based rate and increased January 1, 2021 retained income by $51 million due to adjustments for contracts with net premiums in excess of gross premiums.


Impact of adoption for DAC
($ in millions)	Accident and health		Traditional life		Interest- sensitive life		Total
Pre-adoption 12/31/2020 balance	$	343	$	32	$	95	$	470
Adjustment for removal of impact of unrealized gains or losses (1)	—		—		2		2

Post-adoption 1/1/2021 balance	$	343	$	32	$	97	$	472

(1)Adjustment reflected with a corresponding increase to AOCI.

Third Quarter 2023 Form 10-Q 7

Notes to Condensed Consolidated Financial Statements

Impacts of the adoption on the financial statements


Condensed Consolidated Statements of Operations
	As reported		Impact of change		As adjusted
($ in millions, except per share data)	Three months ended September 30, 2022
Revenues
Accident and health insurance premiums and contract charges	$	463	$	—	$	463
Total revenues	13,208		—		13,208

Costs and expenses
Accident, health and other policy benefits	263		(11)		252
Amortization of deferred policy acquisition costs	1,682		1		1,683

Total costs and expenses	14,128		(10)		14,118

Loss from operations before income tax expense	(920)		10		(910)
Income tax benefit	(237)		1		(236)
Net loss	(683)		9		(674)
Net loss attributable to Allstate	(668)		9		(659)
Net loss applicable to common shareholders	$	(694)	$	9	$	(685)

Earnings per common share:
Net loss applicable to common shareholders per common share - Basic	$	(2.58)	$	0.03	$	(2.55)
Net loss applicable to common shareholders per common share - Diluted	$	(2.58)	$	0.03	$	(2.55)
	Nine months ended September 30, 2022
Revenues
Accident and health insurance premiums and contract charges	$	1,398	$	(2)	$	1,396
Total revenues	37,765		(2)		37,763

Costs and expenses
Accident, health and other policy benefits	801		(16)		785
Amortization of deferred policy acquisition costs	4,913		(4)		4,909

Total costs and expenses	39,203		(20)		39,183

Loss from operations before income tax expense	(1,438)		18		(1,420)
Income tax benefit	(377)		3		(374)
Net loss	(1,061)		15		(1,046)
Net loss attributable to Allstate	(1,027)		15		(1,012)
Net loss applicable to common shareholders	$	(1,106)	$	15	$	(1,091)

Earnings per common share:
Net loss applicable to common shareholders per common share - Basic	$	(4.04)	$	0.05	$	(3.99)
Net loss applicable to common shareholders per common share - Diluted	$	(4.04)	$	0.05	$	(3.99)

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Notes to Condensed Consolidated Financial Statements


Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)
	As reported		Impact of change		As adjusted
($ in millions)	Three months ended September 30, 2022
Net loss	$	(683)	$	9	$	(674)

Other comprehensive loss, after-tax
Changes in:
Unrealized net capital gains and losses	(789)		—		(789)
Discount rate for reserve for future policy benefits	—		52		52
Other comprehensive loss, after-tax	(885)		52		(833)

Comprehensive loss	(1,568)		61		(1,507)
Comprehensive loss attributable to Allstate	$	(1,547)	$	61	$	(1,486)
	Nine months ended September 30, 2022
Net loss	$	(1,061)	$	15	$	(1,046)

Other comprehensive loss, after-tax
Changes in:
Unrealized net capital gains and losses	(3,525)		(2)		(3,527)
Discount rate for reserve for future policy benefits	—		232		232
Other comprehensive loss, after-tax	(3,698)		230		(3,468)

Comprehensive loss	(4,759)		245		(4,514)
Comprehensive loss attributable to Allstate	$	(4,699)	$	245	$	(4,454)


Condensed Consolidated Statements of Financial Position (unaudited)
	As reported		Impact of change		As adjusted
($ in millions)	December 31, 2022
Assets
Deferred policy acquisition costs	$	5,418	$	24	$	5,442
Reinsurance and indemnification recoverables, net	9,606		13		9,619
Deferred income taxes	386		(4)		382
Other assets, net	5,905		(1)		5,904
Total assets	97,957		32		97,989
Liabilities
Reserve for future policy benefits	1,273		49		1,322
Contractholder funds	897		(18)		879
Unearned premiums	22,311		(12)		22,299

Total liabilities	80,607		19		80,626
Equity
Retained income	50,954		16		50,970
Accumulated other comprehensive income (loss):
Unrealized net capital gains and losses	(2,253)		(2)		(2,255)
Discount rate for reserve for future policy benefits	—		(1)		(1)
Total AOCI	(2,389)		(3)		(2,392)
Total Allstate shareholders’ equity	17,475		13		17,488
Total equity	17,350		13		17,363
Total liabilities and equity	$	97,957	$	32	$	97,989

Third Quarter 2023 Form 10-Q 9

Notes to Condensed Consolidated Financial Statements


Condensed Consolidated Statements of Shareholders’ Equity (unaudited)
	As reported		Impact of change		As adjusted
($ in millions)	Three months ended September 30, 2022
Retained income
Balance, beginning of period	$	52,412	$	—	$	52,412
Net loss	(668)		9		(659)
Balance, end of period	51,490		9		51,499

Accumulated other comprehensive income (loss)
Balance, beginning of period	(2,158)		(51)		(2,209)
Change in unrealized net capital gains and losses	(789)		—		(789)
Change in discount rate for reserve for future policy benefits	—		52		52
Balance, end of period	(3,043)		1		(3,042)

Total Allstate shareholders’ equity	17,673		10		17,683
Total equity	$	17,561	$	10	$	17,571
	Nine months ended September 30, 2022
Retained income
Balance, beginning of period	$	53,294	$	(6)	$	53,288
Net loss	(1,027)		15		(1,012)
Balance, end of period	51,490		9		51,499

Accumulated other comprehensive income (loss)
Balance, beginning of period	655		(229)		426
Change in unrealized net capital gains and losses	(3,525)		(2)		(3,527)
Change in discount rate for reserve for future policy benefits	—		232		232
Balance, end of period	(3,043)		1		(3,042)

Total Allstate shareholders’ equity	17,673		10		17,683
Total equity	$	17,561	$	10	$	17,571


Condensed Consolidated Statements of Cash Flows (unaudited)
	As reported		Impact of change		As adjusted
($ in millions)	Nine months ended September 30, 2022
Cash flows from operating activities
Net loss	$	(1,061)	$	15	$	(1,046)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Changes in:
Policy benefits and other insurance reserves	3,520		(56)		3,464
Unearned premiums	2,256		(1)		2,255
Deferred policy acquisition costs	(562)		(5)		(567)
Reinsurance recoverables, net	56		43		99
Income taxes	(559)		4		(555)
Other operating assets and liabilities	(381)		—		(381)
Net cash provided by operating activities	$	4,151	$	—	$	4,151

Changes to significant accounting policies

Reserve for future policy benefits

Long-duration voluntary accident and health insurance and traditional life insurance contracts The reserve for future policy benefits (“RFPB”) is calculated using the net premium reserving model, which uses the present value of insurance contract benefits less the present value of net premiums. Under the net premium reserving model, the Company computes a net premium ratio which is the present value of insurance contract benefits divided by the present value of gross premiums. The present value of contract benefits and

gross premiums are determined using the discount rate at contract inception. The net premium ratio is applied to premiums due on a periodic basis to compute the RFPB. The net premium ratio is recomputed at least annually using both actual historical cash flows and future cash flows anticipated over the life of cohort of contracts subject to measurement. Assumptions including mortality, morbidity, and lapses affect the timing and amount of estimated cash flows used to calculate the RFPB.

The Company has grouped contracts into cohorts based on product type and issue year. Examples of insurance product types include whole life, term life,

10 www.allstate.com

Notes to Condensed Consolidated Financial Statements

critical illness and disability. Issue year is based on the issuance date of the contract to the policyholder, except in the case of contracts acquired in a business combination, where the issue date is based on the acquisition date of the business combination. The RFPB is calculated for contracts in force at the end of each period, which results in the Company recognizing the effects of actual experience in the period it occurs.

Annually, in the third quarter, the Company obtains historical premiums and benefits information and evaluates future cash flow assumptions that include mortality, morbidity, and lapses, and updates cash flow assumptions as necessary. The Company has elected to not update the expense assumption when annually reviewing and updating future cash flow assumptions. Actual premiums and benefits and any updates to future cash flow assumptions are incorporated into the calculation of an updated net premium ratio. Updates for actual premiums and benefits and changes to future cash flow assumptions will result in a liability remeasurement gain or loss. The first step to determining the liability remeasurement gain or loss is to calculate the RFPB using revised net premiums discounted at the locked-in discount rate set at contract issuance. The result of the first step is then compared to the carrying amount of the RFPB before the updates for actual experience and changes to future cash flow assumptions. The decrease (gain) or increase (loss) in the RFPB is reported as liability remeasurement gain or loss in net income and presented parenthetically as part of accident, health and other policy benefits on the Condensed Consolidated Statements of Operations. The updated net premium ratio is used in future quarters to measure the RFPB until the next annual update or an earlier date if the Company determines it is necessary to revise future cash flow assumptions based on available evidence, including actual experience.

The discount rate assumption is determined using a yield curve approach. The yield curve consists of U.S. dollar-denominated senior unsecured fixed-income securities issued by U.S. companies that have an A credit rating based on the ratings provided by nationally recognized rating agencies that include Moody’s, Standard & Poor’s, and Fitch. For points on the yield curve that do not have observable yields, the Company uses linear interpolation which calculates the unobservable yield based on the two nearest observable yields, except for any points beyond the last observable yield at 30 years, where interest rates are held constant with the last observable point on the yield curve. The Company updates the current discount rate quarterly and the change in the RFPB resulting from the updated current discount rate is recognized in OCI.

Deferred policy acquisition costs

Deferred policy acquisition costs are related directly to the successful acquisition of new or renewal insurance contracts and are deferred and recognized as an expense over the life of the related contracts. These costs are principally agent and broker remuneration, premium taxes and certain underwriting expenses. All other acquisition costs are expensed as incurred and included in operating costs and expenses.

Long-duration voluntary accident and health insurance, traditional life insurance contracts, and interest-sensitive life insurance contracts Voluntary accident and health insurance and traditional life insurance contracts are grouped by product and issue year into cohorts consistent with the cohorts used to calculate the RFPB. Interest-sensitive life insurance contracts are grouped into cohorts by issue year, and the issue year is determined based on contract issue date. DAC is amortized on a constant level basis over the expected contract term and is included in amortization of deferred policy acquisition costs on the Condensed Consolidated Statements of Operations. The constant level basis used for all cohorts is based on policies in force. The expected contract term and mortality, morbidity, and lapse assumptions are used to calculate both DAC amortization and the RFPB. If actual contract lapses are greater than expected lapses for any cohort, each affected cohort’s DAC balance will be reduced in the current period based on the difference between the actual and expected lapses. No adjustments to DAC amortization are recorded if actual contract lapses are less than expected lapses for any cohort. If the Company makes an update to any of its mortality, morbidity, or lapse assumptions, the Company will use the assumptions prospectively to amortize any cohort’s remaining DAC over the remaining expected contract term.

The costs assigned to the right to receive future cash flows from certain business purchased from other insurers are also classified as DAC in the Condensed Consolidated Statements of Financial Position. The costs capitalized represent the present value of future profits expected to be earned over the lives of the contracts acquired. The Company amortizes the present value of future profits using the same methodology and assumptions as the amortization of DAC. The present value of future profits is subject to premium deficiency testing.

Pending accounting standard

In August 2023, the FASB issued guidance requiring a joint venture to initially measure assets contributed and liabilities assumed at fair value as of the formation date. The new guidance will be applied prospectively for joint ventures with a formation date on or after January 1, 2025. The impact of the adoption is not expected to be material to the Company’s results of operations or financial position.

Third Quarter 2023 Form 10-Q 11

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,
	2023		2022		2023		2022
Numerator:
Net loss	$	(4)	$	(674)	$	(1,700)	$	(1,046)
Less: Net income (loss) attributable to noncontrolling interest	1		(15)		(23)		(34)
Net loss attributable to Allstate	(5)		(659)		(1,677)		(1,012)
Less: Preferred stock dividends	36		26		99		79


Net loss applicable to common shareholders	$	(41)	$	(685)	$	(1,776)	$	(1,091)

Denominator:
Weighted average common shares outstanding	261.8		268.7		262.6		273.5
Effect of dilutive potential common shares (1):
Stock options	—		—		—		—
Restricted stock units (non-participating) and performance stock awards	—		—		—		—
Weighted average common and dilutive potential common shares outstanding	261.8		268.7		262.6		273.5

Earnings per common share - Basic	$	(0.16)	$	(2.55)	$	(6.76)	$	(3.99)
Earnings per common share - Diluted (1)	$	(0.16)	$	(2.55)	$	(6.76)	$	(3.99)

Anti-dilutive options excluded from diluted earnings per common share	3.1		2.4		3.0		1.6
Weighted average dilutive potential common shares excluded due to net loss applicable to common shareholders (1)	1.5		2.9		1.9		3.3

(1)As a result of the net loss reported for the three and nine month periods ended September 30, 2023 and 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.


Note 3			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.

Allstate Protection and Run-off Property Liability segments comprise Property-Liability. The Company does not allocate 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, Protection Services, Allstate Health and Benefits, and Corporate and Other levels for decision-making purposes.

Underwriting income is calculated as premiums earned and other revenue, less claims and claims expenses (“losses”), 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
•			Amortization or impairment of purchased intangibles
•			Gain or loss on disposition
•			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.

12 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)	2023		2022		2023		2022
Underwriting income (loss) by segment
Allstate Protection	$	(331)	$	(1,170)	$	(3,421)	$	(1,749)
Run-off Property-Liability	(83)		(122)		(88)		(127)
Total Property-Liability	(414)		(1,292)		(3,509)		(1,876)

Adjusted net income (loss) by segment, after-tax
Protection Services	27		35		102		131
Allstate Health and Benefits	69		63		182		187
Corporate and Other	(110)		(104)		(310)		(322)

Reconciling items
Property-Liability net investment income	627		632		1,680		1,696
Net gains (losses) on investments and derivatives	(86)		(167)		(223)		(1,167)
Pension and other postretirement remeasurement gains (losses)	(149)		(79)		(56)		(91)

Amortization of purchased intangibles (1)	(23)		(29)		(71)		(86)

Gain (loss) on disposition	(5)		(5)		(4)		6
Non-recurring costs (2)	—		—		(90)		—
Income tax benefit on reconciling items	25		246		501		396
Total reconciling items	389		598		1,737		754

Less: Net income (loss) attributable to noncontrolling interest (3)	2		(15)		(22)		(35)

Net loss applicable to common shareholders	$	(41)	$	(685)	$	(1,776)	$	(1,091)

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

(2)Relates to settlement costs for non-recurring litigation that is outside of the ordinary course of business. See Note 14 for additional details.

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

Third Quarter 2023 Form 10-Q 13

Notes to Condensed Consolidated Financial Statements


Reportable segments revenue information
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Property-Liability
Insurance premiums
Auto	$	8,345	$	7,545	$	24,374	$	21,974
Homeowners	2,969		2,642		8,662		7,698
Other personal lines	608		540		1,757		1,616
Commercial lines	194		296		628		874
Other business lines	154		134		405		367
Allstate Protection	12,270		11,157		35,826		32,529
Run-off Property-Liability	—		—		—		—
Total Property-Liability insurance premiums	12,270		11,157		35,826		32,529
Other revenue	393		364		1,135		1,066
Net investment income	627		632		1,680		1,696
Net gains (losses) on investments and derivatives	(62)		(123)		(185)		(988)
Total Property-Liability	13,228		12,030		38,456		34,303

Protection Services
Protection plans	392		330		1,126		961
Roadside assistance	51		50		148		152
Finance and insurance products	126		124		382		362
Intersegment premiums and service fees (1)	34		39		102		118
Other revenue	75		84		243		269
Net investment income	19		13		53		34
Net gains (losses) on investments and derivatives	(8)		(13)		(13)		(56)
Total Protection Services	689		627		2,041		1,840

Allstate Health and Benefits
Employer voluntary benefits	253		257		753		777
Group health	111		96		328		285
Individual health	99		110		298		334
Other revenue	104		90		306		277
Net investment income	20		17		60		50
Net gains (losses) on investments and derivatives	(2)		(6)		1		(25)
Total Allstate Health and Benefits	585		564		1,746		1,698

Corporate and Other
Other revenue	20		23		66		72
Net investment income	23		28		81		66
Net gains (losses) on investments and derivatives	(14)		(25)		(26)		(98)
Total Corporate and Other	29		26		121		40

Intersegment eliminations (1)	(34)		(39)		(102)		(118)
Consolidated revenues	$	14,497	$	13,208	$	42,262	$	37,763

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

14 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Note 4			Investments


Portfolio composition
($ in millions)	September 30, 2023		December 31, 2022
Fixed income securities, at fair value	$	46,771	$	42,485
Equity securities, at fair value	2,419		4,567
Mortgage loans, net	830		762
Limited partnership interests	8,363		8,114
Short-term investments, at fair value	3,368		4,173
Other investments, net	1,608		1,728
Total	$	63,359	$	61,829


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, 2023
U.S. government and agencies	$	8,629	$	1	$	(385)	$	8,245
Municipal	7,044		3		(463)		6,584
Corporate	32,007		16		(2,317)		29,706
Foreign government	1,196		—		(61)		1,135
ABS	1,103		9		(11)		1,101
Total fixed income securities	$	49,979	$	29	$	(3,237)	$	46,771

December 31, 2022
U.S. government and agencies	$	8,123	$	6	$	(231)	$	7,898
Municipal	6,500		36		(326)		6,210
Corporate	28,562		46		(2,345)		26,263
Foreign government	997		—		(40)		957
ABS	1,188		4		(35)		1,157
Total fixed income securities	$	45,370	$	92	$	(2,977)	$	42,485


Scheduled maturities for fixed income securities
($ in millions)	September 30, 2023				December 31, 2022
	Amortized cost, net		Fair value		Amortized cost, net		Fair value
Due in one year or less	$	3,536	$	3,476	$	2,870	$	2,836
Due after one year through five years	24,560		23,246		26,546		25,217
Due after five years through ten years	13,038		11,919		11,035		9,870
Due after ten years	7,742		7,029		3,731		3,405
	48,876		45,670		44,182		41,328
ABS	1,103		1,101		1,188		1,157
Total	$	49,979	$	46,771	$	45,370	$	42,485

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,
	2023		2022		2023		2022
Fixed income securities	$	457	$	323	$	1,269	$	889
Equity securities	15		30		47		100
Mortgage loans	9		8		25		25
Limited partnership interests	190		325		446		841
Short-term investments	59		30		194		42
Other investments	41		38		121		120
Investment income, before expense	771		754		2,102		2,017
Investment expense	(82)		(64)		(228)		(171)
Net investment income	$	689	$	690	$	1,874	$	1,846

Third Quarter 2023 Form 10-Q 15

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,
	2023		2022		2023		2022
Fixed income securities	$	(129)	$	(166)	$	(397)	$	(644)
Equity securities	(35)		(239)		153		(1,222)
Mortgage loans	(1)		1		(4)		—
Limited partnership interests	(6)		(49)		1		(224)
Derivatives	31		299		(28)		889
Other investments	54		(13)		52		34
Net gains (losses) on investments and derivatives	$	(86)	$	(167)	$	(223)	$	(1,167)


Net gains (losses) on investments and derivatives by transaction type
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Sales	$	(63)	$	(175)	$	(313)	$	(605)
Credit losses	(20)		(6)		(69)		(30)
Valuation change of equity investments (1)	(34)		(285)		187		(1,421)
Valuation change and settlements of derivatives	31		299		(28)		889
Net gains (losses) on investments and derivatives	$	(86)	$	(167)	$	(223)	$	(1,167)

(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,
	2023		2022		2023		2022
Gross realized gains	$	11	$	19	$	85	$	112
Gross realized losses	(133)		(181)		(459)		(748)


Net appreciation (decline) recognized in net income for assets that are still held
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Equity securities	$	(32)	$	(209)	$	31	$	(771)
Limited partnership interests carried at fair value	19		(36)		67		8
Total	$	(13)	$	(245)	$	98	$	(763)


Credit losses recognized in net income
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Assets
Fixed income securities:

Corporate	$	(7)	$	(2)	$	(23)	$	(6)
ABS	—		(2)		—		(2)
Total fixed income securities	(7)		(4)		(23)		(8)
Mortgage loans	(1)		1		(4)		—
Limited partnership interests	(9)		(1)		(25)		(4)
Other investments
Bank loans	(2)		(2)		(16)		(18)
Total credit losses by asset type	$	(19)	$	(6)	$	(68)	$	(30)

Liabilities
Commitments to fund commercial mortgage loans and bank loans	(1)		—		(1)		—
Total	$	(20)	$	(6)	$	(69)	$	(30)

16 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Unrealized net capital gains and losses included in AOCI
($ in millions)	Fair value		Gross unrealized				Unrealized net gains (losses)
September 30, 2023			Gains		Losses
Fixed income securities	$	46,771	$	29	$	(3,237)	$	(3,208)
Short-term investments	3,368		—		(1)		(1)
Derivative instruments	—		—		(2)		(2)
Limited partnership interests (1)							(1)
Unrealized net capital gains and losses, pre-tax							(3,212)
Reclassification of noncontrolling interest							21
Deferred income taxes							679
Unrealized net capital gains and losses, after-tax							$	(2,512)

December 31, 2022
Fixed income securities	$	42,485	$	92	$	(2,977)	$	(2,885)
Short-term investments	4,173		—		(1)		(1)
Derivative instruments	—		—		(3)		(3)
Limited partnership interests (1)							2
Unrealized net capital gains and losses, pre-tax							(2,887)
Reclassification of noncontrolling interest							23
Deferred income taxes							609
Unrealized net capital gains and losses, after-tax							$	(2,255)

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


Change in unrealized net capital gains (losses)
($ in millions)	Nine months ended September 30, 2023
Fixed income securities	$	(323)
Short-term investments	—
Derivative instruments	1
Limited partnership interests	(3)
Total	(325)
Reclassification of noncontrolling interest	(2)
Deferred income taxes	70
Decrease in unrealized net capital gains and losses, after-tax	$	(257)


Carrying value for limited partnership interests
($ in millions)	September 30, 2023						December 31, 2022
	EMA		Fair Value		Total		EMA		Fair Value		Total
Private equity	$	5,925	$	1,167	$	7,092	$	5,372	$	1,217	$	6,589
Real estate	1,076		27		1,103		1,013		29		1,042
Other (1)	168		—		168		483		—		483
Total	$	7,169	$	1,194	$	8,363	$	6,868	$	1,246	$	8,114

(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, 2023 and December 31, 2022, the fair value of short-term investments totaled $3.37 billion and $4.17 billion, respectively.

Third Quarter 2023 Form 10-Q 17

Notes to Condensed Consolidated Financial Statements

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, 2023		December 31, 2022
Bank loans, net	$	679	$	686
Real estate	700		813
Policy loans	122		120
Derivatives	4		1
Other	103		108
Total	$	1,608	$	1,728

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.

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 $492 million and $389 million as of September 30, 2023 and December 31, 2022, 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

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Notes to Condensed Consolidated Financial Statements

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)	2023		2022		2023		2022
Beginning balance	$	(29)	$	(10)	$	(13)	$	(6)
Credit losses on securities for which credit losses not previously reported	(8)		(2)		(12)		(2)
Net (increases) decreases related to credit losses previously reported	1		(2)		(11)		(6)
(Increase) decrease of allowance related to sales and other	(1)		1		(1)		1
Write-offs	—		—		—		—
Ending balance	$	(37)	$	(13)	$	(37)	$	(13)

Components of credit loss allowance as of September 30
Corporate bonds					$	(34)	$	(11)
ABS					(3)		(2)
Total					$	(37)	$	(13)


Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position (1)
($ 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, 2023
Fixed income securities
U.S. government and agencies	119	$	4,868	$	(234)	128	$	3,289	$	(151)	$	(385)
Municipal	1,713	3,644		(158)		2,057	2,710		(305)		(463)
Corporate	1,112	10,982		(501)		2,200	17,584		(1,816)		(2,317)
Foreign government	68	734		(27)		89	397		(34)		(61)
ABS	90	57		—		170	738		(11)		(11)
Total fixed income securities	3,102	$	20,285	$	(920)	4,644	$	24,718	$	(2,317)	$	(3,237)
Investment grade fixed income securities	2,954	$	19,517	$	(895)	4,216	$	21,946	$	(1,936)	$	(2,831)
Below investment grade fixed income securities	148	768		(25)		428	2,772		(381)		(406)
Total fixed income securities	3,102	$	20,285	$	(920)	4,644	$	24,718	$	(2,317)	$	(3,237)

December 31, 2022
Fixed income securities
U.S. government and agencies	112	$	4,900	$	(138)	75	$	2,393	$	(93)	$	(231)
Municipal	3,015	3,944		(215)		507	740		(111)		(326)
Corporate	2,085	18,072		(1,389)		845	6,105		(956)		(2,345)
Foreign government	74	739		(22)		42	200		(18)		(40)
ABS	194	874		(27)		83	109		(8)		(35)
Total fixed income securities	5,480	$	28,529	$	(1,791)	1,552	$	9,547	$	(1,186)	$	(2,977)
Investment grade fixed income securities	4,959	$	25,487	$	(1,409)	1,437	$	8,791	$	(1,009)	$	(2,418)
Below investment grade fixed income securities	521	3,042		(382)		115	756		(177)		(559)
Total fixed income securities	5,480	$	28,529	$	(1,791)	1,552	$	9,547	$	(1,186)	$	(2,977)

(1)Includes fixed income securities with fair values of $37 million and $10 million and unrealized losses of $7 million and $5 million with credit loss allowances of $15 million and $11 million as of September 30, 2023 and December 31, 2022, respectively.

Third Quarter 2023 Form 10-Q 19

Notes to Condensed Consolidated Financial Statements


Gross unrealized losses by unrealized loss position and credit quality as of September 30, 2023
($ in millions)	Investment grade		Below investment grade		Total
Fixed income securities with unrealized loss position less than 20% of amortized cost, net (1) (2)	$	(2,444)	$	(312)	$	(2,756)
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost, net (3) (4)	(387)		(94)		(481)
Total unrealized losses	$	(2,831)	$	(406)	$	(3,237)

(1)Below investment grade fixed income securities include $25 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)Below investment grade fixed income securities include $94 million that 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 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, 2023, 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,
	2023		2022
Mortgage loans	$	3	$	3
Bank Loans	5		3

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Notes to Condensed Consolidated Financial Statements

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, 2023														December 31, 2022
($ in millions)	2018 and prior		2019		2020		2021		2022		Current		Total		Total
Below 1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	18
1.0 - 1.25	28		12		—		—		—		2		42		42
1.26 - 1.50	24		4		10		—		43		58		139		151
Above 1.50	78		220		42		185		59		76		660		558
Amortized cost before allowance	$	130	$	236	$	52	$	185	$	102	$	136	$	841	$	769
Allowance													(11)		(7)
Amortized cost, net													$	830	$	762

Mortgage loans with a debt service coverage ratio below 1.0 that are not considered impaired primarily relate to instances 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 circumstances such as additional collateral, escrow balances or borrower guarantees. Payments on all mortgage loans were current as of September 30, 2023 and December 31, 2022.


Rollforward of credit loss allowance for mortgage loans
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Beginning balance	$	(10)	$	(7)	$	(7)	$	(6)

Net (increases) decreases related to credit losses	(1)		1		(4)		—
Write-offs	—		—		—		—

Ending balance	$	(11)	$	(6)	$	(11)	$	(6)

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.

Third Quarter 2023 Form 10-Q 21

Notes to Condensed Consolidated Financial Statements


Bank loans amortized cost by credit rating and year of origination
	September 30, 2023														December 31, 2022
($ in millions)	2018 and prior		2019		2020		2021		2022		Current		Total		Total
NAIC 2 / BBB	$	4	$	5	$	5	$	26	$	4	$	10	$	54	$	54
NAIC 3 / BB	—		—		1		139		9		46		195		266
NAIC 4 / B	11		17		14		197		34		121		394		329
NAIC 5-6 / CCC and below	35		1		1		23		6		6		72		94
Amortized cost before allowance	$	50	$	23	$	21	$	385	$	53	$	183	$	715	$	743
Allowance													(36)		(57)
Amortized cost, net													$	679	$	686


Rollforward of credit loss allowance for bank loans
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Beginning balance	$	(62)	$	(56)	$	(57)	$	(61)

Net increases related to credit losses	(2)		(2)		(16)		(18)
Reduction of allowance related to sales	28		6		34		27
Write-offs	—		—		3		—

Ending balance	$	(36)	$	(52)	$	(36)	$	(52)


Note 5			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:

(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

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Notes to Condensed Consolidated Financial Statements

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.

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 mortgage-backed securities, 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

Third Quarter 2023 Form 10-Q 23

Notes to Condensed Consolidated Financial Statements

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 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 and bank loans written down to fair value in connection with recognizing other-than-temporary impairments.

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, 2023, the Company has commitments to invest $182 million in these limited partnership interests.

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Notes to Condensed Consolidated Financial Statements


Assets and liabilities measured at fair value
	September 30, 2023
($ 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	$	8,232		$	13		$	—					$	8,245
Municipal	—			6,573			11						6,584
Corporate - public	—			22,034			25						22,059
Corporate - privately placed	—			7,588			59						7,647
Foreign government	—			1,135			—						1,135
ABS	—			1,063			38						1,101
Total fixed income securities	8,232			38,406			133						46,771
Equity securities	1,892			144			383						2,419
Short-term investments	1,478			1,874			16						3,368
Other investments	—			20			2			$	(16)		6
Other assets	2			—			113						115
Total recurring basis assets	11,604			40,444			647			(16)			52,679
Non-recurring basis	—			—			—						—
Total assets at fair value	$	11,604		$	40,444		$	647		$	(16)		$	52,679
% of total assets at fair value	22.0		%	76.8		%	1.2		%	—		%	100.0		%

Investments reported at NAV													1,194
Total													$	53,873
Liabilities
Other liabilities	$	(3)		$	(10)		$	—		$	4		$	(9)
Total recurring basis liabilities	(3)			(10)			—			4			(9)

Total liabilities at fair value	$	(3)		$	(10)		$	—		$	4		$	(9)
% of total liabilities at fair value	33.3		%	111.1		%	—		%	(44.4)		%	100.0		%

Third Quarter 2023 Form 10-Q 25

Notes to Condensed Consolidated Financial Statements


Assets and liabilities measured at fair value
	December 31, 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	$	7,878		$	20		$	—					$	7,898
Municipal	—			6,189			21						6,210
Corporate - public	—			18,547			69						18,616
Corporate - privately placed	—			7,592			55						7,647
Foreign government	—			957			—						957
ABS	—			1,129			28						1,157
Total fixed income securities	7,878			34,434			173						42,485
Equity securities	3,936			298			333						4,567
Short-term investments	508			3,659			6						4,173
Other investments	—			23			3			$	(22)		4
Other assets	3			—			103						106
Total recurring basis assets	12,325			38,414			618			(22)			51,335
Non-recurring basis	—			—			23						23
Total assets at fair value	$	12,325		$	38,414		$	641		$	(22)		$	51,358
% of total assets at fair value	24.0		%	74.8		%	1.2		%	—		%	100.0		%

Investments reported at NAV													1,246
Total													$	52,604
Liabilities
Other liabilities	$	(1)		$	(25)		$	—		$	21		$	(5)
Total recurring basis liabilities	(1)			(25)			—			21			(5)

Total liabilities at fair value	$	(1)		$	(25)		$	—		$	21		$	(5)
% of total liabilities at fair value	20.0		%	500.0		%	—		%	(420.0)		%	100.0		%

As of September 30, 2023 and December 31, 2022, Level 3 fair value measurements of fixed income securities total $133 million and $173 million, respectively, and include $26 million and $70 million, respectively, of securities valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable and $11 million and $21 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.

26 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, 2023
	Balance as of June 30, 2023		Total gains (losses) included in:				Transfers																Balance as of September 30, 2023
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3		Purchases			Sales			Issues			Settlements
Assets
Fixed income securities:
Municipal	$	12	$	—	$	—	$	—	$	—		$	—		$	(1)		$	—		$	—	$	11
Corporate - public	26		—		(1)		—		—			—			—			—			—		25
Corporate - privately placed	60		—		(1)		—		—			—			—			—			—		59
ABS	34		—		—		—		—			4			—			—			—		38
Total fixed income securities	132		—		(2)		—		—			4			(1)			—			—		133
Equity securities	381		15		—		—		—			—			(13)			—			—		383
Short-term investments	6		—		—		—		—			10			—			—			—		16
Other investments	2		—		—		—		—			—			—			—			—		2
Other assets	104		9		—		—		—			—			—			—			—		113
Total recurring Level 3 assets	$	625	$	24	$	(2)	$	—	$	—		$	14		$	(14)		$	—		$	—	$	647


Rollforward of Level 3 assets and liabilities held at fair value during the nine month period ended September 30, 2023
	Balance as of December 31, 2022		Total gains (losses) included in:				Transfers																Balance as of September 30, 2023
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3		Purchases			Sales			Issues			Settlements
Assets
Fixed income securities:
Municipal	$	21	$	3	$	(1)	$	—	$	—		$	—		$	(10)		$	—		$	(2)	$	11
Corporate - public	69		(1)		1		—		—			—			(44)			—			—		25
Corporate - privately placed	55		(11)		—		16		—			1			(2)			—			—		59
ABS	28		—		—		—		—			11			—			—			(1)		38
Total fixed income securities	173		(9)		—		16		—			12			(56)			—			(3)		133
Equity securities	333		22		—		—		—			70			(42)			—			—		383
Short-term investments	6		—		—		—		—			10			—			—			—		16
Other investments	3		(1)		—		—		—			—			—			—			—		2
Other assets	103		10		—		—		—			—			—			—			—		113
Total recurring Level 3 assets	$	618	$	22	$	—	$	16	$	—		$	92		$	(98)		$	—		$	(3)	$	647

Third Quarter 2023 Form 10-Q 27

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


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


Total Level 3 gains (losses) included in net income
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Net investment income	$	(1)	$	4	$	(3)	$	17
Net gains (losses) on investments and derivatives	25		(23)		25		56

There were no transfers into Level 3 during the three months ended September 30, 2023. Transfers into Level 3 during the nine months ended September 30, 2023 included situations where securities were written down utilizing an internal price where the inputs have not been corroborated to be market observable resulting in the securities being classified as Level 3.

Transfers into Level 3 during the three and nine months ended September 30, 2022 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.

There were no transfers out of Level 3 during the three and nine months ended September 30, 2023. Transfers out of Level 3 during the three and nine months ended September 30, 2022 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.

28 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of September 30,
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Assets
Fixed income securities:


Corporate - privately placed	$	—	$	1	$	(11)	$	1

Total fixed income securities	—		1		(11)		1
Equity securities	15		(16)		21		11

Other investments	—		—		(1)		—
Other assets	9		(4)		10		39


Total recurring Level 3 assets	$	24	$	(19)	$	19	$	51



Total included in net income	$	24	$	(19)	$	19	$	51

Components of net income
Net investment income	$	(1)	$	3	$	(3)	$	16
Net gains (losses) on investments and derivatives	25		(22)		22		35
Total included in net income	$	24	$	(19)	$	19	$	51

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



Changes in unrealized net capital gains and losses reported in OCI	$	(2)	$	(4)	$	—	$	(7)


Financial instruments not carried at fair value
($ in millions)		September 30, 2023				December 31, 2022
Financial assets	Fair value level	Amortized cost, net		Fair value		Amortized cost, net		Fair value
Mortgage loans	Level 3	$	830	$	752	$	762	$	700
Bank loans	Level 3	679		704		686		686



Financial liabilities	Fair value level	Carrying value (1)		Fair value		Carrying value (1)		Fair value
Contractholder funds on investment contracts	Level 3	$	47	$	47	$	50	$	50
Debt	Level 2	7,946		7,197		7,964		7,449
Liability for collateral	Level 2	1,746		1,746		2,011		2,011

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


Note 6			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, futures, 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

Third Quarter 2023 Form 10-Q 29

Notes to Condensed Consolidated Financial Statements

holding foreign currency denominated investments and foreign operations.

In 2022, the Company also had derivatives embedded in non-derivative host contracts that were 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 in 2021, the sale agreement included a provision related to contingent consideration that may be earned over a ten-year period with the first potential payment date commencing on January 1, 2026 and a final potential payment date of 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. There are no collateral requirements related to the contingent consideration.

30 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Summary of the volume and fair value positions of derivative instruments as of September 30, 2023
($ 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		10,126	$	1	$	1	$	—
Equity and index contracts

Futures	Other assets	n/a		1,451	1		1		—



Foreign currency contracts
Foreign currency forwards	Other investments	$	267	n/a	3		5		(2)

Contingent consideration	Other assets	250		n/a	113		113		—
Credit default contracts
Credit default swaps – buying protection	Other investments	37		n/a	—		—		—






Total asset derivatives		$	554	11,577	$	118	$	120	$	(2)

Liability derivatives


Derivatives not designated as accounting hedging instruments
Interest rate contracts




Futures	Other liabilities & accrued expenses	n/a		5,312	$	(2)	$	—	$	(2)
Equity and index contracts

Futures	Other liabilities & accrued expenses	n/a		1,995	(1)		—		(1)




Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	$	354	n/a	12		14		(2)





Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	567		n/a	(5)		1		(6)



Total liability derivatives		921		7,307	4		$	15	$	(11)
Total derivatives		$	1,475	18,884	$	122

(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 2023 Form 10-Q 31

Notes to Condensed Consolidated Financial Statements


Summary of the volume and fair value positions of derivative instruments as of December 31, 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		24,380	$	3	$	3	$	—
Equity and index contracts

Futures	Other assets	n/a		343	—		—		—



Foreign currency contracts
Foreign currency forwards	Other investments	$	354	n/a	1		14		(13)

Contingent consideration	Other assets	250		n/a	103		103		—
Credit default contracts
Credit default swaps – buying protection	Other investments	24		n/a	—		1		(1)





Total asset derivatives		$	628	24,723	$	107	$	121	$	(14)

Liability derivatives


Derivatives not designated as accounting hedging instruments
Interest rate contracts


Futures	Other liabilities & accrued expenses	n/a		1,624	$	—	$	—	$	—
Equity and index contracts

Futures	Other liabilities & accrued expenses	n/a		1,229	(1)		—		(1)



Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	$	283	n/a	—		7		(7)


Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	525		n/a	(3)		1		(4)


Total liability derivatives		808		2,853	(4)		$	8	$	(12)
Total derivatives		$	1,436	27,576	$	103


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, 2023
Asset derivatives	$	20	$	(17)	$	1	$	4	$	—	$	4
Liability derivatives	(5)		17		(13)		(1)		—		(1)

December 31, 2022
Asset derivatives	$	23	$	(22)	$	—	$	1	$	—	$	1
Liability derivatives	(22)		22		(1)		(1)		—		(1)

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

32 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, 2023
Interest rate contracts	$	5	$	—	$	5
Equity and index contracts	10		(10)		—
Contingent consideration	—		9		9
Foreign currency contracts	17		—		17
Credit default contracts	(1)		—		(1)



Total	$	31	$	(1)	$	30

Nine months ended September 30, 2023
Interest rate contracts	$	(12)	$	—	$	(12)
Equity and index contracts	(6)		8		2
Contingent consideration	—		10		10
Foreign currency contracts	6		—		6
Credit default contracts	(16)		—		(16)



Total	$	(28)	$	18	$	(10)

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

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, 2023
Pledged by the Company	$	4
Pledged to the Company (1)	16

(1) No collateral was posted under MNAs 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 2023 Form 10-Q 33

Notes to Condensed Consolidated Financial Statements


OTC derivatives counterparty credit exposure by counterparty credit rating
($ in millions)	September 30, 2023							December 31, 2022
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	$	672	$	15	$	—	1	$	128	$	5	$	—
A	—	—		—		—		1	192		7		—



Total	4	$	672	$	15	$	—	2	$	320	$	12	$	—

(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, 2023
Pledged by the Company	$	178
Received by the Company	—

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, 2023		December 31, 2022
Gross liability fair value of contracts containing credit-risk-contingent features	$	4	$	21
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs	(4)		(11)
Collateral posted under MNAs for contracts containing credit-risk-contingent features	—		(10)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently	$	—	$	—


Note 7			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, 2023 and December 31, 2022, 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 addition, the Company provides quota share reinsurance on the property business of the Reciprocal Exchanges.

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.

34 www.allstate.com

Notes to Condensed Consolidated Financial Statements

The results of operations of the Reciprocal Exchanges are included in the Company’s Allstate Protection segment and generated $59 million and $173 million of earned premiums for the three and nine months ended September 30, 2023, respectively, compared to $39 million and $122 million for the three and nine months ended September 30, 2022, respectively.

Total costs and expenses were $58 million and $202 million for the three and nine months ended September 30, 2023, respectively, compared to $61 million and $174 million for the three and nine months ended September 30, 2022, respectively.


Assets and liabilities of Reciprocal Exchanges
($ in millions)	September 30, 2023		December 31, 2022
Assets
Fixed income securities	$	262	$	302
Short-term investments	4		13
Deferred policy acquisition costs	19		15
Premium installment and other receivables, net	42		43
Reinsurance recoverables, net	88		97
Other assets	68		90
Total assets	483		560
Liabilities
Reserve for property and casualty insurance claims and claims expense	191		209
Unearned premiums	148		171
Other liabilities and expenses	294		311
Total liabilities	$	633	$	691


Note 8			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 laws and regulations, judicial decisions, and economic conditions.

When the Company experiences changes in the mix or type of claims or changing claim settlement patterns or data, it applies actuarial judgment in the determination and selection of development factors to develop reserve liabilities. Supply chain disruptions and inflation have resulted in higher part 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. The Company has also digitized and modified claim processes to increase effectiveness and efficiency. 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 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 different actuarial estimation methods. Changes in auto claim

frequency may result from changes in mix of business, driving behaviors, miles driven or other factors. Changes in auto current year claim severity are generally influenced by inflation in the medical and auto repair sectors, the effectiveness and efficiency of claim settlements and changes in mix of claim types. When changes in claim data occur, actuarial judgment is used to determine appropriate development factors to establish reserves. The Company’s reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine its best estimate of recorded 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

Third Quarter 2023 Form 10-Q 35

Notes to Condensed Consolidated Financial Statements

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)	2023		2022
Balance as of January 1	$	37,541	$	33,060
Less recoverables (1)	(9,176)		(9,479)
Net balance as of January 1	28,365		23,581

Incurred claims and claims expense related to:
Current year	31,910		25,792
Prior years	380		1,470
Total incurred	32,290		27,262
Claims and claims expense paid related to:
Current year	(16,593)		(14,020)
Prior years	(12,057)		(9,850)
Total paid	(28,650)		(23,870)
Net balance as of September 30	32,005		26,973
Plus recoverables	8,654		9,556
Balance as of September 30	$	40,659	$	36,529

(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 $5.57 billion and $2.33 billion in the nine months ended September 30, 2023 and 2022, 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.

36 www.allstate.com

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)	2023		2022		2023		2022		2023		2022
Three months ended September 30,
Auto	$	27	$	643	$	6	$	(11)	$	33	$	632
Homeowners	46		50		16		3		62		53
Other personal lines	(3)		(2)		(11)		(3)		(14)		(5)
Commercial lines	13		63		6		1		19		64
Other business lines	1		1		—		1		1		2
Run-off Property-Liability (2)	82		120		—		—		82		120
Protection Services	—		—		—		—		—		—
Total prior year reserve reestimates	$	166	$	875	$	17	$	(9)	$	183	$	866

Nine months ended September 30,
Auto	$	146	$	1,069	$	(41)	$	(58)	$	105	$	1,011
Homeowners	75		104		61		77		136		181
Other personal lines	15		(18)		(23)		4		(8)		(14)
Commercial lines	42		174		9		1		51		175
Other business lines	12		(9)		—		5		12		(4)
Run-off Property-Liability (2)	85		124		—		—		85		124
Protection Services	(1)		(3)		—		—		(1)		(3)
Total prior year reserve reestimates	$	374	$	1,441	$	6	$	29	$	380	$	1,470

(1)Favorable reserve reestimates are shown in parentheses.

(2)The Company’s 2023 and 2022 annual reserve reviews, using established industry and actuarial practices, resulted in unfavorable reestimates of $80 million and $118 million, respectively.

Third Quarter 2023 Form 10-Q 37

Notes to Condensed Consolidated Financial Statements


Note 9			Reserve for Future Policy Benefits and Contractholder Funds


Rollforward of reserve for future policy benefits (1)
	Nine months ended September 30,
	Accident and health				Traditional life				Total
($ in millions)	2023		2022		2023		2022		2023		2022
Present value of expected net premiums
Beginning balance	$	1,464	$	1,785	$	238	$	254	$	1,702	$	2,039
Beginning balance at original discount rate	1,549		1,604		246		215		1,795		1,819
Effect of changes in cash flow assumptions	(12)		—		34		—		22		—
Effect of actual variances from expected experience	(4)		(138)		4		35		—		(103)
Adjusted beginning balance	1,533		1,466		284		250		1,817		1,716
Issuances	378		301		53		7		431		308
Interest accrual	48		36		8		5		56		41
Net premiums collected	(260)		(254)		(37)		(34)		(297)		(288)

Ending balance at original discount rate	1,699		1,549		308		228		2,007		1,777
Effect of changes in discount rate assumptions	(113)		(96)		(19)		(8)		(132)		(104)
Ending balance	1,586		1,453		289		220		1,875		1,673

Present value of expected future policy benefits
Beginning balance	2,229		2,796		524		673		2,753		3,469
Beginning balance at original discount rate	2,316		2,426		534		511		2,850		2,937
Effect of changes in cash flow assumptions	21		(44)		30		—		51		(44)
Effect of actual variances from expected experience	(24)		(120)		3		26		(21)		(94)
Adjusted beginning balance	2,313		2,262		567		537		2,880		2,799
Issuances	368		293		68		8		436		301
Interest accrual	75		62		18		15		93		77
Benefit payments	(297)		(294)		(30)		(53)		(327)		(347)

Ending balance at original discount rate	2,459		2,323		623		507		3,082		2,830
Effect of changes in discount rate assumptions	(126)		(105)		(38)		(11)		(164)		(116)
Ending balance	$	2,333	$	2,218	$	585	$	496	$	2,918	$	2,714

Net reserve for future policy benefits (1)	$	747	$	765	$	296	$	276	$	1,043	$	1,041
Less: reinsurance recoverables	82		75		2		2		84		77
Net reserve for future policy benefits, after reinsurance recoverables	$	665	$	690	$	294	$	274	$	959	$	964

(1)Excludes $266 million and $277 million of reserves related to short-duration and other contracts as of September 30, 2023 and 2022, respectively.


Revenue and interest recognized in the condensed consolidated statements of operations
($ in millions)	Nine months ended September 30,
		2023		2022
Revenues (1)
Accident and health		$	600	$	629
Traditional life		77		72
Total		$	677	$	701

Interest expense (2)
Accident and health		$	27	$	26
Traditional life		10		10
Total		$	37	$	36

(1) Total revenues reflects gross premiums used in the calculation for reserve for future policy benefits. Revenues included in Accident and health insurance premiums and contract charges on the Condensed Consolidated Statements of Operations reflect premium revenue recognized for traditional life insurance and long-duration and short-duration accident and health insurance contracts.

(2) Total interest expense presented as part of Accident, health and other policy benefits on the Condensed Consolidated Statements of Operations.

38 www.allstate.com

Notes to Condensed Consolidated Financial Statements

The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefits and expenses for nonparticipating traditional and limited-payment contracts.


	As of September 30,
	2023				2022
($ in millions)	Undiscounted		Discounted		Undiscounted		Discounted
Accident and health
Expected future gross premiums	$	5,263	$	3,600	$	4,963	$	3,533
Expected future benefits and expenses	3,503		2,333		3,253		2,218
Traditional life
Expected future gross premiums	813		553		624		422
Expected future benefits and expenses	1,153		585		932		496


Key assumptions used in calculating the reserve for future policy benefits
	As of September 30,
	Accident and health				Traditional life
	2023		2022		2023		2022
Weighted-average duration (in years)	4.3		3.7		14.8		13.4
Weighted-average interest rates
Interest accretion rate (discount rate at contract issuance)	4.73	%	4.69	%	5.43	%	5.60	%
Current discount rate (upper-medium grade fixed income yield)	5.28		4.73		5.56		5.38

Significant assumptions To determine mortality and morbidity assumptions, the Company uses a combination of its historical experience and industry data. Mortality and morbidity are monitored throughout the year. Historical experience is obtained through annual Company experience studies in the third quarter that consider its historical claim patterns. The lapse assumption is determined based on historical lapses of the Company’s insurance contracts.

The Company performed the annual review of the mortality, morbidity and lapse experience assumptions in the third quarter of 2023 and 2022 resulting in an increase of less than $1 million and a decrease of $4 million, respectively, to the reserve for future policy benefits.

The following table summarizes the ratio of actual to expected experience used in the determination of the reserve for future policy benefits.


	As of September 30,
	Accident and health				Traditional life
	2023		2022		2023		2022
Actual to expected experience
Mortality	n/a		n/a		95	%	238	%

Morbidity	92	%	94	%	n/a		n/a


Lapses	116	%	123	%	89	%	75	%

n/a = not applicable

Third Quarter 2023 Form 10-Q 39

Notes to Condensed Consolidated Financial Statements

Contractholder funds


Contractholder funds activity
	Nine months ended September 30,
($ in millions)	2023			2022
Beginning balance	$	879		$	890
Deposits	99			102
Interest credited	25			25
Benefits	(8)			(15)
Surrenders and partial withdrawals	(15)			(16)
Contract charges	(90)			(88)
Other adjustments	(6)			(5)
Ending balance	$	884		$	893

Components of contractholder funds
Interest-sensitive life insurance	$	837		$	841
Fixed annuities	47			52
Total	$	884		$	893

Weighted-average crediting rate	4.26		%	4.28		%
Net amount at risk (1)	$	11,550		$	11,796
Cash surrender value	728			728

(1)Guaranteed benefit amounts in excess of the current account balances.


Account values: comparison of current crediting rate to guaranteed minimum crediting rate (1)
($ in millions) Range of guaranteed minimum crediting rates	At guaranteed minimum		1-50 basis points above		Total
September 30, 2023
Less than 3.00%	$	—	$	—	$	—
3.00% - 3.49%	—		27		27
3.50% - 3.99%	11		—		11
4.00% - 4.49%	437		—		437
4.50% - 4.99%	263		—		263
5.00% or greater	68		—		68
Non-account balances (2)					78
Total	$	779	$	27	$	884

September 30, 2022
Less than 3.00%	$	—	$	—	$	—
3.00% - 3.49%	—		13		13
3.50% - 3.99%	12		—		12
4.00% - 4.49%	438		—		438
4.50% - 4.99%	269		—		269
5.00% or greater	70		—		70
Non-account balances (2)					91
Total	$	789	$	13	$	893

(1)Difference, in basis points, between rates being credited to contractholders and the respective guaranteed minimum crediting rates.

(2)Non-account balances include unearned revenue and amounts related to policies where a claim is either in the course of settlement or incurred but not reported. A claim on a life insurance policy results in the accrual of interest at a rate and over a period of time that is specified by state insurance regulations.

40 www.allstate.com

Notes to Condensed Consolidated Financial Statements


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,
	2023		2022		2023		2022
Property and casualty insurance premiums earned	$	(514)	$	(479)	$	(1,455)	$	(1,362)
Accident and health insurance premiums and contract charges	(16)		(12)		(35)		(28)


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,
	2023		2022		2023		2022
Property and casualty insurance claims and claims expense (1)	$	(274)	$	(925)	$	(534)	$	(1,300)
Accident, health and other policy benefits	(7)		39		(32)		22

(1)Includes approximately $60 million of ceded losses related to the Nationwide Reinsurance Program for the nine months ended September 30, 2023. Ceded losses for the three and nine months ended September 30, 2022 included $305 million of expected reinsurance recoveries related to the Florida Excess Catastrophe Reinsurance Program for Hurricane Ian.

Reinsurance and indemnification recoverables


Reinsurance and indemnification recoverables, net
($ in millions)	September 30, 2023		December 31, 2022
Property and casualty
Paid and due from reinsurers and indemnitors	$	268	$	291
Unpaid losses estimated (including IBNR)	8,654		9,176
Total property and casualty	$	8,922	$	9,467

Accident and health insurance	161		152
Total	$	9,083	$	9,619


Rollforward of credit loss allowance for reinsurance recoverables
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Property and casualty (1) (2)
Beginning balance	$	(61)	$	(66)	$	(62)	$	(66)
(Increase) decrease in the provision for credit losses	—		(5)		1		(5)
Write-offs	—		9		—		9
Ending balance	$	(61)	$	(62)	$	(61)	$	(62)

Accident and health insurance
Beginning balance	$	(3)	$	(8)	$	(3)	$	(8)

Increase in the provision for credit losses	—		—		—		—
Write-offs	—		—		—		—
Ending balance	$	(3)	$	(8)	$	(3)	$	(8)

(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.

Third Quarter 2023 Form 10-Q 41

Notes to Condensed Consolidated Financial Statements


Note 11			Deferred Policy Acquisition Costs


Deferred policy acquisition costs activity
($ in millions)	Accident and health		Traditional life		Interest-sensitive life		Total
Nine months ended September 30, 2023
Accident and health insurance
Long-duration contracts
Beginning balance	$	322	$	79	$	101	$	502

Acquisition costs deferred	73		24		12		109
Amortization charged to income	(54)		(17)		(11)		(82)
Experience adjustment	(22)		(1)		(2)		(25)
Total	$	319	$	85	$	100	504
Short-duration contracts							27
Property and casualty							5,293
Ending balance							$	5,824

Nine months ended September 30, 2022
Accident and health insurance
Long-duration contracts
Beginning balance	$	339	$	47	$	90	$	476

Acquisition costs deferred	66		33		23		122
Amortization charged to income	(55)		(7)		(11)		(73)
Experience adjustment	(26)		(1)		(1)		(28)
Total	$	324	$	72	$	101	497
Short-duration contracts							24
Property and casualty							4,770
Ending balance							$	5,291

42 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Note 12			Capital Structure

Repayment of debt On March 29, 2023, the Company repaid, at maturity, $250 million of Floating Rate Senior Notes that bear interest at a floating rate equal to three-month London Interbank Offered Rate (“LIBOR”) plus 0.63% per year. On June 15, 2023, the Company repaid, at maturity, $500 million of 3.15% Senior Notes.

Issuance of debt On March 31, 2023, the Company issued $750 million of 5.250% Senior Notes due 2033. Interest on the Senior Notes is payable semi-annually in arrears on March 30 and September 30 of each year, beginning on September 30, 2023. The Senior Notes are redeemable at any time at the applicable redemption price prior to the maturity date. The net proceeds of this issuance were used to repay the $500 million senior debt maturity and for general corporate purposes.

Redemption of preferred stock On April 17, 2023, the Company redeemed all 23,000 shares of Fixed Rate Noncumulative Preferred Stock, Series G, par value $1.00 per share and liquidation preference amount of $25,000 per share, and the corresponding depositary shares for a total redemption payment of $575 million. The Company recognized $18 million of original issuance costs in preferred stock dividends on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Shareholders’ Equity.

Issuance of preferred stock On May 18, 2023, the Company issued 24,000 shares of Fixed Rate Noncumulative Preferred Stock, Series J, par value $1.00 per share and liquidation preference amount of $25,000 per share, and the corresponding depositary shares for gross proceeds of $600 million. The preferred stock is perpetual and has no maturity date. The preferred stock is redeemable at the Company’s option in whole or in part, on or after July 15, 2028 at a redemption price of $25,000 per share, plus declared and unpaid dividends. Prior to July 15, 2028, the preferred stock is redeemable at the Company’s option, in whole but not in part, within 90 days after the occurrence of certain rating agency events at a redemption price equal to $25,500 per share, plus declared and unpaid dividends, or in whole but not in part, within 90 days after the occurrence of a regulatory capital event, at a redemption price equal to $25,000 per share, plus declared and unpaid dividends.

LIBOR-linked debt Interest on the 5.100% Subordinated Debentures was payable quarterly at the stated fixed annual rate to January 14, 2023, or any earlier redemption date, and then at an annual rate equal to the three-month LIBOR plus 3.165%. Interest on the 5.750% Subordinated Debentures was payable semi-annually at the stated fixed annual rate to August 14, 2023, or any earlier redemption date, and then quarterly at an annual rate equal to the three-month LIBOR plus 2.938%. The Company may elect to defer payment of interest on the Subordinated Debentures for one or more consecutive interest periods that do not exceed five years. During a deferral period, interest will continue to accrue on the

Subordinated Debentures at the then-applicable rate and deferred interest will compound on each interest payment date. If all deferred interest on the Subordinated Debentures is paid, the Company can again defer interest payments.

The administrator of LIBOR ceased the publication of the one week and two month U.S. dollar (“USD”) LIBOR settings December 31, 2021, and the remaining USD LIBOR settings ceased following the LIBOR publication on June 30, 2023. The Subordinated Debentures allow for the use of an alternative methodology to determine the interest rate if LIBOR is no longer available. The Federal Reserve Board adopted a final rule that implemented the Adjustable Interest Rate (LIBOR) Act on December 16, 2022. This guidance impacts the alternative rate methodology utilized by the Subordinated Debentures.

Both Subordinated Debentures replaced the three-month LIBOR with the CME Term SOFR Reference Rate published for a three-month tenor plus a spread adjustment of 0.26161% effective for interest paid under the terms of each of the Subordinated Debentures after June 30, 2023, as shown in the table below.

Interest rates for LIBOR-linked debt

($ in millions)

5.100% Subordinated Debentures, due 2053

5.750% Subordinated Debentures, due 2053

Debt outstanding

500

800

Dividend accrual date (1)

July 15, 2023

August 15, 2023

Rate following commencement date

3-month SOFR + 3.165% + .26161%

3-month SOFR

+ 2.938% + .26161%

(1)First dividend accrual date following the last published three-month LIBOR rate on June 30, 2023.

Third Quarter 2023 Form 10-Q 43

Notes to Condensed Consolidated Financial Statements


Note 13			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 $87 million and $14 million during the three months ended September 30, 2023 and 2022, respectively, and $141 million and $27 million during the nine months ended September 30, 2023 and 2022, respectively.

Restructuring expenses during the third quarter of 2023 primarily relate to implementing actions to

achieve the organizational transformation component of the Transformative Growth plan designed to streamline the organization and outsource operations. Restructuring expenses during the first nine months of 2023 primarily relate to the organizational transformation and real estate costs related to facilities being vacated. The Company continues to identify ways to improve operating efficiency and reduce cost which may result in additional restructuring charges in the future.


Organizational transformation
($ in millions)
Expected program charges	$	95
2023 expenses	(76)
Remaining program charges	$	19

These charges are primarily recorded in the Allstate Protection segment. The Company expects these actions will be completed in 2024.


Restructuring activity during the period
($ in millions)	Employee costs		Exit costs		Total liability
Restructuring liability as of December 31, 2022	$	27	$	7	$	34
Expense incurred	92		56		148
Adjustments to liability	(1)		(6)		(7)
Payments and non-cash charges	(35)		(56)		(91)
Restructuring liability as of September 30, 2023	$	83	$	1	$	84

As of September 30, 2023, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled $91 million for employee costs and $185 million for exit costs.


Note 14			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.

44 www.allstate.com

Notes to Condensed Consolidated Financial Statements

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, 2023.

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 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

Third Quarter 2023 Form 10-Q 45

Notes to Condensed Consolidated Financial Statements

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 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 $67 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 lawsuit, 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 oral argument before the Florida Supreme Court was on March 8, 2023. The Company is also defending litigation involving individual plaintiffs.

The Company is defending putative class actions in various courts that raise challenges to the

46 www.allstate.com

Notes to Condensed Consolidated Financial Statements

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: Sims, et al. v. Allstate Fire and Casualty Insurance Company, et al. (W.D. Tex. filed June 2022); Thompson, et al. v. Allstate Insurance Company (Circuit Court of Cole Co., Mo. filed June 2022); Hill v. Allstate Vehicle and Property Insurance Company (Circuit Court of Cole Co., Mo. filed October 2022); Tabuga v. Allstate Vehicle and Property Insurance Company (D. Md. filed April 2023); and Hernandez v. Allstate Vehicle and Property Insurance Company (D. Ariz. filed April 2023) (the Shumway plaintiff was substituted with Hernandez). No classes have been certified in any of these matters. The court granted final approval of a class-wide settlement in: 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); Mitchell, et al. v. Allstate Vehicle and Property Insurance Company, et al. (S.D. Ala. filed August 2021).

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 alleged systematic underpayments result from 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; and/or (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.

The following cases are currently pending against the Company: 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); 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); Golla v. Allstate Insurance Company (N.D. Ohio filed June 2023); and Bibbs v. Allstate Insurance Company and Allstate Fire and Casualty Insurance Company (N.D. Ohio filed August 2023).

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

Other proceedings The Company has pending 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 was completed in the investigatory hearing. Allstate and the California Department of Insurance have reached an agreement in principle to resolve the investigatory hearing. The May 22, 2023 hearing was continued. A new hearing date has not been set.

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. On January 10, 2023, the parties filed a joint pre-trial order. A pre-trial conference has not occurred.

Third Quarter 2023 Form 10-Q 47

Notes to Condensed Consolidated Financial Statements

Subsequently, on June 28, 2023, the parties reached an agreement in principle to settle the action, without any admission of liability or wrongdoing. On September 26, 2023, an order was entered by the district court granting preliminary approval of the class settlement. The settlement is subject to final approval by the district court and any appeals therefrom. The final approval hearing is scheduled for December 19, 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. On April 19, 2023, the court certified a class in Farley. On September 28, 2023, the Ninth Circuit accepted Lincoln Benefit Life Company’s petition to appeal the district court’s class certification ruling. There has been

no ruling on plaintiff’s motion for class certification in Hewitt. 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.


Note 15			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)	2023		2022		2023		2022
Pension benefits
Service cost	$	34	$	22	$	99	$	79
Interest cost	58		59		176		157
Expected return on plan assets	(78)		(85)		(234)		(295)
Amortization of prior service credit	—		(2)		—		(27)

Costs and expenses	14		(6)		41		(86)
Remeasurement of projected benefit obligation	(211)		(254)		(156)		(1,427)
Remeasurement of plan assets	369		335		219		1,563
Remeasurement (gains) losses	158		81		63		136
Pension net cost	$	172	$	75	$	104	$	50

Postretirement benefits
Service cost	$	—	$	—	$	—	$	1
Interest cost	3		3		8		7
Amortization of prior service credit	(6)		(7)		(18)		(19)

Costs and expenses	(3)		(4)		(10)		(11)
Remeasurement of projected benefit obligation	(9)		(2)		(7)		(45)
Remeasurement of plan assets	—		—		—		—
Remeasurement (gains) losses	(9)		(2)		(7)		(45)
Postretirement net benefit	$	(12)	$	(6)	$	(17)	$	(56)

Pension and postretirement benefits
Costs and expenses	$	11	$	(10)	$	31	$	(97)
Remeasurement (gains) losses	149		79		56		91
Total net cost (benefit)	$	160	$	69	$	87	$	(6)

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.

48 www.allstate.com

Notes to Condensed Consolidated Financial Statements


Pension and postretirement benefits remeasurement gains and losses
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Remeasurement of projected benefit obligation (gains) losses:
Discount rate	$	(231)	$	(284)	$	(180)	$	(1,289)
Other assumptions	11		28		17		(183)
Remeasurement of plan assets (gains) losses	369		335		219		1,563
Remeasurement (gains) losses	$	149	$	79	$	56	$	91

Remeasurement losses for the third quarter and first nine months of 2023 are primarily related to unfavorable asset performance compared to expected return on plan assets, partially offset by an increase in the liability discount rate.

The weighted average discount rate used to measure the pension benefit obligation increased to 6.16% at September 30, 2023 compared to 5.50% at June 30, 2023, 5.33% at March 31, 2023 and 5.64% at December 31, 2022 resulting in gains for the third quarter and the first nine months of 2023.

For the third quarter of 2023, the actual return on plan assets was lower than the expected return due to lower equity and fixed income valuations from higher market yields during the quarter. For the first nine months of 2023, the actual return on plan assets was lower than the expected return due to lower fixed income valuations from higher market yields, partially offset by higher equity valuations.


Note 16			Supplemental Cash Flow Information

Non-cash investing activities include $54 million and $111 million related to mergers and exchanges completed with equity securities, fixed income securities, bank loans, real estate and limited partnerships for the nine months ended September 30, 2023 and 2022, respectively. Non-cash investing activities include $15 million related to right-of-use real estate obtained in exchange for lease obligations and $123 million related to debt assumed by purchaser on sale of real estate for the nine months ended September 30, 2023.

Non-cash financing activities include $38 million and $65 million related to the issuance of Allstate common shares for vested equity awards for the nine months ended September 30, 2023 and 2022, 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 $101 million and $127 million for the nine

months ended September 30, 2023 and 2022, respectively. Non-cash operating activities include $26 million and $17 million related to right-of-use assets obtained in exchange for lease obligations for the nine months ended September 30, 2023 and 2022, 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,
	2023		2022
Net change in proceeds managed
Net change in fixed income securities	$	207	$	(473)
Net change in short-term investments	58		(285)
Operating cash flow provided (used)	265		(758)
Net change in cash	—		1
Net change in proceeds managed	$	265	$	(757)

Cash flows from operating activities
Net change in liabilities
Liabilities for collateral, beginning of period	$	(2,011)	$	(1,444)
Liabilities for collateral, end of period	(1,746)		(2,201)
Operating cash flow (used) provided	$	(265)	$	757

Third Quarter 2023 Form 10-Q 49

Notes to Condensed Consolidated Financial Statements


Note 17			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,
	2023						2022
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets	$	(974)	$	210	$	(764)	$	(1,161)	$	246	$	(915)
Less: reclassification adjustment of realized capital gains and losses	(121)		24		(97)		(159)		33		(126)
Unrealized net capital gains and losses	(853)		186		(667)		(1,002)		213		(789)
Unrealized foreign currency translation adjustments	(18)		4		(14)		(112)		24		(88)
Unamortized pension and other postretirement prior service credit (1)	(6)		1		(5)		(9)		1		(8)
Discount rate for reserve for future policy benefits	38		(8)		30		66		(14)		52
Other comprehensive (loss) income	$	(839)	$	183	$	(656)	$	(1,057)	$	224	$	(833)

	Nine months ended September 30,
	2023						2022
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets	$	(717)	$	152	$	(565)	$	(5,083)	$	1,080	$	(4,003)
Less: reclassification adjustment of realized capital gains and losses	(390)		82		(308)		(602)		126		(476)
Unrealized net capital gains and losses	(327)		70		(257)		(4,481)		954		(3,527)
Unrealized foreign currency translation adjustments	81		(17)		64		(171)		36		(135)
Unamortized pension and other postretirement prior service credit (1)	(18)		4		(14)		(47)		9		(38)
Discount rate for reserve for future policy benefits	37		(8)		29		294		(62)		232
Other comprehensive (loss) income	$	(227)	$	49	$	(178)	$	(4,405)	$	937	$	(3,468)

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

50 www.allstate.com

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

The Allstate Corporation

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, 2023, the related condensed consolidated statements of operations, comprehensive income (loss) and shareholders’ equity for the three and nine month periods ended September 30, 2023 and 2022, and of cash flows for the nine month periods ended September 30, 2023 and 2022, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it 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, 2022, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the year then ended prior to the retrospective adjustment for a change in the Company’s method of accounting for reserve for future policy benefits and deferred policy acquisition costs for long-duration insurance contracts (not presented herein); and in our report dated February 16, 2023, we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 1 that were applied to retrospectively adjust the December 31, 2022, consolidated statement of financial position of the Company (not presented herein). In our opinion, such adjustments are appropriate and have been properly applied to the previously issued consolidated statement of financial position in deriving the accompanying retrospectively adjusted condensed consolidated statement of financial position as of December 31, 2022.

Basis for Review Results

This interim financial information is 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 interim financial information 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 1, 2023

Third Quarter 2023 Form 10-Q 51

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 2022, filed February 16, 2023. Certain amounts have been reclassified to conform to current year presentation.

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.

Macroeconomic Impacts

Macroeconomic factors have and may continue to impact the results of our operations, financial condition and liquidity, such as U.S. government fiscal and monetary policies, banking system instability, the Russia/Ukraine and Israel/Hamas conflicts and the remaining impacts of the Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”), through longer-term impacts such as supply chain disruptions, labor shortages and other macroeconomic factors that have increased inflation.

Inflation continues 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 foreign governmental authorities and central banks have also responded to inflationary pressure, generally through more restrictive monetary policy, such as increasing target interest rates. These actions could create significant economic uncertainty. Market volatility resulting from these factors and from disruptions in the banking industry have and may continue to impact our investment valuations and returns.

These factors have affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity and should be considered when comparing the current period to prior periods. This 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 macroeconomic impacts on our 2023 results.

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 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 methods. The ultimate objective is to create continuous transformative growth in all businesses.

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

•Improving customer value

•Expanding customer access

•Increasing sophistication and investment in customer acquisition

•Modernizing the technology ecosystem

•Driving organizational transformation

We are expanding protection services businesses utilizing enterprise capabilities and resources such as the Allstate brand, distribution, analytics, claims, investment expertise, talent and capital.

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
•			Amortization or impairment of purchased intangibles
•			Gain or loss on disposition
•			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

52 www.allstate.com

Highlights

Consolidated net income (loss) applicable to common shareholders

($ in millions)


Consolidated net loss applicable to common shareholders was $41 million in the third quarter of 2023 compared to a loss of $685 million in the third quarter of 2022, primarily due to higher Property-Liability premiums earned and lower unfavorable prior year reserve reestimates. Net loss was $1.78 billion in the first nine months of 2023 compared to a loss of $1.09 billion in the first nine months of 2022 primarily due to higher catastrophe losses and higher incurred losses driven by severity, partially offset by increased Property-Liability premiums earned, lower unfavorable prior year reserve reestimates and gains on equity valuations in 2023 compared to losses in 2022. For the nine months ended September 30, 2023, return on Allstate common shareholders’ equity was (14.7)%.

Total revenue

($ in millions)


Total revenues increased 9.8% to $14.50 billion and increased 11.9% to $42.26 billion in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022 due to an increase of 10.1% and 10.2% in property and casualty insurance premiums earned in the third quarter and first nine months of 2023, respectively, compared to the third quarter and first nine months of 2022 and net gains on equity valuations in the first nine months of 2023 compared to losses in 2022.

Net investment income

($ in millions)


Net investment income decreased $1 million to $689 million in the third quarter of 2023, primarily due to lower performance-based investment results, partially offset by higher market-based income reflecting higher fixed income portfolio yields and investment balances. Net investment income increased $28 million to $1.87 billion in the first nine months of 2023 compared to the same periods of 2022, primarily due to higher market-based income reflecting higher fixed income portfolio yields and investment balances, partially offset by lower performance-based investment results.

Third Quarter 2023 Form 10-Q 53

Financial highlights

Investments totaled $63.36 billion as of September 30, 2023, increasing from $61.83 billion as of December 31, 2022.

Allstate shareholders’ equity was $14.59 billion as of September 30, 2023, decreasing from $17.49 billion as of December 31, 2022, primarily due to a net loss, dividends paid to shareholders, common share repurchases, and higher unrealized net capital losses on investments.

Book value per diluted common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $47.79, a decrease of 18.2% from $58.39 as of September 30, 2022, and a decrease of 17.8% from $58.12 as of December 31, 2022.

Return on average Allstate common shareholders’ equity For the twelve months ended September 30, 2023, return on Allstate common shareholders’ equity was (14.7)%, a decrease of 13.2 points from (1.5)% for the twelve months ended September 30, 2022. The decrease was primarily due to a net loss applicable to common shareholders for the trailing twelve-month period ending September 30, 2023 and a decrease in average Allstate common shareholders’ equity.

Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement losses of $149 million in the third quarter due to lower equity and fixed income valuations from higher market yields during the quarter. We recorded losses of $56 million in the first nine months of 2023 due to lower fixed income valuations from higher market yields, partially offset by higher equity valuations.

Summarized consolidated financial results


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Revenues
Property and casualty insurance premiums	$	12,839	$	11,661	$	37,482	$	34,004
Accident and health insurance premiums and contract charges	463		463		1,379		1,396
Other revenue	592		561		1,750		1,684
Net investment income	689		690		1,874		1,846
Net gains (losses) on investments and derivatives	(86)		(167)		(223)		(1,167)
Total revenues	14,497		13,208		42,262		37,763

Costs and expenses
Property and casualty insurance claims and claims expense	(10,237)		(10,073)		(32,290)		(27,262)
Accident, health and other policy benefits	(262)		(252)		(785)		(785)
Amortization of deferred policy acquisition costs	(1,841)		(1,683)		(5,374)		(4,909)
Operating, restructuring and interest expenses	(1,946)		(1,941)		(5,686)		(5,872)
Pension and other postretirement remeasurement gains (losses)	(149)		(79)		(56)		(91)
Amortization of purchased intangibles	(83)		(90)		(246)		(264)

Total costs and expenses	(14,518)		(14,118)		(44,437)		(39,183)

Loss from operations before income tax expense	(21)		(910)		(2,175)		(1,420)

Income tax benefit	17		236		475		374

Net loss	(4)		(674)		(1,700)		(1,046)

Less: Net income (loss) attributable to noncontrolling interest	1		(15)		(23)		(34)

Net loss attributable to Allstate	(5)		(659)		(1,677)		(1,012)

Preferred stock dividends	(36)		(26)		(99)		(79)

Net loss applicable to common shareholders	$	(41)	$	(685)	$	(1,776)	$	(1,091)

Segment highlights

Allstate Protection underwriting loss was $331 million in the third quarter of 2023 compared to underwriting loss of $1.17 billion in the third quarter of 2022 due to increased premiums earned and lower unfavorable non-catastrophe reserve reestimates, partially offset by higher losses. Underwriting loss totaled $3.42 billion in the first nine months of 2023 compared to underwriting loss of $1.75 billion in the first nine months of 2022 due to higher losses primarily for auto insurance, partially offset by increased premiums and lower unfavorable reserve reestimates.

We are executing a comprehensive plan to improve auto insurance profitability, by raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and enhancing claims processes to manage loss costs.

Catastrophe losses were $1.18 billion and $5.57 billion in the third quarter and first nine months of 2023, respectively, compared to $763 million and $2.33 billion in the third quarter and first nine months of 2022, respectively.

54 www.allstate.com

Premiums written increased 10.5% to $13.30 billion and 9.9% to $37.71 billion in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022, reflecting higher premiums in both Allstate and National General brands.

Protection Services adjusted net income was $27 million in the third quarter of 2023 compared to $35 million in the third quarter of 2022. Adjusted net income was $102 million in the first nine months of 2023 compared to $131 million in the first nine months of 2022. The decrease in both periods was due to Allstate Protection Plans higher appliance and furniture claim severity, lower margins at Allstate Dealer Services, lower third-party advertising sales at Arity and higher restructuring charges across multiple businesses, partially offset by improved margins at Allstate Roadside and lower expenses at Allstate Identity Protection.

Premiums and other revenue increased 9.5% or $56 million and 8.9% or $155 million in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022, primarily due to Allstate Protection Plans.

Allstate Health and Benefits adjusted net income was $69 million in the third quarter of 2023 compared to $63 million in the third quarter of 2022, primarily due to increases in group and individual health, partially offset by a decline in employer voluntary benefits. Adjusted net income was $182 million in the first nine months of 2023 compared to $187 million in the first nine months of 2022, primarily due to a decline in employer voluntary benefits, partially offset by increases in group and individual health.

Premiums and contract charges were $463 million in the third quarter of 2023 and comparable to the third quarter of 2022. Premiums and contract charges decreased 1.2% to $1.38 billion in the first nine months of 2023 compared to the same period of 2022, primarily due to a decline in individual health and employer voluntary benefits, partially offset by growth in group health.

Adopted accounting standard

Accounting for Long-Duration Insurance Contracts Effective January 1, 2023, we adopted the Financial Accounting Standards Board (”FASB”) guidance revising the accounting for certain long-duration insurance contracts using the modified retrospective approach to the transition date of January 1, 2021.

Under the new guidance, measurement assumptions, including those for mortality, morbidity and policy lapses, are required to be reviewed at least annually, and updated as appropriate. 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. Additionally, DAC for all long-duration products are amortized on a simplified basis. Our reserve for future policy benefits and DAC are subject to new disclosure guidance.


After-tax cumulative effect of change in accounting principle on transition date

($ in millions)	January 1, 2021

Decrease in retained income	$	21
Decrease in accumulated other comprehensive income (“AOCI”)	277
Total decrease in equity	$	298

See Note 1 of the condensed consolidated financial statements for further information regarding the impact of the adopted accounting standard on our condensed consolidated financial statements.

Third Quarter 2023 Form 10-Q 55

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, 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 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. Lender-placed policies are excluded from policy counts because relationships are with the lenders.

•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).

56 www.allstate.com

Property-Liability Operations

•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.

•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)	2023		2022		2023		2022
Premiums written	$	13,304	$	12,037	$	37,707	$	34,307
Premiums earned	$	12,270	$	11,157	$	35,826	$	32,529
Other revenue	393		364		1,135		1,066
Claims and claims expense	(10,077)		(9,934)		(31,832)		(26,867)
Amortization of DAC	(1,533)		(1,414)		(4,481)		(4,117)
Other costs and expenses	(1,333)		(1,390)		(3,861)		(4,285)
Restructuring and related charges (1)	(74)		(14)		(121)		(24)
Amortization of purchased intangibles	(60)		(61)		(175)		(178)
Underwriting (loss) income	$	(414)	$	(1,292)	$	(3,509)	$	(1,876)

Catastrophe losses
Catastrophe losses, excluding reserve reestimates	$	1,164	$	772	$	5,562	$	2,304
Catastrophe reserve reestimates (2)	17		(9)		6		29
Total catastrophe losses	$	1,181	$	763	$	5,568	$	2,333

Non-catastrophe reserve reestimates (2)	$	166	$	875	$	375	$	1,444
Prior year reserve reestimates (2)	183		866		381		1,473

GAAP operating ratios
Loss ratio	82.2		89.0		88.9		82.6
Expense ratio (3)	21.2		22.6		20.9		23.2
Combined ratio	103.4		111.6		109.8		105.8
Effect of catastrophe losses on combined ratio	9.6		6.8		15.5		7.2
Effect of prior year reserve reestimates on combined ratio	1.5		7.7		1.1		4.6
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio	0.1		(0.1)		—		0.1
Effect of restructuring and related charges on combined ratio (1)	0.6		0.1		0.3		0.1
Effect of amortization of purchased intangibles on combined ratio	0.5		0.6		0.5		0.5
Effect of Run-off Property-Liability business on combined ratio	0.7		1.1		0.3		0.4

(1)Restructuring and related charges for the third quarter of 2023 primarily relate to implementing actions to achieve the organizational transformation component of the Transformative Growth plan designed to streamline the organization and outsource operations. Restructuring and related charges for the first nine months of 2023 primarily relate to the organizational transformation and real estate costs related to facilities being vacated. See Note 13 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.

Third Quarter 2023 Form 10-Q 57

Segment Results Allstate Protection

Allstate Protection Segment


Underwriting results
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Premiums written	$	13,304	$	12,037	$	37,707	$	34,307
Premiums earned	$	12,270	$	11,157	$	35,826	$	32,529
Other revenue	393		364		1,135		1,066
Claims and claims expense	(9,995)		(9,814)		(31,747)		(26,743)
Amortization of DAC	(1,533)		(1,414)		(4,481)		(4,117)
Other costs and expenses	(1,332)		(1,388)		(3,858)		(4,282)
Restructuring and related charges	(74)		(14)		(121)		(24)
Amortization of purchased intangibles	(60)		(61)		(175)		(178)
Underwriting loss	$	(331)	$	(1,170)	$	(3,421)	$	(1,749)
Catastrophe losses	$	1,181	$	763	$	5,568	$	2,333

Underwriting loss improved to $331 million in the third quarter compared to underwriting loss of $1.17 billion in the third quarter of 2022 due to increased premiums earned and lower unfavorable non-catastrophe reserve reestimates, partially offset by higher losses. Underwriting loss was $3.42 billion in the first nine months of 2023 compared to underwriting loss of $1.75 billion in the first nine months of 2022 due to higher losses primarily for auto insurance, partially offset by increased premiums and lower unfavorable reserve reestimates. We are executing a comprehensive plan to improve auto insurance profitability, by raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and enhancing claims processes 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)

58 www.allstate.com

Allstate Protection Segment Results


Underwriting income (loss) by brand and by line of business
	Allstate brand				National General				Allstate Protection
($ in millions)	2023		2022		2023		2022		2023		2022
Three months ended September 30,
Auto	$	(75)	$	(1,222)	$	(103)	$	(93)	$	(178)	$	(1,315)
Homeowners (1)	(69)		268		(62)		(2)		(131)		266
Other personal lines	1		(3)		5		(7)		6		(10)
Commercial lines	(54)		(116)		(6)		(1)		(60)		(117)
Other business lines (1)	29		24		(1)		(21)		28		3
Answer Financial	—		—		—		—		4		3
Total	$	(168)	$	(1,049)	$	(167)	$	(124)	$	(331)	$	(1,170)

Nine months ended September 30,
Auto	$	(953)	$	(1,937)	$	(249)	$	(103)	$	(1,202)	$	(2,040)
Homeowners (1)	(1,772)		504		(200)		(30)		(1,972)		474
Other personal lines	(159)		20		6		(1)		(153)		19
Commercial lines	(178)		(280)		(3)		6		(181)		(274)
Other business lines (1)	75		70		3		(5)		78		65
Answer Financial	—		—		—		—		9		7
Total	$	(2,987)	$	(1,623)	$	(443)	$	(133)	$	(3,421)	$	(1,749)

(1)Other business lines represents commissions earned and other costs and expenses for Ivantage, non-proprietary life and annuity products, and lender-placed products and related services. In the first quarter of 2023, National General lender-placed products and related services results were reclassified from homeowners to other business lines. Historical results have been updated to conform with this presentation.

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 reporting 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)	2023		2022		2023		2022		2023		2022
Three months ended September 30,
Auto	$	7,206	$	6,704	$	1,564	$	1,156	$	8,770	$	7,860
Homeowners	3,118		2,803		407		342		3,525		3,145
Other personal lines	621		564		55		42		676		606
Commercial lines	75		233		65		52		140		285
Other business lines	—		—		193		141		193		141
Total premiums written	$	11,020	$	10,304	$	2,284	$	1,733	$	13,304	$	12,037

Nine months ended September 30,
Auto	$	20,853	$	19,386	$	4,535	$	3,506	$	25,388	$	22,892
Homeowners	8,265		7,488		1,175		946		9,440		8,434
Other personal lines	1,734		1,609		165		110		1,899		1,719
Commercial lines	398		718		169		158		567		876
Other business lines	—		—		413		386		413		386
Total premiums written	$	31,250	$	29,201	$	6,457	$	5,106	$	37,707	$	34,307

Third Quarter 2023 Form 10-Q 59

Segment Results Allstate Protection


Premiums earned by brand and by line of business
	Allstate brand				National General				Allstate Protection
($ in millions)	2023		2022		2023		2022		2023		2022
Three months ended September 30,
Auto	$	6,910	$	6,416	$	1,435	$	1,129	$	8,345	$	7,545
Homeowners	2,613		2,350		356		292		2,969		2,642
Other personal lines	554		505		54		35		608		540
Commercial lines	138		246		56		50		194		296
Other business lines	—		—		154		134		154		134
Total premiums earned	$	10,215	$	9,517	$	2,055	$	1,640	$	12,270	$	11,157

Nine months ended September 30,
Auto	$	20,342	$	18,742	$	4,032	$	3,232	$	24,374	$	21,974
Homeowners	7,638		6,841		1,024		857		8,662		7,698
Other personal lines	1,615		1,511		142		105		1,757		1,616
Commercial lines	474		722		154		152		628		874
Other business lines	—		—		405		367		405		367
Total premiums earned	$	30,069	$	27,816	$	5,757	$	4,713	$	35,826	$	32,529


Reconciliation of premiums written to premiums earned
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Total premiums written	$	13,304	$	12,037	$	37,707	$	34,307
(Increase) decrease in unearned premiums	(1,082)		(852)		(1,962)		(1,709)
Other	48		(28)		81		(69)
Total premiums earned	$	12,270	$	11,157	$	35,826	$	32,529


Policies in force by brand and by line of business
	Allstate brand		National General		Allstate Protection
PIF (thousands)	2023	2022	2023	2022	2023	2022
Auto	20,546	21,853	4,830	4,278	25,376	26,131
Homeowners	6,627	6,599	670	638	7,297	7,237
Other personal lines	4,555	4,637	329	293	4,884	4,930
Commercial lines	174	204	122	106	296	310

Total	31,902	33,293	5,951	5,315	37,853	38,608

Auto insurance premiums written increased 11.6% or $910 million in the third quarter of 2023 compared to the third quarter of 2022 and 10.9% or $2.50 billion in the first nine months of 2023 compared to the first nine months of 2022, primarily due to the following factors:

•Increased average premiums driven by rate increases primarily taken in 2022. Additionally, in the nine months ended September 30, 2023:

–Rate increases of 11.0% were taken for Allstate brand in 51 locations, resulting in total Allstate brand insurance premium impact of 9.5%

–Rate increases of 12.7% were taken for National General brand in 46 locations, resulting in total National General brand insurance premium impact of 8.8%

•We expect to continue to pursue rate increases for both Allstate and National General brands for the remainder of 2023 to improve auto insurance profitability

•PIF decreased 2.9% or 755 thousand to 25,376 thousand as of September 30, 2023 compared to September 30, 2022

•Renewal ratio decreased 2.1 and 1.9 points in the third quarter and the first nine months of 2023, respectively, compared to the third quarter and first nine months of 2022

•Decreased new issued applications driven by the direct and exclusive agency channels, partially offset by growth in the independent agency channel

•The impact of the ongoing rate increases, underwriting restrictions in markets with returns below target levels and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio, premiums and future PIF growth

60 www.allstate.com

Allstate Protection Segment Results


Auto premium measures and statistics
	Three months ended September 30,						Nine months ended September 30,
	2023		2022		Change		2023		2022		Change




New issued applications (thousands)
Allstate Protection by brand
Allstate brand	751		933		(19.5)	%	2,226		2,856		(22.1)	%
National General	754		648		16.4	%	2,291		2,038		12.4	%
Total new issued applications	1,505		1,581		(4.8)	%	4,517		4,894		(7.7)	%

Allstate Protection by channel
Exclusive agency channel	582		624		(6.7)	%	1,745		1,842		(5.3)	%
Direct channel	398		535		(25.6)	%	1,276		1,737		(26.5)	%
Independent agency channel	525		422		24.4	%	1,496		1,315		13.8	%
Total new issued applications	1,505		1,581		(4.8)	%	4,517		4,894		(7.7)	%





Allstate brand average premium	$	772	$	667	15.7	%	$	745	$	646	15.3	%
Allstate brand renewal ratio (%)	84.9		87.0		(2.1)		85.4		87.3		(1.9)

Homeowners insurance premiums written increased 12.1% or $380 million in the third quarter of 2023 compared to the third quarter of 2022 and increased 11.9% or $1.01 billion in the first nine months of 2023 compared to the first nine months of 2022, primarily due to the following factors:

•Higher Allstate brand average premiums from implemented rate increases primarily taken in 2022 and inflation in insured home replacement costs, combined with policies in force growth

•In the nine months ended September 30, 2023, rate increases of 14.4% were taken for Allstate brand in 39 locations, resulting in total Allstate brand insurance premium impact of 9.5%

•National General policy growth may be negatively impacted in future quarters as we improve underwriting margins to targeted levels in current books of business through underwriting and rate actions. In the nine months ended September 30,

2023, rate increases of 19.5% were taken for National General brand in 22 locations, resulting in total National General brand insurance premium impact of 6.5%

•Decreased new issued applications in the direct and exclusive agency channels, partially offset by growth in the independent agency channel

•Policy growth is being reduced in states and lines of business that are underperforming. We are no longer writing new homeowners business in California and Florida, and we may take further actions to reduce our exposure, which have and will continue to negatively impact premiums

•The impact of the ongoing rate increases and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio, premiums and future PIF growth


Homeowners premium measures and statistics
	Three months ended September 30,						Nine months ended September 30,
	2023		2022		Change		2023		2022		Change
New issued applications (thousands)
Allstate Protection by brand
Allstate brand	248		267		(7.1)	%	712		765		(6.9)	%
National General	54		41		31.7	%	135		108		25.0	%
Total new issued applications	302		308		(1.9)	%	847		873		(3.0)	%

Allstate Protection by channel
Exclusive agency channel	211		219		(3.7)	%	609		642		(5.1)	%
Direct channel	22		24		(8.3)	%	60		74		(18.9)	%
Independent agency channel	69		65		6.2	%	178		157		13.4	%
Total new issued applications	302		308		(1.9)	%	847		873		(3.0)	%





Allstate brand average premium	$	1,851	$	1,635	13.2	%	$	1,792	$	1,596	12.3	%
Allstate brand renewal ratio (%)	86.8		87.4		(0.6)		86.5		86.9		(0.4)

Other personal lines premiums written increased 11.6% or $70 million in the third quarter of 2023 compared to the third quarter of 2022 and increased 10.5% or $180 million in the first nine months of 2023 compared to the first nine months of 2022, primarily

due to increases in landlords and condominiums for Allstate brand. We are no longer writing condominium new business in California and Florida, we are non-renewing certain policies in Florida, and we are taking

Third Quarter 2023 Form 10-Q 61

Segment Results Allstate Protection

further actions to reduce exposure in Florida, which will continue to negatively impact premiums.

Commercial lines premiums written decreased 50.9% or $145 million in the third quarter of 2023 compared to the third quarter of 2022 and decreased 35.3% or $309 million in the first nine months of 2023 compared to the first nine months of 2022, due to profitability actions taken to no longer offer coverage to transportation network companies unless the contracts utilize telematics-based pricing and the Allstate brand exiting traditional commercial insurance in five states, including non-renewals in 2023.

Other business lines premiums written increased 36.9% or $52 million in the third quarter of 2023 compared to the third quarter of 2022 and increased 7.0% or $27 million in the first nine months of 2023 compared to the first nine months of 2022.

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
	2023	2022	2023	2022	2023	2022
Three months ended September 30,
Auto	81.4	95.3	20.7	22.1	102.1	117.4
Homeowners	82.4	67.4	22.0	22.5	104.4	89.9
Other personal lines	78.6	76.1	20.4	25.8	99.0	101.9
Commercial lines	102.0	120.6	28.9	18.9	130.9	139.5
Other business lines	49.3	56.7	32.5	41.1	81.8	97.8

Total	81.5	88.0	21.2	22.5	102.7	110.5
Impact of amortization of purchased intangibles			0.5	0.6	0.5	0.6
Impact of restructuring and related charges			0.6	0.1	0.6	0.1

Nine months ended September 30,
Auto	84.2	86.1	20.7	23.2	104.9	109.3
Homeowners	101.8	71.3	21.0	22.5	122.8	93.8
Other personal lines	88.4	74.4	20.3	24.4	108.7	98.8
Commercial lines	103.2	112.0	25.6	19.4	128.8	131.4
Other business lines	48.1	41.7	32.6	40.6	80.7	82.3

Total	88.6	82.2	20.9	23.2	109.5	105.4
Impact of amortization of purchased intangibles			0.5	0.5	0.5	0.5
Impact of restructuring and related charges			0.3	0.1	0.3	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
	2023	2022	2023	2022	2023	2022	2023	2022
Three months ended September 30,
Auto	81.4	95.3	2.6	4.4	0.4	8.4	0.1	(0.1)
Homeowners	82.4	67.4	29.6	13.4	2.1	2.0	0.6	0.1
Other personal lines	78.6	76.1	9.7	5.7	(2.3)	(0.9)	(1.8)	(0.6)
Commercial lines	102.0	120.6	5.2	3.4	9.8	21.6	3.1	0.4
Other business lines	49.3	56.7	13.0	27.6	0.7	1.5	—	0.7
Total	81.5	88.0	9.6	6.8	0.8	6.7	0.1	(0.1)

Nine months ended September 30,
Auto	84.2	86.1	2.7	2.2	0.4	4.6	(0.1)	(0.3)
Homeowners	101.8	71.3	52.1	21.4	1.6	2.3	0.7	1.0
Other personal lines	88.4	74.4	19.1	8.4	(0.5)	(0.9)	(1.3)	0.2
Commercial lines	103.2	112.0	4.3	2.1	8.1	20.0	1.4	0.1
Other business lines	48.1	41.7	9.4	12.8	2.9	(1.1)	—	1.3
Total	88.6	82.2	15.5	7.2	0.8	4.2	—	0.1

(1)The ten-year average effect of catastrophe losses on the total combined ratio was 8.3 points in the third quarter of 2023.

62 www.allstate.com

Allstate Protection Segment Results


Auto underwriting results
	For the periods ended
	2023			2022				2021
($ in millions, except ratios)	Q3	Q2	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Underwriting income (loss)	(178)	(678)	(346)	(974)	(1,315)	(578)	(147)	(300)	(159)	394	1,327
Loss ratio	81.4	87.9	83.4	90.6	95.3	84.9	77.6	78.9	76.9	68.7	57.2
Effect of prior year non-catastrophe reserve reestimates on combined ratio	0.3	1.4	(0.1)	2.3	8.5	3.8	2.1	2.1	1.1	(0.4)	(0.2)

Frequency and severity are influenced by:

•Supply chain disruptions and labor shortages

•Value of total losses due to higher used car prices

•Labor and part cost increases

•Changes in commuting activity

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

•Organizational and process changes impacting claim opening and closing practices and shifts in timing, if any, can impact comparisons to prior periods

The quarterly auto loss ratio has been more variable due to these and additional factors discussed below.

Auto loss ratio decreased 13.9 and 1.9 points in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022. Estimated report year 2023 incurred claim severity for Allstate brand, excluding Esurance and Canada, had a weighted average increase of 9% compared to report year 2022 for major coverages due to higher part costs and labor rates for repairable vehicles, a higher mix of total losses, an increase in claims with attorney representation, higher medical consumption, and inflation. Gross claim frequency increased relative to the prior year. We are enhancing our claims practices to manage loss costs by increasing resources and expanding re-inspections, accelerating resolution of bodily injury claims, and negotiating improved vendor services and parts agreements.

Homeowners loss ratio increased 15.0 and 30.5 points in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022, primarily due to higher catastrophe losses and severity, partially offset by increased premiums earned.


Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses)
(% change year-over-year)
Three months ended September 30, 2023
Gross claim frequency	(4.3)	%
Paid claim severity	16.0

Nine months ended September 30, 2023
Gross claim frequency	(3.0)	%
Paid claim severity	12.9

Gross claim frequency decreased in the third quarter and in the first nine months of 2023 compared to the same periods of 2022 due to water and fire

perils. Paid claim severity increased in the third quarter and first nine months of 2023 compared to the same periods of 2022 due to inflationary loss cost pressure driven by increases in labor and materials costs. 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 2.5 points in the third quarter of 2023 compared to the third quarter of 2022, primarily due to increased severity and higher catastrophe losses, partially offset by increased premiums earned. Other personal lines loss ratio increased 14.0 points in the first nine months of 2023 compared to the first nine months of 2022, primarily due to higher catastrophe losses and increased severity, partially offset by increased premiums earned.

Commercial lines loss ratio decreased 18.6 and 8.8 points in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022, primarily due to the result of profitability actions taken and less unfavorable reserve reestimates, partially offset by continued elevated frequency and severity.

Other business lines loss ratio decreased 7.4 points in the third quarter of 2023 compared to the third quarter of 2022, primarily due to increased premiums earned. Other business lines loss ratio increased 6.4 points in the first nine months of 2023 compared to the first nine months of 2022, primarily due to higher non-catastrophe losses and unfavorable prior year reserve reestimates.

Catastrophe losses increased $418 million to $1.18 billion in the third quarter of 2023 compared to the third quarter of 2022 and increased $3.24 billion to $5.57 billion in the first nine months of 2023 compared to the first nine months of 2022 primarily related to an increased number of wind/hail events and larger losses per event. The catastrophe losses for the first nine months of 2023 represent the highest level for the period in the Company’s history.

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.

Third Quarter 2023 Form 10-Q 63

Segment Results Allstate Protection

We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest, wildfires 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 limited our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes 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	2023		Number of events	2022		Number of events	2023		Number of events	2022
Hurricanes/tropical storms	3	$	76	1	$	378	3	$	76	1	$	378
Tornadoes	—	—		—	—		3	133		3	148
Wind/hail	48	997		32	446		111	5,009		78	1,712
Wildfires	2	305		4	19		4	340		8	50
Freeze/other events	—	—		—	—		2	4		1	16
Prior year reserve reestimates		17			(4)			6			44
Prior year aggregate reinsurance recoveries		—			(5)			—			(15)

Prior quarter reserve reestimates		(214)			(71)			—			—
Total catastrophe losses	53	$	1,181	37	$	763	123	$	5,568	91	$	2,333

Catastrophe reinsurance Our current catastrophe reinsurance program supports the Company’s risk framework which is intended to provide our shareholders with an acceptable return on the risks assumed in our property business, and to reduce variability of earnings, while providing protection to our customers. This framework incorporates our robust economic capital model and is informed by catastrophe risk models including hurricanes, earthquakes and wildfires and adjusts based on premium and insured value growth. Our reinsurance agreements are part of our capital models and our catastrophe management strategy. As of September 30, 2023, our risk framework supports an aggregate catastrophe loss of approximately $2.5 billion, net of reinsurance. We continually review our aggregate risk appetite and the cost and availability of reinsurance to optimize the risk and return profile of this exposure.

The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the third quarter and first nine months of 2023 was $268 million and $729 million, respectively, compared to $211 million and $528 million in the third quarter and first nine months of 2022, respectively. Catastrophe placement premiums reduce net written and earned premium with approximately 75% of the reduction related to homeowners premium.

Prior year reserve reestimates Unfavorable reserve reestimates, including catastrophes, were $101 million and $296 million in the third quarter and the first nine months of 2023, respectively, primarily due to National General personal auto lines and unfavorable reserve reestimates in homeowners lines.

For a more detailed discussion on reinsurance and reserve reestimates, see Note 8 of the condensed consolidated financial statements.

64 www.allstate.com

Allstate Protection Segment Results


Prior year reserve reestimates
	Three months ended September 30,						Nine months ended September 30,
	Prior year reserve reestimates (1)				Effect on combined ratio (2)		Prior year reserve reestimates (1)				Effect on combined ratio (2)
($ in millions, except ratios)	2023		2022		2023	2022	2023		2022		2023	2022
Auto	$	33	$	632	0.3	5.6	$	105	$	1,011	0.3	3.1
Homeowners	62		53		0.5	0.5	136		181		0.4	0.6
Other personal lines	(14)		(5)		(0.1)	—	(8)		(14)		—	—
Commercial lines	19		64		0.1	0.6	51		175		0.1	0.5
Other business lines	1		2		—	—	12		(4)		—	—
Total Allstate Protection	$	101	$	746	0.8	6.7	$	296	$	1,349	0.8	4.2

Allstate brand	$	7	$	702	—	6.3	$	(11)	$	1,292	—	4.0
National General	94		44		0.8	0.4	307		57		0.8	0.2
Total Allstate Protection	$	101	$	746	0.8	6.7	$	296	$	1,349	0.8	4.2

(1)Favorable reserve reestimates are shown in parentheses.

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

Expense ratio decreased 1.3 and 2.3 points in the third quarter and the first nine months of 2023, respectively, compared to the third quarter and the first nine months of 2022, primarily due to higher earned premium growth relative to fixed costs, and lower advertising, agent and employee-related costs, partially offset by higher restructuring 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)	2023		2022		Change		2023		2022		Change
Amortization of DAC	$	1,533	$	1,414	$	119	$	4,481	$	4,117	$	364
Advertising expense	175		191		(16)		446		787		(341)
Amortization of purchased intangibles	60		61		(1)		175		178		(3)
Other costs and expenses, net of other revenue	764		833		(69)		2,277		2,429		(152)
Restructuring and related charges	74		14		60		121		24		97
Total underwriting expenses	$	2,606	$	2,513	$	93	$	7,500	$	7,535	$	(35)

Premiums earned	$	12,270	$	11,157	$	1,113	$	35,826	$	32,529	$	3,297

Expense ratio
Amortization of DAC	12.5		12.7		(0.2)		12.5		12.7		(0.2)
Advertising expense	1.4		1.7		(0.3)		1.2		2.4		(1.2)
Other costs and expenses	6.2		7.4		(1.2)		6.4		7.5		(1.1)
Subtotal	20.1		21.8		(1.7)		20.1		22.6		(2.5)
Amortization of purchased intangibles	0.5		0.6		(0.1)		0.5		0.5		—
Restructuring and related charges	0.6		0.1		0.5		0.3		0.1		0.2
Total expense ratio	21.2		22.5		(1.3)		20.9		23.2		(2.3)

Third Quarter 2023 Form 10-Q 65

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,
	2023		2022		2023		2022



Claims and claims expense
Asbestos claims	$	(44)	$	(34)	$	(44)	$	(34)
Environmental claims	(18)		(56)		(18)		(56)
Other run-off lines	(20)		(30)		(23)		(34)
Total claims and claims expense	(82)		(120)		(85)		(124)

Operating costs and expenses	(1)		(2)		(3)		(3)
Underwriting loss	$	(83)	$	(122)	$	(88)	$	(127)

Annual reserve review In the third quarter of 2023 and 2022, we performed our annual reserve review using established industry and actuarial best practices. The annual review resulted in unfavorable reserve reestimates totaling $80 million and $118 million in 2023 and 2022, respectively. The reserve reestimates are included as part of claims and claims expense.

The reserve reestimates in 2023 primarily related to new reported information and defense costs for asbestos and other run-off exposures and higher than expected environmental reported losses.

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.

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, 2023		December 31, 2022
Asbestos claims
Gross reserves	$	1,204	$	1,190
Reinsurance	(378)		(379)
Net reserves	826		811
Environmental claims
Gross reserves	338		328
Reinsurance	(66)		(61)
Net reserves	272		267
Other run-off claims
Gross reserves	451		437
Reinsurance	(72)		(64)
Net reserves	379		373
Total
Gross reserves	1,993		1,955
Reinsurance	(516)		(504)
Net reserves	$	1,477	$	1,451

66 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, 2023		December 31, 2022
Direct excess commercial insurance
Gross reserves	$	1,141	$	1,106
Reinsurance	(395)		(385)
Net reserves	746		721
Assumed reinsurance coverage
Gross reserves	622		618
Reinsurance	(58)		(56)
Net reserves	564		562
Direct primary commercial insurance
Gross reserves	144		148
Reinsurance	(62)		(62)
Net reserves	82		86
Other run-off business
Gross reserves	1		1
Reinsurance	—		—
Net reserves	1		1
Unallocated loss adjustment expenses
Gross reserves	85		82
Reinsurance	(1)		(1)
Net reserves	84		81
Total
Gross reserves	1,993		1,955
Reinsurance	(516)		(504)
Net reserves	$	1,477	$	1,451


Percentage of gross and ceded reserves by case and IBNR
	September 30, 2023				December 31, 2022
	Case		IBNR		Case		IBNR
Direct excess commercial insurance
Gross reserves (1)	59	%	41	%	58	%	42	%
Ceded (2)	64		36		63		37
Assumed reinsurance coverage
Gross reserves	33		67		31		69
Ceded	48		52		33		67
Direct primary commercial insurance
Gross reserves	59		41		57		43
Ceded	81		19		81		19

(1)Approximately 68% and 64% of gross case reserves as of September 30, 2023 and December 31, 2022, respectively, are subject to settlement agreements.

(2)Approximately 72% and 70% of ceded case reserves as of September 30, 2023 and December 31, 2022, respectively, are subject to settlement agreements.

Third Quarter 2023 Form 10-Q 67

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,
	2023		2022		2023		2022
Direct excess commercial insurance
Gross (1)	$	13	$	9	$	45	$	37
Ceded (2)	(7)		(3)		(16)		(13)
Assumed reinsurance coverage
Gross	6		14		25		25
Ceded	—		—		(3)		(1)
Direct primary commercial insurance
Gross	1		1		3		4
Ceded	—		—		—		(1)

(1) In the third quarter and first nine months of 2023, 82% and 84% of payments related to settlement agreements, respectively, compared to 75% and 82% of the third quarter and first nine months of 2022, respectively.

(2) In the third quarter and first nine months of 2023, 56% and 77% of payments related to settlement agreements, respectively, compared to 88% and 90% of the third quarter and first nine months of 2022, respectively.

Total net reserves as of September 30, 2023, included $766 million or 52% of estimated IBNR reserves compared to $765 million or 53% of estimated IBNR reserves as of December 31, 2022.

Total gross payments were $20 million and $73 million for the third quarter and first nine months of 2023, respectively, compared to $25 million and $66 million for the third quarter and first nine months of 2022, respectively. Payments primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos related losses, 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 $30 million for the third quarter and first nine months of 2023, respectively, compared to $6 million and $27 million for the third quarter and first nine months of 2022, respectively.

68 www.allstate.com

Protection Services Segment Results

Protection Services Segment ProtectionServicesLogos - Updated 1.6.23.jpg


Summarized financial information
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Premiums written	$	658	$	657	$	1,935	$	1,957

Revenues
Premiums	$	569	$	504	$	1,656	$	1,475
Other revenue	75		84		243		269
Intersegment insurance premiums and service fees (1)	34		39		102		118
Net investment income	19		13		53		34

Costs and expenses
Claims and claims expense	(166)		(141)		(472)		(392)
Amortization of DAC	(269)		(236)		(779)		(685)
Operating costs and expenses	(225)		(214)		(664)		(645)
Restructuring and related charges	(3)		(1)		(4)		(1)

Income tax expense on operations	(8)		(13)		(34)		(41)

Less: noncontrolling interest	(1)		—		(1)		1

Adjusted net income	$	27	$	35	$	102	$	131

Allstate Protection Plans	$	20	$	29	$	79	$	108
Allstate Dealer Services	5		10		18		27
Allstate Roadside	7		1		17		4
Arity	(6)		(2)		(13)		(4)
Allstate Identity Protection	1		(3)		1		(4)
Adjusted net income	$	27	$	35	$	102	$	131

Allstate Protection Plans					140,648		134,700
Allstate Dealer Services					3,813		3,888
Allstate Roadside					554		523
Allstate Identity Protection					2,965		2,968
Policies in force as of September 30 (in thousands)					147,980		142,079

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

Adjusted net income decreased 22.9% or $8 million in the third quarter of 2023 and decreased 22.1% or $29 million in the first nine months of 2023 compared to the same periods of 2022, due to Allstate Protection Plans higher appliance and furniture claim severity, lower margins at Allstate Dealer Services, lower third-party advertising sales at Arity and higher restructuring charges across multiple businesses, partially offset by improved margins at Allstate Roadside and lower expenses at Allstate Identity Protection.

Premiums written increased 0.2% or $1 million in the third quarter of 2023 compared to the third quarter of 2022, primarily due to growth at Allstate Protection Plans, partially offset by a decrease at Allstate Dealer Services. Premiums written decreased 1.1% or $22 million in the first nine months of 2023 compared to the same period of 2022, primarily due to a decrease at Allstate Dealer Services and lower rescue volumes at Allstate Roadside, partially offset by growth at Allstate Protection Plans.

PIF increased 4.2% or 6 million as of September 30, 2023 compared to September 30, 2022 due to an increase at Allstate Protection Plans.

Other revenue decreased 10.7% or $9 million in the third quarter of 2023 and decreased 9.7% or $26 million in the first nine months of 2023 compared to the same periods of 2022, primarily due to lower revenue from reductions in customer advertising at Arity.

Intersegment premiums and service fees decreased 12.8% or $5 million in the third quarter of 2023 and decreased 13.6% or $16 million in the first nine months of 2023 compared to the same periods of 2022, driven by decreased device sales for the Drivewise® offering at Arity due to a shift from devices to a lower cost mobile phone program.

Third Quarter 2023 Form 10-Q 69

Segment Results Protection Services

Claims and claims expense increased 17.7% or $25 million in the third quarter 2023 and increased 20.4% or $80 million in the first nine months of 2023 compared to the same periods of 2022, primarily driven by growth in the business and higher severity at both Allstate Protection Plans and Allstate Dealer Services, partially offset by lower frequency at Allstate Protection Plans.

Amortization of DAC increased 14.0% or $33 million in the third quarter of 2023 and increased 13.7% or $94 million in the first nine months of 2023 compared to the same periods of 2022, driven by revenue growth at both Allstate Protection Plans and Allstate Dealer Services.

Operating costs and expenses increased 5.1% or $11 million in the third quarter of 2023 and increased 2.9% or $19 million in the first nine months of 2023 compared to the same periods of 2022, primarily due to growth at Allstate Protection Plans, partially offset by lower expenses at Arity.

70 www.allstate.com

Allstate Health and Benefits Segment Results

Allstate Health and Benefits Segment

Effective January 1, 2023, we adopted the FASB guidance revising the accounting for certain long-duration insurance contracts in the Allstate Health and Benefits segment using the modified retrospective approach at the transition date of January 1, 2021. See Note 1 of the condensed consolidated financial statements for further information regarding the impact of the adopted accounting standard on our condensed consolidated financial statements.


Summarized financial information
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Revenues
Accident and health insurance premiums and contract charges	$	463	$	463	$	1,379	$	1,396
Other revenue	104		90		306		277
Net investment income	20		17		60		50

Costs and expenses
Accident, health and other policy benefits	(262)		(252)		(785)		(785)
Amortization of DAC	(39)		(33)		(114)		(107)
Operating costs and expenses	(197)		(207)		(610)		(594)
Restructuring and related charges	(2)		1		(6)		(1)

Income tax expense on operations	(18)		(16)		(48)		(49)
Adjusted net income	$	69	$	63	$	182	$	187

Benefit ratio (1)	54.9		52.7		55.1		54.4

Employer voluntary benefits (2)					3,710		3,799
Group health (3)					134		116
Individual health (4)					412		405
Policies in force as of September 30 (in thousands)					4,256		4,320

(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, 2023 and 2022, and $25 million for both the nine months ended September 30, 2023 and 2022, 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 $6 million in the third quarter of 2023 compared to the third quarter of 2022 primarily due to increases in group and individual health, partially offset by a decline in employer voluntary benefits. Adjusted net income decreased $5 million in the first nine months of 2023 compared to the first nine months of 2022, primarily due to a decline in employer voluntary benefits, partially offset by increases in group and individual health.

Premiums and contract charges in the third quarter of 2023 were comparable to the third quarter of 2022. Premiums and contract charges decreased 1.2% or $17 million in the first nine months of 2023 compared to the first nine months of 2022, primarily due to a decline in individual health and employer voluntary benefits, partially offset by growth in group health.


Premiums and contract charges by line of business
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Employer voluntary benefits	$	253	$	257	$	753	$	777
Group health	111		96		328		285
Individual health	99		110		298		334
Premiums and contract charges	$	463	$	463	$	1,379	$	1,396

Other revenue increased $14 million in the third quarter of 2023 and increased $29 million in the first nine months of 2023 compared to the same periods of 2022, primarily due to an increase in group health administrative fees.

Accident, health and other policy benefits increased 4.0% or $10 million in the third quarter of 2023 compared to the third quarter of 2022, primarily due to higher benefit utilization and growth in group health, partially offset by decreased contract benefits for individual health and employer voluntary benefits. Accident, health and other policy benefits in the first

Third Quarter 2023 Form 10-Q 71

Segment Results Allstate Health and Benefits

nine months of 2023 were comparable to the first nine months of 2022.

Accident, health and other policy benefits include changes in the reserve for future policy benefits, expected development on reported claims, and reserves for incurred but not reported claims as shown in Note 9.

Benefit ratio increased 2.2 points to 54.9 in the third quarter of 2023 compared to 52.7 in the third quarter of 2022 primarily due to higher benefit

utilization in group health. Benefit ratio increased 0.7 points to 55.1 in the first nine months of 2023 compared to 54.4 in the same period of 2022.

Amortization of DAC increased 18.2% or $6 million in the third quarter of 2023 and increased 6.5% or $7 million in the first nine months of 2023 compared to the same periods of 2022 primarily due to accelerated amortization related to large account terminations, partially offset by a reduction in policy benefits.


Operating costs and expenses
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Non-deferrable commissions	$	66	$	77	$	223	$	230
General and administrative expenses	131		130		387		364
Total operating costs and expenses	$	197	$	207	$	610	$	594

Operating costs and expenses decreased $10 million in the third quarter of 2023 compared to the third quarter of 2022, primarily due to lower non-deferrable commissions. Operating costs and expenses increased $16 million in the first nine months of 2023 compared to the first nine months of 2022, primarily due to growth in group health and investments in the business.

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Portfolio composition and strategy by reporting segment (1)
	September 30, 2023
($ in millions)	Property-Liability			Protection Services			Allstate Health and Benefits			Corporate and Other			Total
Fixed income securities (2)	$	41,598		$	1,779		$	1,550		$	1,844		$	46,771
Equity securities (3)	1,613			198			44			564			2,419
Mortgage loans, net	703			—			127			—			830
Limited partnership interests	8,349			—			—			14			8,363
Short-term investments (4)	2,787			132			75			374			3,368
Other investments, net	1,486			—			122			—			1,608
Total	$	56,536		$	2,109		$	1,918		$	2,796		$	63,359
Percent to total	89.3		%	3.3		%	3.0		%	4.4		%	100.0		%

Market-based	$	47,022		$	2,109		$	1,918		$	2,796		$	53,845
Performance-based	9,514			—			—			—			9,514
Total	$	56,536		$	2,109		$	1,918		$	2,796		$	63,359

(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 $44.40 billion, $1.92 billion, $1.75 billion, $1.91 billion and $49.98 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, 2023, was $26 million in excess of cost. These net gains were primarily concentrated in the technology and banking. Equity securities include $1.28 billion of funds with underlying investments in fixed income securities as of September 30, 2023.

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

Investments totaled $63.36 billion as of September 30, 2023, increasing from $61.83 billion as of December 31, 2022, primarily due to positive operating cash flows, partially offset by dividends paid to shareholders and common share repurchases and lower fixed income valuations.

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 provide flexibility to adjust investment risk profile based on enterprise objectives and market 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 with a majority being limited partnerships. These investments include investee level expenses, reflecting asset level operating expenses on directly held real estate and other consolidated investments.

Investments in the Middle East As of September 30, 2023, we have approximately $47 million investment exposure in the Middle East, of which approximately $42 million is held in Israel, which is primarily indirect exposure through foreign funds managed by external asset managers.

Third Quarter 2023 Form 10-Q 73

Investments


Portfolio composition by investment strategy
	September 30, 2023
($ in millions)	Market- based			Performance-based			Total
Fixed income securities	$	46,675		$	96		$	46,771
Equity securities	1,986			433			2,419
Mortgage loans, net	830			—			830
Limited partnership interests	168			8,195			8,363
Short-term investments	3,368			—			3,368
Other investments, net	818			790			1,608
Total	$	53,845		$	9,514		$	63,359
Percent to total	85.0		%	15.0		%	100.0		%

Unrealized net capital gains and losses
Fixed income securities	$	(3,206)		$	(2)		$	(3,208)
Limited partnership interests	—			(1)			(1)
Short-term investments	(1)			—			(1)
Other	(2)			—			(2)
Total	$	(3,209)		$	(3)		$	(3,212)

Fixed income securities


Fixed income securities by type
	Fair value as of
($ in millions)	September 30, 2023		December 31, 2022
U.S. government and agencies	$	8,245	$	7,898
Municipal	6,584		6,210
Corporate	29,706		26,263
Foreign government	1,135		957
Asset-backed securities (“ABS”)	1,101		1,157
Total fixed income securities	$	46,771	$	42,485

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, 2023, 91.4% 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 4 of the condensed consolidated financial statements.

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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, 2023
	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	$	8,245	$	(384)	$	—	$	—	$	—	$	—
Municipal	6,486		(451)		89		(11)		7		1
Corporate
Public	6,665		(398)		14,559		(1,183)		723		(74)
Privately placed	1,846		(115)		2,684		(209)		1,682		(155)
Total corporate	8,511		(513)		17,243		(1,392)		2,405		(229)
Foreign government	1,134		(61)		1		—		—		—
ABS	1,028		(9)		14		—		10		(1)
Total fixed income securities	$	25,404	$	(1,418)	$	17,347	$	(1,403)	$	2,422	$	(229)

	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	$	—	$	—	$	—	$	—	$	8,245	$	(384)
Municipal	—		—		2		1		6,584		(460)
Corporate
Public	112		(7)		—		—		22,059		(1,662)
Privately placed	1,286		(131)		149		(29)		7,647		(639)
Total corporate	1,398		(138)		149		(29)		29,706		(2,301)
Foreign government	—		—		—		—		1,135		(61)
ABS	—		—		49		8		1,101		(2)
Total fixed income securities	$	1,398	$	(138)	$	200	$	(20)	$	46,771	$	(3,208)

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-backed securities.

Equity securities of $2.42 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 $830 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 4 of the condensed consolidated financial statements.

Limited partnership interests include $7.09 billion of interests in private equity funds, $1.10 billion of interests in real estate funds and $168 million of interests in other funds as of September 30, 2023. We have commitments to invest additional amounts in limited partnership interests totaling $2.71 billion as of September 30, 2023.

Other investments include $679 million of bank loans, net, and $700 million of direct investments in real estate as of September 30, 2023.

Third Quarter 2023 Form 10-Q 75

Investments


Unrealized net capital gains (losses)
	September 30,		December 31,
($ in millions)	2023		2022
U.S. government and agencies	$	(384)	$	(225)
Municipal	(460)		(290)
Corporate	(2,301)		(2,299)
Foreign government	(61)		(40)
ABS	(2)		(31)
Fixed income securities	(3,208)		(2,885)
Short-term investments	(1)		(1)
Derivatives	(2)		(3)
Equity method of accounting (“EMA”) limited partnerships	(1)		2
Unrealized net capital gains and losses, pre-tax	$	(3,212)	$	(2,887)


Gross unrealized gains (losses) on fixed income securities by type and sector
($ in millions)	Amortized cost, net		Gross unrealized				Fair value
			Gains		Losses
September 30, 2023
Corporate
Banking (1)	$	4,228	$	1	$	(242)	$	3,987
Basic industry	1,015		2		(74)		943
Capital goods	2,626		1		(187)		2,440
Communications	2,773		—		(262)		2,511
Consumer goods (cyclical and non-cyclical)	6,909		2		(517)		6,394
Financial services	2,237		—		(167)		2,070
Energy	2,742		2		(155)		2,589





Technology	2,957		4		(270)		2,691
Transportation	1,033		1		(73)		961
Utilities	5,098		3		(318)		4,783
Other	389		—		(52)		337
Total corporate fixed income portfolio	32,007		16		(2,317)		29,706
U.S. government and agencies	8,629		1		(385)		8,245
Municipal	7,044		3		(463)		6,584
Foreign government	1,196		—		(61)		1,135
ABS	1,103		9		(11)		1,101
Total fixed income securities	$	49,979	$	29	$	(3,237)	$	46,771






December 31, 2022
Corporate
Banking	$	5,153	$	16	$	(314)	$	4,855
Basic industry	1,019		2		(75)		946
Capital goods	2,288		3		(197)		2,094
Communications	2,422		1		(261)		2,162
Consumer goods (cyclical and non-cyclical)	5,984		6		(531)		5,459
Financial services	2,243		4		(176)		2,071
Energy	2,364		2		(156)		2,210





Technology	3,137		4		(298)		2,843
Transportation	959		1		(73)		887
Utilities	2,633		7		(203)		2,437
Other	360		—		(61)		299
Total corporate fixed income portfolio	28,562		46		(2,345)		26,263
U.S. government and agencies	8,123		6		(231)		7,898
Municipal	6,500		36		(326)		6,210
Foreign government	997		—		(40)		957
ABS	1,188		4		(35)		1,157
Total fixed income securities	$	45,370	$	92	$	(2,977)	$	42,485

(1)As of September 30, 2023, we have exposure of approximately $85 million to regional banks primarily through investment grade corporate bonds.

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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.


Equity securities by sector
	September 30, 2023						December 31, 2022
($ in millions)	Cost		Over (under) cost		Fair value		Cost		Over (under) cost		Fair value

Banking	$	33	$	35	$	68	$	135	$	56	$	191
Basic Industry	11		1		12		57		16		73
Capital Goods	78		(31)		47		196		3		199
Energy	38		3		41		110		44		154





Funds
Equities	230		(6)		224		904		(19)		885
Fixed income	1,364		(83)		1,281		1,067		(84)		983
Other	19		—		19		3		—		3
Total funds	1,613		(89)		1,524		1,974		(103)		1,871
Utilities	56		—		56		67		12		79
Transportation	18		19		37		48		19		67
Other (1)	546		88		634		1,666		267		1,933
Total equity securities	$	2,393	$	26	$	2,419	$	4,253	$	314	$	4,567

(1)As of September 30, 2023, other is generally comprised of consumer goods, technology, REITs, financial services and communications sectors.


Net investment income
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Fixed income securities	$	457	$	323	$	1,269	$	889
Equity securities	15		30		47		100
Mortgage loans	9		8		25		25
Limited partnership interests	190		325		446		841
Short-term investments	59		30		194		42
Other investments	41		38		121		120
Investment income, before expense	771		754		2,102		2,017
Investment expense
Investee level expenses	(18)		(17)		(53)		(47)
Securities lending expense	(25)		(10)		(68)		(13)
Operating costs and expenses	(39)		(37)		(107)		(111)
Total investment expense	(82)		(64)		(228)		(171)
Net investment income	$	689	$	690	$	1,874	$	1,846

Property-Liability	$	627	$	632	$	1,680	$	1,696
Protection Services	19		13		53		34
Allstate Health and Benefits	20		17		60		50
Corporate and Other	23		28		81		66
Net investment income	$	689	$	690	$	1,874	$	1,846

Market-based	$	569	$	406	$	1,615	$	1,100
Performance-based	202		348		487		917
Investment income, before expense	$	771	$	754	$	2,102	$	2,017

Net investment income decreased $1 million in the third quarter of 2023 compared to the same period of 2022, primarily due to lower performance-based investment results, partially offset by higher market-based income reflecting higher fixed income portfolio yields and investment balances. Net investment income increased $28 million in the first nine months of 2023 compared to the same period of 2022, primarily due to higher market-based results driven by reinvesting into fixed income securities with higher yields and to a lesser extent, the reinvestment of proceeds from sales of equity securities into fixed income securities, partially offset by lower performance-based results, mainly from limited partnerships.

Third Quarter 2023 Form 10-Q 77

Investments


Performance-based investment income
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Private equity	$	131	$	311	$	348	$	688
Real estate	71		37		139		229
Total performance-based income before investee level expenses	$	202	$	348	$	487	$	917

Investee level expenses (1)	(16)		(13)		(48)		(40)
Total performance-based income	$	186	$	335	$	439	$	877

(1)Investee level expenses include asset level operating expenses on directly held real estate and other consolidated investments reported in investment expense.

Performance-based investment income decreased $149 million and $438 million in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022, primarily due to lower net gains on the sales of underlying investments.

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)	2023		2022		2023		2022
Sales	$	(63)	$	(175)	$	(313)	$	(605)
Credit losses	(20)		(6)		(69)		(30)
Valuation change of equity investments - appreciation (decline):
Equity securities	(14)		(206)		160		(1,061)
Equity fund investments in fixed income securities	(21)		(33)		(7)		(161)
Limited partnerships (1)	1		(46)		34		(199)
Total valuation of equity investments	(34)		(285)		187		(1,421)
Valuation change and settlements of derivatives	31		299		(28)		889
Net gains (losses) on investments and derivatives, pre-tax	(86)		(167)		(223)		(1,167)
Income tax benefit	19		35		48		251
Net gains (losses) on investments and derivatives, after-tax	$	(67)	$	(132)	$	(175)	$	(916)

Property-Liability	$	(48)	$	(98)	$	(146)	$	(776)
Protection Services	(6)		(10)		(10)		(43)
Allstate Health and Benefits	(2)		(5)		1		(20)
Corporate and Other	(11)		(19)		(20)		(77)
Net gains (losses) on investments and derivatives, after-tax	$	(67)	$	(132)	$	(175)	$	(916)

Market-based	$	(166)	$	(156)	$	(293)	$	(1,238)
Performance-based	80		(11)		70		71
Net gains (losses) on investments and derivatives, pre-tax	$	(86)	$	(167)	$	(223)	$	(1,167)

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

Net losses on investments and derivatives in the third quarter of 2023 related primarily to losses on sales of fixed income securities. Net losses in the first nine months of 2023 related primarily to losses on sales, partially offset by higher valuation on equity investments.

Net losses on sales in the third quarter and first nine months of 2023 related primarily to sales of fixed income securities in connection with ongoing portfolio management.

Net gains on valuation change and settlements of derivatives of $31 million in the third quarter of 2023 primarily related to gains on foreign currency contracts due to the strengthening of the U.S. dollar and net gains on equity futures used to manage equity exposure, and net gains on rate futures used to manage duration. Net losses on valuation change and settlements of derivatives of $28 million in the first nine months of 2023 primarily related to losses on credit default swaps used to reduce credit risk, and net losses on interest rate futures used to manage duration.

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Investments


Net gains (losses) on performance-based investments and derivatives
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2023		2022		2023		2022
Sales	$	65	$	(10)	$	68	$	40
Credit losses	(10)		(3)		(37)		(10)
Valuation change of equity investments	8		(38)		33		(43)
Valuation change and settlements of derivatives	17		40		6		84
Total performance-based	$	80	$	(11)	$	70	$	71

Net gains on performance-based investments and derivatives in the third quarter and first nine months of 2023, primarily related to gains on sales, increased valuation of equity investments and valuation change and settlements of derivatives, partially offset by increased credit losses from limited partnerships.

Third Quarter 2023 Form 10-Q 79

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, 2023			December 31, 2022
Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items	$	17,163		$	19,880
Accumulated other comprehensive loss	(2,570)			(2,392)
Total Allstate shareholders’ equity	14,593			17,488
Debt	7,946			7,964
Total capital resources	$	22,539		$	25,452

Ratio of debt to Allstate shareholders’ equity	54.5		%	45.5		%
Ratio of debt to capital resources	35.3			31.3

Allstate shareholders’ equity decreased in the first nine months of 2023, primarily due to a net loss, dividends paid to shareholders, common share repurchases, and higher unrealized net capital losses on investments. In the nine months ended September 30, 2023, we paid dividends of $692 million and $71 million related to our common and preferred shares, respectively.

Debt maturities


Debt maturities for each of the next five years and thereafter (excluding issuance costs and other)
($ in millions)
2024	$	350
2025	600
2026	550
2027	—
2028	—

Thereafter	6,491
Total long-term debt principal	$	7,991

Redemption of preferred stock On April 17, 2023, the Company redeemed all 23,000 shares of Fixed Rate Noncumulative Preferred Stock, Series G, par value $1.00 per share and liquidation preference $25,000 per share, and the corresponding depositary shares for a total redemption payment of $575 million. The Company recognized $18 million of original issuance costs in preferred stock dividends on the Condensed Consolidated Statements of Operations

and Condensed Consolidated Statements of Shareholders’ Equity.

Issuance of preferred stock On May 18, 2023, the Company issued 24,000 shares of Fixed Rate Noncumulative Preferred Stock, Series J, par value $1.00 per share and liquidation preference amount of $25,000 per share, and the corresponding depositary shares for gross proceeds of $600 million. The preferred stock is perpetual and has no maturity date. The preferred stock is redeemable at the Company’s option in whole or in part, on or after July 15, 2028 at a redemption price of $25,000 per share, plus declared and unpaid dividends. Prior to July 15, 2028, the preferred stock is redeemable at the Company’s option, in whole but not in part, within 90 days of the occurrence of certain rating agency events at a redemption price equal to $25,500 per share, plus declared and unpaid dividends, or in whole but not in part, within 90 days after the occurrence of a regulatory capital event, at a redemption price equal to $25,000 per share, plus declared and unpaid dividends.

Common share repurchases As of September 30, 2023, there was $472 million remaining in the $5.00 billion common share repurchase program. In July 2023, we suspended repurchasing shares under the current authorization. The authorization for the share repurchase program expires in March 2024.

During the first nine months of 2023, we repurchased 2.8 million common shares, or 1.1% of total common shares outstanding at December 31, 2022, for $330 million.

Common shareholder dividends On January 3, 2023, April 3, 2023 and July 3, 2023, we paid a common shareholder dividend of $0.85, $0.89 and $0.89, respectively. On July 14, 2023, we declared a common shareholder dividend of $0.89 payable on October 2, 2023.

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

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Capital Resources and Liquidity

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 March 2023, Moody’s affirmed The Allstate Corporation’s (the “Corporation”) senior debt and short-term issuer ratings of A3 and P-2, respectively, and Allstate Insurance Company’s (“AIC”) insurance financial strength rating of Aa3. The outlook for the ratings was changed from stable to negative.

In August 2023, A.M. Best downgraded the Corporation’s senior debt and short-term issuer ratings to a- and AMB-1, respectively, and affirmed AIC’s insurance financial strength rating of A+. The outlook for the ratings is stable.

In August 2023, A.M. Best downgraded the insurance financial strength ratings of the members of Castle Key Group (Castle Key Insurance Company, Castle Key Indemnity Company, Encompass Floridian Insurance Company, Encompass Floridian Indemnity Company) to B. The outlook for the ratings changed from negative to stable.

In August 2023, A.M. Best affirmed the insurance financial strength rating of A of the members of Allstate New Jersey Group (Allstate New Jersey Insurance Company, Allstate New Jersey Property and Casualty Insurance Company, Encompass Insurance Company of New Jersey, Encompass Property and Casualty Insurance Company of New Jersey, Esurance Insurance Company of New Jersey). The outlook for the rating changed from stable to negative.

In August 2023, S&P downgraded the Corporation’s senior debt rating and AIC’s insurance financial strength rating to BBB+ and A+, respectively, and affirmed the Corporation’s short-term issuer rating of A-2. The outlook for the ratings changed from negative to 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

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 At the parent holding company level, we have deployable assets totaling $2.92 billion as of September 30, 2023, 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, 2023, we held $14.36 billion of cash, U.S. government and agencies fixed income securities, public equity securities, and short-term investments, which we would expect to be able to liquidate within one week.

Intercompany dividends were paid in the first nine months of 2023 between the following companies: American Heritage Life Insurance Company (“AHL”), Allstate Financial Insurance Holdings Corporation (“AFIHC”) and the Corporation.


Intercompany dividends
($ in millions)
AHL to AFIHC	$	40
AFIHC to the Corporation	40

Based on the greater of 2022 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 2024, is estimated at $1.22 billion, less dividends paid during the preceding twelve months measured at that point in time. In the first nine months of 2023, no dividends have been paid.

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.

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 2023, we did not defer interest payments on the subordinated debentures.

Additional resources to support liquidity are as follows:

Third Quarter 2023 Form 10-Q 81

Capital Resources and Liquidity

•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 2027. 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 24.6% as of September 30, 2023. 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 2023.

•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, 2023, 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 638 million shares of treasury stock as of September 30, 2023), 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.

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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 claim costs exceeding current reserves; (6) market risk, inflation, and declines in credit quality of our investment portfolios; (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; (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) evolving environmental, social and governance standards and expectations; (25) restrictive regulations and regulatory reforms, including limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (26) losses from legal and regulatory actions; (27) changes in or the application of accounting standards; (28) vendor-related business disruptions or failure of a vendor to provide and protect data, confidential and proprietary information, or personal information of our customers, claimants or employees; (29) our ability to attract, develop and retain talent; and (30) 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, 2023, 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.

Third Quarter 2023 Form 10-Q 83

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 14 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, 2022.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

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, 2023 - July 31, 2023
Open Market Purchases	214,463	$	107.46	212,406

August 1, 2023 - August 31, 2023
Open Market Purchases	617	$	110.49	—

September 1, 2023 - September 30, 2023
Open Market Purchases	3,972	$	110.39	—

Total	219,052	$	107.52	212,406	$	472	million

(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: 2,057

August: 617

September: 3,972

(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. In July 2023, we suspended repurchasing shares under the current authorization. The authorization for the share repurchase program expires in March 2024. 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 is classified as an additional cost of the stock acquired included in treasury stock in shareholders’ equity.

Item 5. Other Information

During the three months ended September 30, 2023, no director or officer of the Company who is required to file reports under Section 16 of the Exchange Act adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Other Information Part II.

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

3.1

Restated Certificate of Incorporation filed with the Secretary of State of Delaware on May 23, 2012

8-K

1-11840

3(i)

May 23, 2012

3.2

Amended and Restated Bylaws of The Allstate Corporation as amended July 14, 2023

8-K

1-11840

3.1

July 17, 2023

3.3

Certificate of Designations with respect to the Preferred Stock of the Registrant, Series H, dated August 5, 2019

8-K

1-11840

3.1

August 5, 2019

3.4

Certificate of Designations with respect to the Preferred Stock of the Registrant, Series I, dated November 6, 2019

8-K

1-11840

3.1

November 8, 2019

3.5

Certificate of Elimination with respect to the Preferred Stock, Series A, C, D, E and F of the Registrant, dated February 20, 2020

10-K

1-11840

3.6

February 21, 2020

3.6

Certificate of Elimination with respect to the Preferred Stock, Series G of the Registrant, dated May 1, 2023

10-Q

1-11840

3.6

May 3, 2023

3.7

Certificate of Designations with respect to the Preferred Stock of the Registrant, Series J, dated May 16, 2023

8-K

1-11840

3.1

May 18, 2023

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

Acknowledgment of awareness from Deloitte & Touche LLP, dated November 1 , 2023, 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)

Third Quarter 2023 Form 10-Q 85

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 1, 2023	By	/s/ John C. Pintozzi
		John C. Pintozzi
		Senior Vice President, Controller and Chief Accounting Officer
		(Authorized Signatory and Principal Accounting Officer)

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