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,
2017 2016 2017 2016
(unaudited) (unaudited)
Net income $ 666
$ 520
$ 1,940
$ 1,037

Other comprehensive income, after-tax

Changes in:

Unrealized net capital gains and losses 125
193
598
1,197
Unrealized foreign currency translation adjustments 28
(7 ) 36
12
Unrecognized pension and other postretirement benefit cost 73
21
110
48
Other comprehensive income, after-tax 226
207
744
1,257

Comprehensive income $ 892
$ 727
$ 2,684
$ 2,294


($ in millions)	Three months ended March 31,
	2023		2022
Net (loss) income	$	(321)	$	650

Other comprehensive income (loss), after-tax
Changes in:
Unrealized net capital gains and losses	682		(1,594)
Unrealized foreign currency translation adjustments	50		—
Unamortized pension and other postretirement prior service credit	(4)		(15)
Discount rate for reserve for future policy benefits	(9)		95
Other comprehensive income (loss), after-tax	719		(1,514)

Comprehensive income (loss)	398		(864)
Less: Comprehensive income (loss) attributable to noncontrolling interest	4		(22)
Comprehensive income (loss) attributable to Allstate	$	394	$	(842)

See notes to condensed consolidated financial statements.

2www.allstate.com

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)	March 31, 2023		December 31, 2022
Assets
Investments
Fixed income securities, at fair value (amortized cost, net $46,120 and $45,370)	$	44,103	$	42,485
Equity securities, at fair value (cost $2,147 and $4,253)	2,174		4,567
Mortgage loans, net	781		762
Limited partnership interests	7,971		8,114
Short-term, at fair value (amortized cost $6,722 and $4,174)	6,722		4,173
Other investments, net	1,724		1,728
Total investments	63,475		61,829
Cash	662		736
Premium installment receivables, net	9,483		9,165
Deferred policy acquisition costs	5,471		5,442
Reinsurance and indemnification recoverables, net	9,528		9,619
Accrued investment income	436		423
Deferred income taxes	345		382
Property and equipment, net	971		987
Goodwill	3,502		3,502
Other assets, net	5,758		5,904
Total assets	99,631		97,989
Liabilities
Reserve for property and casualty insurance claims and claims expense	38,644		37,541
Reserve for future policy benefits	1,338		1,322
Contractholder funds	878		879
Unearned premiums	22,499		22,299
Claim payments outstanding	1,333		1,268

Other liabilities and accrued expenses	9,114		9,353
Debt	8,452		7,964
Total liabilities	82,258		80,626
Commitments and Contingent Liabilities (Note 14)
Equity
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 81.0 thousand shares issued and outstanding, $2,025 aggregate liquidation preference	1,970		1,970
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 263 million and 263 million shares outstanding	9		9
Additional capital paid-in	3,780		3,788
Retained income	50,388		50,970
Treasury stock, at cost (637 million and 637 million shares)	(36,980)		(36,857)
Accumulated other comprehensive income:
Unrealized net capital gains and losses	(1,573)		(2,255)
Unrealized foreign currency translation adjustments	(115)		(165)
Unamortized pension and other postretirement prior service credit	25		29
Discount rate for reserve for future policy benefits	(10)		(1)
Total accumulated other comprehensive income	(1,673)		(2,392)
Total Allstate shareholders’ equity	17,494		17,488
Noncontrolling interest	(121)		(125)
Total equity	17,373		17,363
Total liabilities and equity	$	99,631	$	97,989

($ in millions, except par value data) September 30, 2017 December 31, 2016
Assets (unaudited)
Investments

Fixed income securities, at fair value (amortized cost $57,608 and $56,576) $ 59,391
$ 57,839
Equity securities, at fair value (cost $5,468 and $5,157) 6,434
5,666
Mortgage loans 4,322
4,486
Limited partnership interests 6,600
5,814
Short-term, at fair value (amortized cost $2,198 and $4,288) 2,198
4,288
Other 3,826
3,706
Total investments 82,771
81,799
Cash 690
436
Premium installment receivables, net 5,922
5,597
Deferred policy acquisition costs 4,147
3,954
Reinsurance recoverables, net 9,748
8,745
Accrued investment income 590
567
Property and equipment, net 1,067
1,065
Goodwill 2,309
1,219
Other assets 2,966
1,835
Separate Accounts 3,422
3,393
Total assets $ 113,632
$ 108,610
Liabilities

Reserve for property-liability insurance claims and claims expense $ 27,154
$ 25,250
Reserve for life-contingent contract benefits 12,227
12,239
Contractholder funds 19,650
20,260
Unearned premiums 13,535
12,583
Claim payments outstanding 959
879
Deferred income taxes 1,249
487
Other liabilities and accrued expenses 6,968
6,599
Long-term debt 6,349
6,347
Separate Accounts 3,422
3,393
Total liabilities 91,513
88,037
Commitments and Contingent Liabilities (Note 11)

Shareholders’ equity

Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 72.2 thousand shares issued and outstanding, and $1,805 aggregate liquidation preference 1,746
1,746
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 360 million and 366 million shares outstanding 9
9
Additional capital paid-in 3,330
3,303
Retained income 42,125
40,678
Deferred ESOP expense (6 ) (6 )
Treasury stock, at cost (540 million and 534 million shares) (25,413 ) (24,741 )
Accumulated other comprehensive income:

Unrealized net capital gains and losses:

Unrealized net capital gains and losses on fixed income securities with OTTI 68
57
Other unrealized net capital gains and losses 1,715
1,091
Unrealized adjustment to DAC, DSI and insurance reserves (132 ) (95 )
Total unrealized net capital gains and losses 1,651
1,053
Unrealized foreign currency translation adjustments (14 ) (50 )
Unrecognized pension and other postretirement benefit cost (1,309 ) (1,419 )
Total accumulated other comprehensive income (loss) 328
(416 )
Total shareholders’ equity 22,119
20,573
Total liabilities and shareholders’ equity $ 113,632
$ 108,610

See notes to condensed consolidated financial statements.

First Quarter 2023 Form 10-Q 3

~~The Allstate Corporation~~ 3

Condensed Consolidated Financial Statements

The Allstate ~~Corporate~~Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity (unaudited)


($ in millions, except per share data)	Three months ended March 31,
	2023		2022




Preferred stock par value	$	—	$	—






Preferred stock additional capital paid-in	1,970		1,970

Common stock par value	9		9

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

Equity incentive plans activity	(8)		(16)
Balance, end of period	3,780		3,706

Retained income
Balance, beginning of period	50,970		53,288

Net (loss) income	(320)		660
Dividends on common stock (declared per share of $0.89 and $0.85)	(236)		(236)
Dividends on preferred stock	(26)		(26)


Balance, end of period	50,388		53,686






Treasury stock
Balance, beginning of period	(36,857)		(34,471)
Shares acquired	(153)		(794)
Shares reissued under equity incentive plans, net	30		57
Balance, end of period	(36,980)		(35,208)

Accumulated other comprehensive income
Balance, beginning of period	(2,392)		426
Change in unrealized net capital gains and losses	682		(1,594)
Change in unrealized foreign currency translation adjustments	50		—
Change in unamortized pension and other postretirement prior service credit	(4)		(15)
Change in discount rate for reserve for future policy benefits	(9)		95
Balance, end of period	(1,673)		(1,088)
Total Allstate shareholders’ equity	17,494		23,075

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

Change in unrealized net capital gains and losses	5		(12)
Noncontrolling loss	(1)		(10)
Balance, end of period	(121)		(74)
Total equity	$	17,373	$	23,001

($ in millions) Nine months ended September 30,
2017 2016
(unaudited)
Preferred stock par value $ —
$ —

Preferred stock additional capital paid-in 1,746
1,746

Common stock 9
9

Additional capital paid-in

Balance, beginning of period 3,303
3,245
Forward contract on accelerated share repurchase agreement —
(37 )
Equity incentive plans activity 27
29
Balance, end of period 3,330
3,237

Retained income

Balance, beginning of period 40,678
39,413
Net income 1,940
1,037
Dividends on common stock (406 ) (373 )
Dividends on preferred stock (87 ) (87 )
Balance, end of period 42,125
39,990

Deferred ESOP expense (6 ) (13 )

Treasury stock

Balance, beginning of period (24,741 ) (23,620 )
Shares acquired (845 ) (1,094 )
Shares reissued under equity incentive plans, net 173
177
Balance, end of period (25,413 ) (24,537 )

Accumulated other comprehensive income

Balance, beginning of period (416 ) (755 )
Change in unrealized net capital gains and losses 598
1,197
Change in unrealized foreign currency translation adjustments 36
12
Change in unrecognized pension and other postretirement benefit cost 110
48
Balance, end of period 328
502
Total shareholders’ equity $ 22,119
$ 20,934

See notes to condensed consolidated financial statements.

4www.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,
2017 2016
Cash flows from operating activities (unaudited)
Net income $ 1,940
$ 1,037
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and other non-cash items 358
285
Realized capital gains and losses (318 ) 92
Gain on disposition of operations (15 ) (4 )
Interest credited to contractholder funds 522
558
Changes in:

Policy benefits and other insurance reserves 1,276
978
Unearned premiums 525
540
Deferred policy acquisition costs (176 ) (159 )
Premium installment receivables, net (267 ) (236 )
Reinsurance recoverables, net (1,017 ) (420 )
Income taxes 119
30
Other operating assets and liabilities 267
41
Net cash provided by operating activities 3,214
2,742
Cash flows from investing activities

Proceeds from sales

Fixed income securities 19,508
19,132
Equity securities 5,179
4,069
Limited partnership interests 767
634
Other investments 170
206
Investment collections

Fixed income securities 3,038
3,430
Mortgage loans 477
403
Other investments 458
281
Investment purchases

Fixed income securities (23,935 ) (22,282 )
Equity securities (5,296 ) (4,113 )
Limited partnership interests (1,082 ) (1,128 )
Mortgage loans (311 ) (460 )
Other investments (700 ) (674 )
Change in short-term investments, net 2,257
94
Change in other investments, net (28 ) (60 )
Purchases of property and equipment, net (216 ) (190 )
Acquisition of operations (1,356 ) —
Net cash used in investing activities (1,070 ) (658 )
Cash flows from financing activities

Repayments of long-term debt —
(16 )
Contractholder fund deposits 767
785
Contractholder fund withdrawals (1,416 ) (1,537 )
Dividends paid on common stock (391 ) (364 )
Dividends paid on preferred stock (87 ) (87 )
Treasury stock purchases (848 ) (1,154 )
Shares reissued under equity incentive plans, net 132
123
Excess tax benefits on share-based payment arrangements —
25
Other (47 ) 35
Net cash used in financing activities (1,890 ) (2,190 )
Net increase (decrease) in cash 254
(106 )
Cash at beginning of period 436
495
Cash at end of period $ 690
$ 389


($ in millions)	Three months ended March 31,
	2023		2022
Cash flows from operating activities
Net (loss) income	$	(321)	$	650

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and other non-cash items	177		236
Net (gains) losses on investments and derivatives	(14)		267

Pension and other postretirement remeasurement (gains) losses	(53)		(247)

Changes in:
Policy benefits and other insurance reserves	1,080		(111)
Unearned premiums	199		390
Deferred policy acquisition costs	(29)		(103)
Premium installment receivables, net	(317)		(502)
Reinsurance recoverables, net	91		333
Income taxes	(125)		93
Other operating assets and liabilities	(87)		(574)
Net cash provided by operating activities	601		432
Cash flows from investing activities
Proceeds from sales
Fixed income securities	7,008		12,400
Equity securities	3,739		5,216
Limited partnership interests	414		300

Other investments	55		208
Investment collections
Fixed income securities	646		104
Mortgage loans	22		3
Other investments	25		49
Investment purchases
Fixed income securities	(8,424)		(13,220)
Equity securities	(1,187)		(3,624)
Limited partnership interests	(226)		(216)
Mortgage loans	(41)		(37)
Other investments	(73)		(186)
Change in short-term and other investments, net	(2,675)		114
Purchases of property and equipment, net	(79)		(130)



Net cash (used in) provided by investing activities	(796)		981
Cash flows from financing activities
Proceeds from issuance of long-term debt	744		—
Redemption and repayment of debt	(250)		—


Contractholder fund deposits	33		34
Contractholder fund withdrawals	(9)		(9)
Dividends paid on common stock	(224)		(230)
Dividends paid on preferred stock	(26)		(26)
Treasury stock purchases	(153)		(802)
Shares reissued under equity incentive plans, net	6		17

Other	—		(30)
Net cash provided by (used in) financing activities	121		(1,046)
Net (decrease) increase in cash	(74)		367
Cash at beginning of period	736		763
Cash at end of period	$	662	$	1,130

See notes to condensed consolidated financial statements.

~~The Allstate Corporation~~

First 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-liability~~property and casualty insurance company ~~with various property-liability and life and investment subsidiaries, including Allstate Life Insurance Company (“ALIC”)~~ (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, 2017~~March 31, 2023 and for the ~~three-month and nine-month~~three month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~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~~annual report on Form 10-K for the year ended December 31, ~~2016.~~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.

Macroeconomic impacts

The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”) and subsequent U.S. government fiscal and monetary policies have and may continue to effect economic activity through longer-term impacts such as supply chain disruptions, labor shortages and other macroeconomic factors that have increased inflation and affected our operations. These factors may continue to significantly affect results of operations, financial condition and liquidity. The impact from the pandemic and the ongoing effects should be considered when comparing the current period to prior periods.

Adopted accounting ~~standards~~standard

~~Employee Share-Based Payment~~ Accounting

for Long-Duration Insurance ContractsEffective January 1, ~~2017,~~2023, the Company adopted ~~new~~the Financial Accounting Standards Board (“(”FASB”) guidance that amends the accounting for share-based payments on a prospective basis. Under the new guidance, reporting entities are required to recognize all tax effects related to share-based payments at settlement or expiration through the income statement and the requirement to delay recognition of certain tax benefits until they reduce current taxes payable is eliminated. The new guidance also permits employers to withhold shares issued in connection with an employee’s exercise of options or the settlement of stock awards, up to the employee’s maximum individual statutory tax rate, to meet tax withholding requirements without causing liability classification of the award. In addition, all tax-related cash flows resulting from share-based payments are reported as operating activities on the statement of cash flows whereas cash payments made to taxing authorities on an employee’s behalf for withheld shares are presented as financing activities. The adoption of this guidance had no impact on the Company’s results of operations or financial position on the date of adoption.

~~Transition to Equity Method Accounting~~

Effective January 1, 2017, the Company adopted new FASB guidance amending the accounting requirements for transitioning to the equity method of accounting (“EMA”), including a transition from the cost method. The guidance requires the cost of acquiring an additional interest in an investee to be added to the existing carrying value to establish the initial basis of the EMA investment. Under the new guidance, no retroactive adjustment is required when an investment initially qualifies for EMA treatment. The guidance is applied prospectively to investments that qualify for EMA after application of the cost method of accounting. Accordingly, the adoption of this guidance had no impact on the Company’s results of operations or financial position.

~~Pending accounting standards~~

~~Revenue from Contracts with Customers~~

In May 2014, the FASB issued guidance which revises the criteria for revenue recognition. Insurance contracts are excluded from the scope of the new guidance. Under the guidance, the transaction price is attributed to underlying performance obligations in the contract and revenue is recognized as the entity satisfies the performance obligations and transfers control of a good or service to the customer. Incremental costs of obtaining a contract may be capitalized to the extent the entity expects to recover those costs. The guidance is effective for reporting periods beginning after December 15, 2017 and is to be applied retrospectively. The Company’s principal activities impacted by the standard are those related to the issuance of protection plans for consumer products and automobiles and service contracts that provide roadside assistance. The impacts include an increase in deferred revenue with a corresponding increase in deferred costs for protection plans that are sold directly to retailers for which Allstate is deemed to be the principal in the transaction. The anticipated impacts of this adjustment offset and will not impact net income, but result in an increase in unearned premiums and deferred policy acquisition costs of approximately $145 million to $175 million, pre-tax. The Company also anticipates impacts related to recognizing revenue for SquareTrade based on expected losses, accounting for variable consideration and the deferral of certain costs associated with acquiring service contracts that provide roadside

6 ~~www.allstate.com~~

assistance, the net impact of which is not expected to materially reduce shareholders’ equity at the date of adoption. Based on the Company’s assessment, the total impact of adoption will not be material to the Company’s results of operations or financial position.

~~Recognition and Measurement of Financial Assets and Financial Liabilities~~

In January 2016, the FASB issued guidance requiring equity investments, including equity securities and limited partnership interests, that are not accounted for under the equity method of accounting or result in consolidation to be measured at fair value with changes in fair value recognized in net income. Equity investments without readily determinable fair values may be measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. When a qualitative assessment of equity investments without readily determinable fair values indicates that impairment exists, the carrying value is required to be adjusted to fair value, if lower. The guidance clarifies that an entity should evaluate the realizability of a deferred tax asset related to available-for-sale fixed income securities in combination with the entity’s other deferred tax assets. The guidance also changes certain disclosure requirements. The guidance is effective for interim and annual periods beginning after December 15, 2017, and is to be applied through a cumulative-effect adjustment to beginning retained income which results in no impact to the Company’s results of operations at the date of adoption. The new guidance related to equity investments without readily determinable fair values is applied prospectively as of the date of adoption. The most significant anticipated impacts, using values as of September 30, 2017, relate to the change in accounting for equity securities, where $966 million of pre-tax unrealized net capital gains would be reclassified from accumulated other comprehensive income to retained income, and cost method limited partnership interests (excluding limited partnership interests accounted for on a cost recovery basis), where the carrying value of these investments would increase by approximately $200 million, pre-tax, with the offsetting after-tax adjustment recognized in retained income. The after-tax change in accounting for equity securities will not affect the Company’s shareholders’ equity and the unrealized net capital gains reclassified to retained income will never be recognized in net income. The after-tax change in accounting for cost method limited partnerships, if adopted at the end of this reporting period, would increase the Company’s shareholders’ equity, while also decreasing net income return on shareholders’ equity. The amount by which the fair value of cost method limited partnerships exceeds their carrying value will never be recognized in net income.

~~Accounting for Leases~~

~~In February 2016, the FASB issued~~ guidance revising the accounting for ~~leases.~~ certain long-duration insurance contracts using the modified retrospective approach to the transition date of January 1, 2021.

Under the new guidance, ~~lessees~~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 will be ~~required~~amortized on a simplified basis. Also, the Company’s reserve for future policy benefits and DAC will be subject to ~~recognize~~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 is primarily attributable to a ~~right-of-use asset~~change in the discount rate used in measuring the reserve for future policy benefits for traditional life contracts and ~~lease liability for all leases~~ other ~~than those that meet~~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 ~~definition~~reporting date. The decrease in retained income primarily relates to certain cohorts of long-term contracts whose expected net premiums exceeded expected gross premiums which resulted in an increase in reserves and a ~~short-term lease. The lease liability will be~~decrease in retained income equal to the present value of ~~lease payments. A right-of-use asset will be~~expected future benefits less the present value of expected future premiums at the transition date.

6www.allstate.com

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.

Impacts of the adoption on the financial statements


Consolidated Statements of Operations
	Three months ended March 31, 2022
($ in millions, except per share data)	As reported		Impact of change		As adjusted
Revenues
Accident and health insurance premiums and contract charges	$	469	$	(1)	$	468
Total revenues	12,337		(1)		12,336

Costs and expenses
Accident, health and other policy benefits	269		(1)		268
Amortization of deferred policy acquisition costs	1,612		(4)		1,608

Total costs and expenses	11,540		(5)		11,535

Income from operations before income tax expense	797		4		801
Income tax expense	151		—		151
Net income	646		4		650

Net income attributable to Allstate	656		4		660

Net income applicable to common shareholders	$	630	$	4	$	634

Earnings per common share:
Net income applicable to common shareholders per common share - Basic	$	2.27	$	0.01	$	2.28
Net income applicable to common shareholders per common share - Diluted	$	2.24	$	0.01	$	2.25

First Quarter 2023 Form 10-Q 7

Notes to Condensed Consolidated Financial Statements


Condensed Consolidated Statements of Comprehensive Income (unaudited)
	Three months ended March 31, 2022
($ in millions)	As reported		Impact of change		As adjusted
Net income	$	646	$	4	$	650

Other comprehensive income (loss), after-tax
Changes in:
Unrealized net capital gains and losses	(1,593)		(1)		(1,594)
Discount rate for reserve for future policy benefits	—		95		95
Other comprehensive loss, after-tax	(1,608)		94		(1,514)

Comprehensive loss	(962)		98		(864)
Comprehensive loss attributable to Allstate	$	(940)	$	98	$	(842)














Condensed Consolidated Statements of Financial Position (unaudited)
	December 31, 2022
($ in millions)	As reported		Impact of change		As adjusted
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:
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

8www.allstate.com

Notes to Condensed Consolidated Financial Statements


Condensed Consolidated Statements of Shareholders’ Equity (unaudited)
	Three months ended March 31, 2022
($ in millions)	As reported		Impact of change		As adjusted
















Retained income
Balance, beginning of period	$	53,294	$	(6)	$	53,288

Net income	656		4		660



Balance, end of period	53,688		(2)		53,686












Accumulated other comprehensive income (loss)
Balance, beginning of period	655		(229)		426

Change in unrealized net capital gains and losses	(1,593)		(1)		(1,594)


Change in discount rate for reserve for future policy benefits	—		95		95
Balance, end of period	(953)		(135)		(1,088)

Total Allstate shareholders’ equity	23,212		(137)		23,075
Total equity	$	23,138	$	(137)	$	23,001


Condensed Consolidated Statements of Cash Flows (unaudited)
	Three months ended March 31, 2022
($ in millions)	As reported		Impact of change		As adjusted
Cash flows from operating activities
Net income	$	646	$	4	$	650
Adjustments to reconcile net income to net cash provided by operating activities:







Changes in:
Policy benefits and other insurance reserves	(113)		2		(111)
Unearned premiums	392		(2)		390
Deferred policy acquisition costs	(99)		(4)		(103)
Reinsurance recoverables, net	334		(1)		333
Income taxes	92		1		93
Other operating assets and liabilities	(574)		—		(574)
Net cash provided by operating activities	$	432	$	—	$	432

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, critical illness and disability. Issue year is based on the ~~lease~~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 terminations, 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 ~~adjusted for qualifying initial direct costs. The expense of operating leases under the new guidance will be~~remeasurement gain or loss that is recognized in net income. 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

First Quarter 2023 Form 10-Q 9

Notes to Condensed Consolidated Financial Statements

remeasurement gain or loss in net income ~~statement on a straight-line basis after combining the lease expense components (interest expense~~and presented parenthetically as part of Accident, health and other policy benefits on the ~~lease liability~~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 ~~amortization~~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 ~~right-of-use asset) over~~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 ~~term of~~cohorts used to calculate the ~~lease. For finance leases, the expense components~~RFPB. Interest-sensitive life insurance contracts are ~~computed separately and produce greater up-front expense compared to operating leases as interest expense on the lease liability is higher in early years~~grouped into cohorts by issue year, and the ~~right-of-use asset~~issue year is determined based on contract issue date. DAC is amortized on a ~~straight-line basis. Lease classification~~constant level basis over the expected contract term and is included in Amortization of deferred policy acquisition costs on the 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 termination assumptions are used to calculate both DAC amortization and the RFPB. If actual contract terminations are greater than expected terminations for any cohort, each affected cohort’s DAC balance will be reduced in the current period based on ~~criteria similar~~the difference between the actual and expected terminations. No adjustments to ~~those currently applied.~~ DAC amortization are recorded if actual contract terminations are less than expected terminations for any cohort. If the Company makes an update to any of its mortality, morbidity, or termination assumptions, the Company will use the assumptions prospectively to amortize any cohort’s remaining DAC over the remaining expected contract term.

The ~~accounting model for lessors will be similar~~costs assigned to the ~~current model with modifications~~right to ~~reflect definition changes for components such~~receive future cash flows from certain business purchased from other insurers are also classified as initial direct costs. Lessors will continue to classify leases as operating, direct financing, or sales-type. The guidance is effective for reporting periods beginning after December 15, 2018 using a modified retrospective approach applied at the beginning of the earliest period presented. The Company isDAC in the ~~process~~Consolidated Statements of ~~evaluating~~Financial Position. The costs capitalized represent the ~~impact~~present value of ~~adoption, which is not~~future profits expected to be ~~material to~~earned over the ~~Company’s results of operations or financial position.~~

~~Measurement of Credit Losses on Financial Instruments~~

In June 2016, the FASB issued guidance which revises the credit loss recognition criteria for certain financial assets measured at amortized cost, including reinsurance recoverables. The new guidance replaces the existing incurred loss recognition model with an expected loss recognition model. The objectivelives of the ~~expected credit loss model is for~~contracts acquired. The Company amortizes the reporting entity to recognize its estimate of expected credit losses for affected financial assets in a valuation allowance deducted from the amortized cost basis of the related financial assets that results in presenting the net carryingpresent value of future profits using the financial assets at the amount expected to be collected. The reporting entity must consider all available relevant information when estimating expected credit losses, including details about past events, current conditions,same methodology and reasonable and supportable forecasts over the life of an asset. Financial assets may be evaluated individually or on a pooled basis when they share similar risk characteristics. The measurement of credit losses for available-for-sale debt securities measured at fair value is not affected except that credit losses recognized are limited to the amount by which fair value is below amortized cost and the carrying value adjustment is recognized through a valuation allowance and not as a direct write-down. The guidance is effective for interim and annual periods beginning after December 15, 2019, and for most affected instruments must be adopted using a modified retrospective approach, with a cumulative effect adjustment recorded to beginning retained income. The Company is in the process of evaluating the impact of adoption.

~~Goodwill Impairment~~

In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment which removes the second step of the goodwill impairment test that requires a hypothetical purchase price allocation. Under the new guidance, goodwill

~~The Allstate Corporation~~ 7

~~impairment will be measured and recognized~~assumptions as the ~~amount by which a reporting unit’s carrying value, including goodwill, exceeds its fair value, not to exceed the carrying amount~~amortization of ~~goodwill allocated to the reporting unit.~~DAC. The revised guidance does not affect a reporting entity’s ability to first assess qualitative factors by reporting unit to determine whether to perform the quantitative goodwill impairment test. The guidance is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The guidance is to be applied on a prospective basis, with the effects, if any, recognized in net income in the period of adoption. The impact to the Company upon adoption is dependent upon the excess, if any, of carryingpresent value of ~~the Company’s reporting units, including goodwill, over their respective fair values, a measure that~~future profits is ~~not currently determinable.~~subject to premium deficiency testing.

~~Presentation of Net Periodic Pension and Postretirement Benefits Costs~~

10www.allstate.com

~~In March 2017, the FASB issued guidance~~

Notes to improve the presentation of net periodic pension and postretirement benefits costs that requires the service cost component to be reported in operating expenses together with other employee compensation costs and all other components of net periodic pension and postretirement benefits costs reported in non-operating expenses. If the reporting entity does not separately report operating and non-operating expenses on the statement of operations it is required to identify, on the statement of operations or in disclosures, the line items in which the components of net periodic pension and postretirement benefits costs are presented. The new guidance permits only the service cost component to be eligible for capitalization where applicable. The guidance is effective for annual periods beginning after December 15, 2017 and for interim periods within those annual periods. The guidance is to be applied on a prospective basis for capitalization of service costs where applicable and on a retrospective basis for the presentation of the service cost and other components of net periodic pension benefit costs in the statements of operations or in disclosures. The impact of adoption is not expected to be material to the Company’s results of operations or financial position.Condensed Consolidated Financial Statements

~~Accounting for Hedging Activities~~

In August 2017, the FASB issued amendments intended to better align hedge accounting with an organization’s risk management activities. The amendments expand hedge accounting for nonfinancial and financial risk components and revise the measurement methodologies to better align with an organization’s risk management activities. Separate presentation of hedge ineffectiveness is eliminated to provide greater transparency of the full impact of hedging by requiring presentation of the results of the hedged item and hedging instrument in a single financial statement line item. In addition, the amendments reduce complexity by simplifying the manner in which assessments of hedge effectiveness may be performed. The guidance is effective for annual periods beginning after December 15, 2018 and for interim periods within those annual periods. The presentation and disclosure guidance is effective on a prospective basis. The impact of adoption is not expected to be material to the Company’s results of operations or financial position.


Note 2			Earnings per Common Share

~~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, ~~and~~ unvested

non-participating restricted stock units and contingently issuable performance stock awards.

8 ~~www.allstate.com~~

~~The computation of basic and diluted earnings per common share is presented in the following table.~~

($ in millions, except per share data) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Numerator:

Net income $ 666
$ 520
$ 1,940
$ 1,037
Less: Preferred stock dividends 29
29
87
87
Net income applicable to common shareholders ⁽¹⁾
$ 637
$ 491
$ 1,853
$ 950

Denominator:

Weighted average common shares outstanding 361.3
371.5
363.5
374.4
Effect of dilutive potential common shares:

Stock options 4.4
3.2
4.3
3.3
Restricted stock units (non-participating) and performance stock awards 1.4
1.2
1.3
1.2
Weighted average common and dilutive potential common shares outstanding 367.1
375.9
369.1
378.9

Earnings per common share - Basic $ 1.76
$ 1.32
$ 5.10
$ 2.54
Earnings per common share - Diluted $ 1.74
$ 1.31
$ 5.02
$ 2.51

~~_____________________________~~


⁽¹⁾	~~Net income applicable to common shareholders is net income less preferred stock dividends.~~

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. ~~Options to purchase 0.2 million and 3.6 million Allstate common shares, with exercise prices ranging from $78.35 to $93.93 and $58.14 to $71.29, were outstanding~~


Computation of basic and diluted earnings per common share
(In millions, except per share data)	Three months ended March 31,
	2023		2022
Numerator:
Net (loss) income	$	(321)	$	650
Less: Net loss attributable to noncontrolling interest	(1)		(10)
Net (loss) income attributable to Allstate	(320)		660
Less: Preferred stock dividends	26		26


Net (loss) income applicable to common shareholders	$	(346)	$	634

Denominator:
Weighted average common shares outstanding	263.5		278.1
Effect of dilutive potential common shares (1):
Stock options	—		2.6
Restricted stock units (non-participating) and performance stock awards	—		1.1
Weighted average common and dilutive potential common shares outstanding	263.5		281.8

Earnings per common share - Basic	$	(1.31)	$	2.28
Earnings per common share - Diluted (1)	$	(1.31)	$	2.25

Anti-dilutive options excluded from diluted earnings per common share	1.1		1.2
Weighted average dilutive potential common shares excluded due to net loss applicable to common shareholders (1)	2.6		—

(1)As a result of the net loss reported for the ~~three-month periods~~three month period ended ~~September 30, 2017 and 2016, respectively, but were not included in the computation of~~March 31, 2023, weighted average shares for basic earnings per share is also used for calculating diluted earnings per ~~common~~ share ~~in those periods. Options to purchase 2.5 million and 4.7 million Allstate~~because all dilutive potential common shares ~~with exercise prices ranging~~are anti-dilutive and are therefore excluded from ~~$74.03 to $93.93 and $57.29 to $71.29, were outstanding~~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 ~~nine-month periods ended September 30, 2017~~Allstate Protection and ~~2016, respectively, but were not~~Run-off Property-Liability segments and adjusted net income for the Protection Services, Allstate Health and Benefits and Corporate and Other segments.

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.

First Quarter 2023 Form 10-Q 11

Notes to Condensed Consolidated Financial Statements


Reportable segments financial performance
	Three months ended March 31,
($ in millions)	2023		2022
Underwriting income (loss) by segment
Allstate Protection	$	(998)	$	282
Run-off Property-Liability	(3)		(2)
Total Property-Liability	(1,001)		280

Adjusted net income (loss) by segment, after-tax
Protection Services	34		53
Allstate Health and Benefits	56		57
Corporate and Other	(89)		(111)

Reconciling items
Property-Liability net investment income	509		558
Net gains (losses) on investments and derivatives	14		(267)
Pension and other postretirement remeasurement gains (losses)	53		247

Amortization of purchased intangibles (1)	(24)		(29)

Gain (loss) on disposition	9		(16)
Income tax benefit (expense) on reconciling items	92		(148)
Total reconciling items	653		345

Less: Net loss attributable to noncontrolling interest (2)	(1)		(10)

Net (loss) income applicable to common shareholders	$	(346)	$	634

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

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

12www.allstate.com

Notes to Condensed Consolidated Financial Statements


Reportable segments revenue information
($ in millions)	Three months ended March 31,
	2023		2022
Property-Liability
Insurance premiums
Auto	$	7,908	$	7,081
Homeowners	2,810		2,490
Other personal lines	562		531
Commercial lines	232		283
Other business lines	123		113
Allstate Protection	11,635		10,498
Run-off Property-Liability	—		—
Total Property-Liability insurance premiums	11,635		10,498
Other revenue	353		347
Net investment income	509		558
Net gains (losses) on investments and derivatives	12		(203)
Total Property-Liability	12,509		11,200

Protection Services
Protection plans	361		313
Roadside assistance	49		53
Finance and insurance products	128		117
Intersegment premiums and service fees (1)	33		41
Other revenue	84		94
Net investment income	16		9
Net gains (losses) on investments and derivatives	(1)		(13)
Total Protection Services	670		614

Allstate Health and Benefits
Employer voluntary benefits	255		263
Group health	107		94
Individual health	101		111
Other revenue	101		95
Net investment income	19		17
Net gains (losses) on investments and derivatives	2		(7)
Total Allstate Health and Benefits	585		573

Corporate and Other
Other revenue	23		24
Net investment income	31		10
Net gains (losses) on investments and derivatives	1		(44)
Total Corporate and Other	55		(10)

Intersegment eliminations (1)	(33)		(41)
Consolidated revenues	$	13,786	$	12,336

(1)Intersegment insurance premiums and service fees are primarily related to Arity and Allstate Roadside and are eliminated in the ~~computation of diluted earnings per common share in those periods.~~condensed consolidated financial statements.

~~3. Acquisition~~

On January 3, 2017, the Company acquired SquareTrade Holding Company, Inc. (“SquareTrade”), a consumer product protection plan provider that distributes through many of America’s major retailers and Europe’s mobile operators, for $1.4 billion in cash. SquareTrade provides protection plans primarily covering consumer appliances and electronics, such as TVs, smartphones and computers. This acquisition broadens Allstate’s unique product offerings to better meet consumers’ needs.

In connection with the acquisition, the Company recorded goodwill of $1.08 billion, commissions paid to retailers (reported in deferred policy acquisition costs) of $70 million, other intangible assets (reported in other assets) of $555 million, contractual liability insurance policy premium expenses (reported in other assets) of $201 million, unearned premiums of $373 million and net deferred income tax liability of $140 million. The Company increased goodwill by $14 million through third quarter 2017 related to an adjustment to the fair value of the opening balance sheet liabilities.

~~As of September 30, 2017, the Company has $30 million of restricted cash related to an escrow account in connection with the acquisition that is recorded in other assets.~~

~~The Allstate Corporation~~ 9

First Quarter 2023 Form 10-Q 13

Notes to Condensed Consolidated Financial Statements

~~4. Reportable Segments~~

~~Summarized revenue data for each of the Company’s reportable segments are as follows:~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Property-Liability

Property-liability insurance premiums

Auto $ 5,502
$ 5,353
$ 16,327
$ 15,879
Homeowners 1,832
1,813
5,462
5,438
Other personal lines 439
426
1,306
1,271
Commercial lines 124
127
367
383
Other business lines 146
150
429
435
SquareTrade 78
—
207
—
Allstate Protection 8,121
7,869
24,098
23,406
Discontinued Lines and Coverages —
—
—
—
Total property-liability insurance premiums 8,121
7,869
24,098
23,406
Net investment income 372
310
1,074
928
Realized capital gains and losses 82
53
302
(20 )
Total Property-Liability 8,575
8,232
25,474
24,314
Allstate Financial

Life and annuity premiums and contract charges

Premiums
Traditional life insurance 153
145
450
422
Accident and health insurance 232
216
697
646
Total premiums 385
361
1,147
1,068
Contract charges
Interest-sensitive life insurance 204
206
620
623
Fixed annuities 4
4
10
10
Total contract charges 208
210
630
633
Total life and annuity premiums and contract charges 593
571
1,777
1,701
Net investment income 461
427
1,383
1,281
Realized capital gains and losses 21
(21 ) 16
(70 )
Total Allstate Financial 1,075
977
3,176
2,912
Corporate and Other

Net investment income 10
11
31
32
Realized capital gains and losses —
1
—
(2 )
Total Corporate and Other 10
12
31
30
Consolidated revenues $ 9,660
$ 9,221
$ 28,681
$ 27,256


Note 4			Investments


Portfolio composition

($ in millions)	March 31, 2023		December 31, 2022
Fixed income securities, at fair value	$	44,103	$	42,485
Equity securities, at fair value	2,174		4,567
Mortgage loans, net	781		762
Limited partnership interests	7,971		8,114
Short-term investments, at fair value	6,722		4,173
Other investments, net	1,724		1,728
Total	$	63,475	$	61,829

10 ~~www.allstate.com~~


Amortized cost, gross unrealized gains (losses) and fair value for fixed income securities
($ in millions)	Amortized cost, net		Gross unrealized				Fair value
			Gains		Losses
March 31, 2023
U.S. government and agencies	$	7,826	$	21	$	(152)	$	7,695
Municipal	6,499		65		(240)		6,324
Corporate	29,705		118		(1,787)		28,036
Foreign government	1,112		3		(24)		1,091
ABS	978		4		(25)		957
Total fixed income securities	$	46,120	$	211	$	(2,228)	$	44,103

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

~~Summarized financial performance data for each of the Company’s reportable segments are as follows:~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Property-Liability

Underwriting income

Allstate Protection $ 517
$ 455
$ 1,258
$ 518
Discontinued Lines and Coverages (88 ) (100 ) (95 ) (104 )
Total underwriting income 429
355
1,163
414
Net investment income 372
310
1,074
928
Income tax expense on operations (252 ) (218 ) (703 ) (429 )
Realized capital gains and losses, after-tax 54
36
199
(10 )
Gain on disposition of operations, after-tax 1
—
7
—
Property-Liability net income applicable to common shareholders 604
483
1,740
903
Allstate Financial

Life and annuity premiums and contract charges 593
571
1,777
1,701
Net investment income 461
427
1,383
1,281
Contract benefits and interest credited to contractholder funds (629 ) (667 ) (1,935 ) (1,939 )
Operating costs and expenses and amortization of deferred policy acquisition costs (188 ) (194 ) (597 ) (577 )
Restructuring and related charges (1 ) —
(2 ) (1 )
Income tax expense on operations (79 ) (43 ) (206 ) (147 )
Operating income 157
94
420
318
Realized capital gains and losses, after-tax 13
(14 ) 9
(46 )
Valuation changes on embedded derivatives that are not hedged, after-tax (1 ) —
(2 ) (8 )
DAC and DSI amortization related to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax (2 ) (1 ) (8 ) (3 )
Gain on disposition of operations, after-tax 1
1
3
3
Allstate Financial net income applicable to common shareholders 168
80
422
264
Corporate and Other

Net investment income 10
11
31
32
Operating costs and expenses (175 ) (80 ) (360 ) (238 )
Income tax benefit on operations 60
26
121
77
Preferred stock dividends (29 ) (29 ) (87 ) (87 )
Operating loss (134 ) (72 ) (295 ) (216 )
Realized capital gains and losses, after-tax —
—
—
(1 )
Business combination expenses, after-tax (1 ) —
(14 ) —
Corporate and Other net loss applicable to common shareholders (135 ) (72 ) (309 ) (217 )
Consolidated net income applicable to common shareholders $ 637
$ 491
$ 1,853
$ 950

~~The Allstate Corporation~~ 11

~~5. Investments~~

~~Fair values~~

~~The amortized cost, gross unrealized gains and losses and fair value for fixed income securities are as follows:~~

($ in millions) Amortized cost Gross unrealized
Fair
value
Gains Losses
September 30, 2017

U.S. government and agencies $ 3,843
$ 65
$ (8 ) $ 3,900
Municipal 7,484
332
(22 ) 7,794
Corporate 43,259
1,419
(132 ) 44,546
Foreign government 1,077
30
(14 ) 1,093
Asset-backed securities (“ABS”) 1,263
16
(9 ) 1,270
Residential mortgage-backed securities (“RMBS”) 512
101
(2 ) 611
Commercial mortgage-backed securities (“CMBS”) 149
8
(4 ) 153
Redeemable preferred stock 21
3
—
24
Total fixed income securities $ 57,608
$ 1,974
$ (191 ) $ 59,391

December 31, 2016

U.S. government and agencies $ 3,572
$ 74
$ (9 ) $ 3,637
Municipal 7,116
304
(87 ) 7,333
Corporate 42,742
1,178
(319 ) 43,601
Foreign government 1,043
36
(4 ) 1,075
ABS 1,169
13
(11 ) 1,171
RMBS 651
85
(8 ) 728
CMBS 262
17
(9 ) 270
Redeemable preferred stock 21
3
—
24
Total fixed income securities $ 56,576
$ 1,710
$ (447 ) $ 57,839

~~Scheduled maturities~~

~~The scheduled maturities for fixed income securities are as follows as of September 30, 2017:~~


Scheduled maturities for fixed income securities					Scheduled maturities for fixed income securities
($ in millions)					($ in millions)	March 31, 2023				December 31, 2022
	Amortized cost		Fair value			Amortized cost, net		Fair value		Amortized cost, net		Fair value
Due in one year or less	$	4,392	$	4,415	Due in one year or less	$	3,754	$	3,697	$	2,870	$	2,836
Due after one year through five years	29,466		30,044		Due after one year through five years	24,766		23,771		26,546		25,217
Due after five years through ten years	16,604		17,042		Due after five years through ten years	11,461		10,697		11,035		9,870
Due after ten years	5,222		5,856		Due after ten years	5,161		4,981		3,731		3,405
	55,684		57,357			45,142		43,146		44,182		41,328
ABS, RMBS and CMBS	1,924		2,034
ABS					ABS	978		957		1,188		1,157
Total	$	57,608	$	59,391	Total	$	46,120	$	44,103	$	45,370	$	42,485

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


Net investment income
($ in millions)	Three months ended March 31,
		2023		2022
Fixed income securities		$	390	$	267
Equity securities		11		36
Mortgage loans		8		8
Limited partnership interests		134		292
Short-term investments		66		2
Other investments		41		40
Investment income, before expense		650		645
Investment expense		(75)		(51)
Net investment income		$	575	$	594

14www.allstate.com

Notes to Condensed Consolidated Financial Statements

~~Net investment income~~

~~Net investment income is as follows:~~


Net gains (losses) on investments and derivatives by asset type													Net gains (losses) on investments and derivatives by asset type
($ in millions)	Three months ended September 30,						Nine months ended September 30,						($ in millions)	Three months ended March 31,
	2017			2016			2017			2016
($ in millions)													($ in millions)		2023		2022
	$	519		$	508		$	1,564		$	1,546				$	(136)	$	(152)
Equity securities	37			31			130			103			Equity securities		167		(347)
Mortgage loans	52			56			157			162			Mortgage loans		—		(1)
Limited partnership interests	223			136			596			383			Limited partnership interests		22		(101)
Short-term investments	9			4			21			11
Other	58			55			174			163
Investment income, before expense	898			790			2,642			2,368
Investment expense	(55		)	(42		)	(154		)	(127		)
Net investment income	$	843		$	748		$	2,488		$	2,241
Derivatives													Derivatives		(52)		318
Other investments													Other investments		13		16
Net gains (losses) on investments and derivatives													Net gains (losses) on investments and derivatives		$	14	$	(267)

~~Realized capital gains and losses~~


Net gains (losses) on investments and derivatives by transaction type
($ in millions)	Three months ended March 31,
		2023		2022
Sales		$	(120)	$	(127)
Credit losses		(12)		(11)
Valuation change of equity investments (1)		198		(447)
Valuation change and settlements of derivatives		(52)		318
Net gains (losses) on investments and derivatives		$	14	$	(267)

~~Realized capital gains and losses by asset type are as follows:~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Fixed income securities $ 41
$ (1 ) $ 78
$ (48 )
Equity securities 57
45
182
(34 )
Mortgage loans 1
—
1
1
Limited partnership interests 21
12
92
25
Derivatives (17 ) (15 ) (40 ) (22 )
Other —
(8 ) 5
(14 )
Realized capital gains and losses $ 103
$ 33
$ 318
$ (92 )

~~Realized capital gains and losses by transaction type are as follows:~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Impairment write-downs $ (23 ) $ (63 ) $ (94 ) $ (185 )
Change in intent write-downs (5 ) (10 ) (43 ) (48 )
Net other-than-temporary impairment losses recognized in earnings (28 ) (73 ) (137 ) (233 )
Sales and other 148
121
495
166
Valuation and settlements of derivative instruments (17 ) (15 ) (40 ) (25 )
Realized capital gains and losses $ 103
$ 33
$ 318
$ (92 )

~~Gross gains~~(1)Includes valuation change of ~~$145 million and $150 million and gross losses of $36 million and $62 million were realized on sales of fixed income and~~ equity securities ~~during~~and certain limited partnership interests where the ~~three months ended September 30, 2017 and 2016, respectively. Gross gains of $521 million and $456 million and gross losses of $161 million and $347 million were realized on sales of fixed income and~~underlying assets are predominately public equity ~~securities during the nine months ended September 30, 2017 and 2016, respectively.~~securities.


Gross realized gains (losses) on sales of fixed income securities
($ in millions)	Three months ended March 31,
		2023		2022
Gross realized gains		$	46	$	66
Gross realized losses		(173)		(218)


Net appreciation (decline) recognized in net income for assets that are still held
($ in millions)	Three months ended March 31,
		2023		2022
Equity securities		$	20	$	(92)
Limited partnership interests carried at fair value		16		38
Total		$	36	$	(54)


Credit losses recognized in net income
($ in millions)	Three months ended March 31,
		2023		2022
Assets
Fixed income securities:

Corporate		$	(9)	$	—

Total fixed income securities		(9)		—
Mortgage loans		—		(1)

Other investments
Bank loans		(3)		(10)
Total credit losses by asset type		$	(12)	$	(11)

Liabilities
Commitments to fund commercial mortgage loans and bank loans		—		—
Total		$	(12)	$	(11)

~~The Allstate Corporation~~ 13

First Quarter 2023 Form 10-Q 15

Notes to Condensed Consolidated Financial Statements

~~Other-than-temporary impairment losses by asset type are as follows:~~

($ in millions) Three months ended September 30, 2017 Three months ended September 30, 2016
Gross
Included
in OCI
Net Gross
Included
in OCI
Net
Fixed income securities:

Corporate $ —
$ —
$ —
$ (13 ) $ —
$ (13 )
ABS —
(1 ) (1 ) —
—
—
RMBS —
—
—
(1 ) —
(1 )
CMBS (1 ) (1 ) (2 ) (3 ) —
(3 )
Total fixed income securities (1 ) (2 ) (3 ) (17 ) —
(17 )
Equity securities (8 ) —
(8 ) (27 ) —
(27 )
Mortgage loans (1 ) —
(1 ) —
—
—
Limited partnership interests (16 ) —
(16 ) (22 ) —
(22 )
Other —
—
—
(7 ) —
(7 )
Other-than-temporary impairment losses $ (26 ) $ (2 ) $ (28 ) $ (73 ) $ —
$ (73 )

Nine months ended September 30, 2017 Nine months ended September 30, 2016
Gross
Included
in OCI
Net Gross
Included
in OCI
Net
Fixed income securities:

Municipal $ (1 ) $ (2 ) $ (3 ) $ —
$ —
$ —
Corporate (9 ) 3
(6 ) (30 ) 7
(23 )
ABS (1 ) (1 ) (2 ) (6 ) —
(6 )
RMBS (1 ) (3 ) (4 ) (1 ) —
(1 )
CMBS (9 ) 1
(8 ) (7 ) 1
(6 )
Total fixed income securities (21 ) (2 ) (23 ) (44 ) 8
(36 )
Equity securities (77 ) —
(77 ) (155 ) —
(155 )
Mortgage loans (1 ) —
(1 ) —
—
—
Limited partnership interests (32 ) —
(32 ) (33 ) —
(33 )
Other (4 ) —
(4 ) (9 ) —
(9 )
Other-than-temporary impairment losses $ (135 ) $ (2 ) $ (137 ) $ (241 ) $ 8
$ (233 )


Unrealized net capital gains and losses included in AOCI
($ in millions)	Fair value		Gross unrealized				Unrealized net gains (losses)
March 31, 2023			Gains		Losses
Fixed income securities	$	44,103	$	211	$	(2,228)	$	(2,017)
Short-term investments	6,722		—		—		—
Derivative instruments	—		—		(2)		(2)
Limited partnership interests (1)							4
Unrealized net capital gains and losses, pre-tax							(2,015)
Other unrealized net capital gains and losses, pre-tax (2)							18
Deferred income taxes							424
Unrealized net capital gains and losses, after-tax							$	(1,573)

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)
Other unrealized net capital gains and losses, pre-tax (2)							23
Deferred income taxes							609
Unrealized net capital gains and losses, after-tax							$	(2,255)

The total amount of other-than-temporary impairment losses included in accumulated other comprehensive income at the time of impairment for fixed income securities, which were not included in earnings, are presented in the following table. The amounts exclude $213 million and $221 million as of September 30, 2017 and December 31, 2016, respectively, of net unrealized gains related to changes in valuation of the fixed income securities subsequent to the impairment measurement date.

($ in millions) September 30, 2017 December 31, 2016
Municipal $ (5 ) $ (8 )
Corporate (3 ) (7 )
ABS (15 ) (21 )
RMBS (80 ) (90 )
CMBS (5 ) (7 )
Total $ (108 ) $ (133 )

14 ~~www.allstate.com~~

~~Rollforwards of the cumulative credit losses recognized in earnings for fixed income securities held as of the end of the period are as follows:~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Beginning balance $ (281 ) $ (331 ) $ (318 ) $ (392 )
Additional credit loss for securities previously other-than-temporarily impaired (3 ) (3 ) (15 ) (14 )
Additional credit loss for securities not previously other-than-temporarily impaired —
(14 ) (8 ) (22 )
Reduction in credit loss for securities disposed or collected 20
12
76
92
Change in credit loss due to accretion of increase in cash flows —
—
1
—
Ending balance $ (264 ) $ (336 ) $ (264 ) $ (336 )

The Company uses its best estimate of future cash flows expected to be collected from the fixed income security, discounted at the security’s original or current effective rate, as appropriate, to calculate a recovery value and determine whether a credit loss exists. 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, including past events, current conditions, and reasonable and supportable assumptions and forecasts, are 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, foreign exchange rates, the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, vintage, 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, sector 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 estimated recovery value is less than the amortized cost of the security, a credit loss exists and an other-than-temporary impairment for the difference between the estimated recovery value and amortized cost is recorded in earnings. The portion of the unrealized loss related to factors other than credit remains classified in accumulated other comprehensive income. 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.

~~The Allstate Corporation~~ 15

~~Unrealized net capital gains and losses~~

(1)Unrealized net capital gains and losses ~~included in accumulated other comprehensive income~~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 ~~as follows:~~not applicable.

(2)Includes amounts recognized for the reclassification of unrealized gains and losses related to noncontrolling interest.

($ in millions)
Fair
value
Gross unrealized
Unrealized net
gains (losses)
September 30, 2017 Gains Losses
Fixed income securities $ 59,391
$ 1,974
$ (191 ) $ 1,783
Equity securities 6,434
1,006
(40 ) 966
Short-term investments 2,198
—
—
—
Derivative instruments ⁽¹⁾
1
2
(4 ) (2 )
Equity method (“EMA”) limited partnerships ⁽²⁾

—
Unrealized net capital gains and losses, pre-tax

2,747
Amounts recognized for:

Insurance reserves ⁽³⁾

—
DAC and DSI ⁽⁴⁾

(203 )
Amounts recognized

(203 )
Deferred income taxes

(893 )
Unrealized net capital gains and losses, after-tax

$ 1,651

~~_______________~~

⁽¹⁾

Change in unrealized net capital gains (losses)

~~Included in the fair value of derivative instruments is $1 millionclassified as assets.~~


⁽²⁾ ($ in millions)	~~Unrealized~~	Three months ended March 31, 2023
Fixed income securities		$	868
Short-term investments		1
Derivative instruments		1
Limited partnership interests		2
Total		872
Other unrealized net capital gains and losses, ~~for limited partnership interests represent the Company’s share of EMA limited partnerships’ other comprehensive income. Fair value and gross~~pre-tax		(5)
Deferred income taxes		(185)
Increase in unrealized net capital gains and losses, ~~are not applicable.~~after-tax

			$	682
⁽³⁾	The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency. Although the Company evaluates premium deficiencies on the combined performance of life insurance and immediate annuities with life contingencies, the adjustment, if any, primarily relates to structured settlement annuities with life contingencies, in addition to annuity buy-outs and certain payout annuities with life contingencies.


⁽⁴⁾	The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.

($ in millions)
Fair
value
Gross unrealized
Unrealized net
gains (losses)
December 31, 2016 Gains Losses
Fixed income securities $ 57,839
$ 1,710
$ (447 ) $ 1,263
Equity securities 5,666
594
(85 ) 509
Short-term investments 4,288
—
—
—
Derivative instruments ⁽¹⁾
5
5
(3 ) 2
EMA limited partnerships

(4 )
Unrealized net capital gains and losses, pre-tax

1,770
Amounts recognized for:

Insurance reserves

—
DAC and DSI

(146 )
Amounts recognized

(146 )
Deferred income taxes

(571 )
Unrealized net capital gains and losses, after-tax

$ 1,053

~~_______________~~

^{Carrying value for limited partnership interests
($ in millions) March 31, 2023 December 31, 2022
EMA Fair Value Total EMA Fair Value Total
Private equity $ 5,546 $ 1,199 $ 6,745 $ 5,372 $ 1,217 $ 6,589
Real estate 1,019 29 1,048 1,013 29 1,042
Other (1) 178 — 178 483 — 483
Total $ 6,743 $ 1,228 $ 7,971 $ 6,868 $ 1,246 $ 8,114}

(1)~~Included in~~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 March 31, 2023 and December 31, 2022, the fair value of ~~derivative instruments is $5 millionclassified as assets.~~

short-term investments totaled $6.72 billion and $4.17 billion, respectively.

16www.allstate.com

Notes to Condensed Consolidated Financial Statements

~~Change in unrealized net capital gains~~

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)	March 31, 2023		December 31, 2022
Bank loans, net	$	698	$	686
Real estate	790		813
Policy loans	120		120
Derivatives	10		1
Other	106		108
Total	$	1,724	$	1,728

Portfolio monitoring and credit losses

~~The change in unrealized net capital gains and losses for the nine months ended September 30, 2017 is as follows:~~

($ in millions)
Fixed income securities $ 520
Equity securities 457
Derivative instruments (4 )
EMA limited partnerships 4
Total 977
Amounts recognized for:
Insurance reserves —
DAC and DSI (57 )
Amounts recognized (57 )
Deferred income taxes (322 )
Increase in unrealized net capital gains and losses, after-tax $ 598

~~Portfolio monitoring~~

Fixed income securitiesThe Company has a comprehensive portfolio monitoring process to identify and evaluate each fixed income ~~and equity~~ security ~~whose carrying value~~that may ~~be other-than-temporarily impaired~~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 ~~security’s decline in fair value is considered other than temporary and is~~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 ~~by discounting~~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 ~~original or~~ current effective rate ~~as appropriate,~~ and ~~compares this~~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, ~~the~~a credit loss ~~component of the impairment~~allowance is recorded in earnings ~~with~~for the ~~remaining amount~~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 ~~factors recognized~~than credit remains classified in ~~other comprehensive income.~~

~~For equity securities,~~AOCI. If the Company ~~considers various factors, including whether it has~~determines that the ~~intent and ability~~fixed income security does not have sufficient cash flow or other information to ~~hold~~estimate a recovery value for the ~~equity~~ security, ~~for a period of time sufficient to recover its cost basis. Where~~ the Company ~~lacks~~may conclude that the ~~intent and ability to hold to recovery, or believes the recovery period is extended, the equity security’s~~entire decline in fair value is ~~considered other than temporary~~deemed to be credit related and the loss is recorded in earnings.

~~For~~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 $400 million and ~~equity securities managed by third parties, either~~$389 million as of March 31, 2023 and December 31, 2022, respectively, and is reported within the ~~Company has contractually retained its decision making authority as it pertains to selling securities that are in an unrealized loss position or it recognizes any unrealized loss at the end~~accrued investment income line of the ~~period through a charge~~Condensed Consolidated Statements of Financial Position. The Company monitors accrued interest and writes off amounts when they are not expected to ~~earnings.~~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 ~~(for fixed income securities) or cost (for equity securities)~~ is below internally established thresholds. The process also includes the monitoring of other ~~impairment~~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 ~~other-than-temporary impairment~~credit losses using all reasonably available information relevant to the collectability or recovery of the security. Inherent in the Company’s evaluation of ~~other-than-temporary impairment~~credit losses for these ~~fixed income and equity~~ 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

First Quarter 2023 Form 10-Q 17

Notes to Condensed Consolidated Financial Statements

decline in fair value ~~is other than temporary~~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 ~~length of time and~~ extent to which the fair value has been less than amortized ~~cost or~~ cost.


Rollforward of credit loss allowance for fixed income securities
	Three months ended March 31,
($ in millions)		2023		2022
Beginning balance		$	(13)	$	(6)
Credit losses on securities for which credit losses not previously reported		—		—
Net increases related to credit losses previously reported		(9)		—
Reduction of allowance related to sales		—		—
Write-offs		—		—
Ending balance		$	(22)	$	(6)

Components of credit loss allowance
Corporate bonds		$	(20)	$	(6)
ABS		(2)		—
Total		$	(22)	$	(6)


Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position
($ in millions)	Less than 12 months					12 months or more					Total unrealized losses
	Number of issues	Fair value		Unrealized losses		Number of issues	Fair value		Unrealized losses
March 31, 2023
Fixed income securities
U.S. government and agencies	70	$	2,576	$	(41)	104	$	3,216	$	(111)	$	(152)
Municipal	1,183	1,632		(27)		1,860	2,376		(213)		(240)
Corporate	970	8,673		(286)		1,777	14,543		(1,501)		(1,787)
Foreign government	15	197		(1)		87	452		(23)		(24)
ABS	74	160		(5)		152	669		(20)		(25)
Total fixed income securities	2,312	$	13,238	$	(360)	3,980	$	21,256	$	(1,868)	$	(2,228)
Investment grade fixed income securities	2,132	$	12,415	$	(313)	3,601	$	18,633	$	(1,509)	$	(1,822)
Below investment grade fixed income securities	180	823		(47)		379	2,623		(359)		(406)
Total fixed income securities	2,312	$	13,238	$	(360)	3,980	$	21,256	$	(1,868)	$	(2,228)

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)

~~The Allstate Corporation~~ 17

18www.allstate.com

Notes to Condensed Consolidated Financial Statements

~~The following table summarizes the gross unrealized losses and fair value of~~


Gross unrealized losses by unrealized loss position and credit quality as of March 31, 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)	$	(1,669)	$	(296)	$	(1,965)
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost, net (3) (4)	(153)		(110)		(263)
Total unrealized losses	$	(1,822)	$	(406)	$	(2,228)

(1)Below investment grade fixed income ~~and equity~~ securities ~~by the length of time~~include $41 million that ~~individual securities~~ have been in ~~a continuous~~an unrealized loss ~~position.~~position for less than twelve months.

($ 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, 2017

Fixed income securities

U.S. government and agencies 64
$ 2,625
$ (7 ) 7
$ 93
$ (1 ) $ (8 )
Municipal 938
1,736
(14 ) 83
172
(8 ) (22 )
Corporate 560
7,468
(74 ) 94
1,370
(58 ) (132 )
Foreign government 68
697
(14 ) —
—
—
(14 )
ABS 44
379
(1 ) 10
34
(8 ) (9 )
RMBS 84
42
—
176
57
(2 ) (2 )
CMBS 5
20
(2 ) 4
15
(2 ) (4 )
Total fixed income securities 1,763
12,967
(112 ) 374
1,741
(79 ) (191 )
Equity securities 129
544
(30 ) 17
48
(10 ) (40 )
Total fixed income and equity securities 1,892
$ 13,511
$ (142 ) 391
$ 1,789
$ (89 ) $ (231 )
Investment grade fixed income securities 1,689
$ 12,345
$ (96 ) 323
$ 1,530
$ (53 ) $ (149 )
Below investment grade fixed income securities 74
622
(16 ) 51
211
(26 ) (42 )
Total fixed income securities 1,763
$ 12,967
$ (112 ) 374
$ 1,741
$ (79 ) $ (191 )

December 31, 2016

Fixed income securities

U.S. government and agencies 46
$ 943
$ (9 ) —
$ —
$ —
$ (9 )
Municipal 1,310
3,073
(76 ) 8
29
(11 ) (87 )
Corporate 862
13,343
(256 ) 83
678
(63 ) (319 )
Foreign government 41
225
(4 ) —
—
—
(4 )
ABS 31
222
(1 ) 14
109
(10 ) (11 )
RMBS 89
53
(1 ) 179
91
(7 ) (8 )
CMBS 15
59
(4 ) 4
15
(5 ) (9 )
Redeemable preferred stock 1
—
—
—
—
—
—
Total fixed income securities 2,395
17,918
(351 ) 288
922
(96 ) (447 )
Equity securities 195
654
(56 ) 46
165
(29 ) (85 )
Total fixed income and equity securities 2,590
$ 18,572
$ (407 ) 334
$ 1,087
$ (125 ) $ (532 )
Investment grade fixed income securities 2,202
$ 15,678
$ (293 ) 201
$ 493
$ (51 ) $ (344 )
Below investment grade fixed income securities 193
2,240
(58 ) 87
429
(45 ) (103 )
Total fixed income securities 2,395
$ 17,918
$ (351 ) 288
$ 922
$ (96 ) $ (447 )

~~As of September 30, 2017, $188 million of the $231 million unrealized losses are related~~(2)Related to securities with an unrealized loss position less than 20% of amortized cost, ~~or cost,~~net, the degree of which suggests that these securities do not pose a high risk of ~~being other-than-temporarily impaired. Of the $188 million, $133 million are related to unrealized losses on~~having credit losses.

(3)Below investment grade fixed income securities ~~and $28~~include $104 million ~~are related to equity securities. Of the remaining $27 million, $16 million~~that have been in an unrealized loss position for ~~less than 12~~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 ~~a rating of~~or AAA, AA, A or BBB from S&P Global Ratings (“S&P”), ~~a comparable rating from another nationally recognized rating agency,~~ 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~~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 ~~and/~~or wider credit spreads since the time of initial purchase.

~~As of September 30, 2017, the remaining $43 million of~~ The unrealized losses are ~~related~~expected to reverse as the securities in unrealized loss positions greater than or equal to 20% of amortized cost or cost. Investment grade fixed income securities comprising $16 million of these unrealized losses were 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. Of the $43 million, $15 million are related to below investment grade fixed income securities and $12 million are related to equity securities. Of these amounts, $2 million are related to below investment grade fixed income securities that had been in an unrealized loss position greater than or equal to 20% of amortized cost for a period of twelve or more consecutive months as of September 30, 2017.

18 ~~www.allstate.com~~

approach maturity.

ABS ~~RMBS and CMBS~~ 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. ~~Unrealized losses on equity securities are primarily related to temporary equity market fluctuations of securities that are expected to recover.~~

As of ~~September 30, 2017,~~March 31, 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. As

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 ~~September 30, 2017,~~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 ~~had~~considers origination vintage year and property level information such as debt service coverage, property type, property location and collateral value. For bank loans, the ~~intent~~Company considers the credit rating of the borrower, credit spreads and ~~ability~~type of loan. After the reasonable and supportable forecast period, the Company’s model reverts to ~~hold equity securities with unrealized losses for~~historical loss trends.

Loans are evaluated on a ~~period of time sufficient for them to recover.~~

~~Limited partnerships~~

~~As of September 30, 2017 and December 31, 2016, the carrying value of equity method limited partnerships totaled $5.26 billion and $4.53 billion, respectively.~~pooled basis when they share similar risk characteristics. The Company recognizes an impairment loss for equity method limited partnerships when evidence demonstrates that the loss is other than temporary. Evidence of a loss in value that is other than temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of the investee to sustain a level of earnings that would justify the carrying amount of the investment.

As of September 30, 2017 and December 31, 2016, the carrying value for cost method limited partnerships was $1.34 billion and $1.28 billion, respectively. To determine if an other-than-temporary impairment has occurred, the Company evaluates whether an impairment indicator has occurred in the period that may have a significant adverse effect on the carrying value of the investment. Impairment indicators may include: significantly reduced valuations of the investments held by the limited partnerships; actual recent cash flows received being significantly less than expected cash flows; reduced valuations based on financing completed at a lower value; completed sale of a material underlying investment at a price significantly lower than expected; or any other adverse events since the last financial statements received that might affect the fair value of the investee’s capital. Additionally, the Company’s portfolio monitoring process includes a quarterly review of all cost method limited partnerships to identify instances where the net asset value is below established thresholds for certain periods of time, as well as investments that are performing below expectations, for further impairment consideration. If a cost method limited partnership is other-than-temporarily impaired, the carrying value is written down to fair value, generally estimated to be equivalent to the reported net asset value.

~~Mortgage~~monitors loans

~~Mortgage loans are evaluated for impairment on a specific loan basis~~ through a quarterly credit monitoring process to determine when they no longer share similar risk characteristics and ~~review of key~~are to be evaluated individually when estimating credit ~~quality indicators. Mortgage loans~~losses.

Loans are considered impaired when it is probable that the Company will not collect the contractual principal and interest. Valuation allowances are established for impaired loans to reduce the carrying value to the fair value of the collateral less costs to sell or the present value of the loan’s expected future repayment cash flows discounted at the loan’s original effective interest rate. Impaired mortgage loans may not have a valuation allowance when the fair value of the collateral less costs to sell is higher than the carrying value. Valuation allowances are adjusted for subsequent changes in the fair value of the collateral less costs to sell or present value of the loan’s expected future repayment cash flows. Mortgage loans are chargedwritten off against their corresponding ~~valuation~~ allowances when there is no reasonable expectation of recovery. ~~The impairment evaluation is non-statistical in respect to~~If a loan recovers after a write-off, the ~~aggregate portfolio but considers facts and circumstances attributable to each loan. It is not considered probable that additional impairment~~estimate of expected credit losses ~~beyond those identified on a specific loan basis, have been incurred as of September 30, 2017.~~includes the expected recovery.

Accrual of income is suspended for ~~mortgage~~ 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 ~~mortgage~~ loans on ~~nonaccrual~~non-accrual status are generally recorded as a reduction of ~~carrying value.~~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)	March 31,		December 31,
	2023		2022
Mortgage loans	$	3	$	3
Bank Loans	4		3

First Quarter 2023 Form 10-Q 19

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 ~~loans~~loan credit loss allowances are ~~evaluated for impairment.~~estimated. Debt service coverage ratio represents the amount of estimated cash ~~flows~~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
	March 31, 2023														December 31, 2022
($ in millions)	2018 and prior		2019		2020		2021		2022		Current		Total		Total
Below 1.0	$	—	$	—	$	—	$	—	$	18	$	—	$	18	$	18
1.0 - 1.25	10		—		10		—		—		—		20		42
1.26 - 1.50	41		66		—		12		7		8		134		151
Above 1.50	108		172		42		185		77		32		616		558
Amortized cost before allowance	$	159	$	238	$	52	$	197	$	102	$	40	$	788	$	769
Allowance													(7)		(7)
Amortized cost, net													$	781	$	762

~~The Allstate Corporation~~ 19

~~The following table reflects the carrying value of non-impaired fixed rate and variable rate mortgage loans summarized by debt service coverage ratio distribution.~~

($ in millions) September 30, 2017 December 31, 2016
Debt service coverage ratio distribution
Fixed rate
mortgage
loans

Variable rate
mortgage
loans
Total
Fixed rate
mortgage
loans

Variable rate
mortgage
loans
Total
Below 1.0 $ 4
$ —
$ 4
$ 60
$ —
$ 60
1.0 - 1.25 349
—
349
324
—
324
1.26 - 1.50 1,111
—
1,111
1,293
—
1,293
Above 1.50 2,804
39
2,843
2,765
39
2,804
Total non-impaired mortgage loans $ 4,268
$ 39
$ 4,307
$ 4,442
$ 39
$ 4,481

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

temporary, or there are other risk mitigating ~~circumstances~~factors such as additional collateral, escrow balances or borrower guarantees.

~~The net carrying value of impaired mortgage loans is as follows:~~

($ in millions) September 30, 2017 December 31, 2016
Impaired mortgage loans with a valuation allowance $ 15
$ 5
Impaired mortgage loans without a valuation allowance —
—
Total impaired mortgage loans $ 15
$ 5
Valuation allowance on impaired mortgage loans $ 4
$ 3

~~The average balance of impaired loans was $8 million and $6 million for the nine months ended September 30, 2017 and 2016, respectively.~~

~~The rollforward of the valuation allowance on impaired mortgage loans is as follows:~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Beginning balance $ 3
$ 3
$ 3
$ 3
Net increase in valuation allowance 1
—
1
—
Charge offs —
—
—
—
Ending balance $ 4
$ 3
$ 4
$ 3

Payments on all mortgage loans were current as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016.~~2022.


Rollforward of credit loss allowance for mortgage loans
	Three months ended March 31,
($ in millions)		2023		2022
Beginning balance		$	(7)	$	(6)

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

Ending balance		$	(7)	$	(7)

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.

20www.allstate.com

Notes to Condensed Consolidated Financial Statements


Bank loans amortized cost by credit rating and year of origination
	March 31, 2023														December 31, 2022
($ in millions)	2018 and prior		2019		2020		2021		2022		Current		Total		Total
NAIC 2 / BBB	$	—	$	7	$	5	$	45	$	4	$	—	$	61	$	54
NAIC 3 / BB	5		4		3		202		16		22		252		266
NAIC 4 / B	22		17		15		223		38		32		347		329
NAIC 5-6/ CCC and below	31		34		1		16		6		2		90		94
Amortized cost before allowance	$	58	$	62	$	24	$	486	$	64	$	56	$	750	$	743
Allowance													(52)		(57)
Amortized cost, net													$	698	$	686


Rollforward of credit loss allowance for bank loans
($ in millions)	Three months ended March 31,
		2023		2022
Beginning balance		$	(57)	$	(61)

Net increases related to credit losses		(3)		(10)
Reduction of allowance related to sales		5		3
Write-offs		3		—

Ending balance		$	(52)	$	(68)



Note 5							Fair Value of Assets and Liabilities

~~6. Fair Value of Assets and Liabilities~~

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

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

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


~~(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.~~

(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 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 ~~employee termination~~the following costs related to these programs:

•Employee- severance and relocation benefits

•Exit - contract termination penalties and ~~post-exit rent expenses in connection with these programs,~~real estate costs primarily related to accelerated amortization of right-of-use assets and ~~non-cash charges resulting from pension benefit payments made~~related leasehold improvements at facilities to ~~agents and certain legal expenses incurred in connection with the 1999 reorganization of Allstate’s multiple agency programs to a single exclusive agency program.~~ be vacated

The expenses related to these activities are included in the Condensed Consolidated Statements of Operations as restructuring and related charges and totaled ~~$14~~$27 million and $5$12 million during the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, respectively, and $77 million and $21 million~~2022, respectively.

Restructuring expenses during the ~~nine months ended September 30, 2017 and 2016, respectively. Restructuring expenses in 2017~~first quarter of 2023 are primarily due to real estate costs related to ~~Allstate brand claims process changes~~facilities being vacated. The Company continues to identify ways to improve operating efficiency and ~~office closures due to increased efficiencies and improvements~~reduce cost which may result in digital technology, a voluntary termination program extended to certain employees, outsourcing of certain functions, and realigning or consolidating departments within the Allstate, Esurance and Encompass operations.

~~The following table presents changes~~additional restructuring charges in the ~~restructuring liability during the nine months ended September 30, 2017.~~future.


Restructuring activity during the period										Restructuring activity during the period
($ in millions)	Employee costs			Exit costs			Total liability			($ in millions)	Employee costs		Exit costs		Total liability
Balance as of December 31, 2016	$	—		$	2		$	2
Restructuring liability as of December 31, 2022										Restructuring liability as of December 31, 2022	$	27	$	7	$	34
Expense incurred	46			18			64			Expense incurred	6		28		34
Adjustments to liability	(4		)	—			(4		)	Adjustments to liability	(2)		(5)		(7)
Payments applied against liability	(24		)	(7		)	(31		)
Balance as of September 30, 2017	$	18		$	13		$	31
Payments and non-cash charges										Payments and non-cash charges	(16)		(28)		(44)
Restructuring liability as of March 31, 2023										Restructuring liability as of March 31, 2023	$	15	$	2	$	17

The payments applied against the liability for employee costs primarily reflect severance costs, and the payments for exit costs generally consist of post-exit rent expenses and contract termination penalties. As of ~~September 30, 2017,~~March 31, 2023, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled ~~$101~~$23 million for employee costs and ~~$80~~$169 million for exit costs.

~~11.~~


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.~~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 ~~and/~~or assessments from these facilities.

Guarantees

The Company provides residual value guarantees on Company leased automobiles. If all outstanding leases were terminated effective September 30, 2017, the Company’s maximum obligation pursuant to these guarantees, assuming the automobiles have no residual value, would be $32 million as of September 30, 2017. The remaining term of each residual value guarantee is equal to the term of the underlying lease that ranges from less than one year to four years. Historically, the Company has not made any material payments pursuant to these guarantees.

Related to the sale of LBL on April 1, 2014, ALIC agreed to indemnify Resolution Life Holdings, Inc. in connection with certain representations, warranties and covenants of ALIC, and certain liabilities specifically excluded from the transaction, subject to specific contractual limitations regarding ALIC’s maximum obligation. Management does not believe these indemnifications will have a material effect on results of operations, cash flows or financial position of the Company.

Related to the disposal through reinsurance of substantially all of Allstate Financial’s variable annuity business to Prudential in 2006, the Company and its consolidated subsidiaries, ALIC and ALNY, have agreed to indemnify Prudential for certain pre-closing contingent liabilities (including extra-contractual liabilities of ALIC and ALNY and liabilities specifically excluded from the transaction) that ALIC and ALNY have agreed to retain. In addition, the Company, ALIC and ALNY will each indemnify Prudential for certain post-closing liabilities that may arise from the acts of ALIC, ALNY and their agents, including certain liabilities arising from ALIC’s and ALNY’s provision of transition services. The reinsurance agreements contain no limitations or indemnifications with regard to insurance risk transfer and transferred all of the future risks and responsibilities for performance on the underlying variable annuity contracts to Prudential, including those related to benefit guarantees. Management does not believe this agreement will have a material effect on results of operations, cash flows or financial position of the Company.

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~~third-party lawsuits.

~~The Allstate Corporation~~ 39

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

First Quarter 2023 Form 10-Q 39

Notes to Condensed Consolidated Financial Statements

excluded from the transaction, subject to specific contractual limitations regarding AIC’s maximum obligation. Management does not believe these indemnifications will have a material effect on results of operations, cash flows or financial position of the Company.

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

The aggregate liability balance related to all guarantees was not material as of ~~September 30, 2017.~~March 31, 2023.

Regulation and ~~Compliance~~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 ~~agent~~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 Department of Labor,~~ 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.

40www.allstate.com

Notes to Condensed Consolidated Financial Statements

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

40 ~~www.allstate.com~~

of the loss can be reasonably estimated. The Company does not establish accruals for such matters when the Company does not believe both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company’s assessment of whether a loss is reasonably possible or probable is based on its assessment of the ultimate outcome of the matter following all appeals. The Company does not include potential recoveries in its estimates of reasonably possible or probable losses. Legal fees are expensed as incurred.

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

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

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

These developments may include information learned through the discovery process, rulings on dispositive motions, settlement discussions, information obtained from other sources, experience from managing these and other matters, and other rulings by courts, arbitrators or others. When the Company possesses sufficient appropriate information to develop an estimate of the reasonably possible loss or range of loss above the amount accrued, if any, that estimate is aggregated and disclosed below. There 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 ~~$300~~$148 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 ~~litigating two class action cases~~managing various disputes in ~~California in which~~Florida that raise challenges to the ~~plaintiffs allege off-the-clock wage~~Company’s practices, processes, and ~~hour claims. Plaintiffs in both cases seek recovery of unpaid compensation, liquidated damages,~~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 ~~attorneys’ fees~~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 ~~costs.~~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

First Quarter 2023 Form 10-Q 41

Notes to Condensed Consolidated Financial Statements

personal injury protection statute. The ~~first case~~11th Circuit is ~~Christopher Williams,~~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 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: Clark v. Allstate Vehicle and Property Insurance Company (Circuit Court of Independence Co., Ark. filed February 2016); 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 Shumway, et al. v Allstate Vehicle and Property Insurance Company (D. Ariz. filed April 2023). No classes have been certified in any of these matters. The ~~Williams~~ ~~case is pending in Los Angeles Superior Court and was filed in December 2007. The case involves two classes. The first class includes auto field physical damage adjusters employed~~court granted preliminary approval of a class-wide settlement in the ~~state of California from January 1, 2005 to the date of final judgment, to the extent the~~following cases: Perry v. Allstate Indemnity Company, failed to pay for off-the-clock work to those adjusters who performed certain duties prior to their first assignments. The other class includes all non-exempt employees in California from December 19, 2006 until June 2011 who received pay statements fromet al. (N.D. Ohio filed May 2016); Lado v. Allstate ~~which allegedly did not comply with California law. On April 13, 2016, the court granted the Company’s motion to~~

~~The~~Vehicle and Property Insurance Company (S.D. Ohio filed March 2020); Maniaci v. Allstate ~~Corporation~~ 41

~~decertify both classes; both classes are thus dissolved unless and until the appellate court orders the classes recertified. On May 17, 2016, plaintiffs~~Insurance Company (N.D. Ohio filed their notice of appeal. Plaintiff’s opening brief was filed on November 22, 2016. Allstate’s response was filed on May 16, 2017. Plaintiff’s reply brief was filed on July 6, 2017. Oral argument occurred on October 26, 2017.

~~The second case is~~ ~~Jack Jimenez,~~March 2020); Ferguson-Luke, et al. v. Allstate Property and Casualty Insurance Company. ~~Jimenez~~ ~~was~~ (N.D. Ohio filed in the U.S. District Court for the Central District of California in September 2010. The plaintiffs allege that they worked off-the-clock; they also allege other California Labor Code violations resulting from purported unpaid overtime. In April 2012, the court certified a class that includes all adjusters in the state of California, except auto field adjusters, from September 29, 2006 to final judgment. Allstate appealed the court’s decision to certify the class, first to the Ninth Circuit Court of Appeals and then to the U.S. Supreme Court. On June 15, 2015, the U.S. Supreme Court denied Allstate’s petition for a writ of certiorari. The case was scheduled for trial on September 27, 2016. On May 4, 2016, the court vacated that trial date in part because the court had not approved a trial plan. No trial date has been scheduled because the parties continue to wait for the court’s approval of a trial plan.

~~In addition to the California class actions, the case of~~ ~~Maria Victoria Perez and Kaela Brown,~~2020); Mitchell, et al. v. Allstate Vehicle and Property Insurance Company, ~~was~~ et al. (S.D. Ala. filed ~~in the U.S. District Court for the Eastern District of New York. Plaintiffs allege that no-fault claim adjusters have been improperly classified as exempt employees under New York Labor Law~~August 2021); and ~~the Fair Labor Standards Act. The case was~~Hester, et al. v. Allstate Vehicle and Property Insurance Company, et al. (St. Clair Co., Ill. filed in April 2011, and the plaintiffs are seeking unpaid wages, liquidated damages, injunctive relief, compensatory and punitive damages, and attorneys’ fees. On September 16, 2014, the court certified a class of no-fault adjusters under New York Labor Law and refused to decertify a Fair Labor Standards Act class of no-fault adjusters. There are 105 membersJune 2020) (as part of the ~~Fair Labor Standards Act class~~proposed class-wide settlement, the plaintiff and ~~137 members of the New York Labor Law class. The parties are engaged~~defendant in ~~discovery.~~

~~The~~Thaxton v. Allstate Indemnity Company has been involved in litigation challenging whether the Company’s personal injury protection policies include sufficient language providing notice of the Company’s election to apply the fee schedules. The Florida personal injury protection statute permits insurers to pay personal injury protection benefits for reasonable medical expenses based on certain benefit reimbursement limitations which are authorized by the personal injury protection statute (generally referred to as “fee schedules”) resulting from automobile accidents.

~~On January 26, 2017, the Florida Supreme Court issued its decision in~~ ~~Allstate Insurance Company v. Orthopedic Specialists, et al.~~ (Madison Co., ~~holding that Allstate’s language was clear and unambiguous and provided adequate notice of its intent to use the fee schedules. On February 7, 2017, Orthopedic Specialists~~Ill. filed ~~a motion for rehearing, which the Florida Supreme Court denied on March 27, 2017. Thus, the Florida Supreme Court’s decision is final.~~

~~In light of this ruling, the fee schedule issue is expected to be resolved favorably to Allstate in other pending cases. There~~July 2020) were ~~three other cases with petitions for leave to appeal~~added to the Florida Supreme Court pending. In those cases, three District Courts of Appeal had previously ruled in favor of Allstate. The Florida Supreme Court issued “show cause” orders in each of those appeals directing the providers to file a response explaining why the ~~Orthopedic Specialists~~ ~~decision is not controlling and why the Florida Supreme Court should not decline to exercise jurisdiction. In one appeal, the provider acknowledged that~~ ~~Orthopedic Specialists~~ ~~governs and the court declined jurisdiction in that appeal. In the other two appeals, the providers asserted that their petitions to appeal should be granted because~~ ~~Orthopedic Specialists~~ was wrongly decided, repeating the arguments previously asserted. Allstate’s responses were filed on May 8, 2017. On August 4, 2017, the Florida Supreme Court issued orders in both of those cases stating that the court was declining to exercise jurisdiction in those appeals. Accordingly, all proceedings on the fee schedule issue in the Florida Supreme Court have been concluded in Allstate’s favor.Hester complaint).

~~This fee schedule issue has also been the subject of thousands of individual lawsuits filed against Allstate in Florida. The decision by the Florida Supreme Court~~has established Florida law on the sufficiency of Allstate’s fee schedule policy language that is binding on all Florida courts. Allstate intends to seek final resolution in its favor of all fee schedule claims currently in litigation as well as those not in litigation. Allstate may seek restitution from some plaintiffs for attorneys’ fees and costs.

Providers continue to pursue individual suits under various theories challenging the amounts paid when Allstate pays personal injury protection benefits under the fee schedule limitations. Allstate is vigorously asserting both procedural and substantive defenses to these suits.

~~Other proceedings~~

The Company is defending ~~a consolidated proceeding relating to the reorganization of its agent sales force~~putative class actions pending in ~~2000, when~~multiple states alleging that the Company ~~discontinued employee agent programs, terminated~~underpays total loss vehicle physical damage claims on auto policies. The alleged systematic underpayments result from one or more of the ~~contracts~~following theories: (a) the third party valuation tool used by the Company as part of ~~its employee agents, and offered those agents~~a comprehensive adjustment process is allegedly flawed, biased, or contrary to applicable law; or (b) the ~~opportunity to become Allstate Exclusive Agent independent contractors~~ Company allegedly does not pay sales tax, title fees, registration fees, and/or ~~to take severance benefits in exchange for a release of claims.~~ other specified fees that are allegedly mandatory under policy language or state legal authority.

The ~~consolidated proceeding, captioned~~ ~~Gene Romero, et al.~~following cases are currently pending against the Company: Kronenberg v. Allstate Insurance Company ~~et al.~~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); Cotton v. Allstate Fire and Casualty Insurance Company (Cir. Ct. of Cook Co. Ill.,

Chancery Div. filed October 2020); Bass v. Imperial Fire and Casualty Insurance Company (W.D. La. filed February 2022); Cummings v. Allstate Property and Casualty Insurance Company (M.D. La. filed April 2022); Slaughter v. Esurance Property and Casualty Insurance Company (Cir. Ct. of Cook Co, Ill., Chancery Div. filed September 2022); and Kanak v. Allstate Fire and Casualty Insurance Company (Cir. Ct. of Cook Co., Ill., Chancery Div. filed September 2022).

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

Other proceedings The Company is ~~pending~~defending against an investigatory hearing before the California Insurance Commissioner concerning the private passenger automobile insurance rating practices of Allstate Insurance Company and Allstate Indemnity Company in California. The investigatory hearing is captioned: In the Matter of the Rating Practices of Allstate Insurance Company and Allstate Indemnity Company. Pursuant to the Notice of Hearing issued by the California Insurance Commissioner, the California Insurance Commissioner is investigating: (1) whether Allstate has potentially violated California insurance law by using illegal price optimization; (2) how Allstate implemented any such potentially illegal price optimization in its private passenger auto insurance rates and/or class plans; and (3) how such potentially illegal price optimization impacted Allstate’s private passenger auto insurance policyholders. Fact discovery has been completed in the ~~United States District Court~~investigatory hearing. The hearing is scheduled for ~~the Eastern District of Pennsylvania.~~May 22, 2023.

~~This matter has~~Inre The Allstate Corp. Securities Litigation is a ~~long and complex history, only relevant portions of which are summarized here. The case began in 2001 as two separate putative~~certified class actions filed by approximately 32 former employee agents. In one case, plaintiffs challenged the reorganization alleging claims under the Age Discrimination in Employment Act (“ADEA”), interference with benefits under ERISA, breach of contract, and breach of fiduciary duty. Plaintiffs also challenged the release of claims on various grounds

42 ~~www.allstate.com~~

including alleging that the release was retaliatory under the ADEA and ERISA. In the other case, plaintiffs challenged certain amendments to the Agents Pension Plan and sought to have service as Exclusive Agent independent contractors count toward eligibility for benefits. Plaintiffs sought various relief, including back pay, compensatory and punitive damages, liquidated damages, lost investment capital, loss of benefits, repeal of the challenged plan amendments and attorneys’ fees.

In February, 2014, the court addressed the validity and enforceability of the release and determined that the question of whether the releases were voluntarily signed raised disputed issues of fact to be resolved at trial. The court also held that the release, if valid, would bar all claims. ~~In late 2014, the court~~denied plaintiffs’ motion to certify a class for purposes of determining whether the releases were signed voluntarily and ordered that all statutes of limitations would resume running, after which approximately 460 additional individual plaintiffs filed separate similar lawsuits or sought to intervene.

A jury trial was held in June, 2015, to determine whether the releases of ten plaintiffs were knowingly and voluntarily signed. The jury found that two plaintiffs signed their releases voluntarily and eight plaintiffs did not.

~~On May 2, 2016, a consolidated amended complaint was~~action filed on ~~behalf of 498 plaintiffs, most of whom had previously filed separate lawsuits or intervened. On July 6,~~November 11, 2016 the court denied the Company’s motion to dismiss plaintiffs’ state law breach of contract and fiduciary duty claims but granted dismissal of plaintiffs’ retaliation claims under the ADEA and ERISA challenging the release of claims.

The court then separated the case into phases to address “common issues” in plaintiffs’ claims, beginning with: (a) “Phase I” addressing claims by 118 plaintiffs alleging that certain plan amendments violated ERISA’s anti-cutback provision by eliminating an accrued benefit and (b) “Phase II” addressing all plaintiffs’ claims for alleged interference with employee benefits under ERISA and disparate impact under the ADEA.

A bench trial on Phase I claims was held in December, 2016. The court ruled that (i) the Company’s 1991 amendments to the Plan did not violate ERISA by improperly cutting back on plaintiffs’ benefits, and (ii) the Company’s interpretation of the Plan’s definition of “retire” violated ERISA’s anti-cutback rule. The court required the parties to provide further information, in the form of an accounting, to determine whether any plaintiffs suffered a loss based on any such cutback. Plaintiffs have asserted that only two of the 118 plaintiffs suffered a loss as a result of the court’s order. The Company contends that no plaintiff suffered a compensable loss and that judgment should be entered in favor of the Company. We await a final ruling by the court.

In Phase II, the court granted the Company’s motion for summary judgment on both the ADEA disparate impact and ERISA interference with benefits claims. This ruling resolved these claims in the trial court as to all plaintiffs.

In June, 2017, the court entered an order establishing Phases III and IV of the litigation. In Phase III, the remaining claims of the eight individual plaintiffs who reside in the Eastern District of Pennsylvania were to be litigated, possibly culminating in two separate jury trials in early 2018. The Company filed several motions for summary judgment on the Phase III claims. The court granted the Company’s motion as to the Phase III plaintiffs’ ADEA disparate treatment claims and as to a retaliation claim that had been asserted by one of the Phase III plaintiffs. The court denied the Company’s motion on the Phase III plaintiffs’ breach of contract and breach of fiduciary duty claims.

The Company and 82 individual plaintiffs, including all eight of the Phase III plaintiffs whose remaining claims were set for trial in early 2018, recently reached agreements in principle to settle all claims of those plaintiffs on a confidential basis, subject to negotiating and executing appropriate written settlement agreements. Three other plaintiffs voluntarily dismissed their claims leaving 413 plaintiffs in this litigation.

The parties are currently engaging in further written discovery relating to the claims of the remaining plaintiffs (Phase IV of the litigation) pending the court’s determination of the proper venue for depositions, dispositive motions, and trials of those claims.

The final resolution of these matters is subject to various uncertainties and complexities including how trials, post-trial motions, possible appeals with respect to the validity of the release, and any rulings on the merits will be resolved.

The below shareholder derivative action is disclosed pursuant to SEC disclosure requirements for these types of matters, and the putative class action has been disclosed because both matters involve similar allegations. On August 3, 2017, a plaintiff alleging to be a stockholder in the Company filed a shareholder derivative complaint in the Circuit Court for Cook County, Chancery Division. The action is styled ~~Biefeldt v. Wilson, et al.~~, Case No. 2017 CH 10676 (Cook County, Ill.). In the complaint, plaintiff purports to assert claims on behalf of the Company for alleged breaches of fiduciary duty based on allegations that are similar to those asserted in the securities action described below. The complaint names as defendants the Company’s chairman and chief executive officer, its president, its chief financial officer and the members of the board of directors during the period of the alleged misstatements or omissions regarding auto claims frequency. By agreement, the time to respond to the complaint has been extended through and including November 13, 2017. The complaint seeks, on behalf of the Company, an unspecified amount of damages and various forms of equitable relief.

~~The Allstate Corporation~~ 43

~~In November 2016, a putative class action was filed~~ in the United States District Court for the Northern District of Illinois against the Company and ~~several~~two of its officers asserting claims under the federal securities laws. ~~The action is titled~~ ~~In re The~~Plaintiffs allege that they purchased Allstate ~~Corp. Securities Litigation, No. 1:16-cv-10510 (N.D. Ill.). In March 2017, lead plaintiffs filed a consolidated amended complaint. In~~common stock during the ~~complaint, plaintiffs~~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 ~~during the period from~~between October ~~29,~~ 2014 toand August 3, 2015. ~~The complaint~~

Plaintiffs further ~~alleges~~allege that a senior officer engaged in stock option exercises ~~and sales~~ during that time allegedly while in possession of material nonpublic information about Allstate brand auto insurance claim ~~frequency that had not been disclosed.~~frequency. The ~~consolidated amended complaint names as defendants the~~ Company, its chairman, president and chief executive officer, and its ~~president. Plaintiffs assert claims under sections 10(b) and 20(a) of~~former president are the ~~Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. On June 1, 2017, all defendants filed motions~~named defendants. After the court denied their motion to dismiss on February 27, 2018, defendants answered the ~~consolidated amended~~ complaint, ~~for failure to state a claim. Briefing on the motion was completed in September 2017. The Company and the other defendants dispute~~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 ~~seeks an unspecified amount~~to add the City of ~~damages, costs~~Providence Employee Retirement System as a proposed class representative and ~~attorney’s fees~~on September 12, 2018, the amended complaint was filed. A class was

42www.allstate.com

Notes to Condensed Consolidated Financial Statements

certified on March 26, 2019, vacated by the U.S. Court of Appeals for the Seventh Circuit on July 16, 2020 and ~~such other relief as~~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 ~~deems appropriate.~~

~~Asbestos~~entered its order granting summary judgment in part (as to plaintiffs’ claims relating to certain statements made in October 2014) and ~~environmental~~

Allstate’s reserves for asbestos claims were $908 million and $912 million, net of reinsurance recoverables of $428 million and $444 million, as of September 30, 2017 and December 31, 2016, respectively. Reserves for environmental claims were $175 million and $179 million, net of reinsurance recoverables of $35 million and $40 million, as of September 30, 2017 and December 31, 2016, respectively.

Management believes its net loss reserves for asbestos, environmental and other discontinued lines exposures are appropriately established based on available facts, technology, laws and regulations. However, establishing net loss reserves for asbestos, environmental and other discontinued lines claims is subject to uncertainties that are much greater than those presented by other types of claims. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimate. Among the complications are lack of historical data, long reporting delays, uncertaintydenying it as to the ~~number~~remainder of plaintiffs’ claims. On January 10, 2023, the parties filed a joint pre-trial order. There is no date currently set for a pre-trial conference.

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 ~~identity~~Farley v. Lincoln Benefit Life Company (E.D. Cal. filed Dec. 2020), following the sale of ~~insureds~~ALIC. On April 19, 2023, the court certified a class in Farley. 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 ~~potential exposure~~certain California statutes which address contractual grace periods and ~~unresolved legal issues regarding policy coverage; unresolved legal issues regarding~~lapse notice requirements for certain life insurance policies. Plaintiffs claim that these statutes apply to life insurance policies that existed before the ~~determination, availability~~statutes’ effective date. The plaintiffs seek damages and ~~timing of exhaustion of policy limits;~~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’ ~~evolving~~claims and ~~expanding theories of liability; availability~~to class certification.


Note 15			Benefit Plans


Components of net cost (benefit) for pension and other postretirement plans
	Three months ended March 31,
($ in millions)	2023		2022
Pension benefits
Service cost	$	33	$	29
Interest cost	60		46
Expected return on plan assets	(77)		(110)
Amortization of prior service credit	—		(13)

Costs and expenses	16		(48)
Remeasurement of projected benefit obligation	123		(752)
Remeasurement of plan assets	(180)		529
Remeasurement (gains) losses	(57)		(223)
Pension net benefit	$	(41)	$	(271)

Postretirement benefits
Service cost	$	—	$	—
Interest cost	3		2
Amortization of prior service credit	(6)		(6)

Costs and expenses	(3)		(4)
Remeasurement of projected benefit obligation	4		(24)
Remeasurement of plan assets	—		—
Remeasurement (gains) losses	4		(24)
Postretirement net cost (benefit)	$	1	$	(28)

Pension and postretirement benefits
Costs and expenses	$	13	$	(52)
Remeasurement (gains) losses	(53)		(247)
Total net benefit	$	(40)	$	(299)

Differences in actual experience and ~~collectability of recoveries from reinsurance; retrospectively determined premiums~~changes in other assumptions affect our pension and other ~~contractual agreements; estimates of the extent~~postretirement obligations and ~~timing of any contractual liability; the impact of bankruptcy protection sought by various asbestos producers~~expenses. Differences between expected and actual returns on plan assets affect remeasurement (gains) losses.

Pension and other ~~asbestos defendants;~~postretirement service cost, interest cost, expected return on plan assets and ~~other uncertainties. There~~amortization of prior service credit are ~~also complex legal issues concerning the interpretation of various~~reported in property and casualty insurance policy provisions and whether those losses are covered, or were ever intended to be covered, and could be recoverable through retrospectively determined premium, reinsurance or other contractual agreements. Courts have reached different and sometimes inconsistent conclusions as to when losses are deemed to have occurred and which policies provide coverage; what types of losses are covered; whether there is an insurer obligation to defend; how policy limits are determined; how policy exclusions and conditions are applied and interpreted; and whether clean-up costs represent insured property damage. Further, insurersclaims and claims administrators acting on behalf of insurers are increasingly pursuing evolving and expanding theories of reinsurance coverage for asbestos and environmental losses. Adjudication of reinsurance coverage is predominately decided in confidential arbitration proceedings which may have limited precedential or predictive value further complicating management’s ability to estimate probable loss for reinsured asbestos and environmental claims. Management believes these issues are not likely to be resolved in the near future, and the ultimate costs may vary materially from the amounts currently recorded resulting in material changes in loss reserves. In addition, while the Company believes that improved actuarial techniques and databases have assisted in its ability to estimate asbestos, environmental, and other discontinued lines net loss reserves, these refinements may subsequently prove to be inadequate indicators of the extent of probable losses. Due to the uncertainties and factors described above, management believes it is not practicable to develop a meaningful range for any such additional net loss reserves that may be required.

44 ~~www.allstate.com~~

~~12. Benefit Plans~~

~~The components of net periodic cost for the Company’s pension and postretirement benefit plans are as follows:~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Pension benefits
Service cost $ 28
$ 28
$ 85
$ 84
Interest cost 66
71
198
214
Expected return on plan assets (102 ) (99 ) (306 ) (298 )
Amortization of:

Prior service credit (14 ) (14 ) (42 ) (42 )
Net actuarial loss 48
44
142
131
Settlement loss 94
7
110
23
Net periodic pension cost $ 120
$ 37
$ 187
$ 112

Postretirement benefits
Service cost $ 2
$ 2
$ 6
$ 7
Interest cost 4
4
11
13
Amortization of:
Prior service credit (6 ) (5 ) (18 ) (16 )
Net actuarial gain (6 ) (2 ) (18 ) (18 )
Net periodic postretirement credit $ (6 ) $ (1 ) $ (19 ) $ (14 )

During the third quarter of 2017, the Company concluded that its qualified employee pension plan 2017 lump sum payments are expected to exceed a threshold of service and interest cost due to higher-than-expected retirement levels, rising interest rates that reduce benefit lump sum payments in the future and reductions in force. As a result, a pension settlement loss of $86 million, pre-tax, was recorded as part ofexpense, operating costs and expenses, net investment income and (if applicable) restructuring and related charges on the Condensed Consolidated Statements of Operations.

First Quarter 2023 Form 10-Q 43

Notes to Condensed Consolidated Financial Statements


Pension and postretirement benefits remeasurement gains and losses
	Three months ended March 31,
($ in millions)	2023		2022
Remeasurement of projected benefit obligation (gains) losses:
Discount rate	$	124	$	(585)
Other assumptions	3		(191)
Remeasurement of plan assets (gains) losses	(180)		529
Remeasurement (gains) losses	$	(53)	$	(247)

Remeasurement gains for the first quarter of 2023 are primarily related to favorable asset performance compared to expected return on plan assets, partially offset by a decrease in the ~~Corporate and Other segment.~~ liability discount rate.

The ~~Company will continue~~weighted average discount rate used to ~~monitor lump sum payments through~~measure the ~~end of~~pension benefit obligation decreased to 5.33% at March 31, 2023 compared to 5.64% at December 31, 2022, resulting in losses for the ~~year and will recognize an additional settlement expense based on lump sum payments made during the fourth~~first quarter of ~~2017.~~2023.

~~13. Supplemental Cash Flow Information~~

For the first quarter of 2023, the actual return on plan assets was higher than the expected return due to higher fixed income valuations from lower market yields and positive equity returns.


Note 16			Supplemental Cash Flow Information

Non-cash investing activities include ~~$31~~$36 million and ~~$290~~$21 million related to mergers and exchanges completed with equity securities, ~~and modifications of certain mortgage~~fixed income securities, bank loans, and ~~other investments~~limited partnerships for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. Non-cash investing activities include $17 million related to right-of-use real estate obtained in exchange for lease obligations and $51 million related to debt assumed by purchaser on sale of real estate for the three months ended March 31, 2023.

Non-cash financing activities include ~~$42~~$35 million and ~~$40~~$60 million related to the issuance of Allstate common shares for vested equity awards for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~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 $33 million and $43 million for the three

months ended March 31, 2023 and 2022, respectively. Non-cash ~~financing~~operating activities ~~also included $34~~include $4 million and $8 million related to ~~debt acquired~~right-of-use assets obtained in ~~conjunction with the purchase of an investment~~exchange for lease obligations for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2023 and 2022, respectively.

Liabilities for collateral received in conjunction with the Company’s securities lending program and ~~over-the-counter~~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, ~~which are~~ as follows:


($ in millions)	Nine months ended September 30,						($ in millions)	Three months ended March 31,
	2017			2016
($ in millions)							($ in millions)	2023		2022

Net change in fixed income securities	$	129		$	(436	)	Net change in fixed income securities	$	111	$	—
Net change in short-term investments	(157		)	181			Net change in short-term investments	93		(63)
Operating cash flow used	(28		)	(255		)
Operating cash flow provided (used)							Operating cash flow provided (used)	204		(63)
Net change in cash	1			—			Net change in cash	—		3
Net change in proceeds managed	$	(27	)	$	(255	)	Net change in proceeds managed	$	204	$	(60)

Cash flows from operating activities							Cash flows from operating activities
Net change in liabilities							Net change in liabilities
Liabilities for collateral, beginning of period	$	(1,129	)	$	(840	)	Liabilities for collateral, beginning of period	$	(2,011)	$	(1,444)
Liabilities for collateral, end of period	(1,156		)	(1,095		)	Liabilities for collateral, end of period	(1,807)		(1,504)
Operating cash flow provided	$	27		$	255
Operating cash flow (used) provided							Operating cash flow (used) provided	$	(204)	$	60

~~The Allstate Corporation~~ 45

44www.allstate.com

Notes to Condensed Consolidated Financial Statements

~~14.~~


Note 17			Other Comprehensive Income (Loss)

~~The components~~


Components of other comprehensive income (loss) on a pre-tax and after-tax basis
($ in millions)	Three months ended March 31,
	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	$	729	$	(156)	$	573	$	(2,149)	$	458	$	(1,691)
Less: reclassification adjustment of realized capital gains and losses	(138)		29		(109)		(123)		26		(97)
Unrealized net capital gains and losses	867		(185)		682		(2,026)		432		(1,594)
Unrealized foreign currency translation adjustments	63		(13)		50		—		—		—
Unamortized pension and other postretirement prior service credit (1)	(6)		2		(4)		(19)		4		(15)
Discount rate for reserve for future policy benefits	(11)		2		(9)		120		(25)		95
Other comprehensive income (loss)	$	913	$	(194)	$	719	$	(1,925)	$	411	$	(1,514)

(1) Represents prior service credits reclassified out of other comprehensive income ~~on a pre-tax~~ and ~~after-tax basis are as follows:~~amortized into operating costs and expenses.

First Quarter 2023 Form 10-Q 45

($ in millions) Three months ended September 30,
2017 2016
Pre-tax Tax After-tax Pre-tax Tax After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets $ 300
$ (105 ) $ 195
$ 350
$ (123 ) $ 227
Less: reclassification adjustment of realized capital gains and losses 107
(37 ) 70
53
(19 ) 34
Unrealized net capital gains and losses 193
(68 ) 125
297
(104 ) 193
Unrealized foreign currency translation adjustments 43
(15 ) 28
(11 ) 4
(7 )
Unrecognized pension and other postretirement benefit cost arising during the period (5 ) 3
(2 ) 1
—
1
Less: reclassification adjustment of net periodic cost recognized in operating costs and expenses (116 ) 41
(75 ) (30 ) 10
(20 )
Unrecognized pension and other postretirement benefit cost 111
(38 ) 73
31
(10 ) 21
Other comprehensive income $ 347
$ (121 ) $ 226
$ 317
$ (110 ) $ 207

Nine months ended September 30,
2017 2016
Pre-tax Tax After-tax Pre-tax Tax After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets $ 1,165
$ (408 ) $ 757
$ 1,685
$ (589 ) $ 1,096
Less: reclassification adjustment of realized capital gains and losses 245
(86 ) 159
(156 ) 55
(101 )
Unrealized net capital gains and losses 920
(322 ) 598
1,841
(644 ) 1,197

Unrealized foreign currency translation adjustments 55
(19 ) 36
18
(6 ) 12

Unrecognized pension and other postretirement benefit cost arising during the period (8 ) 5
(3 ) (6 ) 3
(3 )
Less: reclassification adjustment of net periodic cost recognized in operating costs and expenses (174 ) 61
(113 ) (78 ) 27
(51 )
Unrecognized pension and other postretirement benefit cost 166
(56 ) 110
72
(24 ) 48
Other comprehensive income $ 1,141
$ (397 ) $ 744
$ 1,931
$ (674 ) $ 1,257

46 ~~www.allstate.com~~

~~15. Subsequent Events~~

Effective October 2017, the Company changed from four to seven reportable segments: Allstate Protection, Discontinued Lines and Coverages, Service Businesses, Allstate Life, Allstate Benefits, Allstate Annuities and Corporate and Other. These segments align with the Company’s key product and service offerings, including the acquisitionReport of SquareTrade and the strategic focus and expansion of Arity and other emerging businesses. These new segments reflect the manner in which the Company’s chief operating decision maker will review performance and make decisions about the allocation of resources.

~~Goodwill~~

Upon adoption of the new segments in the fourth quarter 2017, the Company is required to evaluate goodwill, including the allocation of goodwill to any new reporting units on a relative fair value basis. The Company allocated the $1.09 billion of goodwill recorded in conjunction with the acquisition of SquareTrade to the Service Businesses reporting unit along with an immaterial amount of goodwill from the Allstate Protection segment related to other businesses included in this segment. The Allstate Financial segment had goodwill that will be reallocated between the new Allstate Life, Allstate Benefits, and Allstate Annuities segments. While substantially all of Allstate Financial goodwill related to the acquisition of Allstate Benefits, the Company is required to allocate a portion of the goodwill to the Allstate Life and Allstate Annuities segments. The estimated allocation is $170 million to Allstate Life, $100 million to Allstate Benefits and $125 million to Allstate Annuities.

The reallocation was computed using fair values for the goodwill reporting units determined using discounted cash flow (“DCF”) calculations and market to book multiples derived from a peer company analysis. The DCF analysis utilizes long term assumptions for revenues, investment income, benefits, claims, other operating expenses and income taxes to produce projections of both income and cash flows available for dividends that are present valued using weighted average cost of capital. Market to book multiples represent the mean market to book multiple for selected peer companies with operations similar to the Company’s goodwill reporting units to which the multiple is applied. The outputs from these methods are weighted based on the nature of the business and the relative amount of market observable assumptions supporting the estimates. The computed values were then weighted to reflect the fair value estimate based on the specific attributes of each goodwill reporting unit.

A goodwill impairment assessment is required to be completed in conjunction with the segment changes. The Company estimates it will recognize an impairment of approximately $125 million in the fourth quarter of 2017 related to the goodwill allocated to the Allstate Annuities reporting unit reflecting a market-based valuation.

~~Reserve for life-contingent contract benefits~~

Prior to fourth quarter 2017, the Company evaluated the adequacy of reserves and recoverability of DAC for traditional life insurance products and immediate annuities with life contingencies on an aggregate basis. The Company also evaluated these policies on an aggregate basis for circumstances where projected profits would be recognized in early years followed by projected losses in later years. As of September 30, 2017, both traditional life insurance and immediate annuities with life contingencies had projected profit as measured using actual and expected investment holdings and returns; however, the aggregate sufficiency substantially related to traditional life insurance with a marginal sufficiency related to immediate annuities with life contingencies. In conjunction with the segment change in fourth quarter 2017, the Company will review traditional life insurance products and immediate annuities with life contingencies separately.

The Company records an adjustment to the reserve for life-contingent contract benefits that represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product investment portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency. The offset to this liability is recorded as a reduction of the unrealized net capital gains included in accumulated other comprehensive income. As of September 30, 2017, no adjustment was recorded. In conjunction with the segment change in fourth quarter 2017, the Company will evaluate the need for a reserve adjustment separately for traditional life insurance and immediate annuities with life contingencies. The estimated impact, using values as of September 30, 2017, is approximately a $550 million increase to the reserve for life-contingent contract benefits, and a $350 million decrease to unrealized net capital gains, after-tax, included in shareholders’ equity.

~~The Allstate Corporation~~ 47

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

The Allstate Corporation

Northbrook, Illinois 60062

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated statement of financial position of The Allstate Corporation and subsidiaries (the “Company”) as of ~~September 30, 2017, and~~March 31, 2023, the related condensed consolidated statements of operations, comprehensive income ~~for the three-month and nine-month periods ended September 30, 2017 and 2016, and of~~(loss), shareholders’ equity and cash flows for the ~~nine-month~~three month periods ended ~~September 30, 2017~~March 31, 2023 and ~~2016. These~~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 ~~statements are~~information for it to be in conformity with accounting principles generally accepted in the ~~responsibility~~United States of ~~the Company’s management.~~America.

We ~~conducted our reviews~~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 Public Company Accounting Oversight Board (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 ~~Public Company Accounting Oversight Board (United States),~~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.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of The Allstate Corporation and subsidiaries as of December 31, 2016, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 17, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2016 is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived.

/s/ ~~DELOITTE~~Deloitte & ~~TOUCHE~~Touche LLP

Chicago, Illinois

~~November 1, 2017~~

May 3, 2023

46www.allstate.com

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~for the Three and Nine Month Periods Ended September 30, 2017 and 2016~~

~~Overview~~

~~Allstate is focused on the following priorities:~~

~~better serve our customers;~~

~~achieve target economic returns on capital;~~

~~grow customer base;~~

~~proactively manage investments; and~~

~~build long-term growth platforms.~~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~~annual report on Form 10-K for ~~2016.~~ 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 ~~(which includes the~~and Segment Results sections, including Allstate Protection and ~~the Discontinued Lines~~Run-off Property-Liability, Protection Services and ~~Coverages segments)~~Allstate Health and ~~in the Allstate Financial Segment sections~~Benefits, of Management’s Discussion and Analysis (“MD&A”). The segments are consistent with the way in which ~~we use financial information to evaluate business performance and to determine the allocation of resources. Resources are allocated by~~ the chief operating decision maker ~~and performance is assessed for Allstate Protection, Discontinued Lines and Coverages and Allstate Financial. Allstate Protection and Allstate Financial~~reviews financial performance and ~~resources are managed by committees of senior officers of the respective segments. The Allstate Protection segment also includes SquareTrade and Arity.~~

Effective October 2017, we changed from four to seven reportable segments: Allstate Protection, Discontinued Lines and Coverages, Service Businesses, Allstate Life, Allstate Benefits, Allstate Annuities and Corporate and Other. These segments align with our key product and service offerings, including the acquisition of SquareTrade and the strategic focus and expansion of Arity and other emerging businesses. These new segments also reflect the manner in which our chief operating decision maker will review performance and makemakes decisions about the allocation of resources.

Macroeconomic Impacts

The ~~change~~Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”) and subsequent U.S. government fiscal and monetary policies have and may continue to effect economic activity through longer-term impacts such as supply chain disruptions, labor shortages and other macroeconomic factors that have increased inflation and affected our operations. These factors may continue to significantly affect results of operations, financial condition and liquidity. The impact from the pandemic and the ongoing effects should be considered when comparing the current period to prior periods.

Over the past several quarters, inflation continued to remain elevated, which led to increases in ~~reporting segments~~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 and other ongoing impacts ~~goodwill~~from the pandemic could create significant economic uncertainty. Market volatility resulting from these factors and ~~reserves for life-contingent contract benefits. For additional detail see Note 15 “Subsequent Events”~~from disruptions in the banking industry have and may continue to impact our investment valuations and returns.

This is not inclusive of all potential impacts and should not be treated as such. Within the ~~condensed consolidated financial statements in Item 1.~~MD&A we have included further disclosures related to macroeconomic impacts on our 2023 results.

Russia/Ukraine Conflict

The Russia-Ukraine war and related sanctions imposed as a result of this ~~Form 10-Q.~~conflict have increased global economic and political uncertainty, including inflationary pressures and an increased risk of cybersecurity incidents. Allstate does not have operations or direct investments in Russia, Belarus or Ukraine, but we could experience significant indirect impacts on the investment portfolio, financial position, or results of operations.

Corporate Strategy

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

~~The Allstate Corporation~~ 49

First Quarter 2023 Form 10-Q 47

Measuring segment profit or loss

~~Highlights~~

~~Consolidated~~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 applicable to common shareholders was $637 million in the third quarter of 2017 compared to $491 million in the third quarter of 2016, and $1.85 billion in the first nine months of 2017 compared to $950 million in the first nine months of 2016. Net income applicable to common shareholders per diluted common share was $1.74 in the third quarter of 2017 compared to $1.31 in the third quarter of 2016, and $5.02 in the first nine months of 2017 compared to $2.51 in the first nine months of 2016.

Property-Liability net income applicable to common shareholders was $604 million in the third quarter of 2017 compared to $483 million in the third quarter of 2016, and $1.74 billion in the first nine months of 2017 compared to $903 million in the first nine months of 2016.

The Property-Liability combined ratio was 94.7 in the third quarter of 2017 compared to 95.5 in the third quarter of 2016, and 95.2 in the first nine months of 2017 compared to 98.2 in the first nine months of 2016.

Allstate Financial net income applicable to common shareholders was $168 million in the third quarter of 2017 compared to $80 million in the third quarter of 2016, and $422 million in the first nine months of 2017 compared to $264 million in the first nine months of 2016.

Total revenues were $9.66 billion in the third quarter of 2017 compared to $9.22 billion in the third quarter of 2016, and $28.68 billion in the first nine months of 2017 compared to $27.26 billion in the first nine months of 2016.

Property-Liability premiums earned totaled $8.12 billion in the third quarter of 2017, an increase of 3.2% from $7.87 billion in the third quarter of 2016, and $24.10 billion in the first nine months of 2017, an increase of 3.0% from $23.41 billion in the first nine months of 2016.

Investments totaled $82.77 billion as of September 30, 2017, increasing from $81.80 billion as of December 31, 2016. Net investment income was $843 million in the third quarter of 2017, an increase of 12.7% from $748 million in the third quarter of 2016, and $2.49 billion in the first nine months of 2017, an increase of 11.0% from $2.24 billion in the first nine months of 2016.

Net realized capital gains were $103 million in the third quarter of 2017 compared to $33 million in the third quarter of 2016, and net realized capital gains were $318 million in the first nine months of 2017 compared to net realized capital losses of $92 million in the first nine months of 2016.

Book value per diluted common share (ratio of common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $55.69 as of September 30, 2017, an increase of 8.2% from $51.48 as of September 30, 2016, and an increase of 9.7% from $50.77 as of December 31, 2016.

~~For the twelve months ended September 30, 2017, return on the average of beginning and ending period common shareholders’ equity of 13.5% increased by 6.1 points from 7.4%~~ for the ~~twelve months ended September 30, 2016.~~

~~As of September 30, 2017, shareholders’ equity was $22.12 billion. This total included $2.47 billion in deployable assets at the parent holding company level comprising cash~~Protection Services, Allstate Health and ~~investments that are generally saleable within one quarter.~~

~~On January 3, 2017, we acquired SquareTrade Holding Company, Inc. (“SquareTrade”), a consumer product protection plan provider that distributes through many of America’s major retailers~~Benefits and Europe’s mobile operators, for $1.4 billion in cash. SquareTrade provides protection plans primarily covering consumer appliances and electronics, such as TVs, smartphones and computers. This acquisition broadens Allstate’s unique product offerings to better meet consumers’ needs.

During the third quarter of 2017, the Company concluded that its qualified employee pension plan 2017 lump sum payments are expected to exceed a threshold of service and interest cost, which resulted in a pension settlement loss of $86 million, pre-tax, and was recorded as part of operating costs and expenses in the Corporate and Other ~~segment.~~segments.

50 ~~www.allstate.com~~

~~Consolidated Net Income~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Revenues

Property-liability insurance premiums $ 8,121
$ 7,869
$ 24,098
$ 23,406
Life and annuity premiums and contract charges 593
571
1,777
1,701
Net investment income 843
748
2,488
2,241
Realized capital gains and losses:

Total other-than-temporary impairment (“OTTI”) losses (26 ) (73 ) (135 ) (241 )
OTTI losses reclassified to (from) other comprehensive income (2 ) —
(2 ) 8
Net OTTI losses recognized in earnings (28 ) (73 ) (137 ) (233 )
Sales and other realized capital gains and losses 131
106
455
141
Total realized capital gains and losses 103
33
318
(92 )
Total revenues 9,660
9,221
28,681
27,256

Costs and expenses

Property-liability insurance claims and claims expense (5,545 ) (5,553 ) (16,650 ) (17,138 )
Life and annuity contract benefits (456 ) (484 ) (1,416 ) (1,393 )
Interest credited to contractholder funds (174 ) (183 ) (522 ) (558 )
Amortization of deferred policy acquisition costs (1,200 ) (1,138 ) (3,545 ) (3,393 )
Operating costs and expenses (1,218 ) (1,021 ) (3,401 ) (3,043 )
Restructuring and related charges (14 ) (5 ) (77 ) (21 )
Interest expense (83 ) (73 ) (251 ) (218 )
Total costs and expenses (8,690 ) (8,457 ) (25,862 ) (25,764 )

Gain on disposition of operations⁽¹⁾
1
1
15
4
Income tax expense ⁽²⁾
(305 ) (245 ) (894 ) (459 )
Net income 666
520
1,940
1,037

Preferred stock dividends (29 ) (29 ) (87 ) (87 )
Net income applicable to common shareholders $ 637
$ 491
$ 1,853
$ 950

Property-Liability $ 604
$ 483
$ 1,740
$ 903
Allstate Financial 168
80
422
264
Corporate and Other (135 ) (72 ) (309 ) (217 )
Net income applicable to common shareholders $ 637
$ 491
$ 1,853
$ 950


⁽¹⁾	~~The nine months ended September 30, 2017 includes $10 million related to the conclusion of a contractual arrangement related to the sale of Sterling Collision Centers, Inc. in 2014.~~


⁽²⁾	Income tax expense includes a tax benefit of $9 million and $42 million in the third quarter and nine months ended September 30, 2017, respectively, related to the adoption of the new accounting standard on January 1, 2017 for share-based payments.

~~The Allstate Corporation~~ 51

~~Property-Liability~~

~~Property-Liability Operations~~

~~Overview~~ Our Property-Liability operations consist of two reporting segments: Allstate Protection and Discontinued Lines and Coverages. Allstate Protection comprises three brands where we accept underwriting risk: Allstate, Esurance and Encompass. Allstate Protection is principally engaged in the sale of personal property and casualty insurance, primarily private passenger auto and homeowners insurance, to individuals in the United States and Canada. Allstate Protection also includes service businesses Allstate Roadside Services, Allstate Dealer Services and Arity, which are included in Allstate brand, and SquareTrade. These businesses have a higher service component to the business model than our traditional property and casualty products such as auto or homeowners insurance. Discontinued Lines and Coverages includes results from property-liability insurance coverage that we no longer write. Our exposure to asbestos, environmental and other discontinued lines claims arises principally from direct excess insurance, assumed reinsurance coverage, direct primary commercial insurance and other businesses in run-off. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources. In fourth quarter 2017, we are changing our reportable segments. See Note 15 “Subsequent Events” of the condensed consolidated financial statements for further information.

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

Highlights

Consolidated net income (loss) applicable to common shareholders

($ in millions)


Consolidated net loss applicable to common shareholders was $346 million in the first quarter of 2023 compared to income of $634 million in the first quarter of 2022, primarily due to higher losses driven by severity and frequency and higher catastrophe losses, partially offset by increased Property-Liability premiums earned. For the twelve months ended March 31, 2023, return on Allstate common shareholders’ equity was (13.0)%, a decrease of 28.6 points from 15.6% for the twelve months ended March 31, 2022.

Total revenue

($ in millions)


Total revenue increased 11.8% to $13.79 billion in the first quarter of 2023 compared to the first quarter of 2022 due to an increase of 10.9% in property and casualty insurance premiums earned in the first quarter of 2023 compared to the first quarter of 2022 and net gains on investments and derivatives in 2023 compared to net losses in 2022.

Net investment income

($ in millions)


Net investment income decreased $19 million to $575 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to lower performance-based investment results, mainly from limited partnerships, largely offset by higher market-based income. Market-based reflects higher fixed income portfolio yields and balance.

48www.allstate.com

Financial highlights

Investments totaled $63.48 billion as of March 31, 2023, increasing from $61.83 billion as of December 31, 2022.

Allstate shareholders’ equity was $17.49 billion as of March 31, 2023 and December 31, 2022.

Book value per diluted common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $58.65, a decrease of 22.3% from $75.46 as of March 31, 2022, and an increase of 0.9% from $58.12 as of December 31, 2022.

Return on average Allstate common shareholders’ equity For the ~~profitability~~twelve months ended March 31, 2023, return on Allstate common shareholders’ equity was (13.0)%, a decrease of 28.6 points from 15.6% for the ~~Property-Liability insurance operations separately from investment results. Underwriting income is reconciled~~twelve months ended March 31, 2022. The decrease was primarily due to lower net income applicable to common shareholders ~~below.~~for the trailing twelve-month period ending March 31, 2023.

Pension and other postretirement remeasurement gains and lossesWe recorded pension and other postretirement remeasurement gains of $53 million in the first quarter of 2023, primarily related to favorable asset performance compared to expected return on plan assets, partially offset by a decrease in the liability discount rate.

Summarized consolidated financial results


	Three months ended March 31,
($ in millions)	2023		2022
Revenues
Property and casualty insurance premiums	$	12,173	$	10,981
Accident and health insurance premiums and contract charges	463		468
Other revenue	561		560
Net investment income	575		594
Net gains (losses) on investments and derivatives	14		(267)
Total revenues	13,786		12,336

Costs and expenses
Property and casualty insurance claims and claims expense	(10,326)		(7,822)
Accident, health and other policy benefits	(265)		(268)
Amortization of deferred policy acquisition costs	(1,744)		(1,608)
Operating, restructuring and interest expenses	(1,829)		(1,997)
Pension and other postretirement remeasurement gains (losses)	53		247
Amortization of purchased intangibles	(81)		(87)

Total costs and expenses	(14,192)		(11,535)

(Loss) income from operations before income tax expense	(406)		801

Income tax benefit (expense)	85		(151)

Net (loss) income	(321)		650

Less: Net loss attributable to noncontrolling interest	(1)		(10)

Net (loss) income attributable to Allstate	(320)		660

Preferred stock dividends	(26)		(26)

Net (loss) income applicable to common shareholders	$	(346)	$	634

Segment highlights

Allstate Protection underwriting loss was $998 million in the first quarter of 2023 compared to underwriting income of $282 million in the first quarter of 2022. The decrease was primarily due to higher non-catastrophe losses, primarily for auto insurance, and higher catastrophe losses, partially offset by increased premiums. We are executing a comprehensive plan to improve auto insurance profitability, including broadly raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and executing claims operating actions to manage loss costs.

Catastrophe losses were $1.69 billion in the first quarter of 2023 compared to $462 million in the first quarter of 2022.

Premiums written increased 9.5% to $11.78 billion in the first quarter of 2023 compared to the same period of 2022, reflecting higher premiums in both Allstate and National General brands.

Protection Services adjusted net income was $34 million in the first quarter of 2023 compared to $53 million in the first quarter of 2022, due to Allstate Protection Plans higher appliance and furniture claim severity, a shift in business mix and lower third-party advertising sales by Arity. The decrease was partially offset by growth in new business at Allstate Protection Plans.

First Quarter 2023 Form 10-Q 49

Premiums and other revenue increased 7.8% or $45 million in the first quarter of 2023 compared to the same period of 2022, primarily due to Allstate Protection Plans.

Allstate Health and Benefits adjusted net income was $56 million in the first quarter of 2023 compared to $57 million in the first quarter 2022, primarily due to a decline in employer voluntary benefits, partially offset by growth in group health.

Premiums and contract charges decreased 1.1% to $463 million in the first quarter 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, deferred policy acquisition costs (“DAC”) for all long-duration products will be amortized on a simplified basis. Our reserve for future policy benefits and DAC will be 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

The ~~table below includes~~ decrease in AOCI is 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 reporting date. The decrease in retained income primarily relates 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.

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.

50www.allstate.com

Property-Liability Operations

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

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

GAAP operating ratios ~~we use~~ are used to measure our ~~profitability. We believe that they~~profitability to enhance an investor’s understanding of our ~~profitability. They~~financial results and are calculated as follows:

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

•Expense ~~ratio -~~ 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 ratio of claims and claims expense, amortization of DAC, operating costs and expenses, and restructuring and related charges to premiums earned. The combined ratio is~~ratio: the sum of the loss ratio and the expense ratio. ~~The difference between 100% and the combined ratio represents underwriting income as a percentage of premiums earned, or underwriting margin.~~

We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between ~~fiscal~~ 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 - the percentage~~ratio: includes catastrophe losses and prior year reserve reestimates of catastrophe losses included in claims and claims expense ~~to premiums earned. This ratio includes prior year reserve reestimates of catastrophe losses.~~

•Effect of prior year reserve reestimates on combined ratio ~~- the percentage of prior year reserve reestimates included in claims and claims expense to premiums earned. This ratio includes prior year reserve reestimates of catastrophe losses.~~

•Effect of amortization of purchased ~~intangible assets~~intangibles on combined ratio - the percentage of amortization of purchased intangible assets to premiums earned. Amortization of purchased intangible assets is reported in operating costs and expenses on the Condensed Consolidated Statements of Operations.

•Effect of restructuring and related charges on combined ratio ~~- the percentage~~

•Effect of Run-off Property-Liability business on combined ratio: includes claims and claims expense, restructuring and related charges ~~to premiums earned.~~

~~Effect of Discontinued Lines and Coverages on combined ratio - the ratio of claims and claims expense~~ and operating costs and expenses in the ~~Discontinued Lines~~Run-off Property-Liability segment

Premium measures and ~~Coverages segment~~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).

First Quarter 2023 Form 10-Q 51

Property-Liability ~~premiums earned. The~~Operations

•Report year incurred claim severityis calculated by dividing the sum of recorded estimated incurred losses and allocated loss adjustment expenses, excluding catastrophes, by the ~~effect~~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 severityis calculated by dividing the sum of ~~Discontinued Lines~~paid losses and ~~Coverages on~~loss expenses by claims closed with a payment during the ~~combined ratio and~~period.

•Percent change in frequency or paid claim severity statistics are calculated as the ~~Allstate Protection combined ratio is equal~~amount of increase or decrease in gross claim frequency or paid claim severity in the current period compared to the ~~Property-Liability combined ratio.~~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 March 31,
($ in millions, except ratios)	2023		2022
Premiums written	$	11,783	$	10,761
Premiums earned	$	11,635	$	10,498
Other revenue	353		347
Claims and claims expense	(10,180)		(7,702)
Amortization of DAC	(1,452)		(1,348)
Other costs and expenses	(1,279)		(1,445)
Restructuring and related charges (1)	(21)		(12)
Amortization of purchased intangibles	(57)		(58)
Underwriting (loss) income	$	(1,001)	$	280

Catastrophe losses
Catastrophe losses, excluding reserve reestimates	$	1,733	$	475
Catastrophe reserve reestimates (2)	(42)		(13)
Total catastrophe losses	$	1,691	$	462

Non-catastrophe reserve reestimates (2)	27		158
Prior year reserve reestimates (2)	(15)		145

GAAP operating ratios
Loss ratio	87.5		73.3
Expense ratio (3)	21.1		24.0
Combined ratio	108.6		97.3
Effect of catastrophe losses on combined ratio	14.5		4.4
Effect of prior year reserve reestimates on combined ratio	(0.1)		1.4
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio	(0.4)		(0.1)
Effect of restructuring and related charges on combined ratio (1)	0.2		0.1
Effect of amortization of purchased intangibles on combined ratio	0.5		0.5

(1)Restructuring and related charges for the first quarter of 2023 are primarily for 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.

52www.allstate.com

~~Property-Liability~~

Allstate ProtectionSegment Results

Allstate Protection Segment

~~Property-Liability Highlights~~


Underwriting results
	Three months ended March 31,
($ in millions)	2023		2022
Premiums written	$	11,783	$	10,761
Premiums earned	$	11,635	$	10,498
Other revenue	353		347
Claims and claims expense	(10,178)		(7,701)
Amortization of DAC	(1,452)		(1,348)
Other costs and expenses	(1,278)		(1,444)
Restructuring and related charges	(21)		(12)
Amortization of purchased intangibles	(57)		(58)
Underwriting (loss) income	$	(998)	$	282
Catastrophe losses	$	1,691	$	462

~~Net income applicable to common shareholders~~Underwriting loss was ~~$604 million in the third quarter of 2017 compared to $483 million in the third quarter of 2016, and $1.74 billion in the first nine months of 2017 compared to $903~~$998 million in the first ~~nine months of 2016.~~

~~Premiums written totaled $8.58 billion in the third~~ quarter of 2017, an increase of 3.3% from $8.31 billion in the third quarter of 2016, and $24.60 billion in the first nine months of 2017, an increase of 3.0% from $23.88 billion in the first nine months of 2016. Premiums written related to SquareTrade were $104 million and $270 million in the third quarter and first nine months of 2017, respectively. Excluding SquareTrade, premiums written totaled $8.48 billion and $24.33 billion, respectively.

Premiums earned totaled $8.12 billion in the third quarter of 2017, an increase of 3.2% from $7.87 billion in the third quarter of 2016, and $24.10 billion in the first nine months of 2017, an increase of 3.0% from $23.41 billion in the first nine months of 2016. Premiums earned related to SquareTrade included $78 million and $207 million in the third quarter and first nine months of 2017, respectively. Excluding SquareTrade, premiums earned totaled $8.04 billion and $23.89 billion, respectively.

~~The loss ratio was 68.3 in the third quarter of 2017~~2023 compared to ~~70.6 in the third quarter of 2016, and 69.1 in the first nine months of 2017 compared to 73.2 in the first nine months of 2016.~~

Catastrophe losses were $861 million in the third quarter of 2017 compared to $481 million in the third quarter of 2016, and $2.64 billion in the first nine months of 2017 compared to $2.27 billion in the first nine months of 2016. The effect of catastrophes on the combined ratio was 10.6 in the third quarter of 2017 compared to 6.1 in the third quarter of 2016, and 11.0 in the first nine months of 2017 compared to 9.7 in the first nine months of 2016.

Prior year reserve reestimates totaled $135 million favorable in the third quarter of 2017 compared to $99 million unfavorable in the third quarter of 2016, and $321 million favorable in the first nine months of 2017 compared to $120 million unfavorable in the first nine months of 2016. These amounts include unfavorable reestimates of $85 million and $96 million from our annual Discontinued Lines and Coverages reserve review performed in the third quarter of 2017 and 2016, respectively.

~~Underwriting income was $429 million in the third quarter of 2017 compared to $355 million in the third quarter of 2016, and~~ underwriting income ~~was $1.16 billion in the first nine months~~ of ~~2017 compared to $414~~$282 million in the first ~~nine months of 2016.~~

~~Investments were $43.84 billion as of September 30, 2017, an increase of 2.6% from $42.72 billion as of December 31, 2016. Net investment income was $372 million in the third~~ quarter of ~~2017, an increase of 20.0% from $310 million~~2022, due to higher non-catastrophe losses, primarily for auto insurance, and higher catastrophe losses, partially offset by increased premiums. We are executing a comprehensive plan to improve auto insurance profitability, including broadly raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in ~~the third quarter of 2016,~~underperforming states and ~~$1.07 billion in the first nine months of 2017, an increase of 15.7% from $928 million in the first nine months of 2016.~~

~~Net realized capital gains were $82 million in the third quarter of 2017 compared~~executing claims operating actions to $53 million in the third quarter of 2016, and net realized capital gains were $302 million in the first nine months of 2017 compared to net realized capital losses of $20 million in the first nine months of 2016.

~~The Allstate Corporation~~ 53

manage loss costs.

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

($ in millions)

~~Property-Liability~~


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 March 31,
Auto	$	(332)	$	(137)	$	(14)	$	(10)	$	(346)	$	(147)
Homeowners (1)	(508)		368		(26)		32		(534)		400
Other personal lines	(90)		18		1		—		(89)		18
Commercial lines	(64)		(19)		4		(3)		(60)		(22)
Other business lines (1)	22		21		7		10		29		31
Answer Financial	—		—		—		—		2		2
Total	$	(972)	$	251	$	(28)	$	29	$	(998)	$	282

~~Summarized financial data, a reconciliation~~(1)Other business lines represents commissions earned and other costs and expenses for Ivantage and non-proprietary life and annuity products, and lender-placed products and related services. In the first quarter of ~~underwriting income~~2023, National General lender-placed products and related services results were reclassified from homeowners to ~~net income applicable~~other business lines. Historical results have been updated to ~~common shareholders, and GAAP operating ratios for our Property-Liability operations are presented in the following table.~~conform with this presentation.

First Quarter 2023 Form 10-Q 53

($ in millions, except ratios) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 8,583
$ 8,311
$ 24,595
$ 23,877

Revenues

Premiums earned $ 8,121
$ 7,869
$ 24,098
$ 23,406
Net investment income 372
310
1,074
928
Realized capital gains and losses 82
53
302
(20 )
Total revenues 8,575
8,232
25,474
24,314

Costs and expenses

Claims and claims expense (5,545 ) (5,553 ) (16,650 ) (17,138 )
Amortization of DAC (1,138 ) (1,068 ) (3,331 ) (3,181 )
Operating costs and expenses (996 ) (888 ) (2,879 ) (2,653 )
Restructuring and related charges (13 ) (5 ) (75 ) (20 )
Total costs and expenses (7,692 ) (7,514 ) (22,935 ) (22,992 )

Gain on disposition of operations —
—
10
⁽¹⁾
—
Income tax expense ⁽²⁾
(279 ) (235 ) (809 ) (419 )
Net income applicable to common shareholders $ 604
$ 483
$ 1,740
$ 903

Underwriting income $ 429
$ 355
$ 1,163
$ 414
Net investment income 372
310
1,074
928
Income tax expense on operations (252 ) (218 ) (703 ) (429 )
Realized capital gains and losses, after-tax 54
36
199
(10 )
Gain on disposition of operations, after-tax 1
—
7
—
Net income applicable to common shareholders $ 604
$ 483
$ 1,740
$ 903

Catastrophe losses $ 861
$ 481
$ 2,635
$ 2,269

GAAP operating ratios

Claims and claims expense ratio 68.3
70.6
69.1
73.2
Expense ratio 26.4
24.9
26.1
25.0
Combined ratio 94.7
95.5
95.2
98.2
Effect of catastrophe losses on combined ratio 10.6
6.1
11.0
9.7
Effect of prior year reserve reestimates on combined ratio ⁽³⁾
(1.7 ) 1.3
(1.3 ) 0.5
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio ⁽⁴⁾
(0.1 ) —
—
0.1
Effect of amortization of purchased intangible assets on combined ratio ⁽⁵⁾
0.3
0.1
0.3
0.1
Effect of restructuring and related charges on combined ratio 0.2
0.1
0.3
0.1
Effect of Discontinued Lines and Coverages on combined ratio 1.1
1.3
0.4
0.4

~~_______________~~


⁽¹⁾	~~Represents the conclusion of a contractual arrangement related to the sale of Sterling Collision Centers, Inc. in 2014.~~


⁽²⁾	Income tax expense includes a tax benefit of $9 million and $42 million in the third quarter and nine months ended September 30, 2017, respectively, related to the adoption of the new accounting standard on January 1, 2017 for share-based payments.


⁽³⁾	Favorable prior year reserve reestimates in the three and nine months ended September 30, 2017 were primarily related to severity development for auto injury coverages that was better than expected, partially offset by our annual reserve review in Discontinued Lines and Coverages.


⁽⁴⁾	Prior year reserve reestimates included in catastrophe losses totaled $7 million and $10 million favorable in the three and nine months ended September 30, 2017, respectively, compared to $3 million and $13 million unfavorable in the three and nine months ended September 30, 2016, respectively.


⁽⁵⁾	Amortization of purchased intangible assets totaled $25 million and $74 million for the three and nine months ended September 30, 2017, respectively, of which $23 million and $69 million related to the acquisition of SquareTrade.

54 ~~www.allstate.com~~

~~Property-Liability~~

Segment Results Allstate Protection

Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends. Premiums writtenis the amount of premiums charged for policies issued during a ~~fiscal~~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.

~~A reconciliation of~~


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 March 31,
Auto	$	6,826	$	6,308	$	1,523	$	1,254	$	8,349	$	7,562
Homeowners	2,210		2,020		324		261		2,534		2,281
Other personal lines	492		469		56		35		548		504
Commercial lines	177		238		50		56		227		294
Other business lines	—		—		125		120		125		120
Total premiums written	$	9,705	$	9,035	$	2,078	$	1,726	$	11,783	$	10,761


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 March 31,
Auto	$	6,660	$	6,073	$	1,248	$	1,008	$	7,908	$	7,081
Homeowners	2,488		2,210		322		280		2,810		2,490
Other personal lines	521		496		41		35		562		531
Commercial lines	183		232		49		51		232		283
Other business lines	—		—		123		113		123		113
Total premiums earned	$	9,852	$	9,011	$	1,783	$	1,487	$	11,635	$	10,498


Reconciliation of premiums written to premiums earned
	Three months ended March 31,
($ in millions)	2023		2022
Total premiums written	$	11,783	$	10,761
(Increase) decrease in unearned premiums	(127)		(258)
Other	(21)		(5)
Total premiums earned	$	11,635	$	10,498


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	21,142	21,968	4,591	4,103	25,733	26,071
Homeowners	6,621	6,536	641	629	7,262	7,165
Other personal lines	4,607	4,609	306	285	4,913	4,894
Commercial lines	199	208	108	104	307	312

Total	32,569	33,321	5,646	5,121	38,215	38,442

Auto insurance premiums written ~~to premiums earned is shown~~increased 10.4% or $787 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to the following ~~table.~~factors:

•Increased average premiums driven by rate increases. In the three months ended March 31, 2023, rate increases of 8.4% were taken for Allstate brand in 28 locations, resulting in total Allstate brand insurance premium impact of 1.7%

•Rate increases of 5.6% were taken for National General brand in 28 locations, resulting in total National General brand insurance premium impact of 1.9%

•We expect to continue to pursue rate increases for both Allstate and National General brands

throughout 2023 to improve auto insurance profitability

•PIF decreased 1.3% or 338 thousand to 25,733 thousand as of March 31, 2023 compared to March 31, 2022

•Renewal ratio decreased 1.8 points

•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 and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio and future PIF growth

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written

Allstate Protection $ 8,583
$ 8,309
$ 24,595
$ 23,875
Discontinued Lines and Coverages ⁽¹⁾
—
2
—
2
Property-Liability premiums written 8,583
8,311
24,595
23,877
Increase in unearned premiums (513 ) (472 ) (580 ) (570 )
Other 51
30
83
99
Property-Liability premiums earned $ 8,121
$ 7,869
$ 24,098
$ 23,406

Premiums earned

Allstate Protection $ 8,121
$ 7,869
$ 24,098
$ 23,406
Discontinued Lines and Coverages —
—
—
—
Property-Liability $ 8,121
$ 7,869
$ 24,098
$ 23,406

54www.allstate.com

Allstate ProtectionSegment Results

~~_______________~~


Auto premium measures and statistics
	Three months ended March 31,
	2023		2022		Change




New issued applications (thousands)
Allstate Protection by brand


Allstate brand	751		964		(22.1)	%
National General	783		718		9.1	%
Total new issued applications	1,534		1,682		(8.8)	%

Allstate Protection by channel
Exclusive agency channel	589		599		(1.7)	%
Direct channel	463		631		(26.6)	%
Independent agency channel	482		452		6.6	%
Total new issued applications	1,534		1,682		(8.8)	%





Allstate brand average premium	$	726	$	626	16.0	%
Allstate brand renewal ratio (%)	85.7		87.5		(1.8)

Homeowners insurance premiums writtenincreased 11.1% or $253 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to the following factors:

•Higher Allstate brand average premiums from inflation in insured home replacement costs and implemented rate increases, combined with policies in force growth. National General policy growth is expected to be negatively impacted in future quarters as we improve underwriting margins to targeted levels through underwriting and rate actions

•Increased new issued applications driven 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, which have and will continue to negatively impact premiums


Homeowners premium measures and statistics
	Three months ended March 31,
	2023		2022		Change




New issued applications (thousands)


Allstate Protection by brand
Allstate brand	230		235		(2.1)	%
National General	35		27		29.6	%
Total new issued applications	265		262		1.1	%

Allstate Protection by channel
Exclusive agency channel	196		201		(2.5)	%
Direct channel	19		23		(17.4)	%
Independent agency channel	50		38		31.6	%
Total new issued applications	265		262		1.1	%





Allstate brand average premium	$	1,706	$	1,554	9.8	%
Allstate brand renewal ratio (%)	86.3		86.2		0.1

Other personal linespremiums written increased 8.7% or $44 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to increases in landlords for Allstate brand. Starting in the fourth quarter of 2022, we no longer write condominium new business in California and Florida and we may take further actions to reduce certain exposure in Florida, which will continue to negatively impact premiums.

Commercial lines premiums written decreased 22.8% or $67 million in the first quarter of 2023 compared to the first quarter 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, with non-renewals for those states beginning later in 2023.

Other business lines premiums written increased 4.2% or $5 million in the first quarter of 2023 compared to the first quarter of 2022.

First Quarter 2023 Form 10-Q 55

Segment Results Allstate Protection

GAAP operating ratiosinclude 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 March 31,
Auto	83.4	77.6	21.0	24.5	104.4	102.1
Homeowners	98.5	61.8	20.5	22.1	119.0	83.9
Other personal lines	93.8	72.1	22.0	24.5	115.8	96.6
Commercial lines	102.2	87.3	23.7	20.5	125.9	107.8
Other business lines	43.1	31.0	33.3	41.6	76.4	72.6

Total	87.5	73.3	21.1	24.0	108.6	97.3
Impact of amortization of purchased intangibles	—	—	0.5	0.5	0.5	0.5
Impact of restructuring and related charges	—	—	0.2	0.1	0.2	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 March 31,
Auto	83.4	77.6	1.2	0.6	(0.3)	2.0	(0.4)	(0.1)
Homeowners	98.5	61.8	51.6	15.4	(0.7)	(0.3)	(0.2)	(0.4)
Other personal lines	93.8	72.1	23.8	6.4	0.5	(1.3)	(1.3)	0.8
Commercial lines	102.2	87.3	3.9	—	10.3	6.7	0.4	(0.4)
Other business lines	43.1	31.0	4.9	1.8	0.8	(2.7)	—	3.5
Total	87.5	73.3	14.5	4.4	(0.1)	1.4	(0.4)	(0.1)

(1)The ten-year average effect of catastrophe losses on the total combined ratio was 7.3 points in the first quarter of 2023.


Auto underwriting results
		For the periods ended
	2023	2022				2021
($ in millions, except ratios)	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Underwriting income (loss)	(346)	(974)	(1,315)	(578)	(147)	(300)	(159)	394	1,327
Loss ratio	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	(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 increased 5.8 points in the first quarter compared to the same period of 2022. Estimated report year 2023 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased 9% to 11% for all major coverages compared to the prior year due to higher part costs and labor rates for repairable vehicles, a higher mix of total losses, an increase in claims with attorney representation and higher medical consumption and inflation. Gross claim frequency increased in all coverages, but remains below pre-pandemic levels.

Homeowners loss ratio increased 36.7 points in the first quarter of 2023 compared to the same period of 2022, primarily due to higher catastrophe losses and severity, partially offset by increased premiums earned.

56www.allstate.com

Allstate ProtectionSegment Results


⁽¹⁾	~~2016 results represent retrospective reinsurance premium recognized when billed.~~

~~The Allstate Corporation~~ 55



Allstate ~~Protection~~brand homeowners frequency and severity statistics (excluding catastrophe losses)
(% change year-over-year)	~~Allstate brand~~	~~Esurance brand~~
Three months ended March 31, 2023
Gross claim frequency	~~Encompass brand~~	~~SquareTrade~~1.3	%

~~Allstate Protection Segment~~

~~Underwriting results~~ ~~are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 8,583
$ 8,309
$ 24,595
$ 23,875
Premiums earned $ 8,121
$ 7,869
$ 24,098
$ 23,406
Claims and claims expense (5,457 ) (5,454 ) (16,557 ) (17,036 )
Amortization of DAC (1,138 ) (1,068 ) (3,331 ) (3,181 )
Other costs and expenses (996 ) (887 ) (2,877 ) (2,651 )
Restructuring and related charges (13 ) (5 ) (75 ) (20 )
Underwriting income $ 517
$ 455
$ 1,258
$ 518
Catastrophe losses $ 861
$ 481
$ 2,635
$ 2,269

Underwriting income (loss) by line of business

Auto $ 244
$ 24
$ 878
$ (44 )
Homeowners 335
395
431
528
Other personal lines ⁽¹⁾
(15 ) 50
54
104
Commercial lines (15 ) (19 ) (21 ) (90 )
Other business lines ⁽²⁾
(3 ) 7
3
25
SquareTrade⁽³⁾
(29 ) —
(86 ) —
Answer Financial —
(2 ) (1 ) (5 )
Underwriting income $ 517
$ 455
$ 1,258
$ 518

~~_______________~~

⁽¹⁾~~Other personal lines include renter, condominium, landlord and other personal lines products.~~

⁽²⁾ ~~Other business lines primarily include Allstate Roadside Services, Allstate Dealer Services, Arity and Ivantage.~~

⁽³⁾ ~~SquareTrade includes protection plans covering a wide range of consumer appliance and electronic products.~~

56 ~~www.allstate.com~~

Paid claim severity					10.9




~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

The following table summarizes the changes in underwriting results from the prior year by the components of the increase (decrease) in underwriting income (loss) by line of business. The 2017 columns present changesGross claim frequency increased in the ~~third~~first quarter ~~and the first nine months of 2017, respectively,~~ compared to the same ~~periods~~period of ~~2016. The 2016 columns present changes~~2022 primarily due to wind/hail perils. Paid claim severity increased in the ~~third~~first quarter ~~and first nine months~~ of ~~2016, respectively,~~2023 compared to the same ~~periods~~period of ~~2015.~~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.

($ in millions) Three months ended September 30,
Auto Homeowners Other personal lines Commercial lines SquareTrade
Allstate Protection ⁽¹⁾⁽²⁾
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Underwriting income (loss) - prior period $ 24
$ 22
$ 395
$ 465
$ 50
$ 43
$ (19 ) $ (5 ) $ —
$ —
$ 455
$ 540
Changes in underwriting income (loss) from:
Increase (decrease) premiums earned 149
199
19
18
13
1
(3 ) (1 ) 78
—
252
219
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates 213
(50 ) 3
(11 ) (29 ) 3
8
14
(40 ) —
164
(40 )
Catastrophe losses, excluding reserve reestimates (221 ) (139 ) (119 ) (57 ) (40 ) (6 ) (5 ) (4 ) —
—
(390 ) (206 )
Non-catastrophe reserve reestimates 176
24
30
(6 ) (2 ) 13
7
(25 ) —
—
213
4
Catastrophe reserve reestimates 3
—
8
(5 ) —
—
(1 ) —
—
—
10
(5 )
Losses subtotal 171
(165 ) (78 ) (79 ) (71 ) 10
9
(15 ) (40 ) —
(3 ) (247 )
(Increase) decrease expenses (100 ) (32 ) (1 ) (9 ) (7 ) (4 ) (2 ) 2
(67 ) —
(187 ) (57 )
Underwriting income (loss) - current period $ 244
$ 24
$ 335
$ 395
$ (15 ) $ 50
$ (15 ) $ (19 ) $ (29 ) $ —
$ 517
$ 455

Nine months ended September 30,
Auto Homeowners Other personal lines Commercial lines SquareTrade
Allstate Protection ^{(1) (2)}
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Underwriting income (loss) - prior period $ (44 ) $ (13 ) $ 528
$ 922
$ 104
$ 104
$ (90 ) $ (33 ) $ —
$ —
$ 518
$ 1,001
Changes in underwriting income (loss) from:

Increase (decrease) premiums earned 448
660
24
107
35
3
(16 ) 2
207
—
692
781
(Increase) decrease incurred claims and claims expense (“losses”):

Incurred losses, excluding catastrophe losses and reserve reestimates 560
(491 ) (49 ) 55
(27 ) 28
29
(4 ) (105 ) —
436
(399 )
Catastrophe losses, excluding reserve reestimates (179 ) (319 ) (182 ) (514 ) (26 ) (55 ) 3
(8 ) —
—
(389 ) (896 )
Non-catastrophe reserve reestimates 289
90
73
(5 ) (1 ) 25
46
(54 ) —
—
409
55
Catastrophe reserve reestimates 6
—
21
(13 ) (7 ) 1
3
—
—
—
23
(12 )
Losses subtotal 676
(720 ) (137 ) (477 ) (61 ) (1 ) 81
(66 ) (105 ) —
479
(1,252 )
(Increase) decrease expenses (202 ) 29
16
(24 ) (24 ) (2 ) 4
7
(188 ) —
(431 ) (12 )
Underwriting income (loss) - current period $ 878
$ (44 ) $ 431
$ 528
$ 54
$ 104
$ (21 ) $ (90 ) $ (86 ) $ —
$ 1,258
$ 518

~~_______________~~

⁽¹⁾

Includes other business lines underwriting loss of $3 million and underwriting income of $7 million in the third quarter of 2017 and 2016, respectively, and underwriting income of $3 million and $25 million in the first nine months of 2017 and 2016, respectively. Includes Answer Financial underwriting loss of zero and $2 million in the third quarter of 2017 and 2016, respectively, and $1 million and $5 million in the first nine months of 2017 and 2016, respectively.


⁽²⁾	Arity had affiliate revenues and expenses of $19 million and $26 million in the third quarter of 2017, respectively, and $59 million and $72 million the first nine months of 2017, respectively, which have been eliminated in consolidation.

~~The Allstate Corporation~~ 57



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Underwriting income totaled $517 million~~Other personal lines loss ratioincreased 21.7 points in the ~~third~~first quarter of ~~2017~~2023, compared to ~~$455 million~~the same period of 2022, primarily due to higher catastrophes losses, partially offset by increased premiums earned.

Commercial lines loss ratioincreased 14.9 points in the ~~third~~first quarter of ~~2016~~2023 compared to the same period of 2022, primarily due to premiums earned decreasing as a result of profitability actions and ~~$1.26~~continued elevated frequency and severity.

Other business lines loss ratio increased 12.1 points in the first quarter of 2023 compared to the same period of 2022, primarily due to higher catastrophe and non-catastrophe losses.

Catastrophe lossesincreased $1.23 billion to $1.69 billion in the first nine months of 2017 compared to $518 million in the first nine months of 2016. The increases in both periods were primarily due to increased premiums earned, lower claim frequency and favorable prior year reserve reestimates, partially offset by higher catastrophe losses.

Investment results are not included in the underwriting income analysis above. We do not allocate Property-Liability investment income, realized capital gains and losses, or assets to the Allstate Protection and Discontinued Lines and Coverages segments. Management reviews assets at the Property-Liability level for decision-making purposes. For a more detailed discussion on investment results, see the Property-Liability Investment Results section of the MD&A and Reportable Segments Footnote (Note 4) of the condensed consolidated financial statements.

~~Premiums written and earned~~ ~~by line of business are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
Premiums written 2017
2016 2017 2016
Auto $ 5,664
$ 5,521
$ 16,569
$ 16,149
Homeowners 2,053
2,006
5,542
5,484
Other personal lines 478
474
1,336
1,307
Subtotal – Personal lines 8,195
8,001
23,447
22,940
Commercial lines 116
123
363
384
Other business lines 168
185
515
551
SquareTrade 104
—
270
—
Total $ 8,583
$ 8,309
$ 24,595
$ 23,875
Premiums earned
Auto $ 5,502

$ 5,353
$ 16,327
$ 15,879
Homeowners 1,832

1,813
5,462
5,438
Other personal lines 439

426
1,306
1,271
Subtotal – Personal lines 7,773
7,592
23,095
22,588
Commercial lines 124

127
367
383
Other business lines 146
150
429
435
SquareTrade 78

—
207
—
Total $ 8,121
$ 7,869
$ 24,098
$ 23,406

~~Combined ratios~~ ~~by line of business are analyzed in the following table.~~

Loss ratio ⁽¹⁾

Expense ratio⁽¹⁾

Combined ratio ⁽¹⁾
2017
2016
2017
2016
2017
2016
Three months ended September 30,
Auto 70.3
75.5
25.3
24.1
95.6
99.6
Homeowners 57.6
53.9
24.1
24.3
81.7
78.2
Other Personal lines 74.3
59.9
29.1
28.4
103.4
88.3
Commercial lines 83.1
88.2
29.0
26.8
112.1
115.0
Other business lines 43.2
46.0
58.9
49.3
102.1
95.3
SquareTrade 51.3
—
85.9
—
137.2
—
Total 67.2
69.3
26.4
24.9
93.6
94.2

Nine months ended September 30,
Auto 69.6
75.9
25.0
24.4
94.6
100.3
Homeowners 68.6
66.4
23.5
23.9
92.1
90.3
Other Personal lines 67.6
64.6
28.3
27.2
95.9
91.8
Commercial lines 77.6
95.6
28.1
27.9
105.7
123.5
Other business lines 39.4
44.6
59.9
49.7
99.3
94.3
SquareTrade 50.7
—
90.8
—
141.5
—
Total 68.7
72.8
26.1
25.0
94.8
97.8

~~_______________~~


⁽¹⁾	~~Ratios are calculated using the premiums earned for the respective line of business.~~

58 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Loss ratios~~ ~~by line of business are analyzed in the following table and discussed in detail in the brand sections below.~~

Loss ratio Effect of catastrophe losses Effect of prior year reserve reestimates Effect of catastrophe losses included in prior year reserve reestimates
2017
2016
2017
2016
2017
2016
2017
2016
Three months ended September 30,
Auto 70.3
75.5
6.9
3.1
(3.4 ) (0.2 ) (0.1 ) (0.1 )
Homeowners 57.6
53.9
21.6
15.7
(2.3 ) (0.2 ) (0.1 ) 0.3
Other Personal lines 74.3
59.9
14.8
5.9
—
(0.5 ) (0.2 ) (0.3 )
Commercial lines 83.1
88.2
10.5
5.5
5.6
10.3
0.8
—
Other business lines 43.2
46.0
3.4
—
0.7
2.0
—
—
SquareTrade 51.3
—
—
—
—
—
—
—
Total 67.2
69.3
10.6
6.1
(2.8 ) —
(0.1 ) —

Nine months ended September 30,
Auto 69.6
75.9
4.2
3.2
(2.1 ) (0.3 ) (0.1 ) (0.1 )
Homeowners 68.6
66.4
31.8
29.0
(1.6 ) 0.1
(0.1 ) 0.3
Other Personal lines 67.6
64.6
14.3
12.0
—
(0.6 ) 0.4
(0.1 )
Commercial lines 77.6
95.6
6.0
7.3
1.9
14.6
0.3
1.0
Other business lines 39.4
44.6
1.2
—
0.2
0.7
—
—
SquareTrade 50.7
—
—
—
—
—
—
—
Total 68.7
72.8
11.0
9.7
(1.7 ) 0.1
—
0.1

~~The Allstate Corporation~~ 59



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Catastrophe losses~~ were $861 million and $2.64 billion in the third quarter and first nine months of 2017, respectively, compared to $481 million and $2.27 billion in the third quarter and first nine months of 2016, respectively. Catastrophe losses included $507 million and $134 million related to Hurricanes Harvey and Irma, respectively, in the third quarter of ~~2017, with over 100 thousand auto and homeowners reported claims, excluding flood related homeowners claims. Over 85% of the reported claims have been closed.~~

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. Auto policyholders generally have coverage for physical damage due to flood if they have purchased optional auto comprehensive coverage. Our homeowners policies specifically exclude coverage for losses caused by flood. We voluntarily participate as a Write Your Own carrier in the National Flood Insurance Program (“NFIP”). The NFIP is administered and regulated by the Federal Emergency Management Agency. We write the policy for the NFIP, which assumes 100% of the flood risk, while we retain a commission for our service. We operate in a fiduciary capacity as a fiscal agent of the federal government in the issuing and administering of the Standard Flood Insurance Policy. The federal government is obligated to pay all claims and certain allocated loss adjustment expenses in accordance with the arrangement. Congress is considering reforms to the program that would be incorporated in legislation to reauthorize the NFIP as well as evaluating the funding of the program.

Hurricane Irma property losses are covered by our Florida Excess Catastrophe Reinsurance Agreement which is comprised of five contracts and provides $658 million of coverage for personal lines property excess catastrophe losses caused by multiple perils in Florida subject to a $20 million retention. We ceded approximately $90 million of claims and claims expense related to these reinsurance agreements. Hurricane Harvey catastrophe losses were $507 million. These losses were subject to our personal lines property and auto nationwide reinsurance agreement. However, the losses qualifying under this agreement did not exceed the program’s $500 million retention. For details of our catastrophe reinsurance program see Note 10 on our Form 10-K for the year-ended December 31, 2016 and Item 2. Management’s Discussion and Analysis on our Form 10-Q for the periods ended March 31, 2017 and June 30, 2017.

We are subject to assessments from Citizens Property Insurance Corporation in the state of Florida (“FL Citizens”). FL Citizens, at the discretion and direction of its Board of Governors, can levy a regular assessment on assessable insurers and assessable insureds for a deficit in any calendar year up to a specified amount with the insurer having the ability to recoup a regular assessment through a surcharge to policyholders. Based on initial estimates by the Board of Governors, FL Citizens has sufficient resources to cover the losses from Hurricane Irma, and the impact of the storm will not put the program in a deficit position. See Note 14 on our Form 10-K for the year-ended December 31, 2016 for additional information.

We also participate as a member of the Texas Windstorm Insurance Association (“TWIA”) which provides wind and hail coverage to coastal risks unable to procure coverage in the voluntary market. Wind and hail coverage is written on a TWIA-issued policy. The TWIA board has the ability to assess insurers operating in the state, but has not indicated any assessments to insurers at this time. See Note 14 on our Form 10-K for the year-ended December 31, 2016 for additional information.

~~The first nine months of 2017 and 2016 have been impacted by higher than normal historical year-to-date catastrophe losses~~2023 compared to the ~~past~~first quarter of 2022, primarily related to five ~~years. For additional information on the impacts of Hurricanes Harvey and Irma see the brand discussions below.~~wind events in March.

We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring

within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes.

We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest, 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 March 31,
($ in millions)	Number of events	2023		Number of events	2022

Tornadoes	2	$	133	1	$	91
Wind/Hail	22	1,498		14	365

Freeze/other events	4	102		1	19
Prior year reserve reestimates		(42)			(13)



Total catastrophe losses	28	$	1,691	16	$	462

60 ~~www.allstate.com~~

First Quarter 2023 Form 10-Q 57



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Catastrophe losses by the size of event are shown in the following table.~~

($ in millions) Three months ended September 30, 2017
Number of events Claims and claims expense
Combined
ratio
impact
Average catastrophe loss per event
Size of catastrophe loss

Greater than $250 million 1
4.5 % $ 507
58.9 % 6.2
$ 507
$101 million to $250 million 1
4.5
134
15.6
1.7
134
$50 million to $100 million —
—
—
—
—
—
Less than $50 million 20
91.0
188
21.8
2.3
9
Total 22
100.0 % 829
96.3
10.2
38
Prior year reserve reestimates

(7 ) (0.8 ) (0.1 )
Prior quarter reserve reestimates 39
4.5
0.5

Total catastrophe losses

$ 861
100.0 % 10.6

Nine months ended September 30, 2017
Number of events Claims and claims expense
Combined
ratio
impact
Average catastrophe loss per event
Size of catastrophe loss

Greater than $250 million 1
1.1 % $ 507
19.2 % 2.1
$ 507
$101 million to $250 million 4
4.4
695
26.4
2.9
174
$50 million to $100 million 7
7.7
465
17.7
1.9
66
Less than $50 million 79
86.8
978
37.1
4.1
12
Total 91
100.0 % 2,645
100.4
11.0
29
Prior year reserve reestimates

(10 ) (0.4 ) —

Total catastrophe losses

$ 2,635
100.0 % 11.0

~~Catastrophe losses by the type of event are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,

Number
of events
2017 Number of events 2016 Number of events 2017 Number of events 2016
Hurricanes/Tropical storms 2
$ 641
1
$ 17
2
$ 641
1
$ 17
Tornadoes —
—
2
9
3
101
2
9
Wind/Hail 17
180
28
434
81
1,872
64
2,120
Wildfires 3
8
4
32
3
8
6
53
Other events —
—
—
—
2
23
2
57
Prior year reserve reestimates (7 ) 3
(10 ) 13
Prior quarter reserve reestimates 39
(14 ) —
—
Total catastrophe losses 22
$ 861
35
$ 481
91
$ 2,635
75
$ 2,269

~~Expense ratio~~ increased 1.5 points and 1.1 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. The expense ratios by line of business are shown in the following table.

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Auto 25.3
24.1
25.0
24.4
Homeowners 24.1
24.3
23.5
23.9
Other personal lines 29.1
28.4
28.3
27.2
Commercial lines 29.0
26.8
28.1
27.9
Other business lines 58.9
49.3
59.9
49.7
SquareTrade ⁽¹⁾
85.9
—
90.8
—
Total expense ratio ⁽¹⁾
26.4
24.9
26.1
25.0

~~_______________~~

⁽¹⁾ Includes $23 million and $69 million in the third quarter and first nine months of 2017, respectively, of amortization of purchased intangible assets related to the acquisition of SquareTrade that was completed on January 3, 2017, an impact of 29.5 points and 33.3 points to the SquareTrade expense ratio in the third quarter and first nine months of 2017, respectively, and an impact of 0.3 points to the total expense ratio in both the third quarter and first nine months of 2017.

~~The~~Segment Results Allstate ~~Corporation~~ 61Protection



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~The impact of specific costs and expenses on the expense ratio are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017
2016 2017 2016
Amortization of DAC 14.0
13.5
13.9
13.6
Advertising expense 2.3
2.6
2.3
2.4
Amortization of purchased intangible assets 0.3
0.1
0.3
0.1
Other costs and expenses 9.6
8.6
9.3
8.8
Restructuring and related charges 0.2
0.1
0.3
0.1
Total expense ratio 26.4
24.9
26.1
25.0

~~Reserve reestimates~~ The tables below show reserves, net of reinsurance, representing the estimated cost of outstanding claims as they were recorded at the beginning of years 2017 and 2016 and the effect of reestimates in each year.

($ in millions) January 1 reserves
2017 2016
Auto $ 13,530
$ 12,459
Homeowners 1,990
1,937
Other personal lines 1,456
1,490
Commercial lines 621
554
Other business lines 24
21
Total Allstate Protection $ 17,621
$ 16,461

($ in millions, except ratios) Three months ended September 30, Nine months ended September 30,

Reserve
reestimate ⁽¹⁾

Effect on
combined ratio⁽²⁾

Reserve
reestimate ⁽¹⁾

Effect on
combined ratio ⁽²⁾
2017 2016 2017 2016 2017 2016 2017 2016
Auto $ (189 ) $ (10 ) (2.4 ) (0.1 ) $ (336 ) $ (41 ) (1.4 ) (0.2 )
Homeowners (42 ) (4 ) (0.5 ) (0.1 ) (86 ) 8
(0.3 ) —
Other personal lines —
(2 ) —
—
—
(8 ) —
—
Commercial lines 7
13
0.1
0.2
7
56
—
0.3
Other business lines 1
3
—
—
1
3
—
—
Total Allstate Protection ⁽³⁾
$ (223 ) $ —
(2.8 ) —
$ (414 ) $ 18
(1.7 ) 0.1

Allstate brand $ (220 ) $ 3
(2.8 ) —
$ (408 ) $ 14
(1.7 ) 0.1
Esurance brand (1 ) (4 ) —
—
(2 ) (12 ) —
(0.1 )
Encompass brand (2 ) 1
—
—
(4 ) 16
—
0.1
Total Allstate Protection $ (223 ) $ —
(2.8 ) —
$ (414 ) $ 18
(1.7 ) 0.1

~~_______________~~


⁽¹⁾	~~Favorable reserve reestimates are shown in parentheses.~~


⁽²⁾	~~Ratios are calculated using Property-Liability premiums earned.~~


⁽³⁾	Prior year reserve reestimates included in catastrophe losses totaled $7 million and $10 million favorable in the three and nine months ended September 30, 2017, respectively, compared to $3 million and $13 million unfavorable in the three and nine months ended September 30, 2016, respectively.

Favorable reserve reestimates in the third quarter and first nine months of 2017 primarily relate to severity development for auto injury coverages that was better than expected. Severity development for auto injury coverages was due in part to claims process improvements.

62 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

The following table presents premiums written, policies in force (“PIF”) and underwriting income (loss) by line of business for Allstate brand, Esurance brand, Encompass brand and Allstate Protection for the nine months ended September 30, 2017. Detailed analysis of underwriting results, premiums written and earned, and the combined ratios, including loss and expense ratios are discussed in the brand sections below.

($ in millions) Allstate brand Esurance brand Encompass brand Allstate Protection
Premiums written Amount Percent to total Amount Percent to total Amount Percent to total Amount Percent to total
Auto $ 14,903
67.1 % $ 1,252
95.0 % $ 414
52.3 % $ 16,569
67.4 %
Homeowners 5,171
23.3
60
4.5
311
39.3
5,542
22.5
Other personal lines 1,263
5.7
6
0.5
67
8.4
1,336
5.4
Commercial lines 363
1.6
—
—
—
—
363
1.5
Other business lines 515
2.3
—
—
—
—
515
2.1
SquareTrade —
—
—
—
—
—
270
1.1
Total $ 22,215
100.0 % $ 1,318
100.0 % $ 792
100.0 % $ 24,595
100.0 %

Percent to total Allstate Protection 90.3 % 5.4 % 3.2 %

PIF (thousands)
Auto 19,513
55.9 % 1,369
91.9 % 548
61.0 % 21,430
30.0 %
Homeowners 6,071
17.4
76
5.1
262
29.2
6,409
9.0
Other personal lines 4,212
12.1
45
3.0
88
9.8
4,345
6.1
Commercial lines 251
0.7
—
—
—
—
251
0.4
Other business lines 4,838
13.9
—
—
—
—
4,838
6.8
SquareTrade —
—
—
—
—
—
34,078
47.7
Total 34,885
100.0 % 1,490
100.0 % 898
100.0 % 71,351
100.0 %

Percent to total Allstate Protection 48.9 % 2.1 % 1.3 %

Underwriting income (loss)
Auto $ 913
64.5 % $ (32 ) 58.2 % $ (3 ) 18.8 % $ 878
69.8 %
Homeowners 473
33.4
(24 ) 43.6
(18 ) 112.5
431
34.3
Other personal lines 48
3.4
1
(1.8 ) 5
(31.3 ) 54
4.3
Commercial lines (21 ) (1.5 ) —
—
—
—
(21 ) (1.7 )
Other business lines 3
0.2
—
—
—
—
3
0.2
SquareTrade —
—
—
—
—
—
(86 ) (6.8 )
Answer Financial —
—
—
—
—
—
(1 ) (0.1 )
Total $ 1,416
100.0 % $ (55 ) 100.0 % $ (16 ) 100.0 % $ 1,258
100.0 %

~~When analyzing premium measures and statistics for all three brands the following calculations are used as described below.~~

~~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.~~

New issued applications: Item counts of automobiles or homeowners insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate Protection brand. Allstate brand includes automobiles added by existing customers when they exceed the number allowed (currently 10) on a policy.

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. Allstate and Esurance brands policy terms are 6 months for auto and 12 months for homeowners. Encompass brand policy terms are 12 months for auto and homeowners.

Renewal ratio: Renewal policies issued during the period, based on contract effective dates, divided by the total policies issued 6 months prior for auto (12 months prior for Encompass brand) or 12 months prior for homeowners.

~~The Allstate Corporation~~ 63



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Underwriting results~~ ~~are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 7,755
$ 7,564
$ 22,215
$ 21,708
Premiums earned $ 7,342
$ 7,152
$ 21,785
$ 21,257
Claims and claims expense (4,922 ) (4,920 ) (14,865 ) (15,419 )
Amortization of DAC (1,067 ) (1,003 ) (3,119 ) (2,982 )
Other costs and expenses (804 ) (731 ) (2,318 ) (2,183 )
Restructuring and related charges (13 ) (5 ) (67 ) (19 )
Underwriting income $ 536
$ 493
$ 1,416
$ 654
Catastrophe losses $ 832
$ 440
$ 2,455
$ 2,136

Underwriting income (loss) by line of business
Auto $ 253
$ 49
$ 913
$ 37
Homeowners 319
406
473
568
Other personal lines ⁽¹⁾
(18 ) 50
48
114
Commercial lines (15 ) (19 ) (21 ) (90 )
Other business lines ⁽²⁾
(3 ) 7
3
25
Underwriting income $ 536
$ 493
$ 1,416
$ 654

~~_______________~~


⁽¹⁾	~~Other personal lines include renter, condominium, landlord and other personal lines products.~~


⁽²⁾	~~Other business lines primarily include Allstate Roadside Services, Allstate Dealer Services, Arity and Ivantage.~~

The following table summarizes the changes in underwriting results from the prior year by the components of the increase (decrease) in underwriting income. The 2017 columns present changes in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. The 2016 columns present changes in the third quarter and first nine months of 2016, respectively, compared to the same periods of 2015.

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Underwriting income (loss) - prior period $ 493
$ 571
$ 654
$ 1,183
Changes in underwriting income from:
Increase (decrease) premiums earned 190
220
528
776
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates 176
(36 ) 473
(423 )
Catastrophe losses, excluding reserve reestimates (401 ) (184 ) (341 ) (870 )
Non-catastrophe reserve reestimates 214
(10 ) 400
58
Catastrophe reserve reestimates 9
(6 ) 22
(12 )
Losses subtotal (2 ) (236 ) 554
(1,247 )
(Increase) decrease expenses (145 ) (62 ) (320 ) (58 )
Underwriting income (loss) - current period $ 536
$ 493
$ 1,416
$ 654

Underwriting income totaled $536 million in the third quarter of 2017 compared to $493 million in the third quarter of 2016 and $1.42 billion in the first nine months of 2017, an increase from $654 million in the first nine months of 2016. Both period increases were primarily due to increased premiums earned, lower claim frequency and favorable prior year reserve reestimates compared to unfavorable reserve reestimates in 2016, partially offset by higher catastrophe losses primarily related to Hurricanes Harvey and Irma, and higher employee-related and agent compensation costs.

64 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

For auto insurance, we continued to take a balanced approach to profitable growth. As auto margins have improved, we have expanded the number of states in which we are implementing growth plans. While we continue to file rate increases to keep pace with loss trends, the overall magnitude of rates taken has moderated as profitability trends have improved.Catastrophe reinsurance

Our trusted advisor strategy for Allstate exclusive agencies remains critical. This includes enhancements to our approach to initiating relationships, building personalized solutions and cultivating trust based relationships. We are also focused on broadening our distribution footprint, both in terms of agency owners and licensed sales professionals, to expand sales and service capacity and making other sales and marketing investments to increase new business volume.

We are leveraging data and analytic capabilities to generate business value. This includes the strategic deployment of new agencies, improved operational efficiency to create a better customer experience, enhanced target marketing as well as enhanced sophistication of product and pricing capabilities.

For homeowners insurance, we continue to be disciplined in how we manage margins through underwriting guidelines, risk management policies, property inspections and implement rate and other actions to maintain or improve returns where required. Our growth actions include continuing to implement updated competitive products, including our House & Home product and a new condominium product, leveraging agency sales practices focused on multi-line households, increasing availability in coastal markets, improving penetration in underserved markets in the middle of the country and targeted advertising campaigns.

~~Premiums written and earned~~ ~~by line of business are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
Premiums written 2017 2016 2017 2016
Auto $ 5,096
$ 4,940
$ 14,903
$ 14,453
Homeowners 1,921
1,869
5,171
5,092
Other personal lines 454
447
1,263
1,228
Subtotal – Personal lines 7,471
7,256
21,337
20,773
Commercial lines 116
123
363
384
Other business lines 168
185
515
551
Total $ 7,755
$ 7,564
$ 22,215
$ 21,708
Premiums earned
Auto $ 4,951
$ 4,793
$ 14,673
$ 14,205
Homeowners 1,707
1,683
5,086
5,045
Other personal lines 414
399
1,230
1,189
Subtotal – Personal lines 7,072
6,875
20,989
20,439
Commercial lines 124
127
367
383
Other business lines 146
150
429
435
Total $ 7,342
$ 7,152
$ 21,785
$ 21,257

~~The Allstate Corporation~~ 65



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Auto insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 19,513
19,852
19,513
19,852
New issued applications (thousands) 651
584
1,900
1,750
Average premium
$ 556
$ 532
$ 546
$ 518
Renewal ratio (%) 87.7
87.5
87.5
87.9
Approved rate changes ⁽¹⁾:

# of locations⁽²⁾
17
25
43
51
Total brand (%) ⁽³⁾
0.4
1.0
2.8
⁽⁶⁾
5.9
Location specific (%) ^(4) (5)
3.0
7.1
4.7
⁽⁶⁾
7.0

~~____________~~

⁽¹⁾

Rate changes that are indicated based on loss trend analysis to achieve a targeted return will continue to be pursued. Rate changes do not include rating plan enhancements, including the introduction of discounts and surcharges that result in no change in the overall rate level in a location. These rate changes do not reflect initial rates filed for insurance subsidiaries initially writing business in a location.


⁽²⁾	~~Allstate brand operates in 50 states, the District of Columbia, and 5 Canadian provinces.~~


⁽³⁾	~~Represents the impact in the states, the District of Columbia and Canadian provinces where rate changes were approved during the period as a percentage of total brand prior year-end premiums written.~~


⁽⁴⁾	Represents the impact in the states, the District of Columbia and Canadian provinces where rate changes were approved during the period as a percentage of its respective total prior year-end premiums written in those same locations.

⁽⁵⁾

Based on historical premiums written in the locations noted above, the annual impact of rate changes approved for auto totaled $76 million and $551 million in the three and nine months ended September 30, 2017, respectively, compared to $192 million and $1.09 billion in the three and nine months ended September 30, 2016, respectively. Approximately 38% of the Allstate brand rate increases approved in the first nine months of 2017 are expected to be earned in 2017, with the remainder expected to be earned in 2018 and 2019.

⁽⁶⁾Includes a rate increase in California in first quarter 2017. Excluding California, Allstate brand auto total brand and location specific rate changes were 2.2% and 4.3% for the nine months ended September 30, 2017, respectively.

~~Auto insurance premiums written~~ totaled $5.10 billion in the third quarter of 2017, a 3.2% increase from $4.94 billion in the third quarter of 2016, and $14.90 billion in the first nine months of 2017, a 3.1% increase from $14.45 billion in the first nine months of 2016. Factors impacting premiums written were the following:

1.7% or 339 thousand decrease in PIF as of September 30, 2017 compared to September 30, 2016. PIF decreased slightly by 0.2% or 35 thousand as of September 30, 2017 compared to June 30, 2017. Auto PIF increased in 14 states, including 3 of our largest 10 states, as of September 30, 2017 compared to September 30, 2016.

11.5% and 8.6% increase in new issued applications in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. 41 states, including all of our 10 largest states, experienced increases in new issued applications in the third quarter of 2017 compared to the same period of 2016, with 29 states experiencing double digit increases. 40 states, including 8 of our 10 largest states, experienced increases in new issued applications in the first nine months of 2017 compared to the same period of 2016, with 22 states experiencing double digit increases. Hurricanes disrupted business operations and constrained new business volume in the impacted areas in the third quarter of 2017.

4.5% and 5.4% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to rate increases. Rate changes approved for auto do not assume customer choices such as non-renewal or changes in policy terms which might reduce future premiums.

0.2 point increase and 0.4 point decrease in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. 29 states, including 6 of our 10 largest states, and 20 states, including 3 of our 10 largest states, experienced increases in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. The renewal ratio in third quarter 2017 sequentially increased by 0.3 points compared to second quarter 2017.

66 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Homeowners insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 6,071
6,131
6,071
6,131

New issued applications (thousands) 198
188
556
545

Average premium $ 1,203
$ 1,181
$ 1,194
$ 1,176

Renewal ratio (%)
87.5
87.9
87.2
87.9

Approved rate changes ⁽¹⁾:

# of locations ⁽²⁾
8
10
23
33

Total brand (%) 0.5
0.2
1.6
0.6
⁽⁴⁾
Location specific (%) ⁽³⁾
5.3
4.6
4.2
1.6
⁽⁴⁾

~~_______________~~


⁽¹⁾	~~Includes rate changes approved based on our net cost of reinsurance.~~


⁽²⁾	~~Allstate brand operates in 50 states, the District of Columbia, and 5 Canadian provinces.~~


⁽³⁾	Based on historical premiums written in the locations noted above, the annual impact of rate changes approved for homeowners totaled $38 million and $113 million in the three and nine months ended September 30, 2017, respectively, compared to $16 million and $43 million in the three and nine months ended September 30, 2016, respectively.


⁽⁴⁾	Includes the impact of a rate decrease in California in first quarter 2016. Excluding California, Allstate brand homeowners total brand and location specific rate changes were 1.6% and 5.2% for the nine months ended September 30, 2016, respectively.

~~Homeowners insurance premiums written~~ totaled $1.92 billion in the third quarter of 2017, a 2.8% increase from $1.87 billion in the third quarter of 2016, and $5.17 billion in the first nine months of 2017, a 1.6% increase from $5.09 billion in the first nine months of 2016. Factors impacting premiums written were the following:

1.0% or 60 thousand decrease in PIF as of September 30, 2017 compared to September 30, 2016. PIF decreased slightly by 2 thousand as of September 30, 2017 compared to June 30, 2017. Allstate brand homeowners PIF increased in 18 states, including 2 of our largest 10 states, as of September 30, 2017 compared to September 30, 2016.

5.3% and 2.0% increase in new issued applications in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Of our largest 10 states, 6 experienced increases in new issued applications in both the third quarter and first nine months of 2017 compared to the same periods of 2016. Hurricanes disrupted business operations and constrained new business volume in the impacted areas in the third quarter of 2017.

1.9% and 1.5% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to rate changes and increasing insured home valuations due to inflationary costs.

0.4 point and 0.7 point decrease in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Of our largest 10 states, 3 and 2 experienced an increase in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. The renewal ratio in third quarter 2017 sequentially increased by 0.5 points compared to second quarter 2017.

~~$11 million decrease in the cost of our~~current catastrophe reinsurance program ~~to $69 million in~~supports the ~~third quarter~~Company’s risk tolerance framework which utilizes a modeled 1-in-100 annual aggregate limit for catastrophe losses from hurricanes, earthquakes and wildfires of ~~2017 from $80 million in the third quarter~~$2.5 billion, net of 2016, and $33 million decrease to $223 million in the first nine months of 2017 from $256 million in the first nine months of 2016. Catastrophe reinsurance premiums are recorded primarily in Allstate brand and are a reduction of premium.reinsurance.

~~Premiums written for Allstate’s House and Home~~product, our homeowners offering currently available in 41 of the 50 states we operate in, totaled $668 million in the third quarter of 2017 compared to $532 million in the third quarter of 2016, and $1.73 billion in the first nine months of 2017 compared to $1.08 billion in the first nine months of 2016.

~~Other personal lines~~ premiums written totaled $454 million in the third quarter of 2017, a 1.6% increase from $447 million in the third quarter of 2016, and $1.26 billion in the first nine months of 2017, a 2.9% increase from $1.23 billion in the first nine months of 2016. The increases in both periods were primarily due to personal umbrella insurance premiums.

~~Commercial lines~~ premiums written totaled $116 million in the third quarter of 2017, a 5.7% decrease from $123 million in the third quarter of 2016, and $363 million in the first nine months of 2017, a 5.5% decrease from $384 million in the first nine months of 2016. The decreases in both periods were driven by decreased new business and lower renewals due to profit improvement actions, partially offset by increased average premiums.

~~Other business lines~~ premiums written totaled $168 million in the third quarter of 2017, a 9.2% decrease from $185 million in the third quarter of 2016, and $515 million in the nine months of 2017, a 6.5% decrease from $551 million in the first nine

~~The Allstate Corporation~~ 67



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

months of 2016. The decreases in both periods were primarily driven by lower wholesale rescue volume primarily due to lower partner renewals and retail memberships in force at Allstate Roadside Services. Allstate Roadside Services continues to implement profit improvement actions, which have impacted premium, but are reducing loss costs.

~~Combined ratios~~ ~~by line of business are analyzed in the following table.~~

Loss ratio ⁽¹⁾

Expense ratio⁽¹⁾

Combined ratio ⁽¹⁾
2017 2016 2017 2016 2017 2016
Three months ended September 30,
Auto 69.8
75.3
25.1
23.7
94.9
99.0
Homeowners 57.9
53.1
23.4
22.8
81.3
75.9
Other personal lines 75.3
59.2
29.0
28.3
104.3
87.5
Commercial lines 83.1
88.2
29.0
26.8
112.1
115.0
Other business lines 43.2
46.0
58.9
49.3
102.1
95.3
Total 67.0
68.8
25.7
24.3
92.7
93.1

Nine months ended September 30,
Auto 69.0
75.8
24.8
23.9
93.8
99.7
Homeowners 67.9
66.2
22.8
22.5
90.7
88.7
Other Personal lines 67.9
63.3
28.2
27.1
96.1
90.4
Commercial lines 77.6
95.6
28.1
27.9
105.7
123.5
Other business lines 39.4
44.6
59.9
49.7
99.3
94.3
Total 68.2
72.5
25.3
24.4
93.5
96.9

~~_______________~~


⁽¹⁾	~~Ratios are calculated using the premiums earned for the respective line of business.~~

~~Loss ratios~~ ~~by line of business are analyzed in the following table.~~

Loss ratio Effect of catastrophe losses Effect of prior year reserve reestimates Effect of catastrophe losses included in prior year reserve reestimates
2017 2016 2017 2016 2017 2016 2017 2016
Three months ended September 30,
Auto 69.8
75.3
7.4
3.1
(3.8 ) (0.1 ) (0.1 ) (0.1 )
Homeowners 57.9
53.1
22.4
15.4
(2.5 ) (0.3 ) (0.2 ) 0.3
Other personal lines 75.3
59.2
15.7
6.0
0.7
(0.8 ) —
(0.3 )
Commercial lines 83.1
88.2
10.5
5.5
5.6
10.3
0.8
—
Other business lines 43.2
46.0
3.4
—
0.7
2.0
—
—
Total 67.0
68.8
11.3
6.2
(3.0 ) —
(0.1 ) —

Nine months ended September 30,
Auto 69.0
75.8
4.4
3.4
(2.3 ) (0.2 ) (0.1 ) —
Homeowners 67.9
66.2
31.6
29.3
(1.7 ) 0.1
(0.1 ) 0.4
Other Personal lines 67.9
63.3
14.7
12.5
0.5
(1.3 ) 0.4
(0.1 )
Commercial lines 77.6
95.6
6.0
7.3
1.9
14.6
0.3
1.0
Other business lines 39.4
44.6
1.2
—
0.2
0.7
—
—
Total 68.2
72.5
11.3
10.0
(1.9 ) 0.1
—
0.1

~~Auto loss ratio~~ decreased 5.5 points and 6.8 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to increased premiums earned, lower claim frequency and higher favorable prior year reserve reestimates, partially offset by higher catastrophe losses.

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

Paid claim frequency is calculated as annualized notice counts closed with payment in the period divided by the average of policies in force with the applicable coverage during the period. Gross claim frequency is calculated as annualized notice counts received in the period divided by the average of policies in force 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

68 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

with a payment or closed without payment). Frequency statistics exclude counts associated with catastrophe events. The percent change in paid or gross claim frequency is calculated as the amount of increase or decrease in the paid or gross claim frequency in the current period compared to the same period in the prior year; divided by the prior year paid or gross claim frequency.

Paid claim frequency trends will often differ from gross claim frequency trends due to differences in the timing of when notices are received and when claims are settled. For property damage claims, paid frequency trends reflect little differences as timing between opening and settlement is minimal. For bodily injury, gross frequency trends reflect emerging trends since the difference in timing between opening and settlement is much greater and gross frequency does not experience the same volatility in quarterly fluctuations seen in paid frequency. In evaluating frequency, we typically rely upon paid frequency trends for physical damage coverages such as property damage and gross frequency for casualty coverages such as bodily injury to provide an indicator of emerging trends in overall claim frequency while also providing insights for our analysis of severity.

Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period. The percent change in paid claim severity is calculated as the amount of increase or decrease in paid claim severity in the current period compared to the same period in the prior year; divided by the prior year paid claims severity.

Claims is operating in a continuous improvement environment, actively focusing on effective loss cost management, process efficiency and leveraging emerging technologies to enhance the customer experience. The aim is to ensure a fast, fair and easy claims experience. We have ~~been simplifying and streamlining~~completed the ~~claim handling process using leading technology, self-servicing capabilities and electronic payments.~~

~~We have opened several Digital Operating Centers to handle auto claims countrywide utilizing~~placement of our ~~virtual estimation capabilities, which includes estimating damage through photos with~~2023-2024 Nationwide Excess Catastrophe Reinsurance Program (the “Nationwide Program”), the ~~use of QuickFoto Claim~~^®~~and Virtual Assist~~^SM ~~(video chat technology used to review supplemental damage with auto body shops). We are assessing wind and hail property claims through~~National General Reciprocal Excess Catastrophe Program, the use of drones, piloted airplanes and satellite imagery. We are continuing to aggressively seek new technology and process solutions to provide continued loss cost accuracy, efficient processes and customer experiences that are simple, fast and produce high degrees of satisfaction. While these claims organizational and process changes are occurring, frequency and severity statistics may be impacted as changes in claim opening and closing practices, if any, can impact comparisons to prior periods.

~~Property damage~~ paid claim frequency decreased 9.0% and 5.2% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. 47 states experienced a year over year decrease in property damage paid claim frequency in third quarter 2017 when compared to third quarter 2016.Property damage paid claim severities increased 4.9% and 3.8% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Property damage paid claim severity trend is being impacted by claims process changes involving QuickFoto Claim and Virtual Assist, which impacts the timing of claim payments.

~~Bodily injury~~ gross claim frequency decreased 5.6% and 5.5% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Bodily injury paid claim frequency decreased 9.1% and 18.5% while bodily injury paid claim severity increased 15.0% and 23.3% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Claim process changes in the second half of 2016 related to enhanced documentation of injuries and related medical treatments are having a related impact on paid claim frequency and severity due to payment mix and claim closure patterns. These process changes normalized during the first half of 2017Kentucky Earthquake Excess Catastrophe Reinsurance Contract, and the ~~related impacts on the percent change in paid claim frequency and severity have begun to moderate in third quarter 2017.~~

~~Homeowners loss ratio~~ increased 4.8 points and 1.7 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to higher catastrophe losses, partially offset by higher favorable prior year reserve reestimates and increased premiums earned. Paid claim frequency excluding catastrophe losses decreased 5.4% and increased 1.0% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Paid claim severity excluding catastrophe losses increased 8.1% and 4.1% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Homeowner paid claim severity can be impacted by both the mix of perilsCanada Catastrophe Excess Reinsurance Contract. The Florida Excess Catastrophe Reinsurance Program and the ~~magnitude of specific losses paid during the quarter.~~

~~Other personal lines loss ratio~~ increased 16.1 points and 4.6 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to higher catastrophe losses, unfavorable prior year reserve reestimates and higher claim severity, partially offset by increased premiums earned.

~~Commercial lines loss ratio~~ decreased 5.1 points in the third quarter of 2017 compared to the third quarter of 2016, primarily due to lower unfavorable prior year reserve reestimates and lower claim frequency, partially offset by higher catastrophe losses. Commercial lines loss ratio decreased 18.0 points in the first nine months of 2017 compared to the first nine months of 2016, primarily due to lower unfavorable prior year reserve reestimates, lower catastrophe losses and claim frequency.

~~The Allstate Corporation~~ 69



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Catastrophe losses~~ were $832 million and $2.46 billion in the third quarter and first nine months of 2017, respectively, compared to $440 million and $2.14 billion in the third quarter and first nine months of 2016, respectively. Catastrophe losses included $617 million in the third quarter and first nine months of 2017 related to Hurricanes Harvey and Irma.

~~Expense ratio~~ ~~The expense ratios by line of business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Auto 25.1
23.7
24.8
23.9
Homeowners 23.4
22.8
22.8
22.5
Other personal lines 29.0
28.3
28.2
27.1
Commercial lines 29.0
26.8
28.1
27.9
Other business lines ⁽¹⁾
58.9
49.3
59.9
49.7
Total expense ratio 25.7
24.3
25.3
24.4

~~_______________~~


⁽¹⁾	Increases in the third quarter and first nine months of 2017 compared to the same periods of 2016 are primarily due to Allstate Roadside Services increase in strategic investments in the Good Hands Rescue Network and Allstate Dealer Services increase in employee-related costs and an overall decrease in earned premiums.

~~The impact of specific costs and expenses on the expense ratio are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Amortization of DAC 14.5
14.0
14.3
14.0
Advertising expense 2.0
2.2
2.0
2.0
Other costs and expenses 9.0
8.0
8.7
8.3
Restructuring and related charges 0.2
0.1
0.3
0.1
Total expense ratio 25.7
24.3
25.3
24.4

~~Expense ratio~~ increased 1.4 points and 0.9 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to higher employee-related compensation costs, resulting from higher year-to-date profitability, and agent compensation costs. Amortization of DAC primarily includes agent remuneration and premium taxes. Allstate agency total incurred base commissions, variable compensation and bonuses in the third quarter and first nine months of 2017 were higher than the same periods of 2016.

70 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Underwriting results~~ ~~are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 453
$ 446
$ 1,318
$ 1,290
Premiums earned $ 432
$ 418
$ 1,280
$ 1,237
Claims and claims expense (337 ) (326 ) (997 ) (939 )
Amortization of DAC (11 ) (10 ) (31 ) (30 )
Other costs and expenses (103 ) (123 ) (304 ) (371 )
Restructuring and related charges —
—
(3 ) —
Underwriting loss $ (19 ) $ (41 ) $ (55 ) $ (103 )
Catastrophe losses $ 17
$ 14
$ 49
$ 31

Underwriting income (loss) by line of business
Auto $ (15 ) $ (19 ) $ (32 ) $ (49 )
Homeowners (4 ) (22 ) (24 ) (54 )
Other personal lines —
—
1
—
Underwriting loss $ (19 ) $ (41 ) $ (55 ) $ (103 )

The following table summarizes the changes in underwriting results from the prior year by the components of the increase (decrease) in underwriting income (loss). The 2017 columns present changes in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. The 2016 columns present changes in the third quarter and first nine months of 2016, respectively, compared to the same periods of 2015.

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Underwriting income (loss) - prior period $ (41 ) $ (26 ) $ (103 ) $ (136 )
Changes in underwriting income (loss) from:
Increase (decrease) premiums earned 14
19
43
49
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates (5 ) (23 ) (29 ) (25 )
Catastrophe losses, excluding reserve reestimates (3 ) (12 ) (19 ) (21 )
Non-catastrophe reserve reestimates (3 ) (2 ) (11 ) (1 )
Catastrophe reserve reestimates —
1
1
1
Losses subtotal (11 ) (36 ) (58 ) (46 )
(Increase) decrease expenses 19
2
63
30
Underwriting income (loss) - current period $ (19 ) $ (41 ) $ (55 ) $ (103 )

Underwriting loss totaled $19 million in the third quarter of 2017, an improvement from $41 million in the third quarter of 2016 and $55 million in the first nine months of 2017, compared to $103 million in the first nine months of 2016. The improvements in both periods were primarily due to increased premiums earned, decreased homeowners marketing and lower amortization of purchased intangible assets, partially offset by higher catastrophe losses and lower favorable prior year reserve reestimates.

We are focused on improving our results through profit improvement actions that include rate increases, a shift to lower risk customers, and decreased homeowners marketing while enhancing processes and operations to improve the customer experience.

~~The Allstate Corporation~~ 71



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Premiums written and earned~~ ~~by line of business are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
Premiums written 2017 2016 2017 2016
Auto $ 427
$ 428
$ 1,252
$ 1,243
Homeowners 24
16
60
41
Other personal lines 2
2
6
6
Total $ 453
$ 446
$ 1,318
$ 1,290
Premiums earned
Auto $ 411
$ 405
$ 1,225
$ 1,202
Homeowners 19
11
49
29
Other personal lines 2
2
6
6
Total $ 432
$ 418
$ 1,280
$ 1,237

~~Auto insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 1,369
1,395
1,369
1,395
New issued applications (thousands) 116
151
379
460
Average premium
$ 574
$ 546
$ 570
$ 544
Renewal ratio (%) 81.8
78.9
81.3
79.5
Approved rate changes ⁽¹⁾:

# of locations⁽²⁾
16
9
19
26
Total brand (%) ⁽³⁾
2.0
0.4
4.4
2.0
Location specific (%) ^(4) (5)
5.6
2.3
5.7
4.4

~~____________~~

⁽¹⁾


⁽²⁾	~~Esurance brand operates in 43 states and 2 Canadian provinces.~~


⁽³⁾	~~Represents the impact in the states and Canadian provinces where rate changes were approved during the period as a percentage of total brand prior year-end premiums written.~~


⁽⁴⁾	Represents the impact in the states and Canadian provinces where rate changes were approved during the period as a percentage of its respective total prior year-end premiums written in those same locations.


⁽⁵⁾	Based on historical premiums written in the locations noted above, the annual impact of rate changes approved for auto totaled $32 million and $71 million in the three and nine months ended September 30, 2017, respectively, compared to $6 million and $31 million in the three and nine months ended~~September 30, 2016, respectively.~~

~~Auto premiums written~~ totaled $427 million in the third quarter of 2017, a 0.2% decrease from $428 million in the third quarter of 2016, $1.25 billion in the first nine months of 2017, a 0.7% increase from $1.24 billion in the first nine months of 2016. Factors impacting premiums written were the following:

•~~1.9% or 26 thousand decrease in PIF as of September 30, 2017 compared to September 30, 2016.~~

23.2% and 17.6% decrease in new issued applications in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to the impact of rate increases and the shift to lower risk customers.

~~5.1% and 4.8% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016.~~

2.9 point and 1.8 point increase in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to the shift to lower risk customers and improved customer experience.

72 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Homeowners insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 76
52
76
52
New issued applications (thousands) 10
10
27
28
Average premium $ 924
$ 872
$ 919
$ 877
Renewal ratio (%) ⁽¹⁾
85.8
83.1
85.3
83.3
Approved rate changes ⁽²⁾:

# of locations ⁽³⁾
—
N/A
—
N/A
Total brand (%) —
N/A
—
N/A
Location specific (%) —
N/A
—
N/A

~~_______________~~


⁽¹⁾	Esurance’s renewal ratios exclude the impact of risk related cancellations. Customers can enter into a policy without a physical inspection. During the underwriting review period, a number of policies may be canceled if upon inspection the condition is unsatisfactory.


⁽²⁾	~~Includes rate changes approved based on our net cost of reinsurance.~~


⁽³⁾	~~Esurance brand operates in 31 states and 2 Canadian provinces.~~

~~N/A reflects not applicable.~~

~~Homeowners insurance premiums written~~ totaled $24 million in the third quarter of 2017 compared to $16 million in the third quarter of 2016, and $60 million in the first nine months of 2017 compared to $41 million in the first nine months of 2016. Factors impacting premiums written were the following:

~~24 thousand increase in PIF as of September 30, 2017 compared to September 30, 2016.~~

~~3.6% decrease in new issued applications in the first nine months of 2017 compared to the same period of 2016, due to reduced advertising spending.~~

6.0% and 4.8% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to rate changes. As of September 30, 2017, Esurance is writing homeowners insurance in 31 states with lower hurricane risk, contributing to lower average premium.

~~Combined ratios~~ ~~by line of business are analyzed in the following table.~~

Loss ratio ⁽¹⁾

Expense ratio ⁽¹⁾

Combined ratio ⁽¹⁾
2017 2016 2017 2016 2017 2016
Three months ended September 30,
Auto 78.3
77.3
25.3
27.4
103.6
104.7
Homeowners 73.7
100.0
47.4
200.0
121.1
300.0
Other personal lines 50.0
100.0
50.0
—
100.0
100.0
Total 78.0
78.0
26.4
31.8
104.4
109.8

Nine months ended September 30,
Auto 77.2
75.7
25.4
28.4
102.6
104.1
Homeowners 98.0
86.2
51.0
200.0
149.0
286.2
Other Personal lines 50.0
66.7
33.3
33.3
83.3
100.0
Total 77.9
75.9
26.4
32.4
104.3
108.3

~~_______________~~


⁽¹⁾	~~Ratios are calculated using the premiums earned for the respective line of business.~~

~~The Allstate Corporation~~ 73



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Loss ratios~~ ~~by line of business are analyzed in the following table.~~

~~Auto loss ratio~~ ~~increased 1.0 point and 1.5 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to higher catastrophe losses.~~

~~Catastrophe losses~~ were $17 million and $49 million in the third quarter and first nine months of 2017, respectively, compared to $14 million and $31 million in the third quarter and first nine months of 2016, respectively. Catastrophe losses included $14 million in the third quarter and first nine months of 2017 related to Hurricanes Harvey and Irma. As Esurance increases its homeowners business, we are exposed to more catastrophe losses.

~~Expense ratio~~ ~~The expense ratios by line of business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Auto 25.3
27.4
25.4
28.4
Homeowners 47.4
200.0
51.0
200.0
Other personal lines 50.0
—
33.3
33.3
Total expense ratio 26.4
31.8
26.4
32.4

~~The impact of specific costs and expenses on the expense ratio are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Amortization of DAC 2.5
2.4
2.4
2.4
Advertising expense 9.3
11.7
8.8
11.9
Amortization of purchased intangible assets 0.2
1.5
0.2
1.5
Other costs and expenses 14.4
16.2
14.8
16.6
Restructuring and related charges —
—
0.2
—
Total expense ratio 26.4
31.8
26.4
32.4

~~Expense ratio~~ decreased 5.4 points and 6.0 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Esurance uses a direct distribution model, therefore its primary acquisition-related costs are advertising as opposed to commissions. Esurance advertising expense ratio decreased 2.4 points and 3.1 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to reductions in homeowners marketing spending.

Other costs and expenses, including salaries of telephone sales personnel and other underwriting costs related to customer acquisition, were lower in the third quarter and first nine months of 2017 compared to the same periods of 2016. Expense ratio includes amortization of purchased intangible assets from the original acquisition in 2011. Starting in 2017, the portion of the remaining purchased intangible asset related to the Esurance brand name was classified as an infinite-lived intangible and is no longer being amortized, but instead tested for impairment on an annual basis.

74 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Underwriting results~~ ~~are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 271
$ 299
$ 792
$ 877
Premiums earned $ 269
$ 299
$ 826
$ 912
Claims and claims expense (158 ) (208 ) (590 ) (678 )
Amortization of DAC (49 ) (55 ) (152 ) (169 )
Other costs and expenses (33 ) (31 ) (95 ) (92 )
Restructuring and related charges —
—
(5 ) (1 )
Underwriting income (loss) $ 29
$ 5
$ (16 ) $ (28 )
Catastrophe losses $ 12
$ 27
$ 131
$ 102

Underwriting income (loss) by line of business

Auto $ 6
$ (6 ) $ (3 ) $ (32 )
Homeowners 20
11
(18 ) 14
Other personal lines 3
—
5
(10 )
Underwriting income (loss) $ 29
$ 5
$ (16 ) $ (28 )

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Underwriting income (loss) - prior period $ 5
$ (4 ) $ (28 ) $ (40 )
Changes in underwriting loss from:
Increase (decrease) premiums earned (30 ) (20 ) (86 ) (44 )
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates 33
19
97
49
Catastrophe losses, excluding reserve reestimates 14
(10 ) (29 ) (5 )
Non-catastrophe reserve reestimates 2
16
20
(2 )
Catastrophe reserve reestimates 1
—
—
(1 )
Losses subtotal 50
25
88
41
(Increase) decrease expenses 4
4
10
15
Underwriting income (loss) - current period $ 29
$ 5
$ (16 ) $ (28 )

Underwriting income totaled $29 million in the third quarter of 2017 compared to $5 million in the third quarter of 2016, primarily due to the improvement in auto and homeowner underwriting income resulting from decreased loss costs, including lower catastrophe losses. Underwriting loss totaled $16 million in the first nine months of 2017, an improvement from $28 million in the first nine months of 2016, primarily due to improved auto loss costs, partially offset by higher homeowners catastrophe losses.

~~We continue to implement actions to improve profitability in states with inadequate returns, including announcing exiting operations in Massachusetts~~National General Lender Services Program will be completed in the second quarter of ~~2017. These actions have led~~2023.

Similar to our 2022 program, our 2023 program includes coverage for losses to personal lines property, personal lines automobile, commercial lines property or commercial lines automobile arising out of multiple perils, in addition to hurricanes and earthquakes.

The Nationwide Program provides coverage up to $6.92 billion of losses less a $500 million retention, and is subject to the percentage of reinsurance placed in each of its agreements. Property business in the state of Florida is excluded from this program. Separate reinsurance agreements address the distinct needs of separately capitalized legal entities. The Nationwide Program includes reinsurance agreements with both the traditional and insurance-linked securities (“ILS”) markets as described below:

•Core traditional market multi-year and per occurrence agreements provide limits totaling $4.56 billion for catastrophe losses arising out of multiple perils and are comprised of the following:

–$3.94 billion of placed limits exhausting at $4.75 billion, with a 5% co-participation and one annual reinstatement:

–31.6% of the coverage is provided in four multi-year contracts attaching at $500 million.

–31.7% of the coverage is provided in four multi-year contracts with the first $250 million in excess of $500 million retained by Allstate.

–31.7% of the coverage is provided in one single-year contract attaching at $250 million in excess of a $750 million retention and four multi-year contracts attaching at $1.00 billion.

–One single-year contract providing $500 million of placed limits in excess of a $4.25 billion retention, 95% placed.

–$105 million of placed limits in excess of a $4.75 billion retention and $131 million of placed limits in excess of a $5.54 billion retention, both with a 5% co-participation and

one reinstatement of limits over each contract’s eight-year term.

–$375 million of placed limits in single-year placements filling capacity around the multi-year and ILS placements:

–One contract providing $95 million of placed limits in excess of a $4.75 billion retention, with two limits available in any one contract year.

–One contract providing $260 million of placed limits in excess of a $4.75 billion retention, with no annual reinstatement.

–One contract providing $20 million of placed limits in excess of a $6.82 billion retention, with no annual reinstatement.

•ILS placements provide $1.78 billion of placed limits, with no reinstatement of limits, and are comprised of the following:

–Six contracts providing occurrence coverage of $1.05 billion of placed limits, reinsuring losses in all states except Florida caused by named storms, earthquakes and fire following earthquakes, severe weather, wildfires, and other naturally occurring or man-made events determined to be a catastrophe by the Company.

–Three contracts providing occurrence and aggregate coverage of $405 million of placed limits, also provide that for each annual period beginning April 1, Allstate declared catastrophes to personal lines property and automobile business can be aggregated to erode the aggregate retention and qualify for coverage under the aggregate limits. Recoveries are limited to the ultimate net loss from the reinsured event.

–Two contracts, providing aggregate coverage of $325 million of placed limits.

National General Reciprocal Excess Catastrophe Reinsurance Contracts are placed in the traditional market and provide $600 million of coverage, subject to a ~~reduction~~$20 million retention, with one reinstatement of ~~PIF, new issued applications,~~limits.

Kentucky Earthquake Excess Catastrophe Reinsurance Contract is placed in the traditional market and provides two limits of $28 million, subject to a $2 million retention.

Canada Catastrophe Excess of Loss Reinsurance Contract is placed in the ~~renewal ratio~~traditional market and provides CAD 275 million of coverage, subject to a CAD 75 million retention, with one reinstatement of limits.

The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the first quarter of 2023 was $219 million, compared to prior year for both auto and homeowners. Targeted growth plans have been tailored and focused on eight states that are growing or have improved trends. New issued applications in these eight states increased approximately 20% in the first nine months of 2017 compared to the same period of 2016. PIF decreased approximately 5% in these same eight states compared to an approximate 15% decrease in all states. Our growth plan includes leveraging competitive rates, enhancing pricing and underwriting sophistication, implementing best in class underwriting and claim processes, enhancing product analytics, and focusing on geographic diversification.

~~The Allstate Corporation~~ 75



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Premiums written and earned~~ ~~by line of business are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
Premiums written 2017 2016 2017 2016
Auto $ 141
$ 153
$ 414
$ 453
Homeowners 108
121
311
351
Other personal lines 22
25
67
73
Total $ 271
$ 299
$ 792
$ 877
Premiums earned
Auto $ 140
$ 155
$ 429
$ 472
Homeowners 106
119
327
364
Other personal lines 23
25
70
76
Total $ 269
$ 299
$ 826
$ 912

~~Auto insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 548
649
548
649
New issued applications (thousands) 13
13
38
43
Average premium
$ 1,087
$ 1,022
$ 1,070
$ 997
Renewal ratio (%) ⁽¹⁾
72.0
73.1
73.2
74.9
Approved rate changes ⁽²⁾:

# of locations⁽³⁾
8
9
22
22
Total brand (%) ⁽⁴⁾
0.8
1.6
4.5
7.3
Location specific (%) ^(5) (6)
4.5
8.8
7.1
10.1

~~____________~~

⁽¹⁾

Encompass announced a plan to exit business in Massachusetts in the second quarter of 2017 and previously announced a plan to exit business in North Carolina in the first half of 2016, which has impacted the renewal ratio. Excluding Massachusetts and North Carolina, the renewal ratios were 74.4 points and 74.3 points for the three and nine months ended September 30, 2017, respectively, compared to 73.9 points and 75.3 points for the three and nine months ended September 30, 2016, respectively.

⁽²⁾


⁽³⁾	~~Encompass brand operates in 39 states and the District of Columbia.~~


⁽⁴⁾	~~Represents the impact in the states and the District of Columbia where rate changes were approved during the period as a percentage of total brand prior year-end premiums written.~~


⁽⁵⁾	Represents the impact in the states and the District of Columbia where rate changes were approved during the period as a percentage of its respective total prior year-end premiums written in those same locations.

⁽⁶⁾

Based on historical premiums written in the locations noted above, the annual impact of rate changes approved for auto totaled $5 million and $27 million in the three and nine months ended September 30, 2017, respectively, compared to $11 million and $48 million in the three and nine months ended September 30, 2016, respectively. Approximately 27% of the Encompass brand rate increases approved in the first nine months of 2017 are expected to be earned in 2017, with the remainder expected to be earned in 2018 and 2019.

~~Auto insurance premiums written~~ ~~totaled $141 million in the third quarter of 2017, a 7.8% decrease from $153 million in the third quarter of 2016, and $414~~$144 million in the first ~~nine months~~quarter of ~~2017, an 8.6% decrease from $453~~2022. Catastrophe placement premiums reduce net written and earned premium with approximately 74% related to homeowners.

58www.allstate.com

Liquidity sources and usesWe 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 ~~Allstate~~ Corporation ~~101~~

~~Capital Resources and Liquidity~~

~~ALIC, AIC, AAC and The Allstate Corporation are~~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. ~~ALIC and~~ AIC ~~each serve~~serves as a lender and borrower, ~~AAC serves~~certain other subsidiaries serve only as ~~a borrower,~~borrowers, and the Corporation serves only as a lender. ~~AIC also has a capital support agreement with ALIC. Under the capital support agreement, AIC is committed to provide capital to ALIC to maintain an adequate capital level.~~ 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 ~~include,~~includes, but ~~are~~is not limited to, ~~AIC and ALIC.~~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 capacityAt the parent holding company level, we have deployable assets totaling ~~$2.47~~$4.16 billion as of ~~September 30, 2017 comprising~~March 31, 2023, primarily comprised of cash and investments that are generally saleable within one quarter. The ~~substantial~~ earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation. ~~This provides funds for the parent company’s~~

As of March 31, 2023, we held $16.72 billion of cash, U.S. government and agencies fixed ~~charges~~income securities, public equity securities, and ~~other corporate purposes.~~short-term investments, which we would expect to be able to liquidate within one week.

InNo intercompany dividends from insurance companies were paid in the first ~~nine months~~quarter of ~~2017, AIC paid dividends totaling $1.16 billion to its parent, Allstate Insurance Holdings, LLC (“AIH”), which then paid $1.16 billion~~2023.

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 ~~Corporation.~~preceding twelve months measured at that point in time. As of March 31, 2023, we paid no dividends.

Dividends may not be paid or declared on our common stock and shares of common stock may not be repurchased unless the full dividends for the latest

completed dividend period on our preferred stock have been declared and paid or provided for. We are prohibited from declaring or paying dividends on our preferred stock if we fail to meet specified capital adequacy, net income or shareholders’ equity levels, except out of the net proceeds of common stock issued during the 90 days prior to the date of declaration. As of September 30, 2017, we satisfied all of the tests with no current restrictions on the payment of preferred stock dividends.

The terms of our outstanding subordinated debentures also prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions. In the first ~~nine~~three months of ~~2017,~~2023, we did not defer interest payments on the subordinated debentures.

Additional ~~borrowings~~resources to support liquidity are as follows:

•The Corporation ~~has access to a commercial paper facility with a borrowing limit of $1.00 billion to cover short-term cash needs. As of September 30, 2017, there were no balances outstanding~~ and ~~therefore the remaining borrowing capacity was $1.00 billion; however, the outstanding balance can fluctuate daily.~~

~~The Corporation,~~ AIC ~~and ALIC~~ have access to a ~~$1.00 billion~~$750 million unsecured revolving credit facility that is available for short-term liquidity requirements. The maturity date of this facility is ~~April 2021.~~November 2027. The facility is fully subscribed among 11 lenders with the largest commitment being ~~$115~~$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.~~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 ~~15.2%~~24.2% as of ~~September 30, 2017.~~March 31, 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 ~~third quarter~~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 March 31, 2023, there were no balances outstanding for the credit facility or the ~~first nine months of 2017.~~commercial paper facility and therefore the remaining borrowing capacity was $750 million.

•The Corporation has access to a universal shelf registration statement ~~that was filed~~ with the Securities and Exchange Commission ~~on April 30, 2015.~~that expires in 2024. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including ~~540~~637 million shares of treasury stock as of ~~September 30, 2017)~~March 31, 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.

~~102~~ ~~www.allstate.com~~

First Quarter 2023 Form 10-Q 75

~~Capital Resources and Liquidity~~

~~Liquidity exposure~~ ~~Contractholder funds were $19.65 billion as of September 30, 2017. The following table summarizes contractholder funds by their contractual withdrawal provisions as of September 30, 2017.~~

($ in millions)
Percent
to total
Not subject to discretionary withdrawal $ 3,030
15.4 %
Subject to discretionary withdrawal with adjustments:
Specified surrender charges ⁽¹⁾
4,955
25.2
Market value adjustments ⁽²⁾
1,456
7.4
Subject to discretionary withdrawal without adjustments ⁽³⁾
10,209
52.0
Total contractholder funds⁽⁴⁾
$ 19,650
100.0 %

~~_______________~~


⁽¹⁾	~~Includes $1.15 billion of liabilities with a contractual surrender charge of less than 5% of the account balance.~~


⁽²⁾	$908 million of the contracts with market value adjusted surrenders have a 30-45 day period at the end of their initial and subsequent interest rate guarantee periods (which are typically 1, 5, 7 or 10 years) during which there is no surrender charge or market value adjustment.


⁽³⁾	~~89% of these contracts have a minimum interest crediting rate guarantee of 3% or higher.~~


⁽⁴⁾	~~Includes $763 million of contractholder funds on variable annuities reinsured to The Prudential Insurance Company of America, a subsidiary of Prudential Financial Inc., in 2006.~~

Retail life and annuity products may be surrendered by customers for a variety of reasons. Reasons unique to individual customers include a current or unexpected need for cash or a change in life insurance coverage needs. Other key factors that may impact the likelihood of customer surrender include the level of the contract surrender charge, the length of time the contract has been in force, distribution channel, market interest rates, equity market conditions and potential tax implications. In addition, the propensity for retail life insurance policies to lapse is lower than it is for fixed annuities because of the need for the insured to be re-underwritten upon policy replacement. The annualized surrender and partial withdrawal rate on deferred fixed annuities and interest-sensitive life insurance products, based on the beginning of year contractholder funds, was 6.0% and 6.4% in the first nine months of 2017 and 2016, respectively. Allstate Financial strives to promptly pay customers who request cash surrenders; however, statutory regulations generally provide up to six months in most states to fulfill surrender requests.

~~The Allstate Corporation~~ ~~103~~

~~Recent Developments~~

The following updates the regulation disclosures included in Part I Regulation in our Annual Report on Form 10-K for the year-ended December 31, 2016 and Form 10-Q for the periods ended March 31, 2017 and June 30, 2017.

~~Department of Labor.~~ In August 2017, the Department of Labor (“DOL”) filed a proposed amendment to its Fiduciary Rule which would extend the Rule’s transition period until July 1, 2019. It is yet to be determined whether the proposed 18-month delay will occur or whether any other action, including changes to the Rule’s requirements, will result from the DOL’s continued examination of the Rule. In addition, the new Securities and Exchange Commission Chairman has pledged to work with the DOL Secretary on a fiduciary rule.

~~Dodd-Frank.~~ The Secretary of the Treasury (operating through Federal Insurance Office (“FIO”)) and the Office of the U.S. Trade Representative (“USTR”) are jointly authorized, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), to negotiate a Covered Agreement with one or more foreign governments, authorities, or regulatory entities. A Covered Agreement is a written bilateral or multilateral agreement that “relates to the recognition of prudential measures with respect to the business of insurance or reinsurance that achieves a level of protection for insurance or reinsurance consumers that is substantially equivalent to the level of protection achieved under State insurance or reinsurance regulation.” As provided in Dodd-Frank, a Covered Agreement cannot supersede state insurance measures that govern an insurer’s rates, premiums, underwriting or sales practices; any state insurance coverage requirements; the application of antitrust laws of any state to the business of insurance; or any state insurance measure governing insurer capital or solvency, except where a state insurance measure results in less favorable treatment of a non-U.S. insurer than a U.S. insurer.

In November 2015, Treasury and USTR notified Congress that they were formally initiating negotiations on a Covered Agreement with the EU (the “Covered Agreement”) addressing: permanent equivalence treatment of the U.S. regulatory system by the EU; the confidential sharing of information by regulators across jurisdictions, and elimination of reinsurance collateral requirements for EU-based foreign reinsurers in all states that meet certain conditions. On January 13, 2017, the Secretary of the Treasury and USTR jointly submitted a Covered Agreement consistent with their November 2015 notification to Congress. In accordance with authorities provided in Dodd-Frank, the Covered Agreement may supersede state laws after 60 months from its effective date if then existing State insurance measures affected by the Covered Agreement result in less favorable treatment of an EU insurer or reinsurer subject to the Covered Agreement than a U.S. insurer domiciled, licensed, or otherwise admitted in a U.S. State. On September 22, 2017, the U.S. and EU signed the Covered Agreement, the text of which was identical to the text submitted to Congress on January 13, 2017. In addition to signing the Covered Agreement, Treasury and the USTR jointly issued a policy on September 22, 2017 clarifying how the U.S. views implementation of certain provisions of the Covered Agreement. The policy statement addresses key provisions of the Covered Agreement for which constituents sought clarity, including: application of the Covered Agreement’s collateral requirements (the policy statement clarifies that the Covered Agreement shall not be applied to reinsurance agreements, incurred losses, or posted reserves entered into or recognized before the date of the Covered Agreement), group capital assessment (the policy statement affirms that the Covered Agreement does not require development of a group capital standard or group capital requirement in the U.S.), and establishment of a Joint Committee, composed of representatives of the U.S. and EU as a forum for administration and implementation of the Covered Agreement (the policy statement clarifies that because state insurance regulators are largely responsible for implementing the Covered Agreement, the U.S. is committed to the direct involvement of state insurance regulators in the work of the Joint Committee).

~~Federal Reserve Board.~~ On April 21, 2017, the President signed an Executive Order directing the Secretary of the Treasury to conduct a review of the systemically important financial institutions (“SIFI”) designation process and provide a written report within 180 days of the date of the Executive Order. The Executive Order directs the Secretary of the Treasury to consider, among other attributes, whether the designation process is sufficiently transparent, provides entities with adequate due process, is supported by quantified risk assessments, and whether the designated entity is provided an opportunity to reduce identified risks to avoid SIFI designation. The Executive Order also directs the Secretary of the Treasury to evaluate the activities of the Financial Stability Oversight Council (“FSOC”) related to its authority to make SIFI designations and determine whether that authority is consistent with the Presidential Executive Order on Core Principles for Regulating the U.S. Financial System. Lastly, the Executive Order temporarily suspends SIFI determinations and designations pending submission and review of the Secretary of the Treasury’s report. The Company has not been designated a SIFI under existing criteria nor does it anticipate a future SIFI designation if the activities and authorities of the FSOC are modified. On September 29, 2017, FSOC announced that in connection with its annual review of SIFI status required by Dodd-Frank, it rescinded the SIFI designation of a large insurance company due to actions taken by the company subsequent to its original designation that reduced the risk it posed to financial stability.

~~U.S. Treasury Department.~~ On February 3, 2017, the President signed an Executive Order establishing Core Principles for financial regulation. These principles include empowering Americans to make independent financial decisions, save for retirement, and build wealth; preventing taxpayer-funded bailouts; promoting American competitiveness both at home and abroad; and making regulation efficient, effective and appropriately tailored. The Executing Order calls for the Secretary of the Treasury to evaluate the existing U.S. financial regulatory system to determine the extent to which existing regulation promotes the Core Principles

~~104~~ ~~www.allstate.com~~

~~Recent Developments~~

and to identify laws, regulations, and other regulatory actions that inhibit regulation in a manner consistent with the Core Principles. The first in a series of reports examining the U.S. financial regulatory system focused on depository institutions and was released on June 12, 2017. A second report on capital markets was released October 6, 2017. A report that addresses the asset management and insurance industries was released on October 26, 2017. We are assessing the impact on the Company and the industry.

~~The Allstate Corporation~~ ~~105~~

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. ~~These forward-looking~~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. ~~However, if~~Forward-looking statements speak only as of the ~~estimates, assumptions or plans underlying the~~date on which they are made, and we assume no obligation to update any forward-looking statements ~~prove inaccurate~~as a result of new information or ~~if other~~future events or developments. In addition, forward-looking statements are subject to certain risks or uncertainties ~~arise,~~that could cause actual results ~~could~~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) ~~adverse changes~~unexpected increases in ~~the nature~~claim frequency and ~~level of~~ severity; (2) catastrophes and severe weather events; ~~(2)~~ (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~~strategy; (14) restrictions on ~~premium growth; (3) unexpected increases~~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 ~~frequency~~global economy and capital markets; (21)a large-scale pandemic, the occurrence of terrorism, military actions or ~~severity~~social unrest; (22)the failure in cyber or other information security controls, as well as the occurrence of ~~claims; (4)~~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 ~~changes,~~reforms, including limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (5) impacts from the Covered Agreement, including changes in state insurance laws; (6) the cyclical nature of the property and casualty business; (7) market convergence and regulatory changes on our risk segmentation and pricing; (8) reestimates of reserves for claims; (9) adverse legal determinations regarding discontinued product lines and other legal and regulatory actions; (10) changes in underwriting and actual experience; (11) changes in reserve estimates for life-contingent contract benefits payable; (12) the influence of changes in market interest rates or performance-based investment returns on spread-based products; (13) changes in estimates of profitability on interest-sensitive life products; (14) reducing our concentration in spread-based business and exiting certain distribution channels; (15) changes in tax laws; (16) our ability to mitigate the capital impact associated with statutory reserving and capital requirements; (17) a decline in Lincoln Benefit Life Company’s financial strength ratings; (18) market risk and declines in credit quality relating to our investment portfolio; (19) our subjective determination of the fair value of our fixed income and equity securities and the amount of realized capital losses recorded for impairments of our investments; (20) competition in the insurance industry; (21) impacts of new or changing technologies on our business; (22) conditions in the global economy and capital markets; (23)(26) losses from legal and regulatory actions; ~~(24) restrictive regulation and regulatory reforms; (25) the availability of reinsurance at current levels and prices; (26) risk of our reinsurers;~~ (27) our participation in state industry pools and facilities; (28) a downgrade in our financial strength ratings; (29) the effect of adverse capital and credit market conditions; (30) failure in cyber or other information security; (31) the impact of a large scale pandemic, the threat or occurrence of terrorism or military action; (32) acquisitions of businesses; (33) possible impairments in the value of goodwill; (34) changes in or the application of accounting standards; (35) the realization of deferred tax assets; (36) restrictions on our subsidiaries’ ability to pay dividends; (37) restrictions under the terms of certain of our securities on our ability to pay dividends or repurchase our stock; (38) changing climate and weather conditions; (39) loss of key vendor relationships(28)vendor-related business disruptions or failure of a vendor to provide and protect data, confidential and proprietary ~~information;~~information, or personal information of our customers, claimants or employees; (29) our ability to attract, develop and ~~(40) intellectual property infringement, misappropriation~~retain talent; and (30) misconduct or fraudulent acts by employees, agents and third ~~party claims.~~ 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. ~~Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.~~

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, 2017,~~March 31, 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.

~~106~~

76www.allstate.com

Other Information Part II.

Part II. Other Information

Item 1. Legal Proceedings

Information required for Part II, Item 1 is incorporated by reference to the discussion under the heading “Regulation and ~~Compliance”~~compliance” and under the heading “Legal and regulatory proceedings and inquiries” in Note 1114 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~~annual report on Form 10-K for the year ended December 31, ~~2016.~~2022.

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

Issuer Purchases of Equity Securities


Period	Total number of shares (or units) purchased (1)	Average price paid per share (or unit)		Total number of shares (or units) purchased as part of publicly announced plans or programs (2)	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (3)
January 1, 2023 - January 31, 2023
Open Market Purchases	375,573	$	133.03	375,100

February 1, 2023 - February 28, 2023
Open Market Purchases	538,124	$	134.02	339,286

March 1, 2023 - March 31, 2023
Open Market Purchases	518,483	$	114.65	508,120

Total	1,432,180	$	126.75	1,222,506	$	649	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.

January: 473

February: 198,838

March: 10,363

(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. 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.

First Quarter 2023 Form 10-Q 77

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 ⁽³⁾

Maximum number
(or approximate dollar
value) of shares
(or units) that may yet be
purchased under the
plans or programs ⁽⁴⁾
July 1, 2017 -
July 31, 2017

      Open Market Purchases 664
$88.4400 —

August 1, 2017 -
August 31, 2017

      Goldman ASR ⁽²⁾
341,077
$89.4127 341,077

      Open Market Purchases 575,355
$92.0418 529,900

September 1, 2017 -
September 30, 2017

      Open Market Purchases 1,243,261
$90.1919 1,240,600

Total 2,160,357
$90.5610 2,111,577
$1.85 billion

~~_______________~~

⁽¹⁾

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

~~July: 664~~

~~August: 45,455~~

~~September: 2,661~~


⁽²⁾	On June 9, 2017, Allstate entered into an accelerated share repurchase agreement (“ASR Agreement”) with Goldman Sachs & Co. LLC (“Goldman”) to purchase $250 million of our outstanding shares of common stock, which settled on August 17, 2017. Under this ASR Agreement, we repurchased a total of 2.8 million shares at an average price of $89.4127.


⁽³⁾	~~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.~~


⁽⁴⁾	On May 4, 2016, we announced the approval of a common share repurchase program for $1.5 billion, which was completed on August 21, 2017. On August 1, 2017, we announced the approval of a new common share repurchase program for $2 billion, which is expected to be completed by February 2019.

~~The Allstate Corporation~~ ~~107~~

Item 6. Exhibits


~~(a)~~	~~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 November 19, 2015

8-K

1-11840

3.1

November 19, 2015

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

Cer tificate of Elimination with re spect to the Pref erred Stock, S eries G of the Registrant, dated May 1 , 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

10.1

Offer Letter dated March 9, 2022 to Robert Toohey

Acknowledgment of awareness from Deloitte & Touche LLP, dated May 3, 20 23 , 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)

78www.allstate.com



		~~Incorporated by Reference~~
~~Exhibit~~ ~~Number~~	~~Exhibit Description~~	~~Form~~	~~File~~ ~~Number~~	~~Exhibit~~	~~Filing~~ ~~Date~~	~~Filed or~~ ~~Furnished~~ ~~Herewith~~
4	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
15	~~Acknowledgment of awareness from Deloitte & Touche, dated November 1, 2017, concerning unaudited interim financial information~~					X
~~31(i)~~	~~Rule 13a-14(a) Certification of Principal Executive Officer~~					X
~~31(i)~~	~~Rule 13a-14(a) Certification of Principal Financial Officer~~					X
32	~~Section 1350 Certifications~~					X
~~101.INS~~	~~XBRL Instance Document~~					X
~~101.SCH~~	~~XBRL Taxonomy Extension Schema~~					X
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase~~					X
~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase~~					X
~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase~~					X
~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase~~					X

~~108~~ ~~www.allstate.com~~

~~SIGNATURE~~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, 2017~~May 3, 2023		By	/s/ ~~Eric K. Ferren~~John C. Pintozzi
			~~Eric K. Ferren~~John C. Pintozzi
			Senior Vice President, Controller and Chief Accounting Officer
			(~~chief accounting officer~~Authorized Signatory and ~~duly~~
	~~authorized officer of Registrant)~~Principal Accounting Officer)

~~The Allstate Corporation~~ ~~109~~

First Quarter 2023 Form 10-Q 79



Title of each class	~~2775 Sanders Road, Northbrook, Illinois~~Trading Symbols	~~60062~~	Name of each exchange on which registered
Common Stock, par value $.01 per share	~~(Address~~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 ~~principal executive offices)~~a share of 5.100% Noncumulative Preferred Stock, Series H	~~(Zip Code)~~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



Large accelerated filer	X ☒	Accelerated filer	~~____~~☐

Non-accelerated filer	~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	~~____~~☐

		Emerging growth company	~~____~~☐


Part I Financial Information					Page

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

~~Part I~~			~~Financial Information~~	~~Page~~

~~Item 1.~~	~~Financial Statements~~

	Condensed Consolidated Statements of Operations ~~for the Three-Month and Nine-Month Periods Ended September 30, 2017 and 2016 (unaudited)~~	1
			Condensed Consolidated Statements of Comprehensive Income ~~for the Three-Month and Nine-Month Periods Ended September 30, 2017 and 2016 (unaudited)~~(Loss)		2
			Condensed Consolidated Statements of Financial Position ~~as of September 30, 2017 (unaudited) and December 31, 2016~~		3
			Condensed Consolidated Statements of Shareholders’ Equity ~~for the Nine-Month Periods Ended September 30, 2017 and 2016 (unaudited)~~		4
			Condensed Consolidated Statements of Cash Flows ~~for the Nine-Month Periods Ended September 30, 2017 and 2016 (unaudited)~~		5
			Notes to Condensed Consolidated Financial Statements (unaudited)		6
			Report of Independent Registered Public Accounting Firm		4746

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

			~~Overview~~	49Highlights		47
			~~Consolidated Net Income~~Property-Liability Operations		51
			Segment results
			~~Property-Liability~~ Allstate Protection~~Results~~		5253
					~~Allstate Protection Segment~~Run-off Property-Liability	5660
					~~Allstate brand~~ Protection Services	6462
					~~Esurance brand~~ Allstate Health and Benefits	7164
			~~Encompass brand~~	75Investments		66
			~~SquareTrade~~	79
	~~Discontinued Lines and Coverages Segment~~	80
	~~Allstate Financial Segment~~	83
	~~Allstate Life~~	84
	~~Allstate Benefits~~	87
	~~Allstate Annuities~~	89
	~~Investment~~s	92
	Capital Resources and Liquidity	~~101~~74

			Forward-Looking Statements		~~106~~76

Item 4.					Controls and Procedures	~~106~~76

Part II							Other Information
Item 1.					Legal Proceedings	~~107~~77
Item 1A.					Risk Factors	~~107~~77
Item 2.					Unregistered Sales of Equity Securities and Use of Proceeds	~~107~~77

Item 6.Exhibits					~~Exhibits~~78		~~108~~


($ in millions, except per share data)	Three months ended March 31,
	2023		2022
Revenues
Property and casualty insurance premiums	$	12,173	$	10,981
Accident and health insurance premiums and contract charges	463		468
Other revenue	561		560
Net investment income	575		594
Net gains (losses) on investments and derivatives	14		(267)
Total revenues	13,786		12,336

Costs and expenses
Property and casualty insurance claims and claims expense	10,326		7,822

Accident, health and other policy benefits	265		268
Amortization of deferred policy acquisition costs	1,744		1,608
Operating costs and expenses	1,716		1,902
Pension and other postretirement remeasurement (gains) losses	(53)		(247)
Restructuring and related charges	27		12
Amortization of purchased intangibles	81		87

Interest expense	86		83
Total costs and expenses	14,192		11,535

(Loss) income from operations before income tax expense	(406)		801

Income tax (benefit) expense	(85)		151

Net (loss) income	(321)		650

Less: Net loss attributable to noncontrolling interest	(1)		(10)

Net (loss) income attributable to Allstate	(320)		660

Less: Preferred stock dividends	26		26

Net (loss) income applicable to common shareholders	$	(346)	$	634

Earnings per common share:
Net (loss) income applicable to common shareholders per common share - Basic	$	(1.31)	$	2.28
Weighted average common shares - Basic	263.5		278.1
Net (loss) income applicable to common shareholders per common share - Diluted	$	(1.31)	$	2.25
Weighted average common shares - Diluted	263.5		281.8



($ in millions, except par value data)	September 30, 2017			December 31, 2016
Assets	(unaudited)
Investments
Fixed income securities, at fair value (amortized cost $57,608 and $56,576)	$	59,391		$	57,839
Equity securities, at fair value (cost $5,468 and $5,157)	6,434			5,666
Mortgage loans	4,322			4,486
Limited partnership interests	6,600			5,814
Short-term, at fair value (amortized cost $2,198 and $4,288)	2,198			4,288
Other	3,826			3,706
Total investments	82,771			81,799
Cash	690			436
Premium installment receivables, net	5,922			5,597
Deferred policy acquisition costs	4,147			3,954
Reinsurance recoverables, net	9,748			8,745
Accrued investment income	590			567
Property and equipment, net	1,067			1,065
Goodwill	2,309			1,219
Other assets	2,966			1,835
Separate Accounts	3,422			3,393
Total assets	$	113,632		$	108,610
Liabilities
Reserve for property-liability insurance claims and claims expense	$	27,154		$	25,250
Reserve for life-contingent contract benefits	12,227			12,239
Contractholder funds	19,650			20,260
Unearned premiums	13,535			12,583
Claim payments outstanding	959			879
Deferred income taxes	1,249			487
Other liabilities and accrued expenses	6,968			6,599
Long-term debt	6,349			6,347
Separate Accounts	3,422			3,393
Total liabilities	91,513			88,037
Commitments and Contingent Liabilities (Note 11)
Shareholders’ equity
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 72.2 thousand shares issued and outstanding, and $1,805 aggregate liquidation preference	1,746			1,746
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 360 million and 366 million shares outstanding	9			9
Additional capital paid-in	3,330			3,303
Retained income	42,125			40,678
Deferred ESOP expense	(6		)	(6		)
Treasury stock, at cost (540 million and 534 million shares)	(25,413		)	(24,741		)
Accumulated other comprehensive income:
Unrealized net capital gains and losses:
Unrealized net capital gains and losses on fixed income securities with OTTI	68			57
Other unrealized net capital gains and losses	1,715			1,091
Unrealized adjustment to DAC, DSI and insurance reserves	(132		)	(95		)
Total unrealized net capital gains and losses	1,651			1,053
Unrealized foreign currency translation adjustments	(14		)	(50		)
Unrecognized pension and other postretirement benefit cost	(1,309		)	(1,419		)
Total accumulated other comprehensive income (loss)	328			(416		)
Total shareholders’ equity	22,119			20,573
Total liabilities and shareholders’ equity	$	113,632		$	108,610



($ in millions)	Three months ended September 30, 2017									Three months ended September 30, 2016
	Gross			Included in OCI			Net			Gross			Included in OCI		Net
Fixed income securities:
Corporate	$	—		$	—		$	—		$	(13	)	$	—	$	(13	)
ABS	—			(1		)	(1		)	—			—		—
RMBS	—			—			—			(1		)	—		(1		)
CMBS	(1		)	(1		)	(2		)	(3		)	—		(3		)
Total fixed income securities	(1		)	(2		)	(3		)	(17		)	—		(17		)
Equity securities	(8		)	—			(8		)	(27		)	—		(27		)
Mortgage loans	(1		)	—			(1		)	—			—		—
Limited partnership interests	(16		)	—			(16		)	(22		)	—		(22		)
Other	—			—			—			(7		)	—		(7		)
Other-than-temporary impairment losses	$	(26	)	$	(2	)	$	(28	)	$	(73	)	$	—	$	(73	)

	Nine months ended September 30, 2017									Nine months ended September 30, 2016
	Gross			Included in OCI			Net			Gross			Included in OCI		Net
Fixed income securities:
Municipal	$	(1	)	$	(2	)	$	(3	)	$	—		$	—	$	—
Corporate	(9		)	3			(6		)	(30		)	7		(23		)
ABS	(1		)	(1		)	(2		)	(6		)	—		(6		)
RMBS	(1		)	(3		)	(4		)	(1		)	—		(1		)
CMBS	(9		)	1			(8		)	(7		)	1		(6		)
Total fixed income securities	(21		)	(2		)	(23		)	(44		)	8		(36		)
Equity securities	(77		)	—			(77		)	(155		)	—		(155		)
Mortgage loans	(1		)	—			(1		)	—			—		—
Limited partnership interests	(32		)	—			(32		)	(33		)	—		(33		)
Other	(4		)	—			(4		)	(9		)	—		(9		)
Other-than-temporary impairment losses	$	(135	)	$	(2	)	$	(137	)	$	(241	)	$	8	$	(233	)


Carrying value for limited partnership interests
($ in millions)	March 31, 2023						December 31, 2022
	EMA		Fair Value		Total		EMA		Fair Value		Total
Private equity	$	5,546	$	1,199	$	6,745	$	5,372	$	1,217	$	6,589
Real estate	1,019		29		1,048		1,013		29		1,042
Other (1)	178		—		178		483		—		483
Total	$	6,743	$	1,228	$	7,971	$	6,868	$	1,246	$	8,114



($ 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			Balance as of September 30, 2017
Assets
Fixed income securities:
U.S. government and agencies	$	3,190		$	710		$	—					$	3,900
Municipal	—			7,687			107						7,794
Corporate - public	—			32,269			104						32,373
Corporate - privately placed	—			11,923			250						12,173
Foreign government	—			1,093			—						1,093
ABS - CDO	—			545			19						564
ABS - consumer and other	—			640			66						706
RMBS	—			611			—						611
CMBS	—			127			26						153
Redeemable preferred stock	—			24			—						24
Total fixed income securities	3,190			55,629			572						59,391
Equity securities	5,938			328			168						6,434
Short-term investments	380			1,818			—						2,198
Other investments: Free-standing derivatives	—			109			1			$	(9	)	101
Separate account assets	3,422			—			—						3,422
Other assets	1			—			—						1
Total recurring basis assets	12,931			57,884			741			(9		)	71,547
Non-recurring basis⁽¹⁾	—			—			24						24
Total assets at fair value	$	12,931		$	57,884		$	765		$	(9	)	$	71,571
% of total assets at fair value	18.0		%	80.9		%	1.1		%	—		%	100		%

Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(292	)				$	(292	)
Other liabilities: Free-standing derivatives	(1		)	(69		)	—			$	21		(49		)
Total liabilities at fair value	$	(1	)	$	(69	)	$	(292	)	$	21		$	(341	)
% of total liabilities at fair value	0.3		%	20.2		%	85.6		%	(6.1		)%	100		%


⁽¹⁾	~~Includes $14 million of limited partnership interests and $10 million of mortgage loans written-down to fair value in connection with recognizing other-than-temporary impairments.~~


Assets and liabilities measured at fair value
	March 31, 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	$	7,678		$	17		$	—					$	7,695
Municipal	—			6,307			17						6,324
Corporate - public	—			20,320			29						20,349
Corporate - privately placed	—			7,638			49						7,687
Foreign government	—			1,091			—						1,091
ABS	—			930			27						957
Total fixed income securities	7,678			36,303			122						44,103
Equity securities	1,523			293			358						2,174
Short-term investments	2,034			4,682			6						6,722
Other investments	—			10			2			$	—		12
Other assets	4			—			112						116
Total recurring basis assets	11,239			41,288			600			—			53,127
Non-recurring basis	—			—			19						19
Total assets at fair value	$	11,239		$	41,288		$	619		$	—		$	53,146
% of total assets at fair value	21.1		%	77.7		%	1.2		%	—		%	100.0		%

Investments reported at NAV													1,228
Total													$	54,374
Liabilities
Other liabilities	$	(5)		$	(16)		$	—		$	16		$	(5)
Total recurring basis liabilities	(5)			(16)			—			16			(5)

Total liabilities at fair value	$	(5)		$	(16)		$	—		$	16		$	(5)
% of total liabilities at fair value	100.0		%	320.0		%	—		%	(320.0)		%	100.0		%


⁽¹⁾	~~Includes $24 millionof limited partnership interests written-down to fair value in connection with recognizing other-than-temporary impairments.~~



($ in millions)	Fair value			Valuation technique	Unobservable input	Range	Weighted average
September 30, 2017
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(253	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.74%
December 31, 2016
Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options	$	(247	)	Stochastic cash flow model	Projected option cost	1.0 - 2.2%	1.75%


Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended March 31, 2023
	Balance as of December 31, 2022		Total gains (losses) included in:				Transfers																Balance as of March 31, 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)	$	17
Corporate - public	69		(1)		2		—		—			—			(41)			—			—		29
Corporate - privately placed	55		(4)		—		—		—			—			(2)			—			—		49
ABS	28		—		—		—		—			—			—			—			(1)		27
Total fixed income securities	173		(5)		2		—		—			—			(46)			—			(2)		122
Equity securities	333		—		—		—		—			42			(17)			—			—		358
Short-term investments	6		—		—		—		—			—			—			—			—		6
Other investments	3		(1)		—		—		—			—			—			—			—		2
Other assets	103		9		—		—		—			—			—			—			—		112
Total recurring Level 3 assets	$	618	$	3	$	2	$	—	$	—		$	42		$	(63)		$	—		$	(2)	$	600



	~~Yes~~ X	~~No ___~~



	~~Yes~~ X	~~No ___~~



	~~Yes~~	No X


Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended March 31, 2022
	Balance as of December 31, 2021		Total gains (losses) included in:				Transfers												Balance as of March 31, 2022
($ in millions)			Net income		OCI		Into Level 3		Out of Level 3		Purchases		Sales		Issues		Settlements
Assets
Fixed income securities:
Municipal	$	18	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(1)	$	17
Corporate - public	20		—		(2)		—		—		35		(4)		—		—		49
Corporate - privately placed	66		—		1		—		—		63		—		—		—		130
ABS	40		1		—		—		(28)		7		—		—		(1)		19
Total fixed income securities	144		1		(1)		—		(28)		105		(4)		—		(2)		215
Equity securities	349		25		—		—		—		2		(3)		—		—		373
Short-term investments	5		—		—		—		—		6		—		—		—		11
Other investments	2		—		—		—		—		—		—		—		—		2
Other assets	65		12		—		—		—		—		—		—		—		77

Total recurring Level 3 assets	$	565	$	38	$	(1)	$	—	$	(28)	$	113	$	(7)	$	—	$	(2)	$	678


Total Level 3 gains (losses) included in net income
	Three months ended March 31,
($ in millions)		2023		2022
Net investment income		$	(5)	$	9
Net gains (losses) on investments and derivatives		8		29



($ in millions)				Total gains (losses) included in:
	Balance as of June 30, 2017			Net income ⁽¹⁾			OCI		Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	114		$	—		$	—	$	—		$	(4	)
Corporate - public	60			—			—		—			(4		)
Corporate - privately placed	266			1			2		—			(34		)
ABS - CDO	91			—			1		—			(68		)
ABS - consumer and other	120			—			—		—			(62		)
CMBS	24			—			—		—			—
Total fixed income securities	675			1			3		—			(172		)
Equity securities	166			2			1		—			(1		)
Free-standing derivatives, net	1			—			—		—			—
Total recurring Level 3 assets	$	842		$	3		$	4	$	—		$	(173	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(285	)	$	(9	)	$	—	$	—		$	—
Total recurring Level 3 liabilities	$	(285	)	$	(9	)	$	—	$	—		$	—

	Purchases			Sales			Issues		Settlements			Balance as of September 30, 2017
Assets
Fixed income securities:
Municipal	$	1		$	(3	)	$	—	$	(1	)	$	107
Corporate - public	51			(1		)	—		(2		)	104
Corporate - privately placed	18			(1		)	—		(2		)	250
ABS - CDO	—			—			—		(5		)	19
ABS - consumer and other	10			—			—		(2		)	66
CMBS	3			—			—		(1		)	26
Total fixed income securities	83			(5		)	—		(13		)	572
Equity securities	—			—			—		—			168
Free-standing derivatives, net	—			—			—		—			1			⁽²⁾
Total recurring Level 3 assets	$	83		$	(5	)	$	—	$	(13	)	$	741
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	—	$	2		$	(292	)
Total recurring Level 3 liabilities	$	—		$	—		$	—	$	2		$	(292	)


⁽¹⁾	The effect to net income totals $(6) million and is reported in the Condensed Consolidated Statements of Operations as follows: $3 million in net investment income, $(5) million in interest credited to contractholder funds and $(4) million in life and annuity contract benefits.



($ in millions)				Total gains (losses) included in:
	Balance as of December 31, 2016			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	125		$	(1	)	$	6		$	—		$	(5	)
Corporate - public	78			—			—			—			(20		)
Corporate - privately placed	263			7			—			30			(34		)
ABS - CDO	27			—			3			30			(190		)
ABS - consumer and other	42			—			—			—			(69		)
RMBS	1			—			—			—			—
CMBS	22			—			—			—			—
Total fixed income securities	558			6			9			60			(318		)
Equity securities	163			15			4			—			(4		)
Short-term investments	15			—			—			—			—
Free-standing derivatives, net	(2		)	3			—			—			—
Other assets	1			(1		)	—			—			—
Total recurring Level 3 assets	$	735		$	23		$	13		$	60		$	(322	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(290	)	$	(6	)	$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(290	)	$	(6	)	$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2017
Assets
Fixed income securities:
Municipal	$	6		$	(23	)	$	—		$	(1	)	$	107
Corporate - public	50			—			—			(4		)	104
Corporate - privately placed	22			(30		)	—			(8		)	250
ABS - CDO	160			—			—			(11		)	19
ABS - consumer and other	99			—			—			(6		)	66
RMBS	—			—			—			(1		)	—
CMBS	6			—			—			(2		)	26
Total fixed income securities	343			(53		)	—			(33		)	572
Equity securities	3			(13		)	—			—			168
Short-term investments	25			(40		)	—			—			—
Free-standing derivatives, net	—			—			—			—			1			⁽²⁾
Other assets	—			—			—			—			—
Total recurring Level 3 assets	$	371		$	(106	)	$	—		$	(33	)	$	741
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	5		$	(292	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	5		$	(292	)


⁽¹⁾	The effect to net income totals $17 million and is reported in the Condensed Consolidated Statements of Operations as follows: $7 million in realized capital gains and losses, $17 million in net investment income, $(11) million in interest credited to contractholder funds and $4 million in life and annuity contract benefits.



($ in millions)				Total gains (losses) included in:
	Balance as of June 30, 2016			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
Municipal	$	149		$	1		$	(1	)	$	—		$	—
Corporate - public	74			—			—			—			(6		)
Corporate - privately placed	585			—			2			—			(280		)
ABS - CDO	33			—			3			—			—
ABS - consumer and other	45			—			—			—			—
RMBS	1			—			—			—			—
CMBS	20			—			—			—			—
Total fixed income securities	907			1			4			—			(286		)
Equity securities	118			(1		)	—			—			—
Free-standing derivatives, net	(7		)	4			—			—			—
Other assets	1			—			—			—			—
Total recurring Level 3 assets	$	1,019		$	4		$	4		$	—		$	(286	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(304	)	$	(3	)	$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(304	)	$	(3	)	$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2016
Assets
Fixed income securities:
Municipal	$	22		$	(11	)	$	—		$	—		$	160
Corporate - public	40			(10		)	—			—			98
Corporate - privately placed	38			—			—			(29		)	316
ABS - CDO	40			—			—			(2		)	74
ABS - consumer and other	35			—			—			(1		)	79
RMBS	—			—			—			—			1
CMBS	3			—			—			—			23
Total fixed income securities	178			(21		)	—			(32		)	751
Equity securities	43			—			—			—			160
Free-standing derivatives, net	—			—			—			—			(3		)	⁽²⁾
Other assets	—			—			—			—			1
Total recurring Level 3 assets	$	221		$	(21	)	$	—		$	(32	)	$	909
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(1	)	$	1		$	(307	)
Total recurring Level 3 liabilities	$	—		$	—		$	(1	)	$	1		$	(307	)


⁽¹⁾	The effect to net income totals $1 million and is reported in the Condensed Consolidated Statements of Operations as follows: $1 million in realized capital gains and losses, $3 million in net investment income, $(6) million in interest credited to contractholder funds and $3 million in life and annuity contract benefits.


⁽²⁾	~~Comprises $1 million of assets and $4 million of liabilities.~~



($ in millions)				Total gains (losses) included in:
	Balance as of December 31, 2015			Net income ⁽¹⁾			OCI			Transfers into Level 3			Transfers out of Level 3
Assets
Fixed income securities:
U.S. government and agencies	$	5		$	—		$	—		$	—		$	(4	)
Municipal	161			11			(6		)	6			—
Corporate - public	46			—			1			25			(13		)
Corporate - privately placed	502			4			15			16			(363		)
ABS - CDO	61			—			5			10			(3		)
ABS - consumer and other	50			—			(2		)	3			—
RMBS	1			—			—			—			—
CMBS	20			—			—			—			—
Total fixed income securities	846			15			13			60			(383		)
Equity securities	133			(33		)	8			—			—
Free-standing derivatives, net	(7		)	4			—			—			—
Other assets	1			—			—			—			—
Total recurring Level 3 assets	$	973		$	(14	)	$	21		$	60		$	(383	)
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	(299	)	$	(11	)	$	—		$	—		$	—
Total recurring Level 3 liabilities	$	(299	)	$	(11	)	$	—		$	—		$	—

	Purchases			Sales			Issues			Settlements			Balance as of September 30, 2016
Assets
Fixed income securities:
U.S. government and agencies	$	—		$	—		$	—		$	(1	)	$	—
Municipal	22			(33		)	—			(1		)	160
Corporate - public	47			(6		)	—			(2		)	98
Corporate - privately placed	181			—			—			(39		)	316
ABS - CDO	40			(2		)	—			(37		)	74
ABS - consumer and other	35			(5		)	—			(2		)	79
RMBS	—			—			—			—			1
CMBS	5			—			—			(2		)	23
Total fixed income securities	330			(46		)	—			(84		)	751
Equity securities	52			—			—			—			160
Free-standing derivatives, net	—			—			—			—			(3		)	⁽²⁾
Other assets	—			—			—			—			1
Total recurring Level 3 assets	$	382		$	(46	)	$	—		$	(84	)	$	909
Liabilities
Contractholder funds: Derivatives embedded in life and annuity contracts	$	—		$	—		$	(2	)	$	5		$	(307	)
Total recurring Level 3 liabilities	$	—		$	—		$	(2	)	$	5		$	(307	)


⁽¹⁾	The effect to net income totals $(25) million and is reported in the Condensed Consolidated Statements of Operations as follows: $(24) million in realized capital gains and losses, $10 million in net investment income, $(12) million in interest credited to contractholder funds and $1 million in life and annuity contract benefits.


Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of March 31,
	Three months ended March 31,
($ in millions)	2023		2022
Assets
Fixed income securities:


Corporate - privately placed	$	(4)	$	—

Total fixed income securities	(4)		—
Equity securities	(1)		25

Other investments	(1)		—
Other assets	9		12


Total recurring Level 3 assets	$	3	$	37



Total included in net income	$	3	$	37

Components of net income
Net investment income	$	(5)	$	9
Net gains (losses) on investments and derivatives	8		28
Total included in net income	$	3	$	37

Assets

Corporate - public	$	1	$	(2)
Corporate - privately placed	—		1



Changes in unrealized net capital gains and losses reported in OCI	$	1	$	(1)


Financial instruments not carried at fair value
($ in millions)		March 31, 2023				December 31, 2022
Financial assets	Fair value level	Amortized cost, net		Fair value		Amortized cost, net		Fair value
Mortgage loans	Level 3	$	781	$	724	$	762	$	700
Bank loans	Level 3	698		706		686		686



Financial liabilities	Fair value level	Carrying value (1)		Fair value		Carrying value (1)		Fair value
Contractholder funds on investment contracts	Level 3	$	48	$	48	$	50	$	50
Debt	Level 2	8,452		8,089		7,964		7,449
Liability for collateral	Level 2	1,807		1,807		2,011		2,011


Summary of the volume and fair value positions of derivative instruments as of March 31, 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		6,842	$	2	$	2	$	—
Equity and index contracts

Futures	Other assets	n/a		1,116	2		2		—



Foreign currency contracts
Foreign currency forwards	Other investments	$	453	n/a	(9)		5		(14)

Contingent consideration	Other assets	250		n/a	112		112		—
Credit default contracts
Credit default swaps – buying protection	Other investments	51		n/a	—		1		(1)






Total asset derivatives		$	754	7,958	$	107	$	122	$	(15)

Liability derivatives


Derivatives not designated as accounting hedging instruments
Interest rate contracts




Futures	Other liabilities & accrued expenses	n/a		12,394	$	(3)	$	—	$	(3)
Equity and index contracts

Futures	Other liabilities & accrued expenses	n/a		680	(2)		—		(2)




Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	$	176	n/a	3		4		(1)





Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	3		n/a	—		—		—



Total liability derivatives		179		13,074	(2)		$	4	$	(6)
Total derivatives		$	933	21,032	$	105



($ 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 designated as accounting hedging instruments
Foreign currency swap agreements	Other investments	$	49	n/a	$	1		$	2	$	(1	)
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other investments	41		n/a	1			1		—
Equity and index contracts
Options	Other investments	173		6,301	96			96		—
Financial futures contracts	Other assets	—		1,866	1			1		—
Foreign currency contracts
Foreign currency forwards	Other investments	322		n/a	(6		)	3		(9		)
Credit default contracts
Credit default swaps – buying protection	Other investments	104		n/a	(2		)	1		(3		)
Credit default swaps – selling protection	Other investments	100		n/a	1			1		—
Other contracts
Other contracts	Other assets	3		n/a	—			—		—
Subtotal		743		8,167	91			103		(12		)
Total asset derivatives		$	792	8,167	$	92		$	105	$	(13	)

Liability derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Interest rate cap agreements	Other liabilities & accrued expenses	$	11	n/a	$	—		$	—	$	—
Equity and index contracts
Options and futures	Other liabilities & accrued expenses	595		5,895	(34		)	2		(36		)
Foreign currency contracts
Foreign currency forwards	Other liabilities & accrued expenses	568		n/a	(8		)	3		(11		)
Embedded derivative financial instruments
Guaranteed accumulation benefits	Contractholder funds	234		n/a	(25		)	—		(25		)
Guaranteed withdrawal benefits	Contractholder funds	274		n/a	(14		)	—		(14		)
Equity-indexed and forward starting options in life and annuity product contracts	Contractholder funds	1,764		n/a	(253		)	—		(253		)
Credit default contracts
Credit default swaps – buying protection	Other liabilities & accrued expenses	416		n/a	(9		)	1		(10		)
Credit default swaps – selling protection	Other liabilities & accrued expenses	5		n/a	—			—		—
Total liability derivatives		3,867		5,895	(343		)	$	6	$	(349	)
Total derivatives		$	4,659	14,062	$	(251	)


⁽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)


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
March 31, 2023
Asset derivatives	$	10	$	(19)	$	19	$	10	$	—	$	10
Liability derivatives	(16)		19		(3)		—		—		—

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


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 March 31, 2023
Interest rate contracts	$	(35)	$	—	$	(35)
Equity and index contracts	4		8		12
Contingent consideration	—		9		9
Foreign currency contracts	(7)		—		(7)
Credit default contracts	(14)		—		(14)



Total	$	(52)	$	17	$	(35)












Three months ended March 31, 2022
Interest rate contracts	$	316	$	—	$	316
Equity and index contracts	3		(13)		(10)
Contingent consideration	—		12		12

Foreign currency contracts	7		—		7
Credit default contracts	(8)		—		(8)


Total	$	318	$	(1)	$	317



($ in millions)	Realized capital gains and losses			Life and annuity contract benefits			Interest credited to contractholder funds			Operating costs and expenses			Total gain (loss) recognized in net income on derivatives
Three months ended September 30, 2017
Equity and index contracts	$	(10	)	$	—		$	11		$	8		$	9
Embedded derivative financial instruments	—			(4		)	(3		)	—			(7		)
Foreign currency contracts	(5		)	—			—			1			(4		)
Credit default contracts	(2		)	—			—			—			(2		)
Total	$	(17	)	$	(4	)	$	8		$	9		$	(4	)

Nine months ended September 30, 2017
Equity and index contracts	$	(17	)	$	—		$	33		$	20		$	36
Embedded derivative financial instruments	—			4			(7		)	—			(3		)
Foreign currency contracts	(20		)	—			—			6			(14		)
Credit default contracts	(3		)	—			—			—			(3		)
Total	$	(40	)	$	4		$	26		$	26		$	16

Three months ended September 30, 2016
Equity and index contracts	$	(10	)	$	—		$	14		$	7		$	11
Embedded derivative financial instruments	—			3			(6		)	—			(3		)
Foreign currency contracts	(5		)	—			—			(5		)	(10		)
Total	$	(15	)	$	3		$	8		$	2		$	(2	)

Nine months ended September 30, 2016
Interest rate contracts	$	(1	)	$	—		$	—		$	—		$	(1	)
Equity and index contracts	(15		)	—			9			11			5
Embedded derivative financial instruments	—			1			(9		)	—			(8		)
Foreign currency contracts	(4		)	—			—			(26		)	(30		)
Credit default contracts	(5		)	—			—			—			(5		)
Total	$	(25	)	$	1		$	—		$	(15	)	$	(39	)


OTC cash and securities collateral pledged
($ in millions)	March 31, 2023
Pledged by the Company	$	19
Pledged to the Company (1)	3