Allstate 10-K 2019-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2019

OR

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

For the transition period from to

Commission file number 1-11840

THE ALLSTATE CORP****ORATION

(Exact name of registrant as specified in its charter)

2775 Sanders Road**,** Northbrook**,** Illinois 60062

(Address of principal executive offices) (Zip Code)

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

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

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

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

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

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

The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2019, was approximately $33.04 billion.

As of January 31, 2020, the registrant had 316,913,648 shares of common stock outstanding.

Documents Incorporated By Reference

Portions of the following documents are incorporated herein by reference as follows:

Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive proxy statement for its annual stockholders meeting to be held on May 19, 2020, (the “Proxy Statement”) to be filed not later than 120 days after the end of the fiscal year covered by this Form 10-K.

Table of Contents

2019 Form 10-K Item 1. Business

Part I

Item 1. Business

The Allstate Corporation was incorporated under the laws of the State of Delaware on November 5, 1992, to serve as the holding company for Allstate Insurance Company. Its business is conducted principally through Allstate Insurance Company, Allstate Life Insurance Company and other subsidiaries (collectively, including The Allstate Corporation, “Allstate”).

Allstate’s purpose is to protect people from life’s uncertainties and prepare them for the future so they can realize their hopes and dreams. Allstate is primarily engaged in the property and casualty insurance business in the United States and Canada. Additionally, Allstate provides customers other protection offerings such as life, accident and health insurance and protection plans that cover electronic devices and personal identities.

The Allstate Corporation is one of the largest publicly held personal lines insurers in the United States. Allstate’s personal property-liability strategy is to increase market share by providing auto insurance with a competitive value proposition and offering a circle of protection. The Allstate brand is widely known through the “You’re In Good Hands With Allstate®” slogan. Allstate is the third largest personal property and casualty insurer in the United States on the basis of 2018 statutory direct premiums written according to A.M. Best.

In addition, Allstate also has strong market positions in other protection products. According to A.M. Best, Allstate is the nation’s 20th largest issuer of life insurance business on the basis of 2018 ordinary life insurance in force and 40th largest on the basis of 2018 statutory admitted assets. Allstate Benefits provides accident, health and life insurance through employers and is one of the top five voluntary benefits carriers in the market based on a 2018 voluntary/worksite industry survey. SquareTrade, which sells consumer protection plans using the Allstate Protection Plans name in the U.S., provides protection plans on a wide variety of consumer goods such as cell phones, tablets, computers and appliances, and has a leading position in distribution through major retailers. InfoArmor, which provides identity protection through employers using the Allstate Identity Protection name, has a leading position in this distribution channel. In total, Allstate had 145.9 million policies in force (“PIF”) as of December 31, 2019.

In this Annual Report on Form 10-K, we occasionally refer to statutory financial information. All domestic United States insurance companies are required to prepare statutory-basis financial statements. As a result, industry data is available that enables comparisons between insurance companies, including competitors that are not required to prepare financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). We frequently use industry publications containing statutory financial information to assess our competitive position.

The Allstate Corporation 1

2019 Form 10-K Item 1. Business

Strategy and Segment Information

Allstate’s strategy has two components: increase personal property-liability market share and expand protection businesses including Service Businesses, Allstate Life and Allstate Benefits. We create shareholder value through customer satisfaction, unit growth, attractive returns on capital, sustainable profitability and a diversified business platform.

Transformative Growth Plan

We have implemented a multi-year Transformative Growth Plan that leverages the Allstate brand, people and technology. The Transformative Growth Plan will enable us to better serve customers in a changing world. The plan will ensure Allstate remains a strong competitor and local agencies continue to provide high value to customers. Winning is our past, our present and our future.

Allstate has thrived for 88 years by adapting to better serve customers. Our Transformative Growth Plan builds on our success by leveraging the Allstate brand, people and technology to improve our long-term competitive position and accelerate growth. The plan has three components:

Expanded customer access — Consumers currently can access Allstate branded property-liability products through Allstate agencies, contact centers and online. Access will be expanded to enable consumers to select a method of interaction. All consumers will have the opportunity to decide if they want access to an Allstate agency, so we will no longer need to use both the Allstate and Esurance brands for direct sales and Esurance will be integrated into the Allstate brand in 2020.

Improved customer value — Property-liability products will be redesigned to be affordable, simple and connected. Insurance pricing will utilize sophisticated rating algorithms, such as telematics, and reflect the service model a customer chooses.

Centralized customer service capabilities are being expanded to improve consistency, reduce costs and enable Allstate agencies to focus on acquiring new customers and developing relationships with existing customers.

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2019 Form 10-K Item 1. Business

We will improve our expense position by focusing on reducing spending while eliminating redundancies. Simplification efforts will continue to eliminate the need for manual work and optimize our operating model.

Increased investments in marketing and technology — Investments in marketing the Allstate brand will be increased by reallocating Esurance spending. New technology ecosystems are being built to support increased connectivity, new products and operational adaptability.

This plan is focused on the customer experience, providing a circle of protection through people and technology along with increased connectivity, combined with distribution, product, and technology enhancements.

We are expanding protection businesses utilizing enterprise capabilities and resources such as distribution, analytics, claims, investment expertise, talent and capital. Using innovative growth platforms (such as telematics and identity protection) and broad distribution including Allstate exclusive agencies, contact centers, online, retailers, workplace benefits brokers, auto dealers, original equipment manufacturers and telecom providers further enhance our customer value proposition.

We evaluate performance and make resource and capital decisions across seven reportable segments.

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2019 Form 10-K Item 1. Business

Allstate Protection Segment

Our Allstate Protection segment accounted for 90.3% of Allstate’s 2019 consolidated insurance premiums and contract charges and 23.1% of Allstate’s December 31, 2019 PIF. Private passenger auto, homeowners, other personal lines and commercial insurance products offered through agencies and directly through contact centers and online are included in this segment. Our strategy is to position product offerings, distribution and technology to meet customers’ evolving needs and protect them from life’s uncertainties.

Strategy

Allstate Protection currently has four market-facing property-liability businesses with products and services that cater to different customer preferences for advice and brand recognition to improve our competitive position and performance. As part of the Transformative Growth Plan, we will enable consumers to select a method of interaction and Esurance will be integrated into the Allstate brand in 2020. Investments in marketing for the Allstate brand will be increased by reallocating Esurance spending.

We currently serve our consumers using differentiated products, analytical expertise, telematics and an integrated digital enterprise that leverages data and technology to redesign our processes with a focus on greater effectiveness and efficiencies and long-term expense savings.

Allstate brand strategy

Our strategy is to grow profitably through exclusive agencies and direct channels, while leveraging best-in-class operational capabilities to gain market share and efficiencies. The Allstate brand differentiates itself by offering comprehensive product options and features with access to agencies that provide local advice and service, including a partnership with exclusive financial specialists to deliver life and retirement solutions.

This strategy focuses on four customer-centric themes to expand and deliver profitable growth:

Available Being available is about making sure customers can find us whenever, wherever and however they choose. And once they do, offer them the protection they need as effectively as possible. In 2020, we are expanding access by allowing customers to choose how they interact with us.

Consumers will have the opportunity to select an Allstate agency to get tailored solutions and support

based on their needs from Allstate’s 10,800 exclusive agencies or interact directly with Allstate through mobile, online or contact centers. Agencies are established in 10,700 locations, supported by 27,100 licensed sales professionals and 1,000 exclusive financial specialists.

Allstate exclusive agents also offer life and retirement solutions and can partner with exclusive

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Item 1. Business 2019 Form 10-K

financial specialists who provide expertise with more complex life and retirement solutions and other financial needs of our customers.

Exclusive agencies and financial specialists are supported through marketing assistance, service and business processes, technology, education, offering financing to grow their businesses and other resources to help them enhance the customer experience and to acquire and retain more customers.

Focus areas include improving the effectiveness of the sales and distribution systems through integrated support, tools and technology and reinventing products and services, supported by people and technology.

Affordable Leveraging the Allstate brand, people and technology to improve our long-term competitive position and accelerate growth.

Data, analytics and technology support advances in pricing sophistication for all lines of business. Pricing and underwriting strategies and decisions are designed to generate sustainable profitable growth.

Targeted marketing includes messaging that communicates the value of our Good Hands®, the importance of having proper coverage, product options, and the ease of doing business with Allstate.

Enhanced loss cost management and expense control are priorities. To achieve this, we are continuing to modernize our operating platform (including enhanced digital capabilities) and optimizing vendor relationships. Investments are being made to increase efficiencies and reduce expenses.

Simple The strategy to keep things simple for customers and improve their experience with us across the board, giving them open access to shop, get service or file a claim in whatever channel is convenient.

Focus areas include streamlined quoting and binding processes, intelligent services allowing customers to easily find the optimal channel to address their service needs, expanded customer self-service, and continued claims transformation.

Emerging technologies and predictive analytics are being used to simplify the customer experience and expedite the quoting, underwriting and claims processes.

Connected We are enhancing customer connectivity by broadening and deepening the way we stay connected, providing compelling features to customers that connect to us through our Allstate Mobile application while continually developing solutions to enhance offerings and make Allstate Mobile core to the customer experience.

Current capabilities are being expanded through our partnership with Arity, which uses telematics to offer personalized, engaging programs that empower drivers with insights about their vehicle’s health, costs and safety.

Exclusive agent compensation structure The compensation structure for Allstate exclusive agents rewards them for delivering high value to customers and achieving certain business outcomes such as profitable growth and household penetration. Allstate exclusive agent remuneration comprises a base commission, variable compensation and a bonus.

Compensation changes for 2020 shift variable compensation toward new business and eliminates variable compensation for renewing customers. We are aligning agent compensation to emphasize growth while simultaneously improving customer service consistency.

Agents have the ability to earn commissions and additional bonuses on non-proprietary products provided to customers when an Allstate product is not available. In 2019 Ivantage, which provides access to these products, had $1.90 billion non-proprietary premiums under management and is a leading provider of property and casualty brokerage services.

Allstate agents and exclusive financial specialists receive commissions for proprietary and non-proprietary life and retirement sales and are eligible for a quarterly bonus based on the volume of non-proprietary sales.

Allstate independent agent remuneration comprises a base commission and a bonus that can be earned by agents who achieve sales goals and a target loss ratio.

Commercial lines strategy We are actively pursuing profitable expansion of our commercial lines business in the shared economy, including transportation and home-sharing network companies. Profit improvement actions have been implemented for our traditional commercial lines insurance products, emphasizing pricing, claims, governance and operational improvements.

Esurance strategy

Esurance has grown in the direct channel with a focus on making insurance surprisingly painless by innovating to make it simple, transparent and affordable with a seamless online and mobile experience. Esurance is 2.4 times bigger, as measured by premiums written, than when it was acquired eight years ago. Esurance will be integrated into the Allstate brand in 2020.

The Allstate Corporation 5

2019 Form 10-K Item 1. Business

Encompass strategy

Currently, customers who prefer an independent agent can access products under either the Encompass or Allstate brand. As part of Allstate’s multi-year Transformative Growth Plan, independent agent access will be increased as we combine our Allstate and Encompass brand independent agency businesses and go to market exclusively with the Encompass brand. In addition to bringing the organizations together, we will expand the independent agency footprint, provide a superior agency and customer experience, and offer contemporary products with sophisticated pricing.

Over the past several years, Encompass has been executing a profit improvement plan emphasizing pricing, governance and operational improvements at both the state and countrywide levels. These actions have improved underlying profitability but led to a reduction of policies in force compared to prior years for both auto and homeowners. We expect these profit improvement actions to continue as we implement the Transformative Growth Plan.

Answer Financial strategy

Answer Financial is an insurance agency that sells other insurance companies’ products directly to customers online. Our strategy as a technology-enabled insurance agency is to provide comparison shopping and related services for businesses, offering customers choice, convenience and ease of use.

Allstate Protection pricing and risk management strategies

Our pricing and underwriting strategies and decisions are designed to generate sustainable profitable growth.

A proprietary database of underwriting and loss experience enables sophisticated pricing algorithms and methodologies to more accurately price risks while also seeking to attract and retain customers in multiple risk segments.

A combination of underwriting information, pricing and discounts are also used to achieve a more competitive position and growth. The pricing strategy involves local marketplace pricing and underwriting decisions based on risk evaluation factors to the extent permissible by applicable law and an evaluation of competitors.

Pricing of property products is intended to generate risk-adjusted returns that are acceptable over a long-term period. Rate increases are pursued to keep pace with loss trends, including losses from catastrophic events and those that are weather-related (such as wind, hail, lightning and freeze not meeting our criteria to be declared a catastrophe). We also take into consideration potential customer disruption, the impact on our ability to market our products, regulatory limitations, our competitive position and profitability.

In any reporting period, loss experience from catastrophic events and weather-related losses may contribute to negative or positive underwriting performance relative to the expectations incorporated into product pricing.

Property catastrophe exposure is managed with the goal of providing shareholders an acceptable return on the risks assumed in the property business. Catastrophe exposure management includes purchasing reinsurance to provide coverage for known exposure to hurricanes, earthquakes and fires following earthquakes, wildfires and other catastrophes. Our current catastrophe reinsurance program supports our risk tolerance framework that targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes and earthquakes, net of reinsurance, exceeding $2 billion.

The use of different assumptions and updates to industry models and to our risk transfer program could materially change the projected loss. Growth strategies include areas where we believe diversification can be enhanced and an appropriate return can be earned for the risk. As a result, our modeled exposure may increase, but in aggregate remain lower than $2 billion as noted above. In addition, we have exposure to other severe weather events and wildfires, which impact catastrophe losses.

We are promoting measures to prevent and mitigate losses and make homes and communities more resilient, including enactment of stronger building codes and effective enforcement of those codes, adoption of sensible land use policies, and development of effective and affordable methods of improving the resilience of existing structures.

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Item 1. Business 2019 Form 10-K

Products and distribution

Allstate Protection differentiates itself by offering solutions to meet broad-based household protection needs and a comprehensive range of innovative product options and features across distribution channels that best suit each consumer segment.

Products
Insurance products (1)		Auto
	Homeowners
	Specialty auto (motorcycle, trailer, motor home and off-road vehicle)
	Other personal lines (renters, condominium, landlord, boat, umbrella, manufactured home and stand-alone scheduled personal property)
	Commercial lines
Answer Financial		Comparison quotes and sales of non-proprietary auto, homeowners and other personal lines (condominium, renters, motorcycle, recreational vehicle and boat)

Allstate exclusive agencies also support the Service Businesses, Allstate Life and Allstate Benefits segments through offering roadside assistance, consumer protection plans, identity protection, life insurance and voluntary benefits products.

When an Allstate product is not available, we may offer non-proprietary products to consumers through Ivantage and arrangements made with other companies, agencies, and brokers. As of December 31, 2019, Allstate agencies had approximately $1.7 billion of non-proprietary personal insurance premiums under management, primarily related to property business in hurricane exposed areas, and approximately $225 million of non-proprietary commercial insurance premiums under management. Additionally, we offer a homeowners product through our excess and surplus lines carrier, North Light Specialty Insurance Company, in certain areas with higher risk of catastrophes or where customers do not meet the Allstate brand standard underwriting profile.

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2019 Form 10-K Item 1. Business

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Item 1. Business 2019 Form 10-K

Competition

The personal lines insurance markets, including private passenger auto and homeowners insurance, are highly competitive. The following charts provide Allstate Protection’s combined market share compared to our principal U.S. competitors using statutory direct written premium for the year ended December 31, 2018, according to A.M. Best.

Geographic markets

We primarily operate in the U.S (all 50 states and D.C.) and Canada. Our top geographic markets based on 2019 statutory direct written premiums are reflected below.

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2019 Form 10-K Item 1. Business

Service Businesses Segment

Our Service Businesses segment accounted for 3.7% of Allstate’s 2019 consolidated total revenue and 72.6% of Allstate’s December 31, 2019 PIF. Service Businesses includes Allstate Protection Plans®, Allstate Dealer Services®, Allstate Roadside Services®, Arity® and Allstate Identity Protection®, which offer a broad range of products and services that expand and enhance customer value propositions.

Strategy - To deliver superior value propositions and build strategic platforms to connect and engage with customers and effectively address their changing needs and preferences.

Products and distribution

Geographic markets

The Service Businesses primarily operate in the U.S., with certain businesses offering services in Europe, Canada, and Puerto Rico.

Competition

We compete on a variety of factors, including product offerings, brand recognition, financial strength, price, distribution and the customer experience. The market for these services is highly fragmented and competitive.

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Allstate Life Segment

Strategy

Our Allstate Life segment accounted for 4.4% of Allstate’s 2019 consolidated total revenue and 1.3% of Allstate’s December 31, 2019 PIF. Our overall strategy is to broaden Allstate’s customer relationships and value proposition. We also distribute non-proprietary retirement products offered by third-party providers. Our target customers are middle market consumers with family and financial protection needs.

Our product positioning provides solutions to help meet customer needs during various phases of life. Term and whole life insurance products offer basic life protection solutions while universal life and retirement products cover more advanced needs. Many Allstate exclusive agencies partner with exclusive financial specialists to deliver life and retirement solutions to their customers. These specialists have expertise with advanced life and retirement cases and other more complex customer needs. Successful partnerships assist agencies with building stronger and deeper customer relationships. Improvements in sales education and technology are being made to ensure agencies have the tools and information needed to help customers meet their needs and build personal relationships.

The operating model is being modernized through investments in data and analytics and technology capabilities, tailoring distribution support, product innovation and enhancing the underwriting process.

Products and distribution

Allstate exclusive agencies and exclusive financial specialists also sell certain non-proprietary products, including mutual funds, fixed and variable annuities, disability insurance, and long-term care insurance to provide a broad suite of protection and retirement products. As of December 31, 2019, Allstate agencies had approximately $16.5 billion of non-proprietary mutual funds and fixed and variable annuity account balances under management. New and additional deposits into these non-proprietary products were $2.4 billion in 2019.

Competition

We compete on a variety of factors, including product offerings, brand recognition, financial strength and ratings, price, distribution and customer service. The market for life insurance continues to be highly fragmented and competitive. As of December 31, 2018, there were approximately 350 groups of life insurance companies in the United States.

Geographic markets

We primarily operate in the U.S. (all 50 states and D.C.). Our top geographic markets based on 2019 statutory direct premiums are reflected below.

The Allstate Corporation 11

2019 Form 10-K Item 1. Business

Allstate Benefits Segment

Strategy

Our Allstate Benefits segment accounted for 2.8% of Allstate’s 2019 consolidated total revenue and 2.9% of Allstate’s December 31, 2019 PIF. The Allstate Benefits segment provides consumers with financial protection against the risk of accidents, illness and mortality. We are among the industry leaders in the growing voluntary benefits market, offering a broad range of products through workplace enrollment. Our life insurance portfolio includes individual and group permanent life solutions. Target customers are middle market consumers with family and financial protection needs employed by small, medium and large sized firms. Allstate Benefits is well represented in all market segments and is a leader in the large and mega (over 10,000 employees) market segments.

Our products are offered through independent agents, benefits brokers and Allstate exclusive agencies. Allstate Benefits is differentiated through its broad product portfolio, flexible enrollment solutions, strong national accounts team and well-recognized brand.

Our strategy for growth is to deliver substantially more value through innovative products and technology, tailored solutions and exceptional service. Initiatives are focused on expanding into non-traditional products and becoming an integrated digital enterprise through investments in future-state technologies and data and analytics capabilities.

Products and distribution

Competition

We compete on a wide variety of factors, including product offerings, brand recognition, financial strength and ratings, price, distribution and customer service.

The market for voluntary benefits is growing as these products help employees fill the increasing gaps associated with continued medical cost inflation and the shifting of costs from employers to employees to cover co-pays and deductibles. Favorable industry and economic trends have increased competitive pressure and attracted new traditional and non-traditional entrants to the voluntary benefits market. Recent entrants, including large group medical, life and disability insurance carriers, are leveraging core benefit capabilities by bundling and discounting to capture voluntary market share.

Geographic markets

We primarily operate in the U.S. (all 50 states and D.C.) and Canada. The top geographic markets based on 2019 statutory direct premiums are reflected below.

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2019 Form 10-K Item 1. Business

Allstate Annuities Segment

Strategy

Our Allstate Annuities segment accounted for 2.9% of Allstate’s 2019 consolidated total revenue and 0.1% of Allstate’s December 31, 2019 PIF. The Allstate Annuities segment consists primarily of deferred fixed annuities and immediate fixed annuities (including standard and sub-standard structured settlements). The segment is in run-off and is focused on increasing lifetime economic value. Both the deferred and immediate annuity businesses have been adversely impacted by the historically low interest rate environment. Our immediate annuity business has also been impacted by medical advancements that have resulted in annuitants living longer than anticipated when many of these contracts were originated.

Allstate Annuities focuses on the distinct risk and return profiles of the specific products when developing investment and liability management strategies. The level of legacy deferred annuities in force has been significantly reduced and the investment portfolio and crediting rates are proactively managed to improve profitability of the business while providing appropriate levels of liquidity.

The investment portfolio supporting our immediate annuities is managed to ensure the assets match the characteristics of the liabilities and provide the long-term returns needed to support this business. To better match the long-term nature of our immediate annuities, we use performance-based investments (primarily limited partnership investments) in which we have ownership interests and a greater proportion of return is derived from idiosyncratic asset or operating performance.

We continue to review strategic options to reduce exposure and improve returns of the business. As a result, we may take additional operational and financial actions that offer return improvement and risk reduction opportunities.

Products and distribution

We previously offered and continue to have in force deferred fixed annuities and immediate fix

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We collect, use, store or transmit a large amount of confidential, proprietary and other information (including personal information of customers, claimants or employees) in connection with the operation of our business. Systems are subject to increased attempted cyberattacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering.

We constantly defend against threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. Events like these could jeopardize the information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction.

These risks may increase in the future as threats become more sophisticated and we continue to expand internet and mobile strategies, develop additional remote connectivity solutions to serve our employees and customers, develop and expand products and services designed to protect customers’ digital footprint, and build and maintain an integrated digital enterprise. Our increased use of third-party services (e.g., cloud technology and software as a service) can make it more difficult to identify and respond to cyberattacks in any of the above situations. Third parties to whom we outsource certain functions are also subject to these risks.

Personal information is subject to an increasing number of federal, state, local and international laws and regulations regarding privacy and data security, as well as contractual commitments. Any failure or perceived failure by us to comply with such obligations may result in governmental enforcement actions and fines, litigation or public statements against us by consumer advocacy groups or others and could cause our employees and customers to lose trust in us, which could have an adverse effect on our reputation and business.

See the Regulation section, Privacy Regulation and Data Security, for additional information.

The occurrence of a disaster, such as a natural catastrophe, pandemic, industrial accident, blackout, terrorist attack, war, cyberattack, computer virus, insider threat, unanticipated problems with our disaster recovery processes, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of employees were unavailable in the event of a disaster, our ability to effectively conduct business could be severely compromised. Our systems are also subject to compromise from internal threats.

Losses from changing climate and weather conditions may adversely affect our financial condition, profitability or cash flows

Climate change may affect the occurrence of certain natural events, such as an increase in the frequency or severity of wind, tornado, hailstorm and thunderstorm events due to increased convection in the atmosphere. There could also be more frequent wildfires in certain geographies, more flooding and the potential for increased severity of hurricanes due to higher sea surface temperatures. As a result, incurred losses from such events and the demand, price and availability of reinsurance coverages for automobile and homeowners insurance may be affected.

Climate change may also impact insurability by impairing our ability to identify and quantify potential hazards that will result in losses and offer our customers products at an affordable price. Our investment portfolio is also subject to the effects of climate change as economic shifts alter the return dynamic of long-term investments and reduce valuations.

Due to significant variability associated with future changing climate conditions, we are unable to predict the impact climate change will have on our businesses.

We are subject to extensive regulation, and potential further restrictive regulation may increase operating costs and limit growth

Many of our affiliates operate in the highly regulated insurance and broader financial services sector and are subject to extensive laws and regulations that are complex and subject to change. Changes may lead to additional expenses, increased legal exposure, increased reserve or capital requirements limiting our ability to grow or to achieve targeted profitability. Moreover, laws and regulations are administered and enforced by governmental authorities that exercise interpretive latitude, including state insurance regulators; state securities administrators; state attorneys general as well as federal agencies including the SEC, the Financial Industry Regulatory Authority, the Department of Labor, the U.S. Department of Justice and the National Labor Relations Board. Consequently, compliance with one regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another’s interpretation of the same issue.

In addition, there is risk that one regulator’s or enforcement authority’s interpretation of a legal issue may change to our detriment. There is also a risk that changes in the overall legal environment may cause us to change our views regarding the actions we need to take from a legal risk management perspective. This could necessitate changes to our practices that may adversely impact our business. In some cases, state insurance laws and regulations are generally intended to protect or benefit purchasers or users of insurance products, not holders of securities that we issue. These laws and regulations may limit our ability to grow or to improve the profitability of our business.

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2019 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

A regulatory environment that requires rate increases to be approved, can dictate underwriting practices and mandate participation in loss sharing arrangements may adversely affect results of operations and financial condition

Political events and positions can affect the insurance market, including efforts to suppress rates to a level that may not allow us to reach targeted levels of profitability. Regulatory challenges to rate increases may restrict rate changes that may be required to achieve targeted levels of profitability and returns on equity. If we are unsuccessful, our results of operations could be negatively impacted.

In addition, certain states have enacted laws that require an insurer conducting business in that state to participate in assigned risk plans, reinsurance facilities and joint underwriting associations. Certain states also require the insurer to offer coverage to all consumers, often restricting an insurer’s ability to charge the price it might otherwise charge for the risk acceptance. In these markets, we may be compelled to underwrite significant amounts of business at lower-than-desired rates, possibly leading to an unacceptable return on equity. Alternatively, as the facilities recognize a financial deficit, they could have the ability to assess participating insurers, adversely affecting our results of operations and financial condition. Laws and regulations of many states also limit an insurer’s ability to withdraw from one or more lines of insurance, except pursuant to a plan that is approved by the state insurance department. Certain states require an insurer to participate in guaranty funds for impaired or insolvent insurance companies. These funds periodically assess losses against all insurance companies doing business in the state. Our results of operations and financial condition could be adversely affected by any of these factors.

Regulatory reforms, and the more stringent application of existing regulations, may make it more expensive for us to conduct our business

The federal government has enacted comprehensive regulatory reforms for financial services entities. As part of a larger effort to strengthen the regulation of the financial services market, certain reforms are applicable to the insurance industry.

The Federal Insurance Office (“FIO”) and Financial Stability Oversight Council were established, and the federal government may enact reforms that affect the state insurance regulatory framework. The potential impact of state or federal measures that change the nature or scope of insurance and financial regulation is uncertain but may make it more expensive for us to conduct business and limit our ability to grow or achieve profitability.

We have business process and information technology operations in Canada, India and the United Kingdom that are subject to operating, regulatory and political risks in those countries. We may incur substantial costs and other negative consequences if any of these occur, including an adverse effect on our business, results of operations and financial condition.

Losses from legal and regulatory actions may be material to our results of operations, cash flows and financial condition

We are involved in various legal actions, including class-action litigation challenging a range of company practices and coverage provided by our insurance products, some of which involve claims for substantial or indeterminate amounts. We are also involved in various regulatory actions and inquiries, including market conduct exams by state insurance regulatory agencies. In the event of an unfavorable outcome in any of these matters, the ultimate liability may be more than amounts currently accrued or disclosed in our reasonably possible loss range and may be material to our results of operations, cash flows and financial condition.

See Note 14 of the consolidated financial statements.

Changes in or the application of accounting standards issued by standard-setting bodies and changes in tax laws may adversely affect our results of operations and financial condition

Our financial statements are subject to the application of accounting principles generally accepted in the United States of America, which are periodically revised, interpreted and/or expanded. Accordingly, we may be required to adopt new guidance or interpretations, which may have a material effect on our results of operations and financial condition and could adversely impact financial strength ratings.

See MD&A, Application of Critical Accounting Estimates and Note 2 of the consolidated financial statements for further details.

Loss of key vendor relationships or failure of a vendor to protect our data, confidential and proprietary information, or personal information of our customers, claimants or employees could adversely affect our operations

We rely on services and products provided by many vendors in the U.S. and abroad. These include, vendors of computer hardware, software, cloud

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Part I - Item 1A. Risk Factors and Other Disclosures 2019 Form 10-K

technology and software as a service, as well as vendors and/or outsourcing of services such as:

If any vendor becomes unable to continue to provide products or services, or fails to protect our confidential, proprietary, and other information, we may suffer operational impairments and financial losses.

Our ability to attract, develop, and retain talent to maintain appropriate staffing levels, and establish a successful work culture is critical to our success

Competition from within the insurance industry and from other industries, including the technology sector, for qualified employees with highly specialized knowledge in areas such as underwriting, data and analytics, technology and e-commerce, has often been intense and we have experienced increased competition in hiring and retaining employees.

Factors that affect our ability to attract and retain such employees include:

The unexpected loss of key personnel could have a material adverse impact on our business because of the loss of their skills, knowledge of our products and offerings and years of industry experience and, in some cases, the difficulty of promptly finding qualified replacement personnel.

Misconduct or fraudulent acts by employees, agents and third parties may expose us to financial loss, disruption of business, regulatory assessments and reputational harm

The company and the insurance industry are inherently susceptible to past and future misconduct or fraudulent activities by employees, representative agents, vendors, customers and other third parties. These activities could include:

None.

Our home office complex is owned and located in Northbrook, Illinois. As of December 31, 2019, the home office complex consists of several buildings totaling 1.9 million square feet of office space on a 186-acre site.

We also operate from approximately 450 administrative, data processing, claims handling and other support facilities in North America. In addition to our home office facilities, 825 thousand square feet are owned and 6.1 million square feet are leased.

Outside North America, we own one and lease three properties in Northern Ireland comprising approximately 220 thousand square feet. We also have two leased facilities in India for approximately 434 thousand square feet and two leased facilities in London for 7,182 square feet.

The locations where Allstate exclusive agencies operate in the U.S. are normally leased by the agencies.

Information required for Item 3 is incorporated by reference to the discussion under the heading “Regulation and compliance” and under the heading “Legal and regulatory proceedings and inquiries” in Note 14 of the consolidated financial statements.

Not applicable.

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2019 Form 10-K

Part II

As of January 31, 2020, there were 67,204 holders of record of The Allstate Corporation’s common stock. The principal market for the common stock is the New York Stock Exchange, where our common stock trades under the trading symbol “ALL”. Our common stock is also listed on the Chicago Stock Exchange.

Common stock performance graph

The following performance graph compares the cumulative total shareholder return on Allstate common stock for a five-year period (December 31, 2014 to December 31, 2019) with the cumulative total return of the S&P Property and Casualty Insurance Index (S&P P/C) and the S&P’s 500 stock index.

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2019 Form 10-K

Issuer Purchases of Equity Securities

October: 6,645

November: 9,936

December: 54

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2019 Form 10-K

2019 Highlights

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 consolidated financial statements and related notes found under Item 8. contained herein.

This section of this Form 10-K generally discusses 2019 and 2018 results and year-to-year comparisons between 2019 and 2018. Discussions of 2017 results and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis (“MD&A”) in Part II, Item 7 of our annual report on Form 10-K for 2018, filed February 15, 2019, and the Company’s Current Report on Form 8-K filed on May 16, 2019, Exhibit 99.1, reflecting the Company’s 2018 Form 10-K with adjustments to Part II. Item 6., Item 7. and Item 8. for the Company’s change in accounting principle for pension and other postretirement benefit plans.

The most important factors we monitor to evaluate the financial condition and performance for our reportable segments and the Company include:

Measuring segment profit or loss

The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Discontinued Lines and Coverages segments and adjusted net income for the Service Businesses, Allstate Life, Allstate Benefits, Allstate Annuities, and Corporate and Other segments.

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, restructuring and related charges and amortization or impairment of purchased intangibles, 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 the profitability of the Property-Liability insurance operations separately from investment results. Underwriting income is reconciled to net income applicable to common shareholders in the Property-Liability Operations section of Management’s Discussion and Analysis (“MD&A”).

Adjusted net income is net income applicable to common shareholders, excluding:

Adjusted net income is reconciled to net income applicable to common shareholders in the Service Businesses, Allstate Life, Allstate Benefits and Allstate Annuities Segment sections of MD&A.

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2019 Form 10-K

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Information required for Item 7A is incorporated by reference to the material under the caption “Market Risk” in Part II, Item 7 of this report.

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2019 Form 10-K

The Allstate Corporation 119

2019 Form 10-K Financial Statements

The Allstate Corporation and Subsidiaries

Consolidated Statements of Operations

See notes to consolidated financial statements.

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Financial Statements 2019 Form 10-K

The Allstate Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

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None.

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures as defined in Rule 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 recorded, processed, summarized and reported within the time periods specified by the Securities Exchange Act and made known to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) 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 internal control over financial reporting as of December 31, 2019 based on the criteria related to internal control over financial reporting described in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2019.

Deloitte & Touche LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Form 10-K, has issued their attestation report on the Company’s internal control over financial reporting, which is included herein.

Changes in Internal Control over Financial Reporting. During the fiscal quarter ended December 31, 2019, 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.

On February 20, 2020, The Allstate Corporation filed a Certificate of Elimination to its Restated Certificate of Incorporation with the Secretary of State of the State of Delaware eliminating from the Restated Certificate of Incorporation all matters set forth in the Certificates of Designations with respect to its: (i) 5.625% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A; (ii) 6.750% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series C; (iii) 6.625% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series D; (iv) 6.625% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series E; and (v) 6.250% Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series F (together collectively referred to as the “Preferred Stock”). These series of Preferred Stock have been previously redeemed by the Corporation and no shares remain outstanding.

A copy of the Certificate of Elimination relating to the Preferred Stock is listed as Exhibit 3.6 to this report and is incorporated herein by reference.

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Part III

Information regarding directors of The Allstate Corporation standing for election at the 2020 annual stockholders meeting is incorporated in this Item 10 by reference to the descriptions in the Proxy Statement under the captions “Corporate Governance – Director Nominees’ Skills and Experience.”

Information regarding our audit committee and audit committee financial experts is incorporated in this Item 10 by reference to the information under the caption “Corporate Governance – Board Meetings and Committees” in the Proxy Statement.

Information regarding executive officers of The Allstate Corporation is incorporated in this Item 10 by reference to Part I, Item 1 of this report under the caption “Information about our Executive Officers.”

We have adopted a Global Code of Business Conduct that applies to all of our directors and employees, including our principal executive officer, principal financial officer and controller and principal accounting officer. The text of our Global Code of Business Conduct is posted on our website, www.allstateinvestors.com. We intend to satisfy the disclosure requirements, regarding amendments to, and waiver from, the provisions of our Global Code of Business Conduct by posting such information on the same website pursuant to applicable NYSE and SEC rules.

Information required for Item 11 is incorporated by reference to the sections of the Proxy Statement with the following captions:

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2019 Form 10-K

Information regarding security ownership of certain beneficial owners and management is incorporated in this Item 12 by reference to the sections of the Proxy Statement with the following captions:

Asset managers, such as those that manage mutual funds and exchange traded funds, principally on behalf of third-party investors, at times acquire sufficient voting ownership interests in Allstate to require disclosure. State Street Corp. manages an investment portfolio of $3.4 billion on behalf of participants in Allstate’s 401(k) Savings Plan and $2.3 billion on behalf of Allstate domestic qualified pension plan. The terms of these arrangements are customary, and the aggregate related fees are not material.

Information required for Item 13 is incorporated by reference to the material in the Proxy Statement under the captions “Corporate Governance – Board Independence and Related Person Transactions - Nominee Independence Determinations," “Corporate Governance – Board Independence and Related Person Transactions - Related Person Transactions” and “Other Information - Appendix B – Categorical Standards of Independence.”

Information required for Item 14 is incorporated by reference to the material in the Proxy Statement under the caption “Audit Committee Matters – Proposal 3. Ratification of Deloitte & Touche LLP as the Independent Registered Public Accountant for 2020.”

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2019 Form 10-K

Part IV

Item 15. (a) (1) Exhibits and Financial Statement Schedules.

The following consolidated financial statements, notes thereto and related information of The Allstate Corporation (the “Company”) are included in Item 8.

Item 15. (a) (2)

The following additional financial statement schedules are furnished herewith pursuant to the requirements of Form 10-K.

All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the Consolidated Financial Statements or notes thereto.

The following is a list of the exhibits filed as part of this Form 10-K. The exhibit numbers followed by an asterisk (*) indicate exhibits that are management contracts or compensatory plans or arrangements. A dagger (†) indicates an award form first used under The Allstate Corporation 2001 Equity Incentive Plan, which was amended and restated as The Allstate Corporation 2009 Equity Incentive Plan. A plus (+) indicates an award form first used under The Allstate Corporation 2009 Equity Incentive Plan, which was subsequently amended and restated as The Allstate Corporation 2013 Equity Incentive Plan, and further amended and restated as The Allstate Corporation 2019 Equity Incentive Plan.

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Item 15. (b)

The exhibits are listed in Item 15. (a)(3) above.

Item 15. (c)

The financial statement schedules are listed in Item 15. (a)(2) above.

None.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) 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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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The Allstate Corporation and Subsidiaries

Schedule I — Summary of Investments Other than Investments in Related Parties

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2019 Form 10-K

The Allstate Corporation and Subsidiaries

Schedule II — Condensed Financial Information of Registrant Statement of Operations

See accompanying notes to condensed financial information and notes to consolidated financial statements.

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2019 Form 10-K

The Allstate Corporation and Subsidiaries

Schedule II (Continued) — Condensed Financial Information of Registrant Statement of Financial Position

See accompanying notes to condensed financial information and notes to consolidated financial statements.

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2019 Form 10-K

The Allstate Corporation and Subsidiaries

Schedule II (Continued) — Condensed Financial Information of Registrant Statement of Cash Flows

See accompanying notes to condensed financial information and notes to consolidated financial statements.

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The Allstate Corporation and Subsidiaries

Schedule II (Continued) — Condensed Financial Information of Registrant

Notes to Condensed Financial Information

1. General

Pursuant to rules and regulations of the SEC, the unconsolidated condensed financial statements of the Parent Company do not reflect all of the information and notes normally included with financial statements prepared in accordance with GAAP. Therefore, these condensed financial statements of the Registrant should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8.

The long-term debt presented in Note 12 “Capital Structure” are direct obligations of the Registrant. A majority of the pension and other postretirement benefits plans presented in Note 17 “Benefit Plans” are direct obligations of the Registrant.

Participating subsidiaries fund the pension plans contributions under a master services cost sharing agreement. In addition, as a result of joint and several pension liability rules under the Internal Revenue Code and the Employee Retirement Income Security Act of 1974, as amended, many liabilities that arise in connection with pension plans are joint and several across all members of a controlled group of entities.

2. Notes due to subsidiaries

On June 19, 2019, the Registrant issued a $1.00 billion note, with a rate of 2.63% due on June 19, 2020 to Kennett Capital Inc. The proceeds of this issuance were used for cash management purposes.

On October 11, 2018 and December 18, 2018, the Registrant issued $250 million and $1.00 billion notes, with a rate of 2.49% and 3.03% due on April 11, 2019 and June 18, 2019, respectively, both to its wholly owned subsidiary Kennett Capital Inc. The proceeds of these issuances were used for cash management purposes. On April 11, 2019 and June 18, 2019, the Registrant repaid $250 million and $1.00 billion, respectively, to Kenneth Capital Inc.

3. Supplemental Disclosures of Cash Flow Information

The Registrant paid $312 million, $330 million and $331 million of interest on debt in 2019, 2018 and 2017, respectively.

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2019 Form 10-K

The Allstate Corporation and Subsidiaries

Schedule III — Supplementary Insurance Information