Item 8. Financial Statements and Supplementary Data

Consolidated Financial Statements									Page
Consolidated Statements of Operations									96
Consolidated Statements of Comprehensive Income									97
Consolidated Statements of Financial Position									98
Consolidated Statements of Shareholders’ Equity									99
Consolidated Statements of Cash Flows									100
Notes to Consolidated Financial Statements
Note 1			General						101
Note 2			Summary of Significant Accounting Policies						102
Note 3			Acquisitions and Dispositions						113
Note 4			Reportable Segments						116
Note 5			Investments						119
Note 6			Fair Value of Assets and Liabilities						129
Note 7			Derivative Financial Instruments and Off-balance Sheet Financial Instruments						137
Note 8			Variable Interest Entities						143
Note 9			Reserve for Property and Casualty Insurance Claims and Claims Expense						143
Note 10			Reserve for Future Policy Benefits and Contractholder Funds						149
Note 11			Reinsurance and Indemnification						152
Note 12			Deferred Policy Acquisition Costs						157
Note 13			Capital Structure						157
Note 14			Company Restructuring						160
Note 15			Commitments, Guarantees and Contingent Liabilities						161
Note 16			Income Taxes						168
Note 17			Statutory Financial Information and Dividend Limitations						170
Note 18			Benefit Plans						171
Note 19			Equity Incentive Plans						178
Note 20			Supplemental Cash Flow Information						180
Note 21			Other Comprehensive Income						181
Note 22			Quarterly Results (unaudited)						181
Report of Independent Registered Public Accounting Firm									182

The Allstate Corporation 95

2021 Form 10-K Financial Statements

The Allstate Corporation and Subsidiaries

Consolidated Statements of Operations

						Years Ended December 31,
($ in millions, except per share data)						2021						2020						2019
Revenues
Property and casualty insurance premiums (net of reinsurance ceded and indemnification programs of $1,904, $1,141 and $1,122)						$	42,218					$	37,073					$	36,076
Accident and health insurance premiums and contract charges (net of reinsurance ceded of $78, $13 and $14)						1,821						1,094						1,145
Other revenue						2,172						1,065						1,054
Net investment income						3,293						1,590						1,728
Net gains (losses) on investments and derivatives						1,084						1,087						1,538
Total revenues						50,588						41,909						41,541
Costs and expenses
Property and casualty insurance claims and claims expense (net of reinsurance ceded and indemnification programs of $3,484, $530 and $524)						29,318						22,001						23,976
Shelter-in-Place Payback expense						29						948						—
Accident and health insurance policy benefits (net of reinsurance ceded of $85, $15 and $12)						1,015						516						601
Interest credited to contractholder funds (net of reinsurance ceded of $1, zero and zero)						34						33						34
Amortization of deferred policy acquisition costs						6,252						5,477						5,353
Operating costs and expenses						7,260						5,494						5,422
Pension and other postretirement remeasurement (gains) losses						(644)						(51)						114
Restructuring and related charges						170						253						39
Amortization of purchased intangibles						376						118						126
Impairment of purchased intangibles						—						—						106
Interest expense						330						318						327
Total costs and expenses						44,140						35,107						36,098
Income from operations before income tax expense						6,448						6,802						5,443
Income tax expense						1,289						1,373						1,116
Net income from continuing operations						5,159						5,429						4,327
(Loss) income from discontinued operations, net of tax						(3,593)						147						520
Net income						1,566						5,576						4,847
Less: Net loss attributable to noncontrolling interest						(33)						—						—
Net income attributable to Allstate						1,599						5,576						4,847
Less: Preferred stock dividends						114						115						169
Net income applicable to common shareholders						$	1,485					$	5,461					$	4,678
Earnings per common share applicable to common shareholders
Basic
Continuing operations						$	17.23					$	17.06					$	12.67
Discontinued operations						(12.19)						0.47						1.58
Total						$	5.04					$	17.53					$	14.25
Diluted
Continuing operations						$	16.98					$	16.84					$	12.47
Discontinued operations						(12.02)						0.47						1.56
Total						$	4.96					$	17.31					$	14.03
Weighted average common shares - Basic						294.8						311.6						328.2
Weighted average common shares - Diluted						299.1						315.5						333.5

See notes to consolidated financial statements.

96 www.allstate.com

Financial Statements 2021 Form 10-K

The Allstate Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

						Years Ended December 31,
($ in millions)						2021						2020						2019
Net income						$	1,566					$	5,576					$	4,847
Other comprehensive (loss) income, after-tax
Changes in:
Unrealized net capital gains and losses						(2,582)						1,293						1,889
Unrealized foreign currency translation adjustments						(8)						52						(10)
Unamortized pension and other postretirement prior service credit						(59)						9						(47)
Other comprehensive (loss) income, after-tax						(2,649)						1,354						1,832
Comprehensive (loss) income						(1,083)						6,930						6,679
Less: Comprehensive loss attributable to noncontrolling interest						(36)						—						—
Comprehensive (loss) income attributable to Allstate						$	(1,047)					$	6,930					$	6,679

See notes to consolidated financial statements.

The Allstate Corporation 97

2021 Form 10-K Financial Statements

The Allstate Corporation and Subsidiaries

Consolidated Statements of Financial Position

						December 31,
($ in millions, except par value data)						2021						2020
Assets
Investments
Fixed income securities, at fair value (amortized cost, net $41,376 and $40,034)						$	42,136					$	42,565
Equity securities, at fair value (cost $6,016 and $2,740)						7,061						3,168
Mortgage loans, net						821						746
Limited partnership interests						8,018						4,563
Short-term, at fair value (amortized cost $4,009 and $6,807)						4,009						6,807
Other investments, net						2,656						1,691
Total investments						64,701						59,540
Cash						763						311
Premium installment receivables, net						8,364						6,463
Deferred policy acquisition costs						4,722						3,774
Reinsurance and indemnification recoverables, net						10,024						7,215
Accrued investment income						339						371
Property and equipment, net						939						1,057
Goodwill						3,502						2,369
Other assets, net						6,086						2,756
Assets held for sale						—						42,131
Total assets						99,440						125,987
Liabilities
Reserve for property and casualty insurance claims and claims expense						33,060						27,610
Reserve for future policy benefits						1,273						1,028
Contractholder funds						908						857
Unearned premiums						19,844						15,946
Claim payments outstanding						1,123						957
Deferred income taxes						833						382
Other liabilities and accrued expenses						9,296						7,840
Long-term debt						7,976						7,825
Liabilities held for sale						—						33,325
Total liabilities						74,313						95,770
Commitments and Contingent Liabilities (Note 7, 9 and 15)
Shareholders’ 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, 281 million and 304 million shares outstanding						9						9
Additional capital paid-in						3,722						3,498
Retained income						53,294						52,767
Treasury stock, at cost (619 million and 596 million shares)						(34,471)						(31,331)
Accumulated other comprehensive income:
Unrealized net capital gains and losses						598						3,180
Unrealized foreign currency translation adjustments						(15)						(7)
Unamortized pension and other postretirement prior service credit						72						131
Total accumulated other comprehensive income ("AOCI")						655						3,304
Total Allstate shareholders’ equity						25,179						30,217
Noncontrolling interest						(52)						—
Total equity						25,127						30,217
Total liabilities and equity						$	99,440					$	125,987

See notes to consolidated financial statements.

98 www.allstate.com

Financial Statements 2021 Form 10-K

The Allstate Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity

						Years Ended December 31,
($ in millions, except per share data)						2021						2020						2019
Preferred stock par value						$	—					$	—					$	—
Preferred stock additional capital paid-in
Balance, beginning of year						1,970						2,248						1,930
Acquisition						450						—						—
Preferred stock issuance, net of issuance costs						—						—						1,414
Preferred stock redemption						(450)						(278)						(1,096)
Balance, end of year						1,970						1,970						2,248
Common stock par value						9						9						9
Common stock additional capital paid-in
Balance, beginning of year						3,498						3,463						3,310
Forward contract on accelerated share repurchase agreement						113						(38)						75
Equity incentive plans activity						111						73						78
Balance, end of year						3,722						3,498						3,463
Retained income
Balance, beginning of year						52,767						48,074						44,033
Cumulative effect of change in accounting principle						—						(88)						21
Net income						1,599						5,576						4,847
Dividends on common stock (declared per share of $3.24, $2.16 and $2.00)						(958)						(680)						(658)
Dividends on preferred stock						(114)						(115)						(169)
Balance, end of year						53,294						52,767						48,074
Deferred employee stock ownership plan (“ESOP”) expense
Balance, beginning of year						—						—						(3)
Payments						—						—						3
Balance, end of year						—						—						—
Treasury stock
Balance, beginning of year						(31,331)						(29,746)						(28,085)
Shares acquired						(3,262)						(1,700)						(1,810)
Shares reissued under equity incentive plans, net						122						115						149
Balance, end of year						(34,471)						(31,331)						(29,746)
Accumulated other comprehensive income (loss)
Balance, beginning of year						3,304						1,950						118
Change in unrealized net capital gains and losses						(2,582)						1,293						1,889
Change in unrealized foreign currency translation adjustments						(8)						52						(10)
Change in unamortized pension and other postretirement prior service credit						(59)						9						(47)
Balance, end of year						655						3,304						1,950
Total Allstate shareholders’ equity						25,179						30,217						25,998
Noncontrolling interest
Balance, beginning of period						—						—						—
Acquisition						(16)						—						—
Change in unrealized net capital gains and losses						(3)						—						—
Noncontrolling loss						(33)						—						—
Balance, end of period						(52)						—						—
Total equity						$	25,127					$	30,217					$	25,998

See notes to consolidated financial statements.

The Allstate Corporation 99

2021 Form 10-K Financial Statements

The Allstate Corporation and Subsidiaries Consolidated Statements of Cash Flows

						Years Ended December 31,
($ in millions)						2021						2020						2019
Cash flows from operating activities
Net income						$	1,566					$	5,576					$	4,847
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items						1,086						686						647
Net (gains) losses on investments and derivatives						(1,279)						(1,356)						(1,885)
Pension and other postretirement remeasurement (gains) losses						(644)						(51)						114
Amortization of deferred gain on reinsurance						(4)						(4)						(6)
Interest credited to contractholder funds						448						638						640
Impairment of purchased intangibles						—						—						106
Loss on disposition of operations, net of tax						4,031						—						—
Changes in:
Policy benefits and other insurance reserves						1,984						(682)						(508)
Unearned premiums						1,618						598						801
Deferred policy acquisition costs						(608)						(125)						(85)
Premium installment receivables, net						(498)						(3)						(299)
Reinsurance recoverables, net						(1,565)						(11)						320
Income taxes						349						(232)						487
Other operating assets and liabilities						(1,368)						457						(50)
Net cash provided by operating activities						5,116						5,491						5,129
Cash flows from investing activities
Proceeds from sales
Fixed income securities						31,774						31,950						29,849
Equity securities						4,513						8,405						5,277
Limited partnership interests						886						1,350						756
Mortgage loans						—						230						—
Other investments						1,406						340						303
Investment collections
Fixed income securities						2,284						2,235						2,570
Mortgage loans						860						626						695
Other investments						550						209						254
Investment purchases
Fixed income securities						(33,857)						(38,121)						(31,317)
Equity securities						(6,409)						(4,648)						(7,176)
Limited partnership interests						(1,766)						(1,265)						(1,332)
Mortgage loans						(221)						(203)						(844)
Other investments						(1,647)						(371)						(666)
Change in short-term and other investments, net						4,017						(3,871)						(725)
Purchases of property and equipment, net						(345)						(308)						(433)
Acquisition of operations, net of cash acquired						(3,593)						1						(18)
Proceeds from disposition of operations, net of cash transferred						2,058						—						—
Net cash provided by (used in) investing activities						510						(3,441)						(2,807)
Cash flows from financing activities
Proceeds from issuance of long-term debt						—						1,189						491
Redemption and repayment of long-term debt						(436)						—						(317)
Proceeds from issuance of preferred stock						—						—						(1,132)
Redemption of preferred stock						(450)						(288)						1,414
Contractholder fund deposits						826						991						996
Contractholder fund withdrawals						(1,140)						(1,494)						(1,662)
Dividends paid on common stock						(885)						(668)						(653)
Dividends paid on preferred stock						(114)						(108)						(134)
Treasury stock purchases						(3,120)						(1,737)						(1,735)
Shares reissued under equity incentive plans, net						114						63						120
Other						(35)						41						129
Net cash used in financing activities						(5,240)						(2,011)						(2,483)
Net increase (decrease) in cash, including cash classified as assets held for sale						386						39						(161)
Cash from continuing operations at beginning of period						311						273						425
Cash classified as assets held for sale at beginning of period						66						65						74
Less: Cash classified as assets held for sale at end of period						—						66						65
Cash from continuing operations at end of period						$	763					$	311					$	273

See notes to consolidated financial statements.

The Allstate Corporation 100

Notes to Consolidated Financial Statements 2021 Form 10-K

Notes to Consolidated Financial Statements

Note 1			General

Basis of presentation

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

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Nature of operations

Allstate is engaged, principally in the United States, in the property and casualty insurance business. Allstate is one of the country’s largest personal property and casualty insurers and is organized into five reportable segments: Allstate Protection, Run-off Property Liability (previously Discontinued Lines and Coverages), Protection Services, Allstate Health and Benefits (previously Allstate Benefits), and Corporate and Other.

Allstate’s primary business is the sale of private passenger auto and homeowners insurance. The Company also offers several other personal property and casualty insurance products, select commercial property and casualty coverages, consumer product protection plans, device and mobile data collection services and analytic solutions using automotive telematics information, roadside assistance, finance and insurance products, employer voluntary benefits and group accident and health insurance and identity protection. Allstate primarily distributes its products through exclusive agents, financial specialists, independent agents and brokers, major retailers, contact centers and the internet.

Risks and uncertainties

Allstate has exposure to catastrophic events, including wind and hail, wildfires, tornadoes, hurricanes, tropical storms, earthquakes, severe freeze events, volcanic eruptions, terrorism and industrial accidents.

Catastrophes, an inherent risk of the property and casualty insurance business, have contributed, and will continue to contribute, to material year-to-year fluctuations in the Company’s results of operations and financial position (see Note 9). The nature and level of catastrophic loss experienced in any period cannot be predicted and could be material to results of operations and financial position.

The Company considers the following categories and locations to be the greatest areas of potential catastrophe losses:

• Wildfires — California, Colorado, Oregon, Texas and Arizona

• Hurricanes — Major metropolitan centers in counties along the eastern and gulf coasts of the United States

• Wind/Hail, Rain and Tornado — Texas, Illinois, Georgia and Colorado

• Earthquakes and fires following earthquakes —Major metropolitan areas near fault lines in the states of California, Oregon, Washington, South Carolina and Kentucky

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

The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”) resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures moderated in 2021 as vaccines have become more widely available in the United States and Canada. There is no way of predicting with certainty how long the pandemic might last. We continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to our operations, but the effects have been and could be material.

The Allstate Corporation 101

2021 Form 10-K Notes to Consolidated Financial Statements

Note 2			Summary of Significant Accounting Policies

Investments

Fixed income securities include bonds and asset-backed securities (“ABS”). ABS includes mortgage-backed securities (“MBS”) that were previously disclosed separately. Fixed income securities, which may be sold prior to their contractual maturity, are designated as available-for-sale (“AFS”) and are carried at fair value. The difference between amortized cost, net of credit loss allowances (“amortized cost, net”) and fair value, net of deferred income taxes and related life deferred policy acquisition costs (“DAC”), is reflected as a component of AOCI. The Company excludes accrued interest receivable from the amortized cost basis of its AFS fixed income securities. Cash received from calls and make-whole payments is reflected as a component of proceeds from sales and cash received from maturities and pay-downs is reflected as a component of investment collections within the Consolidated Statements of Cash Flows.

Equity securities primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments. Equity securities are carried at fair value. Equity securities without readily determinable or estimable fair values are measured using the measurement alternative, which is cost less impairment, if any, and adjustments resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.

Mortgage loans and bank loans are carried at amortized cost, net, which represent the amount expected to be collected. The Company excludes accrued interest receivable from the amortized cost basis of its mortgage and bank loans. Credit loss allowances are estimates of expected credit losses, established for loans upon origination or purchase, and are established considering all relevant information available, including past events, current conditions, and reasonable and supportable forecasts over the life of the loans. Loans are evaluated on a pooled basis when they share similar risk characteristics; otherwise, they are evaluated individually.

Investments in limited partnership interests are primarily accounted for in accordance with the equity method of accounting (“EMA”) and include interests in private equity funds, real estate funds and other funds. Investments in limited partnership interests purchased prior to January 1, 2018, where the Company’s interest is so minor that it exercises virtually no influence over operating and financial policies, are accounted for at fair value primarily utilizing the net asset value (“NAV”) as a practical expedient to determine fair value.

Short-term investments, including money market funds, commercial paper, U.S. Treasury bills and other short-term investments, are carried at fair value. Other investments primarily consist of bank loans, policy loans, real estate and derivatives. Bank loans are primarily senior secured corporate loans. Policy loans

are carried at unpaid principal balances. Real estate is carried at cost less accumulated depreciation. Derivatives are carried at fair value.

Investment income primarily consists of interest, dividends, income from limited partnership interests, rental income from real estate, and income from certain derivative transactions. Interest is recognized on an accrual basis using the effective yield method and dividends are recorded at the ex-dividend date. Interest income for ABS is determined considering estimated pay-downs, including prepayments, obtained from third-party data sources and internal estimates. Actual prepayment experience is periodically reviewed, and effective yields are recalculated when differences arise between the prepayments originally anticipated and the actual prepayments received and currently anticipated. For ABS of high credit quality with fixed interest rates, the effective yield is recalculated on a retrospective basis. For all others, the effective yield is generally recalculated on a prospective basis. Net investment income for AFS fixed income securities includes the impact of accreting the credit loss allowance for the time value of money. Accrual of income is suspended for fixed income securities when the timing and amount of cash flows expected to be received is not reasonably estimable. Accrual of income is suspended for mortgage loans and bank 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 investments on nonaccrual status are generally recorded as a reduction of amortized cost. Income from limited partnership interests carried at fair value is recognized based upon the changes in fair value of the investee’s equity primarily determined using NAV. Income from EMA limited partnership interests is recognized based on the Company’s share of the partnerships’ earnings. Income from EMA limited partnership interests is generally recognized on a three month delay due to the availability of the related financial statements from investees.

Net gains and losses on investments and derivatives include gains and losses on investment sales, changes in the credit loss allowances related to fixed income securities, mortgage loans and bank loans, impairments, valuation changes of equity investments, including equity securities and certain limited partnerships where the underlying assets are predominately public equity securities, and periodic changes in fair value and settlements of certain derivatives, including hedge ineffectiveness. Net gains and losses on sales of investments and derivatives are determined on a specific identification basis and are net of credit losses already recognized through an allowance.

102 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Derivative and embedded derivative financial instruments

Derivative financial instruments include interest rate swaps, credit default swaps, futures (interest rate and equity), options (including swaptions), warrants and rights, foreign currency forwards and total return swaps.

All derivatives are accounted for on a fair value basis and reported as other investments, other assets, other liabilities and accrued expenses. Embedded derivative instruments subject to bifurcation are also accounted for on a fair value basis and are reported together with the host contract. Cash flows from other derivatives are reported in cash flows from investing activities within the Consolidated Statements of Cash Flows.

For derivatives for which hedge accounting is not applied, the income statement effects, including fair value gains and losses and accrued periodic settlements, are reported either in net gains and losses on investments and derivatives or in a single line item together with the results of the associated asset or liability for which risks are being managed.

Securities loaned

The Company’s business activities include securities lending transactions, which are used primarily to generate net investment income. The proceeds received in conjunction with securities lending transactions can be reinvested in short-term investments or fixed income securities. These transactions are short-term in nature, usually 30 days or less.

The Company receives cash collateral for securities loaned in an amount generally equal to 102% and 105% of the fair value of domestic and foreign securities, respectively, and records the related obligations to return the collateral in other liabilities and accrued expenses. The carrying value of these obligations approximates fair value because of their relatively short-term nature. The Company monitors the market value of securities loaned on a daily basis and obtains additional collateral as necessary under the terms of the agreements to mitigate counterparty credit risk. The Company maintains the right and ability to repossess the securities loaned on short notice.

Recognition of premium revenues and contract charges, and related benefits and interest credited

Property and casualty insurance premiums include premiums from personal lines policies, protection plans, other contracts (primarily finance and insurance products) and roadside assistance.

Personal lines insurance premiums are deferred and earned on a pro-rata basis over the terms of the policies, typically periods of six or twelve months.

Revenues related to protection plans, other contracts (primarily finance and insurance products) and roadside assistance are deferred and earned over the term of the contract in a manner that recognizes revenue as obligations under the contracts are performed. Revenues from these products are classified as premiums as the products are backed by insurance. Protection plans and finance and insurance premiums are recognized using a cost-based incurrence method over the term of the contracts, which is generally one to five years. Roadside assistance premiums are recognized evenly over the term of the contract as performance obligations are fulfilled.

The portion of premiums written applicable to the unexpired terms of the policies is recorded as unearned premiums.

Unearned premiums
						December 31,
($ in millions)						2021						2020
Allstate Protection						$	15,762					$	12,772
Protection Services						4,054						3,167
Total						$	19,816					$	15,939

Protection Services For the year ended December 31, 2021, the Company recognized $1.28 billion of property and casualty insurance premiums for Protection Services that were included in the unearned premium balance as of December 31, 2020.

For the year ended December 31, 2020, the Company recognized $1.11 billion of property and casualty insurance premiums for Protection Services that were included in the unearned premium balance as of December 31, 2019.

The Company expects to recognize approximately $1.48 billion, $1.07 billion and $1.50 billion of the December 31, 2021 unearned premium balance in 2022, 2023 and thereafter, respectively.

Premium installment receivables represent premiums written and not yet collected, net of the credit loss allowance for uncollectible premiums. These receivables are primarily outstanding for one year or less. The Company utilizes historical internal data including aging analyses to estimate allowances under current conditions and for the forecast period. The Company regularly evaluates and updates the data and adjusts its allowance as appropriate.

The increase in the provision for credit losses primarily related to the acquisition of National General.

The Allstate Corporation 103

2021 Form 10-K Notes to Consolidated Financial Statements

Rollforward of credit loss allowance for premium installment receivables
						For the years ended December 31,
($ in millions)						2021						2020
Beginning balance						$	(153)					$	(91)
Increase in the provision for credit losses						(293)						(223)
Write-off of uncollectible premium installment receivable amounts						339						161
Ending balance						$	(107)					$	(153)

Voluntary accident and health insurance products are expected to remain in force for an extended period and therefore are primarily classified as long-duration contracts. Traditional life insurance products consist principally of products with fixed and guaranteed premiums and benefits, primarily term and whole life insurance products. Premiums from these products are recognized as revenue when due from policyholders, net of any credit loss allowance for uncollectible premiums. Benefits are reflected in accident and health insurance policy benefits and recognized over the life of the policy in relation to premiums.

Interest-sensitive life contracts, such as universal life, are insurance contracts whose terms are not fixed and guaranteed. The terms that may be changed include premiums paid by the contractholder, interest credited to the contractholder account balance and contract charges assessed against the contractholder account balance. Premiums from these contracts are reported as contractholder fund deposits. Contract charges consist of fees assessed against the contractholder account balance for the cost of insurance (mortality risk), contract administration and surrender of the contract prior to contractually specified dates. These contract charges are recognized as revenue when assessed against the contractholder account balance. Benefit payments in excess of the contractholder account balance are reflected in accident and health insurance policy benefits.

Interest credited to contractholder funds represents interest accrued or paid on interest-sensitive life contracts. Crediting rates for interest-sensitive life contracts are adjusted periodically by the Company to reflect current market conditions subject to contractually guaranteed minimum rates.

Other revenue

Other revenue represents fees collected from policyholders relating to premium installment payments, commissions on sales of non-proprietary products, sales of identity protection services, fee-based services and other revenue transactions. Other revenue is recognized when performance obligations are fulfilled.

Deferred policy acquisition costs

Costs that are related directly to the successful acquisition of new or renewal policies or contracts are deferred and recorded as DAC. 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.

For property and casualty insurance, DAC is amortized into income as premiums are earned, typically over periods of six or twelve months for personal lines policies or generally one to five years for protection plans and other contracts (primarily related to finance and insurance products), and is included in amortization of deferred policy acquisition costs. DAC associated with property and casualty insurance is periodically reviewed for recoverability and adjusted if necessary. Future investment income is considered in determining the recoverability of DAC.

For voluntary accident and health insurance and traditional life, DAC is amortized over the premium paying period of the related policies in proportion to the estimated revenues on such business.

Assumptions used in the amortization of DAC and reserve calculations are established at the time the policy is issued and are generally not revised during the life of the policy. Any deviations from projected business in force resulting from actual policy terminations differing from expected levels and any estimated premium deficiencies may result in a change to the rate of amortization in the period such events occur. Generally, the amortization periods for these policies approximates the estimated lives of the policies. The Company periodically reviews the recoverability of DAC using actual experience and current assumptions. Voluntary accident and health insurance products and traditional life insurance products are reviewed individually. If actual experience and current assumptions are adverse compared to the original assumptions and a premium deficiency is determined to exist, any remaining unamortized DAC balance would be expensed to the extent not recoverable and the establishment of a premium deficiency reserve may be required for any remaining deficiency.

For interest-sensitive life insurance, DAC is amortized in proportion to the incidence of the total present value of gross profits expected to be earned over the estimated lives of the contracts.

Gross profits primarily consist of the following components: contract charges for the cost of insurance less mortality costs and other benefits; investment income and net gains and losses on investments less interest credited; and surrender and other contract charges less maintenance expenses. The principal assumptions for determining the amount of gross profits are mortality, persistency, expenses, investment returns and interest crediting rates to contractholders.

The Company performs quarterly reviews of DAC recoverability for interest-sensitive life using actual experience and current assumptions.

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Notes to Consolidated Financial Statements 2021 Form 10-K

The DAC balance presented includes adjustments to reflect the amount by which the amortization of DAC would increase or decrease if the unrealized capital gains or losses in the respective product investment portfolios were actually realized. The adjustments are recorded net of tax in AOCI. DAC and deferred income taxes determined on unrealized capital gains and losses and reported in AOCI recognize the impact on shareholders’ equity consistently with the amounts that would be recognized in the income statement on net gains and losses on investments and derivatives.

Customers of the Company may exchange one insurance policy for another offered by the Company, or make modifications to an existing life, accident and health or property and casualty contract issued by the Company. These transactions are identified as internal replacements for accounting purposes. Internal replacement transactions determined to result in replacement contracts that are substantially unchanged from the replaced contracts are accounted for as continuations of the replaced contracts. Unamortized DAC related to the replaced contracts continue to be deferred and amortized in connection with the replacement contracts. For traditional life, accident and health and property and casualty insurance policies, any changes to unamortized DAC that result from replacement contracts are treated as prospective revisions and any costs associated with the issuance of replacement contracts are characterized as maintenance costs and expensed as incurred.

The costs assigned to the right to receive future cash flows from certain business purchased from other insurers are also classified as DAC in the Consolidated Statements of Financial Position. The costs capitalized represent the present value of future profits expected to be earned over the lives of the contracts acquired. These costs are amortized as profits emerge over the lives of the acquired business and are periodically evaluated for recoverability. The present value of future profits was $24 million and $23 million as of December 31, 2021 and 2020, respectively. Amortization expense of the present value of future profits was $323 million, $14 million and $6 million in 2021, 2020 and 2019, respectively.

Reinsurance and Indemnification

Reinsurance In the normal course of business, the Company seeks to limit aggregate and single exposure to losses on large risks by purchasing reinsurance. The Company has also used reinsurance to affect the disposition of certain blocks of business. Reinsurance does not extinguish the Company’s primary liability under the policies written. Therefore, in addition to establishing allowances as appropriate after evaluating reinsurers’ activities related to claims settlement practices and commutations, the Company evaluates reinsurer counterparty credit risk and records reinsurance recoverables net of credit loss allowances. The Company assesses counterparty credit risk for individual reinsurers separately when more relevant or on a pooled basis when shared risk characteristics exist. The evaluation considers the credit quality of the reinsurer and the period over which the recoverable

balances are expected to be collected. The Company considers factors including past events, current conditions and reasonable and supportable forecasts in the development of the estimate of credit loss allowances.

Allowances for property and casualty and accident and health reinsurance recoverables are established primarily through risk-based evaluations.

The property and casualty recoverable evaluation considers the credit rating of the reinsurer, the period over which the reinsurance recoverable balances are expected to be recovered and other relevant factors including historical experience of reinsurer failures. Reinsurers in liquidation or in default status are evaluated individually using the Company’s historical liquidation recovery assumptions and any other relevant information available including the most recent public information related to the financial condition or liquidation status of the reinsurer. For accident and health reinsurance recoverables, the Company uses a probability of default and loss given default model developed independently of the Company to estimate current expected credit losses. The accident and health reinsurance recoverable evaluation utilizes factors including historical industry factors based on the probability of liquidation, and incorporates current loss given default factors reflective of the industry.

The Company monitors the credit ratings of reinsurer counterparties and evaluates the circumstances surrounding credit rating changes as inputs into its credit loss assessments. Uncollectible reinsurance recoverable balances are written off against the allowances when there is no reasonable expectation of recovery.

The changes in the allowances are reported in property and casualty insurance claims and claims expense and accident and health insurance policy benefits.

Indemnification The Company also participates in various indemnification mechanisms, including industry pools and facilities, which are reimbursement mechanisms that assess participating insurers for expected insured claims, reimburse participating insurers for qualifying paid claims and permit participating insurers to recoup amounts assessed directly from insureds. Indemnification recoverables are backed by the financial resources of the property and casualty insurance company market participants.

The amounts reported as indemnification recoverables include amounts paid and due from indemnitors as well as estimates of amounts expected to be recovered from indemnitors on insurance liabilities that have been incurred but not yet paid. The design and function of these indemnification programs does not result in the retention of insurance or reinsurance risk by the indemnitor. Based on the Company’s evaluation of these programs on an individual basis, the establishment of credit loss allowances is not warranted at this time. The Company has not experienced any historical credit losses related to its indemnification programs. The Company

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2021 Form 10-K Notes to Consolidated Financial Statements

continues to monitor these programs to determine whether any changes from historical experience have emerged or are expected to emerge or whether there have been any changes in the design or administration of the programs that would require establishment of credit loss allowances.

Goodwill

Goodwill represents the excess of amounts paid for acquiring businesses over the fair value of the net assets acquired, less any impairment of goodwill recognized. The Company’s goodwill reporting units are equivalent to its reportable segments, Allstate Protection, Protection Services, and Allstate Health and Benefits to which goodwill has been assigned.

Goodwill by reporting unit
						December 31,
($ in millions)						2021						2020
Allstate Protection						$	1,563					$	810
Protection Services						1,494						1,463
Allstate Health and Benefits						445						96
Total						$	3,502					$	2,369

Goodwill is recognized when acquired and allocated to reporting units based on which unit is expected to benefit from the synergies of the business combination. Goodwill is not amortized but is tested for impairment at least annually. The Company performs its annual goodwill impairment testing during the fourth quarter of each year based upon data as of the close of the third quarter. Goodwill impairment is measured and recognized as the amount by which a reporting unit’s carrying value, including goodwill, exceeds its fair value, not to exceed the carrying amount of goodwill allocated to the reporting unit. The Company also reviews goodwill for impairment whenever events or changes in circumstances, such as deteriorating or adverse market conditions, indicate that it is more likely than not that the carrying amount of the reporting unit including goodwill may exceed the fair value of the reporting unit. The goodwill impairment analysis is performed at the reporting unit level.

As of December 31, 2021 and 2020, the fair value of the Company’s goodwill reporting units exceeded their carrying values.

As disclosed in Note 3, the Company completed the sales of Allstate Life Insurance Company (“ALIC”) and certain affiliates and Allstate Life Insurance Company of New York (“ALNY”) involving business in both the Allstate Life and Allstate Annuities segments. As a result of these transactions, the Company’s goodwill was reduced by $175 million in 2021.

Intangible assets

Intangible assets (reported in other assets) consist of capitalized costs primarily related to acquired customer relationships, trade names and licenses, technology and other assets. The estimated useful lives of customer relationships, technology and other intangible assets are generally 10 years, 5 years and 7 years, respectively. Intangible assets are carried at cost less accumulated amortization. Amortization expense is calculated using an accelerated amortization method. Amortization expense on intangible assets was $376 million, $118 million and $126 million in 2021, 2020 and 2019, respectively.

Amortization expense of intangible assets for the next five years and thereafter
($ in millions)
2022												$	342
2023												291
2024												226
2025												179
2026												92
Thereafter												151
Total amortization												$	1,281

Accumulated amortization of intangible assets was $1.13 billion and $751 million as of December 31, 2021 and 2020, respectively. Trade names and licenses are considered to have an indefinite useful life and are reviewed for impairment at least annually or more frequent if circumstances arise that indicate an impairment may have occurred. An impairment is recognized if the carrying amount of the asset exceeds its estimated fair value.

Intangible assets by type
						December 31,
($ in millions)						2021						2020
Customers relationships						$	909					$	322
Trade names and licenses						206						37
Technology and other						305						94
Total						$	1,420					$	453

During second quarter 2019, the Company made the decision to phase-out the use of the SquareTrade trade name in the United States and sell consumer protection plans under the Allstate Protection Plans name. The SquareTrade trade name will continue to be used outside of the United States. The change required an impairment evaluation of the indefinite-lived intangible asset recognized in the Protection Services segment for SquareTrade’s trade name recorded when SquareTrade was acquired in 2017.

During fourth quarter 2019, the Company made the decision to integrate Esurance into the Allstate brand as part of Transformative Growth. This required an impairment evaluation of the indefinite-lived intangible asset recognized in the Allstate Protection segment for the Esurance trade name recorded when Esurance was acquired in 2011.

As a result of these actions, the Company recognized total impairment charges of $106 million pre-tax during 2019.

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Notes to Consolidated Financial Statements 2021 Form 10-K

Property and equipment

Property and equipment is carried at cost less accumulated depreciation. Included in property and equipment are capitalized costs related to computer software licenses and software developed for internal use. These costs generally consist of certain external payroll and payroll related costs. Property and equipment depreciation is calculated using the straight-line method over the estimated useful lives of the assets, generally 3 to 10 years for equipment and 40 years for real property. Depreciation expense is reported in operating costs and expenses. Accumulated depreciation on property and equipment was $2.44 billion and $2.81 billion as of December 31, 2021 and 2020, respectively. Depreciation expense on property and equipment was $411 million, $353 million and $326 million in 2021, 2020 and 2019, respectively. The Company reviews its property and equipment for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Income taxes

Income taxes are accounted for using the asset and liability method under which deferred tax assets and liabilities are recognized for temporary differences between the financial reporting and tax bases of assets and liabilities at the enacted tax rates. The principal assets and liabilities giving rise to such differences are DAC, unearned premiums, investments (including unrealized capital gains and losses), intangible assets and insurance reserves. A deferred tax asset valuation allowance is established when it is more likely than not such assets will not be realized. The Company recognizes interest expense related to income tax matters in income tax expense and penalties in other expense.

Reserve for property and casualty insurance claims and claims expense

The reserve for property and casualty insurance claims and claims expense is the estimate of amounts necessary to settle all reported and unreported incurred claims for the ultimate cost of insured property and casualty losses, based upon the facts of each case and the Company’s experience with similar cases. Estimated amounts of salvage and subrogation are deducted from the reserve for claims and claims expense. The establishment of appropriate reserves, including reserves for catastrophe losses, is an inherently uncertain and complex process. Reserve estimates are primarily derived using an actuarial estimation process in which historical loss patterns are applied to actual paid losses and reported losses (paid losses plus individual case reserves established by claim adjusters) for an accident or report year to create an estimate of how losses are likely to develop over time. Development factors are calculated quarterly and periodically throughout the year for data elements such as claims reported and settled, paid losses, and paid losses combined with case reserves. The historical development patterns for these data elements are used as the assumptions to calculate reserve estimates, including the reserves for reported and

unreported claims. Reserve estimates are regularly reviewed and updated, using the most current information available. Any resulting reestimates are reflected in current results of operations.

Reserve for future policy benefits

The reserve for future policy benefits payable under insurance policies, including voluntary accident and health insurance and traditional life insurance products, is computed on the basis of long-term actuarial assumptions of future investment yields, mortality, morbidity, policy terminations and expenses. These assumptions include provisions for adverse deviation and generally vary by characteristics such as type of coverage, year of issue and policy duration. The assumptions are established at the time the policy is issued and are generally not changed during the life of the policy. The Company periodically reviews the adequacy of reserves using actual experience and current assumptions. If actual experience and current assumptions are adverse compared to the original assumptions and a premium deficiency is determined to exist, any remaining unamortized DAC balance would be expensed to the extent not recoverable and the establishment of a premium deficiency reserve may be required for any remaining deficiency. Voluntary accident and health insurance and traditional life insurance products are reviewed individually. The Company also reviews these policies for circumstances where projected profits would be recognized in early years followed by projected losses in later years. If this circumstance exists, the Company will accrue a liability, during the period of profits, to offset the losses at such time as the future losses are expected to commence using a method updated prospectively over time.

Accident and health short duration contracts The reserve for future policy benefits includes unpaid losses and loss adjustment expense (“LAE”) reserves for individual and certain voluntary accident and health short-duration contracts and is an estimate of the Company’s liability from incurred claims at the end of the reporting period. The unpaid losses and LAE reserves are the result of an ongoing analysis of recent loss development trends and emerging historical experience. Original estimates are increased or decreased as additional information becomes known regarding individual claims. In setting its reserves, the Company reviews its loss data to estimate expected loss development. Management believes that its use of standard actuarial methodology applied to its analyses of its historical experience provides a reasonable estimate of future losses. However, actual future losses may differ from the Company’s estimate, and may be affected by future events beyond the control of management, including inflation, which may favorably or unfavorably impact the ultimate settlement of the Company’s losses and LAE, as well as changes in the law and judicial interpretations.

The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and LAE. In addition to inflation, the average severity of claims is affected by a number of factors that may vary by types and features of policies written. Future average severities are projected from historical trends,

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2021 Form 10-K Notes to Consolidated Financial Statements

adjusted for implemented changes in underwriting standards and policy provisions, as well as general economic trends. These estimated trends are monitored and revised as necessary based on actual development.

Unpaid losses include a provision for incurred-but-not-reported (“IBNR”) reserve estimates representing claims that have occurred but have not yet been reported, some of which are not yet known to the insured, as well as a provision for future development on reported claims. IBNR reserves are generally calculated by first projecting the ultimate cost of all claims that have occurred and then subtracting reported losses and loss expenses. Reported losses include cumulative paid losses and loss expenses plus case reserves.

The Company’s accident and health claims are counted by claim number assigned to each claimant per illness, injury or death, regardless of number of services rendered for each incident. Claims closed without payment are not included in the cumulative number of reported accident and health claims.

Contractholder funds

Contractholder funds represent interest-bearing liabilities arising from the sale of interest-sensitive life insurance contracts. Contractholder funds primarily comprise cumulative deposits received and interest credited to the contractholder less cumulative contract benefits, surrenders, withdrawals and contract charges for mortality or administrative expenses. Contractholder funds also include reserves for secondary guarantees on interest-sensitive life insurance.

Pension and other postretirement remeasurement gains and losses

Pension and other postretirement gains and losses represent the remeasurement of projected benefit obligation and plan assets, which are immediately recognized in earnings and are referred to as pension and other postretirement remeasurement gains and losses on the Consolidated Statements of Operations. The Company’s policy is to remeasure its pension and postretirement plans on a quarterly basis.

Differences between expected and actual returns and changes in assumptions affect our pension and other postretirement obligations, plan assets and expenses.

The primary factors contributing to pension and postretirement remeasurement gains and losses are:

• Changes in the discount rate used to value pension and postretirement obligations as of the measurement date
• Differences between the expected and the actual return on plan assets
• Changes in demographic assumptions, including mortality and participant experience

Pension and other postretirement service cost, interest cost, expected return on plan assets and amortization of prior service credits are allocated to the Company’s reportable segments. The pension and

other postretirement remeasurement gains and losses are reported in the Corporate and Other segment.

Legal contingencies

The Company reviews its lawsuits, regulatory inquiries, and other legal proceedings on an ongoing basis. The Company establishes accruals for such matters at management’s best estimate when the Company assesses that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company’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.

Long-term debt

Long-term debt includes senior notes, senior debentures, subordinated debentures and junior subordinated debentures issued by the Corporation. Unamortized debt issuance costs and fair value adjustments are reported in long-term debt and are amortized over the expected period the debt will remain outstanding.

Equity incentive plans

The Company has equity incentive plans under which it grants nonqualified stock options, restricted stock units and performance stock awards (“equity awards”) to certain employees and directors of the Company. The Company measures the fair value of equity awards at the grant date and recognizes the expense over the shorter of the period in which the requisite service is rendered or retirement eligibility is attained. The expense for performance stock awards with no market condition is adjusted each period to reflect the performance factor most likely to be achieved at the end of the performance period. The expense for performance stock awards with a market condition is based on the fair value of the awards at the grant date which incorporates the probability of achieving the market condition. In the event the market condition is not met, any previously recognized expense is not reversed. The Company uses a binomial lattice model to determine the fair value of employee stock options. The Company uses a Monte Carlo simulation model to determine the fair value of performance stock awards with market condition.

Measurement of credit losses

The Company carries an allowance for expected credit losses for all financial assets measured at amortized cost on the Consolidated Statements of Financial Position. The Company considers past events, current conditions, and reasonable and supportable forecasts in estimating an allowance for credit losses. The Company also carries a credit loss allowance for fixed income securities where applicable and, when amortized cost is reported, it is net of credit loss allowances. For additional information, refer to the Investments, Reinsurance, Indemnification or Recognition of premium revenues and contract charges, topics of this section.

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Notes to Consolidated Financial Statements 2021 Form 10-K

The Company also estimates a credit loss allowance for commitments to fund mortgage loans and bank loans unless they are unconditionally

cancellable by the Company. The related allowance is reported in other liabilities and accrued expenses.

Allowance for credit losses
						As of December 31,
($ in millions)						2021						2020
Fixed income securities						$	6					$	2
Mortgage loans (1)						6						67
Bank loans (1)						61						67
Investments						73						136
Premium installment receivables						107						153
Reinsurance recoverables						74						60
Other assets						26						17
Assets						280						366
Commitments to fund mortgage loans and bank loans						—						1
Liabilities						—						1
Total						$	280					$	367

(1)Includes credit loss allowance for investments that are classified as held for sale as of December 31, 2020.

Leases

The Company has certain operating leases for office facilities, computer and office equipment, and vehicles. The Company’s leases have remaining lease terms of generally 1 year to 9 years, some of which include options to extend the leases for up to 20 years, and some of which include options to terminate the leases within 32 days.

The Company determines if an arrangement is a lease at inception. Leases with an initial term less than one year are not recorded on the balance sheet and the lease costs for these leases are recorded as an expense on a straight-line basis over the lease term. Operating leases with terms greater than one year result in a lease liability recorded in other liabilities with a corresponding right-of-use (“ROU”) asset recorded in other assets. As of December 31, 2021 and 2020, the Company had $465 million and $511 million in lease liabilities and $314 million and $393 million in ROU assets, respectively.

Operating lease liabilities are recognized at the commencement date based on the present value of future minimum lease payments over the lease term. ROU assets are recognized based on the corresponding lease liabilities adjusted for qualifying initial direct costs, prepaid or accrued lease payments and unamortized lease incentives. As most of the Company’s leases do not disclose the implicit interest rate, the Company uses collateralized incremental borrowing rates based on information available at lease commencement when determining the present value of future lease payments. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease. Lease terms may include options to extend or terminate the lease which are incorporated into the Company’s measurements when it is reasonably certain that the Company will exercise the option.

Operating lease costs are recognized on a straight-line basis over the lease term and include interest expense on the lease liability and amortization

of the ROU asset. Variable lease costs are expensed as incurred and include maintenance costs and real estate taxes. Lease costs are reported in operating costs and expenses and totaled $162 million and $166 million, including $30 million and $30 million of variable lease costs in 2021 and 2020, respectively.

Other information related to operating leases
						December 31,
						2021						2020
Weighted average remaining lease term (years)						5						5
Weighted average discount rate						3.09		%				3.10		%

Maturity of lease liabilities
($ in millions)						Operating leases
2022						$	95
2023						125
2024						101
2025						79
2026						48
Thereafter						56
Total lease payments						$	504
Less: interest						(39)
Present value of lease liabilities						$	465

Consolidation of variable interest entities (“VIEs”)

A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not participate in the gains and losses of the entity. The Company consolidates VIEs in which the Company is deemed the primary beneficiary. The primary beneficiary is the entity that has both (1) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE and (2) the power to direct the activities of the VIE that most significantly affect that entity’s economic performance.

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2021 Form 10-K Notes to Consolidated Financial Statements

Discontinued Operations and Held for Sale

A business is classified as held for sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value and certain other criteria are met. A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. When the carrying amount of the business exceeds its estimated fair value less cost to sell, a loss is recognized and updated each reporting period as appropriate.

The results of operations of business classified as held for sale are reported as discontinued operations if the disposal represents a strategic shift that will have a major effect on the entity’s operations and financial results. The disposal of a reportable segment generally qualifies for discontinued operations presentation.

When a business is identified for discontinued operations reporting:

• Results for prior periods are retrospectively reclassified as discontinued operations

• Results of operations are reported in a single line, net of tax, in the Consolidated Statements of Operations

• Assets and liabilities are reported as held for sale in the Consolidated Statements of Financial Position in the period in which the business is classified as held for sale

Additional details by major classification of operating results and financial position are included in Note 3.

Foreign currency translation

The local currency of the Company’s foreign subsidiaries is deemed to be the functional currency of the country in which these subsidiaries operate. The financial statements of the Company’s foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect at the end of a reporting period for assets and liabilities and at average exchange rates during the period for results of operations.

The unrealized gains and losses from the translation of the net assets are recorded as unrealized foreign currency translation adjustments and included in AOCI. Changes in unrealized foreign currency translation adjustments are included in OCI. Gains and losses from foreign currency transactions are reported in operating costs and expenses and have not been material.

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. The effect of dilutive potential common shares does not include 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.

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Notes to Consolidated Financial Statements 2021 Form 10-K

Computation of basic and diluted earnings per common share
						For the years ended December 31,
($ in millions, except per share data)						2021						2020						2019
Numerator:
Net income from continuing operations						$	5,159					$	5,429					$	4,327
Less: Net loss attributable to noncontrolling interest						(33)						—						—
Net income from continuing operations attributable to Allstate						5,192						5,429						4,327
Less: Preferred stock dividends						114						115						169
Net income from continuing operations applicable to common shareholders						5,078						5,314						4,158
(Loss) income from discontinued operations, net of tax						(3,593)						147						520
Net income applicable to common shareholders						$	1,485					$	5,461					$	4,678
Denominator:
Weighted average common shares outstanding						294.8						311.6						328.2
Effect of dilutive potential common shares:
Stock options						2.7						2.2						3.2
Restricted stock units (non-participating) and performance stock awards						1.6						1.7						2.1
Weighted average common and dilutive potential common shares outstanding						299.1						315.5						333.5
Earnings per share applicable to common shareholders
Basic
Continuing operations						$	17.23					$	17.06					$	12.67
Discontinued operations						(12.19)						0.47						1.58
Total						$	5.04					$	17.53					$	14.25
Diluted
Continuing operations						$	16.98					$	16.84					$	12.47
Discontinued operations						(12.02)						0.47						1.56
Total						$	4.96					$	17.31					$	14.03
Anti-dilutive options excluded from diluted earnings per common share						1.3						2.9						3.7

Adopted accounting standards

Simplifications to the Accounting for Income Taxes Effective January 1, 2021, the Company adopted new Financial Accounting Standards Board (“FASB”) guidance which simplified the accounting for income taxes by eliminating certain exceptions and clarifying certain guidance. The adoption had an immaterial impact on the Company’s results of operations and financial position.

Changes to the Disclosure Requirements for Defined Benefit Plans Effective January 1, 2021, the Company adopted new FASB guidance to modify certain annual disclosure requirements for defined benefit plans. New disclosures include explanations for significant gains and losses related to changes in the benefit obligation during the reporting period, as well as the weighted-average interest crediting rate assumptions used to determine the benefit obligation and net benefit cost for cash balance plans and other plans with interest crediting rates. Disclosures to be eliminated include amounts expected to be reclassified out of AOCI and into the income statement in the coming year and the anticipated impact of a one-percentage point change in the assumed health care cost trend rate on service and interest cost and on the accumulated benefit obligation. The impacts of adoption are to the Company’s annual disclosures only.

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2021 Form 10-K Notes to Consolidated Financial Statements

Pending accounting standard

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

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

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

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

The Company is evaluating the anticipated impacts of applying the new guidance to both retained income and AOCI and does not anticipate the financial statement impact of adopting the new guidance to be material to the Company’s results of operations or financial position due to the dispositions of ALIC, ALNY and certain affiliates.

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Notes to Consolidated Financial Statements 2021 Form 10-K

Note 3			Acquisitions and Dispositions

Acquisitions

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

National General provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed, health and other niche insurance products. This acquisition increased the Company’s market share in personal property-liability and enhance its independent agent distribution platform.

Assets and liabilities recognized in the National General acquisition (1)
($ in millions)												January 4, 2021
Assets
Investments												$	4,962
Cash												400
Premiums and other receivables, net												1,539
Deferred acquisition costs (value of business acquired)												317
Reinsurance recoverables, net												1,212
Intangible assets												1,199
Other assets												734
Goodwill (2)												1,038
Total assets												11,401
Liabilities
Reserve for property and casualty insurance claims and claims expense												2,765
Reserve for future policy benefits												186
Unearned premiums												2,245
Reinsurance payable												363
Debt (3)												593
Deferred tax liabilities												162
Other liabilities												776
Total liabilities												$	7,090

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

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

(3)Subsequent to the acquisition, the Company repaid $100 million of 7.625% Subordinated Notes and $72 million of Subordinated Debentures on February 3, 2021 and March 15, 2021, respectively. As of December 31, 2021, the Company had principal balance remaining of $350 million 6.750% Senior Notes due 2024, with a fair value adjustment of $45 million.

Intangible assets by type
($ in millions)						January 4, 2021
Distribution and customer relationships						$	795
Trade names						102
Licenses						97
Technology						205
Total						$	1,199

Intangible assets (reported in other assets in the Consolidated Statements of Financial Position) consist of capitalized costs, primarily of the estimated fair value of distribution and customer relationships, trade names, licenses and technology assets. The estimated useful lives of these assets generally range from 3 to 10 years.

The estimated fair value of distribution and customer relationship intangible assets was determined using an income approach that considered cash flows and profits expected to be generated by the

acquired relationships, a weighted-average cost of capital discount rate reflecting the relative risk of achieving the anticipated cash flows, profits, the time value of money, and other relevant inputs. Technology and trade names were valued using estimated useful lives and market licensing rates discounted at a weighted-average cost of capital. Licenses are primarily insurance licenses which were valued using the median value of market transactions executed over an extended observation period.

Licenses are considered to have an indefinite useful life and are reviewed for impairment at least annually or more frequently if circumstances arise that indicate an impairment may have occurred. An impairment is recognized if the carrying amount of the asset exceeds its estimated fair value.

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Intangible assets are carried at cost less accumulated amortization. Amortization expense is primarily calculated using accelerated amortization methods. Amortization expense on intangible assets was $251 million in 2021.

Estimated amortization expense of National General intangible assets for the next five years and thereafter
($ in millions)
2022												$	218
2023												185
2024												135
2025												103
2026												70
Thereafter												140
Total amortization												$	851

Value of business acquired (reported in DAC in the Consolidated Statements of Financial Position) recognized in connection with the acquisition of National General represents the value of future profits expected to be earned over the lives of the contracts acquired determined using a weighted-average cost of capital discount and other relevant assumptions. These costs are amortized over the policy term of the contracts in force at the acquisition date, generally over six or twelve months. The value of business acquired asset recognized in connection with the National General acquisition totaled $317 million, all of which was expensed in 2021. The most significant portion relates to insurance contracts in the Allstate Protection segment.

Other fair value adjustments included an increase in reserves of $62 million, a $9 million reduction to investments that were not held at fair value, and a net increase in current and deferred tax liabilities of $153 million.

Preferred stock On February 2, 2021, subsequent to the acquisition, the Company redeemed all outstanding shares of 7.50% Non-Cumulative Preferred Stock, Series A, par value $0.01 per share, all outstanding Depositary shares, representing 1/40th of a Share of 7.50% Non-Cumulative Preferred Stock, Series B, and the underlying shares of 7.50% Non-Cumulative Preferred Stock, Series B, par value $0.01 per share, and all outstanding shares of Fixed/Floating Rate Non-Cumulative Convertible Preferred Stock, Series D, par value $0.01 per share for a total redemption payment of $250 million.

On July 15, 2021, the Company redeemed all outstanding Depositary shares, representing 1/40th of a share of National General’s 7.50% Noncumulative Preferred Stock, Series C, and the underlying shares of 7.50% Noncumulative Preferred Stock, Series C, par value $0.01 per share for a total redemption payment of $200 million.

Transactions costs (reported in operating costs and expenses in the Consolidated Statements of Operations) of $22 million related to the acquisition were expensed as incurred in the Corporate and Other segment.

SafeAuto On June 1, 2021, the Company announced an agreement to acquire Safe Auto Insurance Group, Inc. (“SafeAuto”), a non-standard auto insurance carrier focused on providing state-minimum private-passenger auto insurance with coverage options in 28 states. On October 1, 2021, the Company completed the acquisition of SafeAuto for $262 million in cash. Starting in the fourth quarter of 2021, the Allstate Protection segment includes SafeAuto.

In connection with the acquisition, the Company recorded goodwill of $79 million, intangible assets of $30 million and value of business acquired of $7 million. The intangible assets include $24 million and $6 million related to acquired customer relationships and licenses, respectively.

On December 17, 2021, subsequent to the acquisition, the Company redeemed the outstanding principal of SafeAuto’s trust preferred securities for $13 million.

Dispositions

Life and annuity business On January 26, 2021, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Everlake US Holdings Company (formerly Antelope US Holdings Company), an affiliate of an investment fund associated with The Blackstone Group Inc. to sell ALIC and certain affiliates.

On March 29, 2021, the Company entered into a Stock Purchase Agreement with Wilton Reassurance Company to sell ALNY.

On October 1, 2021, the Company closed the sale of ALNY to Wilton Reassurance Company for $400 million. On November 1, 2021, the Company closed the sale of ALIC and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including a pre-close dividend of $1.25 billion paid by ALIC.

In 2021, the loss on disposition was $4.09 billion, after-tax, and reflects purchase price adjustments associated with certain pre-close transactions specified in the stock purchase agreements, changes in statutory capital and surplus prior to the closing date and the closing date equity of the sold entities determined under GAAP, excluding AOCI derecognized related to the dispositions.

Beginning in the first quarter of 2021, the assets and liabilities of the business were reclassified as held for sale and results are presented as discontinued operations. This change was applied on a retrospective basis.

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Financial results from discontinued operations
						For the years ended December 31,
($ in millions)						2021						2020						2019
Revenues
Life premiums and contract charges						$	1,109					$	1,350					$	1,356
Net investment income						1,336						1,262						1,431
Net gains (losses) on investments and derivatives						195						269						347
Total revenues						2,640						2,881						3,134
Costs and expenses
Life contract benefits						1,315						1,726						1,438
Interest credited to contractholder funds						414						605						606
Amortization of DAC						87						153						180
Operating costs and expenses						163						238						268
Restructuring and related charges						31						7						2
Total costs and expenses						2,010						2,729						2,494
Amortization of deferred gain on reinsurance						4						4						6
Income (loss) from discontinued operations before income tax expense						634						156						646
Income tax expense						136						9						126
Income from discontinued operations, net of tax						498						147						520
Loss on disposition of operations						(4,315)						—						—
Income tax benefit						(224)						—						—
Loss on disposition of operations, net of tax						(4,091)						—						—
(Loss) income from discontinued operations, net of tax						$	(3,593)					$	147					$	520

Major classes of assets and liabilities disposed in transactions
($ in millions)						Closing (1)												December 31, 2020
Assets
Investments
Fixed income securities, at fair value						$	26,425											$	23,789
Equity securities, at fair value						11												1,542
Mortgage loans, net						2,662												3,329
Limited partnership interests						1,624												3,046
Short-term, at fair value						643												993
Other investments, net						690												1,998
Total investments						$	32,055											$	34,697
Cash						1,081												66
Deferred policy acquisitions costs						996												925
Reinsurance recoverables, net						1,979												2,005
Accrued investment income						240												229
Other assets						536												865
Separate accounts						3,465												3,344
Total assets						$	40,352											$	42,131
Liabilities
Reserve for future policy benefits						$	11,573											$	11,740
Contractholder funds						15,880												16,356
Deferred income taxes						834												973
Other liabilities and accrued expenses						452												912
Separate accounts						3,465												3,344
Total liabilities						$	32,204											$	33,325

(1)The Company closed the sales of Allstate Life Insurance Company of New York and Allstate Life Insurance Company and certain affiliates on October 1, 2021 and November 1, 2021, respectively.

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Cash flows from discontinued operations
						For the years ended December 31,
($ in millions)						2021						2020						2019
Net cash provided by operating activities from discontinued operations						$	634					$	311					$	346
Net cash provided by investing activities from discontinued operations						984						330						448

Note 4			Reportable Segments

The Company’s chief operating decision maker reviews financial performance and makes decisions about the allocation of resources for the five reportable segments. These segments are described below and align with the Company’s key product and service offerings.

Allstate Protection principally offers private passenger auto and homeowners insurance in the United States and Canada, with earned premiums accounting for 80.0% of Allstate’s 2021 consolidated revenues. Allstate Protection primarily operates in the U.S. (all 50 states and the District of Columbia (“D.C.”)) and Canada. For 2021, the top U.S. geographic locations for premiums earned by the Allstate Protection segment were Texas, California, New York and Florida. No other jurisdiction accounted for more than 5% of premium earned for Allstate Protection. Revenues from external customers generated outside the United States were $1.86 billion, $1.57 billion and $1.37 billion in 2021, 2020 and 2019, respectively.

Run-off Property-Liability includes property and casualty insurance coverage that primarily relates to policies written during the 1960s through the mid-1980s. Our exposure to asbestos, environmental and other run-off lines claims arises principally from direct excess commercial insurance, assumed reinsurance coverage, direct primary commercial insurance and other businesses in run-off.

Protection Services comprise Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside, Arity and Allstate Identity Protection. Protection Services offer consumer product protection plans, finance and insurance products (including vehicle service contracts, guaranteed asset protection waivers, road hazard tire and wheel and paintless dent repair protection), roadside assistance, device and mobile data collection services and analytic solutions using automotive telematics information and identity protection. Protection Services primarily operate in the U.S. and Canada, with Allstate Protection Plans also offering services in Europe, Australia and Asia. Revenues from external customers generated outside the United States relate to consumer product protection plans sold primarily in the European Union and were $232 million, $188 million and $95 million in 2021, 2020 and 2019, respectively.

Allstate Health and Benefits offers employer voluntary benefits, group health and individual health products, including life, accident, critical illness, hospital, short-term disability and other health products. Allstate Health and Benefits primarily operates in the U.S. (all 50 states and D.C.) and Canada. For 2021, the top geographic locations for statutory direct accident and health insurance premiums were Florida, Texas, Georgia, Ohio and North Carolina. No other jurisdiction accounted for more than 5% of statutory direct accident and health insurance premiums. Revenues from external customers generated outside the United States relate to voluntary accident and health insurance sold in Canada and were not material.

Corporate and Other comprises holding company activities and certain non-insurance operations, including expenses associated with strategic initiatives.

National General results are included in the following segments:

• Property and casualty - Allstate Protection

• Accident and health - Allstate Health and Benefits

• Technology solutions - Protection Services

Allstate Protection and Run-off Property Liability segments comprise Property-Liability. The Company does not allocate investment income, net gains and losses on investments and derivatives, or assets to the Allstate Protection and Run-off Property Liability segments. Management reviews assets at the Property-Liability, Protection Services, Allstate Health and Benefits, and Corporate and Other levels for decision-making purposes.

The accounting policies of the reportable segments are the same as those described in Note 2. The effects of intersegment transactions are eliminated in the consolidated results. For segment results, services provided by Protection Services to Allstate Protection are not eliminated as management considers those transactions in assessing the results of the respective segments.

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Measuring segment profit or loss

The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Run-off Property-Liability 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”), Shelter-in-Place Payback expense, amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges as determined using GAAP.

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

•			Net gains and losses on investments and derivatives except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with net gains and losses on investments and derivatives but included in adjusted net income
•			Pension and other postretirement remeasurement gains and losses
•			Business combination expenses and the amortization or impairment of purchased intangibles
•			Income or loss from discontinued operations
•			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.

Reportable segments financial performance
						For the years ended December 31,
($ in millions)						2021						2020						2019
Underwriting income (loss) by segment
Allstate Protection						$	1,785					$	4,569					$	2,921
Run-off Property-Liability						(120)						(144)						(108)
Total Property-Liability						1,665						4,425						2,813
Adjusted net income (loss) by segment, after-tax
Protection Services						179						153						38
Allstate Health and Benefits						208						96						115
Corporate and Other						(433)						(428)						(438)
Reconciling items
Property-Liability net investment income						3,118						1,421						1,533
Net gains (losses) on investments and derivatives						1,084						1,087						1,538
Pension and other postretirement remeasurement gains (losses)						644						51						(114)
Curtailment gains (losses)						—						8						—
Business combination expenses and amortization of purchased intangibles (1)						(157)						(106)						(122)
Business combination fair value adjustment						6						—						—
Impairment of purchased intangibles (1)						—						—						(55)
Income tax (expense) benefit on reconciling items						(1,270)						(1,393)						(1,150)
Total reconciling items						3,425						1,068						1,630
(Loss) income from discontinued operations						(3,612)						157						646
Income tax benefit (expense) from discontinued operations						19						(10)						(126)
Total from discontinued operations						$	(3,593)					$	147					$	520
Less: Net loss attributable to noncontrolling interest (2)						(34)						—						—
Net income applicable to common shareholders						$	1,485					$	5,461					$	4,678

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

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

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Reportable segments revenue information
						For the years ended December 31,
($ in millions)						2021						2020						2019
Property-Liability
Insurance premiums
Auto						$	27,623					$	24,640					$	24,188
Homeowners						9,927						8,254						7,912
Other personal lines						2,077						1,919						1,861
Commercial lines						827						767						882
Allstate Protection						40,454						35,580						34,843
Run-off Property-Liability						—						—						—
Total Property-Liability insurance premiums						40,454						35,580						34,843
Other revenue						1,437						857						866
Net investment income						3,118						1,421						1,533
Net gains (losses) on investments and derivatives						1,021						990						1,470
Total Property-Liability						46,030						38,848						38,712
Protection Services
Protection Plans						1,132						909						633
Roadside assistance						192						188						238
Finance and insurance products						440						396						362
Intersegment premiums and service fees (1)						175						147						154
Other revenue						354						208						188
Net investment income						43						44						42
Net gains (losses) on investments and derivatives						25						30						32
Total Protection Services						2,361						1,922						1,649
Allstate Health and Benefits
Employer voluntary benefits						1,031						1,094						1,145
Group health						350						—						—
Individual health						440						—						—
Other revenue						359						—						—
Net investment income						74						78						83
Net gains (losses) on investments and derivatives						7						8						12
Total Allstate Health and Benefits						2,261						1,180						1,240
Corporate and Other
Other revenue						22						—						—
Net investment income						58						47						70
Net gains (losses) on investments and derivatives						31						59						24
Total Corporate and Other						111						106						94
Intersegment eliminations (1)						(175)						(147)						(154)
Consolidated revenues						$	50,588					$	41,909					$	41,541

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

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Additional significant financial performance data
						For the years ended December 31,
($ in millions)						2021						2020						2019
Amortization of DAC
Property-Liability						$	5,313					$	4,642					$	4,649
Protection Services						795						658						543
Allstate Health and Benefits						144						177						161
Consolidated						$	6,252					$	5,477					$	5,353
Income tax expense (benefit)
Property-Liability						$	1,151					$	1,382					$	1,196
Protection Services						39						26						(18)
Allstate Health and Benefits						50						28						35
Corporate and Other						49						(63)						(97)
Consolidated						$	1,289					$	1,373					$	1,116

Interest expense is primarily incurred in the Corporate and Other segment. Capital expenditures for long-lived assets are generally made in Property-Liability as the Company does not allocate assets to the Allstate Protection and Run-off Property-Liability segments. A portion of these long-lived assets are used by entities included in the Protection Services, Allstate Health and Benefits and Corporate and Other segments and, accordingly, are charged to expenses in proportion to their use.

Reportable segment total assets, investments and deferred policy acquisition costs
						As of December 31,
($ in millions)						2021						2020
Assets
Property-Liability						$	84,846					$	69,171
Protection Services						6,909						6,177
Allstate Health and Benefits						4,015						2,905
Corporate and Other						3,670						5,603
Assets held for sale						—						42,131
Consolidated						$	99,440					$	125,987
Investments (1)
Property-Liability						$	57,258					$	50,134
Protection Services						1,890						1,822
Allstate Health and Benefits						2,191						2,012
Corporate and Other						3,362						5,572
Consolidated						$	64,701					$	59,540
Deferred policy acquisition costs
Property-Liability						$	1,951					$	1,608
Protection Services						2,294						1,696
Allstate Health and Benefits						477						470
Consolidated						$	4,722					$	3,774

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

Note 5			Investments

Portfolio composition
						As of December 31,
($ in millions)						2021						2020
Fixed income securities, at fair value						$	42,136					$	42,565
Equity securities, at fair value						7,061						3,168
Mortgage loans, net						821						746
Limited partnership interests						8,018						4,563
Short-term investments, at fair value						4,009						6,807
Other investments, net						2,656						1,691
Total						$	64,701					$	59,540

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2021 Form 10-K Notes to Consolidated Financial Statements

Amortized cost, gross unrealized gains (losses) and fair value for fixed income securities
						Amortized cost, net						Gross unrealized												Fair value
($ in millions)									Gains						Losses
December 31, 2021
U.S. government and agencies						$	6,287					$	12					$	(26)					$	6,273
Municipal						6,130						279						(16)						6,393
Corporate						26,834						688						(192)						27,330
Foreign government						982						9						(6)						985
ABS						1,143						14						(2)						1,155
Total fixed income securities						$	41,376					$	1,002					$	(242)					$	42,136
December 31, 2020
U.S. government and agencies						$	2,058					$	50					$	(1)					$	2,107
Municipal						7,100						480						(2)						7,578
Corporate						29,057						1,986						(26)						31,017
Foreign government						921						37						—						958
ABS						898						10						(3)						905
Total fixed income securities						$	40,034					$	2,563					$	(32)					$	42,565

Scheduled maturities for fixed income securities
						As of December 31, 2021
($ in millions)						Amortized cost, net						Fair value
Due in one year or less						$	1,105					$	1,111
Due after one year through five years						21,039						21,291
Due after five years through ten years						13,808						14,079
Due after ten years						4,281						4,500
						40,233						40,981
ABS						1,143						1,155
Total						$	41,376					$	42,136

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

Net investment income
						For the years ended December 31,
($ in millions)						2021						2020						2019
Fixed income securities						$	1,148					$	1,232					$	1,201
Equity securities						100						78						175
Mortgage loans						43						34						27
Limited partnership interests						1,973						238						296
Short-term investments						5						17						70
Other investments						195						124						131
Investment income, before expense						3,464						1,723						1,900
Investment expense						(171)						(133)						(172)
Net investment income						$	3,293					$	1,590					$	1,728

Net gains (losses) on investments and derivatives by asset type
						For the years ended December 31,
($ in millions)						2021						2020						2019
Fixed income securities						$	425					$	925					$	433
Equity securities						520						117						930
Mortgage loans						20						(1)						—
Limited partnership interests						(52)						(14)						157
Derivatives						49						49						(26)
Other investments						122						11						44
Net gains (losses) on investments and derivatives						$	1,084					$	1,087					$	1,538

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Notes to Consolidated Financial Statements 2021 Form 10-K

Net gains (losses) on investments and derivatives by transaction type
						For the years ended December 31,
($ in millions)						2021						2020						2019
Sales						$	578					$	974					$	519
Credit losses						(42)						(32)						(26)
Valuation change of equity investments (1)						499						96						1,071
Valuation change and settlements of derivatives						49						49						(26)
Net gains (losses) on investments and derivatives						$	1,084					$	1,087					$	1,538

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

Gross realized gains (losses) on sales of fixed income securities
						For the years ended December 31,
($ in millions)						2021						2020						2019
Gross realized gains						$	587					$	1,105					$	541
Gross realized losses						(158)						(177)						(99)

The following table presents the net pre-tax appreciation (decline) recognized in net income of equity securities and limited partnership interests carried at fair value that are still held as of December 31, 2021 and 2020, respectively.

Net appreciation (decline) recognized in net income
						For the years ended December 31,
($ in millions)						2021						2020
Equity securities						$	377					$	247
Limited partnership interests carried at fair value						435						150
Total						$	812					$	397

Credit losses recognized in net income
			For the years ended December 31,
($ in millions)						2021						2020						2019
Assets
Fixed income securities:
Corporate						$	(5)					$	(1)					$	(6)
ABS						1						(2)						(3)
Total fixed income securities						(4)						(3)						(9)
Mortgage loans						18						(1)						—
Limited partnership interests						(34)						(6)						(4)
Other investments
Bank loans						(22)						(23)						(13)
Total credit losses by asset type						$	(42)					$	(33)					$	(26)
Liabilities
Commitments to fund commercial mortgage loans and bank loans						—						1						—
Total						$	(42)					$	(32)					$	(26)

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Unrealized net capital gains and losses included in AOCI
($ in millions)						Fair value						Gross unrealized												Unrealized net gains (losses)
December 31, 2021									Gains						Losses
Fixed income securities						$	42,136					$	1,002					$	(242)					$	760
Short-term investments						4,009						—						—						—
Derivative instruments						—						—						(3)						(3)
EMA limited partnerships (1)																								(1)
Investments classified as held for sale																								—
Unrealized net capital gains and losses, pre-tax																								756
Amounts recognized for:
Insurance reserves (2)																								—
DAC and DSI (3)																								1
Reclassification of noncontrolling interest																								4
Amounts recognized																								5
Deferred income taxes																								(163)
Unrealized net capital gains and losses, after-tax																								$	598
December 31, 2020
Fixed income securities						$	42,565					$	2,563					$	(32)					$	2,531
Short-term investments						6,807						—						—						—
Derivative instruments						—						—						(3)						(3)
EMA limited partnerships																								(1)
Investments classified as held for sale																								2,369
Unrealized net capital gains and losses, pre-tax																								4,896
Amounts recognized for:
Insurance reserves (2)																								(496)
DAC and DSI (3)																								(364)
Amounts recognized																								(860)
Deferred income taxes																								(856)
Unrealized net capital gains and losses, after-tax																								$	3,180

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

(2)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 lower interest rates, resulting in a premium deficiency. This adjustment primarily relates to structured settlement annuities with life contingencies (a type of immediate fixed annuity), classified as held for sale as of December 31, 2020.

(3)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. This adjustment relates primarily to life insurance products, which are classified as held for sale as of December 31, 2020.

Change in unrealized net capital gains (losses)
						For the years ended December 31,
($ in millions)						2021						2020						2019
Fixed income securities						$	(1,771)					$	2,152					$	2,715
EMA limited partnerships						—						—						(4)
Investments classified as held for sale						(2,369)						—						—
Total						(4,140)						2,152						2,711
Amounts recognized for:
Insurance reserves						496						(370)						(126)
DAC and DSI						365						(140)						(191)
Reclassification of noncontrolling interest						4						—						—
Amounts recognized						865						(510)						(317)
Deferred income taxes						693						(349)						(505)
(Decrease) increase in unrealized net capital gains and losses, after-tax						$	(2,582)					$	1,293					$	1,889

122 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Mortgage loans The Company’s mortgage loans are commercial mortgage loans collateralized by a variety of commercial real estate property types located across the United States and totaled $821 million and $746 million, net of credit loss allowance, as of December 31, 2021 and 2020, respectively. Substantially all of the commercial mortgage loans are non-recourse to the borrower.

Principal geographic distribution of commercial real estate exceeding 5% of the mortgage loans portfolio
						As of December 31,
(% of mortgage loan portfolio carrying value)						2021						2020
Texas						20.4		%				22.0		%
California						19.6						15.6
Illinois						6.7						2.4
Florida						6.0						8.6
Massachusetts						5.7						3.6
Tennessee						5.7						4.7
Ohio						5.3						7.2
Missouri						4.4						5.7

Types of properties collateralizing the mortgage loan portfolio
						As of December 31,
(% of mortgage loan portfolio carrying value)						2021						2020
Apartment complex						35.3		%				53.2		%
Retail						23.8						7.9
Office						18.5						21.8
Warehouse						11.0						14.2
Other						11.4						2.9
Total						100.0		%				100.0		%

Contractual maturities of the mortgage loan portfolio
						As of December 31, 2021
($ in millions)						Number of loans						Amortized cost, net						Percent
2022						5						$	98					11.9		%
2023						6						44						5.4
2024						5						89						10.8
2025						7						115						14.0
Thereafter						30						475						57.9
Total						53						$	821					100.0		%

Limited partnerships Investments in limited partnership interests include interests in private equity funds, real estate funds and other funds. Principal factors influencing carrying value appreciation or decline include operating performance, comparable public company earnings multiples, capitalization rates and the economic environment. For equity method limited partnerships, the Company recognizes an impairment loss 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. Changes in fair value limited partnerships are recorded through net investment income and therefore are not tested for impairment.

Carrying value for limited partnership interests
						As of December 31, 2021																		As of December 31, 2020
($ in millions)						EMA						Fair Value						Total						EMA						Fair Value						Total
Private equity						$	4,905					$	1,434					$	6,339					$	2,667					$	988					$	3,655
Real estate						823						97						920						623						74						697
Other (1)						759						—						759						211						—						211
Total (2)						$	6,487					$	1,531					$	8,018					$	3,501					$	1,062					$	4,563

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

(2)Carrying value for limited partnership interests as of December 31, 2021, includes certain investments classified as assets held for sale as of December 31, 2020 and March 31, 2021, and transferred to continuing operations in the first and second quarter of 2021, respectively.

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2021 Form 10-K Notes to Consolidated Financial Statements

Municipal bonds The Company maintains a diversified portfolio of municipal bonds, including tax exempt and taxable securities, which totaled $6.39 billion and $7.58 billion as of December 31, 2021 and 2020, respectively.

The municipal bond portfolio includes general obligations of state and local issuers and revenue bonds (including pre-refunded bonds, which are bonds for which an irrevocable trust has been established to fund the remaining payments of principal and interest).

Principal geographic distribution of municipal bond issuers exceeding 5% of the portfolio
						As of December 31,
(% of municipal bond portfolio carrying value)						2021						2020
California						11.8		%				11.8		%
Texas						8.7						9.5
Pennsylvania						5.4						5.8
New York						5.1						5.2
Colorado						4.4						5.5
Florida						4.2						5.5

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 December 31, 2021 and 2020, the fair value of short-term investments totaled $4.01 billion and $6.81 billion, respectively.

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

Other investments by asset type
						As of December 31,
($ in millions)						2021						2020
Bank loans, net						$	1,574					$	772
Real estate						809						659
Policy loans						148						181
Derivatives						12						20
Other						113						59
Total (1)						$	2,656					$	1,691

(1)Other investments as of December 31, 2021 include certain real estate and other investments classified as held for sale as of December 31, 2020 and transferred to continuing operations in the first quarter of 2021.

Agent loans were loans issued to exclusive Allstate agents and were carried at amortized cost, net. On November 15, 2021, the Company sold its portfolio of agent loans which were previously reported in other investments. Agent loans were assets of the Allstate Life segment and classified as assets held for sale as of December 31, 2020.

Concentration of credit risk As of December 31, 2021, the Company is not exposed to any credit concentration risk of a single issuer and its affiliates greater than 10% of the Company’s shareholders’ equity, other than the U.S. government and its agencies.

Securities loaned The Company’s business activities include securities lending programs with third parties, mostly large banks. As of December 31, 2021 and 2020, fixed income and equity securities with a carrying value of $1.38 billion and $872 million, respectively, were on loan under these agreements. Interest income on collateral, net of fees, was $1 million, $2 million and $3 million in 2021, 2020 and 2019, respectively.

Other investment information Included in fixed income securities are below investment grade assets totaling $7.50 billion and $6.06 billion as of December 31, 2021 and 2020, respectively.

As of December 31, 2021, fixed income securities and short-term investments with a carrying value of $211 million were on deposit with regulatory authorities as required by law.

As of December 31, 2021, the carrying value of fixed income securities and other investments that were non-income producing was $57 million.

124 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Portfolio monitoring and credit losses

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

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

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

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

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

When a security is sold or otherwise disposed or when the security is deemed uncollectible and written off, the Company removes amounts previously recognized in the credit loss allowance. Recoveries after write-offs are recognized when received. Accrued interest excluded from the amortized cost of fixed income securities totaled $311 million and $351 million as of December 31, 2021, and 2020, respectively, and is reported within the accrued investment income line of the Consolidated Statements of Financial Position. The Company monitors accrued interest and writes off amounts when they are not expected to be received.

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

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2021 Form 10-K Notes to Consolidated Financial Statements

Rollforward of credit loss allowance for fixed income securities
						For the years ended December 31,
($ in millions)						2021						2020
Beginning balance						$	(2)					$	—
Credit losses on securities for which credit losses not previously reported						(5)						(2)
Net decreases related to credit losses previously reported						1						—
Reduction of allowance related to sales						—						—
Write-offs						—						—
Ending balance (1)						$	(6)					$	(2)

(1)Allowance for fixed income securities as of December 31, 2021 comprised $6 million of corporate bonds. Allowance for fixed income securities as of December 31, 2020 comprised $1 million and $1 million of corporate bonds and ABS, respectively.

Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position
						Less than 12 months																		12 months or more
($ in millions)						Number of issues						Fair value						Unrealized losses						Number of issues						Fair value						Unrealized losses						Total unrealized losses
December 31, 2021
Fixed income securities
U.S. government and agencies						112						$	5,451					$	(24)					4						$	72					$	(2)					$	(26)
Municipal						767						1,213						(15)						2						14						(1)						(16)
Corporate						1,197						9,725						(176)						22						130						(16)						(192)
Foreign government						51						415						(6)						4						3						—						(6)
ABS						80						500						(2)						53						8						—						(2)
Total fixed income securities						2,207						$	17,304					$	(223)					85						$	227					$	(19)					$	(242)
Investment grade fixed income securities						1,993						$	15,391					$	(188)					71						$	183					$	(8)					$	(196)
Below investment grade fixed income securities						214						1,913						(35)						14						44						(11)						(46)
Total fixed income securities						2,207						$	17,304					$	(223)					85						$	227					$	(19)					$	(242)
December 31, 2020
Fixed income securities
U.S. government and agencies						26						$	215					$	(1)					—						$	—					$	—					$	(1)
Municipal						43						116						(2)						—						—						—						(2)
Corporate						107						730						(21)						14						46						(5)						(26)
Foreign government						7						7						—						—						—						—						—
ABS						32						157						(2)						69						43						(1)						(3)
Total fixed income securities						215						$	1,225					$	(26)					83						$	89					$	(6)					$	(32)
Investment grade fixed income securities						146						$	855					$	(8)					66						$	45					$	—					$	(8)
Below investment grade fixed income securities						69						370						(18)						17						44						(6)						(24)
Total fixed income securities						215						$	1,225					$	(26)					83						$	89					$	(6)					$	(32)

Gross unrealized losses by unrealized loss position and credit quality as of December 31, 2021
($ in millions)						Investment grade						Below investment grade						Total
Fixed income securities with unrealized loss position less than 20% of amortized cost, net (1) (2)						$	(196)					$	(35)					$	(231)
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost, net (3) (4)						—						(11)						(11)
Total unrealized losses						$	(196)					$	(46)					$	(242)

(1)Below investment grade fixed income securities include $33 million that have been in an unrealized loss position for less than twelve months.

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

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

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

126 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Investment grade is defined as a security having a rating of Aaa, Aa, A or Baa from Moody’s, a rating of 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 rating. Unrealized losses on investment grade securities are principally related to an increase in market yields which may include increased risk-free interest rates or wider credit spreads since the time of initial purchase. The unrealized losses are expected to reverse as the securities approach maturity.

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

As of December 31, 2021, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost basis.

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

Loans are evaluated on a pooled basis when they share similar risk characteristics. The Company

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

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

Accrual of income is suspended for loans that are in default or when full and timely collection of principal and interest payments is not probable. Accrued income receivable is monitored for recoverability and when not expected to be collected is written off through net investment income. Cash receipts on loans on non-accrual status are generally recorded as a reduction of amortized cost.

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

Accrued interest
						As of December 31,
($ in millions)						2021						2020
Mortgage loans						$	2					$	2
Bank Loans						4						3

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

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

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

The Allstate Corporation 127

2021 Form 10-K Notes to Consolidated Financial Statements

Mortgage loans amortized cost by debt service coverage ratio distribution and year of origination
						December 31, 2021																																										December 31, 2020
($ in millions)						2016 and prior						2017						2018						2019						2020						Current						Total						Total
Below 1.0						$	—					$	—					$	—					$	—					$	—					$	—					$	—					$	—
1.0 - 1.25						11						—						—						25						10						—						46						46
1.26 - 1.50						39						5						—						104						—						12						160						201
Above 1.50						65						39						106						141						67						203						621						507
Amortized cost before allowance						$	115					$	44					$	106					$	270					$	77					$	215					$	827					$	754
Allowance																																										(6)						(8)
Amortized cost, net																																										$	821					$	746

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

temporary, or there are other risk mitigating factors such as additional collateral, escrow balances or borrower guarantees. Payments on all mortgage loans were current as of December 31, 2021, 2020 and 2019.

Rollforward of credit loss allowance for mortgage loans
						For the years ended December 31,
($ in millions)						2021						2020
Beginning balance						$	(67)					$	(3)
Cumulative effect of change in accounting principle						—						(42)
Net decreases related to credit losses						40						(39)
Reduction of allowance related to sales						21						17
Write-offs						—						—
Ending balance (1)						$	(6)					$	(67)

(1)Includes $59 million of credit loss allowance for mortgage loans that are classified as held for sale as of December 31, 2020.

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 updated quarterly and are either received from a nationally recognized rating agency or a comparable internal rating is derived if an externally provided rating is not available. The year of origination is determined to be the year in which the asset is acquired.

128 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Bank loans amortized cost by credit rating and year of origination
($ in millions)						December 31, 2021																																										December 31, 2020
						2016 and prior						2017						2018						2019						2020						Current						Total						Total
BBB						$	—					$	—					$	5					$	14					$	7					$	60					$	86					$	38
BB						9						16						15						24						31						561						656						168
B						—						18						47						34						63						606						768						456
CCC and below						3						21						18						40						9						34						125						161
Amortized cost before allowance						$	12					$	55					$	85					$	112					$	110					$	1,261					$	1,635					$	823
Allowance																																										(61)						(51)
Amortized cost, net																																										$	1,574					$	772

Rollforward of credit loss allowance for bank loans
						For the years ended December 31,
($ in millions)						2021						2020
Beginning balance						$	(67)					$	—
Cumulative effect of change in accounting principle						—						(53)
Net increases related to credit losses						(15)						(28)
Reduction of allowance related to sales						21						9
Write-offs						—						5
Ending balance (1)						$	(61)					$	(67)

(1)Includes $16 million of credit loss allowance for bank loans that are classified as held for sale as of December 31, 2020.

Note 6			Fair Value of Assets and Liabilities

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

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

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

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

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

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

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

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

The Company is responsible for the determination of fair value and the supporting assumptions and methodologies. The Company gains assurance that assets and liabilities are appropriately valued through the execution of various processes and controls designed to ensure the overall reasonableness and consistent application of valuation methodologies, including inputs and assumptions, and compliance with accounting standards. For fair values received from third parties or internally estimated, the Company’s processes and controls are designed to ensure that the valuation methodologies are appropriate and consistently applied, the inputs and assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded. For example, on a continuing basis, the Company assesses the reasonableness of

The Allstate Corporation 129

2021 Form 10-K Notes to Consolidated Financial Statements

individual fair values that have stale security prices or that exceed certain thresholds as compared to previous fair values received from valuation service providers or brokers or derived from internal models. The Company performs procedures to understand and assess the methodologies, processes and controls of valuation service providers. In addition, the Company may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third-party valuation sources for selected securities. The Company performs ongoing price validation procedures such as back-testing of actual sales, which corroborate the various inputs used in internal models to market observable data. When fair value determinations are expected to be more variable, the Company validates them through reviews by members of management who have relevant expertise and who are independent of those charged with executing investment transactions.

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

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

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

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

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

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

Level 2 measurements

*•*Fixed income securities:

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

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

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

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

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

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

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

Over-the-counter (“OTC”) derivatives, including interest rate swaps, foreign currency swaps, total return swaps, foreign exchange forward contracts, certain options and certain credit default swaps, are valued using models that rely on inputs such as interest rate yield curves, implied volatilities, index price levels, currency rates, and credit spreads that are observable for substantially the full term of the contract. The valuation techniques underlying the

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models are widely accepted in the financial services industry and do not involve significant judgment.

*•*Assets held for sale: Comprise U.S. government and agencies, municipal, corporate, foreign government and ABS fixed income securities, equity securities, short-term investments and other investments. The valuation is based on the respective asset type as described above.

*•*Liabilities held for sale: Comprise other liabilities, mainly free-standing exchange listed derivatives, that are not actively traded and are valued based on quoted prices for identical instruments in markets that are not active.

Level 3 measurements

*•*Fixed income securities:

Municipal: Comprise municipal bonds that are not rated by third-party credit rating agencies. The primary inputs to the valuation of these municipal bonds include quoted prices for identical or similar assets in markets that exhibit less liquidity relative to those markets supporting Level 2 fair value measurements, contractual cash flows, benchmark yields and credit spreads. Also included are municipal bonds valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable and municipal bonds in default valued based on the present value of expected cash flows.

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

*•*Equity securities: The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets in markets that are less active relative to those markets supporting Level 2 fair value measurements.

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

*•*Other investments: Certain OTC derivatives, such as interest rate caps, certain credit default swaps and certain options (including swaptions), are valued using models that are widely accepted in the financial services industry. These are categorized as Level 3 as a result of the significance of non-market observable inputs such

as volatility. Other primary inputs include interest rate yield curves and credit spreads and quoted prices for identical or similar assets in the markets that exhibit less liquidity relative to those markets supporting Level 2 fair value measurements.

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

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

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

Assets measured at fair value on a non-recurring basis

Comprise long-lived assets to be disposed of by sale, including real estate, that are written down to fair value less costs to sell and bank loans with individual credit loss allowance where amortized cost, net is equal to fair value based on broker quotes.

Investments excluded from the fair value hierarchy

Limited partnerships carried at fair value, which do not have readily determinable fair values, use NAV provided by the investees and are excluded from the fair value hierarchy. These investments are generally not redeemable by the investees and generally cannot be sold without approval of the general partner. The Company receives distributions of income and proceeds from the liquidation of the underlying assets of the investees, which usually takes place in years 4-9 of the typical contractual life of 10-12 years. As of December 31, 2021, the Company has commitments to invest $236 million in these limited partnership interests.

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2021 Form 10-K Notes to Consolidated Financial Statements

Assets and liabilities measured at fair value
						As of December 31, 2021
($ in millions)						Quoted prices in active markets for identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant unobservable inputs (Level 3)						Counterparty and cash collateral netting						Total
Assets
Fixed income securities:
U.S. government and agencies						$	6,247					$	26					$	—											$	6,273
Municipal						—						6,375						18												6,393
Corporate - public						—						16,569						20												16,589
Corporate - privately placed						—						10,675						66												10,741
Foreign government						—						985						—												985
ABS						—						1,115						40												1,155
Total fixed income securities						6,247						35,745						144												42,136
Equity securities						6,312						400						349												7,061
Short-term investments						1,140						2,864						5												4,009
Other investments						—						34						2						$	(22)					14
Other assets						1						—						65												66
Total recurring basis assets						13,700						39,043						565						(22)						53,286
Non-recurring basis						—						—						32												32
Total assets at fair value						$	13,700					$	39,043					$	597					$	(22)					$	53,318
% of total assets at fair value						25.7		%				73.2		%				1.1		%				—		%				100.0		%
Investments reported at NAV																														1,531
Total																														$	54,849
Liabilities
Other liabilities						$	(3)					$	(12)					$	—					$	7					$	(8)
Total recurring basis liabilities						(3)						(12)						—						7						(8)
Total liabilities at fair value						$	(3)					$	(12)					$	—					$	7					$	(8)
% of total liabilities at fair value						37.5		%				150.0		%				—		%				(87.5)		%				100.0		%

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Notes to Consolidated Financial Statements 2021 Form 10-K

Assets and liabilities measured at fair value
						As of December 31, 2020
($ 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						$	2,061					$	45					$	—											$	2,106
Municipal						—						7,562						17												7,579
Corporate - public						—						21,885						67												21,952
Corporate - privately placed						—						9,002						63												9,065
Foreign government						—						958						—												958
ABS						—						826						79												905
Total fixed income securities						2,061						40,278						226												42,565
Equity securities						2,468						396						304												3,168
Short-term investments						6,549						223						35												6,807
Other investments						—						29						—						$	(9)					20
Other assets						1						—						—												1
Assets held for sale						6,488						23,103						267						(6)						29,852
Total recurring basis assets						17,567						64,029						832						(15)						82,413
Total assets at fair value						$	17,567					$	64,029					$	832					$	(15)					$	82,413
% of total assets at fair value						21.3		%				77.7		%				1.0		%				—		%				100.0		%
Investments reported at NAV																														1,062
Assets held for sale at NAV																														762
Total																														$	84,237
Liabilities
Other liabilities						$	—					$	(34)					$	—					$	18					$	(16)
Liabilities held for sale						—						(119)						(516)						9						(626)
Total recurring basis liabilities						—						(153)						(516)						27						(642)
Total liabilities at fair value						$	—					$	(153)					$	(516)					$	27					$	(642)
% of total liabilities at fair value						—		%				23.8		%				80.4		%				(4.2)		%				100.0		%

As of December 31, 2021 and 2020, Level 3 fair value measurements of fixed income securities total $144 million and $226 million, respectively, and include $41 million and $69 million, respectively, of securities valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable and $16 million and $18 million, respectively, of municipal fixed income securities that are not rated by third-party credit rating agencies. As the Company does not develop the Level 3 fair value

unobservable inputs for these fixed income securities, they are not included in the table above. However, an increase (decrease) in credit spreads for fixed income securities valued based on non-binding broker quotes would result in a lower (higher) fair value, and an increase (decrease) in the credit rating of municipal bonds that are not rated by third-party credit rating agencies would result in a higher (lower) fair value.

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2021 Form 10-K Notes to Consolidated Financial Statements

Rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2021
						Balance as of December 31, 2020						Total gains (losses) included in:												Transfers												Transfers to (from) held for sale																														Balance as of December 31, 2021
($ in millions)									Net income						OCI						Into Level 3						Out of Level 3									Purchases						Sales						Issues						Settlements
Assets
Fixed income securities:
Municipal						$	17					$	—					$	—					$	1					$	—					$	—					$	3					$	—					$	—					$	(3)					$	18
Corporate - public						67						1						(1)						—						—						(7)						13						(53)						—						—						20
Corporate - privately placed						63						(2)						3						10						—						14						6						(23)						—						(5)						66
ABS						79						—						1						4						(32)						—						47						(5)						—						(54)						40
Total fixed income securities						226						(1)						3						15						(32)						7						69						(81)						—						(62)						144
Equity securities						304						61						—						—						—						101						43						(160)						—						—						349
Short-term investments						35						—						—						—						—						—						5						—						—						(35)						5
Other investments						—						—						—						—						—						—						3						(1)						—						—						2
Other assets						—						65						—						—						—						—						—						—						—						—						65
Assets held for sale						267						3						(1)						17						(13)						(108)						4						(163)						—						(6)						—
Total recurring Level 3 assets						832						128						2						32						(45)						—						124						(405)						—						(103)						565
Liabilities
Liabilities held for sale						(516)						35						—						—						—						—						—						492						(28)						17						—
Total recurring Level 3 liabilities						$	(516)					$	35					$	—					$	—					$	—					$	—					$	—					$	492					$	(28)					$	17					$	—

Rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2020
						Balance as of December 31, 2019						Total gains (losses) included in:												Transfers																																										Balance as of December 31, 2020
($ in millions)									Net income						OCI						Into Level 3						Out of Level 3									Purchases						Sales						Issues						Settlements
Assets
Fixed income securities:
Municipal						$	22					$	—					$	—					$	—					$	—											$	—					$	(3)					$	—					$	(2)					$	17
Corporate - public						36						—						1						1						—												48						(19)						—						—						67
Corporate - privately placed						32						—						(5)						21						—												17						(2)						—						—						63
ABS						84						(1)						—						54						(49)												59						(26)						—						(42)						79
Total fixed income securities						174						(1)						(4)						76						(49)												124						(50)						—						(44)						226
Equity securities						255						—						—						—						—												57						(8)						—						—						304
Short-term investments						25						—						—						—						(25)												35						—						—						—						35
Assets held for sale						284						1						(8)						52						(42)												24						(37)						—						(7)						267
Total recurring Level 3 assets						738						—						(12)						128						(116)												240						(95)						—						(51)						832
Liabilities
Liabilities held for sale						(462)						(43)						—						—						—												—						—						(34)						23						(516)
Total recurring Level 3 liabilities						$	(462)					$	(43)					$	—					$	—					$	—											$	—					$	—					$	(34)					$	23					$	(516)

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Rollforward of Level 3 assets and liabilities held at fair value during the year ended December 31, 2019
						Balance as of December 31, 2018						Total gains (losses) included in:												Transfers																																										Balance as of December 31, 2019
($ in millions)									Net income						OCI						Into Level 3						Out of Level 3									Purchases						Sales						Issues						Settlements
Assets
Fixed income securities:
Municipal						$	31					$	—					$	1					$	—					$	(6)											$	—					$	(3)					$	—					$	(1)					$	22
Corporate - public						38						—						2						—						—												—						(4)						—						—						$	36
Corporate - privately placed						32						—						—						2						—												1						(2)						—						(1)						$	32
ABS						73						—						—						2						(21)												33						—						—						(3)						$	84
Total fixed income securities						174						—						3						4						(27)												34						(9)						—						(5)						174
Equity securities						212						16						—						—						(1)												73						(44)						—						(1)						255
Short-term investments						30						—						—						—						—												35						(40)						—						—						25
Other investments						—						—						—						—						—												—						—						—						—						—
Assets held for sale						281						15						4						57						(4)												14						(53)						—						(30)						284
Total recurring Level 3 assets						697						31						7						61						(32)												156						(146)						—						(36)						738
Liabilities
Liabilities held for sale						(224)						(61)						—						(175)						—												—						—						(16)						14						(462)
Total recurring Level 3 liabilities						$	(224)					$	(61)					$	—					$	(175)					$	—											$	—					$	—					$	(16)					$	14					$	(462)

Total Level 3 gains (losses) included in net income
						For the years ended December 31,
($ in millions)						2021						2020						2019
Net investment income						$	1					$	(16)					$	—
Net gains (losses) on investments and derivatives						124						15						16

Transfers into Level 3 during 2021, 2020 and 2019 included situations where a quote was not provided by the Company’s independent third-party valuation service provider and as a result the price was stale or had been replaced with a broker quote where the inputs had not been corroborated to be market observable resulting in the security being classified as Level 3. Transfers into Level 3 during 2019 also included derivatives embedded in equity-indexed universal life contracts due to refinements in the valuation modeling resulting in an increase in significance of non-market observable inputs.

Transfers out of Level 3 during 2021, 2020 and 2019 included situations where a broker quote was used in the prior period and a quote became available from the Company’s independent third-party valuation service provider in the current period. A quote utilizing the new pricing source was not available as of the prior period, and any gains or losses related to the change in valuation source for individual securities were not significant.

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2021 Form 10-K Notes to Consolidated Financial Statements

Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of December 31,
($ in millions)						2021						2020						2019
Assets
Fixed income securities:
Corporate - public						$	—					$	(1)					$	—
Corporate - privately placed						(2)						—						—
ABS						—						—						(1)
Total fixed income securities						(2)						(1)						(1)
Equity securities						28						(1)						5
Other assets						65						—						—
Assets held for sale						—						—						2
Total recurring Level 3 assets						$	91					$	(2)					$	6
Liabilities
Liabilities held for sale						$	—					$	(43)					$	(61)
Total recurring Level 3 liabilities						—						(43)						(61)
Total included in net income						$	91					$	(45)					$	(55)
Components of net income
Net investment income						$	1					$	(16)					$	—
Net gains (losses) on investments and derivatives						90						14						4
Total included in net income						$	91					$	(2)					$	4
Assets
Corporate - public						$	—					$	1
Corporate - privately placed						3						(5)
Assets held for sale						—						(5)
Changes in unrealized net capital gains and losses reported in OCI (1)						$	3					$	(9)

(1)Effective January 1, 2020, the Company adopted the fair value accounting standard that prospectively requires the disclosure of valuation changes reported in OCI.

Financial instruments not carried at fair value
($ in millions)												December 31, 2021												December 31, 2020
Financial assets						Fair value level						Amortized cost, net						Fair value						Amortized cost, net						Fair value
Mortgage loans						Level 3						$	821					$	853					$	746					$	792
Bank loans						Level 3						1,574						1,634						772						803
Assets held for sale						Level 3						—						—						4,206						4,440
Financial liabilities						Fair value level						Carrying value (1)						Fair value						Carrying value (1)						Fair value
Contractholder funds on investment contracts						Level 3						$	55					$	55					$	—					$	—
Long-term debt						Level 2						7,976						9,150						7,825						9,489
Liability for collateral						Level 2						1,444						1,444						914						914
Liabilities held for sale (2)						Level 3						—						—						8,130						9,424

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

(2)Includes certain liabilities for collateral measured at Level 2 fair value as of December 31, 2020.

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Note 7			Derivative Financial Instruments and Off-balance Sheet Financial Instruments

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

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

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

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

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

The notional amounts specified in the contracts are used to calculate the exchange of contractual payments under the agreements and are generally not representative of the potential for gain or loss on these agreements. However, the notional amounts specified in credit default swaps where the Company has sold credit protection represent the maximum amount of potential loss, assuming no recoveries.

Fair value, which is equal to the carrying value, is the estimated amount that the Company would receive

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

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

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

Assets and liabilities held for sale Asset-liability management is a risk management practice that balances the cash flows and risk and return characteristics of assets and liabilities. Depending upon the attributes of the assets acquired and liabilities issued, derivative instruments such as interest rate swaps, caps, swaptions and futures were utilized to change the interest rate characteristics of existing assets and liabilities to ensure the relationship is maintained within specified ranges and to reduce exposure to rising or falling interest rates. Futures and options were used for hedging the equity exposure contained in equity indexed life and annuity product contracts that offer equity returns to contractholders.

The Company’s primary embedded derivatives were equity options in life and annuity product contracts, which provided returns linked to equity indices to contractholders.

In connection with the sale of ALIC and certain affiliates, the sale agreement includes a provision related to contingent consideration that may be earned over a ten-year period commencing on January 1, 2026 and ending January 1, 2035. The contingent consideration is determined annually based on the average 10-year Treasury rate over the preceding 3-year period compared to a designated rate. The contingent consideration meets the definition of a derivative and is accounted for on a fair value basis with periodic changes in fair value reflected in earnings. As of December 31, 2021, the Company recorded $65 million in other assets related to this derivative.

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2021 Form 10-K Notes to Consolidated Financial Statements

Summary of the volume and fair value positions of derivative instruments as of December 31, 2021
									Volume (1)
($ in millions, except number of contracts)			Balance sheet location						Notional amount						Number of contracts						Fair value, net						Gross asset						Gross liability
Asset derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Futures			Other assets						n/a						1,181						$	1					$	1					$	—
Equity and index contracts
Options			Other investments						n/a						61						5						5						—
Futures			Other assets						n/a						113						—						—						—
Foreign currency contracts
Foreign currency forwards			Other investments						$	2					n/a						—						—						—
Embedded derivative financial instruments			Other investments						750						n/a						—						—						—
Contingent consideration			Other assets						250						n/a						65						65						—
Credit default contracts
Credit default swaps – buying protection			Other investments						33						n/a						(1)						—						(1)
Credit default swaps – selling protection			Other investments						250						n/a						6						6						—
Total asset derivatives									$	1,285					1,355						$	76					$	77					$	(1)
Liability derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Futures			Other liabilities & accrued expenses						n/a						36,668						$	(2)					$	—					$	(2)
Equity and index contracts
Futures			Other liabilities & accrued expenses						—						1,260						(1)						—						(1)
Foreign currency contracts
Foreign currency forwards			Other liabilities & accrued expenses						715						n/a						16						23						(7)
Credit default contracts
Credit default swaps – buying protection			Other liabilities & accrued expenses						70						n/a						(4)						—						(4)
Credit default swaps – selling protection			Other liabilities & accrued expenses						5						n/a						—						—						—
Total liability derivatives									790						37,928						9						$	23					$	(14)
Total derivatives									$	2,075					39,283						$	85

(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)

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Notes to Consolidated Financial Statements 2021 Form 10-K

Summary of the volume and fair value positions of derivative instruments as of December 31, 2020
									Volume
($ in millions, except number of contracts)			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						290						$	—					$	—					$	—
Equity and index contracts
Options			Other investments						n/a						56						6						6						—
Futures			Other assets						n/a						905						1						1						—
Foreign currency contracts
Foreign currency forwards			Other investments						$	291					n/a						4						9						(5)
Embedded derivative financial instruments			Other investments						750						n/a						—						—						—
Credit default contracts
Credit default swaps – buying protection			Other investments						60						n/a						(3)						—						(3)
Credit default swaps – selling protection			Other investments						750						n/a						13						13						—
Assets held for sale									158						3,189						185						189						(4)
Total asset derivatives									$	2,009					4,440						$	206					$	218					$	(12)
Liability derivatives
Derivatives not designated as accounting hedging instruments
Interest rate contracts
Futures			Other liabilities & accrued expenses						n/a						705						$	—					$	—					$	—
Equity and index contracts
Futures			Other liabilities & accrued expenses						n/a						666						—						—						—
Total return index contracts
Total return swap agreements - fixed income			Other liabilities & accrued expenses						50						n/a						—						—						—
Foreign currency contracts
Foreign currency forwards			Other liabilities & accrued expenses						250						n/a						(9)						1						(10)
Credit default contracts
Credit default swaps – buying protection			Other liabilities & accrued expenses						638						n/a						(16)						—						(16)
Credit default swaps – selling protection			Other liabilities & accrued expenses						4						n/a						—						—						—
Liabilities held for sale									2,240						2,737						(630)						1						(631)
Total liability derivatives									3,182						4,108						(655)						$	2					$	(657)
Total derivatives									$	5,191					8,548						$	(449)

Gross and net amounts for OTC derivatives (1)
												Offsets
($ in millions)						Gross amount						Counter- party netting						Cash collateral (received) pledged						Net amount on balance sheet						Securities collateral (received) pledged						Net amount
December 31, 2021
Asset derivatives						$	23					$	(24)					$	2					$	1					$	—					$	1
Liability derivatives						(10)						24						(17)						(3)						—						(3)
December 31, 2020
Asset derivatives						$	10					$	(9)					$	—					$	1					$	—					$	1
Liability derivatives						(19)						9						9						(1)						—						(1)

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

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2021 Form 10-K Notes to Consolidated Financial Statements

Gains (losses) from valuation and settlements reported on derivatives not designated as accounting hedges
($ in millions)									Net gains (losses) on investments and derivatives						Accident and health insurance policy benefits and interest credited to contractholder funds						Operating costs and expenses												(Loss) income from discontinued operations						Total gain (loss) recognized in net income on derivatives
2021
Interest rate contracts									$	22					—						$	—											—						$	22
Equity and index contracts									(7)						27						45												—						65
Contingent consideration									—						—						—												65						65
Foreign currency contracts									32						—						—												—						32
Credit default contracts									7						—						—												—						7
Total return swaps - fixed income									4						—						—												—						4
Total									$	58					$	27					$	45											$	65					$	195
2020
Interest rate contracts									$	36					$	—					$	—											$	—					$	36
Equity and index contracts									15						—						29												—						44
Foreign currency contracts									(13)						—						—												—						(13)
Credit default contracts									6						—						—												—						6
Total return swaps - fixed income									1						—						—												—						1
Total return swaps - equity index									4						—						—												—						4
Total									$	49					$	—					$	29											$	—					$	78
2019
Interest rate contracts									$	51					$	—					$	—											$	—					$	51
Equity and index contracts									(121)						—						40												—						(81)
Foreign currency contracts									5						—						—												—						5
Credit default contracts									(7)						—						—												—						(7)
Total return swaps - fixed income									13						—						—												—						13
Total return swaps - equity									33						—						—												—						33
Total									$	(26)					$	—					$	40											$	—					$	14

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

OTC cash and securities collateral pledged
($ in millions)						December 31, 2021
Pledged by the Company						$	2
Pledged to the Company (1)						17

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

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

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

140 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

OTC derivatives counterparty credit exposure by counterparty credit rating
($ in millions)						2021																								2020
Rating (1)						Number of counter-parties						Notional amount (2)						Credit exposure (2)						Exposure, net of collateral (2)						Number of counter-parties						Notional amount (2)						Credit exposure (2)						Exposure, net of collateral (2)
A+						1						$	199					$	7					$	—					1						$	186					$	4					$	—
A						1						367						9						—						—						—						—						—
Total						2						$	566					$	16					$	—					1						$	186					$	4					$	—

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

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

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

Exchange traded and cleared margin deposits
($ in millions)						December 31, 2021
Pledged by the Company						$	73
Received by the Company						3

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

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

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

($ in millions)						2021						2020
Gross liability fair value of contracts containing credit-risk-contingent features						$	8					$	19
Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs						(7)						(6)
Collateral posted under MNAs for contracts containing credit-risk-contingent features						—						(13)
Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently						$	1					$	—

Credit derivatives - selling protection

A credit default swap (“CDS”) is a derivative instrument, representing an agreement between two parties to exchange the credit risk of a specified entity (or a group of entities), or an index based on the credit risk of a group of entities (all commonly referred to as the “reference entity” or a portfolio of “reference entities”), in return for a periodic premium.

In selling protection, CDS are used to replicate fixed income securities and to complement the cash market when credit exposure to certain issuers is not available or when the derivative alternative is less expensive than the cash market alternative. CDS typically have a five-year term.

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2021 Form 10-K Notes to Consolidated Financial Statements

CDS notional amounts by credit rating and fair value of protection sold
						Notional amount
($ in millions)						AAA						AA						A						BBB						BB and lower						Total						Fair value
December 31, 2021
Single name
Corporate debt						$	—					$	—					$	—					$	—					$	5					$	5					$	—
Index
Corporate debt						2						4						46						190						8						250						6
Total						$	2					$	4					$	46					$	190					$	13					$	255					$	6
December 31, 2020
Single name
Corporate debt						$	—					$	—					$	—					$	—					$	4					$	4					$	—
Index
Corporate debt						6						12						156						492						84						750						13
Total						$	6					$	12					$	156					$	492					$	88					$	754					$	13

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

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

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

Off-balance sheet financial instruments

Commitments to invest, commitments to purchase private placement securities, commitments to fund loans, financial guarantees and credit guarantees have off-balance sheet risk because their contractual amounts are not recorded in the Company’s Consolidated Statements of Financial Position.

Contractual amounts of off-balance sheet financial instruments
						As of December 31,
($ in millions)						2021						2020
Commitments to invest in limited partnership interests						$	2,720					$	2,015
Private placement commitments						104						36
Other loan commitments						16						17

In the preceding table, the contractual amounts represent the amount at risk if the contract is fully drawn upon, the counterparty defaults and the value of any underlying security becomes worthless. Unless noted otherwise, the Company does not require collateral or other security to support off-balance sheet financial instruments with credit risk.

Commitments to invest in limited partnership interests represent agreements to acquire new or additional participation in certain limited partnership investments. The Company enters into these agreements in the normal course of business. Because the investments in limited partnerships are not actively traded, it is not practical to estimate the fair value of these commitments.

142 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Private placement commitments represent commitments to purchase private placement debt and private equity securities at a future date. The Company enters into these agreements in the normal course of business. The fair value of the debt commitments generally cannot be estimated on the date the commitment is made as the terms and conditions of the underlying private placement securities are not yet final. Because the private equity securities are not actively traded, it is not practical to estimate fair value of the commitments.

Other loan commitments are agreements to lend to a borrower provided there is no violation of any condition established in the contract. The Company enters into these agreements to commit to future loan fundings at predetermined interest rates. Unless unconditionally cancellable, the Company recognizes a credit loss allowance on such commitments. Commitments have either fixed or varying expiration dates or other termination clauses. The fair value of these commitments is insignificant.

Note 8			Variable Interest Entities

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

The Company manages the business operations of the Reciprocal Exchanges and has the power to direct their activities that most significantly impact their economic performance. The Company receives a management fee for the services provided to the Reciprocal Exchanges. In addition, the Company holds interests that provide capital to the Reciprocal Exchanges and would absorb any expected losses. The Company is therefore the primary beneficiary.

In the event of dissolution, policyholders would share any residual unassigned surplus but are not subject to assessment for any deficit in unassigned surplus of the Reciprocal Exchanges. The assets of the Reciprocal Exchanges can be used only to settle the obligations of the Reciprocal Exchanges and general creditors have no recourse to the Company. The results of operations of the Reciprocal Exchanges are included in the Company’s Allstate Protection segment and generated $181 million of earned premiums and $135 million in claims and claims expenses in 2021.

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

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

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

in law and regulation, judicial decisions, and economic conditions.

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

The Allstate Corporation 143

2021 Form 10-K Financial Statements

disruptions have resulted in higher parts costs and used car values which have combined with labor shortages to increase physical damage loss costs while medical inflation, treatment trends and higher levels of attorney representation have increased liability losses. These factors may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability. Generally, the initial reserves for a new accident year are established based on actual claim frequency and severity assumptions for different business segments, lines and coverages based on historical relationships to relevant inflation indicators. Reserves for prior accident years are statistically determined using several different actuarial estimation methods. Changes in auto claim frequency may result from changes in mix of business, the rate of distracted driving, miles driven or other macroeconomic factors. Changes in auto current year claim severity are generally influenced by inflation in the medical and auto repair sectors, the effectiveness and efficiency of claim practices and changes in mix of claim types. The Company mitigates these effects through various loss management programs. When such changes in claim data occur, actuarial judgment is used to determine appropriate development factors to establish reserves.

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

Because reserves are estimates of unpaid portions of losses that have occurred, including IBNR losses, the establishment of appropriate reserves, including reserves for catastrophes, Run-off Property-Liability and reinsurance and indemnification recoverables, is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates.

The highest degree of uncertainty is associated with reserves for losses incurred in the initial reporting period as it contains the greatest proportion of losses that have not been reported or settled. The Company also has uncertainty in the Run-off Property-Liability reserves that are based on events long since passed and are complicated by lack of historical data, legal interpretations, unresolved legal issues and legislative intent based on establishment of facts.

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

Rollforward of reserve for property and casualty insurance claims and claims expense
($ in millions)						2021						2020						2019
Balance as of January 1						$	27,610					$	27,712					$	27,423
Less recoverables (1)						(7,033)						(6,912)						(7,155)
Net balance as of January 1						20,577						20,800						20,268
National General acquisition as of January 4, 2021						1,797						—						—
SafeAuto acquisition as of October 1, 2021						134						—						—
Incurred claims and claims expense related to:
Current year						29,196						22,437						24,106
Prior years						122						(436)						(130)
Total incurred						29,318						22,001						23,976
Claims and claims expense paid related to:
Current year						(18,438)						(14,245)						(15,160)
Prior years						(9,807)						(7,979)						(8,284)
Total paid						(28,245)						(22,224)						(23,444)
Net balance as of December 31						23,581						20,577						20,800
Plus recoverables						9,479						7,033						6,912
Balance as of December 31						$	33,060					$	27,610					$	27,712

(1) Recoverables comprises reinsurance and indemnification recoverables. See Note 11 for further details.

144 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Reconciliation of total claims and claims expense incurred and paid by coverage
						December 31, 2021
($ in millions)						Incurred						Paid
Allstate Protection
Auto insurance - liability coverage						$	10,830					$	(9,420)
Auto insurance - physical damage coverage						7,170						(7,150)
Homeowners insurance						6,371						(6,045)
Total auto and homeowners insurance						24,371						(22,615)
Other personal lines						1,144						(1,163)
Commercial lines						767						(581)
Protection Services						376						(373)
Run-off Property-Liability						109						(97)
Unallocated loss adjustment expenses (“ULAE”)						2,569						(2,726)
Claims incurred and paid from before 2017						(69)						(622)
Other (1)						51						(68)
Total						$	29,318					$	(28,245)

(1)Paid and incurred includes amounts primarily related to the acquisition of SafeAuto. Additionally, incurred includes the amortization of the fair value adjustment related to the acquisition of National General.

Incurred claims and claims expense represents the sum of paid losses, claim adjustment expenses and reserve changes in the calendar year. This expense includes losses from catastrophes of $3.34 billion, $2.81 billion and $2.56 billion in 2021, 2020 and 2019, respectively, net of recoverables. Catastrophes are an inherent risk of the property and casualty insurance business that have contributed to, and will continue to contribute to, material year-to-year fluctuations in the Company’s results of operations and financial position.

The Company calculates and records a single best reserve estimate for losses from catastrophes, in conformance with generally accepted actuarial standards. As a result, management believes that no other estimate is better than the recorded amount. Due to the uncertainties involved, including the factors described above, the ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates. Accordingly, management believes that it is not practical to develop a meaningful range for any such changes in losses incurred.

Prior year reserve reestimates included in claims and claims expense (1)
						Twelve months ended December 31,
						Non-catastrophe losses																		Catastrophe losses																		Total
($ in millions)						2021						2020						2019						2021(2)(3)						2020 (4)						2019						2021						2020						2019
Auto						$	178					$	(63)					$	(306)					$	(29)					$	(44)					$	(17)					$	149					$	(107)					$	(323)
Homeowners						12						(17)						(1)						(165)						(422)						66						(153)						(439)						65
Other personal lines						(96)						(27)						8						(11)						(39)						—						(107)						(66)						8
Commercial lines						116						34						18						3						2						(1)						119						36						17
Run-off Property-Liability (5)						116						141						105						—						—						—						116						141						105
Protection Services						(2)						(1)						(2)						—						—						—						(2)						(1)						(2)
Total prior year reserve reestimates						$	324					$	67					$	(178)					$	(202)					$	(503)					$	48					$	122					$	(436)					$	(130)

(1)Favorable reserve reestimates are shown in parentheses.

(2)Includes approximately $240 million of estimated recoveries related to Nationwide Aggregate Reinsurance Program cover for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, which primarily impacted homeowners reestimates.

(3)Includes approximately $110 million favorable subrogation settlements arising from the Woolsey wildfire, which primarily impacted homeowners reestimates.

(4)2020 includes approximately $495 million of favorable reserve reestimates related to the PG&E Corporation and Southern California Edison subrogation settlements, which primarily impacted homeowners.

(5)The Company’s 2021 annual reserve review, using established industry and actuarial best practices, resulted in unfavorable reestimates of $111 million.

The Allstate Corporation 145

2021 Form 10-K Financial Statements

The following presents information about incurred and paid claims development as of December 31, 2021, net of recoverables, as well as the cumulative number of reported claims and the total of IBNR reserves plus expected development on reported claims included in the net incurred claims amounts. See Note 2 for the accounting policy and methodology for determining reserves for claims and claims expense, including both reported and IBNR claims. The cumulative number of reported claims is identified by coverage and excludes reported claims for industry pools and facilities where information is not available. The information about incurred and paid claims development for the 2017 to 2021 years, and the average annual percentage payout of incurred claims by age as of December 31, 2021, is presented as required supplementary information.

Auto insurance – liability coverage

($ in millions, except number of reported claims)						Incurred claims and allocated claim adjustment expenses, net of recoverables																																				IBNR reserves plus expected development on reported claims						Cumulative number of reported claims
						For the years ended December 31,																														Prior year reserve reestimates						As of December 31, 2021
						(unaudited)						(unaudited)						(unaudited)						(unaudited)
Accident year						2017						2018						2019						2020						2021
2017						$	9,424					$	9,341					$	9,286					$	9,332					$	9,392					$	60					$	581					2,519,909
2018						—						9,817						9,786						9,825						9,862						37						1,140						2,499,583
2019						—						—						10,557						10,503						10,750						247						2,080						2,632,610
2020						—						—						—						8,773						8,770						(3)						2,901						1,891,726
2021						—						—						—						—						10,489												6,860						2,150,167
																								Total						$	49,263					$	341
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2017 accident years																																				(51)
Prior year reserve reestimates for ULAE																																				29
Other																																				(18)
Total prior year reserve reestimates																																				$	301
						Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
						For the years ended December 31,
						(unaudited)						(unaudited)						(unaudited)						(unaudited)
Accident year						2017						2018						2019						2020						2021
2017						$	3,554					$	6,058					$	7,386					$	8,241					$	8,811
2018						—						3,672						6,417						7,801						8,722
2019						—						—						3,985						7,096						8,670
2020						—						—						—						3,143						5,869
2021						—						—						—						—						3,629
																								Total						$	35,701
All outstanding liabilities before 2017, net of recoverables																														1,393
Liabilities for claims and claim adjustment expenses, net of recoverables																														$	14,955

Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2021
						1 year						2 years						3 years						4 years						5 years
Auto insurance – liability coverage						38.8		%				28.1		%				13.2		%				8.4		%				5.1		%

146 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Auto insurance – physical damage coverage

($ in millions, except number of reported claims)						Incurred claims and allocated claim adjustment expenses, net of recoverables																																				IBNR reserves plus expected development on reported claims						Cumulative number of reported claims
						For the years ended December 31,																														Prior year reserve reestimates						As of December 31, 2021
						(unaudited)						(unaudited)						(unaudited)						(unaudited)
Accident year						2017						2018						2019						2020						2021
2017						$	5,738					$	5,627					$	5,612					$	5,610					$	5,613					$	3					$	4					4,634,171
2018						—						5,788						5,704						5,659						5,652						(7)						5						4,686,395
2019						—						—						6,269						6,188						6,150						(38)						(2)						4,860,355
2020						—						—						—						5,508						5,419						(89)						(8)						4,008,243
2021						—						—						—						—						7,301												429						4,407,369
																								Total						$	30,135					$	(131)
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2017 accident years																																				(5)
Prior year reserve reestimates for ULAE																																				(14)
Other																																				(2)
Total prior year reserve reestimates																																				$	(152)
						Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
						For the years ended December 31,
						(unaudited)						(unaudited)						(unaudited)						(unaudited)
Accident year						2017						2018						2019						2020						2021
2017						$	5,398					$	5,625					$	5,614					$	5,609					$	5,609
2018						—						5,475						5,693						5,650						5,647
2019						—						—						5,959						6,158						6,152
2020						—						—						—						5,140						5,427
2021						—						—						—						—						6,872
																								Total						$	29,707
All outstanding liabilities before 2017, net of recoverables																														7
Liabilities for claims and claim adjustment expenses, net of recoverables																														$	435

Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2021
						1 year						2 years						3 years						4 years						5 years
Auto insurance – physical damage coverage						96.2		%				3.9		%				(0.3)		%				(0.1)		%				—		%

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Homeowners insurance

($ in millions, except number of reported claims)						Incurred claims and allocated claim adjustment expenses, net of recoverables																																				IBNR reserves plus expected development on reported claims						Cumulative number of reported claims
						For the years ended December 31,																														Prior year reserve reestimates						As of December 31, 2021
						(unaudited)						(unaudited)						(unaudited)						(unaudited)
Accident year						2017						2018						2019						2020						2021
2017						$	4,929					$	5,036					$	5,037					$	4,805					$	4,816					$	11					$	60					977,319
2018						—						5,155						5,262						4,958						4,829						(129)						82						898,425
2019						—						—						4,864						4,924						4,931						7						153						868,577
2020						—						—						—						5,792						5,839						47						280						982,690
2021						—						—						—						—						6,435												1,884						908,890
																								Total						$	26,850					$	(64)
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2017 accident years																																				(13)
Prior year reserve reestimates for ULAE																																				(70)
Other																																				(6)
Total prior year reserve reestimates																																				$	(153)
						Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
						For the years ended December 31,
						(unaudited)						(unaudited)						(unaudited)						(unaudited)
Accident year						2017						2018						2019						2020						2021
2017						$	3,521					$	4,634					$	4,835					$	4,734					$	4,756
2018						—						3,775						4,883						4,759						4,747
2019						—						—						3,535						4,587						4,778
2020						—						—						—						4,266						5,559
2021						—						—						—						—						4,551
																								Total						$	24,391
All outstanding liabilities before 2017, net of recoverables																														115
Liabilities for claims and claim adjustment expenses, net of recoverables																														$	2,574

Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2021
						1 year						2 years						3 years						4 years						5 years
Homeowners insurance						73.7		%				20.7		%				2.8		%				0.8		%				0.7		%

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Notes to Consolidated Financial Statements 2021 Form 10-K

Reconciliation of the net incurred and paid claims development tables above to the reserve for property and casualty insurance claims and claims expense
($ in millions)						As of December 31, 2021
Net outstanding liabilities
Allstate Protection
Auto insurance - liability coverage						$	14,955
Auto insurance - physical damage coverage						435
Homeowners insurance						2,574
Other personal lines						1,316
Commercial lines						1,316
Protection Services						33
Run-off Property-Liability (1)						1,342
ULAE						1,430
Other (2)						180
Net reserve for property and casualty insurance claims and claims expense						23,581
Recoverables
Allstate Protection
Auto insurance - liability coverage						7,247
Auto insurance - physical damage coverage						81
Homeowners insurance						1,023
Other personal lines						173
Commercial lines						256
Protection Services						9
Run-off Property-Liability						494
ULAE						196
Total recoverables						9,479
Gross reserve for property and casualty insurance claims and claims expense						$	33,060

(1)Run-off Property-Liability includes business in run-off with most of the claims related to accident years more than 30 years ago. IBNR reserves represent $733 million of the total reserves as of December 31, 2021.

(2)Includes amounts primarily related to the acquisition of SafeAuto and the unamortized fair value adjustment related to the acquisition of National General.

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

Note 10			Reserve for Future Policy Benefits and Contractholder Funds

Reserve for future policy benefits
						As of December 31,
($ in millions)						2021						2020
Traditional life insurance and other						$	313					$	299
Accident and health insurance						960						729
Reserve for future policy benefits						$	1,273					$	1,028

Key assumptions generally used in calculating the reserve for future policy benefits
Product						Mortality						Interest rate						Estimation method
Traditional life insurance						Actual company experience plus loading						Interest rate assumptions range from 1.8% to 7.0%						Net level premium reserve method using the Company’s withdrawal experience rates; includes reserves for unpaid claims
Accident and health insurance						Actual company experience plus loading						Interest rate assumptions range from 2.8% to 7.0%						Unearned premium; additional contract reserves for mortality risk and unpaid claims

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2021 Form 10-K Notes to Consolidated Financial Statements

Accident and health short-duration contracts

The following presents information about incurred and paid claims development as of December 31, 2021, net of recoverables, as well as the cumulative number of reported claims and the total of IBNR reserves plus expected development on reported claims included in the net incurred claims amounts. See Note 2 for the accounting policy and methodology for determining reserves for future policy benefits, including both reported and IBNR claims. The information about incurred and paid claims development for the 2017 to 2021 years, as of December 31, 2021, is presented as required supplementary information.

Group and individual accident and health

($ in millions, except number of reported claims)						Incurred claims and allocated claim adjustment expenses, net of recoverables																																				IBNR reserves plus expected development on reported claims						Cumulative number of reported claims
						For the years ended December 31,																																				As of December 31, 2021
						(unaudited)						(unaudited)						(unaudited)						(unaudited)
Accident year						2017						2018						2019						2020						2021
2017						$	211					$	186					$	183					$	183					$	183											$	—					302,100
2018						—						235						205						203						203												—						269,095
2019						—						—						257						239						242												—						306,998
2020						—						—						—						297						293												9						410,031
2021						—						—						—						—						424												152						465,525
																								Total						$	1,345
						Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
						For the years ended December 31,
						(unaudited)						(unaudited)						(unaudited)						(unaudited)
Accident year						2017						2018						2019						2020						2021
2017						$	105					$	178					$	182					$	183					$	183
2018						—						126						201						203						203
2019						—						—						158						234						242
2020						—						—						—						184						284
2021						—						—						—						—						272
																								Total						$	1,184
All outstanding liabilities before 2017, net of recoverables																														—
Liabilities for claims and claim adjustment expenses, net of recoverables																														$	161

Reconciliation of the net incurred and paid claims development tables above to the reserve for future policy benefits
($ in millions)						As of December 31, 2021
Net outstanding liabilities
Group and individual accident and health short-duration contracts						$	161
Other accident and health short-duration contracts						28
Long duration accident and health insurance						617
Long duration traditional life insurance and other						313
Net reserve for future policy benefits						1,119
Recoverables
Group and individual accident and health short-duration contracts						38
Other accident and health short-duration contracts						—
Insurance lines other than short-duration						116
Gross reserve for future policy benefits						$	1,273

Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2021
						1 year						2 years						3 years						4 years						5 years
Group and individual accident and health						62.6		%				35.1		%				1.9		%				0.4		%				—		%

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Notes to Consolidated Financial Statements 2021 Form 10-K

Contractholder funds for interest-sensitive life insurance were $853 million and $857 million as of December 31, 2021 and 2020, respectively.

Contractholder funds activity
						For the years ended December 31,
($ in millions)						2021						2020						2019
Balance, beginning of year						$	857					$	915					$	898
Deposits						118						121						126
Interest credited						34						33						34
Benefits						(41)						(34)						(11)
Surrenders and partial withdrawals						(23)						(61)						(21)
Contract charges						(107)						(123)						(114)
Other adjustments						70						6						3
Balance, end of year						$	908					$	857					$	915

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2021 Form 10-K Notes to Consolidated Financial Statements

Note 11			Reinsurance and Indemnification

Effects of reinsurance and indemnification on property and casualty premiums written and earned and accident and health insurance premiums and contract charges
						For the years ended December 31,
($ in millions)						2021						2020						2019
Property and casualty insurance premiums written
Direct						$	45,523					$	38,695					$	37,976
Assumed						213						105						95
Ceded						(1,736)						(1,142)						(1,117)
Property and casualty insurance premiums written, net of recoverables						$	44,000					$	37,658					$	36,954
Property and casualty insurance premiums earned
Direct						$	43,944					$	38,115					$	37,104
Assumed						178						99						94
Ceded						(1,904)						(1,141)						(1,122)
Property and casualty insurance premiums earned, net of recoverables						$	42,218					$	37,073					$	36,076
Accident and health insurance premiums and contract charges
Direct						$	1,878					$	1,093					$	1,145
Assumed						21						14						14
Ceded						(78)						(13)						(14)
Accident and health insurance premiums and contract charges, net of recoverables						$	1,821					$	1,094					$	1,145

Reinsurance and indemnification recoverables

Reinsurance and indemnification recoverables, net
						As of December 31,
($ in millions)						2021						2020
Property and casualty
Paid and due from reinsurers and indemnitors						$	391					$	101
Unpaid losses estimated (including IBNR)						9,479						7,033
Total property and casualty						$	9,870					$	7,134
Accident and health insurance						154						81
Total						$	10,024					$	7,215

Rollforward of credit loss allowance for reinsurance recoverables
						For the years ended December 31,
($ in millions)						2021						2020
Property and casualty (1) (2)
Beginning balance						$	(59)					$	(60)
(Increase)/Decrease in the provision for credit losses						(8)						1
Write-offs						1						—
Ending balance						$	(66)					$	(59)
Accident and health insurance
Beginning balance						$	(1)					$	(1)
Increase in the provision for credit losses						(7)						—
Write-offs						—						—
Ending Balance						$	(8)					$	(1)

(1)Primarily related to run-off lines reinsurance ceded.

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

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Notes to Consolidated Financial Statements 2021 Form 10-K

Property and casualty

Property and casualty programs are grouped by the following characteristics:

1.Indemnification programs - industry pools, facilities or associations that are governed by state insurance statutes or regulations or the federal government.

2.Catastrophe reinsurance programs - reinsurance protection for catastrophe exposure nationwide and by specific states, as applicable.

3.Other reinsurance programs - reinsurance protection for asbestos, environmental and other liability exposures as well as commercial lines, including shared economy.

Property and casualty reinsurance is in place for the Allstate Protection, Run-off lines and Protection Services segments. The Company purchases reinsurance after evaluating the financial condition of the reinsurer as well as the terms and price of coverage.

Indemnification programs

The Company participates in state-based industry pools or facilities mandating participation by insurers offering certain coverage in their state, including the Michigan Catastrophic Claims Association (“MCCA”), the New Jersey Property-Liability Insurance Guaranty Association (“PLIGA”), the North Carolina Reinsurance Facility (“NCRF”) and the Florida Hurricane Catastrophe Fund (“FHCF”). When the Company pays qualifying claims under the coverage indemnified by a state’s pool or facility, the Company is reimbursed for the qualifying claim losses or expenses. Each state pool or facility may assess participating companies to collect sufficient amounts to meet its total indemnification requirements. The enabling legislation for each state’s pool or facility compels the pool or facility only to indemnify participating companies for qualifying claim losses or expenses; the state pool or facility does not underwrite the coverage or take on the ultimate risk of the indemnified business. As a pass through, these pools or facilities manage the receipt of assessments paid by participating companies and payment of indemnified amounts for covered claims presented by participating companies. The Company has not had any credit losses related to these indemnification programs.

State-based industry pools or facilities

Michigan Catastrophic Claims Association The MCCA is a statutory indemnification mechanism for member insurers’ qualifying personal injury protection claims paid for the unlimited lifetime medical benefits above the applicable retention level for qualifying injuries from automobile, motorcycle and commercial vehicle accidents. Indemnification recoverables on paid and unpaid claims, including IBNR, as of December 31, 2021 and 2020 include $6.70 billion and $5.65 billion, respectively, from the MCCA for its indemnification obligation.

The MCCA is funded by annually assessing participating member companies actively writing motor vehicle coverage in Michigan on a per vehicle basis that is currently $86 per vehicle insured. The MCCA’s calculation of the annual assessment is based upon the total of members’ actuarially determined present value of expected payments on lifetime claims by all persons expected to be catastrophically injured in that year and ultimately qualify for MCCA reimbursement, its operating expenses, and adjustments for the amount of excesses or deficiencies in prior assessments. The MCCA has also included its calculation of the impacts of the auto insurance reforms which have begun to phase in since their passage in June 2019, including the personal injury protection medical fee schedule that became effective July 2, 2021. The assessment is incurred by the Company as policies are written and recovered as a component of premiums from the Company’s customers.

The MCCA indemnifies qualifying claims of all current and former member companies (whether or not actively writing motor vehicle coverage in Michigan) for qualifying claims and claims expenses incurred while the member companies were actively writing the mandatory personal injury protection coverage in Michigan. Member companies actively writing automobile coverage in Michigan include the MCCA annual assessments in determining the level of premiums to charge insureds in the state.

As required for member companies by the MCCA, the Company reports covered paid and unpaid claims to the MCCA when estimates of loss for a reported claim are expected to exceed the retention level, the claims involve certain types of severe injuries, or there are litigation demands received suggesting the claim value exceeds certain thresholds. The retention level is adjusted upward every other MCCA fiscal year by the lesser of 6% or the increase in the Consumer Price Index. The retention level will be $600 thousand per claim for the fiscal two-years ending June 30, 2023 compared to $580 thousand per claim for the fiscal two-years ending June 30, 2021.

The MCCA is obligated to fund the ultimate liability of member companies’ qualifying claims and claim expenses. The MCCA does not underwrite the insurance coverage or hold any underwriting risk.

The MCCA indemnifies members as qualifying claims are paid and billed by members to the MCCA. Unlimited lifetime covered losses result in significant levels of ultimate incurred claim reserves being recorded by member companies along with offsetting indemnification recoverables. Disputes with claimants over coverage on certain reported claims can result in additional losses, which may be recoverable from the MCCA, excluding litigation expenses. There is currently no method by which insurers are able to obtain the benefit of managed care programs to reduce claims costs through the MCCA.

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2021 Form 10-K Notes to Consolidated Financial Statements

The MCCA annual assessments fund current operations and member company reimbursements. The MCCA prepares statutory-basis financial statements in conformity with accounting practices prescribed or permitted by the State of Michigan Department of Insurance and Financial Services (“MI DOI”). The MI DOI has granted the MCCA a statutory permitted practice that expires in June 30, 2022 to discount its liabilities for loss and loss adjustment expense. As of June 30, 2021, the date of its most recent annual financial report, the MCCA had cash and invested assets of $27.26 billion and an accumulated surplus of $5.04 billion. The permitted practice reduced the accumulated deficit by $31.28 billion. As a result of the auto insurance reforms passed in June 2019, the MCCA announced on November 3, 2021 that the surplus had increased beyond a level necessary to safely cover its expected losses and expenses and will return a portion of its surplus to its member insurance companies as a pass-through to issue a refund of $400 per vehicle and $80 per historical vehicle to the policyholders. At the time the returned surplus is received a liability will be recorded until the refunds are disbursed to the policyholders.

New Jersey Property-Liability Insurance Guaranty Association PLIGA serves as the statutory administrator of the Unsatisfied Claim and Judgment Fund (“UCJF”), Workers’ Compensation Security Fund and the New Jersey Surplus Lines Insurance Guaranty Fund.

In addition to its insolvency protection responsibilities, PLIGA reimburses insurers for unlimited excess medical benefits (“EMBs”) paid in connection with personal injury protection claims in excess of $75,000 for policies issued or renewed prior to January 1, 1991, and limited EMB claims in excess of $75,000 and capped at $250,000 for policies issued or renewed on or after January 1, 1991, to December 31, 2003.

A significant portion of the incurred claim reserves and the recoverables can be attributed to a small number of catastrophic claims. Assessments paid to PLIGA for the EMB program totaled $7 million in 2021. The amounts of paid and unpaid recoverables as of December 31, 2021 and 2020 were $371 million and $389 million, respectively.

PLIGA annually assesses all admitted property and casualty insurers writing covered lines in New Jersey for PLIGA indemnification and expenses. PLIGA assessments may be recouped as a surcharge on premiums collected. PLIGA does not ultimately retain underwriting risk as it assesses member companies for their expected qualifying losses to provide funding for payment of its indemnification obligation to member companies for their actual losses. As a pass through, PLIGA facilitates these transactions of receipt of assessments paid by member companies and payment to member companies for covered claims presented by them for indemnification. As of December 31, 2020, the date of its most recent annual financial report, PLIGA had a fund balance of $254 million.

As statutory administrator of the UCJF, PLIGA provides compensation to qualified claimants for personal injury protection, bodily injury, or death caused by private passenger automobiles operated by uninsured or “hit and run” drivers. The UCJF also provides private passenger pedestrian personal injury protection benefits when no other coverage is available.

PLIGA annually collects a UCJF assessment from all admitted property and casualty insurers writing motor vehicle liability insurance in New Jersey for UCJF indemnification and expenses. UCJF assessments can be expensed as losses recoverable in rates as appropriate. As of December 31, 2020, the date of its most recent annual financial report, the UCJF fund had a balance of $57 million.

North Carolina Reinsurance Facility The NCRF provides automobile liability insurance to drivers that insurers are not otherwise willing to insure. All insurers licensed to write automobile insurance in North Carolina are members of the NCRF. Premiums, losses and expenses are assigned to the NCRF. North Carolina law allows the NCRF to recoup operating losses for certain insureds through a surcharge to policyholders. As of September 30, 2021, the NCRF reported a deficit of $67 million in members’ equity. The NCRF implemented a loss recoupment surcharge on all private passenger and commercial fleet policies effective October 1, 2021, through September 30, 2022. Member companies are assessed the recoupment surcharge. The loss recoupment surcharge will be adjusted on October 1, 2022 and discontinued once losses are recovered. The NCRF results are shared by the member companies in proportion to their respective North Carolina automobile liability writings. For the fiscal year ending September 30, 2021, net gain was $58 million, including $1.11 billion of earned premiums, $244 million of certain private passenger auto risk recoupment and $127 million of member loss recoupments. As of December 31, 2021, the NCRF recoverables on paid claims is $51 million and recoverables on unpaid claims is $228 million. Paid recoverable balances, if covered, are typically settled within sixty days of monthly filing.

Florida Hurricane Catastrophe Fund Allstate subsidiaries Castle Key Insurance Company (“CKIC”) and Castle Key Indemnity Company (“CKI”, and together with CKIC, “Castle Key”) participate in the mandatory coverage provided by the FHCF and therefore have access to reimbursement for certain qualifying Florida hurricane losses from the FHCF. Castle Key has exposure to assessments and pays annual premiums to the FHCF for this reimbursement protection. The FHCF has the authority to issue bonds to pay its obligations to participating insurers in excess of its capital balances. Payment of these bonds is funded by emergency assessments on all property and casualty premiums in the state, except workers’ compensation, medical malpractice, accident and health insurance and policies written under the National Flood Insurance Program (“NFIP”). The FHCF emergency assessments are limited to 6% of premiums per year beginning the first year in which

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Notes to Consolidated Financial Statements 2021 Form 10-K

reimbursements require bonding, and up to a total of 10% of premiums per year for assessments in the second and subsequent years, if required to fund additional bonding. The FHCF issued $2.00 billion in pre-event bonds in 2013 to build its capacity to reimburse member companies’ claims. The FHCF plans to fund these pre-event bonds through current FHCF cash flows. Pursuant to an Order issued by the Florida Office of Insurance Regulation, the emergency assessment is zero for all policies issued or renewed on or after January 1, 2015.

Annual premiums earned and paid under the FHCF agreement were $15 million, $9 million and $9 million in 2021, 2020 and 2019, respectively. Qualifying losses were $13 million, $15 million and $33 million in 2021, 2020 and 2019, respectively. The Company has access to reimbursement provided by the FHCF for 90% of qualifying personal property losses that exceed its current retention of $104 million for the two largest hurricanes and $35 million for other hurricanes, up to a maximum total of $251 million, effective from June 1, 2021 to May 31, 2022. The amounts recoverable from the FHCF totaled $25 million and $32 million as of December 31, 2021 and 2020, respectively.

Federal Government - National Flood Insurance Program NFIP is a program administered by the Federal Emergency Management Agency (“FEMA”) whereby the Company sells and services NFIP flood insurance policies as an agent of FEMA and receives fees for its services. The Company is fully indemnified for claims and claim expenses and does not retain any ultimate risk for the indemnified business. The federal government is obligated to pay all claims and certain allocated loss adjustment expenses in accordance with the arrangement.

Congressional authorization for the NFIP is periodically evaluated and may be subjected to freezes, including when the federal government experiences a shutdown. FEMA has a NFIP reinsurance program to manage the future exposure of the NFIP through the transfer of risk to private reinsurance companies and capital market investors. Congress is evaluating the funding of the program as well as considering reforms to the program that would be incorporated in legislation to reauthorize the NFIP.

The amounts recoverable as of December 31, 2021 and 2020 were $34 million and $30 million, respectively. Premiums earned under the NFIP include $350 million, $261 million and $258 million in 2021, 2020 and 2019, respectively. Qualifying losses incurred include $267 million, $87 million and $150 million in 2021, 2020 and 2019, respectively.

Catastrophe reinsurance

The Company’s reinsurance program is designed to provide reinsurance protection for catastrophes resulting from multiple perils including hurricanes, windstorms, hail, tornadoes, winter storms, wildfires, earthquakes and fires following earthquakes.

• The Company purchases reinsurance from traditional reinsurance companies as well as the insurance linked securities market.

• The majority of the Company’s program comprises multi-year contracts, primarily placed in the traditional reinsurance market, such that generally one-third of the program is renewed every year.

• Coverage is generally purchased on a broad geographic, product line and multiple peril loss basis.

• Florida personal lines property is covered by a separate agreement, as the risk of loss is different and the Company’s subsidiaries operating in this state are separately capitalized.

• A portion of New Jersey personal lines property and automobile remains covered by a separate standalone agreement.

• When applicable, reinsurance reinstatement premiums are recognized in the same period as the loss event that gave rise to the reinstatement premium and are recorded in claims and claims expense in the consolidated statements of operations.

The Company’s current catastrophe reinsurance program supports the Company’s risk tolerance framework that targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes, earthquakes and wildfires, net of reinsurance, exceeding $2.5 billion.

The 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. These reinsurance agreements are part of the catastrophe management strategy, which is intended to provide shareholders an acceptable return on the risks assumed in the property business, and to reduce variability of earnings, while providing protection to customers. The Company has the following catastrophe reinsurance agreements in effect as of December 31, 2021.

The June 1, 2021 Nationwide Excess Catastrophe Reinsurance Program (the “Nationwide Program”) provides coverage up to $5.76 billion of loss 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:

*•*The traditional market placement provides limits totaling $3.73 billion for losses arising out of multiple perils and is comprised of four contracts providing coverage of $3.25 billion with one annual reinstatement of limits, two contracts combining $348 million of limits with one reinstatement of limits over two eight-year terms, and one single-year term contract providing $132 million of coverage, subject to a $3.75 billion retention, with no reinstatement of limits. In addition to Allstate

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2021 Form 10-K Notes to Consolidated Financial Statements

and its affiliated companies covered under the 2020-2021 program, coverage also includes the National General Companies.

*•*ILS placements provide $1.70 billion of limits, with remaining available limit of $1.40 billion, with no reinstatement of limits, and are comprised of the following:

–$500 million, $400 million, 75% placed, $400 million, 62.5% placed, $250 million, $225 million, 67% placed, $150 million and $100 million placements 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.

–The $500 million, $400 million, 75% placed, and $100 million placements 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 limit. Recoveries are limited to our ultimate net loss from the reinsured event.

–At the annual reset of the Sanders Re Catastrophe Bonds, National General was added as ceding companies.

The New Jersey agreement consists of one contract that reinsures personal lines property and automobile catastrophe losses caused by multiple perils in New Jersey and provides 32% of $400 million of limits in excess of provisional retentions of $150 million. The contract includes one annual reinstatement of limits. The New Jersey contract inures to portions of the Nationwide Program.

The Kentucky earthquake agreement comprises a three-year term contract that reinsures personal lines property losses caused by earthquakes and fire following earthquakes in Kentucky and provides $28 million of limits, 95% placed, in excess of a $2 million retention.

The 2021 Florida program includes reinsurance agreements placed with the traditional market, the Florida Hurricane Catastrophe Fund (“FHCF”), and the ILS market as follows:

• The Florida program provides limit up to $1.53 billion of a single event loss, less a $40 million retention.

• The traditional market placement comprises $999 million of reinsurance limits for losses to personal lines property in Florida arising out of multiple perils. The Excess contracts, which form a part of the traditional market placement, with $939 million of limits, subject to a $100 million retention and the Below FHCF contract with $60 million of limits subject to $40 million retention, provide coverage for perils not covered by the FHCF contracts, which only cover hurricanes.

• Two FHCF contracts provide $253 million of limits for qualifying losses to personal lines property in Florida caused by storms the National Hurricane Center declares to be hurricanes. Both contracts are 90% placed.

• The ILS placement provides $275 million of reinsurance limits, 73% placed, for qualifying losses to personal lines property in Florida caused by a named storm event, a severe weather event, an earthquake event, a fire event, a volcanic eruption event, or a meteorite impact event.

National General Lender Services Standalone Program is placed in the traditional market and provides $190 million of coverage, subject to a $50 million retention, with one reinstatement of limits.

National General Florida Hurricane Catastrophe Program provides $37 million of limit and is 90% placed.

National General Reciprocal Excess Catastrophe Reinsurance Contract is placed in the traditional market and provides $545 million of coverage, subject to a $20 million retention, with one reinstatement of limits.

The Company has not experienced credit losses on its catastrophe reinsurance programs. The total cost of the property catastrophe reinsurance program was $556 million, $425 million and $386 million in 2021, 2020 and 2019, respectively.

Other reinsurance programs

The Company’s other reinsurance programs relate to commercial lines, including shared economy, and asbestos, environmental, and other liability exposures. The largest reinsurance recoverable balance the Company had outstanding was $187 million and $165 million from Aleka Insurance Inc. as of December 31, 2021 and 2020, respectively. These programs also include reinsurance recoverables of $165 million and $166 million from Lloyd’s of London as of December 31, 2021 and 2020, respectively.

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Note 12			Deferred Policy Acquisition Costs

Deferred policy acquisition costs activity
						For the years ended December 31,
($ in millions)						2021						2020						2019
Balance, beginning of year						$	3,774					$	3,600					$	3,457
National General acquisition						317						—						—
SafeAuto acquisition						7						—						—
Acquisition costs deferred						6,874						5,651						5,499
Amortization charged to income						(6,252)						(5,477)						(5,353)
Effect of unrealized gains and losses						2						—						(3)
Balance, end of year						$	4,722					$	3,774					$	3,600

Note 13			Capital Structure

Total debt outstanding
						As of December 31,
($ in millions)						2021						2020
Floating Rate Senior Notes, due 2021						$	—					$	250
Floating Rate Senior Notes, due 2023 (1)						250						250
3.150% Senior Notes, due 2023 (2)						500						500
6.750% Senior Notes due 2024 (2) (3)						350						—
0.750% Senior Notes, due 2025 (2)						600						600
3.280% Senior Notes, due 2026 (2)						550						550
Due after one year through five years						2,250						2,150
1.450% Senior Notes, due 2030 (2)						600						600
Due after five years through ten years						600						600
6.125% Senior Notes, due 2032 (2)						159						159
5.350% Senior Notes due 2033 (2)						323						323
5.550% Senior Notes due 2035 (2)						546						546
5.950% Senior Notes, due 2036 (2)						386						386
6.900% Senior Debentures, due 2038						165						165
5.200% Senior Notes, due 2042 (2)						62						62
4.500% Senior Notes, due 2043 (2)						500						500
4.200% Senior Notes, due 2046 (2)						700						700
3.850% Senior Notes, due 2049 (2)						500						500
5.100% Subordinated Debentures, due 2053						500						500
5.750% Subordinated Debentures, due 2053						800						800
6.500% Junior Subordinated Debentures, due 2067						500						500
Due after ten years						5,141						5,141
Long-term debt total principal						7,991						7,891
Fair value adjustments (3)						45						—
Debt issuance costs						(60)						(66)
Total long-term debt						7,976						7,825
Short-term debt (4)						—						—
Total debt						$	7,976					$	7,825

(1)2023 Floating Rate Senior Notes are not redeemable prior to the applicable maturity dates and bear interest at a floating rate equal to three-month LIBOR, reset quarterly on each interest reset date, plus 0.63% per year.

(2)Senior Notes are subject to redemption at the Company’s option in whole or in part at any time at the greater of either 100% of the principal amount plus accrued and unpaid interest to the redemption date or the discounted sum of the present values of the remaining scheduled payments of principal and interest and accrued and unpaid interest to the redemption date.

(3)Debt acquired as part of the National General acquisition completed on January 4, 2021.

(4)The Company classifies any borrowings which have a maturity of twelve months or less at inception as short-term debt.

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2021 Form 10-K Notes to Consolidated Financial Statements

Repayment of debt On March 29, 2021, the Company repaid, at maturity, $250 million of Floating Rate Senior Notes that bear interest at a floating rate equal to three-month LIBOR plus 0.43% per year.

Debt maturities for each of the next five years and thereafter
($ in millions)
2022						$	—
2023						750
2024						350
2025						600
2026						550
Thereafter						5,741
Total long-term debt principal						$	7,991

The Subordinated Debentures may be redeemed (i) in whole at any time or in part from time to time on or after January 15, 2023 for the 5.100% Subordinated Debentures and August 15, 2023 for the 5.750% Subordinated Debentures at their principal amount plus accrued and unpaid interest to, but excluding, the date of redemption; provided that if the Subordinated Debentures are not redeemed in whole, at least $25 million aggregate principal amount must remain outstanding, or (ii) in whole, but not in part, prior to January 15, 2023 for the 5.100% Subordinated Debentures and August 15, 2023 for the 5.750% Subordinated Debentures, within 90 days after the occurrence of certain tax and rating agency events, at their principal amount or, if greater, a make-whole redemption price, plus accrued and unpaid interest to, but excluding, the date of redemption. The 5.750% Subordinated Debentures have this make-whole redemption price provision only when a reduction of equity credit assigned by a rating agency has occurred.

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

As of December 31, 2021, the Company had outstanding $500 million of Series A 6.500% Fixed-to-Floating Rate Junior Subordinated Debentures (“Debentures”). The scheduled maturity date for the Debentures is May 15, 2057 with a final maturity date of May 15, 2067. The Debentures may be redeemed (i) in whole or in part, at any time on or after May 15, 2037 at the principal amount plus accrued and unpaid interest to the date of redemption, or (ii) in certain circumstances, in whole or in part, prior to May 15, 2037

at the principal amount plus accrued and unpaid interest to the date of redemption or, if greater, a make-whole price.

Interest on the Debentures is payable semi-annually at the stated fixed annual rate to May 15, 2037, and then payable quarterly at an annual rate equal to the three-month LIBOR plus 2.120%. The Company may elect at one or more times to defer payment of interest on the Debentures for one or more consecutive interest periods that do not exceed 10 years. Interest compounds during such deferral periods at the rate in effect for each period. The interest deferral feature obligates the Company in certain circumstances to issue common stock or certain other types of securities if it cannot otherwise raise sufficient funds to make the required interest payments. The Company has reserved 75 million shares of its authorized and unissued common stock to satisfy this obligation.

The terms of the Company’s outstanding subordinated debentures prohibit the Company from declaring or paying any dividends or distributions on common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on common stock or preferred stock if the Company has elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions.

In connection with the issuance of the Debentures, the Company entered into a replacement capital covenant (“RCC”). This covenant was not intended for the benefit of the holders of the Debentures and could not be enforced by them. Rather, it was for the benefit of holders of one or more other designated series of the Company’s indebtedness (“covered debt”), currently the 5.750% Subordinated Debentures due 2053. Pursuant to the RCC, the Company has agreed that it will not repay, redeem, or purchase the Debentures on or before May 15, 2067 (or such earlier date on which the RCC terminates by its terms) unless, subject to certain limitations, the Company has received net cash proceeds in specified amounts from the sale of common stock or certain other qualifying securities. The promises and covenants contained in the RCC will not apply if (i) S&P upgrades the Company’s issuer credit rating to A or above, (ii) the Company redeems the Debentures due to a tax event, (iii) after notice of redemption has been given by the Company and a market disruption event occurs preventing the Company from raising proceeds in accordance with the RCC, or (iv) the Company repurchases or redeems up to 10% of the outstanding principal of the Debentures in any one-year period, provided that no more than 25% will be so repurchased, redeemed or purchased in any ten-year period.

The RCC terminates in 2067. The RCC will terminate prior to its scheduled termination date if (i) the Debentures are no longer outstanding and the Company has fulfilled its obligations under the RCC or it is no longer applicable, (ii) the holders of a majority of the then-outstanding principal amount of the then-effective series of covered debt consent to agree to

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the termination of the RCC, (iii) the Company does not have any series of outstanding debt that is eligible to be treated as covered debt under the RCC, (iv) the Debentures are accelerated as a result of an event of default, (v) certain rating agency or change in control events occur, (vi) S&P, or any successor thereto, no longer assigns a solicited rating on senior debt issued or guaranteed by the Company, or (vii) the termination of the RCC would have no effect on the equity credit provided by S&P with respect to the Debentures. An event of default, as defined by the supplemental indenture, includes default in the payment of interest or principal and bankruptcy proceedings.

The administrator of LIBOR has announced it will cease the publication of the one week and two month U.S. dollar (“USD”) LIBOR settings immediately after December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. The Subordinated Debentures and the 2023 Floating Rate Senior Notes allow for the use of an alternative methodology to determine the interest rate if LIBOR is no longer available.

To manage short-term liquidity, the Company maintains a commercial paper program and a credit facility as a potential source of funds. The commercial paper program has a borrowing limit of $750 million. In November 2020, the Company entered into a new agreement for a $750 million unsecured revolving credit facility with a maturity date of November 2025. In November 2021, the maturity date was extended to November 2026. This facility contains an increase provision that would allow up to an additional $500 million of borrowing. This facility has a financial covenant requiring the Company not to exceed a 37.5% debt to capitalization ratio as defined in the agreement. 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 the Company’s senior unsecured, unguaranteed long-term debt. The total amount outstanding at any point in time under the combination of the commercial paper program and the credit facility cannot exceed the amount that can be borrowed under the credit facility. No amounts were outstanding under the credit facility as of December 31, 2021 or 2020. The Company had no commercial paper outstanding as of December 31, 2021 or 2020.

The Company paid $321 million, $311 million and $312 million of interest on debt in 2021, 2020 and 2019, respectively.

The Company had $401 million and $306 million of investment-related debt that is reported in other liabilities and accrued expenses as of December 31, 2021 and 2020, respectively.

During 2021, the Company filed a universal shelf registration statement with the Securities and Exchange Commission (“SEC”) that expires in 2024. The registration statement covers an unspecified amount of securities and can be used to issue debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries.

Common stock The Company had 900 million shares of issued common stock of which 281 million shares were outstanding and 619 million shares were held in treasury as of December 31, 2021. In 2021, the Company acquired 26 million shares at an average cost of $123.87 and reissued 3 million net shares under equity incentive plans.

Preferred stock All outstanding preferred stock represents noncumulative perpetual preferred stock with a $1.00 par value per share and a liquidation preference of $25,000 per share.

Total preferred stock outstanding
						As of December 31,												Aggregate liquidation preference ($ in millions)																		Dividend per depository share (1)																		Aggregate dividend payment ($ in millions)
						2021						2020						2021						2020						Dividend rate						2021						2020						2019						2021						2020						2019
Series A						—						—						$	—					$	—					5.625		%				$	—					$	—					$	1.41					$	—					$	4		(2)			$	16
Series D						—						—						—						—						6.625		%				—						—						1.66						—						—						9			(2)
Series E						—						—						—						—						6.625		%				—						—						1.66						—						—						49			(2)
Series F						—						—						—						—						6.250		%				—						—						1.56						—						—						16			(2)
Series G						23,000						23,000						575.0						575.0						5.625		%				1.41						1.41						1.41						32						32						32
Series H						46,000						46,000						1,150.0						1,150.0						5.100		%				1.28						1.28						1.28						59						59						12
Series I						12,000						12,000						300.0						300.0						4.750		%				1.19						1.19						1.19						14						13						—
National General Series (3)																																																						9						—						—
Total						81,000						81,000						$	2,025					$	2,025																													$	114					$	108					$	134		(2)

(1)Each depositary share represents a 1/1,000th interest in a share of preferred stock.

(2)Excludes $10 million and $37 million in 2020 and 2019, respectively, related to original issuance costs in preferred stock dividends on the Consolidated Statements of Operations and Consolidated Statements of Shareholders’ Equity as a result of the preferred stock redemptions.

(3)On February 2, 2021 and July 15, 2021, the Company redeemed all outstanding shares of National General Preferred Stock Series A, B and D, and National General Preferred Stock Series C, respectively.

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The preferred stock ranks senior to the Company’s common stock with respect to the payment of dividends and liquidation rights. The Company will pay dividends on the preferred stock on a noncumulative basis only when, as and if declared by the Company’s board of directors (or a duly authorized committee of the board) and to the extent that the Company has legally available funds to pay dividends. If dividends are declared on the preferred stock, they will be payable quarterly in arrears at an annual fixed rate. Dividends on the preferred stock are not cumulative. Accordingly, in the event dividends are not declared on the preferred stock for payment on any dividend payment date, then those dividends will cease to be payable. If the Company has not declared a dividend before the dividend payment date for any dividend period, the Company has no obligation to pay dividends for that dividend period, whether or not dividends are declared for any future dividend period. No dividends may be paid or declared on the Company’s common stock and no shares of the Company’s common stock may be repurchased unless the full dividends for the latest completed dividend period on the preferred stock have been declared and paid or provided for.

The Company is prohibited from declaring or paying dividends on its Series G preferred stock in excess of the amount of net proceeds from an issuance of common stock taking place within 90 days before a dividend declaration date if, on that dividend declaration date, either: (1) the risk-based capital ratios of the largest U.S. property-casualty insurance subsidiaries that collectively account for 80% or more of the net written premiums of U.S. property-casualty insurance business on a weighted average basis were less than 175% of their company action level risk-based capital as of the end of the most recent year; or (2) consolidated net income for the four-quarter period ending on the preliminary quarter end test date (the quarter that is two quarters prior to the most recently completed quarter) is zero or negative and consolidated shareholders’ equity (excluding AOCI, and subject to certain other adjustments relating to changes in U.S. GAAP) as of each of the preliminary quarter test date and the most recently completed quarter has declined by 20% or more from its level as measured at the end of the benchmark quarter (the date that is ten quarters prior to the most recently

completed quarter). If the Company fails to satisfy either of these tests on any dividend declaration date, the restrictions on dividends will continue until the Company is able again to satisfy the test on a dividend declaration date. In addition, in the case of a restriction arising under (2) above, the restrictions on dividends will continue until consolidated shareholders’ equity (excluding AOCI, and subject to certain other adjustments relating to changes in U.S. GAAP) has increased, or has declined by less than 20%, in either case as compared to its level at the end of the benchmark quarter for each dividend payment date as to which dividend restrictions were imposed.

The preferred stock does not have voting rights except with respect to certain changes in the terms of the preferred stock, in the case of certain dividend nonpayments, certain other fundamental corporate events, mergers or consolidations and as otherwise provided by law. If and when dividends have not been declared and paid in full for at least six quarterly dividend periods or their equivalent (whether or not consecutive), the authorized number of directors then constituting our board of directors will be increased by two. The holders of the preferred stock, together with the holders of all other affected classes and series of voting parity stock, voting as a single class, will be entitled to elect the two additional members of the board of directors of the Company, subject to certain conditions. The board of directors shall at no time have more than two preferred stock directors.

The preferred stock is perpetual and has no maturity date. The preferred stock is redeemable at the Company’s option in whole or in part, on or after April 15, 2023 for Series G, October 15, 2024 for Series H and January 15, 2025 for Series I at a redemption price of $25,000 per share of preferred stock, plus declared and unpaid dividends. Prior to April 15, 2023 for Series G, October 15, 2024 for Series H and January 15, 2025 for Series I, the preferred stock is redeemable at the Company’s option, in whole but not in part, within 90 days of the occurrence of certain regulatory capital event at a redemption price equal to $25,000 or $25,500 per share or a certain rating agency event at a redemption price equal to $25,000 or $25,500 per share, plus declared and unpaid dividends for Series G and for Series H and I, respectively.

Note 14			Company Restructuring

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

*•*Employee - severance and relocation benefits

*•*Exit - contract termination penalties

The expenses related to these activities are included in the Consolidated Statements of Operations as restructuring and related charges and totaled $170 million, $253 million and $39 million in 2021, 2020 and 2019, respectively.

Restructuring expenses in 2021 are primarily due to the future of work environment as we reevaluate our facilities footprint. The Company continues to identify ways to improve operating efficiency and reduce cost which may result in additional restructuring charges in the future.

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Restructuring programs
($ in millions)						Future work environment						Transformative Growth
Expected program charges						$	110					$	290
2020 expenses						—						(238)
2021 expenses						(131)						6
Change in estimated program costs in 2021						37						(52)
Remaining program charges						$	16					$	6

These charges are primarily in the Allstate Protection segment. The actions related to the Transformative Growth program are substantially complete as of December 31, 2021. The future work environment program will be substantially complete in the first half of 2022 based on decisions made through December 31, 2021.

Employee costs include severance and employee benefits primarily impacting claims, sales, service and support functions. Exit costs, primarily related to future work environment, reflect real estate costs primarily related to accelerated amortization of right of use assets and related leasehold improvements at facilities to be vacated.

Restructuring activity during the period
($ in millions)						Employee costs						Exit costs						Total liability
Restructuring liability as of December 31, 2020						$	72					$	—					$	72
Expense incurred						51						144						195
Adjustments to liability						(25)						—						(25)
Payments and non-cash charges						(84)						(137)						(221)
Restructuring liability as of December 31, 2021						$	14					$	7					$	21

As of December 31, 2021, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled $247 million for employee costs and $157 million for exit costs.

Note 15			Commitments, Guarantees and Contingent Liabilities

Shared markets and state facility assessments

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

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

Florida Citizens Castle Key is subject to assessments from Citizens Property Insurance Corporation in the state of Florida (“FL Citizens”), which was initially created by the state of Florida to provide insurance to property owners unable to obtain coverage in the private insurance market. 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 maximum of the greater of: 2% of the projected deficit or 2% of the aggregate statewide direct written premium for the prior calendar year. The base of assessable insurers includes all property and casualty premiums in the state, except workers’ compensation, medical malpractice, accident and health insurance and policies written under the NFIP. An insurer may recoup a

regular assessment through a surcharge to policyholders. In order to recoup this assessment, an insurer must file for a policy surcharge with the Florida Office of Insurance Regulation at least fifteen days prior to imposing the surcharge on policies. If a deficit remains after the regular assessment, FL Citizens can also levy emergency assessments in the current and subsequent years. Companies are required to collect the emergency assessments directly from residential property policyholders and remit to FL Citizens as collected. Currently, the emergency assessment is zero for all policies issued or renewed on or after July 1, 2015.

Louisiana Citizens Louisiana Citizens Property Insurance Corporation (“LA Citizens”) can levy a regular assessment on participating companies for a deficit in any calendar year up to a maximum of the greater of 10% of the calendar year deficit or 10% of Louisiana direct property premiums industry-wide for the prior calendar year. If the plan year deficit exceeds the amount that can be recovered through regular assessments, LA Citizens may fund the remaining deficit by issuing revenue assessment bonds in the capital markets. LA Citizens then declares emergency assessments each year to provide debt service on the bonds until they are retired. Companies writing assessable lines must surcharge their policyholders emergency assessments in the percentage established annually by LA Citizens and must remit amounts collected to the bond trustee on a quarterly basis. Emergency assessments to pay off bonds issued in 2007 for the hurricanes of 2005 will continue until 2025.

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2021 Form 10-K Notes to Consolidated Financial Statements

Facilities such as FL Citizens and LA Citizens are generally designed so that the ultimate cost is borne by policyholders; however, the exposure to assessments from these facilities and the availability of recoupments or premium rate increases may not offset each other in the Company’s financial statements. Moreover, even if they do offset each other, they may not offset each other in financial statements for the same fiscal period due to the ultimate timing of the assessments and recoupments or premium rate increases, as well as the possibility of policies not being renewed in subsequent years.

California Earthquake Authority Exposure to certain potential losses from earthquakes in California is limited by the Company’s participation in the California Earthquake Authority (“CEA”), which provides insurance for California earthquake losses. The CEA is a privately-financed, publicly-managed state agency created to provide insurance coverage for earthquake damage. Insurers selling homeowners insurance in California are required to offer earthquake insurance to their customers either through their company or by participation in the CEA. The Company’s homeowners policies continue to include coverages for losses caused by explosions, theft, glass breakage and fires following an earthquake, which are not underwritten by the CEA.

As of October 31, 2021, the CEA’s capital balance was approximately $5.70 billion. Should losses arising from an earthquake cause a deficit in the CEA, an additional $1.70 billion would be obtained from the proceeds of revenue bonds the CEA may issue, an existing $9.50 billion reinsurance layer, $1.00 billion from policy surcharge, and finally, if needed, assessments on participating insurance companies. Participating insurers are required to pay an assessment, currently estimated not to exceed $1.70 billion, if the capital of the CEA falls below $350 million. Within the limits previously described, the assessment could be intended to restore the CEA’s capital to a level of $350 million. There is no provision that allows insurers to recover assessments through a premium surcharge or other mechanism. The CEA’s projected aggregate claim paying capacity is $19.60 billion as of October 31, 2021 and if an event were to result in claims greater than its capacity, affected policyholders may be paid a prorated portion of their covered losses, paid on an installment basis, or no payments may be made if the claim paying capacity of the CEA is insufficient.

All future assessments on participating CEA insurers are based on their CEA insurance market share as of December 31 of the preceding year. As of December 31, 2020, the Company’s market share was 8.7%. The Company does not expect its market share to materially change. At this level, the Company’s maximum possible CEA assessment was $144 million during 2021. These amounts are re-evaluated by the board of directors of the CEA on an annual basis. Accordingly, assessments from the CEA for a particular quarter or annual period may be material to the results of operations and cash flows, but not the financial position of the Company. Management believes the

Company’s exposure to earthquake losses in California has been significantly reduced as a result of its participation in the CEA.

Texas Windstorm Insurance Association The Company participates as a member of the Texas Windstorm Insurance Association (“TWIA”), which provides wind and hail property coverage to coastal risks unable to procure coverage in the voluntary market. Wind and hail coverage is written on a TWIA-issued policy. TWIA follows a funding structure first utilizing currently available funds set aside from current and prior years. Under the current law, to the extent losses exceed premiums received from policyholders, TWIA utilizes a combination of reinsurance, TWIA issued securities, as well as member and policyholder assessments to fund loss payments.

Any assessments from TWIA for a particular quarter or annual period may be material to the results of operations and cash flows, but not to the financial position of the Company.

Texas Fair Plan Association The Company participates as a member of the Texas Fair Plan Association (“FAIR Plan”), which provides residential property insurance to inland areas designated as underserved by the Commissioner of Insurance and the applicant(s) are unable to procure coverage in the voluntary market. The FAIR Plan issues insurance policies, like an insurance company, and it also functions as a pooling mechanism that allocates premiums, claims and expenses back to the insurance industry. As a result of the losses incurred related to Hurricane Harvey, in 2017 the FAIR Plan Board unanimously voted to approve its first ever member assessment of which the Company’s share was $8 million based on total direct premium written in Texas. Insurers are permitted to recover the assessment through either a premium surcharge applied to existing customers over a three-year period or increased rates, but the ability to fully recover the assessment may be impacted by market conditions or other factors.

North Carolina Joint Underwriters Association The North Carolina Joint Underwriters Association (“NCJUA”) was created to provide property insurance for properties (other than the state’s beach and coastal areas) that insurers are not otherwise willing to insure. All insurers licensed to write property insurance in North Carolina are members of the NCJUA. Premiums, losses and expenses of the NCJUA are shared by the member companies in proportion to their respective North Carolina property insurance writings. Member companies participate in plan deficits or surpluses based on their participation ratios, which are determined annually. The Company had a $5 million receivable from the NCJUA at December 31, 2021 representing our participation in the NCJUA’s surplus of $16 million for all open years.

North Carolina Insurance Underwriting Association The North Carolina Insurance Underwriting Association (“NCIUA”) provides windstorm and hail coverage as well as homeowners policies for properties located in the state’s beach and coastal areas that insurers are not otherwise willing to insure. All insurers licensed to write

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Notes to Consolidated Financial Statements 2021 Form 10-K

residential and commercial property insurance in North Carolina are members of the NCIUA. Members are assessed in proportion to their North Carolina residential and commercial property insurance writings, which is determined annually and varies by coverage, for plan deficits. As of December 31, 2021, the NCIUA had a surplus of $664 million. No member company is entitled to the distribution of any portion of the Association’s surplus. The Company does not recognize any interest related to this surplus. Legislation in 2009 capped insurers’ assessments for losses incurred in any calendar year at $1.00 billion. Subsequent to an industry assessment of $1.00 billion, if the plan continues to require funding, it may authorize insurers to assess a 10% catastrophe recovery charge on each property insurance policy statewide to be remitted to the plan.

Other programs The Company is also subject to assessments by the NCRF and the FHCF, which are described in Note 11.

Guaranty funds

Under state insurance guaranty fund laws, insurers doing business in a state can be assessed, up to prescribed limits, for certain obligations of insolvent insurance companies to policyholders and claimants. Amounts assessed to each company are typically related to its proportion of business written in each state. The Company’s policy is to accrue assessments when the entity for which the insolvency relates has met its state of domicile’s statutory definition of insolvency, the amount of the loss is reasonably estimable and the related premium upon which the assessment is based is written. In most states, the definition is met with a declaration of financial insolvency by a court of competent jurisdiction. In certain states there must also be a final order of liquidation. Since most states allow a credit against premium or other state related taxes for assessments, an asset is recorded based on paid and accrued assessments for the amount the Company expects to recover on the respective state’s tax return and is realized over the period allowed by each state. As of December 31, 2021 and 2020, the liability balance included in other liabilities and accrued expenses was $17 million and $9 million, respectively. The related premium tax offsets included in other assets were $7 million and $8 million as of December 31, 2021 and 2020, respectively.

Guarantees

In the normal course of business, the Company provides standard indemnifications to contractual counterparties in connection with numerous transactions, including acquisitions and divestitures. The types of indemnifications typically provided include indemnifications for breaches of representations and warranties, taxes and certain other liabilities, such as third-party lawsuits. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business based on an assessment that the risk of loss would be remote. The terms of the indemnifications vary in duration and nature. In many cases, the

maximum obligation is not explicitly stated and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur. Consequently, the maximum amount of the obligation under such indemnifications is not determinable. Historically, the Company has not made any material payments pursuant to these obligations.

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

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

The aggregate liability balance related to all guarantees was not material as of December 31, 2021.

Regulation and compliance

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

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Company routinely reviews its practices to validate compliance with laws and regulations and with internal procedures and policies. As a result of these reviews, from time to time the Company may decide to modify some of its procedures and policies. Such modifications, and the reviews that led to them, may be accompanied by payments being made and costs being incurred. The ultimate changes and eventual effects of these actions on the Company’s business, if any, are uncertain.

Legal and regulatory proceedings and inquiries

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

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

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

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

pleadings bear little relation to the ultimate loss, if any, to the Company.

In connection with regulatory examinations and proceedings, government authorities may seek various forms of relief, including penalties, restitution, and changes in business practices. The Company may not be advised of the nature and extent of relief sought until the final stages of the examination or proceeding.

Accrual and disclosure policy The Company reviews its lawsuits, regulatory inquiries, and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for such matters at management’s best estimate when the Company assesses that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company does not establish accruals for such matters when the 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

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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 $135 million, pre-tax. This disclosure is not an indication of expected loss, if any. Under accounting guidance, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event or events occurring is slight.” This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate. The estimate does not include matters or losses for which an estimate is not possible. Therefore, this estimate represents an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Company’s maximum possible loss exposure. Information is provided below regarding the nature of all of the disclosed matters and, where specified, the amount, if any, of plaintiff claims associated with these loss contingencies.

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

Claims related proceedings The Company is managing various disputes in Florida that raise challenges to the Company’s practices, processes, and procedures relating to claims for personal injury protection benefits under Florida auto policies. Medical providers continue to pursue litigation under various theories that challenge the amounts that the Company pays under the personal injury protection coverage,

seeking additional benefit payments, as well as applicable interest, penalties and fees. There is a pending class action, Revival Chiropractic v. Allstate Insurance Company, et al. (M.D. Fla., filed January 2019; appeal pending, 11th Circuit Court of Appeals), where the court denied class certification and plaintiff’s request to file a renewed motion for class certification. The Company is also defending litigation involving individual plaintiffs.

The Company is defending putative class actions in various courts that raise challenges to the Company’s depreciation practices in homeowner property claims. In these lawsuits, plaintiffs generally allege that, when calculating actual cash value, the costs of “non-materials” such as labor, general contractor’s overhead and profit, and sales tax should not be subject to depreciation. The Company is currently defending the following lawsuits on this issue: Perry v. Allstate Indemnity Company, et al. (N.D. Ohio, filed May 2016); Lado v. Allstate Vehicle and Property Insurance Company (S.D. Ohio, filed March 2020); Maniaci v. Allstate Insurance Company (N.D. Ohio, filed March 2020); Ferguson-Luke, et al. v. Allstate Property and Casualty Insurance Company (N.D. Ohio, filed April 2020); Clark v. Allstate Vehicle and Property Insurance Company (Circuit Court of Independence Co., Ark., filed February 2016); and Mitchell, et al. v. Allstate Vehicle and Property Insurance Company, et al. (S.D. Ala., filed August 2021). No classes have been certified in these matters. A settlement has been reached in Huey v. Allstate Vehicle and Property Insurance Company (N.D. Miss., filed October 2019), and a settlement-in-principle has been reached in Thaxton v. Allstate Indemnity Company (Madison Co., Ill., filed July 2020); and Hester v. Allstate Vehicle and Property Insurance Company (St. Clair Co., Ill., filed 2020).

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

The following cases are currently pending against the Company: Olberg v. Allstate Insurance Company, Allstate Fire and Casualty Insurance Company, and CCC Information Services, Inc. (W.D. Wash., filed April 2018); Bloomgarden v. Allstate Fire and Casualty Insurance Company (S.D. Fla., filed July 2018, dismissed August 2019, refiled on September 2019, remanded to 17th Judicial Circuit, Broward Co. October 2020); Erby v. Allstate Fire and Casualty Insurance Company (E.D. Pa.,

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filed October 2018); Kronenberg v. Allstate Insurance Company and Allstate Fire and Casualty Insurance Company (E.D.N.Y., filed December 2018); Durgin v. Allstate Property and Casualty Insurance Company (W.D. La., filed June 7, 2019); Saad v. National General Insurance Company (Superior Ct., Los Angeles Co., Cal., filed May 2020); Williams v. Esurance Property and Casualty Insurance Company (C.D. Cal., filed September 2020); Cotton v. Allstate Fire and Casualty Insurance Company (Cir. Ct. of Cook Co. Ill., Chancery Div., filed October 2020); Romaniak v. Esurance Property and Casualty Insurance Company (N.D. Ohio, filed December 2020); Rawlins v. Esurance Property and Casualty Insurance Company (E.D. Mo., filed February 2021).

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

Other proceedings The Company is defending against an investigatory hearing before the California Insurance Commissioner concerning the private passenger automobile insurance rating practices of Allstate Insurance Company and Allstate Indemnity Company in California. The investigatory hearing is captioned: In the Matter of the Rating Practices of Allstate Insurance Company and Allstate Indemnity Company. Pursuant to the Notice of Hearing issued by the California Insurance Commissioner, the California Insurance Commissioner is investigating: (1) whether Allstate has potentially violated California insurance law by using illegal price optimization; (2) how Allstate implemented any such potentially illegal price optimization in its private passenger auto insurance rates and/or class plans; and (3) how such potentially illegal price optimization impacted Allstate’s private passenger auto insurance policyholders. Fact discovery has been completed in the investigatory hearing and an administrative hearing is scheduled to begin on May 10, 2022.

The stockholder derivative actions described below are disclosed pursuant to SEC disclosure requirements for these types of matters. The putative class action alleging violations of the federal securities laws is disclosed because it involves similar allegations to those made in the stockholder derivative actions.

Biefeldt / IBEW Consolidated Action. Two separately filed stockholder derivative actions have been consolidated into a single proceeding that is pending in the Circuit Court for Cook County, Illinois, Chancery Division. The original complaint in the first-filed of those actions, Biefeldt v. Wilson, et al., was filed on August 3, 2017, in that court by a plaintiff alleging that she is a stockholder of the Company. On June 29, 2018, the court granted defendants’ motion to dismiss that complaint for failure to make a pre-suit demand on the Allstate Board but granted plaintiff permission to file an amended complaint. The original complaint in IBEW Local No. 98 Pension Fund v. Wilson, et al., was filed on April 12, 2018, in the same court by another plaintiff alleging to be a stockholder of the Company. After the court issued its dismissal decision in the Biefeldt action, plaintiffs agreed to consolidate the two actions and filed a consolidated amended complaint

naming as defendants the Company’s chairman, president and chief executive officer, its former president, and certain present or former members of the Allstate Board. In that complaint, plaintiffs allege that the directors and officer defendants breached their fiduciary duties to the Company in connection with allegedly material misstatements or omissions concerning the Company’s automobile insurance claim frequency statistics and the reasons for a claim frequency increase for Allstate brand auto insurance between October 2014 and August 3, 2015. The factual allegations are substantially similar to those at issue in In re The Allstate Corp. Securities Litigation. Plaintiffs further allege that a senior officer and several outside directors engaged in stock option exercises allegedly while in possession of material nonpublic information. Plaintiffs seek, on behalf of the Company, an unspecified amount of damages and various forms of equitable relief. Defendants moved to dismiss the consolidated complaint on September 24, 2018 for failure to make a demand on the Allstate Board. On May 14, 2019, the court granted defendants’ motion to dismiss the complaint, but allowed plaintiffs leave to file a second consolidated amended complaint which they filed on September 17, 2019. Defendants moved to dismiss the complaint on November 1, 2019 for failure to make a demand on the Allstate Board. The court subsequently requested supplemental briefing on the motion which concluded on February 1, 2021. On February 24, 2021, the court dismissed the second amended consolidated complaint with prejudice. Plaintiffs appealed and the court held a hearing on February 8, 2022. The Company awaits the court’s decision.

In Sundquist v. Wilson, et al., another plaintiff alleging to be a stockholder of the Company filed a stockholder derivative complaint in the United States District Court for the Northern District of Illinois on May 21, 2018. Plaintiff seeks, on behalf of the Company, an unspecified amount of damages and various forms of equitable relief. The complaint names as defendants the Company’s chairman, president and chief executive officer, its former president, its former vice chairman, and certain present or former members of the board of directors.

The complaint alleges breaches of fiduciary duty based on allegations similar to those asserted in In re The Allstate Corp. Securities Litigation as well as state law “misappropriation” claims based on stock option transactions by the Company’s chairman, president and chief executive officer, its former vice chairman, and certain members of the board of directors. Defendants moved to dismiss and/or stay the complaint on August 7, 2018. On December 4, 2018, the court granted defendants’ motion and stayed the case pending the final resolution of the consolidated Biefeldt/IBEW matter.

Mims v. Wilson, et al., is an additional stockholder derivative action filed on February 12, 2020 in the United States District Court for the Northern District of Illinois. Plaintiff alleges that she previously made a demand on the Allstate Board and seeks, on behalf of the Company, an unspecified amount of damages and

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various forms of equitable relief. The complaint names as defendants the Company’s chairman, president and chief executive officer, its former president, its former vice chairman, and certain present or former members of the Allstate Board. The complaint alleges breaches of fiduciary duty and unjust enrichment based on allegations similar to those asserted in In re The Allstate Corp. Securities Litigation. On February 20, 2020, the Allstate Board appointed a special committee to investigate the allegations in plaintiff’s demand. The Company moved to dismiss the complaint on August 24, 2020 and on December 8, 2020, the court granted defendants’ motion, and dismissed the complaint with prejudice. On January 5, 2021, plaintiff filed a motion to alter the judgment and requested leave to file an amended complaint and defendants opposed the motion. On February 10, 2021, the court denied plaintiff’s motion to alter the judgment. No appeal was filed.

In re The Allstate Corp. Securities Litigation is a certified class action filed on November 11, 2016 in the United States District Court for the Northern District of Illinois against the Company and two of its officers asserting claims under the federal securities laws. Plaintiffs allege that they purchased Allstate common stock during the class period and suffered damages as the result of the conduct alleged. Plaintiffs seek an unspecified amount of damages, costs, attorney’s fees, and other relief as the court deems appropriate. Plaintiffs allege that the Company and certain senior officers made allegedly material misstatements or omissions concerning claim frequency statistics and the reasons for a claim frequency increase for Allstate brand auto insurance between October 2014 and August 3, 2015.

Plaintiffs further allege that a senior officer engaged in stock option exercises during that time allegedly while in possession of material nonpublic information about Allstate brand auto insurance claim frequency. The Company, its chairman, president and chief executive officer, and its former president are the named defendants. After the court denied their motion to dismiss on February 27, 2018, defendants answered the complaint, denying plaintiffs’ allegations that there was any misstatement or omission or other misconduct. On June 22, 2018, plaintiffs filed their motion for class certification. The court allowed the lead plaintiffs to amend their complaint to add the City of Providence Employee Retirement System as a proposed class representative and on September 12, 2018, the amended complaint was filed. On March 26, 2019, the court 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. On April 9, 2019, defendants filed with the U.S. Court of Appeals for the Seventh Circuit a petition for permission to appeal this ruling and the Seventh Circuit granted that petition on April 25, 2019. On July 16, 2020, the Seventh Circuit vacated the class certification order and remanded the matter for further consideration by the district court. Discovery in this matter concluded on October 5, 2020. 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. On January 4, 2021, defendants filed with the Seventh Circuit a petition for permission to appeal this ruling. The petition was denied on January 28, 2021. On January 10, 2022, the magistrate judge denied the parties’ Daubert challenges in all material aspects. The court held a status conference on February 1, 2022 and set a schedule for summary judgment briefing to commence on March 23, 2022.

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

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Note 16			Income Taxes

The Company and its domestic subsidiaries file a consolidated federal income tax return. Tax liabilities and benefits realized by the consolidated group are allocated as generated by the respective entities.

Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted through income tax expense as changes in tax laws or rates are enacted.

The Company qualified and claimed certain employer payroll tax credits that are allowed under the Coronavirus Aid, Relief and Economic Security Act. For the year ended December 31, 2021, the Company recorded $21 million of refundable employee retention tax credit reported in property and casualty claims and claims expense in the Consolidated Statements of Operations.

Regulatory tax examinations On January 4, 2021 and October 1, 2021, the Company acquired National General and SafeAuto, respectively. For tax years prior to the acquisition, National General and SafeAuto are subject to separate Internal Revenue Service (“IRS”) audits. The IRS has completed its exam of Allstate’s tax years prior to 2017, National General tax years prior to 2016, and SafeAuto’s tax years prior to 2018. Currently, the Company is under exam for the 2017 and 2018 tax years and National General is under exam for the 2016, 2017, and 2018 tax years. Any adjustments that may result from IRS examinations of the Company’s tax returns are not expected to have a material effect on the consolidated financial statements.

Unrecognized tax benefits The Company recognizes tax positions in the consolidated financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the consolidated financial statements.

Reconciliation of the change in the amount of unrecognized tax benefits
						For the years ended December 31,
($ in millions)						2021						2020						2019
Balance – beginning of year						$	12					$	70					$	70
Acquisitions						5						—						—
Decrease for settlements						—						(58)						—
Balance – end of year						$	17					$	12					$	70

The Company believes that the unrecognized tax benefits balance will not materially change within the next twelve months.

Components of the deferred income tax assets and liabilities
						As of December 31,
($ in millions)						2021						2020
Deferred tax assets
Unearned premium reserves						$	742					$	659
Discount on loss reserves						169						79
Accrued compensation						151						146
Net operating loss carryover						88						23
Other postretirement benefits						31						34
Pension						—						187
Other assets						90						91
Total deferred tax assets before valuation allowance						1,271						1,219
Valuation allowance						(24)						—
Total deferred tax assets after valuation allowance						1,247						1,219
Deferred tax liabilities
DAC						(924)						(683)
Investments						(666)						(216)
Intangible assets						(219)						(86)
Unrealized net capital gains						(163)						(539)
Pension						(9)						—
Other liabilities						(99)						(77)
Total deferred tax liabilities						(2,080)						(1,601)
Net deferred tax liabilities						$	(833)					$	(382)

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As of December 31, 2021, the Company has U.S. federal and foreign net operating loss (“NOL”) carryforwards, some of which will expire on various dates from 2024 through 2037 as indicated in the table below. In assessing the realizability of gross deferred tax assets, management considers whether it is more likely than not that some portion or all of the gross deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment, as well as limitations on use in future periods. Accordingly, management believes that it is more likely than not that the benefit from certain NOL carryforwards from recent acquisitions will not be realized. The Company had a valuation allowance of $24 million on the deferred tax assets related to these NOL carryforwards.

The provisions of the Tax Cuts and Jobs Act of 2017 eliminated the 20-year carryforward period and made it indefinite for federal net operating losses generated in tax years after December 31, 2017. For such amounts generated prior to 2018, the 20-year carryforward period continues to apply.

Components of the net operating loss carryforwards as of December 31, 2021
($ in millions)						20-Year Carryforward Expires in 2024-2037						Indefinite Carryforward Period						Total
US Federal						$	195					$	9					$	204
Foreign						—						218						218
Total						$	195					$	227					$	422

Components of income tax expense
						For the years ended December 31,
($ in millions)						2021						2020						2019
Current						$	841					$	1,480					$	919
Deferred						448						(107)						197
Total income tax expense						$	1,289					$	1,373					$	1,116

The Company paid income taxes of $1.05 billion, $1.48 billion and $648 million in 2021, 2020 and 2019, respectively.

The Company had current income tax receivable of $370 million and payable of $55 million as of December 31, 2021 and 2020, respectively.

Reconciliation of the statutory federal income tax rate to the effective income tax rate
						For the years ended December 31,
($ in millions)						2021									2020									2019
Income before income taxes						$	6,448								$	6,802								$	5,443
Statutory federal income tax rate on income from operations						1,354			21.0		%				1,428			21.0		%				1,141			21.0		%
State income taxes						13			0.2						31			0.4						39			0.7
Tax credits						(42)			(0.6)						(24)			(0.4)						(19)			(0.3)
Tax-exempt income						(18)			(0.3)						(23)			(0.3)						(27)			(0.5)
Share-based payments						(18)			(0.3)						(30)			(0.4)						(24)			(0.4)
Other						—			—						(9)			(0.1)						6			—
Effective income tax rate on income from operations						$	1,289		20.0		%				$	1,373		20.2		%				$	1,116		20.5		%

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2021 Form 10-K Notes to Consolidated Financial Statements

Note 17			Statutory Financial Information and Dividend Limitations

Allstate’s domestic property and casualty and life insurance subsidiaries prepare their statutory-basis financial statements in conformity with accounting practices prescribed or permitted by the insurance department of the applicable state of domicile. Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners (“NAIC”), as well as state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed.

All states require domiciled insurance companies to prepare statutory-basis financial statements in conformity with the NAIC Accounting Practices and Procedures Manual, subject to any deviations prescribed or permitted by the applicable insurance commissioner or director. Statutory accounting practices differ from GAAP primarily since they require charging policy acquisition costs to expense as incurred, establishing life insurance reserves based on different actuarial assumptions, and valuing certain investments and establishing deferred taxes on a different basis.

Statutory net income (loss) and capital and surplus of Allstate’s domestic insurance subsidiaries
						Net income (loss)																		Capital and surplus
($ in millions)						2021						2020						2019						2021						2020
Amounts by major business type:
Property and casualty insurance						$	5,975					$	6,232					$	3,989					$	21,186					$	17,128
Accident and health insurance						96						95						92						322						231
Life and annuity business sold						1,642						(81)						330						—						4,024
Amount per statutory accounting practices						$	7,713					$	6,246					$	4,411					$	21,508					$	21,383

Dividend Limitations

There are no regulatory restrictions that limit the payment of dividends by the Corporation, except those generally applicable to corporations incorporated in Delaware. Dividends are payable only out of certain components of shareholders’ equity as permitted by Delaware law. However, the ability of the Corporation to pay dividends is dependent on business conditions, income, cash requirements of the Company, receipt of dividends from AIC and other relevant factors.

The payment of shareholder dividends by AIC without the prior approval of the Illinois Department of Insurance (“IL DOI”) is limited to formula amounts based on net income and capital and surplus, determined in conformity with statutory accounting practices, as well as the timing and amount of dividends paid in the preceding twelve months. AIC paid dividends of $5.95 billion in 2021. The maximum amount of dividends AIC will be able to pay without prior IL DOI approval at a given point in time during 2022 is $5.51 billion, less dividends paid during the preceding twelve months measured at that point in time. The payment of a dividend in excess of this amount requires 30 days advance written notice to the IL DOI. The dividend is deemed approved, unless the IL DOI disapproves it within the 30-day notice period. Additionally, any dividend must be paid out of unassigned surplus excluding unrealized appreciation from investments, which for AIC totaled $12.72 billion as of December 31, 2021, and cannot result in capital and surplus being less than the minimum amount required by law.

Under state insurance laws, insurance companies are required to maintain paid up capital of not less than the minimum capital requirement applicable to the types of insurance they are authorized to write. Insurance companies are also subject to risk-based capital (“RBC”) requirements adopted by state

insurance regulators. A company’s “authorized control level RBC” is calculated using various factors applied to certain financial balances and activity. Companies that do not maintain adjusted statutory capital and surplus at a level in excess of the company action level RBC, which is two times authorized control level RBC, are required to take specified actions. Company action level RBC is significantly in excess of the minimum capital requirements. Total adjusted statutory capital and surplus and authorized control level RBC of AIC were $18.43 billion and $2.90 billion, respectively, as of December 31, 2021. Most of the Corporation’s insurance subsidiaries are subsidiaries of or reinsure all of their business to AIC. AIC’s subsidiaries are included as a component of AIC’s total statutory capital and surplus.

The amount of restricted net assets, as represented by the Corporation’s investment in its insurance subsidiaries, was $27.72 billion as of December 31, 2021.

Intercompany transactions

Notification and approval of intercompany lending activities is also required by the IL DOI for transactions that exceed a level that is based on a formula using statutory admitted assets and statutory surplus.

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Notes to Consolidated Financial Statements 2021 Form 10-K

Note 18			Benefit Plans

Pension and other postretirement plans

Defined benefit pension plans cover most full-time employees, certain part-time employees and employee-agents. Benefits under the pension plans are based upon the employee’s length of service, eligible annual compensation and, prior to January 1, 2014, either a cash balance or final average pay formula. A cash balance formula applies to all eligible employees hired after August 1, 2002. Eligible employees hired before August 1, 2002 chose between the cash balance formula and the final average pay formula. In July 2013, the Company amended its primary plans effective January 1, 2014 to introduce a new cash balance formula to replace the previous formulas (including the final average pay formula and the previous cash balance formula) under which eligible employees accrue benefits. The Company merged two of its qualified pension plans effective March 31, 2019.

The Company also provides a medical coverage subsidy for eligible employees hired before January 1, 2003, including their eligible dependents, when they retire and certain life insurance benefits for eligible retirees (“postretirement benefits”). Effective January 1, 2021, the Company eliminated the medical coverage subsidy for employees who were not eligible to retire as of December 31, 2020.

Qualified employees may become eligible for a medical subsidy if they retire in accordance with the terms of the applicable plans and are insured under the Company’s group plans or other approved plans in accordance with the plan’s participation requirements. The Company shares the cost of retiree medical benefits with non Medicare-eligible retirees based on years of service, with the Company’s share being subject to a 5% limit on future annual medical cost inflation after retirement. For Medicare-eligible retirees, the Company provides a fixed Company contribution based on years of service and other factors, which is not subject to adjustments for inflation.

In July 2013, the Company amended the plan to eliminate the life insurance benefits effective January 1, 2014 for current eligible employees and effective January 1, 2016 for eligible retirees who retired after 1989. Subject to a court order, the Company paid life insurance premiums for certain retiree plaintiffs until their lawsuit seeking to keep their life insurance benefits intact was resolved. In September 2020, the court entered summary judgment in favor of the Company and dismissed the action, releasing the Company from the order requiring the continued payment of premiums for certain retirees. In December 2021, the Court of Appeals affirmed summary judgment in favor of the Company. In January 2022, the remaining plaintiffs signaled they will appeal to U.S. Supreme Court.

The Company has reserved the right to modify or terminate its benefit plans at any time and for any reason.

Obligations and funded status

The Company calculates benefit obligations based upon generally accepted actuarial methodologies using the projected benefit obligation (“PBO”) for pension plans and the accumulated postretirement benefit obligation (“APBO”) for other postretirement plans. Pension costs and other postretirement obligations are determined using a December 31 measurement date. The benefit obligations represent the actuarial present value of all benefits attributed to employee service rendered as of the measurement date. The PBO is measured using the pension benefit formulas and assumptions. A plan’s funded status is calculated as the difference between the benefit obligation and the fair value of plan assets. The Company’s funding policy for the pension plans is to make contributions at a level in accordance with regulations under the Internal Revenue Code (“IRC”) and generally accepted actuarial principles. The Company’s other postretirement benefit plans are not funded.

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2021 Form 10-K Notes to Consolidated Financial Statements

Change in projected benefit obligation, plan assets and funded status
						As of December 31,
						Pension benefits												Postretirement benefits
($ in millions)						2021						2020						2021						2020
Change in projected benefit obligation
Benefit obligation, beginning of year						$	7,763					$	7,139					$	318					$	397
Service cost						103						104						1						4
Interest cost						191						210						8						11
Participant contributions						—						—						16						14
Remeasurement of projected benefit obligation (gains) losses						(309)						813						(16)						22
Benefits paid						(1,242)						(522)						(43)						(37)
Plan amendments						—						—						—						(102)
Translation adjustment and other						(6)						(1)						—						(1)
Curtailment losses (gains)						—						20						—						10
Benefit obligation, end of year						$	6,500					$	7,763					$	284					$	318
Change in plan assets
Fair value of plan assets, beginning of year						$	6,987					$	6,192
Actual return on plan assets						764						1,300
Employer contribution						22						18
Benefits paid						(1,242)						(522)
Translation adjustment and other						(6)						(1)
Fair value of plan assets, end of year						$	6,525					$	6,987
Funded status (1)						$	25					$	(776)					$	(284)					$	(318)
Amounts recognized in AOCI
Unamortized pension and other postretirement prior service credit						$	(28)					$	(78)					$	(65)					$	(89)

(1)The funded status is recorded within other assets or other liabilities and accrued expenses on the Consolidated Statements of Financial Position.

Changes in items not yet recognized as a component of net cost for pension and other postretirement plans
($ in millions)						Pension benefits						Postretirement benefits
Items not yet recognized as a component of net cost – December 31, 2020						$	(78)					$	(89)
Prior service credit amortized to net cost						50						25
Translation adjustment and other						—						(1)
Items not yet recognized as a component of net cost – December 31, 2021						$	(28)					$	(65)

The prior service credit is recognized as a component of net cost for pension and other postretirement plans amortized over the average remaining service period of active employees expected to receive benefits.

The accumulated benefit obligation (“ABO”) for all defined benefit pension plans was $6.36 billion and $7.55 billion as of December 31, 2021 and 2020, respectively. The ABO is the actuarial present value of all benefits attributed by the pension benefit formula

to employee service rendered at the measurement date. However, it differs from the PBO due to the

exclusion of an assumption as to future compensation levels.

The PBO, ABO and fair value of plan assets for the Company’s pension plans with an ABO in excess of plan assets were $123 million, $121 million and zero, respectively, as of December 31, 2021 and $7.33 billion, $7.13 billion and $6.56 billion, respectively, as of December 31, 2020. Included in the accrued benefit cost of the pension benefits are certain unfunded non-qualified plans with accrued benefit costs of $123 million and $139 million for 2021 and 2020, respectively.

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Notes to Consolidated Financial Statements 2021 Form 10-K

Components of net cost (benefit) for pension and other postretirement plans
						For the years ended December 31,
						Pension benefits																		Postretirement benefits																		Total pension and postretirement benefits
($ in millions)						2021						2020						2019						2021						2020						2019						2021						2020						2019
Service cost						$	103					$	104					$	117					$	1					$	4					$	8					$	104					$	108					$	125
Interest cost						191						210						240						8						11						14						199						221						254
Expected return on plan assets						(445)						(414)						(403)						—						—						—						(445)						(414)						(403)
Amortization of prior service credit						(50)						(54)						(56)						(25)						(10)						(3)						(75)						(64)						(59)
Curtailment losses (gains)						—						10						—						—						(8)						—						—						2						—
Costs and expenses						(201)						(144)						(102)						(16)						(3)						19						(217)						(147)						(83)
Remeasurement of projected benefit obligation						(309)						813						927						(16)						22						19						(325)						835						946
Remeasurement of plan assets						(319)						(886)						(832)						—						—						—						(319)						(886)						(832)
Remeasurement (gains) losses						(628)						(73)						95						(16)						22						19						(644)						(51)						114
Total net (benefit) cost						$	(829)					$	(217)					$	(7)					$	(32)					$	19					$	38					$	(861)					$	(198)					$	31

The service cost component is the actuarial present value of the benefits attributed by the plans’ benefit formula to services rendered by the employees during the period.

Interest cost is the increase in the PBO in the period due to the passage of time at the discount rate.

Interest cost fluctuates as the discount rate changes and is also impacted by the related change in the size of the PBO.

The expected return on plan assets is determined as the product of the expected long-term rate of return on plan assets and the fair value of plan assets.

Pension and other postretirement service cost, interest cost, expected return on plan assets, amortization of prior service credit and curtailment gains and losses are reported in property and casualty insurance claims and claims expense, operating costs and expenses, net investment income and (if applicable) restructuring and related charges on the Consolidated Statements of Operations.

Remeasurement gains and losses relate to changes in discount rates, the differences between actual return on plan assets and the expected long-term rate of return on plan assets, and differences between actual plan experience and actuarial assumptions.

Weighted average assumptions used to determine net pension cost and net postretirement benefit cost
						For the years ended December 31,
						Pension benefits																		Postretirement benefits
						2021						2020						2019						2021						2020						2019
Discount rate						2.84		%				3.00		%				3.70		%				2.75		%				2.99		%				3.61		%
Expected long-term rate of return on plan assets						7.06						7.08						7.34						n/a						n/a						n/a
Cash balance interest credit rate						2.04						1.65						2.59						n/a						n/a						n/a

Weighted average assumptions used to determine benefit obligations
						For the years ended December 31,
						Pension benefits												Postretirement benefits
						2021						2020						2021						2020
Discount rate						2.93		%				2.51		%				2.86		%				2.39		%
Cash balance interest credit rate						1.90						1.65						n/a						n/a

The weighted average health care cost trend rate used in measuring the accumulated postretirement benefit cost is 6.6% for 2022, gradually declining to 4.5% in 2035 and remaining at that level thereafter.

Pension plan assets In general, the Company’s pension plan assets are managed in accordance with investment policies approved by pension investment committees. The purpose of the policies is to ensure the plans’ long-term ability to meet benefit obligations by prudently investing plan assets and Company contributions, while taking into consideration regulatory and legal requirements and current market conditions. The investment policies are reviewed periodically and specify target plan asset allocation by

asset category. In addition, the policies specify various asset allocation and other risk limits. The target asset allocation takes the plans’ funding status into consideration, among other factors, including anticipated demographic changes or liquidity requirements that may affect the funding status such as the potential impact of lump sum settlements as well as existing or expected market conditions. In general, the allocation has a lower overall investment risk when a plan is in a stronger funded status position since there is less economic incentive to take risk to increase the expected returns on the plan assets. The pension plans’ asset exposure within each asset category is tracked against widely accepted

The Allstate Corporation 173

2021 Form 10-K Notes to Consolidated Financial Statements

established benchmarks for each asset class with limits on variation from the benchmark established in the investment policy. Pension plan assets are regularly

monitored for compliance with these limits and other risk limits specified in the investment policies.

Weighted average target asset allocation and actual percentage of plan assets by asset category
						As of December 31, 2021
						Target asset allocation (1)						Actual percentage of plan assets
Pension plan’s asset category						2021						2021						2020
Equity securities (2)						42 - 56%						55		%				50		%
Fixed income securities						26 - 45						30						38
Limited partnership interests						1 - 18						14						10
Short-term investments and other						—						1						2
Total without securities lending (3)												100		%				100		%

(1)The target asset allocation considers risk-based exposure while the actual percentage of plan assets utilizes a financial reporting view excluding exposure provided through derivatives.

(2)The actual percentage of plan assets for equity securities includes 3% and 1% of fixed income mutual funds in 2021 and 2020, respectively, that are subject to the fixed income securities target allocation.

(3)Securities lending collateral reinvestment of $121 million and $101 million is excluded from the table above in 2021 and 2020, respectively.

The target asset allocation for an asset category may be achieved either through direct investment holdings, through replication using derivative instruments (e.g., futures or swaps) or net of hedges using derivative instruments to reduce exposure to an asset category. The net notional amount of derivatives used for replication and non-hedging strategies is limited to 115% of total plan assets. Market performance of the different asset categories may, from time to time, cause deviation from the target

asset allocation. The asset allocation mix is reviewed on a periodic basis and rebalanced to bring the allocation within the target ranges.

Outside the target asset allocation, the pension plans participate in a securities lending program to enhance returns. As of December 31, 2021, fixed income securities are lent out and cash collateral is invested in short-term investments.

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Notes to Consolidated Financial Statements 2021 Form 10-K

Fair values of pension plan assets as of December 31, 2021
($ in millions)						Quoted prices in active markets for identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant unobservable inputs (Level 3)						Balance as of December 31, 2021
Equity securities						$	311					$	44					$	2					$	357
Fixed income securities:
Government bonds (1)						58						1,206						—						1,264
Corporate bonds						—						696						—						696
Short-term investments						135						65						—						200
Free-standing derivatives:
Assets						—						4						—						4
Liabilities						—						(3)						—						(3)
Other assets						2						—						—						2
Total plan assets at fair value						$	506					$	2,012					$	2					2,520
% of total plan assets at fair value						20.1		%				79.8		%				0.1		%				100.0		%
Investments measured using the net asset value practical expedient																								4,109
Securities lending obligation (2)																								(121)
Derivatives counterparty and cash collateral netting																								(3)
Other net plan assets (3)																								20
Total reported plan assets																								$	6,525

(1)Includes U.S. government and agencies and foreign government bonds.

(2)The securities lending obligation represents the plan’s obligation to return securities lending collateral received under a securities lending program. The terms of the program allow both the plan and the counterparty the right and ability to redeem/return the securities loaned on short notice. Due to its relatively short-term nature, the outstanding balance of the obligation approximates fair value.

(3)Other net plan assets represent cash and cash equivalents, interest and dividends receivable and net receivables related to settlements of investment transactions, such as purchases and sales.

Fair values of pension plan assets as of December 31, 2020
($ in millions)						Quoted prices in active markets for identical assets (Level 1)						Significant other observable inputs (Level 2)						Significant unobservable inputs (Level 3)						Balance as of December 31, 2020
Equity securities						$	227					$	42					$	—					$	269
Fixed income securities:
Government bonds						32						865						—						897
Corporate bonds						—						1,709						2						1,711
Short-term investments						210						35						—						245
Free-standing derivatives:
Assets						—						21						—						21
Liabilities						(2)						(21)						—						(23)
Other assets						2						—						—						2
Total plan assets at fair value						$	469					$	2,651					$	2					3,122
% of total plan assets at fair value						15.0		%				84.9		%				0.1		%				100.0		%
Investments measured using the net asset value practical expedient																								3,908
Securities lending obligation																								(101)
Derivatives counterparty and cash collateral netting																								(19)
Other net plan assets																								77
Total reported plan assets																								$	6,987

The fair values of pension plan assets are estimated using the same methodologies and inputs as those used to determine the fair values for the respective asset category of the Company. These methodologies and inputs are disclosed in Note 6.

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2021 Form 10-K Notes to Consolidated Financial Statements

Rollforward of Level 3 plan assets during December 31, 2021
												Actual return on plan assets:
($ in millions)						Balance as of December 31, 2020						Relating to assets sold during the period						Relating to assets still held at the reporting date						Purchases, sales and settlements, net						Net transfers in (out) of Level 3						Balance as of December 31, 2021
Equity securities						$	—					$	—					$	—					$	2					$	—					$	2
Fixed income securities:
Corporate						2						—						—						(2)						—						—
Total Level 3 plan assets						$	2					$	—					$	—					$	—					$	—					$	2

Rollforward of Level 3 plan assets during December 31, 2020
												Actual return on plan assets:
($ in millions)						Balance as of December 31, 2019						Relating to assets sold during the period						Relating to assets still held at the reporting date						Purchases, sales and settlements, net						Net transfers in (out) of Level 3						Balance as of December 31, 2020
Fixed income securities:
Corporate						$	—					$	—					$	—					$	2					$	—					$	2
Total Level 3 plan assets						$	—					$	—					$	—					$	2					$	—					$	2

Rollforward of Level 3 plan assets during December 31, 2019
												Actual return on plan assets:
($ in millions)						Balance as of December 31, 2018						Relating to assets sold during the period						Relating to assets still held at the reporting date						Purchases, sales and settlements, net						Net transfers in (out) of Level 3						Balance as of December 31, 2019
Fixed income securities:
Corporate						$	5					$	—					$	—					$	(5)					$	—					$	—
Total Level 3 plan assets						$	5					$	—					$	—					$	(5)					$	—					$	—

The expected long-term rate of return on plan assets reflects the average rate of earnings expected on plan assets. The Company’s assumption for the expected long-term rate of return on plan assets is evaluated annually giving consideration to appropriate data including, but not limited to, the plan asset allocation, forward-looking expected returns for the period over which benefits will be paid, historical returns on plan assets and other relevant market data. Given the long-term forward-looking nature of this assumption, the actual returns in any one year do not immediately result in a change to the expected long-term rate of return on plan assets. In consideration of the targeted plan asset allocation, the Company evaluated expected returns using sources including historical average asset class returns from independent nationally recognized providers of this type of data blended together using the asset allocation policy weights for the Company’s pension plans; asset class return forecasts developed by employees with relevant expertise in such forecasts and who are independent from those charged with managing the pension plan assets; and expected portfolio returns from a proprietary simulation methodology of a widely recognized external

investment consulting firm that performs asset allocation and actuarial services for corporate pension plan sponsors. The above sources support the Company’s weighted average long-term rate of return on plan assets assumption of 7.06% used for 2021 and an estimate of 7.06% that will be used for 2022. As of the 2021 measurement date, the arithmetic average of the annual actual return on plan assets for the most recent 10 and 5 years was 11.7% and 15.0%, respectively.

Cash flows There was no required cash contribution necessary to satisfy the minimum funding requirement under the IRC for the tax qualified pension plan for the year ended December 31, 2021.

The Company currently plans to contribute $24 million to its unfunded non-qualified plans and zero to both its primary and other qualified funded pension plans in 2022.

The Company contributed $27 million and $23 million to the postretirement benefit plans in 2021 and 2020, respectively. Contributions by participants were $16 million and $14 million in 2021 and 2020, respectively.

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Notes to Consolidated Financial Statements 2021 Form 10-K

Estimated future benefit payments expected to be paid in the next 10 years
						As of December 31, 2021
($ in millions)						Pension benefits						Postretirement benefits
2022						$	602					$	25
2023						586						25
2024						566						25
2025						533						25
2026						517						24
2027-2031						2,180						85
Total benefit payments						$	4,984					$	209

Allstate 401(k) Savings Plan

Employees of the Company, with the exception of those employed by the Company’s international, SquareTrade and InfoArmor subsidiaries, are eligible to become members of the Allstate 401(k) Savings Plan (“Allstate Plan”). The Company’s contributions are based on the Company’s matching obligation. The Company is responsible for funding its contribution to the Allstate Plan.

The Company’s contribution to the Allstate Plan was $110 million, $103 million and $93 million in 2021, 2020 and 2019, respectively. In 2019, the amount was reduced by $41 million of ESOP benefit. Prior to 2020, the Allstate Plan had a leveraged ESOP to fund a portion of the contribution. The ESOP note matured on December 31, 2019.

Allstate’s Canadian, SquareTrade and InfoArmor subsidiaries sponsor defined contribution plans for their eligible employees. Expense for subsidiary sponsored defined contribution plans was $9 million, $13 million and $15 million in 2021, 2020 and 2019, respectively.

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2021 Form 10-K Notes to Consolidated Financial Statements

Note 19			Equity Incentive Plans

The Company currently has equity incentive plans under which it grants nonqualified stock options, restricted stock units and performance stock awards to certain employees and directors of the Company.

Equity awards
($ in millions)						2021						2020						2019
Compensation expense						$	120					$	124					$	105
Income tax benefits						18						18						17
Cash received from exercise of options						151						111						154
Tax benefit realized on options exercised and release of stock restrictions						37						53						43

The Company records compensation expense related to awards under these plans over the shorter of the period in which the requisite service is rendered or retirement eligibility is attained. Compensation expense for performance stock awards with no market condition is based on the probable number of awards expected to vest using the performance level most likely to be achieved at the end of the performance period. Compensation expense for performance stock awards with a market condition is based on the number of awards expected to vest as estimated at the grant date and does not change if the market condition is not met.

Nonvested awards as of December 31, 2021
($ in millions)						Unrecognized compensation						Weighted average vesting period
Nonqualified stock options						$	16					1.61
Restricted stock units						44						1.87
Performance stock awards						30						1.65
Total						$	90

Options are granted to employees with exercise prices equal to the closing share price of the Company’s common stock on the applicable grant date. Options granted to employees vest ratably over a three-year period. Vesting is subject to continued service, except for employees who are retirement eligible and in certain other limited circumstances. Options may be exercised once vested and will expire no later than ten years after the date of grant.

Restricted stock units for directors vest immediately and convert into shares of stock on the earlier of the day of the third anniversary of the grant date or the date the director’s service terminates, unless a deferred period of restriction is elected.

Restricted stock units granted to directors prior to June 1, 2016 convert upon leaving the board. Restricted stock units granted to employees prior to February 19, 2020 vest on the day prior to the third anniversary of the grant date. Restricted stock units granted to employees on or after February 19, 2020 vest ratably over a three-year period. Restricted stock units granted to employees subsequently convert into shares of stock on the day of the respective anniversary of the grant date. Vesting is subject to continued service, except for employees who are retirement eligible and in certain other limited circumstances.

Performance stock awards vest into shares of stock based on achieving established company-specific performance goals. Performance stock awards granted prior to February 19, 2020 vest into shares of stock on the day prior to the third anniversary of the grant date. Performance stock awards granted on or after February 19, 2020 vest into shares of stock on the third anniversary of the grant date.

The numbers of shares earned upon vesting of the performance stock awards is based on the attainment of performance goals for each of the performance periods, subject to continued service, except for employees who are retirement eligible and in certain other limited circumstances.

Since 2001, a total of 110.8 million shares of common stock were authorized to be used for awards under the plans, subject to adjustment in accordance with the plans’ terms. As of December 31, 2021, 17.0 million shares were reserved and remained available for future issuance under these plans. The Company uses its treasury shares for these issuances.

The fair value of each option grant is estimated on the date of grant using a binomial lattice model. The Company uses historical data to estimate option exercise and employee termination within the valuation model. In addition, separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the binomial lattice model and represents the period of time that options granted are expected to be outstanding. The expected volatility of the price of the underlying shares is implied based on traded options and historical volatility of the Company’s common stock. The expected dividends were based on the current dividend yield of the Company’s stock as of the date of the grant. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

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Notes to Consolidated Financial Statements 2021 Form 10-K

Option grant assumptions
						2021						2020						2019
Weighted average expected term						7.5 years						6.1 years						5.8 years
Expected volatility						16.5% - 28.8%						16.3% - 37.1%						15.6% - 28.9%
Weighted average volatility						23.0		%				17.6		%				18.4		%
Expected dividends						2.0% - 3.0%						1.6% - 2.4%						1.9% - 2.2%
Weighted average expected dividends						3.1		%				1.8		%				2.2		%
Risk-free rate						—% - 1.7%						0.1% - 1.8%						1.3% - 2.7%

Summary of option activity
						For the year ended December 31, 2021
						Number (in 000s)						Weighted average exercise price						Aggregate intrinsic value (in 000s)						Weighted average remaining contractual term (years)
Outstanding as of January 1, 2021						10,617						$	83.65
Granted						1,738						105.45
Exercised						(2,167)						74.05
Forfeited						(319)						106.33
Expired						(15)						104.22
Outstanding as of December 31, 2021						9,854						88.84						$	292,514					5.8
Outstanding, net of expected forfeitures						9,791						88.71						291,849						5.8
Outstanding, exercisable (“vested”)						6,654						79.96						253,563						4.6

The weighted average grant date fair value of options granted was $15.61, $18.17 and $14.96 during 2021, 2020 and 2019, respectively. The intrinsic value, which is the difference between the fair value and the exercise price, of options exercised was $112 million, $119 million and $114 million during 2021, 2020 and 2019, respectively.

Changes in restricted stock units
						For the year ended December 31, 2021
						Number (in 000s)						Weighted average grant date fair value
Nonvested as of January 1, 2021						948						$	98.61
Granted						552						108.99
Vested						(322)						102.45
Forfeited						(140)						105.68
Nonvested as of December 31, 2021						1,038						101.98

The fair value of restricted stock units is based on the market value of the Company’s stock as of the date of the grant. The market value in part reflects the payment of future dividends expected. The weighted average grant date fair value of restricted stock units granted was $108.99, $118.61 and $92.97 during 2021, 2020 and 2019, respectively. The total fair value of restricted stock units vested was $35 million, $32 million and $29 million during 2021, 2020 and 2019, respectively.

The Allstate Corporation 179

2021 Form 10-K Notes to Consolidated Financial Statements

Changes in performance stock awards
						For the year ended December 31, 2021
						Number (in 000s)						Weighted average grant date fair value
Nonvested as of January 1, 2021						951						$	100.89
Granted						442						107.14
Adjustment for performance achievement						338						92.88
Vested						(676)						92.88
Forfeited						(81)						107.91
Nonvested as of December 31, 2021						974						105.92

The change in performance stock awards comprises those initially granted in 2021 and the adjustment to previously granted performance stock awards for performance achievement.

The fair value of performance stock awards that do not include a market condition is based on the market value of the Company’s stock as of the date of the grant.

Starting with the February 2020 award, the fair value of performance stock awards includes a component with market-based condition measured on the grant date using a Monte Carlo simulation model. Market-based condition measures the Company’s total shareholder return (“TSR”) relative to the TSR of peer companies, expressed in terms of the Company’s TSR percentile rank among the peer companies, over a three-calendar-year performance period. The Monte Carlo simulation model uses a risk-neutral framework to model future stock price movements based upon the risk-free rate of return at the time of grant,

volatilities of the Company and the peer companies, and expected term assumed to be equal to the remaining measurement period. The market value in part reflects the payment of future dividends expected.

For the year ended December 31, 2021, the 2021 performance stock awards with market-based condition assumes a risk-free rate of 0.2%, volatility of 29.9%, average peer volatility of 37.4% and an expected term of 2.9 years.

The weighted average grant date fair value of performance stock awards granted was $107.14, $123.48 and $92.49 during 2021, 2020 and 2019, respectively. The total fair value of performance stock awards vested was $70 million, $101 million and $65 million during 2021, 2020 and 2019, respectively.

The Company recognizes all tax effects related to share-based payments at settlement or expiration through the income statement.

Note 20			Supplemental Cash Flow Information

Non-cash investing activities include $51 million, $55 million and $131 million related to mergers and exchanges completed with equity securities, fixed income securities and limited partnerships, and modifications of certain mortgage loans and other investments in 2021, 2020 and 2019, respectively.

Non-cash financing activities include $53 million, $56 million and $50 million related to the issuance of Allstate common shares for vested equity awards in 2021, 2020 and 2019, respectively.

Cash flows used in operating activities in the Consolidated Statements of Cash Flows include cash paid for operating leases related to amounts included in the measurement of lease liabilities of $181 million, $156 million and $155 million for the twelve months ended December 31, 2021, 2020 and 2019, respectively. Non-cash operating activities include $98 million,

$51 million and $604 million related to right-of-use assets obtained in exchange for lease obligations for the twelve months ended December 31, 2021, 2020 and 2019, respectively. Non-cash operating activities related to right-of-use assets obtained in exchange for lease obligations for twelve months ended December 31, 2019 include the impact of $488 million related to the adoption of the accounting for leases standard.

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

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Notes to Consolidated Financial Statements 2021 Form 10-K

						For the years ended December 31,
($ in millions)						2021						2020						2019
Net change in proceeds managed
Net change in fixed income securities						$	—					$	—					$	52
Net change in short-term investments						(539)						396						(417)
Operating cash flow (used) provided						(539)						396						(365)
Net change in cash						9						(12)						—
Net change in proceeds managed						$	(530)					$	384					$	(365)
Net change in liabilities
Liabilities for collateral, beginning of year						$	(914)					$	(1,298)					$	(933)
Liabilities for collateral, end of year						(1,444)						(914)						(1,298)
Operating cash flow provided (used)						$	530					$	(384)					$	365

Note 21			Other Comprehensive Income

Components of other comprehensive income (loss) on a pre-tax and after-tax basis
						For the years ended December 31,
						2021																		2020																		2019
($ in millions)						Pre-tax						Tax						After-tax						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)						$	(2,839)					$	601					$	(2,238)					$	2,512					$	(532)					$	1,980					$	2,807					$	(592)					$	2,215
Less: reclassification adjustment of net gains and losses on investments and derivatives						436						(92)						344						870						(183)						687						413						(87)						326
Unrealized net capital gains and losses						(3,275)						693						(2,582)						1,642						(349)						1,293						2,394						(505)						1,889
Unrealized foreign currency translation adjustments						(10)						2						(8)						66						(14)						52						(13)						3						(10)
Unamortized pension and other postretirement prior service credit (2)						(75)						16						(59)						12						(3)						9						(59)						12						(47)
Other comprehensive (loss) income						$	(3,360)					$	711					$	(2,649)					$	1,720					$	(366)					$	1,354					$	2,322					$	(490)					$	1,832

(1)Includes $2.4 billion of losses related to held for sale investments in connection with 2021 sale of life and annuity business.

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

Note 22			Quarterly Results (unaudited)

						First Quarter												Second Quarter												Third Quarter												Fourth Quarter
($ in millions, except per share data)						2021						2020						2021						2020						2021						2020						2021						2020
Revenues						$	12,451					$	9,866					$	12,646					$	10,403					$	12,480					$	10,678					$	13,011					$	10,962
Net income from continuing operations applicable to common shareholders						2,385						801						1,399						1,080						183						1,189						1,111						2,244
Income (loss) from discontinued operations, net of tax						(3,793)						(288)						196						144						325						(63)						(321)						354
Net income (loss) applicable to common shareholders						$	(1,408)					$	513					$	1,595					$	1,224					$	508					$	1,126					$	790					$	2,598
Earnings per common share applicable to common shareholders
Basic
Continuing operations						$	7.88					$	2.52					$	4.68					$	3.44					$	0.62					$	3.82					$	3.90					$	7.38
Discontinued operations						(12.53)						(0.90)						0.66						0.46						1.11						(0.20)						(1.13)						1.16
Total						$	(4.65)					$	1.62					$	5.34					$	3.90					$	1.73					$	3.62					$	2.77					$	8.54
Diluted
Continuing operations						$	7.78					$	2.48					$	4.61					$	3.41					$	0.62					$	3.78					$	3.84					$	7.30
Discontinued operations						(12.38)						(0.89)						0.65						0.45						1.09						(0.20)						(1.11)						1.15
Total						$	(4.60)					$	1.59					$	5.26					$	3.86					$	1.71					$	3.58					$	2.73					$	8.45

The Allstate Corporation 181

2021 Form 10-K

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

The Allstate Corporation

Northbrook, Illinois 60062

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying Consolidated Statements of Financial Position of The Allstate Corporation and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related Consolidated Statements of Operations, Comprehensive Income, Shareholders’ Equity, and Cash Flows for each of the three years in the period ended December 31, 2021, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A. Controls and Procedures. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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2021 Form 10-K

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Reserve for Property and Casualty Insurance Claims and Claims Expense - Refer to Notes 2 and 9 to the Financial Statements

Critical Audit Matter Description

As of December 31, 2021, the reserve for property and casualty insurance claims and claims expense was $33.06 billion. The Company establishes reserves for property and casualty insurance claims and claims expense on reported and unreported claims of insured losses. Using established industry and actuarial best practices as well as the Company’s historical claims experience, the reserve for property and casualty insurance claims and claims expense is estimated based on (i) claims reported, (ii) claims incurred but not reported, and (iii) projections of claim payments to be made in the future.

Given the subjectivity of estimating claims incurred but not reported and projections of claim payments to be made in the future, particularly those with payout requirements over a longer period of time, the related audit effort in evaluating the reserve for property and casualty insurance claims and claims expense required a high degree of auditor judgment and an increased extent of effort, including involvement of our actuarial specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the reserve for property and casualty insurance claims and claims expense included the following:

• We tested the effectiveness of controls related to the reserve for property and casualty insurance claims and claims expense, including those over the Company’s estimates and projections.

• We evaluated the methods and assumptions used by the Company to estimate the reserve for property and casualty insurance claims and claims expense by:

–Testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were complete and accurate.

–Comparing the Company’s prior year assumptions of expected development and ultimate loss to actual losses incurred during the year to assess the reasonableness of those assumptions, including consideration of potential bias, in the determination of the reserve for property and casualty claims and claims expense.

–With the assistance of our actuarial specialists, we developed independent estimates for the reserve for property and casualty insurance claims and claims expense, particularly related to those with payout requirements over a longer period of time, utilizing loss data and industry claim development factors, and compared our estimates to management’s estimates.

National General Acquisition - Refer to Notes 2 and 3 to the Financial Statements

Critical Audit Matter Description

The Company completed the acquisition of National General Holdings Corp. (“National General”) on January 4, 2021 for approximately $4 billion in cash. The Company accounted for the acquisition of National General under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including distribution and customer relationship intangible assets of $795 million. Management estimated the fair value of such intangible assets using an income approach that considered cash flows expected to be generated by the acquired relationships, a weighted-average cost of capital discount rate reflecting the relative risk of achieving the anticipated cash flows, profits, the time value of money and other relevant inputs, which required management to make significant estimates and assumptions. Changes in the assumptions could impact the amount allocated to acquired intangible assets and ultimately the amount recorded as goodwill.

Given the fair value determination of distribution and customer relationship intangible assets requires management to make significant estimates and assumptions regarding projected cash flows and discount rates, performing audit procedures to evaluate the reasonableness of those estimates and assumptions required a high degree of auditor judgment, and an increased extent of effort, including involving fair value specialists.

The Allstate Corporation 183

2021 Form 10-K

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the fair value of distribution and customer relationship intangible assets acquired from National General included the following, among others:

• We tested the effectiveness of controls over the valuation methodology used for these acquired intangible assets, including management’s controls over assumptions used in developing estimated future cash flows, and discount rates used to present value cash flows.

• We assessed the knowledge, skill, ability and objectivity of management’s valuation specialist and evaluated the work performed.

• We assessed the reasonableness of management’s forecasts by comparing the projection to historical cash flow results of National General, as well as to certain peer companies of National General. We also performed sensitivity analyses to evaluate the impact of changes in assumptions to the valuation of the customer relationship intangible assets.

• With the assistance of fair value specialists, we evaluated:

▪The reasonableness of the valuation methodology, and

▪The reasonableness of the discount rate used to present value the expected cash flows by:

–Testing the source information underlying the determination of the discount rate and testing mathematical accuracy of the calculation.

–Developing a range of independent estimates and comparing those to the discount rate selected by management to evaluate the inputs used in the calculation.

• We evaluated whether the estimated cash flows were consistent with evidence obtained in other areas of the audit.

• We tested the accuracy and evaluated the relevance of the data used by management on the date of the acquisition.

/s/ Deloitte & Touche LLP

Chicago, Illinois

February 18, 2022

We have served as the Company's auditor since 1992.

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2021 Form 10-K