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

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

Overview

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as “we,” “our,” “us,” the “Company” or “Allstate”). It should be read in conjunction with the condensed consolidated financial statements and related notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporation annual report on Form 10-K for 2020, filed February 19, 2021.

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

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

The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures have moderated 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 Coronavirus has affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity, including:

Sales of new and retention of existing policies
Premium for transportation network products
Driving behavior and auto accident frequency
Supply chain disruptions and labor shortages could increase the cost of settling claims
Hospital and outpatient claim costs
Investment valuations and returns
Bad debt and credit allowance exposure
Consumer utilization of Milewise®, our pay-per-mile insurance product
Retail sales in Allstate Protection Plans

This list is not inclusive of all potential impacts and should not be treated as such. Within the MD&A we

have included further disclosures related to the impacts of the Coronavirus on our 2021 results.

Corporate Strategy

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

Transformative Growth is about creating business models, capabilities and culture to build growth businesses that deliver affordable, simple and connected protection solutions for consumers.

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

Improving customer value
Expanding customer access
Increasing customer acquisition sophistication and investment
Building new technology applications

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

Enhancing strategic position in the independent agent channel On January 4, 2021, we completed the acquisition of National General Holdings Corp. (“National General”), significantly enhancing our strategic position in the independent agency channel. The transaction increased our market share in personal property-liability by over one percentage point and enhanced our independent agent-facing technology. It will significantly expand our distribution footprint, leading us to be a top five personal lines carrier in the independent agency distribution channel.

As part of the acquisition, Allstate Independent Agency and Encompass organizations will be integrated into National General by:

Migrating Encompass policyholders and business operations to National General and retiring Encompass’s technology
Transitioning Allstate Independent Agent new business to National General as mid-market products roll out

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Discontinued operations and held for sale During the first quarter of 2021, we announced the pending sales of Allstate Life Insurance Company (“ALIC”), Allstate Life Insurance Company of New York (“ALNY”) and certain affiliates. We are no longer accepting new proprietary life insurance applications through Allstate exclusive agents. On October 1, 2021, we closed the sale of ALNY to Wilton Reassurance Company for $400 million. On November 1, 2021, we closed the sale of ALIC and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including purchase price of $2.8 billion as well as increases in statutory surplus.

A loss on disposition of $4 billion, after-tax, was recorded in the first quarter of 2021 related to these transactions. For the nine months ended September 30, 2021, the loss on disposition was $3.8 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 dates and the closing date equity of the sold entities determined under GAAP, excluding unrealized gains and losses on fixed income securities.

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.

SafeAuto On June 1, 2021, we announced an agreement to acquire Safe Auto Insurance Group, Inc., a non-standard auto insurance carrier. On October 1, 2021, we completed the acquisition for $262 million in cash.

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

Measuring segment profit or loss

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

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

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


•			Realized capital gains and losses except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses 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

Third Quarter 2021 Form 10-Q 53

Highlights


Consolidated net income
($ in millions)




Q1	Q2	Q3


Consolidated net income applicable to common shareholders decreased 54.9% to $508 million in the third quarter of 2021 compared to the same period of 2020 primarily due to higher non-catastrophe and catastrophe losses, lower realized capital gains, partially offset by higher property and casualty insurance premiums and higher net investment income. Consolidated net income applicable to common shareholders decreased 75.7% to $695 million in the first nine months of 2021 compared to the same period of 2020 primarily due to a loss from discontinued operations and higher non-catastrophe losses. Partially offsetting were higher property and casualty insurance premiums, net investment income, and pension and other postretirement gains in 2021 compared to losses in 2020. For the twelve months ended September 30, 2021, return on Allstate common shareholders’ equity was 13.2%, a decrease of 5.7 points from 18.9% for the twelve months ended September 30, 2020.


Total revenue
( ($ in millions)


Total revenue increased 16.9% to $12.48 billion and 21.4% to $37.58 billion in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, driven by 13.7% and 12.9% increase in property and casualty insurance premiums in the third quarter and first nine months of 2021, respectively, and higher net investment income. Insurance premiums earned increased in both Property-Liability, primarily due to the acquisition of National General, and Protection Services.


Net investment income
($ in millions)


Net investment income increased $300 million to $764 million in the third quarter of 2021 compared to the same period of 2020 and increased $1.52 billion to $2.45 billion in the first nine months of 2021 compared to the same period of 2020. The increase in both periods was primarily due to increases in performance-based income results, mainly from limited partnerships.

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Financial highlights

Investments totaled $61.84 billion as of September 30, 2021, increasing from $59.54 billion as of December 31, 2020.

Allstate shareholders’ equity As of September 30, 2021, Allstate shareholders’ equity was $26.73 billion.

Book value per common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $84.62, an increase of 2.7% from $82.39 as of September 30, 2020, and a decrease of 7.5% from $91.50 as of December 31, 2020.

Return on average Allstate common shareholders’ equity For the twelve months ended September 30, 2021, return on Allstate common shareholders’ equity was 13.2%, a decrease of 5.7 points from 18.9% for the twelve months ended September 30, 2020. The decrease was primarily due to lower net income

applicable to common shareholders for the trailing twelve-month period ended September 30, 2021 and an increase in average Allstate common shareholders’ equity.

Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement losses of $40 million in the third quarter of 2021 primarily related to unfavorable asset performance compared to the expected return on plan assets, partially offset by an increase in the liability discount rate. Pension and other postretirement remeasurement gains of $404 million in the first nine months of 2021 primarily related to an increase in the liability discount rate and favorable asset performance compared to the expected return on plan assets.

Summarized consolidated financial results


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Revenues
Property and casualty insurance premiums	$	10,615	$	9,336	$	31,366	$	27,794
Accident and health insurance premiums and contract charges	460		287		1,362		832
Other revenue	536		272		1,585		794
Net investment income	764		464		2,446		930
Realized capital gains (losses)	105		319		818		597
Total revenues	12,480		10,678		37,577		30,947

Costs and expenses
Property and casualty insurance claims and claims expense	(8,264)		(6,072)		(21,514)		(16,635)
Shelter-in-Place Payback expense	—		—		(29)		(948)
Accident and health insurance policy benefits	(269)		(128)		(746)		(392)
Interest credited to contractholder funds	(8)		(8)		(25)		(26)
Amortization of deferred policy acquisition costs	(1,582)		(1,386)		(4,650)		(4,095)
Operating, restructuring and interest expenses	(1,982)		(1,596)		(5,695)		(4,505)
Pension and other postretirement remeasurement gains (losses)	(40)		71		404		(320)
Amortization of purchased intangibles	(109)		(31)		(267)		(88)

Total costs and expenses	(12,254)		(9,150)		(32,522)		(27,009)

Income from operations before income tax expense	226		1,528		5,055		3,938

Income tax expense	(20)		(312)		(1,008)		(779)

Net income from continuing operations	206		1,216		4,047		3,159

Income (loss) from discontinued operations, net of tax	325		(63)		(3,272)		(207)

Net income	531		1,153		775		2,952

Less: Net loss attributable to noncontrolling interest	(7)		—		(7)		—

Net income attributable to Allstate	538		1,153		782		2,952

Preferred stock dividends	(30)		(27)		(87)		(89)

Net income applicable to common shareholders	$	508	$	1,126	$	695	$	2,863

Third Quarter 2021 Form 10-Q 55

Segment highlights

Allstate Protection underwriting loss was $421 million in the third quarter of 2021, compared to underwriting income of $887 million in the third quarter of 2020 primarily due to higher auto and home non-catastrophe losses, lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020 and increased underwriting expenses, partially offset by premiums from the acquisition of National General. Underwriting income totaled $1.67 billion in the first nine months of 2021, a $1.47 billion decrease from $3.14 billion in the first nine months of 2020 primarily due to higher auto and home non-catastrophe and catastrophe losses and increased underwriting expenses, partially offset by premiums from the acquisition of National General and lower Shelter-in-Place Payback expense.

Catastrophe losses were $1.27 billion and $2.81 billion in the third quarter and first nine months of 2021, respectively, compared to $990 million and $2.39 billion in the third quarter and first nine months of 2020, respectively.

Premiums written increased 16.7% to $10.97 billion in the third quarter of 2021 and 14.4% to $31.06 billion in the first nine months of 2021 compared to the same periods of 2020, reflecting the acquisition of National General and higher Allstate brand homeowners premiums.

Protection Services adjusted net income was $45 million in the third quarter of 2021 compared to $40 million in the third quarter of 2020. Adjusted net income was $150 million in the first nine months of 2021 compared to $115 million in the first nine months of 2020. The increase in both periods was primarily due to growth, partially offset by higher operating costs and expenses related to investments in growth.

Premiums and other revenue increased 24.1% or $105 million in the third quarter of 2021 and 24.9% or $312 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to Allstate Protection Plan’s growth through its U.S. retail and international channels and the addition of LeadCloud and Transparent.ly, which were acquired as part of the National General acquisition.

Allstate Health and Benefits adjusted net income was $33 million in the third quarter of both 2021 and 2020. Adjusted net income was $160 million in the first nine months of 2021 compared to $62 million in the first nine months of 2020 primarily due to the acquisition of National General’s group health and individual accident and health business, which resulted in higher premiums and contract charges and the addition of other revenue, partially offset by higher policy benefits and operating costs and expenses.

Premiums and contract charges increased 60.3% to $460 million in the third quarter of 2021 and 63.7% to $1.36 billion in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of group health and individual accident and health business.

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Property-Liability Operations

Property-Liability Operations

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

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

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

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

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

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

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

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

*•*Effect of prior year reserve reestimates on combined ratio, includes prior year reserve reestimates of catastrophe losses

*•*Effect of amortization of purchased intangibles on combined ratio

*•*Effect of restructuring and related charges on combined ratio

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

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

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

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

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

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

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

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

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

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

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

Third Quarter 2021 Form 10-Q 57

Property-Liability Operations


Underwriting results
	Three months ended September 30,				Nine months ended September 30,
($ in millions, except ratios)	2021		2020		2021		2020
Premiums written	$	10,966	$	9,395	$	31,057	$	27,159
Premiums earned	$	10,159	$	8,952	$	30,064	$	26,696
Other revenue	365		220		1,071		639
Claims and claims expense	(8,145)		(5,968)		(21,193)		(16,358)
Shelter-in-Place Payback expense	—		—		(29)		(948)
Amortization of DAC	(1,346)		(1,158)		(3,968)		(3,474)
Other costs and expenses	(1,552)		(1,107)		(4,280)		(3,354)
Restructuring and related charges (1)	(15)		(187)		(113)		(199)
Underwriting (loss) income	$	(534)	$	752	$	1,552	$	3,002

Catastrophe losses
Catastrophe losses, excluding reserve reestimates	$	1,270	$	1,497	$	3,018	$	2,889
Catastrophe reserve reestimates (2) (3)	(1)		(507)		(207)		(502)
Total catastrophe losses	$	1,269	$	990	$	2,811	$	2,387

Non-catastrophe reserve reestimates (2)	162		70		144		63
Prior year reserve reestimates (2) (3)	161		(437)		(63)		(439)

GAAP operating ratios
Loss ratio	80.2		66.7		70.5		61.3
Expense ratio (4)	25.1		24.9		24.3		27.5
Combined ratio	105.3		91.6		94.8		88.8
Effect of catastrophe losses on combined ratio	12.5		11.1		9.4		8.9
Effect of prior year reserve reestimates on combined ratio	1.6		(4.9)		(0.3)		(1.6)
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio	—		(5.7)		(0.7)		(1.9)
Effect of amortization of purchased intangibles on combined ratio	0.8		—		0.5		—
Effect of restructuring and related charges on combined ratio (1)	0.1		2.1		0.4		0.7
Effect of Shelter-in-Place Payback expense on combined and expense ratios	—		—		0.1		3.6
Effect of Run-off Property-Liability business on combined ratio	1.2		1.5		0.4		0.6

(1)Restructuring and related charges for the third quarter and first nine months of 2021 primarily related to future work environment. See Note 12 of the condensed consolidated financial statements for additional details.

(2)Favorable reserve reestimates are shown in parentheses.

(3)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.

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

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Allstate Protection Segment Results

Allstate Protection Segment

Allstate Protection consists of the Allstate brand, National General and Answer Financial. The Encompass brand was combined into National General beginning in the first quarter of 2021 and results prior to 2021 reflect Encompass brand results only.


Underwriting results
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Premiums written	$	10,966	$	9,395	$	31,057	$	27,159
Premiums earned	$	10,159	$	8,952	$	30,064	$	26,696
Other revenue	365		220		1,071		639
Claims and claims expense	(8,032)		(5,833)		(21,078)		(16,219)
Shelter-in-Place Payback expense	—		—		(29)		(948)
Amortization of DAC	(1,346)		(1,158)		(3,968)		(3,474)
Other costs and expenses	(1,551)		(1,107)		(4,277)		(3,352)
Restructuring and related charges	(16)		(187)		(113)		(199)
Underwriting (loss) income	$	(421)	$	887	$	1,670	$	3,143
Catastrophe losses	$	1,269	$	990	$	2,811	$	2,387

Underwriting loss was $421 million in the third quarter of 2021 compared to underwriting income of $887 million in the third quarter of 2020 primarily due to higher auto and home non-catastrophe losses, lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020 and increased underwriting expenses, partially offset by premiums from the acquisition of National General. Underwriting income decreased 46.9% or $1.47 billion in the first nine months of 2021, compared to the same period of 2020 primarily due to higher auto and home non-catastrophe and catastrophe losses and increased underwriting expenses, partially offset by premiums from the acquisition of National General and lower Shelter-in-Place Payback expense.


Change in underwriting results from the prior period - three months ended
($ in millions)

Third Quarter 2021 Form 10-Q 59

Segment Results Allstate Protection


Change in underwriting results from the prior period - nine months ended
($ in millions)


Underwriting income (loss) by brand and by line of business
	Allstate brand				National General			Allstate Protection
($ in millions)	2021		2020			2021		2020		2021		2020
Three months ended September 30,
Auto (1)	$	(123)	$	897		$	(36)	$	9	$	(159)	$	906
Homeowners (2)	(208)		(93)			(69)		26		(277)		(67)
Other personal lines	47		34			(7)		8		40		42
Commercial lines	(54)		(14)			—		—		(54)		(14)
Other business lines (3)	27		18			—		—		27		18
Answer Financial	—		—			—		—		2		2
Total	$	(311)	$	842		$	(112)	$	43	$	(421)	$	887

Nine months ended September 30,
Auto (1)	$	1,444	$	2,522		$	118	$	39	$	1,562	$	2,561
Homeowners (2)	61		356			(77)		19		(16)		375
Other personal lines	112		170			—		5		112		175
Commercial lines	(81)		(20)			—		—		(81)		(20)
Other business lines (3)	82		49			—		—		82		49
Answer Financial	—		—			—		—		11		3
Total	$	1,618	$	3,077		$	41	$	63	$	1,670	$	3,143

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

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

(3)Other business lines includes revenue and direct operating expenses for distribution of non-proprietary life and annuity products.

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

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Allstate Protection Segment Results


Premiums written by brand and by line of business
	Allstate brand				National General				Allstate Protection
($ in millions)	2021		2020		2021		2020		2021		2020
Three months ended September 30,
Auto	$	6,153	$	6,192	$	1,018	$	134	$	7,171	$	6,326
Homeowners	2,452		2,234		552		105		3,004		2,339
Other personal lines	543		521		41		21		584		542
Commercial lines	207		188		—		—		207		188

Total premiums written	$	9,355	$	9,135	$	1,611	$	260	$	10,966	$	9,395

Nine months ended September 30,
Auto	$	18,165	$	18,337	$	2,836	$	388	$	21,001	$	18,725
Homeowners	6,492		6,057		1,317		298		7,809		6,355
Other personal lines	1,519		1,441		120		59		1,639		1,500
Commercial lines	608		579		—		—		608		579

Total premiums written	$	26,784	$	26,414	$	4,273	$	745	$	31,057	$	27,159


Premiums earned by brand and by line of business
	Allstate brand				National General			Allstate Protection
($ in millions)	2021		2020			2021		2020		2021		2020
Three months ended September 30,
Auto	$	6,009	$	6,081		$	903	$	129	$	6,912	$	6,210
Homeowners	2,080		1,974			442		99		2,522		2,073
Other personal lines	481		466			40		20		521		486
Commercial lines	204		183			—		—		204		183

Total premiums earned	$	8,774	$	8,704		$	1,385	$	248	$	10,159	$	8,952

Nine months ended September 30,
Auto	$	18,059	$	18,138		$	2,545	$	399	$	20,604	$	18,537
Homeowners	6,120		5,865			1,205		299		7,325		6,164
Other personal lines	1,432		1,376			113		59		1,545		1,435
Commercial lines	590		560			—		—		590		560

Total premiums earned	$	26,201	$	25,939		$	3,863	$	757	$	30,064	$	26,696


Reconciliation of premiums written to premiums earned
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Total premiums written	$	10,966	$	9,395	$	31,057	$	27,159
(Increase) decrease in unearned premiums (1)	(672)		(470)		(1,264)		(449)
Other	(135)		27		271		(14)
Total premiums earned	$	10,159	$	8,952	$	30,064	$	26,696

(1)2021 results include unearned premiums related to acquisition of National General.


Policies in force by brand and by line of business
	Allstate brand		National General		Allstate Protection
PIF (thousands)	2021	2020		2021	2020	2021	2020
Auto	21,951	21,900		3,703	460	25,654	22,360
Homeowners	6,496	6,414		642	220	7,138	6,634
Other personal lines	4,560	4,455		288	73	4,848	4,528
Commercial lines	212	219		107	—	319	219

Total	33,219	32,988		4,740	753	37,959	33,741

Third Quarter 2021 Form 10-Q 61

Segment Results Allstate Protection

Auto insurance premiums written increased 13.4% or $845 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 12.2% or 2.28 billion in the first nine months of 2021 compared to the first nine months of 2020, primarily due to the following factors:

Acquisition of National General
Increased new issued applications in the Allstate brand driven by increased advertising and higher close rates
Decreased Allstate brand average premium reflecting approved rate decreases of approximately 3% for the trailing twelve months ended September 30, 2021
Rate increases are being implemented broadly to improve underwriting results given the higher inflationary trends adversely impacting loss costs
PIF increased 14.7% or 3,294 thousand to 25,654 thousand as of September 30, 2021 compared to September 30, 2020 due to the acquisition of National General

–PIF increased by 40 thousand as of September 30, 2021 compared to June 30, 2021, with increases in both Allstate brand and National General


Auto premium measures and statistics
	Three months ended September 30,						Nine months ended September 30,
	2021		2020		Change		2021		2020		Change




New issued applications (thousands)
Agency channel	648		682		(5.0)	%	1,957		2,018		(3.0)	%
Direct channel	284		206		37.9	%	830		619		34.1	%
Allstate brand	932		888		5.0	%	2,787		2,637		5.7	%
National General	516		14		NM		1,553		44		NM
Total new issued applications	1,448		902		60.5	%	4,340		2,681		61.9	%





Allstate brand average premium	$	604	$	621	(2.7)	%	$	604	$	616	(1.9)	%
Allstate brand renewal ratio (%)	87.2		87.9		(0.7)		87.0		87.6		(0.6)

Homeowners insurance premiums written increased 28.4% or $665 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 22.9% or $1.45 billion in the first nine months of 2021 compared to the first nine months of 2020, primarily due to the following factors:

Acquisition of National General
Higher Allstate brand average premiums from approved rate increases of approximately 3.4% for the trailing twelve months ended September 30, 2021 and inflation adjustments to premium due to higher insured home valuations
Increased new issued applications in the Allstate brand driven by higher quote volumes and improved close rates


Homeowners premium measures and statistics
	Three months ended September 30,						Nine months ended September 30,
	2021		2020		Change		2021		2020		Change




New issued applications (thousands)
Agency channel	236		231		2.2	%	676		636		6.3	%
Direct channel	23		16		43.8	%	61		45		35.6	%
Allstate brand	259		247		4.9	%	737		681		8.2	%
National General	28		9		NM		77		25		NM
Total new issued applications	287		256		12.1	%	814		706		15.3	%





Allstate brand average premium	$	1,443	$	1,334	8.2	%	$	1,406	$	1,324	6.2	%
Allstate brand renewal ratio (%)	87.1		87.8		(0.7)		87.1		87.6		(0.5)

Other personal lines premiums written increased 7.7% or $42 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 9.3% or $139 million in the first nine months of 2021 compared to the first nine months of 2020. The increase in both periods was primarily due to the acquisition of National General and increases in condominiums and personal umbrella premiums for Allstate brand.

Commercial lines premiums written increased 10.1% or $19 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 5.0% or $29 million in the first nine months of 2021 compared to the first nine months of 2020. The increase in both periods was primarily due to the addition of a large transportation network company, higher miles driven in our shared economy business as the impacts of the Coronavirus decrease and an increase in average premiums.

62 www.allstate.com

Allstate Protection Segment Results

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


Combined ratios by line of business
	Loss ratio		Expense ratio (1)		Combined ratio
	2021	2020	2021	2020	2021	2020
Three months ended September 30,
Auto	76.9	59.7	25.4	25.7	102.3	85.4


Homeowners	85.9	80.4	25.1	22.8	111.0	103.2
Other personal lines	64.9	63.0	27.4	28.4	92.3	91.4
Commercial lines	104.4	83.6	22.1	24.1	126.5	107.7
Impact of Shelter-in-Place Payback expense	—	—	—	—	—	—


Total	79.0	65.2	25.1	24.9	104.1	90.1
Impact of amortization of purchased intangibles	—	—	0.8	—	0.8	—

Impact of restructuring and related charges	—	—	0.2	2.1	0.2	2.1
Impact of Allstate Special Payment plan bad debt expense (2)	—	—	—	0.2	—	0.2

Nine months ended September 30,
Auto	67.7	56.6	24.7	29.6	92.4	86.2
Impact of Shelter-in-Place Payback expense	0.1	—	0.1	5.1	0.1	5.1

Homeowners	75.9	71.4	24.3	22.5	100.2	93.9
Other personal lines	67.0	60.8	25.8	27.0	92.8	87.8
Commercial lines	91.5	80.2	22.2	23.4	113.7	103.6
Impact of Shelter-in-Place Payback expense	—	—	—	0.7	—	0.7


Total	70.1	60.7	24.3	27.5	94.4	88.2
Impact of amortization of purchased intangibles	—	—	0.5	—	0.5	—
Impact of Shelter-in-Place Payback expense	—	—	0.1	3.6	0.1	3.6
Impact of restructuring and related charges	—	—	0.4	0.7	0.4	0.7
Impact of Allstate Special Payment plan bad debt expense (2)	—	—	(0.1)	0.2	(0.1)	0.2

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

(2)Relates to the Allstate Special Payment plan offered in 2020 to customers as a result of the Coronavirus to provide more flexible payment options. Approximately 70% of the higher bad debt expense was attributed to auto.


Loss ratios by line of business
	Loss ratio		Effect of catastrophe losses (1)		Effect of prior year reserve reestimates		Effect of catastrophe losses included in prior year reserve reestimates
	2021	2020	2021	2020	2021	2020	2021	2020
Three months ended September 30,
Auto	76.9	59.7	2.9	1.6	1.0	(0.9)	(0.1)	(0.4)
Homeowners	85.9	80.4	38.0	39.1	0.7	(22.0)	0.1	(21.3)
Other personal lines	64.9	63.0	19.6	13.4	(12.7)	(11.9)	—	(8.0)
Commercial lines	104.4	83.6	4.9	6.6	12.3	1.1	0.5	(1.1)

Total	79.0	65.2	12.5	11.1	0.4	(6.4)	—	(5.7)

Nine months ended September 30,
Auto	67.7	56.6	1.9	1.4	—	(0.5)	(0.1)	(0.2)
Homeowners	75.9	71.4	29.8	31.6	(2.1)	(7.1)	(2.3)	(6.8)
Other personal lines	67.0	60.8	14.4	11.6	(5.4)	(4.6)	(0.9)	(2.9)
Commercial lines	91.5	80.2	4.2	4.1	9.8	5.2	0.5	0.2

Total	70.1	60.7	9.4	8.9	(0.6)	(2.2)	(0.7)	(1.9)

(1) The ten-year average effect of catastrophe losses on the total combined ratio was 7.3 points in the third quarter of 2021.

Third Quarter 2021 Form 10-Q 63

Segment Results Allstate Protection

Auto loss ratio increased 17.2 and 11.1 points in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to:

Higher gross claim frequency in all coverages, as miles driven continue to rebound toward pre-pandemic levels
While frequency increased relative to the prior year quarter, it remains below pre-pandemic levels
Increased severity, primarily for property damage, collision and bodily injury coverages, driven by inflationary pressures and accident type mix
Prior quarter development impact of 2.2 points on the third quarter 2021 loss ratio for reserve strengthening of first and second quarter 2021 claims

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

Shelter-in-place and travel restrictions, which have moderated in 2021 as vaccines have become more widely available in the US and Canada
Unemployment levels
Changes in commuting activity
Supply chain disruptions and labor shortages
Shifts in the frequency environment may impact the speed claims are settled
Driving behavior (e.g., speed, time of day) impacting mix of claim types
Value of total losses due to higher used car prices
Labor and part cost increases


Allstate brand frequency and paid claim severity statistics (excluding catastrophe losses)
(% change year-over-year)
Three months ended September 30, 2021
Property damage gross claim frequency	16.6	%
Property damage paid claim severity	15.1

Nine months ended September 30, 2021
Property damage gross claim frequency	10.1	%
Property damage paid claim severity	5.6

Property damage gross claim frequency increased in the third quarter and the first nine months of 2021 compared to the same periods of 2020 due to factors including:

Increases in miles driven compared to the third quarter of 2020 which was impacted by the continuation of shelter-in-place restrictions due to the Coronavirus

Gross claim frequency decreased 16.8% and 22.1% in the third quarter and first nine months of 2021, respectively, when compared to pre-pandemic levels of 2019 as auto miles driven, particularly during peak commuting hours, is lower.

Property damage paid claim severity increased in the third quarter and the first nine months of 2021 compared to the same periods of 2020.

When compared to pre-pandemic levels of 2019, property damage paid claim severity increased 24.2% and 17.8% in the third quarter and first nine months of 2021, respectively, or an average annual increase of approximately 12.0% and 9.0%, respectively
The increases are due to rising inflationary impacts in both used car values and replacement part costs, including higher costs to repair more sophisticated newer model vehicles and increased costs associated with total losses

Collision severity trends increased in the third quarter and the first nine months of 2021 compared to the same periods of 2020 due to inflationary pressures from higher used car values that increases total losses and parts and labor costs associated with repairs.

Bodily injury severity trends increased in the third quarter and the first nine months of 2021 compared to the same periods of 2020 due to injury mix and higher medical care inflation.

Homeowners loss ratio increased 5.5 and 4.5 points in the third quarter and first nine months of 2021 compared to the same periods of 2020, respectively, primarily due to increased non-catastrophe claim frequency and severity and lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020, partially offset by increased premiums earned.


Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses)
(% change year-over-year)
Three months ended September 30, 2021
Gross claim frequency	3.4	%
Paid claim severity	15.0

Nine months ended September 30, 2021
Gross claim frequency	10.4	%

Paid claim severity	8.4

Gross claim frequency increased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to increases in water perils. Gross claim frequency increased in the first nine months of 2021 compared to the same period of 2020 primarily due to increases in wind/hail, water and fire perils. Paid claim severity increased in the third quarter and first nine months of 2021 compared to the same periods of 2020 due to inflationary loss cost pressure driven by increases in labor and materials costs. Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the quarter.

Other personal lines loss ratio increased 1.9 and 6.2 points in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to higher non-catastrophe losses, partially offset by increased premiums earned.

Commercial lines loss ratio increased 20.8 and 11.3 points in the third quarter and the first nine months of

64 www.allstate.com

Allstate Protection Segment Results

2021, respectively, compared to the same periods of 2020 due to higher auto frequency and severity and higher unfavorable non-catastrophe prior year reserves reestimates, partially offset by increased premiums earned.

Catastrophe losses increased 28.2% or $279 million in the third quarter of 2021 compared to the third quarter of 2020. Catastrophe losses increased 17.8% or $424 million in the first nine months of 2021 compared to the first nine months of 2020.

Catastrophe losses in the third quarter of 2021, included gross and net losses related to Hurricane Ida of $1.5 billion and $689 million, respectively. Net losses include reinsurance recoveries of $986 million and reinstatement premiums of $181 million.

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

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

Loss estimates are generally based on claim adjuster inspections and the application of historical

loss development factors. Our loss estimates are calculated in accordance with the coverage provided by our policies. Auto policyholders generally have coverage for physical damage due to flood if they have purchased optional auto comprehensive coverage. Our homeowners policies specifically exclude coverage for losses caused by flood.

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

In the third quarter of 2021, our catastrophe reinsurance program risk tolerance framework that targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes, earthquakes and wildfires, excluding other catastrophe losses, net of reinsurance, increased from $2 billion to $2.5 billion, reflecting the addition of wildfires to the target.

Catastrophe reinsurance The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the third quarter and first nine months of 2021 were $109 million and $345 million, respectively, compared to $106 million and $310 million in the third quarter and first nine months of 2020. The increases were driven by higher Nationwide and Florida program costs due to program expansion for growth in policies, including National General exposures. Catastrophe placement premiums are a reduction of premium with approximately 70% related to homeowners.


Catastrophe losses by the type of event
	Three months ended September 30,						Nine months ended September 30,
($ in millions)	Number of events	2021		Number of events	2020		Number of events	2021		Number of events	2020
Hurricanes/Tropical storms	5	$	747	6	$	771	6	$	754	6	$	771
Tornadoes	1	9		1	4		2	26		3	43
Wind/Hail	35	389		23	399		68	1,650		54	1,768
Wildfires	4	49		12	293		4	48		13	295
Freeze/other events	—	—		—	—		1	605		2	12
Prior year reserve reestimates		38			(507)			30			(502)
Prior year aggregate reinsurance cover		(38)			—			(237)			—
Current year aggregate reinsurance cover		(11)			—			(65)			—
Prior quarter reserve reestimates		86			30			—			—
Total catastrophe losses (1)	45	$	1,269	42	$	990	81	$	2,811	78	$	2,387

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

Third Quarter 2021 Form 10-Q 65

Segment Results Allstate Protection

Reserve reestimates were unfavorable in the third quarter of 2021 primarily due to strengthening of reserves in auto and commercial lines, partially offset by favorable reserve reestimates in other personal lines. Reserve reestimates were favorable in the first nine months of 2021 due to estimated recoveries related to our aggregate reinsurance coverage and subrogation settlements arising from the Woolsey wildfire, partially offset by strengthening of reserves in commercial lines.

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


Reserve reestimates
	Three months ended September 30,						Nine months ended September 30,
	Reserve reestimate (1)				Effect on combined ratio (2)		Reserve reestimate (1)				Effect on combined ratio (2)
($ in millions, except ratios)	2021		2020		2021	2020	2021		2020		2021	2020
Auto	$	72	$	(60)	0.7	(0.7)	$	3	$	(101)	—	(0.4)
Homeowners	17		(456)		0.1	(5.1)	(156)		(440)		(0.5)	(1.7)
Other personal lines	(66)		(58)		(0.6)	(0.6)	(83)		(66)		(0.3)	(0.2)
Commercial lines	25		2		0.2	—	58		29		0.2	0.1

Total Allstate Protection (3)	$	48	$	(572)	0.4	(6.4)	$	(178)	$	(578)	(0.6)	(2.2)

Allstate brand	$	40	$	(529)	0.4	(5.9)	$	(176)	$	(532)	(0.6)	(2.0)
National General	8		(43)		—	(0.5)	(2)		(46)		—	(0.2)
Total Allstate Protection (3)	$	48	$	(572)	0.4	(6.4)	$	(178)	$	(578)	(0.6)	(2.2)

(1)Favorable reserve reestimates are shown in parentheses.

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

(3)2020 includes approximately $495 million of favorable reserve reestimates related to subrogation settlements, which primarily impacted homeowners. The favorable reserve reestimates decreased the combined ratio by 5.5 points and 1.9 points in the third quarter and first nine months of 2020, respectively.

Expense ratio increased 0.2 points in the third quarter of 2021 compared to the third quarter of 2020 primarily due to higher advertising expenses and operating costs, increased amortization of purchased intangibles and DAC, partially offset by lower restructuring and related charges. The expense ratio decreased 3.2 points in the first nine months of 2021 compared to the same period of 2020, primarily due to lower Shelter-in-Place Payback expense, operating costs and expenses, restructuring and related charges, partially offset by increased advertising and amortization of purchased intangibles and DAC.


Impact of specific costs and expenses on the expense ratio
	Three months ended September 30,						Nine months ended September 30,
($ in millions, except ratios)	2021		2020		Change		2021		2020		Change

Amortization of DAC	$	1,346	$	1,158	$	188	$	3,968	$	3,474	$	494
Advertising expense	325		202		123		949		615		334
Amortization of purchased intangibles	75		3		72		165		7		158
Other costs and expenses, net of other revenue	786		663		123		2,111		2,025		86
Restructuring and related charges	16		187		(171)		113		199		(86)
Shelter-in-Place Payback expense	—		—		—		29		948		(919)
Allstate Special Payment plan bad debt expense	—		19		(19)		(19)		66		(85)
Total underwriting expenses	$	2,548	$	2,232	$	316	$	7,316	$	7,334	$	(18)


Premiums earned	$	10,159	$	8,952	$	1,207	$	30,064	$	26,696	$	3,368

Expense ratio
Amortization of DAC	13.2		12.9		0.3		13.2		13.0		0.2
Advertising expense	3.2		2.3		0.9		3.2		2.3		0.9
Other costs and expenses	7.7		7.4		0.3		7.0		7.7		(0.7)
Subtotal	24.1		22.6		1.5		23.4		23.0		0.4
Amortization of purchased intangibles	0.8		—		0.8		0.5		—		0.5
Restructuring and related charges	0.2		2.1		(1.9)		0.4		0.7		(0.3)
Shelter-in-Place Payback expense	—		—		—		0.1		3.6		(3.5)
Allstate Special Payment plan bad debt expense	—		0.2		(0.2)		(0.1)		0.2		(0.3)
Total expense ratio	25.1		24.9		0.2		24.3		27.5		(3.2)

66 www.allstate.com

Run-off Property-Liability Segment Results

Run-off Property-Liability Segment


Underwriting results
($ in millions)		Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020



Claims and claims expense
Asbestos claims		$	(64)		$	(78)		$	(64)		$	(78)
Environmental claims		(40)			(44)			(40)			(44)
Other run-off lines		(9)			(13)			(11)			(17)
Total claims and claims expense		(113)			(135)			(115)			(139)

Operating costs and expenses		—			—			(3)			(2)
Underwriting loss		$	(113)		$	(135)		$	(118)		$	(141)

Annual reserve review In the third quarter of 2021 and 2020, we performed our annual reserve review using established industry and actuarial best practices. The annual review resulted in unfavorable reserve reestimates totaling $111 million and $132 million in 2021 and 2020. The reserve reestimates are included as part of claims and claims expense.

The reserve reestimates in 2021 primarily related to new reported information for asbestos and environmental and higher than expected reported losses for environmental and other run-off exposures.

The reserve reestimates in 2020 primarily related to new reported information, court decisions and policy buyback settlements for asbestos exposures and higher than expected reported losses for environmental and other run-off exposures.

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


Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance
($ in millions)	September 30, 2021		December 31, 2020
Asbestos claims
Gross reserves	$	1,249	$	1,204
Reinsurance	(396)		(377)
Net reserves	853		827
Environmental claims
Gross reserves	285		249
Reinsurance	(51)		(43)
Net reserves	234		206
Other run-off claims
Gross reserves	438		435
Reinsurance	(65)		(60)
Net reserves	373		375
Total
Gross reserves	1,972		1,888
Reinsurance	(512)		(480)
Net reserves	$	1,460	$	1,408

Third Quarter 2021 Form 10-Q 67

Segment Results Run-off Property-Liability


Reserves by type of exposure before and after the effects of reinsurance
($ in millions)	September 30, 2021		December 31, 2020
Direct excess commercial insurance
Gross reserves	$	1,095	$	1,011
Reinsurance	(381)		(358)
Net reserves	714		653
Assumed reinsurance coverage
Gross reserves	627		636
Reinsurance	(56)		(58)
Net reserves	571		578
Direct primary commercial insurance
Gross reserves	168		160
Reinsurance	(74)		(63)
Net reserves	94		97
Other run-off business
Gross reserves	1		2
Reinsurance	—		—
Net reserves	1		2
Unallocated loss adjustment expenses
Gross reserves	81		79
Reinsurance	(1)		(1)
Net reserves	80		78
Total
Gross reserves	1,972		1,888
Reinsurance	(512)		(480)
Net reserves	$	1,460	$	1,408


Percentage of gross and ceded reserves by case and incurred but not reported (“IBNR”)
	September 30, 2021				December 31, 2020
	Case		IBNR		Case		IBNR
Direct excess commercial insurance
Gross reserves (1)	62	%	38	%	65	%	35	%
Ceded (2)	69		31		71		29
Assumed reinsurance coverage
Gross reserves	31		69		34		66
Ceded	29		71		35		65
Direct primary commercial insurance
Gross reserves	49		51		55		45
Ceded	62		38		79		21

(1)Approximately 62% of gross case reserves as of September 30, 2021 are subject to settlement agreements.

(2)Approximately 70% of ceded case reserves as of September 30, 2021 are subject to settlement agreements.


Gross payments from case reserves by type of exposure
($ in millions)		Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Direct excess commercial insurance
Gross (1)		$	12		$	15		$	46		$	53
Ceded (2)		(6)			(6)			(21)			(20)
Assumed reinsurance coverage
Gross		11			11			33			33
Ceded		(1)			(2)			(4)			(4)
Direct primary commercial insurance
Gross		(1)			4			5			7
Ceded		2			(3)			(1)			(4)

(1) In the third quarter and first nine months of 2021, 66% and 72% of payments related to settlement agreements.

(2) In the third quarter and first nine months of 2021, 53% and 71% of payments related to settlement agreements.

68 www.allstate.com

Run-off Property-Liability Segment Results

Total net reserves as of September 30, 2021, included $744 million or 51% of estimated IBNR reserves compared to $695 million or 49% of estimated IBNR reserves as of December 31, 2020.

Total gross payments were $22 million and $84 million for the third quarter and first nine months of 2021, respectively. Payments for the third quarter and first nine months of 2021 primarily related to asbestos claims, mainly settlement agreements reached with

several insureds on large claims where the scope of coverages has been agreed upon. The claims associated with these settlement agreements are expected to be substantially paid out over the next several years as qualified claims are submitted by these insureds. Reinsurance collections were $7 million and $31 million for the third quarter and first nine months of 2021, respectively.

Third Quarter 2021 Form 10-Q 69

Segment Results Protection Services

Protection Services Segment

Protection Services include National General’s LeadCloud and Transparent.ly’s results within Arity starting in the first quarter of 2021. These businesses provide marketing and integration platforms connecting data buyers and sellers. Results prior to 2021 reflect historical Arity results only.


Summarized financial information
($ in millions)		Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Premiums written		$	651		$	485		$	1,926		$	1,331

Revenues
Premiums		$	456		$	384		$	1,302		$	1,098
Other revenue		85			52			263			155
Intersegment insurance premiums and service fees (1)		46			36			133			109
Net investment income		10			12			32			33


Costs and expenses
Claims and claims expense		(122)			(107)			(334)			(284)
Amortization of DAC		(206)			(169)			(581)			(482)
Operating costs and expenses		(209)			(160)			(610)			(484)
Restructuring and related charges		1			2			(12)			(1)





Income tax expense on operations		(16)			(10)			(43)			(29)
Adjusted net income		$	45		$	40		$	150		$	115








Allstate Protection Plans		$	32		$	36		$	119		$	105
Allstate Dealer Services		7			7			25			22
Allstate Roadside		1			4			7			8
Arity		1			(3)			4			(9)
Allstate Identity Protection		4			(4)			(5)			(11)
Adjusted net income		$	45		$	40		$	150		$	115

Allstate Protection Plans								141,809			125,831
Allstate Dealer Services								3,980			4,075
Allstate Roadside								533			558
Allstate Identity Protection								3,197			2,490
Policies in force as of September 30 (in thousands)								149,519			132,954

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

Adjusted net income increased 12.5% or $5 million in the third quarter of 2021 and increased 30.4% or $35 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to growth, partially offset by higher operating costs and expenses related to investments in growth.

Premiums written increased 34.2% or $166 million in the third quarter of 2021 and increased 44.7% or $595 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to growth at Allstate Protection Plans and increased sales at Allstate Dealer Services.

PIF increased 12.5% or 17 million to 150 million as of September 30, 2021 compared to September 30, 2020 due to continued growth at Allstate Protection Plans and Allstate Identity Protection.

Other revenue increased 63.5% or $33 million in the third quarter of 2021 and increased 69.7% or $108 million in the first nine months of 2021 compared to the same periods of 2020, reflecting the addition of LeadCloud and Transparent.ly, which were acquired as part of the National General acquisition.

Intersegment premiums and service fees increased 27.8% or $10 million in the third quarter of 2021 and increased 22.0% or $24 million in the first nine months of 2021 compared to the same periods of 2020, primarily related to increased device sales through Arity driven by growth in the Allstate brand Milewise® product and growth in automotive rescue services provided by Allstate Roadside for Allstate brand auto customers.

70 www.allstate.com

Protection Services Segment Results

Claims and claims expense increased 14.0% or $15 million in the third quarter 2021 and increased 17.6% or $50 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to higher levels of claims at Allstate Protection Plans driven by growth of the business and increased claims at Allstate Roadside due to higher severity and rescue volumes.

Amortization of DAC increased 21.9% or $37 million in the third quarter of 2021 and increased 20.5% or $99 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the growth experienced at Allstate Protection Plans and Allstate Dealer Services.

Operating costs and expenses increased 30.6% or $49 million in the third quarter of 2021 and increased 26.0% or $126 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to higher operating costs at Arity driven by the addition of LeadCloud and Transparent.ly and growth experienced at Allstate Protection Plans.

Restructuring and related charges in the third quarter of 2021 were comparable to the third quarter of 2020 and increased $11 million in the first nine months of 2021 compared to the first nine months of 2020, primarily due to a facility closure at Allstate Identity Protection in the first quarter of 2021 and accelerated lease costs at Allstate Protection Plans.

Third Quarter 2021 Form 10-Q 71

Segment Results Allstate Health and Benefits

Allstate Health and Benefits Segment

Allstate Health and Benefits results include National General’s accident and health business, starting in the first quarter of 2021. Results prior to 2021 reflect historical Allstate Benefits results only.


Summarized financial information
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Revenues
Accident and health insurance premiums and contract charges	$	460	$	287	$	1,362	$	832
Other revenue	85		—		248		—
Net investment income	18		18		56		58

Costs and expenses
Accident and health insurance policy benefits	(269)		(128)		(746)		(392)
Interest credited to contractholder funds	(8)		(8)		(25)		(26)
Amortization of DAC	(30)		(59)		(101)		(139)
Operating costs and expenses	(206)		(68)		(582)		(253)
Restructuring and related charges	(8)		—		(9)		(1)

Income tax expense on operations	(9)		(9)		(43)		(17)

Adjusted net income	$	33	$	33	$	160	$	62












Benefit ratio (1)	58.5		44.6		54.8		47.1







Employer voluntary benefits (2)					3,835		4,092
Group health (3)					126		—
Individual accident and health (4)					417		—
Policies in force as of September 30 (in thousands)					4,378		4,092

(1)Benefit ratio is calculated as accident and health insurance policy benefits divided by premiums and contract charges.

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

(3)Group health includes health products sold to employers for use by their employees.

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

Adjusted net income in the third quarter of 2021 was comparable to the third quarter of 2020. Adjusted net income increased $98 million in the first nine months of 2021 compared to the first nine months of 2020, primarily due to the acquisition of National General’s group health and individual accident and health business, which resulted in higher premiums and contract charges and the addition of other revenue, partially offset by higher policy benefits and operating costs and expenses. Results for the first nine months of 2020 included an after-tax charge of $32

million related to the write-off of previously capitalized software.

Premiums and contract charges increased 60.3% or $173 million in the third quarter of 2021 and increased 63.7% or $530 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of group health and individual accident and health business.


Premiums and contract charges by line of business
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Employer voluntary benefits	$	251	$	287	$	769	$	832
Group health	90		—		260		—
Individual accident and health	119		—		333		—
Premiums and contract charges	$	460	$	287	$	1,362	$	832

Other revenue of $85 million and $248 million in the third quarter and first nine months of 2021, respectively, reflects National General’s commission revenue, group health administrative fees, agency fees and technology fees.

Accident and health insurance policy benefits increased $141 million in the third quarter of 2021 and increased 90.3% or $354 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of the group health and individual accident and health products and increased benefit utilization compared to the prior year quarter.

72 www.allstate.com

Allstate Health and Benefits Segment Results

Benefit ratio increased to 58.5 and 54.8 in the third quarter and the first nine months of 2021 compared to 44.6 and 47.1 in the same periods of 2020, primarily due to a higher benefit ratio associated with group health products added in 2021 and a higher benefit ratio for employer voluntary benefit products due to lower claim experience in the prior year, primarily driven by the impacts of the pandemic on benefit utilization.

Amortization of DAC decreased 49.2% or $29 million in the third quarter of 2021 and decreased 27.3% or $38 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to unfavorable adjustments associated with our annual review of assumptions in 2020 compared to favorable adjustments in 2021, and lower health product lapses for employer voluntary benefits.

Our annual comprehensive review of assumptions underlying estimated future gross profits for our interest-sensitive life contracts resulted in a deceleration of DAC amortization (increase to income) of $2 million of the unamortized DAC asset balance in the third quarter of 2021 compared to $28 million acceleration of DAC amortization (decrease to income) in the third quarter of 2020. In 2020, DAC amortization acceleration primarily related to lower projected investment returns, partially offset by favorable projected mortality.


Operating costs and expenses
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Non-deferrable commissions	$	80	$	25	$	231	$	76
General and administrative expenses	126		43		351		177
Total operating costs and expenses	$	206	$	68	$	582	$	253

Operating costs and expenses increased $138 million in the third quarter of 2021 and increased $329 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of the group health and individual accident and health business in 2021. Results for the first nine months of 2020 included a write-off of capitalized software costs associated with a billing system.

Analysis of reserves


Reserve for future policy benefits
($ in millions)	September 30, 2021		December 31, 2020
Traditional life insurance	$	305	$	299
Accident and health insurance	958		729
Reserve for future policy benefits	$	1,263	$	1,028

Third Quarter 2021 Form 10-Q 73

Investments

Investments


Portfolio composition and strategy by reporting segment (1)
	September 30, 2021
($ in millions)	Property-Liability			Protection Services			Allstate Health and Benefits			Corporate and Other			Total
Fixed income securities (2)	$	35,185		$	1,628		$	1,794		$	1,382		$	39,989
Equity securities (3)	2,970			122			99			616			3,807
Mortgage loans, net	681			—			71			—			752
Limited partnership interests	7,578			—			—			—			7,578
Short-term investments (4)	4,741			177			67			1,443			6,428
Other, net	3,140			—			144			2			3,286
Total	$	54,295		$	1,927		$	2,175		$	3,443		$	61,840
Percent to total	87.8		%	3.1		%	3.5		%	5.6		%	100.0		%

Market-based	$	45,784		$	1,927		$	2,175		$	3,441		$	53,327
Performance-based	8,511			—			—			2			8,513
Total	$	54,295		$	1,927		$	2,175		$	3,443		$	61,840

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

(2) Fixed income securities are carried at fair value. Amortized cost, net for these securities was $34.16 billion, $1.59 billion, $1.72 billion, $1.34 billion and $38.81 billion for Property-Liability, Protection Services, Allstate Health and Benefits, Corporate and Other, and in total, respectively.

(3) Equity securities are carried at fair value. The fair value of equity securities held as of September 30, 2021, was $868 million in excess of cost. These net gains were primarily concentrated in the consumer goods, technology and banking sectors. Equity securities include $962 million of funds with underlying investments in fixed income securities as of September 30, 2021.

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

Investments totaled $61.84 billion as of September 30, 2021, increasing from $59.54 billion as of December 31, 2020, primarily due to positive operating cash flows, partially offset by common share repurchases and dividends paid to shareholders.

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

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

As long as market yields remain below the current portfolio yield, market-based portfolio yield is expected to decline resulting in lower net investment income for the market-based portfolio in future periods.

Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity and real estate. These investments include investee level expenses, reflecting asset level operating expenses on directly held real estate and other consolidated investments.

Coronavirus impacts Future investment results will be influenced by the magnitude and duration of the global pandemic and the impact of actions taken by governmental authorities, businesses and consumers, including the availability, utilization rate and effectiveness of vaccines, to mitigate health risks, which creates significant uncertainty. Supply chain disruptions and labor shortages could increase inflation, which may have an adverse impact on investment valuations and returns.

74 www.allstate.com

Investments


Portfolio composition by investment strategy
	September 30, 2021
($ in millions)	Market-based			Performance-based			Total
Fixed income securities	$	39,913		$	76		$	39,989
Equity securities	3,455			352			3,807
Mortgage loans, net	752			—			752
Limited partnership interests	441			7,137			7,578
Short-term investments	6,428			—			6,428
Other, net	2,338			948			3,286
Total	$	53,327		$	8,513		$	61,840
Percent to total	86.2		%	13.8		%	100.0		%

Unrealized net capital gains and losses
Fixed income securities	$	1,177		$	1		$	1,178


Other	(3)			—			(3)
Total	$	1,174		$	1		$	1,175

Fixed income securities


Fixed income securities by type
	Fair value as of
($ in millions)	September 30, 2021		December 31, 2020
U.S. government and agencies	$	3,042	$	2,107
Municipal	7,417		7,578
Corporate	27,367		31,017
Foreign government	1,059		958
Asset-backed securities (“ABS”)	1,070		846
Mortgage-backed securities (“MBS”)	34		59
Total fixed income securities	$	39,989	$	42,565

Fixed income securities are rated by third-party credit rating agencies and/or are internally rated. As of September 30, 2021, 83.8% of the consolidated fixed income securities portfolio was rated investment grade, which 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, a comparable rating from another nationally recognized rating agency, or a comparable internal rating if an externally provided rating is not available. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Our initial investment decisions and ongoing monitoring procedures for fixed income

securities are based on a due diligence process which includes, but is not limited to, an assessment of the credit quality, sector, structure, and liquidity risks of each issue.

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

Third Quarter 2021 Form 10-Q 75

Investments


Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating
	September 30, 2021

	A and above				BBB				BB
($ in millions)	Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)











































U.S. government and agencies	$	3,042	$	7	$	—	$	—	$	—	$	—
Municipal	7,186		292		216		6		—		—
Corporate
Public	5,097		136		10,380		418		1,594		87
Privately placed	1,799		36		3,668		96		2,169		52
Total corporate	6,896		172		14,048		514		3,763		139
Foreign government	1,058		5		1		—		—		—
ABS	1,012		5		10		—		7		—
MBS	31		1		—		—		2		—
Total fixed income securities	$	19,225	$	482	$	14,275	$	520	$	3,772	$	139

	B				CCC and lower				Total
	Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)
U.S. government and agencies	$	—	$	—	$	—	$	—	$	3,042	$	7
Municipal	10		1		5		1		7,417		300
Corporate
Public	268		6		8		(4)		17,347		643
Privately placed	2,088		29		296		(4)		10,020		209
Total corporate	2,356		35		304		(8)		27,367		852
Foreign government	—		—		—		—		1,059		5
ABS	3		—		38		8		1,070		13
MBS	1		—		—		—		34		1
Total fixed income securities	$	2,370	$	36	$	347	$	1	$	39,989	$	1,178

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

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

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

MBS includes residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”). RMBS is subject to interest rate risk, but unlike other fixed income securities, is additionally subject to prepayment risk from the underlying residential mortgage loans. RMBS consists of a U.S. Agency portfolio having collateral issued or guaranteed by U.S. government agencies and a non-agency portfolio consisting of securities collateralized by Prime, Alt-A and Subprime loans. CMBS investments are primarily traditional conduit transactions collateralized by commercial mortgage loans and

typically are diversified across property types and geographical area.

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

Mortgage loans mainly comprise loans secured by first mortgages on developed commercial real estate. Key considerations used to manage our exposure include property type and geographic diversification.

For further detail on our mortgage loan portfolio, see Note 5 of the condensed consolidated financial statements.

Limited partnership interests include $6.18 billion of interests in private equity funds, $962 million of interests in real estate funds and $441 million of interests in other funds as of September 30, 2021.

We have commitments to invest additional amounts in limited partnership interests totaling $2.50 billion as of September 30, 2021.

Other investments include $849 million of direct investments in real estate as of September 30, 2021.

76 www.allstate.com

Investments


Unrealized net capital gains (losses)
	September 30,		December 31,
($ in millions)	2021		2020
U.S. government and agencies	$	7	$	49
Municipal	300		478
Corporate	852		1,960
Foreign government	5		37
ABS	13		6
MBS	1		1
Fixed income securities	1,178		2,531

Derivatives	(3)		(3)
EMA limited partnerships	—		(1)
Unrealized net capital gains and losses, pre-tax	$	1,175	$	2,527

Third Quarter 2021 Form 10-Q 77

Investments


Gross unrealized gains (losses) on fixed income securities by type and sector
		September 30, 2021
($ in millions)		Amortized cost, net			Gross unrealized				Fair value
	Gains			Losses
Corporate
Consumer goods (cyclical and non-cyclical)		$	6,615		$	234	$	(26)	$	6,823
Utilities		2,089			66		(19)		2,136
Communications		2,148			86		(14)		2,220
Banking		4,038			93		(14)		4,117
Technology		2,858			114		(10)		2,962
Financial services		1,871			59		(7)		1,923
Capital goods		2,588			102		(7)		2,683
Transportation		969			48		(6)		1,011
Energy
Midstream		1,091			48		(2)		1,137
Integrated		172			12		(1)		183
Independent/upstream		244			20		—		264
Other		158			7		(1)		164
Total energy		1,665			87		(4)		1,748
Basic industry		1,281			71		(2)		1,350
Other		393			3		(2)		394
Total corporate fixed income portfolio		26,515			963		(111)		27,367
U.S. government and agencies		3,035			22		(15)		3,042
Municipal		7,117			318		(18)		7,417
Foreign government		1,054			12		(7)		1,059
ABS		1,057			14		(1)		1,070
MBS		33			1		—		34
Total fixed income securities		$	38,811		$	1,330	$	(152)	$	39,989



		December 31, 2020
($ in millions)		Amortized cost			Gross unrealized				Fair value
	Gains			Losses
Corporate
Consumer goods (cyclical and non-cyclical)		$	7,820		$	516	$	(2)	$	8,334
Utilities		2,749			156		(2)		2,903
Communications		2,529			201		(4)		2,726
Banking		4,353			244		—		4,597
Technology		2,443			191		(1)		2,633
Financial services		1,785			116		(2)		1,899
Capital goods		2,906			205		—		3,111
Transportation		1,055			84		(11)		1,128
Energy
Midstream		1,095			72		(1)		1,166
Integrated		270			27		—		297
Independent/upstream		186			21		(1)		206
Other		139			9		(2)		146
Total energy		1,690			129		(4)		1,815
Basic industry		1,512			136		—		1,648
Other		215			8		—		223
Total corporate fixed income portfolio		29,057			1,986		(26)		31,017
U.S. government and agencies		2,058			50		(1)		2,107
Municipal		7,100			480		(2)		7,578
Foreign government		921			37		—		958
ABS		840			9		(3)		846
MBS		58			1		—		59
Total fixed income securities		$	40,034		$	2,563	$	(32)	$	42,565

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

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Investments


Equity securities by sector
	September 30, 2021						December 31, 2020
($ in millions)	Cost		Over (under) cost		Fair value		Cost		Over (under) cost		Fair value


Utilities	$	52	$	15	$	67	$	37	$	3	$	40
Transportation	34		15		49		24		7		31
Basic Industry	44		21		65		29		10		39
Energy
Midstream	40		7		47		65		(2)		63
Integrated	19		8		27		10		—		10
Independent/upstream	14		6		20		7		—		7
Other	6		3		9		2		1		3
Total energy	79		24		103		84		(1)		83
Capital Goods	162		32		194		92		(4)		88
Other (1)	1,270		646		1,916		823		211		1,034
Funds
Fixed income	925		37		962		804		55		859
Equities	373		78		451		847		147		994

Total funds	1,298		115		1,413		1,651		202		1,853




Total equity securities	$	2,939	$	868	$	3,807	$	2,740	$	428	$	3,168

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


Net investment income
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Fixed income securities	$	279	$	314	$	870	$	918
Equity securities	24		18		51		49
Mortgage loans	9		8		31		25
Limited partnership interests	438		123		1,467		(71)
Short-term investments	1		2		3		15
Other	50		29		139		91
Investment income, before expense	801		494		2,561		1,027
Investment expense
Investee level expenses	(12)		(7)		(36)		(24)
Securities lending expense	—		—		—		(4)
Operating costs and expenses	(25)		(23)		(79)		(69)
Total investment expense	(37)		(30)		(115)		(97)
Net investment income	$	764	$	464	$	2,446	$	930


Property-Liability	$	710	$	422	$	2,314	$	802
Protection Services	10		12		32		33
Allstate Health and Benefits	18		18		56		58
Corporate and Other	26		12		44		37
Net investment income	$	764	$	464	$	2,446	$	930

Market-based	$	353	$	359	$	1,064	$	1,073
Performance-based	448		135		1,497		(46)
Investment income, before expense	$	801	$	494	$	2,561	$	1,027

Net investment income increased $300 million and $1.52 billion in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to increases in performance-based income results, mainly from limited partnerships.

Third Quarter 2021 Form 10-Q 79

Investments


Performance-based investment income
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020













Private equity	$	400	$	134	$	1,282	$	(71)
Real estate	48		1		215		25

Total performance-based income before investee level expenses	$	448	$	135	$	1,497	$	(46)

Investee level expenses (1)	(11)		(6)		(33)		(21)
Total performance-based income	$	437	$	129	$	1,464	$	(67)

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

Performance-based investment income increased $308 million and $1.53 billion in the third quarter and the first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to increased valuations and a decline in the equity market and lower valuations in 2020. Performance-based investment income in the first nine months of 2021 includes income generated by certain investments which were classified as assets held for sale in 2020.

Performance-based investment results and income can vary significantly between periods and are influenced by economic conditions, equity market performance, comparable public company earnings multiples, capitalization rates, operating performance of the underlying investments and the timing of asset sales.


Components of realized capital gains (losses) and the related tax effect
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Sales	$	80	$	214	$	441	$	762






Credit losses	(12)		7		2		(29)

Valuation of equity investments - appreciation (decline):
Equity securities	14		96		333		(92)
Equity fund investments in fixed income securities	(8)		18		(11)		(56)
Limited partnerships (1)	(15)		14		(1)		(50)
Total valuation of equity investments	(9)		128		321		(198)
Valuation and settlements of derivative instruments	46		(30)		54		62
Realized capital gains (losses), pre-tax	105		319		818		597
Income tax expense	(21)		(68)		(179)		(130)
Realized capital gains (losses), after-tax	$	84	$	251	$	639	$	467


Property-Liability	$	74	$	230	$	595	$	447
Protection Services	4		11		16		7
Allstate Health and Benefits	(1)		3		4		—
Corporate and Other	7		7		24		13
Realized capital gains (losses), after-tax	$	84	$	251	$	639	$	467

Market-based	$	74	$	333	$	659	$	590
Performance-based	31		(14)		159		7
Realized capital gains (losses), pre-tax	$	105	$	319	$	818	$	597

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

Realized capital gains in the third quarter of 2021 related primarily to gains on sales of fixed income securities and increased valuation and settlements of derivative instruments. Realized capital gains in the first nine months of 2021 related primarily to gains on sales of fixed income securities and real estate investments, increased valuation of equity investments and increased valuation and settlements of derivative instruments.

Sales in the third quarter and first nine months of 2021 related primarily to sales of fixed income securities in connection with ongoing portfolio management. Sales in the first nine months of 2021 also included sales of real estate investments.

Valuation and settlements of derivative instruments in the third quarter and first nine months of 2021 primarily comprised of gains on foreign currency contracts due to the strengthening of the U.S. dollar and gains on interest rate futures used to increase asset duration.

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Investments


Realized capital gains (losses) for performance-based investments
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Sales	$	(5)	$	(4)	$	79	$	4
Credit losses	(3)		1		(3)		(7)
Valuation of equity investments	23		4		60		3
Valuation and settlements of derivative instruments	16		(15)		23		7
Total performance-based	$	31	$	(14)	$	159	$	7

Realized capital gains for performance-based investments in the third quarter of 2021 primarily related to increased valuation of equity investments and increased valuation and settlements of derivative instruments. Realized capital gains for performance-based investments in the first nine months of 2021 primarily related to gains on sales of real estate investments and increased valuation of equity investments.

Third Quarter 2021 Form 10-Q 81

Capital Resources and Liquidity

Capital Resources and Liquidity

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


Capital resources
($ in millions)	September 30, 2021			December 31, 2020
Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items	$	24,811		$	26,913
Accumulated other comprehensive income	1,918			3,304
Total Allstate shareholders’ equity	26,729			30,217
Debt	7,980			7,825
Total capital resources	$	34,709		$	38,042

Ratio of debt to Allstate shareholders’ equity	29.9		%	25.9		%
Ratio of debt to capital resources	23.0			20.6

Allstate shareholders’ equity decreased in the first nine months of 2021, primarily due to common share repurchases, decreased unrealized capital gains on investments and dividends paid to shareholders, partially offset by net income. In the nine months ended September 30, 2021, we paid dividends of $650 million and $87 million related to our common and preferred shares, respectively.

Debt maturities $250 million of floating rate senior notes matured on March 29, 2021. We do not have any other scheduled debt maturities in 2021.


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

2022	$	—
2023	750
2024 (1)	350
2025	600
2026	550
Thereafter	5,741
Total long-term debt principal	$	7,991

(1)Reflects National General 6.750% Senior Notes.

Common share repurchases In August 2021, the Board authorized a new $5.00 billion common share repurchase program that is expected to be completed by March 31, 2023. We also completed the $3.00 billion common share repurchase program that commenced in February 2020.

In August 2021, we entered into an accelerated share repurchase program (“ASR agreement”) with JPMorgan Chase Bank, National Association to purchase $750 million of our outstanding common stock. Under the ASR agreement, we paid $750 million upfront and initially acquired 4.7 million shares. The ASR agreement concluded on September 17, 2021, and we repurchased a total of 5.6 million shares at an average price of $133.39.

As of September 30, 2021, there was $4.17 billion remaining in the $5.00 billion program.

During the first nine months of 2021, we repurchased 18.8 million common shares, or 6.2% of total common shares outstanding at December 31, 2020, for $2.39 billion.

Common shareholder dividends On January 4, 2021, April 1, 2021 and July 1, 2021, we paid a common shareholder dividend of $0.54, $0.81 and $0.81, respectively. On July 15, 2021, we declared a common shareholder dividend of $0.81 payable on October 1, 2021.

Redemption of preferred stock On July 15, 2021, we 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.

82 www.allstate.com

Capital Resources and Liquidity

Financial ratings and strength Our ratings are influenced by many factors including our operating and financial performance, asset quality, liquidity, overall portfolio mix, financial leverage (i.e., debt), exposure to risks such as catastrophes and the current level of operating leverage. The preferred stock and subordinated debentures are viewed as having a common equity component by certain rating agencies and are given equity credit up to a pre-determined limit in our capital structure as determined by their respective methodologies. These respective methodologies consider the existence of certain terms and features in the instruments such as the noncumulative dividend feature in the preferred stock.

In January 2021, Moody’s affirmed The Allstate Corporation’s (the “Corporation’s”) debt and short-term issuer ratings of A3 and P-2, respectively, and the insurance financial strength rating of Aa3 for Allstate Insurance Company (“AIC”). The outlook for the ratings is stable.

In June 2021, S&P affirmed the Corporation’s debt and short-term issuer ratings of A- and A-2, respectively, and the insurance financial strength rating of AA- for AIC. The outlook for the ratings is stable.

In July 2021, A.M. Best affirmed the Corporation’s debt and short-term issuer ratings of a and AMB-1+, respectively, and the insurance financial strength rating of A+ for AIC. The outlook for the ratings is stable.

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

The Corporation is party to an Amended and Restated Intercompany Liquidity Agreement (“Liquidity Agreement”) with certain subsidiaries, which include but are not limited to AIC. The Liquidity Agreement allows for short-term advances of funds to be made between parties for liquidity and other general corporate purposes. The Liquidity Agreement does not establish a commitment to advance funds on the part of any party. AIC serves as a lender and borrower, certain other subsidiaries serve only as borrowers, and the Corporation serves only as a lender. The maximum amount of potential funding under each of these agreements is $1.00 billion.

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

Third Quarter 2021 Form 10-Q 83

Capital Resources and Liquidity

Parent company capital capacity Parent holding company deployable assets totaled $3.41 billion as of September 30, 2021, primarily comprised of cash and investments that are generally saleable within one quarter. The substantial earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation.

As of September 30, 2021, we held $6.70 billion of cash, U.S. government and agencies fixed income securities, and public equity securities which we would expect to be able to liquidate within one week.

Intercompany dividends were paid in the first nine months of 2021 between the following companies: AIC, Allstate Insurance Holdings, LLC (“AIH”), the Corporation, ALIC and Allstate Financial Insurance Holdings Corporation (“AFIHC”).


Intercompany dividends
($ in millions)
AIC to AIH	$	4,643
AIH to the Corporation	4,640
ALIC to AIC	392


AHL to AFIHC	50
AFIHC to the Corporation	50

Based on the greater of 2020 statutory net income or 10% of statutory surplus, the maximum amount of dividends that AIC will be able to pay, without prior Illinois Department of Insurance approval, at a given point in time in 2021 is estimated at $5.95 billion, less dividends paid during the preceding twelve months measured at that point in time. As of September 30, 2021, we paid dividends of $4.64 billion.

Dividends may not be paid or declared on our common stock and shares of common stock may not be repurchased unless the full dividends for the latest completed dividend period on our preferred stock have been declared and paid or provided for. We are prohibited from declaring or paying dividends on our Series G preferred stock if we fail to meet specified capital adequacy, net income or shareholders’ equity levels, except out of the net proceeds of common stock issued during the 90 days prior to the date of declaration. As of September 30, 2021, we satisfied all the requirements with no current restrictions on the payment of preferred stock dividends.

The terms of our outstanding subordinated debentures also prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions. In the first nine months of 2021, we did not defer interest payments on the subordinated debentures.

Additional resources to support liquidity are as follows:

The Corporation and AIC have access to a $750 million unsecured revolving credit facility that is available for short-term liquidity requirements. The maturity date of this facility is November 2025. The facility is fully subscribed among 11 lenders with the largest commitment being $95 million. The commitments of the lenders are several and no lender is responsible for any other lender’s commitment if such lender fails to make a loan under the facility. This facility contains an increase provision that would allow up to an additional $500 million of borrowing, subject to the lenders’ commitment. This facility has a financial covenant requiring that we not exceed a 37.5% debt to capitalization ratio as defined in the agreement. This ratio was 18.9% as of September 30, 2021. Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior unsecured, unguaranteed long-term debt. There were no borrowings under the credit facility during 2021.
The Corporation has access to a commercial paper facility with a borrowing limit equal to our undrawn credit facility balance of $750 million to cover short-term cash needs.
As of September 30, 2021, there were no balances outstanding for the credit facility or the commercial paper facility and therefore the remaining borrowing capacity was $750 million.
The Corporation has access to a universal shelf registration statement with the Securities and Exchange Commission that expires in 2024. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 612 million shares of treasury stock as of September 30, 2021), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.

84 www.allstate.com

Forward-Looking Statements

This report contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. We believe these statements are based on reasonable estimates, assumptions and plans. If the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements include risks related to:

Insurance and Financial Services (1) unexpected increases in claim frequency and severity; (2) catastrophes and severe weather events; (3) limitations in analytical models used for loss cost estimates; (4) price competition and changes in underwriting standards; (5) actual claims costs exceeding current reserves; (6) market risk and declines in credit quality of our investment portfolio; (7) our subjective determination of fair value and amount of credit losses for investments; (8) changes in market interest rates or performance-based investment returns impacting our annuity business; (9) changes in reserve estimates and amortization of deferred acquisition costs impacting our life, benefits and annuity businesses; (10) our participation in indemnification programs, including state industry pools and facilities; (11) inability to mitigate the capital impact associated with statutory reserving and capital requirements; (12) a downgrade in financial strength ratings; (13) changes in tax laws;

Business, Strategy and Operations (14) competition in the insurance industry and new or changing technologies; (15) implementation of our transformative growth strategy; (16) our catastrophe management strategy; (17) restrictions on our subsidiaries’ ability to pay dividends; (18) restrictions under terms of certain of our securities on our ability to pay dividends or repurchase our stock; (19) the availability of reinsurance at current levels and prices; (20) counterparty risk related to reinsurance; (21) acquisitions and divestitures of businesses; (22) intellectual property infringement, misappropriation and third-party claims;

Macro, Regulatory and Risk Environment (23) conditions in the global economy and capital markets; (24) a large-scale pandemic, such as the Coronavirus and its impacts, or occurrence of terrorism, military actions or social unrest; (25) the failure in cyber or other information security controls, or the occurrence of events unanticipated in our disaster recovery processes and business continuity planning; (26) changing climate and weather conditions; (27) restrictive regulations and regulatory reforms, including limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (28) losses from legal and regulatory actions; (29) changes in or the application of accounting standards; (30) loss of key vendor relationships or failure of a vendor to protect our data or confidential, proprietary and personal information; (31) our ability to attract, develop and retain key personnel; and (32) misconduct or fraudulent acts by employees, agents and third parties.

Additional information concerning these and other factors may be found in our filings with the Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K. Forward- looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.

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