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 2021, filed February 18, 2022.

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

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 generally moderated, with periodic changes in response to local conditions. 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.

Certain growth and profitability comparisons to the prior year were impacted, in part, by the effects the Coronavirus had on our prior year results. Beginning in March 2020, when shelter-in-place orders and other restrictions were initiated, and throughout 2021, we experienced lower accident claim frequency and different claim patterns than historically experienced. Claim frequency has increased through the first quarter of 2022 and during 2021, but remains below pre-pandemic levels.

The Coronavirus has affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity. The impact from the pandemic should be considered when comparing the current period to the prior period, including:

Sales of new and retention of existing policies
Rate increases and average gross premiums
Premium for transportation network products
Driving behavior and auto accident frequency
Supply chain disruptions and labor shortages increasing 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 2022 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 a business model, capabilities and culture that continually transform to better serve customers. This is done by providing affordable, simple and connected protection through multiple distribution partners. The ultimate objective is to create continuous transformative growth in all businesses.

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

Expanding customer access
Improving customer value
Increasing customer acquisition sophistication
Modernizing the technology ecosystem
Enhancing organizational capabilities

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

Acquisitions and Dispositions

Acquisitions 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.

Discontinued operations and held for sale On October 1, 2021, we closed the sale of Allstate Life Insurance Company of New York (“ALNY”) to Wilton Reassurance Company for $400 million. On November 1, 2021, we closed the sale of Allstate Life Insurance Company (“ALIC”) and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including a pre-close dividend of $1.25 billion paid by ALIC.

In 2021 and prior periods, the assets and liabilities of the business were reclassified as held for sale and results were presented as discontinued operations.

First Quarter 2022 Form 10-Q 43

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”), amortization of deferred policy acquisition costs (“DAC”), operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, as determined using accounting principles generally accepted in the United States of America (“GAAP”). We use this measure in our evaluation of results of operations to analyze profitability.

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


•			Net gains and losses on investments and derivatives
•			Pension and other postretirement remeasurement gains and losses
•			Business combination expenses and the amortization or impairment of purchased intangibles
•			Income or loss from discontinued operations
•			Gain or loss on disposition of 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

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Highlights


Consolidated net income
($ in millions)


Consolidated net income applicable to common shareholders was $630 million in the first quarter of 2022 compared to a loss of $1.41 billion in the same period of 2021 primarily due to a loss from discontinued operations in 2021, partially offset by lower Allstate Protection underwriting income and equity valuation decreases. For the twelve months ended March 31, 2022, return on Allstate common shareholders’ equity was 15.4%, an increase of 0.3 points from 15.1% for the twelve months ended March 31, 2021.


Total revenue
( ($ in millions)


Total revenue decreased 0.9% to $12.34 billion in the first quarter of 2022 compared to the same period of 2021, driven by net losses on investments and derivatives in 2022 compared to net gains in 2021, decreases in net investment income, offset by a 6.5% increase in property and casualty insurance premiums earned. Insurance premiums earned increased in Property-Liability and Protection Services.


Net investment income
($ in millions)


Net investment income decreased $114 million to $594 million in the first quarter of 2022 compared to the same period of 2021, primarily due to lower performance-based investment results, mainly from limited partnerships, and lower market-based fixed income portfolio yields.

Financial highlights

Investments totaled $61.77 billion as of March 31, 2022, decreasing from $64.70 billion as of December 31, 2021.

Allstate shareholders’ equity As of March 31, 2022, Allstate shareholders’ equity was $23.21 billion.

Book value per common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $75.95, a decrease of 6.3% from $81.08 as of March 31, 2021, and a decrease of 6.8% from $81.52 as of December 31, 2021.

Return on average Allstate common shareholders’ equity For the twelve months ended March 31, 2022, return on Allstate common shareholders’ equity was 15.4%, an increase of 0.3 points from 15.1% for the twelve months ended March 31, 2021. The increase was primarily due to a decrease in average Allstate common shareholders’ equity.

Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement gains of $247 million in the first quarter of 2022 primarily related to an increase in the liability discount rate and changes in other assumptions, partially offset by unfavorable asset performance compared to the expected return on plan assets.

First Quarter 2022 Form 10-Q 45

Summarized consolidated financial results


	Three months ended March 31,
($ in millions)	2022		2021
Revenues
Property and casualty insurance premiums	$	10,981	$	10,307
Accident and health insurance premiums and contract charges	469		455
Other revenue	560		555
Net investment income	594		708
Net gains (losses) on investments and derivatives	(267)		426
Total revenues	12,337		12,451

Costs and expenses
Property and casualty insurance claims and claims expense	(7,822)		(6,043)

Accident, health and other policy benefits	(269)		(242)
Amortization of deferred policy acquisition costs	(1,612)		(1,523)
Operating, restructuring and interest expenses	(1,997)		(1,868)
Pension and other postretirement remeasurement gains (losses)	247		310
Amortization of purchased intangibles	(87)		(53)

Total costs and expenses	(11,540)		(9,419)

Income from operations before income tax expense	797		3,032

Income tax expense	(151)		(626)

Net income from continuing operations	646		2,406

Income (loss) from discontinued operations, net of tax	—		(3,793)

Net income (loss)	646		(1,387)

Less: Net loss attributable to noncontrolling interest	(10)		(6)

Net income (loss) attributable to Allstate	656		(1,381)

Preferred stock dividends	(26)		(27)

Net income (loss) applicable to common shareholders	$	630	$	(1,408)

Segment highlights

Allstate Protection underwriting income was $282 million in the first quarter of 2022, compared to underwriting income of $1.66 billion in the first quarter of 2021 primarily due to higher auto non-catastrophe losses, partially offset by increased premiums.

Catastrophe losses were $462 million in the first quarter of 2022 compared to $590 million in the first quarter of 2021.

Premiums written increased 10.2% to $10.76 billion in the first quarter of 2022 compared to the same period of 2021, reflecting higher premiums in both Allstate and National General brands.

Protection Services adjusted net income was $53 million in the first quarter of 2022 compared to $49 million in the first quarter of 2021. The increase was primarily due to restructuring charges in 2021 and higher revenue in Allstate Identity Protection, partially offset by higher operating costs at Allstate Protection Plans and Arity and higher severity and rescue volumes in Allstate Roadside.

Premiums and other revenue increased 15.2% or $76 million in the first quarter of 2022 compared to the same period of 2021, primarily due to Allstate Protection Plan’s growth through its U.S. retail and international channels.

Allstate Health and Benefits adjusted net income was $53 million in the first quarter of 2022 compared to $65 million in the first quarter of 2021, primarily due to increases in individual and group health claims and favorable reserve reestimates in the prior year for group health, partially offset by lower employer voluntary benefits claim utilization.

Premiums and contract charges increased 3.1% to $469 million in the first quarter of 2022 compared to the same period of 2021, primarily due to growth in group health.

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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, net gains and losses on investments and derivatives, or assets to the Allstate Protection and Run-off Property-Liability segments. Management reviews assets at the Property-Liability level for decision-making purposes.

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

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

*•*Expense ratio: the ratio of amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges 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

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

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

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

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

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

reflect contracts that cover multiple rather than individual drivers.

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

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

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

*•*Implemented rate changes: Represents the impact in the locations (U.S. states, the District of Columbia or Canadian provinces) where rate changes were implemented during the period as a percentage of total brand prior year-end premiums written.

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

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

*•*Report year incurred claim severity is calculated by dividing the sum of recorded estimated incurred losses and allocated loss adjustment expenses, excluding catastrophes, by the reported notice counts during that report year. Report year incurred claim severity does not include incurred but not reported (“IBNR”) losses or benefits from subrogation and salvage.

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

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

First Quarter 2022 Form 10-Q 47

Property-Liability Operations

same period in the prior year, divided by the prior year gross claim frequency or paid claim severity.

*•*Percent change in report year incurred claim severity statistic is calculated as the amount of

increase or decrease in report year incurred claim severity recorded in the year-to-date period divided by the current estimate of the prior report year incurred claim severity.


Underwriting results
	Three months ended March 31,
($ in millions, except ratios)	2022		2021
Premiums written	$	10,761	$	9,768
Premiums earned	$	10,498	$	9,896
Other revenue	347		385
Claims and claims expense	(7,702)		(5,945)

Amortization of DAC	(1,348)		(1,303)
Other costs and expenses	(1,445)		(1,325)
Restructuring and related charges (1)	(12)		(32)
Amortization of purchased intangibles	(58)		(19)
Underwriting (loss) income	$	280	$	1,657

Catastrophe losses
Catastrophe losses, excluding reserve reestimates	$	475	$	833
Catastrophe reserve reestimates (2)	(13)		(243)
Total catastrophe losses	$	462	$	590

Non-catastrophe reserve reestimates (2)	158		2
Prior year reserve reestimates (2)	145		(241)

GAAP operating ratios
Loss ratio	73.3		60.1
Expense ratio (3)	24.0		23.2
Combined ratio	97.3		83.3
Effect of catastrophe losses on combined ratio	4.4		6.0
Effect of prior year reserve reestimates on combined ratio	1.4		(2.4)
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio	(0.1)		(2.5)
Effect of restructuring and related charges on combined ratio (1)	0.1		0.3
Effect of amortization of purchased intangibles on combined ratio	0.5		0.1

Effect of Run-off Property-Liability business on combined ratio	—		0.1

(1)Restructuring and related charges for the first quarter of 2022 primarily related to future work environment. See Note 11 of the condensed consolidated financial statements for additional details.

(2)Favorable reserve reestimates are shown in parentheses.

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

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Allstate Protection Segment Results

Allstate Protection Segment


Underwriting results
	Three months ended March 31,
($ in millions)	2022		2021
Premiums written	$	10,761	$	9,768
Premiums earned	$	10,498	$	9,896
Other revenue	347		385
Claims and claims expense	(7,701)		(5,944)

Amortization of DAC	(1,348)		(1,303)
Other costs and expenses	(1,444)		(1,323)
Restructuring and related charges	(12)		(32)
Amortization of purchased intangibles	(58)		(19)
Underwriting income	$	282	$	1,660
Catastrophe losses	$	462	$	590

Underwriting income was $282 million in the first quarter of 2022 compared to underwriting income of $1.66 billion in the first quarter of 2021 primarily due to higher auto non-catastrophe losses, partially offset by increased premiums.


Change in underwriting results from the prior period
($ in millions)


Underwriting income (loss) by brand and by line of business
	Allstate brand				National General			Allstate Protection
($ in millions)	2022		2021			2022		2021		2022		2021
Three months ended March 31,
Auto (1)	$	(137)	$	1,203		$	(10)	$	124	$	(147)	$	1,327
Homeowners (2)	368		262			42		6		410		268
Other personal lines	18		25			—		8		18		33
Commercial lines	(19)		(2)			(3)		—		(22)		(2)
Other business lines (3)	21		27			—		—		21		27
Answer Financial	—		—			—		—		2		7
Total	$	251	$	1,515		$	29	$	138	$	282	$	1,660

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

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

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

First Quarter 2022 Form 10-Q 49

Segment Results Allstate Protection

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.


Premiums written by brand and by line of business
	Allstate brand				National General				Allstate Protection
($ in millions)	2022		2021		2022		2021		2022		2021
Three months ended March 31,
Auto	$	6,308	$	6,060	$	1,254	$	952	$	7,562	$	7,012
Homeowners	2,020		1,727		381		356		2,401		2,083
Other personal lines	469		437		35		39		504		476
Commercial lines	238		197		56		—		294		197

Total premiums written	$	9,035	$	8,421	$	1,726	$	1,347	$	10,761	$	9,768


Premiums earned by brand and by line of business
	Allstate brand				National General			Allstate Protection
($ in millions)	2022		2021			2022		2021		2022		2021
Three months ended March 31,
Auto	$	6,073	$	6,014		$	1,008	$	795	$	7,081	$	6,809
Homeowners	2,210		2,008			393		384		2,603		2,392
Other personal lines	496		469			35		36		531		505
Commercial lines	232		190			51		—		283		190

Total premiums earned	$	9,011	$	8,681		$	1,487	$	1,215	$	10,498	$	9,896


Reconciliation of premiums written to premiums earned
	Three months ended March 31,
($ in millions)	2022		2021
Total premiums written	$	10,761	$	9,768
(Increase) decrease in unearned premiums	(258)		(280)
Other	(5)		408
Total premiums earned	$	10,498	$	9,896


Policies in force by brand and by line of business
	Allstate brand		National General		Allstate Protection
PIF (thousands)	2022	2021		2022	2021	2022	2021
Auto	21,968	21,824		4,103	3,629	26,071	25,453
Homeowners	6,536	6,427		629	663	7,165	7,090
Other personal lines	4,609	4,483		285	291	4,894	4,774
Commercial lines	208	214		104	111	312	325

Total	33,321	32,948		5,121	4,694	38,442	37,642

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Allstate Protection Segment Results

Auto insurance premiums written increased 7.8% or $550 million in the first quarter of 2022 compared to the first quarter of 2021 primarily due to the following factors:

Increased new issued applications driven by direct channel, including the acquisition of SafeAuto, and growth in the independent agency channel
Increased average premiums driven by rate increases. In the three months ended March 31, 2022, rate increases of 9.3% were taken for Allstate brand in 28 locations, resulting in total Allstate brand insurance premium impact of 3.6% and 4.6% were taken for National General brand in 24 locations, resulting in total National General brand insurance premium impact of 1.9%, to improve underwriting results given the higher inflationary trends adversely impacting loss costs
Renewal ratio increased 0.8 points in the first quarter of 2022 compared to first quarter of 2021. The impact of the ongoing rate actions may have an adverse effect on the renewal ratio in future periods
PIF increased 2.4% or 618 thousand to 26,071 thousand as of March 31, 2022 compared to March 31, 2021 due to growth in National General, including SafeAuto acquisition, and Allstate brand


Auto premium measures and statistics
	Three months ended March 31,
	2022		2021		Change




New issued applications (thousands)
Allstate Protection by brand


Allstate brand	964		929		3.8	%
National General	718		542		32.5	%
Total new issued applications	1,682		1,471		14.3	%

Allstate Protection by channel
Exclusive agency channel	599		613		(2.3)	%
Direct channel	631		455		38.7	%
Independent agency channel	452		403		12.2	%
Total new issued applications	1,682		1,471		14.3	%





Allstate brand average premium	$	626	$	607	3.1	%
Allstate brand renewal ratio (%)	87.5		86.7		0.8

Homeowners insurance premiums written increased 15.3% or $318 million in the first quarter of 2022 compared to the first quarter of 2021 primarily due to the following factors:

Higher Allstate brand average premiums from approved rate increases 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 March 31,
	2022		2021		Change




New issued applications (thousands)


Allstate Protection by brand
Allstate brand	235		220		6.8	%
National General	27		22		22.7	%
Total new issued applications	262		242		8.3	%

Allstate Protection by channel
Exclusive agency channel	201		195		3.1	%
Direct channel	23		16		43.8	%
Independent agency channel	38		31		22.6	%
Total new issued applications	262		242		8.3	%





Allstate brand average premium	$	1,554	$	1,360	14.3	%
Allstate brand renewal ratio (%)	86.2		87.0		(0.8)

Other personal lines premiums written increased 5.9% or $28 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to increases in condominiums, personal umbrella and landlords premiums for Allstate brand.

Commercial lines premiums written increased 49.2% or $97 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to increased average premium and higher miles driven in our shared economy business.

First Quarter 2022 Form 10-Q 51

Segment Results Allstate Protection

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
	2022	2021	2022	2021	2022	2021
Three months ended March 31,
Auto	77.6	57.2	24.5	23.3	102.1	80.5

Homeowners	60.4	64.9	23.8	23.9	84.2	88.8
Other personal lines	72.1	68.1	24.5	25.4	96.6	93.5
Commercial lines	87.3	78.4	20.5	22.7	107.8	101.1



Total	73.3	60.0	24.0	23.2	97.3	83.2
Impact of amortization of purchased intangibles	—	—	0.5	0.1	0.5	0.1

Impact of restructuring and related charges	—	—	0.1	0.3	0.1	0.3

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


Loss ratios by line of business
	Loss ratio		Effect of catastrophe losses (1)		Effect of prior year reserve reestimates		Effect of catastrophe losses included in prior year reserve reestimates
	2022	2021	2022	2021	2022	2021	2022	2021
Three months ended March 31,
Auto	77.6	57.2	0.6	0.4	2.0	(0.5)	(0.1)	(0.3)
Homeowners	60.4	64.9	14.8	20.7	(0.4)	(8.5)	(0.3)	(8.7)
Other personal lines	72.1	68.1	6.4	11.5	(1.3)	(3.6)	0.8	(3.6)
Commercial lines	87.3	78.4	—	4.2	6.7	7.9	(0.4)	1.0

Total	73.3	60.0	4.4	6.0	1.4	(2.5)	(0.1)	(2.5)

(1) The ten-year average effect of catastrophe losses on the total combined ratio was 6.1 points in the first quarter of 2022.

Auto loss ratio increased 20.4 points in the first quarter of 2022 compared to the same period of 2021, primarily due to:

Higher gross claim frequency in all coverages, as miles driven has rebounded toward pre-pandemic levels
While frequency increased relative to the prior year quarter, it remains below pre-pandemic levels
Increased severity for all coverages, driven by inflationary pressures and medical service utilization for bodily injury claims
Unfavorable non-catastrophe prior year reserve reestimates

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

Shelter-in-place and travel restrictions, which moderated in 2021 as vaccines became more widely available in the US and Canada
Unemployment levels
Changes in commuting activity
Supply chain disruptions and labor shortages
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

Property damage gross claim frequency for Allstate brand increased 18.4% in the first quarter of

2022 compared to the same period of 2021 due to factors including:

Increases in miles driven compared to 2021 which was impacted by the continuation of shelter-in-place restrictions due to the Coronavirus
While gross claim frequency has rebounded from the low in 2020, it is 15.6% below pre-pandemic levels of 2019 as auto miles driven, particularly during peak commuting hours, remains lower than pre-pandemic levels

Property damage estimated report year 2022 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased approximately 11% compared to report year 2021. The current 2021 estimated report year incurred claim severity increased approximately 9% compared to 2020. The increases are due to rising inflationary factors that began in the second quarter of 2021 impacting both repairable vehicles and total losses, including higher used car values, replacement part costs and labor rates, and higher costs to repair more sophisticated newer model vehicles.

Bodily injury estimated report year 2022 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased approximately 8% compared to report year 2021. The current 2021 estimated report year incurred claim severity increased approximately 5% compared to 2020. The increases are due to higher consumption of medical treatment, increased severity

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Allstate Protection Segment Results

of claims with attorney representation and higher medical care inflation.

Homeowners loss ratio decreased 4.5 points in the first quarter of 2022 compared to the same period of 2021, primarily due to increased premiums earned and lower catastrophe losses, partially offset by higher severity.


Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses)
(% change year-over-year)
Three months ended March 31, 2022
Gross claim frequency	(4.6)	%
Paid claim severity	25.4

Gross claim frequency decreased in the first three months of 2022 compared to the same period of 2021 primarily due to declines in wind/hail and water perils. Paid claim severity increased in the first quarter of 2022 compared to the same period of 2021 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 4.0 points in the first quarter of 2022 compared to the same period of 2021, primarily due to higher non-catastrophe losses, partially offset by increased premiums earned.

Commercial lines loss ratio increased 8.9 points in the first quarter of 2022 compared to the same period of 2021 due to higher auto frequency and severity and higher unfavorable non-catastrophe prior year reserve reestimates in the shared economy business, partially offset by increased premiums earned.

Catastrophe losses decreased 21.7% or $128 million in the first quarter of 2022 compared to the prior year due to lower losses which was partially offset by the absence of reinsurance recoveries in 2022. Reinsurance recoveries in 2021 related to the Nationwide Aggregate Reinsurance Program for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, which primarily impacted homeowners reestimates.

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.


Catastrophe losses by the type of event
	Three months ended March 31,
($ in millions)	Number of events	2022		Number of events	2021

Tornadoes	1	$	91	1	$	13
Wind/Hail	14	365		11	277

Freeze/other events	1	19		1	586
Prior year reserve reestimates		(13)			(91)
Prior year aggregate reinsurance recoveries		—			(152)
Current year aggregate reinsurance recoveries		—			(43)

Total catastrophe losses	16	$	462	13	$	590

First Quarter 2022 Form 10-Q 53

Segment Results Allstate Protection

Catastrophe reinsurance Our current catastrophe reinsurance program supports our risk tolerance framework that targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes earthquakes and wildfires, net of reinsurance, exceeding $2.5 billion. We have completed the placement of our 2022-2023 Nationwide Excess Catastrophe Reinsurance Program (the “Nationwide Program”).

Similar to our 2021 program, our 2022 program includes coverage for losses to personal lines property, personal lines automobile, commercial lines property or commercial lines automobile arising out of multiple perils, in addition to hurricanes and earthquakes.

The Nationwide Program provides coverage up to $6.61 billion of losses less a $500 million retention, and is subject to the percentage of reinsurance placed in each of its agreements. Property business in the state of Florida is excluded from this program. Separate reinsurance agreements address the distinct needs of separately capitalized legal entities.

The Nationwide Program includes reinsurance agreements with both the traditional and Insurance - Linked securities markets as described below:

*•*The traditional market multi-year placements provide limits totaling $3.89 billion for catastrophe events arising out of multiple perils and are comprised of the following:

–$3.56 billion of placed limits attaching at $500 million, exhausting at $3.75 billion, with a 5% co-participation. Coverage is provided in four contracts with one annual reinstatement of limits. 31.7% of the first $250 million in excess of $500 million is retained by Allstate.

–$331 million of placed limits in excess of a $3.75 billion retention, with a 5% co-participation. Coverage is provided in two contracts, with one reinstatement of limits over each contract’s eight-year term.

*•*Insurance - Linked securities multi-year placements provide $1.45 billion of placed limits, with no reinstatement of limits, and are comprised of the following:

–Four contracts providing occurrence coverage of $850 million of placed limits, reinsuring losses in all states except Florida caused by named storms, earthquakes and fire following earthquakes, severe weather, wildfires, and other naturally occurring or man-made events determined to be a catastrophe by the Company.

–Three contracts providing occurrence and aggregate coverage of $425 million of placed limits, also provide that for each annual period beginning April 1, Allstate declared catastrophes to personal lines property and automobile business can be aggregated to erode the aggregate retention and qualify for coverage under the aggregate limits. Recoveries are limited to our ultimate net loss from the reinsured event.

–One contract, providing aggregate coverage of $175 million of placed limits.

*•*Traditional single-year placements provide $640 million of placed limits, filling capacity around the traditional market and Insurance-Linked securities multi-year placements:

–Three contracts providing $465 million of placed limits between $5.94 billion and $6.61 billion of loss, with no reinstatement of limits.

–Two contracts providing $175 million of placed limits between $3.75 billion and $5.94 billion of loss, with no reinstatement limits.

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

The Florida Excess Catastrophe Program, National General Lender Services Program and National General Reciprocal Excess Catastrophe Program will be completed in the second quarter of 2022.

The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the first quarter of 2022 was $144 million compared to $113 million in the first quarter of 2021. Catastrophe placement premiums reduce net written and earned premium with approximately 74% related to homeowners.

Reserve reestimates were $144 million unfavorable in the first quarter of 2022 primarily due to strengthening of non-catastrophe reserves in auto and commercial lines, partially offset by favorable reserve reestimates in other personal lines and catastrophes.

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

54 www.allstate.com

Allstate Protection Segment Results


Reserve reestimates
	Three months ended March 31,
	Reserve reestimates (1)				Effect on combined ratio (2)
($ in millions, except ratios)	2022		2021		2022	2021
Auto	$	142	$	(36)	1.4	(0.4)
Homeowners	(10)		(203)		(0.1)	(2.1)
Other personal lines	(7)		(18)		(0.1)	(0.2)
Commercial lines	19		15		0.2	0.2

Total Allstate Protection	$	144	$	(242)	1.4	(2.5)

Allstate brand	$	148	$	(228)	1.4	(2.4)
National General	(4)		(14)		—	(0.1)
Total Allstate Protection	$	144	$	(242)	1.4	(2.5)

(1)Favorable reserve reestimates are shown in parentheses.

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

Expense ratio increased 0.8 points in the first quarter of 2022 compared to the first quarter of 2021 primarily due to higher operating costs and amortization of intangibles, partially offset by lower impact of amortization of DAC. Higher operating costs primarily related to employee-related costs and agent compensation.


Impact of specific costs and expenses on the expense ratio
	Three months ended March 31,
($ in millions, except ratios)	2022		2021		Change

Amortization of DAC	$	1,348	$	1,303	$	45
Advertising expense	343		312		31
Amortization of purchased intangibles	58		19		39
Other costs and expenses, net of other revenue	754		626		128
Restructuring and related charges	12		32		(20)

Total underwriting expenses	$	2,515	$	2,292	$	223


Premiums earned	$	10,498	$	9,896	$	602

Expense ratio
Amortization of DAC	12.9		13.2		(0.3)
Advertising expense	3.3		3.2		0.1
Other costs and expenses	7.2		6.4		0.8
Subtotal	23.4		22.8		0.6
Amortization of purchased intangibles	0.5		0.1		0.4
Restructuring and related charges	0.1		0.3		(0.2)

Total expense ratio	24.0		23.2		0.8

First Quarter 2022 Form 10-Q 55

Segment Results Run-off Property-Liability

Run-off Property-Liability Segment


Underwriting results
($ in millions)		Three months ended March 31,
	2022			2021



Claims and claims expense		$	(1)		$	(1)





Operating costs and expenses		(1)			(2)
Underwriting loss		$	(2)		$	(3)


Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance
($ in millions)	March 31, 2022		December 31, 2021
Asbestos claims
Gross reserves	$	1,197	$	1,210
Reinsurance	(377)		(382)
Net reserves	820		828
Environmental claims
Gross reserves	270		273
Reinsurance	(47)		(47)
Net reserves	223		226
Other run-off claims
Gross reserves	425		433
Reinsurance	(64)		(66)
Net reserves	361		367
Total
Gross reserves	1,892		1,916
Reinsurance	(488)		(495)
Net reserves	$	1,404	$	1,421


Reserves by type of exposure before and after the effects of reinsurance
($ in millions)	March 31, 2022		December 31, 2021
Direct excess commercial insurance
Gross reserves	$	1,032	$	1,050
Reinsurance	(356)		(363)
Net reserves	676		687
Assumed reinsurance coverage
Gross reserves	611		617
Reinsurance	(55)		(56)
Net reserves	556		561
Direct primary commercial insurance
Gross reserves	168		168
Reinsurance	(76)		(75)
Net reserves	92		93
Other run-off business
Gross reserves	1		1
Reinsurance	—		—
Net reserves	1		1
Unallocated loss adjustment expenses
Gross reserves	80		80
Reinsurance	(1)		(1)
Net reserves	79		79
Total
Gross reserves	1,892		1,916
Reinsurance	(488)		(495)
Net reserves	$	1,404	$	1,421

56 www.allstate.com

Run-off Property-Liability Segment Results


Percentage of gross and ceded reserves by case and IBNR
	March 31, 2022				December 31, 2021
	Case		IBNR		Case		IBNR
Direct excess commercial insurance
Gross reserves (1)	60	%	40	%	61	%	39	%
Ceded (2)	67		33		67		33
Assumed reinsurance coverage
Gross reserves	33		67		33		67
Ceded	37		63		38		62
Direct primary commercial insurance
Gross reserves	53		47		53		47
Ceded	71		29		71		29

(1)Approximately 69% of gross case reserves as of March 31, 2022 are subject to settlement agreements.

(2)Approximately 76% of ceded case reserves as of March 31, 2022 are subject to settlement agreements.


Gross payments from case reserves by type of exposure
($ in millions)		Three months ended March 31,
	2022			2021
Direct excess commercial insurance
Gross (1)		$	18		$	18
Ceded (2)		(7)			(8)
Assumed reinsurance coverage
Gross		6			11
Ceded		(1)			(2)
Direct primary commercial insurance
Gross		1			4
Ceded		—			(1)

(1) In the first quarter of 2022 88% of payments related to settlement agreements.

(2) In the first quarter of 2022 93% of payments related to settlement agreements.

Total net reserves as of March 31, 2022, included $722 million or 51% of estimated IBNR reserves compared to $733 million or 52% of estimated IBNR reserves as of December 31, 2021.

Total gross payments were $25 million for the first quarter of 2022, primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos 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 $10 million for the first quarter of 2022.

First Quarter 2022 Form 10-Q 57

Segment Results Protection Services

Protection Services Segment


Summarized financial information
($ in millions)	Three months ended March 31,
		2022			2021
Premiums written			$	630		$	583

Revenues
Premiums			$	483		$	411
Other revenue			94			90
Intersegment insurance premiums and service fees (1)			41			41
Net investment income			9			10


Costs and expenses
Claims and claims expense			(123)			(103)
Amortization of DAC			(221)			(181)
Operating costs and expenses			(218)			(198)
Restructuring and related charges			—			(9)



Income tax expense on operations			(12)			(12)





Adjusted net income			$	53		$	49






Allstate Protection Plans			$	43		$	45
Allstate Dealer Services			9			8
Allstate Roadside			2			4
Arity			(1)			2
Allstate Identity Protection			—			(10)
Adjusted net income			$	53		$	49

Allstate Protection Plans			139,992			133,510
Allstate Dealer Services			3,924			3,996
Allstate Roadside			518			540
Allstate Identity Protection			2,949			2,702
Policies in force as of March 31 (in thousands)			147,383			140,748

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

Adjusted net income increased 8.2% or $4 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to restructuring charges in 2021 and higher revenue in Allstate Identity Protection, partially offset by higher operating costs at Allstate Protection Plans and Arity and higher severity and rescue volumes in Allstate Roadside.

Premiums written increased 8.1% or $47 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to growth at Allstate Protection Plans.

PIF increased 4.7% or 7 million in the first quarter of 2022 compared to the first quarter of 2021 due to continued growth at Allstate Protection Plans and Allstate Identity Protection.

Other revenue increased 4.4% or $4 million in the first quarter of 2022 compared to the first quarter of 2021, reflecting growth in Allstate Identity Protection.

Intersegment premiums and service fees in the first quarter of 2022 were comparable to the first quarter of 2021.

Claims and claims expense increased 19.4% or $20 million in the first quarter 2022 compared to the first quarter of 2021, 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 22.1% or $40 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to the growth experienced at Allstate Protection Plans and Allstate Dealer Services.

Operating costs and expenses increased 10.1% or $20 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to growth experienced at Allstate Protection Plans.

Restructuring and related charges decreased $9 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to a facility closure at Allstate Identity Protection in the first quarter of 2021.

58 www.allstate.com

Allstate Health and Benefits Segment Results

Allstate Health and Benefits Segment


Summarized financial information
	Three months ended March 31,
($ in millions)	2022			2021
Revenues
Accident and health insurance premiums and contract charges	$	469		$	455
Other revenue	95			80
Net investment income	17			19

Costs and expenses
Accident, health and other policy benefits	(269)			(242)
Amortization of DAC	(43)			(39)
Operating costs and expenses	(202)			(190)


Income tax expense on operations	(14)			(18)
Adjusted net income	$	53		$	65

Benefit ratio (1)	55.7		%	51.2		%

Employer voluntary benefits (2)	3,951			3,983
Group health (3)	114			115
Individual health (4)	419			424
Policies in force as of March 31 (in thousands)	4,484			4,522

(1)Benefit ratio is calculated as accident, health and other policy benefits less interest credited to contractholder funds of $8 million and $9 million as of March 31, 2022 and March 31, 2021, respectively, divided by premiums and contract charges.

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

(3)Group health includes health products and administrative services sold to employers.

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

Adjusted net income in the first quarter of 2022 decreased $12 million compared to the same period of 2021, primarily due to increases in individual and group health claims and favorable reserve reestimates in the prior year for group health, partially offset by lower employer voluntary benefits claim utilization.

Premiums and contract charges increased 3.1% or $14 million in the first quarter of 2022 compared to the same period of 2021, primarily due to growth in group health.


Premiums and contract charges by line of business
	Three months ended March 31,
($ in millions)	2022		2021
Employer voluntary benefits	$	266	$	263
Group health	94		83
Individual health	109		109
Premiums and contract charges	$	469	$	455

Other revenue increased $15 million in the first quarter of 2022 compared to the same period of 2021, primarily due to an increase in group health administrative fees.

Accident, health and other policy benefits increased $27 million in the first quarter of 2022 compared to the same period of 2021, primarily due to increased benefits utilization for individual health and group health and prior year favorable reserve reestimates for group health, slightly offset by lower utilization for employer voluntary benefits compared to the prior year quarter.

Benefit ratio increased to 55.7% in the first quarter of 2022 compared to 51.2% in the same period of 2021, primarily due to an increase in individual and group health claims and favorable reserve reestimates for group health in the prior year, partially offset by a lower benefit ratio for employer voluntary benefits products due to lower accident and health claim experience and lower life mortality compared to the prior year.

Amortization of DAC increased 10.3% or $4 million in the first quarter of 2022 compared to the same period of 2021, primarily related to individual health.

First Quarter 2022 Form 10-Q 59

Segment Results Allstate Health and Benefits


Operating costs and expenses
	Three months ended March 31,
($ in millions)	2022		2021
Non-deferrable commissions	$	81	$	74
General and administrative expenses	121		116
Total operating costs and expenses	$	202	$	190

Operating costs and expenses increased $12 million in the first quarter of 2022 compared to the same period of 2021, primarily due to growth in group health.

Analysis of reserves


Reserve for future policy benefits
($ in millions)	March 31, 2022		December 31, 2021
Traditional life insurance and other	$	318	$	313
Accident and health insurance	956		960
Reserve for future policy benefits	$	1,274	$	1,273

60 www.allstate.com

Investments

Investments


Portfolio composition and strategy by reporting segment (1)
	March 31, 2022
($ in millions)	Property-Liability			Protection Services			Allstate Health and Benefits			Corporate and Other			Total
Fixed income securities (2)	$	33,446		$	1,602		$	1,719		$	3,978		$	40,745
Equity securities (3)	4,515			161			80			559			5,315
Mortgage loans, net	756			—			99			—			855
Limited partnership interests	7,977			—			—			—			7,977
Short-term investments (4)	3,693			116			54			481			4,344
Other investments, net	2,386			—			144			2			2,532
Total	$	52,773		$	1,879		$	2,096		$	5,020		$	61,768
Percent to total	85.5		%	3.0		%	3.4		%	8.1		%	100.0		%

Market-based	$	43,950		$	1,879		$	2,096		$	5,018		$	52,943
Performance-based	8,823			—			—			2			8,825
Total	$	52,773		$	1,879		$	2,096		$	5,020		$	61,768

(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 $34.57 billion, $1.67 billion, $1.78 billion, $4.01 billion and $42.03 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 March 31, 2022, was $862 million in excess of cost. These net gains were primarily concentrated in the technology, consumer goods and banking sectors. Equity securities include $1.02 billion of funds with underlying investments in fixed income securities as of March 31, 2022.

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

Investments totaled $61.77 billion as of March 31, 2022, decreasing from $64.70 billion as of December 31, 2021, primarily due to lower fixed income and equity valuations, common share repurchases and dividends paid to shareholders, partially offset by positive operating cash flows.

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

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

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

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, labor shortages and other macroeconomic factors have increased inflation, which may have an adverse impact on investment valuations and returns.

Investments in Russia and Ukraine As of March 31, 2022, we do not have any direct investments in Russia, Belarus or Ukraine. We have indirect exposure of less than $1 million in Russia and Ukraine through broad-based, global funds managed by external asset managers.

First Quarter 2022 Form 10-Q 61

Investments


Portfolio composition by investment strategy
	March 31, 2022
($ in millions)	Market- based			Performance-based			Total
Fixed income securities	$	40,641		$	104		$	40,745
Equity securities	4,915			400			5,315
Mortgage loans, net	855			—			855
Limited partnership interests	501			7,476			7,977
Short-term investments	4,344			—			4,344
Other investments, net	1,687			845			2,532
Total	$	52,943		$	8,825		$	61,768
Percent to total	85.7		%	14.3		%	100.0		%

Unrealized net capital gains and losses
Fixed income securities	$	(1,283)		$	1		$	(1,282)
Limited partnership interests	—			4			4
Short-term investments	(1)			—			(1)
Other	(3)			—			(3)
Total	$	(1,287)		$	5		$	(1,282)

Fixed income securities


Fixed income securities by type
	Fair value as of
($ in millions)	March 31, 2022		December 31, 2021
U.S. government and agencies	$	6,485	$	6,273
Municipal	5,698		6,393
Corporate	25,336		27,330
Foreign government	1,053		985
Asset-backed securities (“ABS”)	2,173		1,155

Total fixed income securities	$	40,745	$	42,136

Fixed income securities are rated by third-party credit rating agencies or are internally rated. As of March 31, 2022, 84.1% 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 issuer.

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

62 www.allstate.com

Investments


Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating
	March 31, 2022

	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	$	6,485	$	(128)	$	—	$	—	$	—	$	—
Municipal	5,457		(94)		227		(15)		—		—
Corporate
Public	4,078		(135)		9,735		(364)		1,501		(34)
Privately placed	1,418		(63)		3,693		(158)		2,492		(120)
Total corporate	5,496		(198)		13,428		(522)		3,993		(154)
Foreign government	1,052		(39)		1		—		—		—
ABS	2,090		(17)		11		—		8		—
Total fixed income securities	$	20,580	$	(476)	$	13,667	$	(537)	$	4,001	$	(154)

	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	$	—	$	—	$	—	$	—	$	6,485	$	(128)
Municipal	8		—		6		2		5,698		(107)
Corporate
Public	192		(6)		2		(6)		15,508		(545)
Privately placed	1,979		(95)		246		(17)		9,828		(453)
Total corporate	2,171		(101)		248		(23)		25,336		(998)
Foreign government	—		—		—		—		1,053		(39)
ABS	1		—		63		7		2,173		(10)
Total fixed income securities	$	2,180	$	(101)	$	317	$	(14)	$	40,745	$	(1,282)

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

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

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

Equity securities of $5.32 billion primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments.

Mortgage loans of $855 million mainly comprise loans secured by first mortgages on developed commercial real estate. Key considerations used to manage our exposure include property type and geographic diversification. For further detail on our mortgage loan portfolio, see Note 5 of the condensed consolidated financial statements.

Limited partnership interests include $6.52 billion of interests in private equity funds, $956 million of interests in real estate funds and $501 million of interests in other funds as of March 31, 2022. We have commitments to invest additional amounts in limited partnership interests totaling $2.73 billion as of March 31, 2022.

Other investments include $1.52 billion of bank loans, net, and $750 million of direct investments in real estate as of March 31, 2022.

First Quarter 2022 Form 10-Q 63

Investments


Unrealized net capital gains (losses)
	March 31,		December 31,
($ in millions)	2022		2021
U.S. government and agencies	$	(128)	$	(14)
Municipal	(107)		263
Corporate	(998)		496
Foreign government	(39)		3
ABS	(10)		12
Fixed income securities	(1,282)		760
Short-term investments	(1)		—
Derivatives	(3)		(3)
Equity method of accounting (“EMA”) limited partnerships	4		(1)
Unrealized net capital gains and losses, pre-tax	$	(1,282)	$	756

64 www.allstate.com

Investments


Gross unrealized gains (losses) on fixed income securities by type and sector
		March 31, 2022
($ in millions)		Amortized cost, net			Gross unrealized				Fair value
	Gains			Losses
Corporate
Consumer goods (cyclical and non-cyclical)		$	6,760		$	30	$	(293)	$	6,497
Banking		3,736			5		(158)		3,583
Technology		2,924			16		(138)		2,802
Utilities		2,004			4		(98)		1,910
Communications		2,256			12		(98)		2,170
Capital goods		2,453			10		(97)		2,366
Financial services		1,919			8		(95)		1,832
Energy
Midstream		1,156			9		(33)		1,132
Independent/upstream		343			7		(6)		344
Integrated		105			1		(1)		105
Other		165			1		(5)		161
Total energy		1,769			18		(45)		1,742
Basic industry		1,152			11		(42)		1,121
Transportation		951			6		(29)		928
Other		410			—		(25)		385
Total corporate fixed income portfolio		26,334			120		(1,118)		25,336
Municipal		5,805			54		(161)		5,698
U.S. government and agencies		6,613			3		(131)		6,485
Foreign government		1,092			1		(40)		1,053
ABS		2,183			11		(21)		2,173

Total fixed income securities		$	42,027		$	189	$	(1,471)	$	40,745



		December 31, 2021
($ in millions)		Amortized cost, net			Gross unrealized				Fair value
	Gains			Losses
Corporate
Consumer goods (cyclical and non-cyclical)		$	6,817		$	176	$	(42)	$	6,951
Banking		3,975			54		(31)		3,998
Technology		2,947			80		(23)		3,004
Utilities		2,009			43		(28)		2,024
Communications		2,077			58		(21)		2,114
Capital goods		2,615			75		(12)		2,678
Financial services		1,936			41		(14)		1,963
Energy
Midstream		1,132			37		(4)		1,165
Independent/upstream		312			18		(1)		329
Integrated		119			6		—		125
Other		224			6		(1)		229
Total energy		1,787			67		(6)		1,848
Basic industry		1,249			56		(6)		1,299
Transportation		976			35		(5)		1,006
Other		446			3		(4)		445
Total corporate fixed income portfolio		26,834			688		(192)		27,330
U.S. government and agencies		6,287			12		(26)		6,273
Municipal		6,130			279		(16)		6,393
Foreign government		982			9		(6)		985
ABS		1,143			14		(2)		1,155

Total fixed income securities		$	41,376		$	1,002	$	(242)	$	42,136

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.

First Quarter 2022 Form 10-Q 65

Investments


Equity securities by sector
	March 31, 2022						December 31, 2021
($ in millions)	Cost		Over (under) cost		Fair value		Cost		Over (under) cost		Fair value

Transportation	48		21		69		74		22		96
Utilities	$	80	$	21	$	101	$	122	$	23	$	145
Capital goods	232		24		256		376		37		413
Basic industry	66		27		93		119		30		149
Energy
Midstream	37		6		43		39		7		46
Integrated	51		24		75		62		8		70
Independent/upstream	27		15		42		44		5		49
Other	7		6		13		14		3		17
Total energy	122		51		173		159		23		182
Other (1)	2,060		694		2,754		3,413		811		4,224
Funds
Fixed income	1,053		(31)		1,022		1,108		24		1,132
Equities	772		54		826		645		75		720
Other	20		1		21		—		—		—

Total funds	1,845		24		1,869		1,753		99		1,852




Total equity securities	$	4,453	$	862	$	5,315	$	6,016	$	1,045	$	7,061

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


Net investment income
	Three months ended March 31,
($ in millions)		2022		2021
Fixed income securities		$	267	$	301
Equity securities		36		14
Mortgage loans		8		10
Limited partnership interests		292		378
Short-term investments		2		1
Other investments		40		41
Investment income, before expense		645		745
Investment expense
Investee level expenses		(16)		(13)

Operating costs and expenses		(35)		(24)
Total investment expense		(51)		(37)
Net investment income		$	594	$	708

Property-Liability		$	558	$	673
Protection Services		9		10
Allstate Health and Benefits		17		19
Corporate and Other		10		6
Net investment income		$	594	$	708

Market-based		$	325	$	355
Performance-based		320		390
Investment income, before expense		$	645	$	745

Net investment income decreased $114 million in the first quarter of 2022 compared to the same period of 2021, primarily due to lower performance-based income results, mainly from limited partnerships, and lower market-based fixed income portfolio yields.

66 www.allstate.com

Investments


Performance-based investment income
	Three months ended March 31,
($ in millions)		2022		2021













Private equity		$	248	$	330
Real estate		72		60

Total performance-based income before investee level expenses		$	320	$	390

Investee level expenses (1)		(14)		(12)
Total performance-based income		$	306	$	378

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

Performance-based investment income decreased $72 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to lower valuation increases and lesser net gains on the sale of underlying investments compared to strong results in 2021.

Performance-based investment results and income can vary significantly between periods and are influenced by economic conditions, equity market

performance, comparable public company earnings multiples, capitalization rates, operating performance of the underlying investments and the timing of asset sales. The company typically employs a lag in recording and recognizing changes in valuations of limited partnership interests due to the availability of investee financial statements.


Components of net gains (losses) on investments and derivatives and the related tax effect
	Three months ended March 31,
($ in millions)		2022		2021
Sales		$	(127)	$	246






Credit losses		(11)		2

Valuation change of equity investments - appreciation (decline):
Equity securities		(285)		181
Equity fund investments in fixed income securities		(62)		(17)
Limited partnerships (1)		(100)		3
Total valuation of equity investments		(447)		167
Valuation change and settlements of derivatives		318		11
Net gains (losses) on investments and derivatives, pre-tax		(267)		426
Income tax benefit (expense)		56		(94)
Net gains (losses) on investments and derivatives, after-tax		$	(211)	$	332

Property-Liability		$	(161)	$	314
Protection Services		(10)		8
Allstate Health and Benefits		(5)		2
Corporate and Other		(35)		8
Net gains (losses) on investments and derivatives, after-tax		$	(211)	$	332

Market-based		$	(304)	$	337
Performance-based		37		89
Net gains (losses) on investments and derivatives, pre-tax		$	(267)	$	426

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

Net losses on investments and derivatives in the first quarter of 2022 related primarily to lower valuation on equity investments and losses on sales, partially offset by increased valuation change and settlements of derivatives.

Sales in the first quarter of 2022 related primarily to sales of fixed income securities in connection with ongoing portfolio management.

Valuation change and settlements of derivatives of $318 million in the first quarter of 2022 primarily comprised of gains on interest rate futures used as part of an interest rate risk reduction strategy to mitigate the impact of increases in interest rates.

First Quarter 2022 Form 10-Q 67

Investments


Net gains (losses) on performance-based investments and derivatives
	Three months ended March 31,
($ in millions)		2022		2021
Sales		$	23	$	59
Credit losses		(4)		—
Valuation change of equity investments		11		20
Valuation change and settlements of derivatives		7		10
Total performance-based		$	37	$	89

Net gains on performance-based investments and derivatives in the first quarter of 2022 primarily related to gains on sales and increased valuation of equity investments.

68 www.allstate.com

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)	March 31, 2022			December 31, 2021
Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items	$	24,165		$	24,524
Accumulated other comprehensive (loss) income	(953)			655
Total Allstate shareholders’ equity	23,212			25,179
Debt	7,973			7,976
Total capital resources	$	31,185		$	33,155

Ratio of debt to Allstate shareholders’ equity	34.3		%	31.7		%
Ratio of debt to capital resources	25.6			24.1

Allstate shareholders’ equity decreased in the first three months of 2022, primarily due to unrealized capital losses on investments in 2022 compared to gains in 2021, common share repurchases and dividends paid to shareholders, partially offset by net income. In the three months ended March 31, 2022, we paid dividends of $230 million and $26 million related to our common and preferred shares, respectively.

Debt maturities We do not have any scheduled debt maturities in 2022.


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

2023	$	750
2024	350
2025	600
2026	550
2027	—
Thereafter	5,741
Total long-term debt principal	$	7,991

Common share repurchases As of March 31, 2022, there was $2.50 billion remaining in the $5.00 billion common share repurchase program that is expected to be completed by March 31, 2023.

During the first three months of 2022, we repurchased 6.4 million common shares, or 2.3% of total common shares outstanding at December 31, 2021, for $794 million.

Common shareholder dividends On January 3, 2022, we paid a common shareholder dividend of $0.81. On February 18, 2022, we declared a common shareholder dividend of $0.85 payable on April 1, 2022.

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. There have been no changes to any of our ratings from A.M. Best, S&P or Moody’s since December 31, 2021.

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

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

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

Parent company capital capacity Parent holding company deployable assets totaled $5.31 billion as of March 31, 2022, primarily comprised of cash and investments that are generally saleable within one quarter. The earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation.

First Quarter 2022 Form 10-Q 69

Capital Resources and Liquidity

As of March 31, 2022, we held $12.11 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 three months of 2022 between the following companies: AIC, Allstate Insurance Holdings, LLC (“AIH”) and the Corporation.


Intercompany dividends
($ in millions)
AIC to AIH	$	3,131
AIH to the Corporation	3,131

Based on the greater of 2021 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 2022 is estimated at $5.51 billion, less dividends paid during the preceding twelve months measured at that point in time. As of March 31, 2022, we paid dividends of $3.13 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 March 31, 2022, 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 three months of 2022, 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 2026. 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 19.3% as of March 31, 2022. 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 2022.
To cover short-term cash needs, the Corporation has access to a commercial paper facility with a borrowing capacity limited to any undrawn credit facility balance up to $750 million.
As of March 31, 2022, 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 624 million shares of treasury stock as of March 31, 2022), 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.

70 www.allstate.com

Recent Developments

The following updates the regulation disclosures included in Part I, Item 1. Regulation in our annual report on Form 10-K for the year ended December 31, 2021.

Securities and Exchange Commission (“SEC”) proposed rule changes

Climate disclosures. In March 2022, the SEC released its climate-related proposed regulation, requiring registrants to provide certain climate-related information in their registration statements and annual reports. The proposed rule would require information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks. In addition, under the proposed rule, certain climate-related financial metrics would be required in a registrant’s audited financial statements. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures.

Cybersecurity risk management. The SEC issued a proposed rule in March 2022 to mandate cybersecurity disclosures, including information such as: management's and the board’s role and oversight of cybersecurity risks, policies and procedures and how risks and incidents are likely to impact the financial statements. Additionally, certain incidents would have mandatory reporting on a Form 8-K. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures.

Share repurchase disclosure modernization. The SEC issued two proposed amendments in December 2021 that could impact both the administration of 10b5-1 plans used in part to execute the Company’s stock repurchases and disclosure of activity under those plans. The proposals involve potential daily reporting of share repurchase activity, cooling off periods for both individual and corporate 10b5-1 plans (120 and 30 days, respectively) and a number of new 10Q and 10K disclosures that would be subject to SOX Section 302 Certifications. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures.

First Quarter 2022 Form 10-Q 71

Forward-Looking Statements

This report contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe, exposure management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation, and reserves. We believe that these statements are based on reasonable estimates, assumptions and plans. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments. In addition, forward-looking statements are subject to certain risks or uncertainties that could cause actual results to differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements include risks related to:

Insurance and Financial Services (1) unexpected increases in claim frequency and severity; (2) catastrophes and severe weather events; (3) limitations in analytical models used for loss cost estimates; (4) price competition and changes in regulation and underwriting standards; (5) actual 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) our participation in indemnification programs, including state industry pools and facilities; (9) inability to mitigate the impact associated with changes in capital requirements; (10) a downgrade in financial strength ratings;

Business, Strategy and Operations (11) competition in the industries in which we compete and new or changing technologies; (12) implementation of our transformative growth strategy; (13) our catastrophe management strategy; (14) restrictions on our subsidiaries’ ability to pay dividends; (15) restrictions under terms of certain of our securities on our ability to pay dividends or repurchase our stock; (16) the availability of reinsurance at current levels and prices; (17) counterparty risk related to reinsurance; (18) acquisitions and divestitures of businesses; (19) intellectual property infringement, misappropriation and third-party claims;

Macro, Regulatory and Risk Environment (20) conditions in the global economy and capital markets, including the economic impacts from the recent military conflict between Russia and Ukraine; (21) a large-scale pandemic, the occurrence of terrorism, military actions or social unrest; (22) the failure in cyber or other information security controls, as well as the occurrence of events unanticipated in our disaster recovery processes and business continuity planning; (23) changing climate and weather conditions; (24) restrictive regulations and regulatory reforms, including limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (25) losses from legal and regulatory actions; (26) changes in or the application of accounting standards; (27) loss of key vendor relationships or failure of a vendor to protect our data, confidential and proprietary information, or personal information of our customers, claimants or employees; (28) our ability to attract, develop and retain talent; and (29) 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.

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