all-20201231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2020

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

For the transition period from to

Commission file number 1-11840

THE ALLSTATE CORPORATION

(Exact name of registrant as specified in its charter)


Delaware						36-3871531
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

2775 Sanders Road, Northbrook, Illinois 60062

(Address of principal executive offices) (Zip Code)

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

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


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ALL	New York Stock Exchange Chicago Stock Exchange
5.100% Fixed-to-Floating Rate Subordinated Debentures due 2053	ALL.PR.B	New York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 5.625% Noncumulative Preferred Stock, Series G	ALL PR G	New York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 5.100% Noncumulative Preferred Stock, Series H	ALL PR H	New York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 4.750% Noncumulative Preferred Stock, Series I	ALL PR I	New York Stock Exchange

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

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

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

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

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

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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2020, was approximately $29.94 billion.

As of January 29, 2021, the registrant had 302,873,426 shares of common stock outstanding.

Documents Incorporated By Reference

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

Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive proxy statement for its annual stockholders meeting to be held on May 25, 2021, (the “Proxy Statement”) to be filed not later than 120 days after the end of the fiscal year covered by this Form 10-K.

Table of Contents

Part I

Page

Item 1.

Business

• Overview

• Strategy and Segment Information

– Allstate Protection

– Protection Services (previously Service Businesses)

– Allstate Benefits

– Allstate Life

– Allstate Annuities

– Other Business Segments

• Regulation

• Human Cap ital

• Website

• Other Information About Allstate

• Information about our Executive Officers

Forward-Looking Statements

Item 1A.

Risk Factors

Item 1B.

Unresolved Staff Comments

Mine Safety Disclosures

Part II

Item 5.

Market for Registrant's Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities

Item 6.

Selected Financial Data

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

121

Item 8.

Financial Statements and Supplementary Data

122

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

215

Item 9A.

Controls and Procedures

Part III

Directors, Executive Officers and Corporate Governance

216

Item 11.

Executive Compensation

216

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

217

Item 13.

Certain Relationships and Related Transactions, and Director Independence

217

Item 14.

Principal Accounting Fees and Services

217

Part IV

Item 15.

Exhibits and Financial Statement Schedules

Financial Statement Schedules

S-1

2020 Form 10-K Item 1. Business

Part I

Item 1. Business

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

Allstate protects people from life’s uncertainties with a wide array of protection for autos, homes, electronic devices and identity theft. Allstate is primarily engaged in the property and casualty insurance business in the United States and Canada. Additionally, Allstate provides customers other protection solutions such as life, accident and health insurance and protection plans that cover electronic devices and personal identities.

The Allstate Corporation is one of the largest publicly held personal lines insurers in the United States. Allstate’s personal property-liability strategy is to increase market share by offering consumers a broad suite of personal lines solutions and a competitive value proposition across distribution channels. The Allstate brand is widely known through the “You’re In Good Hands With Allstate®” slogan. Allstate is the fourth largest personal property and casualty insurer in the United States on the basis of 2019 statutory direct premiums written according to A.M. Best.

Allstate also has strong market positions in other protection solutions. Allstate Benefits provides accident, health and life insurance through employers and is one of the top voluntary benefits carriers in the market based on a 2019 voluntary/worksite industry survey. Allstate Protection Plans provides protection plans on a wide variety of consumer goods such as cell phones, tablets, computers, furniture and appliances, and has a leading position in distribution through major retailers. Allstate Identity Protection, which provides identity protection, has a leading position in worksite distribution. In total, Allstate had 175.9 million policies in force (“PIF”) as of December 31, 2020.

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

Subsequent event On January 26, 2021, Allstate announced an agreement to sell Allstate Life Insurance Company (“ALIC”) and certain affiliates for $2.8 billion to Antelope US Holdings Company, an affiliate of an investment fund associated with The Blackstone Group Inc. Allstate will retain ownership of Allstate Life Insurance Company of New York (“ALNY”) while pursuing alternatives to sell or otherwise transfer risk to a third party. ALIC and certain affiliates represent approximately 80% of Allstate Life and Allstate Annuity reserves for life-contingent contract benefits and contractholder funds as of December 31, 2020 and generated net income of approximately $290 million and $470 million in 2020 and 2019, respectively. A loss on disposition estimated at $3 billion, after-tax, will be recorded in the first quarter of 2021. The ultimate amount of the loss on sale will be impacted by purchase price adjustments associated with certain pre-close transactions specified in the stock purchase agreement, changes in statutory capital and surplus prior to the closing date and the closing date equity of ALIC determined under GAAP, excluding unrealized gains and losses. The transaction is expected to close in the second half of 2021, subject to regulatory approvals and other customary closing conditions.

On January 4, 2021, Allstate completed the acquisition of National General Holdings Corp. (“National General”), expanding its independent agent channel business.

For additional information, see Part II, Item 8 - Note 3 of the consolidated financial statements of this report.

The Allstate Corporation 1

2020 Form 10-K Item 1. Business

Strategy, Transformative Growth, Our Shared Purpose and Segment Information

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

Transformative Growth is about creating a business model, capabilities and culture that continually transform to deliver market share. This is done by focusing on the customer by expanding access and improving value. The ultimate objective is to create continuous transformative growth in all businesses by delivering affordable, simple and connected protection solutions.

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

Allstate has thrived for 89 years by adapting to better serve customers. Our two-part strategy builds on this success by leveraging the Allstate brand, people and technology to improve our long-term competitive position and accelerate growth.

(1)ALIC and certain affiliates to be divested and we will broaden non-proprietary product distribution to include life insurance.

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2020 Form 10-K Item 1. Business

Our Shared Purpose

As the good hands...

our values

our operating standards

our behaviors

•We empower customers with protection to help them achieve their hopes and dreams.

•We provide affordable, simple and connected protection solutions.

•We create opportunity for our team, economic value for our shareholders and improve communities.

•Integrity is non-negotiable.

•Inclusive Diversity & Equity values and leverages unique identities with equitable opportunity and rewards.

•Collective Success is achieved through empathy and prioritizing enterprise outcomes ahead of individuals.

•Focus on Customers by anticipating and exceeding service expectations at low costs.

•Be the Best at protecting customers, developing talent and running our businesses.

•Be Bold with original ideas using speed and conviction to beat the competition.

•Earn Attractive Returns by providing customer value, proactively accepting risk and using analytics.

•Collaborate early and often to develop and implement comprehensive solutions and share learnings.

•Challenge Ideas to leverage collective expertise, evaluate multiple alternatives and create the best path forward.

•Provide Clarity for expected outcomes, decision authority and accountability.

•Provide Feedback that is candid, actionable, independent of hierarchy and safe.


Reportable segments
Allstate Protection (1)						Includes the Allstate and Encompass brands and Answer Financial. Offers private passenger auto, homeowners, other personal lines and commercial insurance through agents, contact centers and online. Esurance results were combined into the Allstate brand in the third quarter of 2020.
Protection Services (previously Service Businesses)						Includes Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside, Arity and Allstate Identity Protection, which offer a broad range of solutions and services that expand and enhance our customer value propositions.
Allstate Life (2)						Consists of traditional, interest-sensitive and variable life insurance products primarily through Allstate exclusive agents and exclusive financial specialists.
Allstate Benefits						Offers voluntary benefits products, including life, accident, critical illness, short-term disability and other health insurance products sold through independent agents, benefits brokers and Allstate exclusive agents.

Allstate Annuities (2)						Consists of deferred fixed annuities and immediate fixed annuities (including standard and sub-standard structured settlements) in run-off.
Discontinued Lines and Coverages (1)						Relates to property and casualty insurance policies written during the 1960's through the mid-1980's with exposure to asbestos, environmental and other claims in run-off.
Corporate and Other						Includes holding company activities and certain non-insurance operations.

(1)Allstate Protection and Discontinued Lines and Coverages segments comprise Property-Liability.

(2)The pending sale of ALIC and certain affiliates represents approximately 90% of Allstate Life and 75% of Allstate Annuities reserves for life-contingent contract benefits and contractholder funds.

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2020 Form 10-K Item 1. Business

Allstate Protection Segment

Our Allstate Protection segment accounted for 90.0% of Allstate’s 2020 consolidated insurance premiums and contract charges and 19.1% of Allstate’s December 31, 2020 PIF. Private passenger auto, homeowners, other personal lines and commercial insurance products offered through both exclusive and independent agents and directly through contact centers and online are included in this segment. Our strategy is to provide open access and choice of interaction, while offering affordable, simple and connected solutions to meet customers’ evolving needs and protect them from life’s uncertainties.

Strategy Allstate Protection segment is key to the strategy of increasing personal lines market share through Transformative Growth focusing on:

•Allstate brand growth, while making it easier to do business with us and reducing our cost structure

•Expanding Independent Agency channel business with the acquisition of National General in January 2021

We have three market-facing property-liability businesses, Allstate brand, Encompass brand and Answer Financial with products and services that cater to different customer preferences for advice and brand recognition. Starting in 2021, Allstate Independent Agency and Encompass organizations will be integrated into National General.

We serve our consumers using differentiated products, analytical expertise, telematics and an integrated digital enterprise that leverages data and technology to execute processes with a focus on greater effectiveness and efficiency.

Transformative Growth

Expanding Customer Access

Expanding open access and customer choice of solutions under the Allstate brand across multiple channels, including Exclusive Agency and direct (online or call centers)

Driving direct growth through improving online quote flow and enhancing call center practices

Continuing to emphasize growth and customer service in existing Exclusive Agencies

Stopped appointing new agents while building and scaling new agent models, such as the Allstate Sales Agent, to offer different access points to Allstate brand products at a lower distribution cost

Lowering the Allstate brand distribution expense ratio

Establishing a market leading position in the independent agency channel as a top five personal lines carrier with the National General acquisition, utilizing its broad range of products and strong technology platform

Improving Customer Value

Building affordable, simple and connected protection solutions

Improving the competitive prices of products through efficiencies, automation, optimized vendor management, lower distribution costs, and retirement of legacy technologies

Enhancing pricing sophistication to price products based on customer needs and risks and improving our purchase process with automated decision support

Increasing engagement with the Allstate Mobile app and new business penetration of telematics products, including pay-per-mile insurance

Leveraging our circle of protection to provide added protection solutions

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Item 1. Business 2020 Form 10-K

Additional Information and Strategy Updates

Commercial lines strategy We continue to focus on profitable expansion of our shared economy commercial lines business, which is primarily comprised of transportation network companies. Traditional small business commercial insurance is being enhanced through new product development using technology to improve customer experience and reduce costs while leveraging enterprise capabilities. Profit improvement actions continue for our traditional commercial lines insurance products, emphasizing pricing, claims, governance and operational improvements.

Independent agent strategy On January 4, 2021, we completed the acquisition of National General, significantly enhancing our strategic position in the independent agency channel. The transaction will increase our market share in personal property-liability by over one percentage point and enhance 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. Additional expansion opportunities through independent agents also exist in standard auto and homeowners insurance by leveraging Allstate’s capabilities.

National General provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed property, supplemental health and other niche insurance products. Auto insurance represents approximately 60% of premium with a significant presence in the non-standard auto market.

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 sunset Encompass infrastructure

•Transitioning Allstate Independent Agent new business to National General as mid-market products roll out

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

Allstate Protection pricing and risk management strategies Our pricing and underwriting strategies and decisions are designed to generate sustainable profitable growth.

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

•For auto insurance, risk evaluation factors can include, but are not limited to: vehicle make, model and year; driver age and marital status; territory; years licensed; loss history; years insured with prior carrier; prior liability limits; prior lapse in coverage; and insurance scoring utilizing telematics data and other consumer information.

•For property insurance, risk evaluation factors can include, but are not limited to: the amount of insurance purchased; geographic location of the property; loss history; age, condition and construction characteristics of the property; and characteristics of the insured including insurance scoring utilizing other consumer information.

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

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

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

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

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

The Allstate Corporation 5

2020 Form 10-K Item 1. Business

We are promoting measures to prevent and mitigate losses and make homes and communities more resilient, including enactment of stronger building codes and effective enforcement of those

codes, adoption of sensible land use policies, and development of effective and affordable methods of improving the resilience of existing structures.

Products and distribution

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

Products

Insurance products (1)

Auto

Homeowners

Specialty auto (motorcycle, trailer, motor home and off-road vehicle)

Other personal lines (renters, condominium, landlord, boat, umbrella, manufactured home and stand-alone scheduled personal property)

Commercial lines

Answer Financial

Comparison quotes and sales of non-proprietary auto, homeowners and other personal lines (condominium, renters, motorcycle, recreational vehicle and boat)

(1)Insurance products are offered by the Allstate and Encompass brands.


Distribution
Allstate brand			In the U.S., we offer products through 10,400 Allstate exclusive agents operating in 10,300 locations, supported by 23,900 licensed sales professionals, and 1,000 exclusive financial specialists. We also offer products through 5,200 independent agents, contact centers and online. In Canada, we offer Allstate brand products through 1,000 employee sales agents.
Encompass brand			Distributed through 3,100 independent agents.
Answer Financial			Comparison quotes and sales offered to customers online or through contact centers.

Allstate exclusive agents also support the Protection Services, Allstate Life and Allstate Benefits segments through offering roadside assistance, consumer protection plans, identity protection, life insurance and voluntary benefits products. We expect to discontinue sales of proprietary life insurance products during the second quarter of 2021, and will expand the non-proprietary product suite to include a range of life insurance products offered by third-party providers.

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

•Agents receive a monthly base commission payment as a percentage of their total eligible written premium.

•Variable compensation rewards agents for acquiring new customers by exceeding a base production goal.

•Bonus compensation is based on a percentage of premiums and can be earned by agents who are meeting certain sales goals and selling additional policies to meet customer needs profitably.

Compensation for 2021 includes a shift in variable compensation toward new business, including homeowners, and eliminates variable compensation for renewing customers. We are aligning agent compensation to emphasize growth while simultaneously improving customer service consistency.

Agents have the ability to earn commissions and additional bonuses on non-proprietary products provided to customers when an Allstate product is not available through Ivantage, a leading provider of property and casualty brokerage services, and arrangements made with other companies, agencies, and brokers. As of December 31, 2020, Ivantage had $1.94 billion non-proprietary premiums under management, consisting of approximately $1.72 billion of personal insurance premiums primarily related to property business in hurricane exposed areas, and approximately $222 million of commercial insurance premiums.

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Item 1. Business 2020 Form 10-K

Additionally, we offer a homeowners product through our excess and surplus lines carrier, North Light Specialty Insurance Company, in certain areas with higher risk of catastrophes or where customers do not meet the Allstate brand standard underwriting profile.

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

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


Innovative product offerings and features
Market-leading solutions
Allstate brand	Your Choice Auto®	Qualified customers choose from a variety of options, such as Accident Forgiveness, Deductible Rewards®, Safe Driving Bonus® and New Car Replacement.
	Allstate House and Home®	Featured options include Claim RateGuard®, Claim-Free Bonus, Deductible Rewards® and flexibility in options and coverages, including graduated roof coverage and pricing based on roof type and age for damage related to wind and hail events.
	Claim Satisfaction Guarantee®	Promised return of premium to standard auto insurance customers dissatisfied with their claims experience.
	Bundling Benefits	Auto customers with a qualifying property policy are provided an auto renewal guarantee and a deductible waiver (when the same event, with the same covered cause of loss, damages both auto and property). Offered in 47 states and District of Columbia (“D.C.”) as of December 31, 2020.
	New Car Replacement Protection	Replaces a qualifying customer’s vehicle (two model years old or less) involved in a total loss accident with a vehicle of the same or similar make and model. Offered in 50 states and D.C. as of December 31, 2020.
Encompass brand	EncompassOne® Policy	Packaged insurance product with one premium, one bill, one policy deductible and one renewal date. Broad coverage options include customizable features such as enhanced accident forgiveness, new-car replacement coverage, walk-away home coverage option should the insured decide not to rebuild, flexible additional living expense coverage, water-sewer backup coverage options and roadside assistance. This product is offered in 36 states and the District of Columbia (“D.C.”) as of December 31, 2020.
	Surround Solutions by Encompass®	Offers auto (6-months), homeowner and specialty lines products, pricing, services and support designed to provide flexibility and be customized based on consumer needs. Offered exclusively in four states for Encompass as of December 31, 2020.
Telematics solutions
Allstate brand	Drivewise®	Telematics-based program, available in 50 states and the District of Columbia as of December 31, 2020, that uses a mobile application or an in-car device to capture driving behaviors and encourage safe driving. It provides customers with information and tools, incentives and driving challenges. For example, in most states, Allstate Rewards® provides reward points for safe driving.
	Milewise®	Usage-based insurance product, available in 17 states as of December 31, 2020, that gives customers flexibility to customize their insurance and pay based on the number of miles they drive.
	DriveSense®	Telematics-based insurance program offered by Esurance, available in 37 states as of December 31, 2020, that primarily uses a mobile application to capture driving behaviors and reward customers for safe driving.
Encompass brand	Routely®	Telematics application, available in 18 states as of December 31, 2020, used to capture driving behaviors and reward customer participation.
Shared economy solutions
Allstate brand	Transportation Network Company Commercial Auto	Commercial coverage of transportation networking company independent drivers during various phases of the ride sharing service.

	Allstate Ride for Hire®/ HostAdvantage®	Supplemental personal insurance coverage for those using their vehicle to drive for a transportation network company or their house for peer-to-peer property sharing.

The Allstate Corporation 7

2020 Form 10-K Item 1. Business

Competition

The personal lines insurance markets, including private passenger auto and homeowners insurance, are highly competitive. The following charts provide Allstate Protection’s combined market share compared to our principal U.S. competitors using statutory direct written premium for the year ended December 31, 2019, according to A.M. Best.

On January 4, 2021, we completed the acquisition of National General and we estimate that our market share in personal lines insurance will increase by 1.1%, totaling 10.0%, ranking Allstate as the second largest personal lines insurer in the United States, based on statutory direct written premium for the year ended December 31, 2019, according to A.M. Best.

Geographic markets

We primarily operate in the U.S (all 50 states and D.C.) and Canada. Our top geographic markets based on 2020 statutory direct premiums are reflected below. The geographic distribution does not include National General results.

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Item 1. Business 2020 Form 10-K

Protection Services Segment

Our Protection Services segment accounted for 4.3% of Allstate’s 2020 consolidated total revenue and 77.5% of Allstate’s December 31, 2020 PIF. Protection Services includes AllstateSM Protection Plans, Allstate Dealer Services®, Allstate Roadside, Arity® and AllstateSM Identity Protection, which offer a broad range of products and services that expand and enhance customer value propositions.

Strategy - Protection Services are a key part of our strategy by expanding other protection businesses and increasing our total addressable market by delivering superior value propositions and building strategic platforms to connect and engage with customers and effectively address their changing needs and preferences.


Allstate Protection Plans						Expand distribution of consumer protection plan and technical support products through new and existing retail and mobile operator accounts while increasing profitability and returns.
Allstate Dealer Services						Expand distribution of Allstate branded finance and insurance products and services through auto dealerships.
Allstate Roadside						Modernize the roadside assistance business through technology and enhance capabilities to deliver a superior customer experience while improving efficiency and returns.
Arity						Leverage analytics and deep understanding of driver risk to create a strategic platform. The platform will be used by those industries affected most by the changing face of transportation, including insurance companies, shared mobility companies and the automotive ecosystem.
Allstate Identity Protection						Create a leading position in the identity protection market, offering full identity protection monitoring with proactive alerts, digital exposure reporting and identity theft reimbursement as well as expanding into other distribution channels.

Products and distribution


Products and services
Allstate Protection Plans						Provides consumer protection plans and related technical support for mobile phones, consumer electronics, furniture and appliances which provide customers protection from mechanical or electrical failure, and in certain cases, accidental damage from handling.
Allstate Dealer Services						Offers finance and insurance products, including vehicle service contracts, guaranteed asset protection waivers, road hazard tire and wheel protection, and paintless dent repair protection.
Allstate Roadside						Offers towing, jump-start, lockout, fuel delivery and tire change services to retail customers and customers of our wholesale partners.
Arity						Provides data and analytics solutions with the Arity platform using automotive telematics information. Customers receive value from our solutions either by using web-based software tools, white labeled mobile applications or through embedding our technology in their mobile applications.
Allstate Identity Protection						Provides identity protection services including monitoring, alerts, remediation and a proprietary indicator of identity health.


Distribution channels
Allstate Protection Plans						Major retailers in the U.S. and mobile operators in Europe.
Allstate Dealer Services						Independent agents and brokers through auto dealerships in the U.S. in conjunction with the purchase of a new or used vehicle.
Allstate Roadside						Allstate exclusive agents, wholesale partners, affinity groups and a mobile application.
Arity						Sells directly to affiliate and non-affiliate customers and through strategic partners.
Allstate Identity Protection						Primarily through workplace benefit programs and direct to consumer using the mobile application and online.

Geographic markets

Protection Services primarily operate in the U.S. and Canada, with Allstate Protection Plans also offering services in Europe and Japan.

Competition

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

The Allstate Corporation 9

2020 Form 10-K Item 1. Business

Allstate Benefits Segment

Strategy

Our Allstate Benefits segment accounted for 2.6% of Allstate’s 2020 consolidated total revenue and 2.2% of Allstate’s December 31, 2020 PIF. The Allstate Benefits segment provides consumers with financial protection against the risk of accidents, illness and mortality. We are among the industry leaders in the growing and highly competitive voluntary benefits market, offering a broad range of products through workplace enrollment. Our life insurance portfolio includes individual and group permanent life solutions. Target customers are middle market consumers with family and financial protection needs employed by small, medium and large sized firms. Allstate Benefits is well represented in all market segments and is a leader in the large and mega (over 10,000 employees) market segments.

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

Our strategy for growth is to deliver substantially more value through innovative products and technology, tailored solutions and exceptional service through investments in future-state technologies and data and analytics capabilities.

Products and distribution


Voluntary benefits products
Life						Hospital
Accident						Short-term disability
Critical illness						Other health


Distribution channels
4,160 workplace enrolling independent agents and benefits brokers.
Allstate exclusive agents, focusing on small employers.

On January 4, 2021, we completed the acquisition of National General. National General’s accident and health products include accident and non-major medical health insurance products and will be included in the Allstate Benefits segment. These products are offered direct to consumers through call centers and the internet, and through independent agents, general agencies, affinity relationships and the workplace.

Competition

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

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

Geographic markets

We primarily operate in the U.S. (all 50 states and D.C.) and Canada. The top geographic markets based on 2020 statutory direct premiums are reflected below.

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Item 1. Business 2020 Form 10-K

Pending Sale of ALIC and Certain Affiliates

We announced the pending sale of ALIC and certain affiliates, which represents approximately 90% of Allstate Life and 75% of Allstate Annuities reserves for life-contingent contract benefits and contractholder funds. Allstate will retain ownership of ALNY while pursuing alternatives to sell or otherwise transfer risk to a third party. We expect to discontinue sales of proprietary life insurance products during the second quarter of 2021.

Allstate Life Segment

Strategy

Our Allstate Life segment accounted for 4.4% of Allstate’s 2020 consolidated total revenue and 1.1% of Allstate’s December 31, 2020 PIF.

Our strategy is to broaden Allstate’s customer relationships and value proposition. Target customers are middle market consumers with family and financial protection needs. Our business consists of traditional, interest-sensitive and variable life insurance sold through Allstate exclusive agents and exclusive financial specialists. Allstate exclusive agents and exclusive financial specialists also sell certain non-proprietary products offered by third-party providers, including mutual funds, fixed and variable annuities, disability insurance, and long-term care insurance to provide a broad suite of protection and retirement products. As of December 31, 2020, Allstate agencies had approximately $17.9 billion of non-proprietary mutual funds and fixed and variable annuity account balances under management. New and additional deposits into these non-proprietary products were $2.2 billion in 2020.

We will expand the non-proprietary product suite available for distribution to include a range of life insurance products offered by third-party providers.

Competition

We compete on a variety of factors, including product offerings, brand recognition, financial strength and ratings, price, distribution and customer service. The market for life insurance continues to be highly fragmented and competitive. As of December 31, 2019, there were approximately 335 groups of life insurance companies in the United States.

Geographic markets

We operate in the U.S. (all 50 states and D.C.). Our top geographic markets based on 2020 statutory direct premiums are reflected below.

Allstate Annuities Segment

Strategy

Our Allstate Annuities segment accounted for 2.3% of Allstate’s 2020 consolidated total revenue and 0.1% of Allstate’s December 31, 2020 PIF. The Allstate Annuities segment consists primarily of deferred fixed annuities and immediate fixed annuities (including standard and sub-standard structured settlements).

The segment is in run-off and is focused on increasing lifetime economic value. Both the deferred and immediate annuity businesses have been adversely impacted by the historically low interest rate environment. Our immediate annuity business has also been impacted by medical advancements that have resulted in annuitants living longer than anticipated when many of these contracts were originated.

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

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

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2020 Form 10-K Item 1. Business

Other Business Segments

Discontinued Lines and Coverages Segment

The Discontinued Lines and Coverages segment includes results from property and casualty insurance coverage that primarily relates to policies written during the 1960s through the mid-1980s.

Strategy Management of this segment has been assigned to a designated group of professionals with expertise in claims handling, policy coverage interpretation, exposure identification, litigation and reinsurance collection. As part of its responsibilities, this group pursues settlement agreements including policy buybacks on direct excess commercial business when appropriate to improve the certainty of the liabilities. At the end of 2020, 67.0% of the direct excess gross case reserves were attributable to settlement agreements. This group also manages other direct commercial and assumed reinsurance business in runoff and engages in reinsurance ceded and assumed commutations as required or when considered economically advantageous.

Changes in the reserves established for asbestos, environmental and other discontinued lines losses have occurred and may continue. Reserve changes can be caused by new information relating to new and additional claims, new exposures or the impact of resolving unsettled claims based on unanticipated events such as arbitrations, litigation, legislative, judicial or regulatory actions. Environmental losses may also increase as the result of additional funding for environmental site clean-up.

Challenges related to the concentration of insurance and reinsurance claims from companies who specialize in this business continue to be addressed.

Corporate and Other Segment

Our Corporate and Other segment is comprised of holding company activities and certain non-insurance operations, including expenses associated with strategic initiatives.

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Item 1. Business 2020 Form 10-K

Regulation

Allstate is subject to extensive regulation, primarily at the state level. The method, extent and substance of such regulation vary by state but generally have their source in statutes that establish standards and requirements for conducting the business of insurance and that also delegate regulatory authority to a state agency. These rules have a substantial effect on our business and relate to a wide variety of matters, including insurer solvency and statutory surplus sufficiency, reserve adequacy, insurance company licensing and examination, agent and adjuster licensing, agent and broker compensation, policy forms, rate setting, the nature and amount of investments, claims practices, participation in shared markets and guaranty funds, transactions with affiliates, the payment of dividends, underwriting standards, statutory accounting methods, trade practices, privacy regulation and data security, corporate governance and risk management. In addition, state legislators and insurance regulators continue to examine the appropriate nature and scope of state insurance regulation. For a discussion of statutory financial information, see Note 16 of the consolidated financial statements.

For a discussion of regulatory contingencies, see Note 14 of the consolidated financial statements. Notes 14 and 16 are incorporated in this Part I, Item 1 by reference.

As part of an effort to strengthen the regulation of the financial services market, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) was enacted in 2010. Dodd-Frank created the Federal Insurance Office (“FIO”) within the U.S. Department of the Treasury (“Treasury”). The FIO monitors the insurance industry, provides advice to the Financial Stability Oversight Council (“FSOC”), represents the U.S. on international insurance matters, and studies the current regulatory system.

Additional regulations or new requirements may emerge from the activities of various regulatory entities, including the Federal Reserve Board, FIO, FSOC, the National Association of Insurance Commissioners (“NAIC”), and the International Association of Insurance Supervisors (“IAIS”), that are evaluating solvency and capital standards for insurance company groups. In addition, the NAIC has adopted amendments to its model holding company law that have been adopted by some jurisdictions. The outcome of these actions is uncertain; however, these actions may result in an increase in the level of capital and liquidity required by insurance holding companies.

We cannot predict whether any specific state or federal measures will be adopted to change the nature or scope of the regulation of insurance or what effect any such measures would have on Allstate. We are working for changes in the regulatory environment to make insurance more available and affordable for customers, encourage market innovation, improve driving safety, strengthen cybersecurity, promote better catastrophe preparedness and loss mitigation

and advocate for appropriate long-term capital standards to support optimal risk adjusted returns.

Limitations on Dividends by Insurance Subsidiaries. As a holding company with no significant business operations of its own, The Allstate Corporation relies on dividends from Allstate Insurance Company as one of the principal sources of cash to pay dividends and to meet its obligations, including the payment of principal and interest on debt or to fund non-insurance-related businesses. Allstate Insurance Company is regulated as an insurance company in Illinois, and its ability to pay dividends is restricted by Illinois law. The laws of the other jurisdictions that generally govern our other insurance subsidiaries contain similar limitations on the payment of dividends. However, such laws in some jurisdictions may be more restrictive.

For additional information regarding limitations, see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.

In addition, the NAIC has formed a working group for the development of a group capital calculation covering all entities of the insurance company group for use in solvency monitoring activities. The calculation is intended to provide analytical information and we do not expect potential revisions to impact our current dividend plans, any increase in the amount of capital or reserves our insurance subsidiaries are required to hold could reduce the amount of future dividends such subsidiaries are able to distribute to the holding company. Any reduction in the RBC ratios of our insurance subsidiaries could also adversely affect their financial strength ratings as determined by statistical rating agencies.

Insurance Holding Company Regulation – Change of Control. The Allstate Corporation and Allstate Insurance Company are insurance holding companies subject to regulation in the jurisdictions in which their insurance subsidiaries, including the insurance subsidiaries of National General, do business. In the U.S., these subsidiaries are organized under the insurance codes of Alabama, California, Florida, Illinois, Indiana, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, South Carolina and Texas. Additionally, some of these subsidiaries are considered commercially domiciled in California and Florida.

Generally, the insurance codes in these states provide that the acquisition or change of “control” of a domestic or commercially domiciled insurer or of any person that controls such an insurer cannot be consummated without the prior approval of the relevant insurance regulator. In general, a presumption of “control” arises from the ownership, control, possession with the power to vote, or possession of proxies with respect to ten percent or more of the voting securities of an insurer or of a person who controls an insurer. In addition, certain state insurance laws require pre-acquisition notification to state

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2020 Form 10-K Item 1. Business

agencies of a change in control with respect to a non-domestic insurance company licensed to do business in that state. While such pre-acquisition notification statutes do not authorize the state agency to disapprove the change of control, such statutes do authorize certain remedies, including the issuance of a cease-and-desist order with respect to the non-domestic insurer if certain conditions exist, such as undue market concentration.

Thus, any transaction involving the acquisition of ten percent or more of The Allstate Corporation’s common stock would generally require prior approval by the state insurance departments in Alabama (where the threshold is five percent or more of The Allstate Corporation’s common stock), California, Florida, Illinois, Indiana, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, South Carolina and Texas. Moreover, notification would be required in those other states that have adopted pre-acquisition notification provisions and where the insurance subsidiaries are admitted to transact business. Such approval requirements may deter, delay or prevent certain transactions affecting the ownership of The Allstate Corporation’s common stock.

Rate Regulation. Nearly all states have insurance laws requiring personal property and casualty insurers to file rating plans, policy or coverage forms, and other information with the state’s regulatory authority. In many cases, such rating plans, policy forms, or both must be approved prior to use.

The speed with which an insurer can change rates in response to competition or increasing costs depends on the state rating laws, which include the following categories:

•Prior approval — Regulators must approve a rate before the insurer may use it

•File-and-use — Insurers do not have to wait for the regulator’s approval to use a rate, but the rate must be filed with the regulatory authority prior to being used

•Use-and-file — Requires an insurer to file rates within a certain period of time after the insurer begins using them

•No approval — One state, with an immaterial amount of written premiums, does not impose a rate filing requirement

Under these rating laws, the regulator has the authority to disapprove a rate filing. The percentage of 2020 statutory direct written premiums based on state rating laws are reflected below.

An insurer’s ability to adjust its rates in response to competition or to changing costs is dependent on an insurer’s ability to demonstrate to the regulator that its rates or proposed rating plan meets the requirements of the rating laws. In those states that significantly restrict an insurer’s discretion in selecting the business that it wants to underwrite, an insurer can manage its risk of loss by charging a rate that reflects the cost and expense of providing the insurance. In those states that significantly restrict an insurer’s ability to charge a rate that reflects the cost and expense of providing the insurance, the insurer can manage its risk of loss by being more selective in the type of business it underwrites. When a state significantly restricts both underwriting and pricing, it becomes more difficult for an insurer to maintain its profitability.

From time to time, the personal lines insurance industry comes under pressure from state regulators, legislators, and special-interest groups to reduce, freeze, or set rates at levels that do not correspond with our analysis of underlying costs, catastrophe loss exposure, and expenses. We expect this kind of pressure to persist. Allstate and other insurers are using increasingly sophisticated pricing models and rating plans that are reviewed by regulators and special-interest groups. State regulators may interpret existing law or rely on future legislation or regulations to impose new restrictions that adversely affect profitability or growth. We cannot predict the impact on our business of possible future legislative and regulatory measures regarding insurance rates.

Involuntary Markets. As a condition of maintaining our licenses to write personal property and casualty insurance in various states, we are required to participate in assigned risk plans, reinsurance facilities, and joint underwriting associations that provide various types of insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers. Underwriting results related to these arrangements, which tend to be adverse, have been immaterial to our results of operations.

For a discussion of these items see Note 14 of the consolidated financial statements. Note 14 is incorporated in this Part I, Item 1 by reference.

Indemnification Programs. We are a participant in state-based industry pools, facilities or associations, mandating participation by insurers offering certain coverage in their state, including the Michigan Catastrophic Claims Association (“MCCA”), the New Jersey Property-Liability Insurance Guaranty Association, the North Carolina Reinsurance Facility and the Florida Hurricane Catastrophe Fund. We also participate in the Federal Government National Flood Insurance Program.

Recent regulatory changes have occurred related to the MCCA. At this time, we are unable to determine whether, or to what extent, these changes will have on our claims and claims expense reserves and corresponding MCCA indemnification recoverables.

•On August 6, 2020, member companies of the MCCA were notified of the ratification of

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Item 1. Business 2020 Form 10-K

amendments to the MCCA’s Plan of Operation. The amendments were designed to align the Plan of Operation with Public Acts 21 and 22, which passed in 2019.

•On July 2, 2020, portions of Public Acts 21 and 22 went into effect. The changes under those laws include:

–Allowing insureds to choose levels of personal injury protection coverage, including the option to opt-out of personal injury protection coverage in certain circumstances.

–Implementing mandated rate reductions that correspond to the level of personal injury protection coverage chosen by insureds.

–Implementing or creating new processes for reviewing claims, assessing allowable expenses and setting limits on certain allowable expenses.

•On July 2, 2021, legislation passed in 2019 will become effective, setting fee schedules for personal injury protection claims. Such fee schedules will be set at 200% of Medicare rates in 2021, declining to 195% in 2022 and 190% in 2023, for any providers other than certain unique categories of providers and applying to treatment on existing and new claims.

•Other legislative proposals to change the MCCA operation in the future and to adjust Public Acts 21 and 22 are put forth periodically.

For a discussion of these items see Note 10 of the consolidated financial statements. Note 10 is incorporated in this Part I, Item 1 by reference.

Guaranty Funds. Under state insurance guaranty fund laws, insurers doing business in a state can be assessed, up to prescribed limits, in order to cover certain obligations of insolvent insurance companies. We do not anticipate any material adverse financial impact on Allstate from these assessments.

Investment Regulation. Our insurance subsidiaries are subject to state regulation that specifies the types of investments that can be made and concentration limits of invested assets. Failure to comply with these rules leads to the treatment of non-conforming investments as non-admitted assets for purposes of measuring statutory surplus. Further, in some instances, these rules require divestiture of non-conforming investments.

Exiting Geographic Markets; Canceling and Non-Renewing Policies. Most states regulate an insurer’s ability to exit a market. For example, states may limit, to varying degrees, an insurer’s ability to cancel and non-renew policies. Some states restrict or prohibit an insurer from withdrawing one or more types of insurance business from the state, except pursuant to a plan that is approved by the state insurance department. Regulations that limit cancellation and non-renewal and that subject withdrawal plans to prior approval requirements may restrict an insurer’s ability to exit unprofitable markets.

Variable Life Insurance and Registered Fixed Annuities. The sale and administration of variable life insurance and registered fixed annuities with market value adjustment features are subject to extensive regulatory oversight at the federal and state level, including regulation and supervision by the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”).

Broker-Dealers, Investment Advisors and Investment Companies. The Allstate entities that operate as broker-dealers, registered investment advisors, and investment companies are subject to regulation and supervision by the SEC, FINRA and/or, in some cases, state securities administrators. Certain state and federal regulators are considering or have implemented best interest or fiduciary standards. Such standards could impact products provided by Allstate agents and Allstate’s broker-dealers, their sales processes, sales volume, and producer compensation arrangements.

Dodd-Frank: Covered Agreement. The Secretary of the Treasury (operating through FIO) and the Office of the U.S. Trade Representative (“USTR”) are jointly authorized, pursuant to the Dodd-Frank, to negotiate Covered Agreements. A Covered Agreement is a bilateral or multilateral agreement that “relates to the recognition of prudential measures with respect to the business of insurance or reinsurance that achieves a level of protection for insurance or reinsurance consumers that is substantially equivalent to the level of protection achieved under State insurance or reinsurance regulation.”

On September 22, 2017, the U.S. and European Union (“EU”) signed a Covered Agreement. In addition to signing the Covered Agreement, Treasury and the USTR jointly issued a policy statement clarifying how the U.S. views implementation of certain provisions of the Covered Agreement. The policy statement affirms the U.S. system of insurance regulation, including the role of state insurance regulators as the primary supervisors of the business of insurance and addresses several other key provisions of the Covered Agreement for which constituents sought clarity, including prospective application to reinsurance agreements and an affirmation that the Covered Agreement does not require development of a group capital standard or group capital requirement in the U.S.

The U.S. has five years from the date of signing to amend its credit for reinsurance laws and regulations to conform with the requirements of the Covered Agreement or face federal preemption determinations by the FIO. To address the requirements of the Covered Agreement, the NAIC has formally adopted revisions to its existing credit for reinsurance model law and model regulation to conform with the requirements of the Covered Agreement with the expectation that states will adopt and implement the modified model law and regulation by September 2022.

On December 19, 2018, the U.S. and the United Kingdom (“UK”) signed a separate Covered Agreement consistent with the U.S.-EU Covered Agreement to

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2020 Form 10-K Item 1. Business

coordinate regulation of the insurance industry doing business in the U.S. and UK. Consistent with the U.S.-EU Covered Agreement (the “Agreement”) signed in 2017, Treasury and the USTR also issued a policy statement regarding implementation of the Agreement affirming the role that state insurance regulators play as the primary supervisors of the U.S. insurance industry.

Division Statute. On November 27, 2018, the Illinois General Assembly passed legislation authorizing a statute that makes available a process by which a domestic insurance company may divide into two or more domestic insurance companies. The statute, which became effective January 1, 2019, can be used to divide continuing blocks of insurance business from insurance business no longer marketed, or otherwise has been discontinued, into separate companies with separate capital. The statute can also be used for sale to a third party or to manage risks associated with indemnification programs. Before a plan of division can be effected it must be approved according to the organizational documents of the dividing insurer and submitted for approval by the Illinois Department of Insurance.

Privacy Regulation and Data Security. Federal law and the laws of many states require financial institutions to protect the security and confidentiality of consumer information and to notify consumers about their policies and practices relating to collection, use, and disclosure of consumer information and their policies relating to protecting the security and confidentiality of that information. Federal law and the laws of many states also regulate disclosures and disposal of consumer information. Congress, state legislatures, and regulatory authorities are expected to consider additional regulation relating to privacy and other aspects of consumer information.

For example, the California Consumer Privacy Act, which took effect in January 2020, adopted significant compliance requirements for businesses that collect personal information on California residents. In addition, the California Privacy Rights Act, which expands consumer privacy rights and establishes a new privacy regulatory agency, was passed in November 2020 and will become effective in January 2023. Further, the New York State Department of Financial Services cybersecurity regulation and the NAIC Insurance Data Security Model Law, which has been adopted in some form by several states, establish standards for data security and for the investigation of and notification to insurance commissioners of cybersecurity events. Additional states are also likely to adopt similarly themed cybersecurity requirements in the future. We cannot predict the impact on our business of possible future legislative measures regarding privacy or cybersecurity.

Asbestos. Congress has repeatedly considered legislation to address asbestos claims and litigation in the past. We cannot predict the impact on our business of possible future legislative measures regarding asbestos.

Environmental. Environmental pollution and clean-up of polluted waste sites is the subject of federal and state regulation. The Comprehensive Environmental Response Compensation and Liability Act of 1980 (the “Superfund”) and comparable state statutes (the “mini-Superfunds”) govern the clean-up and restoration of waste sites by Potentially Responsible Parties (“PRPs”). The Superfund and the mini-Superfunds (collectively, the “Environmental Clean-up Laws” or “ECLs”) establish a mechanism to assign liability to PRPs or to fund the clean-up of waste sites if PRPs fail to do so. The extent of liability to be allocated to a PRP depends on a variety of factors. The insurance industry is involved in extensive litigation regarding coverage issues arising out of the clean-up of waste sites by insured PRPs and the insured parties’ alleged liability to third parties responsible for the clean-up. The insurance industry, including Allstate, has disputed and is disputing many such claims. Key coverage issues include whether the Superfund response, investigation, and clean-up costs are considered damages under the policies; whether coverage has been triggered; whether any pollution exclusion applies; whether there has been proper notice of claims; whether administrative liability triggers the duty to defend; whether there is an appropriate allocation of liability among potentially responsible insurers; and whether the liability in question falls within the definition of an “occurrence.” Identical coverage issues exist for clean-up and waste sites not covered under the Superfund. To date, courts have been inconsistent in their rulings on these issues.

Allstate’s exposure to liability with regard to its insureds that have been, or may be, named as PRPs is uncertain. While comprehensive Superfund reform proposals have been introduced in Congress, only modest reform measures have been enacted. In May 2017, the Environmental Protection Agency created a Superfund Task Force that issued proposed reforms in a July 2018 report. These recommendations address expediting clean-up and remediation processes, reducing the financial burden of the clean-up process, encouraging private investment, promoting redevelopment and community revitalization, and building and strengthening partnerships. We cannot predict which, if any, of these reforms will be enacted.

Developments in the insurance and reinsurance industries have fostered a movement to segregate asbestos, environmental and other discontinued lines exposures into separate legal entities with dedicated capital. Regulatory bodies in certain cases have supported these actions. We are unable to determine the impact, if any, that these developments will have on the collectability of reinsurance recoverables in the future.

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Item 1. Business 2020 Form 10-K

Human Capital

Allstate’s success is highly dependent on human capital. The wellbeing of our employees is a key priority, and Allstate strives to promote a dynamic and welcoming workplace that promotes inclusive diversity and equity, fosters collaboration and encourages employees to bring their best ideas to work every day. As of December 31, 2020, Allstate had approximately 41,860 full-time employees and 300 part-time employees.

Allstate’s human capital management focuses on the following priorities:

Inclusive Diversity and Equity (“IDE”) We strive for a workforce where the breadth of our diversity makes us a better company. IDE is one of Allstate’s core values and serves as a foundation of Our Shared Purpose.


U.S. workforce diversity as of December 31, 2020
Women						55%
Racially and ethnically diverse						39%

•We track our workforce composition data over time to determine if we are making appropriate progress in advancing gender and racial representation in our employee population and we disclose our progress. In our Sustainability Report, we provide, among other things, five years of workforce composition data that shows a breakdown of salaried, hourly and management employees by gender and race.

•As part of our commitment to fair and equitable compensation practices, we complete an annual pay equity analysis. Over the past two years, we engaged an external firm to provide a more detailed analysis to identify potential pay gaps across substantially similar employee groups as well as identify policies, practices or systematic issues that may contribute to pay gaps now or over time. The external analyses found that Allstate’s results compared well to benchmarks for companies of similar size and scope.

•Allstate’s Employee Resource Group (“ERG”) Program and the Enterprise Diversity Leadership Council (“EDLC”) help advance IDE.

–ERGs: We support and fund 11 ERGs. ERGs offer specific opportunities for employees to partner and collaborate with each other through professional development workshops, recruiting events, volunteer projects and mentoring. Officers from across the enterprise, leverage their time, networks and resources to support the ERGs and advance IDE at Allstate.

–EDLC: The EDLC is made up of senior leaders throughout the organization and focuses on driving targeted results for IDE by identifying and prioritizing action, taking accountability for achieving targeted results and ensuring

clarity and understanding of the business relevance of IDE. The EDLC provides updates to our chief executive officer.

•In 2020, employees completed 30,827 courses on IDE. The number of courses completed in June through December 2020 comprised more than double the total of IDE courses completed in all of 2019. Three new virtual, instructor-led sessions were launched in July 2020, in line with our focus on reflection, learning and action.

•Allstate continues to look for ways to build awareness and drive action. In response to the unprecedented events in 2020, we:

–Began observing Juneteenth as an annual company holiday

–Launched an Anti-Racism Resource Center for employees

–Expanded the “Inclusive Conversations” series to monthly, hosted, enterprise-level sessions to build off themes of racial inequity, allyship, privilege and other relevant topics

–Founding member of OneTen (with other leading CEOs and organizations), an organization committed to upskilling, hiring and promoting one million Black Americans over the next 10 years into family-sustaining jobs with opportunities for advancement

•An external comprehensive IDE assessment will be completed in 2021 and will include a full assessment of our programs, policies, processes, procedures, and practices to ensure that we are building, maintaining and supporting fully sustainable and equitable programs at Allstate.

Employee Wellbeing and Safety We take seriously our responsibility to care for employees’ well-being, devoting resources to employee health and safety.

•The Coronavirus made Allstate even more focused on employees’ health and safety.

–In just one week, we transitioned 95% of our workforce to working remotely.

–As part of the Good Office program, we shipped over 50,000 office items to our employees to help them work more productively at home.

–We established Coronavirus hotlines for employees and continued to pay employees who could not work remotely under shelter-in-place orders.

–During the fourth quarter of 2020, we announced the Holiday Support Program, which helped provide financial relief to approximately 5,000 employees experiencing financial hardships due to the Coronavirus.

–Enhanced safety guidelines, cleaning protocols and social distancing practices remain in place for in-office workers.

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2020 Form 10-K Item 1. Business

•We conduct wellbeing assessments for employees to help determine which services, programming and benefits to offer the workforce. The assessment asks about physical, emotional, mental and financial wellbeing. Completing the assessment lowers the cost of benefits to employees.

•We offer resilience and stress management programs to improve employee wellbeing, including Energy for Life, a workshop on employee wellness to help employees articulate and pursue their individual purpose and embrace new challenges with ease. Over 39,000 employees have taken this wellness workshop since 2010.

•The ERGs provided multiple forums in 2020 to share wellness resources and support for their members.

•Wellbeing Champions promote Allstate’s health and wellness resources across the enterprise, including yoga and meditation classes and flu shots.

Talent Recruitment and Management We seek to provide employees with rewarding work, professional growth and educational opportunities.

•Our flexible work and equal opportunity policies support talent attraction and retention.

•Employees receive an annual performance review, with additional performance conversations taking place throughout the year. Allstate invests in training and re-skilling opportunities so employees can be successful throughout their careers. In 2020:

–Employees completed over 139,000 hours in formal learning opportunities.

–7,000 employees attended Allstate’s Global Learning Week, with over 2,000 development commitments made to grow one new skill by the end of the year.

–Over 1,000 employees attended Quarterly Skill Builders featuring external experts facilitating topics including data visualization, storytelling and talent development.

–702 employees participated in Allstate’s tuition reimbursement program, with $3.3 million paid in tuition reimbursement.

–42% of open positions were filled with internal applicants.

•The Power of Mentoring for Inclusive Diversity (“MInD”) program engaged 74 women and racially and ethnically diverse high potential managers, senior managers and directors who were nominated to receive sponsorship, job shadowing, and networking opportunities.

Organizational Culture At Allstate, we believe that when your passion fuels your purpose, you can achieve anything. We expect all employees to be leaders and dedicate extensive resources to developing leaders at all levels.

•Allstate defines culture as a self-sustaining system of shared values, priorities and principles that shape beliefs and drive behaviors and decision-making within an organization.

•In 2020, we updated Our Shared Purpose to reflect the evolution of our culture to drive our business strategy.

For additional information, please see the section titled “Spotlight on Human Capital Management” in our 2020 Proxy Statement.

In addition to the above discussion of our employees, please see information about Allstate agents under the caption “Allstate Protection Segment - Products and Distribution” in Part I, Item 1 of this report.

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Item 1. Business 2020 Form 10-K

Website

Our website is allstate.com. The Allstate Corporation’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports that we file or furnish pursuant to Section 13(a) of the Securities Exchange Act of 1934 are available on the Investor Relations section of our website (www.allstateinvestors.com), free of charge, as soon as reasonably practicable after they are electronically filed or furnished to the SEC. In addition, our Corporate Governance Guidelines, our Global Code of Business Conduct, and the charters of our Audit Committee, Compensation and Succession Committee, Nominating, Governance and Social Responsibility Committee, Executive Committee and Risk and Return Committee are available on the Investor Relations section of our website and in print to any stockholder who requests copies by contacting Investor Relations, The Allstate Corporation, 2775 Sanders Road, Northbrook, Illinois 60062-6127, 1-847-402-2800. The information found on our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document filed with the SEC.

Other Information About Allstate

•Allstate’s seven reportable segments use shared services, including human resources, investment, finance, information technology and legal services, provided by Allstate Insurance Company and other affiliates.

•Although the insurance business generally is not seasonal, claims and claims expense for the Allstate Protection segment tend to be higher for periods of severe or inclement weather.

•“Allstate®” is a very well-recognized brand name in the United States. We use the “Allstate®, “Encompass®” and “Answer Financial®” brands extensively in our business. We also provide additional protection products and services through “AllstateSM Protection Plans”, “Allstate Dealer Services®”, “Allstate Roadside”, “Arity®”, “AllstateSM Identity Protection” and “Allstate Benefits®”. These brands, products and services are supported with the related service marks, logos, and slogans. Our rights in the United States to these names, service marks, logos and slogans continue as long as we continue to use them in commerce. Many service marks used by Allstate are the subject of renewable U.S. and/or foreign service mark registrations. We believe that these service marks are important to our business and we intend to maintain our rights to them.

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2020 Form 10-K Item 1. Business

Information about our Executive Officers

The following table sets forth the names of our executive officers, their ages as of February 1, 2021, their positions, business experience, and the years of their first election as officers. “AIC” refers to Allstate Insurance Company. Each of the officers named below may be removed from office at any time, with or without cause, by the board of directors of the relevant company.


Name	Age	Position with Allstate and Business Experience	Year First Elected Officer
Thomas J. Wilson	63	Chair of the Board (May 2008 to present), President (June 2005 to January 2015 and February 2018 to present), and Chief Executive Officer (January 2007 to present) of The Allstate Corporation and AIC.	1995
Carolyn D. Blair	52	Executive Vice President and Chief Human Resources Officer of AIC (October 2019 to present); President of Tartan Advisory Group, Inc. (November 2018 to October 2019); Executive Vice President, Chief Human Resources & Communications Officer of Sun Life Financial (April 2014 to June 2018).	2019
Elizabeth A. Brady	56	Executive Vice President, Chief Marketing, Customer and Communications Officer of AIC (January 2020 to present); Executive Vice President and Chief Marketing, Innovation and Corporate Relations Officer of AIC (August 2018 to January 2020); Senior Vice President, Global Brand Management of Kohler Co. (November 2013 to July 2018).	2018
Don Civgin	59	Vice Chair of The Allstate Corporation and AIC (March 2020 to present) and Chief Executive Officer, Protection Products and Services of AIC (January 2020 to present); President, Service Businesses of AIC (January 2018 to January 2020); President, Emerging Businesses of AIC (February 2015 to January 2018).	2008
John E. Dugenske	54	President, Investments and Financial Products of AIC (January 2020 to present); Executive Vice President and Chief Investment and Corporate Strategy Officer of AIC (January 2018 to January 2020); Executive Vice President and Chief Investment Officer of AIC (March 2017 to January 2018); Group Managing Director and Global Head of Fixed Income at UBS Global Asset Management (December 2008 to February 2017).	2017
Rhonda S. Ferguson	51	Executive Vice President, Chief Legal Officer, General Counsel, and Secretary of The Allstate Corporation and AIC (November 2020 to present); Executive Vice President and General Counsel of The Allstate Corporation and AIC (September 2020 to November 2020); Executive Vice President, Chief Legal Officer and Corporate Secretary of Union Pacific Railroad (December 2017 to September 2020); Executive Vice President and Chief Legal Officer of Union Pacific Railroad (July 2016 to December 2017); Vice President, Corporate Secretary and Chief Ethics Officer of FirstEnergy Corp. (April 2007 to June 2016).	2020
Suren Gupta	59	Executive Vice President, Chief Information Technology and Enterprise Services Officer of AIC (January 2020 to present); Executive Vice President, Enterprise Technology and Strategic Ventures of AIC (February 2015 to January 2020).	2011
Susan L. Lees	63	Executive Vice President, Chief Sustainability Officer of AIC (November 2020 to present); Executive Vice President, Chief Legal Officer and Secretary of The Allstate Corporation and AIC (September 2020 to November 2020); Executive Vice President, Chief Legal Officer, General Counsel, and Secretary of The Allstate Corporation and AIC (January 2020 to September 2020); Executive Vice President, General Counsel, and Secretary of The Allstate Corporation (May 2013 to January 2020) and of AIC (June 2013 to January 2020).	2008
Jesse E. Merten	46	President, Financial Products of AIC (May 2020 to present); Executive Vice President and Chief Risk Officer of AIC (December 2017 to May 2020); Treasurer of The Allstate Corporation (January 2015 to April 2019) and of AIC (February 2015 to May 2019).	2012
John C. Pintozzi	55	Senior Vice President, Controller and Chief Accounting Officer of The Allstate Corporation (August 2019 to present) and of AIC (September 2019 to present); Senior Vice President and Chief Financial Officer, Allstate Investments (May 2012 to August 2019)	2005
Mark Q. Prindiville	53	Executive Vice President and Chief Risk Officer of AIC (May 2020 to present); Senior Vice President of AIC (September 2016 to May 2020); Vice President of AIC (March 2011 to September 2016).	2016
Mario Rizzo	54	Executive Vice President and Chief Financial Officer of The Allstate Corporation and AIC (January 2018 to present); Senior Vice President and Chief Financial Officer, Allstate Personal Lines of AIC (February 2015 to January 2018).	2010
Glenn T. Shapiro	55	President, Personal Property-Liability of AIC (January 2020 to present); President, Allstate Personal Lines of AIC (January 2018 to January 2020); Executive Vice President, Claims of AIC (April 2016 to January 2018); Executive Vice President and Chief Claims Officer of Liberty Mutual Commercial Insurance (May 2011 to March 2016).	2016

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Item 1. Business 2020 Form 10-K

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. These risks and uncertainties include, but are not limited to, those described in Part 1, “Item 1A. Risk Factors” and elsewhere in this report and those described from time to time in our other reports filed with the Securities and Exchange Commission.

The Allstate Corporation 21

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

Item 1A. Risk Factors

Summary Risks are categorized by (1) insurance and financial services, (2) business, strategy and operations and (3) macro, regulatory and risk environment. Many risks may affect more than one category and are included where the impact is most significant. If some of these risk factors occur, they may cause the emergence of or exacerbate the impact of other risk factors, which could materially increase the severity of the impact of these risks on our business, results of operations, financial condition or liquidity. The table below includes examples of risks from each category.

Insurance and financial services

Business, strategy and operations

Macro, regulatory

and risk environment

Risks that are unique to the insurance and financial services industries

Risks that are unique to Allstate’s business and operating model

Risks that impact most companies

• Claim frequency and severity volatility

• Catastrophes and severe weather

• Loss cost estimates are complex and losses are unknown at the time policies are sold

• Investment results are subject to volatility and valuation judgments

• Highly competitive industry, impacted by new and changing technologies

• Operating model effectiveness in light of changing customer preferences

• Ability to maintain catastrophe reinsurance programs and limits

• Fluctuations in financial strength and ratings

• Adverse changes in economic and capital market conditions

• Large-scale pandemic events

• Cybersecurity controls and privacy

• Changing climate conditions

• Regulatory and political changes

• Loss of key business relationships

• Ability to attract, develop and retain talent

Allstate manages these risks through an Enterprise Risk and Return Management framework on an integrated basis following our risk and return principles.

See Management’s Discussion and Analysis (“MD&A”), Enterprise Risk and Return Management for further details.

Consider these cautionary statements carefully together with other factors discussed elsewhere in this document, in filings with the Securities and Exchange Commission (“SEC”) or in materials incorporated therein by reference.


			Insurance and financial services

Unexpected increases in the frequency or severity of property and casualty claims may adversely affect our results of operations and financial condition

A significant increase in claim frequency could adversely affect our results of operations and financial condition. Changes in mix of business, miles driven, weather, distracted driving or other factors can lead to changes in auto claim frequency. We may experience volatility in claim frequency, and short-term trends may not be predictive of future losses over the longer term.

Increases in claim severity can arise from numerous causes that are inherently difficult to predict. The following factors may impact claim severity for auto bodily injury, property damage and homeowners coverages:

•Bodily injury — inflation in medical costs, litigation trends and precedents and regulation

•Vehicle property damage — inflation in repair costs, including parts and labor rates, mix of total losses declared, costs associated with repairing sophisticated newer vehicles, model year and used-car values

•Homeowners — inflation in the construction industry, building materials and home furnishings, changes in the mix of loss type, and other economic and environmental factors, including

short-term supply imbalances for services and supplies in areas affected by catastrophes

Catastrophes and severe weather events may subject us to significant losses

Catastrophic events could adversely affect operating results and cause them to vary significantly from one period to the next. Also, our liquidity could be constrained by a catastrophe, or multiple catastrophes, which could result in extraordinary losses, sales of investments or a downgrade of our debt or financial strength ratings.

Catastrophic losses are caused by wind and hail, wildfires, tornadoes, hurricanes, tropical storms, earthquakes, volcanic eruptions, terrorism and industrial accidents and other such events.

Our personal property insurance business may incur catastrophe losses greater than:

•Those experienced in prior years

•The average expected level used in pricing

•Current reinsurance coverage limits

•Loss estimates from hurricane and earthquake models at various levels of probability

Property and casualty businesses are subject to claims arising from severe weather events such as winter storms, rain, hail and high winds. The incidence and severity of weather conditions resulting in claims are unpredictable.

The total number of policyholders affected by the event, the severity of the event and the coverage

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Part I - Item 1A. Risk Factors and Other Disclosures 2020 Form 10-K

provided contribute to catastrophe and severe weather losses. Increases in the insured values of covered property, geographic concentration and the number of policyholders exposed to certain events could increase the severity of claims from catastrophic and severe weather events.

Limitations in analytical models used to assess and predict the exposure to catastrophe losses may adversely affect our results of operations and financial condition

We use internally developed and third-party vendor models along with our own historical data to assess exposure to catastrophe losses. The models assume various conditions and probability scenarios and may not accurately predict future losses or measure losses currently incurred.

Price competition and changes in underwriting standards in property and casualty businesses may adversely affect our results of operations and financial condition

The personal property-liability market is highly competitive with carriers competing through underwriting, advertising, price, customer service, innovation and distribution. Companies can alter underwriting standards, lower prices and increase advertising, which could result in lower growth or profitability for Allstate. A decline in the growth or profitability of the property and casualty businesses could have a material effect on our results of operations and financial condition.

Property and casualty actual claims costs may exceed current reserves established for claims due to changes in the inflationary, regulatory and litigation environment

•Estimating claim reserves is an inherently uncertain and complex process as losses are unknown at the time policies are sold. We continually refine our best estimates of losses after considering known facts and interpretations of the circumstances.

•Our reserving methodology may be impacted by the following:

•Models that rely on the assumption that past loss development patterns will persist into the future

•Internal factors including experience with similar cases, actual claims paid, historical trends involving claim payment patterns, pending levels of unpaid claims, loss management programs, product mix, contractual terms and changes in claim reporting and settlement practices

•External factors such as inflation, court decisions, changes in law or litigation imposing unintended coverage, regulatory requirements, changes in driving patterns and economic conditions

•The ultimate cost of losses may vary materially from recorded reserves and such variance may adversely affect our results of operations and financial condition as the reserves and amounts due from reinsurers are reestimated.

See MD&A, Application of Critical Accounting Estimates for further details.

Our investment portfolios are subject to market risk and declines in quality which may adversely affect or create volatility in our investment income and cause realized and unrealized losses

We continually evaluate investment management strategies since we are subject to risk of loss due to adverse changes in interest rates, credit spreads, equity prices, real estate values, currency exchange rates and liquidity. Adverse changes may occur due to changes in monetary and fiscal policy and the economic climate, liquidity of a market or market segment, investor return expectations or risk tolerance, insolvency or financial distress of key market makers or participants, or changes in market perceptions of credit worthiness. Adverse changes in market conditions could cause the value of our investments to decrease significantly and impact our results of operations and financial condition.

Our investments are subject to risks associated with economic and capital market conditions and factors that may be unique to our portfolio, including:

•General weakening of the economy, which is typically reflected through higher credit spreads and lower equity and real estate valuations

•Declines in credit quality

•Declines in market interest rates, credit spreads or sustained low interest rates could lead to further declines in portfolio yields and investment income

•Increases in market interest rates, credit spreads or a decrease in liquidity could have an adverse effect on the value of our fixed income securities that form a substantial majority of our investment portfolios

•Weak performance of general and joint venture partners and underlying investments unrelated to general market or economic conditions could lead to declines in investment income and cause realized losses in our limited partnership interests

•Concentration in any particular issuer, industry, collateral type, group of related industries, geographic sector or risk type

The amount and timing of net investment income, capital contributions and distributions from our performance-based investments, which primarily include limited partnership interests, can fluctuate significantly due to the underlying investments’ performance or changes in market or economic conditions. Additionally, these investments are less liquid than similar, publicly-traded investments and a decline in market liquidity could impact our ability to sell them at their current carrying values.

Declining equity markets or increases in interest rates or credit spreads could cause the value of the investments in our pension plans to decrease. Declines in interest rates could cause the funding ratio to decline and the value of the obligations for our pension and postretirement plans to increase. These factors could decrease the funded status of our pension and postretirement plans, increasing the likelihood or magnitude of future benefit expense and contributions.

The Allstate Corporation 23

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

Determination of the fair value and amount of credit losses for investments includes subjective judgments and could materially impact our results of operations and financial condition

The valuation of the portfolio is subjective, and the value of assets may differ from the actual amount received upon the sale of an asset. The degree of judgment required in determining fair values increases when:

•Market observable information is less readily available

•The use of different valuation assumptions may have a material effect on the assets’ fair values

•Changing market conditions could materially affect the fair value of investments

The determination of the amount of credit losses varies by investment type and is based on ongoing evaluation and assessment of known and inherent risks associated with the respective asset class or investment.

Such evaluations and assessments are highly judgmental and are revised as conditions change and new information becomes available.

We update our evaluations regularly and reflect changes in credit losses in our results of operations. Our conclusions may ultimately prove to be incorrect as assumptions, facts and circumstances change. Historical loss trends, consideration of current conditions, and forecasts may not be indicative of future changes in credit losses and additional amounts may need to be recorded in the future.

Changes in market interest rates or performance-based investment returns may lead to a significant decrease in the profitability of our annuity business

Spread-based products, such as fixed annuities, are dependent upon maintaining profitable spreads between investment returns and interest crediting rates. When market interest rates decrease or remain at low levels, investment income may decline. Lowering interest crediting rates on some products in such an environment can partially offset decreases in investment yield. However, these changes could be limited by regulatory minimum rates or contractual minimum rate guarantees on many contracts and may not match the timing or magnitude of changes in investment yields.

Increases in market interest rates can lead to increased surrenders at a time when fixed income investment asset values are lower due to the increase in interest rates. Liquidating investments to fund surrenders could result in a loss that would adversely impact results of operations.

Performance-based net investment income, capital contributions and distributions can fluctuate significantly due to the underlying investments’ performance or changes in market or economic conditions.

Changes in reserve estimates and amortization of deferred acquisition costs (“DAC”) could materially affect results of operations and financial condition of our life, voluntary benefits and annuity businesses

We use long-term assumptions, including future investment yields, mortality, morbidity, persistency and expenses in pricing and valuation. If experience differs significantly from assumptions, adjustments to reserves and amortization of DAC may be required that could have a material adverse effect on our results of operations and financial condition.

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

Our participation in indemnification programs subjects us to the risk that reimbursement for qualifying claims and claims expenses may not be received

Participation in state-based industry pools, facilities and associations as well as the National Flood Insurance Program may have a material, adverse effect on our results of operations and financial condition. Our largest exposure is associated with the Michigan Catastrophic Claim Association (“MCCA”), a state-mandated indemnification mechanism for qualified personal injury protection losses that exceed a specified level. To the extent the MCCA’s current and future assessments are insufficient to reimburse its ultimate obligation on existing claims to member companies, our ability to obtain the 100% indemnification of ultimate loss could be impaired.

For further discussion of these items, see Regulation section, Indemnification Programs and Note 10 of the consolidated financial statements.

We may not be able to mitigate the capital impact associated with statutory reserving and capital requirements

Regulatory capital and reserving requirements affect the amount of capital required to be maintained by our subsidiary insurance companies. Changes to capital or reserving requirements or regulatory interpretations may result in additional capital held in our insurance companies and could require us to increase prices, reduce our sales of certain products, or accept a return on equity below original levels assumed in pricing.

A downgrade in financial strength ratings may have an adverse effect on our business

Financial strength ratings are important factors in establishing the competitive position of insurance companies and their access to capital markets. Rating agencies could downgrade or change the outlook on our ratings due to:

•Changes in the financial profile of one of our insurance companies

•Changes in a rating agency’s determination of the amount of capital required to maintain a particular rating

•Increases in the perceived risk of our investment portfolio, a reduced confidence in management or

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Part I - Item 1A. Risk Factors and Other Disclosures 2020 Form 10-K

our business strategy, or other considerations that may or may not be under our control

A downgrade in our ratings could have a material effect on our sales, competitiveness, customer retention, the marketability of our product offerings, liquidity, access to and cost of borrowing, results of operations and financial condition.

Changes in tax laws may adversely affect the sales and profitability of life insurance products

Changes in taxation of life insurance products could reduce sales and result in the surrender of some existing contracts and policies, which may have a material effect on our profitability and financial condition.


			Business, strategy and operations

We operate in markets that are highly competitive and may be impacted by new or changing technologies

Markets in which we operate are highly competitive, and we must continually allocate resources to refine and improve products and services to remain competitive. If we are unsuccessful in generating new business, retaining customers or renewing contracts, our ability to maintain or increase premiums written or the ability to sell our products could be adversely impacted.

Determining competitive position is complicated in the auto and homeowners insurance business as companies use different underwriting standards to accept new customers and quotes and close rates can fluctuate across companies and locations. Pricing of products is driven by multiple factors, including loss expectations, expense structure and dissimilar return targets. Additionally, sophisticated pricing algorithms make it difficult to determine what price potential customers would pay across competitors.

There is also significant competition for producers, such as exclusive and independent agents and their licensed sales professionals. Growth and retention may be materially affected if we are unable to attract and retain effective producers or if those producers are unable to attract and retain their licensed sales professionals or customers. Similarly, growth and retention may be impacted if customer preferences change and we are unable to effectively adapt our business model and processes.

Our business could also be affected by technological changes, such as autonomous or partially autonomous vehicles or technologies that facilitate ride, car or home sharing. Such changes could disrupt the demand for products from current customers, create coverage issues, impact the frequency or severity of losses, or reduce the size of the automobile insurance market causing our auto insurance business to decline. Since auto insurance constitutes a significant portion of our overall business, we may be more sensitive than other insurers and more adversely affected by trends that could decrease auto insurance rates or reduce demand for auto insurance over time.

Technological advancements and innovation are occurring in distribution, underwriting, claims and operations at a rapid pace that may continue to accelerate. Nontraditional competitors could enter the insurance market and further accelerate these trends. Innovations must be implemented in compliance with applicable insurance regulations and may require extensive modifications to our systems and processes and extensive coordination with and reliance on the systems of third parties. If we are unable to adapt to or bring such advancements and innovations to market, the quality of our products, our relationships with customers and agents, competitive position and business prospects may be materially affected. Changes in technology related to collection and analysis of data regarding customers could expose us to regulatory or legal actions and may have a material adverse effect on our business, reputation, results of operations and financial condition.

Technology and customer preference changes may impact the ways in which we interact, do business with our customers and design our products. We may not be able to respond effectively to these changes, which could have a material effect on our results of operations and financial condition.

Our ability to adequately and effectively price our products and services is affected by the evolving nature of consumer needs and preferences, market and regulatory dynamics, broader use of telematics-based rate segmentation and potential reduction in consumer demand.

Many voluntary benefits contracts are renewed annually. There is a risk that employers may be able to obtain more favorable terms from competitors than they could by renewing coverage with us. These competitive pressures may adversely affect the renewal of these contracts, as well as our ability to sell products.

Transformative Growth may not be effectively implemented

Transformative Growth is intended to accelerate growth by expanding customer access, improving customer value and investing in marketing and technology. The strategy encompasses all aspects of Allstate’s customer experience and business model, spanning product distribution and sales, operations and servicing, and claims processing. If the strategy is not implemented effectively, customer retention and policy growth objectives could be adversely impacted. Lost business opportunities may result due to slower than anticipated speed to market. External forces including competitor actions or regulatory changes may also have an adverse effect on the value generated from the transformation.

Our catastrophe management strategy may adversely affect premium growth

Catastrophe risk management actions have negatively impacted the size of our homeowners business and customer retention, including customers with auto and other personal lines products and may negatively impact future sales if further actions are

The Allstate Corporation 25

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

taken. Adjustments to our business structure, size and underwriting practices in markets with significant severe weather and catastrophe risk exposure could adversely impact premium growth rates and retention.

The ability of our subsidiaries to pay dividends may affect our liquidity and ability to meet our obligations

The Allstate Corporation is a holding company with no significant operations. Its principal assets are the stock of its subsidiaries and its directly held cash and investment portfolios. Its liabilities include debt and pension and other postretirement benefit obligations related to Allstate Insurance Company employees. State insurance regulatory authorities limit the payment of dividends by insurance subsidiaries, as described in Note 16 of the consolidated financial statements. The limitations are based on statutory income and surplus. In addition, competitive pressures generally require the subsidiaries to maintain insurance financial strength ratings. These restrictions and other regulatory requirements may affect the ability of subsidiaries to make dividend payments. Limits on the ability of the subsidiaries to pay dividends could adversely affect holding company liquidity, including the ability to pay dividends to shareholders, service debt or complete share repurchase programs as planned.

Changes in regulatory capital requirements could decrease deployable capital and potentially reduce future dividends paid by our insurance companies.

For a discussion of capital requirements, including a potential change to a group capital calculation, see Regulation section, Limitations on Dividends by Insurance Subsidiaries.

Our ability to pay dividends or repurchase stock is subject to limitations under terms of certain of our securities

The terms of the outstanding subordinated debentures 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.

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. The prohibition is subject to an exception permitting us to declare dividends out of the net proceeds of common stock issued by us during the 90 days before the date of declaration even if we fail to meet such levels.

If the full preferred stock dividends for all preceding dividend periods have not been declared and paid, we generally may not repurchase or pay dividends on common stock during any dividend period while our preferred stock is outstanding.

See Note 12 of the consolidated financial statements.

Reinsurance may be unavailable at current levels and prices, which may limit our ability to write new business

Market conditions beyond our control impact the availability and cost of the reinsurance we purchase. Reinsurance may not remain continuously available to us to the same extent and on the same terms and rates as is currently available. Our ability to economically justify reinsurance to reduce our catastrophe risk in designated areas may depend on our ability to adjust premium rates to fully or partially recover cost. If we cannot maintain our current level of reinsurance or purchase new reinsurance protection in amounts we consider sufficient at acceptable prices, we would have to either accept an increase in our catastrophe exposure, reduce our insurance exposure or seek other alternatives.

Reinsurance subjects us to counterparty risk and may not be adequate to protect us against losses arising from ceded insurance

Collecting from reinsurers is subject to uncertainty arising from factors that include:

•Whether reinsurers, their affiliates or certain indemnitors have the financial capacity and willingness to make payments under the terms of a reinsurance treaty or contract

•Whether insured losses meet the qualifying conditions of the reinsurance contract

Our inability to recover from a reinsurer could have a material effect on our results of operations and financial condition.

Disruption, volatility or uncertainty in the insurance linked securities market may decrease our ability to access such market on favorable terms or at all.

Acquisitions or divestitures of businesses may not produce anticipated benefits, resulting in operating difficulties, unforeseen liabilities or asset impairments

The ability to achieve certain anticipated financial benefits from the acquisition of National General or other businesses depends in part on our ability to successfully grow and integrate the businesses consistent with our anticipated acquisition economics. Financial results could be adversely affected by unanticipated performance issues, unforeseen liabilities, transaction-related charges, diversion of management time and resources to acquisition integration challenges or growth strategies, loss of key employees, challenges in integrating information technology systems of acquired companies with our own, amortization of expenses related to intangibles, charges for impairment of long-term assets or goodwill and indemnifications.

Acquired businesses may not perform as projected, cost savings anticipated from the acquisition may not materialize, and costs associated with the integration may be greater than anticipated. As a result, if we do not manage these transitions effectively, the quality of our products as well as our relationships with customers and partners may result in the company not achieving returns on its investment at the level projected at acquisition.

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Part I - Item 1A. Risk Factors and Other Disclosures 2020 Form 10-K

We also may divest businesses from time to time, including the pending sale of ALIC and certain affiliates. These transactions may result in continued financial involvement in the divested businesses, such as through reinsurance, guarantees or other financial arrangements, following the transaction. If the acquiring companies do not perform under the arrangements, our financial results could be negatively impacted.

We may be subject to the risks and costs associated with intellectual property infringement, misappropriation and third-party claims

We rely on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish and protect our intellectual property. Third parties may infringe or misappropriate our intellectual property. We may have to litigate to enforce and protect intellectual property and to determine its scope, validity or enforceability, which could divert significant resources and prove unsuccessful. An inability to protect intellectual property or an inability to successfully defend against a claim of intellectual property infringement could have a material effect on our business.

We may be subject to claims by third parties for patent, trademark or copyright infringement or breach of usage rights. Any such claims and any resulting litigation could result in significant expense and liability. If third-party providers or we are found to have infringed a third-party intellectual property right, either of us could be enjoined from providing certain products or services or from utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licenses. Alternatively, we could be required to enter into costly licensing arrangements with third parties or implement costly work-arounds. Any of these scenarios could have a material effect on our business and results of operations.


			Macro, regulatory and risk environment

Conditions in the global economy and capital markets could adversely affect our business and results of operations

Global economic and capital market conditions could adversely impact demand for our products, returns on our investment portfolio and results of operations. The conditions that would have the largest impact on our business include:

•Low or negative economic growth

•Sustained low interest rates

•Rising inflation increasing claims and claims expense

•Substantial increases in delinquencies or defaults on debt

•Significant downturns in the market value or liquidity of our investment portfolio

•Reduced consumer spending and business investment

Stressed conditions, volatility and disruptions in global capital markets or financial asset classes could adversely affect our investment portfolio.

Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs or obtain credit on acceptable terms

In periods of extreme volatility and disruption in the capital and credit markets, liquidity and credit capacity may be severely restricted. Our access to additional financing depends on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to our industry, our credit ratings and credit capacity, as well as lenders’ perception of our long- or short-term financial prospects. In such circumstances, our ability to obtain capital to fund operating expenses, financing costs, capital expenditures or acquisitions may be limited, and the cost of any such capital may be significant.

A large-scale pandemic, the occurrence of terrorism, military actions, social unrest or other actions may have an adverse effect on our business

A large-scale pandemic, such as the Coronavirus and its impacts, the occurrence of terrorism, military actions, social unrest or other actions, may result in loss of life, property damage, and disruptions to commerce and reduced economic activity. Some of the assets in our investment portfolio may be adversely affected by declines in the equity markets, changes in interest rates, reduced liquidity and economic activity caused by a large-scale pandemic. Additionally, a large-scale pandemic or terrorist act could have a material effect on sales, liquidity and operating results.

The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which have included the implementation of travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings, have caused material disruption to businesses globally, resulting in increased unemployment, a recession and increased economic uncertainty. Additionally, there is no way of predicting with certainty how long the pandemic might last, including the potential for restrictions being restored or new restrictions being implemented that could result in further economic volatility.

The Coronavirus has affected our operations and depending on its length and severity may continue to significantly affect our results of operations, financial condition and liquidity, including:

•Sales of new and retention of existing policies

•Shared economy demand

•Claim severity costs, driving behavior and auto accident frequency

•Life insurance mortality, hospital and outpatient claim costs and annuity reserves

•Investment valuations and returns

•Bad debt and credit allowance exposure

The Allstate Corporation 27

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

See MD&A, Highlights for a summary of the impacts of the Coronavirus on our operations, each of our segments and investments that may continue, emerge, evolve or accelerate into 2021.

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, could result in a loss or disclosure of confidential information, damage to our reputation, additional costs and impair our ability to conduct business effectively

We depend heavily on computer systems, mathematical algorithms and data to perform necessary business functions. There are threats that could impact our ability to protect our data and systems; if the threats are successful, they could impact confidentiality, integrity and availability:

•Confidentiality — protecting our data from disclosure to unauthorized parties

•Integrity — ensuring data is not changed accidentally or without authorization and is accurate

•Availability — ensuring our data and systems are accessible to meet our business needs

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

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

These risks may increase in the future as threats become more sophisticated and we continue to expand internet and mobile strategies, develop additional remote connectivity solutions to serve our employees and customers, develop and expand products and services designed to protect customers’ digital footprint, and build and maintain an integrated digital enterprise.

Our increased use of third-party services (e.g., cloud technology and software as a service) can make it more difficult to identify and respond to cyberattacks in any of the above situations. Although we may review and assess third-party vendor cyber security controls, our efforts may not be successful in preventing or mitigating the effects of such events. Third parties to whom we outsource certain functions are also subject to cybersecurity risks.

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

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

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

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

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

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

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

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

Many of our affiliates operate in the highly regulated insurance and broader financial services sector and are subject to extensive laws and regulations that are complex and subject to change.

28 www.allstate.com

Part I - Item 1A. Risk Factors and Other Disclosures 2020 Form 10-K

Changes may lead to additional expenses, increased legal exposure, or increased reserve or capital requirements limiting our ability to grow or to achieve targeted profitability. Moreover, laws and regulations are administered and enforced by governmental authorities that exercise interpretive latitude, including:

•State insurance regulators

•State securities administrators

•State attorneys general

•Federal agencies including the SEC, the Financial Industry Regulatory Authority, the Department of Labor, the U.S. Department of Justice and the National Labor Relations Board

Consequently, compliance with one regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another’s interpretation of the same issue.

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

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

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

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

insurance department. Certain states require an insurer to participate in guaranty funds for impaired or insolvent insurance companies. These funds periodically assess losses against all insurance companies doing business in the state. Our results of operations and financial condition could be adversely affected by any of these factors.

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

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

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

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

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

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

See Note 14 of the consolidated financial statements.

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

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

The Allstate Corporation 29

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

operations and financial condition and could adversely impact financial strength ratings.

•Market declines, changes in business strategies or other events impacting the fair value of goodwill or purchased intangible assets could result in an impairment charge to income

•Pending changes to accounting for long-duration insurance contracts such as traditional life, life-contingent immediate annuities and certain voluntary accident and health insurance products will have a material effect on reserves and shareholders’ equity and could adversely impact financial strength ratings

•Realization of our deferred tax assets assumes that we can fully utilize the deductions recognized for tax purposes; we may recognize additional tax expense if these assets are not fully utilized

•New tax legislative initiatives may be enacted that may impact our effective tax rate and could adversely affect our tax positions or tax liabilities

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

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

We rely on services and products provided by many vendors in the U.S. and abroad. These include vendors of computer hardware, software, cloud technology and software as a service, as well as vendors or outsourcing of services such as:

•Claim adjustment or call center services

•Human resource benefits management

•Information technology support

•Investment management services

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

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

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

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

•Compensation and benefits

•Training and re-skilling programs

•Reputation as a successful business with a culture

of fair hiring, and of training and promoting qualified employees

•Recognition of and response to changing trends and other circumstances that affect employees

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

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

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

•Fraud against the company, its employees and its customers through illegal or prohibited activities

•Unauthorized acts or representations, unauthorized use or disclosure of personal or proprietary information, deception, and misappropriation of funds or other benefits

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our home office complex is owned and located in Northbrook, Illinois. As of December 31, 2020, the home office complex consists of several buildings totaling 1.9 million square feet of office space on a 186-acre site.

We also operate from approximately 415 administrative, data processing, claims handling and other support facilities in North America. In addition to our home office facilities, 825 thousand square feet are owned and 5.8 million square feet are leased.

Outside North America, we own one and lease three properties in Northern Ireland comprising approximately 223 thousand square feet. We also have three leased facilities in India for approximately 600 thousand square feet and two leased facilities in London for 7,182 square feet.

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

Item 3. Legal Proceedings

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

Item 4. Mine Safety Disclosures

Not applicable.

30 www.allstate.com

2020 Form 10-K

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

As of January 29, 2021, there were 64,567 holders of record of The Allstate Corporation’s common stock. The principal market for the common stock is the New York Stock Exchange, where our common stock trades under the trading symbol “ALL”. Our common stock is also listed on the Chicago Stock Exchange.

Common stock performance graph

The following performance graph compares the cumulative total shareholder return on Allstate common stock for a five-year period (December 31, 2015 to December 31, 2020) with the cumulative total return of the S&P Property and Casualty Insurance Index (S&P P/C) and the S&P’s 500 stock index.


Value at each year-end of $100 initial investment made on December 31, 2015
	12/31/2015		12/31/2016		12/31/2017		12/31/2018		12/31/2019		12/31/2020
Allstate	$	100.00	$	121.71	$	174.80	$	140.67	$	195.28	$	195.05
S&P P/C	$	100.00	$	115.71	$	141.61	$	134.96	$	169.88	$	180.63
S&P 500	$	100.00	$	111.95	$	136.38	$	130.39	$	171.44	$	202.96

The Allstate Corporation 31

2020 Form 10-K

Issuer Purchases of Equity Securities


Period	Total number of shares (or units) purchased (1)	Average price paid per share (or unit)		Total number of shares (or units) purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (3)
October 1, 2020 - October 31, 2020
Open Market Purchases	288	$	93.02	—
November 1, 2020 - November 30, 2020
Open Market Purchases	703	$	90.90	—

December 1, 2020 - December 31, 2020
Open Market Purchases	162	$	104.36	—
Total (2)	1,153	$	93.32	—	$	1.56	billion

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

October: 288

November: 703

December: 162

(2)On September 18, 2020, Allstate entered into an accelerated share repurchase agreement (“ASR agreement”) with Goldman Sachs & Co. LLC (“Goldman Sachs”), to purchase $750 million of our outstanding shares of common stock. In exchange for an upfront payment of $750 million, Goldman Sachs initially delivered 7.0 million shares to Allstate. The ASR agreement settled on January 12, 2021, and we repurchased a total of 7.8 million shares at an average price of $96.21.

(3)In February 2020, we announced the approval of a common share repurchase program for $3 billion that is expected to be completed by the end of 2021.

Item 6.

None.

32 www.allstate.com

2020 Form 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations


		Page

2020 Highlights		34

Property-Liability Operations		40

Allstate Protection		43
	– Allstate brand	51

	– Encompass brand	56
Discontinued Lines and Coverages		59

Protection Services (previously Service Businesses)		62
Claims and Claims Expense Reserves		64
Allstate Life		71
Allstate Benefits		76
Allstate Annuities		79

Investments		83

Market Risk		94


Capital Resources and Liquidity		98
Enterprise Risk and Return Management		104
Application of Critical Accounting Estimates		107
Regulation and Legal Proceedings		121
Pending Accounting Standards		121

The Allstate Corporation 33

2020 Form 10-K

2020 Highlights

Overview

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as “we,” “our,” “us,” the “Company” or “Allstate”). It should be read in conjunction with the consolidated financial statements and related notes found under Item 8. contained herein.

A discussion of strategy, including updates to the multi-year Transformative Growth initiative, can be found in Part 1, Item 1. Business.

This section of this Form 10-K generally discusses 2020 and 2019 results and year-to-year comparisons between 2020 and 2019. Discussions of 2018 results and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis (“MD&A”) in Part II, Item 7 of our annual report on Form 10-K for 2019, filed February 21, 2020.

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

•Allstate Protection: premium, policies in force (“PIF”), new business sales, policy retention, price changes, claim frequency and severity, catastrophes, loss ratio, expenses, underwriting results, and relative competitive position.

•Protection Services: revenues, premium written, PIF, adjusted net income and net income.

•Allstate Life: premiums and contract charges, new business sales, PIF, benefit spread, investment spread, expenses, adjusted net income and net income.

•Allstate Benefits: premiums, new business sales, PIF, benefit ratio, expenses, adjusted net income and net income.

•Allstate Annuities: investment spread, asset-liability matching, contract benefits, expenses, adjusted net income, net income and invested assets.

•Investments: exposure to market risk, asset allocation, credit quality/experience, total return, net investment income, cash flows, realized capital gains and losses, unrealized capital gains and losses, long-term returns, and asset and liability duration.

•Financial condition: liquidity, parent holding company deployable assets, financial strength ratings, operating leverage, debt levels, book value per share and return on equity.

Measuring segment profit or loss

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

Underwriting income is calculated as premiums earned and other revenue, less claims and claims expense (“losses”), Shelter-in-Place Payback expense, amortization of deferred policy acquisition costs (“DAC”), operating costs and expenses, restructuring and related charges and amortization or impairment of purchased intangibles, as determined using accounting principles generally accepted in the United States of America (“GAAP”). We use this measure in our evaluation of results of operations to analyze the profitability of the Property-Liability insurance operations separately from investment results. Underwriting income is reconciled to net income applicable to common shareholders in the Property-Liability Operations section of MD&A.

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


• Realized capital gains and losses, after-tax, 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, after-tax
• Valuation changes on embedded derivatives that are not hedged, after-tax
• Amortization of DAC and deferred sales inducement costs (“DSI”), to the extent they resulted from the recognition of certain realized capital gains and losses or valuation changes on embedded derivatives that are not hedged, after-tax
• Business combination expenses and the amortization or impairment of purchased intangible assets, after-tax
• Gain (loss) on disposition of operations, after-tax
• 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

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

34 www.allstate.com

2020 Form 10-K

Subsequent event

On January 26, 2021, Allstate announced an agreement to sell Allstate Life Insurance Company (“ALIC”) and certain affiliates for $2.8 billion to Antelope US Holdings Company, an affiliate of an investment fund associated with The Blackstone Group Inc. Allstate will retain ownership of Allstate Life Insurance Company of New York (“ALNY”) while pursuing alternatives to sell or otherwise transfer risk to a third party. ALIC and certain affiliates represent approximately 80% of Allstate Life and Allstate Annuity reserves for life-contingent contract benefits and contractholder funds as of December 31, 2020 and generated net income of approximately $290 million and $470 million in 2020 and 2019, respectively. A loss on disposition estimated at $3 billion, after-tax, will be recorded in the first quarter of 2021. The ultimate amount of the loss on sale will be impacted by purchase price adjustments associated with certain pre-close transactions specified in the stock purchase agreement, changes in statutory capital and surplus prior to the closing date and the closing date equity of ALIC determined under GAAP, excluding unrealized gains and losses. The transaction is expected to close in the second half of 2021, subject to regulatory approvals and other customary closing conditions. Additional information about this transaction can be found in Allstate Life and Allstate Annuities sections of Part 1, Item 1. Business, MD&A and Note 3 of the consolidated financial statements of this report.

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

We have been proactive in protecting the health and safety of our employees and agents, while delivering on our commitment to protect our customers. We executed business continuity plans, maximized work from home, including the use of virtual tools to allow for safe claims handling, provided financial relief to employees experiencing financial hardship, developed exposure escalation protocols and a return to office framework.

A pandemic such as the Coronavirus and its impacts are disclosed in Part 1 “Item 1A. Risk Factors’’, including the risk factors titled “A large-scale pandemic, the occurrence of terrorism, military actions, social unrest or other actions may have an adverse effect on our business” and “Conditions in the global economy and capital markets could adversely affect our business and results of operations”.

The magnitude and duration of the global pandemic and the impact of actions taken by governmental authorities, businesses and consumers, including timing of vaccine distribution, to mitigate health risks create significant uncertainty. We will continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the length and severity of the pandemic or its impact to our operations, but the effects could be material.

We have continued to support our customers during the Coronavirus pandemic as we:

•Provided our Shelter-in-Place Payback of over $948 million to customers in 2020, as the significant decline in the number of auto accidents contributed favorably to our underwriting results

•Offered the Allstate Special Payment plan to provide more flexible payment options, including the option to delay payments

•Extended auto insurance coverage to customers using their personal vehicles to deliver food, medicine and other goods for commercial purposes; coverage for these activities is typically excluded

•Continued to provide prompt payments for life insurance and health claims related to Coronavirus

•Offered free Allstate Identity Protection to U.S. residents through December 31, 2020, regardless of whether they were already Allstate customers

•Increased the utilization of virtual tools such as QuickFoto Claim® and Virtual Assist® to allow for a simple, fast and safe claims handling process for customers and our employees

The following sections summarize the potential impacts of the Coronavirus on our operations, each of our segments and investments that may continue, emerge, evolve or accelerate in 2021. 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 2020 results.

The Allstate Corporation 35

2020 Form 10-K

Allstate’s operations

•Employee availability and productivity

•Increased regulatory restrictions on profitability, rate actions or claim practices, potentially outside the scope of current policies

•Availability and performance of third party vendors, including technology development, car or home repair and marketing programs

•Cybersecurity risks related to remote workforce

Allstate Protection

•Slower written premiums growth and declines in auto new issued applications due to lower car sales

•Impact to future rate filings and pricing

•Lower auto accident frequency from reduced miles driven, including usage in shared economy products

•Expanding the availability of our pay-per-mile insurance product, Milewise®

•Increased auto claim severity due to more severe accidents or replacement parts cost variability

•Increased exposure to allowances for uncollectible receivables

•Validity of statistical models given changes in underlying statistics such as auto frequency or investment projections

•Agent availability and productivity

Protection Services

•Increased consumer spending and retail sales in Allstate Protection Plans resulting from shelter-in-place orders

•Reduced demand for Allstate Dealer Services products due to lower new and used car sales

•Decline in claims in Allstate Dealer Services and Allstate Roadside due to lower miles driven

•Decreased sales of Allstate Identity Protection products due to higher unemployment

•Increased costs from Allstate Identity Protection providing free identity protection to consumers through the end of 2020

Allstate Life

•Higher death benefit costs

•Decline in sales due to temporary underwriting restrictions placed on new business; agents are able to offer coverage to customers outside the new guidelines through non-proprietary carriers

•Statutory reserving requirements could be increased due to low interest rates, which could affect the amount of capital required to be maintained by our insurance companies

Allstate Benefits

•Decreased accident injury claims and deferral of non-essential medical procedures, reducing accident, hospital and critical illness product exposure, partially offset by increased claim cost exposure for our life products

•Decreased sales and increased policy lapses due to higher employee turnover, business closures and employee layoffs and furloughs

Allstate Annuities

•Lower performance-based investment income

•Higher reserves released on death of the insured for life-contingent immediate annuities, which lowers contract benefits

•Statutory reserving requirements could be increased due to low interest rates, which could affect the amount of capital required to be maintained by our insurance companies

Investments

•Impact on the market values, liquidity and valuations of fixed income securities, equity securities and performance-based investments as well as changes in the expected pace of funding performance-based and loan commitments

•Negative impact on fixed income securities in certain sectors such as energy, automotive, retail, travel, lodging and airlines

•State and local government budgets may be strained by the costs of responding to the Coronavirus and reduced tax revenues from lower economic activity which may have an adverse impact on valuations and returns of our municipal bond portfolio

•Volatility in future investment results due to capital market conditions, including the pace of economic recovery, effectiveness of the fiscal and monetary policy responses and uncertainty resulting from the ongoing pandemic

•Volatility in expected credit losses

36 www.allstate.com

2020 Form 10-K

Allstate Delivered on 2020 Operating Priorities (1)

Better Serve Customers

Allstate acted quickly and led the industry in taking care of customers during the pandemic by providing two Shelter-In-Place Paybacks, financial flexibility through Special Payment Plans and offering free identity protection in 2020

Enterprise Net Promoter Score, which measures how likely customers are to recommend us, increased to 59.0 in 2020 compared to 58.6 in 2019

Grow Customer Base

Consolidated policies in force reached 175.9 million, a 20.5% increase from prior year

Property-Liability policies in force were down slightly compared to the prior year as Allstate brand growth was more than offset by a decline in the Encompass brand. Protection Services policies in force grew to 136.3 million, a 28.6% increase to the prior year, driven by continued rapid expansion in Allstate Protection Plans

Achieve Target Returns on Capital

Strong results in Property-Liability insurance with a combined ratio of 87.6

21.0% return on average common shareholders’ equity in 2020

Proactively Manage Investments

Total return on the $94.24 billion investment portfolio was 7.1% in 2020

Net investment income of $2.85 billion in 2020 was 9.7% below prior year reflecting lower reinvestment rates and reduced performance-based income

Build Long-Term Growth Platforms

Allstate made substantial progress in building higher growth business models to increase personal property-liability market share under the Allstate brand

Allstate Protection Plans expanded its total addressable market through new accounts addressing furniture, appliances and international markets

(1)2021 operating priorities will remain consistent with the 2020 priorities.

Consolidated Net Income

($ in millions)


Consolidated net income applicable to common shareholders increased 16.7% or $783 million to $5.46 billion in 2020 compared to 2019, primarily due to higher Allstate Protection underwriting income and higher Protection Services adjusted net income, partially offset by Shelter-in-Place Payback expense, lower net realized capital gains and lower net investment income. For the twelve months ended December 31, 2020, return on common shareholders’ equity was 21.0% compared to 21.7% for the twelve months ended December 31, 2019.

Total Revenue

($ in millions)


Total revenue increased 0.3% to $44.79 billion in 2020 compared to 2019, driven by a 2.8% increase in property and casualty insurance premiums earned, partially offset by lower realized capital gains and lower net investment income. Insurance premiums increased in Allstate brand and Protection Services (Allstate Protection Plans and Allstate Dealer Services).

Net Investment Income

($ in millions)


Net investment income decreased 9.7% to $2.85 billion in 2020 compared to 2019, primarily due to a decline in market-based income driven by lower interest-bearing portfolio yields and lower performance-based results, primarily from limited partnerships.

The Allstate Corporation 37

2020 Form 10-K

Summarized financial results


	Years Ended December 31,
($ in millions)	2020		2019		2018
Revenues
Property and casualty insurance premiums	$	37,073	$	36,076	$	34,048
Life premiums and contract charges	2,444		2,501		2,465
Other revenue	1,065		1,054		939
Net investment income	2,853		3,159		3,240
Realized capital gains (losses)	1,356		1,885		(877)
Total revenues	44,791		44,675		39,815

Costs and expenses
Property and casualty insurance claims and claims expense	(22,001)		(23,976)		(22,778)
Shelter-in-Place Payback expense	(948)		—		—
Life contract benefits and interest credited to contractholder funds	(2,881)		(2,679)		(2,627)
Amortization of deferred policy acquisition costs	(5,630)		(5,533)		(5,222)
Operating, restructuring and interest expenses	(6,309)		(6,058)		(5,993)
Pension and other postretirement remeasurement gains (losses)	51		(114)		(468)
Amortization of purchased intangibles	(118)		(126)		(105)
Impairment of purchased intangibles	—		(106)		—
Total costs and expenses	(37,836)		(38,592)		(37,193)

Gain on disposition of operations	4		6		6
Income tax expense	(1,383)		(1,242)		(468)
Net income	5,576		4,847		2,160

Preferred stock dividends	(115)		(169)		(148)
Net income applicable to common shareholders	$	5,461	$	4,678	$	2,012

Segment Highlights

Allstate Protection underwriting income totaled $4.57 billion in 2020, a 56.8% increase from $2.91 billion in 2019, primarily due to lower auto non-catastrophe losses, increased premiums earned and favorable catastrophe reserve reestimates in personal lines homeowners driven by subrogation settlements, partially offset by Shelter-in-Place Payback expense and higher catastrophe losses.

Catastrophe losses were $2.81 billion in 2020 compared $2.56 billion in 2019.

Subrogation settlements Allstate recognized favorable prior year catastrophe reserve reestimates of approximately $450 million and $45 million, pre-tax, net of expenses and adjustments to reinsurance, in the third quarter of 2020 related to PG&E Corporation and Southern California Edison (together “subrogation settlements”), respectively. See Note 8 of the consolidated financial statements for additional details.

Premiums written increased 1.0% to $35.77 billion in 2020 compared to 2019.

Protection Services adjusted net income was $153 million in 2020 compared to $38 million in 2019. The improvement in 2020 was primarily due to growth of Allstate Protection Plans and improved profitability at Allstate Roadside, partially offset by investments at Allstate Identity Protection.

Total revenues increased 16.6% or $273 million to $1.92 billion in 2020 from $1.65 billion in 2019 due to Allstate Protection Plan’s growth through its U.S. retail and international channels, partially offset by declines in revenue at Allstate Roadside.

Allstate Life adjusted net income was $194 million in 2020 compared to $261 million in 2019. The decrease was primarily due to higher contract benefits due to mortality associated with the Coronavirus, partially offset by lower operating costs and expenses.

Premiums and contract charges totaled $1.34 billion in both 2020 and 2019.

Allstate Benefits adjusted net income was $96 million in 2020 compared to $115 million in 2019. The decrease was primarily due to lower premiums and higher operating costs and expenses driven by a $41 million, pre-tax, write-off of capitalized software costs associated with a billing system in the second quarter of 2020, partially offset by lower contract benefits.

Premiums and contract charges totaled $1.09 billion in 2020, a decrease of 4.5% from $1.15 billion in 2019.

Allstate Annuities adjusted net loss was $53 million in 2020 compared to adjusted net income of $10 million in 2019, primarily due to lower net investment income, partially offset by lower contract benefits.

Net investment income decreased 17.0% to $761 million in 2020 from $917 million in 2019. The decrease was primarily due to a decline in market-based income driven by lower interest-bearing portfolio yields as well as lower performance-based investment results and lower average investment balances.

38 www.allstate.com

2020 Form 10-K

Financial Highlights

Investments totaled $94.24 billion as of December 31, 2020, increasing from $88.36 billion as of December 31, 2019.

Shareholders’ equity As of December 31, 2020, shareholders’ equity was $30.22 billion. This total included $5.52 billion in deployable assets at the parent holding company level and approximately $4 billion were used to fund the purchase of National General, which closed on January 4, 2021. Deployable assets include $1.2 billion of proceeds from a debt issuance in November 2020 and comprise cash and investments that are generally saleable within one quarter.

Book value per diluted common share (ratio of common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $91.50 as of December 31, 2020, an increase of 25.1% from $73.12 as of December 31, 2019.

Return on average common shareholders’ equity For the twelve months ended December 31, 2020, return on common shareholders’ equity was 21.0%, a decrease of 0.7 points from 21.7% for the twelve months ended December 31, 2019, primarily due to an increase in average common shareholders’ equity, partially offset by higher net income applicable to common shareholders.

Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement gains of $51 million in 2020, primarily related to favorable asset performance compared to the expected return on plan assets, partially offset by a decrease in the discount rate and changes in actuarial assumptions. See Note 17 of the consolidated financial statements and Application of Critical Accounting Estimates section of the MD&A for further information.

Adopted accounting standard

Effective January 1, 2020, we adopted the measurement of credit losses on financial instruments accounting standard that primarily affected mortgage loans, bank loans and reinsurance recoverables. Subsequent to the adoption, we measure credit losses on financial instruments, including losses related to mortgage loans, bank loans and reinsurance recoverables, using the expected credit loss model. This model requires us to recognize an estimate of expected credit losses for affected financial assets in a valuation allowance that when deducted from the amortized cost basis of the related financial assets results in a net carrying value at the amount expected to be collected.

See Note 2 of the consolidated financial statements for additional details on the adopted accounting standard.

The Allstate Corporation 39

2020 Form 10-K Property-Liability

Property-Liability Operations

Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Discontinued Lines and Coverages. 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 Discontinued Lines and Coverages segments. Management reviews assets at the Property-Liability level for decision-making purposes.

The table below includes GAAP operating ratios we use to measure our profitability. We believe that they enhance an investor’s understanding of our profitability. They are calculated as follows:

•Loss ratio: the ratio of claims and claims expense 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. The difference between 100% and the combined ratio represents underwriting income as a percentage of premiums earned, or underwriting margin.

We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between fiscal periods.

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

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

•Effect of amortization of purchased intangibles on combined ratio: the ratio of amortization of purchased intangibles to premiums earned.

•Effect of impairment of purchased intangibles on combined ratio: the ratio of impairment of purchased intangibles to premiums earned.

•Effect of restructuring and related charges on combined ratio: the ratio of restructuring and related charges to premiums earned.

•Effect of Shelter-in-Place Payback expense on combined and expense ratios: the ratio of Shelter-in-Place Payback expense to premiums earned.

•Effect of Discontinued Lines and Coverages on combined ratio: the ratio of claims and claims expense and operating costs and expenses in the Discontinued Lines and Coverages segment to Property-Liability premiums earned. The sum of the effect of Discontinued Lines and Coverages on the combined ratio and the Allstate Protection combined ratio is equal to the Property-Liability combined ratio.

40 www.allstate.com

Property-Liability 2020 Form 10-K


Summarized financial data
($ in millions, except ratios)	2020		2019		2018
Premiums written	$	35,768	$	35,419	$	33,555

Revenues
Premiums earned	$	35,580	$	34,843	$	32,950
Other revenue	736		741		738
Net investment income	1,421		1,533		1,464
Realized capital gains (losses)	990		1,470		(639)
Total revenues	38,727		38,587		34,513

Costs and expenses
Claims and claims expense	(21,626)		(23,622)		(22,435)
Shelter-in-Place Payback expense (1)	(948)		—		—
Amortization of DAC	(4,642)		(4,649)		(4,475)
Operating costs and expenses (2)	(4,443)		(4,420)		(4,465)
Restructuring and related charges (3)	(235)		(38)		(60)
Impairment of purchased intangibles	—		(51)		—
Total costs and expenses	(31,894)		(32,780)		(31,435)


Income tax expense	(1,382)		(1,196)		(613)
Net income applicable to common shareholders	$	5,451	$	4,611	$	2,465

Underwriting income	$	4,422	$	2,804	$	2,253
Net investment income	1,421		1,533		1,464
Income tax expense on operations	(1,166)		(887)		(747)
Realized capital gains (losses), after-tax	774		1,161		(500)

Tax Legislation expense	—		—		(5)
Net income applicable to common shareholders	$	5,451	$	4,611	$	2,465

Catastrophe losses
Catastrophe losses, excluding reserve reestimates	$	3,314	$	2,509	$	2,830
Catastrophe reserve reestimates (4) (5)	(503)		48		25
Total catastrophe losses	$	2,811	$	2,557	$	2,855

Non-catastrophe reserve reestimates (4)	68		(176)		(278)
Prior year reserve reestimates (4) (5)	(435)		(128)		(253)

GAAP operating ratios
Loss ratio	60.8		67.8		68.1
Expense ratio (6)	26.8		24.2		25.1
Combined ratio	87.6		92.0		93.2
Effect of catastrophe losses on combined ratio	7.9		7.3		8.7
Effect of prior year reserve reestimates on combined ratio	(1.2)		(0.3)		(0.7)
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio	(1.4)		0.1		0.1
Effect of restructuring and related charges on combined ratio (3)	0.7		0.1		0.2
Effect of amortization of purchased intangibles on combined ratio	0.1		—		—
Effect of impairment of purchased intangibles	—		0.1		—
Effect of Shelter-in-Place Payback expense on combined and expense ratios	2.7		—		—
Effect of Discontinued Lines and Coverages on combined ratio	0.4		0.4		0.3

(1)Auto and commercial lines customers received a Shelter-in-Place Payback due to the significant declines in the number of auto accidents caused by mandated stay-at-home orders, other pandemic containment actions and reduced economic activity.

(2)As a result of the Coronavirus, we offered customers the Allstate Special Payment plan to provide more flexible payment options, including the option to delay payments, resulting in increased bad debt expense of $60 million in 2020. This increase added 0.2 points to the expense ratio in 2020.

(3)Restructuring and related charges in 2020 primarily related to Transformative Growth. See Note 13 of the consolidated financial statements for additional details.

(4)Favorable reserve reestimates are shown in parentheses.

(5)2020 includes approximately $495 million of favorable reserve reestimates related to the PG&E Corporation and Southern California Edison (together “subrogation settlements”), which primarily impacted homeowners. See Note 8 of the consolidated financial statements for additional details.

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

The Allstate Corporation 41

2020 Form 10-K Property-Liability

Net investment income decreased 7.3% or $112 million in 2020 compared to 2019, due to a decline in market-based income driven by lower interest-bearing portfolio yields as well as lower performance-based investment results, mainly from limited partnerships. The maturity profile of fixed income securities in our Property-Liability portfolio was a duration of 5.0 years as of December 31, 2020 compared to 5.2 years as of December 31, 2019.


Net investment income
	For the years ended December 31,
($ in millions)	2020		2019		2018
Fixed income securities	$	1,110	$	1,066	$	943
Equity securities	60		155		121
Mortgage loans	24		17		17
Limited partnership interests	238		296		378
Short-term investments	12		56		40
Other	101		107		123
Investment income, before expense	1,545		1,697		1,622
Investment expense
Investee level expenses (1)	(36)		(51)		(45)
Securities lending expenses	(4)		(27)		(18)
Operating costs and expenses	(84)		(86)		(95)
Total investment expense	(124)		(164)		(158)
Net investment income	$	1,421	$	1,533	$	1,464

(1) Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses.

Realized capital gains and losses Net realized capital gains in 2020 primarily related to gains on sales of fixed income securities. Net realized capital gains in 2019 primarily related to increased valuation of equity investments and gains on sales of fixed income securities.


Realized capital gains (losses)
	For the years ended December 31,
($ in millions)	2020		2019		2018
Sales (1)	$	890	$	498	$	(148)
Credit losses (2)	(31)		(26)		(5)
Valuation of equity investments - appreciation (decline):
Equity securities	123		840		(434)
Equity fund investments in fixed income securities	(20)		43		(13)
Limited partnerships (3)	(21)		141		(75)
Total valuation of equity investments	82		1,024		(522)
Valuation and settlements of derivative instruments	49		(26)		36
Realized capital gains (losses), pre-tax	990		1,470		(639)
Income tax (expense) benefit	(216)		(309)		139
Realized capital gains (losses), after-tax	$	774	$	1,161	$	(500)

(1)Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses.

(2)Due to the adoption of the measurement of credit losses on financial instruments accounting standard, realized capital losses previously reported as other-than-temporary impairment write-downs are now presented as credit losses.

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

42 www.allstate.com

Allstate Protection 2020 Form 10-K

Allstate Protection Segment

Private passenger auto, homeowners, and other personal lines insurance products are offered to consumers through both exclusive and independent agents and directly through contact centers and online. Our strategy is to provide open access and choice of interaction, while offering affordable, simple and connected solutions to meet customers’ evolving needs and protect them from life’s uncertainties. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.

As part of Transformative Growth, Esurance results were combined into the Allstate brand in the third quarter of 2020. Historical results have been updated to conform with this presentation.


Underwriting results
	For the years ended December 31,
($ in millions)	2020		2019		2018
Premiums written	$	35,768	$	35,419	$	33,555
Premiums earned	$	35,580	$	34,843	$	32,950
Other revenue	736		741		738
Claims and claims expense	(21,485)		(23,517)		(22,348)
Shelter-in-Place Payback expense	(948)		—		—
Amortization of DAC	(4,642)		(4,649)		(4,475)
Other costs and expenses	(4,440)		(4,417)		(4,462)
Restructuring and related charges	(235)		(38)		(60)
Impairment of purchased intangibles	—		(51)		—
Underwriting income	$	4,566	$	2,912	$	2,343
Catastrophe losses	$	2,811	$	2,557	$	2,855

Underwriting income (loss) by line of business
Auto	$	3,444	$	1,688	$	1,791
Homeowners	824		914		483
Other personal lines (1)	264		224		110
Commercial lines	(36)		14		(83)
Other business lines (2)	67		75		49
Answer Financial	3		(3)		(7)
Underwriting income	$	4,566	$	2,912	$	2,343

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

(2)Other business lines primarily represent Ivantage, a general agency for Allstate exclusive agents and reflects revenue and direct operating expenses of the business. Ivantage provides agents a solution for their customers when coverage through Allstate brand underwritten products is not available.

The Allstate Corporation 43

2020 Form 10-K Allstate Protection


Changes in underwriting results from prior year by component and by line of business (1)
	For the year ended December 31,
	Auto				Homeowners				Other personal lines				Commercial lines				Allstate Protection (2)
($ in millions)	2020		2019		2020		2019		2020		2019		2020		2019		2020		2019
Underwriting income (loss) - prior year	$	1,688	$	1,791	$	914	$	483	$	224	$	110	$	14	$	(83)	$	2,912	$	2,343
Changes in underwriting income (loss) from:
Increase (decrease) premiums earned	452		1,218		342		395		58		53		(115)		227		737		1,893
Increase (decrease) other revenue	(11)		1		(2)		—		5		(1)		(1)		—		(5)		3
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates	2,450		(1,002)		(78)		(183)		6		21		116		(219)		2,494		(1,383)
Catastrophe losses, excluding reserve reestimates	100		(33)		(823)		294		(70)		51		(12)		9		(805)		321
Catastrophe reserve reestimates	27		(22)		488		(1)		39		(1)		(3)		1		551		(23)
Non-catastrophe reserve reestimates	(243)		(110)		16		(50)		35		(14)		(16)		90		(208)		(84)

Losses subtotal	2,334		(1,167)		(397)		60		10		57		85		(119)		2,032		(1,169)
Shelter-in-Place Payback expense	(944)		—		—		—		—		—		(4)		—		(948)		—
(Increase) decrease expenses	(75)		(155)		(33)		(24)		(33)		5		(15)		(11)		(162)		(158)
Underwriting income (loss)	$	3,444	$	1,688	$	824	$	914	$	264	$	224	$	(36)	$	14	$	4,566	$	2,912

(1)The 2020 column presents changes relative to 2019. The 2019 column presents changes relative to 2018.

(2)Includes other business lines and Answer Financial.

Underwriting income increased 56.8% or $1.65 billion in 2020 compared to 2019, primarily due to lower auto non-catastrophe losses, increased premiums earned and favorable catastrophe reserve reestimates in personal lines homeowners driven by subrogation settlements, partially offset by Shelter-in-Place Payback expense and higher catastrophe losses.

44 www.allstate.com

Allstate Protection 2020 Form 10-K

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 Consolidated Statements of Financial Position.


Premiums written and earned by line of business
	For the years ended December 31,
($ in millions)	2020		2019		2018
Premiums written
Auto	$	24,611	$	24,462	$	23,367
Homeowners	8,400		8,165		7,698
Other personal lines	1,965		1,890		1,831
Subtotal – Personal lines	34,976		34,517		32,896
Commercial lines	792		902		659


Total premiums written	$	35,768	$	35,419	$	33,555
Reconciliation of premiums written to premiums earned:
Increase in unearned premiums	(205)		(614)		(544)
Other	17		38		(61)
Total premiums earned	$	35,580	$	34,843	$	32,950

Auto	$	24,640	$	24,188	$	22,970
Homeowners	8,254		7,912		7,517
Other personal lines	1,919		1,861		1,808
Subtotal – Personal lines	34,813		33,961		32,295
Commercial lines	767		882		655


Total premiums earned	$	35,580	$	34,843	$	32,950

Auto insurance premiums written increased 0.6% or $149 million in 2020 compared to 2019.

Homeowners insurance premiums written increased 2.9% or $235 million in 2020 compared to 2019.


Unearned premium balance and the time frame in which we expect to recognize these premiums as earned
($ in millions)	As of December 31,				% earned after
	2020		2019		Three months		Six months		Nine months		Twelve months
Allstate brand:
Auto	$	6,409	$	6,405	70.7	%	96.3	%	99.1	%	100.0	%
Homeowners	4,379		4,220		43.2	%	75.4	%	94.1	%	100.0	%
Other personal lines	1,001		952		43.3	%	75.3	%	94.1	%	100.0	%
Commercial lines	295		270		43.3	%	74.6	%	93.7	%	100.0	%

Total Allstate brand	12,084		11,847		58.0	%	86.6	%	96.8	%	100.0	%
Encompass brand:
Auto	258		276		44.1	%	75.8	%	94.2	%	100.0	%
Homeowners	207		214		43.9	%	75.8	%	94.3	%	100.0	%
Other personal lines	39		41		44.2	%	76.1	%	94.3	%	100.0	%
Total Encompass brand	504		531		44.0	%	75.8	%	94.2	%	100.0	%
Allstate Protection unearned premiums	$	12,588	$	12,378

The Allstate Corporation 45

2020 Form 10-K Allstate Protection


Combined ratios by line of business
	For the years ended December 31,
	Loss ratio			Expense ratio (1)			Combined ratio
	2020	2019	2018	2020	2019	2018	2020	2019	2018
Auto	57.5	68.2	66.8	28.5	24.8	25.4	86.0	93.0	92.2
Impact of Shelter-in-Place Payback expense	—	—	—	3.8	—	—	3.8	—	—
Homeowners	67.3	65.1	69.4	22.7	23.3	24.2	90.0	88.4	93.6
Other personal lines	58.7	61.1	66.0	27.5	26.9	27.9	86.2	88.0	93.9
Commercial lines	82.4	81.3	91.3	22.3	17.1	21.4	104.7	98.4	112.7
Impact of Shelter-in-Place Payback expense	—	—	—	0.5	—		0.5	—	—

Total	60.4	67.5	67.8	26.8	24.1	25.1	87.2	91.6	92.9
Impact of restructuring and related charges (2)	—	—	—	0.7	0.1	0.2	0.7	0.1	0.2
Impact of Shelter-in-Place Payback expense	—	—	—	2.7	—	—	2.7	—	—
Impact of Allstate Special Payment plan bad debt expense (3)	—	—	—	0.2	—	—	0.2	—	—

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

(2)Restructuring and related charges in 2020 primarily related to Transformative Growth.

(3)Relates to the Allstate Special Payment plan offered to customers as a result of the Coronavirus to provide more flexible payment options, including the option to delay payments. Approximately 70% of the higher bad debt expense was attributed to auto.


Loss ratios by line of business
	For the years ended December 31,
	Loss ratio			Effect of catastrophe losses on combined ratio			Effect of prior year reserve reestimates on combined ratio			Effect of catastrophe losses included in prior year reserve reestimates on combined ratio
	2020	2019	2018	2020	2019	2018	2020	2019	2018	2020	2019	2018
Auto	57.5	68.2	66.8	1.2	1.7	1.6	(0.4)	(1.4)	(2.0)	(0.1)	(0.1)	(0.2)
Homeowners	67.3	65.1	69.4	27.9	24.8	30.0	(5.3)	0.8	0.2	(5.1)	0.8	0.8
Other personal lines	58.7	61.1	66.0	10.4	9.0	12.1	(3.5)	0.5	(0.4)	(2.0)	—	—
Commercial lines	82.4	81.3	91.3	3.5	1.4	3.4	4.7	1.9	16.5	0.2	(0.1)	—

Total	60.4	67.5	67.8	7.9	7.3	8.7	(1.6)	(0.7)	(1.0)	(1.4)	0.1	0.1

46 www.allstate.com

Allstate Protection 2020 Form 10-K

Catastrophe losses increased 9.9% or $254 million in 2020 compared to 2019. Catastrophe losses include approximately $495 million favorable subrogation settlements, which decreased the loss ratio by 1.4 points in 2020 compared to the same period of 2019. Excluding subrogation settlements, catastrophe losses increased approximately 30% or $750 million compared to 2019.

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, wildfires or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.


Catastrophe losses in 2020 by the size of event
($ in millions)	Number of events			Claims and claims expense				Combined ratio impact	Average catastrophe loss per event
Size of catastrophe loss
Greater than $250 million	1	0.9	%	$	518	18.4	%	1.4	$	518
$101 million to $250 million	6	5.7		953		33.9		2.7	159
$50 million to $100 million	11	10.5		740		26.3		2.1	67
Less than $50 million	87	82.9		1,103		39.3		3.1	13
Total	105	100.0	%	3,314		117.9		9.3	32
Prior year reserve reestimates				(503)		(17.9)		(1.4)
Total catastrophe losses				$	2,811	100.0	%	7.9


Catastrophe losses by the type of event
	For the years ended December 31,
($ in millions)	Number of events	2020		Number of events	2019		Number of events	2018
Hurricanes/Tropical storms	9	$	1,001	3	$	86	3	$	200
Tornadoes	3	43		6	551		3	17
Wind/Hail	73	1,940		91	1,721		99	1,752
Wildfires	17	300		4	28		10	745
Other events	3	30		6	123		2	116
Prior year reserve reestimates		(503)			48			25
Total catastrophe losses	105	$	2,811	110	$	2,557	117	$	2,855

Catastrophe management

Historical catastrophe experience For the last ten years, the average annual impact of catastrophes on our loss ratio was 8.2 points, but it has varied from 4.5 points to 14.7 points. The average annual impact of catastrophes on the homeowners loss ratio for the last ten years was 26.6 points. Over time, we have limited our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes by our participation in various state facilities. For further discussion of these facilities, see Note 14 of the consolidated financial statements. However, the impact of these actions may be diminished by the growth in insured values, and the effect of state insurance laws and regulations. In addition, in various states we are required to participate in assigned risk plans, reinsurance facilities and joint underwriting associations that provide insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers. Because of our participation in these and other state facilities such as wind pools, we may be exposed to losses that surpass the capitalization of these facilities and to assessments from these facilities.

We have continued to take actions to maintain an appropriate level of exposure to catastrophic events while continuing to meet the needs of our customers, including the following:

•Continuing to limit or not offer new homeowners, manufactured home and landlord package policy business in certain coastal geographies.

•Increased capacity in our brokerage platform for customers not offered an Allstate policy.

•We began to write a limited number of homeowners policies in select areas of California in 2016, additionally we:

–Continue to renew current policyholders and allow replacement policies for existing customers who buy a new home or change their residence to rental property

–Have decreased our overall homeowner exposures in California by more than 50% since 2007

–Write homeowners coverage through our excess and surplus lines carrier, North Light Specialty Insurance Company (“North Light”), which includes earthquake coverage (other

The Allstate Corporation 47

2020 Form 10-K Allstate Protection

than fire following earthquakes) that is currently ceded via quota share reinsurance.

•In certain states, we have been ceding wind exposure related to insured property located in wind pool eligible areas.

•Starting in the second quarter of 2017, we began writing a limited number of homeowners policies in select areas of Florida and continue to support existing customers who replace their currently-insured home with an acceptable property. Encompass withdrew from property lines in Florida in 2009.

•Tropical cyclone deductibles are generally higher than all peril deductibles and are in place for a large portion of coastal insured properties.

•Auto comprehensive damage coverage generally includes coverage for flood-related loss. We have additional catastrophe exposure, beyond the property lines, for auto customers who have purchased comprehensive damage coverage.

•We offer a homeowners policy available in 43 states, Allstate House and Home®, that provides options of coverage for roof damage, including graduated coverage and pricing based on roof type and age. In 2020, premiums written totaled $3.92 billion or 46.7% of homeowners premiums written compared to $3.44 billion or 42.1% in 2019.

Hurricanes We consider the greatest areas of potential catastrophe losses due to hurricanes generally to be major metropolitan centers in counties along the eastern and gulf coasts of the United States. The average premium on a property policy near these coasts is generally greater than in other areas. However, average premiums are often not considered commensurate with the inherent risk of loss. In addition, as explained in Note 14 of the consolidated financial statements, in various states Allstate is subject to assessments from assigned risk plans, reinsurance facilities and joint underwriting associations providing insurance for wind related property losses.

We have addressed our risk of hurricane loss by, among other actions, purchasing reinsurance for specific states and on a countrywide basis for our personal lines property insurance in areas most exposed to hurricanes, limiting personal homeowners, landlord package policy and manufactured home new business writings in coastal areas in southern and eastern states, implementing tropical cyclone deductibles where appropriate, and not offering continuing coverage on certain policies in coastal counties in certain states. We continue to seek appropriate returns for the risks we write. This may require further actions, similar to those already taken, in geographies where we are not getting appropriate

returns. However, we may maintain or opportunistically increase our presence in areas where adequate risk adjusted returns can be achieved.

Earthquakes We do not offer earthquake coverage in most states. We retain approximately 20,000 PIF with earthquake coverage, primarily in Kentucky, due to regulatory and other reasons. We purchase reinsurance in Kentucky and enter into arrangements in many states to make earthquake coverage available through our brokerage platform.

We continue to have exposure to earthquake risk on certain policies that do not specifically exclude coverage for earthquake losses, including our auto policies, and to fires following earthquakes. Allstate homeowner policyholders in California are offered coverage for damage caused by an earthquake through the California Earthquake Authority (“CEA”), a privately-financed, publicly-managed state agency created to provide insurance coverage for earthquake damage. Allstate is subject to assessments from the CEA under certain circumstances as explained in Note 14 of the consolidated financial statements. While North Light writes property policies in California, which can include earthquake coverage, this coverage is 100% ceded via quota share reinsurance.

Fires following earthquakes Under a standard homeowners policy we cover fire losses, including those caused by an earthquake. Actions taken related to our risk of loss from fires following earthquakes include restrictive underwriting guidelines in California for new business writings, purchasing reinsurance for Kentucky personal lines property risks, and purchasing nationwide occurrence reinsurance, excluding Florida.

Wildfires Actions taken related to managing our risk of loss from wildfires include purchasing nationwide occurrence reinsurance, new and renewal inspection programs to identify and remediate wildfire risk as well as leveraging contemporary underwriting tools in select areas. While these programs are designed to mitigate risk, the exposure to wildfires still exists. We continue to manage our exposure and seek appropriate returns for the risks we write.

To manage the exposure, we may implement further actions, similar to those already taken, in geographies where we are not achieving appropriate returns. However, we may maintain or opportunistically increase our presence in areas where adequate risk adjusted returns can be achieved.

Reinsurance A description of our current catastrophe reinsurance program appears in Note 10 of the consolidated financial statements.

48 www.allstate.com

Allstate Protection 2020 Form 10-K

Expense ratio increased 2.7 points in 2020 compared to 2019, reflecting Shelter-in-Place Payback expense, higher restructuring charges related to Transformative Growth and bad debt expense. Excluding Shelter-in-Place Payback expense, higher restructuring charges related to Transformative Growth, bad debt expense and impairment of purchased intangibles in 2019, the expense ratio decreased 0.8 points in 2020 compared to 2019, primarily due to lower operating expenses and agent compensation, partially offset by an increase in advertising costs.


Impact of specific costs and expenses on the expense ratio
	For the years ended December 31,
	2020	2019	2018
Amortization of DAC	13.0	13.4	13.6
Advertising expense	2.6	2.4	2.5
Amortization of purchased intangibles	0.1	—	—
Other costs and expenses	7.5	8.1	8.8
Subtotal	23.2	23.9	24.9
Restructuring and related charges (1)	0.7	0.1	0.2
Shelter-in-Place Payback expense	2.7	—	—
Allstate Special Payment plan bad debt expense	0.2	—	—
Impairment of purchased intangibles	—	0.1	—
Total expense ratio	26.8	24.1	25.1

(1)Restructuring and related charges in 2020 primarily related to Transformative Growth.

Deferred acquisition costs We establish a DAC asset for costs that are related directly to the successful acquisition of new or renewal insurance policies, principally agent remuneration and premium taxes. DAC is amortized to income over the period in which premiums are earned.


DAC balance as of December 31 by product type
($ in millions)	2020		2019
Auto	$	826	$	849
Homeowners	602		600
Other personal lines	144		141
Commercial lines	36		34

Total DAC	$	1,608	$	1,624

The Allstate Corporation 49

2020 Form 10-K Allstate Protection

The following table presents premiums written, PIF and underwriting income (loss) by line of business for Allstate brand, Encompass brand and Allstate Protection as of or for the year ended December 31, 2020. Detailed analysis of underwriting results, premiums written and earned, and the combined ratios, including loss and expense ratios, are discussed in the brand sections.


Premiums written, policies in force and underwriting income (loss)
($ in millions)	Allstate brand				Encompass brand				Allstate Protection
Premiums written	Amount		Percent to total brand		Amount		Percent to total brand		Amount		Percent to total
Auto	$	24,103	69.3	%	$	508	52.3	%	$	24,611	68.8	%
Homeowners	8,012		23.0		388		39.9		8,400		23.5
Other personal lines	1,889		5.4		76		7.8		1,965		5.5
Commercial lines	792		2.3		—		—		792		2.2
Total	$	34,796	100.0	%	$	972	100.0	%	$	35,768	100.0	%

Percent to total Allstate Protection			97.3	%			2.7	%			100.0	%

PIF (thousands)
Auto	21,809		66.3	%	451		61.1	%	22,260		66.2	%
Homeowners	6,427		19.5		216		29.3		6,643		19.7
Other personal lines	4,459		13.5		71		9.6		4,530		13.5
Commercial lines	216		0.7		—		—		216		0.6
Total	32,911		100.0	%	738		100.0	%	33,649		100.0	%

Percent to total Allstate Protection			97.8	%			2.2	%			100.0	%

Underwriting income (loss)
Auto	$	3,404	75.8	%	$	40	53.3	%	$	3,444	75.4	%
Homeowners	798		17.8		26		34.7		824		18.0
Other personal lines	255		5.7		9		12.0		264		5.8
Commercial lines	(36)		(0.8)		—		—		(36)		(0.8)
Other business lines	67		1.5		—		—		67		1.5
Answer Financial	—		—		—		—		3		0.1
Total	$	4,488	100.0	%	$	75	100.0	%	$	4,566	100.0	%

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

•PIF: Policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy while 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 Protection brand. Allstate brand includes automobiles added by existing customers when they exceed the number allowed (currently 10) on a policy.

•Average premium-gross written (“average premium”): Gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line. Allstate brand policy terms are 6 months for auto and 12 months for homeowners. Encompass brand

policy terms are generally 12 months for auto and homeowners.

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

•Total brand rate changes: Based on historical premiums written, not including rate plan enhancements (such as the introduction of discounts and surcharges that result in no change in the overall rate level) and initial rates filed for insurance subsidiaries initially writing business in a location. Includes rate changes approved based on our net cost of reinsurance. The rate change percentages are calculated using approved rate changes during the period as a percentage of total brand premiums written.

50 www.allstate.com

Allstate Protection: Allstate brand 2020 Form 10-K

Allstate brand products are sold across multiple channels, including Allstate exclusive agents and direct (online or call centers). In 2020, the Allstate brand represented 97.3% of the Allstate Protection segment’s written premium. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.


Underwriting results
	For the years ended December 31,
($ in millions)	2020		2019		2018
Premiums written	$	34,796	$	34,399	$	32,539
Premiums earned	$	34,581	$	33,825	$	31,927
Other revenue	663		666		662
Claims and claims expense	(20,897)		(22,828)		(21,680)
Shelter-in-Place Payback expense	(927)		—		—
Amortization of DAC	(4,451)		(4,457)		(4,285)
Other costs and expenses	(4,253)		(4,213)		(4,239)
Restructuring and related charges	(228)		(34)		(53)
Impairment of purchased intangibles	—		(51)		—
Underwriting income	$	4,488	$	2,908	$	2,332
Catastrophe losses	$	2,716	$	2,442	$	2,753

Underwriting income (loss) by line of business
Auto	$	3,404	$	1,680	$	1,777
Homeowners	798		912		481
Other personal lines (1)	255		227		108
Commercial lines	(36)		14		(83)
Other business lines (2)	67		75		49
Underwriting income	$	4,488	$	2,908	$	2,332

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

(2)Other business lines primarily represent Ivantage.

Underwriting income increased 54.3% or $1.58 billion in 2020 compared to 2019, primarily due to lower auto non-catastrophe losses, increased premiums earned and favorable catastrophe reserve reestimates in homeowners driven by subrogation settlements, partially offset by Shelter-in-Place Payback expense and higher catastrophe losses.

The Allstate Corporation 51

2020 Form 10-K Allstate Protection: Allstate brand


Premiums written and earned by line of business
	For the years ended December 31,
($ in millions)	2020		2019		2018
Premiums written
Auto	$	24,103	$	23,922	$	22,830
Homeowners (1)	8,012		7,764		7,300
Other personal lines	1,889		1,811		1,750
Subtotal – Personal lines	34,004		33,497		31,880
Commercial lines	792		902		659

Total	$	34,796	$	34,399	$	32,539
Premiums earned
Auto	$	24,115	$	23,649	$	22,434
Homeowners	7,858		7,513		7,114
Other personal lines	1,841		1,781		1,724
Subtotal – Personal lines	33,814		32,943		31,272
Commercial lines	767		882		655

Total	$	34,581	$	33,825	$	31,927

(1)The cost of our catastrophe reinsurance program increased $35 million to $321 million in 2020 from $286 million in 2019. Catastrophe placement premiums are recorded primarily in the Allstate brand and are a reduction of premium. For a more detailed discussion on reinsurance, see the Claims and Claims Expense Reserves section of the MD&A and Note 10 of the consolidated financial statements.


Auto premium measures and statistics
	2020		2019		2018		2020 vs. 2019		2019 vs. 2018
PIF (thousands)	21,809		21,913		21,592		(0.5)	%	1.5	%
New issued applications (thousands)	3,467		3,535		3,566		(1.9)	%	(0.9)	%
Average premium	$	617	$	603	$	586	2.3	%	2.9	%
Renewal ratio (%)	87.5		88.0		88.0		(0.5)		—


Total brand rate changes (%)	(0.2)		3.0		1.2		(3.2)		1.8

Auto insurance premiums written increased 0.8% or $181 million in 2020 compared to 2019, primarily due to an increase in average premium. During the second quarter through year-end 2020, growth in premiums written slowed significantly due to lower increases in average premium from fewer approved rate changes related to the Coronavirus.

New issued applications decreased 1.9% compared to 2019 due to impacts from the Coronavirus in the first half of 2020 and fewer new exclusive agent appointments, partially offset by an increase in direct and independent agent business.

Rate changes are maintained on a state by state basis. Auto average premium may decline in 2021 compared to 2020 as some rate changes will reflect the decline in auto miles driven and lower expenses.

PIF decreased 0.5% or 104 thousand policies as of December 31, 2020 compared to December 31, 2019 as higher PIF in Allstate brand, with increases in 20 states, including 3 of our largest 10 states, was offset by lower PIF in Esurance brand as advertising resources are redirected to Allstate brand.


Homeowners premium measures and statistics
	2020		2019		2018		2020 vs. 2019		2019 vs. 2018
PIF (thousands)	6,427		6,359		6,281		1.1	%	1.2	%
New issued applications (thousands)	899		877		858		2.5	%	2.2	%
Average premium	$	1,328	$	1,291	$	1,226	2.9	%	5.3	%
Renewal ratio (%)	87.5		88.2		88.0		(0.7)		0.2



Total brand rate changes (%)	2.7		3.3		2.7		(0.6)		0.6

Homeowners insurance premiums written increased 3.2% or $248 million in 2020 compared to 2019, primarily due to higher average premiums, including rate changes and inflation in insured home valuations, and policy growth. Homeowners PIF increased 68 thousand policies with increases in 27 states, including 5 of our largest 10 states, as of December 31, 2020 compared to December 31, 2019.

Other personal lines premiums written increased 4.3% or $78 million in 2020 compared to 2019. The

increase in 2020 was primarily due to increases in condominium, personal umbrella and boat insurance premiums.

Commercial lines premiums written decreased 12.2%or $110 million in 2020 compared to 2019, primarily due to lower miles driven and utilization in our shared economy business related to the impacts of the Coronavirus. PIF for the shared economy agreements typically reflect contracts that cover multiple insureds as opposed to individual insureds.

52 www.allstate.com

Allstate Protection: Allstate brand 2020 Form 10-K


Combined ratios by line of business
	For the years ended December 31,
	Loss ratio			Expense ratio (1)			Combined ratio
	2020	2019	2018	2020	2019	2018	2020	2019	2018
Auto	57.5	68.3	66.8	28.4	24.6	25.3	85.9	92.9	92.1
Impact of Shelter-in-Place Payback expense	—	—	—	3.8	—	—	3.8	—	—
Homeowners	67.5	65.0	69.5	22.3	22.9	23.7	89.8	87.9	93.2
Other personal lines	58.8	60.7	66.3	27.3	26.6	27.4	86.1	87.3	93.7
Commercial lines	82.4	81.3	91.3	22.3	17.1	21.4	104.7	98.4	112.7
Impact of Shelter-in-Place Payback expense	—	—	—	0.5	—	—	0.5	—	—

Total	60.4	67.5	67.9	26.6	23.9	24.8	87.0	91.4	92.7
Impact of restructuring and related charges (2)	—	—	—	0.7	0.1	0.2	0.7	0.1	0.2
Impact of Shelter-in-Place Payback expense	—	—	—	2.7	—	—	2.7	—	—
Impact of Allstate Special Payment plan bad debt expense (3)	—	—	—	0.2	—	—	0.2	—	—

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

(2)Restructuring and related charges in 2020 primarily related to Transformative Growth.


Loss ratios by line of business
	For the years ended December 31,
	Loss ratio			Effect of catastrophe losses			Effect of prior year reserve reestimates			Effect of catastrophe losses included in prior year reserve reestimates (1)
	2020	2019	2018	2020	2019	2018	2020	2019	2018	2020	2019	2018
Auto	57.5	68.3	66.8	1.2	1.7	1.6	(0.5)	(1.3)	(2.0)	(0.2)	(0.1)	(0.2)
Homeowners	67.5	65.0	69.5	28.2	24.8	30.5	(5.1)	0.7	—	(4.9)	0.7	0.8
Other personal lines	58.8	60.7	66.3	10.5	9.2	12.2	(3.1)	0.6	0.4	(2.0)	0.1	(0.2)
Commercial lines	82.4	81.3	91.3	3.5	1.4	3.4	4.7	1.9	16.5	0.2	(0.1)	—

Total	60.4	67.5	67.9	7.9	7.2	8.6	(1.5)	(0.7)	(1.0)	(1.3)	0.1	—

(1) 2020 includes approximately $450 million of favorable reserve reestimates related to subrogation settlements, which primarily impacted homeowners. See Note 8 of the consolidated financial statements for additional details.

The Allstate Corporation 53

2020 Form 10-K Allstate Protection: Allstate brand

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 (1) is calculated as annualized notice counts 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 the paid or gross claim frequency or severity in the current period compared to the same period in the prior year divided by the prior year paid or gross claim frequency or severity.

(1)Excludes counts associated with catastrophe events.

We have expanded our utilization of virtual claims processes in response to the Coronavirus. We are continuing to implement new technology and process improvements that provide continued loss cost accuracy, efficient processing and enhanced customer experiences that are simple, fast and produce high degrees of satisfaction.

•Digital Operating Centers handle auto physical damage claims countrywide utilizing our virtual estimation capabilities, which includes estimating damage with photos and video through the use of QuickFoto Claim® and Virtual Assist®.

•Virtual Assist and aerial imagery using satellites, airplanes and drones handle property claims by estimating damage through video.

These organizational and process changes impact frequency and severity statistics as changes in claim opening and closing practices and shifts in timing, if any, can impact comparisons to prior periods.

Auto loss ratio decreased 10.8 points in 2020 compared to 2019, primarily due to decline in non-catastrophe losses driven by favorable frequency, higher premiums earned and lower catastrophe losses, partially offset by increased severity and less favorable non-catastrophe prior year reserve reestimates compared to prior year.


Auto property damage frequency and severity statistics
(% change year-over-year)	For the year ended December 31, 2020
Gross claim frequency	(29.1)	%
Paid claim severity	10.0

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

•Shelter-in-place restrictions, social distancing requirements, limits on large gatherings and events, and restrictions on non-essential businesses as these become more or less strict

•Unemployment levels

•Reduced commuting activity

•Paid claims settlement rates as the low frequency environment creates capacity to settle claims faster

•Driving behavior (e.g., speed, time of day) impacting mix of claim types

•Labor and part cost variability

•Changes in limits purchased

•Court system variability in both timing and magnitude of claim settlement

Property damage gross claim frequency decreased in 2020 compared to 2019 due to factors including:

•Declines in auto miles driven.

•Declines in gross claim frequency compared to the prior year moderated in the second half of 2020 from earlier in the year, reflecting an increase in miles driven compared to April and May 2020 as shelter-in-place restrictions were lifted in many states.

Property damage paid claim severity increased in 2020 compared to 2019 due to factors including:

•Claims settled within days or weeks of the loss tend to be less complex and have lower severity, while higher severity property damage claims generally take longer to resolve.

•The reduction in new claims due to lower frequency, as described above, led to an increase in the proportion of more complex, higher severity paid claims to total paid claims.

•Higher costs to repair more sophisticated newer model vehicles, higher third-party subrogation demands and increased costs associated with total losses.

Bodily injury gross claim frequency was consistent with trends noted in property damage. Bodily injury severity trends increased at a rate above medical care inflation indices in 2020.

54 www.allstate.com

Allstate Protection: Allstate brand 2020 Form 10-K

Homeowners loss ratio increased 2.5 points in 2020 compared to 2019, primarily due to higher catastrophe losses and increased claim severity, partially offset by favorable catastrophe reserve reestimates driven by subrogation settlements, increased premiums earned and improved claim frequency.


Homeowners frequency and severity statistics (excluding catastrophe losses)
(% change year-over-year)	For the year ended December 31, 2020
Gross claim frequency	(4.0)	%
Paid claim severity	7.1

Gross claim frequency excluding catastrophe losses decreased in 2020 compared to 2019 due to decreases in water and theft claims, partially offset by increases in fire and wind/hail. Paid claim severity excluding catastrophe losses increased in 2020 compared to 2019 as we experienced increased claim

severity in wind/hail and fire perils. Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the year.

Other personal lines loss ratio decreased 1.9 points in 2020 compared to 2019, primarily due to increased premiums earned, favorable catastrophe reserve reestimates driven by the subrogation settlements and favorable non-catastrophe reserve reestimates, partially offset by higher catastrophe losses.

Commercial lines loss ratio increased 1.1 points in 2020 compared to 2019, primarily due to decreased premiums earned, higher claim severity and higher losses related to an underperforming account that was not renewed, partially offset by a decline in non-catastrophe losses driven by favorable auto frequency related to the Coronavirus.


Impact of specific costs and expenses on the expense ratio
	For the years ended December 31,
	2020	2019	2018
Amortization of DAC (1)	12.9	13.2	13.4
Advertising expense	2.7	2.5	2.5

Other costs and expenses	7.4	7.9	8.7
Subtotal	23.0	23.6	24.6
Restructuring and related charges (2)	0.7	0.1	0.2
Impairment of purchased intangibles	—	0.2	—
Shelter-in-Place Payback expense	2.7	—	—
Allstate Special Payment plan bad debt expense	0.2	—	—
Total expense ratio	26.6	23.9	24.8

(1) Primarily includes agent compensation and premium taxes.

(2)Restructuring and related charges in 2020 primarily related to Transformative Growth.

Expense ratio increased 2.7 points in 2020 compared to 2019, reflecting Shelter-in-Place Payback expense, higher restructuring charges related to Transformative Growth and bad debt expense. Excluding Shelter-in-Place Payback expense, higher restructuring charges related to Transformative Growth, bad debt expense and impairment of purchased intangibles in 2019, the expense ratio decreased 0.7 points in 2020 compared to 2019, primarily due to lower operating expenses and agent compensation, partially offset by an increase in advertising costs.

The Allstate Corporation 55

2020 Form 10-K Allstate Protection: Encompass brand

Encompass products are sold through independent agents that serve brand-neutral customers who prefer personal service and support from an independent agent. In 2020, the Encompass brand represented 2.7% of the Allstate Protection segment’s written premium. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.


Underwriting results
	For the years ended December 31,
($ in millions)	2020		2019		2018
Premiums written	$	972	$	1,020	$	1,016
Premiums earned	$	999	$	1,018	$	1,023
Other revenue	5		5		5
Claims and claims expense	(588)		(689)		(668)
Shelter-in-Place Payback expense	(21)		—		—
Amortization of DAC	(191)		(192)		(190)
Other costs and expenses	(123)		(131)		(145)
Restructuring and related charges	(6)		(4)		(7)
Underwriting income	$	75	$	7	$	18
Catastrophe losses	$	95	$	115	$	102

Underwriting income (loss) by line of business
Auto	$	40	$	8	$	14
Homeowners	26		2		1
Other personal lines	9		(3)		3
Underwriting income	$	75	$	7	$	18

Underwriting income increased $68 million in 2020 compared to 2019, primarily due to lower auto and homeowners non-catastrophe losses and favorable catastrophe reserve reestimates in personal lines homeowners driven by subrogation settlements, partially offset by higher catastrophe losses and Shelter-in-Place Payback expense.

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Allstate Protection: Encompass brand 2020 Form 10-K


Premiums written and earned by line of business
	For the years ended December 31,
($ in millions)	2020		2019		2018
Premiums written
Auto	$	508	$	540	$	537
Homeowners	388		401		398
Other personal lines	76		79		81
Total	$	972	$	1,020	$	1,016
Premiums earned
Auto	$	525	$	539	$	537
Homeowners	396		399		402
Other personal lines	78		80		84
Total	$	999	$	1,018	$	1,023


Auto premium measures and statistics
	2020		2019		2018		2020 vs. 2019		2019 vs. 2018
PIF (thousands)	451		493		502		(8.5)	%	(1.8)	%
New issued applications (thousands)	60		82		76		(26.8)	%	7.9	%
Average premium	$	1,156	$	1,134	$	1,118	1.9	%	1.4	%
Renewal ratio (%)	76.8		78.1		74.9		(1.3)		3.2
Total brand rate changes (%)	(0.4)		1.5		2.4		(1.9)		(0.9)

Auto insurance premiums written decreased 5.9% or $32 million in 2020 compared to 2019, primarily due to decreased new issued applications and lower retention, partially offset by higher average premiums, with the top 10 states representing approximately 70% of premiums written.


Homeowners premium measure and statistics
	2020		2019		2018		2020 vs. 2019		2019 vs. 2018
PIF (thousands)	216		234		239		(7.7)	%	(2.1)	%
New issued applications (thousands)	34		42		37		(19.0)	%	13.5	%
Average premium	$	1,892	$	1,795	$	1,724	5.4	%	4.1	%
Renewal ratio (%)	81.0		82.5		80.0		(1.5)		2.5
Total brand rate changes (%)	4.8		9.2		4.7		(4.4)		4.5

Homeowners insurance premiums written decreased 3.2% or $13 million in 2020 compared to 2019, primarily due to decreased new issued applications and lower retention, partially offset by higher average premiums due to rate changes over the past 12 months, with the top 10 states representing approximately 70% of premiums written.


Combined ratios by line of business
	For the years ended December 31,
	Loss ratio			Expense ratio (1)			Combined ratio
	2020	2019	2018	2020	2019	2018	2020	2019	2018
Auto	56.8	66.8	65.0	35.6	31.7	32.4	92.4	98.5	97.4
Impact of Shelter-in-Place Payback expense	—	—	—	4.0	—	—	4.0	—	—
Homeowners	62.1	68.2	66.7	31.3	31.3	33.1	93.4	99.5	99.8
Other personal lines	56.4	71.3	60.7	32.1	32.5	35.7	88.5	103.8	96.4
Total	58.9	67.7	65.3	33.6	31.6	32.9	92.5	99.3	98.2
Impact of restructuring and related charges (2)	—	—	—	0.6	0.4	0.7	0.6	0.4	0.7
Impact of Shelter-in-Place Payback expense	—	—	—	2.1	—	—	2.1	—	—

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

(2)Restructuring and related charges in 2020 primarily related to Transformative Growth.

The Allstate Corporation 57

2020 Form 10-K Allstate Protection: Encompass brand


Loss ratios by line of business
	For the years ended December 31,
	Loss ratio			Effect of catastrophe losses			Effect of prior year reserve reestimates			Effect of catastrophe losses included in prior year reserve reestimates (1)
	2020	2019	2018	2020	2019	2018	2020	2019	2018	2020	2019	2018
Auto	56.8	66.8	65.0	1.3	1.9	1.1	1.0	(1.9)	(1.9)	(0.4)	—	(0.2)
Homeowners	62.1	68.2	66.7	20.7	25.1	22.1	(9.3)	3.7	3.3	(9.8)	2.5	3.0
Other personal lines	56.4	71.3	60.7	7.7	6.3	8.3	(12.8)	(2.5)	(16.7)	(2.6)	(1.2)	1.2
Total	58.9	67.7	65.3	9.5	11.3	10.0	(4.2)	0.3	(1.1)	(4.3)	0.9	1.2

(1)2020 includes approximately $45 million of favorable reserve reestimates related to subrogation settlements, which primarily impacted homeowners. See Note 8 of the consolidated financial statements for additional details.

Auto loss ratio decreased 10.0 points in 2020 compared to 2019, primarily due to lower claim frequency, partially offset by increased claim severity and unfavorable non-catastrophe reserves reestimates compared to favorable non-catastrophe reserve reestimates in the prior year.

Homeowners loss ratio decreased 6.1 points in 2020 compared to 2019, primarily due to favorable catastrophe reserve reestimates driven by subrogation settlements and lower non-catastrophe claim frequency, partially offset by higher catastrophe losses.


Impact of specific costs and expenses on the expense ratio
	For the years ended December 31,
	2020	2019	2018
Amortization of DAC	19.1	18.8	18.5
Advertising expense	0.1	0.2	0.2

Other costs and expenses	11.7	12.2	13.5
Subtotal	30.9	31.2	32.2
Restructuring and related charges (1)	0.6	0.4	0.7
Shelter-in-Place Payback expense	2.1	—	—
Total expense ratio	33.6	31.6	32.9

(1)Restructuring and related charges in 2020 primarily related to the Transformative Growth.

Expense ratio increased 2.0 points in 2020 compared to 2019, primarily due to Shelter-in-Place Payback expense and higher restructuring charges related to Transformative Growth, partially offset by lower operating costs.

58 www.allstate.com

Discontinued Lines and Coverages 2020 Form 10-K

Discontinued Lines and Coverages Segment

The Discontinued Lines and Coverages segment includes results from property and casualty insurance coverage that primarily relates to policies written during the 1960s through the mid-1980s. Our exposure to asbestos, environmental and other discontinued lines claims arises principally from direct excess commercial insurance, assumed reinsurance coverage, direct primary commercial insurance and other businesses in run-off. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.


Underwriting results
	For the years ended December 31,
($ in millions)	2020		2019		2018
Claims and claims expense
Asbestos claims	$	(78)	$	(28)	$	(44)
Environmental claims	(44)		(36)		(20)
Other discontinued lines	(19)		(41)		(23)
Total claims and claims expense	(141)		(105)		(87)
Operating costs and expenses	(3)		(3)		(3)
Underwriting loss	$	(144)	$	(108)	$	(90)

Underwriting losses in 2020 and 2019 primarily related to our annual reserve review using established industry and actuarial best practices. The annual review resulted in unfavorable reserve reestimates totaling $132 million and $95 million, in 2020 and 2019, net of $1 million and $6 million reduction in the allowance for future uncollectible reinsurance, respectively. The reserve reestimates are included as part of claims and claims expense.

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 discontinued lines exposures. Reserve reestimates in 2019 primarily related to new reported information and settlement agreements, including bankruptcy proceedings, impacting asbestos and other discontinued lines and additional environmental clean-up sites.

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 discontinued lines claims before and after the effects of reinsurance
($ in millions)	December 31, 2020		December 31, 2019
Asbestos claims
Gross reserves	$	1,204	$	1,172
Reinsurance	(377)		(362)
Net reserves	827		810
Environmental claims
Gross reserves	249		219
Reinsurance	(43)		(40)
Net reserves	206		179
Other discontinued lines
Gross reserves	435		427
Reinsurance	(60)		(51)
Net reserves	375		376
Total
Gross reserves	1,888		1,818
Reinsurance	(480)		(453)
Net reserves	$	1,408	$	1,365

The Allstate Corporation 59

2020 Form 10-K Discontinued Lines and Coverages


Reserves by type of exposure before and after the effects of reinsurance
($ in millions)	December 31, 2020		December 31, 2019
Direct excess commercial insurance
Gross reserves	$	1,011	$	948
Reinsurance	(358)		(332)
Net reserves	653		616
Assumed reinsurance coverage
Gross reserves	636		606
Reinsurance	(58)		(53)
Net reserves	578		553
Direct primary commercial insurance
Gross reserves	160		169
Reinsurance	(63)		(54)
Net reserves	97		115
Other run-off business
Gross reserves	2		15
Reinsurance	—		(13)
Net reserves	2		2
Unallocated loss adjustment expenses
Gross reserves	79		80
Reinsurance	(1)		(1)
Net reserves	78		79
Total
Gross reserves	1,888		1,818
Reinsurance	(480)		(453)
Net reserves	$	1,408	$	1,365


Percentage of gross and ceded reserves by case and incurred but not reported (“IBNR”)
	December 31, 2020				December 31, 2019
	Case		IBNR		Case		IBNR
Direct excess commercial insurance
Gross reserves (1)	65	%	35	%	68	%	32	%
Ceded (2)	71		29		78		22
Assumed reinsurance coverage
Gross reserves	34		66		34		66
Ceded	35		65		35		65
Direct primary commercial insurance
Gross reserves	55		45		56		44
Ceded	79		21		78		22

(1)Approximately 67% of gross case reserves as of December 31, 2020 are subject to settlement agreements.

(2)Approximately 75% of ceded case reserves as of December 31, 2020 are subject to settlement agreements.


Gross payments from case reserves by type of exposure
($ in millions)	For the years ended December 31,
	2020		2019
Direct excess commercial insurance
Gross (1)	$	88	$	122
Ceded (2)	(37)		(53)
Assumed reinsurance coverage
Gross	40		43
Ceded	(7)		(3)
Direct primary commercial insurance
Gross	8		15
Ceded	(5)		(2)

(1) In 2020 77% of payments related to settlement agreements.

(2) In 2020 75% of payments related to settlement agreements.

60 www.allstate.com

Discontinued Lines and Coverages 2020 Form 10-K

Total net reserves as of December 31, 2020, included $695 million or 49% of estimated IBNR reserves compared to $660 million or 48% of estimated IBNR reserves as of December 31, 2019.

Total gross payments were $137 million and $183 million for 2020 and 2019, respectively, primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos related losses, 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 $53 million and $49 million for 2020 and 2019, respectively. The allowance for uncollectible reinsurance recoverables was $59 million and $60 million as of December 31, 2020 and December 31, 2019, respectively. The allowance represents 10.5% and 11.1% of the related reinsurance recoverable balances as of December 31, 2020 and December 31, 2019, respectively.

The Allstate Corporation 61

2020 Form 10-K Protection Services

Protection Services Segment

Protection Services comprise Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside, Arity and Allstate Identity Protection. In 2020, Protection Services represented 4.3% of total revenue, 77.5% of total PIF and 3.3% of total adjusted net income. We offer consumer product protection plans, finance and insurance products (including vehicle service contracts, guaranteed asset protection waivers, road hazard tire and wheel and paintless dent repair protection), roadside assistance, device and mobile data collection services and analytic solutions using automotive telematics information and identity protection. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.


Summarized financial information
	For the years ended December 31,
($ in millions)	2020		2019		2018
Premiums written	$	1,890	$	1,535	$	1,431

Revenues
Premiums	$	1,493	$	1,233	$	1,098
Other revenue	208		188		82
Intersegment insurance premiums and service fees (1)	147		154		122
Net investment income	44		42		27
Realized capital gains (losses)	30		32		(11)
Total revenues	1,922		1,649		1,318

Costs and expenses
Claims and claims expense	(386)		(363)		(350)
Amortization of DAC	(658)		(543)		(463)
Operating costs and expenses	(651)		(661)		(505)
Restructuring and related charges	(3)		—		(4)
Amortization of purchased intangibles	(106)		(122)		(94)
Impairment of purchased intangibles	—		(55)		—
Total costs and expenses	(1,804)		(1,744)		(1,416)


Income tax (expense) benefit	(26)		18		19
Net income (loss) applicable to common shareholders	$	92	$	(77)	$	(79)

Adjusted net income	$	153	$	38	$	8
Realized capital gains (losses), after-tax	23		25		(9)
Amortization of purchased intangibles, after-tax	(84)		(97)		(74)
Impairment of purchased intangibles, after-tax	—		(43)		—
Tax Legislation (expense) benefit	—		—		(4)
Net income (loss) applicable to common shareholders	$	92	$	(77)	$	(79)

Allstate Protection Plans	$	137	$	60	$	23
Allstate Dealer Services	29		26		15
Allstate Roadside	12		(15)		(20)
Arity	(11)		(7)		(11)
Allstate Identity Protection	(14)		(26)		1
Adjusted net income	$	153	$	38	$	8

Allstate Protection Plans	128,982		99,632		68,588
Allstate Dealer Services	4,042		4,205		4,338
Allstate Roadside	548		599		663
Allstate Identity Protection	2,700		1,511		1,040
Policies in force as of December 31 (in thousands)	136,272		105,947		74,629

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

62 www.allstate.com

Protection Services 2020 Form 10-K

Net income applicable to common shareholders was $92 million in 2020 compared to net loss of $77 million in 2019. 2019 results included a $55 million intangible asset impairment related to the SquareTrade trade name that occurred in the second quarter of 2019.

Adjusted net income increased $115 million in 2020 compared to 2019. The increase in 2020 was primarily due to growth of Allstate Protection Plans and improved profitability at Allstate Roadside, partially offset by investments at Allstate Identity Protection.

Total revenues increased 16.6% or $273 million in 2020 compared to 2019, primarily due to Allstate Protection Plan’s growth through its U.S. retail and international channels, partially offset by declines in revenue at Allstate Roadside.

Premiums written increased 23.1% or $355 million in 2020 compared to 2019, primarily due to growth at Allstate Protection Plans benefiting from higher consumer purchases. In late 2020, Allstate Protection Plans launched several new U.S. retailers and was awarded new business for launch in early 2021, which will result in additional premiums written in 2021.

PIF increased 28.6% or 30 million in 2020 compared to 2019 due to continued growth at Allstate Protection Plans.

Intersegment premiums and service fees decreased 4.5% or $7 million in 2020 compared to 2019, primarily related to decreased device sales through Arity’s device and mobile data collection services and analytic solutions.

Other revenue increased 10.6% or $20 million in 2020 compared to 2019, primarily due to increased sales at Allstate Identity Protection.

Claims and claims expense increased 6.3% or $23 million in 2020 compared to 2019, primarily due to higher levels of claims at Allstate Protection Plans driven by growth of the business, partially offset by lower losses at Allstate Roadside and Allstate Dealer Services due to declines in auto miles driven related to the Coronavirus.

Amortization of DAC increased 21.2% or $115 million in 2020 compared to 2019. The increase is driven by growth at Allstate Protection Plans.

Operating costs and expenses decreased 1.5% or $10 million in 2020 compared to 2019, primarily due to lower operating costs at Allstate Roadside, partially offset by expenses associated with continued growth at Allstate Protection Plans.

Amortization of purchased intangibles relates to the acquisitions of Allstate Protection Plans and Allstate Identity Protection. We recorded amortization expense of $106 million in 2020 compared to $122 million in 2019.

The Allstate Corporation 63

2020 Form 10-K Claims and Claims Expense Reserves

Claims and Claims Expense Reserves

Underwriting results are significantly influenced by estimates of claims and claims expense reserves. For a description of our reserve process, see Note 8 of the consolidated financial statements. Further, for a description of our reserving policies and the potential variability in our reserve estimates, see the Application of Critical Accounting Estimates section of the MD&A. These reserves are an estimate of amounts necessary to settle all outstanding claims, including IBNR claims, as of the reporting date.

The facts and circumstances leading to reestimates of reserves relate to changes in claim activity and revisions to the development factors used to predict how losses are likely to develop from the end of a reporting period until all claims have been paid. Reestimates occur when actual losses differ from those predicted by the estimated development factors used in prior reserve estimates.

We believe the net loss reserves exposures are appropriately established based on available facts, technology, laws and regulations.


Total reserves, net of recoverables (“net reserves”), as of December 31, by line of business
($ in millions)	2020		2019		2018
Allstate brand	$	18,523	$	18,750	$	18,134
Encompass brand	613		646		691
Total Allstate Protection	19,136		19,396		18,825
Discontinued Lines and Coverages	1,408		1,365		1,391
Total Property-Liability	20,544		20,761		20,216
Protection Services	33		39		52
Total net reserves	$	20,577	$	20,800	$	20,268

The year-end 2020 gross reserves of $27.61 billion for insurance claims and claims expense were $8.48 billion more than the net reserve balance of $19.13 billion recorded on the basis of statutory accounting practices for reports provided to state regulatory authorities. The principal differences are recoverables from third parties totaling $7.03 billion, including $5.61 billion of indemnification recoverables related to the Michigan Catastrophic Claims Association (“MCCA”), that reduce reserves for statutory reporting, but are recorded as assets for GAAP reporting, and a liability for the reserves of the Canadian subsidiaries for $1.35 billion that are a component of our consolidated reserves, but not included in our U.S. statutory reserves.


Impact of reserve reestimates by brand on combined ratio and net income applicable to common shareholders(1) (2)
	2020				2019				2018
($ in millions, except ratios)	Reserve reestimate			Effect on combined ratio	Reserve reestimate			Effect on combined ratio	Reserve reestimate			Effect on combined ratio
Allstate brand	$	(534)		(1.5)	$	(236)		(0.7)	$	(329)		(1.0)
Encompass brand	(42)			(0.1)	3			—	(11)			—
Total Allstate Protection	(576)			(1.6)	(233)			(0.7)	(340)			(1.0)
Discontinued Lines and Coverages	141			0.4	105			0.4	87			0.3
Total Property-Liability	(435)			(1.2)	(128)			(0.3)	(253)			(0.7)
Protection Services	(1)			—	(2)			—	(2)			—
Total	$	(436)			$	(130)			$	(255)
Reserve reestimates, after-tax	$	(344)			$	(103)			$	(201)
Consolidated net income applicable to common shareholders	$	5,461			$	4,678			$	2,012
Reserve reestimates as a % impact on consolidated net income applicable to common shareholders	6.3		%		2.2		%		10.0		%
Property-Liability prior year reserve reestimates included in catastrophe losses	$	(503)			$	48			$	25

(1)Favorable reserve reestimates are shown in parentheses.

(2)Ratios are calculated using property and casualty premiums earned.

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Claims and Claims Expense Reserves 2020 Form 10-K

The following tables reflect the accident years to which the reestimates shown above are applicable. Favorable reserve reestimates are shown in parentheses.


2020 prior year reserve reestimates
($ in millions)	2015 & prior		2016		2017		2018		2019		Total
Allstate brand	$	(58)	$	46	$	(162)	$	(348)	$	(12)	$	(534)
Encompass brand	2		(4)		(37)		(5)		2		(42)
Total Allstate Protection	(56)		42		(199)		(353)		(10)		(576)
Discontinued Lines and Coverages	141		—		—		—		—		141
Total Property-Liability	85		42		(199)		(353)		(10)		(435)
Protection Services	—		—		—		—		(1)		(1)
Total	$	85	$	42	$	(199)	$	(353)	$	(11)	$	(436)


2019 prior year reserve reestimates
($ in millions)	2014 & prior		2015		2016		2017		2018		Total
Allstate brand	$	(138)	$	(46)	$	(26)	$	(99)	$	73	$	(236)
Encompass brand	(2)		2		(2)		4		1		3
Total Allstate Protection	(140)		(44)		(28)		(95)		74		(233)
Discontinued Lines and Coverages	105		—		—		—		—		105
Total Property-Liability	(35)		(44)		(28)		(95)		74		(128)
Protection Services	—		—		—		—		(2)		(2)
Total	$	(35)	$	(44)	$	(28)	$	(95)	$	72	$	(130)


2018 prior year reserve reestimates
($ in millions)	2013 & prior		2014		2015		2016		2017		Total
Allstate brand	$	(66)	$	(56)	$	(16)	$	(133)	$	(58)	$	(329)
Encompass brand	(12)		(11)		(15)		1		26		(11)
Total Allstate Protection	(78)		(67)		(31)		(132)		(32)		(340)
Discontinued Lines and Coverages	87		—		—		—		—		87
Total Property-Liability	9		(67)		(31)		(132)		(32)		(253)
Protection Services	—		—		—		—		(2)		(2)
Total	$	9	$	(67)	$	(31)	$	(132)	$	(34)	$	(255)

Allstate Protection

The tables below show Allstate Protection net reserves representing the estimated cost of outstanding claims as they were recorded at the beginning of years 2020, 2019, and 2018, and the effect of reestimates in each year.


Net reserves by line
	January 1 reserves
($ in millions)	2020		2019		2018
Auto	$	14,728	$	14,378	$	14,051
Homeowners	2,138		2,157		2,205
Other personal lines	1,459		1,489		1,489
Commercial lines	1,071		801		616
Total Allstate Protection	$	19,396	$	18,825	$	18,361


Impact of reserve reestimates by line on combined ratio and underwriting income
	2020				2019				2018
($ in millions, except ratios)	Reserve reestimate			Effect on combined ratio	Reserve reestimate			Effect on combined ratio	Reserve reestimate			Effect on combined ratio
Auto	$	(107)		(0.3)	$	(323)		(0.9)	$	(455)		(1.3)
Homeowners	(439)			(1.2)	65			0.2	14			—
Other personal lines	(66)			(0.2)	8			—	(7)			—
Commercial lines	36			0.1	17			—	108			0.3

Total Allstate Protection	$	(576)		(1.6)	$	(233)		(0.7)	$	(340)		(1.0)
Underwriting income	$	4,566			$	2,912			$	2,343
Reserve reestimates as a % impact on underwriting income	12.6		%		8.0		%		14.5		%

The Allstate Corporation 65

2020 Form 10-K Claims and Claims Expense Reserves

Favorable results for homeowners lines in 2020 were primarily due to catastrophe reserve reestimates driven by the subrogation settlements. Favorable reserve reestimates for auto in 2020 primarily related to favorable non-catastrophe reserve reestimates in personal lines auto, partially offset by strengthening in commercial lines auto reserves.

Favorable reserve reestimates for auto in 2019 primarily related to continued favorable personal lines auto injury coverage development, offset by strengthening in our homeowners lines. Auto liability claims process changes implemented in prior years, including a program requiring enhanced documentation of injuries and related medical treatments, resulted in favorable severity trends compared to those originally estimated as we developed greater experience in settling claims under these programs. Unfavorable results for homeowners lines in 2019 were primarily due to catastrophe development being higher than anticipated in previous estimates.

Estimating the ultimate cost of claims and claims expenses is an inherently uncertain and complex process involving a high degree of judgment and is subject to the evaluation of numerous variables.

Discontinued Lines and Coverages

We conduct an annual review in the third quarter of each year to evaluate and establish asbestos, environmental and other discontinued lines reserves. Reserves are recorded in the reporting period in which they are determined. Using established industry and actuarial best practices and assuming no change in the regulatory or economic environment, this detailed and comprehensive methodology determines reserves based on assessments of the characteristics of exposure (e.g. claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by policyholders.


Discontinued Lines and Coverages reserve reestimates
	2020				2019				2018
($ in millions)	January 1 reserves		Reserve reestimate		January 1 reserves		Reserve reestimate		January 1 reserves		Reserve reestimate
Asbestos claims	$	810	$	78	$	866	$	28	$	884	$	44
Environmental claims	179		44		170		36		166		20
Other discontinued lines	376		19		355		41		357		23
Total	$	1,365	$	141	$	1,391	$	105	$	1,407	$	87
Underwriting loss			$	(144)			$	(108)			$	(90)

Reserve reestimates in 2019 primarily related to new reported information and settlement agreements, including bankruptcy proceedings, impacting asbestos and other discontinued lines and additional environmental clean-up sites.

66 www.allstate.com

Claims and Claims Expense Reserves 2020 Form 10-K


Reserves and claim activity before (Gross) and after (Net) the effects of reinsurance
	2020					2019					2018
($ in millions, except ratios)	Gross		Net			Gross		Net			Gross		Net
Asbestos claims
Beginning reserves	$	1,172	$	810		$	1,266	$	866		$	1,296	$	884
Incurred claims and claims expense	132		78			39		28			89		44
Claims and claims expense paid	(100)		(61)			(133)		(84)			(119)		(62)
Ending reserves	$	1,204	$	827		$	1,172	$	810		$	1,266	$	866

Annual survival ratio	12.0		13.6			8.8		9.6			10.6		14.0
3-year survival ratio	10.3		12.0			9.0		10.3			9.1		9.7

Environmental claims
Beginning reserves	$	219	$	179		$	209	$	170		$	199	$	166
Incurred claims and claims expense	49		44			42		36			30		20
Claims and claims expense paid	(19)		(17)			(32)		(27)			(20)		(16)
Ending reserves	$	249	$	206		$	219	$	179		$	209	$	170

Annual survival ratio	13.1		12.1			6.8		6.6			10.5		10.6
3-year survival ratio	10.5		10.3			8.1		8.1			8.4		8.2

Combined environmental and asbestos claims
Annual survival ratio	12.2		13.2			8.4		8.9			10.6		13.3
3-year survival ratio	10.3		11.6			8.8		9.9			9.0		9.5
Percentage of IBNR in ending reserves			50.3		%			48.8		%			49.6		%

The survival ratio is calculated by taking our ending reserves divided by payments made during the year. This is a commonly used but simplistic and imprecise approach to measuring the adequacy of asbestos and environmental reserve levels. Many factors, such as mix of business, level of coverage provided and settlement procedures have significant impacts on the amount of environmental and asbestos claims and claims expense reserves, claim payments and the resultant ratio. As payments result in corresponding reserve reductions, survival ratios can be expected to vary over time. In 2020 and 2019, the asbestos and environmental net 3-year survival ratio increased due to lower claim payments associated with settlement agreements.


Net asbestos reserves by type of exposure and total reserve additions
	December 31, 2020					December 31, 2019					December 31, 2018
($ in millions)	Active policy-holders	Net reserves		% of reserves		Active policy-holders	Net reserves		% of reserves		Active policy-holders	Net reserves		% of reserves
Direct policyholders:
Primary	59	$	10	1	%	58	$	12	1	%	51	$	12	1	%
Excess	303	291		35		299	292		36		295	309		36
Total	362	301		36		357	304		37		346	321		37
Assumed reinsurance		122		15			127		16			138		16
IBNR		404		49			379		47			407		47
Total net reserves		$	827	100	%		$	810	100	%		$	866	100	%
Total reserve additions		$	78				$	28				$	44

At December 31, 2020, there were 362 active policyholders with open asbestos claims.

•Active policyholders increased by 5 in 2020, including 8 policyholders reporting asbestos claims for the first time and the closing of all claims for 3 policyholders.

•Active policyholders increased by 11 in 2019, including 16 policyholders reporting asbestos claims for the first time and the closing of all claims for 5 policyholders.

IBNR net reserves increased $25 million as of December 31, 2020 compared to December 31, 2019. IBNR provides for reserve development of known claims and future reporting of additional unknown

claims from current policyholders and ceding companies.

Reinsurance and indemnification programs We utilize reinsurance to reduce exposure to catastrophe risk and manage capital, and to support the required statutory surplus and the insurance financial strength ratings of certain subsidiaries such as Castle Key Insurance Company (“CKIC”) and Allstate New Jersey Insurance Company (“ANJ”). We purchase significant reinsurance to manage our aggregate countrywide exposure to an acceptable level. The price and terms of reinsurance and the credit quality of the reinsurer are considered in the purchase process, along with whether the price can be appropriately reflected in the costs that are considered in setting future rates

The Allstate Corporation 67

2020 Form 10-K Claims and Claims Expense Reserves

charged to policyholders. We have also purchased reinsurance to mitigate exposures in our long-tail liability lines, including environmental, asbestos and other discontinued lines as well as our commercial lines, including shared economy. We also participate in various indemnification mechanisms, including state-based industry pool or facility programs mandating

participation by insurers offering certain coverage in their state and the federal government National Flood Insurance Program (“NFIP”). See Note 10 of the consolidated financial statements for additional details on these programs.


Reinsurance and indemnification recoverables, net of the allowance established for uncollectible amounts
	S&P financial strength rating (1)	Reinsurance or indemnification recoverable on paid and unpaid claims, net
($ in millions)		2020		2019
Indemnification programs
State-based industry pool or facility programs
MCCA (2)	N/A	$	5,646	$	5,499
New Jersey Property-Liability Insurance Guaranty Association (“PLIGA”)	N/A	389		446
North Carolina Reinsurance Facility	N/A	67		78
Florida Hurricane Catastrophe Fund (“FHCF”)	N/A	32		52
Other		8		9
Federal Government - NFIP	N/A	30		25

Subtotal		6,172		6,109

Catastrophe reinsurance recoverables
Renaissance Reinsurance Limited	A+	17		27
Swiss Reinsurance America Corporation	AA-	12		15
Everest Reinsurance Company	A+	12		15
Other		156		179
Subtotal		197		236

Other reinsurance recoverables, net (3)
Lloyd’s of London (“Lloyd’s”) (4)	A+	166		158
Aleka Insurance Inc.	N/A	165		115
Westport Insurance Corporation	AA-	59		55
TIG Insurance Company	N/A	40		38


Other, including allowance for credit losses		317		293
Subtotal		747		659
Total Property-Liability		7,116		7,004
Protection Services		18		20
Total		$	7,134	$	7,024

(1)N/A reflects no S&P Global Ratings (“S&P”) rating available.

(2)As of December 31, 2020 and 2019, MCCA includes $34 million and $39 million of reinsurance recoverable on paid claims, respectively, and $5.61 billion and $5.46 billion of reinsurance recoverable on unpaid claims, respectively.

(3)Other reinsurance recoverables primarily relate to asbestos, environmental and other liability exposures as well as commercial lines, including shared economy.

(4)As of December 31, 2020, case reserves for Lloyd’s were 64% of the reinsurance recoverable for unpaid claims.

Reinsurance and indemnification recoverables include an estimate of the amount of insurance claims and claims expense reserves that are ceded under the terms of the agreements, including IBNR unpaid losses. We calculate our ceded reinsurance and indemnification estimates based on the terms of each applicable agreement, including an estimate of how IBNR losses will ultimately be ceded under the agreement. We also consider other limitations and coverage exclusions under our agreements. Accordingly, our estimate of recoverables is subject to similar risks and uncertainties as our estimate of reserves claims and claims expense. We believe the recoverables are appropriately established; however,

as our underlying reserves continue to develop, the amount ultimately recoverable may vary from amounts currently recorded. We regularly evaluate the reinsurers and the respective amounts of our reinsurance recoverables, and a provision for uncollectible reinsurance recoverables is recorded, if needed. The establishment of reinsurance recoverables and the related allowance for uncollectible reinsurance is also an inherently uncertain process involving estimates. Changes in estimates could result in additional changes to the Consolidated Statements of Operations.

Indemnification recoverables are considered collectible based on the industry pool and facility

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Claims and Claims Expense Reserves 2020 Form 10-K

enabling legislation and the Company has not had any credit losses related to these programs and we do not anticipate losses in the foreseeable future. We also have not experienced credit losses on our catastrophe reinsurance programs, which include highly rated reinsurers.

The allowance for uncollectible reinsurance relates to other reinsurance programs primarily related to our Discontinued Lines and Coverages segment. This allowance was $59 million and $60 million as of December 31, 2020 and 2019, respectively.

The allowance is based upon our ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, and other relevant factors. In addition, in the ordinary course of business, we may become involved in coverage disputes with certain of our reinsurers that may ultimately result in lawsuits and arbitrations brought by or against such reinsurers to determine the parties’ rights and obligations under the various reinsurance agreements. We employ dedicated specialists to manage reinsurance collections and disputes. We also consider recent developments in commutation activity

between reinsurers and cedents, and recent trends in arbitration and litigation outcomes in disputes between cedents and reinsurers in seeking to maximize our reinsurance recoveries.

Adverse developments in the insurance industry have led to a decline in the financial strength of some of our reinsurance carriers, causing amounts recoverable from them and future claims ceded to them to be considered a higher risk. There has also been consolidation activity in the industry, which causes reinsurance risk across the industry to be concentrated among fewer companies.

See Note 2 of the consolidated financial statements for a description of the methodology utilized to calculate the allowance for reinsurance recoverables.

For further details related to our reinsurance and indemnification recoverables, see the Regulation section in Part I and Note 10 of the consolidated financial statements.


Effects of reinsurance ceded and indemnification programs on our premiums earned and claims and claims expense
	For the years ended December 31,
($ in millions)	2020			2019			2018
Allstate Protection - Premiums
Indemnification programs
State-based industry pool or facility programs
MCCA	$	61		$	89		$	77
PLIGA	7			8			9
FHCF	9			9			10
Other	97			85			90
Federal Government - NFIP	261			258			258
Catastrophe reinsurance	416			377			344
Other reinsurance programs	110			121			54
Total Allstate Protection	961			947			842
Discontinued Lines and Coverages	—			—			—
Total Property-Liability	961			947			842
Protection Services	180			175			174
Total effect on premiums earned	$	1,141		$	1,122		$	1,016

Allstate Protection - Claims
Indemnification programs
State-based industry pool or facility programs
MCCA	$	256		$	208		$	233
PLIGA	(40)			3			(6)
FHCF	15			31			148
Other	63			67			90
Federal Government - NFIP	87			150			118
Catastrophe reinsurance	(105)		(1)	(166)		(2)	604
Other reinsurance programs	88			94			40
Total Allstate Protection	364			387			1,227
Discontinued Lines and Coverages	75			39			57
Total Property-Liability	439			426			1,284
Protection Services	91			98			94
Total effect on claims and claims expense	$	530		$	524		$	1,378

(1)Decline reflects reestimates in claims and claims expense related subrogation settlements.

(2)Decline reflects reestimates in claims and claims expense related to the 2018 Camp Fire.

The Allstate Corporation 69

2020 Form 10-K Claims and Claims Expense Reserves

In 2020 and 2019, ceded premiums earned increased primarily due to increased catastrophe reinsurance premium rates. In 2020, ceded claims and claims expenses increased $6 million. In 2019, ceded claims and claims expenses decreased $854 million, primarily due to lower amounts related to the catastrophe reinsurance program, partially offset by increased activity with our shared economy business.

Our claim reserve development experience in 2020 is consistent with the prior two years as gross reserves have increased between 2-3% each year. The Governor of Michigan signed new legislation on May 30, 2019 to reform Michigan’s no-fault auto insurance system. For further discussion of these items, see Regulation, Indemnification Programs and Note 10 of the consolidated financial statements.


Michigan personal injury protection reserve and claim activity before and after the effects of MCCA recoverables
	For the years ended December 31,
	2020				2019				2018
($ in millions)	Gross		Net		Gross		Net		Gross		Net
Beginning reserves	$	6,106	$	647	$	5,975	$	605	$	5,799	$	565
Incurred claims and claims expense-current year	312		98		446		202		449		189
Incurred claims and claims expense-prior years	107		65		(16)		20		9		35
Claims and claims expense paid-current year (1)	(47)		(42)		(55)		(53)		(52)		(51)
Claims and claims expense paid-prior years (1)	(196)		(98)		(244)		(127)		(230)		(133)
Ending reserves (2)	$	6,282	$	670	$	6,106	$	647	$	5,975	$	605

(1)Paid claims and claims expenses reported in the table for the current and prior years, recovered from the MCCA totaled $103 million, $119 million and $98 million in 2020, 2019 and 2018, respectively.

(2)Gross reserves for the year ended December 31, 2020, comprise 82% case reserves and 18% IBNR. Gross reserves for the year ended December 31, 2019, comprise 85% case reserves and 15% IBNR. Gross reserves for the year ended December 31, 2018 comprise 88% case reserves and 12% IBNR. The MCCA does not require member companies to report ultimate case reserves.

Pending MCCA claims differ from most personal lines insurance pending claims as other personal lines policies have coverage limits and incurred claims settle in shorter periods. Claims are considered pending as long as payments are continuing pursuant to an outstanding MCCA claim, which can be for a claimant’s lifetime. Many of these injuries are catastrophic in nature, resulting in serious permanent disabilities that

require attendant and residential care for periods that may span decades. A significant portion of the ultimate incurred claim reserves and the recoverables can be attributed to a small number of catastrophic claims that occurred more than five years ago and continue to pay lifetime benefits.


Pending, new and closed claims for Michigan personal injury protection exposure
	For the years ended December 31,
Number of claims (1)	2020	2019	2018
Pending, beginning of year	4,942	4,812	4,983
New	5,896	7,807	7,858
Closed	(5,981)	(7,677)	(8,029)
Pending, end of year	4,857	4,942	4,812

(1)Total claims includes those covered and not covered by the MCCA indemnification.

As of December 31, 2020, approximately 1,500 of our pending claims have been reported to the MCCA, of which approximately 60% represents claims that occurred more than 5 years ago. There are 68 Allstate brand claims with reserves in excess of $15 million as of December 31, 2020, which comprise approximately 29% of the gross ending reserves in the table above. As a result, significant developments with a single claimant can result in volatility in prior year incurred claims.

Intercompany reinsurance We enter into certain intercompany insurance and reinsurance transactions in order to maintain underwriting control and manage insurance risk among various legal entities. These reinsurance agreements have been approved by the appropriate regulatory authorities. All significant intercompany transactions have been eliminated in consolidation.

Catastrophe reinsurance Our catastrophe reinsurance program is designed to address our exposure to catastrophes nationwide, utilizing our risk management methodology. Our program is designed

to provide reinsurance protection for catastrophes resulting from multiple perils including hurricanes, windstorms, hail, tornadoes, earthquakes, wildfires, and fires following earthquakes. These reinsurance agreements are part of our catastrophe management strategy, which is intended to provide our shareholders an acceptable return on the risks assumed in our property business, while providing protection to our customers.

We anticipate completing the placement of our 2021 nationwide catastrophe reinsurance program in the second quarter of 2021. We expect the program will be similar to our 2020 nationwide catastrophe reinsurance program, but will evaluate opportunities to improve the economic terms and conditions. We are also evaluating opportunities to include National General, which was acquired on January 4, 2021, into the program. For further details of the existing 2020 program, see Note 10 of the consolidated financial statements.

70 www.allstate.com

Allstate Life 2020 Form 10-K

Allstate Life Segment

Allstate Life consists of traditional, interest-sensitive and variable life insurance. In 2020, Allstate Life represented 4.4% of total revenue, 1.1% of total PIF and 4.2% of total adjusted net income. Our target customers are middle market consumers with family and financial protection needs.

On January 26, 2021, we announced an agreement to sell ALIC and certain affiliates, which represent approximately 90% of Allstate Life reserves for life-contingent contract benefits and contractholder funds. Allstate will retain ownership of ALNY unless an agreement can be reached with a third party to assume some or all of ALNY’s liabilities. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.


Summarized financial information
	For the years ended December 31,
($ in millions)	2020		2019		2018
Revenues
Premiums and contract charges	$	1,340	$	1,343	$	1,315
Other revenue	121		125		119
Net investment income	502		514		505
Realized capital gains (losses)	(10)		1		(14)
Total revenues	1,953		1,983		1,925

Costs and expenses
Contract benefits	(964)		(855)		(809)
Interest credited to contractholder funds	(329)		(299)		(285)
Amortization of DAC	(149)		(173)		(132)
Operating costs and expenses	(329)		(354)		(361)
Restructuring and related charges	(6)		(2)		(3)
Total costs and expenses	(1,777)		(1,683)		(1,590)


Income tax expense	(17)		(53)		(75)
Net income applicable to common shareholders	$	159	$	247	$	260

Adjusted net income	$	194	$	261	$	295
Realized capital gains (losses), after-tax	(9)		—		(11)
Valuation changes on embedded derivatives that are not hedged, after-tax	(34)		(9)		—
DAC and DSI amortization related to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax	8		(5)		(8)

Tax Legislation (expense) benefit	—		—		(16)
Net income applicable to common shareholders	$	159	$	247	$	260

Reserve for life-contingent contract benefits as of December 31	$	2,755	$	2,736	$	2,677

Contractholder funds as of December 31	$	8,013	$	7,805	$	7,656

Policies in force as of December 31 by distribution channel (in thousands)
Allstate agencies	1,765		1,816		1,831
Closed channels	98		107		114
Total	1,863		1,923		1,945

Net income applicable to common shareholders decreased 35.6% or $88 million in 2020 compared to 2019.

Adjusted net income decreased 25.7% or $67 million in 2020 compared to 2019, primarily due to higher contract benefits due to mortality associated with the Coronavirus, partially offset by lower operating costs and expenses.

Premiums and contract charges decreased 0.2% or $3 million in 2020 compared to 2019, primarily due to lower contract charges on interest-sensitive life insurance from a decline in business in force, partially offset by higher premiums from traditional life insurance. Approximately 85% of Allstate Life’s traditional life insurance premium relates to term life insurance products.

The Allstate Corporation 71

2020 Form 10-K Allstate Life

Effective March 31, 2020, in light of uncertainty around the impacts of the Coronavirus, we implemented temporary underwriting restrictions on new life insurance applications. We are approving standard and preferred rate classes only, with a maximum issue age of 69, and suspended sales of our simplified issue term life product that does not require

underwriting. While these restrictions are in place, we expect sales to slow. Allstate agents and exclusive financial specialists are able to offer coverage to customers outside these guidelines through nonproprietary carriers.


Premiums and contract charges by product
	For the years ended December 31,
($ in millions)	2020		2019		2018
Traditional life insurance premiums	$	633	$	630	$	600
Accident and health insurance premiums	2		2		2
Interest-sensitive life insurance contract charges (1)	705		711		713
Premiums and contract charges	$	1,340	$	1,343	$	1,315

(1)Contract charges related to the cost of insurance totaled $506 million, $499 million and $493 million in 2020, 2019 and 2018, respectively.

Other revenue decreased 3.2% or $4 million in 2020 compared to 2019, primarily due to lower gross dealer concessions earned on Allstate agents’ or exclusive financial specialists’ sales of non-proprietary products.

Contract benefits increased 12.7% or $109 million in 2020 compared to 2019, primarily due to higher claim experience related to Coronavirus on both interest-sensitive and traditional life insurance. Estimated Coronavirus claims, net of reinsurance and reserve releases, totaled $78 million in 2020.

Our annual review of assumptions in 2020 resulted in a $24 million increase in reserves primarily for secondary guarantees on interest-sensitive life insurance due to decreased projected interest rates that result in lower projected policyholder account values which increases guaranteed benefits. In 2019, the review resulted in a $5 million decrease in reserves primarily for secondary guarantees on interest-sensitive life insurance due to utilizing more refined policy level information and assumptions.

Benefit spread reflects our mortality and morbidity results using the difference between premiums and contract charges earned for the cost of insurance and contract benefits (“benefit spread”). Benefit spread decreased 35.9% to $177 million in 2020 compared to $276 million in 2019, primarily due to higher claim experience on interest-sensitive life insurance and an increase in reserves for secondary guarantees on interest-sensitive life insurance.

Interest credited to contractholder funds increased 10.0% or $30 million in 2020 compared to 2019. Valuation changes on derivatives embedded in equity-indexed universal life contracts that are not hedged increased interest credited to contractholder funds by $43 million in 2020 compared to $11 million in 2019. These valuation changes are primarily driven by changes in interest rates.

Investment spread reflects the difference between net investment income and interest credited to contractholder funds (“investment spread”) and is used to analyze the impact of net investment income and interest credited to contractholder funds on net income.


Investment spread
	For the years ended December 31,
($ in millions)	2020		2019		2018
Investment spread before valuation changes on embedded derivatives that are not hedged	$	216	$	226	$	220
Valuation changes on derivatives embedded in equity-indexed universal life contracts that are not hedged	(43)		(11)		—
Total investment spread	$	173	$	215	$	220

Investment spread before valuation changes on embedded derivatives that are not hedged decreased 4.4% in 2020 compared to 2019, primarily due to lower net investment income.

Amortization of DAC decreased 13.9% or $24 million in 2020 compared to 2019, primarily due to lower amortization from lower gross profits on interest-sensitive life insurance, partially offset by higher amortization acceleration for changes in assumptions.

72 www.allstate.com

Allstate Life 2020 Form 10-K


Components of amortization of DAC
	For the years ended December 31,
($ in millions)	2020		2019		2018
Amortization of DAC before amortization relating to realized capital gains and losses, valuation changes on embedded derivatives that are not hedged and changes in assumptions	$	78	$	109	$	117
Amortization relating to realized capital gains and losses (1) and valuation changes on embedded derivatives that are not hedged	(10)		6		10
Amortization acceleration for changes in assumptions (‘‘DAC unlocking’’)	81		58		5
Total amortization of DAC	$	149	$	173	$	132

(1)The impact of realized capital gains and losses on amortization of DAC is dependent upon the relationship between the assets that give rise to the gain or loss and the product liability supported by the assets. Fluctuations result from changes in the impact of realized capital gains and losses on actual and expected gross profits.

Our annual comprehensive review of assumptions underlying estimated future gross profits for our interest-sensitive life contracts covers assumptions for mortality, persistency, expenses, investment returns, including capital gains and losses, interest crediting rates to policyholders, and the effect of any hedges. An assessment is made of future projections to ensure the reported DAC balances reflect current expectations.

In 2020, the review resulted in an acceleration of DAC amortization (decrease to income) of $81 million. DAC amortization acceleration primarily related to the investment margin component of estimated gross profits and was due to lower projected future interest rates and investment returns compared to our previous expectations. This was partially offset by DAC

amortization deceleration (increase to income) for changes in the expense margin due to a decrease in projected expenses.

In 2019, the review resulted in an acceleration of DAC amortization of $58 million. DAC amortization acceleration primarily related to the investment margin component of estimated gross profits and was due to lower projected future interest rates and investment returns compared to our previous expectations. The acceleration related to benefit margin was due to decreased projected interest rates that result in lower projected policyholder account values which increases benefits on guaranteed products and more refined policy level information and assumptions.


Changes in DAC
($ in millions)	Traditional life and accident and health				Interest-sensitive life insurance				Total
	For the years ended December 31,
	2020		2019		2020		2019		2020		2019
Balance, beginning of year	$	508	$	489	$	571	$	811	$	1,079	$	1,300
Acquisition costs deferred	50		63		56		60		106		123
Amortization of DAC before amortization relating to realized capital gains and losses, valuation changes on embedded derivatives that are not hedged and changes in assumptions (1)	(44)		(44)		(34)		(65)		(78)		(109)
Amortization relating to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged (1)	—		—		10		(6)		10		(6)
Amortization acceleration for DAC unlocking (1)	—		—		(81)		(58)		(81)		(58)
Effect of unrealized capital gains and losses (2)	—		—		(127)		(171)		(127)		(171)
Ending balance	$	514	$	508	$	395	$	571	$	909	$	1,079

(1)Included as a component of amortization of DAC on the Consolidated Statements of Operations.

(2)Represents the change in the DAC adjustment for unrealized capital gains and losses. The DAC adjustment represents the amount by which the amortization of DAC would increase or decrease if the unrealized gains and losses in the respective product portfolios were realized.

Operating costs and expenses decreased 7.1% or $25 million in 2020 compared to 2019, primarily due to lower employee-related, marketing and technology costs.

Analysis of reserves and contractholder funds


Reserve for life-contingent contract benefits
	As of December 31,
($ in millions)	2020		2019
Traditional life insurance	$	2,643	$	2,612
Accident and health insurance	112		124
Reserve for life-contingent contract benefits	$	2,755	$	2,736

The Allstate Corporation 73

2020 Form 10-K Allstate Life

Contractholder funds represent interest-bearing liabilities arising from the sale of products such as interest-sensitive life insurance. The balance of contractholder funds is equal to the cumulative deposits received and interest credited to the contractholder less cumulative contract benefits, surrenders, withdrawals and contract charges for mortality or administrative expenses.


Change in contractholder funds
	For the years ended December 31,
($ in millions)	2020		2019		2018
Contractholder funds, beginning balance	$	7,805	$	7,656	$	7,608



Deposits	921		949		965

Interest credited	327		298		284

Benefits, withdrawals and other adjustments
Benefits	(230)		(233)		(232)
Surrenders and partial withdrawals	(225)		(261)		(259)
Contract charges	(704)		(702)		(704)
Net transfers from separate accounts	5		10		6
Other adjustments (1)	114		88		(12)
Total benefits, withdrawals and other adjustments	(1,040)		(1,098)		(1,201)
Contractholder funds, ending balance	$	8,013	$	7,805	$	7,656

(1)The table above illustrates the changes in contractholder funds, which are presented gross of reinsurance recoverables on the Consolidated Statements of Financial Position. The table above is intended to supplement our discussion and analysis of revenues, which are presented net of reinsurance on the Consolidated Statements of Operations. As a result, the net change in contractholder funds associated with products reinsured is reflected as a component of the other adjustments line.

Contractholder deposits decreased 3.0% in 2020 compared to 2019. The weighted average guaranteed crediting rate and weighted average current crediting rate for our interest-sensitive life insurance contracts, excluding variable life, are both 3.8% as of December 31, 2020.

74 www.allstate.com

Allstate Life 2020 Form 10-K

Allstate Life reinsurance ceded

In the normal course of business, we seek to limit aggregate and single exposure to losses on large risks by purchasing reinsurance. In addition, we have used reinsurance to effect the disposition of certain blocks of business.

We retain primary liability as a direct insurer for all risks ceded to reinsurers. As of December 31, 2020, approximately 12% of our face amount of life insurance in force was reinsured.


Reinsurance recoverables by reinsurer, net
	S&P financial strength rating (1)	Reinsurance recoverable on paid and unpaid benefits

		As of December 31,
($ in millions)		2020		2019
RGA Reinsurance Company	AA-	$	167	$	197
Swiss Re Life and Health America, Inc.	AA-	147		155
Transamerica Life Group	A+	75		75
Munich American Reassurance	AA-	70		80
Scottish Re (U.S.), Inc. (2)	N/A	66		73
John Hancock Life & Health Insurance Company	AA-	45		50
Triton Insurance Company (3)	N/A	40		43
American Health & Life Insurance Co. (3)	N/A	29		32
Security Life of Denver	A+	22		23
Lincoln National Life Insurance	AA-	21		27
SCOR Global Life	AA-	12		14
American United Life Insurance Company	AA-	9		11
Other (4)		18		17
Credit loss allowance (5)		(9)		(3)
Total		$	712	$	794

(1)N/A reflects no S&P rating available.

(2)In December 2018, the Delaware Insurance Commissioner placed Scottish Re (U.S.), Inc. under regulatory supervision and in March 2019, the reinsurer was placed in rehabilitation. We have been permitted to exercise certain setoff rights while the parties address any potential disputes. See Note 10 of the consolidated financial statements for further details.

(3)A.M. Best rating is B++.

(4)As of December 31, 2020 and 2019, the other category includes $11 million and $12 million, respectively, of recoverables due from reinsurers rated A- or better by S&P.

(5)Due to the adoption of the measurement of credit losses on financial instruments accounting standard, prior valuation allowance is now presented as an allowance for expected credit losses.

We continuously monitor the creditworthiness of reinsurers in order to determine our risk of recoverability on an individual and aggregate basis. In connection with the adoption of the measurement of credit losses on financial instruments accounting standard in 2020, the method of calculating the allowance for reinsurance recoverables changed. See Note 2 of the consolidated financial statements for additional details. No reinsurance recoverables have been written off in the three-years ended December 31, 2020.

We enter into certain intercompany reinsurance transactions for the Allstate Life operations in order to maintain underwriting control and manage insurance risk among various legal entities. These reinsurance agreements have been approved by the appropriate regulatory authorities. All significant intercompany transactions have been eliminated in consolidation.

The Allstate Corporation 75

2020 Form 10-K Allstate Benefits

Allstate Benefits Segment

Allstate Benefits offers voluntary benefits products, including life, accident, critical illness, hospital, short-term disability and other health products. In 2020, Allstate Benefits represented 2.6% of total revenue, 2.2% of total PIF and 2.1% of total adjusted net income. Our target customers are middle market consumers with family and financial protection needs. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.


Summarized financial information
	For the years ended December 31,
($ in millions)	2020		2019		2018
Revenues
Premiums and contract charges	$	1,094	$	1,145	$	1,135

Net investment income	78		83		77
Realized capital gains (losses)	8		12		(9)
Total revenues	1,180		1,240		1,203

Costs and expenses
Contract benefits	(516)		(601)		(595)
Interest credited to contractholder funds	(33)		(34)		(35)
Amortization of DAC	(177)		(161)		(145)
Operating costs and expenses	(322)		(285)		(278)

Restructuring and related charges	(1)		—		—
Total costs and expenses	(1,049)		(1,081)		(1,053)


Income tax expense	(28)		(35)		(32)
Net income applicable to common shareholders	$	103	$	124	$	118

Adjusted net income	$	96	$	115	$	124
Realized capital gains (losses), after-tax	7		9		(7)
DAC and DSI amortization related to realized capital gains and losses, after-tax	—		—		1




Net income applicable to common shareholders	$	103	$	124	$	118

Benefit ratio (1)	47.2		52.5		52.4

Operating expense ratio (2)	29.4		24.9		24.5

Reserve for life-contingent contract benefits as of December 31	$	1,028	$	1,034	$	1,007

Contractholder funds as of December 31	$	857	$	915	$	898

Policies in force as of December 31 (in thousands)	3,950		4,183		4,208

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

(2)Operating expense ratio is calculated as operating costs and expenses divided by premiums and contract charges.

Net income applicable to common shareholders decreased 16.9% or $21 million in 2020 compared to 2019.

Adjusted net income decreased 16.5% or $19 million in 2020 compared to 2019, primarily due to lower premiums and higher operating costs and expenses driven by a $41 million, pre-tax, write-off of capitalized software costs associated with a billing system in the second quarter of 2020, partially offset by lower contract benefits.

Premiums and contract charges decreased 4.5% or $51 million in 2020 compared to 2019, primarily due to decreases in disability products from the non-renewal of a large underperforming account in the fourth quarter of 2019, and decreased premium collections due to Coronavirus-related layoffs and furloughs, partially offset by an increase in contract charges associated with the annual review of assumptions.

76 www.allstate.com

Allstate Benefits 2020 Form 10-K


Premiums and contract charges by product
	For the years ended December 31,
($ in millions)	2020		2019		2018
Life	$	168	$	157	$	155
Accident	281		298		297
Critical illness	465		479		476
Hospital	102		99		93
Short-term disability	74		107		108
Other health	4		5		6
Premiums and contract charges	$	1,094	$	1,145	$	1,135

New annualized premium sales (annualized premiums at initial customer enrollment) decreased 24.5% to $281 million in 2020. The decrease in 2020 relates to the impact of the Coronavirus and increased competition.

Contract benefits decreased 14.1% or $85 million in 2020 compared to 2019, primarily due to lower reported claim experience on critical illness, disability and accident products, driven by limited activities and deferral of non-essential medical procedures from the Coronavirus and the non-renewal of a large underperforming account in the fourth quarter of 2019.

Benefit ratio decreased to 47.2 in 2020 compared to 52.5 in 2019 primarily due to lower contract benefits for critical illness and accident products and an increase in contract charges associated with the annual review of assumptions.

Amortization of DAC increased 9.9% or $16 million in 2020 compared to 2019, primarily due to an unfavorable adjustment associated with our annual review of assumptions.

Our annual comprehensive review of assumptions underlying estimated future gross profits for our interest-sensitive life contracts resulted in an acceleration of DAC amortization (decrease to income) of $28 million or 5.8% of the unamortized DAC asset balance in 2020 compared to $2 million in 2019. In both 2020 and 2019, DAC amortization acceleration primarily related to lower projected investment returns, partially offset by favorable projected mortality.


Changes in DAC
	For the years ended
($ in millions)	2020		2019
Balance, beginning of year	$	527	$	549
Acquisition costs deferred	120		142
Amortization of DAC before amortization relating to changes in assumptions (1)	(148)		(159)
Amortization relating to realized capital gains and losses (1)	(1)		—
Amortization acceleration for DAC unlocking (1)	(28)		(2)
Effect of unrealized capital gains and losses (2)	—		(3)
Ending balance	$	470	$	527

(1)Included as a component of amortization of DAC on the Consolidated Statements of Operations.


Operating costs and expenses
	For the years ended December 31,
($ in millions)	2020		2019		2018
Non-deferrable commissions	$	99	$	104	$	109
General and administrative expenses	223		181		169
Total operating costs and expenses	$	322	$	285	$	278

Operating costs and expenses increased 13.0% or $37 million in 2020 compared to 2019, primarily due to a $41 million, pre-tax, write-off of capitalized software costs associated with a billing system in the second quarter of 2020 and higher technology costs.

Operating expense ratio increased to 29.4 in 2020 compared to 24.9 in 2019, primarily due to a $41 million, pre-tax, software write-off.

The Allstate Corporation 77

2020 Form 10-K Allstate Benefits

Analysis of reserves


Reserve for life-contingent contract benefits
	As of December 31,
($ in millions)	2020		2019
Traditional life insurance	$	299	$	285
Accident and health insurance	729		749
Reserve for life-contingent contract benefits	$	1,028	$	1,034

Allstate Benefits reinsurance ceded

The vast majority of reinsurance relates to the disposition of long-term care and other closed blocks of business several years ago. We retain primary liability as a direct insurer for all risks ceded to reinsurers.


Reinsurance recoverables by reinsurer, net
	S&P financial strength rating	Reinsurance recoverable on paid and unpaid benefits

		As of December 31,
($ in millions)		2020		2019
Mutual of Omaha Insurance	A+	$	60	$	64
General Re Life Corporation	AA+	17		18
Other (1)		5		6
Credit loss allowance		(1)		—
Total		$	81	$	88

(1)As of both December 31, 2020 and 2019, the other category includes $4 million of recoverables due from reinsurers rated A- or better by S&P.

We enter into certain intercompany reinsurance transactions for the Allstate Benefits operations in order to maintain underwriting control and manage insurance risk among various legal entities. These reinsurance agreements have been approved by the appropriate regulatory authorities. All significant intercompany transactions have been eliminated in consolidation.

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Allstate Annuities Segment

Allstate Annuities consists primarily of deferred fixed annuities and immediate fixed annuities (including standard and sub-standard structured settlements). In 2020, Allstate Annuities represented 2.3% of total revenue and 0.1% of total PIF. We discontinued the sale of proprietary annuities over an eight-year period from 2006 to 2014, reflecting our expectations of declining returns. This segment is in run-off, and we manage it with a focus on increasing economic value through our investment strategy.

On January 26, 2021, we announced an agreement to sell ALIC and certain affiliates, which represent approximately 75% of Allstate Annuities reserves for life-contingent contract benefits and contractholder funds. Allstate will retain ownership of ALNY unless an agreement can be reached with a third party to assume some or all of ALNY’s liabilities. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.


Summarized financial information
	For the years ended December 31,
($ in millions)	2020		2019		2018
Revenues
Contract charges	$	10	$	13	$	15
Net investment income	761		917		1,096
Realized capital gains (losses)	279		346		(166)
Total revenues	1,050		1,276		945

Costs and expenses
Contract benefits	(763)		(583)		(569)
Interest credited to contractholder funds	(276)		(307)		(334)
Amortization of DAC	(4)		(7)		(7)
Operating costs and expenses	(25)		(29)		(31)
Restructuring and related charges	(2)		(1)		—
Total costs and expenses	(1,070)		(927)		(941)

Gain on disposition of operations	4		6		6
Income tax benefit (expense)	7		(73)		66
Net (loss) income applicable to common shareholders	$	(9)	$	282	$	76

Adjusted net (loss) income	$	(53)	$	10	$	131
Realized capital gains (losses), after-tax	221		274		(131)
Valuation changes on embedded derivatives that are not hedged, after-tax	(2)		(6)		3
Premium deficiency for immediate annuities, after-tax	(178)		—		—

Gain on disposition of operations, after-tax	3		4		4
Tax Legislation benefit	—		—		69
Net (loss) income applicable to common shareholders	$	(9)	$	282	$	76

Reserve for life-contingent contract benefits as of December 31	$	8,985	$	8,530	$	8,524

Contractholder funds as of December 31	$	8,343	$	8,972	$	9,817

Policies in force as of December 31 (in thousands)
Deferred annuities	104		114		127
Immediate annuities	73		78		84
Total	177		192		211

Net loss applicable to common shareholders was $9 million in 2020 compared to net income of $282 million in 2019. Net loss in 2020 includes a $178 million, after-tax, ($225 million, pre-tax) premium deficiency for immediate annuities with life contingencies recognized in the third quarter.

We periodically review the adequacy of reserves for immediate annuities with life contingencies using actual experience and current assumptions. In the event actual experience and current assumptions are adverse compared to the original assumptions and a

premium deficiency is determined to exist, the establishment of a premium deficiency reserve (“PDR”) is required.

In third quarter 2020, our long-term investment yield assumption was lowered, which resulted in the prior sufficiency changing to a deficiency. The deficiency was recognized as an increase in the reserve for life-contingent contract benefits. The original assumptions used to establish reserves were updated to reflect current assumptions, and the primary changes included mortality expectations, where

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2020 Form 10-K Allstate Annuities

annuitants are living longer than originally anticipated, and long-term investment yields.

Our annual review of assumptions in 2020 also resulted in a $5 million increase in reserves primarily for guaranteed withdrawal benefits on equity-indexed annuities due to higher projected guaranteed benefits. In 2019, the review resulted in no adjustment to reserves for guaranteed benefits.

Adjusted net loss was $53 million in 2020 compared to adjusted net income of $10 million in 2019, primarily due to lower net investment income, partially offset by lower contract benefits.

Net investment income decreased 17.0% or $156 million in 2020 compared to 2019, primarily due to a decline in market-based income driven by lower interest-bearing portfolio yields as well as lower performance-based investment results and lower average investment balances.

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

Net realized capital gains in 2020 primarily related to increased valuation of equity investments. Net

realized capital gains in 2019 primarily related to increased valuation of equity investments and gains on sales of fixed income securities.

Contract benefits increased 30.9% or $180 million in 2020 compared to 2019, primarily due to the premium deficiency for immediate annuities, partially offset by immediate annuity mortality experience that was favorable in comparison to the prior year.

Benefit spread reflects our mortality results using the difference between contract charges earned and contract benefits excluding the portion related to the implied interest on immediate annuities with life contingencies. This implied interest totaled $494 million and $479 million in 2020 and 2019, respectively. Total benefit spread was $(260) million and $(95) million in 2020 and 2019, respectively.

Interest credited to contractholder funds decreased 10.1% or $31 million in 2020 compared to 2019, primarily due to lower average contractholder funds.

Valuation changes on derivatives embedded in equity-indexed annuity contracts that are not hedged increased interest credited to contractholder funds by $3 million in 2020 compared to an increase of $8 million in 2019. These valuation changes are primarily driven by changes in interest rates.

Investment spread reflects the difference between net investment income and the sum of interest credited to contractholder funds and the implied interest on immediate annuities with life contingencies, which is included as a component of contract benefits and is used to analyze the impact of net investment income and interest credited to contractholders on net income.


Investment spread
	For the years ended December 31,
($ in millions)	2020		2019		2018
Investment spread before valuation changes on embedded derivatives that are not hedged	$	(6)	$	139	$	267
Valuation changes on derivatives embedded in equity-indexed annuity contracts that are not hedged	(3)		(8)		3
Total investment spread	$	(9)	$	131	$	270

Investment spread before valuation changes on embedded derivatives that are not hedged decreased $145 million in 2020 compared to 2019, primarily due to lower investment income, partially offset by lower interest credited to contractholder funds.

To further analyze investment spreads, the following table summarizes the weighted average investment yield on assets supporting product liabilities, interest crediting rates and investment spreads. Investment spreads may vary significantly between periods due to the variability in investment income, particularly for immediate fixed annuities where the investment portfolio includes performance-based investments.


Analysis of investment spread
	Weighted average investment yield						Weighted average interest crediting rate						Weighted average investment spreads
	2020		2019		2018		2020		2019		2018		2020		2019		2018
Deferred fixed annuities	4.0	%	4.3	%	4.1	%	2.7	%	2.7	%	2.8	%	1.3	%	1.6	%	1.3	%
Immediate fixed annuities with and without life contingencies	4.2		5.0		6.4		6.1		5.9		6.0		(1.9)		(0.9)		0.4

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The following table summarizes the weighted average guaranteed crediting rates and weighted average current crediting rates as of December 31, 2020 for certain fixed annuities where management has the ability to change the crediting rate, subject to a contractual minimum. Other products, including equity-indexed, variable and immediate annuities totaling $3.87 billion of contractholder funds, have been excluded from the analysis because management does not have the ability to change the crediting rate or the minimum crediting rate is not considered meaningful in this context.


Weighted average guaranteed crediting rates and weighted average current crediting rates
($ in millions)	Weighted average guaranteed crediting rates		Weighted average current crediting rates		Contractholder funds
Annuities with annual crediting rate resets	3.17	%	3.17	%	$	3,950
Annuities with multi-year rate guarantees (1):
Resettable in next 12 months	2.18		2.67		103
Resettable after 12 months	2.29		2.63		425

(1)These contracts include interest rate guarantee periods, the majority of which are 5 years.

Operating costs and expenses decreased 13.8% or $4 million in 2020 compared to 2019, primarily due to lower technology and employee-related costs. In July 2020, we entered into an agreement to transition the servicing of annuities to a third-party administrator. The migration is expected to be completed by the end of 2022. Restructuring charges were recorded in the third quarter of 2020 related to employee severance costs in connection with the migration.

Analysis of reserves and contractholder funds


Product liabilities
	As of December 31,
($ in millions)	2020		2019
Immediate fixed annuities with life contingencies
Sub-standard structured settlements and group pension terminations (1)	$	5,780	$	5,085
Standard structured settlements and SPIA (2)	3,138		3,367
Other	67		78
Reserve for life-contingent contract benefits	$	8,985	$	8,530


Deferred fixed annuities	$	6,033	$	6,499
Immediate fixed annuities without life contingencies	2,163		2,346
Other	147		127
Contractholder funds	$	8,343	$	8,972

(1)Comprises structured settlement annuities for annuitants with severe injuries or other health impairments which increased their expected mortality rate at the time the annuity was issued (“sub-standard structured settlements”) and group annuity contracts issued to sponsors of terminated pension plans.

(2)Comprises structured settlement annuities for annuitants with standard life expectancy (“standard structured settlements”) and single premium immediate annuities (“SPIA”) with life contingencies.

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2020 Form 10-K Allstate Annuities

Contractholder funds represent interest-bearing liabilities arising from the sale of products such as fixed annuities. The balance of contractholder funds is equal to the cumulative deposits received and interest credited to the contractholder less cumulative contract benefits, surrenders, withdrawals and contract charges for mortality or administrative expenses.


Changes in contractholder funds
	For the years ended December 31,
($ in millions)	2020		2019		2018
Contractholder funds, beginning balance	$	8,972	$	9,817	$	10,936



Deposits	20		16		15

Interest credited	273		304		331

Benefits, withdrawals and other adjustments
Benefits	(511)		(547)		(587)
Surrenders and partial withdrawals	(442)		(602)		(854)

Contract charges	(9)		(9)		(9)

Other adjustments (1)	40		(7)		(15)
Total benefits, withdrawals and other adjustments	(922)		(1,165)		(1,465)
Contractholder funds, ending balance	$	8,343	$	8,972	$	9,817

Contractholder funds decreased 7.0% in 2020, primarily due to the continued runoff of our deferred fixed annuity business. We discontinued the sale of annuities but still accept additional deposits on existing contracts.

Surrenders and partial withdrawals decreased 26.6% or $160 million in 2020 compared to 2019. 2018 had elevated surrenders on fixed annuities resulting from an increased number of contracts reaching the 30-45 day period during which there is no surrender charge. The surrender and partial withdrawal rate on deferred fixed annuities, based on the beginning of year contractholder funds, was 7.5% in 2020 compared to 9.2% in 2019.

Allstate Annuities reinsurance ceded

We ceded substantially all of the risk associated with our variable annuity business to Prudential Insurance Company of America (“Prudential”). Our reinsurance recoverables from Prudential totaled $1.28 billion and $1.29 billion as of December 31, 2020 and 2019, respectively. We also have reinsurance recoverables from other reinsurers of $14 million and $17 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020, the allowance for expected credit losses was $5 million. There was no valuation allowance as of December 31, 2019.

We retain primary liability as a direct insurer for all risks ceded to reinsurers. We continuously monitor the creditworthiness of reinsurers in order to determine our risk of recoverability on an individual and aggregate basis. In connection with the adoption of the measurement of credit losses on financial instruments accounting standard in 2020, the method of calculating the allowance for reinsurance recoverables changed. See Note 2 of the consolidated financial statements for additional details. No reinsurance recoverables have been written off in the three-years ended December 31, 2020.

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Investments 2020 Form 10-K

Investments

Overview and strategy The return on our investment portfolios is an important component of our ability to offer good value to customers, fund business improvements and create value for shareholders. Investment portfolios are held for Property-Liability, Protection Services, Allstate Life, Allstate Benefits, Allstate Annuities, and Corporate and Other operations. While taking into consideration the investment portfolio in aggregate, management of the underlying portfolios is significantly influenced by the nature of each respective business and its corresponding liability profile. For each business, we identify a strategic asset allocation which considers both the nature of the liabilities and the risk and return characteristics of the various asset classes in which we invest. This allocation is informed by our long-term business and market expectations, as well as other considerations such as risk appetite, portfolio diversification, duration, desired liquidity and capital. Within appropriate ranges relative to strategic allocations, tactical allocations are made in consideration of prevailing and potential future market conditions. We manage risks that involve uncertainty related to interest rates, credit spreads, equity returns and currency exchange rates.

The Property-Liability portfolio emphasizes protection of principal and consistent income generation, within a total return framework. This approach has produced competitive returns over the long term and is designed to ensure financial strength and stability for paying claims, while maximizing economic value and surplus growth. Products with lower liquidity needs, such as auto insurance and discontinued lines and coverages, and capital create capacity to invest in less liquid higher yielding fixed income securities, performance-based investments such as limited partnerships and equity securities. Products with higher liquidity needs, such as homeowners insurance, are invested primarily in high quality liquid fixed income securities.

The Protection Services portfolio is focused on protection of principal and consistent income generation, within a total return framework. The portfolio is largely comprised of fixed income securities with a lesser allocation to equity securities and short-term investments.

The Allstate Life portfolio is comprised of assets chosen to generate returns to support corresponding liabilities within an asset-liability framework that targets an appropriate return on capital. This portfolio is well diversified and primarily consists of longer duration fixed income securities and commercial mortgage loans.

The Allstate Benefits portfolio is focused on protection of principal and consistent income generation while targeting an appropriate return on capital. The portfolio is largely comprised of fixed income securities and commercial mortgage loans with a small allocation to equity securities.

The Allstate Annuities portfolio is managed to ensure the assets match the characteristics of the liabilities. For longer-term immediate annuity liabilities,

we invest primarily in performance-based investments such as limited partnerships and equity securities. For shorter-term annuity liabilities, we invest primarily in fixed income securities and commercial mortgage loans with maturity profiles aligned with liability cash flow requirements.

The pending sale of ALIC and certain affiliates is expected to decrease Allstate Life, Allstate Annuities and total consolidated portfolios by approximately 85%, 80% and 30%, respectively.

The Corporate and Other portfolio balances liquidity needs related to the corporate capital structure with the pursuit of returns.

Within each segment, 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.

Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk. Returns are impacted by a variety of factors including general macroeconomic and public market conditions as public benchmarks are often used in the valuation of underlying investments. Variability in earnings will also result from the performance of the underlying assets or business and the timing of sales of those investments. Earnings from the sales of investments may be recorded as net investment income or realized capital gains and losses. The portfolio, which primarily includes private equity and real estate with a majority being limited partnerships, is diversified across a number of characteristics, including managers or partners, vintage years, strategies, geographies (including international) and industry sectors or property types. These investments are generally illiquid in nature, often require specialized expertise, typically involve a third-party manager, and often enhance returns and income through transformation at the company or property level. A portion of these investments seek returns in markets or asset classes that are dislocated or special situations, primarily in private markets.

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2020 Form 10-K Investments

Coronavirus impacts

Ongoing uncertainty related to the future path of the pandemic has and may continue to create market volatility that has impacted the valuations, liquidity, prospects and risks of fixed income securities, equity securities and performance-based investments, primarily limited partnership interests, during 2020. Fixed income securities in certain sectors such as energy, automotive, retail, travel, lodging and airlines were negatively impacted. Although fixed income and equity security values generally increased since the first quarter, future investment results will depend on developments, including the duration and spread of the outbreak, preventive measures to combat the spread of the virus, and capital market conditions, including the pace of economic recovery and effectiveness of the fiscal and monetary policy responses. During the second quarter of 2020, short-term loan modifications were executed to grant temporary partial deferral of payments on $274 million of commercial mortgage loans with $2 million of modified payments outstanding as of December 31, 2020.

The ongoing impact of the Coronavirus on financial markets and the overall economy remain uncertain.

Some of the restrictions implemented to contain the pandemic have been relaxed, but reduced economic activity, limits on large gatherings and events and higher unemployment continue. Additionally, there is no way of predicting with certainty how long the pandemic might last, including the potential for restrictions being restored or new restrictions being implemented that could result in further economic volatility.

Impact of Low Interest Rate Environment

In January 2021, the Federal Open Market Committee (“FOMC”) maintained the target range for federal funds rate at 0 percent to 1/4 percent. The FOMC noted that the ongoing public health crisis will continue to weigh on economic activity, employment and inflation and poses considerable risks to the economic outlook. The FOMC expects to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.


Contractual maturities and yields of fixed income securities and mortgage loans for the next three years
	Fixed income securities				Mortgage loans
($ in millions)	Carrying value		Investment yield		Carrying value		Investment yield
2021	$	3,136	3.8	%	$	277	4.5	%
2022	5,317		2.9		388		4.3
2023	6,373		2.9		556		4.4

Investing activity will continue to decrease our portfolio yield as long as market yields remain below the current portfolio yield. Any decline in market-based portfolio yield is expected to result in lower net investment income in future periods. Interest-bearing investments are comprised of fixed income securities, mortgage loans, short-term investments and other investments, including bank and agent loans.

In the Allstate Annuities segment, the decline in the portfolio yield has been partially mitigated because a portion of the investment cash flows have been used to fund the managed reduction in spread-based liabilities. The decline in market-based portfolio yield and Allstate Annuities invested assets are expected to result in lower net investment income in future periods.

Investments Outlook

We plan to focus on the following priorities:

•Enhance investment portfolio returns through use of a dynamic capital allocation framework and focus on tax efficiency.

•Leverage our broad capabilities to shift the portfolio mix to earn higher risk-adjusted returns on capital.

•Invest for the specific needs and characteristics of Allstate’s businesses, including its corresponding liability profile.

We continue to increase performance-based investments in our Property-Liability portfolio, consistent with our ongoing strategy to have a greater proportion of return derived from idiosyncratic asset or operating performance.

Invested assets and market-based income are expected to decline with reductions in contractholder funds for the Allstate Annuities segment.

Income related to performance-based investments will result in variability of earnings for the Property-Liability and Allstate Annuities portfolios.

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Portfolio composition and strategy by reporting segment (1)
	As of December 31, 2020
($ in millions)	Property-Liability			Protection Services			Allstate Life			Allstate Benefits			Allstate Annuities			Corporate and Other			Total
Fixed income securities (2)	$	38,793		$	1,604		$	9,076		$	1,485		$	14,713		$	683		$	66,354
Equity securities (3)	2,598			97			133			132			1,409			341			4,710
Mortgage loans, net	568			—			1,476			178			1,853			—			4,075
Limited partnership interests	4,563			—			—			—			3,046			—			7,609
Short-term investments (4)	2,104			121			367			36			626			4,546			7,800
Other, net	1,508			—			1,354			181			644			2			3,689
Total	$	50,134		$	1,822		$	12,406		$	2,012		$	22,291		$	5,572		$	94,237

Percent to total	53.2		%	1.9		%	13.2		%	2.1		%	23.7		%	5.9		%	100.0		%



Market-based	$	44,712		$	1,822		$	12,406		$	2,012		$	18,963		$	5,570		$	85,485
Performance-based	5,422			—			—			—			3,328			2			8,752
Total	$	50,134		$	1,822		$	12,406		$	2,012		$	22,291		$	5,572		$	94,237

(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 $36.52 billion, $1.51 billion, $8.05 billion, $1.36 billion, $13.37 billion, $642 million and $61.45 billion for Property-Liability, Protection Services, Allstate Life, Allstate Benefits, Allstate Annuities, Corporate and Other, and in total, respectively.

(3)Equity securities are carried at fair value. The fair value of equity securities, held as of December 31, 2020, was $857 million in excess of cost. These net gains were primarily concentrated in the technology and consumer goods sectors and in equity index funds. Equity securities include $1.29 billion of funds with underlying investments in fixed income securities as of December 31, 2020.

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

Investments totaled $94.24 billion as of December 31, 2020, increasing from $88.36 billion as of December 31, 2019, primarily due to higher fixed income valuations, positive operating cash flows and issuance of senior

debt, partially offset by common share repurchases, dividends paid to shareholders, net reductions in contractholder funds and repayment of preferred stock.


Portfolio composition by investment strategy
	As of December 31, 2020
($ in millions)	Market- based			Performance-based			Total
Fixed income securities	$	66,242		$	112		$	66,354
Equity securities	4,342			368			4,710
Mortgage loans, net	4,075			—			4,075
Limited partnership interests	410			7,199			7,609
Short-term investments	7,800			—			7,800
Other, net	2,616			1,073			3,689
Total	$	85,485		$	8,752		$	94,237

Percent to total	90.7		%	9.3		%	100.0		%

Unrealized net capital gains and losses
Fixed income securities	$	4,901		$	2		$	4,903


Limited partnership interests	—			(4)			(4)

Other	(3)			—			(3)
Total	$	4,898		$	(2)		$	4,896

During 2020, strategic actions focused on optimizing portfolio yield, return and risk in the low interest rate environment.

We continued to increase performance-based investments in the Property-Liability portfolio.

We increased the maturity profile of fixed income securities in our Allstate Life and Allstate Annuities portfolios to a duration of 6.4 years and 5.3 years, respectively, while maintaining duration at 5.0 years in our Property-Liability portfolio.

In the Allstate Annuities portfolio, invested assets and market-based income declined with reductions in contractholder funds. Performance-based investments and equity securities will continue to be allocated primarily to the longer-term immediate annuity liabilities to reduce the risk that investment returns are below levels required to meet their funding needs while shorter-term annuity liabilities will be invested in market-based investments.

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2020 Form 10-K Investments

Fixed income securities


Fixed income securities by type
	Fair value as of December 31,
($ in millions)	2020		2019
U.S. government and agencies	$	3,222	$	5,086
Municipal	9,587		8,620
Corporate	51,142		43,078
Foreign government	1,055		979
Asset-backed securities (“ABS”)	1,270		862
Mortgage-backed securities (“MBS”)	78		419
Total fixed income securities	$	66,354	$	59,044

Fixed income securities are rated by third-party credit rating agencies or are internally rated. As of December 31, 2020, 86.4% 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 consolidated financial statements.


Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating
	December 31, 2020
	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	$	3,222	$	93	$	—	$	—	$	—	$	—
Municipal	9,246		794		294		35		5		1
Corporate
Public	13,902		1,233		19,071		1,604		2,894		219
Privately placed	4,121		316		5,194		343		2,763		115
Total corporate	18,023		1,549		24,265		1,947		5,657		334
Foreign government	1,039		41		11		1		5		—
ABS	1,165		8		18		(2)		17		—
MBS	44		3		25		—		2		—
Total fixed income securities	$	32,739	$	2,488	$	24,613	$	1,981	$	5,686	$	335

	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	$	—	$	—	$	—	$	—	$	3,222	$	93
Municipal	11		1		31		4		9,587		835
Corporate
Public	531		7		46		(1)		36,444		3,062
Privately placed	2,348		66		272		14		14,698		854
Total corporate	2,879		73		318		13		51,142		3,916
Foreign government	—		—		—		—		1,055		42
ABS	13		(1)		57		5		1,270		10
MBS	—		—		7		4		78		7
Total fixed income securities	$	2,903	$	73	$	413	$	26	$	66,354	$	4,903

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Investments 2020 Form 10-K

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

Our practice for acquiring and monitoring municipal bonds is predominantly based on the underlying credit quality of the primary obligor. We currently rely on the primary obligor to pay all contractual cash flows and are not relying on bond insurers for payments. As a result of downgrades in the insurers’ credit ratings, the ratings of the insured municipal bonds generally reflect the underlying ratings of the primary obligor.

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.

Our portfolio of privately placed securities is diversified by issuer, industry sector and country. The portfolio is made up of 561 issuers. Privately placed corporate obligations may contain structural security features such as financial covenants and call protections that provide investors greater protection against credit deterioration, reinvestment risk or fluctuations in interest rates than those typically found in publicly registered debt securities. Additionally, investments in these securities are made after due diligence of the issuer, typically including discussions with senior management and on-site visits to company facilities. Ongoing monitoring includes direct periodic dialogue with senior management of the issuer and continuous monitoring of operating performance and financial position. Every issue not rated by an independent rating agency is internally rated with a formal rating affirmation at least once a year. Liquidity of securities issued by public entities in unregistered form is similar to public debt markets.

Our corporate bonds portfolio includes $8.85 billion of below investment grade bonds, $5.38 billion of which are privately placed. These securities are diversified by issuer and industry sector. The below investment grade corporate bonds portfolio is made up of 378 issuers. We employ fundamental analyses of issuers and sectors along with macro and asset class views to identify investment opportunities. This results in a portfolio with broad exposure to the high yield market with an emphasis on idiosyncratic positions reflective of our views of market conditions and opportunities.

Foreign government securities include 90.8% of Canadian governmental and provincial securities (all of which are held by our Canadian companies), 8.6% backed by the U.S. government and 0.6% that are highly diversified in other foreign governments.

ABS and MBS are structured securities that are primarily collateralized by consumer or corporate borrowings and residential and commercial real estate loans. The cash flows from the underlying collateral paid to the securitization trust are generally applied in a pre-determined order and are designed so that each security issued by the trust, typically referred to as a “class”, qualifies for a specific original rating.

For example, the “senior” portion or “top” of the capital structure, or rating class, which would originally qualify for a rating of Aaa typically has priority in receiving principal repayments on the underlying collateral and retains this priority until the class is paid in full. In a sequential structure, underlying collateral principal repayments are directed to the most senior rated Aaa class in the structure until paid in full, after which principal repayments are directed to the next most senior Aaa class in the structure until it is paid in full. Senior Aaa classes generally share any losses from the underlying collateral on a pro-rata basis after losses are absorbed by classes with lower original ratings.

The payment priority and class subordination included in these securities serves as credit enhancement for holders of the senior or top portions of the structures. These securities continue to retain the payment priority features that existed at the origination of the securitization trust. Other forms of credit enhancement may include structural features embedded in the securitization trust, such as overcollateralization, excess spread and bond insurance. The underlying collateral may contain fixed interest rates, variable interest rates (such as adjustable rate mortgages), or both fixed and variable rate features.

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.

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 consolidated financial statements.

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2020 Form 10-K Investments

Limited partnership interests include $6.13 billion of interests in private equity funds, $1.07 billion of interests in real estate funds and $410 million of interests in other funds as of December 31, 2020. We have commitments to invest additional amounts in limited partnership interests totaling $2.93 billion as of December 31, 2020.


Private equity limited partnerships by sector
(% of carrying value)	December 31, 2020
Industrial	18.5	%
Consumer staples	11.8
Consumer discretionary	10.8
Information technology	10.2
Utilities	10.1
Healthcare	9.6
Other	29.0
Total	100.0	%


Real estate limited partnerships by sector
(% of carrying value)	December 31, 2020
Industrial	31.3	%
Residential	23.9
Office	13.2
Other	31.6
Total	100.0	%

Short-term investments primarily comprise money market funds, commercial paper, U.S. Treasury bills and other short-term investments, including securities lending collateral of $1.24 billion.

Other investments primarily comprise $1.02 billion of bank loans, $974 million of real estate, $754 million of policy loans, $631 million of agent loans (loans issued to exclusive Allstate agents) and $204 million of derivatives as of December 31, 2020. For further detail on our use of derivatives, see Note 7 of the consolidated financial statements.


Direct real estate investments by sector
(% of carrying value)	December 31, 2020
Residential	43.9	%
Retail	14.2
Agriculture	12.6
Industrial	12.1
Timber	10.6
Other	6.6
Total	100.0	%


Unrealized net capital gains (losses)
	As of December 31,
($ in millions)	2020		2019
U.S. government and agencies	$	93	$	115
Municipal	835		540
Corporate	3,916		1,988
Foreign government	42		11
ABS	10		2
MBS	7		95



Fixed income securities	4,903		2,751
Derivatives	(3)		(3)
Equity method of accounting (“EMA”) limited partnerships	(4)		(4)
Unrealized net capital gains and losses, pre-tax	$	4,896	$	2,744

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Gross unrealized gains (losses) on fixed income securities by type and sector
	As of December 31, 2020
	Amortized cost, net		Gross unrealized				Fair value
($ in millions)			Gains		Losses
Corporate
Transportation
Airlines	$	341	$	12	$	(9)	$	344
Railroad and other	1,588		198		(9)		1,777
Total transportation	1,929		210		(18)		2,121
Banking	5,352		322		(14)		5,660
Energy
Midstream	1,662		128		(1)		1,789
Integrated	517		59		—		576
Independent/upstream	312		36		(2)		346
Other	240		16		(4)		252
Total energy	2,731		239		(7)		2,963
Financial services
Finance companies	494		31		(4)		521
Life insurance	903		64		(1)		966
Other	1,436		111		(1)		1,546
Total financial services	2,833		206		(6)		3,033
Utilities	5,948		622		(6)		6,564
Communications	3,691		328		(6)		4,013
Consumer goods
Cyclical
Automotive	1,706		109		—		1,815
Gaming, lodging, and leisure	711		44		—		755
Retailers	1,185		122		—		1,307
Restaurants	472		39		—		511
Other	1,078		84		(1)		1,161
Total cyclical	5,152		398		(1)		5,549
Non-cyclical	7,991		639		(2)		8,628
Total consumer goods	13,143		1,037		(3)		14,177
Capital goods	5,259		449		(2)		5,706
Technology	3,662		313		(2)		3,973
Basic industry	2,378		240		(1)		2,617
Other	300		15		—		315
Total corporate fixed income portfolio	47,226		3,981		(65)		51,142
U.S. government and agencies	3,129		94		(1)		3,222
Municipal	8,752		837		(2)		9,587
Foreign government	1,013		42		—		1,055
ABS	1,260		15		(5)		1,270
MBS	71		7		—		78
Total fixed income securities	$	61,451	$	4,976	$	(73)	$	66,354

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Gross unrealized gains (losses) on fixed income securities by type and sector
	December 31, 2019
	Amortized cost		Gross unrealized				Fair value
($ in millions)			Gains		Losses
Corporate
Transportation
Airlines	$	418	$	12	$	—	$	430
Railroad and other	1,613		120		—		1,733
Total transportation	2,031		132		—		2,163
Banking	4,610		143		(14)		4,739
Energy
Midstream	1,570		77		(4)		1,643
Independent/upstream	422		19		(10)		431
Integrated	406		32		—		438
Other	237		11		—		248
Total energy	2,635		139		(14)		2,760
Financial services
Finance companies	582		24		—		606
Life insurance	725		30		—		755
Other	1,169		53		(2)		1,220
Total financial services	2,476		107		(2)		2,581
Utilities	5,197		385		(6)		5,576
Communications	2,721		158		(2)		2,877
Consumer goods
Cyclical
Gaming, lodging and leisure	596		28		—		624
Automotive	1,463		42		(1)		1,504
Retailers	920		52		—		972
Restaurants	390		19		—		409
Other	1,056		49		(3)		1,102
Total cyclical	4,425		190		(4)		4,611
Non-cyclical	7,112		316		(1)		7,427
Total consumer goods	11,537		506		(5)		12,038
Capital goods	4,945		229		(1)		5,173
Technology	2,765		112		(1)		2,876
Basic industry	1,897		114		(2)		2,009
Other	276		10		—		286
Total corporate fixed income portfolio	41,090		2,035		(47)		43,078
U.S. government and agencies	4,971		141		(26)		5,086
Municipal	8,080		551		(11)		8,620
Foreign government	968		16		(5)		979
ABS	860		8		(6)		862
MBS	324		96		(1)		419
Total fixed income securities	$	56,293	$	2,847	$	(96)	$	59,044

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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Equity securities by sector
($ in millions)	December 31, 2020						December 31, 2019
	Cost		Over (under) cost		Fair value		Cost		Over (under) cost		Fair value
Energy	$	112	$	6	$	118	$	275	$	15	$	290
Utilities	53		13		66		116		38		154
Transportation	37		13		50		81		32		113
Capital goods	157		16		173		331		91		422
Basic industry	47		26		73		135		40		175
Other (1)	1,260		549		1,809		2,526		1,062		3,588
Funds
Fixed income	1,228		65		1,293		1,727		62		1,789
Equities	959		169		1,128		1,377		254		1,631
Total funds	2,187		234		2,421		3,104		316		3,420
Total equity securities	$	3,853	$	857	$	4,710	$	6,568	$	1,594	$	8,162

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


Net investment income
	For the years ended December 31,
($ in millions)	2020		2019		2018
Fixed income securities	$	2,136	$	2,175	$	2,077
Equity securities	98		206		170
Mortgage loans	220		220		217
Limited partnership interests	338		471		705
Short-term investments	23		102		73
Other	251		262		272
Investment income, before expense	3,066		3,436		3,514
Investment expense
Investee level expenses (1)	(59)		(81)		(71)
Securities lending expense	(6)		(40)		(28)
Operating costs and expenses	(148)		(156)		(175)
Total investment expense	(213)		(277)		(274)
Net investment income	$	2,853	$	3,159	$	3,240

Market-based	$	2,663	$	2,893	$	2,734
Performance-based	403		543		780
Investment income, before expense	$	3,066	$	3,436	$	3,514

(1)Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses.

Net investment income decreased 9.7% or $306 million in 2020 compared to 2019, primarily due to a decline in market-based income driven by lower interest-bearing portfolio yields and lower performance-based results, primarily from limited partnerships.

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2020 Form 10-K Investments


Performance-based investment income
	For the years ended December 31,
($ in millions)	2020		2019		2018
Limited partnerships
Private equity	$	297	$	330	$	582
Real estate	38		138		123
Performance-based - limited partnerships	335		468		705

Non-limited partnerships
Private equity	(12)		9		9
Real estate	80		66		66
Performance-based - non-limited partnerships	68		75		75

Total
Private equity	285		339		591
Real estate	118		204		189
Total performance-based	$	403	$	543	$	780

Investee level expenses (1)	$	(55)	$	(74)	$	(64)

(1)Investee level expenses include depreciation and asset level operating expenses reported in investment expense. Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses.

Performance-based investment income decreased 25.8% or $140 million in 2020 compared to 2019, due to lower valuations of real estate and private equity investments, partially offset by net gains on sales of underlying investments.

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
	For the year December 31,
($ in millions)	2020		2019		2018
Sales (1)	$	1,017	575		$	(215)
Credit losses (2)
Fixed income securities	(5)		(14)		(10)

Mortgage loans	(38)		—		—
Limited partnership interests	(10)		(6)		(3)
Other investments	(27)		(27)		(1)
Total credit losses	(80)		(47)		(14)
Valuation of equity investments - appreciation (decline):
Equity securities	321		1,117		(567)
Equity fund investments in fixed income securities	25		93		(27)
Limited partnerships (3)	20		162		(97)
Total valuation of equity investments	366		1,372		(691)
Valuation and settlements of derivative instruments	53		(15)		43
Realized capital gains and losses, pre-tax	1,356		1,885		(877)
Income tax (expense) benefit	(293)		(397)		189
Realized capital gains and losses, after-tax	$	1,063	$	1,488	$	(688)








Market-based	$	1,288	$	1,750	$	(946)
Performance-based	68		135		69
Realized capital gains and losses, pre-tax	$	1,356	$	1,885	$	(877)

(1)Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses.

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

Sales in 2020 related primarily to fixed income securities in connection with ongoing portfolio management. Sales in 2019 related primarily to fixed income securities in connection with ongoing portfolio management, as well as gains from limited partnerships.

Valuation and settlements of derivative instruments in 2020 primarily comprised gains on interest rate futures used for asset replication and equity futures used for risk management due to a decrease in indices in first quarter 2020,

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partially offset by losses on interest rate futures used for risk management and foreign currency contracts due to weakening of the U.S. dollar in the second half of 2020. 2019 primarily comprised losses on equity options and futures used for risk management, partially offset by gains on interest rate futures and total return swaps used for asset replication due to increases in equity indices.


Realized capital gains (losses) for performance-based investments
	For the years ended December 31,
($ in millions)	2020		2019		2018
Sales (1)	$	39	$	103	$	7
Credit losses (2)	(10)		(6)		(3)
Valuation of equity investments	60		31		36
Valuation and settlements of derivative instruments	(21)		7		29
Total performance-based	$	68	$	135	$	69

(1)Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses.

Realized capital gains for performance-based investments in 2020 primarily related to increased valuation of equity investments and gains on sales of real estate investments, partially offset by losses on valuation and settlement of derivative instruments. 2019 primarily related to gains on sales of investments in directly held real estate, a gain on the sale of a limited partnership and increased valuation of equity investments.

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2020 Form 10-K Market Risk

Market Risk

Market risk is the risk that we will incur losses due to adverse changes in interest rates, credit spreads, equity prices, commodity prices or currency exchange rates. Adverse changes to these rates and prices may occur due to changes in fiscal policy, the economic climate, the liquidity of a market or market segment, insolvency or financial distress of key market makers or participants or changes in market perceptions of credit worthiness or risk tolerance. Our primary market risk exposures are to changes in interest rates, credit spreads and equity prices. We also have direct and indirect exposure to commodity price changes through our diversified investments in timber, agriculture, infrastructure and energy primarily held in limited partnership interests and consolidated subsidiaries.

The active management of market risk is integral to our results of operations. We may use the following approaches to manage exposure to market risk within defined tolerance ranges:

1)Rebalancing existing asset or liability portfolios

2)Changing the type of investments purchased in the future

3)Using derivative instruments to modify the market risk characteristics of existing assets and liabilities or assets expected to be purchased

Overview In formulating and implementing guidelines for investing funds, we seek to earn attractive risk-adjusted returns that enhance our ability to offer competitive rates and prices to customers while contributing to stable profits and long-term capital growth. Accordingly, our investment decisions and objectives are informed by the underlying risks and product profiles. Investment policies define the overall framework for managing market and other investment risks, including accountability and controls over risk management activities. Subsidiaries that conduct investment activities follow policies that have been approved by their respective boards of directors and which specify the investment limits and strategies that are appropriate given the liquidity, surplus, product profile and regulatory requirements of the subsidiary. Executive oversight of investment activities is conducted primarily through the subsidiaries’ boards of directors and legal entity investment committees. The Enterprise Risk and Return Council (“ERRC”) oversees the aggregate risk of Allstate and its subsidiaries. Working in conjunction with the board or the investment committee of each subsidiary, as applicable, the ERRC evaluates the risk tolerance of each subsidiary and determines the aggregate risk tolerance of the enterprise.

For life and annuity products, the asset-liability management (“ALM”) policies further define the overall framework for managing market and investment risks and are approved by the subsidiaries’ respective boards of directors. ALM focuses on strategies to enhance yields, mitigate market risks and optimize capital to improve profitability and returns while incorporating future expected cash requirements to repay liabilities. These ALM policies specify limits,

ranges or targets for investments that best meet business objectives in light of the unique demands and characteristics of the product liabilities and are intended to result in a prudent, methodical and effective adjudication of market risk and return. The pending sale of ALIC and certain affiliates is expected to decrease Allstate Life, Allstate Annuities and total consolidated portfolios by approximately 85%, 80% and 30%, respectively.

We use widely-accepted quantitative and qualitative approaches to measure, monitor and manage market risk. We evaluate our market risk exposure using multiple measures including but not limited to:


• Duration, a measure of the price sensitivity of assets and liabilities to changes in interest rates
• Value-at-risk, a statistical estimate of the probability that the change in fair value of a portfolio will exceed a certain amount over a given time horizon
• Scenario analysis, an estimate of the potential changes in the fair value of a portfolio that could occur under hypothetical market conditions defined by changes to multiple market risk factors: interest rates, credit spreads, equity prices or currency exchange rates
• Sensitivity analysis, an estimate of the potential changes in the fair value of a portfolio that could occur using hypothetical shocks to a market risk factor. The selection of measures used in our sensitivity analysis should not be construed as our prediction of future market events, but only as an illustration of the potential effect of such an event.

In general, we establish investment portfolio asset allocation and market risk limits based upon a combination of these measures. The asset allocation limits place restrictions on the total funds that may be invested within an asset class. Comprehensive day-to-day management of market risk within defined tolerance ranges occurs as portfolio managers buy and sell within their respective markets based upon the acceptable boundaries established by investment policies. Although we apply a similar overall philosophy to market risk, the underlying business frameworks and the accounting and regulatory environments may differ between our products and therefore affect investment decisions and risk parameters.

Interest rate risk is the risk that we will incur a loss due to adverse changes in interest rates relative to the characteristics of our interest-bearing assets and liabilities. Interest rate risk includes risks related to changes in U.S. Treasury yields and other key risk-free reference yields. This risk arises from many of our primary activities, as we invest substantial funds in interest-sensitive assets and issue interest-sensitive liabilities. Changes in interest rates can have favorable and unfavorable effects on our results. For example, increases in rates can improve investment income, but decrease the fair value of our fixed income securities portfolio and increase policyholder surrenders requiring us to liquidate assets. Decreases in rates could increase the fair value of our fixed income securities portfolio while decreasing investment

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income due to reinvesting at lower market yields and accelerating pay-downs and prepayments of certain investments.

For our corporate debt, we monitor market interest rates and evaluate refinancing opportunities as maturity dates approach. To mitigate this risk, we ladder the maturity dates of our debt. For our noncumulative perpetual preferred stock, we monitor market dividend rates and evaluate opportunities to redeem or refinance on or after specified dates. For further detail regarding our debt and our preferred stock, see Note 12 of the consolidated financial statements and the Capital Resources and Liquidity section of this Item.

We manage the interest rate risk in our assets relative to the interest rate risk in our liabilities and our assessment of overall economic and capital risk. One of the measures used to quantify this exposure is duration. The difference in the duration of our assets relative to our liabilities is our duration gap. To calculate the duration gap between assets and liabilities, we project asset and liability cash flows and calculate their net present value using a risk-free market interest rate adjusted for credit quality, sector attributes, liquidity and other specific risks. Duration is calculated by revaluing these cash flows at alternative interest rates and determining the percentage change in aggregate fair value. The cash flows used in this calculation include the expected maturity and repricing characteristics of our derivative financial instruments, all other financial instruments, and certain other items including unearned premiums, claims and claims expense reserves, annuity liabilities and other interest-sensitive liabilities.

The projections include assumptions (based upon historical market experience and our experience) that reflect the effect of changing interest rates on the prepayment, lapse, leverage or option features of instruments, where applicable. The preceding assumptions relate primarily to callable municipal and corporate bonds, fixed rate single and flexible premium deferred annuities, mortgage-backed securities and municipal housing bonds. Additionally, the calculations include assumptions regarding the renewal of property and casualty products.

As of December 31, 2020, the difference between our asset and liability duration was a (2.11) gap compared to a (1.48) gap as of December 31, 2019. The calculation excludes traditional and interest-sensitive life insurance and accident and health insurance products that are not considered financial instruments. A negative duration gap indicates that the fair value of our liabilities is more sensitive to interest rate movements than the fair value of our assets, while a positive duration gap indicates that the fair value of our assets is more sensitive to interest rate movements than the fair value of our liabilities. Due to the relatively short duration of our property and casualty liabilities, primarily related to auto and homeowners claims, the investments generally maintain a positive duration gap between assets and liabilities. In contrast, for our annuity products the

duration gap may be positive or negative as the assets and liabilities vary based on the characteristics of the products in-force and investing activity. As of December 31, 2020, property and casualty products had a positive duration gap while annuity products had a negative duration gap.

To reduce the risk that investment returns are below levels required to meet the funding needs of certain liabilities, we are executing our performance-based strategy that supplements market risk with idiosyncratic risk. We are using these investments, in addition to public equity securities, to support a portion of our property and casualty products and long-term annuity liabilities. Shorter-term annuity liabilities will continue to be invested in market-based investments to generate cash flows that will fund future claims, benefits and expenses, and that will earn stable returns across a wide variety of interest rate and economic scenarios. Performance-based investments and public equity securities are generally not interest-bearing; accordingly, using them to support interest-bearing liabilities contributes toward a negative duration gap.


Interest rate shock analysis (1)
	As of December 31,
($ in millions)	2020		2019
Increase in fair value of the assets net of liabilities (2)	$	1,981	$	1,209

(1)Represents an immediate, parallel increase of 100 basis points based on information and assumptions used in the duration calculations and market interest rates as of December 31, 2020.

(2)Estimate excludes traditional and interest-sensitive life insurance and accident and health insurance products that are not considered financial instruments. The assets supporting these products totaled $12.58 billion and $12.14 billion as of December 31, 2020 and 2019, respectively. Based on assumptions described above, these assets would decrease in value by $673 million as of December 31, 2020 compared to a decrease of $649 million as of December 31, 2019.

To the extent that conditions differ from the assumptions we used in these calculations, duration and rate shock measures could be significantly impacted. Additionally, our calculations assume the current relationship between short-term and long-term interest rates (the term structure of interest rates) will remain constant over time. As a result, these calculations may not fully capture the effect of non-parallel changes in the term structure of interest rates or large changes in interest rates.

Credit spread risk is the risk that we will incur a loss due to adverse changes in credit spreads (“spreads”). Credit spread is the additional yield on fixed income securities and loans above the risk-free rate (typically referenced as the yield on U.S. Treasury securities) that market participants require to compensate them for assuming credit, liquidity or prepayment risks. The magnitude of the spread will depend on the likelihood that a particular issuer will default. This risk arises from many of our primary activities, as we invest substantial funds in spread-sensitive fixed income assets. We manage the spread

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risk in our assets. One of the measures used to quantify this exposure is spread duration. Spread duration measures the price sensitivity of the assets to changes in spreads. For example, if spreads increase 100 basis points, the fair value of an asset exhibiting a spread duration of 5 is expected to decrease in value by 5%.

Spread duration is calculated similarly to interest rate duration. As of December 31, 2020, the spread duration was 4.95 compared to 4.60 as of December 31, 2019.


Credit spread shock analysis (1)
	As of December 31,
($ in millions)	2020		2019
Decrease in net fair value of the assets (2)	$	3,489	$	2,877

(1)Represents an immediate, parallel increase of 100 basis points across all asset classes, industry sectors and credit ratings based on information and assumptions used in the spread duration calculations and market interest rates as of December 31, 2020.

(2)Reflects effects of tactical positions that include the use of credit default swaps to manage spread risk.

Equity price risk is the risk that we will incur losses due to adverse changes in the general levels of the markets.

Equity investments As of December 31, 2020, we held $3.76 billion in equity securities, excluding those with fixed income securities as their underlying investments, and limited partnership interests where the underlying assets are predominately public equity securities, compared to $7.28 billion as of December 31, 2019. 62.6% of the common stocks and other investments with public equity risk supported property and casualty products as of December 31, 2020, compared to 80.4% as of December 31, 2019. As of December 31, 2020, these investments had an equity market portfolio beta of 1.07, compared to a beta of 1.02 as of December 31, 2019. Beta represents a widely used methodology to describe, quantitatively, an investment’s market risk characteristics relative to an index such as the Standard & Poor’s 500 Composite Price Index (“S&P 500”).


Change in S&P 500 by 10%
	As of December 31,
($ in millions)	2020		2019
Change in net fair value of equity investments	$	401	$	742

We periodically use put options to reduce equity price risk or call options to adjust our equity risk profile. Put options provide an offset to declines in equity market values below a targeted level, while call options provide participation in equity market appreciation above a targeted level. Options can expire, terminate early or the option can be exercised. If the equity index does not fall below the put’s strike price or rise above the call’s strike price, the maximum loss on purchased puts and calls is limited to the amount of the premium paid.

Limited partnership interests As of December 31, 2020, we held $7.20 billion in limited partnership interests excluding those limited partnership interests where the underlying assets are predominately public equity securities compared to $7.17 billion as of December 31, 2019. 60.5% of the limited partnership interests supported property and casualty products as of December 31, 2020, compared to 56.7% as of December 31, 2019. These investments are primarily comprised of private equity and real estate funds. These investments are idiosyncratic in nature and a greater portion of the return is derived from asset operating performance. They are not actively traded, and valuation changes typically reflect the performance of the underlying asset.


Change in private market valuations by 10%
	As of December 31,
($ in millions)	2020		2019
Change in net fair value of limited partnership interests	$	720	$	717

For limited partnership interests, quarterly changes in fair values may not be highly correlated to equity indices in the short term and changes in value of these investments are generally recognized on a three-month delay due to the availability of the related investee financial statements. The illustrations noted above may not reflect our actual experience if the future composition of the portfolio (hence its beta) and correlation relationships differ from the historical relationships.

Separate Accounts As of December 31, 2020 and 2019, we had separate account assets related to variable annuity and variable life contracts with account values totaling $3.34 billion and $3.04 billion, respectively. Equity risk exists for contract charges based on separate account balances and guarantees for death or income benefits provided by our variable products.

In 2006, we disposed of substantially all of the variable annuity business through reinsurance agreements with The Prudential Insurance Company of America, a subsidiary of Prudential Financial Inc. and therefore mitigated this aspect of our risk. Equity risk for our variable life business relates to contract charges and policyholder benefits. Total variable life contract charges, including reinsurance assumed, for 2020 and 2019 were $46 million and $45 million, respectively. Separate account liabilities related to variable life contracts were $109 million and $85 million as of December 31, 2020 and 2019, respectively.

Equity-indexed Life and Annuity Liabilities As of December 31, 2020 and 2019, we had $1.98 billion and $1.92 billion, respectively, in equity-indexed life and annuity liabilities that provide customers with interest crediting rates based on the performance of the S&P 500. We hedge the majority of the risk associated with these liabilities using equity-indexed options and futures and eurodollar futures, maintaining risk within specified value-at-risk limits.

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Market Risk 2020 Form 10-K

Foreign currency exchange rate risk is the risk that we will incur economic losses due to adverse changes in foreign currency exchange rates. This risk primarily arises from our foreign equity investments, including common stocks, limited partnership interests, and our Canada, Northern Ireland and India operations. We use foreign currency derivative contracts to partially offset this risk.

As of December 31, 2020, we had $1.27 billion in foreign currency denominated equity investments, including the impact of foreign currency derivative contracts, $1.30 billion net investment in our foreign subsidiaries, primarily related to our Canada operations, and $77 million in unhedged non-U.S. dollar fixed income securities. These amounts were $2.80 billion, $1.08 billion, and $113 million, respectively, as of December 31, 2019.


Change in foreign currency exchange rates (1)
	As of December 31,
($ in millions)	2020		2019
Decrease in value of foreign currency denominated instruments	$	329	$	402

(1)Represents a 10% immediate unfavorable change in each of the foreign currency exchange rates to which we are exposed based on information and assumptions used, including the impact of foreign currency derivative contracts.

The modeling technique we use to report our currency exposure does not take into account correlation among foreign currency exchange rates. Even though we believe it is very unlikely that all of the foreign currency exchange rates that we are exposed to would simultaneously decrease by 10%, we nonetheless stress test our portfolio under this and other hypothetical extreme adverse market scenarios. Our actual experience may differ from these results because of assumptions we have used or because significant liquidity and market events could occur that we did not foresee.

The Allstate Corporation 97

2020 Form 10-K 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
	As of December 31,
($ in millions)	2020			2019			2018
Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items	$	26,913		$	24,048		$	21,194
Accumulated other comprehensive (loss) income	3,304			1,950			118
Total shareholders’ equity	30,217			25,998			21,312
Debt	7,825			6,631			6,451
Total capital resources	$	38,042		$	32,629		$	27,763
Ratio of debt to shareholders’ equity	25.9		%	25.5		%	30.3		%
Ratio of debt to capital resources	20.6		%	20.3		%	23.2		%

Shareholders’ equity increased in 2020, primarily due to net income and increased net unrealized capital gains on investments, partially offset by common share repurchases, dividends paid to shareholders and redemption of preferred stock. In 2020, we paid dividends of $668 million and $108 million related to our common and preferred shares, respectively. Shareholders’ equity increased in 2019, primarily due to net income, increased net unrealized capital gains on investments and issuance of preferred stock, partially offset by common share repurchases and dividends paid to shareholders. In 2019, we paid dividends of $653 million and $134 million related to our common and preferred shares, respectively.

Common share repurchases As of December 31, 2020, there was $1.56 billion remaining on the $3.00 billion common share repurchase program that is expected to be completed by the end of 2021.

In September 2020, we entered into an accelerated share repurchase agreement (“ASR agreement”) with Goldman Sachs & Co. LLC (“Goldman Sachs”) to purchase $750 million of our outstanding common stock. Under the ASR agreement, we paid $750 million upfront and initially acquired 7.0 million shares. The ASR agreement settled on January 12, 2021, and we repurchased a total of 7.8 million shares at an average price of $96.21. After the completion of the ASR, there was $1.45 billion remaining on the $3.00 billion common share repurchase program.

During 2020, we repurchased 17.4 million common shares, or 5.5% of total common shares outstanding as of December 31, 2019, for $1.70 billion. The common share repurchases were completed through open market transactions and ASR agreements.

Since 1995, we have acquired 742 million shares of our common stock at a cost of $36.93 billion, primarily as part of various stock repurchase programs. We have reissued 148 million common shares since 1995, primarily associated with our equity incentive plans, the 1999 acquisition of American Heritage Life Investment Corporation and the 2001 redemption of certain mandatorily redeemable preferred securities. Since 1995, total common shares outstanding has decreased by 594 million shares or 66.2%, primarily due to our repurchase programs.

Common shareholder dividends On January 2, 2020, April 1, 2020, July 1, 2020, and October 1, 2020, we paid common shareholder dividends of $0.50, $0.54, $0.54 and $0.54, respectively. On November 18, 2020, we declared a common shareholder dividend of $0.54, payable on January 4, 2021.

Redemption of preferred stock and issuance of debt On January 15, 2020, we redeemed all 11,500 shares of Fixed Rate Noncumulative Preferred Stock, Series A and the corresponding depositary shares for $288 million.

On November 19, 2020, we issued $600 million of 0.750% Senior Notes due 2025 and $600 million of 1.450% Senior Notes due 2030. Interest on the Senior Notes is payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2021. The Senior Notes are redeemable at any time at the applicable redemption price prior to the maturity date. The net proceeds of this issuance were used to partially fund the acquisition of National General.

For additional details on these transactions, see Note 12 of the consolidated financial statements.

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Capital Resources and Liquidity 2020 Form 10-K

Financial ratings and strength

Senior long-term debt, commercial paper and insurance financial strength ratings

As of December 31, 2020

Moody’s

S&P Global Ratings

A.M. Best

The Allstate Corporation (debt)

A-

The Allstate Corporation (short-term issuer)

P-2

A-2

AMB-1+

Allstate Insurance Company (insurance financial strength)

Aa3

AA-

A+

Allstate Life Insurance Company (insurance financial strength)

N/A

A+

Allstate Assurance Company (insurance financial strength)

N/A

A+

Our ratings are influenced by many factors including our operating and financial performance, asset quality, liquidity, asset/liability management, 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.

The Allstate Corporation (the “Corporation”) and Allstate Insurance Company (“AIC”) In June 2020, 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.

In July 2020, 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 January 2021, Moody’s affirmed the Corporation’s debt and short-term issuer ratings of A3 and P-2, respectively, and the insurance financial strength rating of Aa3 for AIC. The outlook for the ratings is stable.

ALIC and Allstate Assurance Company (“AAC”) In June 2020, A.M. Best affirmed the insurance financial strength ratings of A+ for ALIC and AAC. Subsequent to the announcement of the pending sale of ALIC and certain affiliates, A.M. Best affirmed the insurance financial strength rating of A+ for ALIC and AAC and placed these under review with negative implications.

Effective June 25, 2020, we are no longer requesting a rating from S&P for ALIC, which was rated A+ with a stable outlook at the time of the withdrawal.

Subsequent to the announcement of the pending sale of ALIC and certain affiliates, Moody’s downgraded the insurance financial strength rating for ALIC and AAC to A3 from A2 and placed these under review for potential further downgrade.

Other property and casualty companies We have distinct and separately capitalized groups of subsidiaries licensed to sell property and casualty insurance that maintain separate group ratings. The ratings of these groups are influenced by the risks that relate specifically to each group. Many mortgage companies require property owners to have insurance from an insurance carrier with a secure financial strength rating from an accredited rating agency. In June 2020, A.M. Best affirmed the A rating of ANJ, which writes auto and homeowners insurance in New Jersey, and the A+ rating of North Light, our excess and surplus lines carrier. The outlook for the ANJ rating and North Light rating is stable. ANJ also has a Financial Stability Rating® of A" from Demotech, which was affirmed in December 2020. In April 2020, A.M. Best affirmed the B+ rating of CKIC, which underwrites personal lines property insurance in Florida. CKIC also has a Financial Stability Rating of A’ from Demotech that was affirmed in November 2020. ANJ, North Light and CKIC do not have support agreements with AIC.

Allstate’s domestic property and casualty and life insurance subsidiaries prepare their statutory-basis financial statements in conformity with accounting practices prescribed or permitted by the insurance department of the applicable state of domicile. Statutory surplus is a measure that is often used as a basis for determining dividend paying capacity, operating leverage and premium growth capacity, and it is also reviewed by rating agencies in determining their ratings.

The property and casualty business is comprised of 29 insurance companies as of December 31, 2020, each of which has individual company dividend limitations. As of December 31, 2020, total statutory surplus is $21.38 billion compared to $20.40 billion as of December 31, 2019. Property and casualty subsidiaries surplus was $17.13 billion as of December 31, 2020, compared to $16.19 billion as of December 31, 2019. Life insurance subsidiaries surplus was $4.26 billion as of December 31, 2020, compared to $4.21 billion as of December 31, 2019.

The Allstate Corporation 99

2020 Form 10-K Capital Resources and Liquidity

The National Association of Insurance Commissioners (“NAIC”) has developed financial relationships or tests known as the Insurance Regulatory Information System to assist state insurance regulators in monitoring the financial condition of insurance companies and identifying companies that require special attention or actions by state insurance regulators. The NAIC analyzes financial data provided by insurance companies using prescribed ratios, each with defined “usual ranges”. Additional regulatory scrutiny may occur if a company’s ratios fall outside the usual ranges for four or more of the ratios. Two of our domestic life insurance companies have four ratios outside the usual ranges.

Liquidity sources and uses Our potential sources and uses of funds principally include the following activities below.

Activities for potential sources of funds

Property-

Liability

Protection Services

Allstate

Life

Allstate Benefits

Allstate Annuities

Corporate

and Other

Receipt of insurance premiums

Recurring service fees

Contractholder fund deposits

Reinsurance and indemnification program recoveries

Receipts of principal, interest and dividends on investments

Sales of investments

Funds from securities lending, commercial paper and line of credit agreements

Intercompany loans

Capital contributions from parent

Dividends or return of capital from subsidiaries

Tax refunds/settlements

Funds from periodic issuance of additional securities

Receipt of intercompany settlements related to employee benefit plans

Activities for potential uses of funds

Property-

Liability

Protection Services

Allstate

Life

Allstate Benefits

Allstate Annuities

Corporate

and Other

Payment of claims and related expenses

Payment of contract benefits, surrenders and withdrawals

Reinsurance cessions and indemnification program payments

Operating costs and expenses

Purchase of investments

Repayment of securities lending, commercial paper and line of credit agreements

Payment or repayment of intercompany loans

Capital contributions to subsidiaries

Dividends or return of capital to shareholders/parent company

Tax payments/settlements

Common share repurchases

Debt service expenses and repayment

Payments related to employee benefit plans

Payments for acquisitions

Contractual obligations and commitments We have short-term and long-term contractual obligations and commitments. We manage our short-term liquidity position to ensure the availability of a sufficient amount of liquid assets to extinguish short-term liabilities as they come due in the normal course of business, including utilizing potential sources of liquidity. Long-term obligations include known contractual commitments that require cash needs beyond 12 months.

Short-term contractual obligations are typically settled with cash or short-term investments and operating cash flows. Most of these obligations are paid within one year. These include unconditional purchase obligations, other liabilities and accrued expenses, including liabilities for collateral and operating leases, and net unrecognized tax benefits.

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Capital Resources and Liquidity 2020 Form 10-K

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.

As of December 31, 2020, we held $7.44 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. In addition, we regularly estimate how much of the total portfolio, which includes high quality corporate fixed income and municipal holdings, can be reasonably liquidated within one quarter. These estimates are subject to considerable uncertainty associated with evolving market conditions. As of December 31, 2020, cash and estimated liquidity available within one quarter, under normal market conditions and at current market prices, was $26.77 billion.

Certain remote events and circumstances could constrain our liquidity. Those events and circumstances include, for example, a catastrophe resulting in extraordinary losses, a downgrade in our senior long-term debt ratings to non-investment grade status, or a downgrade in AIC’s or ALIC’s financial strength ratings. The rating agencies also consider the interdependence of our individually rated entities; therefore, a rating change in one entity could potentially affect the ratings of other related entities.

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

In addition to the Liquidity Agreement, the Corporation also has an intercompany loan agreement with certain of its subsidiaries, which include, but are not limited to, AIC and ALIC. 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 At the parent holding company level, we have deployable assets totaling $5.52 billion as of December 31, 2020 and approximately $4 billion were used to fund the purchase of National General, which closed on January 4, 2021. Deployable assets include $1.2 billion of proceeds from a debt issuance in November 2020 and comprise 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.

The payment of dividends by AIC to The Allstate Corporation is limited by Illinois insurance law to formula amounts based on statutory net income and statutory surplus, as well as the timing and amount of dividends paid in the preceding twelve months. 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. Notification and approval of intercompany lending activities are also required by the Illinois Department of Insurance for those transactions that exceed formula amounts based on statutory admitted assets and statutory surplus.

These holding company assets and subsidiary dividends provide funds for the parent company’s fixed charges and other corporate purposes.

Intercompany dividends were paid in 2020, 2019 and 2018 between the following companies: AIC, Allstate Insurance Holdings, LLC (“AIH”), the Corporation, ALIC, American Heritage Life Insurance Company (“AHL”) and Allstate Financial Insurance Holdings Corporation (“AFIHC”).


Intercompany dividends
($ in millions)	2020		2019		2018
AIC to AIH	$	4,435	$	2,732	$	2,874
AIH to the Corporation	4,443		2,747		2,897
ALIC to AIC	—		75		250
AHL to AFIHC	80		80		55
AFIHC to the Corporation	115		50		—

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 December 31, 2020, we satisfied all the requirements with no current restrictions on the payment of preferred stock dividends. There were no capital contributions paid by

The Allstate Corporation 101

2020 Form 10-K Capital Resources and Liquidity

the Corporation to AIC or capital contributions by AIC to ALIC in 2020, 2019 or 2018.

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 2020, we did not defer interest payments on the subordinated debentures.

Additional resources to support liquidity are as follows:

•The Corporation, AIC and ALIC have access to an unsecured revolving credit facility that is available for short-term liquidity requirements. In November 2020, we entered into a new agreement for a $750 million unsecured revolving credit facility with a maturity date of 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 17.5% as of December 31, 2020. 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 2020.

•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 December 31, 2020, 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 2021. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 596 million shares of treasury stock as of December 31, 2020), 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.

Long-term contractual obligations

Defined benefit pension plans and other postretirement benefit plans (“OPEB”) Pension plan obligations within the next 12 months represent our planned contributions to certain unfunded non-qualified plans where the benefit obligation exceeds the assets. Obligations beyond 12 months are projected based on the average remaining service period using the current underfunded status of the plans. The OPEB plans’ obligations are estimated based on the expected benefits to be paid. See Note 17 of the consolidated financial statements for further information.

Reserves for property and casualty insurance claims and claims expense represent estimated amounts necessary to settle all outstanding claims, including claims that have been IBNR as of the balance sheet date. Estimated timing of payments for reserves is based on our historical experience and our expectation of future payment patterns. The ultimate cost of losses may vary materially from recorded amounts that are our best estimates. See Note 8 of the consolidated financial statements and Application of Critical Accounting Estimates section of the MD&A for further information.

Reserve for life-contingent contract benefits and contractholder funds We estimate the present value of cash payments to be made to contractholders and policyholders. We are currently making payments for contracts where the timing of a portion or all of the payments has been determined by the contract. Certain of these contracts, such as immediate annuities without life contingencies, involve payment obligations where the amount and timing of the payment are essentially fixed and determinable. Other contracts, such as interest-sensitive life, fixed deferred annuities, traditional life insurance and voluntary accident and health insurance, involve payment obligations where a portion or all of the amount and timing of future payments is uncertain. For immediate annuities with life contingencies, the amount of future payments is uncertain since payments will continue as long as the annuitant lives. We have estimated the timing of payments related to these contracts based on historical experience and our expectation of future payment patterns. Uncertainties relating to these liabilities include mortality, morbidity, expenses, customer lapse and withdrawal activity, estimated additional deposits for interest-sensitive life contracts, and renewal premium for life policies, which may significantly impact both the timing and amount of future payments. See Note 9 of the consolidated financial statements and Application of Critical Accounting Estimates section of the MD&A for further information. The pending sale of ALIC and certain affiliates represents approximately 90% of Allstate Life and 75% of Allstate Annuities reserves for life-contingent contract benefits and contractholder funds.

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Liquidity exposure Contractholder funds were $17.21 billion as of December 31, 2020.


Contractholder funds by contractual withdrawal provisions
($ in millions)	December 31, 2020		Percent to total
Not subject to discretionary withdrawal	$	2,652	15.4	%
Subject to discretionary withdrawal with adjustments:
Specified surrender charges (1)	4,858		28.2
Market value adjustments (2)	697		4.1
Subject to discretionary withdrawal without adjustments (3)	9,006		52.3
Total contractholder funds	$	17,213	100.0	%

(1)Includes $1.62 billion of liabilities with a contractual surrender charge of less than 5% of the account balance.

(2)$294 million of the contracts with market value adjusted surrenders have a 30-45 day period at the end of their initial and subsequent interest rate guarantee periods (which are typically 1, 5, 7 or 10 years) during which there is no surrender charge or market value adjustment.

(3)90% of these contracts have a minimum interest crediting rate guarantee of 3% or higher.

Retail life and annuity products may be surrendered by customers for a variety of reasons. Reasons unique to individual customers include a current or unexpected need for cash or a change in life insurance coverage needs. Other key factors that may impact the likelihood of customer surrender include the level of the contract surrender charge, the length of time the contract has been in force, distribution channel, market interest rates, equity market conditions and potential tax implications.

In addition, the propensity for retail life insurance policies to lapse is lower than it is for fixed annuities because of the need for the insured to be re-underwritten upon policy replacement.

The surrender and partial withdrawal rate on deferred fixed annuities and interest-sensitive life insurance products, based on the beginning of year contractholder funds, was 5.1% in 2020 and 6.0% in 2019. We strive to promptly pay customers who request cash surrenders; however, statutory regulations generally provide up to six months in most states to fulfill surrender requests.

Our asset-liability management practices enable us to manage the differences between the cash flows generated by our investment portfolio and the expected cash flow requirements of our life insurance and annuity product obligations.

Contractual commitments represent investment commitments such as private placements, limited partnership interests and other loans. Limited partnership interests are typically funded over the commitment period which is shorter than the contractual expiration date of the partnership and as a result, the actual timing of the funding may vary.

We have agreements in place for services we conduct, generally at cost, between subsidiaries relating to insurance, reinsurance, loans and capitalization. All material intercompany transactions have been appropriately eliminated in consolidation. Intercompany transactions among insurance subsidiaries and affiliates have been approved by the appropriate departments of insurance as required.

For a more detailed discussion of our off-balance sheet arrangements, see Note 7 of the consolidated financial statements.

The Allstate Corporation 103

2020 Form 10-K Enterprise Risk and Return Management

Enterprise Risk and Return Management

In addition to the normal risks of the business, Allstate is subject to significant risks as an insurer and a provider of other products and services. These risks are discussed in more detail in the Risk Factors section of this document.

We regularly identify, measure, manage, monitor and report all significant risks. Major categories of enterprise risk are strategic, insurance, investment, financial, operational and culture.

Allstate manages these risks through an Enterprise Risk and Return Management (“ERRM”) framework that includes governance, processes, culture, and activities that are performed on an integrated, enterprise-wide basis, following our risk and return principles. Our legal and capital structures are designed to manage capital and solvency on a legal entity basis. Our risk-return principles define how we operate and guide risk and return decision making. These principles state that our priority is to maintain a strong foundation by protecting solvency, complying with laws and acting with integrity. Building upon this foundation, we strive to build strategic value and optimize risk and return.

Governance ERRM governance includes board oversight, an executive management committee, and enterprise and market-facing business chief risk officers.

•The Allstate Corporation Board of Directors (“Allstate Board”) has overall responsibility for oversight of Management’s design and implementation of ERRM.

•The Risk and Return Committee (“RRC”) of the Allstate Board oversees effectiveness of the ERRM program, governance structure and risk-related decision-making, while focusing on the Company’s overall risk profile.

•The Audit Committee oversees the effectiveness of internal controls over financial reporting, disclosure controls and procedures as well as

management’s risk control framework and cybersecurity program.

•The Enterprise Risk and Return Council (“ERRC”), directs ERRM by establishing risk and return targets, determining economic capital levels and monitoring integrated strategies and actions from an enterprise risk and return perspective. The ERRC consists of Allstate’s chief executive officer, vice chair, chief financial officer, chief risk officer and other senior leaders.

•Other key committees work with the ERRC to direct ERRM activities, including the Operating Committee, the Operational Risk Council, the Information Security Council, the Corporate Asset Liability Committee, liability governance committees, and investment committees.

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Key risks are assessed and reported through comprehensive ERRM reports prepared for senior management and the RRC. The risk summary report communicates alignment of Allstate’s risk profile with risk and return principles while providing a perspective on risk position. Discussion promotes active engagement with management and the RRC. Internal controls over key risks are managed and reported to senior management and the Audit Committee of the Company through a semiannual risk control dashboard. Annually, we review risks related to the strategic plan, operating plan and incentive compensation programs with the Allstate Board.

Framework We apply these principles using an integrated ERRM framework that focuses on assessment, transparency and dialogue. Our framework provides a comprehensive view of risks and is used by senior management and business managers to drive risk-return based decisions. We continually validate and improve our ERRM practices by benchmarking and obtaining external perspectives.

Management and the ERRC rely on internal and external perspectives to determine an appropriate level of target economic capital. Internal perspectives include enterprise solvency and volatility assessments, stress scenarios, model assumptions and management judgment. External considerations include NAIC risk-based capital as well as S&P’s, Moody’s, and A.M. Best’s capital adequacy measurement. Our economic capital reflects management’s view of the aggregate level of capital necessary to satisfy stakeholder interests, manage Allstate’s risk profile and maintain financial strength. The impact of strategic initiatives on enterprise risk is evaluated through the economic capital framework.

The NAIC has adopted the Risk Management and Own Risk and Solvency Assessment Model Act (“ORSA Model Act”), which has been enacted by our insurance subsidiaries’ domiciliary states. The ORSA Model Act requires that insurers maintain a risk management framework and conduct an internal own risk and solvency assessment of the insurer’s material risks in normal and stressed environments. Results of the assessment are filed annually.

Allstate’s risk appetite is measured through our economic capital framework. The enterprise risk appetite is cascaded into individual risk limits which set boundaries on the amount of risk we are willing to accept from one specific risk category before escalating for further management discussion and action. Risk limits are established based upon expected returns, volatility, potential tail losses and impact on the enterprise portfolio. To effectively operate within risk limits and for risk-return optimization, business units establish risk limits and capital targets specific to their businesses. Allstate’s risk management strategies adapt to changes in business and market environments.

Process Our ERRM framework establishes a basis for transparency and dialogue across the enterprise and for continuous learning by embedding our risk and return management culture of identifying, assessing,

managing, monitoring and reporting risks within the organization. Allstate designs business and enterprise strategies that seek to optimize risk-adjusted returns on capital. Risks are managed at both the legal entity and enterprise level.

A summary of our process to manage each of our major risk categories follows:

Strategic risk and return management addresses loss associated with inadequate or flawed business planning or strategy setting, including product mix, mergers or acquisitions and market positioning, and unexpected changes within the market or regulatory environment in which Allstate operates. This includes reputational risk, which is the potential for negative publicity regarding a company’s conduct or business practices to adversely impact its profitability, operations, consumer base or require costly litigation and other defensive measures.

We manage strategic risk through the Allstate Board and senior management strategy reviews that include a risk and return assessment of our strategic plans and ongoing monitoring of our strategic actions, key assumptions and the external competitive environment. Using the ERRM framework, Allstate designs strategies that seek to optimize risk-adjusted returns on economic capital for risk types including interest rate risk, credit risk, equity investments, including those with idiosyncratic return potential, auto profitability and growing property exposure.

Insurance risk and return management addresses fluctuations in the timing, frequency and severity of benefits, expenses, and premiums relative to the return expectations inclusive of systemic risk, concentration of insurance exposures, policy terms, reinsurance coverage, and claims handling practices.

Insurance risk exposures include our operating results and financial condition, claims frequency and severity, catastrophes and severe weather, and mortality and morbidity risk.

Insurance risk exposures are measured and monitored with different approaches including:

•Stochastic methods: measures and monitors risks such as natural catastrophes and severe weather. We develop probabilistic estimates of risk based on our exposures, historical observed volatility or industry-recognized models in the case of catastrophe risk.

•Scenario analysis: measures and monitors risks and estimated losses due to extreme low frequency events that include combined multiple event scenarios across risk categories and time periods.

Investment risk and return management addresses financial loss due to changes in the valuations of assets held in the Allstate investment portfolio, as well as liability valuation within the Life and Annuity business. Such losses may be caused by macro developments, such as changes to interest rates, credit spreads and equity price levels, or could be specific to individual investments in the portfolio.

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2020 Form 10-K Enterprise Risk and Return Management

These losses can encompass both daily market volatility and permanent impairments of capital due to credit defaults and equity write-downs.

Investment risk exposures include interest rate risk, credit spread risk, equity price risk and foreign currency exchange rate risk.

Investment risk exposures are measured and monitored in a number of ways including:

•Sensitivity analysis: measures the impact from a unit change in a market risk input.

•Stochastic and probabilistic estimation of potential losses: combines portfolio risk exposures with historical or recent market volatilities and correlations to assess the potential range of future investment results.

•Scenario analysis: measures material adverse outcomes such as shock scenarios applied to credit, public and private equity markets.

Some of the stress scenarios are a combination of multiple scenarios across risk categories and over multiple time periods, considering the effects of macroeconomic conditions.

Financial risk and return management addresses the risk of insufficient cash flows to meet corporate or policyholder needs, risk of inadequate aggregate capital or capital within any subsidiary, inability to access capital markets, credit risk that arises when an external party fails to meet a contractual obligation such as reinsurance for ceded claims, or risk associated with a business counterparty default.

We actively manage our capital and liquidity levels in light of changing market, economic and business conditions. Our capital position, capital generation capacity, and targeted risk profile provide strategic and financial flexibility.

We generally assess solvency on a statutory accounting basis, but also consider holding company capital and liquidity needs. Current enterprise capital, which exceeds economic targeted levels, is based on a combination of statutory surplus and deployable assets at the parent holding company level.

Operational risk and return management addresses loss as a result of the failure of people, processes, systems or culture. Operational risk exposures include human capital, privacy, regulatory compliance, ethics, fraud, system availability, cybersecurity, data quality, disaster recovery and business continuity.

Operational risk is managed at the enterprise and market-facing business levels, through an integrated Operational Risk and Return Management (“ORRM”) program, with resources throughout the enterprise identifying, measuring, monitoring, managing, and reporting on operational risks at a detailed level.

From time to time, we engage independent advisors to assess and consult on operational risks. We also perform assessments of the quality of our operational risk program and identify opportunities to strengthen our internal controls.

Culture risk and return management addresses the potential for loss of stakeholder value from a suboptimal work environment, missed opportunities, or ineffective risk management practices. Allstate defines organization culture as a self-sustaining system of shared values, principles and priorities that shape beliefs, drive behavior and influence decision-making within an organization.

Culture is managed based on a set of core cultural elements that have been established as a basis for assessment and measurement. Results of culture risk assessment are reported to the ERRC and RRC throughout the year.

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Application of Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates, presented in the order they appear in the Consolidated Statements of Financial Position, include those used in determining:

•Fair value of financial assets

•Impairment of fixed income securities

•Deferred policy acquisition costs amortization

•Evaluation of goodwill for impairment

•Reserve for property and casualty insurance claims and claims expense estimation

•Reserve for life-contingent contract benefits estimation

•Pension and other postretirement plans net costs and assumptions

In making these determinations, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our businesses and operations. It is reasonably likely that changes in these estimates could occur from period to period and result in a material impact on our consolidated financial statements.

A summary of each of these critical accounting estimates follows. For a more detailed discussion of the effect of these estimates on our consolidated financial statements, and the judgments and assumptions related to these estimates, see the referenced sections of this document. For a more detailed summary of our significant accounting policies, see the notes to the consolidated financial statements.

Fair value of financial assets Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are responsible for the determination of fair value of financial assets and the supporting assumptions and methodologies. We use independent third-party valuation service providers, broker quotes and internal pricing methods to determine fair values. We obtain or calculate only one single quote or price for each financial instrument.

Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of proprietary models, produce valuation information in the form of a single fair value for individual fixed income and other securities for which a fair value has been requested under the terms of our agreements. The inputs used by the valuation service providers include, but are not limited to, market prices

from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, liquidity spreads, currency rates, and other information, as applicable. Credit and liquidity spreads are typically implied from completed transactions and transactions of comparable securities. Valuation service providers also use proprietary discounted cash flow models that are widely accepted in the financial services industry and similar to those used by other market participants to value the same financial instruments. The valuation models take into account, among other things, market observable information as of the measurement date, as described above, as well as the specific attributes of the security being valued including its term, interest rate, credit rating, industry sector, and where applicable, collateral quality and other issue or issuer specific information. Executing valuation models effectively requires seasoned professional judgment and experience. For certain equity securities, valuation service providers provide market quotations for completed transactions on the measurement date. In cases where market transactions or other market observable data is limited, the extent to which judgment is applied varies inversely with the availability of market observable information.

For certain of our financial assets measured at fair value, where our valuation service providers cannot provide fair value determinations, we obtain a single non-binding price quote from a broker familiar with the security who, similar to our valuation service providers, may consider transactions or activity in similar securities among other information. The brokers providing price quotes are generally from the brokerage divisions of financial institutions with market making, underwriting and distribution expertise regarding the security subject to valuation.

The fair value of certain financial assets, including privately placed corporate fixed income securities and free-standing derivatives, for which our valuation service providers or brokers do not provide fair value determinations, is developed using valuation methods and models widely accepted in the financial services industry. Our internal pricing methods are primarily based on models using discounted cash flow methodologies that develop a single best estimate of fair value. Our models generally incorporate inputs that we believe are representative of inputs other market participants would use to determine fair value of the same instruments, including yield curves, quoted market prices of comparable securities or instruments, published credit spreads, and other applicable market data as well as instrument-specific characteristics that include, but are not limited to, coupon rates, expected cash flows, sector of the issuer, and call provisions. Because judgment is required in developing the fair values of these financial assets, they may differ from the amount actually received to sell an asset in an orderly transaction between market participants at the measurement date. Moreover, the use of different valuation assumptions may have a material effect on the financial assets’ fair values.

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For most of our financial assets measured at fair value, all significant inputs are based on or corroborated by market observable data, and significant management judgment does not affect the periodic determination of fair value. The determination of fair value using discounted cash flow models involves management judgment when significant model inputs are not based on or corroborated by market observable data. However, where market observable data is available, it takes precedence, and as a result, no range of reasonably likely inputs exists from which the basis of a sensitivity analysis could be constructed.

We gain assurance that our financial assets are appropriately valued through the execution of various processes and controls designed to ensure the overall reasonableness and consistent application of valuation methodologies, including inputs and assumptions, and compliance with accounting standards. For fair values received from third parties or internally estimated, our processes and controls are designed to ensure that the valuation methodologies are appropriate and consistently applied, the inputs and assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded. For example, on a continuing basis, we assess the reasonableness of individual fair values that have stale security prices or that exceed certain thresholds as compared to previous fair values received from valuation service providers or brokers or derived from internal models. We perform procedures to understand and assess the methodologies,

processes and controls of valuation service providers. In addition, we may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third-party valuation sources for selected securities. We perform ongoing price validation procedures such as back-testing of actual sales, which corroborate the various inputs used in internal models to market observable data. When fair value determinations are expected to be more variable, we validate them through reviews by members of management who have relevant expertise and who are independent of those charged with executing investment transactions.

We also perform an analysis to determine whether there has been a significant decrease in the volume and level of activity for the asset when compared to normal market activity, and if so, whether transactions may not be orderly. Among the indicators we consider in determining whether a significant decrease in the volume and level of market activity for a specific asset has occurred include the level of new issuances in the primary market, trading volume in the secondary market, level of credit spreads over historical levels, bid-ask spread, and price consensuses among market participants and sources. If evidence indicates that prices are based on transactions that are not orderly, we place little, if any, weight on the transaction price and will estimate fair value using an internal model. As of December 31, 2020 and 2019, we did not adjust fair values provided by our valuation service providers or brokers or substitute them with an internal model for such securities.


Fixed income, equity securities and short-term investments by source of fair value determination
	December 31, 2020
($ in millions)	Fair value		Percent to total
Fair value based on internal sources	$	2,225	2.8	%
Fair value based on external sources (1)	76,639		97.2
Total	$	78,864	100.0	%

(1)Includes $1.27 billion that are valued using broker quotes and $375 million that are valued using quoted prices or quoted net asset values from deal sponsors.

For additional detail on fair value measurements, see Note 6 of the consolidated financial statements.

Impairment of fixed income securities For fixed income securities classified as available-for-sale, the difference between amortized cost, net of credit loss allowance (“amortized cost, net”) and fair value, net of certain other items and deferred income taxes (as disclosed in Note 5 of the consolidated financial statements), is reported as a component of accumulated other comprehensive income (“AOCI”) on the Consolidated Statements of Financial Position and is not reflected in the operating results of any period until reclassified to net income upon the consummation of a transaction with an unrelated third party or when a credit loss allowance is recorded. We have a comprehensive portfolio monitoring process to identify and evaluate each fixed income security that may require a credit loss allowance.

For each fixed income security in an unrealized loss position, we assess whether management with the

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

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

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

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

When a security is sold or otherwise disposed or the security is deemed uncollectible and written off, we remove amounts previously recognized in the credit loss allowance. Recoveries after write-offs are recognized when received.

For additional detail on investment impairments, see Note 5 of the consolidated financial statements.

Deferred policy acquisition costs amortization We incur significant costs in connection with acquiring insurance policies and investment contracts. In accordance with GAAP, costs that are related directly to the successful acquisition of new or renewal insurance policies and investment contracts are deferred and recorded as an asset on the Consolidated Statements of Financial Position.

DAC related to property and casualty contracts is amortized into income as premiums are earned, typically over periods of six or twelve months for personal lines policies or generally one to five years for protection plans and other contracts (primarily related to finance and insurance products).

DAC related to traditional life and voluntary accident and health insurance is amortized over the premium paying period of the related policies in

proportion to the estimated revenues on such business. Significant assumptions relating to estimated premiums, investment returns, as well as mortality, persistency and expenses to administer the business are established at the time the policy is issued and are generally not revised during the life of the policy. The assumptions for determining the timing and amount of DAC amortization are consistent with the assumptions used to calculate the reserve for life-contingent contract benefits. Any deviations from projected business in force resulting from actual policy terminations differing from expected levels and any estimated premium deficiencies may result in a change to the rate of amortization in the period such events occur. Generally, the amortization periods for these policies approximate the estimated lives of the policies. The recovery of DAC is dependent upon the future profitability of the business.

We periodically review the adequacy of reserves and recoverability of DAC using actual experience and current assumptions. We evaluate our traditional life insurance products, immediate annuities with life contingencies, and voluntary accident and health insurance products individually. In the event actual experience and current assumptions are adverse compared to the original assumptions and a premium deficiency is determined to exist, any remaining unamortized DAC balance must be expensed to the extent not recoverable and a premium deficiency reserve may be required if the remaining DAC balance is insufficient to absorb the deficiency. In 2020 and 2019, our DAC recoverability evaluation concluded that all recorded DAC balances were recoverable. For additional detail on reserve adequacy, see the Reserve for life-contingent contract benefits estimation section.

DAC related to interest-sensitive life insurance is amortized in proportion to the incidence of the total present value of gross profits, which includes both actual historical gross profits (“AGP”) and estimated future gross profits (“EGP”) expected to be earned over the estimated lives of the contracts. The amortization is net of interest on the prior period DAC balance using rates established at the inception of the contracts. Actual amortization periods generally range from 15-30 years; however, incorporating estimates of the rate of customer surrenders, partial withdrawals and deaths generally results in the majority of the DAC being amortized during the surrender charge period, which is typically 10-20 years for interest-sensitive life. The rate of DAC amortization is reestimated and adjusted by a cumulative charge or credit to income when there is a difference between the incidence of actual versus expected gross profits in a reporting period or when there is a change in total EGP.

AGP and EGP primarily consist of the following components: contract charges for the cost of insurance less mortality costs and other benefits (benefit margin); investment income and realized capital gains and losses less interest credited (investment margin); and surrender and other contract charges less maintenance expenses (expense margin). The principal assumptions for determining the amount of EGP are mortality, persistency, expenses,

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2020 Form 10-K Application of Critical Accounting Estimates

investment returns, including capital gains and losses on assets supporting contract liabilities, interest crediting rates to contractholders, and the effects of any hedges. These assumptions are reasonably likely to have the greatest impact on the amount of DAC amortization. Changes in these assumptions can be offsetting and we are unable to reasonably predict their future movements or offsetting impacts over time.

Each reporting period, DAC amortization is recognized in proportion to AGP for that period adjusted for interest on the prior period DAC balance. This amortization process includes an assessment of AGP compared to EGP, the actual amount of business remaining in force and realized capital gains and losses on investments supporting the product liability. The impact of realized capital gains and losses on amortization of DAC depends upon which product liability is supported by the assets that give rise to the gain or loss. If the AGP is greater than EGP in the period, but the total EGP is unchanged, the amount of DAC amortization will generally increase, resulting in a current period decrease to earnings. The opposite result generally occurs when the AGP is less than the EGP in the period, but the total EGP is unchanged. However, when DAC amortization or a component of gross profits for a quarterly period is potentially negative (which would result in an increase of the DAC balance) as a result of negative AGP, the specific facts

and circumstances surrounding the potential negative amortization are considered to determine whether it is appropriate for recognition in the consolidated financial statements. Negative amortization is only recorded when the increased DAC balance is determined to be recoverable based on facts and circumstances. For products whose supporting investments are exposed to capital losses in excess of our expectations which may cause periodic AGP to become temporarily negative, EGP and AGP utilized in DAC amortization may be modified to exclude the excess capital losses.

Annually, we review and update the assumptions underlying the projections of EGP, including mortality, persistency, expenses, investment returns, comprising investment income and realized capital gains and losses, interest crediting rates and the effect of any hedges, using our experience and industry experience. At each reporting period, we assess whether any revisions to assumptions used to determine DAC amortization are required. These reviews and updates may result in amortization acceleration or deceleration, which are referred to as “DAC unlocking”. If the update of assumptions causes total EGP to increase, the rate of DAC amortization will generally decrease, resulting in a current period increase to earnings. A decrease to earnings generally occurs when the assumption update causes the total EGP to decrease.


Effect on DAC amortization of changes in assumptions relating to gross profit components
	For the years ended December 31,
($ in millions)	2020		2019

Investment margin	$	157	$	23
Benefit margin	(7)		38
Expense margin	(41)		(1)
Net acceleration	$	109	$	60

In 2020, DAC amortization acceleration for changes in the investment margin component of EGP related to interest-sensitive life insurance and was due to lower projected future interest rates and investment returns compared to our previous expectations. The deceleration related to benefit margin was due to decreased projected mortality. The expense margin deceleration was due to a decrease in projected expenses.

In 2019, DAC amortization acceleration for changes in the investment margin component of EGP was due to lower projected future interest rates and investment returns compared to our previous expectations. The acceleration related to benefit margin was due to decreased projected interest rates that result in lower projected policyholder account values which increases benefits on guaranteed products and more refined policy level information and assumptions.

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The following table displays the sensitivity of reasonably likely changes in assumptions included in the gross profit components of investment margin or

benefit margin to amortization of the DAC balance as of December 31, 2020.




($ in millions)	Increase/(reduction)

Increase in future investment margins of 25 basis points	$	54
Decrease in future investment margins of 25 basis points		(60)


Decrease in future life mortality by 1%	$	15
Increase in future life mortality by 1%		(16)

Any potential changes in assumptions discussed above are measured without consideration of correlation among assumptions. Therefore, it would be inappropriate to add them together in an attempt to estimate overall variability in amortization.

For additional detail related to DAC, see the Allstate Life Segment section of the MD&A.

Evaluation of goodwill for impairment Goodwill represents the excess of amounts paid for acquiring businesses over the fair value of the net assets acquired, less any impairment of goodwill recognized. Goodwill is recognized when acquired and allocated to reporting units based on which unit is expected to benefit from the synergies of the business combination. Our goodwill reporting units are equivalent to our reportable segments: Allstate Protection, Protection Services, Allstate Life and Allstate Benefits to which goodwill has been assigned.

Upon acquisition, the purchase price of the acquired business is assumed to be its fair value. Subsequently, we estimate the fair value of our businesses in each goodwill reporting unit, utilizing a combination of widely accepted valuation techniques including a stock price and market capitalization analysis, discounted cash flow (“DCF”) calculations and an estimate of a business’s fair value using market to book multiples derived from peer company analysis. The stock price and market capitalization analysis takes into consideration the quoted market price of our outstanding common stock and includes a control premium, derived from relevant historical acquisition activity, in determining the estimated fair value of the consolidated entity before allocating that fair value to individual reporting units. The DCF analysis utilizes long term assumptions for revenues, investment income, benefits, claims, other operating expenses and income taxes to produce projections of both income and cash flows available for dividends that are present valued using the weighted average cost of capital. Market to book multiples represent the mean market to book multiple for selected peer companies with operations similar to our goodwill reporting units to which the multiple is applied. The outputs from these methods are weighted based on the nature of the business and the relative amount of market observable assumptions supporting the estimates. The computed values are then weighted to reflect the fair value estimate based on the specific attributes of each goodwill reporting unit.

Estimating the fair value of reporting units is a subjective process that involves the use of significant estimates by management. Changes in market inputs

or other events impacting the fair value of these businesses, including discount rates, operating results, investment returns, strategies and growth rate assumptions, among other factors, could result in goodwill impairments, resulting in a charge to income. Certain of our goodwill reporting units are comprised of a combination of legacy and acquired businesses and as a result have substantial internally generated and unrecognized intangibles and fair values that significantly exceed their carrying values. Our Protection Services goodwill reporting unit is more heavily comprised of newly acquired businesses and as a result does not have a significant excess of fair value over its carrying value attributable to internally generated unrecognized intangibles. Therefore, this reporting unit may be more susceptible to potential future goodwill impairment based on changes to growth or margin assumptions.

The most significant assumptions utilized in the determination of the estimated fair value of the Protection Services reporting unit are the earnings growth rate and discount rate. The growth rate utilized in our fair value estimates is consistent with our plans to grow these businesses more rapidly over the near-term with more moderated growth rates in later years.

The discount rate, which is consistent with the weighted average cost of capital expected by a market participant, is based upon industry specific required rates of return, including consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by changes in the risk-free rate, cost of debt, equity risk premium and entity specific risks.

Changes in our growth assumptions, including the risk of loss of key customers, or adverse changes in the discount rates could result in a decline in fair value and result in a goodwill impairment charge.

Reserve for property and casualty insurance claims and claims expense estimation Reserves are established to provide for the estimated costs of paying claims and claims expenses under insurance policies we have issued. Underwriting results are significantly influenced by estimates of property and casualty insurance claims and claims expense reserves. These reserves are an estimate of amounts necessary to settle all outstanding claims, including IBNR, as of the financial statement date.

Characteristics of reserves Reserves are established independently of business segment management for each business segment and line of business based on estimates of the ultimate cost to

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settle claims, less losses that have been paid. The significant lines of business are auto, homeowners, and other personal lines for Allstate Protection, and asbestos, environmental, and other discontinued lines for Discontinued Lines and Coverages. Allstate Protection’s claims are typically reported promptly with relatively little reporting lag between the date of occurrence and the date the loss is reported. Auto and homeowners liability losses generally take an average of about two years to settle, while auto physical damage, homeowners property and other personal lines have an average settlement time of less than one year. Discontinued Lines and Coverages involve long-tail losses, such as those related to asbestos and environmental claims, which often involve substantial reporting lags and extended times to settle.

Reserves are the difference between the estimated ultimate cost of losses incurred and the amount of paid losses as of the reporting date. Reserves are estimated for both reported and unreported claims, and include estimates of all expenses associated with processing and settling all incurred claims. We update most of our reserve estimates quarterly and as new information becomes available or as events emerge that may affect the resolution of unsettled claims. Changes in prior reserve estimates (reserve reestimates), which may be material, are determined by comparing updated estimates of ultimate losses to prior estimates, with the differences recorded as property and casualty insurance claims and claims expense in the Consolidated Statements of Operations in the period such changes are determined. Estimating the ultimate cost of claims and claims expenses is an inherently uncertain and complex process involving a high degree of judgment and is subject to the evaluation of numerous variables.

The actuarial methods used to develop reserve estimates Reserve estimates are derived by using several different actuarial estimation methods that are variations on one primary actuarial technique. The actuarial technique is known as a “chain ladder” estimation process in which historical loss patterns are applied to actual paid losses and reported losses (paid losses plus individual case reserves established by claim adjusters) for an accident year or a report year to create an estimate of how losses are likely to develop over time. An accident year refers to classifying claims based on the year in which the claims occurred. A report year refers to classifying claims based on the year in which the claims are reported. Both classifications are used to prepare estimates of required reserves for payments to be made in the future. The key assumptions affecting our reserve estimates comprise data elements including claim counts, paid losses, case reserves, and development factors calculated with this data.

See Discontinued and Lines and Coverages reserve estimates section for specific disclosures of industry and actuarial best practices for this segment.

In the chain ladder estimation technique, a ratio (development factor) is calculated which compares current period results to results in the prior period for

each accident year. A multi-year average development factor, based on historical results, is usually multiplied by the current period experience to estimate the development of losses of each accident year into the next time period. The development factors for the future time periods for each accident year are compounded over the remaining future periods to calculate an estimate of ultimate losses for each accident year. The implicit assumption of this technique is that an average of historical development factors is predictive of future loss development, as the significant size of our experience database achieves a high degree of statistical credibility in actuarial projections of this type. The effects of inflation are implicitly considered in the reserving process, the implicit assumption being that a multi-year average development factor includes an adequate provision. The development factor estimation methodology may require modification when data changes due to changing claim reporting practices, changing claim settlement patterns, external regulatory or financial influences, or contractual coverage changes. In these situations, actuarial estimation techniques are applied to appropriately modify the “chain ladder” assumptions. These actuarial techniques are necessary to analyze the effects of changing loss data to develop modified development factor selections. The actuarial estimation techniques include exclusion of unusual losses or aberrations and adjustment of historical data to present conditions. Actuarially modified patterns of development are calculated with the adjusted historical data. Actuarial judgment is then applied to make appropriate development factor assumptions needed to develop a best estimate of gross ultimate losses. These developments are discussed further in the Allstate brand loss ratio disclosures in the Allstate Protection Segment and the Claims and Claims Expense Reserves sections of the MD&A.

How reserve estimates are established and updated Reserve estimates are developed at a very detailed level, and the results of these numerous micro-level best estimates are aggregated to form a consolidated reserve estimate. For example, over one thousand actuarial estimates of the types described above are prepared each quarter to estimate losses for each line of insurance, major components of losses (such as coverages and perils), major states or groups of states and for reported losses and IBNR. The actuarial methods described above are used to analyze the settlement patterns of claims by determining the development factors for specific data elements that are necessary components of a reserve estimation process. Development factors are calculated quarterly and periodically throughout the year for data elements such as claim counts reported and settled, paid losses, and paid losses combined with case reserves. The calculation of development factors from changes in these data elements also impacts claim severity trends. The historical development patterns for these data elements are used as the assumptions to calculate reserve estimates.

Often, several different estimates are prepared for each detailed component, incorporating alternative

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analyses of changing claim settlement patterns and other influences on losses, from which we select our best estimate for each component, occasionally incorporating additional analyses and actuarial judgment, as described above. These micro-level estimates are not based on a single set of assumptions. Actuarial judgments that may be applied to these components of certain micro-level estimates generally do not have a material impact on the consolidated level of reserves. Moreover, this detailed micro-level process does not permit or result in a compilation of a company-wide roll up to generate a range of needed loss reserves that would be meaningful. Based on our review of these estimates, our best estimate of required reserves for each state/line/coverage component is recorded for each accident year, and the required reserves for each component are summed to create the reserve balance carried on our Consolidated Statements of Financial Position.

Reserves are reestimated quarterly and periodically throughout the year, by combining historical results with current actual results to calculate new development factors. This process continuously incorporates the historic and latest actual trends, and other underlying changes in the data elements used to calculate reserve estimates. New development factors are likely to differ from previous development factors used in prior reserve estimates because actual results

(claims reported or settled, losses paid, or changes to case reserves) occur differently than the implied assumptions contained in the previous development factor calculations. If claims reported, paid losses, or case reserve changes are greater or less than the levels estimated by previous development factors, reserve reestimates increase or decrease. When actual development of these data elements is different than the historical development pattern used in a prior period reserve estimate, a new reserve is determined. The difference between indicated reserves based on new reserve estimates and recorded reserves (the previous estimate) is the amount of reserve reestimate and is recognized as an increase or decrease in claims and claims expense in the Consolidated Statements of Operations. Total net reserve reestimates, after-tax, favorable impact on net income applicable to common shareholders were 6.3%, 2.2% and 10.0% in 2020, 2019 and 2018, respectively. The 3-year average of net reserve reestimates as a percentage of total reserves was a favorable 2.0% for Allstate Protection, an unfavorable 8.0% for Discontinued Lines and Coverages and a favorable 4.1% for Protection Services, each of these results being consistent within a reasonable actuarial tolerance for the respective businesses. A more detailed discussion of reserve reestimates is presented in the Claims and Claims Expense Reserves section of the MD&A.


Net claims and claims expense reserves by segment and line of business
	As of December 31,
($ in millions)	2020		2019		2018
Allstate Protection
Auto	$	14,164	$	14,728	$	14,378
Homeowners	2,315		2,138		2,157
Other lines	2,657		2,530		2,290
Total Allstate Protection	19,136		19,396		18,825
Discontinued Lines and Coverages
Asbestos	827		810		866
Environmental	206		179		170
Other discontinued lines	375		376		355
Total Discontinued Lines and Coverages	1,408		1,365		1,391
Total Protection Services	33		39		52
Total net claims and claims expense reserves	$	20,577	$	20,800	$	20,268

Allstate Protection reserve estimate

Factors affecting reserve estimates Reserve estimates are developed based on the processes and historical development trends described above. These estimates are considered in conjunction with known facts and interpretations of circumstances and factors including our experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions. When we experience changes of the type previously mentioned, we may need to apply actuarial judgment in the determination and selection of development factors considered more reflective of the new trends, such as combining shorter or longer periods of historical results with current actual results to produce development factors based

on two-year, three-year, or longer development periods to reestimate our reserves. For example:

•The Coronavirus has had a significant impact on driving patterns and auto frequency that may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability.

•If a legal change is expected to have a significant impact on the development of claim severity for a coverage which is part of a particular line of insurance in a specific state, actuarial judgment is applied to determine appropriate development factors that will most accurately reflect the expected impact on that specific estimate.

•A change in economic conditions is expected to affect the cost of repairs to damaged autos or

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property for a particular line, coverage, or state, actuarial judgment is applied to determine appropriate development factors to use in the reserve estimate that will most accurately reflect the expected impacts on severity development.

As claims are reported, for certain liability claims of sufficient size and complexity, the field adjusting staff establishes case reserve estimates of ultimate cost, based on their assessment of facts and circumstances related to each individual claim. For other claims which occur in large volumes and settle in a relatively short time frame, it is not practical or efficient to set case reserves for each claim, and a statistical case reserve is set for these claims based on estimation techniques described above. In the normal course of business, we may also supplement our claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims.

Historically, the case reserves set by the field adjusting staff have not proven to be an entirely accurate estimate of the ultimate cost of claims. To provide for this, a development reserve is estimated using the processes described above and allocated to pending claims as a supplement to case reserves. Typically, the case, including statistical case, and supplemental development reserves comprise about 90% of total reserves.

Another major component of reserves is IBNR, which comprises about 10% of total reserves. IBNR can be a small percentage of reserves for relatively short-term claims, such as auto physical damage claims, or a large percentage of reserves for claims that have uncertain payout requirements over a long period of time, such as auto injury and MCCA claims. All major components of reserves are affected by changes in claim frequency as well as claim severity.

Generally, the initial reserves for a new accident year are established based on actual claim frequency and severity assumptions for different business segments, lines and coverages based on historical relationships to relevant inflation indicators. Reserves for prior accident years are statistically determined using processes described above. Changes in auto claim frequency may result from changes in mix of business, the rate of distracted driving, miles driven or other macroeconomic factors. Changes in auto current year claim severity are generally influenced by inflation in the medical and auto repair sectors of the economy and the effectiveness and efficiency of our claim practices. We mitigate these effects through various loss management programs. Injury claims are affected largely by medical cost inflation while physical damage claims are affected largely by auto repair cost inflation and used car prices. For auto physical damage coverages, we monitor our rate of increase in average cost per claim against the auto maintenance, repair, parts and equipment price indices. We believe our claim settlement initiatives, such as improvements to the claim review and settlement process, the use of special investigative units to detect fraud and handle suspect claims, litigation management and defense

strategies, as well as various other loss management initiatives underway, contribute to the mitigation of injury and physical damage severity trends.

Changes in homeowners current year claim severity are generally influenced by inflation in the cost of building materials, the cost of construction and property repair services, the cost of replacing home furnishings and other contents, the types of claims that qualify for coverage, deductibles, other economic and environmental factors and the effectiveness and efficiency of our claim practices. We employ various loss management programs to mitigate the effect of these factors.

As loss experience for the current year develops for each type of loss, it is monitored relative to initial assumptions until it is judged to have sufficient statistical credibility. From that point in time and forward, reserves are reestimated using statistical actuarial processes to reflect the impact actual loss trends have on development factors incorporated into the actuarial estimation processes. Statistical credibility is usually achieved by the end of the first calendar year; however, when trends for the current accident year exceed initial assumptions sooner, they are usually determined to be credible, and reserves are increased accordingly.

The very detailed processes for developing reserve estimates, and the lack of a need and existence of a common set of assumptions or development factors, limits aggregate reserve level testing for variability of data elements. However, by applying standard actuarial methods to consolidated historic accident year loss data for major loss types, comprising auto injury losses, auto physical damage losses and homeowner losses, we develop variability analyses consistent with the way we develop reserves by measuring the potential variability of development factors, as described in the section titled “Potential Reserve Estimate Variability” below.

Causes of reserve estimate uncertainty Since reserves are estimates of unpaid portions of claims and claims expenses that have occurred, including IBNR losses, the establishment of appropriate reserves, including reserves for catastrophe losses, requires regular reevaluation and refinement of estimates to determine our ultimate loss estimate.

At each reporting date, the highest degree of uncertainty in estimates for most of our losses from ongoing businesses arise from claims remaining to be settled for the current accident year and the most recent preceding accident year. The greatest degree of uncertainty exists in the current accident year because the current accident year contains the greatest proportion of losses that have not been reported or settled but must be estimated as of the current reporting date. Most of these losses relate to damaged property such as automobiles and homes, and medical care for injuries from accidents. During the first year after the end of an accident year, a large portion of the total losses for that accident year are settled. When accident year losses paid through the end of the first year following the initial accident year

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are incorporated into updated actuarial estimates, the trends inherent in the settlement of claims emerge more clearly. Consequently, this is the point in time at which we tend to make our largest reestimates of losses for an accident year. After the second year, the losses that we pay for an accident year typically relate to claims that are more difficult to settle, such as those involving serious injuries or litigation. Private passenger auto insurance provides a good illustration of the uncertainty of future loss estimates: our typical annual percentage payout of reserves remaining at December 31 for an accident year is approximately 45% in the first year after the end of the accident year, 20% in the second year, 15% in the third year, 10% in the fourth year, and the remaining 10% thereafter.

Reserves for catastrophe losses Catastrophe losses are an inherent risk of the property and casualty insurance industry that have contributed, and will continue to contribute, to potentially material year-to-year fluctuations in our results of operations and financial position. 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, hurricanes, earthquakes and volcanoes. We are also exposed to man-made catastrophic events, such as certain types of terrorism or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.

The estimation of claims and claims expense reserves for catastrophe losses also comprises estimates of losses from reported claims and IBNR, primarily for damage to property. In general, our estimates for catastrophe reserves are based on claim adjuster inspections and the application of historical loss development factors as described above. However, depending on the nature of the catastrophe, the estimation process can be further complicated. For example, for hurricanes, complications could include the inability of insureds to promptly report losses, limitations placed on claims adjusting staff affecting their ability to inspect losses, determining whether losses are covered by our homeowners policy (generally for damage caused by wind or wind driven rain) or specifically excluded coverage caused by flood, estimating additional living expenses, and assessing the impact of demand surge, exposure to mold damage, and the effects of numerous other considerations, including the timing of a catastrophe in relation to other events, such as at or near the end of a financial reporting period, which can affect the availability of information needed to estimate reserves for that reporting period. In these situations, we may need to adapt our practices to accommodate these circumstances in order to determine a best estimate of our losses from a catastrophe. For example, to complete estimates for certain areas affected by catastrophes not yet inspected by our claims adjusting

staff, or where we believed our historical loss development factors were not predictive, we rely on analysis of actual claim notices received compared to total PIF, as well as visual, governmental and third-party information, including aerial photos, using satellites, aircrafts and drones, area observations, and data on wind speed and flood depth to the extent available.

Potential reserve estimate variability The aggregation of numerous micro-level estimates for each business segment, line of insurance, major components of losses (such as coverages and perils), and major states or groups of states for reported losses and IBNR forms the reserve liability recorded in the Consolidated Statements of Financial Position. Because of this detailed approach to developing our reserve estimates, there is not a single set of assumptions that determines our reserve estimates at the consolidated level. Given the numerous micro-level estimates for reported losses and IBNR, management does not believe the processes that we follow will produce a statistically credible or reliable actuarial reserve range that would be meaningful. Reserve estimates, by their very nature, are very complex to determine and subject to significant judgment, and do not represent an exact determination for each outstanding claim. Accordingly, as actual claims, paid losses, and case reserve results emerge, our estimate of the ultimate cost to settle will be different than previously estimated.

To develop a statistical indication of potential reserve variability within reasonably likely possible outcomes, an actuarial technique (stochastic modeling) is applied to the countrywide consolidated data elements for paid losses and paid losses combined with case reserves separately for injury losses, auto physical damage losses, and homeowners losses excluding catastrophe losses. Based on the combined historical variability of the development factors calculated for these data elements, an estimate of the standard error or standard deviation around these reserve estimates is calculated within each accident year for the last twelve years for each type of loss. The variability of these reserve estimates within one standard deviation of the mean (a measure of frequency of dispersion often viewed to be an acceptable level of accuracy) is believed by management to represent a reasonable and statistically probable measure of potential variability. Based on our products and coverages, historical experience, the statistical credibility of our extensive data and stochastic modeling of actuarial chain ladder methodologies used to develop reserve estimates, we estimate that the potential variability of our Allstate Protection reserves, excluding reserves for catastrophe losses, within a reasonable probability of other possible outcomes, may be approximately plus or minus 4%, or plus or minus $800 million in net income applicable to common shareholders. A lower level of variability exists for auto injury losses, which comprise approximately 80% of reserves, due to their relatively stable development patterns over a longer duration of time required to settle claims. Other types of losses, such as auto physical damage, homeowners losses and

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other personal lines losses, which comprise about 20% of reserves, tend to have greater variability but are settled in a much shorter period of time. Although this evaluation reflects most reasonably likely outcomes, it is possible the final outcome may fall below or above these amounts. Historical variability of reserve estimates is reported in the Claims and Claims Expense Reserves section of the MD&A.

Reserves for Michigan and New Jersey unlimited personal injury protection Claims and claims expense reserves include reserves for Michigan mandatory unlimited personal injury protection coverage to insureds involved in qualifying motor vehicle accidents. The administration of this program is through the MCCA, a state-mandated, non-profit association of which all insurers actively writing automobile coverage in Michigan are members.

The process employed to estimate MCCA covered losses involves a number of activities including the comprehensive review and interpretation of MCCA actuarial reports, other MCCA members’ reports and our personal injury protection loss trends which have increased in severity over time. A significant portion of incurred claim reserves can be attributed to a small number of catastrophic claims and thus a large portion of the recoverable is similarly concentrated. We conduct comprehensive claim file reviews to develop case reserve type estimates of specific claims, which inform our view of future claim development and longevity of claimants. Each year, we update the actuarial estimate of our ultimate reserves and recoverables. We report our paid and unpaid claims based on MCCA requirements. The MCCA develops its own reserving estimates based on its own reserve methodologies, which may not align with our estimations. The MCCA does not provide member companies with its estimate of a company’s claim costs. We continue to update each comprehensive claim file case reserve estimate when there is a significant change in the status of the claimant, or once every three years if there have been no significant changes.

We provide similar personal injury protection coverage in New Jersey for auto policies issued or renewed in New Jersey prior to 1991 that is administered by PLIGA. We use similar actuarial estimating techniques as for the MCCA exposures to estimate loss reserves for unlimited personal injury protection coverage for policies covered by PLIGA. We continue to update our estimates for these claims as the status of claimant’s changes. However, unlimited coverage was no longer offered after 1991; therefore, no new claimants are being added.

Reserve estimates are confidential and proprietary and by their nature are very complex to determine and subject to significant judgments. Reserve estimates do not represent an exact determination for each outstanding claim. Claims may be subject to litigation. As actual claims, paid losses and case reserve results emerge, our estimate of the ultimate cost to settle may be materially greater or less than previously estimated amounts.

For additional information related to indemnification recoverables, see Item 1 - Regulation, Indemnification Programs and Note 10 of the consolidated financial statements.

Adequacy of reserve estimates We believe our net claims and claims expense reserves are appropriately established based on available methodologies, facts, technology, laws and regulations. We calculate and record a single best reserve estimate, in conformance with generally accepted actuarial standards and practices, for each line of insurance, its components (coverages and perils) and state, for reported losses and for IBNR losses, and as a result we believe that no other estimate is better than our recorded amount. Due to the uncertainties involved, the ultimate cost of losses may vary materially from recorded amounts, which are based on our best estimates.

Discontinued Lines and Coverages reserve estimates

Characteristics of Discontinued Lines exposure Our exposure to asbestos, environmental and other discontinued lines claims arise principally from assumed reinsurance coverage written during the 1960s through the mid-1980s, including reinsurance on primary insurance written on large U.S. companies, and from direct excess commercial insurance written from 1972 through 1985, including substantial excess general liability coverages on large U.S. companies. Additional exposure stems from direct primary commercial insurance written during the 1960s through the mid-1980s. Asbestos claims relate primarily to bodily injuries asserted by claimants who were exposed to asbestos or products containing asbestos. Environmental claims relate primarily to pollution and related clean-up costs. Other discontinued lines exposures primarily relate to general liability and product liability mass tort claims, such as those for medical devices and other products, workers’ compensation claims and claims for various other coverage exposures other than asbestos and environmental.

In 1986, the general liability policy form used by us and others in the property and casualty industry was amended to introduce an “absolute pollution exclusion,” which excluded coverage for environmental damage claims, and to add an asbestos exclusion. Most general liability policies issued prior to 1987 contain annual aggregate limits for product liability coverage. General liability policies issued in 1987 and thereafter contain annual aggregate limits for product liability coverage and annual aggregate limits for all coverages. Our experience to date is that these policy form changes have limited the extent of our exposure to environmental and asbestos claim risks.

Our exposure to liability for asbestos, environmental and other discontinued lines losses manifests differently depending on whether it arises from assumed reinsurance coverage, direct excess commercial insurance or direct primary commercial insurance. The direct insurance coverage we provided that covered asbestos, environmental and other discontinued lines was substantially “excess” in nature.

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Direct excess commercial insurance and reinsurance involve coverage written by us for specific layers of protection above retentions and other insurance plans. The nature of excess coverage and reinsurance provided to other insurers limits our exposure to loss to specific layers of protection in excess of policyholder retention on primary insurance plans. Our exposure is further limited by the significant reinsurance that we had purchased on our direct excess business.

Our assumed reinsurance business involved writing generally small participations in other insurers’ reinsurance programs. The reinsured losses in which we participate may be a proportion of all eligible losses or eligible losses in excess of defined retentions. The majority of our assumed reinsurance exposure, approximately 85%, is for excess of loss coverage, while the remaining 15% is for pro-rata coverage.

Our direct primary commercial insurance business did not include coverage to large asbestos manufacturers. This business comprises a cross section of policyholders engaged in many diverse business sectors throughout the country.

How reserve estimates are established and updated We conduct an annual review in the third quarter to evaluate, establish and adjust as necessary, asbestos, environmental and other discontinued lines reserves. Changes to reserves are recorded in the reporting period in which they are determined. Using established industry and actuarial best practices and assuming no change in the regulatory or economic environment, this detailed and comprehensive methodology determines asbestos reserves based on assessments of the characteristics of exposure (i.e. claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, and determines environmental reserves based on assessments of the characteristics of exposure (i.e. environmental damages, respective shares of liability of potentially responsible parties, appropriateness and cost of remediation) to pollution and related clean-up costs. The number and cost of these claims are affected by advertising by trial lawyers seeking asbestos plaintiffs, and entities with asbestos exposure seeking bankruptcy protection as a result of asbestos liabilities, initially causing a delay in the reporting of claims, often followed by an acceleration and an increase in claims and claims expenses as settlements occur.

After evaluating our insureds’ probable liabilities for asbestos and environmental claims, we evaluate our insureds’ coverage programs for such claims. We consider our insureds’ total available insurance coverage, including the coverage we issued. We also consider relevant judicial interpretations of policy language and applicable coverage defenses or determinations, if any.

Evaluation of both the insureds’ estimated liabilities and our exposure to the insureds depends heavily on an analysis of the relevant legal issues and litigation environment. This analysis is conducted by our specialized claims adjusting staff and legal counsel.

Based on these evaluations, case reserves are established by claims adjusting staff and actuarial analysis is employed to develop an IBNR reserve, which includes estimated potential reserve development and claims that have occurred but have not been reported. As of December 31, 2020 and 2019, IBNR was 50% and 49%, respectively, of combined net asbestos and environmental reserves.

For both asbestos and environmental reserves, we also evaluate our historical direct net loss and expense paid and incurred experience to assess any emerging trends, fluctuations or characteristics suggested by the aggregate paid and incurred activity. Other discontinued lines reserves are based on considerations similar to those described above, as they relate to the characteristics of specific individual coverage exposures.

Potential reserve estimate variability Establishing Discontinued Lines and Coverages net loss reserves for asbestos, environmental and other discontinued lines claims is subject to uncertainties that are much greater than those presented by other types of property and casualty claims. Among the complications are lack of historical data, long reporting delays, uncertainty as to the number and identity of insureds with potential exposure and unresolved legal issues regarding policy coverage; unresolved legal issues regarding the determination, availability and timing of exhaustion of policy limits; plaintiffs’ evolving and expanding theories of liability; availability and collectability of recoveries from reinsurance; retrospectively determined premiums and other contractual agreements; estimates of the extent and timing of any contractual liability; the impact of bankruptcy protection sought by various asbestos producers and other asbestos defendants; and other uncertainties. There are also complex legal issues concerning the interpretation of various insurance policy provisions and whether those losses are covered, or were ever intended to be covered, and could be recoverable through retrospectively determined premium, reinsurance or other contractual agreements. Courts have reached different and sometimes inconsistent conclusions as to when losses are deemed to have occurred and which policies provide coverage; what types of losses are covered; whether there is an insurer obligation to defend; how policy limits are determined; how policy exclusions and conditions are applied and interpreted; and whether clean-up costs represent insured property damage. Our reserves for asbestos and environmental exposures could be affected by tort reform, class action litigation, and other potential legislation and judicial decisions. Environmental exposures could also be affected by a change in the existing federal Superfund law and similar state statutes. There can be no assurance that any reform legislation will be enacted or that any such legislation will provide for a fair, effective and cost-efficient system for settlement of asbestos or environmental claims. We believe these issues are not likely to be resolved in the near future, and the ultimate costs may vary materially from the amounts currently recorded resulting in material changes in loss reserves. Historical variability of

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reserve estimates is demonstrated in the Claims and Claims Expense Reserves section of the MD&A.

Adequacy of reserve estimates Management believes its net loss reserves for asbestos, environmental and other discontinued lines exposures are appropriately established based on available facts, technology, laws, regulations, and assessments of other pertinent factors and characteristics of exposure (i.e. claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. Due to the uncertainties and factors described above, management believes it is not practicable to develop a meaningful range for any such additional net loss reserves that may be required.

Further discussion of reserve estimates For further discussion of these estimates and quantification of the impact of reserve estimates, reserve reestimates and assumptions, see Notes 8 and 14 of the consolidated financial statements and the Claims and Claims Expense Reserves section of the MD&A.

Reserve for life-contingent contract benefits estimation Due to the long-term nature of traditional life insurance, life-contingent immediate annuities and voluntary accident and health insurance products, benefits are payable over many years; accordingly, the reserves are calculated as the present value of future expected benefits to be paid, reduced by the present value of future expected net premiums. Long-term actuarial assumptions of future investment yields, mortality, morbidity, policy terminations and expenses are used when establishing the reserve for life-contingent contract benefits payable under these insurance policies. These assumptions, which for traditional life insurance are applied using the net level premium method, include provisions for adverse deviation and generally vary by characteristics such as type of coverage, year of issue and policy duration. Future investment yield assumptions are determined based upon prevailing investment yields as well as estimated reinvestment yields. Mortality, morbidity and policy termination assumptions are based on our experience and industry experience. Expense assumptions include the estimated effects of inflation and expenses to be incurred beyond the premium-paying period. These assumptions are established at the time the policy is issued, are consistent with assumptions for determining DAC amortization for these policies, and are generally not changed during the policy coverage period. However, if actual experience emerges in a manner that is significantly adverse relative to the original assumptions, adjustments to DAC or reserves may be required resulting in a charge to earnings which could have a material effect on our operating results and financial condition.

We periodically review the adequacy of reserves and recoverability of DAC using actual experience and current assumptions. In the event actual experience and current assumptions are adverse compared to the original assumptions and a premium deficiency is determined to exist, any remaining unamortized DAC

balance must be expensed to the extent not recoverable and the establishment of a premium deficiency reserve may be required.

We evaluate our traditional life insurance products, immediate annuities with life contingencies, and voluntary accident and health insurance individually.

In the third quarter of 2020, the premium deficiency evaluation of our immediate annuities with life contingencies resulted in a premium deficiency reserve (“PDR”) of $225 million, pre-tax. Our long-term investment yield assumption was lowered, which resulted in the prior sufficiency changing to a deficiency. The deficiency was recognized as an increase in the reserve for life contingent contract benefits. The original assumptions used to establish reserves were updated to reflect current assumptions, and the primary changes included mortality expectations, where annuitants are living longer than originally anticipated, and long-term investment yields. As of December 31, 2020, our reviews concluded that no additional premium deficiency adjustments were necessary for our immediate annuities with life contingencies.

As of December 31, 2020, traditional life insurance and accident and health insurance both have a substantial sufficiency. In 2019, our reviews concluded that no premium deficiency adjustments were necessary.

We also review these policies for circumstances where projected profits would be recognized in early years followed by projected losses in later years. In 2020 and 2019, our reviews concluded that there were no projected losses following projected profits in each long-term projection.

We will continue to monitor the experience of our traditional life insurance and immediate annuities. We periodically complete comprehensive mortality studies for our structured settlement annuities with life contingencies to determine whether annuitants are living for a longer period than originally estimated. We anticipate that investment and reinvestment yields, mortality, and policy terminations are the factors that would be most likely to require premium deficiency adjustments to reserves or related DAC. Mortality rates and investment and reinvestment yields are the factors that would be most likely to require a profits followed by losses liability accrual.

For further detail on the reserve for life-contingent contract benefits, see Note 9 of the consolidated financial statements.

The pending sale of ALIC and certain affiliates represents approximately 90% of Allstate Life and 75% of Allstate Annuities reserves for life-contingent contract benefits and contractholder funds. For further detail on this transaction, see Note 3 of the consolidated financial statements.

Pension and other postretirement plans net costs and assumptions Our defined benefit pension plans cover most full-time employees, certain part-time employees and employee-agents. Benefits are based primarily on a cash balance formula; however,

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certain participants have a significant portion of their benefits attributable to a former final average pay formula. 87% of the projected benefit obligation (“PBO”) of our primary qualified employee plan is related to the former final average pay formula. See Note 17 of the consolidated financial statements for a discussion of these plans and their effect on the consolidated financial statements.

Our pension and other postretirement benefit costs are calculated using various actuarial assumptions and methodologies. These assumptions include discount rates, health care cost trend rates, inflation, expected returns on plan assets, mortality and other factors. The assumptions utilized in recording the obligations under our pension plans represent our best estimates and we believe they are reasonable based on information as to historical experience and performance as well as other factors that might cause future expectations to differ from past trends.

Net costs for our defined benefit plans are recognized on the Consolidated Statements of Operations and consist of two elements: 1) costs comprised of service and interest costs, expected return of plan assets, amortization of prior service credit and curtailment gains and losses which are reported in property and casualty claims and claims expense, operating costs and expenses, net investment income and, if applicable, restructuring and related charges and 2) remeasurement gains and losses comprised of changes in actuarial assumptions and the difference between actual and expected returns on plan assets which are recognized

immediately in earnings as part of pension and other postretirement remeasurement gains and losses.

We recognize expected returns on plan assets using an unadjusted fair value method. Our policy is to remeasure our pension and postretirement plans on a quarterly basis. We immediately recognize remeasurement of projected benefit obligation and plan assets in earnings as it provides greater transparency of our economic obligations in accounting results and better aligns the recognition of the effects of economic and interest rate changes on pension and other postretirement plan assets and liabilities in the year in which the gains and losses are incurred.

Differences in actual experience or changes in assumptions affect our pension and other postretirement obligations, plan assets and expenses. The primary factors contributing to pension and postretirement remeasurement gains and losses are 1) changes in the discount rate used to value pension and postretirement obligations as of the measurement date, 2) differences between the expected and the actual return on plan assets, 3) changes in demographic assumptions, including mortality and participant experience.

Pension and other postretirement service cost, interest cost, expected return on plan assets and amortization of prior service credits are allocated to our reportable segments. The pension and other postretirement remeasurement gains and losses are reported in the Corporate and Other segment.


Pension and postretirement benefits remeasurement gains and losses
	For the years ended December 31,
($ in millions)	2020		2019
Remeasurement of projected benefit obligation (gains) losses:
Discount rate	$	553	$	633
Other assumptions	282		313
Remeasurement of plan assets (gains) losses	(886)		(832)
Remeasurement (gains) losses	$	(51)	$	114

Impact of assumption changes to net cost for pension and other postretirement plans Remeasurement gains in 2020 primarily related to favorable asset performance compared to the expected return on plan assets, partially offset by a decrease in the discount rate and changes in actuarial assumptions. Remeasurement losses in 2019 primarily related to a decrease in discount rate and changes in actuarial assumptions, partially offset by favorable asset performance compared to the expected return on plan assets.

The discount rate is based on rates at which expected pension benefits attributable to past employee service could effectively be settled on a present value basis at the measurement date. We develop the assumed discount rate by utilizing the weighted average yield of a theoretical dedicated portfolio derived from non-callable bonds and callable bonds with a make-whole provision available in the Bloomberg corporate bond universe having ratings of at least “AA” by S&P or at least “Aa” by Moody’s on the

measurement date with cash flows that match expected plan benefit requirements. Significant changes in discount rates, such as those caused by changes in the credit spreads, yield curve, the mix of bonds available in the market, the duration of selected bonds and expected benefit payments, may result in volatility in pension cost. The weighted average discount rate used to measure the benefit obligation decreased to 2.51% in 2020 compared to 3.31% in 2019, resulting in losses for 2020.

The expected long-term rate of return on plan assets reflects the average rate of earnings expected on plan assets. While this rate reflects long-term assumptions and is consistent with long-term historical returns, sustained changes in the market or changes in the mix of plan assets may lead to revisions in the assumed long-term rate of return on plan assets that may result in variability of pension cost. Differences between the actual return on plan assets and the expected long-term rate of return on plan assets are immediately recognized through earnings upon

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remeasurement. Short-term asset performance can differ significantly from the expected rate of return, especially in volatile markets. In 2020, the actual return on plan assets was higher than the expected return primarily due to a decline in interest rates which increased the fair value of our fixed income investments and strong equity market performance. In 2019, the actual return on plan assets was higher than the expected return due to strong equity market performance and declines in interest rates which increased the fair value of our fixed income investments.

We complete periodic evaluations of demographic information and historical experience that affects our pension and other postretirement obligations to identify any required changes to long-term actuarial assumptions and methodologies. Demographic assumptions affect both our pension and postretirement plans and include elements such as retirement rates and participation rates in our postretirement programs, among other factors.

These actuarial assumption updates affect our pension and other postretirement obligations and are incorporated into our best estimates of these assumptions. Remeasurement losses for other assumptions in 2020 primarily related to a decrease in lump sum interest rates and changes in the estimated percentage of employees taking lump sum distributions. Remeasurement losses for other assumptions in 2019 primarily related to a decrease in lump sum interest rates, recognizing participant experience different from demographic assumptions for mortality, terminations, and retirements and the percentage of employees taking lump sum distributions.

The assumed health care trend rate represents the rate at which health care costs are assumed to increase and is based on historical and expected experience. Assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement health care plans. An increase in the trend rate would increase our obligation and expense.


Sensitivity of assumption changes included in the calculation of net cost as of December 31, 2020
($ in millions)	Basis/percentage point change	Increase (decrease) to net cost
Pension plans discount rate	+100 basis points	$	(873)
	-100 basis points	1,092
Expected long-term rate of return on assets	+100 basis points	(66)
	-100 basis points	66
Postretirement plans assumed health care cost trend rate	+1%	13
	-1%	(11)

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Regulation and Legal Proceedings

We are subject to extensive regulation and we are involved in various legal and regulatory actions, all of which have an effect on specific aspects of our business. For a detailed discussion of the legal and regulatory actions in which we are involved, see Note 14 of the consolidated financial statements.

Pending Accounting Standards

There are several pending accounting standards that we have not implemented because the implementation date has not yet occurred. For a discussion of these pending standards, see Note 2 of the consolidated financial statements.

The effect of implementing certain accounting standards on our financial results and financial condition is often based in part on market conditions at the time of implementation of the standard and other factors we are unable to determine prior to implementation. For this reason, we are sometimes unable to estimate the effect of certain pending accounting standards until the relevant authoritative body finalizes these standards or until we implement them.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

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Item 8. Financial Statements and Supplementary Data


Consolidated Financial Statements		Page
Consolidated Statements of Operations		123
Consolidated Statements of Comprehensive Income		124
Consolidated Statements of Financial Position		125
Consolidated Statements of Shareholders’ Equity		126
Consolidated Statements of Cash Flows		127

Notes to Consolidated Financial Statements
Note 1	General	128
Note 2	Summary of Significant Accounting Policies	129
Note 3	Acquisitions and Disposition	142
Note 4	Reportable Segments	142
Note 5	Investments	147
Note 6	Fair Value of Assets and Liabilities	156
Note 7	Derivative Financial Instruments and Off-balance Sheet Financial Instruments	163
Note 8	Reserve for Property and Casualty Insurance Claims and Claims Expense	170
Note 9	Reserve for Life-Contingent Contract Benefits and Contractholder Funds	177
Note 10	Reinsurance and Indemnification	181
Note 11	Deferred Policy Acquisition and Sales Inducement Costs	186
Note 12	Capital Structure	187
Note 13	Company Restructuring	190
Note 14	Commitments, Guarantees and Contingent Liabilities	191
Note 15	Income Taxes	198
Note 16	Statutory Financial Information and Dividend Limitations	200
Note 17	Benefit Plans	201
Note 18	Equity Incentive Plans	208
Note 19	Supplemental Cash Flow Information	210
Note 20	Other Comprehensive Income	211
Note 21	Quarterly Results (unaudited)	211

Report of Independent Registered Public Accounting Firm		212

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The Allstate Corporation and Subsidiaries

Consolidated Statements of Operations


	Years Ended December 31,
($ in millions, except per share data)	2020		2019		2018
Revenues
Property and casualty insurance premiums (net of reinsurance ceded and indemnification programs of $1,141, $1,122 and $1,016)	$	37,073	$	36,076	$	34,048
Life premiums and contract charges (net of reinsurance ceded of $242, $285 and $290)	2,444		2,501		2,465
Other revenue	1,065		1,054		939
Net investment income	2,853		3,159		3,240
Realized capital gains (losses)	1,356		1,885		(877)
Total revenues	44,791		44,675		39,815

Costs and expenses
Property and casualty insurance claims and claims expense (net of reinsurance ceded and indemnification programs of $530, $524 and $1,378)	22,001		23,976		22,778
Shelter-in-Place Payback expense	948		—		—
Life contract benefits (net of reinsurance ceded of $155, $165 and $240)	2,243		2,039		1,973
Interest credited to contractholder funds (net of reinsurance ceded of $27, $20 and $24)	638		640		654
Amortization of deferred policy acquisition costs	5,630		5,533		5,222
Operating costs and expenses	5,732		5,690		5,594
Pension and other postretirement remeasurement (gains) losses	(51)		114		468
Restructuring and related charges	259		41		67
Amortization of purchased intangibles	118		126		105


Impairment of purchased intangibles	—		106		—
Interest expense	318		327		332
Total costs and expenses	37,836		38,592		37,193

Gain on disposition of operations	4		6		6

Income from operations before income tax expense	6,959		6,089		2,628

Income tax expense	1,383		1,242		468

Net income	5,576		4,847		2,160

Preferred stock dividends	115		169		148

Net income applicable to common shareholders	$	5,461	$	4,678	$	2,012

Earnings per common share:
Net income applicable to common shareholders per common share - Basic	$	17.53	$	14.25	$	5.78
Weighted average common shares - Basic	311.6		328.2		347.8
Net income applicable to common shareholders per common share - Diluted	$	17.31	$	14.03	$	5.70
Weighted average common shares - Diluted	315.5		333.5		353.2

See notes to consolidated financial statements.

The Allstate Corporation 123

2020 Form 10-K Financial Statements

The Allstate Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income


	Years Ended December 31,
($ in millions)	2020		2019		2018
Net income	$	5,576	$	4,847	$	2,160

Other comprehensive income (loss), after-tax
Changes in:
Unrealized net capital gains and losses	1,293		1,889		(754)
Unrealized foreign currency translation adjustments	52		(10)		(48)
Unamortized pension and other postretirement prior service credit	9		(47)		(59)
Other comprehensive income (loss), after-tax	1,354		1,832		(861)

Comprehensive income	$	6,930	$	6,679	$	1,299

See notes to consolidated financial statements.

124 www.allstate.com

Financial Statements 2020 Form 10-K

The Allstate Corporation and Subsidiaries

Consolidated Statements of Financial Position


	December 31,
($ in millions, except par value data)	2020		2019
Assets
Investments
Fixed income securities, at fair value (amortized cost, net $61,451 and $56,293)	$	66,354	$	59,044
Equity securities, at fair value (cost $3,853 and $6,568)	4,710		8,162
Mortgage loans, net	4,075		4,817
Limited partnership interests	7,609		8,078
Short-term, at fair value (amortized cost $7,800 and $4,256)	7,800		4,256
Other, net	3,689		4,005
Total investments	94,237		88,362
Cash	377		338
Premium installment receivables, net	6,479		6,472
Deferred policy acquisition costs	4,700		4,699
Reinsurance and indemnification recoverables, net	9,220		9,211
Accrued investment income	600		600
Property and equipment, net	1,057		1,145
Goodwill	2,544		2,545
Other assets, net	3,429		3,534
Separate Accounts	3,344		3,044

Total assets	$	125,987	$	119,950
Liabilities
Reserve for property and casualty insurance claims and claims expense	$	27,610	$	27,712
Reserve for life-contingent contract benefits	12,768		12,300
Contractholder funds	17,213		17,692
Unearned premiums	15,949		15,343
Claim payments outstanding	957		929
Deferred income taxes	1,355		1,154
Other liabilities and accrued expenses	8,749		9,147
Long-term debt	7,825		6,631
Separate Accounts	3,344		3,044

Total liabilities	95,770		93,952
Commitments and Contingent Liabilities (Note 7, 8 and 14)
Shareholders’ equity
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 81.0 thousand and 92.5 thousand shares issued and outstanding, $2,025 and $2,313 aggregate liquidation preference	1,970		2,248
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 304 million and 319 million shares outstanding	9		9
Additional capital paid-in	3,498		3,463
Retained income	52,767		48,074

Treasury stock, at cost (596 million and 581 million shares)	(31,331)		(29,746)
Accumulated other comprehensive income:
Unrealized net capital gains and losses on fixed income securities with credit losses	—		70
Other unrealized net capital gains and losses	3,860		2,094
Unrealized adjustment to DAC, DSI and insurance reserves	(680)		(277)
Total unrealized net capital gains and losses	3,180		1,887
Unrealized foreign currency translation adjustments	(7)		(59)
Unamortized pension and other postretirement prior service credit	131		122
Total accumulated other comprehensive income ("AOCI")	3,304		1,950
Total shareholders’ equity	30,217		25,998
Total liabilities and shareholders’ equity	$	125,987	$	119,950

See notes to consolidated financial statements.

The Allstate Corporation 125

2020 Form 10-K Financial Statements

The Allstate Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity


	Years Ended December 31,
($ in millions, except per share data)	2020		2019		2018

Preferred stock par value	$	—	$	—	$	—
Preferred stock additional capital paid-in
Balance, beginning of year	2,248		1,930		1,746
Preferred stock issuance, net of issuance costs	—		1,414		557
Preferred stock redemption	(278)		(1,096)		(373)
Balance, end of year	1,970		2,248		1,930

Common stock par value	9		9		9
Common stock additional capital paid-in
Balance, beginning of year	3,463		3,310		3,313
Forward contract on accelerated share repurchase agreement	(38)		75		(105)
Equity incentive plans activity	73		78		102
Balance, end of year	3,498		3,463		3,310

Retained income
Balance, beginning of year	48,074		44,033		41,579
Cumulative effect of change in accounting principle	(88)		21		1,088
Net income	5,576		4,847		2,160
Dividends on common stock (declared per share of $2.16, $2.00 and $1.84)	(680)		(658)		(646)
Dividends on preferred stock	(115)		(169)		(148)

Balance, end of year	52,767		48,074		44,033

Deferred Employee Stock Ownership Plan (“ESOP”) expense
Balance, beginning of year	—		(3)		(3)
Payments	—		3		—
Balance, end of year	—		—		(3)

Treasury stock
Balance, beginning of year	(29,746)		(28,085)		(25,982)
Shares acquired	(1,700)		(1,810)		(2,198)
Shares reissued under equity incentive plans, net	115		149		95
Balance, end of year	(31,331)		(29,746)		(28,085)

Accumulated other comprehensive income (loss)
Balance, beginning of year	1,950		118		1,889
Cumulative effect of change in accounting principle	—		—		(910)
Change in unrealized net capital gains and losses	1,293		1,889		(754)
Change in unrealized foreign currency translation adjustments	52		(10)		(48)
Change in unamortized pension and other postretirement prior service credit	9		(47)		(59)

Balance, end of year	3,304		1,950		118
Total shareholders’ equity	$	30,217	$	25,998	$	21,312

See notes to consolidated financial statements.

126 www.allstate.com

Financial Statements 2020 Form 10-K

The Allstate Corporation and Subsidiaries

Consolidated Statements of Cash Flows


	Years Ended December 31,
($ in millions)	2020		2019		2018
Cash flows from operating activities
Net income	$	5,576	$	4,847	$	2,160
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items	686		647		511
Realized capital (gains) losses	(1,356)		(1,885)		877

Pension and other postretirement remeasurement (gains) losses	(51)		114		468
Gain on disposition of operations	(4)		(6)		(6)
Interest credited to contractholder funds	638		640		654
Impairment of purchased intangibles	—		106		—
Changes in:
Policy benefits and other insurance reserves	(682)		(508)		469
Unearned premiums	598		801		915
Deferred policy acquisition costs	(125)		(85)		(296)
Premium installment receivables, net	(3)		(299)		(396)
Reinsurance recoverables, net	(11)		320		(656)
Income taxes	(232)		487		(380)
Other operating assets and liabilities	457		(50)		855
Net cash provided by operating activities	5,491		5,129		5,175
Cash flows from investing activities
Proceeds from sales
Fixed income securities	31,950		29,849		33,183
Equity securities	8,405		5,277		6,859
Limited partnership interests	1,350		756		764
Mortgage loans	230		—		—
Other investments	340		303		533
Investment collections
Fixed income securities	2,235		2,570		3,466
Mortgage loans	626		695		529
Other investments	209		254		488
Investment purchases
Fixed income securities	(38,121)		(31,317)		(36,960)
Equity securities	(4,648)		(7,176)		(5,936)
Limited partnership interests	(1,265)		(1,332)		(1,679)
Mortgage loans	(203)		(844)		(664)
Other investments	(371)		(666)		(864)
Change in short-term and other investments, net	(3,871)		(725)		(603)
Purchases of property and equipment, net	(308)		(433)		(277)
Acquisition of operations	1		(18)		(558)
Net cash used in investing activities	(3,441)		(2,807)		(1,719)
Cash flows from financing activities
Proceeds from issuance of long-term debt	1,189		491		498
Redemption and repayment of long-term debt	—		(317)		(400)
Proceeds from issuance of preferred stock	—		1,414		557
Redemption of preferred stock	(288)		(1,132)		(385)
Contractholder fund deposits	991		996		1,010
Contractholder fund withdrawals	(1,494)		(1,662)		(1,967)
Dividends paid on common stock	(668)		(653)		(614)
Dividends paid on preferred stock	(108)		(134)		(134)
Treasury stock purchases	(1,737)		(1,735)		(2,303)
Shares reissued under equity incentive plans, net	63		120		73

Other	41		129		91
Net cash used in financing activities	(2,011)		(2,483)		(3,574)
Net increase (decrease) in cash	39		(161)		(118)
Cash at beginning of year	338		499		617
Cash at end of year	$	377	$	338	$	499

See notes to consolidated financial statements.

The Allstate Corporation 127

2020 Form 10-K Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements


Note 1			General

Basis of presentation

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

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

Nature of operations

Allstate is engaged, principally in the United States, in the property and casualty insurance and life insurance businesses. Allstate is one of the country’s largest personal property and casualty insurers and is organized into seven reportable segments: Allstate Protection, Discontinued Lines and Coverages, Protection Services (previously Service Businesses), Allstate Life, Allstate Benefits, Allstate Annuities, and Corporate and Other.

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

Risks and uncertainties

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

Catastrophes, an inherent risk of the property and casualty insurance business, have contributed, and will continue to contribute, to material year-to-year fluctuations in the Company’s results of operations and financial position (see Note 8). The nature and level of catastrophic loss experienced in any period cannot be

predicted and could be material to results of operations and financial position.

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

•Wildfires — California, Oregon, Colorado, and Texas

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

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

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

Recent development

The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”) resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which have included the implementation of travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings, have caused material disruption to businesses globally, resulting in increased unemployment, a recession and increased economic uncertainty. Additionally, there is no way of predicting with certainty how long the pandemic might last, including the potential for restrictions being restored or new restrictions being implemented that could result in further economic volatility.

The magnitude and duration of the global pandemic and the impact of actions taken by governmental authorities, businesses and consumers, including timing of vaccine distribution, to mitigate health risks create significant uncertainty. The Company will continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the length and severity of the pandemic or its impact to the Company’s operations, but the effects could be material and may continue, emerge, evolve or accelerate in 2021.

128 www.allstate.com

Notes to Consolidated Financial Statements 2020 Form 10-K


Note 2			Summary of Significant Accounting Policies

Investments

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

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

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

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

Short-term investments, including money market funds, commercial paper, U.S. Treasury bills and other

short-term investments, are carried at fair value. Other investments primarily consist of bank loans, policy loans, real estate, agent loans and derivatives. Bank loans are primarily senior secured corporate loans. Policy loans are carried at unpaid principal balances. Real estate is carried at cost less accumulated depreciation. Agent loans are loans issued to exclusive Allstate agents. Derivatives are carried at fair value.

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

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

The Allstate Corporation 129

2020 Form 10-K Notes to Consolidated Financial Statements

net of credit losses already recognized through an allowance.

Derivative and embedded derivative financial instruments

Derivative financial instruments include interest rate swaps, credit default swaps, futures (interest rate and equity), options (including swaptions), interest rate caps, warrants and rights, foreign currency swaps, foreign currency forwards, total return swaps and certain investment risk transfer reinsurance agreements. Derivatives required to be separated from the host instrument and accounted for as derivative financial instruments (“subject to bifurcation”) are embedded in equity-indexed life and annuity contracts and reinsured variable annuity contracts.

All derivatives are accounted for on a fair value basis and reported as other investments, other assets, other liabilities and accrued expenses or contractholder funds. Embedded derivative instruments subject to bifurcation are also accounted for on a fair value basis and are reported together with the host contract. The change in fair value of derivatives embedded in life and annuity product contracts and subject to bifurcation is reported in life and annuity contract benefits or interest credited to contractholder funds. Cash flows from embedded derivatives subject to bifurcation and derivatives receiving hedge accounting are reported consistently with the host contracts and hedged risks, respectively, within the Consolidated Statements of Cash Flows. Cash flows from other derivatives are reported in cash flows from investing activities within the Consolidated Statements of Cash Flows.

When derivatives meet specific criteria, they may be designated as accounting hedges and accounted for as fair value, cash flow, foreign currency fair value or foreign currency cash flow hedges. The hedged item may be either all or a specific portion of a recognized asset, liability or an unrecognized firm commitment attributable to a particular risk for fair value hedges. At the inception of the hedge, the Company formally documents the hedging relationship and risk management objective and strategy. The documentation identifies the hedging instrument, the hedged item, the nature of the risk being hedged and the methodology used to assess the effectiveness of the hedging instrument in offsetting the exposure to changes in the hedged item’s fair value attributable to the hedged risk. For a cash flow hedge, this documentation includes the exposure to changes in the variability in cash flows attributable to the hedged risk. The Company does not exclude any component of the change in fair value of the hedging instrument from the effectiveness assessment. At each reporting date, the Company confirms that the hedging instrument continues to be highly effective in offsetting the hedged risk.

Fair value hedges The change in fair value of hedging instruments used in fair value hedges of investment assets or a portion thereof is reported in net investment income, together with the change in

fair value of the hedged items. The change in fair value of hedging instruments used in fair value hedges of contractholder funds liabilities or a portion thereof is reported in interest credited to contractholder funds, together with the change in fair value of the hedged items. Accrued periodic settlements on swaps are reported together with the changes in fair value of the related swaps in net investment income or interest credited to contractholder funds. The amortized cost, net for fixed income securities or the carrying value of a designated hedged liability is adjusted for the change in fair value of the hedged risk.

Cash flow hedges For hedging instruments used in cash flow hedges, the changes in fair value of the derivatives are reported in AOCI. Amounts are reclassified to net investment income, realized capital gains and losses or interest expense as the hedged or forecasted transaction affects income. Accrued periodic settlements on derivatives used in cash flow hedges are reported in net investment income. The amount reported in AOCI for a hedged transaction is the cumulative gain or loss on the derivative instrument from inception of the hedge less gains or losses previously reclassified from AOCI into income. If the Company expects at any time that the loss reported in AOCI would lead to a net loss on the combination of the hedging instrument and the hedged transaction which may not be recoverable, a loss is recognized immediately in realized capital gains and losses. If an impairment loss is recognized on an asset or an additional obligation is incurred on a liability involved in a hedge transaction, any offsetting gain in AOCI is reclassified and reported together with the impairment loss or recognition of the obligation.

Termination of hedge accounting If, subsequent to entering into a hedge transaction, the derivative becomes ineffective (including if the hedged item is sold or otherwise extinguished, the occurrence of a hedged forecasted transaction is no longer probable or the hedged asset has a credit loss), the Company may terminate the derivative position. The Company may also terminate derivative instruments or redesignate them as non-hedge as a result of other events or circumstances. If the derivative instrument is not terminated when a fair value hedge is no longer effective, the future gains and losses recognized on the derivative are reported in realized capital gains and losses. When a fair value hedge is no longer effective, is redesignated as non-hedge or when the derivative has been terminated, the fair value gain or loss on the hedged asset, liability or portion thereof previously recognized in income while the hedge was in place and used to adjust the amortized cost, net of hedged fixed income securities or mortgage loans or carrying value of a hedged liability, is amortized over the remaining life of the hedged asset, liability or portion thereof, and reflected in net investment income or interest credited to contractholder funds beginning in the period that hedge accounting is no longer applied.

When a derivative instrument used in a cash flow hedge of an existing asset or liability is no longer effective or is terminated, the gain or loss recognized on the derivative is reclassified from AOCI to income as

130 www.allstate.com

Notes to Consolidated Financial Statements 2020 Form 10-K

the hedged risk impacts income. If the derivative instrument is not terminated when a cash flow hedge is no longer effective, future gains and losses recognized on the derivative are reported in realized capital gains and losses. When a derivative instrument used in a cash flow hedge of a forecasted transaction is terminated because it is probable the forecasted transaction will not occur, the gain or loss recognized on the derivative is immediately reclassified from AOCI to realized capital gains and losses in the period that hedge accounting is no longer applied.

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

Securities loaned

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

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

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

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

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

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

assistance premiums are recognized evenly over the term of the contract as performance obligations are fulfilled.

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


Unearned premiums
	As of December 31,
($ in millions)	2020		2019
Allstate Protection	$	12,772	$	12,567
Protection Services	3,167		2,765
Total	$	15,939	$	15,332

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

For the year ended December 31, 2019, the Company recognized $996 million of Property and casualty insurance premiums for Protection Services that were included in the unearned premium balance as of December 31, 2018.

The Company expects to recognize approximately $1.30 billion, $861 million and $1.00 billion of the December 31, 2020 the unearned premium balance in 2021, 2022 and thereafter, respectively.

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

The increase in the provision for credit losses primarily related to customer enrollment in the Allstate Special Payment plan implemented in response to the Coronavirus, starting in March 2020.