all-20211231

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, 2021

☐ 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, 2021, was approximately $38.21 billion.

As of January 31, 2022, the registrant had 278,346,060 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 24, 2022, (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

– Allstate Health and Benefits

– Other Business Segments

• Regulation

• Human Capital

• 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.

[Reserved]

Item 7.

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

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

185

Item 9A.

Controls and Procedures

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

185

Part III

Item 10.

Directors, Executive Officers and Corporate Governance

186

Item 11.

Executive Compensation

186

Item 12.

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

187

Item 13.

Certain Relationships and Related Transactions, and Director Independence

187

Item 14.

Principal Accounting Fees and Services

187

Part IV

Item 15.

Exhibits and Financial Statement Schedules

Financial Statement Schedules

S-1

2021 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 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 and personal property. 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 accident and health insurance, protection plans that cover consumer electronics, mobile phones and appliances and personal identity protection.

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 protection 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 second largest personal property and casualty insurer in the United States on the basis of 2020 statutory direct premiums written according to A.M. Best, including the acquisition of National General Holdings Corp. (“National General”).

Allstate also has strong market positions in other protection solutions. Allstate Health and Benefits provides accident, health and life insurance through employers, independent agents and direct-to-consumer, and is one of the top voluntary benefits carriers in the market. Allstate Protection Plans provides protection 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 has a leading position in identity protection through worksite distribution. In total, Allstate had 190.9 million policies in force (“PIF”) as of December 31, 2021.

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.

Acquisitions and Dispositions On January 4, 2021, Allstate completed the acquisition of National General, expanding its independent agent channel business.

During the fourth quarter of 2021, Allstate completed the sales of Allstate Life Insurance Company (“ALIC”), Allstate Life Insurance Company of New York (“ALNY”) and certain affiliates.

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

The Allstate Corporation 1

2021 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 better serve customers. This is done by providing affordable, simple and connected protection through multiple distribution partners. The ultimate objective is to create continuous transformative growth in all businesses.

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.

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2021 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 brand, National General and Answer Financial. Offers private passenger auto, homeowners, other personal lines and commercial insurance through agents, contact centers and online. The Encompass brand was combined into National General beginning in the first quarter of 2021 and results prior to 2021 reflect Encompass brand results only.
Protection Services						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 Health and Benefits						Offers voluntary benefits and individual life and health products, including life, accident, critical illness, short-term disability and other health insurance products sold through independent agents, benefits brokers and Allstate exclusive agents.

Run-off Property-Liability (1)						Relates to property and casualty insurance policies written during the 1960s through the mid-1980s 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 Run-off Property-Liability segments comprise Property-Liability.

The Allstate Corporation 3

2021 Form 10-K Item 1. Business

Allstate Protection Segment

Our Allstate Protection segment accounted for 91.9% of Allstate’s 2021 consolidated insurance premiums and contract charges and 20.0% of Allstate’s December 31, 2021 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 offer products in an open access, digital first model that allows customers to interact with us when, where and how they want with affordable, simple and connected protection products.

Strategy Allstate Protection’s strategy is to increase personal lines market share through Transformative Growth focusing on:

•Expanding customer access to Allstate and National General products and services through the methods of interaction customers want

•Improving customer value by making it easier to do business with us and improved price competitiveness driven by reducing our cost structure

•Increasing sophistication and investment in customer acquisition

•Deploying new technology to support customer experience and product management ecosystems

We have three market-facing property-liability businesses, Allstate brand, National General and Answer Financial with products and services that cater to different customer preferences for advice and brand recognition.

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

Expand Customer Access

Transforming our Allstate agent sales system to enable more growth at a lower cost by incenting agents to focus on sales, while expanding our distribution capacity through new agent models

Driving direct channel growth through improved online experience and data-driven insights to enhance call center sales

Growing National General by leveraging the Allstate brand capabilities and data to enhance product offerings and expand our independent agency footprint

Improve Customer Value

Improving the competitive prices of products and experiences through increased digital self-service capabilities, operating efficiencies, automation and lower distribution costs

Enhancing pricing sophistication to price products based on customer needs and risks and improving the 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 consumer-focused protection solutions

Increase Customer Acquisition Sophistication

Improving the effectiveness and broadening the in-market tactics driving customer acquisition through expanding lead management, building data capabilities and advancing household insights

Modernize Technology Ecosystem

Building an ecosystem to enable a better customer experience, increased sales and retention, and allowing greater flexibility at a lower cost through affordable, simple, connected products and retiring legacy systems

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Item 1. Business 2021 Form 10-K

Additional Information and Strategy Updates

Commercial lines strategy We remain focused on achieving sustainable growth and profitability in 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 The acquisition of National General significantly enhanced our strategic position in the independent agency channel. The transaction increased our total personal property-liability market share by over one percentage point and has enhanced our independent agent-facing technology. It also expanded our distribution footprint, and led us to be a top five personal lines carrier in the independent agency distribution channel.

National General provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed property, health and other niche insurance products. Auto insurance represents approximately 60% of premium with a significant presence in the non-standard auto market. Allstate’s capabilities are being leveraged to create standard auto and homeowners insurance products to better serve mid-market customers through independent agents.

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

•Migrating Encompass policyholders and business operations to National General and retiring Encompass infrastructure

•Transitioning Allstate Independent Agent new business to National General as standard auto and homeowners insurance 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, earthquakes and wildfires, excluding other catastrophe losses, net of reinsurance, exceeding $2.5 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 $2.5 billion as noted above. In addition, we have exposure to other severe weather events, which impact catastrophe losses.

The Allstate Corporation 5

2021 Form 10-K Item 1. Business

We are promoting measures to prevent and mitigate losses that are increasing due to climate change and increased severe weather including making homes and communities more resilient,

enforcement of stronger building codes, adoption of sensible land use policies and expanded disaster response capabilities.

Products and distribution

Allstate Protection differentiates itself by offering a comprehensive range of affordable, simple and connected protection solutions across distribution channels for specific consumer segments.

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 National General brands.


Distribution
Allstate brand			In the U.S., we offer products through 9,300 Allstate exclusive agents operating in 9,400 locations, supported by 21,700 licensed sales professionals, and 800 exclusive financial specialists. We also offer products through 7,800 independent agents, contact centers, online and Market Sales Associates, a new employee model. In Canada, we offer Allstate brand products through 1,000 employee sales agents.
National General			Distributed through over 43,000 independent agent locations, approximately 540 retail stores, contact centers and online.
Answer Financial			Comparison quotes and sales offered to customers online or through contact centers.

Allstate exclusive agents also support the Protection Services and Allstate Health and Benefits segments through offering roadside assistance, consumer protection plans and voluntary benefits products. We have expanded 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.

Variable compensation in 2021 shifted toward new business, including homeowners, and eliminated variable compensation for renewing customers. We are aligning agent compensation to emphasize growth, improve customer service and lower costs.

When an Allstate product is not available, agents have the ability to earn commissions and additional bonuses on non-proprietary products provided to customers through Ivantage, a leading provider of property and casualty brokerage services, and arrangements with other companies, agencies, and brokers. As of December 31, 2021, Ivantage had $1.98 billion non-proprietary premiums under management, consisting of approximately $1.75 billion of personal insurance premiums primarily related to property business in hurricane exposed areas, and approximately $230 million of commercial insurance premiums.

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Item 1. Business 2021 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 non-proprietary life and retirement sales and are eligible for a quarterly bonus based on the volume of non-proprietary sales.

Independent agent remuneration for National General 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.

	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, 2021.
	Auto Car Replacement Protection	Replaces a qualifying customer’s vehicle involved in a total loss accident with a newer vehicle with fewer miles. Offered in 47 states and D.C. as of December 31, 2021.
National General	Custom 360SM	Endorsements and coverage amounts can be scaled up or down to create a custom, needs-based insurance solution for customers at all stages in life.


Telematics solutions
Allstate brand	Drivewise®	Telematics-based program, available in 49 states and D.C. as of December 31, 2021, that uses a mobile application or an in-car device to capture driving behaviors and encourage safe driving. It provides customers with information, tools and incentives. For example, in most states, Allstate Rewards® provides reward points for safe driving.
	Milewise®	Usage-based insurance product, available in 22 states as of December 31, 2021, that gives customers flexibility to customize their insurance and pay based on the number of miles they drive.

National General	DynamicDrive	Mobile-based telematics application, available in 25 states as of December 31, 2021, 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

2021 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, inclusive of National General, compared to our principal U.S. competitors using statutory direct written premium for the year ended December 31, 2020, 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 2021 statutory direct premiums are reflected below.

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Item 1. Business 2021 Form 10-K

Protection Services Segment

Our Protection Services segment accounted for 4.7% of Allstate’s 2021 consolidated total revenue and 77.7% of Allstate’s December 31, 2021 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. National General’s LeadCloud and Transparent.ly’s results are included within Arity starting in the first quarter of 2021. These businesses provide marketing and integration platforms connecting data buyers and sellers.

Strategy - Protection Services’ strategy is to deliver innovative customer protection solutions and expand distribution through strategic partners in the flow of commerce.


Allstate Protection Plans						Expand distribution and product breadth of consumer protection plans through new and existing retailers and mobile operators across North America, Europe and Asia.
Allstate Dealer Services						Expand distribution of Allstate branded finance and insurance products through auto dealerships.
Allstate Roadside						Modernize the roadside assistance business through technology and enhance capabilities to deliver a superior customer experience.
Arity						Leverage data, analytics and deep understanding of driving, mobility and risk to create a strategic platform. The platform is used by those industries affected most by the changing face of transportation, including insurance companies, mobility companies and the automotive ecosystem. Arity’s insights and services create value across the customer journey, including acquisition, pricing, claims and ongoing customer engagement.
Allstate Identity Protection						Create a leading position in the identity protection market, offering full-service identity protection including identity monitoring, digital exposure reporting, and identity theft remediation and reimbursement. Expand our product breadth beyond identity protection and into consumer digital enablement and privacy protection 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.
Allstate Dealer Services						Offers finance and insurance products, including vehicle service contracts, guaranteed asset protection waivers, road hazard tire and wheel protection, and paint and fabric 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 insights and services created from data collected, normalized and analyzed by the Arity platform, including automotive telematics information. Product suite includes on-demand risk scoring, lead generation, digital advertising, data integration, traditional telematics, and data-as-a-service solutions.
Allstate Identity Protection						Provides identity protection services including monitoring, alerts, remediation and a proprietary indicator of identity health.


Distribution channels
Allstate Protection Plans						Retailers and mobile operators, in-store or online, in North America, Europe and Asia Pacific.
Allstate Dealer Services						Independent agents selling 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 on-demand mobile application service.
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, Australia and Asia.

Competition

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

The Allstate Corporation 9

2021 Form 10-K Item 1. Business

Allstate Health and Benefits Segment

Strategy

Our Allstate Health and Benefits segment (previously Allstate Benefits) accounted for 4.5% of Allstate’s 2021 consolidated total revenue and 2.3% of Allstate’s December 31, 2021 PIF. The Allstate Health and 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. Allstate Health and Benefits is well represented in all market segments and is a leader in the large and mega (over 10,000 employees) market segments.

Starting in the first quarter of 2021, National General’s accident and health products, which include accident and medical health insurance products, are included in the Allstate Health and Benefits segment.

Allstate Health and 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


Health and benefits products
Employer Voluntary Benefits
Group Health
Individual Health


Distribution channels
Over 4,000 workplace enrolling independent agents and benefits brokers
Allstate exclusive agents, focusing on small employers
Over 56,000 independent agents. in-house agencies, affinity relationships, wholesaling, worksite marketing and direct-to-consumer marketing through call centers and the internet.

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 2021 statutory direct premiums are reflected below.

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Item 1. Business 2021 Form 10-K

Other Business Segments

Run-off Property-Liability Segment

The Run-off Property-Liability 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 may pursue settlement agreements including policy buybacks on direct excess commercial business when appropriate to improve the certainty of the liabilities. At the end of 2021, 70% 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 run-off 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.

The Allstate Corporation 11

2021 Form 10-K Item 1. Business

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 17 of the consolidated financial statements.

For a discussion of regulatory contingencies, see Note 15 of the consolidated financial statements. Note 15 and Note 17 are incorporated in this Part I, Item 1 by reference.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“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, 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 and promote better catastrophe preparedness and loss mitigation.

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 formed a working group that has developed and adopted 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 to regulators 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 risk-based capital (“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 is a holding company and its insurance subsidiaries are subject to regulation in the jurisdictions in which they write 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, Ohio, 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 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-

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Item 1. Business 2021 Form 10-K

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, Ohio, 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 (20 states)

•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 (19 states)

•Use-and-file — Requires an insurer to file rates within a certain period of time after the insurer begins using them (10 states)

•No approval — One state, with an immaterial amount of written premiums, does not require a filing to be submitted

Under these rating laws, the regulator has the authority to disapprove a rate filing. The percentage of 2021 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 targeted level of 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 15 of the consolidated financial statements. Note 15 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.

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

The Allstate Corporation 13

2021 Form 10-K Item 1. Business

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 became effective, setting fee schedules for personal injury protection claims. Such fee schedules were 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 11 of the consolidated financial statements. Note 11 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.

Broker-Dealers and Investment Advisers The Allstate entities that operate as broker-dealers and registered investment advisers are subject to regulation and supervision by the Securities and Exchange Commission (“SEC”), Financial Institution Regulatory Authority (“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 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

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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 run-off 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.

The Allstate Corporation 15

2021 Form 10-K Item 1. Business

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, 2021, Allstate had approximately 54,300 full-time employees and 400 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, 2021
Women						57%
Racially and ethnically diverse						42%

•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. Beginning in 2021 we also disclosed our EEO-1 data.

•As part of our commitment to fair and equitable compensation practices, we complete an annual pay equity analysis. We partner with external law and data analytics firms 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: Allstate has 11 ERGs that 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 positively impact employee engagement and feelings of belonging 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 2021, employees completed more than 106,000 IDE courses, more than triple the number completed in 2020.

•Allstate continues to look for ways to build awareness and drive action to be a differentiated leader in IDE. In 2021, we:

–Continued to drive skills-based hiring without degree requirements on job postings. 54% of all new hires in 2021 did not have a 4-year bachelor’s degree.

–Began conducting a top-to-bottom review of IDE practices within Allstate, which will continue in 2022.

–Rolled out the IDE Strategy with Culture, People, Business Practices, and Community as the four pillars.

–Launched IDE Dashboard with representation data and goals to guide business practices and increase transparency.

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

•Allstate responded quickly and decisively to the pandemic. To prioritize safety, we transitioned 95% of our workforce to work from home and established comprehensive safety protocols for those who continued to work in-person.

•Allstate established and continues to utilize strong guiding principles to drive our response to the pandemic. These principles include complying with regulations, relying on expert medical advice, adapting our approach to individual circumstances, and keeping our employees, agents, and customers safe.

•As part of the Good Office program, we ship essential office items to our employees to help them work more productively at home and are establishing a new hire bundle to ensure all new employees start with the remote technology they need.

•We conduct wellbeing assessments to solicit employee feedback about physical, emotional, mental and financial wellbeing. Completing the assessment lowers the cost of benefits to employees.

•We offer resilience and stress management programs, including Energy for Life, designed 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.

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•The ERGs provided multiple forums in 2021 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.

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. In early 2021 we conducted research with employees to learn more about their work location preferences. Ultimately 75% of our workforce will remain home-based workers permanently, 24% hybrid, and due to roles, 1% will be fully office-based. This remote-first strategy has enabled us to recruit a more geographically dispersed and diverse talent pool, as well as to reevaluate our facilities footprint.

•Performance review and development takes place throughout the year. Allstate invests in training and re-skilling opportunities, with most of our learning experiences offered virtually to support our remote and global workforce.

•In 2021:

–Employees completed over 154,000 hours in formal learning opportunities.

–Over 7,000 employees participated in Allstate’s Global Learning month, which included speaking events with industry leaders.

–Over 4,000 employees attended Quarterly Skill Builders featuring external experts facilitating topics including building a culture of feedback, collaboration, challenging ideas and providing clarity.

–734 employees participated in Allstate’s tuition reimbursement program, with $2.9 million paid in tuition reimbursement.

–31% of open positions were filled with internal applicants.

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. In 2021 we focused on further embedding Our Shared Purpose into the employee experience, including in our recruiting and hiring practices, performance management, learning and development offerings, leadership development and employee feedback and measurement.

For additional information, please see the section titled “Human Capital Management” in our 2021 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.

The Allstate Corporation 17

2021 Form 10-K Item 1. Business

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 Human Capital Committee, Nominating, Governance and Social Responsibility Committee, Executive Committee and Risk and Return Committee are available on the Investor Relations section of our website. 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 five 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®”, “National General®” 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 Health and 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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Item 1. Business 2021 Form 10-K

Information about our Executive Officers

The following table sets forth the names of our executive officers, their ages as of February 1, 2022, 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	64	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
Elizabeth A. Brady	57	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	60	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	55	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	52	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).	2020
Suren Gupta	60	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
Jesse E. Merten	47	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	56	Senior Vice President, Controller and Chief Accounting Officer of The Allstate Corporation and AIC (September 2019 to present); Senior Vice President and Chief Financial Officer, Allstate Investments (May 2012 to August 2019).	2005
Mark Q. Prindiville	54	Executive Vice President and Chief Risk Officer of AIC (May 2020 to present); Senior Vice President of AIC (September 2016 to May 2020).	2016
Mario Rizzo	55	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	56	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).	2016

The Allstate Corporation 19

2021 Form 10-K Item 1. Business

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.

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Part I - Item 1A. Risk Factors and Other Disclosures 2021 Form 10-K

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 related to the insurance and financial services industries

Risks related 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 and privacy events

• Changing climate conditions

• Regulatory and political changes

• Loss of key business relationships

• Ability to attract, develop and retain talent

The Allstate Corporation Board of Directors (“Allstate Board”) has overall responsibility for oversight of Management’s design and implementation of our Enterprise Risk and Return Management (“ERRM”) framework that manages risk on an integrated basis following our risk and return principles. The Risk and Return Committee 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.

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 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 have and may continue to impact claim severity for auto bodily injury, property damage and homeowners coverages:

•Bodily injury — inflation in medical costs, duration of treatment, 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, severe freeze events, volcanic eruptions, terrorism, cyber-attacks, civil unrest, 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

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2021 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

•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 extremely volatile.

The total number of policyholders affected by the event, the severity of the event and the coverage 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 regulation and 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. Changes in regulatory standards regarding underwriting and rates could also affect the ability to predict future losses and could impact profitability. 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. 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

•Supply chain disruptions and labor shortages could increase the cost of settling claims

•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

•Supply chain disruptions, labor shortages and other factors have and may continue to increase inflation, which could have an adverse impact on investment valuations and returns.

•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

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Part I - Item 1A. Risk Factors and Other Disclosures 2021 Form 10-K

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.

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.

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 11 of the consolidated financial statements.

We may not be able to mitigate the impact associated with changes in capital requirements

Regulatory requirements affect the amount of capital to be maintained by our subsidiary insurance companies. Changes to 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 our business strategy, or other considerations that may or may not be under our control

A downgrade in our ratings could have an adverse 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.


			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

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2021 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

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 and operations 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 application 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 strategy implementation may not be effective

The Transformative Growth strategy is to accelerate growth by expanding customer access, improving customer value, increasing the level and sophistication of new customer acquisition and deploying new technology applications. 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 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 17 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.

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Part I - Item 1A. Risk Factors and Other Disclosures 2021 Form 10-K

Changes in regulatory or rating agency 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 13 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 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.

We also may divest businesses from time to time. 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

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2021 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

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

•Interest rate levels

•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, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures moderated in 2021 in certain locations as vaccines became more widely available in the United States and Canada. There is no way of predicting with certainty how long the pandemic might last. New variants of the Coronavirus may impact the potential for restrictions being restored or new restrictions being implemented that could result in further economic volatility. We continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to our operations, but the effects could be material.

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

•Sales of new and retention of existing policies

•Premium for transportation network products

•Supply chain disruptions and labor shortages increase the cost of settling claims

•Hospital and outpatient claim costs

•Investment valuations and returns

•Bad debt and credit allowance exposure

•Consumer utilization of Milewise®, our pay-per-mile insurance product

•Retail sales in Allstate Protection Plans

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 2022.

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

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Part I - Item 1A. Risk Factors and Other Disclosures 2021 Form 10-K

•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 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. We have experienced breaches of our data and systems, although to date none of these breaches has had a material effect on our business, operations or reputation. Events like these jeopardize the information processed and stored in, and transmitted through, our computer systems and networks and 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 affects the occurrence of certain natural events, such as increasing the frequency or severity of wind, tornado, hailstorm and thunderstorm events due to increased convection in the atmosphere. There could also be more frequent wildfires in certain geographies, more flooding and the potential for increased severity of hurricanes due to higher sea surface temperatures. As a result, incurred losses from such events and the demand, price and availability of reinsurance coverages for automobile and homeowners insurance may be affected.

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

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

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

Many of our affiliates operate in the highly regulated insurance and broader financial services sector and are subject to extensive laws and regulations that are complex and subject to change. Changes may lead to additional expenses, increased legal exposure, 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.

There is risk that one regulator’s or enforcement authority’s interpretation of a legal issue may change

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2021 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

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.

In addition, increasing governmental and societal attention to environmental, social, and governance matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor, and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess, and report.

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 15 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 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

•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

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Part I - Item 1A. Risk Factors and Other Disclosures 2021 Form 10-K

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 services

•Call center services for customer support

•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. The increased prevalence of remote-working arrangements that do not require employees to relocate to take a new job could contribute to higher turnover.

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, 2021, the home office campus consists of several buildings totaling 1.9 million square feet of office space on a 186-acre site.

On November 26, 2021, Allstate entered into a definitive Purchase and Sale Agreement with DPIF3 Acquisition Co LLC, an affiliate of Dermody Properties, to sell Allstate’s home office complex for $232 million. The sale is expected to be completed in 2022, subject to (i) the completion of due diligence, (ii) a purchaser contingency relating to governmental approvals with respect to the entitlements for the property and certain economic or tax incentives, and (iii) satisfaction of customary closing conditions.

We also operate from approximately 955 administrative, data processing, claims handling and other support facilities in North America. In addition to our home office facilities, 842 thousand square feet are owned and 6.5 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 two leased facilities in India for approximately 441 thousand square feet and two leased facilities in London for seven thousand 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 15 of the consolidated financial statements.

Item 4. Mine Safety Disclosures

Not applicable.

The Allstate Corporation 29

2021 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 31, 2022, there were 61,841 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, 2016 to December 31, 2021) 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, 2016
	12/31/2016		12/31/2017		12/31/2018		12/31/2019		12/31/2020		12/31/2021
Allstate	$	100.00	$	143.62	$	115.58	$	160.45	$	160.26	$	176.09
S&P P/C	$	100.00	$	122.39	$	116.64	$	146.82	$	156.11	$	183.45
S&P 500	$	100.00	$	121.82	$	116.47	$	153.13	$	181.29	$	233.28

30 www.allstate.com

2021 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 (2)	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (3)
October 1, 2021 - October 31, 2021
Open Market Purchases	1,662,426	$	127.11	1,657,457
November 1, 2021 - November 30, 2021
Open Market Purchases	2,440,864	$	115.36	2,439,045

December 1, 2021 - December 31, 2021
Open Market Purchases	3,392,587	$	112.15	3,392,456
Total	7,495,877	$	116.51	7,488,958	$	3.30	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 and/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: 4,969

November: 1,819

December: 131

(2)From time to time, repurchases under our programs are executed under the terms of a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934.

(3)In August 2021, we announced the approval of a common share repurchase program for $5 billion which is expected to be completed by the end of March 2023.

Item 6. [Reserved]

None.

The Allstate Corporation 31

2021 Form 10-K

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


									Page
2021 Highlights									33
Property-Liability Operations									38
Allstate Protection									40
Run-off Property-Liability									48
Protection Services									51
Claims and Claims Expense Reserves									53
Allstate Health and Benefits									60
Investments									63
Market Risk									72
Capital Resources and Liquidity									75
Enterprise Risk and Return Management									80
Application of Critical Accounting Estimates									83
Regulation and Legal Proceedings									94
Pending Accounting Standards									94

32 www.allstate.com

2021 Form 10-K

2021 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 2021 and 2020 results and year-to-year comparisons between 2021 and 2020. Discussions of 2019 results and year-to-year comparisons between 2020 and 2019 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 2020, filed February 19, 2021.

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 and adjusted net income.

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

•Investments: exposure to market risk, asset allocation, credit quality/experience, total return, net investment income, cash flows, net gains and losses on investments and derivative instruments, 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 Run-off Property-Liability segments and adjusted net income for the Protection Services, Allstate Health and Benefits, and Corporate and Other segments.

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

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


•			Net gains and losses on investments and derivatives except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with net gains and losses on investments and derivatives but included in adjusted net income
•			Pension and other postretirement remeasurement gains and losses
•			Business combination expenses and the amortization or impairment of purchased intangibles
•			Income or loss from discontinued operations
•			Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years
•			Income tax expense or benefit on reconciling items

The Allstate Corporation 33

2021 Form 10-K

Acquisitions and Dispositions

Acquisitions On January 4, 2021, we completed the acquisition of National General Holdings Corp. (“National General”), significantly enhancing our strategic position in the independent agency channel. The transaction increased our market share in personal property-liability by over one percentage point and enhanced our independent agent-facing technology.

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

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

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

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

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

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

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

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

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

•Sales of new and retention of existing policies

•Premium for transportation network products

•Driving behavior and auto accident frequency

•Supply chain disruptions and labor shortages impacts on the cost of settling claims

•Hospital and outpatient claim costs

•Investment valuations and returns

•Bad debt and credit allowance exposure

•Consumer utilization of Milewise®, our pay-per-mile insurance product

•Retail sales in Allstate Protection Plans

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”.

This list is not inclusive of all potential impacts and should not be treated as such. Within the MD&A we have included further disclosures related to the impacts of the Coronavirus on our 2021 results.

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2021 Form 10-K

Allstate Delivered on 2021 Operating Priorities (1)

Better Serve Customers

Allstate made substantial progress in advancing Transformative Growth initiatives in 2021, which includes improving the competitive price position in auto insurance through continued cost reductions.

Enterprise Net Promoter Score, which measures how likely customers are to recommend us, finished slightly below the prior year.

Grow Customer Base

Consolidated policies in force reached 190.9 million, a 9.8% increase from prior year. Property-Liability policies in force increased by 13.7% compared to the prior year driven by expanded customer access from the acquisition of National General and Allstate brand growth.

Protection Services policies in force grew to 148.4 million, an 8.9% increase to the prior year, driven by continued expansion in Allstate Protection Plans.

Achieve Target Returns on Capital

Return on average common shareholders’ equity was 5.8% in 2021, primarily driven by the loss on the dispositions of ALIC, ALNY and certain affiliates, partially offset by increased net investment income from strong performance-based results.

The Property-Liability combined ratio of 95.9 for the full year increased compared to the prior year primarily driven by higher auto losses. Allstate responded quickly to address the impact of higher severity through rate increases, continued commitment to cost reductions and claims loss cost management.

Proactively Manage Investments

Net investment income of $3.3 billion in 2021 exceeded prior year by $1.7 billion due to strong performance-based results.

Total return on the $64.7 billion investment portfolio was 4.4% in 2021 reflecting higher performance-based income and equity returns, partially offset by fixed income valuation declines.

Build Long-Term Growth Platforms

Allstate’s personal property-liability market share increased by approximately one percentage point primarily through the acquisition of National General, which, consistent with our Transformative Growth objectives, expanded customer access and our strategic positioning in the independent agent channel.

Allstate closed on the sale of lower growth and return life and annuity businesses. Protection Services increased its customer base and total addressable market through an expanded network of products and partners.

(1)2022 operating priorities will remain consistent with the 2021 priorities.

Consolidated Net Income

($ in millions)


Consolidated net income applicable to common shareholders decreased 72.8% or $3.98 billion to $1.49 billion in 2021 compared to 2020, primarily due to a loss from discontinued operations and higher non-catastrophe losses. Partially offsetting were higher property and casualty insurance premiums, net investment income, and pension and other postretirement gains. For the twelve months ended December 31, 2021, return on common shareholders’ equity was 5.8% compared to 21.0% for the twelve months ended December 31, 2020.

Total Revenue

($ in millions)


Total revenue increased 20.7% to $50.59 billion in 2021 compared to 2020, driven by a 13.9% increase in property and casualty insurance premiums earned and higher net investment income. Insurance premiums increased in both Property-Liability, primarily due to the acquisition of National General, and Protection Services (Allstate Protection Plans, Allstate Dealer Services and Allstate Roadside).

Net Investment Income

($ in millions)


Net investment income increased 107.1% to $3.29 billion in 2021 compared to 2020, primarily due to increases in performance-based income results, mainly from limited partnerships.

The Allstate Corporation 35

2021 Form 10-K

Summarized financial results


	Years Ended December 31,
($ in millions)	2021		2020		2019
Revenues
Property and casualty insurance premiums	$	42,218	$	37,073	$	36,076
Accident and health insurance premiums and contract charges	1,821		1,094		1,145
Other revenue	2,172		1,065		1,054
Net investment income	3,293		1,590		1,728
Net gains (losses) on investments and derivatives	1,084		1,087		1,538
Total revenues	50,588		41,909		41,541

Costs and expenses
Property and casualty insurance claims and claims expense	(29,318)		(22,001)		(23,976)
Shelter-in-Place Payback expense	(29)		(948)		—
Accident and health insurance policy benefits	(1,015)		(516)		(601)
Interest credited to contractholder funds	(34)		(33)		(34)
Amortization of deferred policy acquisition costs	(6,252)		(5,477)		(5,353)
Operating, restructuring and interest expenses	(7,760)		(6,065)		(5,788)
Pension and other postretirement remeasurement gains (losses)	644		51		(114)
Amortization of purchased intangibles	(376)		(118)		(126)
Impairment of purchased intangibles	—		—		(106)
Total costs and expenses	(44,140)		(35,107)		(36,098)

Income from operations before income tax expense	6,448		6,802		5,443

Income tax expense	(1,289)		(1,373)		(1,116)

Net income from continuing operations	5,159		5,429		4,327

(Loss) income from discontinued operations, net of tax	(3,593)		147		520

Net income	1,566		5,576		4,847

Less: Net loss attributable to noncontrolling interest	(33)		—		—

Net income attributable to Allstate	1,599		5,576		4,847

Preferred stock dividends	(114)		(115)		(169)

Net income applicable to common shareholders	$	1,485	$	5,461	$	4,678

Segment Highlights

Allstate Protection underwriting income totaled $1.79 billion in 2021, a 60.9% decrease from $4.57 billion in 2020, primarily due to higher auto and homeowners non-catastrophe and catastrophe losses and increased underwriting expenses, partially offset by increased premiums earned in Allstate brand and lower Shelter-in-Place Payback expense.

Catastrophe losses were $3.34 billion in 2021 compared $2.81 billion in 2020.

Premiums written increased 15.6% to $41.36 billion in 2021 compared to 2020, reflecting the acquisition of National General and higher Allstate brand homeowners premiums.

Protection Services adjusted net income was $179 million in 2021 compared to $153 million in 2020. The improvement in 2021 was primarily due to growth of Allstate Protection Plans, lower claims costs at Allstate Dealer Services, growth and lower levels of investment at both Arity and Allstate Identity Protection, partially offset by higher severity and rescue volumes in Allstate Roadside.

Premiums and other revenues increased 24.5% or $417 million to $2.12 billion in 2021 from $1.70 billion in 2020 primarily due to Allstate Protection Plan’s growth through its U.S. retail and international channels and the addition of LeadCloud and Transparent.ly, which were acquired as part of the National General acquisition.

Allstate Health and Benefits adjusted net income was $208 million in 2021 compared to $96 million in 2020. The increase was primarily due to the acquisition of National General’s group health and individual health business, which resulted in higher premiums and contract charges, partially offset by higher policy benefits and operating costs and expenses.

Premiums and contract charges totaled $1.82 billion in 2021, an increase of 66.5% from $1.09 billion in 2020.

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2021 Form 10-K

Financial Highlights

Investments totaled $64.70 billion as of December 31, 2021, increasing from $59.54 billion as of December 31, 2020.

Shareholders’ equity As of December 31, 2021, shareholders’ equity was $25.18 billion.

Book value per diluted common share (ratio of common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $81.52 as of December 31, 2021, a decrease of 10.9% from $91.50 as of December 31, 2020.

Return on average common shareholders’ equity For the twelve months ended December 31, 2021, return on common shareholders’ equity was 5.8%, a decrease of 15.2 points from 21.0% for the twelve months ended December 31, 2020, primarily due to lower net income applicable to common shareholders.

Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement gains of $644 million in 2021, primarily related to favorable asset performance compared to the expected return on plan assets and an increase in the liability discount rate. See Note 18 of the consolidated financial statements and Application of Critical Accounting Estimates section of the MD&A for further information.

The Allstate Corporation 37

2021 Form 10-K Property-Liability

Property-Liability Operations

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

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

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

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

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

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

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

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

•Effect of prior year reserve reestimates on combined ratio

•Effect of amortization of purchased intangibles on combined ratio

•Effect of impairment of purchased intangibles on combined ratio

•Effect of restructuring and related charges on combined ratio

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

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

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

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

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

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

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

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

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

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

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

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Property-Liability 2021 Form 10-K


Underwriting results
($ in millions, except ratios)	2021		2020		2019
Premiums written	$	41,358	$	35,768	$	35,419
Premiums earned	$	40,454	$	35,580	$	34,843
Other revenue	1,437		857		866
Claims and claims expense	(28,876)		(21,626)		(23,622)
Shelter-in-Place Payback expense	(29)		(948)		—
Amortization of DAC	(5,313)		(4,642)		(4,649)
Other costs and expenses	(5,622)		(4,549)		(4,532)
Restructuring and related charges (1)	(145)		(235)		(38)
Amortization of purchased intangibles	(241)		(12)		(4)
Impairment of purchased intangibles	—		—		(51)
Underwriting income	$	1,665	$	4,425	$	2,813

Catastrophe losses
Catastrophe losses, excluding reserve reestimates	$	3,541	$	3,314	$	2,509
Catastrophe reserve reestimates (2)	(202)		(503)		48
Total catastrophe losses	$	3,339	$	2,811	$	2,557

Non-catastrophe reserve reestimates (2)	326		68		(176)
Prior year reserve reestimates (2)	124		(435)		(128)

GAAP operating ratios
Loss ratio	71.4		60.8		67.8
Expense ratio (3)	24.5		26.8		24.1
Combined ratio	95.9		87.6		91.9
Effect of catastrophe losses on combined ratio	8.3		7.9		7.3
Effect of prior year reserve reestimates on combined ratio	0.3		(1.2)		(0.4)
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio	(0.5)		(1.4)		0.1
Effect of restructuring and related charges on combined ratio (1)	0.4		0.7		0.1
Effect of amortization of purchased intangibles on combined ratio	0.6		0.1		—
Effect of impairment of purchased intangibles on combined ratio	—		—		0.2
Effect of Shelter-in-Place Payback expense on combined and expense ratios	0.1		2.7		—
Effect of Run-off Property-Liability business on combined ratio	0.3		0.4		0.3

(1)Restructuring and related charges in 2021 primarily related to reductions in real estate. See Note 14 of the consolidated financial statements for additional details.

(2)Favorable reserve reestimates are shown in parentheses.

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

The Allstate Corporation 39

2021 Form 10-K Allstate Protection

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. The Encompass brand was combined into National General beginning in the first quarter of 2021, and results prior to 2021 reflect Encompass brand results only. Our strategy is to offer products in an open access, digital first model that allows customers to interact with us when, where and how they want with affordable, simple and connected protection products. 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)	2021		2020		2019
Premiums written	$	41,358	$	35,768	$	35,419
Premiums earned	$	40,454	$	35,580	$	34,843
Other revenue	1,437		857		866
Claims and claims expense	(28,760)		(21,485)		(23,517)
Shelter-in-Place Payback expense	(29)		(948)		—
Amortization of DAC	(5,313)		(4,642)		(4,649)
Other costs and expenses	(5,618)		(4,546)		(4,529)
Restructuring and related charges	(145)		(235)		(38)
Amortization of purchased intangibles	(241)		(12)		(4)
Impairment of purchased intangibles	—		—		(51)
Underwriting income	$	1,785	$	4,569	$	2,921
Catastrophe losses	$	3,339	$	2,811	$	2,557

Change in underwriting results from 2020 to 2021

($ in millions)

Change in underwriting results from 2019 to 2020

($ in millions)

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Allstate Protection 2021 Form 10-K


Underwriting income (loss) by brand and by line of business
	For the years ended December 31,
	Allstate Brand						National General						Allstate Protection
($ in millions)	2021		2020		2019		2021		2020		2019		2021		2020		2019
Auto (1)	$	1,208	$	3,404	$	1,680	$	54	$	40	$	8	$	1,262	$	3,444	$	1,688
Homeowners (2)	411		798		912		(92)		26		2		319		824		914
Other personal lines (3)	216		255		227		17		9		(3)		233		264		224
Commercial lines	(158)		(36)		14		—		—		—		(158)		(36)		14
Other business lines (4)	115		70		84		—		—		—		115		70		84
Answer Financial	—		—		—		—		—		—		14		3		(3)
Total	$	1,792	$	4,491	$	2,917	$	(21)	$	75	$	7	$	1,785	$	4,569	$	2,921

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

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

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

(4)Other business lines primarily represents revenue and direct operating expenses of Ivantage and distribution of non-proprietary life and annuity products. Ivantage, a general agency for Allstate exclusive agents, provides agents a solution for their customers when coverage through Allstate brand underwritten products is not available.

Underwriting income decreased 60.9% or $2.78 billion in 2021 compared to 2020, primarily due to higher auto and homeowners non-catastrophe and catastrophe losses and increased underwriting expenses, partially offset by increased premiums earned in Allstate brand and lower Shelter-in-Place Payback expense.

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


Premiums written by brand and line of business
	For the years ended December 31,
	Allstate Brand						National General						Allstate Protection
($ in millions)	2021		2020		2019		2021		2020		2019		2021		2020		2019
Auto	$	24,102	$	24,103	$	23,922	$	3,763	$	508	$	540	$	27,865	$	24,611	$	24,462
Homeowners	8,717		8,012		7,764		1,772		388		401		10,489		8,400		8,165
Other personal lines	2,001		1,889		1,811		155		76		79		2,156		1,965		1,890
Commercial lines	848		792		902		—		—		—		848		792		902

Total premiums written	$	35,668	$	34,796	$	34,399	$	5,690	$	972	$	1,020	$	41,358	$	35,768	$	35,419


Premiums earned by brand and line of business
	For the years ended December 31,
	Allstate Brand						National General						Allstate Protection
($ in millions)	2021		2020		2019		2021		2020		2019		2021		2020		2019
Auto	$	24,088	$	24,115	$	23,649	$	3,535	$	525	$	539	$	27,623	$	24,640	$	24,188
Homeowners	8,272		7,858		7,513		1,655		396		399		9,927		8,254		7,912
Other personal lines	1,925		1,841		1,781		152		78		80		2,077		1,919		1,861
Commercial lines	827		767		882		—		—		—		827		767		882

Total premiums earned	$	35,112	$	34,581	$	33,825	$	5,342	$	999	$	1,018	$	40,454	$	35,580	$	34,843


Reconciliation of premiums written to premiums earned
	For the years ended December 31,
($ in millions)	2021		2020		2019
Total premiums written	$	41,358	$	35,768	$	35,419
Increase in unearned premiums	(1,143)		(205)		(614)
Other	239		17		38
Total premiums earned	$	40,454	$	35,580	$	34,843

The Allstate Corporation 41

2021 Form 10-K Allstate Protection


Unearned premium balance by line of business
($ in millions)	As of December 31,
	2021		2020
Allstate brand:
Auto	$	6,426	$	6,409
Homeowners	4,825		4,379
Other personal lines	1,078		1,001
Commercial lines	315		295

Total Allstate brand	12,644		12,084
National General:
Auto	1,764		258
Homeowners	451		207
Other personal lines	306		39
Commercial lines	177		—
Total National General	2,698		504
Allstate Protection unearned premiums	15,342		12,588


Policies in force by brand and by line of business
	Allstate brand			National General			Allstate Protection
PIF (thousands)	2021	2020	2019	2021	2020	2019	2021	2020	2019
Auto	21,972	21,809	21,913	3,944	451	493	25,916	22,260	22,406
Homeowners	6,525	6,427	6,359	634	216	234	7,159	6,643	6,593
Other personal lines	4,578	4,459	4,390	288	71	76	4,866	4,530	4,466
Commercial lines	210	216	227	105	—	—	315	216	227

Total	33,285	32,911	32,889	4,971	738	803	38,256	33,649	33,692

Auto insurance premiums written increased 13.2% or $3.25 billion in 2021 compared to 2020, primarily due to the following factors:

•Acquisition of National General

•Increased new issued applications in the Allstate brand driven by increased advertising and higher close rates

•Decreased Allstate brand average premium driven by rate decreases taken late in 2020 and the first half of 2021 partially offset by rate increases in the second half of 2021

•Rate increases are being implemented broadly to improve underwriting results given the higher inflationary trends adversely impacting loss costs; new rates become effective at the beginning of the

next policy term and are earned over the coverage period

•PIF increased 16.4% or 3,656 thousand to 25,916 thousand as of December 31, 2021 compared to December 31, 2020 due to increases in Allstate brand and the acquisition of National General

–PIF increased by 262 thousand as of December 31, 2021 compared to September 30, 2021, with increases in both National General and Allstate brand


Auto premium measures and statistics
	2021		2020		2019		2021 vs. 2020		2020 vs. 2019




New issued applications (thousands)
Agency channel	2,531		2,621		2,697		(3.4)	%	(2.8)	%
Direct channel	1,085		846		838		28.3	%	1.0	%
Allstate brand	3,616		3,467		3,535		4.3	%	(1.9)	%
National General	2,057		60		82		NM		(26.8)	%
Total new issued applications	5,673		3,527		3,617		60.8	%	(2.5)	%





Allstate brand average premium	$	605	$	617	$	603	(1.9)	%	2.3	%
Allstate brand renewal ratio (%)	87.0		87.5		88.0		(0.5)		(0.5)

42 www.allstate.com

Allstate Protection 2021 Form 10-K

Homeowners insurance premiums written increased 24.9% or $2.09 billion in 2021 compared to 2020, primarily due to the following factors:

•Acquisition of National General

•Higher Allstate brand average premiums from approved rate increases and inflation adjustments to premium due to higher insured home valuations

•Increased new issued applications in the Allstate brand driven by higher quote volumes and improved close rates


Homeowners premium measures and statistics
	2021		2020		2019		2021 vs. 2020		2020 vs. 2019




New issued applications (thousands)
Agency channel	879		837		821		5.0	%	1.9	%
Direct channel	83		62		56		33.9	%	10.7	%
Allstate brand	962		899		877		7.0	%	2.5	%
National General	102		34		42		NM		(19.0)	%
Total new issued applications	1,064		933		919		14.0	%	1.5	%





Allstate brand average premium	$	1,426	$	1,328	$	1,291	7.4	%	2.9	%
Allstate brand renewal ratio (%)	87.1		87.5		88.2		(0.4)		(0.7)

Other personal lines premiums written increased 9.7% or $191 million in 2021 compared to 2020, primarily due to the acquisition of National General and increases in condominiums and personal umbrella premiums for Allstate brand.

Commercial lines premiums written increased 7.1% or $56 million in 2021 compared to 2020, primarily due to the addition of a large transportation network

company, higher miles driven in our shared economy business as the impacts of the Coronavirus decrease and an increase in average premiums.

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


Combined ratios by line of business
	For the years ended December 31,
	Loss ratio			Expense ratio (1)			Combined ratio
	2021	2020	2019	2021	2020	2019	2021	2020	2019
Auto	70.5	57.5	68.2	24.9	28.5	24.8	95.4	86.0	93.0
Impact of Shelter-in-Place Payback expense	—	—	—	0.1	3.8	—	0.1	3.8	—
Homeowners	72.2	67.3	65.1	24.6	22.7	23.3	96.8	90.0	88.4
Other personal lines	62.9	58.7	61.1	25.9	27.5	26.9	88.8	86.2	88.0
Commercial lines	97.5	82.4	81.3	21.6	22.3	17.1	119.1	104.7	98.4
Impact of Shelter-in-Place Payback expense	—	—	—	—	0.5	—	—	0.5	—

Total	71.1	60.4	67.5	24.5	26.8	24.1	95.6	87.2	91.6
Impact of restructuring and related charges (2)	—	—	—	0.4	0.7	0.1	0.4	0.7	0.1
Impact of Shelter-in-Place Payback expense	—	—	—	0.1	2.7	—	0.1	2.7	—
Impact of Allstate Special Payment plan bad debt expense	—	—	—	—	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 2021 primarily related to reductions in real estate.


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			Effect of catastrophe losses included in prior year reserve reestimates (1)
	2021	2020	2019	2021	2020	2019	2021	2020	2019	2021	2020	2019
Auto	70.5	57.5	68.2	1.7	1.2	1.7	0.5	(0.4)	(1.4)	(0.1)	(0.1)	(0.1)
Homeowners	72.2	67.3	65.1	26.3	27.9	24.8	(1.5)	(5.3)	0.8	(1.7)	(5.1)	0.8
Other personal lines	62.9	58.7	61.1	11.0	10.4	9.0	(5.1)	(3.5)	0.5	(0.5)	(2.0)	—
Commercial lines	97.5	82.4	81.3	2.9	3.5	1.4	14.4	4.7	1.9	0.4	0.2	(0.1)

Total	71.1	60.4	67.5	8.3	7.9	7.3	—	(1.6)	(0.7)	(0.5)	(1.4)	0.1

(1)2020 includes approximately $495 million of favorable reserve reestimates related to the PG&E Corporation and Southern California Edison subrogation settlements.

The Allstate Corporation 43

2021 Form 10-K Allstate Protection

Auto loss ratio increased 13.0 points in 2021 compared to 2020, primarily due to:

•Higher gross claim frequency in all coverages, as miles driven continue to rebound toward pre-pandemic levels

•While frequency increased relative to the prior year, it remains below pre-pandemic levels

•Increased severity for all coverages, driven by inflationary pressures and increased attorney representation and medical service utilization for bodily injury claims

•Adverse prior year reserve reestimates

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

•Shelter-in-place and travel restrictions, which have moderated in 2021 as vaccines have become more widely available in the US and Canada

•Unemployment levels

•Changes in commuting activity

•Supply chain disruptions and labor shortages

•Shifts in the frequency environment may impact the speed claims are settled

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

•Value of total losses due to higher used car prices

•Labor and part cost increases

Allstate brand frequency and paid claim severity statistics (excluding catastrophe losses)

(% change year-over-year)

For the year ended December 31, 2021

Property damage gross claim frequency

13.0

Property damage paid claim severity

8.8

Property damage gross claim frequency increased in 2021 compared to 2020 due to factors including:

•Increases in miles driven compared to 2020 which was impacted by shelter-in-place restrictions due to the Coronavirus

•Gross claim frequency decreased 19.8% in 2021 when compared to pre-pandemic levels of 2019 as auto miles driven, particularly during peak commuting hours, remains lower than pre-pandemic levels

Property damage paid claim severity increased in 2021 compared to 2020.

•When compared to pre-pandemic levels of 2019, property damage paid claim severity increased 19.6% in 2021

•The increases are due to rising inflationary factors impacting both repairable vehicles and total losses, including higher used car values, replacement part costs and labor rates, and higher costs to repair more sophisticated newer model vehicles

Collision severity increased in 2021 compared to 2020 due to inflationary pressures from higher used car values that increased total losses and also increased parts and labor costs associated with repairs.

Bodily injury severity increased in 2021 compared to 2020 due to higher consumption of medical treatment, increased percentage of claimants represented by attorneys and higher medical care inflation.

Homeowners loss ratio increased 4.9 points in 2021 compared to 2020, primarily due to increased non-catastrophe claim frequency and severity and lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020, partially offset by increased premiums earned.

Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses)

(% change year-over-year)

For the year ended December 31, 2021

Gross claim frequency

8.3

Paid claim severity

10.0

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

Other personal lines loss ratio increased 4.2 points in 2021 compared to 2020, primarily due to higher non-catastrophe losses, partially offset by increased premiums earned.

Commercial lines loss ratio increased 15.1 points in 2021 compared to 2020 due to higher auto frequency and severity and higher unfavorable non-catastrophe prior year reserves reestimates, partially offset by increased premiums earned.

Catastrophe losses increased 18.8% or $528 million in 2021 compared to 2020. Catastrophe losses in 2021 included gross losses of $2.4 billion and net losses of $1.3 billion related to Hurricane Ida and Winter Storm Uri. Net losses include reinsurance recoveries of $1.3 billion and reinstatement premiums of $208 million.

We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes. We are also exposed to man-made catastrophic events, such as certain types of terrorism, wildfires or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.

44 www.allstate.com

Allstate Protection 2021 Form 10-K


Catastrophe losses by the type of event
	For the years ended December 31,
($ in millions)	Number of events	2021		Number of events	2020		Number of events	2019
Hurricanes/Tropical storms	6	$	742	9	$	1,001	3	$	86
Tornadoes	3	107		3	43		6	551
Wind/Hail	85	1,878		73	1,940		91	1,721
Wildfires	5	269		17	300		4	28
Other events	2	611		3	30		6	123
Prior year reserve reestimates		35			(503)			48
Prior year aggregate reinsurance cover		(237)			—			—
Current year aggregate reinsurance cover		(66)			—			—
Total catastrophe losses (1)	101	$	3,339	105	$	2,811	110	$	2,557

(1)Includes approximately $250 million of reinstatement premiums for the year ended December 31, 2021, related to the Nationwide Catastrophe Reinsurance Program, primarily due to Hurricane Ida.

Catastrophe management

Historical catastrophe experience For the last ten years, the average annual impact of catastrophes on our loss ratio was 7.7 points, but it has varied from 4.5 points to 10.3 points. The average annual impact of catastrophes on the homeowners loss ratio for the last ten years was 24.6 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 15 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 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 2021, premiums written totaled $4.56 billion or 46.0% of homeowners premiums written compared to $3.92 billion or 46.7% in 2020.

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 15 of the consolidated financial statements, in various states Allstate is subject to assessments from assigned risk plans, reinsurance facilities and joint underwriting

The Allstate Corporation 45

2021 Form 10-K Allstate Protection

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 40,000 PIF with earthquake coverage, with the largest number of policies located 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 15 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 The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during 2021 was $556 million compared to $425 million during 2020. Catastrophe placement premiums are a reduction of premium with approximately 74% related to homeowners. The increases were driven by higher Nationwide and Florida program costs due to program expansion for growth in policies, including National General exposures. In the third quarter of 2021, our catastrophe reinsurance program risk tolerance framework that targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes, earthquakes and wildfires, excluding other catastrophe losses, net of reinsurance, increased from $2 billion to $2.5 billion, reflecting the addition of wildfires to the target. A description of our current catastrophe reinsurance program appears in Note 11 of the consolidated financial statements.

46 www.allstate.com

Allstate Protection 2021 Form 10-K

Expense ratio decreased 2.3 points in 2021 compared to 2020, primarily related to lower Shelter-in-Place Payback expense, operating costs and expenses, restructuring and related charges, partially offset by increased advertising and amortization of purchased intangibles and DAC related to the acquisition of National General.


Impact of specific costs and expenses on the expense ratio
	For the years ended December 31,
($ in millions, except ratios)	2021		2020		2019		2021 vs 2020		2020 vs 2019
Amortization of DAC	$	5,313	$	4,642	$	4,649	$	671	$	(7)
Advertising expense	1,249		941		851		308		90
Amortization of purchased intangibles	241		12		4		229		8
Other costs and expenses, net of other revenue	2,952		2,688		2,812		264		(124)
Restructuring and related charges	145		235		38		(90)		197
Shelter-in-Place Payback expense	29		948		—		(919)		948
Allstate Special Payment plan bad debt expense	(20)		60		—		(80)		60
Impairment of purchased intangibles	—		—		51		—		(51)
Total underwriting expenses	$	9,909	$	9,526	$	8,405	$	383	$	1,121

Premiums earned	$	40,454	$	35,580	$	34,843	$	4,874	$	737

Expense ratio
Amortization of DAC	13.1		13.0		13.4		0.1		(0.4)
Advertising expense	3.1		2.6		2.4		0.5		0.2
Other costs and expenses	7.2		7.5		8.0		(0.3)		(0.5)
Subtotal	23.4		23.1		23.8		0.3		(0.7)
Amortization of purchased intangibles	0.6		0.1		—		0.5		0.1
Restructuring and related charges	0.4		0.7		0.1		(0.3)		0.6
Shelter-in-Place Payback expense	0.1		2.7		—		(2.6)		2.7
Allstate Special Payment plan bad debt expense	—		0.2		—		(0.2)		0.2
Impairment of purchased intangibles	—		—		0.2		—		(0.2)
Total expense ratio	24.5		26.8		24.1		(2.3)		2.7

Deferred acquisition costs We establish a DAC asset for costs that are related directly to the 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)	2021		2020
Auto	$	1,023	$	826
Homeowners	700		602
Other personal lines	169		144
Commercial lines	59		36

Total DAC	$	1,951	$	1,608

The Allstate Corporation 47

2021 Form 10-K Run-off Property-Liability

Run-off Property-Liability Segment

The Run-off Property-Liability 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 run-off 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)	2021		2020		2019
Claims and claims expense
Asbestos claims	$	(63)	$	(78)	$	(28)
Environmental claims	(40)		(44)		(36)
Other run-off lines	(13)		(19)		(41)
Total claims and claims expense	(116)		(141)		(105)
Operating costs and expenses	(4)		(3)		(3)
Underwriting loss	$	(120)	$	(144)	$	(108)

Underwriting losses in 2021 and 2020 primarily related to our annual reserve review using established industry and actuarial best practices. The annual review resulted in unfavorable reserve reestimates totaling $111 million and $132 million in 2021 and 2020, respectively. The reserve reestimates are included as part of claims and claims expense.

Reserve reestimates in 2021 primarily related to new reported information for asbestos and environmental and higher than expected reported losses for environmental and other run-off exposures. Reserve reestimates in 2020 primarily related to new reported information, court decisions and policy buyback settlements for asbestos exposures and higher than expected reported losses for environmental and other run-off exposures.

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


Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance
($ in millions)	December 31, 2021		December 31, 2020
Asbestos claims
Gross reserves	$	1,210	$	1,204
Reinsurance	(382)		(377)
Net reserves	828		827
Environmental claims
Gross reserves	273		249
Reinsurance	(47)		(43)
Net reserves	226		206
Other run-off claims
Gross reserves	433		435
Reinsurance	(66)		(60)
Net reserves	367		375
Total
Gross reserves	1,916		1,888
Reinsurance	(495)		(480)
Net reserves	$	1,421	$	1,408

48 www.allstate.com

Run-off Property-Liability 2021 Form 10-K


Reserves by type of exposure before and after the effects of reinsurance
($ in millions)	December 31, 2021		December 31, 2020
Direct excess commercial insurance
Gross reserves	$	1,050	$	1,011
Reinsurance	(363)		(358)
Net reserves	687		653
Assumed reinsurance coverage
Gross reserves	617		636
Reinsurance	(56)		(58)
Net reserves	561		578
Direct primary commercial insurance
Gross reserves	168		160
Reinsurance	(75)		(63)
Net reserves	93		97
Other run-off business
Gross reserves	1		2
Reinsurance	—		—
Net reserves	1		2
Unallocated loss adjustment expenses
Gross reserves	80		79
Reinsurance	(1)		(1)
Net reserves	79		78
Total
Gross reserves	1,916		1,888
Reinsurance	(495)		(480)
Net reserves	$	1,421	$	1,408


Percentage of gross and ceded reserves by case and incurred but not reported (“IBNR”)
	December 31, 2021				December 31, 2020
	Case		IBNR		Case		IBNR
Direct excess commercial insurance
Gross reserves (1)	61	%	39	%	65	%	35	%
Ceded (2)	67		33		71		29
Assumed reinsurance coverage
Gross reserves	33		67		34		66
Ceded	38		62		35		65
Direct primary commercial insurance
Gross reserves	53		47		55		45
Ceded	71		29		79		21

(1)Approximately 70% of gross case reserves as of December 31, 2021 are subject to settlement agreements.

(2)Approximately 77% of ceded case reserves as of December 31, 2021 are subject to settlement agreements.

The Allstate Corporation 49

2021 Form 10-K Run-off Property-Liability


Gross payments from case reserves by type of exposure
($ in millions)	For the years ended December 31,
	2021		2020
Direct excess commercial insurance
Gross (1)	$	91	$	88
Ceded (2)	(39)		(37)
Assumed reinsurance coverage
Gross	43		40
Ceded	(4)		(7)
Direct primary commercial insurance
Gross	7		8
Ceded	(2)		(5)
Other run-off business
Gross	1		—
Ceded	—		—

(1) In 2021 70% of payments related to settlement agreements.

(2) In 2021 72% of payments related to settlement agreements.

Total net reserves as of December 31, 2021, included $733 million or 52% of estimated IBNR reserves compared to $695 million or 49% of estimated IBNR reserves as of December 31, 2020.

Total gross payments were $142 million and $137 million for 2021 and 2020, respectively, primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos, 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 $39 million and $53 million for 2021 and 2020, respectively. The allowance for uncollectible reinsurance recoverables was $66 million and $59 million as of December 31, 2021 and 2020, respectively. The allowance represents 11.0% and 10.5% of the related reinsurance recoverable balances as of December 31, 2021 and 2020, respectively.

50 www.allstate.com

Protection Services 2021 Form 10-K

Protection Services Segment

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

In 2021, Protection Services represented 77.7% of total PIF, 6.0% of premiums written and 4.4% 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)	2021		2020		2019
Premiums written	$	2,642	$	1,890	$	1,535

Revenues
Premiums	$	1,764	$	1,493	$	1,233
Other revenue	354		208		188
Intersegment insurance premiums and service fees (1)	175		147		154
Net investment income	43		44		42



Costs and expenses
Claims and claims expense	(458)		(386)		(363)
Amortization of DAC	(795)		(658)		(543)
Operating costs and expenses	(837)		(651)		(661)
Restructuring and related charges	(14)		(3)		—





Income tax expense on operations	(52)		(41)		(12)

Less: noncontrolling interest	1		—		—

Adjusted net income	$	179	$	153	$	38








Allstate Protection Plans	$	142	$	137	$	60
Allstate Dealer Services	34		29		26
Allstate Roadside	7		12		(15)
Arity	3		(11)		(7)
Allstate Identity Protection	(7)		(14)		(26)
Adjusted net income	$	179	$	153	$	38

Allstate Protection Plans	141,073		128,982		99,632
Allstate Dealer Services	3,956		4,042		4,205
Allstate Roadside	525		548		599
Allstate Identity Protection	2,802		2,700		1,511
Policies in force as of December 31 (in thousands)	148,356		136,272		105,947

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

Adjusted net income increased 17.0% or $26 million in 2021 compared to 2020, primarily due to growth of Allstate Protection Plans, lower claims costs at Allstate Dealer Services, growth and lower levels of investment at both Arity and Allstate Identity Protection, partially offset by higher severity and rescue volumes in Allstate Roadside.

Premiums written increased 39.8% or $752 million in 2021 compared to 2020, primarily due to growth at

Allstate Protection Plans and increased sales at Allstate Dealer Services.

PIF increased 8.9% or 12 million in 2021 compared to 2020 due to continued growth at Allstate Protection Plans and Allstate Identity Protection.

Other revenue increased 70.2% or $146 million in 2021 compared to 2020, reflecting the addition of LeadCloud and Transparent.ly, which were acquired as part of the National General acquisition.

The Allstate Corporation 51

2021 Form 10-K Protection Services

Intersegment premiums and service fees increased 19.0% to $175 million in 2021 compared to 2020, primarily related to increased device sales through Arity driven by growth in the Allstate brand Milewise® product and growth in automotive rescue services provided by Allstate Roadside for Allstate brand auto customers.

Claims and claims expense increased 18.7% or $72 million in 2021 compared to 2020, primarily due to higher levels of claims at Allstate Protection Plans driven by growth of the business and increased claims costs at Allstate Roadside due to higher severity and rescue volumes.

Amortization of DAC increased 20.8% or $137 million in 2021 compared to 2020, primarily due to the growth experienced at Allstate Protection Plans and Allstate Dealer Services.

Operating costs and expenses increased 28.6% or $186 million in 2021 compared to 2020, primarily due to higher operating costs at Arity driven by the addition of LeadCloud and Transparent.ly and growth experienced at Allstate Protection Plans.

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

52 www.allstate.com

Claims and Claims Expense Reserves 2021 Form 10-K

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 9 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)	2021		2020		2019


Allstate Protection	$	22,124	$	19,136	$	19,396
Run-off Property-Liability	1,421		1,408		1,365
Total Property-Liability	23,545		20,544		20,761
Protection Services	36		33		39
Total net reserves	$	23,581	$	20,577	$	20,800

The year-end 2021 gross reserves of $33.06 billion for insurance claims and claims expense were $11.15 billion more than the net reserve balance of $21.91 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 $9.48 billion, including $6.64 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 $1.55 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)
	2021				2020				2019
($ in millions, except ratios)	Reserve reestimate			Effect on combined ratio	Reserve reestimate			Effect on combined ratio	Reserve reestimate			Effect on combined ratio


Allstate Protection	$	8		—	$	(576)		(1.6)	$	(233)		(0.7)
Run-off Property-Liability	116			0.3	141			0.4	105			0.3
Total Property-Liability	124			0.3	(435)			(1.2)	(128)			(0.4)
Protection Services	(2)			—	(1)			—	(2)			—
Total	$	122			$	(436)			$	(130)
Reserve reestimates, after-tax	$	96			$	(344)			$	(103)
Consolidated net income applicable to common shareholders	$	1,485			$	5,461			$	4,678
Reserve reestimates as a % impact on consolidated net income applicable to common shareholders	(6.5)		%		6.3		%		2.2		%
Property-Liability prior year reserve reestimates included in catastrophe losses	$	(202)			$	(503)			$	48

(1)Favorable reserve reestimates are shown in parentheses.

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

The Allstate Corporation 53

2021 Form 10-K Claims and Claims Expense Reserves

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


Prior year reserve reestimates
($ in millions)
2021	2016 & prior		2017		2018		2019		2020		Total
Allstate Protection	$	(130)	$	100	$	(67)	$	231	$	(126)	$	8
Run-off Property-Liability	116		—		—		—		—		116
Total Property-Liability	(14)		100		(67)		231		(126)		124
Protection Services	—		—		—		—		(2)		(2)
Total	$	(14)	$	100	$	(67)	$	231	$	(128)	$	122

2020	2015 & prior		2016		2017		2018		2019		Total
Allstate Protection	$	(56)	$	42	$	(199)	$	(353)	$	(10)	$	(576)
Run-off Property-Liability	141		—		—		—		—		141
Total Property-Liability	85		42		(199)		(353)		(10)		(435)
Protection Services	—		—		—		—		(1)		(1)
Total	$	85	$	42	$	(199)	$	(353)	$	(11)	$	(436)

2019	2014 & prior		2015		2016		2017		2018		Total
Allstate Protection	$	(140)	$	(44)	$	(28)	$	(95)	$	74	$	(233)
Run-off Property-Liability	105		—		—		—		—		105
Total Property-Liability	(35)		(44)		(28)		(95)		74		(128)
Protection Services	—		—		—		—		(2)		(2)
Total	$	(35)	$	(44)	$	(28)	$	(95)	$	72	$	(130)

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 2021, 2020, and 2019, and the effect of reestimates in each year.


Net reserves by line
	January 1 reserves
($ in millions)	2021		2020		2019
Auto	$	14,164	$	14,728	$	14,378
Homeowners	2,315		2,138		2,157
Other personal lines	1,463		1,459		1,489
Commercial lines	1,194		1,071		801
Total Allstate Protection	$	19,136	$	19,396	$	18,825


Impact of reserve reestimates by line on combined ratio and underwriting income
	2021				2020				2019
($ in millions, except ratios)	Reserve reestimates			Effect on combined ratio	Reserve reestimates			Effect on combined ratio	Reserve reestimates			Effect on combined ratio
Auto	$	149		0.4	$	(107)		(0.3)	$	(323)		(0.9)
Homeowners	(153)			(0.4)	(439)			(1.2)	65			0.2
Other personal lines	(107)			(0.3)	(66)			(0.2)	8			—
Commercial lines	119			0.3	36			0.1	17			—

Total Allstate Protection	$	8		—	$	(576)		(1.6)	$	(233)		(0.7)
Underwriting income	$	1,785			$	4,569			$	2,921
Reserve reestimates as a % impact on underwriting income	(0.4)		%		12.6		%		8.0		%

Favorable results for homeowners lines in 2021 were primarily due to catastrophe reserve reestimates driven by estimated recoveries related to our aggregate reinsurance coverage and wildfire subrogation settlements. Unfavorable reserve reestimates for auto and commercial lines in 2021 primarily related to auto liability coverages.

Favorable results for homeowners lines in 2020 were primarily due to catastrophe reserve reestimates

driven by wildfire 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.

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.

54 www.allstate.com

Claims and Claims Expense Reserves 2021 Form 10-K

Run-off Property-Liability

We conduct an annual review in the third quarter of each year to evaluate and establish asbestos, environmental and other run-off 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.


Run-off Property-Liability reserve reestimates
	2021				2020				2019
($ in millions)	January 1 reserves		Reserve reestimates		January 1 reserves		Reserve reestimates		January 1 reserves		Reserve reestimates
Asbestos claims	$	827	$	63	$	810	$	78	$	866	$	28
Environmental claims	206		40		179		44		170		36
Other run-off lines	375		13		376		19		355		41
Total	$	1,408	$	116	$	1,365	$	141	$	1,391	$	105
Underwriting loss			$	(120)			$	(144)			$	(108)

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

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


Reserves and claim activity before (Gross) and after (Net) the effects of reinsurance
	2021					2020					2019
($ in millions, except ratios)	Gross		Net			Gross		Net			Gross		Net
Asbestos claims
Beginning reserves	$	1,204	$	827		$	1,172	$	810		$	1,266	$	866
Incurred claims and claims expense	100		63			132		78			39		28
Claims and claims expense paid	(94)		(62)			(100)		(61)			(133)		(84)
Ending reserves	$	1,210	$	828		$	1,204	$	827		$	1,172	$	810

Annual survival ratio	12.9		13.4			12.0		13.6			8.8		9.6
3-year survival ratio	11.1		12.0			10.3		12.0			9.0		10.3

Environmental claims
Beginning reserves	$	249	$	206		$	219	$	179		$	209	$	170
Incurred claims and claims expense	50		40			49		44			42		36
Claims and claims expense paid	(26)		(20)			(19)		(17)			(32)		(27)
Ending reserves	$	273	$	226		$	249	$	206		$	219	$	179

Annual survival ratio	10.5		11.3			13.1		12.1			6.8		6.6
3-year survival ratio	10.6		10.6			10.5		10.3			8.1		8.1

Combined environmental and asbestos claims
Annual survival ratio	12.4		12.9			12.2		13.2			8.4		8.9
3-year survival ratio	11.0		11.7			10.3		11.6			8.8		9.9
Percentage of IBNR in ending reserves			54.8		%	0		50.3		%	0		48.8		%

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. The asbestos and environmental net 3-year survival ratio in 2021 was comparable to 2020.

The Allstate Corporation 55

2021 Form 10-K Claims and Claims Expense Reserves


Net asbestos reserves by type of exposure and total reserve additions
	December 31, 2021				December 31, 2020				December 31, 2019
($ in millions)	Net reserves		% of reserves		Net reserves		% of reserves		Net reserves		% of reserves
Direct:
Primary	$	8	1	%	$	10	1	%	$	12	1	%
Excess	275		33		291		35		292		36
Total direct	283		34		301		36		304		37
Assumed reinsurance	104		13		122		15		127		16
IBNR	441		53		404		49		379		47
Total net reserves	$	828	100	%	$	827	100	%	$	810	100	%
Total reserve additions	$	63			$	78			$	28

IBNR net reserves increased $37 million as of December 31, 2021 compared to December 31, 2020. 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. We have also purchased reinsurance to mitigate exposures in our long-tail liability lines, including environmental, asbestos and other run-off 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 11 of the consolidated financial statements for additional details on these programs.

56 www.allstate.com

Claims and Claims Expense Reserves 2021 Form 10-K


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)		2021		2020
Indemnification programs
State-based industry pool or facility programs
MCCA (2)	N/A	$	6,695	$	5,646
New Jersey Property-Liability Insurance Guaranty Association (“PLIGA”)	N/A	371		389
North Carolina Reinsurance Facility (“NCRF”)	N/A	279		67
Florida Hurricane Catastrophe Fund (“FHCF”)	N/A	25		32
Other		7		8
Federal Government - NFIP	N/A	34		30

Subtotal		7,411		6,172

Catastrophe reinsurance recoverables
Sanders RE II LTD.	N/A	303		—
Renaissance Reinsurance Limited	A+	106		17
Swiss Reinsurance America Corporation	AA-	88		12

Other		873		168
Subtotal		1,370		197

Other reinsurance recoverables, net (3)
Aleka Insurance Inc.	N/A	187		165
Lloyd’s of London (“Lloyd’s”) (4)	N/A	165		166
Swiss Reinsurance America Corporation	AA-	75		20
Westport Insurance Corporation (4)	N/A	70		59

Other, including allowance for credit losses		576		337
Subtotal		1,073		747
Total Property-Liability		9,854		7,116
Protection Services		16		18
Total		$	9,870	$	7,134

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

(2)As of December 31, 2021 and 2020, MCCA includes $51 million and $34 million of reinsurance recoverable on paid claims, respectively, and $6.64 billion and $5.61 billion of reinsurance recoverable on unpaid claims, respectively.

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

(4)A.M. Best ratings for Lloyd’s and Westport Insurance Corporation are A and A+, respectively.

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 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 Run-off Property-Liability segment. This allowance was $66 million and $59 million as of December 31, 2021 and 2020, respectively.

The allowance is based upon our ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, and other

The Allstate Corporation 57

2021 Form 10-K Claims and Claims Expense Reserves

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 11 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)	2021		2020			2019
Allstate Protection - Premiums
Indemnification programs
State-based industry pool or facility programs
NCRF	$	310	$	63		$	67
MCCA	20		61			89
PLIGA	7		7			8
FHCF	15		9			9
Other	420		34			18
Federal Government - NFIP	350		261			258
Catastrophe reinsurance	541		416			377
Other reinsurance programs	60		110			121
Total Allstate Protection	1,723		961			947
Run-off Property-Liability	—		—			—
Total Property-Liability	1,723		961			947
Protection Services	181		180			175
Total effect on premiums earned	$	1,904	$	1,141		$	1,122

Allstate Protection - Claims
Indemnification programs
State-based industry pool or facility programs
MCCA	$	611	$	256		$	208
NCRF	279		47			55
PLIGA	—		(40)			3
FHCF	13		15			31
Other	359		16			12
Federal Government - NFIP	267		87			150
Catastrophe reinsurance	1,719		(105)		(1)	(166)		(2)
Other reinsurance programs	85		88			94
Total Allstate Protection	3,333		364			387
Run-off Property-Liability	60		75			39
Total Property-Liability	3,393		439			426
Protection Services	91		91			98
Total effect on claims and claims expense	$	3,484	$	530		$	524

(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.

In 2021, ceded premiums earned increased primarily due to the addition of National General into our program and increased catastrophe reinsurance premium rates. In 2020, ceded premiums earned increased primarily due to increased catastrophe reinsurance premium rates. In 2021, ceded claims and

claims expenses increased $2.95 billion primarily due to Hurricane Ida and Winter Storm Uri. In 2020, ceded claims and claims expenses decreased $6 million. For further discussion of these items, see Regulation, Indemnification Programs and Note 11 of the consolidated financial statements.

58 www.allstate.com

Claims and Claims Expense Reserves 2021 Form 10-K


Michigan personal injury protection reserve and claim activity before and after the effects of MCCA recoverables
	For the years ended December 31,
	2021				2020				2019
($ in millions)	Gross		Net		Gross		Net		Gross		Net
Beginning reserves	$	6,282	$	670	$	6,106	$	647	$	5,975	$	605
National General acquisition as of January 4, 2021	566		31		—		—		—		—
Incurred claims and claims expense-current year	398		132		312		98		446		202
Incurred claims and claims expense-prior years	403		59		107		65		(16)		20
Claims and claims expense paid-current year (1)	(35)		(35)		(47)		(42)		(55)		(53)
Claims and claims expense paid-prior years (1)	(227)		(110)		(196)		(98)		(244)		(127)
Ending reserves (2)	$	7,387	$	747	$	6,282	$	670	$	6,106	$	647

(1)Paid claims and claims expenses reported in the table for the current and prior years, recovered from the MCCA totaled $117 million, $103 million and $119 million in 2021, 2020 and 2019, respectively.

(2)Gross reserves for the year ended December 31, 2021, comprise 74% case reserves and 26% IBNR. 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. 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)	2021	2020	2019
Pending, beginning of year	4,857	4,942	4,812
National General acquisition as of January 4, 2021	525	—	—
New	8,616	5,896	7,807
Closed	(8,577)	(5,981)	(7,677)
Pending, end of year	5,421	4,857	4,942

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

As of December 31, 2021, approximately 1,570 of our pending claims have been reported to the MCCA, of which approximately 70% represents claims that occurred more than 5 years ago. There are 59 Allstate brand claims with reserves in excess of $15 million as of December 31, 2021, which comprise approximately 21% 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 2022 nationwide catastrophe reinsurance program in the second quarter of 2022. For further details of the existing 2021 program, see Note 11 of the consolidated financial statements.

The Allstate Corporation 59

2021 Form 10-K Allstate Health and Benefits

Allstate Health and Benefits Segment

In 2021, Allstate Health and Benefits represented 2.3% of total PIF and 5.2% 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)	2021		2020		2019
Revenues
Accident and health insurance premiums and contract charges	$	1,821	$	1,094	$	1,145
Other revenue	359		—		—
Net investment income	74		78		83



Costs and expenses
Accident and health insurance policy benefits	(1,015)		(516)		(601)
Interest credited to contractholder funds	(34)		(33)		(34)
Amortization of DAC	(144)		(177)		(161)
Operating costs and expenses	(787)		(322)		(285)

Restructuring and related charges	(9)		(1)		—



Income tax expense on operations	(57)		(27)		(32)
Adjusted net income	$	208	$	96	$	115










Benefit ratio (1)	55.7		47.2		52.5



Employer voluntary benefits (2)	3,804		3,950		4,183
Group health (3)	122		—		—
Individual health (4)	407		—		—
Policies in force as of December 31 (in thousands)	4,333		3,950		4,183

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

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

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

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

Adjusted net income increased $112 million in 2021 compared to 2020, primarily due to the acquisition of National General’s group health and individual health business, which resulted in higher premiums and contract charges, partially offset by higher policy benefits and operating costs and expenses. Results for 2020 included an after-tax charge of $32 million related to the write-off of previously capitalized software.

Premiums and contract charges increased 66.5% or $727 million in 2021 compared to 2020, primarily due to the addition of group health and individual health business.


Premiums and contract charges by line of business
	For the years ended December 31,
($ in millions)	2021		2020		2019
Employer voluntary benefits	$	1,031	$	1,094	$	1,145
Group health	350		—		—
Individual health	440		—		—
Premiums and contract charges	$	1,821	$	1,094	$	1,145

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New annualized premium sales (annualized premiums at initial customer enrollment) increased to $778 million in 2021. The increase in 2021 primarily relates to the addition of group health and individual health business.

Other revenue of $359 million in 2021 reflects commission revenue, administrative fees, agency fees and technology fees from the group health and individual health business.

Accident and health insurance policy benefits increased 96.7% or $499 million in 2021 compared to 2020, primarily due to the addition of the group health and individual health products and increased benefit utilization compared to the prior year.

Benefit ratio increased to 55.7 in 2021 compared to 47.2 in 2020 primarily due to a higher benefit ratio associated with group and individual health products

added in 2021 and a higher benefit ratio for employer voluntary benefit products due to higher life mortality and lower accident and health claim experience in the prior year.

Amortization of DAC decreased 18.6% or $33 million in 2021 compared to 2020, primarily due to unfavorable adjustments associated with our annual review of assumptions in 2020 compared to favorable adjustments in 2021, and lower policy and certificate lapses for employer voluntary benefits.

Our annual comprehensive review of assumptions underlying estimated future gross profits for our interest-sensitive life contracts resulted in a deceleration of DAC amortization (increase to income) of $2 million of the unamortized DAC asset balance in 2021 compared to $28 million acceleration of DAC amortization (decrease to income) in 2020.


Changes in DAC
	For the years ended
($ in millions)	2021		2020
Balance, beginning of year	$	470	$	527
National General acquisition	3		—
Acquisition costs deferred	146		120
Amortization of DAC before amortization relating to changes in assumptions (1)	(146)		(148)
Amortization relating to net gains and losses on investments and derivatives (1)	—		(1)
Amortization acceleration for DAC unlocking (1)	2		(28)
Effect of unrealized capital gains and losses (2)	2		—
Ending balance	$	477	$	470

(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
	For the years ended December 31,
($ in millions)	2021		2020		2019
Non-deferrable commissions	$	316	$	99	$	104
General and administrative expenses	471		223		181
Total operating costs and expenses	$	787	$	322	$	285

Operating costs and expenses increased $465 million in 2021 compared to 2020, primarily due to the addition of the group health and individual health business in 2021. Results for 2020 included a write-off of capitalized software costs associated with a billing system.

Analysis of reserves


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

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2021 Form 10-K Allstate Health and Benefits

Allstate Health and Benefits reinsurance ceded

The vast majority of reinsurance relates to the disposition of long-term care and other closed blocks of business. 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)		2021		2020
Mutual of Omaha Insurance	A+	$	55	$	60
Everlake Life Insurance Company (1)	NR	39		—
Argo Capital Group Ltd.	NR	19		—
General Re Life Corporation	AA+	16		17
Midlands Casualty Insurance Company	NR	16		—
Other (2)		17		5
Credit loss allowance		(8)		(1)
Total		$	154	$	81

(1)A.M. Best rating is A+.

(2)As of December 31, 2021 and 2020, the other category includes $8 million and $4 million of recoverables due from reinsurers rated A- or better by S&P, respectively.

We continuously monitor the creditworthiness of reinsurers in order to determine our risk of recoverability on an individual and aggregate basis. No reinsurance recoverables have been written off in the three-years ended December 31, 2021.

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Investments 2021 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 Health and Benefits 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 run-off lines, 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 Health and 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 Corporate and Other portfolio balances liquidity needs related to the corporate capital structure with the pursuit of returns.

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

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

Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk. 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 net gains and losses on investments and derivatives. 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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2021 Form 10-K Investments

Coronavirus impacts

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

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 manage the portfolio 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 expect to maintain performance-based investments in our Property-Liability portfolio, consistent with our strategy to have a greater proportion of return derived from idiosyncratic asset or operating performance. Income related to performance-based investments will result in variability of earnings for the Property-Liability portfolio.

To reduce exposure to an increasing interest rate environment, we shortened the duration of the Property-Liability fixed income portfolio by selling longer duration corporate and municipal bonds and reinvesting in shorter duration fixed income and public equity securities, as well as through the use of derivatives. These actions to shorten duration, coupled with continued reinvestment at market yields below the current market-based portfolio yield, will result in lower net investment income in future periods, but will reduce the adverse portfolio valuation impact of rising interest rates.


Contractual maturities and yields of fixed income securities for the next three years
	Fixed income securities
($ in millions)	Carrying value		Investment yield
2022	$	1,111	2.1	%
2023	6,114		1.3
2024	4,702		2.1


Portfolio composition and strategy by reporting segment (1)
	As of December 31, 2021
($ in millions)	Property-Liability			Protection Services			Allstate Health and Benefits			Corporate and Other			Total
Fixed income securities (2)	$	36,397		$	1,559		$	1,825		$	2,355		$	42,136
Equity securities (3)	6,185			180			74			622			7,061
Mortgage loans, net	728			—			93			—			821
Limited partnership interests	8,018			—			—			—			8,018
Short-term investments (4)	3,424			151			51			383			4,009
Other investments, net	2,506			—			148			2			2,656
Total	$	57,258		$	1,890		$	2,191		$	3,362		$	64,701

Percent to total	88.5		%	2.9		%	3.4		%	5.2		%	100.0		%



Market-based	$	48,642		$	1,890		$	2,191		$	3,360		$	56,083
Performance-based	8,616			—			—			2			8,618
Total	$	57,258		$	1,890		$	2,191		$	3,362		$	64,701

(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 $35.74 billion, $1.54 billion, $1.76 billion, $2.34 billion and $41.38 billion for Property-Liability, Protection Services, Allstate Health and Benefits, Corporate and Other, and in total, respectively.

(3)Equity securities are carried at fair value. The fair value of equity securities, held as of December 31, 2021, was $1.05 billion in excess of cost. These net gains were primarily concentrated in the technology, consumer goods, and banking sectors. Equity securities include $1.13 billion of funds with underlying investments in fixed income securities as of December 31, 2021.

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

Investments totaled $64.70 billion as of December 31, 2021, increasing from $59.54 billion as of December 31, 2020, primarily due to positive operating cash flows, proceeds from the sales of ALIC, ALNY and certain affiliates and National General acquisition, partially

offset by lower fixed income valuations, common share repurchases and dividends paid to shareholders.

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Investments 2021 Form 10-K


Portfolio composition by investment strategy
	As of December 31, 2021
($ in millions)	Market- based			Performance-based			Total
Fixed income securities	$	42,049		$	87		$	42,136
Equity securities	6,689			372			7,061
Mortgage loans, net	821			—			821
Limited partnership interests	759			7,259			8,018
Short-term investments	4,009			—			4,009
Other investments, net	1,756			900			2,656
Total	$	56,083		$	8,618		$	64,701
Percent to total	86.7		%	13.3		%	100.0		%

Unrealized net capital gains and losses
Fixed income securities	$	759		$	1		$	760


Limited partnership interests	—			(1)			(1)

Other investments	(3)			—			(3)
Total	$	756		$	—		$	756

During 2021, strategic actions focused on optimizing portfolio yield, return and risk in the more volatile and rising interest rate environment. We continued to increase performance-based investments in the Property-Liability portfolio including the addition of retained private equity and real estate investments from the sale of ALIC, ALNY and certain affiliates. We shortened the maturity profile of fixed income securities in our Property-Liability portfolio to 4.3 years to reduce exposure to an increasing interest rate environment.

Fixed income securities


Fixed income securities by type
	Fair value as of December 31,
($ in millions)	2021		2020
U.S. government and agencies	$	6,273	$	2,107
Municipal	6,393		7,578
Corporate	27,330		31,017
Foreign government	985		958
Asset-backed securities (“ABS”)	1,155		905


Total fixed income securities	$	42,136	$	42,565

Fixed income securities are rated by third-party credit rating agencies or are internally rated. As of December 31, 2021, 82.2% of the consolidated fixed income securities portfolio was rated investment grade, which is defined as a security having a rating of Aaa, Aa, A or Baa from Moody’s, a rating of AAA, AA, A or BBB from S&P, a comparable rating from another nationally recognized rating agency, or a comparable internal rating if an externally provided rating is not available. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Our initial investment decisions and ongoing

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

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

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2021 Form 10-K Investments


Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating
	December 31, 2021
	A and above				BBB				BB
($ in millions)	Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)
U.S. government and agencies	$	6,273	$	(14)	$	—	$	—	$	—	$	—
Municipal	6,124		257		254		5		—		—
Corporate
Public	4,179		63		10,477		258		1,649		72
Privately placed	1,624		10		3,631		42		2,777		42
Total corporate	5,803		73		14,108		300		4,426		114
Foreign government	984		3		1		—		—		—
ABS	1,088		3		11		—		9		—


Total fixed income securities	$	20,272	$	322	$	14,374	$	305	$	4,435	$	114

	B				CCC and lower				Total
	Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)		Fair value		Unrealized gain (loss)
U.S. government and agencies	$	—	$	—	$	—	$	—	$	6,273	$	(14)
Municipal	10		—		5		1		6,393		263
Corporate
Public	273		3		11		(6)		16,589		390
Privately placed	2,394		17		315		(5)		10,741		106
Total corporate	2,667		20		326		(11)		27,330		496
Foreign government	—		—		—		—		985		3
ABS	1		—		46		9		1,155		12


Total fixed income securities	$	2,678	$	20	$	377	$	(1)	$	42,136	$	760

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 $10.7 billion portfolio of privately placed securities is diversified by issuer, industry sector and country. The portfolio is made up of 553 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 fundamental analysis of issuers and sectors along with macro and asset class views. Ongoing monitoring includes continuous assessment 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 $7.42 billion of below investment grade bonds, $5.49 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 416 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 consist of Canadian governmental and provincial securities (all of which are held by our Canadian companies).

ABS 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.

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

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Investments 2021 Form 10-K

residential mortgage-backed securities and commercial mortgage-backed securities.

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.

Equity securities of $7.06 billion primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments.

Mortgage loans of $821 million mainly comprise loans secured by first mortgages on developed commercial real estate. Key considerations used to manage our exposure include property type and geographic diversification. For further detail on our mortgage loan portfolio, see Note 5 of the consolidated financial statements.

Limited partnership interests include $6.34 billion of interests in private equity funds, $920 million of interests in real estate funds and $759 million of interests in other funds as of December 31, 2021. We

have commitments to invest additional amounts in limited partnership interests totaling $2.72 billion as of December 31, 2021.


Private equity limited partnerships by sector
(% of carrying value)	December 31, 2021
Industrial	19.4	%
Healthcare	12.2
Information Technology	11.9
Consumer staples	10.5
Consumer discretionary	9.6
Utilities	8.8
Other	27.6
Total	100.0	%


Real estate limited partnerships by sector
(% of carrying value)	December 31, 2021
Residential	25.5	%
Industrial	23.6
Office	14.5
Other	36.4
Total	100.0	%

Short-term investments of $4.01 billion primarily comprise money market funds, commercial paper, U.S. Treasury bills and other short-term investments, including securities lending collateral of $1.40 billion.

Other investments primarily comprise $1.57 billion of bank loans, $809 million of real estate, $148 million of policy loans and $12 million of derivatives as of December 31, 2021. 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, 2021
Residential	29.9	%
Agriculture	17.7
Retail	16.7
Industrial	15.2
Timber	12.6
Other	7.9
Total	100.0	%


Unrealized net capital gains (losses)
	As of December 31,
($ in millions)	2021		2020
U.S. government and agencies	$	(14)	$	49
Municipal	263		478
Corporate	496		1,960
Foreign government	3		37
ABS	12		7


Fixed income securities	760		2,531
Derivatives	(3)		(3)
Equity method of accounting (“EMA”) limited partnerships	(1)		(1)
Unrealized net capital gains and losses, pre-tax	$	756	$	2,527

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2021 Form 10-K Investments


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


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


Gross unrealized gains (losses) on fixed income securities by type and sector
	As of December 31, 2020
	Amortized cost		Gross unrealized				Fair value
($ in millions)			Gains		Losses
Corporate
Consumer goods (cyclical and non-cyclical)	$	7,820	$	516	$	(2)	$	8,334
Banking	4,353		244		—		4,597
Utilities	2,749		156		(2)		2,903
Technology	2,443		191		(1)		2,633
Communications	2,529		201		(4)		2,726
Financial services	1,785		116		(2)		1,899
Capital goods	2,906		205		—		3,111
Basic industry	1,512		136		—		1,648
Energy
Midstream	1,095		72		(1)		1,166
Integrated	270		27		—		297
Independent/upstream	186		21		(1)		206
Other	139		9		(2)		146
Total energy	1,690		129		(4)		1,815
Transportation	1,055		84		(11)		1,128
Other	215		8		—		223
Total corporate fixed income portfolio	29,057		1,986		(26)		31,017
U.S. government and agencies	2,058		50		(1)		2,107
Municipal	7,100		480		(2)		7,578
Foreign government	921		37		—		958
ABS	898		10		(3)		905


Total fixed income securities	$	40,034	$	2,563	$	(32)	$	42,565

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

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Equity securities by sector
($ in millions)	December 31, 2021						December 31, 2020
	Cost		Over (under) cost		Fair value		Cost		Over (under) cost		Fair value
Transportation	74		22		96		24		7		31
Energy
Midstream	39		7		46		65		(2)		63
Integrated	62		8		70		10		—		10
Independent/upstream	44		5		49		7		—		7
Other	14		3		17		2		1		3
Total energy	159		23		182		84		(1)		83
Utilities	122		23		145		37		3		40
Basic Industry	119		30		149		29		10		39
Capital Goods	$	376	$	37	$	413	$	92	$	(4)	$	88
Other (1)	3,413		811		4,224		823		211		1,034
Funds
Fixed income	1,108		24		1,132		804		55		859
Equities	645		75		720		847		147		994
Total funds	1,753		99		1,852		1,651		202		1,853
Total equity securities	$	6,016	$	1,045	$	7,061	$	2,740	$	428	$	3,168

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


Net investment income
	For the years ended December 31,
($ in millions)	2021		2020		2019
Fixed income securities	$	1,148	$	1,232	$	1,201
Equity securities	100		78		175
Mortgage loans	43		34		27
Limited partnership interests	1,973		238		296
Short-term investments	5		17		70
Other investments	195		124		131
Investment income, before expense	3,464		1,723		1,900
Investment expense
Investee level expenses	(60)		(36)		(51)
Securities lending expense	—		(4)		(27)
Operating costs and expenses	(111)		(93)		(94)
Total investment expense	(171)		(133)		(172)
Net investment income	$	3,293	$	1,590	$	1,728

Property-Liability	$	3,118	$	1,421	$	1,533
Protection Services	43		44		42
Allstate Health and Benefits	74		78		83
Corporate and Other	58		47		70
Net investment income	$	3,293	$	1,590	$	1,728

Market-based	$	1,429	$	1,444	$	1,557
Performance-based	2,035		279		343
Investment income, before expense	$	3,464	$	1,723	$	1,900

Net investment income increased 107.1% or $1.70 billion in 2021 compared to 2020, primarily due to increases in performance-based income results, mainly from limited partnerships.

The Allstate Corporation 69

2021 Form 10-K Investments


Performance-based investment income
	For the years ended December 31,
($ in millions)	2021		2020		2019











Private equity	$	1,660	$	206	$	212
Real estate	375		73		131
Total performance-based income before investee level expenses	$	2,035	$	279	$	343

Investee level expenses (1)	(55)		(32)		(44)
Total performance-based income	$	1,980	$	247	$	299

(1)Investee level expenses include asset level operating expenses reported in investment expense. In 2019, investee level expenses also included depreciation.

Performance-based investment income increased 701.6% or $1,733 million in 2021 compared to 2020, primarily due to increased valuations and net gains on sales of underlying investments. Performance-based investment income in 2021 includes income generated by certain investments which were classified as assets held for sale in 2020.

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


Components of net gains (losses) on investments and derivatives and the related tax effect
	For the year December 31,
($ in millions)	2021		2020		2019
Sales	$	578	974		$	519
Credit losses	(42)		(32)		(26)






Valuation change of equity investments - appreciation (decline):
Equity securities	544		139		858
Equity fund investments in fixed income securities	(24)		(22)		72
Limited partnerships (1)	(21)		(21)		141
Total valuation of equity investments	499		96		1,071
Valuation change and settlements of derivatives	49		49		(26)
Net gains (losses) on investments and derivatives, pre-tax	1,084		1,087		1,538
Income tax expense	(237)		(236)		(324)
Net gains (losses) on investments and derivatives, after-tax	$	847	$	851	$	1,214

Property-Liability	$	798	$	774	$	1,161
Protection Services	19		23		25
Allstate Health and Benefits	5		7		9
Corporate and Other	25		47		19
Net gains (losses) on investments and derivatives, after-tax	$	847	$	851	$	1,214

Market-based	$	917	$	1,033	$	1,444
Performance-based	167		54		94
Net gains (losses) on investments and derivatives, pre-tax	$	1,084	$	1,087	$	1,538

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

Sales in 2021 related primarily to sales of fixed income securities in connection with ongoing portfolio management and sales of real estate investments. Sales in 2020 related primarily to fixed income securities in connection with ongoing portfolio management.

Valuation change and settlements of derivatives in 2021 primarily comprised gains on foreign currency contracts due to the strengthening of the U.S. dollar and gains on interest rate futures used to manage asset duration and reduce exposure to increases in interest rates. 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, partially offset by losses on interest rate futures used for risk management and foreign currency contracts due to weakening of the U.S. dollar.

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Investments 2021 Form 10-K


Net gains (losses) on performance-based investments and derivatives
	For the years ended December 31,
($ in millions)	2021		2020		2019
Sales	$	111	$	49	$	79
Credit losses	(43)		(6)		(4)
Valuation change of equity investments	71		24		15
Valuation change and settlements of derivatives	28		(13)		4
Total performance-based	$	167	$	54	$	94

Net gains on performance-based investments and derivatives in 2021 primarily related to gains on sales of real estate investments, increased valuation of equity investments, and gains on valuation and settlement of derivatives. 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 derivatives.

The Allstate Corporation 71

2021 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)Rebalance existing asset or liability portfolios

2)Change the type of investments purchased in the future

3)Use 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 prices to customers while contributing to stable profits and long-term capital growth. Accordingly, our investment decisions and objectives are informed by underlying risks. 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.

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. 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. 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 which may require us to liquidate assets at losses. Decreases in rates could increase the fair value of our fixed income securities portfolio while decreasing investment 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 13 of the consolidated financial

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Market Risk 2021 Form 10-K

statements and the Capital Resources and Liquidity section of this Item.

Our assessment of interest rate risk includes assumptions (based upon historical market experience and our experience) that reflect the effect of changing interest rates on the prepayment, leverage or option features of instruments, where applicable. The preceding assumptions relate primarily to callable municipal and corporate bonds, mortgage-backed securities and municipal housing bonds. Additionally, the calculations include assumptions regarding the renewal of property and casualty products. As of December 31, 2021, the fixed income portfolio duration was 4.20 compared to 5.02 as of December 31, 2020.


Interest rate shock analysis (1)
	As of December 31, 2021
($ in millions)	Fair Value of invested assets

-100 bps change	$	1,625

+100 bps change	(1,638)
+200 bps change	(3,215)

(1)Represents an immediate, parallel increase or decrease based on information and assumptions used in the duration calculations and market interest rates as of December 31, 2021.

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 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, 2021, the spread duration was 4.39 compared to 4.74 as of December 31, 2020.


Credit spread shock analysis (1)
	As of December 31,
($ in millions)	2021		2020
Decrease in net fair value of the assets (2)	$	1,731	$	2,042

(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, 2021.

(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, 2021, we held $6.69 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 $2.52 billion as of December 31, 2020. 97.7% of the common stocks and other investments with public equity risk supported property and casualty products as of December 31, 2021, compared to 95.5% as of December 31, 2020. As of December 31, 2021, these investments had an equity market portfolio beta of 1.06, compared to a beta of 1.07 as of December 31, 2020. 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)	2021		2020
Change in net fair value of equity investments	$	708	$	269

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, 2021, we held $7.26 billion in limited partnership interests excluding those limited partnership interests where the underlying assets are predominately public equity securities compared to $4.35 billion as of December 31, 2020. All of our limited partnership interests supported property and casualty products as of December 31, 2021 and 2020. 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

The Allstate Corporation 73

2021 Form 10-K Market Risk

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)	2021		2020
Change in net fair value of limited partnership interests	$	726	$	435

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.

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, 2021, we had $2.04 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 $27 million in unhedged non-U.S. dollar fixed income securities. These amounts were $671 million, $1.30 billion, and $28 million, respectively, as of December 31, 2020.


Change in foreign currency exchange rates (1)
	As of December 31,
($ in millions)	2021		2020
Decrease in value of foreign currency denominated instruments	$	396	$	246

(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.

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Capital Resources and Liquidity 2021 Form 10-K

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)	2021			2020			2019
Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items	$	24,524		$	26,913		$	24,048
Accumulated other comprehensive (loss) income	655			3,304			1,950
Total Allstate shareholders’ equity	25,179			30,217			25,998
Debt	7,976			7,825			6,631
Total capital resources	$	33,155		$	38,042		$	32,629
Ratio of debt to Allstate shareholders’ equity	31.7		%	25.9		%	25.5		%
Ratio of debt to capital resources	24.1		%	20.6		%	20.3		%

Shareholders’ equity decreased in 2021, primarily due to loss on disposition from the sales of ALIC, ALNY and certain affiliates, common share repurchases, decreased net unrealized capital gains on investments and dividends paid to shareholders, partially offset by net income. In 2021, we paid dividends of $885 million and $114 million related to our common and preferred shares, respectively. 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.

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

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

As of December 31, 2021, there was $3.30 billion remaining in the $5.00 billion program.

During 2021, we repurchased 26.3 million common shares, or 8.7% of total common shares outstanding as of December 31, 2020, for $3.26 billion. The common share repurchases were completed through open market transactions and ASR agreements.

Since 1995, we have acquired 769 million shares of our common stock at a cost of $40.24 billion, primarily as part of various stock repurchase programs. We have reissued 151 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 618 million shares or 68.8%, primarily due to our repurchase programs.

Common shareholder dividends On January 4, 2021, April 1, 2021, July 1, 2021, and October 1, 2021, we paid common shareholder dividends of $0.54, $0.81, $0.81 and $0.81, respectively. On November 19, 2021, we declared a common shareholder dividend of $0.81, payable on January 3, 2022.

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

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2021 Form 10-K Capital Resources and Liquidity

Financial ratings and strength

Senior long-term debt, commercial paper and insurance financial strength ratings

As of December 31, 2021

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+

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

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

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

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

American Heritage Life (“AHL”) In July 2021, A.M. Best affirmed the insurance financial strength rating of A+ for AHL. The outlook for the rating is stable.

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 July 2021, 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 September 2021. In July 2021, 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 August 2021. 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 57 insurance companies as of December 31, 2021, each of which has individual company dividend limitations. As of December 31, 2021, total statutory surplus is $21.51 billion compared to $21.38 billion as of December 31, 2020. Property and casualty subsidiaries surplus was $21.19 billion as of December 31, 2021, compared to $17.13 billion as of December 31, 2020. Life insurance subsidiaries surplus was $322 million as of December 31, 2021, compared to $4.26 billion as of December 31, 2020.

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Capital Resources and Liquidity 2021 Form 10-K

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 insurance companies have more than 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 Health and Benefits

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 Health and Benefits

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

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2021 Form 10-K Capital Resources and Liquidity

expenses, including liabilities for collateral and operating leases, and net unrecognized tax benefits.

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, 2021, we held $13.27 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, 2021, cash and estimated liquidity available within one quarter, under normal market conditions and at current market prices, was $25.4 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 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 includes, but is not limited to AIC. The Liquidity Agreement allows for short-term advances of funds to be made between parties for liquidity and other general corporate purposes. The Liquidity Agreement does not establish a commitment to advance funds on the part of any party. AIC serves as a lender and borrower, certain other subsidiaries serve only as borrowers, and the Corporation serves only as a lender. The maximum amount of potential funding under each of these agreements is $1.00 billion.

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

Parent company capital capacity At the parent holding company level, we have deployable assets

totaling $3.31 billion as of December 31, 2021, primarily comprised of cash and investments that are generally saleable within one quarter. The substantial earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation.

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 2021 statutory net income or 10% of statutory surplus, the maximum amount of dividends that AIC will be able to pay, without prior Illinois Department of Insurance approval, at a given point in time in 2022 is estimated at $5.51 billion, less dividends paid during the preceding twelve months measured at that point in time. 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 2021, 2020 and 2019 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)	2021		2020		2019
AIC to AIH	$	5,946	$	4,435	$	2,732
AIH to the Corporation	5,586		4,443		2,747
ALIC to AIC	1,642		—		75
AHL to AFIHC	90		80		80
AFIHC to the Corporation	128		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, 2021, we satisfied all the requirements with no current restrictions on the payment of preferred stock dividends. There were no capital contributions paid by the Corporation to AIC in 2021, 2020 or 2019.

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

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Capital Resources and Liquidity 2021 Form 10-K

certain limited exceptions. In 2021, we did not defer interest payments on the subordinated debentures.

Additional resources to support liquidity are as follows:

•The Corporation and AIC have access to a $750 million unsecured revolving credit facility that is available for short-term liquidity requirements. In November 2021, the maturity date of this facility was extended to November 2026. The facility is fully subscribed among 11 lenders with the largest commitment being $95 million. The commitments of the lenders are several and no lender is responsible for any other lender’s commitment if such lender fails to make a loan under the facility. This facility contains an increase provision that would allow up to an additional $500 million of borrowing, subject to the lenders’ commitment. This facility has a financial covenant requiring that we not exceed a 37.5% debt to capitalization ratio as defined in the agreement. This ratio was 19.0% as of December 31, 2021. Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior unsecured, unguaranteed long-term debt. There were no borrowings under the credit facility during 2021.

•To cover short-term cash needs, the Corporation has access to a commercial paper facility with a borrowing capacity limited to any undrawn credit facility balance up to $750 million.

•As of December 31, 2021, there were no balances outstanding for the credit facility or the commercial paper facility and therefore the remaining borrowing capacity was $750 million.

•The Corporation has access to a universal shelf registration statement with the Securities and Exchange Commission that expires in 2024. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 619 million shares of treasury stock as of December 31, 2021), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.

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 18 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 9 of the consolidated financial statements and Application of Critical Accounting Estimates section of the MD&A for further information.

Reserve for future policy 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. Contracts such as voluntary accident and health insurance, interest-sensitive life and traditional life insurance involve payment obligations where a portion or all of the amount and timing of future payments is uncertain. 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 10 of the consolidated financial statements for further information.

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.

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2021 Form 10-K Enterprise Risk and Return Management

Enterprise Risk and Return Management

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. 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 activities 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 and Return Council, the Information Security Council, the ESG (Environmental, Social, and Governance) Steering

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Committee, liability governance committees, and investment committees.

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 positioning. 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 semi-annual 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, or consumer base, or to require costly litigation and other defensive measures.

We manage strategic risk in part through Allstate Board and senior management strategy reviews that include risk and return assessment of our strategic plans and ongoing monitoring of 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 property risk 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 is the potential for loss due to adverse changes in actual or anticipated insurance claims experience (including claims adjustment expenses), net of reinsurance, and lost future profits. Insurance risk exposures include our operating results and financial condition, claims frequency and severity, and catastrophe and severe weather.

Insurance risk exposures are measured and monitored with different approaches including:

•Stochastic methods: measure and monitor 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.

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2021 Form 10-K Enterprise Risk and Return Management

Investment risk and return management addresses financial loss due to changes in the valuations of assets held in the Allstate investment portfolio. 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. 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, or systems. 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 advisers 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. Allstate’s approach is grounded in its Risk and Return Principles and organized by Our Shared Purpose.

Culture is managed using a set of cultural risk categories established as a basis for assessment and measurement, and the learning loop is applied to ensure continuous improvement. Results of culture risk assessments are reported to the ERRC and RRC throughout the year. To strengthen oversight, the Culture Risk and Return Management (“CRRM”) team partners with Human Resources and the broader organization to enhance the sophistication of the CRRM framework, including the following key components:

•Key risk categories, defining the most important areas of culture to track and enhance.

•Key risk indicators, reflecting the health of the system, providing early warnings, and helping Allstate prioritize risk and return activities.

•Governance, ensuring timely discussion, escalation, and prioritization of issues, as well as identification of opportunities.

Many risk drivers impact more than one of these key risk categories. Examples include risks related to the Coronavirus, inflation, and ESG factors. Such risks are managed within processes listed above, but overall strategy is coordinated at the enterprise level, and holistic governance is provided by cross-functional committees such as the Enterprise Risk and Return Council and ESG Steering Committee.

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Application of Critical Accounting Estimates 2021 Form 10-K

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 with credit losses

•Business combinations and purchase price allocations

•Evaluation of goodwill

•Reserve for property and casualty insurance claims and claims expense 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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2021 Form 10-K Application of Critical Accounting Estimates

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.

During periods of high volatility or market disruption, we may 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, 2021 and 2020, 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, 2021
($ in millions)	Fair value		Percent to total
Fair value based on internal sources	$	275	0.5	%
Fair value based on external sources (1)	52,931		99.5
Total	$	53,206	100.0	%

(1)Includes $94 million that are valued using broker quotes and $290 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 with credit losses 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 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

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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 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.

Business combinations and purchase price allocations We have acquired significant intangible assets through acquisitions of businesses. Intangible assets (reported in other assets in the Consolidated Statements of Financial Position) consist of capitalized costs, primarily of the estimated fair value of distribution and customer relationships, trade names, licenses and technology assets. The estimated useful lives of these assets generally range from 3 to 10 years.

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

accident and health products. The estimated fair value of distribution and customer relationship intangible assets was determined using an income approach that considered cash flows and profits expected to be generated by the acquired relationships, a weighted-average cost of capital discount rate reflecting the relative risk of achieving the anticipated cash flows, profits, the time value of money, and other relevant inputs. Technology and trade names were valued using estimated useful lives and market licensing rates discounted at a weighted-average cost of capital. Licenses are primarily insurance licenses which were valued using the median value of market transactions executed over an extended observation period.

Evaluation of goodwill Goodwill represents the excess of amounts paid for acquiring businesses over the fair value of the net assets acquired, less any impairment of goodwill recognized. 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, and Allstate Health and Benefits to which goodwill has been assigned.

The goodwill balance was $3.50 billion and $2.37 billion at December 31, 2021 and 2020, respectively. During 2021, our goodwill increased primarily reflecting the acquisition of National General and SafeAuto.

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

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2021 Form 10-K Application of Critical Accounting Estimates

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

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 run-off lines for Run-off Property-Liability. 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. Run-off Property-Liability involves 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 Run-off Property-Liability 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

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each accident year. Typically, a multi-year average development factor, based on historical results, is used to estimate the development of losses of each accident year into the next time period. The effects of inflation are implicitly considered in the reserving process, the implicit assumption being that a 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. The modifications include exclusion of unusual losses or aberrations and adjustment of historical data to present conditions. Actuarial judgment is then applied to develop a best estimate of gross ultimate losses. These developments are discussed further in the loss ratio disclosures within 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 are aggregated to form a consolidated reserve estimate. The detailed estimates include 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 used in the reserve estimation process. Development factors are calculated 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 to calculate reserve estimates.

Estimates are prepared for each detailed component, incorporating alternative analyses of changing claim settlement patterns and other influences on losses, from which we select our best estimate. Actuarial judgments that may be applied to these components generally do not have a material impact on the consolidated level of reserves. Based on this review our best estimate of required reserves is

recorded.

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 assumptions contained in the previous development factor calculations. 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. A more detailed discussion of reserve reestimates is presented in the Claims and Claims Expense Reserves section of the MD&A.


Favorable (unfavorable) impact of reserve reestimates on net income applicable to common shareholders (1)
	2021		2020		2019
Net reserve reestimates, after-tax	(6.5)	%	6.3	%	2.2	%

(1)2020 includes approximately $495 million of favorable reserve reestimates related to the PG&E Corporation and Southern California Edison subrogation settlements.


3-year average of net reserve reestimates as a percentage of total reserves for each segment (1) (2)
	2021



Allstate Protection	(1.3)	%
Run-off Property-Liability	8.7	%
Protection Services	(4.7)	%

(1)Favorable reserve reestimates are shown in parentheses.

(2)Each of these results is consistent within a reasonable actuarial tolerance for the respective businesses.


Net claims and claims expense reserves by segment and line of business
	As of December 31,
($ in millions)	2021		2020		2019
Allstate Protection
Auto	$	15,134	$	14,164	$	14,728
Homeowners	3,741		2,315		2,138
Other lines (1)	3,249		2,657		2,530
Total Allstate Protection	22,124		19,136		19,396
Run-off Property-Liability
Asbestos	828		827		810
Environmental	226		206		179
Other run-off lines	367		375		376
Total Run-off Property-Liability	1,421		1,408		1,365
Total Protection Services	36		33		39
Total net claims and claims expense reserves	$	23,581	$	20,577	$	20,800

(1)2021 includes the unamortized fair value adjustment related to the acquisition of National General.

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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 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, the effectiveness and efficiency of our claim practices and changes in mix of claim type. 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.

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.

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

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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 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

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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 $900 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 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 11 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.

Run-off Property-Liability reserve estimates

Characteristics of Run-off exposure Our exposure to asbestos, environmental and other run-off 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

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containing asbestos. Environmental claims relate primarily to pollution and related clean-up costs. Other run-off claims 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 run-off claims 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 run-off claims was substantially “excess” in nature.

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. Of 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 run-off claims 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, 2021 and 2020, IBNR was 54.8% and 50.3%, 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 run-off claims 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 Run-off Property-Liability net loss reserves for asbestos, environmental and other run-off 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

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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 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 run-off claims 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 Note 9 and Note 15 of the consolidated financial statements and the Claims and Claims Expense Reserves section of the MD&A.

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 provided to plan participants based on a cash balance formula. Certain participants have a significant portion of their benefits attributable to a former final average pay formula. 84% of the projected benefit obligation (“PBO”) of our primary qualified employee plan is related to the former final average pay formula. See

Note 18 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 and 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.

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Pension and postretirement benefits remeasurement gains and losses
	For the years ended December 31,
($ in millions)	2021		2020		2019
Remeasurement of projected benefit obligation (gains) losses:
Discount rate	$	(285)	$	553	$	633
Other assumptions	(40)		282		313
Remeasurement of plan assets (gains) losses	(319)		(886)		(832)
Remeasurement (gains) losses	$	(644)	$	(51)	$	114

Impact of assumption changes to net cost for pension and other postretirement plans Remeasurement gains in 2021 primarily related to favorable asset performance compared to the expected return on plan assets and an increase in the liability discount rate. 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.

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 increased to 2.93% in 2021 compared to 2.51% in 2020, resulting in gains for 2021.

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 remeasurement. Short-term asset performance can differ significantly from the expected rate of return, especially in volatile markets. In 2021, the actual return on plan assets was higher than the expected return primarily due to strong equity market performance. 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.

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.

Sensitivity of assumption changes included in the calculation of net cost as of December 31, 2021

($ in millions)

Basis/percentage point change

Increase (decrease) to net cost

Pension plans discount rate

+100 basis points

(755)

-100 basis points

928

Expected long-term rate of return on assets

+100 basis points

(62)

-100 basis points

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2021 Form 10-K

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 15 of the consolidated financial statements.

Pending Accounting Standard

There is a pending accounting standard that we have not implemented because the implementation date has not yet occurred. For a discussion of this pending standard, 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		96
Consolidated Statements of Comprehensive Income		97
Consolidated Statements of Financial Position		98
Consolidated Statements of Shareholders’ Equity		99
Consolidated Statements of Cash Flows		100

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

Report of Independent Registered Public Accounting Firm		182

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The Allstate Corporation and Subsidiaries

Consolidated Statements of Operations


	Years Ended December 31,
($ in millions, except per share data)	2021		2020		2019
Revenues
Property and casualty insurance premiums (net of reinsurance ceded and indemnification programs of $1,904, $1,141 and $1,122)	$	42,218	$	37,073	$	36,076
Accident and health insurance premiums and contract charges (net of reinsurance ceded of $78, $13 and $14)	1,821		1,094		1,145
Other revenue	2,172		1,065		1,054
Net investment income	3,293		1,590		1,728
Net gains (losses) on investments and derivatives	1,084		1,087		1,538
Total revenues	50,588		41,909		41,541

Costs and expenses
Property and casualty insurance claims and claims expense (net of reinsurance ceded and indemnification programs of $3,484, $530 and $524)	29,318		22,001		23,976
Shelter-in-Place Payback expense	29		948		—

Accident and health insurance policy benefits (net of reinsurance ceded of $85, $15 and $12)	1,015		516		601
Interest credited to contractholder funds (net of reinsurance ceded of $1, zero and zero)	34		33		34
Amortization of deferred policy acquisition costs	6,252		5,477		5,353
Operating costs and expenses	7,260		5,494		5,422
Pension and other postretirement remeasurement (gains) losses	(644)		(51)		114
Restructuring and related charges	170		253		39
Amortization of purchased intangibles	376		118		126

Impairment of purchased intangibles	—		—		106
Interest expense	330		318		327
Total costs and expenses	44,140		35,107		36,098

Income from operations before income tax expense	6,448		6,802		5,443

Income tax expense	1,289		1,373		1,116

Net income from continuing operations	5,159		5,429		4,327

(Loss) income from discontinued operations, net of tax	(3,593)		147		520

Net income	1,566		5,576		4,847

Less: Net loss attributable to noncontrolling interest	(33)		—		—

Net income attributable to Allstate	1,599		5,576		4,847

Less: Preferred stock dividends	114		115		169

Net income applicable to common shareholders	$	1,485	$	5,461	$	4,678

Earnings per common share applicable to common shareholders
Basic
Continuing operations	$	17.23	$	17.06	$	12.67
Discontinued operations	(12.19)		0.47		1.58
Total	$	5.04	$	17.53	$	14.25

Diluted
Continuing operations	$	16.98	$	16.84	$	12.47
Discontinued operations	(12.02)		0.47		1.56
Total	$	4.96	$	17.31	$	14.03

Weighted average common shares - Basic	294.8		311.6		328.2
Weighted average common shares - Diluted	299.1		315.5		333.5

See notes to consolidated financial statements.

96 www.allstate.com

Financial Statements 2021 Form 10-K

The Allstate Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income


	Years Ended December 31,
($ in millions)	2021		2020		2019
Net income	$	1,566	$	5,576	$	4,847

Other comprehensive (loss) income, after-tax
Changes in:
Unrealized net capital gains and losses	(2,582)		1,293		1,889
Unrealized foreign currency translation adjustments	(8)		52		(10)
Unamortized pension and other postretirement prior service credit	(59)		9		(47)
Other comprehensive (loss) income, after-tax	(2,649)		1,354		1,832

Comprehensive (loss) income	(1,083)		6,930		6,679
Less: Comprehensive loss attributable to noncontrolling interest	(36)		—		—
Comprehensive (loss) income attributable to Allstate	$	(1,047)	$	6,930	$	6,679

See notes to consolidated financial statements.

The Allstate Corporation 97

2021 Form 10-K Financial Statements

The Allstate Corporation and Subsidiaries

Consolidated Statements of Financial Position


	December 31,
($ in millions, except par value data)	2021		2020
Assets
Investments
Fixed income securities, at fair value (amortized cost, net $41,376 and $40,034)	$	42,136	$	42,565
Equity securities, at fair value (cost $6,016 and $2,740)	7,061		3,168
Mortgage loans, net	821		746
Limited partnership interests	8,018		4,563
Short-term, at fair value (amortized cost $4,009 and $6,807)	4,009		6,807
Other investments, net	2,656		1,691
Total investments	64,701		59,540
Cash	763		311
Premium installment receivables, net	8,364		6,463
Deferred policy acquisition costs	4,722		3,774
Reinsurance and indemnification recoverables, net	10,024		7,215
Accrued investment income	339		371
Property and equipment, net	939		1,057
Goodwill	3,502		2,369
Other assets, net	6,086		2,756
Assets held for sale	—		42,131
Total assets	99,440		125,987
Liabilities
Reserve for property and casualty insurance claims and claims expense	33,060		27,610
Reserve for future policy benefits	1,273		1,028
Contractholder funds	908		857
Unearned premiums	19,844		15,946
Claim payments outstanding	1,123		957
Deferred income taxes	833		382
Other liabilities and accrued expenses	9,296		7,840
Long-term debt	7,976		7,825
Liabilities held for sale	—		33,325
Total liabilities	74,313		95,770
Commitments and Contingent Liabilities (Note 7, 9 and 15)
Shareholders’ equity
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 81.0 thousand shares issued and outstanding, $2,025 aggregate liquidation preference	1,970		1,970
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 281 million and 304 million shares outstanding	9		9
Additional capital paid-in	3,722		3,498
Retained income	53,294		52,767
Treasury stock, at cost (619 million and 596 million shares)	(34,471)		(31,331)
Accumulated other comprehensive income:



Unrealized net capital gains and losses	598		3,180
Unrealized foreign currency translation adjustments	(15)		(7)
Unamortized pension and other postretirement prior service credit	72		131
Total accumulated other comprehensive income ("AOCI")	655		3,304
Total Allstate shareholders’ equity	25,179		30,217
Noncontrolling interest	(52)		—
Total equity	25,127		30,217
Total liabilities and equity	$	99,440	$	125,987

See notes to consolidated financial statements.

98 www.allstate.com

Financial Statements 2021 Form 10-K

The Allstate Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity


	Years Ended December 31,
($ in millions, except per share data)	2021		2020		2019

Preferred stock par value	$	—	$	—	$	—
Preferred stock additional capital paid-in
Balance, beginning of year	1,970		2,248		1,930
Acquisition	450		—		—
Preferred stock issuance, net of issuance costs	—		—		1,414
Preferred stock redemption	(450)		(278)		(1,096)
Balance, end of year	1,970		1,970		2,248

Common stock par value	9		9		9
Common stock additional capital paid-in
Balance, beginning of year	3,498		3,463		3,310
Forward contract on accelerated share repurchase agreement	113		(38)		75
Equity incentive plans activity	111		73		78
Balance, end of year	3,722		3,498		3,463

Retained income
Balance, beginning of year	52,767		48,074		44,033
Cumulative effect of change in accounting principle	—		(88)		21
Net income	1,599		5,576		4,847
Dividends on common stock (declared per share of $3.24, $2.16 and $2.00)	(958)		(680)		(658)
Dividends on preferred stock	(114)		(115)		(169)

Balance, end of year	53,294		52,767		48,074

Deferred employee stock ownership plan (“ESOP”) expense
Balance, beginning of year	—		—		(3)
Payments	—		—		3
Balance, end of year	—		—		—

Treasury stock
Balance, beginning of year	(31,331)		(29,746)		(28,085)
Shares acquired	(3,262)		(1,700)		(1,810)
Shares reissued under equity incentive plans, net	122		115		149
Balance, end of year	(34,471)		(31,331)		(29,746)

Accumulated other comprehensive income (loss)
Balance, beginning of year	3,304		1,950		118

Change in unrealized net capital gains and losses	(2,582)		1,293		1,889
Change in unrealized foreign currency translation adjustments	(8)		52		(10)
Change in unamortized pension and other postretirement prior service credit	(59)		9		(47)

Balance, end of year	655		3,304		1,950
Total Allstate shareholders’ equity	25,179		30,217		25,998

Noncontrolling interest
Balance, beginning of period	—		—		—
Acquisition	(16)		—		—
Change in unrealized net capital gains and losses	(3)		—		—
Noncontrolling loss	(33)		—		—
Balance, end of period	(52)		—		—

Total equity	$	25,127	$	30,217	$	25,998

See notes to consolidated financial statements.

The Allstate Corporation 99

2021 Form 10-K Financial Statements

The Allstate Corporation and Subsidiaries Consolidated Statements of Cash Flows


	Years Ended December 31,
($ in millions)	2021		2020		2019
Cash flows from operating activities
Net income	$	1,566	$	5,576	$	4,847
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items	1,086		686		647
Net (gains) losses on investments and derivatives	(1,279)		(1,356)		(1,885)

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

Other	(35)		41		129
Net cash used in financing activities	(5,240)		(2,011)		(2,483)
Net increase (decrease) in cash, including cash classified as assets held for sale	386		39		(161)
Cash from continuing operations at beginning of period	311		273		425
Cash classified as assets held for sale at beginning of period	66		65		74
Less: Cash classified as assets held for sale at end of period	—		66		65
Cash from continuing operations at end of period	$	763	$	311	$	273

See notes to consolidated financial statements.

The Allstate Corporation 100

Notes to Consolidated Financial Statements 2021 Form 10-K

Notes to Consolidated Financial Statements


Note 1			General

Basis of presentation

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

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

Nature of operations

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

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

Risks and uncertainties

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

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

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

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

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

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

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

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

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

The Allstate Corporation 101

2021 Form 10-K Notes to Consolidated Financial Statements


Note 2			Summary of Significant Accounting Policies

Investments

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

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

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

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

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

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

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

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

102 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Derivative and embedded derivative financial instruments

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

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

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

Securities loaned

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

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

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

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

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

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

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


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

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

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

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

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

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

The Allstate Corporation 103

2021 Form 10-K Notes to Consolidated Financial Statements


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

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

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

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

Other revenue

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

Deferred policy acquisition costs

Costs that are related directly to the successful acquisition of new or renewal policies or contracts are deferred and recorded as DAC. These costs are principally agent and broker remuneration, premium taxes and certain underwriting expenses. All other acquisition costs are expensed as incurred and included in operating costs and expenses.

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

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

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

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

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

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

104 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

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

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

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

Reinsurance and Indemnification

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

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

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

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

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

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

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

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

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2021 Form 10-K Notes to Consolidated Financial Statements

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

Goodwill

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


Goodwill by reporting unit
	December 31,
($ in millions)	2021		2020
Allstate Protection	$	1,563	$	810

Protection Services	1,494		1,463
Allstate Health and Benefits	445		96

Total	$	3,502	$	2,369

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

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

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

Intangible assets

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


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

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


Intangible assets by type
	December 31,
($ in millions)	2021		2020
Customers relationships	$	909	$	322
Trade names and licenses	206		37

Technology and other	305		94
Total	$	1,420	$	453

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

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

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

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Notes to Consolidated Financial Statements 2021 Form 10-K

Property and equipment

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

Income taxes

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

Reserve for property and casualty insurance claims and claims expense

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

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

Reserve for future policy benefits

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

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

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

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2021 Form 10-K Notes to Consolidated Financial Statements

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

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

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

Contractholder funds

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

Pension and other postretirement remeasurement gains and losses

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

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

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


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

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

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

Legal contingencies

The Company reviews its lawsuits, regulatory inquiries, and other legal proceedings on an ongoing basis. The Company establishes accruals for such matters at management’s best estimate when the Company assesses that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company’s assessment of whether a loss is reasonably possible or probable is based on its assessment of the ultimate outcome of the matter following all appeals. The Company does not include potential recoveries in its estimates of reasonably possible or probable losses. Legal fees are expensed as incurred.

Long-term debt

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

Equity incentive plans

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

Measurement of credit losses

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

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Notes to Consolidated Financial Statements 2021 Form 10-K

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

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


Allowance for credit losses
	As of December 31,
($ in millions)	2021		2020
Fixed income securities	$	6	$	2
Mortgage loans (1)	6		67

Bank loans (1)	61		67

Investments	73		136
Premium installment receivables	107		153
Reinsurance recoverables	74		60
Other assets	26		17
Assets	280		366

Commitments to fund mortgage loans and bank loans	—		1
Liabilities	—		1
Total	$	280	$	367

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

Leases

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

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

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

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

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


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


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

Consolidation of variable interest entities (“VIEs”)

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

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2021 Form 10-K Notes to Consolidated Financial Statements

Discontinued Operations and Held for Sale

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

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

When a business is identified for discontinued operations reporting:

•Results for prior periods are retrospectively reclassified as discontinued operations

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

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

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

Foreign currency translation

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

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

Earnings per common share

Basic earnings per common share is computed using the weighted average number of common shares outstanding, including vested unissued participating restricted stock units. Diluted earnings per common share is computed using the weighted average number of common and dilutive potential common shares outstanding.

For the Company, dilutive potential common shares consist of outstanding stock options and unvested non-participating restricted stock units and contingently issuable performance stock awards. The effect of dilutive potential common shares does not include options with an anti-dilutive effect on earnings per common share because their exercise prices exceed the average market price of Allstate common shares during the period or for which the unrecognized compensation cost would have an anti-dilutive effect.

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Notes to Consolidated Financial Statements 2021 Form 10-K


Computation of basic and diluted earnings per common share
	For the years ended December 31,
($ in millions, except per share data)	2021		2020		2019
Numerator:
Net income from continuing operations	$	5,159	$	5,429	$	4,327
Less: Net loss attributable to noncontrolling interest	(33)		—		—
Net income from continuing operations attributable to Allstate	5,192		5,429		4,327
Less: Preferred stock dividends	114		115		169
Net income from continuing operations applicable to common shareholders	5,078		5,314		4,158
(Loss) income from discontinued operations, net of tax	(3,593)		147		520
Net income applicable to common shareholders	$	1,485	$	5,461	$	4,678

Denominator:
Weighted average common shares outstanding	294.8		311.6		328.2
Effect of dilutive potential common shares:
Stock options	2.7		2.2		3.2
Restricted stock units (non-participating) and performance stock awards	1.6		1.7		2.1
Weighted average common and dilutive potential common shares outstanding	299.1		315.5		333.5

Earnings per share applicable to common shareholders
Basic
Continuing operations	$	17.23	$	17.06	$	12.67
Discontinued operations	(12.19)		0.47		1.58
Total	$	5.04	$	17.53	$	14.25

Diluted
Continuing operations	$	16.98	$	16.84	$	12.47
Discontinued operations	(12.02)		0.47		1.56
Total	$	4.96	$	17.31	$	14.03

Anti-dilutive options excluded from diluted earnings per common share	1.3		2.9		3.7

Adopted accounting standards

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

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

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2021 Form 10-K Notes to Consolidated Financial Statements

Pending accounting standard

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

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

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

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

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

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Notes to Consolidated Financial Statements 2021 Form 10-K


Note 3			Acquisitions and Dispositions

Acquisitions

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

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


Assets and liabilities recognized in the National General acquisition (1)
($ in millions)	January 4, 2021
Assets
Investments	$	4,962
Cash	400
Premiums and other receivables, net	1,539
Deferred acquisition costs (value of business acquired)	317
Reinsurance recoverables, net	1,212
Intangible assets	1,199
Other assets	734
Goodwill (2)	1,038
Total assets	11,401

Liabilities
Reserve for property and casualty insurance claims and claims expense	2,765
Reserve for future policy benefits	186
Unearned premiums	2,245
Reinsurance payable	363
Debt (3)	593
Deferred tax liabilities	162
Other liabilities	776
Total liabilities	$	7,090

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

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

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


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

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

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

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

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

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2021 Form 10-K Notes to Consolidated Financial Statements

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


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

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

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

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

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

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

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

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

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

Dispositions

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

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

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

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

114 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K


Financial results from discontinued operations
	For the years ended December 31,
($ in millions)	2021		2020		2019
Revenues
Life premiums and contract charges	$	1,109	$	1,350	$	1,356
Net investment income	1,336		1,262		1,431
Net gains (losses) on investments and derivatives	195		269		347
Total revenues	2,640		2,881		3,134

Costs and expenses
Life contract benefits	1,315		1,726		1,438
Interest credited to contractholder funds	414		605		606
Amortization of DAC	87		153		180
Operating costs and expenses	163		238		268
Restructuring and related charges	31		7		2
Total costs and expenses	2,010		2,729		2,494

Amortization of deferred gain on reinsurance	4		4		6

Income (loss) from discontinued operations before income tax expense	634		156		646

Income tax expense	136		9		126

Income from discontinued operations, net of tax	498		147		520

Loss on disposition of operations	(4,315)		—		—
Income tax benefit	(224)		—		—
Loss on disposition of operations, net of tax	(4,091)		—		—

(Loss) income from discontinued operations, net of tax	$	(3,593)	$	147	$	520


Major classes of assets and liabilities disposed in transactions
($ in millions)	Closing (1)		December 31, 2020
Assets
Investments
Fixed income securities, at fair value	$	26,425	$	23,789
Equity securities, at fair value	11		1,542
Mortgage loans, net	2,662		3,329
Limited partnership interests	1,624		3,046
Short-term, at fair value	643		993
Other investments, net	690		1,998
Total investments	$	32,055	$	34,697
Cash	1,081		66
Deferred policy acquisitions costs	996		925
Reinsurance recoverables, net	1,979		2,005
Accrued investment income	240		229
Other assets	536		865
Separate accounts	3,465		3,344


Total assets	$	40,352	$	42,131

Liabilities
Reserve for future policy benefits	$	11,573	$	11,740
Contractholder funds	15,880		16,356
Deferred income taxes	834		973
Other liabilities and accrued expenses	452		912
Separate accounts	3,465		3,344
Total liabilities	$	32,204	$	33,325

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

The Allstate Corporation 115

2021 Form 10-K Notes to Consolidated Financial Statements


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


Note 4			Reportable Segments

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

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

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

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

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

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

National General results are included in the following segments:

•Property and casualty - Allstate Protection

•Accident and health - Allstate Health and Benefits

•Technology solutions - Protection Services

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

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

116 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K

Measuring segment profit or loss

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

Underwriting income is calculated as premiums earned and other revenue, less claims and claims expenses (“losses”), Shelter-in-Place Payback expense, amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges as determined using GAAP.

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


•			Net gains and losses on investments and derivatives except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with net gains and losses on investments and derivatives but included in adjusted net income
•			Pension and other postretirement remeasurement gains and losses
•			Business combination expenses and the amortization or impairment of purchased intangibles
•			Income or loss from discontinued operations
•			Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years
•			Income tax expense or benefit on reconciling items

A reconciliation of these measures to net income (loss) applicable to common shareholders is provided below.


Reportable segments financial performance
	For the years ended December 31,
($ in millions)	2021		2020		2019
Underwriting income (loss) by segment
Allstate Protection	$	1,785	$	4,569	$	2,921
Run-off Property-Liability	(120)		(144)		(108)
Total Property-Liability	1,665		4,425		2,813

Adjusted net income (loss) by segment, after-tax
Protection Services	179		153		38
Allstate Health and Benefits	208		96		115
Corporate and Other	(433)		(428)		(438)

Reconciling items
Property-Liability net investment income	3,118		1,421		1,533
Net gains (losses) on investments and derivatives	1,084		1,087		1,538
Pension and other postretirement remeasurement gains (losses)	644		51		(114)
Curtailment gains (losses)	—		8		—
Business combination expenses and amortization of purchased intangibles (1)	(157)		(106)		(122)
Business combination fair value adjustment	6		—		—
Impairment of purchased intangibles (1)	—		—		(55)
Income tax (expense) benefit on reconciling items	(1,270)		(1,393)		(1,150)
Total reconciling items	3,425		1,068		1,630

(Loss) income from discontinued operations	(3,612)		157		646
Income tax benefit (expense) from discontinued operations	19		(10)		(126)
Total from discontinued operations	$	(3,593)	$	147	$	520

Less: Net loss attributable to noncontrolling interest (2)	(34)		—		—

Net income applicable to common shareholders	$	1,485	$	5,461	$	4,678

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

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

The Allstate Corporation 117

2021 Form 10-K Notes to Consolidated Financial Statements


Reportable segments revenue information
	For the years ended December 31,
($ in millions)	2021		2020		2019
Property-Liability
Insurance premiums
Auto	$	27,623	$	24,640	$	24,188
Homeowners	9,927		8,254		7,912
Other personal lines	2,077		1,919		1,861
Commercial lines	827		767		882

Allstate Protection	40,454		35,580		34,843
Run-off Property-Liability	—		—		—
Total Property-Liability insurance premiums	40,454		35,580		34,843
Other revenue	1,437		857		866
Net investment income	3,118		1,421		1,533
Net gains (losses) on investments and derivatives	1,021		990		1,470
Total Property-Liability	46,030		38,848		38,712

Protection Services
Protection Plans	1,132		909		633
Roadside assistance	192		188		238
Finance and insurance products	440		396		362
Intersegment premiums and service fees (1)	175		147		154
Other revenue	354		208		188
Net investment income	43		44		42
Net gains (losses) on investments and derivatives	25		30		32
Total Protection Services	2,361		1,922		1,649

Allstate Health and Benefits
Employer voluntary benefits	1,031		1,094		1,145
Group health	350		—		—
Individual health	440		—		—
Other revenue	359		—		—
Net investment income	74		78		83
Net gains (losses) on investments and derivatives	7		8		12
Total Allstate Health and Benefits	2,261		1,180		1,240

Corporate and Other
Other revenue	22		—		—
Net investment income	58		47		70
Net gains (losses) on investments and derivatives	31		59		24
Total Corporate and Other	111		106		94

Intersegment eliminations (1)	(175)		(147)		(154)
Consolidated revenues	$	50,588	$	41,909	$	41,541

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

118 www.allstate.com

Notes to Consolidated Financial Statements 2021 Form 10-K


Additional significant financial performance data
	For the years ended December 31,
($ in millions)	2021		2020		2019
Amortization of DAC
Property-Liability	$	5,313	$	4,642	$	4,649
Protection Services	795		658		543
Allstate Health and Benefits	144		177		161
Consolidated	$	6,252	$	5,477	$	5,353


Income tax expense (benefit)
Property-Liability	$	1,151	$	1,382	$	1,196
Protection Services	39		26		(18)
Allstate Health and Benefits	50		28		35
Corporate and Other	49		(63)		(97)
Consolidated	$	1,289	$	1,373	$	1,116

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


Reportable segment total assets, investments and deferred policy acquisition costs
	As of December 31,
($ in millions)	2021		2020
Assets
Property-Liability	$	84,846	$	69,171
Protection Services	6,909		6,177
Allstate Health and Benefits	4,015		2,905
Corporate and Other	3,670		5,603
Assets held for sale	—		42,131
Consolidated	$	99,440	$	125,987

Investments (1)
Property-Liability	$	57,258	$	50,134
Protection Services	1,890		1,822
Allstate Health and Benefits	2,191		2,012
Corporate and Other	3,362		5,572
Consolidated	$	64,701	$	59,540

Deferred policy acquisition costs
Property-Liability	$	1,951	$	1,608
Protection Services	2,294		1,696
Allstate Health and Benefits	477		470
Consolidated	$	4,722	$	3,774

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


Note 5			Investments


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

The Allstate Corporation 119

2021 Form 10-K Notes to Consolidated Financial Statements


Amortized cost, gross unrealized gains (losses) and fair value for fixed income securities
	Amortized cost, net		Gross unrealized				Fair value
($ in millions)			Gains		Losses
December 31, 2021
U.S. government and agencies	$	6,287	$	12	$	(26)	$	6,273
Municipal	6,130		279		(16)		6,393
Corporate	26,834		688		(192)		27,330
Foreign government	982		9		(6)		985
ABS	1,143		14		(2)		1,155
Total fixed income securities	$	41,376	$	1,002	$	(242)	$	42,136

December 31, 2020
U.S. government and agencies	$	2,058	$	50	$	(1)	$	2,107
Municipal	7,100		480		(2)		7,578
Corporate	29,057		1,986		(26)		31,017
Foreign government	921		37		—		958
ABS	898		10		(3)		905
Total fixed income securities	$	40,034	$	2,563	$	(32)	$	42,565


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

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


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


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

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Notes to Consolidated Financial Statements 2021 Form 10-K


Net gains (losses) on investments and derivatives by transaction type
	For the years ended December 31,
($ in millions)	2021		2020		2019
Sales	$	578	$	974	$	519
Credit losses	(42)		(32)		(26)
Valuation change