What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 265 added, 239 removed, 1690 unchanged (23% of the section changed)

3 unchanged sentences

($ in millions, except per share data) Three months ended

June 30, Six months ended June 30,

September 30, Nine months ended September 30,

2021 2020 2021 2020

22 unchanged sentences

Net income 531 1,153 775 2,952

Net income attributable to noncontrolling interest 6 — — —

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

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

11 unchanged sentences

See notes to condensed consolidated financial statements.

Second Quarter 2021 Form 10-Q 1

Third Quarter 2021 Form 10-Q 1

Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Comprehensive Income (unaudited)

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Net income $ 531 $ 1,153 $ 775 $ 2,952

Other comprehensive income (loss), after-tax

Other comprehensive (loss) income, after-tax

Unrealized net capital gains and losses ( 336 ) 142 ( 1,352 ) 857

1 unchanged sentence

Unamortized pension and other postretirement prior service credit ( 15 ) 38 ( 44 ) 31

Other comprehensive income (loss), after-tax 467 2,070 ( 1,014 ) 678

Other comprehensive (loss) income, after-tax ( 372 ) 205 ( 1,386 ) 883

Comprehensive income (loss) 159 1,358 ( 611 ) 3,835

Comprehensive income (loss) attributable to noncontrolling interest 5 — ( 1 ) —

Comprehensive income (loss) applicable to Allstate $ 2,093 $ 3,320 $ ( 769 ) $ 2,477

Comprehensive loss attributable to noncontrolling interest ( 7 ) — ( 8 ) —

Comprehensive income (loss) attributable to Allstate $ 166 $ 1,358 $ ( 603 ) $ 3,835

See notes to condensed consolidated financial statements.

3 unchanged sentences

Condensed Consolidated Statements of Financial Position (unaudited)

($ in millions, except par value data) June 30, 2021 December 31, 2020

($ in millions, except par value data) September 30, 2021 December 31, 2020

Fixed income securities, at fair value (amortized cost, net $ 38,811 and $ 40,034 )

27 unchanged sentences

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

$ .01 par value, 8 million shares authorized, 200.0 thousand shares issued and outstanding, $ 200 aggregate liquidation preference for $ 200 in 2021

Common stock, $ .01 par value, 2.0 billion shares authorized and 900 million issued, 288 million and 304 million shares outstanding

4 unchanged sentences

Accumulated other comprehensive income:

Other unrealized net capital gains and losses 2,726 3,860

Unrealized adjustment to DAC, DSI and insurance reserves ( 562 ) ( 680 )

Total unrealized net capital gains and losses 2,164 3,180

Unrealized net capital gains and losses 1,828 3,180

Unrealized foreign currency translation adjustments 3 ( 7 )

6 unchanged sentences

See notes to condensed consolidated financial statements.

Second Quarter 2021 Form 10-Q 3

Third Quarter 2021 Form 10-Q 3

Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Shareholders’ Equity (unaudited)

($ in millions, except per share data) Three months ended June 30, Six months ended June 30,

($ in millions, except per share data) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

35 unchanged sentences

Change in unrealized net capital gains and losses — — ( 1 ) —

Noncontrolling income 6 — — —

Noncontrolling loss ( 7 ) — ( 7 ) —

Balance, end of period ( 22 ) — ( 22 ) —

5 unchanged sentences

Condensed Consolidated Statements of Cash Flows (unaudited)

($ in millions) Six months ended June 30,

($ in millions) Nine months ended September 30,

Cash flows from operating activities

34 unchanged sentences

Acquisition of operations, net of cash acquired ( 3,481 ) 1

Net cash used in investing activities ( 157 ) ( 958 )

Net cash provided by (used in) investing activities 289 ( 1,243 )

Cash flows from financing activities

15 unchanged sentences

See notes to condensed consolidated financial statements.

Second Quarter 2021 Form 10-Q 5

Third Quarter 2021 Form 10-Q 5

Notes to Condensed Consolidated Financial Statements

5 unchanged sentences

These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The condensed consolidated financial statements and notes as of June 30, 2021 and for the three and six month periods ended June 30, 2021 and 2020 are unaudited.

The condensed consolidated financial statements and notes as of September 30, 2021 and for the three and nine month periods ended September 30, 2021 and 2020 are unaudited.

The condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods.

7 unchanged sentences

The Company continues to closely monitor and proactively adapt to developments and changing conditions.

Currently, it is not possible to reliably estimate the impact to its operations, but the effects could be material.

Currently, it is not possible to reliably estimate the impact to its operations, but the effects have been and could be material.

Adopted accounting standards

8 unchanged sentences

The Company consolidates VIEs in which the Company is deemed the primary beneficiary.

The primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect that entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE.

The primary beneficiary is the entity that has both (1) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE and (2) the power to direct the activities of the VIE that most significantly affect that entity’s economic performance.

Discontinued Operations and Held for Sale

13 unchanged sentences

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 entered into agreements to sell substantially all of its life and annuity business in scope of the new standard.

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 (“DAC”) for certain voluntary and individual life and accident and health insurance products not held for sale are subject to the new guidance.

7 unchanged sentences

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, assuming the dispositions of Allstate Life Insurance Company and Allstate Life Insurance Company of New York are completed.

Second Quarter 2021 Form 10-Q 7

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 Allstate Life Insurance Company and Allstate Life Insurance Company of New York.

Third Quarter 2021 Form 10-Q 7

Notes to Condensed Consolidated Financial Statements

6 unchanged sentences

Computation of basic and diluted earnings per common share

(In millions, except per share data) Three months ended June 30, Six months ended June 30,

(In millions, except per share data) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

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

Net income attributable to noncontrolling interest 6 — — —

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

Net income from continuing operations attributable to Allstate 213 1,216 4,054 3,159

24 unchanged sentences

Note 3 Acquisitions and Dispositions

SafeAuto On June 1, 2021, the Company announced an agreement to acquire SafeAuto, a non-standard auto insurance carrier focused on providing state-minimum private-passenger auto insurance with coverage options in 28 states, for $ 270 million in cash.

The transaction is expected to close in 2021, subject to regulatory approval and customary closing conditions.

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.

Subsequent event On October 1, 2021, the Company completed the acquisition of SafeAuto for $ 262 million in cash.

National General On January 4, 2021, the Company completed the acquisition of National General Holdings Corp.

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(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.

The Company had principal balance remaining of $ 350 million 6.750 % Senior Notes due 2024 as of June 30, 2021, with a fair value adjustment of $ 67 million.

As of September 30, 2021, the Company had principal balance remaining of $ 350 million 6.750 % Senior Notes due 2024, with a fair value adjustment of $ 50 million.

Intangible assets by type

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Intangible assets (reported in other assets in the Condensed Consolidated Statements of Financial Position) consist of capitalized costs, primarily of the

estimated fair value of distribution, and customer relationships, trade names and licenses, technology and other assets.

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.

Second Quarter 2021 Form 10-Q 9

Technology and trade names were valued using estimated useful

Third Quarter 2021 Form 10-Q 9

Notes to Condensed Consolidated Financial Statements

and trade names were valued using estimated useful lives and market licensing rates discounted at a weighted-average cost of capital.

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.

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Amortization expense is primarily calculated using accelerated amortization methods.

Amortization expense on intangible assets was $ 76 million and $ 99 million for the three and six months ended June 30, 2021, respectively, and the Company expects to recognize $ 152 million of amortization expense for the remainder of 2021.

Amortization expense on intangible assets was $ 76 million and $ 175 million for the three and nine months ended September 30, 2021, respectively, and the Company expects to recognize $ 76 million of amortization expense for the remainder of 2021.

Estimated amortization expense of National General intangible assets for the next five years and thereafter

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the most significant portion relates to insurance contracts in the Allstate Protection segment.

Amortization expense of the value of business acquired was $ 98 million and $ 232 million for the three and six months ended June 30, 2021, respectively, and the Company expects to record an additional $ 85 million in 2021.

Amortization expense of the value of business acquired was $ 61 million and $ 293 million for the three and nine months ended September 30, 2021, respectively, and the Company expects to record an additional $ 24 million in 2021.

Other fair value adjustments included an increase in reserves of $ 62 million, a $ 13 million reduction to investments that were not held at fair value, and a net increase in current and deferred tax liabilities of $ 128 million.

Preferred stock 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.

Subsequent event 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.

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 Condensed Consolidated Statements of Operations) of $ 22 million related to the acquisition were expensed as incurred in the Corporate and Other segment.

On January 26, 2021, the Company entered into a Stock 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 Allstate Life Insurance Company and certain affiliates for approximately $ 2.8 billion in cash.

On March 29, 2021, the Company entered into a Stock Purchase Agreement with Wilton Reassurance Company to sell Allstate Life Insurance Company of New York for $ 220 million in cash.

to sell Allstate Life Insurance Company and certain affiliates.

On March 29, 2021, the Company entered into a Stock Purchase Agreement with Wilton Reassurance Company to sell Allstate Life Insurance Company of New York.

Subsequent event On October 1, 2021, the Company closed the sale of Allstate Life Insurance Company of New York to Wilton Reassurance Company for $ 400 million.

On November 1, 2021, the Company closed the sale of Allstate Life Insurance Company and certain affiliates to entities managed by Blackstone for total proceeds of $ 4 billion, including $ 2.8 billion purchase price, as well as increases in statutory surplus.

A loss on disposition of $ 4 billion, after-tax, was recorded in the first quarter of 2021 related to these transactions.

The loss on disposition is related to the run-off annuity segment, whose returns have been low.

The ultimate amount of the loss on sale will be impacted by purchase price adjustments associated with certain pre-close transactions specified in the stock purchase 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 unrealized gains and losses.

The transactions are expected to close in 2021, subject to regulatory approvals and other customary closing conditions.

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.

For the nine months ended September 30, 2021, the loss on disposition was $ 3.8 billion, after-tax, and reflects purchase price adjustments associated with certain pre-close transactions specified in the stock purchase agreements, changes in statutory capital and surplus prior to the closing dates and the closing date equity of the sold entities determined under GAAP, excluding unrealized gains and losses on fixed income securities.

10 www.allstate.com

Notes to Condensed Consolidated Financial Statements

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.

Financial results from discontinued operations

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2021 2020 2021 2020

15 unchanged sentences

Loss on disposition of operations 89 — ( 4,048 ) —

Income tax expense (benefit) 254 — ( 166 ) —

Loss on disposition, net of tax 27 — ( 3,971 ) —

Income tax benefit ( 128 ) — ( 294 ) —

Loss on disposition of operations, net of tax 217 — ( 3,754 ) —

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

Major classes of assets and liabilities to be transferred in transactions

($ in millions) June 30, 2021 December 31, 2020

($ in millions) September 30, 2021 December 31, 2020

Fixed income securities, at fair value (amortized cost, net $ 25,673 and $ 21,417 )

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Total liabilities held for sale $ 32,421 $ 33,325

Second Quarter 2021 Form 10-Q 11

Third Quarter 2021 Form 10-Q 11

Notes to Condensed Consolidated Financial Statements

Cash flows from discontinued operations

Six months ended June 30,

Nine months ended September 30,

($ in millions) 2021 2020

Net cash provided by operating activities from discontinued operations $ 888 $ 104

Net cash provided by investing activities from discontinued operations 317 169

Net cash (used in) provided by investing activities from discontinued operations ( 405 ) 264

Note 4 Reportable Segments

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• Pension and other postretirement remeasurement gains and losses

• Business combination expenses and amortization or impairment of purchased intangibles

• Business combination expenses and the amortization or impairment of purchased intangibles

• Income or loss from discontinued operations

5 unchanged sentences

Reportable segments financial performance

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2021 2020 2021 2020

3 unchanged sentences

( 113 ) ( 135 ) ( 118 ) ( 141 )

Total Property-Liability ( 534 ) 752 1,552 3,002

Adjusted net income (loss) by segment, after-tax

6 unchanged sentences

Pension and other postretirement remeasurement gains (losses) ( 40 ) 71 404 ( 320 )

Curtailment gains (losses) — 8 — 8

Business combination expenses and amortization of purchased intangibles (1)

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Income (loss) from discontinued operations 235 ( 86 ) ( 3,435 ) ( 289 )

Income tax (expense) benefit from discontinued operations ( 297 ) ( 23 ) 73 59

Income tax benefit from discontinued operations 90 23 163 82

Total from discontinued operations $ 325 $ ( 63 ) $ ( 3,272 ) $ ( 207 )

Net income (loss) attributable to noncontrolling interest 6 — — —

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

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

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

Second Quarter 2021 Form 10-Q 13

Third Quarter 2021 Form 10-Q 13

Notes to Condensed Consolidated Financial Statements

Reportable segments revenue information

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

17 unchanged sentences

Intersegment premiums and service fees (1)

46 36 133 109

Other revenue 85 52 263 155

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Portfolio composition

($ in millions) June 30, 2021 December 31, 2020

($ in millions) September 30, 2021 December 31, 2020

Fixed income securities, at fair value $ 39,989 $ 42,565

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($ in millions) Amortized cost, net Gross unrealized Fair

June 30, 2021

September 30, 2021

government and agencies $ 3,035 $ 22 $ ( 15 ) $ 3,042

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Scheduled maturities for fixed income securities

($ in millions) June 30, 2021

($ in millions) September 30, 2021

Amortized cost, net Fair value

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ABS and MBS are shown separately because of potential prepayment of principal prior to contractual maturity dates.

Second Quarter 2021 Form 10-Q 15

Third Quarter 2021 Form 10-Q 15

Notes to Condensed Consolidated Financial Statements

Net investment income

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

10 unchanged sentences

Realized capital gains (losses) by asset type

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

8 unchanged sentences

($ in millions)

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

7 unchanged sentences

Gross realized gains (losses) on sales of fixed income securities

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

1 unchanged sentence

Gross realized losses ( 18 ) ( 11 ) ( 106 ) ( 164 )

The following table presents the net pre-tax appreciation (decline) recognized in net income of equity securities and limited partnership interests carried at fair value that are still held as of June 30, 2021 and 2020, respectively.

Net appreciation (decline) recognized in net income

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

6 unchanged sentences

Credit losses recognized in net income

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

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Total $ ( 12 ) $ 7 $ 2 $ ( 29 )

Second Quarter 2021 Form 10-Q 17

Third Quarter 2021 Form 10-Q 17

Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

gains (losses)

June 30, 2021 Gains Losses

September 30, 2021 Gains Losses

Fixed income securities $ 39,989 $ 1,330 $ ( 152 ) $ 1,178

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Change in unrealized net capital gains (losses)

($ in millions) Six months ended June 30, 2021

($ in millions) Nine months ended September 30, 2021

Fixed income securities $ ( 1,353 )

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Carrying value for limited partnership interests

($ in millions) June 30, 2021 December 31, 2020

($ in millions) September 30, 2021 December 31, 2020

EMA Fair Value Total EMA Fair Value Total

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

(2) Carrying value for limited partnership interests as of June 30, 2021 includes certain investments which were classified as assets held for sale as of December 31, 2020 and March 31, 2021, and transferred to continuing operations in the first and second quarter of 2021, respectively.

(2) Carrying value for limited partnership interests as of September 30, 2021 includes certain investments which were classified as assets held for sale as of December 31, 2020 and March 31, 2021, and transferred to continuing operations in the first and second quarter of 2021, respectively.

Short-term investments Short-term investments, including money market funds, commercial paper, U.S.

Treasury bills and other short-term investments, are carried at fair value.

As of June 30, 2021 and December 31, 2020, the fair value of short-term investments totaled $ 5.52 billion and $ 6.81 billion, respectively.

As of September 30, 2021 and December 31, 2020, the fair value of short-term investments totaled $ 6.43 billion and $ 6.81 billion, respectively.

Other investments Other investments primarily consist of bank loans, real estate, policy loans, agent loans and derivatives.

5 unchanged sentences

Other investments by asset type

($ in millions) June 30, 2021 December 31, 2020

($ in millions) September 30, 2021 December 31, 2020

Bank loans, net $ 1,592 $ 772

4 unchanged sentences

$ 3,286 $ 1,691

(1) Other investments as of June 30, 2021 i ncludes certain real estate, agent loans and other investments which were classified as assets held for sale as of December 31, 2020 and transferred to continuing operations in the first quarter of 2021.

(1) Other investments as of September 30, 2021 i ncludes certain real estate, agent loans and other investments which were classified as assets held for sale as of December 31, 2020 and transferred to continuing operations in the first quarter of 2021.

Portfolio monitoring and credit losses

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If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed income security, a credit loss

Second Quarter 2021 Form 10-Q 19

Third Quarter 2021 Form 10-Q 19

Notes to Condensed Consolidated Financial Statements

5 unchanged sentences

Recoveries after write-offs are recognized when received.

Accrued interest excluded from the amortized cost of fixed income securities totaled $ 323 million and $ 351 million as of June 30, 2021 and December 31, 2020 and is reported within the accrued investment income line of the Condensed Consolidated Statements of Financial Position.

Accrued interest excluded from the amortized cost of fixed income securities totaled $ 311 million and $ 351 million as of September 30, 2021 and December 31, 2020 and is reported within the accrued investment income line of the Condensed Consolidated Statements of Financial Position.

The Company monitors accrued interest and writes off amounts when they are not expected to be received.

The Company’s portfolio monitoring process includes a quarterly review of all securities to identify

instances where the fair value of a security compared to its amortized cost is below internally established thresholds.

The Company’s portfolio monitoring process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds.

The process also includes the monitoring of other credit loss indicators such as ratings, ratings downgrades and payment defaults.

6 unchanged sentences

Rollforward of credit loss allowance for fixed income securities

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2021 2020 2021 2020

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$ ( 2 ) $ ( 8 ) $ ( 2 ) $ ( 8 )

(1) Allowance for fixed income securities as of June 30, 2021 comprised $ 1 million and $ 1 million of corporate bonds and ABS, respectively.

Allowance for fixed income securities as of June 30, 2020 comprised $ 3 million, $ 1 million, $ 2 million and $ 1 million of municipal bonds, corporate bonds, ABS and MBS, respectively.

(2) Includes $ 1 million and $ 4 million of credit loss allowance for fixed income securities that are classified as held for sale as of June 30, 2021 and 2020, respectively.

(1) Allowance for fixed income securities as of September 30, 2021 comprised $ 1 million and $ 1 million of corporate bonds and ABS, respectively.

Allowance for fixed income securities as of September 30, 2020 comprised $ 3 million, $ 2 million, $ 2 million and $ 1 million of municipal bonds, corporate bonds, ABS and MBS, respectively.

(2) Includes $ 1 million and $ 4 million of credit loss allowance for fixed income securities that are classified as held for sale as of September 30, 2021 and 2020, respectively.

20 www.allstate.com

2 unchanged sentences

($ in millions) Less than 12 months 12 months or more Total

June 30, 2021

September 30, 2021

Fixed income securities

21 unchanged sentences

Total fixed income securities 215 $ 1,225 $ ( 26 ) 83 $ 89 $ ( 6 ) $ ( 32 )

Gross unrealized losses by unrealized loss position and credit quality as of June 30, 2021

Gross unrealized losses by unrealized loss position and credit quality as of September 30, 2021

($ in millions) Investment

14 unchanged sentences

The unrealized losses are expected to reverse as the securities approach maturity.

Second Quarter 2021 Form 10-Q 21

Third Quarter 2021 Form 10-Q 21

Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

Municipal bonds in an unrealized loss position were evaluated based on the underlying credit quality of the primary obligor, obligation type and quality of the underlying assets.

As of June 30, 2021, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost basis.

As of September 30, 2021, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost basis.

Loans The Company establishes a credit loss allowance for mortgage loans, bank loans and agent loans when they are originated or purchased, and for unfunded commitments unless they are unconditionally cancellable by the Company.

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

As of June 30, 2021, accrued interest totaled $ 3 million, $ 5 million and $ 2 million for mortgage loans, bank loans and agent loans, respectively.

As of September 30, 2021, accrued interest totaled $ 2 million, $ 5 million and $ 2 million for mortgage loans, bank loans and agent loans, respectively.

As of December 31, 2020, accrued interest totaled $ 2 million and $ 3 million for mortgage loans and bank loans, respectively.

9 unchanged sentences

Mortgage loans amortized cost by debt service coverage ratio distribution and year of origination

($ in millions) June 30, 2021 December 31, 2020

2016 and prior 2017 2018 2019 2020 Current Total Total

September 30, 2021 December 31, 2020

($ in millions) 2016 and prior 2017 2018 2019 2020 Current Total Total

Below 1.0 $ — $ — $ — $ — $ — $ — $ — $ —

7 unchanged sentences

temporary, or there are other risk mitigating factors such as additional collateral, escrow balances or borrower guarantees.

Payments on all mortgage loans were current as of June 30, 2021 and December 31, 2020.

Payments on all mortgage loans were current as of September 30, 2021 and December 31, 2020.

Rollforward of credit loss allowance for mortgage loans

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2021 2020 2021 2020

5 unchanged sentences

$ ( 28 ) $ ( 85 ) $ ( 28 ) $ ( 85 )

(1) Includes $ 23 million and $ 75 million of credit loss allowance for mortgage loans that are classified as held for sale as of June 30, 2021 and 2020, respectively.

(1) Includes $ 21 million and $ 74 million of credit loss allowance for mortgage loans that are classified as held for sale as of September 30, 2021 and 2020, respectively.

Bank loans When it is determined a bank loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as the present value of the loan’s expected future repayment cash flows discounted at the loan’s current effective interest rate.

3 unchanged sentences

Bank loans amortized cost by credit rating and year of origination

($ in millions) June 30, 2021 December 31, 2020

2016 and prior 2017 2018 2019 2020 Current Total Total

September 30, 2021 December 31, 2020

($ in millions) 2016 and prior 2017 2018 2019 2020 Current Total Total

BBB $ — $ — $ 6 $ 14 $ 7 $ 68 $ 95 $ 38

5 unchanged sentences

Amortized cost, net $ 1,592 $ 772

Second Quarter 2021 Form 10-Q 23

Third Quarter 2021 Form 10-Q 23

Notes to Condensed Consolidated Financial Statements

Rollforward of credit loss allowance for bank loans

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

1 unchanged sentence

Cumulative effect of change in accounting principle — — — ( 53 )

Net decreases (increases) related to credit losses 6 ( 3 ) 4 ( 30 )

Net (increases) decreases related to credit losses ( 14 ) 10 ( 10 ) ( 20 )

Reduction of allowance related to sales 2 5 13 7

2 unchanged sentences

$ ( 64 ) $ ( 61 ) $ ( 64 ) $ ( 61 )

(1) Includes $ 8 million and $ 20 million of credit loss allowance for bank loans that are classified as held for sale as of June 30, 2021 and 2020, respectively.

(1) Includes $ 7 million and $ 15 million of credit loss allowance for bank loans that are classified as held for sale as of September 30, 2021 and 2020, respectively.

Agent loans The Company monitors agent loans to determine when they should be removed from the pool and assessed for credit losses individually by using internal credit risk grades that classify the loans into risk categories.

1 unchanged sentence

Internal credit risk grades are updated annually or more frequently if conditions are warranted based on the Company’s credit monitoring process.

As of June 30, 2021, 84 % of agent loans balance represents the top three highest credit quality categories.

The allowance for agent loans totaled $ 6 million as of June 30, 2021.

As of September 30, 2021, 81 % of agent loans balance represents the top three highest credit quality categories.

The allowance for agent loans totaled $ 5 million as of September 30, 2021.

Agent loans were all classified as assets held for sale as of December 31, 2020 and transferred to continuing operations in the first quarter of 2021.

59 unchanged sentences

The valuation techniques underlying the models are widely accepted in the financial

Second Quarter 2021 Form 10-Q 25

Third Quarter 2021 Form 10-Q 25

Notes to Condensed Consolidated Financial Statements

31 unchanged sentences

Assets measured at fair value on a non-recurring basis

Long-lived assets to be disposed of by sale, including real estate, are written down to fair value less costs to sell.

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

Investments excluded from the fair value hierarchy

2 unchanged sentences

The Company receives distributions of income and proceeds from the liquidation of the underlying assets of the investees, which usually takes place in years 4-9 of the typical contractual life of 10 - 12 years.

As of June 30, 2021, the Company has commitments to invest $ 268 million in these limited partnership interests.

As of September 30, 2021, the Company has commitments to invest $ 248 million in these limited partnership interests.

26 www.allstate.com

1 unchanged sentence

Assets and liabilities measured at fair value

June 30, 2021

September 30, 2021

($ in millions) Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Counterparty and cash collateral netting Total

11 unchanged sentences

Other investments — 39 2 $ ( 19 ) 22

Other assets 4 — — 4

Assets held for sale 6,291 25,818 146 ( 3 ) 32,252

11 unchanged sentences

% of total liabilities at fair value 0.7 % 18.2 % 80.6 % 0.5 % 100.0 %

Second Quarter 2021 Form 10-Q 27

Third Quarter 2021 Form 10-Q 27

Notes to Condensed Consolidated Financial Statements

31 unchanged sentences

input Range Weighted

June 30, 2021

September 30, 2021

Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options $ ( 455 ) Stochastic cash flow model Projected option cost 1.0 - 4.2 %

1 unchanged sentence

Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options $ ( 483 ) Stochastic cash flow model Projected option cost 1.0 - 4.2 %

(1) These were included in the liabilities held for sale as of June 30, 2021 and December 31, 2020.

(1) These were included in the liabilities held for sale as of September 30, 2021 and December 31, 2020.

The embedded derivatives are equity-indexed and forward starting options in certain life and annuity products that provide customers with interest crediting rates based on the performance of the S&P 500.

If the projected option cost increased (decreased), it would result in a higher (lower) liability fair value.

As of June 30, 2021 and December 31, 2020, Level 3 fair value measurements of fixed income securities total $ 155 million and $ 226 million, respectively, and include $ 43 million and $ 69 million, respectively, of securities valued based on non-binding broker quotes where the inputs have not been corroborated to be

market observable and $ 16 million and $ 18 million, respectively, of municipal fixed income securities that are not rated by third-party credit rating agencies.

As of September 30, 2021 and December 31, 2020, Level 3 fair value measurements of fixed income securities total $ 199 million and $ 226 million, respectively, and include $ 41 million and $ 69 million, respectively, of securities valued based on non-binding broker quotes where the inputs have not been

corroborated to be market observable and $ 15 million and $ 18 million, respectively, of municipal fixed income securities that are not rated by third-party credit rating agencies.

As the Company does not develop the Level 3 fair value unobservable inputs for these fixed income securities, they are not included in the table above.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended June 30, 2021

Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended September 30, 2021

Balance as of

March 31, 2021 Total gains (losses) included in:

June 30, 2021 Total gains (losses) included in:

Transfers Transfers to (from) held for sale Balance as of

June 30, 2021

September 30, 2021

($ in millions) Net income OCI Into Level 3 Out of Level 3 Purchases Sales Issues Settlements

13 unchanged sentences

Total recurring Level 3 liabilities $ ( 490 ) $ 15 $ — $ — $ — $ — $ — $ — $ ( 9 ) $ 5 $ ( 479 )

Rollforward of Level 3 assets and liabilities held at fair value during the six month period ended June 30, 2021

Rollforward of Level 3 assets and liabilities held at fair value during the nine month period ended September 30, 2021

Balance as of

1 unchanged sentence

Transfers Transfers to (from) held for sale Balance as of

June 30, 2021

September 30, 2021

($ in millions) Net income OCI Into Level 3 Out of Level 3 Purchases Sales Issues Settlements

13 unchanged sentences

Total recurring Level 3 liabilities $ ( 516 ) $ 46 $ — $ — $ — $ — $ — $ — $ ( 25 ) $ 16 $ ( 479 )

Second Quarter 2021 Form 10-Q 29

Third Quarter 2021 Form 10-Q 29

Notes to Condensed Consolidated Financial Statements

Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended June 30, 2020

Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended September 30, 2020

Balance as of

March 31, 2020 Total gains (losses) included in:

June 30, 2020 Total gains (losses) included in:

Transfers Balance

as of June 30, 2020

as of September 30, 2020

($ in millions) Net income OCI Into Level 3 Out of Level 3 Purchases Sales Issues Settlements

12 unchanged sentences

Total recurring Level 3 liabilities $ ( 488 ) $ ( 6 ) $ — $ — $ — $ — $ — $ ( 10 ) $ 7 $ ( 497 )

Rollforward of Level 3 assets and liabilities held at fair value during the six months period ended June 30, 2020

Rollforward of Level 3 assets and liabilities held at fair value during the nine months period ended September 30, 2020

Balance as of

1 unchanged sentence

Transfers Balance as of

June 30, 2020

September 30, 2020

($ in millions) Net income OCI Into Level 3 Out of Level 3 Purchases Sales Issues Settlements

13 unchanged sentences

Total Level 3 gains (losses) included in net income

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2021 2020 2021 2020

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements

Transfers into Level 3 during the three and six months ended June 30, 2021 and 2020 included situations where a quote was not provided by the Company’s independent third-party valuation service provider and as a result the price was stale or had been replaced with a broker quote where the inputs had not been corroborated to be market observable resulting in the security being classified as Level 3.

Transfers out of Level 3 during the three and six months ended June 30, 2021 and 2020 included situations where a broker quote was used in the prior period and a quote became available from the Company’s independent third-party valuation service provider in the current period.

Transfers into Level 3 during the three and nine months ended September 30, 2021 and 2020 included situations where a quote was not provided by the Company’s independent third-party valuation service provider and as a result the price was stale or had been replaced with a broker quote where the inputs had not been corroborated to be market observable resulting in the security being classified as Level 3.

Transfers out of Level 3 during the three and nine months ended September 30, 2021 and 2020 included situations where a broker quote was used in the prior period and a quote became available from the Company’s independent third-party valuation service provider in the current period.

A quote utilizing the new pricing source was not available as of the prior period, and any gains or losses related to the change in valuation source for individual securities were not significant.

Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of June 30,

($ in millions) Three months ended June 30, Six months ended June 30,

Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of September 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Fixed income securities:

Municipal $ 1 $ — $ — $ —

Corporate - public — — — ( 1 )

Corporate - privately placed — — — —

ABS — — — ( 1 )

Total fixed income securities 1 — — ( 2 )

Equity securities 9 — 22 ( 12 )

Short-term investments — 1 — 1

Assets held for sale 1 2 3 ( 2 )

10 unchanged sentences

Corporate - privately placed 1 — 1 —

ABS — ( 3 ) — ( 2 )

Assets held for sale — — — ( 3 )

Changes in unrealized net capital gains and losses reported in OCI $ — $ 2 $ — $ ( 2 )

Third Quarter 2021 Form 10-Q 31

Notes to Condensed Consolidated Financial Statements

Financial instruments not carried at fair value

($ in millions) June 30, 2021 December 31, 2020

($ in millions) September 30, 2021 December 31, 2020

Financial assets Fair value level Amortized cost, net Fair

12 unchanged sentences

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

(2) Includes certain liabilities for collateral measured at Level 2 fair value as of June 30, 2021 and December 31, 2020 .

Second Quarter 2021 Form 10-Q 31

(2) Includes certain liabilities for collateral measured at Level 2 fair value as of September 30, 2021 and December 31, 2020 .

32 www.allstate.com

Notes to Condensed Consolidated Financial Statements

32 unchanged sentences

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

32 www.allstate.com

Third Quarter 2021 Form 10-Q 33

Notes to Condensed Consolidated Financial Statements

Summary of the volume and fair value positions of derivative instruments as of June 30, 2021

Summary of the volume and fair value positions of derivative instruments as of September 30, 2021

($ in millions, except number of contracts) Volume (1)

7 unchanged sentences

Futures Other assets n/a 1,390 4 4 —

Total return index contracts

Total return swap agreements – fixed income Other investments $ 50 n/a 1 1 —

Foreign currency contracts

12 unchanged sentences

Equity and index contracts

Options Other liabilities & accrued expenses n/a 15,000 ( 13 ) — ( 13 )

Futures Other liabilities & accrued expenses n/a 1,411 ( 3 ) — ( 3 )

3 unchanged sentences

Credit default swaps – buying protection Other liabilities & accrued expenses 881 n/a ( 28 ) — ( 28 )

Credit default swaps – selling protection Other liabilities & accrued expenses 5 n/a — — —

Liabilities held for sale 2,146 2,554 ( 549 ) 3 ( 552 )

4 unchanged sentences

(n/a = not applicable)

Second Quarter 2021 Form 10-Q 33

34 www.allstate.com

Notes to Condensed Consolidated Financial Statements

37 unchanged sentences

Gross amount Counter-party netting Cash collateral (received) pledged Net amount on balance sheet Securities collateral (received) pledged Net amount

June 30, 2021

September 30, 2021

Asset derivatives $ 21 $ ( 21 ) $ 2 $ 2 $ — $ 2

4 unchanged sentences

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

34 www.allstate.com

Third Quarter 2021 Form 10-Q 35

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

($ in millions) Realized capital gains (losses) Operating costs and expenses Total gain (loss) recognized in net income on derivatives

Three months ended June 30, 2021

Three months ended September 30, 2021

Interest rate contracts $ 18 $ — $ 18

4 unchanged sentences

Total $ 46 $ ( 3 ) $ 43

Six months ended June 30, 2021

Nine months ended September 30, 2021

Interest rate contracts $ 19 $ — $ 19

4 unchanged sentences

Total $ 54 $ 27 $ 81

Three months ended June 30, 2020

Three months ended September 30, 2020

Interest rate contracts $ ( 1 ) $ — $ ( 1 )

5 unchanged sentences

Total $ ( 30 ) $ 12 $ ( 18 )

Six months ended June 30, 2020

Nine months ended September 30, 2020

Interest rate contracts $ 35 $ — $ 35

7 unchanged sentences

The Company uses MNAs for OTC derivative transactions that permit either party to net payments due for transactions and collateral is either pledged or obtained when certain predetermined exposure limits are exceeded.

As of June 30, 2021, counterparties pledged $ 7 million in collateral to the Company, and the Company pledged $ 6 million in cash and securities to counterparties which includes $ 3 million of collateral posted under MNAs for contracts containing credit-risk-contingent provisions that are in a liability position.

OTC cash and securities collateral pledged

($ in millions) September 30, 2021

Pledged by the Company $ 2

Pledged to the Company (1)

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

The Company has not incurred any losses on derivative financial instruments due to counterparty nonperformance.

2 unchanged sentences

This exposure is measured by the fair value of OTC derivative contracts with a positive fair value at the reporting date reduced by the effect, if any, of legally enforceable master netting agreements.

Second Quarter 2021 Form 10-Q 35

36 www.allstate.com

Notes to Condensed Consolidated Financial Statements

OTC derivatives counterparty credit exposure by counterparty credit rating

($ in millions) June 30, 2021 December 31, 2020

($ in millions) September 30, 2021 December 31, 2020

parties Notional

8 unchanged sentences

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

As of June 30, 2021, the Company pledged $ 56 million and received $ 10 million in the form of margin deposits.

Exchange traded and cleared margin deposits

($ in millions) September 30, 2021

Pledged by the Company $ 88

Received by the Company

Market risk is the risk that the Company will incur losses due to adverse changes in market rates and prices.

6 unchanged sentences

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

($ in millions) June 30, 2021 December 31, 2020

($ in millions) September 30, 2021 December 31, 2020

Gross liability fair value of contracts containing credit-risk-contingent features $ 7 $ 19

2 unchanged sentences

Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently $ 1 $ —

36 www.allstate.com

Third Quarter 2021 Form 10-Q 37

Notes to Condensed Consolidated Financial Statements

6 unchanged sentences

AAA AA A BBB BB and

June 30, 2021

September 30, 2021

Corporate debt $ — $ — $ — $ — $ 5 $ 5 $ —

18 unchanged sentences

The ratings of individual names for which protection has been sold are also monitored.

Second Quarter 2021 Form 10-Q 37

38 www.allstate.com

Notes to Condensed Consolidated Financial Statements

10 unchanged sentences

The assets of the Reciprocal Exchanges can be used only to settle the obligations of the Reciprocal Exchanges and general creditors have no recourse to the Company.

The results of operations of the Reciprocal Exchanges are included in the Company’s Allstate Protection segment and generated $ 45 million and $ 90 million of earned premiums in the three and six months ended June 30, 2021, respectively.

The results of operations of the Reciprocal Exchanges are included in the Company’s Allstate Protection segment and generated $ 47 million and $ 137 million of earned premiums in the three and nine months ended September 30, 2021, respectively.

Assets and liabilities of Reciprocal Exchanges

($ in millions) June 30, 2021

($ in millions) September 30, 2021

Fixed income securities $ 330

9 unchanged sentences

Total liabilities $ 705

38 www.allstate.com

Third Quarter 2021 Form 10-Q 39

Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

When the Company experiences changes in the mix or type of claims or changing claim settlement patterns, it may need to apply actuarial judgment in the determination and selection of development factors to be more reflective of the new trends.

For example, the Coronavirus has had a significant impact on driving patterns and auto frequency that may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability.

For example, the Coronavirus has had a significant impact on driving patterns and auto frequency.

Supply chain disruptions have resulted in higher parts costs and used car values which have combined with labor shortages to increase loss costs and may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability.

Generally, the initial reserves for a new accident year are established based on actual claim frequency and severity assumptions for different business segments, lines and coverages based on historical relationships to relevant inflation indicators.

1 unchanged sentence

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 and the effectiveness and efficiency of claim practices.

Changes in auto current year claim severity are generally influenced by inflation in the medical and auto repair sectors, the effectiveness and efficiency of claim practices and changes in mix of claim types.

The Company mitigates these effects through various loss management programs.

When such changes in claim data occur, actuarial judgment is used to determine appropriate development factors to establish reserves.

As part of the reserving process, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors, and other professionals and information

sources to assess and settle catastrophe and non-catastrophe related claims.

As part of the reserving process, the Company may also supplement its claims processes by utilizing

third-party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims.

The effects of inflation are implicitly considered in the reserving process.

4 unchanged sentences

The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims.

Changes in prior year reserve estimates, which may be material, are reported in property and casualty insurance claims and claims expense in the Condensed Consolidated Statements of Operations in the period such changes are determined.

Changes in reserve estimates, which may be material, are reported in property and casualty insurance claims and claims expense in the Condensed Consolidated Statements of Operations in the period such changes are determined.

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

Second Quarter 2021 Form 10-Q 39

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Notes to Condensed Consolidated Financial Statements

Rollforward of the reserve for property and casualty insurance claims and claims expense

Six months ended June 30,

Nine months ended September 30,

($ in millions) 2021 2020

12 unchanged sentences

Total paid ( 20,637 ) ( 16,337 )

Net balance as of June 30 22,571 20,413

Net balance as of September 30 23,251 21,098

Plus recoverables 10,035 6,889

Balance as of June 30 $ 31,637 $ 27,426

Balance as of September 30 $ 33,286 $ 27,987

(1) Recoverables comprises reinsurance and indemnification recoverables.

Incurred claims and claims expense represents the sum of paid losses, claim adjustment expenses and reserve changes in the period.

This expense included losses from catastrophes of $ 1.54 billion and $ 1.40 billion in the six months ended June 30, 2021 and 2020, respectively, net of recoverables.

This expense included losses from catastrophes of $ 2.81 billion and $ 2.39 billion in the nine months ended September 30, 2021 and 2020, respectively, net of recoverables.

Catastrophes are an inherent risk of the property and casualty insurance business that have contributed to, and will continue to contribute to, material year-to-year fluctuations in the Company’s results of operations and financial position.

Prior year reserve reestimates included in claims and claims expense (1)

Six months ended June 30,

Nine months ended September 30,

Non-catastrophe losses Catastrophe losses Total

1 unchanged sentence

2021 2020 2021 (2) (3)

2020 2021 2020

Auto $ 31 $ ( 60 ) $ ( 28 ) $ ( 41 ) $ 3 $ ( 101 )

3 unchanged sentences

Run-off Property-Liability (5)

115 139 — — 115 139

Protection Services ( 2 ) ( 1 ) — — ( 2 ) ( 1 )

4 unchanged sentences

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

40 www.allstate.com

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

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

Third Quarter 2021 Form 10-Q 41

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Effects of reinsurance ceded and indemnification programs on property and casualty premiums earned and accident and health insurance premiums and contract charges

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

2 unchanged sentences

Accident and health insurance premiums and contract charges ( 17 ) ( 4 ) ( 65 ) ( 10 )

(1) Includes approximately $ 475 million of ceded premiums related to the acquisition of National General for the six months ended June 30, 2021.

(1) Includes $ 631 million of ceded premiums related to the acquisition of National General for the nine months ended September 30, 2021.

Effects of reinsurance ceded and indemnification programs on property and casualty insurance claims and claims expense and accident and health insurance policy benefits

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

2 unchanged sentences

Accident and health insurance policy benefits ( 13 ) ( 5 ) ( 68 ) ( 13 )

(1) Includes approximately $ 675 million, $ 450 million and $ 275 million of ceded losses related to the Nationwide Catastrophe Reinsurance Program, the Michigan Catastrophic Claims Association and the acquisition of National General, respectively, for the six months ended June 30, 2021, and $ 167 million of ceded losses related to the Michigan Catastrophic Claims Association for the six months ended June 30, 2020.

(1) Includes $ 1.40 billion, $ 531 million, $ 514 million and $ 185 million of ceded losses related to the Nationwide Catastrophe Reinsurance Program, the acquisition of National General, the Michigan Catastrophic Claims Association and National Flood Insurance Program, respectively, for the nine months ended September 30, 2021, and $ 195 million of ceded losses related to the Michigan Catastrophic Claims Association for the nine months ended September 30, 2020.

Reinsurance and indemnification recoverables

Reinsurance and indemnification recoverables, net

($ in millions) June 30, 2021 December 31, 2020

($ in millions) September 30, 2021 December 31, 2020

Property and casualty

5 unchanged sentences

Rollforward of credit loss allowance for reinsurance recoverables

($ in millions) Three months ended June 30, Six months ended June 30,

($ in millions) Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

12 unchanged sentences

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

Second Quarter 2021 Form 10-Q 41

42 www.allstate.com

Notes to Condensed Consolidated Financial Statements

5 unchanged sentences

• Exit - contract termination penalties

The expenses related to these activities are included in the Condensed Consolidated Statements of Operations as restructuring and related charges and totaled $ 71 million and $ 13 million during the three months ended June 30, 2021 and 2020, respectively, and $ 122 million and $ 17 million during the six months

ended June 30, 2021 and 2020, respectively.

Restructuring expenses during the second quarter and first six months of 2021 are primarily due to the future work environment and Transformative Growth to optimize and simplify the Company’s operating model and cost structure.

The estimated cost of the remaining Transformative Growth actions announced in the third quarter of 2020 was reduced by $ 40 million as of June 30, 2021, primarily due to lower severance costs due to attrition.

The expenses related to these activities are included in the Condensed Consolidated Statements of Operations as restructuring and related charges and totaled $ 23 million and $ 196 million during the three months ended September 30, 2021 and 2020, respectively, and $ 145 million and $ 213 million during the nine months ended September 30, 2021 and 2020, respectively.

Restructuring expenses during the third quarter and first nine months of 2021 are primarily due to the future work environment.

The Company continues to identify ways to improve operating efficiency and reduce cost which may result in additional restructuring charges in the future.

4 unchanged sentences

2021 expenses ( 108 ) 7

Change in estimated program costs — ( 40 )

Change in estimated program costs in 2021 30 ( 52 )

Remaining program charges $ 32 $ 7

1 unchanged sentence

The Company expects that a majority of these actions will be completed in 2021.

Employee costs, which primarily relate to Transformative Growth, include severance and employee benefits primarily impacting claims, sales, service and support functions.

Exit costs related to future work environment and Transformative Growth reflect real estate costs primarily related to accelerated amortization of right of use assets and related leasehold improvements at facilities to be vacated.

Employee costs include severance and employee benefits primarily impacting claims, sales, service and support functions.

Exit costs, primarily related to future work environment, reflect real estate costs due to accelerated amortization of right of use assets and related leasehold improvements at facilities to be vacated.

Restructuring activity during the period

4 unchanged sentences

Payments and non-cash charges ( 51 ) ( 112 ) ( 163 )

Restructuring liability as of June 30, 2021 $ 64 $ — $ 64

As of June 30, 2021, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled $ 249 million for employee costs and $ 147 million for exit costs.

Restructuring liability as of September 30, 2021 $ 46 $ 8 $ 54

As of September 30, 2021, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled $ 247 million for employee costs and $ 133 million for exit costs.

Note 13 Guarantees and Contingent Liabilities

4 unchanged sentences

Because of the Company’s participation, it may be exposed to losses that surpass the capitalization of these facilities or assessments from these facilities.

In the normal course of business, the Company provides standard indemnifications to contractual counterparties in connection with numerous transactions, including acquisitions and divestitures.

In the normal course of business, the Company provides standard indemnifications to contractual

counterparties in connection with numerous transactions, including acquisitions and divestitures.

The types of indemnifications typically provided include indemnifications for breaches of representations and warranties, taxes and certain other liabilities, such as third-party lawsuits.

3 unchanged sentences

Consequently, the maximum amount of the obligation under such indemnifications is not determinable.

42 www.allstate.com

Notes to Condensed Consolidated Financial Statements

Historically, the Company has not made any material payments pursuant to these obligations.

The aggregate liability balance related to all guarantees was not material as of June 30, 2021.

The aggregate liability balance related to all guarantees was not material as of September 30, 2021.

Third Quarter 2021 Form 10-Q 43

Notes to Condensed Consolidated Financial Statements

Regulation and compliance

18 unchanged sentences

the length of time before many of these matters might be resolved by settlement, through litigation, or otherwise;

adjustments with respect to anticipated trial schedules

and other proceedings;

adjustments with respect to anticipated trial schedules and other proceedings;

developments in similar actions against other companies;

the fact that some of the lawsuits are putative class actions in which a class has not been certified and in which the purported class may not be clearly defined;

the fact that some of the lawsuits involve multi-state class actions in which the applicable law(s) for the claims at issue is in dispute and therefore unclear;

the fact that some of the

lawsuits involve multi-state class actions in which the applicable law(s) for the claims at issue is in dispute and therefore unclear;

and the challenging legal environment faced by corporations and insurance companies.

14 unchanged sentences

Legal fees are expensed as incurred.

Second Quarter 2021 Form 10-Q 43

The Company continues to monitor its lawsuits, regulatory inquiries, and other legal proceedings for further developments that would make the loss contingency both probable and estimable, and accordingly accruable, or that could affect the amount

44 www.allstate.com

Notes to Condensed Consolidated Financial Statements

of accruals that have been previously established.

There may continue to be exposure to loss in excess of any amount accrued.

12 unchanged sentences

Under accounting guidance, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event or events occurring is slight.” This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties.

The matters underlying the estimate will change from time to time, and actual results may vary

significantly from the current estimate.

The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate.

The estimate does not include matters or losses for which an estimate is not possible.

Therefore, this estimate represents an estimate of possible loss only for certain matters meeting these criteria.

It does not represent the Company’s maximum possible loss exposure.

It does not represent

the Company’s maximum possible loss exposure.

Information is provided below regarding the nature of all of the disclosed matters and, where specified, the amount, if any, of plaintiff claims associated with these loss contingencies.

25 unchanged sentences

filed February 2016);

Allstate Indemnity Company

44 www.allstate.com

Notes to Condensed Consolidated Financial Statements

(Madison Co., Ill.

Allstate Indemnity Company (Madison Co., Ill.

filed July 2020);

4 unchanged sentences

Allstate Vehicle and Property Insurance Company, et al.

filed August 2021).

Third Quarter 2021 Form 10-Q 45

Notes to Condensed Consolidated Financial Statements

August 2021).

No classes have been certified in these matters.

15 unchanged sentences

N.Y., filed December 2018);

Allstate Fire and Casualty Insurance Company (7th Judicial Circuit, Volusia County, Fla.;

filed May 2019, dismissed and refiled October 2019);

Allstate Property and Casualty Insurance Company (W.D.

13 unchanged sentences

Ohio, filed December 2020);

Esurance Property and Casualty Insurance Company (17th Judicial Circuit, Broward County, Fla.;

filed March 2021);

Esurance Property and Casualty Insurance Company (E.D.

1 unchanged sentence

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

Other proceedings The stockholder derivative actions described below are disclosed pursuant to SEC disclosure requirements for these types of matters.

The putative class action alleging violations of the

federal securities laws is disclosed because it involves similar allegations to those made in the stockholder derivative actions.

Other proceedings The Company is defending against an investigatory hearing before the California Insurance Commissioner concerning the private passenger automobile insurance rating practices of Allstate Insurance Company and Allstate Indemnity Company in California.

The investigatory hearing is captioned:

In the Matter of the Rating Practices of Allstate Insurance Company and Allstate Indemnity Company.

Pursuant to the Notice of Hearing issued by the California Insurance Commissioner, the California Insurance Commissioner is investigating:

(1) whether Allstate has potentially violated California insurance

law by using illegal price optimization;

(2) how Allstate implemented any such potentially illegal price optimization in its private passenger auto insurance rates and/or class plans;

and (3) how such potentially illegal price optimization impacted Allstate’s private passenger auto insurance policyholders.

Fact discovery has been completed in the investigatory hearing and an administrative hearing is scheduled to begin on May 10, 2022.

The stockholder derivative actions described below are disclosed pursuant to SEC disclosure requirements for these types of matters.

The putative class action alleging violations of the federal securities laws is disclosed because it involves similar allegations to those made in the stockholder derivative actions.

Biefeldt / IBEW Consolidated Action.

19 unchanged sentences

On February 24, 2021, the court dismissed the second amended consolidated complaint with prejudice.

Plaintiffs filed a notice of appeal on March 26, 2021 and the appeal will be fully briefed as of September 8, 2021.

46 www.allstate.com

Notes to Condensed Consolidated Financial Statements

Plaintiffs filed a notice of appeal on March 26, 2021 and the appeal will be fully briefed as of November 8, 2021.

In Sundquist v.

Wilson, et al., another plaintiff alleging to be a stockholder of the Company filed a stockholder derivative complaint in the United States District Court for the Northern District of Illinois on May 21, 2018.

Wilso n, et al., another plaintiff alleging to be a stockholder of the Company filed a stockholder derivative complaint in the United States District Court for the Northern District of Illinois on May 21, 2018.

Plaintiff seeks, on behalf of the Company, an unspecified amount of damages and various forms of equitable relief.

The complaint names as defendants the Company’s chairman, president and chief executive officer, its former president, its former vice chairman,

Second Quarter 2021 Form 10-Q 45

Notes to Condensed Consolidated Financial Statements

and certain present or former members of the board of directors.

The complaint names as defendants the Company’s chairman, president and chief executive officer, its former president, its former vice chairman, and certain present or former members of the board of directors.

The complaint alleges breaches of fiduciary duty based on allegations similar to those asserted in In re The Allstate Corp.

16 unchanged sentences

Plaintiffs seek an unspecified amount of damages, costs, attorney’s fees, and other relief as the court deems appropriate.

Plaintiffs allege that the Company and certain senior officers made allegedly material misstatements or omissions concerning claim frequency statistics and the reasons for a claim frequency increase for Allstate

brand auto insurance between October 2014 and August 3, 2015.

Plaintiffs allege that the Company and certain senior officers made allegedly material misstatements or

omissions concerning claim frequency statistics and the reasons for a claim frequency increase for Allstate brand auto insurance between October 2014 and August 3, 2015.

Plaintiffs further allege that a senior officer engaged in stock option exercises during that time allegedly while in possession of material nonpublic information about Allstate brand auto insurance claim frequency.

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Cal., filed May 2020) and Farley v.

Lincoln Benefit Life Company (E.D.

Lincoln Benefit Life Compan y (E.D.

Cal., filed Dec.

3 unchanged sentences

No classes have been certified in these matters.

46 www.allstate.com

In August 2021, the California Supreme Court in McHugh v.

Protective Life , a matter involving another insurer, determined that the statutory notice requirements apply to life insurance policies issued before the statutes’ effective date.

In continuing to defend these matters, the Company maintains various defenses to the merits of the plaintiffs’ claims and to class certification.

Third Quarter 2021 Form 10-Q 47

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Components of net cost (benefit) for pension and other postretirement plans

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2021 2020 2021 2020

4 unchanged sentences

Amortization of prior service credit ( 13 ) ( 14 ) ( 38 ) ( 42 )

Curtailment loss — 10 — 10

Costs and expenses ( 51 ) ( 34 ) ( 153 ) ( 96 )

7 unchanged sentences

Amortization of prior service credit ( 5 ) ( 1 ) ( 18 ) ( 3 )

Curtailment gain — ( 8 ) — ( 8 )

Costs and expenses ( 3 ) ( 6 ) ( 11 ) 1

2 unchanged sentences

Remeasurement (gains) losses ( 3 ) 1 ( 13 ) 25

Postretirement net cost (benefit) $ 5 $ 28 $ ( 18 ) $ 31

Postretirement net (benefit) cost $ ( 6 ) $ ( 5 ) $ ( 24 ) $ 26

Pension and postretirement benefits

3 unchanged sentences

Differences between expected and actual returns on plan assets and changes in assumptions affect the Company’s pension and other postretirement obligations, plan assets and expenses.

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

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

Pension and postretirement benefits remeasurement gains and losses

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2021 2020 2021 2020

4 unchanged sentences

Remeasurement (gains) losses $ 40 $ ( 71 ) $ ( 404 ) $ 320

Remeasurement gains for the second quarter of 2021 primarily related to favorable asset performance compared to the expected return on plan assets, partially offset by a decrease in the liability discount rate and changes in actuarial assumptions.

Remeasurement gains in the first six months of 2021 primarily related to an increase in the liability discount rate and favorable asset performance compared to the expected return on plan assets.

The weighted average discount rate used to measure the benefit obligation decreased to 2.85 % at June 30, 2021 compared to 3.13 % at March 31, 2021 and increased compared to 2.51 % at December 31, 2020 resulting in losses for the second quarter and gains for the first six months of 2021.

For the second quarter and first six months of 2021, the actual return on plan assets was higher due to strong equity performance.

The increase in the second quarter of 2021 was also due to lower market yields resulting in higher fixed income valuations.

Second Quarter 2021 Form 10-Q 47

Remeasurement losses for the third quarter of 2021 primarily related to unfavorable asset performance compared to the expected return on plan assets, partially offset by an increase in the liability discount rate.

Remeasurement gains in the first nine months of 2021 primarily related to an increase in the liability discount rate and favorable asset performance compared to the expected return on plan assets.

The weighted average discount rate used to measure the benefit obligation increased to 2.90 % at

September 30, 2021 compared to 2.85 % at June 30, 2021, decreased compared to 3.13 % at March 31, 2021 and increased compared to 2.51 % at December 31, 2020 resulting in gains for the third quarter and first nine months of 2021.

For the third quarter of 2021, the actual return on plan assets was lower due to higher market yields resulting in decreased fixed income valuations and modest public equity performance.

For the first nine

48 www.allstate.com

Notes to Condensed Consolidated Financial Statements

months of 2021, the actual return on plan assets was higher primarily due to strong equity performance.

Note 15 Supplemental Cash Flow Information

Non-cash investing activities include $ 15 million and $ 21 million related to mergers and exchanges completed with equity securities, limited partnerships, and modification of other investments for the six months ended June 30, 2021 and 2020, respectively.

Non-cash financing activities include $ 51 million and $ 56 million related to the issuance of Allstate common shares for vested equity awards for the six months ended June 30, 2021 and 2020, respectively.

Cash flows used in operating activities in the Condensed Consolidated Statements of Cash Flows include cash paid for operating leases related to amounts included in the measurement of lease liabilities of $ 91 million and $ 78 million for the six

months ended June 30, 2021 and 2020, respectively.

Non-cash operating activities include $ 92 million and $ 52 million related to right-of-use (“ROU”) assets obtained in exchange for lease obligations for the six months ended June 30, 2021 and 2020, respectively.

Non-cash investing activities include $ 31 million and $ 42 million related to mergers and exchanges completed with equity securities, fixed income securities, limited partnerships, and modification of other investments for the nine months ended September 30, 2021 and 2020, respectively.

Non-cash financing activities include $ 52 million and $ 56 million related to the issuance of Allstate common shares for vested equity awards for the nine months ended September 30, 2021 and 2020, respectively.

months ended September 30, 2021 and 2020, respectively.

Non-cash operating activities include $ 96 million and $ 47 million related to right-of-use assets obtained in exchange for lease obligations for the nine months ended September 30, 2021 and 2020, respectively.

Liabilities for collateral received in conjunction with the Company’s securities lending program and OTC and cleared derivatives are reported in other liabilities and accrued expenses or other investments.

The accompanying cash flows are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows along with the activities resulting from management of the proceeds, as follows:

($ in millions) Six months ended June 30,

($ in millions) Nine months ended September 30,

Net change in proceeds managed

8 unchanged sentences

Operating cash flow provided (used) $ 567 $ ( 205 )

Third Quarter 2021 Form 10-Q 49

Notes to Condensed Consolidated Financial Statements

Note 16 Other Comprehensive Income

Components of other comprehensive income (loss) on a pre-tax and after-tax basis

($ in millions) Three months ended June 30,

($ in millions) Three months ended September 30,

Pre-tax Tax After-tax Pre-tax Tax After-tax

5 unchanged sentences

( 19 ) 4 ( 15 ) 48 ( 10 ) 38

Other comprehensive income (loss) $ 591 $ ( 124 ) $ 467 $ 2,624 $ ( 554 ) $ 2,070

Six months ended June 30,

Other comprehensive (loss) income $ ( 472 ) $ 100 $ ( 372 ) $ 261 $ ( 56 ) $ 205

Nine months ended September 30,

Pre-tax Tax After-tax Pre-tax Tax After-tax

13 unchanged sentences

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated statement of financial position of The Allstate Corporation and subsidiaries (the “Company”) as of June 30, 2021, the related condensed consolidated statements of operations, comprehensive income and shareholders’ equity for the three and six month periods ended June 30, 2021 and 2020, and cash flows for the six month periods ended June 30, 2021 and 2020, and the related notes (collectively referred to as the “condensed consolidated financial statements”).

We have reviewed the accompanying condensed consolidated statement of financial position of The Allstate Corporation and subsidiaries (the “Company”) as of September 30, 2021, the related condensed consolidated statements of operations, comprehensive income and shareholders’ equity for the three and nine month periods ended September 30, 2021 and 2020, and cash flows for the nine month periods ended September 30, 2021 and 2020, and the related notes (collectively referred to as the “condensed consolidated financial statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

13 unchanged sentences

Chicago, Illinois

August 4, 2021

Second Quarter 2021 Form 10-Q 49

November 3, 2021

Third Quarter 2021 Form 10-Q 51

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements