ALLSTATE CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as “we,” “our,” “us,” the “Company” or “Allstate”). It should be read in conjunction with the condensed consolidated financial statements and related notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporation annual report on Form 10-K for 2020, filed February 19, 2021. Further analysis of our insurance segments is provided in the Property-Liability Operations and Segment Results sections, including Allstate Protection and Run-off Property-Liability (previously Discontinued Lines and Coverages), Protection Services and Allstate Health and Benefits (previously Allstate Benefits), of Management’s Discussion and Analysis (“MD&A”). The segments are consistent with the way in which the chief operating decision maker reviews financial performance and makes decisions about the allocation of resources. The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”) The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures have moderated in 2021 as vaccines have become more widely available in the United States and Canada. There is no way of predicting with certainty how long the pandemic might last. We continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to our operations, but the effects have been and could be material. The Coronavirus has affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity, including: • Sales of new and retention of existing policies • Premium for transportation network products • Driving behavior and auto accident frequency • Supply chain disruptions and labor shortages could increase the cost of settling claims • Hospital and outpatient claim costs • Investment valuations and returns • Bad debt and credit allowance exposure • Consumer utilization of Milewise ® , our pay-per-mile insurance product • Retail sales in Allstate Protection Plans This list is not inclusive of all potential impacts and should not be treated as such. Within the MD&A we have included further disclosures related to the impacts of the Coronavirus on our 2021 results. Corporate Strategy Our strategy has two components: increase personal property-liability market share and expand protection offerings by leveraging the Allstate brand, customer base and other core capabilities. Transformative Growth is about creating business models, capabilities and culture to build growth businesses that deliver affordable, simple and connected protection solutions for consumers. In the personal property-liability businesses this has four key components: • Improving customer value • Expanding customer access • Increasing customer acquisition sophistication and investment • Building new technology applications The protection businesses are being expanded by leveraging enterprise capabilities and resources such as distribution, brand, analytics, claims, investment expertise, talent and capital. Enhancing strategic position in the independent agent channel On January 4, 2021, we completed the acquisition of National General Holdings Corp. (“National General”), significantly enhancing our strategic position in the independent agency channel. The transaction increased our market share in personal property-liability by over one percentage point and enhanced our independent agent-facing technology. It will significantly expand our distribution footprint, leading us to be a top five personal lines carrier in the independent agency distribution channel. As part of the acquisition, Allstate Independent Agency and Encompass organizations will be integrated into National General by: • Migrating Encompass policyholders and business operations to National General and retiring Encompass’s technology • Transitioning Allstate Independent Agent new business to National General as mid-market products roll out 52 www.allstate.com Discontinued operations and held for sale During the first quarter of 2021, we announced the pending sales of Allstate Life Insurance Company (“ALIC”), Allstate Life Insurance Company of New York (“ALNY”) and certain affiliates. We are no longer accepting new proprietary life insurance applications through Allstate exclusive agents. On October 1, 2021, we closed the sale of ALNY to Wilton Reassurance Company for $400 million. On November 1, 2021, we closed the sale of ALIC and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including purchase price of $2.8 billion as well as increases in statutory surplus. A loss on disposition of $4 billion, after-tax, was recorded in the first quarter of 2021 related to these transactions. For the nine months ended September 30, 2021, the loss on disposition was $3.8 billion, after-tax, and reflects purchase price adjustments associated with certain pre-close transactions specified in the stock purchase agreements, changes in statutory capital and surplus prior to the closing dates and the closing date equity of the sold entities determined under GAAP, excluding unrealized gains and losses on fixed income securities. Beginning in the first quarter of 2021, the assets and liabilities of the business were reclassified as held for sale and results are presented as discontinued operations. This change was applied on a retrospective basis. SafeAuto On June 1, 2021, we announced an agreement to acquire Safe Auto Insurance Group, Inc., a non-standard auto insurance carrier. On October 1, 2021, we completed the acquisition for $262 million in cash. See Note 3 of the condensed consolidated financial statements for further information on acquisitions and dispositions. Measuring segment profit or loss The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Run-off Property-Liability segments and adjusted net income for the Protection Services, Allstate Health and Benefits and Corporate and Other segments. Underwriting income is calculated as premiums earned and other revenue, less claims and claims expense (“losses”), Shelter-in-Place Payback expense, amortization of deferred policy acquisition costs (“DAC”), operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, as determined using accounting principles generally accepted in the United States of America (“GAAP”). We use this measure in our evaluation of results of operations to analyze profitability. Adjusted net income is net income (loss) applicable to common shareholders, excluding: • Realized capital gains and losses except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses but included in adjusted net income • Pension and other postretirement remeasurement gains and losses • Business combination expenses and the amortization or impairment of purchased intangibles • Income or loss from discontinued operations • Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years • Income tax expense or benefit on reconciling items Third Quarter 2021 Form 10-Q 53 Highlights Consolidated net income ($ in millions) Q1 Q2 Q3 Consolidated net income applicable to common shareholders decreased 54.9% to $508 million in the third quarter of 2021 compared to the same period of 2020 primarily due to higher non-catastrophe and catastrophe losses, lower realized capital gains, partially offset by higher property and casualty insurance premiums and higher net investment income. Consolidated net income applicable to common shareholders decreased 75.7% to $695 million in the first nine months of 2021 compared to the same period of 2020 primarily due to a loss from discontinued operations and higher non-catastrophe losses. Partially offsetting were higher property and casualty insurance premiums, net investment income, and pension and other postretirement gains in 2021 compared to losses in 2020. For the twelve months ended September 30, 2021, return on Allstate common shareholders’ equity was 13.2%, a decrease of 5.7 points from 18.9% for the twelve months ended September 30, 2020. Total revenue ( ($ in millions) Total revenue increased 16.9% to $12.48 billion and 21.4% to $37.58 billion in the third quarter and first nine months of 2021 , respectively, compared to the same periods of 2020, driven by 13.7% and 12.9% increase in property and casualty insurance premiums in the third quarter and first nine months of 2021 , respectively, and higher net investment income. Insurance premiums earned increased in both Property-Liability, primarily due to the acquisition of National General, and Protection Services. Net investment income ($ in millions) Net investment income increased $300 million to $764 million in the third quarter of 2021 compared to the same period of 2020 and increased $1.52 billion to $2.45 billion in the first nine months of 2021 compared to the same period of 2020. The increase in both periods was primarily due to increases in performance-based income results, mainly from limited partnerships. 54 www.allstate.com Financial highlights Investments totaled $61.84 billion as of September 30, 2021, increasing from $59.54 billion as of December 31, 2020. Allstate shareholders’ equity As of September 30, 2021, Allstate shareholders’ equity was $26.73 billion. Book value per common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $84.62, an increase of 2.7% from $82.39 as of September 30, 2020, and a decrease of 7.5% from $91.50 as of December 31, 2020. Return on average Allstate common shareholders’ equity For the twelve months ended September 30, 2021, return on Allstate common shareholders’ equity was 13.2%, a decrease of 5.7 points from 18.9% for the twelve months ended September 30, 2020. The decrease was primarily due to lower net income applicable to common shareholders for the trailing twelve-month period ended September 30, 2021 and an increase in average Allstate common shareholders’ equity. Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement losses of $40 million in the third quarter of 2021 primarily related to unfavorable asset performance compared to the expected return on plan assets, partially offset by an increase in the liability discount rate. Pension and other postretirement remeasurement gains of $404 million in the first nine months of 2021 primarily related to an increase in the liability discount rate and favorable asset performance compared to the expected return on plan assets. Summarized consolidated financial results Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Revenues Property and casualty insurance premiums $ 10,615 $ 9,336 $ 31,366 $ 27,794 Accident and health insurance premiums and contract charges 460 287 1,362 832 Other revenue 536 272 1,585 794 Net investment income 764 464 2,446 930 Realized capital gains (losses) 105 319 818 597 Total revenues 12,480 10,678 37,577 30,947 Costs and expenses Property and casualty insurance claims and claims expense (8,264) (6,072) (21,514) (16,635) Shelter-in-Place Payback expense — — (29) (948) Accident and health insurance policy benefits (269) (128) (746) (392) Interest credited to contractholder funds (8) (8) (25) (26) Amortization of deferred policy acquisition costs (1,582) (1,386) (4,650) (4,095) Operating, restructuring and interest expenses (1,982) (1,596) (5,695) (4,505) Pension and other postretirement remeasurement gains (losses) (40) 71 404 (320) Amortization of purchased intangibles (109) (31) (267) (88) Total costs and expenses (12,254) (9,150) (32,522) (27,009) Income from operations before income tax expense 226 1,528 5,055 3,938 Income tax expense (20) (312) (1,008) (779) Net income from continuing operations 206 1,216 4,047 3,159 Income (loss) from discontinued operations, net of tax 325 (63) (3,272) (207) Net income 531 1,153 775 2,952 Less: Net loss attributable to noncontrolling interest (7) — (7) — Net income attributable to Allstate 538 1,153 782 2,952 Preferred stock dividends (30) (27) (87) (89) Net income applicable to common shareholders $ 508 $ 1,126 $ 695 $ 2,863 Third Quarter 2021 Form 10-Q 55 Segment highlights Allstate Protection underwriting loss was $421 million in the third quarter of 2021, compared to underwriting income of $887 million in the third quarter of 2020 primarily due to higher auto and home non-catastrophe losses, lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020 and increased underwriting expenses, partially offset by premiums from the acquisition of National General. Underwriting income totaled $1.67 billion in the first nine months of 2021, a $1.47 billion decrease from $3.14 billion in the first nine months of 2020 primarily due to higher auto and home non-catastrophe and catastrophe losses and increased underwriting expenses, partially offset by premiums from the acquisition of National General and lower Shelter-in-Place Payback expense. Catastrophe losses were $1.27 billion and $2.81 billion in the third quarter and first nine months of 2021, respectively, compared to $990 million and $2.39 billion in the third quarter and first nine months of 2020, respectively. Premiums written increased 16.7% to $10.97 billion in the third quarter of 2021 and 14.4% to $31.06 billion in the first nine months of 2021 compared to the same periods of 2020, reflecting the acquisition of National General and higher Allstate brand homeowners premiums. Protection Services adjusted net income was $45 million in the third quarter of 2021 compared to $40 million in the third quarter of 2020. Adjusted net income was $150 million in the first nine months of 2021 compared to $115 million in the first nine months of 2020. The increase in both periods was primarily due to growth, partially offset by higher operating costs and expenses related to investments in growth. Premiums and other revenue increased 24.1% or $105 million in the third quarter of 2021 and 24.9% or $312 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to Allstate Protection Plan’s growth through its U.S. retail and international channels and the addition of LeadCloud and Transparent.ly, which were acquired as part of the National General acquisition. Allstate Health and Benefits adjusted net income was $33 million in the third quarter of both 2021 and 2020. Adjusted net income was $160 million in the first nine months of 2021 compared to $62 million in the first nine months of 2020 primarily due to the acquisition of National General’s group health and individual accident and health business, which resulted in higher premiums and contract charges and the addition of other revenue, partially offset by higher policy benefits and operating costs and expenses. Premiums and contract charges increased 60.3% to $460 million in the third quarter of 2021 and 63.7% to $1.36 billion in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of group health and individual accident and health business. 56 www.allstate.com Property-Liability Operations Property-Liability Operations Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Run-off Property-Liability. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources. We do not allocate Property-Liability investment income, realized capital gains and losses, or assets to the Allstate Protection and Run-off Property-Liability segments. Management reviews assets at the Property-Liability level for decision-making purposes. GAAP operating ratios are used to measure our profitability to enhance an investor’s understanding of our financial results and are calculated as follows: • Loss ratio : the ratio of claims and claims expense (loss adjustment expenses), to premiums earned. Loss ratios include the impact of catastrophe losses. • Expense ratio : the ratio of amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles, restructuring and related charges and Shelter-in-Place Payback expense, less other revenue to premiums earned. • Combined ratio : the sum of the loss ratio and the expense ratio. We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between periods. The impacts are calculated by taking the specific items noted below divided by Property-Liability premiums earned: • Effect of catastrophe losses on combined ratio , includes catastrophe losses and prior year reserve reestimates of catastrophe losses, included in claims and claims expense • Effect of prior year reserve reestimates on combined ratio , includes prior year reserve reestimates of catastrophe losses • Effect of amortization of purchased intangibles on combined ratio • Effect of restructuring and related charges on combined ratio • Effect of Shelter-in-Place Payback expense on combined and expense ratios • Effect of Run-off Property-Liability business on combined ratio , includes claims and claims expense, restructuring and related charges and operating costs and expenses in Run-off Property-Liability segment Premium measures and statistics are used to analyze our premium trends and are calculated as follows: • PIF : Policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy. Commercial lines PIF counts for shared economy agreements typically reflect contracts that cover multiple rather than individual drivers. • New issued applications : Item counts of automobile or homeowner insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate brand. • Average premium-gross written (“average premium”): Gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line. • Renewal ratio: Renewal policy item counts issued during the period, based on contract effective dates, divided by the total policy item counts issued generally 6 months prior for auto or 12 months prior for homeowners. Frequency and severity statistics , which are influenced by driving patterns, inflation and other factors, are provided to describe the trends in loss costs. Our reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine our best estimate of recorded reserves. We use the following statistics to evaluate losses: • Gross claim frequency is calculated as annualized notice counts, excluding counts associated with catastrophe events, received in the period divided by the average of PIF with the applicable coverage during the period. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed with a payment or closed without payment). • Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period. • Percent change in frequency or severity statistics is calculated as the amount of increase or decrease in gross claim frequency or paid claim severity in the current period compared to the same period in the prior year divided by the prior year gross claim frequency or paid claim severity. Third Quarter 2021 Form 10-Q 57 Property-Liability Operations Underwriting results Three months ended September 30, Nine months ended September 30, ($ in millions, except ratios) 2021 2020 2021 2020 Premiums written $ 10,966 $ 9,395 $ 31,057 $ 27,159 Premiums earned $ 10,159 $ 8,952 $ 30,064 $ 26,696 Other revenue 365 220 1,071 639 Claims and claims expense (8,145) (5,968) (21,193) (16,358) Shelter-in-Place Payback expense — — (29) (948) Amortization of DAC (1,346) (1,158) (3,968) (3,474) Other costs and expenses (1,552) (1,107) (4,280) (3,354) Restructuring and related charges (1) (15) (187) (113) (199) Underwriting (loss) income $ (534) $ 752 $ 1,552 $ 3,002 Catastrophe losses Catastrophe losses, excluding reserve reestimates $ 1,270 $ 1,497 $ 3,018 $ 2,889 Catastrophe reserve reestimates (2) (3) (1) (507) (207) (502) Total catastrophe losses $ 1,269 $ 990 $ 2,811 $ 2,387 Non-catastrophe reserve reestimates (2) 162 70 144 63 Prior year reserve reestimates (2) (3) 161 (437) (63) (439) GAAP operating ratios Loss ratio 80.2 66.7 70.5 61.3 Expense ratio (4) 25.1 24.9 24.3 27.5 Combined ratio 105.3 91.6 94.8 88.8 Effect of catastrophe losses on combined ratio 12.5 11.1 9.4 8.9 Effect of prior year reserve reestimates on combined ratio 1.6 (4.9) (0.3) (1.6) Effect of catastrophe losses included in prior year reserve reestimates on combined ratio — (5.7) (0.7) (1.9) Effect of amortization of purchased intangibles on combined ratio 0.8 — 0.5 — Effect of restructuring and related charges on combined ratio (1) 0.1 2.1 0.4 0.7 Effect of Shelter-in-Place Payback expense on combined and expense ratios — — 0.1 3.6 Effect of Run-off Property-Liability business on combined ratio 1.2 1.5 0.4 0.6 (1) Restructuring and related charges for the third quarter and first nine months of 2021 primarily related to future work environment. See Note 12 of the condensed consolidated financial statements for additional details. (2) Favorable reserve reestimates are shown in parentheses. (3) 2020 includes approximately $495 million of favorable reserve reestimates related to the PG&E Corporation and Southern California Edison subrogation settlements, which primarily impacted homeowners. (4) Other revenue is deducted from operating costs and expenses in the expense ratio calculation. 58 www.allstate.com Allstate Protection Segment Results Allstate Protection Segment Allstate Protection consists of the Allstate brand, National General and Answer Financial. The Encompass brand was combined into National General beginning in the first quarter of 2021 and results prior to 2021 reflect Encompass brand results only. Underwriting results Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Premiums written $ 10,966 $ 9,395 $ 31,057 $ 27,159 Premiums earned $ 10,159 $ 8,952 $ 30,064 $ 26,696 Other revenue 365 220 1,071 639 Claims and claims expense (8,032) (5,833) (21,078) (16,219) Shelter-in-Place Payback expense — — (29) (948) Amortization of DAC (1,346) (1,158) (3,968) (3,474) Other costs and expenses (1,551) (1,107) (4,277) (3,352) Restructuring and related charges (16) (187) (113) (199) Underwriting (loss) income $ (421) $ 887 $ 1,670 $ 3,143 Catastrophe losses $ 1,269 $ 990 $ 2,811 $ 2,387 Underwriting loss was $421 million in the third quarter of 2021 compared to underwriting income of $887 million in the third quarter of 2020 primarily due to higher auto and home non-catastrophe losses, lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020 and increased underwriting expenses, partially offset by premiums from the acquisition of National General. Underwriting income decreased 46.9% or $1.47 billion in the first nine months of 2021, compared to the same period of 2020 primarily due to higher auto and home non-catastrophe and catastrophe losses and increased underwriting expenses, partially offset by premiums from the acquisition of National General and lower Shelter-in-Place Payback expense. Change in underwriting results from the prior period - three months ended ($ in millions) Third Quarter 2021 Form 10-Q 59 Segment Results Allstate Protection Change in underwriting results from the prior period - nine months ended ($ in millions) Underwriting income (loss) by brand and by line of business Allstate brand National General Allstate Protection ($ in millions) 2021 2020 2021 2020 2021 2020 Three months ended September 30, Auto (1) $ (123) $ 897 $ (36) $ 9 $ (159) $ 906 Homeowners (2) (208) (93) (69) 26 (277) (67) Other personal lines 47 34 (7) 8 40 42 Commercial lines (54) (14) — — (54) (14) Other business lines (3) 27 18 — — 27 18 Answer Financial — — — — 2 2 Total $ (311) $ 842 $ (112) $ 43 $ (421) $ 887 Nine months ended September 30, Auto (1) $ 1,444 $ 2,522 $ 118 $ 39 $ 1,562 $ 2,561 Homeowners (2) 61 356 (77) 19 (16) 375 Other personal lines 112 170 — 5 112 175 Commercial lines (81) (20) — — (81) (20) Other business lines (3) 82 49 — — 82 49 Answer Financial — — — — 11 3 Total $ 1,618 $ 3,077 $ 41 $ 63 $ 1,670 $ 3,143 (1) 2021 results include National General commercial lines insurance products. (2) 2021 results include National General packaged policies, which include auto and other personal lines insurance products. (3) Other business lines includes revenue and direct operating expenses for distribution of non-proprietary life and annuity products. Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends. Premiums written is the amount of premiums charged for policies issued during a fiscal period. Premiums are considered earned and are included in the financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired term of the policies is recorded as unearned premiums on our Condensed Consolidated Statements of Financial Position. 60 www.allstate.com Allstate Protection Segment Results Premiums written by brand and by line of business Allstate brand National General Allstate Protection ($ in millions) 2021 2020 2021 2020 2021 2020 Three months ended September 30, Auto $ 6,153 $ 6,192 $ 1,018 $ 134 $ 7,171 $ 6,326 Homeowners 2,452 2,234 552 105 3,004 2,339 Other personal lines 543 521 41 21 584 542 Commercial lines 207 188 — — 207 188 Total premiums written $ 9,355 $ 9,135 $ 1,611 $ 260 $ 10,966 $ 9,395 Nine months ended September 30, Auto $ 18,165 $ 18,337 $ 2,836 $ 388 $ 21,001 $ 18,725 Homeowners 6,492 6,057 1,317 298 7,809 6,355 Other personal lines 1,519 1,441 120 59 1,639 1,500 Commercial lines 608 579 — — 608 579 Total premiums written $ 26,784 $ 26,414 $ 4,273 $ 745 $ 31,057 $ 27,159 Premiums earned by brand and by line of business Allstate brand National General Allstate Protection ($ in millions) 2021 2020 2021 2020 2021 2020 Three months ended September 30, Auto $ 6,009 $ 6,081 $ 903 $ 129 $ 6,912 $ 6,210 Homeowners 2,080 1,974 442 99 2,522 2,073 Other personal lines 481 466 40 20 521 486 Commercial lines 204 183 — — 204 183 Total premiums earned $ 8,774 $ 8,704 $ 1,385 $ 248 $ 10,159 $ 8,952 Nine months ended September 30, Auto $ 18,059 $ 18,138 $ 2,545 $ 399 $ 20,604 $ 18,537 Homeowners 6,120 5,865 1,205 299 7,325 6,164 Other personal lines 1,432 1,376 113 59 1,545 1,435 Commercial lines 590 560 — — 590 560 Total premiums earned $ 26,201 $ 25,939 $ 3,863 $ 757 $ 30,064 $ 26,696 Reconciliation of premiums written to premiums earned Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Total premiums written $ 10,966 $ 9,395 $ 31,057 $ 27,159 (Increase) decrease in unearned premiums (1) (672) (470) (1,264) (449) Other (135) 27 271 (14) Total premiums earned $ 10,159 $ 8,952 $ 30,064 $ 26,696 (1) 2021 results include unearned premiums related to acquisition of National General. Policies in force by brand and by line of business Allstate brand National General Allstate Protection PIF (thousands) 2021 2020 2021 2020 2021 2020 Auto 21,951 21,900 3,703 460 25,654 22,360 Homeowners 6,496 6,414 642 220 7,138 6,634 Other personal lines 4,560 4,455 288 73 4,848 4,528 Commercial lines 212 219 107 — 319 219 Total 33,219 32,988 4,740 753 37,959 33,741 Third Quarter 2021 Form 10-Q 61 Segment Results Allstate Protection Auto insurance premiums written increased 13.4% or $845 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 12.2% or 2.28 billion in the first nine months of 2021 compared to the first nine months of 2020, primarily due to the following factors: • Acquisition of National General • Increased new issued applications in the Allstate brand driven by increased advertising and higher close rates • Decreased Allstate brand average premium reflecting approved rate decreases of approximately 3% for the trailing twelve months ended September 30, 2021 • Rate increases are being implemented broadly to improve underwriting results given the higher inflationary trends adversely impacting loss costs • PIF increased 14.7% or 3,294 thousand to 25,654 thousand as of September 30, 2021 compared to September 30, 2020 due to the acquisition of National General – PIF increased by 40 thousand as of September 30, 2021 compared to June 30, 2021, with increases in both Allstate brand and National General Auto premium measures and statistics Three months ended September 30, Nine months ended September 30, 2021 2020 Change 2021 2020 Change New issued applications (thousands) Agency channel 648 682 (5.0) % 1,957 2,018 (3.0) % Direct channel 284 206 37.9 % 830 619 34.1 % Allstate brand 932 888 5.0 % 2,787 2,637 5.7 % National General 516 14 NM 1,553 44 NM Total new issued applications 1,448 902 60.5 % 4,340 2,681 61.9 % Allstate brand average premium $ 604 $ 621 (2.7) % $ 604 $ 616 (1.9) % Allstate brand renewal ratio (%) 87.2 87.9 (0.7) 87.0 87.6 (0.6) Homeowners insurance premiums written increased 28.4% or $665 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 22.9% or $1.45 billion in the first nine months of 2021 compared to the first nine months of 2020, primarily due to the following factors: • Acquisition of National General • Higher Allstate brand average premiums from approved rate increases of approximately 3.4% for the trailing twelve months ended September 30, 2021 and inflation adjustments to premium due to higher insured home valuations • Increased new issued applications in the Allstate brand driven by higher quote volumes and improved close rates Homeowners premium measures and statistics Three months ended September 30, Nine months ended September 30, 2021 2020 Change 2021 2020 Change New issued applications (thousands) Agency channel 236 231 2.2 % 676 636 6.3 % Direct channel 23 16 43.8 % 61 45 35.6 % Allstate brand 259 247 4.9 % 737 681 8.2 % National General 28 9 NM 77 25 NM Total new issued applications 287 256 12.1 % 814 706 15.3 % Allstate brand average premium $ 1,443 $ 1,334 8.2 % $ 1,406 $ 1,324 6.2 % Allstate brand renewal ratio (%) 87.1 87.8 (0.7) 87.1 87.6 (0.5) Other personal lines premiums written increased 7.7% or $42 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 9.3% or $139 million in the first nine months of 2021 compared to the first nine months of 2020. The increase in both periods was primarily due to the acquisition of National General and increases in condominiums and personal umbrella premiums for Allstate brand. Commercial lines premiums written increased 10.1% or $19 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 5.0% or $29 million in the first nine months of 2021 compared to the first nine months of 2020. The increase in both periods was primarily due to the addition of a large transportation network company, higher miles driven in our shared economy business as the impacts of the Coronavirus decrease and an increase in average premiums. 62 www.allstate.com Allstate Protection Segment Results GAAP operating ratios include loss ratio, expense ratio and combined ratio to analyze our profitability trends. Frequency and severity statistics are used to describe the trends in loss costs. Combined ratios by line of business Loss ratio Expense ratio (1) Combined ratio 2021 2020 2021 2020 2021 2020 Three months ended September 30, Auto 76.9 59.7 25.4 25.7 102.3 85.4 Homeowners 85.9 80.4 25.1 22.8 111.0 103.2 Other personal lines 64.9 63.0 27.4 28.4 92.3 91.4 Commercial lines 104.4 83.6 22.1 24.1 126.5 107.7 Impact of Shelter-in-Place Payback expense — — — — — — Total 79.0 65.2 25.1 24.9 104.1 90.1 Impact of amortization of purchased intangibles — — 0.8 — 0.8 — Impact of restructuring and related charges — — 0.2 2.1 0.2 2.1 Impact of Allstate Special Payment plan bad debt expense (2) — — — 0.2 — 0.2 Nine months ended September 30, Auto 67.7 56.6 24.7 29.6 92.4 86.2 Impact of Shelter-in-Place Payback expense 0.1 — 0.1 5.1 0.1 5.1 Homeowners 75.9 71.4 24.3 22.5 100.2 93.9 Other personal lines 67.0 60.8 25.8 27.0 92.8 87.8 Commercial lines 91.5 80.2 22.2 23.4 113.7 103.6 Impact of Shelter-in-Place Payback expense — — — 0.7 — 0.7 Total 70.1 60.7 24.3 27.5 94.4 88.2 Impact of amortization of purchased intangibles — — 0.5 — 0.5 — Impact of Shelter-in-Place Payback expense — — 0.1 3.6 0.1 3.6 Impact of restructuring and related charges — — 0.4 0.7 0.4 0.7 Impact of Allstate Special Payment plan bad debt expense (2) — — (0.1) 0.2 (0.1) 0.2 (1) Other revenue is deducted from operating costs and expenses in the expense ratio calculation. (2) Relates to the Allstate Special Payment plan offered in 2020 to customers as a result of the Coronavirus to provide more flexible payment options. Approximately 70% of the higher bad debt expense was attributed to auto. Loss ratios by line of business Loss ratio Effect of catastrophe losses (1) Effect of prior year reserve reestimates Effect of catastrophe losses included in prior year reserve reestimates 2021 2020 2021 2020 2021 2020 2021 2020 Three months ended September 30, Auto 76.9 59.7 2.9 1.6 1.0 (0.9) (0.1) (0.4) Homeowners 85.9 80.4 38.0 39.1 0.7 (22.0) 0.1 (21.3) Other personal lines 64.9 63.0 19.6 13.4 (12.7) (11.9) — (8.0) Commercial lines 104.4 83.6 4.9 6.6 12.3 1.1 0.5 (1.1) Total 79.0 65.2 12.5 11.1 0.4 (6.4) — (5.7) Nine months ended September 30, Auto 67.7 56.6 1.9 1.4 — (0.5) (0.1) (0.2) Homeowners 75.9 71.4 29.8 31.6 (2.1) (7.1) (2.3) (6.8) Other personal lines 67.0 60.8 14.4 11.6 (5.4) (4.6) (0.9) (2.9) Commercial lines 91.5 80.2 4.2 4.1 9.8 5.2 0.5 0.2 Total 70.1 60.7 9.4 8.9 (0.6) (2.2) (0.7) (1.9) (1) The ten-year average effect of catastrophe losses on the total combined ratio was 7.3 points in the third quarter of 2021 . Third Quarter 2021 Form 10-Q 63 Segment Results Allstate Protection Auto loss ratio increased 17.2 and 11.1 points in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to: • Higher gross claim frequency in all coverages, as miles driven continue to rebound toward pre-pandemic levels • While frequency increased relative to the prior year quarter, it remains below pre-pandemic levels • Increased severity, primarily for property damage, collision and bodily injury coverages, driven by inflationary pressures and accident type mix • Prior quarter development impact of 2.2 points on the third quarter 2021 loss ratio for reserve strengthening of first and second quarter 2021 claims The impacts of the Coronavirus affect frequency and severity statistics including: • Shelter-in-place and travel restrictions, which have moderated in 2021 as vaccines have become more widely available in the US and Canada • Unemployment levels • Changes in commuting activity • Supply chain disruptions and labor shortages • Shifts in the frequency environment may impact the speed claims are settled • Driving behavior (e.g., speed, time of day) impacting mix of claim types • Value of total losses due to higher used car prices • Labor and part cost increases Allstate brand frequency and paid claim severity statistics (excluding catastrophe losses) (% change year-over-year) Three months ended September 30, 2021 Property damage gross claim frequency 16.6 % Property damage paid claim severity 15.1 Nine months ended September 30, 2021 Property damage gross claim frequency 10.1 % Property damage paid claim severity 5.6 Property damage gross claim frequency increased in the third quarter and the first nine months of 2021 compared to the same periods of 2020 due to factors including: • Increases in miles driven compared to the third quarter of 2020 which was impacted by the continuation of shelter-in-place restrictions due to the Coronavirus Gross claim frequency decreased 16.8% and 22.1% in the third quarter and first nine months of 2021, respectively, when compared to pre-pandemic levels of 2019 as auto miles driven, particularly during peak commuting hours, is lower. Property damage paid claim severity increased in the third quarter and the first nine months of 2021 compared to the same periods of 2020. • When compared to pre-pandemic levels of 2019, property damage paid claim severity increased 24.2% and 17.8% in the third quarter and first nine months of 2021, respectively, or an average annual increase of approximately 12.0% and 9.0%, respectively • The increases are due to rising inflationary impacts in both used car values and replacement part costs, including higher costs to repair more sophisticated newer model vehicles and increased costs associated with total losses Collision severity trends increased in the third quarter and the first nine months of 2021 compared to the same periods of 2020 due to inflationary pressures from higher used car values that increases total losses and parts and labor costs associated with repairs. Bodily injury severity trends increased in the third quarter and the first nine months of 2021 compared to the same periods of 2020 due to injury mix and higher medical care inflation. Homeowners loss ratio increased 5.5 and 4.5 points in the third quarter and first nine months of 2021 compared to the same periods of 2020, respectively, primarily due to increased non-catastrophe claim frequency and severity and lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020, partially offset by increased premiums earned. Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses) (% change year-over-year) Three months ended September 30, 2021 Gross claim frequency 3.4 % Paid claim severity 15.0 Nine months ended September 30, 2021 Gross claim frequency 10.4 % Paid claim severity 8.4 Gross claim frequency increased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to increases in water perils. Gross claim frequency increased in the first nine months of 2021 compared to the same period of 2020 primarily due to increases in wind/hail, water and fire perils. Paid claim severity increased in the third quarter and first nine months of 2021 compared to the same periods of 2020 due to inflationary loss cost pressure driven by increases in labor and materials costs. Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the quarter. Other personal lines loss ratio increased 1.9 and 6.2 points in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to higher non-catastrophe losses, partially offset by increased premiums earned. Commercial lines loss ratio increased 20.8 and 11.3 points in the third quarter and the first nine months of 64 www.allstate.com Allstate Protection Segment Results 2021, respectively, compared to the same periods of 2020 due to higher auto frequency and severity and higher unfavorable non-catastrophe prior year reserves reestimates, partially offset by increased premiums earned. Catastrophe losses increased 28.2% or $279 million in the third quarter of 2021 compared to the third quarter of 2020. Catastrophe losses increased 17.8% or $424 million in the first nine months of 2021 compared to the first nine months of 2020. Catastrophe losses in the third quarter of 2021, included gross and net losses related to Hurricane Ida of $1.5 billion and $689 million, respectively. Net losses include reinsurance recoveries of $986 million and reinstatement premiums of $181 million. We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes. We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted. Loss estimates are generally based on claim adjuster inspections and the application of historical loss development factors. Our loss estimates are calculated in accordance with the coverage provided by our policies. Auto policyholders generally have coverage for physical damage due to flood if they have purchased optional auto comprehensive coverage. Our homeowners policies specifically exclude coverage for losses caused by flood. Over time, we have limited our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes, limited by our participation in various state facilities. In the third quarter of 2021, our catastrophe reinsurance program risk tolerance framework that targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes, earthquakes and wildfires, excluding other catastrophe losses, net of reinsurance, increased from $2 billion to $2.5 billion, reflecting the addition of wildfires to the target. Catastrophe reinsurance The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the third quarter and first nine months of 2021 were $109 million and $345 million, respectively, compared to $106 million and $310 million in the third quarter and first nine months of 2020. The increases were driven by higher Nationwide and Florida program costs due to program expansion for growth in policies, including National General exposures. Catastrophe placement premiums are a reduction of premium with approximately 70% related to homeowners. Catastrophe losses by the type of event Three months ended September 30, Nine months ended September 30, ($ in millions) Number of events 2021 Number of events 2020 Number of events 2021 Number of events 2020 Hurricanes/Tropical storms 5 $ 747 6 $ 771 6 $ 754 6 $ 771 Tornadoes 1 9 1 4 2 26 3 43 Wind/Hail 35 389 23 399 68 1,650 54 1,768 Wildfires 4 49 12 293 4 48 13 295 Freeze/other events — — — — 1 605 2 12 Prior year reserve reestimates 38 (507) 30 (502) Prior year aggregate reinsurance cover (38) — (237) — Current year aggregate reinsurance cover (11) — (65) — Prior quarter reserve reestimates 86 30 — — Total catastrophe losses (1) 45 $ 1,269 42 $ 990 81 $ 2,811 78 $ 2,387 (1) Includes $173 million and $256 million of reinstatement premiums for the three and nine months ended September 30, 2021, related to the Nationwide Catastrophe Reinsurance Program, primarily due to Hurricane Ida Third Quarter 2021 Form 10-Q 65 Segment Results Allstate Protection Reserve reestimates were unfavorable in the third quarter of 2021 primarily due to strengthening of reserves in auto and commercial lines, partially offset by favorable reserve reestimates in other personal lines. Reserve reestimates were favorable in the first nine months of 2021 due to estimated recoveries related to our aggregate reinsurance coverage and subrogation settlements arising from the Woolsey wildfire, partially offset by strengthening of reserves in commercial lines. For a more detailed discussion on reinsurance and reserve reestimates, see Note 9 of the condensed consolidated financial statements. Reserve reestimates Three months ended September 30, Nine months ended September 30, Reserve reestimate (1) Effect on combined ratio (2) Reserve reestimate (1) Effect on combined ratio (2) ($ in millions, except ratios) 2021 2020 2021 2020 2021 2020 2021 2020 Auto $ 72 $ (60) 0.7 (0.7) $ 3 $ (101) — (0.4) Homeowners 17 (456) 0.1 (5.1) (156) (440) (0.5) (1.7) Other personal lines (66) (58) (0.6) (0.6) (83) (66) (0.3) (0.2) Commercial lines 25 2 0.2 — 58 29 0.2 0.1 Total Allstate Protection (3) $ 48 $ (572) 0.4 (6.4) $ (178) $ (578) (0.6) (2.2) Allstate brand $ 40 $ (529) 0.4 (5.9) $ (176) $ (532) (0.6) (2.0) National General 8 (43) — (0.5) (2) (46) — (0.2) Total Allstate Protection (3) $ 48 $ (572) 0.4 (6.4) $ (178) $ (578) (0.6) (2.2) (1) Favorable reserve reestimates are shown in parentheses. (2) Ratios are calculated using Allstate Protection premiums earned. (3) 2020 includes approximately $495 million of favorable reserve reestimates related to subrogation settlements, which primarily impacted homeowners. The favorable reserve reestimates decreased the combined ratio by 5.5 points and 1.9 points in the third quarter and first nine months of 2020, respectively. Expense ratio increased 0.2 points in the third quarter of 2021 compared to the third quarter of 2020 primarily due to higher advertising expenses and operating costs, increased amortization of purchased intangibles and DAC, partially offset by lower restructuring and related charges. The expense ratio decreased 3.2 points in the first nine months of 2021 compared to the same period of 2020, primarily due to lower Shelter-in-Place Payback expense, operating costs and expenses, restructuring and related charges, partially offset by increased advertising and amortization of purchased intangibles and DAC. Impact of specific costs and expenses on the expense ratio Three months ended September 30, Nine months ended September 30, ($ in millions, except ratios) 2021 2020 Change 2021 2020 Change Amortization of DAC $ 1,346 $ 1,158 $ 188 $ 3,968 $ 3,474 $ 494 Advertising expense 325 202 123 949 615 334 Amortization of purchased intangibles 75 3 72 165 7 158 Other costs and expenses, net of other revenue 786 663 123 2,111 2,025 86 Restructuring and related charges 16 187 (171) 113 199 (86) Shelter-in-Place Payback expense — — — 29 948 (919) Allstate Special Payment plan bad debt expense — 19 (19) (19) 66 (85) Total underwriting expenses $ 2,548 $ 2,232 $ 316 $ 7,316 $ 7,334 $ (18) Premiums earned $ 10,159 $ 8,952 $ 1,207 $ 30,064 $ 26,696 $ 3,368 Expense ratio Amortization of DAC 13.2 12.9 0.3 13.2 13.0 0.2 Advertising expense 3.2 2.3 0.9 3.2 2.3 0.9 Other costs and expenses 7.7 7.4 0.3 7.0 7.7 (0.7) Subtotal 24.1 22.6 1.5 23.4 23.0 0.4 Amortization of purchased intangibles 0.8 — 0.8 0.5 — 0.5 Restructuring and related charges 0.2 2.1 (1.9) 0.4 0.7 (0.3) Shelter-in-Place Payback expense — — — 0.1 3.6 (3.5) Allstate Special Payment plan bad debt expense — 0.2 (0.2) (0.1) 0.2 (0.3) Total expense ratio 25.1 24.9 0.2 24.3 27.5 (3.2) 66 www.allstate.com Run-off Property-Liability Segment Results Run-off Property-Liability Segment Underwriting results ($ in millions) Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Claims and claims expense Asbestos claims $ (64) $ (78) $ (64) $ (78) Environmental claims (40) (44) (40) (44) Other run-off lines (9) (13) (11) (17) Total claims and claims expense (113) (135) (115) (139) Operating costs and expenses — — (3) (2) Underwriting loss $ (113) $ (135) $ (118) $ (141) Annual reserve review In the third quarter of 2021 and 2020, we performed our annual reserve review using established industry and actuarial best practices. The annual review resulted in unfavorable reserve reestimates totaling $111 million and $132 million in 2021 and 2020. The reserve reestimates are included as part of claims and claims expense. The reserve reestimates in 2021 primarily related to new reported information for asbestos and environmental and higher than expected reported losses for environmental and other run-off exposures. The reserve reestimates in 2020 primarily related to new reported information, court decisions and policy buyback settlements for asbestos exposures and higher than expected reported losses for environmental and other run-off exposures. We believe that our reserves are appropriately established based on available facts, technology, laws, regulations, and assessments of other pertinent factors and characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. However, as we progress with the resolution of disputed claims in the courts and arbitrations and with negotiations and settlements, our reported losses may be more variable. Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance ($ in millions) September 30, 2021 December 31, 2020 Asbestos claims Gross reserves $ 1,249 $ 1,204 Reinsurance (396) (377) Net reserves 853 827 Environmental claims Gross reserves 285 249 Reinsurance (51) (43) Net reserves 234 206 Other run-off claims Gross reserves 438 435 Reinsurance (65) (60) Net reserves 373 375 Total Gross reserves 1,972 1,888 Reinsurance (512) (480) Net reserves $ 1,460 $ 1,408 Third Quarter 2021 Form 10-Q 67 Segment Results Run-off Property-Liability Reserves by type of exposure before and after the effects of reinsurance ($ in millions) September 30, 2021 December 31, 2020 Direct excess commercial insurance Gross reserves $ 1,095 $ 1,011 Reinsurance (381) (358) Net reserves 714 653 Assumed reinsurance coverage Gross reserves 627 636 Reinsurance (56) (58) Net reserves 571 578 Direct primary commercial insurance Gross reserves 168 160 Reinsurance (74) (63) Net reserves 94 97 Other run-off business Gross reserves 1 2 Reinsurance — — Net reserves 1 2 Unallocated loss adjustment expenses Gross reserves 81 79 Reinsurance (1) (1) Net reserves 80 78 Total Gross reserves 1,972 1,888 Reinsurance (512) (480) Net reserves $ 1,460 $ 1,408 Percentage of gross and ceded reserves by case and incurred but not reported (“IBNR”) September 30, 2021 December 31, 2020 Case IBNR Case IBNR Direct excess commercial insurance Gross reserves (1) 62 % 38 % 65 % 35 % Ceded (2) 69 31 71 29 Assumed reinsurance coverage Gross reserves 31 69 34 66 Ceded 29 71 35 65 Direct primary commercial insurance Gross reserves 49 51 55 45 Ceded 62 38 79 21 (1) Approximately 62% of gross case reserves as of September 30, 2021 are subject to settlement agreements. (2) Approximately 70% of ceded case reserves as of September 30, 2021 are subject to settlement agreements. Gross payments from case reserves by type of exposure ($ in millions) Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Direct excess commercial insurance Gross (1) $ 12 $ 15 $ 46 $ 53 Ceded (2) (6) (6) (21) (20) Assumed reinsurance coverage Gross 11 11 33 33 Ceded (1) (2) (4) (4) Direct primary commercial insurance Gross (1) 4 5 7 Ceded 2 (3) (1) (4) (1) In the third quarter and first nine months of 2021 , 66% and 72% of payments related to settlement agreements. (2) In the third quarter and first nine months of 2021 , 53% and 71% of payments related to settlement agreements. 68 www.allstate.com Run-off Property-Liability Segment Results Total net reserves as of September 30, 2021, included $744 million or 51% of estimated IBNR reserves compared to $695 million or 49% of estimated IBNR reserves as of December 31, 2020. Total gross payments were $22 million and $84 million for the third quarter and first nine months of 2021, respectively. Payments for the third quarter and first nine months of 2021 primarily related to asbestos claims, mainly settlement agreements reached with several insureds on large claims where the scope of coverages has been agreed upon. The claims associated with these settlement agreements are expected to be substantially paid out over the next several years as qualified claims are submitted by these insureds. Reinsurance collections were $7 million and $31 million for the third quarter and first nine months of 2021, respectively. Third Quarter 2021 Form 10-Q 69 Segment Results Protection Services Protection Services Segment Protection Services include National General’s LeadCloud and Transparent.ly’s results within Arity starting in the first quarter of 2021. These businesses provide marketing and integration platforms connecting data buyers and sellers. Results prior to 2021 reflect historical Arity results only. Summarized financial information ($ in millions) Three months ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Premiums written $ 651 $ 485 $ 1,926 $ 1,331 Revenues Premiums $ 456 $ 384 $ 1,302 $ 1,098 Other revenue 85 52 263 155 Intersegment insurance premiums and service fees (1) 46 36 133 109 Net investment income 10 12 32 33 Costs and expenses Claims and claims expense (122) (107) (334) (284) Amortization of DAC (206) (169) (581) (482) Operating costs and expenses (209) (160) (610) (484) Restructuring and related charges 1 2 (12) (1) Income tax expense on operations (16) (10) (43) (29) Adjusted net income $ 45 $ 40 $ 150 $ 115 Allstate Protection Plans $ 32 $ 36 $ 119 $ 105 Allstate Dealer Services 7 7 25 22 Allstate Roadside 1 4 7 8 Arity 1 (3) 4 (9) Allstate Identity Protection 4 (4) (5) (11) Adjusted net income $ 45 $ 40 $ 150 $ 115 Allstate Protection Plans 141,809 125,831 Allstate Dealer Services 3,980 4,075 Allstate Roadside 533 558 Allstate Identity Protection 3,197 2,490 Policies in force as of September 30 (in thousands) 149,519 132,954 (1) Primarily related to Arity and Allstate Roadside and are eliminated in our condensed consolidated financial statements. Adjusted net income increased 12.5% or $5 million in the third quarter of 2021 and increased 30.4% or $35 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to growth, partially offset by higher operating costs and expenses related to investments in growth. Premiums written increased 34.2% or $166 million in the third quarter of 2021 and increased 44.7% or $595 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to growth at Allstate Protection Plans and increased sales at Allstate Dealer Services. PIF increased 12.5% or 17 million to 150 million as of September 30, 2021 compared to September 30, 2020 due to continued growth at Allstate Protection Plans and Allstate Identity Protection. Other revenue increased 63.5% or $33 million in the third quarter of 2021 and increased 69.7% or $108 million in the first nine months of 2021 compared to the same periods of 2020, reflecting the addition of LeadCloud and Transparent.ly, which were acquired as part of the National General acquisition. Intersegment premiums and service fees increased 27.8% or $10 million in the third quarter of 2021 and increased 22.0% or $24 million in the first nine months of 2021 compared to the same periods of 2020, primarily related to increased device sales through Arity driven by growth in the Allstate brand Milewise® product and growth in automotive rescue services provided by Allstate Roadside for Allstate brand auto customers. 70 www.allstate.com Protection Services Segment Results Claims and claims expense increased 14.0% or $15 million in the third quarter 2021 and increased 17.6% or $50 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to higher levels of claims at Allstate Protection Plans driven by growth of the business and increased claims at Allstate Roadside due to higher severity and rescue volumes. Amortization of DAC increased 21.9% or $37 million in the third quarter of 2021 and increased 20.5% or $99 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the growth experienced at Allstate Protection Plans and Allstate Dealer Services. Operating costs and expenses increased 30.6% or $49 million in the third quarter of 2021 and increased 26.0% or $126 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to higher operating costs at Arity driven by the addition of LeadCloud and Transparent.ly and growth experienced at Allstate Protection Plans. Restructuring and related charges in the third quarter of 2021 were comparable to the third quarter of 2020 and increased $11 million in the first nine months of 2021 compared to the first nine months of 2020, primarily due to a facility closure at Allstate Identity Protection in the first quarter of 2021 and accelerated lease costs at Allstate Protection Plans. Third Quarter 2021 Form 10-Q 71 Segment Results Allstate Health and Benefits Allstate Health and Benefits Segment Allstate Health and Benefits results include National General’s accident and health business, starting in the first quarter of 2021. Results prior to 2021 reflect historical Allstate Benefits results only. Summarized financial information Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Revenues Accident and health insurance premiums and contract charges $ 460 $ 287 $ 1,362 $ 832 Other revenue 85 — 248 — Net investment income 18 18 56 58 Costs and expenses Accident and health insurance policy benefits (269) (128) (746) (392) Interest credited to contractholder funds (8) (8) (25) (26) Amortization of DAC (30) (59) (101) (139) Operating costs and expenses (206) (68) (582) (253) Restructuring and related charges (8) — (9) (1) Income tax expense on operations (9) (9) (43) (17) Adjusted net income $ 33 $ 33 $ 160 $ 62 Benefit ratio (1) 58.5 44.6 54.8 47.1 Employer voluntary benefits (2) 3,835 4,092 Group health (3) 126 — Individual accident and health (4) 417 — Policies in force as of September 30 (in thousands) 4,378 4,092 (1) Benefit ratio is calculated as accident and health insurance policy benefits divided by premiums and contract charges. (2) Employer voluntary benefits include supplemental life and health products offered through workplace enrollment. (3) Group health includes health products sold to employers for use by their employees. (4) Individual accident and health includes short-term medical and supplemental products sold directly to individuals. Adjusted net income in the third quarter of 2021 was comparable to the third quarter of 2020. Adjusted net income increased $98 million in the first nine months of 2021 compared to the first nine months of 2020, primarily due to the acquisition of National General’s group health and individual accident and health business, which resulted in higher premiums and contract charges and the addition of other revenue, partially offset by higher policy benefits and operating costs and expenses. Results for the first nine months of 2020 included an after-tax charge of $32 million related to the write-off of previously capitalized software. Premiums and contract charges increased 60.3% or $173 million in the third quarter of 2021 and increased 63.7% or $530 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of group health and individual accident and health business. Premiums and contract charges by line of business Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Employer voluntary benefits $ 251 $ 287 $ 769 $ 832 Group health 90 — 260 — Individual accident and health 119 — 333 — Premiums and contract charges $ 460 $ 287 $ 1,362 $ 832 Other revenue of $85 million and $248 million in the third quarter and first nine months of 2021, respectively, reflects National General’s commission revenue, group health administrative fees, agency fees and technology fees. Accident and health insurance policy benefits increased $141 million in the third quarter of 2021 and increased 90.3% or $354 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of the group health and individual accident and health products and increased benefit utilization compared to the prior year quarter. 72 www.allstate.com Allstate Health and Benefits Segment Results Benefit ratio increased to 58.5 and 54.8 in the third quarter and the first nine months of 2021 compared to 44.6 and 47.1 in the same periods of 2020, primarily due to a higher benefit ratio associated with group health products added in 2021 and a higher benefit ratio for employer voluntary benefit products due to lower claim experience in the prior year, primarily driven by the impacts of the pandemic on benefit utilization. Amortization of DAC decreased 49.2% or $29 million in the third quarter of 2021 and decreased 27.3% or $38 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to unfavorable adjustments associated with our annual review of assumptions in 2020 compared to favorable adjustments in 2021, and lower health product lapses for employer voluntary benefits. Our annual comprehensive review of assumptions underlying estimated future gross profits for our interest-sensitive life contracts resulted in a deceleration of DAC amortization (increase to income) of $2 million of the unamortized DAC asset balance in the third quarter of 2021 compared to $28 million acceleration of DAC amortization (decrease to income) in the third quarter of 2020. In 2020, DAC amortization acceleration primarily related to lower projected investment returns, partially offset by favorable projected mortality. Operating costs and expenses Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Non-deferrable commissions $ 80 $ 25 $ 231 $ 76 General and administrative expenses 126 43 351 177 Total operating costs and expenses $ 206 $ 68 $ 582 $ 253 Operating costs and expenses increased $138 million in the third quarter of 2021 and increased $329 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of the group health and individual accident and health business in 2021. Results for the first nine months of 2020 included a write-off of capitalized software costs associated with a billing system. Analysis of reserves Reserve for future policy benefits ($ in millions) September 30, 2021 December 31, 2020 Traditional life insurance $ 305 $ 299 Accident and health insurance 958 729 Reserve for future policy benefits $ 1,263 $ 1,028 Third Quarter 2021 Form 10-Q 73 Investments Investments Portfolio composition and strategy by reporting segment (1) September 30, 2021 ($ in millions) Property-Liability Protection Services Allstate Health and Benefits Corporate and Other Total Fixed income securities (2) $ 35,185 $ 1,628 $ 1,794 $ 1,382 $ 39,989 Equity securities (3) 2,970 122 99 616 3,807 Mortgage loans, net 681 — 71 — 752 Limited partnership interests 7,578 — — — 7,578 Short-term investments (4) 4,741 177 67 1,443 6,428 Other, net 3,140 — 144 2 3,286 Total $ 54,295 $ 1,927 $ 2,175 $ 3,443 $ 61,840 Percent to total 87.8 % 3.1 % 3.5 % 5.6 % 100.0 % Market-based $ 45,784 $ 1,927 $ 2,175 $ 3,441 $ 53,327 Performance-based 8,511 — — 2 8,513 Total $ 54,295 $ 1,927 $ 2,175 $ 3,443 $ 61,840 (1) Balances reflect the elimination of related party investments between segments. (2) Fixed income securities are carried at fair value. Amortized cost, net for these securities was $34.16 billion, $1.59 billion, $1.72 billion, $1.34 billion and $38.81 billion for Property-Liability, Protection Services, Allstate Health and Benefits, Corporate and Other, and in total, respectively. (3) Equity securities are carried at fair value. The fair value of equity securities held as of September 30, 2021, was $868 million in excess of cost. These net gains were primarily concentrated in the consumer goods, technology and banking sectors. Equity securities include $962 million of funds with underlying investments in fixed income securities as of September 30, 2021. (4) Short-term investments are carried at fair value. Investments totaled $61.84 billion as of September 30, 2021, increasing from $59.54 billion as of December 31, 2020, primarily due to positive operating cash flows, partially offset by common share repurchases and dividends paid to shareholders. Portfolio composition by investment strategy We utilize two primary strategies to manage risks and returns and to position our portfolio to take advantage of market opportunities while attempting to mitigate adverse effects. As strategies and market conditions evolve, the asset allocation may change, or assets may be moved between strategies. Market-based strategy includes investments primarily in public fixed income and equity securities. It seeks to deliver predictable earnings aligned to business needs and take advantage of short-term opportunities primarily through public and private fixed income investments and public equity securities. As long as market yields remain below the current portfolio yield, market-based portfolio yield is expected to decline resulting in lower net investment income for the market-based portfolio in future periods. Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity and real estate. These investments include investee level expenses, reflecting asset level operating expenses on directly held real estate and other consolidated investments. Coronavirus impacts Future investment results will be influenced by the magnitude and duration of the global pandemic and the impact of actions taken by governmental authorities, businesses and consumers, including the availability, utilization rate and effectiveness of vaccines, to mitigate health risks, which creates significant uncertainty. Supply chain disruptions and labor shortages could increase inflation, which may have an adverse impact on investment valuations and returns. 74 www.allstate.com Investments Portfolio composition by investment strategy September 30, 2021 ($ in millions) Market-based Performance-based Total Fixed income securities $ 39,913 $ 76 $ 39,989 Equity securities 3,455 352 3,807 Mortgage loans, net 752 — 752 Limited partnership interests 441 7,137 7,578 Short-term investments 6,428 — 6,428 Other, net 2,338 948 3,286 Total $ 53,327 $ 8,513 $ 61,840 Percent to total 86.2 % 13.8 % 100.0 % Unrealized net capital gains and losses Fixed income securities $ 1,177 $ 1 $ 1,178 Other (3) — (3) Total $ 1,174 $ 1 $ 1,175 Fixed income securities Fixed income securities by type Fair value as of ($ in millions) September 30, 2021 December 31, 2020 U.S. government and agencies $ 3,042 $ 2,107 Municipal 7,417 7,578 Corporate 27,367 31,017 Foreign government 1,059 958 Asset-backed securities (“ABS”) 1,070 846 Mortgage-backed securities (“MBS”) 34 59 Total fixed income securities $ 39,989 $ 42,565 Fixed income securities are rated by third-party credit rating agencies and/or are internally rated. As of September 30, 2021, 83.8% of the consolidated fixed income securities portfolio was rated investment grade, which is defined as a security having a rating of Aaa, Aa, A or Baa from Moody’s, a rating of AAA, AA, A or BBB from S&P, a comparable rating from another nationally recognized rating agency, or a comparable internal rating if an externally provided rating is not available. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Our initial investment decisions and ongoing monitoring procedures for fixed income securities are based on a due diligence process which includes, but is not limited to, an assessment of the credit quality, sector, structure, and liquidity risks of each issue. Fixed income portfolio monitoring is a comprehensive process to identify and evaluate each fixed income security that may require a credit loss allowance. The process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. For further detail on our fixed income portfolio monitoring process, see Note 5 of the condensed consolidated financial statements. Third Quarter 2021 Form 10-Q 75 Investments Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating September 30, 2021 A and above BBB BB ($ in millions) Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) U.S. government and agencies $ 3,042 $ 7 $ — $ — $ — $ — Municipal 7,186 292 216 6 — — Corporate Public 5,097 136 10,380 418 1,594 87 Privately placed 1,799 36 3,668 96 2,169 52 Total corporate 6,896 172 14,048 514 3,763 139 Foreign government 1,058 5 1 — — — ABS 1,012 5 10 — 7 — MBS 31 1 — — 2 — Total fixed income securities $ 19,225 $ 482 $ 14,275 $ 520 $ 3,772 $ 139 B CCC and lower Total Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) U.S. government and agencies $ — $ — $ — $ — $ 3,042 $ 7 Municipal 10 1 5 1 7,417 300 Corporate Public 268 6 8 (4) 17,347 643 Privately placed 2,088 29 296 (4) 10,020 209 Total corporate 2,356 35 304 (8) 27,367 852 Foreign government — — — — 1,059 5 ABS 3 — 38 8 1,070 13 MBS 1 — — — 34 1 Total fixed income securities $ 2,370 $ 36 $ 347 $ 1 $ 39,989 $ 1,178 Municipal bonds , including tax-exempt and taxable securities, include general obligations of state and local issuers and revenue bonds. Corporate bonds include publicly traded and privately placed securities. Privately placed securities primarily consist of corporate issued senior debt securities that are negotiated with the borrower or are in unregistered form. ABS includes collateralized debt obligations, consumer and other ABS. Credit risk is managed by monitoring the performance of the underlying collateral. Many of the securities in the ABS portfolio have credit enhancement with features such as overcollateralization, subordinated structures, reserve funds, guarantees and/or insurance. MBS includes residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”). RMBS is subject to interest rate risk, but unlike other fixed income securities, is additionally subject to prepayment risk from the underlying residential mortgage loans. RMBS consists of a U.S. Agency portfolio having collateral issued or guaranteed by U.S. government agencies and a non-agency portfolio consisting of securities collateralized by Prime, Alt-A and Subprime loans. CMBS investments are primarily traditional conduit transactions collateralized by commercial mortgage loans and typically are diversified across property types and geographical area. Equity securities primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments. Mortgage loans mainly comprise loans secured by first mortgages on developed commercial real estate. Key considerations used to manage our exposure include property type and geographic diversification. For further detail on our mortgage loan portfolio, see Note 5 of the condensed consolidated financial statements. Limited partnership interests include $6.18 billion of interests in private equity funds, $962 million of interests in real estate funds and $441 million of interests in other funds as of September 30, 2021. We have commitments to invest additional amounts in limited partnership interests totaling $2.50 billion as of September 30, 2021. Other investments include $849 million of direct investments in real estate as of September 30, 2021. 76 www.allstate.com Investments Unrealized net capital gains (losses) September 30, December 31, ($ in millions) 2021 2020 U.S. government and agencies $ 7 $ 49 Municipal 300 478 Corporate 852 1,960 Foreign government 5 37 ABS 13 6 MBS 1 1 Fixed income securities 1,178 2,531 Derivatives (3) (3) EMA limited partnerships — (1) Unrealized net capital gains and losses, pre-tax $ 1,175 $ 2,527 Third Quarter 2021 Form 10-Q 77 Investments Gross unrealized gains (losses) on fixed income securities by type and sector September 30, 2021 ($ in millions) Amortized cost, net Gross unrealized Fair value Gains Losses Corporate Consumer goods (cyclical and non-cyclical) $ 6,615 $ 234 $ (26) $ 6,823 Utilities 2,089 66 (19) 2,136 Communications 2,148 86 (14) 2,220 Banking 4,038 93 (14) 4,117 Technology 2,858 114 (10) 2,962 Financial services 1,871 59 (7) 1,923 Capital goods 2,588 102 (7) 2,683 Transportation 969 48 (6) 1,011 Energy Midstream 1,091 48 (2) 1,137 Integrated 172 12 (1) 183 Independent/upstream 244 20 — 264 Other 158 7 (1) 164 Total energy 1,665 87 (4) 1,748 Basic industry 1,281 71 (2) 1,350 Other 393 3 (2) 394 Total corporate fixed income portfolio 26,515 963 (111) 27,367 U.S. government and agencies 3,035 22 (15) 3,042 Municipal 7,117 318 (18) 7,417 Foreign government 1,054 12 (7) 1,059 ABS 1,057 14 (1) 1,070 MBS 33 1 — 34 Total fixed income securities $ 38,811 $ 1,330 $ (152) $ 39,989 December 31, 2020 ($ in millions) Amortized cost Gross unrealized Fair value Gains Losses Corporate Consumer goods (cyclical and non-cyclical) $ 7,820 $ 516 $ (2) $ 8,334 Utilities 2,749 156 (2) 2,903 Communications 2,529 201 (4) 2,726 Banking 4,353 244 — 4,597 Technology 2,443 191 (1) 2,633 Financial services 1,785 116 (2) 1,899 Capital goods 2,906 205 — 3,111 Transportation 1,055 84 (11) 1,128 Energy Midstream 1,095 72 (1) 1,166 Integrated 270 27 — 297 Independent/upstream 186 21 (1) 206 Other 139 9 (2) 146 Total energy 1,690 129 (4) 1,815 Basic industry 1,512 136 — 1,648 Other 215 8 — 223 Total corporate fixed income portfolio 29,057 1,986 (26) 31,017 U.S. government and agencies 2,058 50 (1) 2,107 Municipal 7,100 480 (2) 7,578 Foreign government 921 37 — 958 ABS 840 9 (3) 846 MBS 58 1 — 59 Total fixed income securities $ 40,034 $ 2,563 $ (32) $ 42,565 In general, the gross unrealized losses are related to an increase in market yields which may include increased risk-free interest rates and wider credit spreads since the time of initial purchase. Similarly, gross unrealized gains reflect a decrease in market yields since the time of initial purchase. 78 www.allstate.com Investments Equity securities by sector September 30, 2021 December 31, 2020 ($ in millions) Cost Over (under) cost Fair value Cost Over (under) cost Fair value Utilities $ 52 $ 15 $ 67 $ 37 $ 3 $ 40 Transportation 34 15 49 24 7 31 Basic Industry 44 21 65 29 10 39 Energy Midstream 40 7 47 65 (2) 63 Integrated 19 8 27 10 — 10 Independent/upstream 14 6 20 7 — 7 Other 6 3 9 2 1 3 Total energy 79 24 103 84 (1) 83 Capital Goods 162 32 194 92 (4) 88 Other (1) 1,270 646 1,916 823 211 1,034 Funds Fixed income 925 37 962 804 55 859 Equities 373 78 451 847 147 994 Total funds 1,298 115 1,413 1,651 202 1,853 Total equity securities $ 2,939 $ 868 $ 3,807 $ 2,740 $ 428 $ 3,168 (1) Other is comprised of communications, REITs, financial services, banking, technology and consumer goods sectors. Net investment income Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Fixed income securities $ 279 $ 314 $ 870 $ 918 Equity securities 24 18 51 49 Mortgage loans 9 8 31 25 Limited partnership interests 438 123 1,467 (71) Short-term investments 1 2 3 15 Other 50 29 139 91 Investment income, before expense 801 494 2,561 1,027 Investment expense Investee level expenses (12) (7) (36) (24) Securities lending expense — — — (4) Operating costs and expenses (25) (23) (79) (69) Total investment expense (37) (30) (115) (97) Net investment income $ 764 $ 464 $ 2,446 $ 930 Property-Liability $ 710 $ 422 $ 2,314 $ 802 Protection Services 10 12 32 33 Allstate Health and Benefits 18 18 56 58 Corporate and Other 26 12 44 37 Net investment income $ 764 $ 464 $ 2,446 $ 930 Market-based $ 353 $ 359 $ 1,064 $ 1,073 Performance-based 448 135 1,497 (46) Investment income, before expense $ 801 $ 494 $ 2,561 $ 1,027 Net investment income increased $300 million and $1.52 billion in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to increases in performance-based income results, mainly from limited partnerships. Third Quarter 2021 Form 10-Q 79 Investments Performance-based investment income Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Private equity $ 400 $ 134 $ 1,282 $ (71) Real estate 48 1 215 25 Total performance-based income before investee level expenses $ 448 $ 135 $ 1,497 $ (46) Investee level expenses (1) (11) (6) (33) (21) Total performance-based income $ 437 $ 129 $ 1,464 $ (67) (1) Investee level expenses include depreciation and asset level operating expenses reported in investment expense. Performance-based investment income increased $308 million and $1.53 billion in the third quarter and the first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to increased valuations and a decline in the equity market and lower valuations in 2020. Performance-based investment income in the first nine months of 2021 includes income generated by certain investments which were classified as assets held for sale in 2020. Performance-based investment results and income can vary significantly between periods and are influenced by economic conditions, equity market performance, comparable public company earnings multiples, capitalization rates, operating performance of the underlying investments and the timing of asset sales. Components of realized capital gains (losses) and the related tax effect Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Sales $ 80 $ 214 $ 441 $ 762 Credit losses (12) 7 2 (29) Valuation of equity investments - appreciation (decline): Equity securities 14 96 333 (92) Equity fund investments in fixed income securities (8) 18 (11) (56) Limited partnerships (1) (15) 14 (1) (50) Total valuation of equity investments (9) 128 321 (198) Valuation and settlements of derivative instruments 46 (30) 54 62 Realized capital gains (losses), pre-tax 105 319 818 597 Income tax expense (21) (68) (179) (130) Realized capital gains (losses), after-tax $ 84 $ 251 $ 639 $ 467 Property-Liability $ 74 $ 230 $ 595 $ 447 Protection Services 4 11 16 7 Allstate Health and Benefits (1) 3 4 — Corporate and Other 7 7 24 13 Realized capital gains (losses), after-tax $ 84 $ 251 $ 639 $ 467 Market-based $ 74 $ 333 $ 659 $ 590 Performance-based 31 (14) 159 7 Realized capital gains (losses), pre-tax $ 105 $ 319 $ 818 $ 597 (1) Relates to limited partnerships where the underlying assets are predominately public equity securities. Realized capital gains in the third quarter of 2021 related primarily to gains on sales of fixed income securities and increased valuation and settlements of derivative instruments. Realized capital gains in the first nine months of 2021 related primarily to gains on sales of fixed income securities and real estate investments, increased valuation of equity investments and increased valuation and settlements of derivative instruments. Sales in the third quarter and first nine months of 2021 related primarily to sales of fixed income securities in connection with ongoing portfolio management. Sales in the first nine months of 2021 also included sales of real estate investments. Valuation and settlements of derivative instruments in the third quarter and first nine months of 2021 primarily comprised of gains on foreign currency contracts due to the strengthening of the U.S. dollar and gains on interest rate futures used to increase asset duration. 80 www.allstate.com Investments Realized capital gains (losses) for performance-based investments Three months ended September 30, Nine months ended September 30, ($ in millions) 2021 2020 2021 2020 Sales $ (5) $ (4) $ 79 $ 4 Credit losses (3) 1 (3) (7) Valuation of equity investments 23 4 60 3 Valuation and settlements of derivative instruments 16 (15) 23 7 Total performance-based $ 31 $ (14) $ 159 $ 7 Realized capital gains for performance-based investments in the third quarter of 2021 primarily related to increased valuation of equity investments and increased valuation and settlements of derivative instruments. Realized capital gains for performance-based investments in the first nine months of 2021 primarily related to gains on sales of real estate investments and increased valuation of equity investments. Third Quarter 2021 Form 10-Q 81 Capital Resources and Liquidity Capital Resources and Liquidity Capital resources consist of shareholders’ equity and debt, representing funds deployed or available to be deployed to support business operations or for general corporate purposes. Capital resources ($ in millions) September 30, 2021 December 31, 2020 Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items $ 24,811 $ 26,913 Accumulated other comprehensive income 1,918 3,304 Total Allstate shareholders’ equity 26,729 30,217 Debt 7,980 7,825 Total capital resources $ 34,709 $ 38,042 Ratio of debt to Allstate shareholders’ equity 29.9 % 25.9 % Ratio of debt to capital resources 23.0 20.6 Allstate shareholders’ equity decreased in the first nine months of 2021, primarily due to common share repurchases, decreased unrealized capital gains on investments and dividends paid to shareholders, partially offset by net income. In the nine months ended September 30, 2021, we paid dividends of $650 million and $87 million related to our common and preferred shares, respectively. Debt maturities $250 million of floating rate senior notes matured on March 29, 2021. We do not have any other scheduled debt maturities in 2021. Debt maturities for each of the next five years and thereafter (excluding issuance costs and other) ($ in millions) 2022 $ — 2023 750 2024 (1) 350 2025 600 2026 550 Thereafter 5,741 Total long-term debt principal $ 7,991 (1) Reflects National General 6.750% Senior Notes. Common share repurchases In August 2021, the Board authorized a new $5.00 billion common share repurchase program that is expected to be completed by March 31, 2023. We also completed the $3.00 billion common share repurchase program that commenced in February 2020. In August 2021, we entered into an accelerated share repurchase program (“ASR agreement”) with JPMorgan Chase Bank, National Association to purchase $750 million of our outstanding common stock. Under the ASR agreement, we paid $750 million upfront and initially acquired 4.7 million shares. The ASR agreement concluded on September 17, 2021, and we repurchased a total of 5.6 million shares at an average price of $133.39. As of September 30, 2021, there was $4.17 billion remaining in the $5.00 billion program. During the first nine months of 2021, we repurchased 18.8 million common shares, or 6.2% of total common shares outstanding at December 31, 2020, for $2.39 billion. Common shareholder dividends On January 4, 2021, April 1, 2021 and July 1, 2021, we paid a common shareholder dividend of $0.54, $0.81 and $0.81, respectively. On July 15, 2021, we declared a common shareholder dividend of $0.81 payable on October 1, 2021. Redemption of preferred stock On July 15, 2021, we redeemed all outstanding Depositary shares, representing 1/40th of a share of National General’s 7.50% Noncumulative Preferred Stock, Series C, and the underlying shares of 7.50% Noncumulative Preferred Stock, Series C, par value $0.01 per share for a total redemption payment of $200 million. 82 www.allstate.com Capital Resources and Liquidity Financial ratings and strength Our ratings are influenced by many factors including our operating and financial performance, asset quality, liquidity, overall portfolio mix, financial leverage (i.e., debt), exposure to risks such as catastrophes and the current level of operating leverage. The preferred stock and subordinated debentures are viewed as having a common equity component by certain rating agencies and are given equity credit up to a pre-determined limit in our capital structure as determined by their respective methodologies. These respective methodologies consider the existence of certain terms and features in the instruments such as the noncumulative dividend feature in the preferred stock. In January 2021, Moody’s affirmed The Allstate Corporation’s (the “Corporation’s”) debt and short-term issuer ratings of A3 and P-2, respectively, and the insurance financial strength rating of Aa3 for Allstate Insurance Company (“AIC”). The outlook for the ratings is stable. In June 2021, S&P affirmed the Corporation’s debt and short-term issuer ratings of A- and A-2, respectively, and the insurance financial strength rating of AA- for AIC. The outlook for the ratings is stable. In July 2021, A.M. Best affirmed the Corporation’s debt and short-term issuer ratings of a and AMB-1+, respectively, and the insurance financial strength rating of A+ for AIC. The outlook for the ratings is stable. Liquidity sources and uses We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions. Liquidity is managed at both the entity and enterprise level across the Company and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across the Company to enhance flexibility. The Corporation is party to an Amended and Restated Intercompany Liquidity Agreement (“Liquidity Agreement”) with certain subsidiaries, which include but are not limited to AIC. The Liquidity Agreement allows for short-term advances of funds to be made between parties for liquidity and other general corporate purposes. The Liquidity Agreement does not establish a commitment to advance funds on the part of any party. AIC serves as a lender and borrower, certain other subsidiaries serve only as borrowers, and the Corporation serves only as a lender. The maximum amount of potential funding under each of these agreements is $1.00 billion. In addition to the Liquidity Agreement, the Corporation also has an intercompany loan agreement with certain of its subsidiaries, which includes, but is not limited to AIC. The amount of intercompany loans available to the Corporation’s subsidiaries is at the discretion of the Corporation. The maximum amount of loans the Corporation will have outstanding to all its eligible subsidiaries at any given point in time is limited to $1.00 billion. The Corporation may use commercial paper borrowings, bank lines of credit and securities lending to fund intercompany borrowings. Third Quarter 2021 Form 10-Q 83 Capital Resources and Liquidity Parent company capital capacity Parent holding company deployable assets totaled $3.41 billion as of September 30, 2021, primarily comprised of cash and investments that are generally saleable within one quarter. The substantial earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation. As of September 30, 2021, we held $6.70 billion of cash, U.S. government and agencies fixed income securities, and public equity securities which we would expect to be able to liquidate within one week. Intercompany dividends were paid in the first nine months of 2021 between the following companies: AIC, Allstate Insurance Holdings, LLC (“AIH”), the Corporation, ALIC and Allstate Financial Insurance Holdings Corporation (“AFIHC”). Intercompany dividends ($ in millions) AIC to AIH $ 4,643 AIH to the Corporation 4,640 ALIC to AIC 392 AHL to AFIHC 50 AFIHC to the Corporation 50 Based on the greater of 2020 statutory net income or 10% of statutory surplus, the maximum amount of dividends that AIC will be able to pay, without prior Illinois Department of Insurance approval, at a given point in time in 2021 is estimated at $5.95 billion, less dividends paid during the preceding twelve months measured at that point in time. As of September 30, 2021, we paid dividends of $4.64 billion. Dividends may not be paid or declared on our common stock and shares of common stock may not be repurchased unless the full dividends for the latest completed dividend period on our preferred stock have been declared and paid or provided for. We are prohibited from declaring or paying dividends on our Series G preferred stock if we fail to meet specified capital adequacy, net income or shareholders’ equity levels, except out of the net proceeds of common stock issued during the 90 days prior to the date of declaration. As of September 30, 2021, we satisfied all the requirements with no current restrictions on the payment of preferred stock dividends. The terms of our outstanding subordinated debentures also prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions. In the first nine months of 2021, we did not defer interest payments on the subordinated debentures. Additional resources to support liquidity are as follows: • The Corporation and AIC have access to a $750 million unsecured revolving credit facility that is available for short-term liquidity requirements. The maturity date of this facility is November 2025. The facility is fully subscribed among 11 lenders with the largest commitment being $95 million. The commitments of the lenders are several and no lender is responsible for any other lender’s commitment if such lender fails to make a loan under the facility. This facility contains an increase provision that would allow up to an additional $500 million of borrowing, subject to the lenders’ commitment. This facility has a financial covenant requiring that we not exceed a 37.5% debt to capitalization ratio as defined in the agreement. This ratio was 18.9% as of September 30, 2021. Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior unsecured, unguaranteed long-term debt. There were no borrowings under the credit facility during 2021. • The Corporation has access to a commercial paper facility with a borrowing limit equal to our undrawn credit facility balance of $750 million to cover short-term cash needs. • As of September 30, 2021, there were no balances outstanding for the credit facility or the commercial paper facility and therefore the remaining borrowing capacity was $750 million. • The Corporation has access to a universal shelf registration statement with the Securities and Exchange Commission that expires in 2024. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 612 million shares of treasury stock as of September 30, 2021), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements. 84 www.allstate.com Forward-Looking Statements This report contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. We believe these statements are based on reasonable estimates, assumptions and plans. If the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements include risks related to: Insurance and Financial Services (1) unexpected increases in claim frequency and severity; (2 ) catastrophes and severe weather events; (3) limitations in analytical models used for loss cost estimates; (4) price competition and changes in underwriting standards; (5) actual claims costs exceeding current reserves; (6) market risk and declines in credit quality of our investment portfolio; (7) our subjective determination of fair value and amount of credit losses for investments; (8) changes in market interest rates or performance-based investment returns impacting our annuity business; (9) changes in reserve estimates and amortization of deferred acquisition costs impacting our life, benefits and annuity businesses; (10) our participation in indemnification programs, including state industry pools and facilities; (11) inability to mitigate the capital impact associated with statutory reserving and capital requirements; (12) a downgrade in financial strength ratings; (13 ) changes in tax laws; Business, Strategy and Operations (14) competition in the insurance industry and new or changing technologies; (15) implementation of our transformative growth strategy; (16) our catastrophe management strategy; (17) restrictions on our subsidiaries’ ability to pay dividends; (18) restrictions under terms of certain of our securities on our ability to pay dividends or repurchase our stock; (19) the availability of reinsurance at current levels and prices; (20) counterparty risk related to reinsurance; (21) acquisitions and divestitures of businesses; (22) intellectual property infringement, misappropriation and third-party claims; Macro, Regulatory and Risk Environment (23) conditions in the global economy and capital markets; (24) a large-scale pandemic, such as the Coronavirus and its impacts, or occurrence of terrorism, military actions or social unrest; (25) the failure in cyber or other information security controls, or the occurrence of events unanticipated in our disaster recovery processes and business continuity planning; (26) changing climate and weather conditions; (27) restrictive regulations and regulatory reforms, including limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (28) losses from legal and regulatory actions; (29) changes in or the application of accounting standards; (30) loss of key vendor relationships or failure of a vendor to protect our data or confidential, proprietary and personal information; (31) our ability to attract, develop and retain key personnel; and (32) misconduct or fraudulent acts by employees, agents and third parties. Additional information concerning these and other factors may be found in our filings with the Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K. Forward- looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statement.