What changed in this filing

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Item 1. Financial Statements

2022-05-04 compared with 2021-11-03 · 383 added, 653 removed, 1302 unchanged (44% of the section changed)

3 unchanged sentences

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

September 30, Nine months ended September 30,

2021 2020 2021 2020

Property and casualty insurance premiums $ 10,981 $ 10,307

2 unchanged sentences

Net investment income 594 708

Realized capital gains (losses) 105 319 818 597

Net gains (losses) on investments and derivatives ( 267 ) 426

Total revenues 12,337 12,451

1 unchanged sentence

Property and casualty insurance claims and claims expense 7,822 6,043

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

Accident, health and other policy benefits 269 242

Amortization of deferred policy acquisition costs 1,612 1,523

9 unchanged sentences

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

Net income 531 1,153 775 2,952

Net income (loss) 646 ( 1,387 )

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

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

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

Preferred stock dividends 26 27

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

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

Earnings per common share applicable to common shareholders

8 unchanged sentences

See notes to condensed consolidated financial statements.

Third Quarter 2021 Form 10-Q 1

First Quarter 2022 Form 10-Q 1

Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Comprehensive Income (unaudited)

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

2021 2020 2021 2020

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

Other comprehensive (loss) income, after-tax

($ in millions) Three months ended March 31,

Net income (loss) $ 646 $ ( 1,387 )

Other comprehensive loss, after-tax

Unrealized net capital gains and losses ( 1,593 ) ( 1,500 )

1 unchanged sentence

Unamortized pension and other postretirement prior service credit ( 15 ) ( 15 )

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

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

Other comprehensive loss, after-tax ( 1,608 ) ( 1,481 )

Comprehensive loss ( 962 ) ( 2,868 )

Comprehensive loss attributable to noncontrolling interest ( 22 ) ( 6 )

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

Comprehensive loss attributable to Allstate $ ( 940 ) $ ( 2,862 )

See notes to condensed consolidated financial statements.

3 unchanged sentences

Condensed Consolidated Statements of Financial Position (unaudited)

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

($ in millions, except par value data) March 31, 2022 December 31, 2021

Fixed income securities, at fair value (amortized cost, net $ 42,027 and $ 41,376 )

4 unchanged sentences

Short-term, at fair value (amortized cost $ 4,345 and $ 4,009 )

Other, net 3,286 1,691

Other investments, net 2,532 2,656

Total investments 61,768 64,701

Cash 1,130 763

Premium installment receivables, net 8,874 8,364

5 unchanged sentences

Other assets, net 6,059 6,086

Assets held for sale 36,803 42,131

Total assets 97,150 99,440

7 unchanged sentences

Long-term debt 7,973 7,976

Liabilities held for sale 32,421 33,325

Total liabilities 74,012 74,313

16 unchanged sentences

See notes to condensed consolidated financial statements.

Third Quarter 2021 Form 10-Q 3

First Quarter 2022 Form 10-Q 3

Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Shareholders’ Equity (unaudited)

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

2021 2020 2021 2020

($ in millions, except per share data) Three months ended March 31,

Preferred stock par value $ — $ —

12 unchanged sentences

Balance, beginning of period 53,294 52,767

Cumulative effect of change in accounting principle — — — ( 88 )

Net income 538 1,153 782 2,952

Net income (loss) 656 ( 1,387 )

Dividends on common stock (declared per share of $ 0.85 and $ 0.81 )

26 unchanged sentences

Condensed Consolidated Statements of Cash Flows (unaudited)

($ in millions) Nine months ended September 30,

($ in millions) Three months ended March 31,

Cash flows from operating activities

Net income $ 775 $ 2,952

Net income (loss) $ 646 $ ( 1,387 )

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and other non-cash items 236 260

Realized capital (gains) losses ( 1,011 ) ( 682 )

Net (gains) losses on investments and derivatives 267 ( 505 )

Pension and other postretirement remeasurement (gains) losses ( 247 ) ( 310 )

29 unchanged sentences

Acquisition of operations, net of cash acquired — ( 3,480 )

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

Net cash provided by investing activities 981 513

Cash flows from financing activities

15 unchanged sentences

See notes to condensed consolidated financial statements.

Third Quarter 2021 Form 10-Q 5

First Quarter 2022 Form 10-Q 5

Notes to Condensed Consolidated Financial Statements

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Basis of presentation

The accompanying condensed consolidated financial statements include the accounts of The Allstate Corporation (the “Corporation”) and its wholly owned subsidiaries, primarily Allstate Insurance Company (“AIC”), a property and casualty insurance company with various property and casualty and life and investment subsidiaries (collectively referred to as the “Company” or “Allstate”) and variable interest entities in which the Company is considered a primary beneficiary.

The accompanying condensed consolidated financial statements include the accounts of The Allstate Corporation (the “Corporation”) and its wholly owned subsidiaries, primarily Allstate Insurance Company (“AIC”), a property and casualty insurance company with various property and casualty and investment subsidiaries (collectively referred to as the “Company” or “Allstate”) and variable interest entities in which the Company is considered a primary beneficiary.

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

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

The condensed consolidated financial statements and notes as of March 31, 2022 and for the three month periods ended March 31, 2022 and 2021 are unaudited.

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

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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.

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

There is no way of predicting with certainty how long the pandemic might last.

1 unchanged sentence

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

Adopted accounting standards

Simplifications to the Accounting for Income Taxes Effective January 1, 2021, the Company adopted new Financial Accounting Standards Board (“FASB”) guidance which simplified the accounting for income taxes by eliminating certain exceptions and clarifying certain guidance.

The adoption had an immaterial impact on the Company’s results of operations and financial position.

Changes to the Disclosure Requirements for Defined Benefit Plans Effective January 1, 2021, the Company adopted new FASB guidance to modify certain annual disclosure requirements for defined benefit plans.

New disclosures include the weighted-average interest crediting rates for cash balance plans and other plans with interest crediting rates and explanations for significant gains and losses related to changes in the benefit obligation during the reporting period.

Disclosures to be eliminated include amounts expected to be reclassified out of AOCI and into the income statement in the coming year and the anticipated impact of a one-percentage point change in the assumed health care cost trend rate on service and interest cost and on the accumulated benefit obligation.

The impacts of adoption are to the Company’s annual disclosures only.

Significant accounting policies

Consolidation of Variable Interest Entities (“VIEs”) A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not participate in the gains and losses of the entity.

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

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

Discontinued Operations and Held for Sale

A business is classified as held for sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value and certain other criteria are met.

A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell.

When the carrying amount of the business exceeds its estimated fair value less cost to sell, a loss is recognized and updated each reporting period as appropriate.

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Notes to Condensed Consolidated Financial Statements

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

The disposal of a reportable segment generally qualifies for discontinued operations presentation.

When a business is identified for discontinued operations reporting:

• Results for prior periods are retrospectively reclassified as discontinued operations

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

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

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

Pending accounting standards

Pending accounting standard

Accounting for Long-Duration Insurance Contracts In August 2018, the FASB issued guidance revising the accounting for certain long-duration insurance contracts.

As disclosed in Note 3, the Company sold substantially all of its life and annuity business in scope of the new standard.

The Company’s reserves and deferred policy acquisition costs (“DAC”) for certain voluntary and individual life and accident and health insurance products not held for sale are subject to the new guidance.

The Company’s reserves and deferred policy acquisition costs (“DAC”) for certain voluntary and individual life and accident and health insurance products are subject to the new guidance.

Under the new guidance, measurement assumptions, including those for mortality, morbidity and policy terminations, will be required to be reviewed at least annually, and updated as appropriate.

6 unchanged sentences

The new guidance will be applied to affected contracts and DAC on the basis of existing carrying amounts at the earliest period presented.

The Company is evaluating the anticipated impacts of applying the new guidance to both retained income and AOCI and does not anticipate the financial statement impact of adopting the new guidance to be material to the Company’s results of operations or financial position due to the dispositions of Allstate Life Insurance Company and Allstate Life Insurance Company of New York.

Third Quarter 2021 Form 10-Q 7

The Company is evaluating the anticipated impacts of applying the new guidance to both retained income and AOCI and does not anticipate the financial statement impact of adopting the new guidance to be material to the Company’s results of operations or financial position due to the 2021 dispositions of Allstate Life Insurance Company (“ALIC”), Allstate Life Insurance Company of New York (“ALNY”) and certain affiliates.

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Notes to Condensed Consolidated Financial Statements

6 unchanged sentences

Computation of basic and diluted earnings per common share

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

2021 2020 2021 2020

(In millions, except per share data) Three months ended March 31,

Net income from continuing operations $ 646 $ 2,406

4 unchanged sentences

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

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

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

Weighted average common shares outstanding

293.1 311.2 298.1 314.1

Effect of dilutive potential common shares:

Stock options

3.1 1.6 2.9 2.3

Restricted stock units (non-participating) and performance stock awards

1.7 1.3 1.6 1.5

Weighted average common and dilutive potential common shares outstanding

297.9 314.1 302.6 317.9

Earnings per common share applicable to common shareholders

6 unchanged sentences

Anti-dilutive options excluded from diluted earnings per common share

0.6 4.2 1.3 3.0

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First Quarter 2022 Form 10-Q 7

Notes to Condensed Consolidated Financial Statements

Note 3 Acquisitions and Dispositions

SafeAuto On June 1, 2021, the Company announced an agreement to acquire Safe Auto Insurance Group, Inc.

(“SafeAuto”), a non-standard auto insurance carrier focused on providing state-minimum private-passenger auto insurance with coverage options in 28 states.

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

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

(“National General”), an insurance holding company serving customers predominantly through independent agents for property and casualty and accident and health products.

National General provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed, health and other niche insurance products.

This acquisition will increase the Company’s market share in personal property-liability and enhance its independent agent distribution platform.

Assets and liabilities recognized in the National General acquisition (1)

14 unchanged sentences

Total liabilities $ 7,090

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

The acquisition date fair values of assets and liabilities, including insurance reserves and intangible assets, as well as the related estimated useful lives of intangibles, are preliminary estimates and are subject to revisions within one year of acquisition date.

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

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

1 unchanged sentence

(3) Subsequent to the acquisition, the Company repaid $ 100 million of 7.625 % Subordinated Notes and $ 72 million of Subordinated Debentures on February 3, 2021 and March 15, 2021, respectively.

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

Intangible assets by type

($ in millions) January 4, 2021

Distribution and customer relationships $ 795

Trade names 102

Technology 205

Total $ 1,199

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

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

The estimated useful lives of these assets generally range from 3 to 10 years.

The estimated fair value of distribution and customer relationship intangible assets was determined using an income approach that considered cash flows and profits expected to be generated by the acquired relationships, a weighted-average cost of capital discount rate reflecting the relative risk of achieving the anticipated cash flows, profits, the time value of money, and other relevant inputs.

Technology and trade names were valued using estimated useful

Third Quarter 2021 Form 10-Q 9

Notes to Condensed Consolidated Financial Statements

lives and market licensing rates discounted at a weighted-average cost of capital.

Licenses are primarily insurance licenses which were valued using the median value of market transactions executed over an extended observation period.

Licenses are considered to have an indefinite useful life and are reviewed for impairment at least annually or more frequently if circumstances arise that indicate an impairment may have occurred.

An impairment is recognized if the carrying amount of the asset exceeds its estimated fair value.

Intangible assets are carried at cost less accumulated amortization.

Amortization expense is primarily calculated using accelerated amortization methods.

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

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

($ in millions)

Thereafter 140

Total amortization $ 851

Value of business acquired (reported in DAC in the Condensed Consolidated Statements of Financial Position) recognized in connection with the acquisition of National General represents the value of future profits expected to be earned over the lives of the contracts acquired determined using a weighted-average cost of capital discount and other relevant assumptions.

These costs are amortized over the policy term of the contracts in force at the acquisition date, generally over six or twelve months .

The value of business acquired asset recognized in connection with the National General acquisition totaled $ 317 million;

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

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

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

Preferred stock Subsequent to the acquisition, the Company redeemed all outstanding shares of 7.50 % Non-Cumulative Preferred Stock, Series A, par value $ 0.01 per share, all outstanding Depositary shares, representing 1/40th of a Share of 7.50 % Non-Cumulative Preferred Stock, Series B, and the

underlying shares of 7.50 % Non-Cumulative Preferred Stock, Series B, par value $ 0.01 per share, and all outstanding shares of Fixed/Floating Rate Non-Cumulative Convertible Preferred Stock, Series D, par value $ 0.01 per share for a total redemption payment of $ 250 million.

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

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

On January 26, 2021, the Company entered into a Stock Purchase Agreement with Everlake US Holdings Company (formerly Antelope US Holdings Company), an affiliate of an investment fund associated with The Blackstone Group Inc.

to sell Allstate Life Insurance Company and certain affiliates.

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

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

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

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

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.

As of March 31, 2022, the Company had principal balance remaining of $ 350 million 6.750 % Senior Notes due 2024, with a fair value adjustment of $ 40 million.

SafeAuto On October 1, 2021, the Company completed the acquisition of Safe Auto Insurance Group, Inc.

(“SafeAuto”), a non-standard auto insurance carrier focused on providing state-minimum private-passenger auto insurance direct to consumers with coverage options in 28 states for $ 262 million in cash.

Life and annuity business On October 1, 2021, the Company closed the sale of ALNY to Wilton Reassurance Company for $ 400 million.

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

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

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Notes to Condensed Consolidated Financial Statements

Beginning in the first quarter of 2021, the assets and liabilities of the business were reclassified as held for sale and results are presented as discontinued operations.

This change was applied on a retrospective basis.

Financial results from discontinued operations

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

Three months ended March 31,

($ in millions) 2021

1 unchanged sentence

Net investment income 439

Realized capital gains (losses) 4 121 193 85

Net gains (losses) on investments and derivatives 79

Total revenues 858

13 unchanged sentences

Loss on disposition of operations, net of tax ( 3,998 )

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

Major classes of assets and liabilities to be transferred in transactions

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

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

$ 27,469 $ 23,789

Equity securities, at fair value (cost $ 23 and $ 1,113 )

Mortgage loans, net 2,719 3,329

Limited partnership interests 1,633 3,046

Short-term, at fair value (amortized cost $ 1,155 and $ 993 )

Other, net 827 1,998

Total investments 33,819 34,697

Deferred policy acquisitions costs 992 925

Reinsurance recoverables, net 1,930 2,005

Accrued investment income 242 229

Other assets 359 865

Separate accounts 3,335 3,344

Assets held for sale 40,833 42,131

loss accrual 4,030 —

Total assets held for sale $ 36,803 $ 42,131

Reserve for future policy benefits $ 11,579 $ 11,740

Contractholder funds 15,897 16,356

Deferred income taxes 945 973

Other liabilities and accrued expenses 665 912

Separate accounts 3,335 3,344

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

Third Quarter 2021 Form 10-Q 11

Notes to Condensed Consolidated Financial Statements

Loss from discontinued operations, net of tax $ ( 3,793 )

Cash flows from discontinued operations

Nine months ended September 30,

Three months ended March 31,

($ in millions) 2021

Net cash provided by operating activities from discontinued operations $ 64

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

Net cash provided by investing activities from discontinued operations 88

Note 4 Reportable Segments

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 (previously Discontinued Lines and Coverages) segments and adjusted net income for the Protection Services, Allstate Health and Benefits (previously Allstate Benefits) and Corporate and Other segments.

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.

National General results are included in the following segments:

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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

• Net gains and losses on investments and derivatives

• Pension and other postretirement remeasurement gains and losses

1 unchanged sentence

• Income or loss from discontinued operations

• Gain or loss on disposition of operations

• Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years

1 unchanged sentence

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

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First Quarter 2022 Form 10-Q 9

Notes to Condensed Consolidated Financial Statements

Reportable segments financial performance

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

Three months ended March 31,

($ in millions) 2022 2021

2 unchanged sentences

Run-off Property-Liability

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

Total Property-Liability 280 1,657

5 unchanged sentences

Property-Liability net investment income 558 673

Realized capital gains (losses) 105 319 818 597

Net gains (losses) on investments and derivatives ( 267 ) 426

Pension and other postretirement remeasurement gains (losses) 247 310

Curtailment gains (losses) — 8 — 8

Business combination expenses and amortization of purchased intangibles (1)

( 29 ) ( 56 )

Business combination fair value adjustment — — 6 —

Gain (loss) on disposition of operations ( 16 ) —

Income tax expense on reconciling items ( 148 ) ( 622 )

Total reconciling items 345 731

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

Loss from discontinued operations — ( 4,163 )

Income tax benefit from discontinued operations — 370

1 unchanged sentence

Net loss attributable to noncontrolling interest (2)

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

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

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

Third Quarter 2021 Form 10-Q 13

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

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Notes to Condensed Consolidated Financial Statements

Reportable segments revenue information

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

2021 2020 2021 2020

($ in millions) Three months ended March 31,

Property-Liability

9 unchanged sentences

Net investment income 558 673

Realized capital gains (losses) 94 292 763 571

Net gains (losses) on investments and derivatives ( 203 ) 404

Total Property-Liability 11,200 11,358

4 unchanged sentences

Intersegment premiums and service fees (1)

46 36 133 109

Other revenue 94 90

Net investment income 9 10

Realized capital gains (losses) 4 14 20 9

Net gains (losses) on investments and derivatives ( 13 ) 10

Total Protection Services 614 562

2 unchanged sentences

Group health 94 83

Individual accident and health 119 — 333 —

Individual health 109 109

Other revenue 95 80

Net investment income 17 19

Realized capital gains (losses) ( 1 ) 3 5 —

Net gains (losses) on investments and derivatives ( 7 ) 2

Total Allstate Health and Benefits

562 308 1,671 890

Corporate and Other

1 unchanged sentence

Net investment income 10 6

Realized capital gains (losses) 8 10 30 17

Net gains (losses) on investments and derivatives ( 44 ) 10

Total Corporate and Other ( 10 ) 16

3 unchanged sentences

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

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First Quarter 2022 Form 10-Q 11

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Portfolio composition

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

($ in millions) March 31, 2022 December 31, 2021

Fixed income securities, at fair value $ 40,745 $ 42,136

3 unchanged sentences

Short-term investments, at fair value 4,344 4,009

Other, net 3,286 1,691

Other investments, net 2,532 2,656

Total $ 61,768 $ 64,701

1 unchanged sentence

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

September 30, 2021

March 31, 2022

government and agencies $ 6,613 $ 3 $ ( 131 ) $ 6,485

3 unchanged sentences

ABS 2,183 11 ( 21 ) 2,173

MBS 33 1 — 34

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

5 unchanged sentences

ABS 1,143 14 ( 2 ) 1,155

MBS 58 1 — 59

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

Scheduled maturities for fixed income securities

($ in millions) September 30, 2021

Amortized cost, net Fair value

($ in millions) March 31, 2022 December 31, 2021

Amortized cost, net Fair value Amortized cost, net Fair value

Due in one year or less $ 1,454 $ 1,455 $ 1,105 $ 1,111

3 unchanged sentences

39,844 38,572 40,233 40,981

ABS and MBS 1,090 1,104

ABS 2,183 2,173 1,143 1,155

Total $ 42,027 $ 40,745 $ 41,376 $ 42,136

Actual maturities may differ from those scheduled as a result of calls and make-whole payments by the issuers.

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

Third Quarter 2021 Form 10-Q 15

Notes to Condensed Consolidated Financial Statements

ABS is shown separately because of potential prepayment of principal prior to contractual maturity dates.

Net investment income

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

2021 2020 2021 2020

($ in millions) Three months ended March 31,

Fixed income securities $ 267 $ 301

3 unchanged sentences

Short-term investments 2 1

Other 50 29 139 91

Other investments 40 41

Investment income, before expense 645 745

1 unchanged sentence

Net investment income

$ 764 $ 464 $ 2,446 $ 930

Realized capital gains (losses) by asset type

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

2021 2020 2021 2020

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Notes to Condensed Consolidated Financial Statements

Net gains (losses) on investments and derivatives by asset type

($ in millions) Three months ended March 31,

Fixed income securities $ ( 152 ) $ 183

3 unchanged sentences

Derivatives 318 11

Other ( 18 ) 3 67 ( 17 )

Realized capital gains (losses) $ 105 $ 319 $ 818 $ 597

Realized capital gains (losses) by transaction type

Other investments 16 58

Net gains (losses) on investments and derivatives $ ( 267 ) $ 426

Net gains (losses) on investments and derivatives by transaction type

($ in millions)

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

2021 2020 2021 2020

Three months ended March 31,

Sales $ ( 127 ) $ 246

Credit losses ( 11 ) 2

Valuation of equity investments (1)

( 9 ) 128 321 ( 198 )

Valuation and settlements of derivative instruments 46 ( 30 ) 54 62

Realized capital gains (losses) $ 105 $ 319 $ 818 $ 597

(1) Includes valuation of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities.

Valuation change of equity investments (1)

Valuation change and settlements of derivatives 318 11

Net gains (losses) on investments and derivatives $ ( 267 ) $ 426

(1) Includes valuation change of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities.

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

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

2021 2020 2021 2020

($ in millions) Three months ended March 31,

Gross realized gains $ 66 $ 245

Gross realized losses ( 218 ) ( 64 )

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

Net appreciation (decline) recognized in net income

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

2021 2020 2021 2020

($ in millions) Three months ended March 31,

Equity securities $ ( 92 ) $ 125

Limited partnership interests carried at fair value

137 73 415 20

Total $ ( 54 ) $ 266

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Notes to Condensed Consolidated Financial Statements

Credit losses recognized in net income

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

2021 2020 2021 2020

($ in millions) Three months ended March 31,

Fixed income securities:

Corporate $ — $ 1

ABS — — 1 ( 2 )

Total fixed income securities — 2

Mortgage loans ( 1 ) 6

Limited partnership interests — — — ( 6 )

Other investments

Bank loans ( 10 ) ( 6 )

Agent loans 1 — — —

Total credit losses by asset type $ ( 11 ) $ 2

Commitments to fund commercial mortgage loans, bank loans and agent loans — 1 — 1

Commitments to fund commercial mortgage loans and bank loans — —

Total $ ( 11 ) $ 2

Third Quarter 2021 Form 10-Q 17

First Quarter 2022 Form 10-Q 13

Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

gains (losses)

September 30, 2021 Gains Losses

March 31, 2022 Gains Losses

Fixed income securities $ 40,745 $ 189 $ ( 1,471 ) $ ( 1,282 )

2 unchanged sentences

Equity method of accounting (“EMA”) limited partnerships (1)

Investments classified as held for sale 1,796

Unrealized net capital gains and losses, pre-tax ( 1,282 )

Amounts recognized for:

Insurance reserves (2)

DAC and DSI (3)

Reclassification of noncontrolling interest 16

7 unchanged sentences

EMA limited partnerships (1)

Investments classified as held for sale 2,369

Unrealized net capital gains and losses, pre-tax 756

Amounts recognized for:

Insurance reserves ( 496 )

DAC and DSI ( 364 )

Reclassification of noncontrolling interest 4

Amounts recognized 5

3 unchanged sentences

Fair value and gross unrealized gains and losses are not applicable.

(2) The insurance reserves adjustment represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product portfolios were realized and reinvested at lower interest rates, resulting in a premium deficiency.

This adjustment primarily relates to structured settlement annuities with life contingencies (a type of immediate fixed annuity), which are now classified as held for sale.

(3) The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.

This adjustment relates to life insurance products, which are now primarily classified as held for sale.

(2) The DAC balance represents the amount by which the amortization of DAC would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.

Change in unrealized net capital gains (losses)

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

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

Fixed income securities $ ( 2,042 )

2 unchanged sentences

EMA limited partnerships 5

Investments classified as held for sale ( 573 )

Total ( 2,038 )

Amounts recognized for:

Insurance reserves 113

DAC and DSI 93

Reclassification of noncontrolling interest 12

2 unchanged sentences

Decrease in unrealized net capital gains and losses, after-tax $ ( 1,593 )

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Notes to Condensed Consolidated Financial Statements

Carrying value for limited partnership interests

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

($ in millions) March 31, 2022 December 31, 2021

EMA Fair Value Total EMA Fair Value Total

2 unchanged sentences

501 — 501 759 — 759

$ 6,023 $ 1,555 $ 7,578 $ 3,501 $ 1,062 $ 4,563

Total $ 6,487 $ 1,490 $ 7,977 $ 6,487 $ 1,531 $ 8,018

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

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

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Notes to Condensed Consolidated Financial Statements

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

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

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

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

As of March 31, 2022 and December 31, 2021, the fair value of short-term investments totaled $ 4.34 billion and $ 4.01 billion, respectively.

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

Bank loans are primarily senior secured corporate loans and are carried at amortized cost, net.

1 unchanged sentence

Real estate is carried at cost less accumulated depreciation.

Agent loans are loans issued to exclusive Allstate agents and are carried at amortized cost, net.

Derivatives are carried at fair value.

Other investments by asset type

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

($ in millions) March 31, 2022 December 31, 2021

Bank loans, net $ 1,520 $ 1,574

Real estate 750 809

Agent loans, net 567 —

Policy loans 144 148

Derivatives 7 12

$ 3,286 $ 1,691

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

Other 111 113

Total $ 2,532 $ 2,656

Portfolio monitoring and credit losses

4 unchanged sentences

The Company calculates the estimated recovery value based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts.

The estimated future cash flows

are discounted at the security’s current effective rate and is compared to the amortized cost of the security.

The estimated future cash flows are discounted at the security’s current effective rate and is compared to the amortized cost of the security.

The determination of cash flow estimates is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the security.

All reasonably available information relevant to the collectability of the security is considered when developing the estimate of cash flows expected to be collected.

That information generally includes, but is not limited to, the remaining payment terms of the security, prepayment speeds, the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements.

enhancements.

Other information, such as industry analyst reports and forecasts, credit ratings, financial condition of the bond insurer for insured fixed income securities, and other market data relevant to the realizability of contractual cash flows, may also be considered.

The estimated fair value of collateral will be used to estimate recovery value if the Company determines that the security is dependent on the liquidation of collateral for ultimate settlement.

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

Third Quarter 2021 Form 10-Q 19

Notes to Condensed Consolidated Financial Statements

allowance is recorded in earnings for the shortfall in expected cash flows;

If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed income security, a credit loss allowance is recorded in earnings for the shortfall in expected cash flows;

however, the amortized cost, net of the credit loss allowance, may not be lower than the fair value of the security.

3 unchanged sentences

Recoveries after write-offs are recognized when received.

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

Accrued interest excluded from the amortized cost of fixed income securities totaled $ 305 million and $ 311 million as of March 31, 2022 and December 31, 2021 and is reported within the accrued investment income line of the Condensed Consolidated Statements of Financial Position.

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

First Quarter 2022 Form 10-Q 15

Notes to Condensed Consolidated Financial Statements

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

1 unchanged sentence

The securities identified, in addition to other securities for which the Company may have a concern, are evaluated for potential credit losses using all reasonably available information relevant to the collectability or recovery of the security.

Inherent in the Company’s evaluation of credit losses for these securities are assumptions and estimates about the financial condition and future earnings potential of the issue or issuer.

Inherent in the Company’s evaluation of credit losses for these securities are assumptions and estimates about the financial condition and future

earnings potential of the issue or issuer.

Some of the factors that may be considered in evaluating whether a decline in fair value requires a credit loss allowance are:

3 unchanged sentences

Rollforward of credit loss allowance for fixed income securities

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

Three months ended March 31,

($ in millions) 2022 2021

6 unchanged sentences

$ ( 6 ) $ ( 1 )

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

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

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

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Notes to Condensed Consolidated Financial Statements

(1) Allowance for fixed income securities as of March 31, 2022 comprised $ 6 million of corporate bonds.

Allowance for fixed income securities as of March 31, 2021 comprised $ 1 million of ABS that were classified as held for sale.

Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position

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

September 30, 2021

March 31, 2022

Fixed income securities

4 unchanged sentences

ABS 175 1,917 ( 21 ) 56 11 — ( 21 )

MBS 18 2 — 47 — — —

Total fixed income securities 5,102 $ 30,188 $ ( 1,312 ) 438 $ 1,612 $ ( 159 ) $ ( 1,471 )

9 unchanged sentences

ABS 80 500 ( 2 ) 53 8 — ( 2 )

MBS 11 — — 57 — — —

Total fixed income securities 2,207 $ 17,304 $ ( 223 ) 85 $ 227 $ ( 19 ) $ ( 242 )

2 unchanged sentences

Total fixed income securities 2,207 $ 17,304 $ ( 223 ) 85 $ 227 $ ( 19 ) $ ( 242 )

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

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Notes to Condensed Consolidated Financial Statements

Gross unrealized losses by unrealized loss position and credit quality as of March 31, 2022

($ in millions) Investment

10 unchanged sentences

Investment grade 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 Global Ratings (“S&P”), a comparable rating from another nationally recognized rating agency, or a comparable internal rating if an externally provided rating is not available.

Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the

current third-party rating.

Unrealized losses on investment grade securities are principally related to an increase in market yields which may include increased risk-free interest rates and/or wider credit spreads since the time of initial purchase.

Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating.

Unrealized losses on investment grade securities are principally related to an increase in market yields which may include increased risk-free interest rates or wider credit spreads since the time of initial purchase.

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

Third Quarter 2021 Form 10-Q 21

Notes to Condensed Consolidated Financial Statements

ABS and MBS in an unrealized loss position were evaluated based on actual and projected collateral losses relative to the securities’ positions in the respective securitization trusts, security specific expectations of cash flows, and credit ratings.

ABS in an unrealized loss position were evaluated based on actual and projected collateral losses relative to the securities’ positions in the respective securitization trusts, security specific expectations of cash flows, and credit ratings.

This evaluation also takes into consideration credit enhancement, measured in terms of (i) subordination from other classes of securities in the trust that are contractually obligated to absorb losses before the class of security the Company owns, and (ii) the expected impact of other structural features embedded in the securitization trust beneficial to the class of securities the Company owns, such as overcollateralization and excess spread.

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

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

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

The Company uses a probability of default and loss given default model for mortgage loans and bank loans to estimate current expected credit losses that considers all relevant information available including past events, current conditions, and reasonable and supportable forecasts over the life of an asset.

As of March 31, 2022, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost basis.

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

The Company uses a probability of default and loss given default model for mortgage loans and bank loans to estimate current expected credit losses that considers all relevant

information available including past events, current conditions, and reasonable and supportable forecasts over the life of an asset.

The Company also considers such factors as historical losses, expected prepayments and various economic factors.

2 unchanged sentences

After the reasonable and supportable forecast period, the Company’s model reverts to historical loss trends.

Given the less complex and homogenous nature of agent loans, the Company estimates current expected credit losses using historical loss experience over the estimated life of the loans, adjusted for current conditions, reasonable and supportable forecasts and expected prepayments.

Loans are evaluated on a pooled basis when they share similar risk characteristics.

6 unchanged sentences

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

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

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

Accrued interest

($ in millions) March 31, December 31,

Mortgage loans $ 3 $ 2

Bank Loans 7 4

First Quarter 2022 Form 10-Q 17

Notes to Condensed Consolidated Financial Statements

Mortgage loans When it is determined a mortgage loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as using collateral value less estimated costs to sell where applicable, including when foreclosure is probable or when repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty.

5 unchanged sentences

Debt service coverage ratio estimates are updated annually or more frequently if conditions are warranted based on the Company’s credit monitoring process.

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Notes to Condensed Consolidated Financial Statements

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

($ in millions) 2017 and prior 2018 2019 2020 2021 Current Total Total

8 unchanged sentences

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

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

Payments on all mortgage loans were current as of March 31, 2022 and December 31, 2021.

Rollforward of credit loss allowance for mortgage loans

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

Three months ended March 31,

($ in millions) 2022 2021

Beginning balance $ ( 6 ) $ ( 67 )

Cumulative effect of change in accounting principle — — — ( 42 )

Net decreases (increases) related to credit losses 2 1 39 ( 40 )

Net (increases) decreases related to credit losses ( 1 ) 22

Write-offs — —

1 unchanged sentence

$ ( 7 ) $ ( 45 )

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

(1) Includes $ 31 million of credit loss allowance for mortgage loans that were classified as held for sale as of March 31, 2021.

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

2 unchanged sentences

The year of origination is determined to be the year in which the asset is acquired.

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Notes to Condensed Consolidated Financial Statements

Bank loans amortized cost by credit rating and year of origination

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

($ in millions) 2017 and prior 2018 2019 2020 2021 Current Total Total

6 unchanged sentences

Amortized cost, net $ 1,520 $ 1,574

Third Quarter 2021 Form 10-Q 23

Notes to Condensed Consolidated Financial Statements

Rollforward of credit loss allowance for bank loans

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

2021 2020 2021 2020

($ in millions) Three months ended March 31,

Beginning balance $ ( 61 ) $ ( 67 )

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

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

Net increases related to credit losses ( 10 ) ( 2 )

Reduction of allowance related to sales 3 9

2 unchanged sentences

$ ( 68 ) $ ( 60 )

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

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

The categorization is based on relevant information about the ability of borrowers to service their debt, such as historical payment experience, current business trends, cash flow coverage and collateral quality.

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

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

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

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

(1) Includes $ 11 million of credit loss allowance for bank loans that were classified as held for sale as of March 31, 2021.

Note 6 Fair Value of Assets and Liabilities

10 unchanged sentences

The availability of observable inputs varies by instrument.

In situations where fair value is based on internally developed pricing models or inputs that are

unobservable in the market, the determination of fair value requires more judgment.

In situations where fair value is based on internally developed pricing models or inputs that are unobservable in the market, the determination of fair value requires more judgment.

The degree of judgment exercised by the Company in determining fair value is typically greatest for instruments categorized in Level 3.

6 unchanged sentences

For fair values received from third parties or internally estimated, the Company’s processes and controls are designed to ensure that the valuation methodologies are appropriate and consistently applied, the inputs and assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded.

For example, on a continuing basis, the Company assesses the reasonableness of individual fair values that have stale security prices or that exceed certain thresholds as compared to previous fair values received from valuation service providers or brokers or derived from internal models.

The Company performs procedures to understand and assess the methodologies, processes and controls of

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For example, on a continuing basis, the Company assesses the reasonableness of individual fair values that have stale security prices or

First Quarter 2022 Form 10-Q 19

Notes to Condensed Consolidated Financial Statements

valuation service providers.

that exceed certain thresholds as compared to previous fair values received from valuation service providers or brokers or derived from internal models.

The Company performs procedures to understand and assess the methodologies, processes and controls of valuation service providers.

In addition, the Company may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third-party valuation sources for selected securities.

7 unchanged sentences

The indicators considered in determining whether a significant decrease in the volume and level of activity for a specific asset has occurred include the level of new issuances in the primary market, trading volume in the secondary market, the level of credit spreads over historical levels, applicable bid-ask spreads, and price consensus among market participants and other pricing sources.

Certain assets are not carried at fair value on a recurring basis, including mortgage loans, bank loans, agent loans and policy loans and are only included in the fair value hierarchy disclosure when the individual investment is reported at fair value.

Certain assets are not carried at fair value on a recurring basis, including mortgage loans, bank loans and policy loans and are only included in the fair value hierarchy disclosure when the individual investment is reported at fair value.

In determining fair value, the Company principally uses the market approach which generally utilizes market transaction data for the same or similar instruments.

12 unchanged sentences

Certain ABS are valued based on non-binding broker quotes whose inputs have been corroborated to be market observable.

Residential MBS include prepayment speeds as a primary input for valuation.

Residential MBS, included in ABS, use prepayment speeds as a primary input for valuation.

• Equity securities:

6 unchanged sentences

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

Third Quarter 2021 Form 10-Q 25

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Notes to Condensed Consolidated Financial Statements

services industry and do not involve significant judgment.

• Assets held for sale:

Comprise U.S.

government and agencies, municipal, corporate, foreign government, ABS and MBS fixed income securities, equity securities, short-term investments and other investments.

The valuation is based on the respective asset type as described above.

• Liabilities held for sale:

Comprise other liabilities, mainly free-standing exchange listed derivatives, that are not actively traded and are valued based on quoted prices for identical instruments in markets that are not active.

Level 3 measurements

3 unchanged sentences

Also included are municipal bonds valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable and municipal bonds in default valued based on the present value of expected cash flows.

Corporate - public and privately placed, ABS and MBS:

Corporate - public and privately placed and ABS:

Primarily valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable.

1 unchanged sentence

• Equity securities:

The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets in markets that exhibit less liquidity relative to those markets supporting Level 2 fair value measurements.

The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets in markets that are less active relative to those markets supporting Level 2 fair value measurements.

• Short-term:

1 unchanged sentence

• Other investments:

Certain OTC derivatives, such as interest rate caps, certain credit default swaps

and certain options (including swaptions), are valued using models that are widely accepted in the financial services industry.

Certain OTC derivatives, such as interest rate caps, certain credit default swaps and certain options (including swaptions), are valued using models that are widely accepted in the financial services industry.

These are categorized as Level 3 as a result of the significance of non-market observable inputs such as volatility.

Other primary inputs include interest rate yield curves and credit spreads, and quoted prices for identical or similar assets in markets that exhibit less liquidity relative to those markets supporting Level 2 fair value measurements.

• Other assets:

Includes the contingent consideration provision in the sale agreement for

ALIC which meets the definition of a derivative.

This derivative is valued internally using a model that includes stochastically determined cash flows and inputs that include spot and forward interest rates, volatility, corporate credit spreads and a liquidity discount.

This derivative is categorized as Level 3 due to the significance of non-market observable inputs.

• Assets held for sale:

Comprise municipal, corporate, ABS and MBS fixed income securities and equity securities.

Comprise municipal, corporate and ABS fixed income securities and equity securities.

The valuation is based on the respective asset type as described above.

9 unchanged sentences

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

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

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As of March 31, 2022, the Company has commitments to invest $ 233 million in these limited partnership interests.

First Quarter 2022 Form 10-Q 21

Notes to Condensed Consolidated Financial Statements

Assets and liabilities measured at fair value

September 30, 2021

March 31, 2022

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

6 unchanged sentences

ABS — 2,154 19 2,173

MBS — 26 8 34

Total fixed income securities 6,459 34,071 215 40,745

3 unchanged sentences

Other assets 4 — 77 81

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

Total recurring basis assets 12,168 37,675 678 ( 27 ) 50,494

3 unchanged sentences

Investments reported at NAV 1,490

Assets held for sale at NAV 549

Total $ 52,016

Other liabilities $ ( 13 ) $ ( 28 ) $ — $ 7 $ ( 34 )

Liabilities held for sale — ( 73 ) ( 479 ) ( 4 ) ( 556 )

Total recurring basis liabilities ( 13 ) ( 28 ) — 7 ( 34 )

1 unchanged sentence

% of total liabilities at fair value 38.2 % 82.4 % — % ( 20.6 ) % 100.0 %

Third Quarter 2021 Form 10-Q 27

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Notes to Condensed Consolidated Financial Statements

9 unchanged sentences

ABS — 1,115 40 1,155

MBS — 32 27 59

Total fixed income securities 6,247 35,745 144 42,136

3 unchanged sentences

Other assets 1 — 65 66

Assets held for sale 6,488 23,103 267 ( 6 ) 29,852

Total recurring basis assets 13,700 39,043 565 ( 22 ) 53,286

Non-recurring basis — — 32 32

Total assets at fair value $ 13,700 $ 39,043 $ 597 $ ( 22 ) $ 53,318

1 unchanged sentence

Investments reported at NAV 1,531

Assets held for sale at NAV 762

Total $ 54,849

Other liabilities $ ( 3 ) $ ( 12 ) $ — $ 7 $ ( 8 )

Liabilities held for sale — ( 119 ) ( 516 ) 9 ( 626 )

Total recurring basis liabilities ( 3 ) ( 12 ) — 7 ( 8 )

2 unchanged sentences

Quantitative information about the significant unobservable inputs used in Level 3 fair value measurements (1)

March 31, 2021

($ in millions) Fair value Valuation

1 unchanged sentence

input Range Weighted

September 30, 2021

Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options $( 435 ) Stochastic cash flow model Projected option cost 1.0 - 4.2 %

December 31, 2020

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

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

(1) These were included in the liabilities held for sale as of March 31, 2021

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

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

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

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

These life and annuity products were included in the sales of ALIC, ALNY and certain affiliates.

As of March 31, 2022 and December 31, 2021, Level 3 fair value measurements of fixed income securities total $ 215 million and $ 144 million, respectively, and include $ 34 million and $ 41 million, respectively, of securities valued based on non-binding broker quotes

where the inputs have not been corroborated to be market observable and $ 15 million and $ 16 million, respectively, of municipal fixed income securities that are not rated by third-party credit rating agencies.

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

However, an increase (decrease) in credit spreads for fixed income securities valued based on non-binding broker quotes would result in a lower (higher) fair value, and an increase (decrease) in the credit rating of municipal bonds that are not rated by third-party credit rating agencies would result in a higher (lower) fair value.

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First Quarter 2022 Form 10-Q 23

Notes to Condensed Consolidated Financial Statements

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

Balance as of

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

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

September 30, 2021

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

Fixed income securities:

Municipal $ 18 $ — $ ( 1 ) $ — $ — $ — $ — $ — $ — $ — $ 17

Corporate - public 20 — — — — ( 1 ) — — — — 19

Corporate - privately placed 84 1 1 — ( 22 ) ( 2 ) 104 ( 7 ) — ( 5 ) 154

ABS 10 — — 1 — — 5 — — ( 15 ) 1

MBS 23 — — — — — — — — ( 15 ) 8

Total fixed income securities 155 1 — 1 ( 22 ) ( 3 ) 109 ( 7 ) — ( 35 ) 199

Equity securities 405 31 — — — — 27 ( 87 ) — — 376

Short-term investments — — — — — — 14 — — — 14

Other investments 3 — — — — — — ( 1 ) — — 2

Assets held for sale 164 1 — — ( 20 ) 3 — — — ( 2 ) 146

Total recurring Level 3 assets 727 33 — 1 ( 42 ) — 150 ( 95 ) — ( 37 ) 737

Liabilities held for sale ( 490 ) 15 — — — — — — ( 9 ) 5 ( 479 )

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

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

Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended March 31, 2022

Balance as of

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

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

September 30, 2021

Transfers Balance as of

March 31, 2022

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

4 unchanged sentences

ABS 40 1 — — ( 28 ) 7 — — ( 1 ) 19

MBS 27 — — — — — — ( 5 ) — ( 14 ) 8

Total fixed income securities 144 1 ( 1 ) — ( 28 ) 105 ( 4 ) — ( 2 ) 215

2 unchanged sentences

Other investments 2 — — — — — — — — 2

Assets held for sale 267 3 — 5 ( 13 ) ( 108 ) 3 ( 6 ) — ( 5 ) 146

Total recurring Level 3 assets 832 68 — 13 ( 45 ) — 236 ( 265 ) — ( 102 ) 737

Liabilities held for sale ( 516 ) 46 — — — — — — ( 25 ) 16 ( 479 )

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

Third Quarter 2021 Form 10-Q 29

Notes to Condensed Consolidated Financial Statements

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

Balance as of

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

Transfers Balance

as of September 30, 2020

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

Fixed income securities:

Municipal $ 26 $ — $ — $ — $ ( 7 ) $ — $ ( 2 ) $ — $ — $ 17

Corporate - public 43 — 9 — — 59 ( 10 ) — — 101

Corporate - privately placed 52 — — — ( 19 ) 34 ( 2 ) — — 65

ABS 45 ( 1 ) 1 — ( 2 ) 17 ( 23 ) — — 37

MBS 44 — — — — — — — ( 15 ) 29

Total fixed income securities 210 ( 1 ) 10 — ( 28 ) 110 ( 37 ) — ( 15 ) 249

Equity securities 273 — — — ( 1 ) 4 ( 5 ) — — 271

Short-term investments 10 1 — — — 19 — — — 30

Assets held for sale 281 2 — 20 ( 46 ) 53 ( 5 ) — — 305

Other assets 65 12 — — — — — — — 77

Total recurring Level 3 assets 565 38 ( 1 ) — ( 28 ) 113 ( 7 ) — ( 2 ) 678

Liabilities held for sale ( 488 ) ( 6 ) — — — — — ( 10 ) 7 ( 497 )

Total recurring Level 3 liabilities $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

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

Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended March 31, 2021

Balance as of

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

Transfers Balance as of

September 30, 2020

Transfers Transfers to (from) held for sale Balance as of March 31, 2021

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

4 unchanged sentences

ABS 79 — — — ( 32 ) — 59 ( 4 ) — — 102

MBS 35 — — — — 10 ( 1 ) — ( 15 ) 29

Total fixed income securities 226 1 ( 4 ) 10 ( 39 ) 7 106 ( 37 ) — ( 2 ) 268

1 unchanged sentence

Short-term investments 35 — — — — — — — — ( 35 ) —

Other investments — — — — — — 3 — — — 3

Assets held for sale 267 1 — 3 ( 8 ) ( 99 ) 11 ( 3 ) — ( 2 ) 170

3 unchanged sentences

Total Level 3 gains (losses) included in net income

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

Three months ended March 31,

($ in millions) 2022 2021

Net investment income $ 9 $ ( 1 )

Realized capital gains (losses) 26 1 66 2

Net gains (losses) on investments and derivatives 29 18

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Notes to Condensed Consolidated Financial Statements

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

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

Transfers into Level 3 during the three months ended March 31, 2021 included situations where a quote was not provided by the Company’s independent third-party valuation service provider and as a result the price was stale or had been replaced with a broker quote where the inputs had not been corroborated to be market observable resulting in the security being classified as Level 3.

Transfers out of Level 3 during the three months ended March 31, 2022 and 2021 included situations where a broker quote was used in the prior period and a quote became available from the Company’s independent third-party valuation service provider in the current period.

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

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

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

2021 2020 2021 2020

Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of March 31,

($ in millions) Three months ended March 31,

Fixed income securities $ — $ 1

Municipal $ 1 $ — $ — $ —

Corporate - public — — — ( 1 )

Corporate - privately placed — — — —

ABS — — — ( 1 )

Total fixed income securities 1 — — ( 2 )

Equity securities 25 16

Short-term investments — 1 — 1

Other assets 12 —

Assets held for sale — 1

5 unchanged sentences

Net investment income $ 9 $ ( 1 )

Realized capital gains (losses) 4 2 23 2

Net gains (losses) on investments and derivatives 28 18

Total included in net income $ 37 $ 17

Municipal $ ( 1 ) $ 1 $ — $ —

Corporate - public $ ( 2 ) $ ( 3 )

Corporate - privately placed 1 ( 1 )

Assets held for sale — — — ( 3 )

Changes in unrealized net capital gains and losses reported in OCI $ ( 1 ) $ ( 4 )

Third Quarter 2021 Form 10-Q 31

Notes to Condensed Consolidated Financial Statements

Financial instruments not carried at fair value

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

($ in millions) March 31, 2022 December 31, 2021

Financial assets Fair value level Amortized cost, net Fair

2 unchanged sentences

Bank loans Level 3 1,520 1,567 1,574 1,634

Agent loans Level 3 567 570 — —

Assets held for sale Level 3 2,852 3,050 4,206 4,440

Financial liabilities Fair value level Carrying value (1)

3 unchanged sentences

Liability for collateral Level 2 1,504 1,504 1,444 1,444

Liabilities held for sale (2)

Level 3 7,316 8,248 8,130 9,424

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

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

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Notes to Condensed Consolidated Financial Statements

Note 7 Derivative Financial Instruments

2 unchanged sentences

Asset replication refers to the “synthetic” creation of assets through the use of derivatives.

The Company replicates fixed income securities using a combination of a credit default swap, index total return swap, options, or a foreign currency forward contract and one or more highly rated fixed income securities, primarily investment grade host bonds, to synthetically replicate the economic characteristics of one or more cash market securities.

replicates fixed income securities using a combination of a credit default swap, index total return swap, options, or a foreign currency forward contract and one or more highly rated fixed income securities, primarily investment grade host bonds, to synthetically replicate the economic characteristics of one or more cash market securities.

The Company replicates equity securities using futures, index total return swaps, and options to increase equity exposure.

First Quarter 2022 Form 10-Q 25

Notes to Condensed Consolidated Financial Statements

Property-Liability may use interest rate swaps, swaptions, futures and options to manage the interest rate risks of existing investments.

9 unchanged sentences

However, the notional amounts specified in credit default swaps where the Company has sold credit protection represent the maximum amount of potential loss, assuming no recoveries.

Fair value, which is equal to the carrying value, is the estimated amount that the Company would

receive or pay to terminate the derivative contracts at the reporting date.

The carrying value amounts for OTC derivatives are further adjusted for the effects, if any, of enforceable master netting agreements and are presented on a net basis, by counterparty agreement, in the Condensed Consolidated Statements of Financial Position.

Fair value, which is equal to the carrying value, is the estimated amount that the Company would receive or pay to terminate the derivative contracts at the reporting date.

The carrying value amounts for OTC derivatives are further adjusted for the effects, if any, of enforceable master netting agreements and are

presented on a net basis, by counterparty agreement, in the Condensed Consolidated Statements of Financial Position.

For those derivatives which qualify and have been designated as fair value accounting hedges, net income includes the changes in the fair value of both the derivative instrument and the hedged risk.

3 unchanged sentences

With the exception of non-hedge derivatives used for asset replication and non-hedge embedded derivatives, all of the Company’s derivatives are evaluated for their ongoing effectiveness as either accounting hedge or non-hedge derivative financial instruments on at least a quarterly basis.

Assets and liabilities held for sale Asset-liability management is a risk management practice that is principally employed by the life and annuity business to balance the respective interest-rate sensitivities of its assets and liabilities.

Depending upon the attributes of the assets acquired and liabilities issued, derivative instruments such as interest rate swaps, caps, swaptions and futures are utilized to change the interest rate characteristics of existing assets and liabilities to ensure the relationship is maintained within specified ranges and to reduce exposure to rising or falling interest rates.

Fixed income index total return swaps are used to offset valuation losses in the portfolio during periods of declining market values.

Credit default swaps are typically used to mitigate the credit risk within the life and annuity fixed income portfolios.

Futures and options are used for hedging the equity exposure contained in equity indexed life and annuity product contracts that offer equity returns to contractholders.

In addition, the Company uses equity index total return swaps, options and futures to offset valuation losses in the equity portfolio during periods of declining equity market values.

Foreign currency swaps and forwards are primarily used to reduce the foreign currency risk associated with holding foreign currency denominated investments.

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

Third Quarter 2021 Form 10-Q 33

In connection with the sale of ALIC and certain affiliates, the sale agreement includes a provision related to contingent consideration that may be earned over a ten-year period commencing on January 1, 2026 and ending January 1, 2035.

The contingent consideration is determined annually based on the average 10-year Treasury rate over the preceding 3-year period compared to a designated rate.

The contingent consideration meets the definition of a derivative and is accounted for on a fair value basis with periodic changes in fair value reflected in earnings.

As of March 31, 2022, the Company recorded $ 77 million in other assets related to this derivative.

For the three months ended March 31, 2022, the Company recorded a $ 12 million gain in operating costs and expenses related to valuation of this contingent consideration.

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Notes to Condensed Consolidated Financial Statements

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

Summary of the volume and fair value positions of derivative instruments as of March 31, 2022

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

9 unchanged sentences

Foreign currency forwards Other investments $ 194 n/a 10 11 ( 1 )

Embedded derivative financial instruments

Other embedded derivative financial instruments Other investments 750 n/a — — —

Embedded derivative financial instruments Other investments 750 n/a — — —

Contingent consideration Other assets 250 n/a 77 77 —

Credit default contracts

Credit default swaps – buying protection Other investments 47 n/a ( 2 ) — ( 2 )

Credit default swaps – selling protection Other investments 750 n/a 14 14 —

Assets held for sale 3 2,561 126 126 —

Total asset derivatives $ 1,241 2,808 $ 93 $ 96 $ ( 3 )

10 unchanged sentences

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

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

Total liability derivatives 904 49,011 ( 19 ) $ 19 $ ( 38 )

3 unchanged sentences

(n/a = not applicable)

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First Quarter 2022 Form 10-Q 27

Notes to Condensed Consolidated Financial Statements

11 unchanged sentences

Foreign currency forwards Other investments $ 2 n/a — — —

Embedded derivative financial instruments

Other embedded derivative financial instruments Other investments 750 n/a — — —

Embedded derivative financial instruments Other investments 750 n/a — — —

Contingent consideration Other assets 250 n/a 65 65 —

Credit default contracts

1 unchanged sentence

Credit default swaps – selling protection Other investments 250 n/a 6 6 —

Assets held for sale 158 3,189 185 189 ( 4 )

Total asset derivatives $ 1,285 1,355 $ 76 $ 77 $ ( 1 )

5 unchanged sentences

Futures Other liabilities & accrued expenses n/a 1,260 ( 1 ) — ( 1 )

Total return index contracts

Total return swap agreements – fixed income Other liabilities & accrued expenses $ 50 n/a — — —

Foreign currency contracts

3 unchanged sentences

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

Liabilities held for sale 2,240 2,737 ( 630 ) 1 ( 631 )

Total liability derivatives 790 37,928 9 $ 23 $ ( 14 )

Total derivatives $ 2,075 39,283 $ 85

(1) Volume for OTC and cleared derivative contracts is represented by their notional amounts.

Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded.

(n/a = not applicable)

Gross and net amounts for OTC derivatives (1)

1 unchanged sentence

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

September 30, 2021

March 31, 2022

Asset derivatives $ 30 $ ( 22 ) $ ( 5 ) $ 3 $ — $ 3

4 unchanged sentences

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

Third Quarter 2021 Form 10-Q 35

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Notes to Condensed Consolidated Financial Statements

Gains (losses) from valuation and settlements reported on derivatives not designated as accounting hedges

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

Three months ended September 30, 2021

Interest rate contracts $ 18 $ — $ 18

Equity and index contracts 10 ( 3 ) 7

Foreign currency contracts 15 — 15

Credit default contracts 1 — 1

Total return swaps - fixed income 2 — 2

Total $ 46 $ ( 3 ) $ 43

Nine months ended September 30, 2021

Interest rate contracts $ 19 $ — $ 19

Equity and index contracts 2 27 29

Foreign currency contracts 23 — 23

Credit default contracts 6 — 6

Total return swaps - fixed income 4 — 4

Total $ 54 $ 27 $ 81

Three months ended September 30, 2020

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

Three months ended March 31, 2022

Interest rate contracts $ 316 $ — $ 316

Equity and index contracts 3 ( 13 ) ( 10 )

Contingent consideration — 12 12

Foreign currency contracts 7 — 7

Credit default contracts ( 8 ) — ( 8 )

Total return swaps - fixed income 2 — 2

Total return swaps - equity index ( 1 ) — ( 1 )

Total $ 318 $ ( 1 ) $ 317

Nine months ended September 30, 2020

Three months ended March 31, 2021

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

2 unchanged sentences

Credit default contracts 4 — 4

Total return swaps - fixed income — — —

Total return swaps - equity index 3 — 3

Total $ 11 $ 16 $ 27

2 unchanged sentences

OTC cash and securities collateral pledged

($ in millions) September 30, 2021

($ in millions) March 31, 2022

Pledged by the Company $ 2

5 unchanged sentences

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

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Notes to Condensed Consolidated Financial Statements

OTC derivatives counterparty credit exposure by counterparty credit rating

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

($ in millions) March 31, 2022 December 31, 2021

parties Notional

9 unchanged sentences

Exchange traded and cleared margin deposits

($ in millions) September 30, 2021

($ in millions) March 31, 2022

Pledged by the Company $ 184

2 unchanged sentences

Market risk exists for all of the derivative financial instruments the Company currently holds, as these instruments may become less valuable due to adverse changes in market conditions.

To limit this risk, the Company’s senior management has established risk control limits.

To limit this risk, the Company’s senior management has established

risk control limits.

In addition, changes in fair value of the derivative financial instruments that the Company uses for risk management purposes are generally offset by the change in the fair value or cash flows of the hedged risk component of the related assets, liabilities or forecasted transactions.

1 unchanged sentence

Credit-risk-contingent termination events allow the counterparties to terminate the derivative agreement or a specific trade on certain dates if AIC’s financial strength credit ratings by Moody’s or S&P fall below a certain level.

Credit-risk-contingent cross-default provisions allow the counterparties to terminate the derivative agreement if the Company defaults by pre-determined threshold amounts on certain debt instruments.

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

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

Credit-risk-contingent cross-default provisions allow the counterparties to terminate the derivative

First Quarter 2022 Form 10-Q 29

Notes to Condensed Consolidated Financial Statements

agreement if the Company defaults by pre-determined threshold amounts on certain debt instruments.

The following summarizes the fair value of derivative instruments with termination, cross-default or collateral credit-risk-contingent features that are in

a liability position, as well as the fair value of assets and collateral that are netted against the liability in accordance with provisions within legally enforceable MNAs.

($ in millions) March 31, 2022 December 31, 2021

Gross liability fair value of contracts containing credit-risk-contingent features $ 7 $ 8

2 unchanged sentences

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

Third Quarter 2021 Form 10-Q 37

Notes to Condensed Consolidated Financial Statements

Credit derivatives - selling protection

A credit default swap (“CDS”) is a derivative instrument, representing an agreement between two parties to exchange the credit risk of a specified entity (or a group of entities), or an index based on the credit risk of a group of entities (all commonly referred to as the “reference entity” or a portfolio of “reference entities”), in return for a periodic premium.

protection, CDS are used to replicate fixed income securities and to complement the cash market when credit exposure to certain issuers is not available or when the derivative alternative is less expensive than the cash market alternative.

In selling protection, CDS are used to replicate fixed income securities and to complement the cash market when credit exposure to certain issuers is not available or when the derivative alternative is less expensive than the cash market alternative.

CDS typically have a five-year term.

2 unchanged sentences

AAA AA A BBB BB and

September 30, 2021

March 31, 2022

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

10 unchanged sentences

Credit events are typically defined as bankruptcy, failure to pay, or restructuring, depending on the nature of the reference entities.

If a credit event occurs, the Company settles with the counterparty, either through physical settlement or cash settlement.

If a credit event occurs, the

Company settles with the counterparty, either through physical settlement or cash settlement.

In a physical settlement, a reference asset is delivered by the buyer of protection to the Company, in exchange for cash payment at par, whereas in a cash settlement, the Company pays the difference between par and the prescribed value of the reference asset.

3 unchanged sentences

A physical settlement may afford the Company with recovery rights as the new owner of the asset.

The Company monitors risk associated with credit derivatives through individual name credit limits at both a credit derivative and a combined cash instrument/credit derivative level.

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

The Company monitors risk associated with credit derivatives through individual name credit limits at both a credit derivative and a combined cash

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Notes to Condensed Consolidated Financial Statements

instrument/credit derivative level.

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

Note 8 Variable Interest Entities

4 unchanged sentences

The Company receives a management fee for the services provided to the Reciprocal Exchanges.

In addition, the Company holds

interests that provide capital to the Reciprocal Exchanges and would absorb any expected losses.

In addition, as of March 31, 2022 and December 31, 2021, the Company holds interests of $ 123 million in the form of surplus notes included in other liabilities and expenses on the Statement of

Assets and Liabilities of the Reciprocal Exchanges that provide capital to the Reciprocal Exchanges and would absorb any expected losses.

The Company is therefore the primary beneficiary.

1 unchanged sentence

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

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

The results of operations of the Reciprocal Exchanges are included in the Company’s Allstate Protection segment and generated $ 42 million of earned premiums and $ 34 million of claims and claims expenses for the three months ended March 31, 2022, compared to $ 45 million and $ 38 million for the three months ended March 31, 2021, respectively.

Assets and liabilities of Reciprocal Exchanges

($ in millions) September 30, 2021

($ in millions) March 31, 2022 December 31, 2021

Fixed income securities $ 324 $ 324

9 unchanged sentences

Total liabilities $ 648 $ 666

Third Quarter 2021 Form 10-Q 39

Notes to Condensed Consolidated Financial Statements

Note 9 Reserve for Property and Casualty Insurance Claims and Claims Expense

3 unchanged sentences

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

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

Supply chain disruptions have resulted in higher parts costs and

used car values which have combined with labor shortages to increase physical damage loss costs while medical inflation, treatment trends and higher levels of attorney representation have increased liability losses.

These factors may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability.

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

1 unchanged sentence

Changes in auto claim frequency may result from changes in mix of business, the rate of distracted driving, miles driven or other macroeconomic factors.

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

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

First Quarter 2022 Form 10-Q 31

Notes to Condensed Consolidated Financial Statements

claim practices and changes in mix of claim types.

The Company mitigates these effects through various loss management programs.

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

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

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

As part of the reserving process, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims.

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

1 unchanged sentence

The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates.

The highest degree of uncertainty is associated with reserves for losses incurred in the initial reporting period as it contains the greatest proportion of losses that have not been reported or settled.

The highest degree of uncertainty is associated with reserves for losses incurred in the initial reporting

period as it contains the greatest proportion of losses that have not been reported or settled.

The Company also has uncertainty in the Run-off Property-Liability reserves that are based on events long since passed and are complicated by lack of historical data, legal interpretations, unresolved legal issues and legislative intent based on establishment of facts.

2 unchanged sentences

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

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Notes to Condensed Consolidated Financial Statements

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

Nine months ended September 30,

Three months ended March 31,

($ in millions) 2022 2021

12 unchanged sentences

Total paid ( 7,486 ) ( 6,272 )

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

Net balance as of March 31 23,917 22,145

Plus recoverables 9,074 9,269

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

Balance as of March 31 $ 32,991 $ 31,414

(1) Recoverables comprises reinsurance and indemnification recoverables.

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

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

This expense included losses from catastrophes of $ 462 million and $ 590 million in the three months ended March 31, 2022 and 2021, respectively, net of recoverables.

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

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Notes to Condensed Consolidated Financial Statements

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

Nine months ended September 30,

Three months ended March 31,

Non-catastrophe losses Catastrophe losses Total

6 unchanged sentences

Run-off Property-Liability

115 139 — — 115 139

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

Total prior year reserve reestimates

1 unchanged sentence

(1) Favorable reserve reestimates are shown in parentheses.

(2) Includes approximately $ 240 million of estimated recoveries related to Nationwide Aggregate Reinsurance Program cover for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, which primarily impacted homeowners reestimates.

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

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

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

Third Quarter 2021 Form 10-Q 41

Notes to Condensed Consolidated Financial Statements

(2) Included approximately $ 150 million of estimated recoveries related to Nationwide Aggregate Reinsurance Program cover for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, which primarily impacted homeowners reestimates.

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

Note 10 Reinsurance and indemnification

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

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

2021 2020 2021 2020

($ in millions) Three months ended March 31,

Property and casualty insurance premiums earned $ ( 427 ) $ ( 508 )

$ ( 442 ) $ ( 277 ) $ ( 1,488 ) $ ( 845 )

Accident and health insurance premiums and contract charges ( 8 ) ( 24 )

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

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

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

2021 2020 2021 2020

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

($ in millions) Three months ended March 31,

Property and casualty insurance claims and claims expense (1) (2)

$ ( 109 ) $ ( 1,593 )

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

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

Accident, health and other policy benefits

(1) Ceded losses incurred included a reduction of $ 12 million and an increase of $ 386 million related to the Michigan Catastrophic Claims Association for the three months ended March 31, 2022 and 2021, respectively.

(2) Included approximately $ 955 million of ceded losses, net of approximately $ 75 million of reinstatement premiums, related to the Nationwide Reinsurance Program for the three months ended March 31, 2021.

Reinsurance and indemnification recoverables

Reinsurance and indemnification recoverables, net

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

($ in millions) March 31, 2022 December 31, 2021

Property and casualty

2 unchanged sentences

Total property and casualty $ 9,547 $ 9,870

Allstate Health and Benefits

Accident and health insurance 144 154

Total $ 9,691 $ 10,024

First Quarter 2022 Form 10-Q 33

Notes to Condensed Consolidated Financial Statements

Rollforward of credit loss allowance for reinsurance recoverables

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

2021 2020 2021 2020

($ in millions) Three months ended March 31,

Property and casualty (1) (2)

Beginning balance $ ( 66 ) $ ( 59 )

(Increase) decrease in the provision for credit losses ( 6 ) — ( 7 ) 1

Increase in the provision for credit losses — ( 1 )

Write-offs — —

Ending balance $ ( 66 ) $ ( 60 )

Allstate Health and Benefits

Accident and health insurance

Beginning balance $ ( 8 ) $ ( 1 )

4 unchanged sentences

(2) Indemnification recoverables are considered collectible based on the industry pool and facility enabling legislation.

Note 11 Capital Structure

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

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Notes to Condensed Consolidated Financial Statements

Note 11 Company Restructuring

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• Employee - severance and relocation benefits

• Exit - contract termination penalties

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

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

• Exit - contract termination penalties and real estate costs primarily related to accelerated amortization of right-of-use assets and related leasehold improvements at facilities to be vacated

The expenses related to these activities are included in the Condensed Consolidated Statements of Operations as restructuring and related charges and totaled $ 12 million and $ 51 million during the three months ended March 31, 2022 and 2021, respectively.

Restructuring expenses during the first quarter 2022 are primarily due to the future work environment.

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

Restructuring programs

($ in millions) Future work environment Transformative Growth

Future work environment

($ in millions)

Expected program charges $ 110

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2022 expenses ( 10 )

Change in estimated program costs in 2021 30 ( 52 )

Change in estimated program costs 47

Remaining program charges $ 16

These charges are primarily recorded in the Allstate Protection segment.

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

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

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

Exit costs of this program reflect real estate costs primarily related to accelerated amortization of right-of-use assets and related leasehold improvements at facilities to be vacated.

The Company expects that the majority of these actions will be completed in 2022.

Restructuring activity during the period

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Expense incurred

Adjustments to liability ( 25 ) — ( 25 )

Payments and non-cash charges ( 6 ) ( 12 ) ( 18 )

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

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

Restructuring liability as of March 31, 2022 $ 8 $ 7 $ 15

As of March 31, 2022, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled $ 15 million for employee costs and $ 135 million for exit costs.

Note 12 Guarantees and Contingent Liabilities

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Underwriting results related to these arrangements, which tend to be adverse, have been immaterial to the Company’s results of operations in the last two years.

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

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

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

Because of the Company’s participation, it may be exposed to losses

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Notes to Condensed Consolidated Financial Statements

that surpass the capitalization of these facilities or assessments from these facilities.

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

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

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

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

Third Quarter 2021 Form 10-Q 43

Notes to Condensed Consolidated Financial Statements

Related to the sale of ALNY on October 1, 2021, AIC agreed to indemnify Wilton Reassurance Company in connection with certain representations, warranties and covenants of AIC, and certain liabilities specifically excluded from the transaction, subject to specific contractual limitations regarding AIC’s maximum obligation.

Management does not believe these indemnifications will have a material effect on results of operations, cash flows or financial position of the Company.

Related to the sale of ALIC and Allstate Assurance Company on November 1, 2021, AIC and Allstate Financial Insurance Holdings Corporation (collectively, the “Sellers”) agreed to indemnify Everlake US Holdings Company in connection with certain representations, warranties and covenants of the Sellers, and certain liabilities specifically excluded from the transaction, subject to specific contractual limitations regarding the Sellers’ maximum obligation.

Management does not believe these indemnifications will have a material effect on results of operations, cash flows or financial position of the Company.

The aggregate liability balance related to all guarantees was not material as of March 31, 2022.

Regulation and compliance

The Company is subject to extensive laws, regulations, administrative directives, and regulatory actions.

From time to time, regulatory authorities or legislative bodies seek to influence and restrict premium rates, require premium refunds to policyholders, require reinstatement of terminated policies, prescribe rules or guidelines on how affiliates compete in the marketplace, restrict the ability of insurers to cancel or non-renew policies, require insurers to continue to write new policies or limit their ability to write new policies, limit insurers’ ability to change coverage terms or to impose underwriting standards, impose additional regulations regarding agency and broker compensation, regulate the nature of and amount of investments, impose fines and penalties for unintended errors or mistakes, impose additional regulations regarding cybersecurity and privacy, and otherwise expand overall regulation of insurance products and the insurance industry.

agency and broker compensation, regulate the nature of and amount of investments, impose fines and penalties for unintended errors or mistakes, impose additional regulations regarding cybersecurity and privacy, and otherwise expand overall regulation of insurance products and the insurance industry.

In addition, the Company is subject to laws and regulations administered and enforced by federal agencies, international agencies, and other organizations, including but not limited to the Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority, the U.S.

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

the fact that some of the

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

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

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

The outcome of these matters may be affected by decisions, verdicts, and settlements, and the timing of such decisions, verdicts, and settlements, in other individual and class action lawsuits that involve the Company, other insurers, or other entities and by other legal, governmental, and regulatory actions that involve the Company, other insurers, or other entities.

The outcome may also be affected by future state or federal legislation, the timing or substance of which cannot be predicted.

The outcome may also be affected by future state or

First Quarter 2022 Form 10-Q 35

Notes to Condensed Consolidated Financial Statements

federal legislation, the timing or substance of which cannot be predicted.

In the lawsuits, plaintiffs seek a variety of remedies which may include equitable relief in the form of injunctive and other remedies and monetary relief in the form of contractual and extra-contractual damages.

11 unchanged sentences

Legal fees are expensed as incurred.

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

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Notes to Condensed Consolidated Financial Statements

of accruals that have been previously established.

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

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When it is possible to estimate the reasonably possible loss or range of loss above the amount accrued, if any, for the matters disclosed, that estimate is aggregated and disclosed.

Disclosure is not required when an estimate of the reasonably possible loss or range of loss cannot be made.

Disclosure is not

required when an estimate of the reasonably possible loss or range of loss cannot be made.

For certain of the matters described below in the “Claims related proceedings” and “Other proceedings” subsections, the Company is able to estimate the reasonably possible loss or range of loss above the amount accrued, if any.

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

It does not represent

the Company’s maximum possible loss exposure.

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

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

Due to the complexity and scope of the matters disclosed in the “Claims related proceedings” and “Other proceedings” subsections below and the many uncertainties that exist, the ultimate outcome of these matters cannot be predicted and in the Company’s judgment, a loss, in excess of amounts accrued, if any, is not probable.

In the event of an unfavorable outcome in one or more of these matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period.

However, based on information currently known to it, management believes that the ultimate outcome of all matters described below, as they are resolved over time, is not likely to have a material effect on the financial position of the Company.

In the event of an unfavorable outcome in one or more of these matters, the ultimate

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Notes to Condensed Consolidated Financial Statements

liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period.

However, based on information currently known, management believes that the ultimate outcome of all matters described below, as they are resolved over time, is not likely to have a material effect on the financial position of the Company.

Claims related proceedings The Company is managing various disputes in Florida that raise challenges to the Company’s practices, processes, and procedures relating to claims for personal injury protection benefits under Florida auto policies.

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Allstate Insurance Company, et al.

filed January 2019;

Fla., filed January 2019;

appeal pending, 11th Circuit Court of Appeals), where the court denied class certification and plaintiff’s request to file a renewed motion for class certification.

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Ohio, filed April 2020);

Allstate Vehicle and Property Insurance Company (Circuit Court of Independence Co., Ark., filed February 2016);

and Mitchell, et al.

Allstate Vehicle and Property Insurance Company, et al .

Ala., filed August 2021).

No classes have been certified in any of these matters.

A settlement has been preliminarily approved by the court in Huey v.

Allstate Vehicle and Property Insurance Company (N.D.

filed October 2019);

Allstate Vehicle and Property Insurance Company (Circuit Court of Independence Co., Ark.

filed February 2016);

Allstate Indemnity Company (Madison Co., Ill.

filed July 2020);

Miss., filed October 2019), and a settlement-in-principle has been reached in Thaxton v.

Allstate Indemnity Company (Madison Co., Ill., filed July 2020);

and Hester v.

Allstate Vehicle and Property Insurance Company (St.

Clair Co., Ill.

filed June 2020);

Mitchell, et al.

Allstate Vehicle and Property Insurance Company, et al.

Third Quarter 2021 Form 10-Q 45

Notes to Condensed Consolidated Financial Statements

August 2021).

No classes have been certified in these matters.

Clair Co., Ill., filed June 2020).

The Company is defending putative class actions pending in multiple states alleging that the Company underpays total loss vehicle physical damage claims on auto policies.

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(a) the third party valuation tool used by the Company as part of a comprehensive adjustment process is allegedly flawed, biased, or contrary to applicable law;

(b) the Company allegedly does not pay sales tax, title fees, registration fees, and/or other specified fees that are allegedly mandatory under policy language or state legal authority;

(b) the Company allegedly does not pay sales tax, title fees, registration fees, and/or other specified fees that

are allegedly mandatory under policy language or state legal authority;

or (c) after paying for the value of the loss vehicle, then the Company allegedly is not entitled to retain the residual salvage value, and the Company allegedly must pay salvage value to the owner (or if the loss vehicle is retained by the owner, then the Company allegedly may not apply any offset for the salvage value).

4 unchanged sentences

Allstate Fire and Casualty Insurance Company (S.D.

Fla., filed July 2018, dismissed August 2019, refiled on September 2019, remanded to 17th Judicial Circuit, Broward County October 2020);

Fla., filed July 2018, dismissed August 2019, refiled on September 2019, remanded to 17th Judicial Circuit, Broward Co.

October 2020);

Allstate Fire and Casualty Insurance Company (E.D.

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Kronenberg v.

Allstate Insurance Company and Allstate Fire and Casualty Insurance Company (E.D.

N.Y., filed December 2018);

Allstate Insurance Company and Allstate Fire and Casualty Insurance Company (E.D.N.Y., filed December 2018);

Allstate Property and Casualty Insurance Company (W.D.

La., filed June 2019);

Allstate Insurance Company (20th Judicial Circuit, Collier County, Fla.;

filed August 2019);

Allstate Fire and Casualty Insurance Company and Allstate County Mutual Insurance Company (N.D.

Tex., filed August 2019);

National General Insurance Company (Superior Ct., Los Angeles County, Cal.;

filed May 2020);

Esurance Property and Casualty Insurance Company (C.D.

filed September 2020);

Cal., filed September 2020);

Allstate Fire and Casualty Insurance Company (Cir.

of Cook County, Chancery Div., Ill.;

filed October 2020);

Ill., Chancery Div., filed October 2020);

Esurance Property and Casualty Insurance Company (N.D.

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Esurance Property and Casualty Insurance Company (E.D.

filed February 2021).

Mo., filed February 2021);

Imperial Fire and Casualty Insurance Company (W.D.

La., filed February 2022);

Allstate Insurance Company (S.D.N.Y., filed February 2022);

Allstate Property and Casualty Insurance Company (M.D.

La., filed April 2022).

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

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

(1) whether Allstate has potentially violated California insurance

law by using illegal price optimization;

(1) whether Allstate has potentially violated California insurance law by using illegal price optimization;

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

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

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

Fact discovery has been completed in the investigatory hearing and an administrative hearing is scheduled to begin on November 9, 2022.

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

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

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

First Quarter 2022 Form 10-Q 37

Notes to Condensed Consolidated Financial Statements

Biefeldt / IBEW Consolidated Action.

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, was filed on April 12, 2018, in the same court by another plaintiff alleging to be a stockholder of the Company.

After the court issued its dismissal decision in the Biefeldt action, plaintiffs agreed to consolidate the two actions and filed a consolidated amended complaint naming as defendants the Company’s chairman, president and chief executive officer, its former president, and certain present or former members of the board of directors.

In that complaint, plaintiffs allege that the directors and officer defendants breached their fiduciary duties to the Company in connection with allegedly material misstatements or omissions concerning the Company’s automobile insurance claim frequency statistics and the reasons for a claim frequency increase for Allstate brand auto insurance between October 2014 and August 3, 2015.

In that complaint, plaintiffs allege that the director and officer defendants breached their fiduciary duties to the Company in connection with allegedly material misstatements or omissions concerning the Company’s automobile insurance claim frequency statistics and the reasons for a claim frequency increase for Allstate brand auto insurance between October 2014 and August 3, 2015.

The factual allegations are substantially similar to those at issue in In re The Allstate Corp.

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

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Notes to Condensed Consolidated Financial Statements

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

Plaintiffs appealed and the court held a hearing on February 8, 2022.

On February 25, 2022 the court issued its opinion and judgment affirming the trial court’s dismissal with prejudice.

The time for further appeals has passed so this matter is concluded.

In Sundquist v.

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On December 4, 2018, the court granted defendants’ motion and stayed the case pending the final resolution of the consolidated Biefeldt/IBEW matter.

Wilson, et al., is an additional stockholder derivative action filed on February 12, 2020 in the United States District Court for the Northern District of Illinois.

Plaintiff alleges that she previously made a demand on the Allstate board of directors and seeks, on behalf of the Company, an unspecified amount of damages and various forms of equitable relief.

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

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

Securities Litigation .

On February 20, 2020, the Allstate board of directors appointed a special committee to investigate the allegations in plaintiff’s demand.

The Company moved to dismiss the complaint on August 24, 2020 and on December 8, 2020, the court granted defendants’ motion, and dismissed the complaint with prejudice.

On January 5, 2021, plaintiff filed a motion to alter the judgment and requested leave to file an amended complaint and defendants opposed the motion.

On February 10, 2021, the court denied plaintiff’s motion to alter the judgment.

No appeal was filed.

On March 14, 2022, on the parties’ stipulation, the court dismissed this matter with prejudice.

This matter is concluded.

In re The Allstate Corp.

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

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

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

Plaintiffs allege that the Company and certain senior officers made allegedly material misstatements or omissions concerning claim frequency statistics and the reasons for a claim frequency increase for Allstate brand auto insurance between October 2014 and August 3, 2015.

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

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On January 4, 2021, defendants filed with the Seventh Circuit a petition for permission to appeal this ruling.

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Notes to Condensed Consolidated Financial Statements

The petition was denied on January 28, 2021.

The parties concluded briefing Daubert motions on April 22, 2021.

The Company is defending two putative class actions in California federal court, Holland Hewitt v.

Defendants moved for summary judgment on March 23, 2022.

Briefing on the motion is to conclude in early June 2022.

The Company is continuing to defend two putative class actions in California federal court, Holland Hewitt v.

Allstate Life Insurance Company (E.D.

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Cal., filed Dec.

2020), where the plaintiffs generally allege that the defendants failed to comply with certain California statutes which address contractual grace periods and lapse notice requirements for certain life insurance policies.

2020), following the sale of ALIC.

No classes have been certified in these matters.

The Company is also defending an individual action in California state court, Gilmore v.

Lincoln Benefit Life Company (San Diego Co., Cal., filed October 29, 2021).

In these cases, plaintiffs generally allege that the defendants failed to comply with certain California

statutes which address contractual grace periods and lapse notice requirements for certain life insurance policies.

Plaintiffs claim that these statutes apply to life insurance policies that existed before the statutes’ effective date.

The plaintiffs seek damages and injunctive relief.

No classes have been certified in these matters.

Similar litigation is pending against other insurance carriers.

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

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

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

Third Quarter 2021 Form 10-Q 47

Notes to Condensed Consolidated Financial Statements

The Company asserts various defenses to plaintiffs’ claims and to class certification.

Note 13 Benefit Plans

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

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

Three months ended March 31,

($ in millions) 2022 2021

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Amortization of prior service credit ( 13 ) ( 13 )

Curtailment loss — 10 — 10

Costs and expenses ( 48 ) ( 58 )

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Remeasurement (gains) losses ( 223 ) ( 291 )

Pension net (benefit) cost $ ( 8 ) $ ( 106 ) $ ( 544 ) $ 199

Pension net benefit $ ( 271 ) $ ( 349 )

Postretirement benefits

2 unchanged sentences

Amortization of prior service credit ( 6 ) ( 6 )

Curtailment gain — ( 8 ) — ( 8 )

Costs and expenses ( 4 ) ( 4 )

2 unchanged sentences

Remeasurement (gains) losses ( 24 ) ( 19 )

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

Postretirement net benefit $ ( 28 ) $ ( 23 )

Pension and postretirement benefits

1 unchanged sentence

Remeasurement (gains) losses ( 247 ) ( 310 )

Total net (benefit) cost $ ( 14 ) $ ( 111 ) $ ( 568 ) $ 225

Total net benefit $ ( 299 ) $ ( 372 )

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

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

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

First Quarter 2022 Form 10-Q 39

Notes to Condensed Consolidated Financial Statements

Pension and postretirement benefits remeasurement gains and losses

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

Three months ended March 31,

($ in millions) 2022 2021

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Remeasurement (gains) losses $ ( 247 ) $ ( 310 )

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

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

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

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

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

For the first nine

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Notes to Condensed Consolidated Financial Statements

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

Remeasurement gains for the first quarter of 2022 primarily related to an increase in the liability discount rate and changes in other assumptions, partially offset by unfavorable asset performance compared to the expected return on plan assets.

The weighted average discount rate used to measure the benefit obligation increased to 3.97 % at March 31, 2022 compared to 2.93 % at December 31, 2021 resulting in gains for the first quarter of 2022.

Remeasurement gains for other assumptions in the first quarter of 2022 are primarily related to an increase in the long-term lump sum interest rate.

For the first quarter of 2022, the actual return on plan assets was lower than the expected return due to higher interest rates, widening credit spreads and weak equity market performance.

Note 14 Supplemental Cash Flow Information

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

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

Cash flows used in operating activities in the Condensed Consolidated Statements of Cash Flows include cash paid for operating leases related to amounts included in the measurement of lease liabilities of $ 137 million and $ 118 million for the nine

months ended September 30, 2021 and 2020, respectively.

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

Non-cash investing activities include $ 21 million and $ 14 million related to mergers and exchanges completed with equity securities, and limited partnerships, and modifications of other investments for the three months ended March 31, 2022 and 2021, respectively.

Non-cash financing activities include $ 60 million and $ 50 million related to the issuance of Allstate common shares for vested equity awards for the three months ended March 31, 2022 and 2021, respectively.

months ended March 31, 2022 and 2021, respectively.

Non-cash operating activities include $ 8 million and $ 103 million related to right-of-use assets obtained in exchange for lease obligations for the three months ended March 31, 2022 and 2021, respectively.

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

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

($ in millions) Nine months ended September 30,

($ in millions) Three months ended March 31,

Net change in proceeds managed

Net change in short-term investments $ ( 63 ) $ ( 183 )

Operating cash flow (used) provided ( 579 ) 211

Operating cash flow (used) ( 63 ) ( 183 )

Net change in cash 3 1

4 unchanged sentences

Liabilities for collateral, end of period ( 1,504 ) ( 1,096 )

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

Third Quarter 2021 Form 10-Q 49

Operating cash flow provided $ 60 $ 182

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Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

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

($ in millions) Three months ended September 30,

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

Unrealized net holding gains and losses arising during the period, net of related offsets $ ( 343 ) $ 73 $ ( 270 ) $ 414 $ ( 88 ) $ 326

reclassification adjustment of realized capital gains and losses 84 ( 18 ) 66 233 ( 49 ) 184

Unrealized net capital gains and losses ( 427 ) 91 ( 336 ) 181 ( 39 ) 142

Unrealized foreign currency translation adjustments ( 26 ) 5 ( 21 ) 32 ( 7 ) 25

Unamortized pension and other postretirement prior service credit (1)

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

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

Nine months ended September 30,

($ in millions) Three months ended March 31,

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

7 unchanged sentences

(1) Represents prior service credits reclassified out of other comprehensive income and amortized into operating costs and expenses.

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First Quarter 2022 Form 10-Q 41

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

Results of Review of Interim Financial Information

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

We have reviewed the accompanying condensed consolidated statement of financial position of The Allstate Corporation and subsidiaries (the “Company”) as of March 31, 2022, the related condensed consolidated statements of operations, comprehensive income and shareholders’ equity for the three month periods ended March 31, 2022 and 2021, and cash flows for the three month periods ended March 31, 2022 and 2021, and the related notes (collectively referred to as the “condensed consolidated financial statements”).

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

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statement of financial position of The Allstate Corporation and subsidiaries as of December 31, 2020, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year then ended prior to the reclassification for the discontinued operations described in Note 3 to the accompanying interim financial information (not presented herein);

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of the Company as of December 31, 2021, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year then ended (not presented herein);

and in our report dated February 18, 2022, we expressed an unqualified opinion on those consolidated financial statements.

We also audited the adjustments described in Note 3 that were applied to reclassify the December 31, 2020 consolidated statement of financial position of The Allstate Corporation and subsidiaries (not presented herein) for discontinued operations.

In our opinion, such adjustments are appropriate and have been properly applied to the previously issued consolidated statement of financial position in deriving the accompanying retrospectively adjusted consolidated statement of financial position as of December 31, 2020.

In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated statement of financial position from which it has been derived.

Basis for Review Results

8 unchanged sentences

Chicago, Illinois

November 3, 2021

Third Quarter 2021 Form 10-Q 51

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

What changed 10-Q

Item 1. Financial Statements