What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-04 · 375 added, 302 removed, 1383 unchanged (33% of the section changed)

3 unchanged sentences

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

June 30, Six months ended June 30,

2022 2021 2022 2021

Property and casualty insurance premiums $ 11,362 $ 10,444 $ 22,343 $ 20,751

6 unchanged sentences

Property and casualty insurance claims and claims expense 9,367 7,207 17,189 13,250

Shelter-in-Place Payback expense — 29 — 29

Accident, health and other policy benefits 269 252 538 494

6 unchanged sentences

Total costs and expenses 13,535 10,849 25,075 20,268

Income from operations before income tax expense 797 3,032

Income tax expense 151 626

Net income from continuing operations 646 2,406

(Loss) income from operations before income tax expense ( 1,315 ) 1,797 ( 518 ) 4,829

Income tax (benefit) expense ( 291 ) 362 ( 140 ) 988

Net (loss) income from continuing operations ( 1,024 ) 1,435 ( 378 ) 3,841

Income (loss) from discontinued operations, net of tax — 196 — ( 3,597 )

Net income (loss) 646 ( 1,387 )

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

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

Net (loss) income ( 1,024 ) 1,631 ( 378 ) 244

Net (loss) income attributable to noncontrolling interest ( 9 ) 6 ( 19 ) —

Net (loss) income attributable to Allstate ( 1,015 ) 1,625 ( 359 ) 244

Preferred stock dividends 27 30 53 57

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

Net (loss) income applicable to common shareholders $ ( 1,042 ) $ 1,595 $ ( 412 ) $ 187

Earnings per common share applicable to common shareholders

8 unchanged sentences

See notes to condensed consolidated financial statements.

First Quarter 2022 Form 10-Q 1

Second 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 March 31,

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

Other comprehensive loss, after-tax

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

2022 2021 2022 2021

Net (loss) income $ ( 1,024 ) $ 1,631 $ ( 378 ) $ 244

Other comprehensive (loss) income, after-tax

Unrealized net capital gains and losses ( 1,143 ) 484 ( 2,736 ) ( 1,016 )

1 unchanged sentence

Unamortized pension and other postretirement prior service credit ( 15 ) ( 14 ) ( 30 ) ( 29 )

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

Comprehensive loss ( 962 ) ( 2,868 )

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

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

Other comprehensive (loss) income, after-tax ( 1,205 ) 467 ( 2,813 ) ( 1,014 )

Comprehensive (loss) income ( 2,229 ) 2,098 ( 3,191 ) ( 770 )

Comprehensive (loss) income attributable to noncontrolling interest ( 17 ) 5 ( 39 ) ( 1 )

Comprehensive (loss) income attributable to Allstate $ ( 2,212 ) $ 2,093 $ ( 3,152 ) $ ( 769 )

See notes to condensed consolidated financial statements.

3 unchanged sentences

Condensed Consolidated Statements of Financial Position (unaudited)

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

($ in millions, except par value data) June 30, 2022 December 31, 2021

Fixed income securities, at fair value (amortized cost, net $ 44,027 and $ 41,376 )

6 unchanged sentences

Total investments 61,055 64,701

Cash 1,130 763

Premium installment receivables, net 8,824 8,364

2 unchanged sentences

Accrued investment income 359 339

Deferred income taxes 118 —

Property and equipment, net 975 939

28 unchanged sentences

See notes to condensed consolidated financial statements.

First Quarter 2022 Form 10-Q 3

Second 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 March 31,

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

2022 2021 2022 2021

Preferred stock par value $ — $ — $ — $ —

12 unchanged sentences

Balance, beginning of period 53,688 51,107 53,294 52,767

Net income (loss) 656 ( 1,387 )

Net (loss) income ( 1,015 ) 1,631 ( 359 ) 244

Dividends on common stock (declared per share of $ 0.85 , $ 0.81 , $ 1.70 and $ 1.62 )

18 unchanged sentences

Change in unrealized net capital gains and losses ( 8 ) ( 1 ) ( 20 ) ( 1 )

Noncontrolling loss ( 10 ) ( 6 )

Noncontrolling (loss) income ( 9 ) 6 ( 19 ) —

Balance, end of period ( 91 ) ( 15 ) ( 91 ) ( 15 )

5 unchanged sentences

Condensed Consolidated Statements of Cash Flows (unaudited)

($ in millions) Three months ended March 31,

($ in millions) Six months ended June 30,

Cash flows from operating activities

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

Net (loss) income $ ( 378 ) $ 244

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

3 unchanged sentences

Amortization of deferred gain on reinsurance — ( 4 )

Interest credited to contractholder funds 8 94

Loss on disposition of operations, net of tax — 3,971

26 unchanged sentences

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

Net cash provided by investing activities 981 513

Net cash used in investing activities ( 138 ) ( 157 )

Cash flows from financing activities

15 unchanged sentences

See notes to condensed consolidated financial statements.

First Quarter 2022 Form 10-Q 5

Second Quarter 2022 Form 10-Q 5

Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

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 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 (“VIEs”) 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 March 31, 2022 and for the three month periods ended March 31, 2022 and 2021 are unaudited.

The condensed consolidated financial statements and notes as of June 30, 2022 and for the three and six month periods ended June 30, 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.

4 unchanged sentences

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

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

These measures have moderated, but there is no way of predicting with certainty how long the pandemic might last.

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

1 unchanged sentence

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.

Accounting for Long-Duration Insurance Contracts In August 2018, the Financial Accounting Standards Board (”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 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.

In July 2022, the FASB issued an Exposure Draft of an Accounting Standards Update that would provide reporting entities with an accounting policy election to not apply the new guidance to insurance contracts in-force on the January 1, 2021 transition date but sold prior to the January 1, 2023 effective date provided certain conditions are met.

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.

8 unchanged sentences

Computation of basic and diluted earnings per common share

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

Net income from continuing operations $ 646 $ 2,406

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

Net income from continuing operations attributable to Allstate 656 2,412

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

2022 2021 2022 2021

Net (loss) income from continuing operations $ ( 1,024 ) $ 1,435 $ ( 378 ) $ 3,841

Net (loss) income attributable to noncontrolling interest ( 9 ) 6 ( 19 ) —

Net (loss) income from continuing operations attributable to Allstate ( 1,015 ) 1,429 ( 359 ) 3,841

Preferred stock dividends

Net income from continuing operations applicable to common shareholders 630 2,385

Net (loss) income from continuing operations applicable to common shareholders ( 1,042 ) 1,399 ( 412 ) 3,784

Income (loss) from discontinued operations, net of tax — 196 — ( 3,597 )

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

Net (loss) income applicable to common shareholders $ ( 1,042 ) $ 1,595 $ ( 412 ) $ 187

Weighted average common shares outstanding

273.8 298.8 275.9 300.6

Effect of dilutive potential common shares (1) :

2 unchanged sentences

Weighted average common and dilutive potential common shares outstanding

273.8 303.3 275.9 304.9

Earnings per common share applicable to common shareholders

6 unchanged sentences

Anti-dilutive options excluded from diluted earnings per common share

First Quarter 2022 Form 10-Q 7

1.3 0.8 1.5 2.0

Weighted average dilutive potential common shares excluded due to net loss applicable to common shareholders (1)

(1) As a result of the net loss reported for the three and six month periods ended June 30, 2022, weighted average shares for basic earnings per share is also used for calculating diluted earnings per share because all dilutive potential common shares are anti-dilutive and are therefore excluded from the calculation.

Second Quarter 2022 Form 10-Q 7

Notes to Condensed Consolidated Financial Statements

22 unchanged sentences

(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 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.

As of June 30, 2022, the Company had principal balance remaining of $ 350 million 6.750 % Senior Notes due 2024, with a fair value adjustment of $ 36 million.

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

2 unchanged sentences

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.

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

8 www.allstate.com

1 unchanged sentence

Financial results from discontinued operations

Three months ended March 31,

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

($ in millions) 2021 2021

11 unchanged sentences

Amortization of deferred gain on reinsurance 2 4

Income (loss) from discontinued operations before income tax expense 255

Income tax expense (benefit) 50

Income (loss) from discontinued operations, net of tax 205

Income from discontinued operations before income tax expense 212 467

Income tax expense 43 93

Income from discontinued operations, net of tax 169 374

Loss on disposition of operations 281 ( 4,137 )

Income tax benefit ( 420 )

Income tax expense (benefit) 254 ( 166 )

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

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

Income (loss) from discontinued operations, net of tax $ 196 $ ( 3,597 )

Cash flows from discontinued operations

Three months ended March 31,

Six months ended June 30,

($ in millions) 2021

18 unchanged sentences

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

First Quarter 2022 Form 10-Q 9

Second Quarter 2022 Form 10-Q 9

Notes to Condensed Consolidated Financial Statements

Reportable segments financial performance

Three months ended March 31,

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

($ in millions) 2022 2021 2022 2021

2 unchanged sentences

Run-off Property-Liability

( 3 ) ( 2 ) ( 5 ) ( 5 )

Total Property-Liability ( 864 ) 429 ( 584 ) 2,086

2 unchanged sentences

Allstate Health and Benefits

65 62 118 127

Corporate and Other ( 107 ) ( 112 ) ( 218 ) ( 235 )

5 unchanged sentences

( 28 ) ( 34 ) ( 57 ) ( 90 )

Business combination fair value adjustment — 6 — 6

Gain (loss) on disposition of operations 27 — 11 —

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

Income tax benefit (expense) on reconciling items 298 ( 354 ) 150 ( 976 )

Total reconciling items ( 189 ) 970 156 1,701

Loss from discontinued operations — ( 4,163 )

Income tax benefit from discontinued operations — 370

Income (loss) from discontinued operations — 493 — ( 3,670 )

Income tax benefit (expense) from discontinued operations — ( 297 ) — 73

Total from discontinued operations $ — $ 196 $ — $ ( 3,597 )

Net loss attributable to noncontrolling interest (2)

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

Net (loss) income attributable to noncontrolling interest (2)

( 10 ) 6 ( 20 ) —

Net (loss) income applicable to common shareholders $ ( 1,042 ) $ 1,595 $ ( 412 ) $ 187

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

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

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

10 www.allstate.com

1 unchanged sentence

Reportable segments revenue information

($ in millions) Three months ended March 31,

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

2022 2021 2022 2021

Property-Liability

28 unchanged sentences

Total Allstate Health and Benefits

562 553 1,136 1,109

Corporate and Other

7 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.

First Quarter 2022 Form 10-Q 11

Second Quarter 2022 Form 10-Q 11

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Portfolio composition

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

($ in millions) June 30, 2022 December 31, 2021

Fixed income securities, at fair value $ 41,282 $ 42,136

7 unchanged sentences

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

March 31, 2022

June 30, 2022

government and agencies $ 8,878 $ 8 $ ( 141 ) $ 8,745

12 unchanged sentences

Scheduled maturities for fixed income securities

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

($ in millions) June 30, 2022 December 31, 2021

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

9 unchanged sentences

Net investment income

($ in millions) Three months ended March 31,

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

2022 2021 2022 2021

Fixed income securities $ 299 $ 290 $ 566 $ 591

7 unchanged sentences

Net investment income

$ 562 $ 974 $ 1,156 $ 1,682

12 www.allstate.com

1 unchanged sentence

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

($ in millions) Three months ended March 31,

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

2022 2021 2022 2021

Fixed income securities $ ( 326 ) $ 86 $ ( 478 ) $ 269

7 unchanged sentences

($ in millions)

Three months ended March 31,

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

2022 2021 2022 2021

Sales $ ( 303 ) $ 115 $ ( 430 ) $ 361

1 unchanged sentence

Valuation change of equity investments (1)

( 689 ) 163 ( 1,136 ) 330

Valuation change and settlements of derivatives 272 ( 3 ) 590 8

2 unchanged sentences

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

($ in millions) Three months ended March 31,

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

2022 2021 2022 2021

Gross realized gains $ 27 $ 111 $ 93 $ 356

Gross realized losses ( 349 ) ( 24 ) ( 567 ) ( 88 )

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 March 31, 2022 and 2021, respectively.

Net appreciation (decline) recognized in net income

($ in millions) Three months ended March 31,

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

2022 2021 2022 2021

Equity securities $ ( 511 ) $ 132 $ ( 600 ) $ 226

2 unchanged sentences

Credit losses recognized in net income

($ in millions) Three months ended March 31,

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

2022 2021 2022 2021

Fixed income securities:

2 unchanged sentences

Mortgage loans — 11 ( 1 ) 17

Limited partnership interests ( 3 ) — ( 3 ) —

Other investments

Bank loans ( 6 ) 3 ( 16 ) ( 3 )

Agent loans — ( 1 ) — ( 1 )

Total credit losses by asset type $ ( 13 ) $ 12 $ ( 24 ) $ 14

1 unchanged sentence

Total $ ( 13 ) $ 12 $ ( 24 ) $ 14

First Quarter 2022 Form 10-Q 13

Second Quarter 2022 Form 10-Q 13

Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

gains (losses)

March 31, 2022 Gains Losses

June 30, 2022 Gains Losses

Fixed income securities $ 41,282 $ 43 $ ( 2,788 ) $ ( 2,745 )

3 unchanged sentences

Unrealized net capital gains and losses, pre-tax ( 2,741 )

Amounts recognized for:

Reclassification of noncontrolling interest 16

Amounts recognized 17

Other unrealized net capital gains and losses, pre-tax (2)

Deferred income taxes 578

6 unchanged sentences

Unrealized net capital gains and losses, pre-tax 756

Amounts recognized for:

Reclassification of noncontrolling interest 4

Amounts recognized 5

Other unrealized net capital gains and losses, pre-tax (2)

Deferred income taxes ( 163 )

2 unchanged sentences

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

(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.

(2) Includes amounts recognized for the reclassification of unrealized gains and losses related to noncontrolling interest and 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) Three months ended March 31, 2022

($ in millions) Six months ended June 30, 2022

Fixed income securities $ ( 3,505 )

3 unchanged sentences

Total ( 3,497 )

Amounts recognized for:

Reclassification of noncontrolling interest 12

Amounts recognized 12

Other unrealized net capital gains and losses, pre-tax 20

Deferred income taxes 741

1 unchanged sentence

Carrying value for limited partnership interests

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

($ in millions) June 30, 2022 December 31, 2021

EMA Fair Value Total EMA Fair Value Total

8 unchanged sentences

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

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.

As of June 30, 2022 and December 31, 2021, the fair value of short-term investments totaled $ 4.38 billion and $ 4.01 billion, respectively.

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

4 unchanged sentences

Other investments by asset type

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

($ in millions) June 30, 2022 December 31, 2021

Bank loans, net $ 868 $ 1,574

23 unchanged sentences

Recoveries after write-offs are recognized when received.

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.

Accrued interest excluded from the amortized cost of fixed income securities totaled $ 327 million and $ 311 million as of June 30, 2022 and December 31, 2021, respectively, 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.

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

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.

The securities identified, in addition to other securities for which the Company may have a concern, are evaluated for

Second Quarter 2022 Form 10-Q 15

Notes to Condensed Consolidated Financial Statements

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.

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

1) the financial condition, near-term and long-term prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices;

1) the financial condition, near-term and long-term

prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices;

2) the specific reasons that a security is in an unrealized loss position, including overall market conditions which could affect liquidity;

1 unchanged sentence

Rollforward of credit loss allowance for fixed income securities

Three months ended March 31,

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

($ in millions) 2022 2021 2022 2021

Beginning balance $ ( 6 ) $ ( 1 ) $ ( 6 ) $ ( 3 )

Credit losses on securities for which credit losses not previously reported — —

Net (increases) decreases related to credit losses previously reported ( 4 ) ( 1 ) ( 4 ) 1

3 unchanged sentences

$ ( 10 ) $ ( 2 ) $ ( 10 ) $ ( 2 )

(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.

(1) Allowance for fixed income securities as of June 30, 2022 comprised $ 10 million of corporate bonds.

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

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

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

March 31, 2022

June 30, 2022

Fixed income securities

21 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

Gross unrealized losses by unrealized loss position and credit quality as of June 30, 2022

($ in millions) Investment

9 unchanged sentences

(4) Evaluated based on factors such as discounted cash flows and the financial condition and near-term and long-term prospects of the issue or issuer and were determined to have adequate resources to fulfill contractual obligations.

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.

Investment grade is defined as a security having a National Association of Insurance Commissioners (“NAIC”) designation of 1 or 2, which is comparable to a rating of Aaa, Aa, A or Baa from Moody’s or AAA, AA, A or BBB from S&P Global Ratings (“S&P”), 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.

4 unchanged sentences

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

As of 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.

As of June 30, 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.

14 unchanged sentences

Accrued interest

($ in millions) March 31, December 31,

($ in millions) June 30, December 31,

Mortgage loans $ 3 $ 2

Bank Loans 6 4

First Quarter 2022 Form 10-Q 17

Second Quarter 2022 Form 10-Q 17

Notes to Condensed Consolidated Financial Statements

7 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 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 March 31, 2022 and December 31, 2021.

Payments on all mortgage loans were current as of June 30, 2022 and December 31, 2021.

Rollforward of credit loss allowance for mortgage loans

Three months ended March 31,

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

($ in millions) 2022 2021 2022 2021

4 unchanged sentences

$ ( 7 ) $ ( 30 ) $ ( 7 ) $ ( 30 )

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

(1) Includes $ 23 million of credit loss allowance for mortgage loans that were classified as held for sale as of June 30, 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.

Credit ratings of the borrower are considered a key credit quality indicator when bank loan credit loss allowances are estimated.

The ratings are updated quarterly and are either received from a nationally recognized rating agency or a comparable internal rating is derived if an externally provided rating is not available.

The ratings are either received from the Securities Valuation Office of the NAIC based on availability of applicable ratings from rating agencies on the NAIC credit rating provider list or a comparable internal rating.

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

2 unchanged sentences

Bank loans amortized cost by credit rating and year of origination

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

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

BBB $ — $ 1 $ 13 $ 8 $ 53 $ — $ 75 $ 86

BB 20 5 15 16 455 13 524 656

B 11 35 30 57 690 40 863 768

CCC and below 24 17 44 16 23 2 126 125

NAIC 2 / BBB $ — $ — $ 8 $ 6 $ 51 $ — $ 65 $ 86

NAIC 3 / BB 16 — 8 5 282 8 319 656

NAIC 4 / B 3 19 18 27 342 31 440 768

NAIC 5-6/ CCC and below 21 15 41 9 12 2 100 125

Amortized cost before allowance $ 40 $ 34 $ 75 $ 47 $ 687 $ 41 $ 924 $ 1,635

2 unchanged sentences

Rollforward of credit loss allowance for bank loans

($ in millions) Three months ended March 31,

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

2022 2021 2022 2021

Beginning balance $ ( 68 ) $ ( 60 ) $ ( 61 ) $ ( 67 )

4 unchanged sentences

$ ( 56 ) $ ( 52 ) $ ( 56 ) $ ( 52 )

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

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

Note 6 Fair Value of Assets and Liabilities

20 unchanged sentences

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

Second Quarter 2022 Form 10-Q 19

Notes to Condensed Consolidated Financial Statements

54 unchanged sentences

• Other assets:

Includes the contingent consideration provision in the sale agreement for

ALIC which meets the definition of a derivative.

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.

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

First Quarter 2022 Form 10-Q 21

As of June 30, 2022, the Company has commitments to invest $ 223 million in these limited partnership interests.

Second Quarter 2022 Form 10-Q 21

Notes to Condensed Consolidated Financial Statements

Assets and liabilities measured at fair value

March 31, 2022

June 30, 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

49 unchanged sentences

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

March 31, 2021

June 30, 2021

($ in millions) Fair value Valuation

2 unchanged sentences

Derivatives embedded in life and annuity contracts – Equity-indexed and forward starting options $ ( 466 ) Stochastic cash flow model Projected option cost 1.0 - 4.2 %

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

(1) These were included in the liabilities held for sale as of June 30, 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.

1 unchanged sentence

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

As of June 30, 2022 and December 31, 2021, Level 3 fair value measurements of fixed income securities total $ 186 million and $ 144 million, respectively, and include $ 93 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 $ 17 million and $ 16 million, respectively, of municipal fixed income securities that are not rated by third-party credit rating agencies.

1 unchanged sentence

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.

First Quarter 2022 Form 10-Q 23

Second 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 March 31, 2022

Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended June 30, 2022

Balance as of

March 31, 2022 Total gains (losses) included in:

Transfers Balance as of

June 30, 2022

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

Fixed income securities:

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

Corporate - public 49 — ( 1 ) — ( 35 ) 71 ( 5 ) — ( 2 ) 77

Corporate - privately placed 130 19 ( 3 ) — ( 51 ) 2 ( 24 ) — — 73

ABS 19 — — — — — — — ( 1 ) 18

Total fixed income securities 215 19 ( 3 ) — ( 86 ) 74 ( 29 ) — ( 4 ) 186

Equity securities 373 4 — — — — ( 5 ) — — 372

Short-term investments 11 — — — — 17 — — ( 20 ) 8

Other investments 2 — — — — — — — — 2

Other assets 77 31 — — — — — — — 108

Total recurring Level 3 assets 678 54 ( 3 ) — ( 86 ) 91 ( 34 ) — ( 24 ) 676

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

Rollforward of Level 3 assets and liabilities held at fair value during the six month period ended June 30, 2022

Balance as of

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

Transfers Balance as of

March 31, 2022

June 30, 2022

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

11 unchanged sentences

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

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

24 www.allstate.com

Notes to Condensed Consolidated Financial Statements

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

Balance as of

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

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

June 30, 2021

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

Fixed income securities:

Municipal $ 18 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ 18

Corporate - public 43 — 1 — ( 3 ) — — ( 21 ) — — 20

Corporate - privately placed 105 — 2 — ( 27 ) 1 23 ( 20 ) — — 84

ABS 102 — — — ( 25 ) — — ( 4 ) — ( 40 ) 33

Total fixed income securities 268 — 3 — ( 55 ) 1 23 ( 45 ) — ( 40 ) 155

Equity securities 410 8 — — — 8 6 ( 27 ) — — 405

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

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

Assets held for sale 170 1 — — — ( 9 ) 7 ( 3 ) — ( 2 ) 164

Total recurring Level 3 assets 851 9 3 — ( 55 ) — 36 ( 75 ) — ( 42 ) 727

Liabilities held for sale ( 463 ) ( 24 ) — — — — — — ( 8 ) 5 ( 490 )

Total recurring Level 3 liabilities $ ( 463 ) $ ( 24 ) $ — $ — $ — $ — $ — $ — $ ( 8 ) $ 5 $ ( 490 )

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

Balance as of

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

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

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

June 30, 2021

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

13 unchanged sentences

Total Level 3 gains (losses) included in net income

Three months ended March 31,

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

($ in millions) 2022 2021 2022 2021

1 unchanged sentence

Net gains (losses) on investments and derivatives 50 13 79 32

24 www.allstate.com

Second Quarter 2022 Form 10-Q 25

Notes to Condensed Consolidated Financial Statements

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.

Transfers into Level 3 during the three and six months ended June 30, 2022 and June 30, 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 and six months ended June 30, 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 March 31,

($ in millions) Three months ended March 31,

Fixed income securities $ — $ 1

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

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

2022 2021 2022 2021

Equity securities $ 4 $ 5 $ 29 $ 22

9 unchanged sentences

Total included in net income $ 35 $ 5 $ 73 $ 22

Municipal $ 1 $ — $ 1 $ 1

Corporate - public ( 1 ) 1 ( 3 ) ( 2 )

Corporate - privately placed ( 3 ) 2 ( 2 ) —

Assets held for sale — — — 1

Changes in unrealized net capital gains and losses reported in OCI $ ( 3 ) $ 3 $ ( 4 ) $ —

Financial instruments not carried at fair value

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

($ in millions) June 30, 2022 December 31, 2021

Financial assets Fair value level Amortized cost, net Fair

8 unchanged sentences

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

26 www.allstate.com

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.

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 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.

7 unchanged sentences

When derivatives meet specific criteria, they may be designated as accounting hedges and accounted for as fair value, cash flow, foreign currency fair value or foreign currency cash flow hedges.

The notional amounts specified in the contracts are used to calculate the exchange of contractual payments under the agreements and are generally not representative of the potential for gain or loss on these agreements.

The notional amounts specified in the contracts are used to calculate the exchange of contractual payments under the agreements and are generally not

representative of the potential for gain or loss on these agreements.

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.

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.

6 unchanged sentences

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.

26 www.allstate.com

As of June 30, 2022, the Company recorded $ 108 million in other assets related to this derivative.

For the three and six months ended June 30, 2022, the Company recorded gains of $ 31 million and $ 43 million, respectively, in operating costs and expenses related to valuation of this contingent consideration.

Second Quarter 2022 Form 10-Q 27

Notes to Condensed Consolidated Financial Statements

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

Summary of the volume and fair value positions of derivative instruments as of June 30, 2022

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

6 unchanged sentences

Options Other investments n/a 1,334 39 39 —

Futures Other assets n/a 2,075 4 4 —

Foreign currency contracts

10 unchanged sentences

Equity and index contracts

Options Other liabilities & accrued expenses n/a 1,212 ( 19 ) — ( 19 )

Futures Other liabilities & accrued expenses n/a 1,204 ( 1 ) — ( 1 )

9 unchanged sentences

(n/a = not applicable)

First Quarter 2022 Form 10-Q 27

28 www.allstate.com

Notes to Condensed Consolidated Financial Statements

36 unchanged sentences

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

March 31, 2022

June 30, 2022

Asset derivatives $ 54 $ ( 55 ) $ 2 $ 1 $ — $ 1

4 unchanged sentences

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

28 www.allstate.com

Second Quarter 2022 Form 10-Q 29

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

($ 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

Three months ended June 30, 2022

Interest rate contracts $ 158 $ — $ 158

4 unchanged sentences

Total $ 272 $ ( 5 ) $ 267

Three months ended March 31, 2021

Six months ended June 30, 2022

Interest rate contracts $ 474 $ — $ 474

Equity and index contracts 56 ( 47 ) 9

Contingent consideration — 43 43

Foreign currency contracts 44 ( 2 ) 42

1 unchanged sentence

Total $ 590 $ ( 6 ) $ 584

Three months ended June 30, 2021

Interest rate contracts $ 2 $ — $ 2

Equity and index contracts ( 6 ) 14 8

Foreign currency contracts ( 2 ) — ( 2 )

Credit default contracts 1 — 1

Total return swaps - fixed income 2 — 2

Total $ ( 3 ) $ 14 $ 11

Six months ended June 30, 2021

Interest rate contracts $ 1 $ — $ 1

Equity and index contracts ( 8 ) 30 22

Foreign currency contracts 8 — 8

Credit default contracts 5 — 5

Total return swaps - fixed income 2 — 2

Total $ 8 $ 30 $ 38

The Company manages its exposure to credit risk by utilizing highly rated counterparties, establishing risk control limits, executing legally enforceable master netting agreements (“MNAs”) and obtaining collateral where appropriate.

1 unchanged sentence

OTC cash and securities collateral pledged

($ in millions) March 31, 2022

($ in millions) June 30, 2022

Pledged by the Company $ 3

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.

30 www.allstate.com

Notes to Condensed Consolidated Financial Statements

OTC derivatives counterparty credit exposure by counterparty credit rating

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

($ in millions) June 30, 2022 December 31, 2021

parties Notional

9 unchanged sentences

Exchange traded and cleared margin deposits

($ in millions) March 31, 2022

($ in millions) June 30, 2022

Pledged by the Company $ 254

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

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

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

($ in millions) June 30, 2022 December 31, 2021

Gross liability fair value of contracts containing credit-risk-contingent features $ 5 $ 8

6 unchanged sentences

CDS typically have a five-year term.

Second Quarter 2022 Form 10-Q 31

Notes to Condensed Consolidated Financial Statements

CDS notional amounts by credit rating and fair value of protection sold

1 unchanged sentence

AAA AA A BBB BB and

March 31, 2022

June 30, 2022

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

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

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.

32 www.allstate.com

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, 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.

In addition, as of June 30, 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.

In the event of dissolution, policyholders would share any residual unassigned surplus but are not subject to assessment for any deficit in unassigned surplus of the Reciprocal Exchanges.

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 $ 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.

The results of operations of the Reciprocal Exchanges are included in the Company’s Allstate Protection segment and generated $ 41 million and $ 83 million of earned premiums for the three and six months ended June 30, 2022, respectively, compared to $ 45 million and $ 90 million for the three and six months ended June 30, 2021, respectively.

Claims and claims expenses were $ 26 million and $ 60 million for the three and six months ended June 30, 2022, respectively, compared to $ 29 million and $ 67 million for the three and six months ended June 30, 2021, respectively.

Assets and liabilities of Reciprocal Exchanges

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

($ in millions) June 30, 2022 December 31, 2021

Fixed income securities $ 327 $ 324

12 unchanged sentences

The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions.

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

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

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

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.

Supply chain disruptions have resulted in higher parts costs, used car values

and longer time to claim resolution, which have combined with labor shortages to increase physical damage loss costs.

Medical inflation, treatment trends and higher severity of claims with attorney representation have also increased liability losses.

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

2 unchanged sentences

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

First Quarter 2022 Form 10-Q 31

Changes in auto current year claim severity are generally influenced by inflation in the medical and

Second Quarter 2022 Form 10-Q 33

Notes to Condensed Consolidated Financial Statements

claim practices and changes in mix of claim types.

auto repair sectors, the effectiveness and efficiency of claim practices and changes in mix of claim types.

The Company mitigates these effects through various loss management programs.

11 unchanged sentences

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

Three months ended March 31,

Six months ended June 30,

($ in millions) 2022 2021

12 unchanged sentences

Total paid ( 15,444 ) ( 13,053 )

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

Net balance as of June 30 25,326 22,571

Plus recoverables 8,950 9,066

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

Balance as of June 30 $ 34,276 $ 31,637

(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 $ 462 million and $ 590 million in the three months ended March 31, 2022 and 2021, respectively, net of recoverables.

This expense included losses from catastrophes of $ 1.57 billion and $ 1.54 billion in the six months ended June 30, 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.

2 unchanged sentences

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

Three months ended March 31,

Non-catastrophe losses Catastrophe losses Total

($ in millions)

2022 2021 2022

Three months ended June 30,

Auto $ 275 $ ( 29 ) $ ( 38 ) $ ( 4 ) $ 237 $ ( 33 )

3 unchanged sentences

Run-off Property-Liability 3 1 — — 3 1

Protection Services ( 3 ) ( 2 ) — — ( 3 ) ( 2 )

Total prior year reserve reestimates $ 408 $ ( 22 ) $ 51 $ 37 $ 459 $ 15

Six months ended June 30,

Auto $ 426 $ ( 46 ) $ ( 47 ) $ ( 23 ) $ 379 $ ( 69 )

Homeowners 44 ( 2 ) 78 ( 171 ) 122 ( 173 )

Other personal lines ( 16 ) ( 3 ) 7 ( 14 ) ( 9 ) ( 17 )

Commercial lines 111 31 — 2 111 33

Run-off Property-Liability

Protection Services ( 3 ) ( 2 ) — — ( 3 ) ( 2 )

Total prior year reserve reestimates

$ 566 $ ( 20 ) $ 38 $ ( 206 ) $ 604 $ ( 226 )

(1) Favorable reserve reestimates are shown in parentheses.

(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.

(2) Unfavorable reserve reestimates for personal auto are primarily from physical damage and bodily injury coverages.

Increases in physical damage reflect the ongoing inflationary factors and supply chain shortages impacting used vehicle and parts prices, labor rates and length of claim resolution, which contributed to the adverse development of claims reported in prior years but settled in 2022.

Increases in injury coverages reflect the ongoing impacts of more severe auto accidents, increased medical inflation, higher consumption of medical treatment and the increased prevalence and severity of claims with attorney representation.

Unfavorable reserve reestimates for commercial auto during the second quarter are primarily from shared economy business written in states which Allstate has exited.

(3) Included approximately $ 50 million and $ 200 million of estimated recoveries related to Nationwide Aggregate Reinsurance Program cover for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, for the three and six months ended 2021, respectively, which primarily impacted homeowners reestimates.

(4) Included approximately $ 110 million favorable subrogation settlements arising from the Woolsey wildfire, which primarily impacted homeowners reestimates, for the six months ended 2021.

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 March 31,

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

2022 2021 2022 2021

Property and casualty insurance premiums earned $ ( 456 ) $ ( 538 ) $ ( 883 ) $ ( 1,046 )

1 unchanged sentence

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,

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

2022 2021 2022 2021

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

1 unchanged sentence

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.

( 9 ) ( 26 ) ( 16 ) ( 55 )

(1) Ceded losses incurred included $ 44 million and $ 450 million related to the Michigan Catastrophic Claims Association for the six months ended June 30, 2022 and 2021, respectively.

(2) Included approximately $ 675 million of ceded losses related to the Nationwide Catastrophe Reinsurance Program for the six months ended June 30, 2021.

Second Quarter 2022 Form 10-Q 35

Notes to Condensed Consolidated Financial Statements

Reinsurance and indemnification recoverables

Reinsurance and indemnification recoverables, net

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

($ in millions) June 30, 2022 December 31, 2021

Property and casualty

4 unchanged sentences

Total $ 9,376 $ 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 March 31,

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

2022 2021 2022 2021

Property and casualty (1) (2)

10 unchanged sentences

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

36 www.allstate.com

Notes to Condensed Consolidated Financial Statements

Note 11 Company Restructuring

4 unchanged sentences

• 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 expenses related to these activities are included in the Condensed Consolidated Statements of Operations as restructuring and related charges and totaled $ 1 million and $ 71 million during the three months ended June 30, 2022 and 2021, respectively, and $ 13 million and $ 122 million during the six months ended June 30, 2022 and 2021, respectively.

Restructuring expenses during the second quarter and first six months of 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.

13 unchanged sentences

Expense incurred

Adjustments to liability ( 8 ) — ( 8 )

Payments and non-cash charges ( 6 ) ( 17 ) ( 23 )

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.

Restructuring liability as of June 30, 2022 $ 4 $ 7 $ 11

As of June 30, 2022, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled $ 4 million for employee costs and $ 140 million for exit costs.

Note 12 Guarantees and Contingent Liabilities

3 unchanged sentences

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

34 www.allstate.com

Notes to Condensed Consolidated Financial Statements

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

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.

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

The types of indemnifications typically provided include indemnifications for breaches of representations and warranties, taxes and certain

other liabilities, such as third-party lawsuits.

The indemnification clauses are often standard contractual terms and are entered into in the normal course of business based on an assessment that the risk of loss would be remote.

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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.

Related to the sale of ALIC and Allstate Assurance Company on November 1, 2021, AIC and Allstate

Second Quarter 2022 Form 10-Q 37

Notes to Condensed Consolidated Financial Statements

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.

The aggregate liability balance related to all guarantees was not material as of June 30, 2022.

Regulation and compliance

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

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.

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.

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 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

First Quarter 2022 Form 10-Q 35

Notes to Condensed Consolidated Financial Statements

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

The outcome may also be affected by future state or 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.

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The Company establishes accruals for such matters at management’s best estimate when the Company assesses that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

The Company does not establish accruals for such matters when the Company does not believe both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

The Company does not establish accruals for such matters when the Company does not believe both that it is probable that a loss has been incurred and the amount of the loss

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Notes to Condensed Consolidated Financial Statements

can be reasonably estimated.

The Company’s assessment of whether a loss is reasonably possible or probable is based on its assessment of the ultimate outcome of the matter following all appeals.

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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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This disclosure is not an indication of expected loss, if any.

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

Under accounting guidance, an event is “reasonably possible” if “the chance of the

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

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

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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

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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.

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.

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.

Medical providers continue to pursue litigation under various theories that challenge the amounts that the Company pays under the personal injury protection coverage, seeking additional benefit payments, as well as applicable interest, penalties and fees.

There is a pending class action, Revival Chiropractic v.

There is a pending putative class action, Revival Chiropractic v.

Allstate Insurance Company, et al.

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.

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

In Revival , on June 2, 2022, the 11 th Circuit certified to the Florida Supreme Court Allstate’s appeal of the federal district court’s interpretation of the state personal injury protection statute.

The 11 th Circuit is holding determination on plaintiff’s class certification appeal pending the outcome of the Florida Supreme Court certification.

The Company is also defending litigation involving individual plaintiffs.

The Company is defending putative class actions in various courts that raise challenges to the Company’s depreciation practices in homeowner property claims.

In these lawsuits, plaintiffs generally allege that, when calculating actual cash value, the costs of “non-materials” such as labor, general contractor’s overhead and profit, and sales tax should not be subject to depreciation.

In these lawsuits, plaintiffs generally allege that, when calculating actual cash value, the

Second Quarter 2022 Form 10-Q 39

Notes to Condensed Consolidated Financial Statements

costs of “non-materials” such as labor, general contractor’s overhead and profit, and sales tax should not be subject to depreciation.

The Company is currently defending the following lawsuits on this issue:

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

and Mitchell, et al.

Mitchell, et al.

Allstate Vehicle and Property Insurance Company, et al .

Ala., filed August 2021);

Allstate Vehicle and Property Insurance Company (W.D.

filed May 2022);

and Sims, et al.

Allstate Fire and Casualty Insurance Company, et al.

filed June 2022).

No classes have been certified in any of these matters.

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

A class settlement received final approval by the court in Huey v.

Allstate Vehicle and Property Insurance Company (N.D.

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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).

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Ohio, filed December 2020);

Esurance Property and Casualty Insurance Company (E.D.

Property and Casualty Insurance Company (E.D.

Mo., filed February 2021);

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La., filed February 2022);

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

Allstate Property and Casualty Insurance Company (M.D.

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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 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.

Two separately filed stockholder derivative actions have been consolidated into a single proceeding that is pending in the Circuit Court for Cook County, Illinois, Chancery Division.

The original complaint in the first-filed of those actions, Biefeldt v.

Wilson, et al.

, was filed on August 3, 2017, in that court by a plaintiff alleging that she is a stockholder of the Company.

On June 29, 2018, the court granted defendants’ motion to dismiss that complaint for failure to make a pre-suit demand on the Allstate Board but granted plaintiff permission to file an amended complaint.

The original complaint in IBEW Local No.

98 Pension Fund v.

Wilson, et al.

, 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 Allstate Board.

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.

Securities Litigation .

Plaintiffs further allege that a senior officer and several outside directors engaged in stock option exercises allegedly while in possession of material nonpublic information.

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

Defendants moved to dismiss the consolidated complaint on September 24, 2018 for failure to make a demand on the Allstate Board.

On May 14, 2019, the court granted defendants’ motion to dismiss the complaint, but allowed plaintiffs leave to file a second consolidated amended complaint which they filed on September 17, 2019.

Defendants moved to dismiss the complaint on November 1, 2019 for failure to make a demand on the Allstate Board.

The court subsequently requested supplemental briefing on the motion which concluded on February 1, 2021.

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

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.

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

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

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

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

Securities Litigation as well as state law “misappropriation” claims based on stock option transactions by the Company’s chairman, president and chief executive officer, its former vice chairman, and certain members of the board of directors.

Defendants moved to dismiss and/or stay the complaint on August 7, 2018.

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

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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The court allowed the lead plaintiffs to amend their complaint to add the City of Providence Employee Retirement System as a proposed class representative and on September 12, 2018, the amended complaint was filed.

On March 26, 2019, the court granted plaintiffs’ motion for class certification and certified a class consisting of all persons who purchased Allstate common stock between October 29, 2014 and August 3, 2015.

On April 9, 2019, defendants filed with the U.S.

Court of Appeals for the Seventh Circuit a petition for permission to appeal this ruling and the Seventh Circuit granted that petition on April 25, 2019.

On July 16, 2020, the Seventh Circuit vacated the class certification order and remanded the matter for further consideration by the district court.

Discovery in this matter concluded on October 5, 2020.

On December 21, 2020, the district court again granted plaintiffs’ motion for class certification and certified a class consisting of all persons who purchased Allstate common stock between October 29, 2014 and August 3, 2015.

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

A class was certified on March 26, 2019, vacated by the U.S.

Court of Appeals for the Seventh Circuit on July 16, 2020 and remanded for further consideration by the district

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Notes to Condensed Consolidated Financial Statements

The petition was denied on January 28, 2021.

Defendants moved for summary judgment on March 23, 2022.

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

Defendants’ petition for permission to appeal this ruling was denied on January 28, 2021.

Following the close of discovery defendants moved for summary judgment on March 23, 2022.

On July 26, 2022 the court entered its order granting summary judgment in part (as to plaintiffs’ claims relating to certain statements made in October 2014) and denying it as to the remainder of plaintiffs’ claims.

The court scheduled a pre-trial conference for August 24, 2022.

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

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No classes have been certified in these matters.

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

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.

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.

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

Three months ended March 31,

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

($ in millions) 2022 2021 2022 2021

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Remeasurement (gains) losses 278 ( 143 ) 55 ( 434 )

Pension net benefit $ ( 271 ) $ ( 349 )

Pension net cost (benefit) $ 246 $ ( 187 ) $ ( 25 ) $ ( 536 )

Postretirement benefits

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Remeasurement (gains) losses ( 19 ) 9 ( 43 ) ( 10 )

Postretirement net benefit $ ( 28 ) $ ( 23 )

Postretirement net (benefit) cost $ ( 22 ) $ 5 $ ( 50 ) $ ( 18 )

Pension and postretirement benefits

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Remeasurement (gains) losses 259 ( 134 ) 12 ( 444 )

Total net benefit $ ( 299 ) $ ( 372 )

Total net cost (benefit) $ 224 $ ( 182 ) $ ( 75 ) $ ( 554 )

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

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

First Quarter 2022 Form 10-Q 39

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 Statements of Operations.

Second Quarter 2022 Form 10-Q 41

Notes to Condensed Consolidated Financial Statements

Pension and postretirement benefits remeasurement gains and losses

Three months ended March 31,

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

($ in millions) 2022 2021 2022 2021

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Remeasurement (gains) losses $ 259 $ ( 134 ) $ 12 $ ( 444 )

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.

Remeasurement losses for the second quarter and first six months of 2022 are primarily related to unfavorable asset performance compared to expected return on plan assets, partially offset by a reduction in the projected benefit obligation due to an increase in the liability discount rate and changes in other assumptions.

The weighted average discount rate used to measure the benefit obligation increased to 4.92 % at June 30, 2022 compared to 3.97 % at March 31, 2022 and 2.93 % at December 31, 2021 resulting in gains for the second quarter and first six months of 2022.

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

For the second quarter and first six months 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 $ 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.

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 $ 43 million and $ 46 million for the three

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.

Non-cash investing activities include $ 51 million and $ 15 million related to mergers and exchanges completed with equity and fixed income securities, limited partnerships, and modifications of other investments for the six months ended June 30, 2022 and 2021, respectively.

Non-cash financing activities include $ 64 million and $ 51 million related to the issuance of Allstate common shares for vested equity awards for the six months ended June 30, 2022 and 2021, respectively.

months ended June 30, 2022 and 2021, respectively.

Non-cash operating activities include $ 16 million and $ 92 million related to right-of-use assets obtained in exchange for lease obligations for the six months ended June 30, 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) Three months ended March 31,

($ in millions) Six months ended June 30,

Net change in proceeds managed

Net change in fixed income securities $ ( 373 ) $ —

Net change in short-term investments ( 203 ) ( 583 )

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

($ in millions) Three months ended March 31,

($ in millions) Three months ended June 30,

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

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Other comprehensive (loss) income $ ( 1,529 ) $ 324 $ ( 1,205 ) $ 591 $ ( 124 ) $ 467

Six months ended June 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 $ ( 3,920 ) $ 834 $ ( 3,086 ) $ ( 1,007 ) $ 215 $ ( 792 )

reclassification adjustment of realized capital gains and losses ( 443 ) 93 ( 350 ) 283 ( 59 ) 224

Unrealized net capital gains and losses ( 3,477 ) 741 ( 2,736 ) ( 1,290 ) 274 ( 1,016 )

Unrealized foreign currency translation adjustments ( 59 ) 12 ( 47 ) 39 ( 8 ) 31

Unamortized pension and other postretirement prior service credit (1)

( 38 ) 8 ( 30 ) ( 37 ) 8 ( 29 )

Other comprehensive (loss) income $ ( 3,574 ) $ 761 $ ( 2,813 ) $ ( 1,288 ) $ 274 $ ( 1,014 )

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

First Quarter 2022 Form 10-Q 41

Second Quarter 2022 Form 10-Q 43

Report of Independent Registered Public Accounting Firm

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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 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”).

We have reviewed the accompanying condensed consolidated statement of financial position of The Allstate Corporation and subsidiaries (the “Company”) as of June 30, 2022, the related condensed consolidated statements of operations, comprehensive income and shareholders’ equity for the three-month and six-month periods ended June 30, 2022 and 2021, and cash flows for the six month periods ended June 30, 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.

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Chicago, Illinois

August 3, 2022

44 www.allstate.com

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