ALLSTATE CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as “we,” “our,” “us,” the “Company” or “Allstate”). It should be read in conjunction with the condensed consolidated financial statements and related notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporation annual report on Form 10-K for 2021, filed February 18, 2022. Further analysis of our insurance segments is provided in the Property-Liability Operations and Segment Results sections, including Allstate Protection and Run-off Property-Liability, Protection Services and Allstate Health and Benefits, of Management’s Discussion and Analysis (“MD&A”). The segments are consistent with the way in which the chief operating decision maker reviews financial performance and makes decisions about the allocation of resources. Subsequent event On October 18, 2022, Allstate closed the sale of its headquarters for $232 million resulting in a gain of approximately $99 million, pre-tax in the fourth quarter of 2022. $16 million of the gain will be classified in Property-Liability net gains and losses on investments and derivatives and $83 million will be classified as other income within the Corporate and Other segment, but excluded from adjusted net income, the measure of segment profit or loss. The sale will reduce real estate expenses and further advance Allstate’s multi-year Transformative Growth initiative. The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”) The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures have moderated, but new variants of the Coronavirus could result in further economic volatility. We continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to our operations, but the effects have been and could be material. Certain growth and profitability comparisons to the prior year were impacted, in part, by the effects the Coronavirus had on our prior year results. Beginning in March 2020, when shelter-in-place orders and other restrictions were initiated, and throughout 2021, we experienced lower auto accident claim frequency and different claim patterns than historically experienced. Total auto claim frequency has increased through the first nine months of 2022 and during 2021, but remains below pre-pandemic levels. The Coronavirus has affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity. The impact from the pandemic should be considered when comparing the current period to the prior period, including: • Sales of new and retention of existing policies • Rate changes and average gross premiums • Supply chain disruptions and labor shortages increasing the cost of settling claims • Premium for transportation network products • Driving behavior and auto accident frequency • Hospital and outpatient claim costs • Investment valuations and returns • Bad debt and credit allowance exposure • Consumer utilization of Milewise ® , our pay-per-mile insurance product • Retail sales in Allstate Protection Plans This list is not inclusive of all potential impacts and should not be treated as such. Within the MD&A we have included further disclosures related to the impacts of the Coronavirus on our 2022 results. Russia/Ukraine Conflict The Russia-Ukraine war and related sanctions imposed as a result of this conflict have increased global economic and political uncertainty, including inflationary pressures and an increased risk of cybersecurity incidents. Allstate does not have operations or direct investments in Russia, Belarus or Ukraine, but we could experience significant indirect impacts on the investment portfolio, financial position, or results of operations. Corporate Strategy Our strategy has two components: increase personal property-liability market share and expand protection offerings by leveraging the Allstate brand, customer base and other core capabilities. Transformative Growth is about creating a business model, capabilities and culture that continually transform to better serve customers. This is done by providing affordable, simple and connected protection through multiple distribution partners. The ultimate objective is to create continuous transformative growth in all businesses. In the personal property-liability businesses this has five key components: • Expanding customer access • Improving customer value • Increasing customer acquisition sophistication • Modernizing the technology ecosystem • Enhancing organizational capabilities 46 www.allstate.com Protection services businesses are being expanded by leveraging enterprise capabilities and resources such as distribution, brand, analytics, claims, investment expertise, talent and capital. Acquisitions and Dispositions Acquisitions On January 4, 2021, we completed the acquisition of National General Holdings Corp. (“National General”), significantly enhancing our strategic position in the independent agency channel. The transaction increased our market share in personal property-liability by over one percentage point and enhanced our independent agent-facing technology. Discontinued operations and held for sale On October 1, 2021, we closed the sale of Allstate Life Insurance Company of New York (“ALNY”) to Wilton Reassurance Company for $400 million. On November 1, 2021, we closed the sale of Allstate Life Insurance Company (“ALIC”) and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including a pre-close dividend of $1.25 billion paid by ALIC. In 2021 and prior periods, the assets and liabilities of the businesses were reclassified as held for sale and results were presented as discontinued operations. See Note 3 of the condensed consolidated financial statements for further information on acquisitions and dispositions. Measuring segment profit or loss The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Run-off Property-Liability segments and adjusted net income for the Protection Services, Allstate Health and Benefits and Corporate and Other segments. Underwriting income is calculated as premiums earned and other revenue, less claims and claims expense (“losses”), amortization of deferred policy acquisition costs (“DAC”), operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, as determined using accounting principles generally accepted in the United States of America (“GAAP”). We use this measure in our evaluation of results of operations to analyze profitability. Adjusted net income is net income (loss) applicable to common shareholders, excluding: • Net gains and losses on investments and derivatives • Pension and other postretirement remeasurement gains and losses • Business combination expenses and the amortization or impairment of purchased intangibles • Income or loss from discontinued operations • Gain or loss on disposition of operations • Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years • Income tax expense or benefit on reconciling items Third Quarter 2022 Form 10-Q 47 Highlights Consolidated net income ($ in millions) Q1 Q2 Q3 Consolidated net loss applicable to common shareholders was $694 million and $1.11 billion in the third quarter and first nine months of 2022, respectively, compared to income of $508 million and $695 million in the third quarter and first nine months of 2021, respectively, primarily due to higher losses, excluding catastrophes, and equity valuation decreases, partially offset by increased Property-Liability premiums earned and the loss on the sale of the life and annuities business in the first nine months of 2021. For the twelve months ended September 30, 2022, return on Allstate common shareholders’ equity was (1.6)%, a decrease of 14.8% from 13.2% for the twelve months ended September 30, 2021. Total revenue ($ in millions) Total revenue increased 5.8% to $13.21 billion and increased 0.5% to $37.77 billion in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021. The increase in both periods is due to increases of 9.9% and 8.4% in property and casualty insurance premiums earned in the third quarter and first nine months of 2022, respectively, partially offset by net losses on investments and derivatives in 2022 compared to net gains in 2021 and decreases in net investment income. Insurance premiums earned increased for Property-Liability and Protection Services. Net investment income ($ in millions) Net investment income decreased $74 million to $690 million in the third quarter of 2022 and decreased $600 million to $1.85 billion in the first nine months of 2022 compared to the same periods of 2021. The decrease in both periods was primarily due to lower performance-based investment results, mainly from limited partnerships, partially offset by higher market-based fixed income portfolio yields. 48 www.allstate.com Financial highlights Investments totaled $61.01 billion as of September 30, 2022, decreasing from $64.70 billion as of December 31, 2021. Allstate shareholders’ equity As of September 30, 2022, Allstate shareholders’ equity was $17.67 billion. Book value per common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $58.35, a decrease of 31.0% from $84.62 as of September 30, 2021, and a decrease of 28.4% from $81.52 as of December 31, 2021. Return on average Allstate common shareholders’ equity For the twelve months ended September 30, 2022, return on Allstate common shareholders’ equity was (1.6)%, a decrease of 14.8 points from 13.2% for the twelve months ended September 30, 2021. The decrease was primarily due to lower net income applicable to common shareholders for the trailing twelve-month period ending September 30, 2022. Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement losses of $79 million in the third quarter of 2022, 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. We recorded losses of $91 million in the first nine months of 2022, primarily related to unfavorable asset performance compared to expected return on plan assets, partially offset by a reduction in the projected benefit obligation due to an increase in the liability discount rate and changes in other assumptions, primarily related to an increase in the long-term lump sum interest rate. Summarized consolidated financial results Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Revenues Property and casualty insurance premiums $ 11,661 $ 10,615 $ 34,004 $ 31,366 Accident and health insurance premiums and contract charges 463 460 1,398 1,362 Other revenue 561 536 1,684 1,585 Net investment income 690 764 1,846 2,446 Net gains (losses) on investments and derivatives (167) 105 (1,167) 818 Total revenues 13,208 12,480 37,765 37,577 Costs and expenses Property and casualty insurance claims and claims expense (10,073) (8,264) (27,262) (21,514) Shelter-in-Place Payback expense — — — (29) Accident, health and other policy benefits (263) (277) (801) (771) Amortization of deferred policy acquisition costs (1,682) (1,582) (4,913) (4,650) Operating, restructuring and interest expenses (1,941) (1,982) (5,872) (5,695) Pension and other postretirement remeasurement gains (losses) (79) (40) (91) 404 Amortization of purchased intangibles (90) (109) (264) (267) Total costs and expenses (14,128) (12,254) (39,203) (32,522) (Loss) income from operations before income tax expense (920) 226 (1,438) 5,055 Income tax benefit (expense) 237 (20) 377 (1,008) Net (loss) income from continuing operations (683) 206 (1,061) 4,047 Income (loss) from discontinued operations, net of tax — 325 — (3,272) Net (loss) income (683) 531 (1,061) 775 Less: Net loss attributable to noncontrolling interest (15) (7) (34) (7) Net (loss) income attributable to Allstate (668) 538 (1,027) 782 Preferred stock dividends (26) (30) (79) (87) Net (loss) income applicable to common shareholders $ (694) $ 508 $ (1,106) $ 695 Third Quarter 2022 Form 10-Q 49 Segment highlights Allstate Protection underwriting loss was $1.17 billion in the third quarter of 2022 compared to underwriting loss of $421 million in the third quarter of 2021. Underwriting loss totaled $1.75 billion in the first nine months of 2022 compared to underwriting income of $1.67 billion in the first nine months of 2021. The decrease in both periods was primarily due to higher losses and unfavorable reserve reestimates, both excluding catastrophes, primarily for auto insurance, partially offset by increased premiums. We are executing a comprehensive plan to improve profitability, including broadly raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and executing claims operating actions to manage loss costs. At this time, we will no longer write new homeowners and condominium business in the state of California, although we will offer continuing coverage to existing customers. Additional actions are likely in personal auto insurance. Commercial insurance is being exited in five states and coverage to transportation network companies will not be offered unless it utilizes telematics-based pricing. We expect these actions will negatively impact premiums starting in the fourth quarter. Catastrophe losses were $763 million and $2.33 billion in the third quarter and first nine months of 2022, respectively, compared to $1.27 billion and $2.81 billion in the third quarter and first nine months of 2021, respectively. Premiums written increased 9.8% to $12.04 billion and 10.5% to $34.31 billion in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, reflecting higher premiums in both Allstate and National General brands. Protection Services adjusted net income was $35 million in the third quarter of 2022 compared to $45 million in the third quarter of 2021, primarily due to a prior year restructuring benefit and higher current year technology expenses at Allstate Identity Protection. Adjusted net income was $131 million in the first nine months of 2022 compared to $150 million in the first nine months of 2021, primarily related to investments in growth at Allstate Protection Plans and lower revenue at Arity. Premiums and other revenue increased 8.7% or $47 million in the third quarter of 2022 and 11.4% or $179 million in the first nine months of 2022 compared to the same periods of 2021, primarily due to Allstate Protection Plans. Allstate Health and Benefits adjusted net income was $54 million in the third quarter of 2022 compared to $33 million in the third quarter 2021, primarily due to lower individual health and employer voluntary benefits claims as well as lower restructuring charges compared to the prior year quarter. Adjusted net income was $172 million in the first nine months of 2022 compared to $160 million in the first nine months of 2021, primarily due to increases in group health and employer voluntary benefits revenues, partially offset by higher group and individual health claims utilization. Premiums and contract charges increased 0.7% to $463 million in the third quarter of 2022 and 2.6% to $1.40 billion in the first nine months of 2022 compared to the same periods of 2021, primarily due to growth in group health and employer voluntary benefits. 50 www.allstate.com Property-Liability Operations Property-Liability Operations Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Run-off Property-Liability. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources. We do not allocate Property-Liability investment income, net gains and losses on investments and derivatives, or assets to the Allstate Protection and Run-off Property-Liability segments. Management reviews assets at the Property-Liability level for decision-making purposes. GAAP operating ratios are used to measure our profitability to enhance an investor’s understanding of our financial results and are calculated as follows: • Loss ratio: the ratio of claims and claims expense (loss adjustment expenses), to premiums earned. Loss ratios include the impact of catastrophe losses and prior year reserve reestimates. • Expense ratio: the ratio of amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges and Shelter-in-Place Payback expense, less other revenue to premiums earned. • Combined ratio: the sum of the loss ratio and the expense ratio. We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between periods. The impacts are calculated by taking the specific items noted below divided by Property-Liability premiums earned: • Effect of catastrophe losses on combined ratio: includes catastrophe losses and prior year reserve reestimates of catastrophe losses, included in claims and claims expense • Effect of prior year reserve reestimates on combined ratio • Effect of amortization of purchased intangibles on combined ratio • Effect of restructuring and related charges on combined ratio • Effect of Shelter-in-Place Payback expense on combined and expense ratios • Effect of Run-off Property-Liability business on combined ratio: includes claims and claims expense, restructuring and related charges and operating costs and expenses in the Run-off Property-Liability segment Premium measures and statistics are used to analyze our premium trends and are calculated as follows: • PIF : policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy. Commercial lines PIF counts for shared economy agreements typically reflect contracts that cover multiple rather than individual drivers. • New issued applications : item counts of automobile or homeowner insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate brand. • Average premium-gross written (“average premium”): gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line. • Renewal ratio: renewal policy item counts issued during the period, based on contract effective dates, divided by the total policy item counts issued generally 6 months prior for auto or 12 months prior for homeowners. • Implemented rate changes: represents the impact in the locations (U.S. states, the District of Columbia or Canadian provinces) where rate changes were implemented during the period as a percentage of total brand prior year-end premiums written. Frequency and severity statistics , which are influenced by driving patterns, inflation and other factors, are provided to describe the trends in loss costs. Our reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine our best estimate of recorded reserves. We use the following statistics to evaluate losses: • Gross claim frequency is calculated as annualized notice counts, excluding counts associated with catastrophe events, received in the period divided by the average of PIF with the applicable coverage during the period. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed with a payment or closed without payment). • Report year incurred claim severity is calculated by dividing the sum of recorded estimated incurred losses and allocated loss adjustment expenses, excluding catastrophes, by the reported notice counts during that report year. Report year incurred claim severity does not include incurred but not reported (“IBNR”) losses or benefits from subrogation and salvage. Third Quarter 2022 Form 10-Q 51 Property-Liability Operations • Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period. • Percent change in frequency or paid claim severity statistics are calculated as the amount of increase or decrease in gross claim frequency or paid claim severity in the current period compared to the same period in the prior year, divided by the prior year gross claim frequency or paid claim severity. • Percent change in report year incurred claim severity statistic is calculated as the amount of increase or decrease in report year incurred claim severity recorded in the year-to-date period divided by the current estimate of the prior report year incurred claim severity. Underwriting results Three months ended September 30, Nine months ended September 30, ($ in millions, except ratios) 2022 2021 2022 2021 Premiums written $ 12,037 $ 10,966 $ 34,307 $ 31,057 Premiums earned $ 11,157 $ 10,159 $ 32,529 $ 30,064 Other revenue 364 365 1,066 1,071 Claims and claims expense (9,934) (8,145) (26,867) (21,193) Shelter-in-Place Payback expense — — — (29) Amortization of DAC (1,414) (1,346) (4,117) (3,968) Other costs and expenses (1,390) (1,477) (4,285) (4,115) Restructuring and related charges (1) (14) (15) (24) (113) Amortization of purchased intangibles (61) (75) (178) (165) Underwriting (loss) income $ (1,292) $ (534) $ (1,876) $ 1,552 Catastrophe losses Catastrophe losses, excluding reserve reestimates $ 772 $ 1,270 $ 2,304 $ 3,018 Catastrophe reserve reestimates (2) (9) (1) 29 (207) Total catastrophe losses $ 763 $ 1,269 $ 2,333 $ 2,811 Non-catastrophe reserve reestimates (2) 875 162 1,444 144 Prior year reserve reestimates (2) 866 161 1,473 (63) GAAP operating ratios Loss ratio 89.0 80.2 82.6 70.5 Expense ratio (3) 22.6 25.1 23.2 24.3 Combined ratio 111.6 105.3 105.8 94.8 Effect of catastrophe losses on combined ratio 6.8 12.5 7.2 9.4 Effect of prior year reserve reestimates on combined ratio 7.7 1.6 4.6 (0.3) Effect of catastrophe losses included in prior year reserve reestimates on combined ratio (0.1) — 0.1 (0.7) Effect of restructuring and related charges on combined ratio (1) 0.1 0.1 0.1 0.4 Effect of amortization of purchased intangibles on combined ratio 0.6 0.8 0.5 0.5 Effect of Shelter-in-Place Payback expense on combined and expense ratios — — — 0.1 Effect of Run-off Property-Liability business on combined ratio 1.1 1.2 0.4 0.4 (1) Restructuring and related charges for the third quarter and first nine months of 2022 primarily related to future work environment and employee costs. See Note 11 of the condensed consolidated financial statements for additional details. (2) Favorable reserve reestimates are shown in parentheses. (3) Other revenue is deducted from operating costs and expenses in the expense ratio calculation. 52 www.allstate.com Allstate Protection Segment Results Allstate Protection Segment Underwriting results Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Premiums written $ 12,037 $ 10,966 $ 34,307 $ 31,057 Premiums earned $ 11,157 $ 10,159 $ 32,529 $ 30,064 Other revenue 364 365 1,066 1,071 Claims and claims expense (9,814) (8,032) (26,743) (21,078) Shelter-in-Place Payback expense — — — (29) Amortization of DAC (1,414) (1,346) (4,117) (3,968) Other costs and expenses (1,388) (1,476) (4,282) (4,112) Restructuring and related charges (14) (16) (24) (113) Amortization of purchased intangibles (61) (75) (178) (165) Underwriting (loss) income $ (1,170) $ (421) $ (1,749) $ 1,670 Catastrophe losses $ 763 $ 1,269 $ 2,333 $ 2,811 Underwriting loss was $1.17 billion in the third quarter of 2022 compared to underwriting loss of $421 million in the third quarter of 2021. Underwriting loss totaled $1.75 billion in first nine months of 2022 compared to underwriting income of $1.67 billion in the first nine months of 2021. The decrease in both periods was primarily due to higher losses and unfavorable reserve reestimates, both excluding catastrophes, primarily for auto insurance, partially offset by increased premiums. We are executing a comprehensive plan to improve profitability, including broadly raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and executing claims operating actions to manage loss costs. Change in underwriting results from prior year period - three months ended ($ in millions) Change in underwriting results from prior year period - nine months ended ($ in millions) Third Quarter 2022 Form 10-Q 53 Segment Results Allstate Protection Underwriting income (loss) by brand and by line of business Allstate brand National General Allstate Protection ($ in millions) 2022 2021 2022 2021 2022 2021 Three months ended September 30, Auto (1) $ (1,222) $ (123) $ (93) $ (36) $ (1,315) $ (159) Homeowners (2) 268 (208) (23) (69) 245 (277) Other personal lines (3) 47 (7) (7) (10) 40 Commercial lines (116) (54) (1) — (117) (54) Other business lines (3) 24 27 — — 24 27 Answer Financial — — — — 3 2 Total $ (1,049) $ (311) $ (124) $ (112) $ (1,170) $ (421) Nine months ended September 30, Auto (1) $ (1,937) $ 1,444 $ (103) $ 118 $ (2,040) $ 1,562 Homeowners (2) 504 61 (35) (77) 469 (16) Other personal lines 20 112 (1) — 19 112 Commercial lines (280) (81) 6 — (274) (81) Other business lines (3) 70 82 — — 70 82 Answer Financial — — — — 7 11 Total $ (1,623) $ 1,618 $ (133) $ 41 $ (1,749) $ 1,670 (1) 2021 results include certain National General commercial lines insurance products. (2) 2021 results include National General packaged policies, which include auto, and commercial lines insurance products. (3) Other business lines represents commissions earned and other costs and expenses for Ivantage and non-proprietary life and annuity products. Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends. Premiums written is the amount of premiums charged for policies issued during a fiscal period. Premiums are considered earned and are included in the financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired term of the policies is recorded as unearned premiums on our Condensed Consolidated Statements of Financial Position. Premiums written by brand and by line of business Allstate brand National General Allstate Protection ($ in millions) 2022 2021 2022 2021 2022 2021 Three months ended September 30, Auto $ 6,704 $ 6,153 $ 1,156 $ 1,018 $ 7,860 $ 7,171 Homeowners 2,803 2,452 483 552 3,286 3,004 Other personal lines 564 543 42 41 606 584 Commercial lines 233 207 52 — 285 207 Total premiums written $ 10,304 $ 9,355 $ 1,733 $ 1,611 $ 12,037 $ 10,966 Nine months ended September 30, Auto $ 19,386 $ 18,165 $ 3,506 $ 2,836 $ 22,892 $ 21,001 Homeowners 7,488 6,492 1,332 1,317 8,820 7,809 Other personal lines 1,609 1,519 110 120 1,719 1,639 Commercial lines 718 608 158 — 876 608 Total premiums written $ 29,201 $ 26,784 $ 5,106 $ 4,273 $ 34,307 $ 31,057 54 www.allstate.com Allstate Protection Segment Results Premiums earned by brand and by line of business Allstate brand National General Allstate Protection ($ in millions) 2022 2021 2022 2021 2022 2021 Three months ended September 30, Auto $ 6,416 $ 6,009 $ 1,129 $ 903 $ 7,545 $ 6,912 Homeowners 2,350 2,080 426 442 2,776 2,522 Other personal lines 505 481 35 40 540 521 Commercial lines 246 204 50 — 296 204 Total premiums earned $ 9,517 $ 8,774 $ 1,640 $ 1,385 $ 11,157 $ 10,159 Nine months ended September 30, Auto $ 18,742 $ 18,059 $ 3,232 $ 2,545 $ 21,974 $ 20,604 Homeowners 6,841 6,120 1,224 1,205 8,065 7,325 Other personal lines 1,511 1,432 105 113 1,616 1,545 Commercial lines 722 590 152 — 874 590 Total premiums earned $ 27,816 $ 26,201 $ 4,713 $ 3,863 $ 32,529 $ 30,064 Reconciliation of premiums written to premiums earned Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Total premiums written $ 12,037 $ 10,966 $ 34,307 $ 31,057 (Increase) decrease in unearned premiums (852) (672) (1,709) (1,264) Other (28) (135) (69) 271 Total premiums earned $ 11,157 $ 10,159 $ 32,529 $ 30,064 Policies in force by brand and by line of business Allstate brand National General Allstate Protection PIF (thousands) 2022 2021 2022 2021 2022 2021 Auto 21,853 21,951 4,278 3,703 26,131 25,654 Homeowners 6,599 6,496 638 642 7,237 7,138 Other personal lines 4,637 4,560 293 288 4,930 4,848 Commercial lines 204 212 106 107 310 319 Total 33,293 33,219 5,315 4,740 38,608 37,959 Auto insurance premiums written increased 9.6% or $689 million in the third quarter of 2022 compared to the third quarter of 2021 and 9.0% or $1.89 billion in the first nine months of 2022 compared to the first nine months of 2021, primarily due to the following factors: • Increased average premiums driven by rate increases. In the nine months ended September 30, 2022, rate increases of 14.7% were taken for Allstate brand in 52 locations, resulting in total Allstate brand insurance premium impact of 10.8%, and 9.1% were taken for National General brand in 36 locations, resulting in total National General brand insurance premium impact of 5.9%, to improve underwriting results. Allstate expects to continue to pursue rate increases for the balance of 2022 and into 2023 to improve auto insurance profitability • Renewal ratio decreased 0.2 in the third quarter and increased 0.3 points in the first nine months of 2022, respectively, compared to the third quarter and first nine months of 2021 • PIF increased 1.9% or 477 thousand to 26,131 thousand as of September 30, 2022 compared to September 30, 2021 due to growth in National General, including the SafeAuto acquisition • The impact of the ongoing rate actions may have an adverse effect on the renewal ratio and future PIF growth • Increased new issued applications driven by direct channel, including the acquisition of SafeAuto, and growth in the independent agency channel Third Quarter 2022 Form 10-Q 55 Segment Results Allstate Protection Auto premium measures and statistics Three months ended September 30, Nine months ended September 30, 2022 2021 Change 2022 2021 Change New issued applications (thousands) Allstate Protection by brand Allstate brand 933 932 0.1 % 2,856 2,787 2.5 % National General 648 516 25.6 % 2,038 1,553 31.2 % Total new issued applications 1,581 1,448 9.2 % 4,894 4,340 12.8 % Allstate Protection by channel Exclusive agency channel 624 610 2.3 % 1,842 1,843 (0.1) % Direct channel 535 447 19.7 % 1,737 1,337 29.9 % Independent agency channel 422 391 7.9 % 1,315 1,160 13.4 % Total new issued applications 1,581 1,448 9.2 % 4,894 4,340 12.8 % Allstate brand average premium $ 667 $ 604 10.4 % $ 646 $ 604 7.0 % Allstate brand renewal ratio (%) 87.0 87.2 (0.2) 87.3 87.0 0.3 Homeowners insurance premiums written increased 9.4% or $282 million in the third quarter of 2022 compared to the third quarter of 2021 and increased 12.9% or $1.01 billion in the first nine months of 2022 compared to the first nine months of 2021, primarily due to the following factors: • Higher Allstate brand average premiums from inflation in insured home replacement costs and implemented rate increases, combined with policies in force growth. National General premiums and policies in force declined in the third quarter of 2022 as we improve underwriting margins to targeted levels • Increased new issued applications driven by growth in the independent agency channel in the third quarter and first nine months of 2022 and direct channel in the first nine months of 2022 compared to the same periods of 2021 • Growth is being reduced in states and lines of business that are underperforming. At this time, we will no longer write new homeowners and condominium business in the state of California, although we will offer continuing coverage to existing customers. We expect this action will negatively impact premiums starting in the fourth quarter Homeowners premium measures and statistics Three months ended September 30, Nine months ended September 30, 2022 2021 Change 2022 2021 Change New issued applications (thousands) Allstate Protection by brand Allstate brand 267 259 3.1 % 765 737 3.8 % National General 41 28 46.4 % 108 77 40.3 % Total new issued applications 308 287 7.3 % 873 814 7.2 % Allstate Protection by channel Exclusive agency channel 219 225 (2.7) % 642 646 (0.6) % Direct channel 24 24 — % 74 62 19.4 % Independent agency channel 65 38 71.1 % 157 106 48.1 % Total new issued applications 308 287 7.3 % 873 814 7.2 % Allstate brand average premium $ 1,635 $ 1,443 13.3 % $ 1,596 $ 1,406 13.5 % Allstate brand renewal ratio (%) 87.4 87.1 0.3 86.9 87.1 (0.2) Other personal lines premiums written increased 3.8% or $22 million in the third quarter of 2022 compared to the third quarter of 2021 and increased 4.9% or $80 million in the first nine months of 2022 compared to the first nine months of 2021, primarily due to increases in landlords, condominiums and personal umbrella premiums for Allstate brand. Commercial lines premiums written increased 37.7% or $78 million in the third quarter of 2022 compared to the third quarter of 2021 and increased 44.1% or $268 million in the first nine months of 2022 compared to the first nine months of 2021, primarily due to higher miles driven and increased average premium in our shared economy business in part due to higher rates. Commercial insurance is being exited in five states and coverage to transportation network companies will not be offered unless it utilizes telematics-based pricing. We expect these actions will negatively impact premiums starting in the fourth quarter. 56 www.allstate.com Allstate Protection Segment Results GAAP operating ratios include loss ratio, expense ratio and combined ratio to analyze our profitability trends. Frequency and severity statistics are used to describe the trends in loss costs. Combined ratios by line of business Loss ratio Expense ratio (1) Combined ratio 2022 2021 2022 2021 2022 2021 Three months ended September 30, Auto 95.3 76.9 22.1 25.4 117.4 102.3 Homeowners 66.9 85.9 24.3 25.1 91.2 111.0 Other personal lines 76.1 64.9 25.8 27.4 101.9 92.3 Commercial lines 120.6 104.4 18.9 22.1 139.5 126.5 Total 88.0 79.0 22.5 25.1 110.5 104.1 Impact of amortization of purchased intangibles — — 0.6 0.8 0.6 0.8 Impact of restructuring and related charges — — 0.1 0.2 0.1 0.2 Nine months ended September 30, Auto 86.1 67.7 23.2 24.7 109.3 92.4 Impact of Shelter-in-Place Payback expense — — — 0.1 — 0.1 Homeowners 69.9 75.9 24.3 24.3 94.2 100.2 Other personal lines 74.4 67.0 24.4 25.8 98.8 92.8 Commercial lines 112.0 91.5 19.4 22.2 131.4 113.7 Total 82.2 70.1 23.2 24.3 105.4 94.4 Impact of amortization of purchased intangibles — — 0.5 0.5 0.5 0.5 Impact of Shelter-in-Place Payback expense — — — 0.1 — 0.1 Impact of restructuring and related charges — — 0.1 0.4 0.1 0.4 Impact of Allstate Special Payment plan bad debt expense — — — (0.1) — (0.1) (1) Other revenue is deducted from operating costs and expenses in the expense ratio calculation. Loss ratios by line of business Loss ratio Effect of catastrophe losses (1) Effect of prior year reserve reestimates Effect of catastrophe losses included in prior year reserve reestimates 2022 2021 2022 2021 2022 2021 2022 2021 Three months ended September 30, Auto 95.3 76.9 4.4 2.9 8.4 1.0 (0.1) (0.1) Homeowners 66.9 85.9 14.1 38.0 2.0 0.7 0.2 0.1 Other personal lines 76.1 64.9 5.7 19.6 (0.9) (12.7) (0.6) — Commercial lines 120.6 104.4 3.4 4.9 21.6 12.3 0.4 0.5 Total 88.0 79.0 6.8 12.5 6.7 0.4 (0.1) — Nine months ended September 30, Auto 86.1 67.7 2.2 1.9 4.6 — (0.3) (0.1) Homeowners 69.9 75.9 21.0 29.8 2.2 (2.1) 1.0 (2.3) Other personal lines 74.4 67.0 8.4 14.4 (0.9) (5.4) 0.2 (0.9) Commercial lines 112.0 91.5 2.1 4.2 20.0 9.8 0.1 0.5 Total 82.2 70.1 7.2 9.4 4.2 (0.6) 0.1 (0.7) (1) The ten-year average effect of catastrophe losses on the total combined ratio was 7.5 points in the third quarter of 2022. Third Quarter 2022 Form 10-Q 57 Segment Results Allstate Protection Auto loss ratio increased 18.4 points in both the third quarter and first nine months of 2022 compared to the same periods of 2021, primarily due to: • Higher gross claim frequency in all coverages, as miles driven has rebounded toward pre-pandemic levels. While total frequency increased relative to the prior year quarter, it remains below pre-pandemic levels • Increased severity for all coverages, driven by inflationary pressures in both physical damage and bodily injury claims • Unfavorable prior year reserve reestimates, excluding catastrophes, in both bodily injury and physical damage coverages The impacts of the Coronavirus affect frequency and severity statistics including: • Supply chain disruptions and labor shortages • Value of total losses due to higher used car prices • Labor and part cost increases • Unemployment levels • Changes in commuting activity • Driving behavior (e.g., speed, time of day) impacting severity and mix of claim types Property damage gross claim frequency for Allstate brand increased 3.5% and 9.1% in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021 due to factors including: • Increases in miles driven compared to 2021 which was impacted by the pandemic • While gross claim frequency has rebounded from the low in 2020, it is 13.8% and 15.0% below pre-pandemic levels of 2019 for the third quarter and first nine months of 2022, respectively Collision gross claim frequency for Allstate brand increased 0.1% and 6.2% in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021. While gross claim frequency has rebounded from the low in 2020, it is 9.3% and 10.0% below pre-pandemic levels of 2019 for the third quarter and first nine months of 2022, respectively. Property damage estimated report year 2022 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased approximately 17% compared to report year 2021 and also increased approximately 27% compared to the 2021 recorded severity as of September 30, 2021. Collision estimated report year 2022 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased approximately 17% compared to report year 2021 and also increased approximately 20% compared to the 2021 recorded severity as of September 30, 2021. The increase in estimated report year 2022 incurred claim severity for both coverages is geographically widespread and is due to rising inflationary factors and supply chain shortages impacting both repairable vehicles and total losses, including higher used car values, replacement part costs and labor rates and length of time to claim resolution. Bodily injury estimated report year 2022 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased approximately 12% compared to report year 2021 and also increased approximately 16% compared to the 2021 recorded severity as of September 30, 2021. The increase is due to recent data and updated assumptions related to more severe accidents, increased claims with attorney representation, litigation costs, higher medical consumption and inflation. Homeowners loss ratio decreased 19.0 points and 6.0 points in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to lower catastrophe losses and increased premiums earned, partially offset by higher severity. Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses) (% change year-over-year) Three months ended September 30, 2022 Gross claim frequency (2.9) % Paid claim severity 18.8 Nine months ended September 30, 2022 Gross claim frequency (2.8) % Paid claim severity 22.1 Gross claim frequency decreased in the third quarter and first nine months of 2022 compared to the same periods of 2021 primarily due to a decline in the wind/hail and water perils. Paid claim severity increased in the third quarter and first nine months of 2022 compared to the same periods of 2021 due to inflationary loss cost pressure driven by increases in labor and materials costs and time to repair. Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the quarter. Other personal lines loss ratio increased 11.2 and 7.4 points in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to higher losses, excluding catastrophes, partially offset by lower catastrophe losses and increased premiums earned. Commercial lines loss ratio increased 16.2 and 20.5 points in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to higher unfavorable prior year reserve reestimates, excluding catastrophes, primarily in commercial auto bodily injury coverage, and higher auto severity, partially offset by increased premiums earned. 58 www.allstate.com Allstate Protection Segment Results Catastrophe losses decreased 39.9% or $506 million in the third quarter of 2022 compared to the third quarter of 2021. Catastrophe losses decreased 17.0% or $478 million in the first nine months of 2022 compared to the first nine months of 2021. Hurricane Ian estimated gross catastrophe losses, excluding National Flood Insurance Program (“NFIP”) claim expenses, totaled $671 million, pre-tax, which will be reduced by $305 million in anticipated reinsurance recoveries for a net estimated loss of $366 million. Approximately 75% of Hurricane Ian net estimated losses relate to auto coverages. Auto policyholders generally have coverage for physical damage due to flood if they have purchased optional auto comprehensive coverage. Homeowners policies specifically exclude coverage for losses caused by flood. Reinsurance recoveries in 2021 related to the Nationwide Aggregate Reinsurance Program for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, which primarily impacted homeowners prior year reserve reestimates. We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes. We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted. Loss estimates are generally based on claim adjuster inspections and the application of historical loss development factors. Our loss estimates are calculated in accordance with the coverage provided by our policies. The establishment of appropriate reserves, including reserves for catastrophe losses, is an inherently uncertain and complex process. Reserving for hurricane losses is complicated by the inability of insureds to promptly report losses, limitations placed on claims adjusting staff affecting their ability to inspect losses, determining whether losses are covered by our homeowners policy (generally for damage caused by wind or wind driven rain) or specifically excluded coverage caused by flood, exposure to mold damage, and the effects of numerous other considerations, including the timing of a catastrophe in relation to other events, such as at or near the end of a financial reporting period, which can affect the availability of information needed to estimate reserves for that reporting period. In these situations, we may need to adapt our practices to accommodate these circumstances in order to determine a best estimate of our losses from a catastrophe. Over time, we have reduced our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes, limited by our participation in various state facilities. Catastrophe losses by the type of event Three months ended September 30, Nine months ended September 30, ($ in millions) Number of events 2022 Number of events 2021 (2) Number of events 2022 Number of events 2021 (2) Hurricanes/Tropical storms (1) 1 $ 378 5 $ 747 1 $ 378 6 $ 754 Tornadoes — — 1 9 3 148 2 26 Wind/Hail 32 446 35 389 78 1,712 68 1,650 Wildfires 4 19 4 49 8 50 4 48 Freeze/other events — — — — 1 16 1 605 Prior year reserve reestimates (4) 38 44 30 Prior year aggregate reinsurance recoveries (5) (38) (15) (237) Current year aggregate reinsurance recoveries — (11) — (65) Prior quarter reserve reestimates (71) 86 — — Total catastrophe losses 37 $ 763 45 $ 1,269 91 $ 2,333 81 $ 2,811 (1) 2022 includes $12 million of claims expenses related to the National Flood Insurance Program. (2) Includes $173 million and $256 million of reinstatement premiums for the three and nine months ended September 30, 2021, related to the Nationwide Catastrophe Reinsurance Program, primarily due to Hurricane Ida. Third Quarter 2022 Form 10-Q 59 Segment Results Allstate Protection Catastrophe reinsurance The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the third quarter and first nine months of 2022 was $211 million and $528 million, respectively, compared to $109 million and $345 million in the third quarter and first nine months of 2021, respectively. Catastrophe placement premiums reduce net written and earned premium with approximately 73% related to homeowners. Prior year reserve reestimates Unfavorable reserve reestimates were $746 million and $1.35 billion in the third quarter and first nine months of 2022, respectively, primarily due to strengthening of reserves, excluding catastrophes, in personal auto, primarily from bodily injury and physical damage coverages. Increases in injury coverages reflect recent data and updated assumptions related to severity with third-party bodily injury claims, increased claims with attorney representation, litigation costs and higher medical inflation. Increases in physical damage reflect the ongoing inflationary factors and supply chain shortages impacting used vehicle and parts prices, labor rates and length of claim resolution. Delays in the receipt of third-party carrier claims also contributed to the adverse development of claims reported in prior years. Unfavorable reserve reestimates for homeowners were driven by losses, excluding catastrophes. Unfavorable reserve reestimates for commercial auto during the third quarter were primarily from bodily injury coverage. For a more detailed discussion on reinsurance and reserve reestimates, see Note 9 of the condensed consolidated financial statements. Prior year reserve reestimates Three months ended September 30, Nine months ended September 30, Reserve reestimates (1) Effect on combined ratio (2) Reserve reestimates (1) Effect on combined ratio (2) ($ in millions, except ratios) 2022 2021 2022 2021 2022 2021 2022 2021 Auto $ 632 $ 72 5.6 0.7 $ 1,011 $ 3 3.1 — Homeowners 55 17 0.5 0.1 177 (156) 0.6 (0.5) Other personal lines (5) (66) — (0.6) (14) (83) — (0.3) Commercial lines 64 25 0.6 0.2 175 58 0.5 0.2 Total Allstate Protection $ 746 $ 48 6.7 0.4 $ 1,349 $ (178) 4.2 (0.6) Allstate brand $ 702 $ 40 6.3 0.4 $ 1,292 $ (176) 4.0 (0.6) National General 44 8 0.4 — 57 (2) 0.2 — Total Allstate Protection $ 746 $ 48 6.7 0.4 $ 1,349 $ (178) 4.2 (0.6) (1) Favorable reserve reestimates are shown in parentheses. (2) Ratios are calculated using Allstate Protection premiums earned. 60 www.allstate.com Allstate Protection Segment Results Expense ratio decreased 2.6 and 1.1 points in the third quarter and first nine months of 2022, respectively, compared to the third quarter and first nine months of 2021, primarily due to lower advertising costs and the impact of amortization of DAC. The expense ratio for the first nine months of 2022 was partially offset by higher operating costs, primarily due to employee-related costs. Impact of specific costs and expenses on the expense ratio Three months ended September 30, Nine months ended September 30, ($ in millions, except ratios) 2022 2021 Change 2022 2021 Change Amortization of DAC $ 1,414 $ 1,346 $ 68 $ 4,117 $ 3,968 $ 149 Advertising expense 191 325 (134) 787 949 (162) Amortization of purchased intangibles 61 75 (14) 178 165 13 Other costs and expenses, net of other revenue 833 786 47 2,429 2,111 318 Restructuring and related charges 14 16 (2) 24 113 (89) Shelter-in-Place Payback expense — — — — 29 (29) Allstate Special Payment plan bad debt expense — — — — (19) 19 Total underwriting expenses $ 2,513 $ 2,548 $ (35) $ 7,535 $ 7,316 $ 219 Premiums earned $ 11,157 $ 10,159 $ 998 $ 32,529 $ 30,064 $ 2,465 Expense ratio Amortization of DAC 12.7 13.2 (0.5) 12.7 13.2 (0.5) Advertising expense 1.7 3.2 (1.5) 2.4 3.2 (0.8) Other costs and expenses 7.4 7.7 (0.3) 7.5 7.0 0.5 Subtotal 21.8 24.1 (2.3) 22.6 23.4 (0.8) Amortization of purchased intangibles 0.6 0.8 (0.2) 0.5 0.5 — Restructuring and related charges 0.1 0.2 (0.1) 0.1 0.4 (0.3) Shelter-in-Place Payback expense — — — — 0.1 (0.1) Allstate Special Payment plan bad debt expense — — — — (0.1) 0.1 Total expense ratio 22.5 25.1 (2.6) 23.2 24.3 (1.1) Third Quarter 2022 Form 10-Q 61 Segment Results Run-off Property-Liability Run-off Property-Liability Segment Underwriting results ($ in millions) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Claims and claims expense Asbestos claims $ (34) $ (64) $ (34) $ (64) Environmental claims (56) (40) (56) (40) Other run-off lines (30) (9) (34) (11) Total claims and claims expense (120) (113) (124) (115) Operating costs and expenses (2) — (3) (3) Underwriting loss $ (122) $ (113) $ (127) $ (118) Annual reserve review In the third quarter of 2022 and 2021, we performed our annual reserve review using established industry and actuarial best practices. The annual review resulted in unfavorable reserve reestimates totaling $118 million and $111 million in 2022 and 2021, respectively. The reserve reestimates are included as part of claims and claims expense. The reserve reestimates in 2022 primarily related to new reported information and defense costs for asbestos and higher than expected reported losses for environmental and other run-off exposures. The reserve reestimates in 2021 primarily related to new reported information for asbestos and environmental and higher than expected reported losses for environmental and other run-off exposures. We believe that our reserves are appropriately established based on available facts, technology, laws, regulations, and assessments of other pertinent factors and characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. However, as we progress with the resolution of disputed claims in the courts and arbitrations and with negotiations and settlements, our reported losses may be more variable. Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance ($ in millions) September 30, 2022 December 31, 2021 Asbestos claims Gross reserves $ 1,231 $ 1,210 Reinsurance (394) (382) Net reserves 837 828 Environmental claims Gross reserves 342 273 Reinsurance (69) (47) Net reserves 273 226 Other run-off claims Gross reserves 442 433 Reinsurance (65) (66) Net reserves 377 367 Total Gross reserves 2,015 1,916 Reinsurance (528) (495) Net reserves $ 1,487 $ 1,421 62 www.allstate.com Run-off Property-Liability Segment Results Reserves by type of exposure before and after the effects of reinsurance ($ in millions) September 30, 2022 December 31, 2021 Direct excess commercial insurance Gross reserves $ 1,152 $ 1,050 Reinsurance (407) (363) Net reserves 745 687 Assumed reinsurance coverage Gross reserves 628 617 Reinsurance (58) (56) Net reserves 570 561 Direct primary commercial insurance Gross reserves 151 168 Reinsurance (62) (75) Net reserves 89 93 Other run-off business Gross reserves 1 1 Reinsurance — — Net reserves 1 1 Unallocated loss adjustment expenses Gross reserves 83 80 Reinsurance (1) (1) Net reserves 82 79 Total Gross reserves 2,015 1,916 Reinsurance (528) (495) Net reserves $ 1,487 $ 1,421 Percentage of gross and ceded reserves by case and IBNR September 30, 2022 December 31, 2021 Case IBNR Case IBNR Direct excess commercial insurance Gross reserves (1) 60 % 40 % 61 % 39 % Ceded (2) 66 34 67 33 Assumed reinsurance coverage Gross reserves 32 68 33 67 Ceded 34 66 38 62 Direct primary commercial insurance Gross reserves 58 42 53 47 Ceded 81 19 71 29 (1) Approximately 64% of gross case reserves as of September 30, 2022 are subject to settlement agreements. (2) Approximately 68% of ceded case reserves as of September 30, 2022 are subject to settlement agreements. Third Quarter 2022 Form 10-Q 63 Segment Results Run-off Property-Liability Gross payments from case reserves by type of exposure ($ in millions) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Direct excess commercial insurance Gross (1) $ 9 $ 12 37 $ 46 Ceded (2) (3) (6) (13) (21) Assumed reinsurance coverage Gross 14 11 25 33 Ceded — (1) (1) (4) Direct primary commercial insurance Gross 1 (1) 4 5 Ceded — 2 (1) (1) (1) In the third quarter and first nine months of 2022, 75% and 82% of payments related to settlement agreements. (2) In the third quarter and first nine months of 2022, 88% and 90% of payments related to settlement agreements. Total net reserves as of September 30, 2022, included $769 million or 52% of estimated IBNR reserves compared to $733 million or 52% of estimated IBNR reserves as of December 31, 2021. Total gross payments were $25 million and $66 million for the third quarter and first nine months of 2022, respectively, primarily related to asbestos claims, mainly from settlement agreements reached with several insureds on large claims where the scope of coverages has been agreed upon. The claims associated with these settlement agreements are expected to be substantially paid out over the next several years as qualified claims are submitted by these insureds. Reinsurance collections were $6 million and $27 million for the third quarter and first nine months of 2022, respectively. 64 www.allstate.com Protection Services Segment Results Protection Services Segment Summarized financial information ($ in millions) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Premiums written $ 657 $ 651 $ 1,957 $ 1,926 Revenues Premiums $ 504 $ 456 $ 1,475 $ 1,302 Other revenue 84 85 269 263 Intersegment insurance premiums and service fees (1) 39 46 118 133 Net investment income 13 10 34 32 Costs and expenses Claims and claims expense (141) (122) (392) (334) Amortization of DAC (236) (206) (685) (581) Operating costs and expenses (214) (209) (645) (610) Restructuring and related charges (1) 1 (1) (12) Income tax expense on operations (13) (16) (41) (43) Less: noncontrolling interest — — 1 — Adjusted net income $ 35 $ 45 $ 131 $ 150 Allstate Protection Plans $ 29 $ 32 $ 108 $ 119 Allstate Dealer Services 10 7 27 25 Allstate Roadside 1 1 4 7 Arity (2) 1 (4) 4 Allstate Identity Protection (3) 4 (4) (5) Adjusted net income $ 35 $ 45 $ 131 $ 150 Allstate Protection Plans 134,700 141,809 Allstate Dealer Services 3,888 3,980 Allstate Roadside 523 533 Allstate Identity Protection 2,968 3,197 Policies in force as of September 30 (in thousands) 142,079 149,519 (1) Primarily related to Arity and Allstate Roadside and are eliminated in our condensed consolidated financial statements. Adjusted net income decreased 22.2% or $10 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to a prior year restructuring benefit and higher current year technology expenses at Allstate Identity Protection. Adjusted net income decreased 12.7% or $19 million in the first nine months of 2022 compared to the same period of 2021, primarily driven by investments in growth at Allstate Protection Plans and lower revenue at Arity. Premiums written increased 0.9% or $6 million in the third quarter of 2022 and increased 1.6% or $31 million in the first nine months of 2022 compared to the same periods of 2021, primarily due to international growth at Allstate Protection Plans, partially offset by a decrease in North American sales at both Allstate Protection Plans and Allstate Dealer Services. PIF decreased 5.0% or 7 million as of September 30, 2022 compared to September 30, 2021 primarily related to a decline in Allstate Protection Plans. Other revenue decreased 1.2% or $1 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to lower Arity revenue. Other revenue increased 2.3% or $6 million in the first nine months of 2022 compared to the same period of 2021, reflecting growth at Allstate Identity Protection partially offset by lower revenue at Arity. Intersegment premiums and service fees decreased 15.2% or $7 million in the third quarter of 2022 and decreased 11.3% or $15 million in the first nine months of 2022 compared to the same periods of 2021, driven by decreased Arity device sales due to a shift from Drivewise® devices to a mobile program. Third Quarter 2022 Form 10-Q 65 Segment Results Protection Services Claims and claims expense increased 15.6% or $19 million in the third quarter 2022 compared to the third quarter of 2021, primarily due to higher claim severity at Allstate Protection Plans. Claims and claims expense increased 17.4% or $58 million in the first nine months of 2022 compared to the same period of 2021, primarily due to higher levels of claims at Allstate Protection Plans driven by growth in the business and higher severity at both Allstate Protection Plans and Allstate Roadside. Amortization of DAC increased 14.6% or $30 million in the third quarter of 2022 and increased 17.9% or $104 million in the first nine months of 2022 compared to the same periods of 2021, driven by Allstate Protection Plans and Allstate Dealer Services business growth. Operating costs and expenses increased 2.4% or $5 million in the third quarter of 2022 and increased 5.7% or $35 million in the first nine months of 2022 compared to the same periods of 2021, primarily due to investments in technology and geographic and product expansion at Allstate Protection Plans and Allstate Identity Protection, partially offset by lower expenses at Arity. Restructuring and related charges increased $2 million in the third quarter of 2022 compared to the same period of 2021. Restructuring and related charges decreased $11 million in the first nine months of 2022 compared to the same period of 2021, primarily due to a facility closure at Allstate Identity Protection in the first quarter of 2021 and accelerated lease costs at Allstate Protections Plans in the third quarter of 2021. 66 www.allstate.com Allstate Health and Benefits Segment Results Allstate Health and Benefits Segment Summarized financial information Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Revenues Accident and health insurance premiums and contract charges $ 463 $ 460 $ 1,398 $ 1,362 Other revenue 90 85 277 248 Net investment income 17 18 50 56 Costs and expenses Accident, health and other policy benefits (263) (277) (801) (771) Amortization of DAC (32) (30) (111) (101) Operating costs and expenses (207) (206) (594) (582) Restructuring and related charges 1 (8) (1) (9) Income tax expense on operations (15) (9) (46) (43) Adjusted net income $ 54 $ 33 $ 172 $ 160 Benefit ratio (1) 55.1 58.5 55.5 54.8 Employer voluntary benefits (2) 3,799 3,835 Group health (3) 405 126 Individual health (4) 116 417 Policies in force as of September 30 (in thousands) 4,320 4,378 (1) Benefit ratio is calculated as accident, health and other policy benefits less interest credited to contractholder funds of $8 million for both the three months ended September 30, 2022 and 2021, and $25 million for both the nine months ended September 30, 2022 and 2021, divided by premiums and contract charges. (2) Employer voluntary benefits include supplemental life and health products offered through workplace enrollment. (3) Group health includes health products and administrative services sold to employers. (4) Individual health includes short-term medical and other health products sold directly to individuals. Adjusted net income increased $21 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to lower individual health and employer voluntary benefits claims as well as lower restructuring charges compared to the prior year quarter. Adjusted net income increased $12 million in the first nine months of 2022, compared to the same period of 2021, primarily due to increases in group health and employer voluntary benefits revenues, partially offset by higher group and individual health claims utilization. Premiums and contract charges increased 0.7% or $3 million in the third quarter of 2022 and increased 2.6% or $36 million in the first nine months of 2022 compared to the same periods of 2021, primarily due to growth in group health and employer voluntary benefits. Premiums and contract charges by line of business Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Employer voluntary benefits $ 257 $ 251 $ 780 $ 769 Group health 96 90 285 260 Individual health 110 119 333 333 Premiums and contract charges $ 463 $ 460 $ 1,398 $ 1,362 Other revenue increased $5 million and $29 million in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to an increase in group health administrative fees. Accident, health and other policy benefits decreased 5.1% or $14 million in the third quarter of 2022 compared to the third quarter of 2021, primarily due to lower benefit utilization in individual health and employer voluntary benefits. Accident, health and other policy benefits increased 3.9% or $30 million in the first nine months of 2022 compared to the same period of 2021, primarily due to increased benefits utilization for group and individual health products, offset by employer voluntary benefits. Benefit ratio decreased to 55.1 in the third quarter of 2022 compared to 58.5 in the third quarter of 2021, primarily due to a lower benefit ratio for individual Third Quarter 2022 Form 10-Q 67 Segment Results Allstate Health and Benefits health products and lower life mortality in employer voluntary benefits. Benefit ratio increased to 55.5 in the first nine months of 2022 compared to 54.8 in the same period of 2021, primarily due to a higher benefit ratio in group and individual health, partially offset by lower accident and health claims in employer voluntary benefits. Amortization of DAC increased 6.7% or $2 million in the third quarter of 2022 and increased 9.9% or $10 million in the first nine months of 2022 compared to the same periods of 2021, primarily related to employer voluntary benefits and individual health. Operating costs and expenses Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Non-deferrable commissions $ 77 $ 80 $ 230 $ 231 General and administrative expenses 130 126 364 351 Total operating costs and expenses $ 207 $ 206 $ 594 $ 582 Operating costs and expenses increased $1 million and $12 million in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to growth and higher employee related expenses. Analysis of reserves Reserve for future policy benefits ($ in millions) September 30, 2022 December 31, 2021 Traditional life insurance and other $ 314 $ 313 Accident and health insurance 962 960 Reserve for future policy benefits $ 1,276 $ 1,273 68 www.allstate.com Investments Investments Portfolio composition and strategy by reporting segment (1) September 30, 2022 ($ in millions) Property-Liability Protection Services Allstate Health and Benefits Corporate and Other Total Fixed income securities (2) $ 34,944 $ 1,713 $ 1,551 $ 3,507 $ 41,715 Equity securities (3) 3,963 132 70 558 4,723 Mortgage loans, net 732 — 101 — 833 Limited partnership interests 7,899 — — 8 7,907 Short-term investments (4) 3,442 118 61 409 4,030 Other investments, net 1,677 — 119 2 1,798 Total $ 52,657 $ 1,963 $ 1,902 $ 4,484 $ 61,006 Percent to total 86.3 % 3.2 % 3.1 % 7.4 % 100.0 % Market-based $ 43,769 $ 1,963 $ 1,902 $ 4,482 $ 52,116 Performance-based 8,888 — — 2 8,890 Total $ 52,657 $ 1,963 $ 1,902 $ 4,484 $ 61,006 (1) Balances reflect the elimination of related party investments between segments. (2) Fixed income securities are carried at fair value. Amortized cost, net for these securities was $38.17 billion, $1.88 billion, $1.77 billion, $3.65 billion and $45.47 billion for Property-Liability, Protection Services, Allstate Health and Benefits, Corporate and Other, and in total, respectively. (3) Equity securities are carried at fair value. The fair value of equity securities held as of September 30, 2022, was $71 million in excess of cost. These net gains were primarily concentrated in the technology, consumer goods and banking sectors. Equity securities include $1.11 billion of funds with underlying investments in fixed income securities as of September 30, 2022. (4) Short-term investments are carried at fair value. Investments totaled $61.01 billion as of September 30, 2022, decreasing from $64.70 billion as of December 31, 2021, primarily due to lower fixed income and equity valuations, common share repurchases and dividends paid to shareholders, partially offset by positive operating cash flows. Portfolio composition by investment strategy We utilize two primary strategies to manage risks and returns and to position our portfolio to take advantage of market opportunities while attempting to mitigate adverse effects. As strategies and market conditions evolve, the asset allocation may change. Market-based strategy seeks to deliver predictable earnings aligned to business needs and take advantage of short-term opportunities primarily through public and private fixed income investments and public equity securities. Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity, including infrastructure investments, and real estate, most of which were limited partnerships. These investments include investee level expenses, reflecting asset level operating expenses on directly held real estate and other consolidated investments. Macroeconomic impacts Supply chain disruptions, labor shortages and other macroeconomic factors have increased inflation, which may have an adverse impact on investment valuations and returns. Over the past several quarters, inflation continued to remain elevated, which led to increases in interest rates by the Federal Reserve and a widening of credit spreads reflecting ongoing recession concerns. Many governmental authorities and central banks have begun to respond to inflationary pressure, generally through more restrictive monetary policy, such as increasing target interest rates. These actions and other ongoing impacts from the pandemic could create significant economic uncertainty. Market volatility resulting from these factors has and may continue to impact our investment valuations and returns. Investments in Russia and Ukraine As of September 30, 2022, we do not have any direct investments in Russia, Belarus or Ukraine. We have indirect exposure of less than $1 million in Russia and Ukraine through broad-based, global funds managed by external asset managers. Third Quarter 2022 Form 10-Q 69 Investments Portfolio composition by investment strategy September 30, 2022 ($ in millions) Market- based Performance-based Total Fixed income securities $ 41,606 $ 109 $ 41,715 Equity securities 4,283 440 4,723 Mortgage loans, net 833 — 833 Limited partnership interests 421 7,486 7,907 Short-term investments 4,030 — 4,030 Other investments, net 943 855 1,798 Total $ 52,116 $ 8,890 $ 61,006 Percent to total 85.4 % 14.6 % 100.0 % Unrealized net capital gains and losses Fixed income securities $ (3,750) $ (3) $ (3,753) Limited partnership interests — 7 7 Short-term investments (1) — (1) Other (3) — (3) Total $ (3,754) $ 4 $ (3,750) Fixed income securities Fixed income securities by type Fair value as of ($ in millions) September 30, 2022 December 31, 2021 U.S. government and agencies $ 8,444 $ 6,273 Municipal 6,029 6,393 Corporate 24,732 27,330 Foreign government 890 985 Asset-backed securities (“ABS”) 1,620 1,155 Total fixed income securities $ 41,715 $ 42,136 Fixed income securities are rated by third-party credit rating agencies or are internally rated. The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”) evaluates the fixed income securities of insurers for regulatory reporting and capital assessment purposes. The NAIC assigns securities to one of six credit quality categories defined as “NAIC designations”. In general, securities with NAIC designations of 1 and 2 are considered investment grade and securities with NAIC designations of 3 through 6 are considered below investment grade. The rating is either received from the SVO based on availability of applicable ratings from rating agencies on the NAIC Nationally Recognized Statistical Rating Organizations (“NRSRO”) provider list, including Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”), Fitch Ratings (“Fitch”), or a comparable internal rating. As a result of time lags between the funding of investments, the finalization of legal documents, and the completion of the SVO filing process, the portfolio includes certain securities that have not yet been designated by the SVO as of each balance sheet date and the categorization of these securities is based on the expected ratings indicated by internal analysis . As of September 30, 2022, 89.4% of the consolidated fixed income securities portfolio was rated investment grade. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Our initial investment decisions and ongoing monitoring procedures for fixed income securities are based on a due diligence process which includes, but is not limited to, an assessment of the credit quality, sector, structure, and liquidity risks of each issuer. Fixed income portfolio monitoring is a comprehensive process to identify and evaluate each fixed income security that may require a credit loss allowance. The process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. For further detail on our fixed income portfolio monitoring process, see Note 5 of the condensed consolidated financial statements. 70 www.allstate.com Investments The following table presents total fixed income securities by the applicable NAIC designation and comparable S&P rating. Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating September 30, 2022 NAIC 1 NAIC 2 NAIC 3 A and above BBB BB ($ in millions) Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) U.S. government and agencies $ 8,444 $ (312) $ — $ — $ — $ — Municipal 5,705 (427) 309 (33) — — Corporate Public 4,891 (384) 10,664 (1,219) 1,125 (168) Privately placed 1,767 (153) 3,065 (359) 1,626 (289) Total corporate 6,658 (537) 13,729 (1,578) 2,751 (457) Foreign government 889 (43) 1 — — — ABS 1,544 (54) 13 (2) 9 (1) Total fixed income securities $ 23,240 $ (1,373) $ 14,052 $ (1,613) $ 2,760 $ (458) NAIC 4 NAIC 5-6 Total B CCC and lower Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) U.S. government and agencies $ — $ — $ — $ — $ 8,444 $ (312) Municipal 8 — 7 3 6,029 (457) Corporate Public 139 (22) — — 16,819 (1,793) Privately placed 1,304 (260) 151 (28) 7,913 (1,089) Total corporate 1,443 (282) 151 (28) 24,732 (2,882) Foreign government — — — — 890 (43) ABS — — 54 (2) 1,620 (59) Total fixed income securities $ 1,451 $ (282) $ 212 $ (27) $ 41,715 $ (3,753) Municipal bonds , including tax-exempt and taxable securities, include general obligations of state and local issuers and revenue bonds. Corporate bonds include publicly traded and privately placed securities. Privately placed securities primarily consist of corporate issued senior debt securities that are negotiated with the borrower or are issued by public entities in unregistered form. ABS includes collateralized debt obligations, consumer and other ABS. Credit risk is managed by monitoring the performance of the underlying collateral. Many of the securities in the ABS portfolio have credit enhancement with features such as overcollateralization, subordinated structures, reserve funds, guarantees or insurance. ABS also includes residential mortgage-backed securities and commercial mortgage back securities. Equity securities of $4.72 billion primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments. Mortgage loans of $833 million mainly comprise loans secured by first mortgages on developed commercial real estate. Key considerations used to manage our exposure include property type and geographic diversification. For further detail on our mortgage loan portfolio, see Note 5 of the condensed consolidated financial statements. Limited partnership interests include $6.57 billion of interests in private equity funds, $919 million of interests in real estate funds and $421 million of interests in other funds as of September 30, 2022. We have commitments to invest additional amounts in limited partnership interests totaling $2.69 billion as of September 30, 2022. Other investments include $748 million of bank loans, net, and $774 million of direct investments in real estate as of September 30, 2022. Third Quarter 2022 Form 10-Q 71 Investments Unrealized net capital gains (losses) September 30, December 31, ($ in millions) 2022 2021 U.S. government and agencies $ (312) $ (14) Municipal (457) 263 Corporate (2,882) 496 Foreign government (43) 3 ABS (59) 12 Fixed income securities (3,753) 760 Short-term investments (1) — Derivatives (3) (3) Equity method of accounting (“EMA”) limited partnerships 7 (1) Unrealized net capital gains and losses, pre-tax $ (3,750) $ 756 72 www.allstate.com Investments Gross unrealized gains (losses) on fixed income securities by type and sector September 30, 2022 ($ in millions) Amortized cost, net Gross unrealized Fair value Gains Losses Corporate Consumer goods (cyclical and non-cyclical) $ 6,185 $ — $ (692) $ 5,493 Technology 3,098 — (353) 2,745 Banking 4,487 — (368) 4,119 Capital goods 2,322 — (269) 2,053 Communications 2,403 — (297) 2,106 Utilities 2,423 — (241) 2,182 Financial services 2,110 — (218) 1,892 Energy Midstream 1,645 — (138) 1,507 Independent/upstream 341 1 (33) 309 Integrated 68 — (6) 62 Other 209 — (16) 193 Total energy 2,263 1 (193) 2,071 Basic industry 1,008 1 (96) 913 Transportation 951 1 (89) 863 Other 364 — (69) 295 Total corporate fixed income portfolio 27,614 3 (2,885) 24,732 U.S. government and agencies 8,756 1 (313) 8,444 Municipal 6,486 4 (461) 6,029 Foreign government 933 — (43) 890 ABS 1,679 4 (63) 1,620 Total fixed income securities $ 45,468 $ 12 $ (3,765) $ 41,715 December 31, 2021 ($ in millions) Amortized cost, net Gross unrealized Fair value Gains Losses Corporate Consumer goods (cyclical and non-cyclical) $ 6,817 $ 176 $ (42) $ 6,951 Technology 2,947 80 (23) 3,004 Banking 3,975 54 (31) 3,998 Capital goods 2,615 75 (12) 2,678 Communications 2,077 58 (21) 2,114 Utilities 2,009 43 (28) 2,024 Financial services 1,936 41 (14) 1,963 Energy Midstream 1,132 37 (4) 1,165 Independent/upstream 312 18 (1) 329 Integrated 119 6 — 125 Other 224 6 (1) 229 Total energy 1,787 67 (6) 1,848 Basic industry 1,249 56 (6) 1,299 Transportation 976 35 (5) 1,006 Other 446 3 (4) 445 Total corporate fixed income portfolio 26,834 688 (192) 27,330 U.S. government and agencies 6,287 12 (26) 6,273 Municipal 6,130 279 (16) 6,393 Foreign government 982 9 (6) 985 ABS 1,143 14 (2) 1,155 Total fixed income securities $ 41,376 $ 1,002 $ (242) $ 42,136 In general, the gross unrealized losses are related to an increase in market yields which may include increased risk-free interest rates and wider credit spreads since the time of initial purchase. Similarly, gross unrealized gains reflect a decrease in market yields since the time of initial purchase. Third Quarter 2022 Form 10-Q 73 Investments Equity securities by sector September 30, 2022 December 31, 2021 ($ in millions) Cost Over (under) cost Fair value Cost Over (under) cost Fair value Capital Goods $ 198 $ (20) $ 178 $ 376 $ 37 $ 413 Basic Industry 57 6 63 119 30 149 Utilities 73 7 80 122 23 145 Transportation 51 14 65 74 22 96 Energy Midstream 34 (1) 33 39 7 46 Independent/upstream 29 10 39 44 5 49 Integrated 40 15 55 62 8 70 Other 8 4 12 14 3 17 Total energy 111 28 139 159 23 182 Other (1) 1,790 245 2,035 3,413 811 4,224 Funds Fixed income 1,227 (116) 1,111 1,108 24 1,132 Equities 1,125 (92) 1,033 645 75 720 Other 20 (1) 19 — — — Total funds 2,372 (209) 2,163 1,753 99 1,852 Total equity securities $ 4,652 $ 71 $ 4,723 $ 6,016 $ 1,045 $ 7,061 (1) Other is comprised of communications, REITs, financial services, banking, technology and consumer goods sectors. Net investment income Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Fixed income securities $ 323 $ 279 $ 889 $ 870 Equity securities 30 24 100 51 Mortgage loans 8 9 25 31 Limited partnership interests 325 438 841 1,467 Short-term investments 30 1 42 3 Other investments 38 50 120 139 Investment income, before expense 754 801 2,017 2,561 Investment expense Investee level expenses (17) (12) (47) (36) Securities lending expense (10) — (13) — Operating costs and expenses (37) (25) (111) (79) Total investment expense (64) (37) (171) (115) Net investment income $ 690 $ 764 $ 1,846 $ 2,446 Property-Liability $ 632 $ 710 $ 1,696 $ 2,314 Protection Services 13 10 34 32 Allstate Health and Benefits 17 18 50 56 Corporate and Other 28 26 66 44 Net investment income $ 690 $ 764 $ 1,846 $ 2,446 Market-based $ 406 $ 353 $ 1,100 $ 1,064 Performance-based 348 448 917 1,497 Investment income, before expense $ 754 $ 801 $ 2,017 $ 2,561 Net investment income decreased $74 million and $600 million in the third quarter and first nine months of 2022, respectively, compared to the same periods of 2021, primarily due to lower performance-based results, mainly from limited partnerships, partially offset by higher market-based fixed income portfolio yields. 74 www.allstate.com Investments Performance-based investment income Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Private equity $ 311 $ 400 $ 688 $ 1,282 Real estate 37 48 229 215 Total performance-based income before investee level expenses $ 348 $ 448 $ 917 $ 1,497 Investee level expenses (1) (13) (11) (40) (33) Total performance-based income $ 335 $ 437 $ 877 $ 1,464 (1) Investee level expenses include asset level operating expenses reported in investment expense. Performance-based investment income decreased $102 million and $587 million in the third quarter and first nine months of 2022, respectively, compared to strong results in the same periods of 2021, primarily due to lower valuation increases, partially offset by net gains on the sale of underlying investments. Three individual investments generated 97% of the performance-based investment income in the third quarter. Performance-based investment results and income can vary significantly between periods and are influenced by economic conditions, equity market performance, comparable public company earnings multiples, capitalization rates, operating performance of the underlying investments and the timing of asset sales. The company typically employs a lag in recording and recognizing changes in valuations of limited partnership interests due to the availability of investee financial statements. Components of net gains (losses) on investments and derivatives and the related tax effect Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Sales $ (175) $ 80 $ (605) $ 441 Credit losses (6) (12) (30) 2 Valuation change of equity investments - appreciation (decline): Equity securities (206) 14 (1,061) 333 Equity fund investments in fixed income securities (33) (8) (161) (11) Limited partnerships (1) (46) (15) (199) (1) Total valuation of equity investments (285) (9) (1,421) 321 Valuation change and settlements of derivatives 299 46 889 54 Net gains (losses) on investments and derivatives, pre-tax (167) 105 (1,167) 818 Income tax benefit (expense) 35 (21) 251 (179) Net gains (losses) on investments and derivatives, after-tax $ (132) $ 84 $ (916) $ 639 Property-Liability $ (98) $ 74 $ (776) $ 595 Protection Services (10) 4 (43) 16 Allstate Health and Benefits (5) (1) (20) 4 Corporate and Other (19) 7 (77) 24 Net gains (losses) on investments and derivatives, after-tax $ (132) $ 84 $ (916) $ 639 Market-based $ (156) $ 74 $ (1,238) $ 659 Performance-based (11) 31 71 159 Net gains (losses) on investments and derivatives, pre-tax $ (167) $ 105 $ (1,167) $ 818 (1) Relates to limited partnerships where the underlying assets are predominately public equity securities. Net losses on investments and derivatives in the third quarter and first nine months of 2022 related primarily to lower valuation on equity investments and losses on sales, partially offset by increased valuation change and settlements of derivatives. Sales in the third quarter and first nine months of 2022 related primarily to sales of fixed income securities in connection with ongoing portfolio management. Valuation change and settlements of derivatives of $299 million and $889 million in the third quarter and first nine months of 2022, respectively, primarily comprised of gains on interest rate futures used as part of an interest rate risk reduction strategy to mitigate the impact of increases in interest rates and gains on foreign currency contracts due to the strengthening of the U.S dollar. Third Quarter 2022 Form 10-Q 75 Investments Net gains (losses) on performance-based investments and derivatives Three months ended September 30, Nine months ended September 30, ($ in millions) 2022 2021 2022 2021 Sales $ (10) $ (5) $ 40 $ 79 Credit losses (3) (3) (10) (3) Valuation change of equity investments (38) 23 (43) 60 Valuation change and settlements of derivatives 40 16 84 23 Total performance-based $ (11) $ 31 $ 71 $ 159 Net losses on performance-based investments and derivatives in the third quarter of 2022 primarily related to decreased valuation of equity investments, partially offset by increased valuation change and settlements of derivatives. Net gains on performance-based investments and derivatives in the first nine months of 2022 primarily related to increased valuation change and settlements of derivatives and gains on sales, partially offset by decreased valuation of equity investments. 76 www.allstate.com Capital Resources and Liquidity Capital Resources and Liquidity Capital resources consist of shareholders’ equity and debt, representing funds deployed or available to be deployed to support business operations or for general corporate purposes. Capital resources ($ in millions) September 30, 2022 December 31, 2021 Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items $ 20,716 $ 24,524 Accumulated other comprehensive (loss) income (3,043) 655 Total Allstate shareholders’ equity 17,673 25,179 Debt 7,967 7,976 Total capital resources $ 25,640 $ 33,155 Ratio of debt to Allstate shareholders’ equity 45.1 % 31.7 % Ratio of debt to capital resources 31.1 24.1 Allstate shareholders’ equity decreased in the first nine months of 2022, primarily due to net unrealized capital losses on investments in 2022 compared to gains at December 31, 2021, common share repurchases, a net loss and dividends paid to shareholders. In the nine months ended September 30, 2022, we paid dividends of $698 million and $79 million related to our common and preferred shares, respectively. Debt maturities We do not have any scheduled debt maturities in 2022. Debt maturities for each of the next five years and thereafter (excluding issuance costs and other) ($ in millions) 2023 $ 750 2024 350 2025 600 2026 550 2027 — Thereafter 5,741 Total long-term debt principal $ 7,991 Common share repurchases As of September 30, 2022, there was $1.16 billion remaining in the $5.00 billion common share repurchase program. We expect the program to be completed after March 31, 2023, as we moderate the pace of share repurchases. During the first nine months of 2022, we repurchased 17.0 million common shares, or 6.1% of total common shares outstanding at December 31, 2021, for $2.14 billion. Common shareholder dividends On January 3, 2022, April 1, 2022 and July 1, 2022 we paid a common shareholder dividend of $0.81, $0.85 and $0.85 respectively. On July 19, 2022, we declared a common shareholder dividend of $0.85 payable on October 3, 2022. Financial ratings and strength Our ratings are influenced by many factors including our operating and financial performance, asset quality, liquidity, overall portfolio mix, financial leverage (i.e., debt), exposure to risks such as catastrophes and the current level of operating leverage. The preferred stock and subordinated debentures are viewed as having a common equity component by certain rating agencies and are given equity credit up to a pre-determined limit in our capital structure as determined by their respective methodologies. These respective methodologies consider the existence of certain terms and features in the instruments such as the noncumulative dividend feature in the preferred stock. In May 2022, Moody’s affirmed The Allstate Corporation’s (the “Corporation’s”) debt and short-term issuer ratings of A3 and P-2, respectively, and the insurance financial strength rating of Aa3 for Allstate Insurance Company (“AIC”). The outlook for the ratings is stable. In June 2022, S&P affirmed the Corporation’s debt and short-term issuer ratings of A- and A-2, respectively, and the insurance financial strength rating of AA- for AIC. The outlook for the ratings is stable. In August 2022, A.M. Best affirmed the Corporation’s debt and short-term issuer ratings of a and AMB-1+, respectively, and the insurance financial strength rating of A+ for AIC. The outlook for the ratings is stable. Liquidity sources and uses We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions. Liquidity is managed at both the entity and enterprise level across the Company and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across the Company to enhance flexibility. The Corporation is party to an Amended and Restated Intercompany Liquidity Agreement (“Liquidity Agreement”) with certain subsidiaries, which includes, but is not limited to AIC. The Liquidity Agreement allows for short-term advances of funds to be made between parties for liquidity and other general corporate purposes. The Liquidity Agreement does not establish a commitment to advance funds on the part of any party. AIC serves as a lender and borrower, certain other subsidiaries serve only as borrowers, and the Corporation serves only as a lender. The maximum Third Quarter 2022 Form 10-Q 77 Capital Resources and Liquidity amount of potential funding under each of these agreements is $1.00 billion. In addition to the Liquidity Agreement, the Corporation also has an intercompany loan agreement with certain of its subsidiaries, which includes, but is not limited to, AIC. The amount of intercompany loans available to the Corporation’s subsidiaries is at the discretion of the Corporation. The maximum amount of loans the Corporation will have outstanding to all its eligible subsidiaries at any given point in time is limited to $1.00 billion. The Corporation may use commercial paper borrowings, bank lines of credit and securities lending to fund intercompany borrowings. Parent company capital capacity Parent holding company deployable assets totaled $4.47 billion as of September 30, 2022, primarily comprised of cash and investments that are generally saleable within one quarter. The earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation. As of September 30, 2022, we held $13.38 billion of cash, U.S. government and agencies fixed income securities, and public equity securities which we would expect to be able to liquidate within one week. Intercompany dividends were paid in the first nine months of 2022 between the following companies: AIC, Allstate Insurance Holdings, LLC (“AIH”), the Corporation, American Heritage Life Insurance Company (“AHL”) and Allstate Financial Insurance Holdings Corporation (“AFIHC”). Intercompany dividends ($ in millions) AIC to AIH 4,203 AIH to the Corporation 4,201 AHL to AFIHC 50 AFIHC to the Corporation 47 Based on the greater of 2021 statutory net income or 10% of statutory surplus, the maximum amount of dividends that AIC will be able to pay, without prior Illinois Department of Insurance approval, at a given point in time through February 2023 is estimated at $5.51 billion, less dividends paid during the preceding twelve months measured at that point in time. As of September 30, 2022, we paid dividends of $4.20 billion. Dividends may not be paid or declared on our common stock and shares of common stock may not be repurchased unless the full dividends for the latest completed dividend period on our preferred stock have been declared and paid or provided for. We are prohibited from declaring or paying dividends on our Series G preferred stock if we fail to meet specified capital adequacy, net income or shareholders’ equity levels, except out of the net proceeds of common stock issued during the 90 days prior to the date of declaration. As of September 30, 2022, we satisfied all the requirements with no current restrictions on the payment of preferred stock dividends. The terms of our outstanding subordinated debentures also prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions. In the first nine months of 2022, we did not defer interest payments on the subordinated debentures. Additional resources to support liquidity are as follows: • The Corporation and AIC have access to a $750 million unsecured revolving credit facility that is available for short-term liquidity requirements. The maturity date of this facility is November 2026. The facility is fully subscribed among 11 lenders with the largest commitment being $95 million. The commitments of the lenders are several and no lender is responsible for any other lender’s commitment if such lender fails to make a loan under the facility. This facility contains an increase provision that would allow up to an additional $500 million of borrowing, subject to the lenders’ commitment. This facility has a financial covenant requiring that we not exceed a 37.5% debt to capitalization ratio as defined in the agreement. This ratio was 21.6% as of September 30, 2022. Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior unsecured, unguaranteed long-term debt. There were no borrowings under the credit facility during 2022. • To cover short-term cash needs, the Corporation has access to a commercial paper facility with a borrowing capacity limited to any undrawn credit facility balance up to $750 million. • As of September 30, 2022, there were no balances outstanding for the credit facility or the commercial paper facility and therefore the remaining borrowing capacity was $750 million. • The Corporation has access to a universal shelf registration statement with the Securities and Exchange Commission that expires in 2024. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 634 million shares of treasury stock as of September 30, 2022), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements. 78 www.allstate.com Recent Developments The following updates the regulation disclosures included in Part I, Item 1. Regulation in our annual report on Form 10-K for the year ended December 31, 2021. Climate disclosures. In March 2022, the Securities and Exchange Commission (“SEC”) released its climate-related proposed regulation, requiring registrants to provide certain climate-related information in their registration statements and annual reports. The proposed rule would require information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks. In addition, under the proposed rule, certain climate-related financial metrics would be required in a registrant’s audited financial statements. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures. Cybersecurity risk management. The SEC issued a proposed rule in March 2022 to mandate cybersecurity disclosures, including information such as: management's and the board’s role and oversight of cybersecurity risks, policies and procedures and how risks and incidents are likely to impact the financial statements. Additionally, certain incidents would have mandatory reporting on a Form 8-K. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures. Share repurchase disclosure modernization. The SEC issued two proposed amendments in December 2021 that could impact both the administration of 10b5-1 plans used in part to execute the Company’s stock repurchases and disclosure of activity under those plans. The proposals involve potential daily reporting of share repurchase activity, cooling off periods for both individual and corporate 10b5-1 plans (120 and 30 days, respectively) and a number of new 10-Q and 10-K disclosures that would be subject to SOX Section 302 Certifications. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures. Inflation Reduction Act of 2022. The Inflation Reduction Act of 2022 (“Act”), which contains several tax-related provisions, was signed into law in August 2022. The Act creates a 15% corporate alternative minimum tax on certain large corporations and an excise tax of 1% on stock repurchases by publicly traded U.S. corporations, effective for repurchases after December 31, 2022. The excise tax on stock repurchases will be classified as an additional cost of the stock acquired included in treasury stock in shareholders' equity. The Company is evaluating the anticipated impacts of the enacted legislation. Third Quarter 2022 Form 10-Q 79 Forward-Looking Statements This report contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe, exposure management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation, and reserves. We believe that these statements are based on reasonable estimates, assumptions and plans. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments. In addition, forward-looking statements are subject to certain risks or uncertainties that could cause actual results to differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements include risks related to: Insurance and Financial Services (1) unexpected increases in claim frequency and severity; (2 ) catastrophes and severe weather events; (3) limitations in analytical models used for loss cost estimates; (4) price competition and changes in regulation and underwriting standards; (5) actual claims costs exceeding current reserves; (6) market risk and declines in credit quality of our investment portfolio; (7) our subjective determination of fair value and amount of credit losses for investments; (8) our participation in indemnification programs, including state industry pools and facilities; (9) inability to mitigate the impact associated with changes in capital requirements; (10) a downgrade in financial strength ratings; Business, Strategy and Operations (11) competition in the industries in which we compete and new or changing technologies; (12) implementation of our transformative growth strategy; (13) our catastrophe management strategy; (14) restrictions on our subsidiaries’ ability to pay dividends; (15) restrictions under terms of certain of our securities on our ability to pay dividends or repurchase our stock; (16) the availability of reinsurance at current levels and prices; (17) counterparty risk related to reinsurance; (18) acquisitions and divestitures of businesses; (19) intellectual property infringement, misappropriation and third-party claims; Macro, Regulatory and Risk Environment (20) conditions in the global economy and capital markets, including the economic impacts from the recent military conflict between Russia and Ukraine; (21) a large-scale pandemic, the occurrence of terrorism, military actions or social unrest; (22) the failure in cyber or other information security controls, as well as the occurrence of events unanticipated in our disaster recovery processes and business continuity planning; (23) changing climate and weather conditions; (24) restrictive regulations and regulatory reforms, including limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (25) losses from legal and regulatory actions; (26) changes in or the application of accounting standards; (27) loss of key vendor relationships or failure of a vendor to protect our data, confidential and proprietary information, or personal information of our customers, claimants or employees; (28) our ability to attract, develop and retain talent; and (29) misconduct or fraudulent acts by employees, agents and third parties. Additional information concerning these and other factors may be found in our filings with the Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K.