What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-01 compared with 2023-05-03 · 346 added, 274 removed, 794 unchanged (44% of the section changed)

9 unchanged sentences

The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”) and subsequent U.S.

government fiscal and monetary policies have and may continue to effect economic activity through longer-term impacts such as supply chain disruptions, labor shortages and other macroeconomic factors that have increased inflation and affected our operations.

government fiscal and monetary policies, banking system instability and the Russia/Ukraine conflict have and may continue to affect economic activity through longer-term impacts such as supply chain disruptions, labor shortages and other macroeconomic factors that have increased inflation and affected our operations.

These factors may continue to significantly affect results of operations, financial condition and liquidity.

6 unchanged sentences

Within the MD&A, we have included further disclosures related to macroeconomic impacts on our 2023 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

11 unchanged sentences

We are expanding protection services businesses utilizing enterprise capabilities and resources such as the Allstate brand, distribution, analytics, claims, investment expertise, talent and capital.

First Quarter 2023 Form 10-Q 47

Measuring segment profit or loss

9 unchanged sentences

• Income tax expense or benefit on reconciling items

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Consolidated net income (loss) applicable to common shareholders

($ in millions)

Consolidated net loss applicable to common shareholders was $346 million in the first quarter of 2023 compared to income of $634 million in the first quarter of 2022, primarily due to higher losses driven by severity and frequency and higher catastrophe losses, partially offset by increased Property-Liability premiums earned.

For the twelve months ended March 31, 2023, return on Allstate common shareholders’ equity was (13.0)%, a decrease of 28.6 points from 15.6% for the twelve months ended March 31, 2022.

Consolidated net loss applicable to common shareholders was $1.39 billion and $1.74 billion in the second quarter and first six months of 2023, respectively, compared to a loss of $1.04 billion and $406 million in the second quarter and first six months of 2022, respectively, primarily due to higher catastrophe losses and higher incurred losses driven by severity and frequency, partially offset by increased Property-Liability premiums earned and gains on equity valuations in 2023 compared to losses in 2022.

For the six months ended June 30, 2023, return on Allstate common shareholders’ equity was (17.2)%.

Total revenue

($ in millions)

Total revenue increased 11.8% to $13.79 billion in the first quarter of 2023 compared to the first quarter of 2022 due to an increase of 10.9% in property and casualty insurance premiums earned in the first quarter of 2023 compared to the first quarter of 2022 and net gains on investments and derivatives in 2023 compared to net losses in 2022.

Total revenues increased 14.4% to $13.98 billion and increased 13.1% to $27.77 billion in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022 due to an increase of 9.8% and 10.3% in property and casualty insurance premiums earned in the second quarter and first six months of 2023, respectively, compared to the second quarter and first six months of 2022 and net gains on equity valuations in 2023 compared to losses in 2022.

Net investment income

($ in millions)

Net investment income decreased $19 million to $575 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to lower performance-based investment results, mainly from limited partnerships, largely offset by higher market-based income.

Market-based reflects higher fixed income portfolio yields and balance.

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Net investment income increased $48 million to $610 million in the second quarter of 2023 and increased $29 million to $1.19 billion in the first six months of 2023 compared to the same periods of 2022, primarily due to higher market-based income reflecting higher fixed income portfolio yields and investment balances, partially offset by lower performance-based investment results, mainly from limited partnerships.

Second Quarter 2023 Form 10-Q 51

Financial highlights

Investments totaled $63.48 billion as of March 31, 2023, increasing from $61.83 billion as of December 31, 2022.

Allstate shareholders’ equity was $17.49 billion as of March 31, 2023 and December 31, 2022.

Book value per diluted common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $58.65, a decrease of 22.3% from $75.46 as of March 31, 2022, and an increase of 0.9% from $58.12 as of December 31, 2022.

Return on average Allstate common shareholders’ equity For the twelve months ended March 31, 2023, return on Allstate common shareholders’ equity was (13.0)%, a decrease of 28.6 points from 15.6% for the twelve months ended March 31, 2022.

The decrease was primarily due to lower net income applicable to common shareholders for the trailing twelve-month period ending March 31, 2023.

Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement gains of $53 million in the first quarter of 2023, primarily related to favorable asset performance compared to expected return on plan assets, partially offset by a decrease in the liability discount rate.

Investments totaled $63.67 billion as of June 30, 2023, increasing from $61.83 billion as of December 31, 2022.

Allstate shareholders’ equity was $15.52 billion as of June 30, 2023, decreasing from $17.49 billion as of December 31, 2022, primarily due to a net loss, dividends paid to shareholders and common share repurchases, partially offset by lower unrealized net capital losses on investments.

Book value per diluted common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $51.29, a decrease of 22.2% from $65.96 as of June 30, 2022, and a decrease of 11.8% from $58.12 as of December 31, 2022.

Return on average Allstate common shareholders’ equity For the twelve months ended June 30, 2023, return on Allstate common shareholders’ equity was (17.2)%, a decrease of 21.4 points from 4.2% for the twelve months ended June 30, 2022.

The decrease was primarily due to a net loss applicable to common shareholders for the trailing twelve-month period ending June 30, 2023 and a decrease in average Allstate common shareholders’ equity.

Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement gains of $40 million in the second quarter primarily related to an increase in the liability discount rate, partially offset by unfavorable asset performance compared to expected return on plan assets.

We recorded gains of $93 million in the first six months of 2023 primarily related to favorable asset performance compared to expected return on plan assets, partially offset by a decrease in the liability discount rate.

Summarized consolidated financial results

Three months ended March 31,

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

($ in millions) 2023 2022 2023 2022

13 unchanged sentences

Total costs and expenses (15,727) (13,530) (29,919) (25,065)

(Loss) income from operations before income tax expense (406) 801

Income tax benefit (expense) 85 (151)

Net (loss) income (321) 650

Loss from operations before income tax expense (1,748) (1,311) (2,154) (510)

Income tax benefit 373 289 458 138

Net loss (1,375) (1,022) (1,696) (372)

Net loss attributable to noncontrolling interest (23) (9) (24) (19)

Net (loss) income attributable to Allstate (320) 660

Net loss attributable to Allstate (1,352) (1,013) (1,672) (353)

Preferred stock dividends (37) (27) (63) (53)

Net (loss) income applicable to common shareholders $ (346) $ 634

Net loss applicable to common shareholders $ (1,389) $ (1,040) $ (1,735) $ (406)

Segment highlights

Allstate Protection underwriting loss was $998 million in the first quarter of 2023 compared to underwriting income of $282 million in the first quarter of 2022.

The decrease was primarily due to higher non-catastrophe losses, primarily for auto insurance, and higher catastrophe losses, partially offset by increased premiums.

We are executing a comprehensive plan to improve auto insurance 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.

Catastrophe losses were $1.69 billion in the first quarter of 2023 compared to $462 million in the first quarter of 2022.

Premiums written increased 9.5% to $11.78 billion in the first quarter of 2023 compared to the same period of 2022, reflecting higher premiums in both Allstate and National General brands.

Protection Services adjusted net income was $34 million in the first quarter of 2023 compared to $53 million in the first quarter of 2022, due to Allstate Protection Plans higher appliance and furniture claim severity, a shift in business mix and lower third-party advertising sales by Arity.

The decrease was partially offset by growth in new business at Allstate Protection Plans.

First Quarter 2023 Form 10-Q 49

Premiums and other revenue increased 7.8% or $45 million in the first quarter of 2023 compared to the same period of 2022, primarily due to Allstate Protection Plans.

Allstate Health and Benefits adjusted net income was $56 million in the first quarter of 2023 compared to $57 million in the first quarter 2022, primarily due to a decline in employer voluntary benefits, partially offset by growth in group health.

Premiums and contract charges decreased 1.1% to $463 million in the first quarter of 2023 compared to the same period of 2022, primarily due to a decline in individual health and employer voluntary benefits, partially offset by growth in group health.

Allstate Protection underwriting loss was $2.09 billion in the second quarter of 2023 compared to underwriting loss of $861 million in the second quarter of 2022.

Underwriting loss totaled $3.09 billion in the first six months of 2023 compared to underwriting loss of $579 million in the first six months of 2022.

The higher losses in both periods was primarily due to higher catastrophe losses and non-catastrophe losses primarily for auto insurance, partially offset by

increased premiums.

We are executing a comprehensive plan to improve auto insurance profitability, by raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and enhancing claims processes to manage loss costs.

Catastrophe losses were $2.70 billion and $4.39 billion in the second quarter and first six months of 2023, respectively, compared to $1.11 billion and $1.57

52 www.allstate.com

billion in the second quarter and first six months of 2022, respectively.

Premiums written increased 9.7% to $12.62 billion and 9.6% to $24.40 billion in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, reflecting higher premiums in both Allstate and National General brands.

Protection Services adjusted net income was $41 million in the second quarter of 2023 compared to $43 million in the second quarter of 2022.

Adjusted net income was $75 million in the first six months of 2023 compared to $96 million in the first six months of 2022.

The decrease in both periods was due to Allstate Protection Plans higher appliance and furniture claim severity, a shift in business mix and lower third-party advertising sales by Arity, partially offset by improved margins at Allstate Roadside.

Premiums and other revenue increased 9.3% or $54 million and 8.6% or $99 million in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to Allstate Protection Plans and Allstate Dealer Services.

Allstate Health and Benefits adjusted net income was $57 million in the second quarter of 2023 compared to $67 million in the second quarter of 2022.

Adjusted net income was $113 million in the first six months of 2023 compared to $124 million in the first six months of 2022.

The decrease in both periods was primarily due to a decline in employer voluntary benefits and individual health, partially offset by growth in group health.

Premiums and contract charges decreased 2.6% to $453 million in the second quarter of 2023 and decreased 1.8% to $916 million in the first six months of 2023 compared to the same periods of 2022, primarily due to a decline in individual health and employer voluntary benefits, partially offset by growth in group health.

Adopted accounting standard

2 unchanged sentences

In addition, reserves under the new guidance are required to be discounted using an upper-medium grade fixed income instrument yield that is updated through other comprehensive income (“OCI”) at each reporting date.

Additionally, deferred policy acquisition costs (“DAC”) for all long-duration products will be amortized on a simplified basis.

Our reserve for future policy benefits and DAC will be subject to new disclosure guidance.

Additionally, DAC for all long-duration products are amortized on a simplified basis.

Our reserve for future policy benefits and DAC are subject to new disclosure guidance.

In addition, the Company met the conditions included in Accounting Standards Update No.

2022-05, Transition for Sold Contracts , and elected to not apply the new guidance for contracts that were part of the 2021 sales of Allstate Life Insurance Company (“ALIC”) and Allstate Life Insurance Company of New York (“ALNY”).

2022-05, Transition for Sold Contracts , and elected to not apply the new guidance for contracts that were part of the 2021 sales of Allstate Life Insurance Company and Allstate Life Insurance Company of New York.

After-tax cumulative effect of change in accounting principle on transition date

3 unchanged sentences

Total decrease in equity $ 298

The decrease in AOCI is primarily attributable to a change in the discount rate used in measuring the reserve for future policy benefits for traditional life contracts and other long-term products with guaranteed terms from a portfolio-based rate at contract issuance to an upper-medium grade fixed income-based rate at the reporting date.

The decrease in retained income primarily relates to certain cohorts of long-term contracts whose expected net premiums exceeded expected gross premiums which resulted in an increase in reserves and a decrease in retained income equal to the present value of expected future benefits less the present value of expected future premiums at the transition date.

The decrease in AOCI was primarily attributable to a change in the discount rate used in measuring the reserve for future policy benefits for traditional life contracts and other long-term products with guaranteed terms from a portfolio-based rate at contract issuance to an upper-medium grade fixed income-based rate at the transition date.

The decrease in retained income primarily related to certain cohorts of long-term contracts whose expected net premiums exceeded expected gross premiums which resulted in an increase in reserves and a decrease in retained income equal to the present value of expected future benefits less the present value of expected future premiums at the transition date.

See Note 1 of the condensed consolidated financial statements for further information regarding the impact of the adopted accounting standard on our condensed consolidated financial statements.

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Second Quarter 2023 Form 10-Q 53

Property-Liability Operations

43 unchanged sentences

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).

First Quarter 2023 Form 10-Q 51

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Property-Liability Operations

5 unchanged sentences

Underwriting results

Three months ended March 31,

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

($ in millions, except ratios) 2023 2022 2023 2022

6 unchanged sentences

Restructuring and related charges (1)

(26) 2 (47) (10)

Amortization of purchased intangibles (58) (59) (115) (117)

3 unchanged sentences

Catastrophe reserve reestimates (2)

31 51 (11) 38

Total catastrophe losses $ 2,696 $ 1,108 $ 4,387 $ 1,570

Non-catastrophe reserve reestimates (2)

$ 182 $ 411 $ 209 $ 569

Prior year reserve reestimates (2)

213 462 198 607

GAAP operating ratios

1 unchanged sentence

Expense ratio (3)

20.5 23.0 20.8 23.5

Combined ratio 117.6 107.9 113.1 102.7

4 unchanged sentences

Effect of amortization of purchased intangibles on combined ratio 0.5 0.5 0.5 0.5

(1) Restructuring and related charges for the first quarter of 2023 are primarily for real estate costs related to facilities being vacated.

Effect of Run-off Property-Liability business on combined ratio 0.1 — — —

(1) Restructuring and related charges for the second quarter and first six months of 2023 are primarily for real estate costs related to facilities being vacated and employee costs related to global workforce enablement, including outsourcing various elements of operations.

See Note 13 of the condensed consolidated financial statements for additional details.

1 unchanged sentence

(3) Other revenue is deducted from operating costs and expenses in the expense ratio calculation.

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Allstate Protection Segment Results

Second Quarter 2023 Form 10-Q 55

Segment Results Allstate Protection

Allstate Protection Segment

Underwriting results

Three months ended March 31,

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

($ in millions) 2023 2022 2023 2022

7 unchanged sentences

Amortization of purchased intangibles (58) (59) (115) (117)

Underwriting (loss) income $ (998) $ 282

Underwriting loss $ (2,092) $ (861) $ (3,090) $ (579)

Catastrophe losses $ 2,696 $ 1,108 $ 4,387 $ 1,570

Underwriting loss was $998 million in the first quarter of 2023 compared to underwriting income of $282 million in the first quarter of 2022, due to higher non-catastrophe losses, primarily for auto insurance, and higher catastrophe losses, partially offset by increased premiums.

Underwriting loss was $2.09 billion and $3.09 billion in the second quarter and first six months of 2023, respectively, compared to underwriting loss of $861 million and $579 million in the second quarter and first six months of 2022, respectively, due to higher catastrophe losses and non-catastrophe losses primarily for auto insurance, partially offset by increased premiums.

Change in underwriting results from prior year period - three months ended

($ in millions)

Change in underwriting results from prior year period - six months ended

($ in millions)

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Allstate Protection Segment Results

Underwriting income (loss) by brand and by line of business

1 unchanged sentence

($ in millions) 2023 2022 2023 2022 2023 2022

Three months ended March 31,

Three months ended June 30,

$ (546) $ (578) $ (132) $ — $ (678) $ (578)

9 unchanged sentences

Total $ (1,847) $ (825) $ (248) $ (38) $ (2,092) $ (861)

(1) Other business lines represents commissions earned and other costs and expenses for Ivantage and non-proprietary life and annuity products, and lender-placed products and related services.

Six months ended June 30,

$ (878) $ (715) $ (146) $ (10) $ (1,024) $ (725)

Homeowners (1)

(1,703) 236 (138) (28) (1,841) 208

Other personal lines (160) 23 1 6 (159) 29

Commercial lines (124) (164) 3 7 (121) (157)

Other business lines (1)

46 46 4 16 50 62

Answer Financial — — — — 5 4

Total $ (2,819) $ (574) $ (276) $ (9) $ (3,090) $ (579)

(1) Other business lines represents commissions earned and other costs and expenses for Ivantage, non-proprietary life and annuity products, and lender-placed products and related services.

In the first quarter of 2023, National General lender-placed products and related services results were reclassified from homeowners to other business lines.

Historical results have been updated to conform with this presentation.

First Quarter 2023 Form 10-Q 53

Segment Results Allstate Protection

Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends.

5 unchanged sentences

($ in millions) 2023 2022 2023 2022 2023 2022

Three months ended March 31,

Three months ended June 30,

Auto $ 6,821 $ 6,374 $ 1,448 $ 1,096 $ 8,269 $ 7,470

4 unchanged sentences

Total premiums written $ 10,525 $ 9,862 $ 2,095 $ 1,647 $ 12,620 $ 11,509

Six months ended June 30,

Auto $ 13,647 $ 12,682 $ 2,971 $ 2,350 $ 16,618 $ 15,032

Homeowners 5,147 4,685 768 604 5,915 5,289

Other personal lines 1,113 1,045 110 68 1,223 1,113

Commercial lines 323 485 104 106 427 591

Other business lines — — 220 245 220 245

Total premiums written $ 20,230 $ 18,897 $ 4,173 $ 3,373 $ 24,403 $ 22,270

Second Quarter 2023 Form 10-Q 57

Segment Results Allstate Protection

Premiums earned by brand and by line of business

1 unchanged sentence

($ in millions) 2023 2022 2023 2022 2023 2022

Three months ended March 31,

Three months ended June 30,

Auto $ 6,772 $ 6,253 $ 1,349 $ 1,095 $ 8,121 $ 7,348

4 unchanged sentences

Total premiums earned $ 10,002 $ 9,288 $ 1,919 $ 1,586 $ 11,921 $ 10,874

Six months ended June 30,

Auto $ 13,432 $ 12,326 $ 2,597 $ 2,103 $ 16,029 $ 14,429

Homeowners 5,025 4,491 668 565 5,693 5,056

Other personal lines 1,061 1,006 88 70 1,149 1,076

Commercial lines 336 476 98 102 434 578

Other business lines — — 251 233 251 233

Total premiums earned $ 19,854 $ 18,299 $ 3,702 $ 3,073 $ 23,556 $ 21,372

Reconciliation of premiums written to premiums earned

Three months ended March 31,

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

($ in millions) 2023 2022 2023 2022

1 unchanged sentence

(Increase) decrease in unearned premiums

(753) (599) (880) (857)

Other 54 (36) 33 (41)

8 unchanged sentences

Total 32,203 33,383 5,782 5,236 37,985 38,619

Auto insurance premiums written increased 10.4% or $787 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to the following factors:

• Increased average premiums driven by rate increases.

In the three months ended March 31, 2023, rate increases of 8.4% were taken for Allstate brand in 28 locations, resulting in total Allstate brand insurance premium impact of 1.7%

Auto insurance premiums written increased 10.7% or $799 million in the second quarter of 2023 compared to the second quarter of 2022 and 10.6% or $1.59 billion in the first six months of 2023 compared to the first six months of 2022, primarily due to the following factors:

• Increased average premiums driven by rate increases primarily taken in 2022.

Additionally, in the six months ended June 30, 2023:

– Rate increases of 9.7% were taken for Allstate brand in 47 locations, resulting in total Allstate brand insurance premium impact of 7.5%

– Rate increases of 9.8% were taken for National General brand in 38 locations, resulting in total National General brand insurance premium impact of 5.5%

• We expect to continue to pursue rate increases for both Allstate and National General brands

throughout 2023 to improve auto insurance profitability

• PIF decreased 1.3% or 338 thousand to 25,733 thousand as of March 31, 2023 compared to March 31, 2022

• Renewal ratio decreased 1.8 points

• We expect to continue to pursue rate increases for both Allstate and National General brands throughout 2023 to improve auto insurance profitability

• PIF decreased 2.6% or 672 thousand to 25,520 thousand as of June 30, 2023 compared to June 30, 2022

• Renewal ratio decreased 2.0 and 1.9 points in the second quarter and the first six months of 2023, respectively, compared to the second quarter and first six months of 2022

• Decreased new issued applications driven by the direct and exclusive agency channels, partially offset by growth in the independent agency channel

• The impact of the ongoing rate increases and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio and future PIF growth

• The impact of the ongoing rate increases and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio, premiums and future PIF growth

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1 unchanged sentence

Auto premium measures and statistics

Three months ended March 31,

2023 2022 Change

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

2023 2022 Change 2023 2022 Change

New issued applications (thousands)

10 unchanged sentences

Allstate brand renewal ratio (%) 85.5 87.5 (2.0) 85.6 87.5 (1.9)

Homeowners insurance premiums written increased 11.1% or $253 million in the first quarter of 2023 compared to the first quarter of 2022, 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.

Homeowners insurance premiums written increased 12.4% or $373 million in the second quarter of 2023 compared to the second quarter of 2022 and increased 11.8% or $626 million in the first six months of 2023 compared to the first six months of 2022, primarily due to the following factors:

• Higher Allstate brand average premiums from implemented rate increases primarily taken in 2022 and inflation in insured home replacement costs, combined with policies in force growth

• In the six months ended June 30, 2023, rate increases of 13.4% were taken for Allstate brand in 34 locations, resulting in total Allstate brand insurance premium impact of 7.4%

• National General policy growth is expected to be negatively impacted in future quarters as we improve underwriting margins to targeted levels through underwriting and rate actions.

• Increased new issued applications driven by growth in the independent agency channel

months ended June 30, 2023, rate increases of 20.0% were taken for National General brand in 15 locations, resulting in total National General brand insurance premium impact of 5.3%

• Decreased new issued applications in the direct and exclusive agency channels, partially offset by growth in the independent agency channel

• Policy growth is being reduced in states and lines of business that are underperforming.

We are no longer writing new homeowners business in California and Florida, and we may take further actions, which have and will continue to negatively impact premiums

We are no longer writing new homeowners business in California and Florida, and we may take further actions to reduce our exposure, which have and will continue to negatively impact premiums

• The impact of the ongoing rate increases and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio, premiums and future PIF growth

Homeowners premium measures and statistics

Three months ended March 31,

2023 2022 Change

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

2023 2022 Change 2023 2022 Change

New issued applications (thousands)

10 unchanged sentences

Allstate brand renewal ratio (%) 86.3 86.9 (0.6) 86.3 86.6 (0.3)

Other personal lines premiums written increased 8.7% or $44 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to increases in landlords for Allstate brand.

Starting in the fourth quarter of 2022, we no longer write condominium new business in California and Florida and we may take further actions to reduce certain exposure in Florida, which will continue to negatively impact premiums.

Commercial lines premiums written decreased 22.8% or $67 million in the first quarter of 2023 compared to the first quarter of 2022, due to profitability actions taken to no longer offer coverage to transportation network companies unless the

contracts utilize telematics-based pricing and the Allstate brand exiting traditional commercial insurance in five states, with non-renewals for those states beginning later in 2023.

Other business lines premiums written increased 4.2% or $5 million in the first quarter of 2023 compared to the first quarter of 2022.

First Quarter 2023 Form 10-Q 55

Second Quarter 2023 Form 10-Q 59

Segment Results Allstate Protection

Other personal lines premiums written increased 10.8% or $66 million in the second quarter of 2023 compared to the second quarter of 2022 and increased 9.9% or $110 million in the first six months of 2023 compared to the first six months of 2022, primarily due to increases in landlords and condominiums for Allstate brand.

We are no longer writing condominium new business in California and Florida, we are non-renewing certain policies in Florida, and we may take further actions to reduce exposure in Florida, which will continue to negatively impact premiums.

Commercial lines premiums written decreased 32.7% or $97 million in the second quarter of 2023 compared to the second quarter of 2022 and decreased 27.7% or $164 million in the first six months of 2023 compared to the first six months of 2022, due to profitability actions taken to no longer offer

coverage to transportation network companies unless the contracts utilize telematics-based pricing and the Allstate brand exiting traditional commercial insurance in five states, with non-renewals for those states beginning in 2023.

Other business lines premiums written decreased 24.0% or $30 million in the second quarter of 2023 compared to the second quarter of 2022 and decreased 10.2% or $25 million in the first six months of 2023 compared to the first six months of 2022.

GAAP operating ratios include loss ratio, expense ratio and combined ratio to analyze our profitability trends.

4 unchanged sentences

2023 2022 2023 2022 2023 2022

Three months ended March 31,

Three months ended June 30,

87.9 84.9 20.4 23.0 108.3 107.9

6 unchanged sentences

Impact of restructuring and related charges — — 0.2 — 0.2 —

Six months ended June 30,

Auto 85.7 81.3 20.7 23.7 106.4 105.0

Homeowners 111.9 73.4 20.4 22.5 132.3 95.9

Other personal lines 93.6 73.5 20.2 23.8 113.8 97.3

Commercial lines 103.7 107.6 24.2 19.6 127.9 127.2

Other business lines 47.4 33.1 32.7 40.3 80.1 73.4

Total 92.3 79.2 20.8 23.5 113.1 102.7

Impact of amortization of purchased intangibles — — 0.5 0.5 0.5 0.5

Impact of restructuring and related charges — — 0.2 — 0.2 —

(1) Other revenue is deducted from operating costs and expenses in the expense ratio calculation.

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Allstate Protection Segment Results

Loss ratios by line of business

2 unchanged sentences

2023 2022 2023 2022 2023 2022 2023 2022

Three months ended March 31,

Three months ended June 30,

Auto 87.9 84.9 4.2 1.5 1.2 3.3 (0.2) (0.5)

4 unchanged sentences

Total 97.0 84.9 22.6 10.2 1.8 4.2 0.3 0.4

(1) The ten-year average effect of catastrophe losses on the total combined ratio was 7.3 points in the first quarter of 2023.

Six months ended June 30,

Auto 85.7 81.3 2.7 1.0 0.5 2.6 (0.3) (0.3)

Homeowners 111.9 73.4 63.9 25.6 1.3 2.6 0.8 1.5

Other personal lines 93.6 73.5 24.0 9.8 0.5 (0.8) (1.1) 0.7

Commercial lines 103.7 107.6 3.9 1.4 7.4 19.2 0.7 —

Other business lines 47.4 33.1 7.2 4.3 4.4 (2.6) — 1.7

Total 92.3 79.2 18.6 7.3 0.8 2.9 (0.1) 0.2

(1) The ten-year average effect of catastrophe losses on the total combined ratio was 13.1 points in the second quarter of 2023.

Auto underwriting results

1 unchanged sentence

2023 2022 2021

($ in millions, except ratios) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

($ in millions, except ratios) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Underwriting income (loss) (678) (346) (974) (1,315) (578) (147) (300) (159) 394 1,327

Loss ratio 87.9 83.4 90.6 95.3 84.9 77.6 78.9 76.9 68.7 57.2

Effect of prior year non-catastrophe reserve reestimates (0.1) 2.3 8.5 3.8 2.1 2.1 1.1 (0.4) (0.2)

Effect of prior year non-catastrophe reserve reestimates on combined ratio

1.4 (0.1) 2.3 8.5 3.8 2.1 2.1 1.1 (0.4) (0.2)

Frequency and severity are influenced by:

6 unchanged sentences

The quarterly auto loss ratio has been more variable due to these and additional factors discussed below.

Auto loss ratio increased 5.8 points in the first quarter compared to the same period of 2022.

Estimated report year 2023 incurred claim severity for Allstate brand, excluding Esurance and Canada, increased 9% to 11% for all major coverages compared to the prior year due to higher part costs and labor rates for repairable vehicles, a higher mix of total losses, an increase in claims with attorney representation and higher medical consumption and inflation.

Gross claim frequency increased in all coverages, but remains below pre-pandemic levels.

Homeowners loss ratio increased 36.7 points in the first quarter of 2023 compared to the same period of 2022, primarily due to higher catastrophe losses and severity, partially offset by increased premiums earned.

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Allstate Protection Segment Results

Auto loss ratio increased 3.0 and 4.4 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022.

Estimated report year 2023 incurred claim severity for Allstate brand, excluding Esurance and Canada, had a weighted average increase of 11% compared to report year 2022 for major coverages due to higher part costs and labor rates for repairable vehicles, a higher mix of total losses, an increase in claims with attorney representation, higher medical consumption, and inflation.

Gross claim frequency increased but remains below pre-pandemic levels.

We are enhancing our

claims practices to manage loss costs by increasing resources and expanding re-inspections, accelerating resolution of bodily injury claims, and negotiating improved vendor services and parts agreements.

Homeowners loss ratio increased 40.5 and 38.5 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to higher catastrophe losses and severity, partially offset by increased premiums earned.

Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses)

(% change year-over-year)

Three months ended March 31, 2023

Three months ended June 30, 2023

Gross claim frequency (5.5) %

Paid claim severity 11.3

Gross claim frequency increased in the first quarter compared to the same period of 2022 primarily due to wind/hail perils.

Paid claim severity increased in the first quarter of 2023 compared to the same period of 2022 due to inflationary loss cost pressure driven by increases in labor and materials costs.

Six months ended June 30, 2023

Gross claim frequency (2.3) %

Paid claim severity 11.2

Gross claim frequency decreased in the second quarter of 2023 compared to the same period of 2022 due to wind/hail perils and decreased in the first six months of 2023 compared to the same period of 2022, primarily due to water and wind/hail perils.

Paid claim severity increased in the second quarter and first six months of 2023 compared to the same periods of 2022

Second Quarter 2023 Form 10-Q 61

Segment Results Allstate Protection

due to inflationary loss cost pressure driven by increases in labor and materials costs.

Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the quarter.

Other personal lines loss ratio increased 21.7 points in the first quarter of 2023, compared to the same period of 2022, primarily due to higher catastrophes losses, partially offset by increased premiums earned.

Commercial lines loss ratio increased 14.9 points in the first quarter of 2023 compared to the same period of 2022, primarily due to premiums earned decreasing as a result of profitability actions and continued elevated frequency and severity.

Other business lines loss ratio increased 12.1 points in the first quarter of 2023 compared to the same period of 2022, primarily due to higher catastrophe and non-catastrophe losses.

Catastrophe losses increased $1.23 billion to $1.69 billion in the first quarter of 2023 compared to the first quarter of 2022, primarily related to five wind events in March.

Other personal lines loss ratio increased 18.6 and 20.1 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to higher catastrophe losses and increased severity, partially offset by increased premiums earned.

Commercial lines loss ratio decreased 21.7 and 3.9 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to the result of profitability actions taken and less unfavorable reserve reestimates, partially offset by continued elevated frequency and severity.

Other business lines loss ratio increased 16.6 and 14.3 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to higher catastrophe and non-catastrophe losses.

Catastrophe losses increased $1.59 billion to $2.70 billion in the second quarter of 2023 compared to the second quarter of 2022 and increased $2.82 billion to $4.39 billion in the first six months of 2023 compared to the first six months of 2022, primarily related to an increased number of wind/hail events and larger losses per event.

The catastrophe losses for the second quarter and first six months of 2023 represent the highest and second highest level for the respective periods in the Company’s history.

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

10 unchanged sentences

Catastrophe losses by the type of event

Three months ended March 31,

($ in millions) Number of events 2023 Number of events 2022

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

($ in millions) Number of events 2023 Number of events 2022 Number of events 2023 Number of events 2022

Tornadoes 1 $ 25 2 $ 93 3 $ 138 3 $ 158

Wind/hail 39 2,858 32 966 63 4,230 46 1,328

Wildfires 2 26 4 28 2 26 4 28

Freeze/other events — — — — 2 4 1 18

Prior year reserve reestimates 31 61 (11) 48

Prior year aggregate reinsurance recoveries

— (10) — (10)

Prior quarter reserve reestimates (244) (30) — —

Total catastrophe losses 42 $ 2,696 38 $ 1,108 70 $ 4,387 54 $ 1,570

First Quarter 2023 Form 10-Q 57

Segment Results Allstate Protection

Catastrophe reinsurance

Our current catastrophe reinsurance program supports the Company’s risk tolerance framework which utilizes a modeled 1-in-100 annual aggregate limit for catastrophe losses from hurricanes, earthquakes and wildfires of $2.5 billion, net of reinsurance.

We have completed the placement of our 2023-2024 Nationwide Excess Catastrophe Reinsurance Program (the “Nationwide Program”), the National General Reciprocal Excess Catastrophe Program, the Kentucky Earthquake Excess Catastrophe Reinsurance Contract, and the Canada Catastrophe Excess Reinsurance Contract.

The Florida Excess Catastrophe Reinsurance Program and the National General Lender Services Program will be completed in the second quarter of 2023.

Similar to our 2022 program, our 2023 program includes coverage for losses to personal lines property, personal lines automobile, commercial lines property or commercial lines automobile arising out of multiple perils, in addition to hurricanes and earthquakes.

The Nationwide Program provides coverage up to $6.92 billion of losses less a $500 million retention, and is subject to the percentage of reinsurance placed in each of its agreements.

Property business in the state of Florida is excluded from this program.

Separate reinsurance agreements address the distinct needs of separately capitalized legal entities.

The Nationwide Program includes reinsurance agreements with both the traditional and insurance-linked securities (“ILS”) markets as described below:

• Core traditional market multi-year and per occurrence agreements provide limits totaling $4.56 billion for catastrophe losses arising out of multiple perils and are comprised of the following:

– $3.94 billion of placed limits exhausting at $4.75 billion, with a 5% co-participation and one annual reinstatement:

– 31.6% of the coverage is provided in four multi-year contracts attaching at $500 million.

– 31.7% of the coverage is provided in four multi-year contracts with the first $250 million in excess of $500 million retained by Allstate.

– 31.7% of the coverage is provided in one single-year contract attaching at $250 million in excess of a $750 million retention and four multi-year contracts attaching at $1.00 billion.

– One single-year contract providing $500 million of placed limits in excess of a $4.25 billion retention, 95% placed.

– $105 million of placed limits in excess of a $4.75 billion retention and $131 million of placed limits in excess of a $5.54 billion retention, both with a 5% co-participation and

one reinstatement of limits over each contract’s eight-year term.

– $375 million of placed limits in single-year placements filling capacity around the multi-year and ILS placements:

– One contract providing $95 million of placed limits in excess of a $4.75 billion retention, with two limits available in any one contract year.

– One contract providing $260 million of placed limits in excess of a $4.75 billion retention, with no annual reinstatement.

– One contract providing $20 million of placed limits in excess of a $6.82 billion retention, with no annual reinstatement.

• ILS placements provide $1.78 billion of placed limits, with no reinstatement of limits, and are comprised of the following:

– Six contracts providing occurrence coverage of $1.05 billion of placed limits, reinsuring losses in all states except Florida caused by named storms, earthquakes and fire following earthquakes, severe weather, wildfires, and other naturally occurring or man-made events determined to be a catastrophe by the Company.

– Three contracts providing occurrence and aggregate coverage of $405 million of placed limits, also provide that for each annual period beginning April 1, Allstate declared catastrophes to personal lines property and automobile business can be aggregated to erode the aggregate retention and qualify for coverage under the aggregate limits.

Recoveries are limited to the ultimate net loss from the reinsured event.

– Two contracts, providing aggregate coverage of $325 million of placed limits.

National General Reciprocal Excess Catastrophe Reinsurance Contracts are placed in the traditional market and provide $600 million of coverage, subject to a $20 million retention, with one reinstatement of limits.

Kentucky Earthquake Excess Catastrophe Reinsurance Contract is placed in the traditional market and provides two limits of $28 million, subject to a $2 million retention.

Canada Catastrophe Excess of Loss Reinsurance Contract is placed in the traditional market and provides CAD 275 million of coverage, subject to a CAD 75 million retention, with one reinstatement of limits.

The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the first quarter of 2023 was $219 million, compared to $144 million in the first quarter of 2022.

Catastrophe placement premiums reduce net written and earned premium with approximately 74% related to homeowners.

Our current catastrophe reinsurance program supports the Company’s risk tolerance framework which utilizes a modeled 1-in-100 annual aggregate limit for catastrophe losses from hurricanes,

earthquakes and wildfires of $2.5 billion, net of reinsurance.

These reinsurance agreements are part of our catastrophe management strategy, which is intended to provide our shareholders with an acceptable return on the risks assumed in our property business, and to

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Allstate Protection Segment Results

Prior year reserve reestimates Favorable reserve reestimates were $17 million in the first quarter of 2023 primarily due to favorable catastrophe reserve reestimates in personal auto lines and favorable reserve reestimates, excluding catastrophes losses in homeowners lines, partially offset by unfavorable reserves, excluding catastrophes, for commercial

insurance primarily related to business that is being exited.

reduce variability of earnings, while providing protection to our customers.

During the second quarter of 2023, we completed the placement of our 2023-2024 Florida Excess Catastrophe Reinsurance Program (“Florida program”) and the National General Lender Services Standalone Program.

Additionally, we placed four single-year term contracts as part of our 2023-2024 Nationwide Excess Catastrophe Reinsurance Program, which provide $120 million of coverage.

Florida program updates Our 2023 Florida program provides coverage for property policies of Castle Key Insurance Company and certain affiliate companies for Florida catastrophe events up to $1.29 billion of loss less a $40 million retention.

The Florida program includes reinsurance agreements placed in the traditional market, the Florida Hurricane Catastrophe Fund (“FHCF”), the Florida Reinsurance to Assist Policyholders Program (“RAP”) and the insurance-linked securities (“ILS”) market as follows:

• Traditional market placements comprise reinsurance limits for losses to personal lines property in Florida arising out of multiple perils.

These contracts provide a combined $695 million of limits, with a portion of the traditional market placements providing coverage for perils not covered by the FHCF and RAP contracts, which only cover hurricanes.

• Three FHCF contracts provide $330 million of limits for qualifying losses to personal lines property in Florida caused by storms the National Hurricane Center declares to be hurricanes.

The three contracts are 90% placed.

• Three RAP contracts provide $49 million of limits for qualifying losses to personal lines property in Florida caused by storms the National Hurricane Center declares to be hurricanes.

The three contracts are 90% placed.

• ILS placements provide $620 million of reinsurance limits for qualifying losses to personal lines property in Florida caused by a named storm event, a severe weather event, an earthquake event, a fire event, a volcanic eruption event, or a meteorite impact event.

National General Lender Services Standalone Program is placed in the traditional market and provides $255 million of coverage, subject to a $60 million retention, with one reinstatement of limits.

Inuring contracts include the National General Florida Hurricane Catastrophe Fund contract providing $64 million of limits in excess of a $33 million retention, 90% placed, and the National General RAP Contract providing $10 million of limits in excess of a $24 million retention, 90% placed.

For a complete summary of the 2023 reinsurance placement, please read this in conjunction with the discussion and analysis in Part I.

Management’s Discussion and Analysis - Allstate Protection Segment Results, Catastrophe Reinsurance of The Allstate Corporation Form 10-Q for the quarterly period ended March 31, 2023.

The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the second quarter and first six months of 2023 was $242 million and $461 million, respectively, compared to $173 million and $317 million in the second quarter and first six months of 2022, respectively.

Catastrophe placement premiums reduce net written and earned premium with approximately 75% of the reduction related to homeowners premium.

Prior year reserve reestimates Unfavorable reserve reestimates were $212 million and $195 million in the second quarter and the first six months of 2023, respectively, primarily due to National General personal auto lines, primarily injury coverages, and unfavorable reserve reestimates in homeowners lines.

For a more detailed discussion on reinsurance and reserve reestimates, see Note 8 of the condensed consolidated financial statements.

Prior year reserve reestimates

Three months ended March 31,

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

Prior year reserve

1 unchanged sentence

combined ratio (2)

Prior year reserve

reestimates (1)

combined ratio (2)

($ in millions, except ratios) 2023 2022 2023 2022 2023 2022 2023 2022

10 unchanged sentences

(2) Ratios are calculated using Allstate Protection premiums earned.

Expense ratio decreased 2.9 points in the first quarter of 2023 compared to the first quarter of 2022, primarily due to lower advertising costs and higher earned premium growth relative to fixed costs.

Second Quarter 2023 Form 10-Q 63

Segment Results Allstate Protection

Expense ratio decreased 2.5 and 2.7 points in the second quarter and the first six months of 2023, respectively, compared to the second quarter and the first six months of 2022, primarily due to higher earned premium growth relative to fixed costs, and lower advertising, agent and employee-related costs.

Impact of specific costs and expenses on the expense ratio

Three months ended March 31,

($ in millions, except ratios) 2023 2022 Change

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

($ in millions, except ratios) 2023 2022 Change 2023 2022 Change

Amortization of DAC $ 1,496 $ 1,355 $ 141 $ 2,948 $ 2,703 $ 245

13 unchanged sentences

Total expense ratio 20.5 23.0 (2.5) 20.8 23.5 (2.7)

First Quarter 2023 Form 10-Q 59

Segment Results Run-off Property-Liability

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Run-off Property-Liability Segment Results

Run-off Property-Liability Segment

Underwriting results

($ in millions) Three months ended March 31,

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

2023 2022 2023 2022

Claims and claims expense $ (1) $ (3) $ (3) $ (4)

1 unchanged sentence

Underwriting loss

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

Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance

($ in millions) March 31, 2023 December 31, 2022

($ in millions) June 30, 2023 December 31, 2022

Asbestos claims

14 unchanged sentences

Reserves by type of exposure before and after the effects of reinsurance

($ in millions) March 31, 2023 December 31, 2022

($ in millions) June 30, 2023 December 31, 2022

Direct excess commercial insurance

22 unchanged sentences

Net reserves $ 1,410 $ 1,451

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Run-off Property-Liability Segment Results

Second Quarter 2023 Form 10-Q 65

Segment Results Run-off Property-Liability

Percentage of gross and ceded reserves by case and IBNR

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Case IBNR Case IBNR

8 unchanged sentences

Ceded 81 19 81 19

(1) Approximately 65% and 64% of gross case reserves as of March 31, 2023 and December 31, 2022, respectively, are subject to settlement agreements.

(2) Approximately 69% and 70% of ceded case reserves as of March 31, 2023 and December 31, 2022, respectively, are subject to settlement agreements.

(1) Approximately 66% and 64% of gross case reserves as of June 30, 2023 and December 31, 2022, respectively, are subject to settlement agreements.

(2) Approximately 70% and 70% of ceded case reserves as of June 30, 2023 and December 31, 2022, respectively, are subject to settlement agreements.

Gross payments from case reserves by type of exposure

($ in millions) Three months ended March 31,

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

2023 2022 2023 2022

Direct excess commercial insurance

$ 9 $ 10 $ 32 $ 28

(4) (3) (9) (10)

Assumed reinsurance coverage

1 unchanged sentence

Direct primary commercial insurance

(1) In the first quarter of 2023 and 2022 , 87% and 88% of payments, respectively, related to settlement agreements.

(2) In the first quarter of 2023 and 2022 , 92% and 93% of payments, respectively, related to settlement agreements.

Total net reserves as of March 31, 2023, included $762 million or 53% of estimated IBNR reserves compared to $765 million or 53% of estimated IBNR reserves as of December 31, 2022.

Total gross payments were $29 million for the first quarter of 2023 compared to $25 million for the first quarter of 2022.

Payments primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos related losses, where the scope of coverages has been agreed upon.

Ceded — (1) — (1)

(1) In the second quarter and first six months of 2023, 79% and 85% of payments related to settlement agreements, respectively, compared to 77% and 84% of the second quarter and first six months of 2022, respectively.

(2) In the second quarter and first six months of 2023, 74% and 87% of payments related to settlement agreements, respectively, compared to 85% and 91% of the second quarter and first six months of 2022, respectively.

Total net reserves as of June 30, 2023, included $700 million or 50% of estimated IBNR reserves compared to $765 million or 53% of estimated IBNR reserves as of December 31, 2022.

Total gross payments were $24 million and $53 million for the second quarter and first six months of 2023, respectively, compared to $16 million and $41 million for the second quarter and first six months of 2022, respectively.

Payments for both periods primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos related losses, 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 $15 million for the first quarter of 2023 compared to $10 million for the first quarter of 2022.

First Quarter 2023 Form 10-Q 61

Segment Results Protection Services

Reinsurance collections were $9 million and $24 million for the second quarter and first six months of 2023, respectively, compared to $11 million and $21 million for the second quarter and first six months of 2022, respectively.

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Protection Services Segment Results

Protection Services Segment

Summarized financial information

($ in millions) Three months ended March 31,

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

2023 2022 2023 2022

Premiums written $ 658 $ 670 $ 1,277 $ 1,300

21 unchanged sentences

Allstate Identity Protection 3,222 2,961

Policies in force as of March 31 (in thousands) 144,172 147,383

Policies in force as of June 30 (in thousands) 145,764 144,693

(1) Primarily related to Arity and Allstate Roadside and are eliminated in our condensed consolidated financial statements.

Adjusted net income decreased 35.8% or $19 million in the first quarter of 2023 compared to the first quarter of 2022, due to Allstate Protection Plans higher appliance and furniture claim severity, a shift in business mix and lower third-party advertising sales by Arity.

The decrease was partially offset by growth in new business at Allstate Protection Plans.

Premiums written decreased 1.7% or $11 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to a decrease in sales at Allstate Dealer Services and lower rescue volumes at Allstate Roadside, partially offset by growth at Allstate Protection Plans.

PIF decreased 2.2% or 3 million as of March 31, 2023 compared to March 31, 2022 due to a decline in Allstate Protection Plans.

Other revenue decreased 10.6% or $10 million in the first quarter of 2023 compared to the first quarter

of 2022, primarily due to lower revenue from reductions in customer advertising at Arity.

Intersegment premiums and service fees decreased 19.5% or $8 million in the first quarter of 2023 compared to the first quarter of 2022, driven by decreased device sales for the Drivewise® offering at Arity due to a shift from devices to a mobile phone program.

Claims and claims expense increased 24.4% or $30 million in the first quarter 2023 compared to the first quarter of 2022, 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 Dealer Services.

Adjusted net income decreased 4.7% or $2 million in the second quarter of 2023 and decreased 21.9% or $21 million in the first six months of 2023 compared to the same periods of 2022, due to Allstate Protection Plans higher appliance and furniture claim severity, a shift in business mix and lower third-party advertising sales by Arity, partially offset by improved margins at Allstate Roadside.

Premiums written decreased 1.8% or $12 million in the second quarter of 2023 and decreased 1.8% or $23 million in the first six months of 2023 compared to the same periods of 2022, primarily due to a decrease in sales at Allstate Dealer Services and lower rescue volumes at Allstate Roadside, partially offset by growth at Allstate Protection Plans.

PIF increased 0.7% or 1 million as of June 30, 2023 compared to June 30, 2022 due to an increase in Allstate Protection Plans.

Other revenue decreased 7.7% or $7 million in the second quarter of 2023 and decreased 9.2% or $17 million in the first six months of 2023 compared to the same periods of 2022, primarily due to lower revenue from reductions in customer advertising at Arity.

Intersegment premiums and service fees decreased 7.9% or $3 million in the second quarter of 2023 and decreased 13.9% or $11 million in the first six months of 2023 compared to the same periods of 2022, driven by decreased device sales for the Drivewise® offering at Arity due to a shift from devices to a mobile phone program.

Claims and claims expense increased 19.5% or $25 million in the second quarter 2023 and increased 21.9% or $55 million in the first six months of 2023 compared to the same periods of 2022, primarily driven by growth in the business and higher severity at both Allstate Protection Plans and Allstate Dealer Services, partially offset by lower frequency at Allstate Protection Plans.

Second Quarter 2023 Form 10-Q 67

Segment Results Protection Services

Amortization of DAC increased 13.6% or $31 million in the second quarter of 2023 and increased 13.6% or $61 million in the first six months of 2023 compared to the same periods of 2022, driven by revenue growth at both Allstate Protection Plans and Allstate Dealer Services.

Operating costs and expenses increased 2.3% or $5 million in the second quarter of 2023 and increased 1.9% or $8 million in the first six months of 2023 compared to the same periods of 2022, primarily due to growth at Allstate Protection Plans.

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Protection Services Segment Results

Amortization of DAC increased 13.6% or $30 million in the first quarter of 2023 compared to the first quarter of 2022, driven by business growth at both Allstate Protection Plans and Allstate Dealer Services.

Operating costs and expenses increased 1.4% or $3 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to investments in technology at Allstate Protection Plans and Allstate Identity Protection.

Restructuring and related charges increased $1 million in the first quarter of 2023 compared to the first quarter of 2022 from real estate costs related to facilities being vacated.

First Quarter 2023 Form 10-Q 63

Segment Results Allstate Health and Benefits

Allstate Health and Benefits Segment Results

Allstate Health and Benefits Segment

2 unchanged sentences

Summarized financial information

Three months ended March 31,

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

($ in millions) 2023 2022 2023 2022

10 unchanged sentences

Benefit ratio (1)

55.0 55.1 55.2 55.3

Employer voluntary benefits (2)

1 unchanged sentence

Individual health (4)

Policies in force as of March 31 (in thousands) 4,339 4,484

(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 March 31, 2023 and 2022, divided by premiums and contract charges.

Policies in force as of June 30 (in thousands) 4,273 4,368

(1) Benefit ratio is calculated as accident, health and other policy benefits less interest credited to contractholder funds of $9 million for both the three months ended June 30, 2023 and 2022, and $17 million for both the six months ended June 30, 2023 and 2022, divided by premiums and contract charges.

(2) Employer voluntary benefits include supplemental life and health products offered through workplace enrollment.

1 unchanged sentence

(4) Individual health includes short-term medical and other health products sold directly to individuals.

Adjusted net income decreased $1 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to a decline in employer voluntary benefits, partially offset by growth in group health.

Premiums and contract charges decreased 1.1% or $5 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to a decline in individual health and employer voluntary benefits, partially offset by growth in group health.

Adjusted net income decreased $10 million in the second quarter of 2023 and decreased $11 million in the first six months of 2023 compared to the same periods of 2022, primarily due to a decline in employer voluntary benefits and individual health, partially offset by growth in group health.

Premiums and contract charges decreased 2.6% or $12 million in the second quarter of 2023 and decreased 1.8% or $17 million in the first six months of 2023 compared to the same periods of 2022, primarily due to a decline in individual health and employer voluntary benefits, partially offset by growth in group health.

Premiums and contract charges by line of business

Three months ended March 31,

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

($ in millions) 2023 2022 2023 2022

3 unchanged sentences

Premiums and contract charges $ 453 $ 465 $ 916 $ 933

Other revenue increased $6 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to an increase in group health administrative fees.

Accident, health and other policy benefits decreased 1.1% or $3 million in the first quarter of 2023 compared to the first quarter of 2022, primarily due to lower benefit utilization in group and individual health, partially offset by increased contract benefits for employer voluntary benefits and growth in group health.

Other revenue increased $9 million in the second quarter of 2023 and increased $15 million in the first six months of 2023 compared to the same periods of 2022, primarily due to an increase in group health administrative fees.

Accident, health and other policy benefits decreased 2.6% or $7 million in the second quarter of 2023 and decreased 1.9% or $10 million in the first six months of 2023 compared to the same periods of 2022, primarily due to lower benefit utilization in group and individual health, partially offset by increased contract benefits for employer voluntary benefits and growth in group health.

Second Quarter 2023 Form 10-Q 69

Segment Results Allstate Health and Benefits

Accident, health and other policy benefits include changes in the reserve for future policy benefits, expected development on reported claims, and reserves for incurred but not reported claims as shown in Note 9.

Benefit ratio decreased 0.1 point to 55.5 in the first quarter of 2023 compared to 55.6 in the first quarter of 2022.

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Allstate Health and Benefits Segment Results

Amortization of DAC increased 5.1% or $2 million in the first quarter of 2023 compared to the first quarter of 2022, primarily related to individual health, partially offset by employer voluntary benefits.

Benefit ratio decreased 0.1 points to 55.0 in the second quarter of 2023 compared to 55.1 in the second quarter of 2022.

Benefit ratio decreased 0.1 points to

55.2 in the first six months of 2023 compared to 55.3 in the same period of 2022.

Amortization of DAC decreased 2.9% or $1 million in the second quarter of 2023 and increased 1.4% or $1 million in the first six months of 2023 compared to the same periods of 2022.

Operating costs and expenses

Three months ended March 31,

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

($ in millions) 2023 2022 2023 2022

2 unchanged sentences

Total operating costs and expenses $ 210 $ 185 $ 413 $ 387

Operating costs and expenses increased $1 million in the first quarter of 2023 compared to the first quarter of 2022.

First Quarter 2023 Form 10-Q 65

Operating costs and expenses increased $25 million in the second quarter of 2023 and increased $26 million in the first six months of 2023 compared to the same periods of 2022, primarily due to growth in group health.

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Portfolio composition and strategy by reporting segment (1)

March 31, 2023

June 30, 2023

($ in millions) Property-Liability Protection Services

19 unchanged sentences

(3) Equity securities are carried at fair value.

The fair value of equity securities held as of March 31, 2023, was $27 million in excess of cost.

These net gains were primarily concentrated in the banking, consumer goods and technology sectors.

Equity securities include $1.05 billion of funds with underlying investments in fixed income securities as of March 31, 2023.

The fair value of equity securities held as of June 30, 2023, was $59 million in excess of cost.

These net gains were primarily concentrated in the technology, banking and consumer goods sectors.

Equity securities include $1.09 billion of funds with underlying investments in fixed income securities as of June 30, 2023.

(4) Short-term investments are carried at fair value.

Investments totaled $63.48 billion as of March 31, 2023, increasing from $61.83 billion as of December 31, 2022, primarily due to higher fixed income and equity valuations and positive operating cash flows, partially offset by common share repurchases and dividends paid to shareholders.

Investments totaled $63.67 billion as of June 30, 2023, increasing from $61.83 billion as of December 31, 2022, primarily due to higher fixed income and equity valuations and positive operating cash flows, partially offset by dividends paid to shareholders and common share repurchases.

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 provide flexibility to adjust investment risk profile based on enterprise objectives and market opportunities primarily through public and private fixed income investments and public equity securities.

Market-based strategy seeks to deliver predictable earnings aligned to business needs and provide

flexibility to adjust investment risk profile based on enterprise objectives and market 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 with a majority being 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.

As inflation remained elevated, the Federal Reserve significantly increased interest rates and credit spreads widened reflecting ongoing recession concerns.

These factors along with other ongoing impacts from the pandemic and from disruptions in the banking industry, could create significant economic uncertainty and the resulting market volatility may continue to impact our investment valuations and returns.

As of March 31, 2023, we have exposure of approximately $240 million to regional banks primarily through investment grade corporate bonds.

The investment portfolio had an insignificant exposure to Silicon Valley Bank, First Republic Bank and Signature Bank prior to their failures.

Investments in Russia and Ukraine As of March 31, 2023, our investment portfolio does not have direct or indirect exposure to Russia, Belarus or Ukraine.

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Portfolio composition by investment strategy

March 31, 2023

June 30, 2023

($ in millions) Market-

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Fixed income securities $ (2,353) $ (1) $ (2,354)

Limited partnership interests — 4 4

Short-term investments (1) — (1)

Other (2) — (2)

Total $ (2,356) $ (1) $ (2,357)

Second Quarter 2023 Form 10-Q 71

Fixed income securities

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Fair value as of

($ in millions) March 31, 2023 December 31, 2022

($ in millions) June 30, 2023 December 31, 2022

government and agencies $ 7,729 $ 7,898

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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 March 31, 2023, 91.0% of the consolidated fixed income securities portfolio was rated investment grade.

As of June 30, 2023, 91.2% 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.

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For further detail on our fixed income portfolio monitoring process, see Note 4 of the condensed consolidated financial statements.

First Quarter 2023 Form 10-Q 67

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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

March 31, 2023

June 30, 2023

NAIC 1 NAIC 2 NAIC 3

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For further detail on our mortgage loan portfolio, see Note 4 of the condensed consolidated financial statements.

Limited partnership interests include $6.75 billion of interests in private equity funds, $1.05 billion of interests in real estate funds and $178 million of interests in other funds as of March 31, 2023.

We have commitments to invest additional amounts in limited partnership interests totaling $2.70 billion as of March 31, 2023.

Other investments include $698 million of bank loans, net, and $790 million of direct investments in real estate as of March 31, 2023.

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Limited partnership interests include $6.92 billion of interests in private equity funds, $1.06 billion of interests in real estate funds and $164 million of interests in other funds as of June 30, 2023.

We have commitments to invest additional amounts in limited partnership interests totaling $2.74 billion as of June 30, 2023.

Other investments include $667 million of bank loans, net, and $825 million of direct investments in real estate as of June 30, 2023.

Second Quarter 2023 Form 10-Q 73

Unrealized net capital gains (losses)

March 31, December 31,

June 30, December 31,

($ in millions) 2023 2022

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Unrealized net capital gains and losses, pre-tax $ (2,357) $ (2,887)

First Quarter 2023 Form 10-Q 69

Gross unrealized gains (losses) on fixed income securities by type and sector

March 31, 2023

($ in millions) Amortized

Gross unrealized Fair

Banking $ 4,534 $ 12 $ (244) $ 4,302

June 30, 2023

$ 4,078 $ 5 $ (223) $ 3,860

Basic industry 975 3 (65) 913

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Financial services 2,233 3 (154) 2,082

Midstream 1,877 7 (74) 1,810

Independent/upstream 320 2 (19) 303

Integrated 52 — (3) 49

Other 238 1 (10) 229

Total energy 2,487 10 (106) 2,391

Energy 2,660 5 (124) 2,541

Technology 2,956 7 (237) 2,726

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December 31, 2022

($ in millions) Amortized

cost, net Gross unrealized Fair

Banking $ 5,153 $ 16 $ (314) $ 4,855

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Financial services 2,243 4 (176) 2,071

Midstream 1,725 1 (110) 1,616

Independent/upstream 354 1 (29) 326

Integrated 67 — (4) 63

Other 218 — (13) 205

Total energy 2,364 2 (156) 2,210

Energy 2,364 2 (156) 2,210

Technology 3,137 4 (298) 2,843

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Total fixed income securities $ 45,370 $ 92 $ (2,977) $ 42,485

(1) As of June 30, 2023, we have exposure of approximately $115 million to regional banks primarily through investment grade corporate bonds.

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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.

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Equity securities by sector

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

($ in millions) Cost Over (under) cost Fair

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Capital Goods 88 (31) 57 196 3 199

Independent/upstream 9 1 10 30 12 42

Integrated 8 3 11 39 26 65

Midstream 30 (2) 28 33 (2) 31

Other 1 1 2 8 8 16

Total energy 48 3 51 110 44 154

Energy 45 1 46 110 44 154

Equities 228 2 230 904 (19) 885

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Total equity securities $ 2,231 $ 59 $ 2,290 $ 4,253 $ 314 $ 4,567

(1) As of March 31, 2023, other is generally comprised of consumer goods, technology, REITs, financial services and communications sectors.

(1) As of June 30, 2023, other is generally comprised of consumer goods, technology, REITs, financial services and communications sectors.

Net investment income

Three months ended March 31,

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

($ in millions) 2023 2022 2023 2022

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Investment income, before expense $ 681 $ 618 $ 1,331 $ 1,263

Net investment income decreased $19 million in the first quarter of 2023, compared to the same period of 2022, as higher market-based results from increased fixed income portfolio yields and to a lesser extent, the reinvestment of proceeds from sales of equity securities into fixed income securities with higher yields were more than offset by lower performance-based results, mainly from limited partnerships.

First Quarter 2023 Form 10-Q 71

Net investment income increased $48 million and $29 million in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to higher market-based results driven by reinvesting into fixed income securities with higher yields and to a lesser extent, the reinvestment of proceeds from sales of equity securities into fixed income securities, partially offset by lower performance-based results, mainly from limited partnerships.

Second Quarter 2023 Form 10-Q 75

Performance-based investment income

Three months ended March 31,

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

($ in millions) 2023 2022 2023 2022

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Investee level expenses (1)

(16) (13) (32) (27)

Total performance-based income $ 127 $ 236 $ 253 $ 542

(1) Investee level expenses include asset level operating expenses on directly held real estate and other consolidated investments reported in investment expense.

Performance-based investment income decreased $180 million in the first quarter of 2023, compared to the same period of 2022, primarily due to lower valuation increases.

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.

Performance-based investment income decreased $109 million and $289 million in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to lower valuation increases and lower net gains on the sales of underlying investments.

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 March 31,

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

($ in millions) 2023 2022 2023 2022

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Limited partnerships (1)

2 (53) 33 (153)

Total valuation of equity investments 23 (689) 221 (1,136)

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Net gains (losses) on investments and derivatives, pre-tax (151) (733) (137) (1,000)

Income tax (expense) benefit (6) 56

Income tax benefit 35 160 29 216

Net gains (losses) on investments and derivatives, after-tax $ (116) $ (573) $ (108) $ (784)

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(1) Relates to limited partnerships where the underlying assets are predominately public equity securities.

Net gains on investments and derivatives in the first quarter of 2023 related primarily to higher valuation on equity investments, partially offset by losses on sales and decreased valuation change and settlements of derivatives.

Net losses on sales in the first quarter of 2023 related primarily to sales of fixed income securities in connection with ongoing portfolio management.

Net losses on valuation change and settlements of derivatives of $52 million in the first quarter of 2023, primarily comprised of losses on interest rate futures used to mitigate the impact of increases in interest rates and losses on credit default swap buy protection due to tightening credit spreads on the underlying credit names.

Net losses on investments and derivatives in the second quarter of 2023 related primarily to losses on sales and credit losses, partially offset by higher valuation on equity investments.

Net losses in the first six months of 2023 related primarily to losses on sales and valuation change and settlements of derivatives, partially offset by higher valuation on equity investments.

Net losses on sales in the second quarter and first six months of 2023 related primarily to sales of fixed income securities in connection with ongoing portfolio management.

Net losses on valuation change and settlements of derivatives were $7 million and $59 million in the second quarter and first six months of 2023, respectively.

Losses in the second quarter of 2023 primarily related to net losses on equity futures used to mitigate impacts to equity exposure, partially offset by net gains on rate futures used to manage duration.

Losses in the first six months of 2023 primarily related to losses on credit default swaps used to reduce credit risk, net losses on equity futures used to mitigate impacts to equity exposure and losses on interest rate futures used to manage duration.

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Net gains (losses) on performance-based investments and derivatives

Three months ended March 31,

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

($ in millions) 2023 2022 2023 2022

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Total performance-based $ (27) $ 45 $ (10) $ 82

Net gains on performance-based investments and derivatives in the first quarter of 2023 primarily related to increased valuation of equity investments, partially offset by decreased valuation change and settlements of derivatives.

First Quarter 2023 Form 10-Q 73

Net losses on performance-based investments and derivatives in the second quarter of 2023 primarily related to increased credit losses from limited partnerships.

Net losses on performance-based investments and derivatives in the first six months of 2023 primarily related to increased credit losses from limited partnerships and decreased valuation change and settlements of derivatives, partially offset by increased valuation of equity investments.

Second Quarter 2023 Form 10-Q 77

Capital Resources and Liquidity

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Capital resources

($ in millions) March 31, 2023 December 31, 2022

($ in millions) June 30, 2023 December 31, 2022

Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items $ 17,431 $ 19,880

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Ratio of debt to capital resources 33.9 31.3

Allstate shareholders’ equity increased in the first three months of 2023, primarily due to lower unrealized net capital losses on investments, partially offset by a net loss, dividends paid to shareholders and common share repurchases.

In the three months ended March 31, 2023, we paid dividends of $224 million and $26 million related to our common and preferred shares, respectively.

Allstate shareholders’ equity decreased in the first six months of 2023, primarily due to a net loss, dividends paid to shareholders and common share repurchases, partially offset by lower unrealized net capital losses on investments.

In the six months ended June 30, 2023, we paid dividends of $459 million and $53 million related to our common and preferred shares, respectively.

Repayment of debt On March 29, 2023, the Company repaid, at maturity, $250 million of Floating Rate Senior Notes that bear interest at a floating rate equal to three-month London Interbank Offered Rate (“LIBOR”) plus 0.63% per year.

On June 15, 2023, the Company repaid, at maturity, $500 million of 3.15% Senior Notes.

Issuance of debt On March 31, 2023, the Company issued $750 million of 5.250% Senior Notes due 2033.

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The net proceeds of this issuance were used to repay the $500 million senior debt maturity and for general corporate purposes.

Subsequent event On April 17, 2023, the Company redeemed all 23,000 shares of Fixed Rate Noncumulative Preferred Stock, Series G, par value $1.00 per share and liquidation preference $25,000 per share, and the corresponding depositary shares for a total redemption payment of $575 million.

Debt maturities

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Total long-term debt principal $ 7,991

Common share repurchases As of March 31, 2023, there was $649 million remaining in the $5.00 billion common share repurchase program.

During the first three months of 2023, we repurchased 1.2 million common shares, or 0.5% of total common shares outstanding at December 31, 2022, for $153 million.

Common shareholder dividends On January 3, 2023, we paid a common shareholder dividend of $0.85.

On February 17, 2023, we declared a common shareholder dividend of $0.89 payable on April 3, 2023.

Redemption of preferred stock On April 17, 2023, the Company redeemed all 23,000 shares of Fixed Rate Noncumulative Preferred Stock, Series G, par value $1.00 per share and liquidation preference $25,000 per share, and the corresponding depositary shares for a total redemption payment of $575 million.

The Company recognized $18 million of original issuance costs in preferred stock dividends on the Condensed Consolidated Statements of Operations

and Condensed Consolidated Statements of Shareholders’ Equity.

Issuance of preferred stock On May 18, 2023, the Company issued 24,000 shares of Fixed Rate Noncumulative Preferred Stock, Series J, par value $1.00 per share and liquidation preference amount of $25,000 per share, and the corresponding depositary shares for gross proceeds of $600 million.

The preferred stock is perpetual and has no maturity date.

The preferred stock is redeemable at the Company’s option in whole or in part, on or after July 15, 2028 at a redemption price of $25,000 per share, plus declared and unpaid dividends.

Prior to July 15, 2028, the preferred stock is redeemable at the Company’s option, in whole but not in part, within 90 days of the occurrence of certain rating agency events at a redemption price equal to $25,500 per share, plus declared and unpaid dividends, or in whole but not in part, within 90 days after the occurrence of a regulatory capital event, at a redemption price equal to $25,000 per share, plus declared and unpaid dividends.

Common share repurchases As of June 30, 2023, there was $495 million remaining in the $5.00 billion common share repurchase program.

In July, we suspended repurchasing shares under the current authorization.

The authorization for the share repurchase program expires in March 2024.

During the first six months of 2023, we repurchased 2.6 million common shares, or 1.0% of total common shares outstanding at December 31, 2022, for $307 million.

Common shareholder dividends On January 3, 2023 and April 3, 2023, we paid a common shareholder dividend of $0.85 and $0.89, respectively.

On May 22, 2023, we declared a common shareholder dividend of $0.89 payable on July 3, 2023.

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.

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Capital Resources and Liquidity

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 March 2023, Moody’s affirmed the A3 and P-2 senior debt and short-term issuer ratings of The Allstate Corporation’s (the “Corporation’s”) and the Aa3 insurance financial strength ratings of Allstate Insurance Company (“AIC”).

In March 2023, Moody’s affirmed the A3 and P-2 senior debt and short-term issuer ratings of The Allstate Corporation (the “Corporation”) and the Aa3 insurance financial strength ratings of Allstate Insurance Company (“AIC”).

The rating outlook for Allstate was changed from stable to negative.

1 unchanged sentence

Best placed under review with negative implications the B+ insurance financial strength rating of the members of Castle Key Group (Castle Key Insurance Company, Castle Key Indemnity Company, Encompass Floridian Insurance Company, Encompass Floridian Indemnity Company).

There have been no changes to our ratings from S&P since December 31, 2022.

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Capital Resources and Liquidity

In May 2023, 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 negative.

Liquidity sources and uses We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions.

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The Corporation may use commercial paper borrowings, bank lines of credit and securities lending to fund intercompany borrowings.

Parent company capital capacity At the parent holding company level, we have deployable assets totaling $4.16 billion as of March 31, 2023, 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 March 31, 2023, we held $16.72 billion of cash, U.S.

Parent company capital capacity At the parent holding company level, we have deployable assets totaling $3.28 billion as of June 30, 2023, 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 June 30, 2023, we held $15.32 billion of cash, U.S.

government and agencies fixed income securities, public equity securities, and short-term investments, which we would expect to be able to liquidate within one week.

No intercompany dividends from insurance companies were paid in the first quarter of 2023.

Intercompany dividends of $40 million were paid from American Heritage Life Insurance Company to Allstate Financial Insurance Holdings Corporation in the first six months of 2023.

Based on the greater of 2022 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 2024, is estimated at $1.22 billion, less dividends paid during the preceding twelve months measured at that point in time.

As of March 31, 2023, we paid no dividends.

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.

As of June 30, 2023, no dividends have been paid.

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.

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 three months of 2023, we did not defer interest payments on the subordinated debentures.

In the first six months of 2023, we did not defer interest payments on the subordinated debentures.

Additional resources to support liquidity are as follows:

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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 24.2% as of March 31, 2023.

This ratio was 24.4% as of June 30, 2023.

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 2023.

• 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 March 31, 2023, there were no balances outstanding for the credit facility or the commercial paper facility and therefore the remaining borrowing capacity was $750 million.

• To cover short-term cash needs, the Corporation has access to a commercial paper facility with a

Second Quarter 2023 Form 10-Q 79

Capital Resources and Liquidity

borrowing capacity limited to any undrawn credit facility balance up to $750 million.

• As of June 30, 2023, 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 637 million shares of treasury stock as of March 31, 2023), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries.

We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 638 million shares of treasury stock as of June 30, 2023), 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.

First Quarter 2023 Form 10-Q 75

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Forward-Looking Statements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis