ALLSTATE CORP 10-Q

Item 1. Financial Statements The Allstate Corporation and Subsidiaries Condensed Consolidated Statements of Operations (unaudited) (In millions, except per share data) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Revenues Property and casualty insurance premiums $ 12,470 $ 11,362 $ 24,643 $ 22,343 Accident and health insurance premiums and contract charges 453 465 916 933 Other revenue 597 563 1,158 1,123 Net investment income 610 562 1,185 1,156 Net gains (losses) on investments and derivatives ( 151 ) ( 733 ) ( 137 ) ( 1,000 ) Total revenues 13,979 12,219 27,765 24,555 Costs and expenses Property and casualty insurance claims and claims expense 11,727 9,367 22,053 17,189 Accident, health and other policy benefits 258 265 523 533 Amortization of deferred policy acquisition costs 1,789 1,618 3,533 3,226 Operating costs and expenses 1,786 1,850 3,502 3,752 Pension and other postretirement remeasurement (gains) losses ( 40 ) 259 ( 93 ) 12 Restructuring and related charges 27 1 54 13 Amortization of purchased intangibles 82 87 163 174 Interest expense 98 83 184 166 Total costs and expenses 15,727 13,530 29,919 25,065 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 ) Less: Net loss attributable to noncontrolling interest ( 23 ) ( 9 ) ( 24 ) ( 19 ) Net loss attributable to Allstate ( 1,352 ) ( 1,013 ) ( 1,672 ) ( 353 ) Less: Preferred stock dividends 37 27 63 53 Net loss applicable to common shareholders $ ( 1,389 ) $ ( 1,040 ) $ ( 1,735 ) $ ( 406 ) Earnings per common share: Net loss applicable to common shareholders per common share - Basic $ ( 5.29 ) $ ( 3.80 ) $ ( 6.59 ) $ ( 1.47 ) Weighted average common shares - Basic 262.6 273.8 263.1 275.9 Net loss applicable to common shareholders per common share - Diluted $ ( 5.29 ) $ ( 3.80 ) $ ( 6.59 ) $ ( 1.47 ) Weighted average common shares - Diluted 262.6 273.8 263.1 275.9 See notes to condensed consolidated financial statements. Second Quarter 2023 Form 10-Q 1 Condensed Consolidated Financial Statements The Allstate Corporation and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Net loss $ ( 1,375 ) $ ( 1,022 ) $ ( 1,696 ) $ ( 372 ) Other comprehensive (loss) income, after-tax Changes in: Unrealized net capital gains and losses ( 272 ) ( 1,144 ) 410 ( 2,738 ) Unrealized foreign currency translation adjustments 28 ( 47 ) 78 ( 47 ) Unamortized pension and other postretirement prior service credit ( 5 ) ( 15 ) ( 9 ) ( 30 ) Discount rate for reserve for future policy benefits 8 85 ( 1 ) 180 Other comprehensive (loss) income, after-tax ( 241 ) ( 1,121 ) 478 ( 2,635 ) Comprehensive loss ( 1,616 ) ( 2,143 ) ( 1,218 ) ( 3,007 ) Less: Comprehensive loss attributable to noncontrolling interest ( 24 ) ( 17 ) ( 20 ) ( 39 ) Comprehensive loss attributable to Allstate $ ( 1,592 ) $ ( 2,126 ) $ ( 1,198 ) $ ( 2,968 ) See notes to condensed consolidated financial statements. 2 www.allstate.com Condensed Consolidated Financial Statements The Allstate Corporation and Subsidiaries Condensed Consolidated Statements of Financial Position (unaudited) ($ in millions, except par value data) June 30, 2023 December 31, 2022 Assets Investments Fixed income securities, at fair value (amortized cost, net $ 47,904 and $ 45,370 ) $ 45,550 $ 42,485 Equity securities, at fair value (cost $ 2,231 and $ 4,253 ) 2,290 4,567 Mortgage loans, net 823 762 Limited partnership interests 8,150 8,114 Short-term, at fair value (amortized cost $ 5,138 and $ 4,174 ) 5,137 4,173 Other investments, net 1,718 1,728 Total investments 63,668 61,829 Cash 699 736 Premium installment receivables, net 9,713 9,165 Deferred policy acquisition costs 5,607 5,442 Reinsurance and indemnification recoverables, net 9,151 9,619 Accrued investment income 471 423 Deferred income taxes 480 382 Property and equipment, net 945 987 Goodwill 3,502 3,502 Other assets, net 6,278 5,904 Total assets 100,514 97,989 Liabilities Reserve for property and casualty insurance claims and claims expense 40,531 37,541 Reserve for future policy benefits 1,339 1,322 Contractholder funds 881 879 Unearned premiums 23,355 22,299 Claim payments outstanding 1,387 1,268 Other liabilities and accrued expenses 9,700 9,353 Debt 7,949 7,964 Total liabilities 85,142 80,626 Commitments and Contingent Liabilities (Note 14) Equity Preferred stock and additional capital paid-in, $ 1 par value, 25 million shares authorized, 82.0 thousand and 81.0 thousand shares issued and outstanding, $ 2,050 and $ 2,025 aggregate liquidation preference 2,001 1,970 Common stock, $ .01 par value, 2.0 billion shares authorized and 900 million issued, 262 million and 263 million shares outstanding 9 9 Additional capital paid-in 3,786 3,788 Retained income 48,766 50,970 Treasury stock, at cost ( 638 million and 637 million shares) ( 37,131 ) ( 36,857 ) Accumulated other comprehensive income (loss): Unrealized net capital gains and losses ( 1,845 ) ( 2,255 ) Unrealized foreign currency translation adjustments ( 87 ) ( 165 ) Unamortized pension and other postretirement prior service credit 20 29 Discount rate for reserve for future policy benefits ( 2 ) ( 1 ) Total accumulated other comprehensive income ( 1,914 ) ( 2,392 ) Total Allstate shareholders’ equity 15,517 17,488 Noncontrolling interest ( 145 ) ( 125 ) Total equity 15,372 17,363 Total liabilities and equity $ 100,514 $ 97,989 See notes to condensed consolidated financial statements. Second Quarter 2023 Form 10-Q 3 Condensed Consolidated Financial Statements The Allstate Corporation and Subsidiaries Condensed Consolidated Statements of Shareholders’ Equity (unaudited) ($ in millions, except per share data) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Preferred stock par value $ — $ — $ — $ — Preferred stock additional capital paid-in Balance, beginning of period 1,970 1,970 1,970 1,970 Preferred stock issuance, net of issuance costs 587 — 587 — Preferred stock redemption ( 556 ) — ( 556 ) — Balance, end of period 2,001 1,970 2,001 1,970 Common stock par value 9 9 9 9 Common stock additional capital paid-in Balance, beginning of period 3,780 3,706 3,788 3,722 Equity incentive plans activity 6 34 ( 2 ) 18 Balance, end of period 3,786 3,740 3,786 3,740 Retained income Balance, beginning of period 50,388 53,686 50,970 53,288 Net loss ( 1,352 ) ( 1,013 ) ( 1,672 ) ( 353 ) Dividends on common stock (declared per share of $ 0.89 , $ 0.85 , $ 1.78 and $ 1.70 ) ( 233 ) ( 234 ) ( 469 ) ( 470 ) Dividends on preferred stock ( 37 ) ( 27 ) ( 63 ) ( 53 ) Balance, end of period 48,766 52,412 48,766 52,412 Treasury stock Balance, beginning of period ( 36,980 ) ( 35,208 ) ( 36,857 ) ( 34,471 ) Shares acquired ( 154 ) ( 683 ) ( 307 ) ( 1,477 ) Shares reissued under equity incentive plans, net 3 33 33 90 Balance, end of period ( 37,131 ) ( 35,858 ) ( 37,131 ) ( 35,858 ) Accumulated other comprehensive income (loss) Balance, beginning of period ( 1,673 ) ( 1,088 ) ( 2,392 ) 426 Change in unrealized net capital gains and losses ( 272 ) ( 1,144 ) 410 ( 2,738 ) Change in unrealized foreign currency translation adjustments 28 ( 47 ) 78 ( 47 ) Change in unamortized pension and other postretirement prior service credit ( 5 ) ( 15 ) ( 9 ) ( 30 ) Change in discount rate for reserve for future policy benefits 8 85 ( 1 ) 180 Balance, end of period ( 1,914 ) ( 2,209 ) ( 1,914 ) ( 2,209 ) Total Allstate shareholders’ equity 15,517 20,064 15,517 20,064 Noncontrolling interest Balance, beginning of period ( 121 ) ( 74 ) ( 125 ) ( 52 ) Change in unrealized net capital gains and losses ( 1 ) ( 8 ) 4 ( 20 ) Noncontrolling loss ( 23 ) ( 9 ) ( 24 ) ( 19 ) Balance, end of period ( 145 ) ( 91 ) ( 145 ) ( 91 ) Total equity $ 15,372 $ 19,973 $ 15,372 $ 19,973 See notes to condensed consolidated financial statements. 4 www.allstate.com Condensed Consolidated Financial Statements The Allstate Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (unaudited) ($ in millions) Six months ended June 30, 2023 2022 Cash flows from operating activities Net loss $ ( 1,696 ) $ ( 372 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, amortization and other non-cash items 363 452 Net (gains) losses on investments and derivatives 137 1,000 Pension and other postretirement remeasurement (gains) losses ( 93 ) 12 Changes in: Policy benefits and other insurance reserves 2,917 1,222 Unearned premiums 1,032 1,201 Deferred policy acquisition costs ( 162 ) ( 315 ) Premium installment receivables, net ( 532 ) ( 664 ) Reinsurance recoverables, net 468 645 Income taxes ( 538 ) ( 288 ) Other operating assets and liabilities ( 126 ) ( 788 ) Net cash provided by operating activities 1,770 2,105 Cash flows from investing activities Proceeds from sales Fixed income securities 12,454 19,928 Equity securities 4,183 7,622 Limited partnership interests 516 633 Other investments 81 926 Investment collections Fixed income securities 992 259 Mortgage loans 36 60 Other investments 53 110 Investment purchases Fixed income securities ( 15,875 ) ( 22,907 ) Equity securities ( 1,717 ) ( 6,028 ) Limited partnership interests ( 424 ) ( 590 ) Mortgage loans ( 100 ) ( 89 ) Other investments ( 140 ) ( 232 ) Change in short-term and other investments, net ( 986 ) 398 Purchases of property and equipment, net ( 141 ) ( 228 ) Proceeds from sale of property and equipment 19 — Net cash used in investing activities ( 1,049 ) ( 138 ) Cash flows from financing activities Proceeds from issuance of debt 743 — Repayment of debt ( 750 ) — Proceeds from issuance of preferred stock 587 — Redemption of preferred stock ( 575 ) — Contractholder fund deposits 66 69 Contractholder fund withdrawals ( 16 ) ( 21 ) Dividends paid on common stock ( 459 ) ( 466 ) Dividends paid on preferred stock ( 53 ) ( 53 ) Treasury stock purchases ( 307 ) ( 1,485 ) Shares reissued under equity incentive plans, net 10 55 Other ( 4 ) ( 63 ) Net cash used in financing activities ( 758 ) ( 1,964 ) Net (decrease) increase in cash ( 37 ) 3 Cash at beginning of period 736 763 Cash at end of period $ 699 $ 766 See notes to condensed consolidated financial statements. Second Quarter 2023 Form 10-Q 5 Notes to Condensed Consolidated Financial Statements The Allstate Corporation and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1 General Basis of presentation The accompanying condensed consolidated financial statements include the accounts of The Allstate Corporation (the “Corporation”) and its wholly owned subsidiaries, primarily Allstate Insurance Company (“AIC”), a property and casualty insurance company (collectively referred to as the “Company” or “Allstate”) and variable interest entities (“VIEs”) in which the Company is considered a primary beneficiary. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The condensed consolidated financial statements and notes as of June 30, 2023 and for the three and six month periods ended June 30, 2023 and 2022 are unaudited. The condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2022. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. All significant intercompany accounts and transactions have been eliminated. To reflect the application of the new guidance to all in-scope long-duration insurance contracts, certain amounts in the condensed consolidated financial statements and notes for 2022 have been recast. Adopted accounting standard Accounting for Long-Duration Insurance Contracts Effective January 1, 2023, the Company adopted the Financial Accounting Standards Board (”FASB”) guidance revising the accounting for certain long-duration insurance contracts using the modified retrospective approach to the transition date of January 1, 2021. Under the new guidance, measurement assumptions, including those for mortality, morbidity and policy lapses, are required to be reviewed at least annually, and updated as appropriate. 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 are amortized on a simplified basis. Also, the Company’s 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”). After-tax cumulative effect of change in accounting principle on transition date ($ in millions) January 1, 2021 Decrease in retained income $ 21 Decrease in accumulated other comprehensive income (“AOCI”) 277 Total decrease in equity $ 298 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. 6 www.allstate.com Notes to Condensed Consolidated Financial Statements Transition disclosures The following tables summarize the balance of and changes in the reserve for future policy benefits and DAC on January 1, 2021 upon the adoption of the guidance. Impact of adoption for reserve for future policy benefits ( $ in millions) Accident and health Traditional life Total Pre-adoption 12/31/2020 balance (1) $ 728 $ 311 $ 1,039 Adjustments: Effect of the remeasurement of the reserve at upper-medium grade fixed income-based rate (2) 232 153 385 Adjustments for contracts with net premiums in excess of gross premiums (3) 77 — 77 Total adjustments 309 153 462 Post-adoption 1/1/2021 balance 1,037 464 1,501 Less: reinsurance recoverables (4) 159 3 162 Post-adoption 1/1/2021 balance, after reinsurance recoverables $ 878 $ 461 $ 1,339 (1) Traditional life includes $ 11 million in reserves related to riders of traditional life insurance products reclassified from contractholder funds. (2) Adjustment reflected with a corresponding decrease to AOCI. (3) Adjustment reflected with a corresponding decrease to retained income. (4) Represents post-adoption January 1, 2021 balance of reinsurance recoverables. Adjustments to reinsurance recoverables for accident and health products increased January 1, 2021 AOCI by $ 33 million due to the remeasurement of the reserve at upper-medium grade fixed income based rate and increased January 1, 2021 retained income by $ 51 million due to adjustments for contracts with net premiums in excess of gross premiums. Impact of adoption for DAC ( $ in millions) Accident and health Traditional life Interest- sensitive life Total Pre-adoption 12/31/2020 balance $ 343 $ 32 $ 95 $ 470 Adjustment for removal of impact of unrealized gains or losses (1) — — 2 2 Post-adoption 1/1/2021 balance $ 343 $ 32 $ 97 $ 472 (1) Adjustment reflected with a corresponding increase to AOCI. Second Quarter 2023 Form 10-Q 7 Notes to Condensed Consolidated Financial Statements Impacts of the adoption on the financial statements Condensed Consolidated Statements of Operations As reported Impact of change As adjusted ($ in millions, except per share data) Three months ended June 30, 2022 Revenues Accident and health insurance premiums and contract charges $ 466 $ ( 1 ) $ 465 Total revenues 12,220 ( 1 ) 12,219 Costs and expenses Accident, health and other policy benefits 269 ( 4 ) 265 Amortization of deferred policy acquisition costs 1,619 ( 1 ) 1,618 Total costs and expenses 13,535 ( 5 ) 13,530 Loss from operations before income tax expense ( 1,315 ) 4 ( 1,311 ) Income tax benefit ( 291 ) 2 ( 289 ) Net loss ( 1,024 ) 2 ( 1,022 ) Net loss attributable to Allstate ( 1,015 ) 2 ( 1,013 ) Net loss applicable to common shareholders $ ( 1,042 ) $ 2 $ ( 1,040 ) Earnings per common share: Net loss applicable to common shareholders per common share - Basic $ ( 3.81 ) $ 0.01 $ ( 3.80 ) Net loss applicable to common shareholders per common share - Diluted $ ( 3.81 ) $ 0.01 $ ( 3.80 ) Six months ended June 30, 2022 Revenues Accident and health insurance premiums and contract charges $ 935 $ ( 2 ) $ 933 Total revenues 24,557 ( 2 ) 24,555 Costs and expenses Accident, health and other policy benefits 538 ( 5 ) 533 Amortization of deferred policy acquisition costs 3,231 ( 5 ) 3,226 Total costs and expenses 25,075 ( 10 ) 25,065 Loss from operations before income tax expense ( 518 ) 8 ( 510 ) Income tax benefit ( 140 ) 2 ( 138 ) Net loss ( 378 ) 6 ( 372 ) Net loss attributable to Allstate ( 359 ) 6 ( 353 ) Net loss applicable to common shareholders $ ( 412 ) $ 6 $ ( 406 ) Earnings per common share: Net loss applicable to common shareholders per common share - Basic $ ( 1.49 ) $ 0.02 $ ( 1.47 ) Net loss applicable to common shareholders per common share - Diluted $ ( 1.49 ) $ 0.02 $ ( 1.47 ) 8 www.allstate.com Notes to Condensed Consolidated Financial Statements Condensed Consolidated Statements of Comprehensive Income (unaudited) As reported Impact of change As adjusted ($ in millions) Three months ended June 30, 2022 Net loss $ ( 1,024 ) $ 2 $ ( 1,022 ) Other comprehensive income (loss), after-tax Changes in: Unrealized net capital gains and losses ( 1,143 ) ( 1 ) ( 1,144 ) Discount rate for reserve for future policy benefits — 85 85 Other comprehensive income (loss), after-tax ( 1,205 ) 84 ( 1,121 ) Comprehensive loss ( 2,229 ) 86 ( 2,143 ) Comprehensive loss attributable to Allstate $ ( 2,212 ) $ 86 $ ( 2,126 ) Six months ended June 30, 2022 Net loss $ ( 378 ) $ 6 $ ( 372 ) Other comprehensive income (loss), after-tax Changes in: Unrealized net capital gains and losses ( 2,736 ) ( 2 ) ( 2,738 ) Discount rate for reserve for future policy benefits — 180 180 Other comprehensive income (loss), after-tax ( 2,813 ) 178 ( 2,635 ) Comprehensive loss ( 3,191 ) 184 ( 3,007 ) Comprehensive loss attributable to Allstate $ ( 3,152 ) $ 184 $ ( 2,968 ) Condensed Consolidated Statements of Financial Position (unaudited) As reported Impact of change As adjusted ($ in millions) December 31, 2022 Assets Deferred policy acquisition costs $ 5,418 $ 24 $ 5,442 Reinsurance and indemnification recoverables, net 9,606 13 9,619 Deferred income taxes 386 ( 4 ) 382 Other assets, net 5,905 ( 1 ) 5,904 Total assets 97,957 32 97,989 Liabilities Reserve for future policy benefits 1,273 49 1,322 Contractholder funds 897 ( 18 ) 879 Unearned premiums 22,311 ( 12 ) 22,299 Total liabilities 80,607 19 80,626 Equity Retained income 50,954 16 50,970 Accumulated other comprehensive income (loss): Unrealized net capital gains and losses ( 2,253 ) ( 2 ) ( 2,255 ) Discount rate for reserve for future policy benefits — ( 1 ) ( 1 ) Total AOCI ( 2,389 ) ( 3 ) ( 2,392 ) Total Allstate shareholders’ equity 17,475 13 17,488 Total equity 17,350 13 17,363 Total liabilities and equity $ 97,957 $ 32 $ 97,989 Second Quarter 2023 Form 10-Q 9 Notes to Condensed Consolidated Financial Statements Condensed Consolidated Statements of Shareholders’ Equity (unaudited) As reported Impact of change As adjusted ($ in millions) Three months ended June 30, 2022 Retained income Balance, beginning of period $ 53,688 $ ( 2 ) $ 53,686 Net loss ( 1,015 ) 2 ( 1,013 ) Balance, end of period 52,412 — 52,412 Accumulated other comprehensive income (loss) Balance, beginning of period ( 953 ) ( 135 ) ( 1,088 ) Change in unrealized net capital gains and losses ( 1,143 ) ( 1 ) ( 1,144 ) Change in discount rate for reserve for future policy benefits — 85 85 Balance, end of period ( 2,158 ) ( 51 ) ( 2,209 ) Total Allstate shareholders’ equity 20,115 ( 51 ) 20,064 Total equity $ 20,024 $ ( 51 ) $ 19,973 Six months ended June 30, 2022 Retained income Balance, beginning of period $ 53,294 $ ( 6 ) $ 53,288 Net loss ( 359 ) 6 ( 353 ) Balance, end of period 52,412 — 52,412 Accumulated other comprehensive income (loss) Balance, beginning of period 655 ( 229 ) 426 Change in unrealized net capital gains and losses ( 2,736 ) ( 2 ) ( 2,738 ) Change in discount rate for reserve for future policy benefits — 180 180 Balance, end of period ( 2,158 ) ( 51 ) ( 2,209 ) Total Allstate shareholders’ equity 20,115 ( 51 ) 20,064 Total equity $ 20,024 $ ( 51 ) $ 19,973 Condensed Consolidated Statements of Cash Flows (unaudited) As reported Impact of change As adjusted ($ in millions) Six months ended June 30, 2022 Cash flows from operating activities Net loss $ ( 378 ) $ 6 $ ( 372 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Changes in: Policy benefits and other insurance reserves 1,223 ( 1 ) 1,222 Unearned premiums 1,202 ( 1 ) 1,201 Deferred policy acquisition costs ( 310 ) ( 5 ) ( 315 ) Reinsurance recoverables, net 645 — 645 Income taxes ( 290 ) 2 ( 288 ) Other operating assets and liabilities ( 787 ) ( 1 ) ( 788 ) Net cash provided by operating activities $ 2,105 $ — $ 2,105 Changes to significant accounting policies Reserve for future policy benefits Long-duration voluntary accident and health insurance and traditional life insurance contracts The reserve for future policy benefits (“RFPB”) is calculated using the net premium reserving model, which uses the present value of insurance contract benefits less the present value of net premiums. Under the net premium reserving model, the Company computes a net premium ratio which is the present value of insurance contract benefits divided by the present value of gross premiums. The present value of contract benefits and gross premiums are determined using the discount rate at contract inception. The net premium ratio is applied to premiums due on a periodic basis to compute the RFPB. The net premium ratio is recomputed at least annually using both actual historical cash flows and future cash flows anticipated over the life of cohort of contracts subject to measurement. Assumptions including mortality, morbidity, and lapses affect the timing and amount of estimated cash flows used to calculate the RFPB. The Company has grouped contracts into cohorts based on product type and issue year. Examples of insurance product types include whole life, term life, 10 www.allstate.com Notes to Condensed Consolidated Financial Statements critical illness and disability. Issue year is based on the issuance date of the contract to the policyholder, except in the case of contracts acquired in a business combination, where the issue date is based on the acquisition date of the business combination. The RFPB is calculated for contracts in force at the end of each period, which results in the Company recognizing the effects of actual experience in the period it occurs. Annually, in the third quarter, the Company obtains historical premiums and benefits information and evaluates future cash flow assumptions that include mortality, morbidity, and terminations, and updates cash flow assumptions as necessary. The Company has elected to not update the expense assumption when annually reviewing and updating future cash flow assumptions. Actual premiums and benefits and any updates to future cash flow assumptions are incorporated into the calculation of an updated net premium ratio. Updates for actual premiums and benefits and changes to future cash flow assumptions will result in a liability remeasurement gain or loss that is recognized in net income. The first step to determining the liability remeasurement gain or loss is to calculate the RFPB using revised net premiums discounted at the locked-in discount rate set at contract issuance. The result of the first step is then compared to the carrying amount of the RFPB before the updates for actual experience and changes to future cash flow assumptions. The decrease (gain) or increase (loss) in the RFPB is reported as liability remeasurement gain or loss in net income and presented parenthetically as part of Accident, health and other policy benefits on the Condensed Consolidated Statements of Operations. The updated net premium ratio is used in future quarters to measure the RFPB until the next annual update or an earlier date if the Company determines it is necessary to revise future cash flow assumptions based on available evidence, including actual experience . The discount rate assumption is determined using a yield curve approach. The yield curve consists of U.S. dollar-denominated senior unsecured fixed-income securities issued by U.S. companies that have an A credit rating based on the ratings provided by nationally recognized rating agencies that include Moody’s, Standard & Poor’s, and Fitch. For points on the yield curve that do not have observable yields, the Company uses linear interpolation w hich calculates the unobservable yield based on the two nearest observable yields, except for any points beyond the last observable yield at 30 years, where interest rates are held constant with the last observable point on the yield curve. The Company updates the current discount rate quarterly and the change in the RFPB resulting from the updated current discount rate is recognized in OCI. Deferred policy acquisition costs Deferred policy acquisition costs are related directly to the successful acquisition of new or renewal insurance contracts and are deferred and recognized as an expense over the life of the related contracts. These costs are principally agent and broker remuneration, premium taxes and certain underwriting expenses. All other acquisition costs are expensed as incurred and included in operating costs and expenses . Long-duration voluntary accident and health insurance, traditional life insurance contracts, and interest-sensitive life insurance contracts Voluntary accident and health insurance and traditional life insurance contracts are grouped by product and issue year into cohorts consistent with the cohorts used to calculate the RFPB. Interest-sensitive life insurance contracts are grouped into cohorts by issue year, and the issue year is determined based on contract issue date. DAC is amortized on a constant level basis over the expected contract term and is included in Amortization of deferred policy acquisition costs on the Condensed Consolidated Statements of Operations. The constant level basis used for all cohorts is based on policies-in-force. The expected contract term and mortality, morbidity, and termination assumptions are used to calculate both DAC amortization and the RFPB. If actual contract terminations are greater than expected terminations for any cohort, each affected cohort’s DAC balance will be reduced in the current period based on the difference between the actual and expected terminations. No adjustments to DAC amortization are recorded if actual contract terminations are less than expected terminations for any cohort. If the Company makes an update to any of its mortality, morbidity, or termination assumptions, the Company will use the assumptions prospectively to amortize any cohort’s remaining DAC over the remaining expected contract term. The costs assigned to the right to receive future cash flows from certain business purchased from other insurers are also classified as DAC in the Condensed Consolidated Statements of Financial Position. The costs capitalized represent the present value of future profits expected to be earned over the lives of the contracts acquired. The Company amortizes the present value of future profits using the same methodology and assumptions as the amortization of DAC. The present value of future profits is subject to premium deficiency testing. Second Quarter 2023 Form 10-Q 11 Notes to Condensed Consolidated Financial Statements Note 2 Earnings per Common Share Basic earnings per common share is computed using the weighted average number of common shares outstanding, including vested unissued participating restricted stock units. Diluted earnings per common share is computed using the weighted average number of common and dilutive potential common shares outstanding. For the Company, dilutive potential common shares consist of outstanding stock options, unvested non-participating restricted stock units and contingently issuable performance stock awards. The effect of dilutive potential common shares does not include the effect of options with an anti-dilutive effect on earnings per common share because their exercise prices exceed the average market price of Allstate common shares during the period or for which the unrecognized compensation cost would have an anti-dilutive effect. Computation of basic and diluted earnings per common share (In millions, except per share data) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Numerator: Net loss $ ( 1,375 ) $ ( 1,022 ) $ ( 1,696 ) $ ( 372 ) Less: Net loss attributable to noncontrolling interest ( 23 ) ( 9 ) ( 24 ) ( 19 ) Net loss attributable to Allstate ( 1,352 ) ( 1,013 ) ( 1,672 ) ( 353 ) Less: Preferred stock dividends 37 27 63 53 Net loss applicable to common shareholders $ ( 1,389 ) $ ( 1,040 ) $ ( 1,735 ) $ ( 406 ) Denominator: Weighted average common shares outstanding 262.6 273.8 263.1 275.9 Effect of dilutive potential common shares (1) : Stock options — — — — Restricted stock units (non-participating) and performance stock awards — — — — Weighted average common and dilutive potential common shares outstanding 262.6 273.8 263.1 275.9 Earnings per common share - Basic $ ( 5.29 ) $ ( 3.80 ) $ ( 6.59 ) $ ( 1.47 ) Earnings per common share - Diluted (1) $ ( 5.29 ) $ ( 3.80 ) $ ( 6.59 ) $ ( 1.47 ) Anti-dilutive options excluded from diluted earnings per common share 3.2 1.3 2.9 1.5 Weighted average dilutive potential common shares excluded due to net loss applicable to common shareholders (1) 1.7 3.2 2.1 3.5 (1) As a result of the net loss reported for the three and six month periods ended June 30, 2023 and 2022, weighted average shares for basic earnings per share is also used for calculating diluted earnings per share because all dilutive potential common shares are anti-dilutive and are therefore excluded from the calculation. Note 3 Reportable Segments Measuring segment profit or loss The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Run-off Property-Liability segments and adjusted net income for the Protection Services, Allstate Health and Benefits and Corporate and Other segments. Allstate Protection and Run-off Property Liability segments comprise Property-Liability. The Company does not allocate investment income, net gains and losses on investments and derivatives, or assets to the Allstate Protection and Run-off Property Liability segments. Management reviews assets at the Property-Liability, Protection Services, Allstate Health and Benefits, and Corporate and Other levels for decision-making purposes. Underwriting income is calculated as premiums earned and other revenue, less claims and claims expenses (“losses”), amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges as determined using GAAP. Adjusted net income is net income (loss) applicable to common shareholders, excluding: • Net gains and losses on investments and derivatives • Pension and other postretirement remeasurement gains and losses • Amortization or impairment of purchased intangibles • Gain or loss on disposition • Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years • Income tax expense or benefit on reconciling items A reconciliation of these measures to net income (loss) applicable to common shareholders is provided below. 12 www.allstate.com Notes to Condensed Consolidated Financial Statements Reportable segments financial performance Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Underwriting income (loss) by segment Allstate Protection $ ( 2,092 ) $ ( 861 ) $ ( 3,090 ) $ ( 579 ) Run-off Property-Liability ( 2 ) ( 3 ) ( 5 ) ( 5 ) Total Property-Liability ( 2,094 ) ( 864 ) ( 3,095 ) ( 584 ) Adjusted net income (loss) by segment, after-tax Protection Services 41 43 75 96 Allstate Health and Benefits 57 67 113 124 Corporate and Other ( 111 ) ( 107 ) ( 200 ) ( 218 ) Reconciling items Property-Liability net investment income 544 506 1,053 1,064 Net gains (losses) on investments and derivatives ( 151 ) ( 733 ) ( 137 ) ( 1,000 ) Pension and other postretirement remeasurement gains (losses) 40 ( 259 ) 93 ( 12 ) Amortization of purchased intangibles (1) ( 24 ) ( 28 ) ( 48 ) ( 57 ) Gain (loss) on disposition ( 8 ) 27 1 11 Non-recurring costs (2) ( 90 ) — ( 90 ) — Income tax benefit on reconciling items 384 298 476 150 Total reconciling items 695 ( 189 ) 1,348 156 Less: Net loss attributable to noncontrolling interest (3) ( 23 ) ( 10 ) ( 24 ) ( 20 ) Net loss applicable to common shareholders $ ( 1,389 ) $ ( 1,040 ) $ ( 1,735 ) $ ( 406 ) (1) Excludes amortization of purchased intangibles in Property-Liability, which is included above in underwriting income. (2) Relates to settlement costs for non-recurring litigation that is outside of the ordinary course of business. See Note 14 for additional details. (3) Reflects net loss attributable to noncontrolling interest in Property-Liability. Second Quarter 2023 Form 10-Q 13 Notes to Condensed Consolidated Financial Statements Reportable segments revenue information ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Property-Liability Insurance premiums Auto $ 8,121 $ 7,348 $ 16,029 $ 14,429 Homeowners 2,883 2,566 5,693 5,056 Other personal lines 587 545 1,149 1,076 Commercial lines 202 295 434 578 Other business lines 128 120 251 233 Allstate Protection 11,921 10,874 23,556 21,372 Run-off Property-Liability — — — — Total Property-Liability insurance premiums 11,921 10,874 23,556 21,372 Other revenue 389 355 742 702 Net investment income 544 506 1,053 1,064 Net gains (losses) on investments and derivatives ( 135 ) ( 662 ) ( 123 ) ( 865 ) Total Property-Liability 12,719 11,073 25,228 22,273 Protection Services Protection plans 373 318 734 631 Roadside assistance 48 49 97 102 Finance and insurance products 128 121 256 238 Intersegment premiums and service fees (1) 35 38 68 79 Other revenue 84 91 168 185 Net investment income 18 12 34 21 Net gains (losses) on investments and derivatives ( 4 ) ( 30 ) ( 5 ) ( 43 ) Total Protection Services 682 599 1,352 1,213 Allstate Health and Benefits Employer voluntary benefits 245 257 500 520 Group health 110 95 217 189 Individual health 98 113 199 224 Other revenue 101 92 202 187 Net investment income 21 16 40 33 Net gains (losses) on investments and derivatives 1 ( 12 ) 3 ( 19 ) Total Allstate Health and Benefits 576 561 1,161 1,134 Corporate and Other Other revenue 23 25 46 49 Net investment income 27 28 58 38 Net gains (losses) on investments and derivatives ( 13 ) ( 29 ) ( 12 ) ( 73 ) Total Corporate and Other 37 24 92 14 Intersegment eliminations (1) ( 35 ) ( 38 ) ( 68 ) ( 79 ) Consolidated revenues $ 13,979 $ 12,219 $ 27,765 $ 24,555 (1) Intersegment insurance premiums and service fees are primarily related to Arity and Allstate Roadside and are eliminated in the condensed consolidated financial statements. 14 www.allstate.com Notes to Condensed Consolidated Financial Statements Note 4 Investments Portfolio composition ($ in millions) June 30, 2023 December 31, 2022 Fixed income securities, at fair value $ 45,550 $ 42,485 Equity securities, at fair value 2,290 4,567 Mortgage loans, net 823 762 Limited partnership interests 8,150 8,114 Short-term investments, at fair value 5,137 4,173 Other investments, net 1,718 1,728 Total $ 63,668 $ 61,829 Amortized cost, gross unrealized gains (losses) and fair value for fixed income securities ($ in millions) Amortized cost, net Gross unrealized Fair value Gains Losses June 30, 2023 U.S. government and agencies $ 7,957 $ 3 $ ( 231 ) $ 7,729 Municipal 7,069 34 ( 263 ) 6,840 Corporate 30,801 63 ( 1,910 ) 28,954 Foreign government 1,075 — ( 31 ) 1,044 ABS 1,002 3 ( 22 ) 983 Total fixed income securities $ 47,904 $ 103 $ ( 2,457 ) $ 45,550 December 31, 2022 U.S. government and agencies $ 8,123 $ 6 $ ( 231 ) $ 7,898 Municipal 6,500 36 ( 326 ) 6,210 Corporate 28,562 46 ( 2,345 ) 26,263 Foreign government 997 — ( 40 ) 957 ABS 1,188 4 ( 35 ) 1,157 Total fixed income securities $ 45,370 $ 92 $ ( 2,977 ) $ 42,485 Scheduled maturities for fixed income securities ($ in millions) June 30, 2023 December 31, 2022 Amortized cost, net Fair value Amortized cost, net Fair value Due in one year or less $ 3,694 $ 3,626 $ 2,870 $ 2,836 Due after one year through five years 24,428 23,235 26,546 25,217 Due after five years through ten years 12,231 11,401 11,035 9,870 Due after ten years 6,549 6,305 3,731 3,405 46,902 44,567 44,182 41,328 ABS 1,002 983 1,188 1,157 Total $ 47,904 $ 45,550 $ 45,370 $ 42,485 Actual maturities may differ from those scheduled as a result of calls and make-whole payments by the issuers. ABS is shown separately because of potential prepayment of principal prior to contractual maturity dates. Net investment income ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Fixed income securities $ 422 $ 299 $ 812 $ 566 Equity securities 21 34 32 70 Mortgage loans 8 9 16 17 Limited partnership interests 122 224 256 516 Short-term investments 69 10 135 12 Other investments 39 42 80 82 Investment income, before expense 681 618 1,331 1,263 Investment expense ( 71 ) ( 56 ) ( 146 ) ( 107 ) Net investment income $ 610 $ 562 $ 1,185 $ 1,156 Second Quarter 2023 Form 10-Q 15 Notes to Condensed Consolidated Financial Statements Net gains (losses) on investments and derivatives by asset type ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Fixed income securities $ ( 132 ) $ ( 326 ) $ ( 268 ) $ ( 478 ) Equity securities 21 ( 636 ) 188 ( 983 ) Mortgage loans ( 3 ) — ( 3 ) ( 1 ) Limited partnership interests ( 15 ) ( 74 ) 7 ( 175 ) Derivatives ( 7 ) 272 ( 59 ) 590 Other investments ( 15 ) 31 ( 2 ) 47 Net gains (losses) on investments and derivatives $ ( 151 ) $ ( 733 ) $ ( 137 ) $ ( 1,000 ) Net gains (losses) on investments and derivatives by transaction type ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Sales $ ( 130 ) $ ( 303 ) $ ( 250 ) $ ( 430 ) Credit losses ( 37 ) ( 13 ) ( 49 ) ( 24 ) Valuation change of equity investments (1) 23 ( 689 ) 221 ( 1,136 ) Valuation change and settlements of derivatives ( 7 ) 272 ( 59 ) 590 Net gains (losses) on investments and derivatives $ ( 151 ) $ ( 733 ) $ ( 137 ) $ ( 1,000 ) (1) Includes valuation change of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities. Gross realized gains (losses) on sales of fixed income securities ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Gross realized gains $ 28 $ 27 $ 74 $ 93 Gross realized losses ( 153 ) ( 349 ) ( 326 ) ( 567 ) Net appreciation (decline) recognized in net income for assets that are still held ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Equity securities $ 19 $ ( 511 ) $ 66 $ ( 600 ) Limited partnership interests carried at fair value 32 6 48 44 Total $ 51 $ ( 505 ) $ 114 $ ( 556 ) Credit losses recognized in net income ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Assets Fixed income securities: Corporate $ ( 7 ) $ ( 4 ) $ ( 16 ) $ ( 4 ) Total fixed income securities ( 7 ) ( 4 ) ( 16 ) ( 4 ) Mortgage loans ( 3 ) — ( 3 ) ( 1 ) Limited partnership interests ( 16 ) ( 3 ) ( 16 ) ( 3 ) Other investments Bank loans ( 11 ) ( 6 ) ( 14 ) ( 16 ) Total credit losses by asset type $ ( 37 ) $ ( 13 ) $ ( 49 ) $ ( 24 ) Liabilities Commitments to fund commercial mortgage loans and bank loans — — — — Total $ ( 37 ) $ ( 13 ) $ ( 49 ) $ ( 24 ) 16 www.allstate.com Notes to Condensed Consolidated Financial Statements Unrealized net capital gains and losses included in AOCI ($ in millions) Fair value Gross unrealized Unrealized net gains (losses) June 30, 2023 Gains Losses Fixed income securities $ 45,550 $ 103 $ ( 2,457 ) $ ( 2,354 ) Short-term investments 5,137 — ( 1 ) ( 1 ) Derivative instruments — — ( 2 ) ( 2 ) Limited partnership interests (1) — Unrealized net capital gains and losses, pre-tax ( 2,357 ) Reclassification of noncontrolling interest 19 Deferred income taxes 493 Unrealized net capital gains and losses, after-tax $ ( 1,845 ) December 31, 2022 Fixed income securities $ 42,485 $ 92 $ ( 2,977 ) $ ( 2,885 ) Short-term investments 4,173 — ( 1 ) ( 1 ) Derivative instruments — — ( 3 ) ( 3 ) Limited partnership interests (1) 2 Unrealized net capital gains and losses, pre-tax ( 2,887 ) Reclassification of noncontrolling interest 23 Deferred income taxes 609 Unrealized net capital gains and losses, after-tax $ ( 2,255 ) (1) Unrealized net capital gains and losses for limited partnership interests represent the Company’s share of the equity method of accounting (“EMA”) limited partnerships’ OCI. Fair value and gross unrealized gains and losses are not applicable. Change in unrealized net capital gains (losses) ($ in millions) Six months ended June 30, 2023 Fixed income securities $ 531 Short-term investments — Derivative instruments 1 Limited partnership interests ( 2 ) Total 530 Reclassification of noncontrolling interest ( 4 ) Deferred income taxes ( 116 ) Increase in unrealized net capital gains and losses, after-tax $ 410 Carrying value for limited partnership interests ($ in millions) June 30, 2023 December 31, 2022 EMA Fair Value Total EMA Fair Value Total Private equity $ 5,722 $ 1,200 $ 6,922 $ 5,372 $ 1,217 $ 6,589 Real estate 1,036 28 1,064 1,013 29 1,042 Other (1) 164 — 164 483 — 483 Total $ 6,922 $ 1,228 $ 8,150 $ 6,868 $ 1,246 $ 8,114 (1) Other consists of certain limited partnership interests where the underlying assets are predominately public equity and debt securities. Short-term investments Short-term investments, including money market funds, commercial paper, U.S. Treasury bills and other short-term investments, are carried at fair value. As of June 30, 2023 and December 31, 2022, the fair value of short-term investments totaled $ 5.14 billion and $ 4.17 billion, respectively. Second Quarter 2023 Form 10-Q 17 Notes to Condensed Consolidated Financial Statements Other investments Other investments primarily consist of bank loans, real estate, policy loans and derivatives. Bank loans are primarily senior secured corporate loans and are carried at amortized cost, net. Policy loans are carried at unpaid principal balances. Real estate is carried at cost less accumulated depreciation. Derivatives are carried at fair value. Other investments by asset type ($ in millions) June 30, 2023 December 31, 2022 Bank loans, net $ 667 $ 686 Real estate 825 813 Policy loans 121 120 Derivatives — 1 Other 105 108 Total $ 1,718 $ 1,728 Portfolio monitoring and credit losses Fixed income securities The Company has a comprehensive portfolio monitoring process to identify and evaluate each fixed income security that may require a credit loss allowance . For each fixed income security in an unrealized loss position, the Company assesses whether management with the appropriate authority has made the decision to sell or whether it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If a security meets either of these criteria, any existing credit loss allowance would be written-off against the amortized cost basis of the asset along with any remaining unrealized losses, with incremental losses recorded in earnings. If the Company has not made the decision to sell the fixed income security and it is not more likely than not the Company will be required to sell the fixed income security before recovery of its amortized cost basis, the Company evaluates whether it expects to receive cash flows sufficient to recover the entire amortized cost basis of the security. The Company calculates the estimated recovery value based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the security’s current effective rate and is compared to the amortized cost of the security. The determination of cash flow estimates is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the security. All reasonably available information relevant to the collectability of the security is considered when developing the estimate of cash flows expected to be collected. That information generally includes, but is not limited to, the remaining payment terms of the security, prepayment speeds, the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. Other information, such as industry analyst reports and forecasts, credit ratings, financial condition of the bond insurer for insured fixed income securities, and other market data relevant to the realizability of contractual cash flows, may also be considered. The estimated fair value of collateral will be used to estimate recovery value if the Company determines that the security is dependent on the liquidation of collateral for ultimate settlement. If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed income security, a credit loss allowance is recorded in earnings for the shortfall in expected cash flows; however, the amortized cost, net of the credit loss allowance, may not be lower than the fair value of the security. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If the Company determines that the fixed income security does not have sufficient cash flow or other information to estimate a recovery value for the security, the Company may conclude that the entire decline in fair value is deemed to be credit related and the loss is recorded in earnings. When a security is sold or otherwise disposed or when the security is deemed uncollectible and written off, the Company removes amounts previously recognized in the credit loss allowance. Recoveries after write-offs are recognized when received. Accrued interest excluded from the amortized cost of fixed income securities totaled $ 435 million and $ 389 million as of June 30, 2023 and December 31, 2022, respectively, and is reported within the accrued investment income line of the Condensed Consolidated Statements of Financial Position. The Company monitors accrued interest and writes off amounts when they are not expected to be received. The Company’s portfolio monitoring process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. The process also includes the monitoring of other credit loss indicators such as ratings, ratings downgrades and payment defaults. The securities identified, in addition to other securities for which the Company may have a concern, are evaluated for potential credit losses using all reasonably available information relevant to the collectability or recovery of the security. Inherent in the Company’s evaluation of credit losses for these securities are assumptions and estimates about the financial condition and future earnings potential of the issue or issuer. Some of the factors that may be considered in evaluating whether a 18 www.allstate.com Notes to Condensed Consolidated Financial Statements decline in fair value requires a credit loss allowance are: 1) the financial condition, near-term and long-term prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices; 2) the specific reasons that a security is in an unrealized loss position, including overall market conditions which could affect liquidity; and 3) the extent to which the fair value has been less than amortized cost. Rollforward of credit loss allowance for fixed income securities Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Beginning balance $ ( 22 ) $ ( 6 ) $ ( 13 ) $ ( 6 ) Credit losses on securities for which credit losses not previously reported ( 4 ) — ( 4 ) — Net increases related to credit losses previously reported ( 3 ) ( 4 ) ( 12 ) ( 4 ) Reduction of allowance related to sales — — — — Write-offs — — — — Ending balance $ ( 29 ) $ ( 10 ) $ ( 29 ) $ ( 10 ) Components of credit loss allowance as of June 30 Corporate bonds $ ( 27 ) $ ( 10 ) ABS ( 2 ) — Total $ ( 29 ) $ ( 10 ) Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position ($ in millions) Less than 12 months 12 months or more Total unrealized losses Number of issues Fair value Unrealized losses Number of issues Fair value Unrealized losses June 30, 2023 Fixed income securities U.S. government and agencies 111 $ 4,297 $ ( 99 ) 107 $ 2,971 $ ( 132 ) $ ( 231 ) Municipal 1,432 2,543 ( 35 ) 1,857 2,391 ( 228 ) ( 263 ) Corporate 926 9,291 ( 261 ) 2,028 16,295 ( 1,649 ) ( 1,910 ) Foreign government 41 671 ( 10 ) 87 333 ( 21 ) ( 31 ) ABS 94 82 ( 3 ) 173 747 ( 19 ) ( 22 ) Total fixed income securities 2,604 $ 16,884 $ ( 408 ) 4,252 $ 22,737 $ ( 2,049 ) $ ( 2,457 ) Investment grade fixed income securities 2,486 $ 16,370 $ ( 388 ) 3,827 $ 19,841 $ ( 1,678 ) $ ( 2,066 ) Below investment grade fixed income securities 118 514 ( 20 ) 425 2,896 ( 371 ) ( 391 ) Total fixed income securities 2,604 $ 16,884 $ ( 408 ) 4,252 $ 22,737 $ ( 2,049 ) $ ( 2,457 ) December 31, 2022 Fixed income securities U.S. government and agencies 112 $ 4,900 $ ( 138 ) 75 $ 2,393 $ ( 93 ) $ ( 231 ) Municipal 3,015 3,944 ( 215 ) 507 740 ( 111 ) ( 326 ) Corporate 2,085 18,072 ( 1,389 ) 845 6,105 ( 956 ) ( 2,345 ) Foreign government 74 739 ( 22 ) 42 200 ( 18 ) ( 40 ) ABS 194 874 ( 27 ) 83 109 ( 8 ) ( 35 ) Total fixed income securities 5,480 $ 28,529 $ ( 1,791 ) 1,552 $ 9,547 $ ( 1,186 ) $ ( 2,977 ) Investment grade fixed income securities 4,959 $ 25,487 $ ( 1,409 ) 1,437 $ 8,791 $ ( 1,009 ) $ ( 2,418 ) Below investment grade fixed income securities 521 3,042 ( 382 ) 115 756 ( 177 ) ( 559 ) Total fixed income securities 5,480 $ 28,529 $ ( 1,791 ) 1,552 $ 9,547 $ ( 1,186 ) $ ( 2,977 ) Second Quarter 2023 Form 10-Q 19 Notes to Condensed Consolidated Financial Statements Gross unrealized losses by unrealized loss position and credit quality as of June 30, 2023 ($ in millions) Investment grade Below investment grade Total Fixed income securities with unrealized loss position less than 20% of amortized cost, net (1) (2) $ ( 1,884 ) $ ( 300 ) $ ( 2,184 ) Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost, net (3) (4) ( 182 ) ( 91 ) ( 273 ) Total unrealized losses $ ( 2,066 ) $ ( 391 ) $ ( 2,457 ) (1) Below investment grade fixed income securities include $ 19 million that have been in an unrealized loss position for less than twelve months. (2) Related to securities with an unrealized loss position less than 20% of amortized cost, net, the degree of which suggests that these securities do not pose a high risk of having credit losses. (3) Below investment grade fixed income securities include $ 90 million that have been in an unrealized loss position for a period of twelve or more consecutive months. (4) Evaluated based on factors such as discounted cash flows and the financial condition and near-term and long-term prospects of the issue or issuer and were determined to have adequate resources to fulfill contractual obligations. Investment grade is defined as a security having a National Association of Insurance Commissioners (“NAIC”) designation of 1 or 2, which is comparable to a rating of Aaa, Aa, A or Baa from Moody’s or AAA, AA, A or BBB from S&P Global Ratings (“S&P”), or a comparable internal rating if an externally provided rating is not available. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Unrealized losses on investment grade securities are principally related to an increase in market yields which may include increased risk-free interest rates or wider credit spreads since the time of initial purchase. The unrealized losses are expected to reverse as the securities approach maturity. ABS in an unrealized loss position were evaluated based on actual and projected collateral losses relative to the securities’ positions in the respective securitization trusts, security specific expectations of cash flows, and credit ratings. This evaluation also takes into consideration credit enhancement, measured in terms of (i) subordination from other classes of securities in the trust that are contractually obligated to absorb losses before the class of security the Company owns, and (ii) the expected impact of other structural features embedded in the securitization trust beneficial to the class of securities the Company owns, such as overcollateralization and excess spread. Municipal bonds in an unrealized loss position were evaluated based on the underlying credit quality of the primary obligor, obligation type and quality of the underlying assets. As of June 30, 2023, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost basis. Loans The Company establishes a credit loss allowance for mortgage loans and bank loans when they are originated or purchased, and for unfunded commitments unless they are unconditionally cancellable by the Company. The Company uses a probability of default and loss given default model for mortgage loans and bank loans to estimate current expected credit losses that considers all relevant information available including past events, current conditions, and reasonable and supportable forecasts over the life of an asset. The Company also considers such factors as historical losses, expected prepayments and various economic factors. For mortgage loans the Company considers origination vintage year and property level information such as debt service coverage, property type, property location and collateral value. For bank loans, the Company considers the credit rating of the borrower, credit spreads and type of loan. After the reasonable and supportable forecast period, the Company’s model reverts to historical loss trends. Loans are evaluated on a pooled basis when they share similar risk characteristics. The Company monitors loans through a quarterly credit monitoring process to determine when they no longer share similar risk characteristics and are to be evaluated individually when estimating credit losses. Loans are written off against their corresponding allowances when there is no reasonable expectation of recovery. If a loan recovers after a write-off, the estimate of expected credit losses includes the expected recovery. Accrual of income is suspended for loans that are in default or when full and timely collection of principal and interest payments is not probable. Accrued income receivable is monitored for recoverability and when not expected to be collected is written off through net investment income. Cash receipts on loans on non-accrual status are generally recorded as a reduction of amortized cost. Accrued interest is excluded from the amortized cost of loans and is reported within the accrued investment income line of the Condensed Consolidated Statements of Financial Position. Accrued interest ($ in millions) June 30, December 31, 2023 2022 Mortgage loans $ 3 $ 3 Bank Loans 4 3 20 www.allstate.com Notes to Condensed Consolidated Financial Statements Mortgage loans When it is determined a mortgage loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as using collateral value less estimated costs to sell where applicable, including when foreclosure is probable or when repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. When collateral value is used, the mortgage loans may not have a credit loss allowance when the fair value of the collateral exceeds the loan’s amortized cost. An alternative approach may be utilized to estimate credit losses using the present value of the loan’s expected future repayment cash flows discounted at the loan’s current effective interest rate. Individual loan credit loss allowances are adjusted for subsequent changes in the fair value of the collateral less costs to sell, when applicable, or present value of the loan’s expected future repayment cash flows. Debt service coverage ratio is considered a key credit quality indicator when mortgage loan credit loss allowances are estimated. Debt service coverage ratio represents the amount of estimated cash flow from the property available to the borrower to meet principal and interest payment obligations. Debt service coverage ratio estimates are updated annually or more frequently if conditions are warranted based on the Company’s credit monitoring process. Mortgage loans amortized cost by debt service coverage ratio distribution and year of origination June 30, 2023 December 31, 2022 ($ in millions) 2018 and prior 2019 2020 2021 2022 Current Total Total Below 1.0 $ — $ — $ — $ — $ 18 $ — $ 18 $ 18 1.0 - 1.25 23 — 10 12 — — 45 42 1.26 - 1.50 41 65 — — 20 48 174 151 Above 1.50 82 172 42 185 64 51 596 558 Amortized cost before allowance $ 146 $ 237 $ 52 $ 197 $ 102 $ 99 $ 833 $ 769 Allowance ( 10 ) ( 7 ) Amortized cost, net $ 823 $ 762 Mortgage loans with a debt service coverage ratio below 1.0 that are not considered impaired primarily relate to situations where the borrower has the financial capacity to fund the revenue shortfalls from the properties for the foreseeable term, the decrease in cash flows from the properties is considered temporary, or there are other risk mitigating factors such as additional collateral, escrow balances or borrower guarantees. Payments on all mortgage loans were current as of June 30, 2023 and December 31, 2022. Rollforward of credit loss allowance for mortgage loans Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Beginning balance $ ( 7 ) $ ( 7 ) $ ( 7 ) $ ( 6 ) Net increases related to credit losses ( 3 ) — ( 3 ) ( 1 ) Write-offs — — — — Ending balance $ ( 10 ) $ ( 7 ) $ ( 10 ) $ ( 7 ) Bank loans When it is determined a bank loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as the present value of the loan’s expected future repayment cash flows discounted at the loan’s current effective interest rate. Credit ratings of the borrower are considered a key credit quality indicator when bank loan credit loss allowances are estimated. The ratings are either received from the Securities Valuation Office of the NAIC based on availability of applicable ratings from rating agencies on the NAIC credit rating provider list or a comparable internal rating. The year of origination is determined to be the year in which the asset is acquired. Second Quarter 2023 Form 10-Q 21 Notes to Condensed Consolidated Financial Statements Bank loans amortized cost by credit rating and year of origination June 30, 2023 December 31, 2022 ($ in millions) 2018 and prior 2019 2020 2021 2022 Current Total Total NAIC 2 / BBB $ 4 $ 6 $ 4 $ 42 $ 5 $ 2 $ 63 $ 54 NAIC 3 / BB — 4 1 150 15 49 219 266 NAIC 4 / B 15 17 15 202 37 60 346 329 NAIC 5-6/ CCC and below 38 30 2 22 7 2 101 94 Amortized cost before allowance $ 57 $ 57 $ 22 $ 416 $ 64 $ 113 $ 729 $ 743 Allowance ( 62 ) ( 57 ) Amortized cost, net $ 667 $ 686 Rollforward of credit loss allowance for bank loans ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Beginning balance $ ( 52 ) $ ( 68 ) $ ( 57 ) $ ( 61 ) Net increases related to credit losses ( 11 ) ( 6 ) ( 14 ) ( 16 ) Reduction of allowance related to sales 1 18 6 21 Write-offs — — 3 — Ending balance $ ( 62 ) $ ( 56 ) $ ( 62 ) $ ( 56 ) Note 5 Fair Value of Assets and Liabilities Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Assets and liabilities recorded on the Condensed Consolidated Statements of Financial Position at fair value are categorized in the fair value hierarchy based on the observability of inputs to the valuation techniques as follows: Level 1: Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access. Level 2: Assets and liabilities whose values are based on the following: (a) Quoted prices for similar assets or liabilities in active markets; (b) Quoted prices for identical or similar assets or liabilities in markets that are not active; or (c) Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability. Level 3: Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Unobservable inputs reflect the Company’s estimates of the assumptions that market participants would use in valuing the assets and liabilities. The availability of observable inputs varies by instrument. In situations where fair value is based on internally developed pricing models or inputs that are unobservable in the market, the determination of fair value requires more judgment. The degree of judgment exercised by the Company in determining fair value is typically greatest for instruments categorized in Level 3. In many instances, valuation inputs used to measure fair value fall into different levels of the fair value hierarchy. The category level in the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company uses prices and inputs that are current as of the measurement date, including during periods of market disruption. In periods of market disruption, the ability to observe prices and inputs may be reduced for many instruments. The Company is responsible for the determination of fair value and the supporting assumptions and methodologies. The Company gains assurance that assets and liabilities are appropriately valued through the execution of various processes and controls designed to ensure the overall reasonableness and consistent application of valuation methodologies, including inputs and assumptions, and compliance with accounting standards. For fair values received from third parties or internally estimated, the Company’s processes and controls are designed to ensure that the valuation methodologies are appropriate and consistently applied, the inputs and assumptions are reasonable and consistent with the objective of determining fair value, and the fair values are accurately recorded. For example, on a continuing basis, the Company assesses the reasonableness of individual fair values that have stale security prices or that exceed certain thresholds as compared to 22 www.allstate.com Notes to Condensed Consolidated Financial Statements previous fair values received from valuation service providers or brokers or derived from internal models. The Company performs procedures to understand and assess the methodologies, processes and controls of valuation service providers. In addition, the Company may validate the reasonableness of fair values by comparing information obtained from valuation service providers or brokers to other third-party valuation sources for selected securities. The Company performs ongoing price validation procedures such as back-testing of actual sales, which corroborate the various inputs used in internal models to market observable data. When fair value determinations are expected to be more variable, the Company validates them through reviews by members of management who have relevant expertise and who are independent of those charged with executing investment transactions. The Company has two types of situations where investments are classified as Level 3 in the fair value hierarchy: (1) Specific inputs significant to the fair value estimation models are not market observable. This primarily occurs in the Company’s use of broker quotes to value certain securities where the inputs have not been corroborated to be market observable, and the use of valuation models that use significant non-market observable inputs. (2) Quotes continue to be received from independent third-party valuation service providers and all significant inputs are market observable; however, there has been a significant decrease in the volume and level of activity for the asset when compared to normal market activity such that the degree of market observability has declined to a point where categorization as a Level 3 measurement is considered appropriate. The indicators considered in determining whether a significant decrease in the volume and level of activity for a specific asset has occurred include the level of new issuances in the primary market, trading volume in the secondary market, the level of credit spreads over historical levels, applicable bid-ask spreads, and price consensus among market participants and other pricing sources. Certain assets are not carried at fair value on a recurring basis, including mortgage loans, bank loans and policy loans and are only included in the fair value hierarchy disclosure when the individual investment is reported at fair value. In determining fair value, the Company principally uses the market approach which generally utilizes market transaction data for the same or similar instruments. To a lesser extent, the Company uses the income approach which involves determining fair values from discounted cash flow methodologies. For the majority of Level 2 and Level 3 valuations, a combination of the market and income approaches is used. Summary of significant inputs and valuation techniques for Level 2 and Level 3 assets and liabilities measured at fair value on a recurring basis Level 2 measurements • Fixed income securities: U.S. government and agencies, municipal, corporate - public and foreign government: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads. Corporate - privately placed: Privately placed are valued using a discounted cash flow model that is widely accepted in the financial services industry and uses market observable inputs and inputs derived principally from, or corroborated by, observable market data. The primary inputs to the discounted cash flow model include an interest rate yield curve, as well as published credit spreads for similar assets in markets that are not active that incorporate the credit quality and industry sector of the issuer. Corporate - privately placed also includes redeemable preferred stock that are valued using quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, underlying stock prices and credit spreads. ABS: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, collateral performance and credit spreads. Certain ABS are valued based on non-binding broker quotes whose inputs have been corroborated to be market observable. Residential mortgage-backed securities (“MBS”), included in ABS, use prepayment speeds as a primary input for valuation. • Equity securities: The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets in markets that are not active. • Short-term: The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields and credit spreads. • Other investments: Free-standing exchange listed derivatives that are not actively traded are valued based on quoted prices for identical instruments in markets that are not active. Over-the-counter (“OTC”) derivatives, including interest rate swaps, foreign currency swaps, total return swaps, foreign exchange forward contracts, certain options and certain credit default swaps, are valued using models that rely on inputs such as interest rate yield curves, implied volatilities, index price levels, currency rates, and credit spreads that are observable for substantially the full term of the contract. The valuation techniques underlying the models are widely accepted in the financial Second Quarter 2023 Form 10-Q 23 Notes to Condensed Consolidated Financial Statements services industry and do not involve significant judgment. Level 3 measurements • Fixed income securities: Municipal: Comprise municipal bonds that are not rated by third-party credit rating agencies. The primary inputs to the valuation of these municipal bonds include quoted prices for identical or similar assets that are not market observable, contractual cash flows, benchmark yields and credit spreads. Also included are municipal bonds valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable and municipal bonds in default valued based on the present value of expected cash flows. Corporate - public and privately placed and ABS: Primarily valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable. Other inputs for corporate fixed income securities include an interest rate yield curve, as well as published credit spreads for similar assets that incorporate the credit quality and industry sector of the issuer. • Equity securities: The primary inputs to the valuation include quoted prices or quoted net asset values for identical or similar assets that are not market observable. • Short-term: For certain short-term investments, amortized cost is used as the best estimate of fair value. • Other investments: Certain OTC derivatives, such as interest rate caps, certain credit default swaps and certain options (including swaptions), are valued using models that are widely accepted in the financial services industry. These are categorized as Level 3 as a result of the significance of non-market observable inputs such as volatility. Other primary inputs include interest rate yield curves and credit spreads, and quoted prices for identical or similar assets in markets that exhibit less liquidity relative to those markets supporting Level 2 fair value measurements. • Other assets: Includes the contingent consideration provision in the sale agreement for ALIC which meets the definition of a derivative. This derivative is valued internally using a model that includes stochastically determined cash flows and inputs that include spot and forward interest rates, volatility, corporate credit spreads and a liquidity discount. This derivative is categorized as Level 3 due to the significance of non-market observable inputs. Assets measured at fair value on a non-recurring basis Comprise long-lived assets to be disposed of by sale, including real estate, that are written down to fair value less costs to sell and bank loans written down to fair value in connection with recognizing other-than-temporary impairments. Investments excluded from the fair value hierarchy Limited partnerships carried at fair value, which do not have readily determinable fair values, use NAV provided by the investees and are excluded from the fair value hierarchy. These investments are generally not redeemable by the investees and generally cannot be sold without approval of the general partner. The Company receives distributions of income and proceeds from the liquidation of the underlying assets of the investees, which usually takes place in years 4-9 of the typical contractual life of 10 - 12 years. As of June 30, 2023, the Company has commitments to invest $ 197 million in these limited partnership interests. 24 www.allstate.com Notes to Condensed Consolidated Financial Statements Assets and liabilities measured at fair value June 30, 2023 ($ in millions) Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Counterparty and cash collateral netting Total Assets Fixed income securities: U.S. government and agencies $ 7,716 $ 13 $ — $ 7,729 Municipal — 6,828 12 6,840 Corporate - public — 21,213 26 21,239 Corporate - privately placed — 7,655 60 7,715 Foreign government — 1,044 — 1,044 ABS — 949 34 983 Total fixed income securities 7,716 37,702 132 45,550 Equity securities 1,777 132 381 2,290 Short-term investments 1,155 3,976 6 5,137 Other investments — 10 2 $ ( 10 ) 2 Other assets 2 — 104 106 Total recurring basis assets 10,650 41,820 625 ( 10 ) 53,085 Non-recurring basis — — 2 2 Total assets at fair value $ 10,650 $ 41,820 $ 627 $ ( 10 ) $ 53,087 % of total assets at fair value 20.0 % 78.8 % 1.2 % — % 100.0 % Investments reported at NAV 1,228 Total $ 54,315 Liabilities Other liabilities $ ( 6 ) $ ( 21 ) $ — $ 18 $ ( 9 ) Total recurring basis liabilities ( 6 ) ( 21 ) — 18 ( 9 ) Total liabilities at fair value $ ( 6 ) $ ( 21 ) $ — $ 18 $ ( 9 ) % of total liabilities at fair value 66.7 % 233.3 % — % ( 200.0 ) % 100.0 % Second Quarter 2023 Form 10-Q 25 Notes to Condensed Consolidated Financial Statements Assets and liabilities measured at fair value December 31, 2022 ($ in millions) Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Counterparty and cash collateral netting Total Assets Fixed income securities: U.S. government and agencies $ 7,878 $ 20 $ — $ 7,898 Municipal — 6,189 21 6,210 Corporate - public — 18,547 69 18,616 Corporate - privately placed — 7,592 55 7,647 Foreign government — 957 — 957 ABS — 1,129 28 1,157 Total fixed income securities 7,878 34,434 173 42,485 Equity securities 3,936 298 333 4,567 Short-term investments 508 3,659 6 4,173 Other investments — 23 3 $ ( 22 ) 4 Other assets 3 — 103 106 Total recurring basis assets 12,325 38,414 618 ( 22 ) 51,335 Non-recurring basis — — 23 23 Total assets at fair value $ 12,325 $ 38,414 $ 641 $ ( 22 ) $ 51,358 % of total assets at fair value 24.0 % 74.8 % 1.2 % — % 100.0 % Investments reported at NAV 1,246 Total $ 52,604 Liabilities Other liabilities $ ( 1 ) $ ( 25 ) $ — $ 21 $ ( 5 ) Total recurring basis liabilities ( 1 ) ( 25 ) — 21 ( 5 ) Total liabilities at fair value $ ( 1 ) $ ( 25 ) $ — $ 21 $ ( 5 ) % of total liabilities at fair value 20.0 % 500.0 % — % ( 420.0 ) % 100.0 % As of June 30, 2023 and December 31, 2022, Level 3 fair value measurements of fixed income securities total $ 132 million and $ 173 million, respectively, and include $ 27 million and $ 70 million, respectively, of securities valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable and $ 11 million and $ 21 million, respectively, of municipal fixed income securities that are not rated by third-party credit rating agencies. As the Company does not develop the Level 3 fair value unobservable inputs for these fixed income securities, they are not included in the table above. However, an increase (decrease) in credit spreads for fixed income securities valued based on non-binding broker quotes would result in a lower (higher) fair value, and an increase (decrease) in the credit rating of municipal bonds that are not rated by third-party credit rating agencies would result in a higher (lower) fair value. 26 www.allstate.com Notes to Condensed Consolidated Financial Statements Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended June 30, 2023 Balance as of March 31, 2023 Total gains (losses) included in: Transfers Balance as of June 30, 2023 ($ in millions) Net income OCI Into Level 3 Out of Level 3 Purchases Sales Issues Settlements Assets Fixed income securities: Municipal $ 17 $ 3 $ ( 1 ) $ — $ — $ — $ ( 6 ) $ — $ ( 1 ) $ 12 Corporate - public 29 — — — — — ( 3 ) — — 26 Corporate - privately placed 49 ( 7 ) 1 16 — 1 — — — 60 ABS 27 — — — — 7 — — — 34 Total fixed income securities 122 ( 4 ) — 16 — 8 ( 9 ) — ( 1 ) 132 Equity securities 358 7 — — — 28 ( 12 ) — — 381 Short-term investments 6 — — — — — — — — 6 Other investments 2 — — — — — — — — 2 Other assets 112 ( 8 ) — — — — — — — 104 Total recurring Level 3 assets $ 600 $ ( 5 ) $ — $ 16 $ — $ 36 $ ( 21 ) $ — $ ( 1 ) $ 625 Rollforward of Level 3 assets and liabilities held at fair value during the six month period ended June 30, 2023 Balance as of December 31, 2022 Total gains (losses) included in: Transfers Balance as of June 30, 2023 ($ in millions) Net income OCI Into Level 3 Out of Level 3 Purchases Sales Issues Settlements Assets Fixed income securities: Municipal $ 21 $ 3 $ ( 1 ) $ — $ — $ — $ ( 9 ) $ — $ ( 2 ) $ 12 Corporate - public 69 ( 1 ) 2 — — — ( 44 ) — — 26 Corporate - privately placed 55 ( 11 ) 1 16 — 1 ( 2 ) — — 60 ABS 28 — — — — 7 — — ( 1 ) 34 Total fixed income securities 173 ( 9 ) 2 16 — 8 ( 55 ) — ( 3 ) 132 Equity securities 333 7 — — — 70 ( 29 ) — — 381 Short-term investments 6 — — — — — — — — 6 Other investments 3 ( 1 ) — — — — — — — 2 Other assets 103 1 — — — — — — — 104 Total recurring Level 3 assets $ 618 $ ( 2 ) $ 2 $ 16 $ — $ 78 $ ( 84 ) $ — $ ( 3 ) $ 625 Second Quarter 2023 Form 10-Q 27 Notes to Condensed Consolidated Financial Statements Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended June 30, 2022 Balance as of March 31, 2022 Total gains (losses) included in: Transfers Balance as of June 30, 2022 ($ in millions) Net income OCI Into Level 3 Out of Level 3 Purchases Sales Issues Settlements Assets Fixed income securities: Municipal $ 17 $ — $ 1 $ — $ — $ 1 $ — $ — $ ( 1 ) $ 18 Corporate - public 49 — ( 1 ) — ( 35 ) 71 ( 5 ) — ( 2 ) 77 Corporate - privately placed 130 19 ( 3 ) — ( 51 ) 2 ( 24 ) — — 73 ABS 19 — — — — — — — ( 1 ) 18 Total fixed income securities 215 19 ( 3 ) — ( 86 ) 74 ( 29 ) — ( 4 ) 186 Equity securities 373 4 — — — — ( 5 ) — — 372 Short-term investments 11 — — — — 17 — — ( 20 ) 8 Other investments 2 — — — — — — — — 2 Other assets 77 31 — — — — — — — 108 Total recurring Level 3 assets $ 678 $ 54 $ ( 3 ) $ — $ ( 86 ) $ 91 $ ( 34 ) $ — $ ( 24 ) $ 676 Rollforward of Level 3 assets and liabilities held at fair value during the six month period ended June 30, 2022 Balance as of December 31, 2021 Total gains (losses) included in: Transfers Balance as of June 30, 2022 ($ in millions) Net income OCI Into Level 3 Out of Level 3 Purchases Sales Issues Settlements Assets Fixed income securities: Municipal $ 18 $ — $ 1 $ — $ — $ 1 $ — $ — $ ( 2 ) $ 18 Corporate - public 20 — ( 3 ) — — 71 ( 9 ) — ( 2 ) 77 Corporate - privately placed 66 19 ( 2 ) — — 14 ( 24 ) — — 73 ABS 40 1 — — ( 28 ) 7 — — ( 2 ) 18 Total fixed income securities 144 20 ( 4 ) — ( 28 ) 93 ( 33 ) — ( 6 ) 186 Equity securities 349 29 — — — 2 ( 8 ) — — 372 Short-term investments 5 — — — — 23 — — ( 20 ) 8 Other investments 2 — — — — — — — — 2 Other assets 65 43 — — — — — — — 108 Total recurring Level 3 assets $ 565 $ 92 $ ( 4 ) $ — $ ( 28 ) $ 118 $ ( 41 ) $ — $ ( 26 ) $ 676 Total Level 3 gains (losses) included in net income Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Net investment income $ 3 $ 4 $ ( 2 ) $ 13 Net gains (losses) on investments and derivatives ( 8 ) 50 — 79 Transfers into Level 3 during the three and six months ended June 30, 2023 included situations where securities were written down utilizing an internal price where the inputs have not been corroborated to be market observable resulting in the securities being classified as Level 3. There were no transfers into Level 3 during the three and six months ended June 30, 2022. There were no transfers out of Level 3 during the three and six months ended June 30, 2023. Transfers out of Level 3 during the three and six months ended June 30, 2022 included situations where a broker quote was used in the prior period and a quote became available from the Company’s independent third-party valuation service provider in the current period. A quote utilizing the new pricing source was not available as of the prior period, and any gains or losses related to the change in valuation source for individual securities were not significant. 28 www.allstate.com Notes to Condensed Consolidated Financial Statements Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of June 30, Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Assets Fixed income securities: Corporate - privately placed $ ( 7 ) $ — $ ( 11 ) $ — Total fixed income securities ( 7 ) — ( 11 ) — Equity securities 7 4 6 29 Other investments — — ( 1 ) — Other assets ( 8 ) 31 1 44 Total recurring Level 3 assets $ ( 8 ) $ 35 $ ( 5 ) $ 73 Total included in net income $ ( 8 ) $ 35 $ ( 5 ) $ 73 Components of net income Net investment income $ 3 $ 4 $ ( 2 ) $ 13 Net gains (losses) on investments and derivatives ( 11 ) 31 ( 3 ) 60 Total included in net income $ ( 8 ) $ 35 $ ( 5 ) $ 73 Assets Municipal $ — $ 1 $ — $ 1 Corporate - public — ( 1 ) 1 ( 3 ) Corporate - privately placed 1 ( 3 ) 1 ( 2 ) Changes in unrealized net capital gains and losses reported in OCI $ 1 $ ( 3 ) $ 2 $ ( 4 ) Financial instruments not carried at fair value ($ in millions) June 30, 2023 December 31, 2022 Financial assets Fair value level Amortized cost, net Fair value Amortized cost, net Fair value Mortgage loans Level 3 $ 823 $ 750 $ 762 $ 700 Bank loans Level 3 667 686 686 686 Financial liabilities Fair value level Carrying value (1) Fair value Carrying value (1) Fair value Contractholder funds on investment contracts Level 3 $ 47 $ 47 $ 50 $ 50 Debt Level 2 7,949 7,465 7,964 7,449 Liability for collateral Level 2 1,791 1,791 2,011 2,011 (1) Represents the amounts reported on the Condensed Consolidated Statements of Financial Position. Note 6 Derivative Financial Instruments The Company uses derivatives for risk reduction and to increase investment portfolio returns through asset replication. Risk reduction activity is focused on managing the risks with certain assets and liabilities arising from the potential adverse impacts from changes in risk-free interest rates, changes in equity market valuations, increases in credit spreads and foreign currency fluctuations. Asset replication refers to the “synthetic” creation of assets through the use of derivatives. The Company replicates fixed income securities using a combination of a credit default swap, index total return swap, options, futures, or a foreign currency forward contract and one or more highly rated fixed income securities, primarily investment grade host bonds, to synthetically replicate the economic characteristics of one or more cash market securities. The Company replicates equity securities using futures, index total return swaps, and options to increase equity exposure. Property-Liability may use interest rate swaps, swaptions, futures and options to manage the interest rate risks of existing investments. These instruments are utilized to change the duration of the portfolio in order to offset the economic effect that interest rates would otherwise have on the fair value of its fixed income securities. Fixed income index total return swaps are used to offset valuation losses in the fixed income portfolio during periods of declining market values. Credit default swaps are typically used to mitigate the credit risk within the Property-Liability fixed income portfolio. Equity index total return swaps, futures and options are used by Property-Liability to offset valuation losses in the equity portfolio during periods of declining equity market values. In addition, equity futures are used to hedge the market risk related to deferred compensation liability contracts. Forward contracts are primarily used by Property-Liability to hedge foreign currency risk associated with Second Quarter 2023 Form 10-Q 29 Notes to Condensed Consolidated Financial Statements holding foreign currency denominated investments and foreign operations. In 2022, the Company also had derivatives embedded in non-derivative host contracts that were required to be separated from the host contracts and accounted for at fair value with changes in fair value of embedded derivatives reported in net income. When derivatives meet specific criteria, they may be designated as accounting hedges and accounted for as fair value, cash flow, foreign currency fair value or foreign currency cash flow hedges. The notional amounts specified in the contracts are used to calculate the exchange of contractual payments under the agreements and are generally not representative of the potential for gain or loss on these agreements. However, the notional amounts specified in credit default swaps where the Company has sold credit protection represent the maximum amount of potential loss, assuming no recoveries. Fair value, which is equal to the carrying value, is the estimated amount that the Company would receive or pay to terminate the derivative contracts at the reporting date. The carrying value amounts for OTC derivatives are further adjusted for the effects, if any, of enforceable master netting agreements and are presented on a net basis, by counterparty agreement, in the Condensed Consolidated Statements of Financial Position. For those derivatives which qualify and have been designated as fair value accounting hedges, net income includes the changes in the fair value of both the derivative instrument and the hedged risk. For cash flow hedges, gains and losses are amortized from AOCI and are reported in net income in the same period the forecasted transactions being hedged impact net income. Non-hedge accounting is generally used for “portfolio” level hedging strategies where the terms of the individual hedged items do not meet the strict homogeneity requirements to permit the application of hedge accounting. For non-hedge derivatives, net income includes changes in fair value and accrued periodic settlements, when applicable. With the exception of non-hedge derivatives used for asset replication and non-hedge embedded derivatives, all of the Company’s derivatives are evaluated for their ongoing effectiveness as either accounting hedge or non-hedge derivative financial instruments on at least a quarterly basis. In connection with the sale of ALIC and certain affiliates in 2021, the sale agreement included a provision related to contingent consideration that may be earned over a ten-year period with the first potential payment date commencing on January 1, 2026 and a final potential payment date of January 1, 2035. The contingent consideration is determined annually based on the average 10-year Treasury rate over the preceding 3-year period compared to a designated rate. The contingent consideration meets the definition of a derivative and is accounted for on a fair value basis with periodic changes in fair value reflected in earnings. There are no collateral requirements related to the contingent consideration. 30 www.allstate.com Notes to Condensed Consolidated Financial Statements Summary of the volume and fair value positions of derivative instruments as of June 30, 2023 ($ in millions, except number of contracts) Volume (1) Balance sheet location Notional amount Number of contracts Fair value, net Gross asset Gross liability Asset derivatives Derivatives not designated as accounting hedging instruments Interest rate contracts Futures Other assets n/a 6,642 $ — $ — $ — Equity and index contracts Futures Other assets n/a 1,956 2 2 — Contingent consideration Other assets $ 250 n/a 104 104 — Total asset derivatives $ 250 8,598 $ 106 $ 106 $ — Liability derivatives Derivatives not designated as accounting hedging instruments Interest rate contracts Futures Other liabilities & accrued expenses n/a 13,862 $ ( 2 ) $ — $ ( 2 ) Equity and index contracts Futures Other liabilities & accrued expenses n/a 1,476 ( 4 ) — ( 4 ) Foreign currency contracts Foreign currency forwards Other liabilities & accrued expenses $ 669 n/a ( 9 ) 9 ( 18 ) Credit default contracts Credit default swaps – buying protection Other liabilities & accrued expenses 104 n/a ( 2 ) 1 ( 3 ) Total liability derivatives 773 15,338 ( 17 ) $ 10 $ ( 27 ) Total derivatives $ 1,023 23,936 $ 89 (1) Volume for OTC and cleared derivative contracts is represented by their notional amounts. Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded. (n/a = not applicable) Summary of the volume and fair value positions of derivative instruments as of December 31, 2022 ($ in millions, except number of contracts) Volume (1) Balance sheet location Notional amount Number of contracts Fair value, net Gross asset Gross liability Asset derivatives Derivatives not designated as accounting hedging instruments Interest rate contracts Futures Other assets n/a 24,380 $ 3 $ 3 $ — Equity and index contracts Futures Other assets n/a 343 — — — Foreign currency contracts Foreign currency forwards Other investments $ 354 n/a 1 14 ( 13 ) Contingent consideration Other assets 250 n/a 103 103 — Credit default contracts Credit default swaps – buying protection Other investments 24 n/a — 1 ( 1 ) Total asset derivatives $ 628 24,723 $ 107 $ 121 $ ( 14 ) Liability derivatives Derivatives not designated as accounting hedging instruments Interest rate contracts Futures Other liabilities & accrued expenses n/a 1,624 $ — $ — $ — Equity and index contracts Futures Other liabilities & accrued expenses n/a 1,229 ( 1 ) — ( 1 ) Foreign currency contracts Foreign currency forwards Other liabilities & accrued expenses $ 283 n/a — 7 ( 7 ) Credit default contracts Credit default swaps – buying protection Other liabilities & accrued expenses 525 n/a ( 3 ) 1 ( 4 ) Total liability derivatives 808 2,853 ( 4 ) $ 8 $ ( 12 ) Total derivatives $ 1,436 27,576 $ 103 (1) Volume for OTC and cleared derivative contracts is represented by their notional amounts. Volume for exchange traded derivatives is represented by the number of contracts, which is the basis on which they are traded. (n/a = not applicable) Second Quarter 2023 Form 10-Q 31 Notes to Condensed Consolidated Financial Statements Gross and net amounts for OTC derivatives (1) ($ in millions) Offsets Gross amount Counter-party netting Cash collateral (received) pledged Net amount on balance sheet Securities collateral (received) pledged Net amount June 30, 2023 Asset derivatives $ 10 $ ( 10 ) $ — $ — $ — $ — Liability derivatives ( 20 ) 10 8 ( 2 ) — ( 2 ) December 31, 2022 Asset derivatives $ 23 $ ( 22 ) $ — $ 1 $ — $ 1 Liability derivatives ( 22 ) 22 ( 1 ) ( 1 ) — ( 1 ) (1) All OTC derivatives are subject to enforceable master netting agreements. Gains (losses) from valuation and settlements reported on derivatives not designated as accounting hedges ($ in millions) Net gains (losses) on investments and derivatives Operating costs and expenses Total gain (loss) recognized in net income on derivatives Three months ended June 30, 2023 Interest rate contracts $ 18 $ — $ 18 Equity and index contracts ( 20 ) 10 ( 10 ) Contingent consideration — ( 8 ) ( 8 ) Foreign currency contracts ( 4 ) — ( 4 ) Credit default contracts ( 1 ) — ( 1 ) Total $ ( 7 ) $ 2 $ ( 5 ) Six months ended June 30, 2023 Interest rate contracts $ ( 17 ) $ — $ ( 17 ) Equity and index contracts ( 16 ) 18 2 Contingent consideration — 1 1 Foreign currency contracts ( 11 ) — ( 11 ) Credit default contracts ( 15 ) — ( 15 ) Total $ ( 59 ) $ 19 $ ( 40 ) Three months ended June 30, 2022 Interest rate contracts $ 158 $ — $ 158 Equity and index contracts 53 ( 34 ) 19 Contingent consideration — 31 31 Foreign currency contracts 37 ( 2 ) 35 Credit default contracts 24 — 24 Total $ 272 $ ( 5 ) $ 267 Six months ended June 30, 2022 Interest rate contracts $ 474 $ — $ 474 Equity and index contracts 56 ( 47 ) 9 Contingent consideration — 43 43 Foreign currency contracts 44 ( 2 ) 42 Credit default contracts 16 — 16 Total $ 590 $ ( 6 ) $ 584 The Company manages its exposure to credit risk by utilizing highly rated counterparties, establishing risk control limits, executing legally enforceable master netting agreements (“MNAs”) and obtaining collateral where appropriate. The Company uses MNAs for OTC derivative transactions that permit either party to net payments due for transactions and collateral is either pledged or obtained when certain predetermined exposure limits are exceeded. OTC cash and securities collateral pledged ($ in millions) June 30, 2023 Pledged by the Company $ 11 Pledged to the Company (1) 3 (1) $ 11 million of collateral was posted under MNAs for contracts containing credit-risk-contingent provisions that are in a liability provision. 32 www.allstate.com Notes to Condensed Consolidated Financial Statements The Company has not incurred any losses on derivative financial instruments due to counterparty nonperformance. Other derivatives, including futures and certain option contracts, are traded on organized exchanges which require margin deposits and guarantee the execution of trades, thereby mitigating any potential credit risk. Counterparty credit exposure represents the Company’s potential loss if all of the counterparties concurrently fail to perform under the contractual terms of the contracts and all collateral, if any, becomes worthless. This exposure is measured by the fair value of OTC derivative contracts with a positive fair value at the reporting date reduced by the effect, if any, of legally enforceable master netting agreements. OTC derivatives counterparty credit exposure by counterparty credit rating ($ in millions) June 30, 2023 December 31, 2022 Rating (1) Number of counter- parties Notional amount (2) Credit exposure (2) Exposure, net of collateral (2) Number of counter- parties Notional amount (2) Credit exposure (2) Exposure, net of collateral (2) A+ 1 $ 199 $ 2 $ — 1 $ 128 $ 5 $ — A — — — — 1 192 7 — Total 1 $ 199 $ 2 $ — 2 $ 320 $ 12 $ — (1) Allstate uses the lower of S&P’s or Moody’s long-term debt issuer ratings. (2) Only OTC derivatives with a net positive fair value are included for each counterparty. For certain exchange traded and cleared derivatives, margin deposits are required as well as daily cash settlements of margin accounts. Exchange traded and cleared margin deposits ($ in millions) June 30, 2023 Pledged by the Company $ 146 Received by the Company — Market risk is the risk that the Company will incur losses due to adverse changes in market rates and prices. Market risk exists for all of the derivative financial instruments the Company currently holds, as these instruments may become less valuable due to adverse changes in market conditions. To limit this risk, the Company’s senior management has established risk control limits. In addition, changes in fair value of the derivative financial instruments that the Company uses for risk management purposes are generally offset by the change in the fair value or cash flows of the hedged risk component of the related assets, liabilities or forecasted transactions. Certain of the Company’s derivative transactions contain credit-risk-contingent termination events and cross-default provisions. Credit-risk-contingent termination events allow the counterparties to terminate the derivative agreement or a specific trade on certain dates if AIC’s financial strength credit ratings by Moody’s or S&P fall below a certain level. Credit-risk-contingent cross-default provisions allow the counterparties to terminate the derivative agreement if the Company defaults by pre-determined threshold amounts on certain debt instruments. The following table summarizes the fair value of derivative instruments with termination, cross-default or collateral credit-risk-contingent features that are in a liability position, as well as the fair value of assets and collateral that are netted against the liability in accordance with provisions within legally enforceable MNAs. ($ in millions) June 30, 2023 December 31, 2022 Gross liability fair value of contracts containing credit-risk-contingent features $ 20 $ 21 Gross asset fair value of contracts containing credit-risk-contingent features and subject to MNAs ( 8 ) ( 11 ) Collateral posted under MNAs for contracts containing credit-risk-contingent features ( 11 ) ( 10 ) Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently $ 1 $ — Note 7 Variable Interest Entities Consolidated VIEs, of which the Company is the primary beneficiary, primarily include Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer (together “Reciprocal Exchanges”). The Reciprocal Exchanges are insurance carriers organized as unincorporated associations. The Company does not own the equity of the Reciprocal Exchanges, which is owned by their respective policyholders. The Company manages the business operations of the Reciprocal Exchanges and has the power to direct their activities that most significantly impact their economic performance. The Company receives a management fee for the services provided to the Reciprocal Exchanges. In addition, as of June 30, 2023 and December 31, 2022, the Company holds interests of $ 123 million in the form of surplus notes included in other liabilities and expenses on the Statement of Assets and Liabilities of the Reciprocal Exchanges that Second Quarter 2023 Form 10-Q 33 Notes to Condensed Consolidated Financial Statements provide capital to the Reciprocal Exchanges and would absorb any expected losses. The Company is therefore the primary beneficiary. In addition, the Company provides quota share reinsurance on the property business of the Reciprocal Exchanges. In the event of dissolution, policyholders would share any residual unassigned surplus but are not subject to assessment for any deficit in unassigned surplus of the Reciprocal Exchanges. The assets of the Reciprocal Exchanges can be used only to settle the obligations of the Reciprocal Exchanges and general creditors have no recourse to the Company. The results of operations of the Reciprocal Exchanges are included in the Company’s Allstate Protection segment and generated $ 57 million and $ 114 million of earned premiums for the three and six months ended June 30, 2023, respectively, compared to $ 41 million and $ 83 million for the three and six months ended June 30, 2022, respectively. Total costs and expenses were $ 85 million and $ 144 million for the three and six months ended June 30, 2023, respectively, compared to $ 55 million and $ 113 million for the three and six months ended June 30, 2022, respectively. Assets and liabilities of Reciprocal Exchanges ($ in millions) June 30, 2023 December 31, 2022 Assets Fixed income securities $ 269 $ 302 Short-term investments 18 13 Deferred policy acquisition costs 17 15 Premium installment and other receivables, net 42 43 Reinsurance recoverables, net 83 97 Other assets 27 90 Total assets 456 560 Liabilities Reserve for property and casualty insurance claims and claims expense 194 209 Unearned premiums 132 171 Other liabilities and expenses 280 311 Total liabilities $ 606 $ 691 Note 8 Reserve for Property and Casualty Insurance Claims and Claims Expense The Company establishes reserves for claims and claims expense on reported and unreported claims of insured losses. The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in law and regulation, judicial decisions, and economic conditions. When the Company experiences changes in the mix or type of claims or changing claim settlement patterns or data, it applies actuarial judgment in the determination and selection of development factors to develop reserve liabilities. Supply chain disruptions and inflation have resulted in higher part costs, used car values and longer time to claim resolution, which have combined with labor shortages to increase physical damage loss costs. Medical inflation, treatment trends, attorney representation, litigation costs and more severe accidents have contributed to higher third-party bodily injury loss costs. The Company has also digitized and modified claim processes to increase effectiveness and efficiency. These factors may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability. Generally, the initial reserves for a new accident year are established based on claim frequency and severity assumptions for different business segments, lines and coverages based on historical relationships to relevant inflation indicators. Reserves for prior accident years are statistically determined using different actuarial estimation methods. Changes in auto claim frequency may result from changes in mix of business, driving behaviors, miles driven or other factors. Changes in auto current year claim severity are generally influenced by inflation in the medical and auto repair sectors, the effectiveness and efficiency of claim settlements and changes in mix of claim types. When changes in claim data occur, actuarial judgment is used to determine appropriate development factors to establish reserves. The Company’s reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine its best estimate of recorded reserves. As part of the reserving process, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process. Because reserves are estimates of unpaid portions of losses that have occurred, including incurred but not reported (“IBNR”) losses, the establishment of appropriate reserves, including reserves for catastrophes, Run-off Property-Liability and reinsurance and indemnification recoverables, is an inherently uncertain and complex process. The 34 www.allstate.com Notes to Condensed Consolidated Financial Statements ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates. The highest degree of uncertainty is associated with reserves for losses incurred in the initial reporting period as it contains the greatest proportion of losses that have not been reported or settled as well as heightened uncertainty for claims that involve litigation or take longer to settle during periods of rapidly increasing loss costs. The Company also has uncertainty in the Run-off Property-Liability reserves that are based on events long since passed and are complicated by lack of historical data, legal interpretations, unresolved legal issues and legislative intent based on establishment of facts. The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in reserve estimates, which may be material, are reported in property and casualty insurance claims and claims expense in the Condensed Consolidated Statements of Operations in the period such changes are determined. Management believes that the reserve for property and casualty insurance claims and claims expense, net of recoverables, is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the Condensed Consolidated Statements of Financial Position based on available facts, laws and regulations. Rollforward of the reserve for property and casualty insurance claims and claims expense Six months ended June 30, ($ in millions) 2023 2022 Balance as of January 1 $ 37,541 $ 33,060 Less recoverables (1) ( 9,176 ) ( 9,479 ) Net balance as of January 1 28,365 23,581 Incurred claims and claims expense related to: Current year 21,856 16,585 Prior years 197 604 Total incurred 22,053 17,189 Claims and claims expense paid related to: Current year ( 9,094 ) ( 7,753 ) Prior years ( 9,523 ) ( 7,691 ) Total paid ( 18,617 ) ( 15,444 ) Net balance as of June 30 31,801 25,326 Plus recoverables 8,730 8,950 Balance as of June 30 $ 40,531 $ 34,276 (1) Recoverables comprises reinsurance and indemnification recoverables. Incurred claims and claims expense represents the sum of paid losses, claim adjustment expenses and reserve changes in the period. This expense included losses from catastrophes of $ 4.39 billion and $ 1.57 billion in the six months ended June 30, 2023 and 2022, respectively, net of recoverables. Catastrophes are an inherent risk of the property and casualty insurance business that have contributed to, and will continue to contribute to, material year-to-year fluctuations in the Company’s results of operations and financial position. Second Quarter 2023 Form 10-Q 35 Notes to Condensed Consolidated Financial Statements Prior year reserve reestimates included in claims and claims expense (1) Non-catastrophe losses Catastrophe losses Total ($ in millions) 2023 2022 2023 2022 2023 2022 Three months ended June 30, Auto $ 116 $ 275 $ ( 19 ) $ ( 38 ) $ 97 $ 237 Homeowners 41 50 53 85 94 135 Other personal lines 8 ( 5 ) ( 5 ) 3 3 ( 2 ) Commercial lines 6 91 2 1 8 92 Other business lines 10 ( 3 ) — — 10 ( 3 ) Run-off Property-Liability 1 3 — — 1 3 Protection Services ( 1 ) ( 3 ) — — ( 1 ) ( 3 ) Total prior year reserve reestimates $ 181 $ 408 $ 31 $ 51 $ 212 $ 459 Six months ended June 30, Auto $ 119 $ 426 $ ( 47 ) $ ( 47 ) $ 72 $ 379 Homeowners 29 54 45 74 74 128 Other personal lines 18 ( 16 ) ( 12 ) 7 6 ( 9 ) Commercial lines 29 111 3 — 32 111 Other business lines 11 ( 10 ) — 4 11 ( 6 ) Run-off Property-Liability 3 4 — — 3 4 Protection Services ( 1 ) ( 3 ) — — ( 1 ) ( 3 ) Total prior year reserve reestimates $ 208 $ 566 $ ( 11 ) $ 38 $ 197 $ 604 (1) Favorable reserve reestimates are shown in parentheses. 36 www.allstate.com Notes to Condensed Consolidated Financial Statements Note 9 Reserve for Future Policy Benefits and Contractholder Funds Rollforward of reserve for future policy benefits (1) Six months ended June 30, Accident and health Traditional life Total ($ in millions) 2023 2022 2023 2022 2023 2022 Present value of expected net premiums Beginning balance $ 1,464 $ 1,785 $ 238 $ 254 $ 1,702 $ 2,039 Beginning balance at original discount rate 1,549 1,604 246 215 1,795 1,819 Effect of changes in cash flow assumptions — — ( 12 ) — ( 12 ) — Effect of actual variances from expected experience ( 26 ) ( 61 ) 19 20 ( 7 ) ( 41 ) Adjusted beginning balance 1,523 1,543 253 235 1,776 1,778 Issuances 259 243 18 5 277 248 Interest accrual 25 24 5 4 30 28 Net premiums collected ( 186 ) ( 199 ) ( 25 ) ( 21 ) ( 211 ) ( 220 ) Lapses and withdrawals — — — — — — Ending balance at original discount rate 1,621 1,611 251 223 1,872 1,834 Effect of changes in discount rate assumptions ( 68 ) ( 29 ) ( 7 ) 4 ( 75 ) ( 25 ) Ending balance 1,553 1,582 244 227 1,797 1,809 Present value of expected future policy benefits Beginning balance 2,229 2,796 524 673 2,753 3,469 Beginning balance at original discount rate 2,316 2,426 534 511 2,850 2,937 Effect of changes in cash flow assumptions — — ( 12 ) — ( 12 ) — Effect of actual variances from expected experience ( 30 ) ( 63 ) 20 ( 7 ) ( 10 ) ( 70 ) Adjusted beginning balance 2,286 2,363 542 504 2,828 2,867 Issuances 256 242 18 5 274 247 Interest accrual 47 37 12 11 59 48 Benefit payments ( 199 ) ( 218 ) ( 26 ) 11 ( 225 ) ( 207 ) Lapses and withdrawals — — — — — — Ending balance at original discount rate 2,390 2,424 546 531 2,936 2,955 Effect of changes in discount rate assumptions ( 64 ) 9 ( 7 ) 30 ( 71 ) 39 Ending balance $ 2,326 $ 2,433 $ 539 $ 561 $ 2,865 $ 2,994 Net reserve for future policy benefits (1) $ 773 $ 851 $ 295 $ 334 $ 1,068 $ 1,185 Less: reinsurance recoverables 84 127 2 2 86 129 Net reserve for future policy benefits, after reinsurance recoverables $ 689 $ 724 $ 293 $ 332 $ 982 $ 1,056 (1) Excludes $ 271 million and $ 281 million of reserves related to short-duration and other contracts as of June 30, 2023 and 2022, respectively. Revenue and interest recognized in the condensed consolidated statements of operations ($ in millions) Six months ended June 30, 2023 2022 Revenues (1) Accident and health $ 446 $ 494 Traditional life 50 44 Total $ 496 $ 538 Interest expense (2) Accident and health $ 22 $ 13 Traditional life 7 7 Total $ 29 $ 20 (1) Total revenues reflects gross premiums used in the calculation for reserve for future policy benefits. Revenues included in Accident and health insurance premiums and contract charges on the Condensed Consolidated Statements of Operations reflect premium revenue recognized for traditional life insurance and long-duration and short-duration accident and health insurance contracts. (2) Total interest expense presented as part of Accident, health and other policy benefits on the Condensed Consolidated Statements of Operations. Second Quarter 2023 Form 10-Q 37 Notes to Condensed Consolidated Financial Statements The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefits and expenses for nonparticipating traditional and limited-payment contracts. As of June 30, 2023 2022 ($ in millions) Undiscounted Discounted Undiscounted Discounted Accident and health Expected future gross premiums $ 5,020 $ 3,602 $ 5,133 $ 3,833 Expected future benefits and expenses 3,350 2,326 3,416 2,433 Traditional life Expected future gross premiums 696 489 636 457 Expected future benefits and expenses 1,008 539 956 561 Key assumptions used in calculating the reserve for future policy benefits As of June 30, Accident and health Traditional life 2023 2022 2023 2022 Weighted-average duration (in years) 3.9 4.0 14.0 13.0 Weighted-average interest rates Interest accretion rate (discount rate at contract issuance) 5.08 % 5.46 % 5.46 % 5.67 % Current discount rate (upper-medium grade fixed income yield) 4.79 3.66 5.14 4.55 Significant assumptions To determine mortality and morbidity assumptions, the Company uses a combination of Company historical experience and industry data. Mortality and morbidity are monitored throughout the year. Historical experience is obtained through annual Company experience studies in the third quarter that consider the Company’s historical claim patterns. The lapse assumption is determined based on historical lapses of the Company’s insurance contracts. The following table summarizes the ratio of actual to expected lapses used in the determination of the reserve for future policy benefits. As of June 30, Accident and health Traditional life 2023 2022 2023 2022 Actual to expected lapses 102 % 104 % 93 % 91 % Contractholder funds Contractholder funds activity Six months ended June 30, ($ in millions) 2023 2022 Beginning balance $ 879 $ 890 Deposits 66 69 Interest credited 17 17 Benefits ( 6 ) ( 11 ) Surrenders and partial withdrawals ( 10 ) ( 11 ) Contract charges ( 60 ) ( 58 ) Other adjustments ( 5 ) ( 4 ) Ending balance $ 881 $ 892 Components of contractholder funds Interest-sensitive life insurance $ 833 $ 839 Fixed annuities 48 53 Total $ 881 $ 892 Weighted-average crediting rate 4.27 % 4.28 % Net amount at risk (1) $ 11,640 $ 11,934 Cash surrender value $ 725 $ 727 (1) Guaranteed benefit amounts in excess of the current account balances. 38 www.allstate.com Notes to Condensed Consolidated Financial Statements Account values: comparison of current crediting rate to guaranteed minimum crediting rate (1) ($ in millions) Range of guaranteed minimum crediting rates At guaranteed minimum 1 - 50 basis points above Total June 30, 2023 Less than 3.00 % $ — $ — $ — 3.00 % - 3.49 % — 23 23 3.50 % - 3.99 % 11 — 11 4.00 % - 4.49 % 433 — 433 4.50 % - 4.99 % 265 — 265 5.00 % or greater 69 — 69 Non-account balances (2) 80 Total $ 778 $ 23 $ 881 June 30, 2022 Less than 3.00 % $ — $ — $ — 3.00 % - 3.49 % — 10 10 3.50 % - 3.99 % 12 — 12 4.00 % - 4.49 % 437 — 437 4.50 % - 4.99 % 270 — 270 5.00 % or greater 71 — 71 Non-account balances (2) 92 Total $ 790 $ 10 $ 892 (1) Difference, in basis points, between rates being credited to contractholders and the respective guaranteed minimum crediting rates. (2) Non-account balances include unearned revenue and amounts related to policies where a claim is either in the course of settlement or incurred but not reported. A claim on a life insurance policy results in the accrual of interest at a rate and over a period of time that is specified by state insurance regulations. Note 10 Reinsurance and Indemnification Effects of reinsurance ceded and indemnification programs on property and casualty premiums earned and accident and health insurance premiums and contract charges ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Property and casualty insurance premiums earned $ ( 495 ) $ ( 456 ) $ ( 941 ) $ ( 883 ) Accident and health insurance premiums and contract charges ( 10 ) ( 8 ) ( 19 ) ( 16 ) Effects of reinsurance ceded and indemnification programs on property and casualty insurance claims and claims expense and accident, health and other policy benefits ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Property and casualty insurance claims and claims expense (1) $ 60 $ ( 406 ) $ ( 260 ) $ ( 515 ) Accident, health and other policy benefits ( 17 ) ( 10 ) ( 25 ) ( 17 ) (1) Includes approximately $ 37 million of ceded losses related to the Nationwide Reinsurance Program for the six months ended June 30, 2023. Reinsurance and indemnification recoverables Reinsurance and indemnification recoverables, net ($ in millions) June 30, 2023 December 31, 2022 Property and casualty Paid and due from reinsurers and indemnitors $ 259 $ 291 Unpaid losses estimated (including IBNR) 8,730 9,176 Total property and casualty $ 8,989 $ 9,467 Accident and health insurance 162 152 Total $ 9,151 $ 9,619 Second Quarter 2023 Form 10-Q 39 Notes to Condensed Consolidated Financial Statements Rollforward of credit loss allowance for reinsurance recoverables ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Property and casualty (1) (2) Beginning balance $ ( 61 ) $ ( 66 ) $ ( 62 ) $ ( 66 ) Decrease in the provision for credit losses — — 1 — Write-offs — — — — Ending balance $ ( 61 ) $ ( 66 ) $ ( 61 ) $ ( 66 ) Accident and health insurance Beginning balance $ ( 3 ) $ ( 8 ) $ ( 3 ) $ ( 8 ) Increase in the provision for credit losses — — — — Write-offs — — — — Ending balance $ ( 3 ) $ ( 8 ) $ ( 3 ) $ ( 8 ) (1) Primarily related to Run-off Property-Liability reinsurance ceded. (2) Indemnification recoverables are considered collectible based on the industry pool and facility enabling legislation. Note 11 Deferred Policy Acquisition Costs Deferred policy acquisition costs activity ($ in millions) Accident and health Traditional life Interest-sensitive life Total Six months ended June 30, 2023 Accident and health insurance Long-duration contracts Beginning balance $ 322 $ 79 $ 101 $ 502 Acquisition costs deferred 25 13 7 45 Amortization charged to income ( 16 ) ( 7 ) ( 7 ) ( 30 ) Experience adjustment ( 13 ) — ( 1 ) ( 14 ) Total $ 318 $ 85 $ 100 503 Short-duration contracts 27 Property and casualty 5,077 Ending balance $ 5,607 Six months ended June 30, 2022 Accident and health insurance Long-duration contracts Beginning balance $ 339 $ 47 $ 90 $ 476 Acquisition costs deferred 20 22 16 58 Amortization charged to income ( 11 ) ( 5 ) ( 7 ) ( 23 ) Experience adjustment ( 21 ) ( 1 ) ( 1 ) ( 23 ) Total $ 327 $ 63 $ 98 488 Short-duration contracts 23 Property and casualty 4,538 Ending balance $ 5,049 40 www.allstate.com Notes to Condensed Consolidated Financial Statements Note 12 Capital Structure 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. Interest on the Senior Notes is payable semi-annually in arrears on March 30 and September 30 of each year, beginning on September 30, 2023. The Senior Notes are redeemable at any time at the applicable redemption price prior to the maturity date. The net proceeds of this issuance were used to repay the $ 500 million senior debt maturity and for general corporate purposes. 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 amount of $ 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 after 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. LIBOR-linked debt Interest on the 5.100 % Subordinated Debentures is payable quarterly at the stated fixed annual rate to January 14, 2023, or any earlier redemption date, and then at an annual rate equal to the three-month LIBOR plus 3.165 %. Interest on the 5.750 % Subordinated Debentures is payable semi-annually at the stated fixed annual rate to August 14, 2023, or any earlier redemption date, and then quarterly at an annual rate equal to the three-month LIBOR plus 2.938 %. The Company may elect to defer payment of interest on the Subordinated Debentures for one or more consecutive interest periods that do not exceed five years . During a deferral period, interest will continue to accrue on the Subordinated Debentures at the then-applicable rate and deferred interest will compound on each interest payment date. If all deferred interest on the Subordinated Debentures is paid, the Company can again defer interest payments. The administrator of LIBOR ceased the publication of the one week and two month U.S. dollar (“USD”) LIBOR settings since December 31, 2021, and the remaining USD LIBOR settings ceased following the LIBOR publication on June 30, 2023. The Subordinated Debentures allow for the use of an alternative methodology to determine the interest rate if LIBOR is no longer available. The Federal Reserve Board adopted a final rule that implemented the Adjustable Interest Rate (LIBOR) Act on December 16, 2022. This guidance impacts the alternative rate methodology utilized by the Subordinated Debentures. Both Subordinated Debentures will replace the three-month LIBOR with the CME Term SOFR Reference Rate published for a three-month tenor plus a spread adjustment of 0.26161 % effective for interest paid under the terms of each of the Subordinated Debentures after June 30, 2023, as shown in the table below. Interest rates for LIBOR-linked debt ($ in millions) 5.100 % Subordinated Debentures, due 2053 5.750 % Subordinated Debentures, due 2053 Debt outstanding $ 500 $ 800 Dividend accrual date (1) July 15, 2023 August 15, 2023 Rate following commencement date 3-month SOFR + 3.165 % + .26161 % 3-month SOFR + 2.938 % + .26161 % (1) First dividend accrual date following the last published three-month LIBOR rate on June 30, 2023. Second Quarter 2023 Form 10-Q 41 Notes to Condensed Consolidated Financial Statements Note 13 Company Restructuring The Company undertakes various programs to reduce expenses. These programs generally involve a reduction in staffing levels, and in certain cases, office closures. Restructuring and related charges primarily include the following costs related to these programs: • Employee - severance and relocation benefits • Exit - contract termination penalties and real estate costs primarily related to accelerated amortization of right-of-use assets and related leasehold improvements at facilities to be vacated The expenses related to these activities are included in the Condensed Consolidated Statements of Operations as restructuring and related charges and totaled $ 27 million and $ 1 million during the three months ended June 30, 2023 and 2022, respectively, and $ 54 million and $ 13 million during the six months ended June 30, 2023 and 2022, respectively. Restructuring expenses during the second quarter and first six months of 2023 are primarily due to real estate costs related to facilities being vacated and employee costs related to global workforce enablement, including outsourcing various elements of operations. The Company continues to identify ways to improve operating efficiency and reduce cost which may result in additional restructuring charges in the future. Restructuring activity during the period ($ in millions) Employee costs Exit costs Total liability Restructuring liability as of December 31, 2022 $ 27 $ 7 $ 34 Expense incurred 15 45 60 Adjustments to liability — ( 6 ) ( 6 ) Payments and non-cash charges ( 25 ) ( 45 ) ( 70 ) Restructuring liability as of June 30, 2023 $ 17 $ 1 $ 18 As of June 30, 2023, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled $ 28 million for employee costs and $ 174 million for exit costs. Note 14 Guarantees and Contingent Liabilities Shared markets and state facility assessments The Company is required to participate in assigned risk plans, reinsurance facilities and joint underwriting associations in various states that provide insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers. The Company routinely reviews its exposure to assessments from these plans, facilities and government programs. Underwriting results related to these arrangements, which tend to be adverse, have been immaterial to the Company’s results of operations in the last two years. Because of the Company’s participation, it may be exposed to losses that surpass the capitalization of these facilities or assessments from these facilities. Guarantees In the normal course of business, the Company provides standard indemnifications to contractual counterparties in connection with numerous transactions, including acquisitions and divestitures. The types of indemnifications typically provided include indemnifications for breaches of representations and warranties, taxes and certain other liabilities, such as third-party lawsuits. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business based on an assessment that the risk of loss would be remote. The terms of the indemnifications vary in duration and nature. In many cases, the maximum obligation is not explicitly stated and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur. Consequently, the maximum amount of the obligation under such indemnifications is not determinable. Historically, the Company has not made any material payments pursuant to these obligations. Related to the sale of ALNY on October 1, 2021, AIC agreed to indemnify Wilton Reassurance Company in connection with certain representations, warranties and covenants of AIC, and certain liabilities specifically excluded from the transaction, subject to specific contractual limitations regarding AIC’s maximum obligation. Management does not believe these indemnifications will have a material effect on results of operations, cash flows or financial position of the Company. Related to the sale of ALIC and Allstate Assurance Company on November 1, 2021, AIC and Allstate Financial Insurance Holdings Corporation (collectively, the “Sellers”) agreed to indemnify Everlake US Holdings Company in connection with certain representations, warranties and covenants of the Sellers, and certain liabilities specifically excluded from the transaction, subject to specific contractual limitations regarding the Sellers’ maximum obligation. Management does not believe these indemnifications will have a material effect on results of operations, cash flows or financial position of the Company. The aggregate liability balance related to all guarantees was not material as of June 30, 2023. 42 www.allstate.com Notes to Condensed Consolidated Financial Statements Regulation and compliance The Company is subject to extensive laws, regulations, administrative directives, and regulatory actions. From time to time, regulatory authorities or legislative bodies seek to influence and restrict premium rates, require premium refunds to policyholders, require reinstatement of terminated policies, prescribe rules or guidelines on how affiliates compete in the marketplace, restrict the ability of insurers to cancel or non-renew policies, require insurers to continue to write new policies or limit their ability to write new policies, limit insurers’ ability to change coverage terms or to impose underwriting standards, impose additional regulations regarding agency and broker compensation, regulate the nature of and amount of investments, impose fines and penalties for unintended errors or mistakes, impose additional regulations regarding cybersecurity and privacy, and otherwise expand overall regulation of insurance products and the insurance industry. In addition, the Company is subject to laws and regulations administered and enforced by federal agencies, international agencies, and other organizations, including but not limited to the Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority, the U.S. Equal Employment Opportunity Commission, and the U.S. Department of Justice. The Company has established procedures and policies to facilitate compliance with laws and regulations, to foster prudent business operations, and to support financial reporting. The Company routinely reviews its practices to validate compliance with laws and regulations and with internal procedures and policies. As a result of these reviews, from time to time the Company may decide to modify some of its procedures and policies. Such modifications, and the reviews that led to them, may be accompanied by payments being made and costs being incurred. The ultimate changes and eventual effects of these actions on the Company’s business, if any, are uncertain. Legal and regulatory proceedings and inquiries The Company and certain subsidiaries are involved in a number of lawsuits, regulatory inquiries, and other legal proceedings arising out of various aspects of its business. Background These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities, including the underlying facts of each matter; novel legal issues; variations between jurisdictions in which matters are being litigated, heard, or investigated; changes in assigned judges; differences or developments in applicable laws and judicial interpretations; judges reconsidering prior rulings; the length of time before many of these matters might be resolved by settlement, through litigation, or otherwise; adjustments with respect to anticipated trial schedules and other proceedings; developments in similar actions against other companies; the fact that some of the lawsuits are putative class actions in which a class has not been certified and in which the purported class may not be clearly defined; the fact that some of the lawsuits involve multi-state class actions in which the applicable law(s) for the claims at issue is in dispute and therefore unclear; and the challenging legal environment faced by corporations and insurance companies. The outcome of these matters may be affected by decisions, verdicts, and settlements, and the timing of such decisions, verdicts, and settlements, in other individual and class action lawsuits that involve the Company, other insurers, or other entities and by other legal, governmental, and regulatory actions that involve the Company, other insurers, or other entities. The outcome may also be affected by future state or federal legislation, the timing or substance of which cannot be predicted. In the lawsuits, plaintiffs seek a variety of remedies which may include equitable relief in the form of injunctive and other remedies and monetary relief in the form of contractual and extra-contractual damages. In some cases, the monetary damages sought may include punitive or treble damages. Often specific information about the relief sought, such as the amount of damages, is not available because plaintiffs have not requested specific relief in their pleadings. When specific monetary demands are made, they are often set just below a state court jurisdictional limit in order to seek the maximum amount available in state court, regardless of the specifics of the case, while still avoiding the risk of removal to federal court. In Allstate’s experience, monetary demands in pleadings bear little relation to the ultimate loss, if any, to the Company. In connection with regulatory examinations and proceedings, government authorities may seek various forms of relief, including penalties, restitution, and changes in business practices. The Company may not be advised of the nature and extent of relief sought until the final stages of the examination or proceeding. Accrual and disclosure policy The Company reviews its lawsuits, regulatory inquiries, and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for such matters at management’s best estimate when the Company assesses that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company does not establish accruals for such matters when the Company does not believe both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company’s assessment of whether a loss is reasonably possible or probable is based on its assessment of the ultimate outcome of the matter following all appeals. The Company does not include potential recoveries in its estimates of reasonably possible or probable losses. Legal fees are expensed as incurred. The Company continues to monitor its lawsuits, regulatory inquiries, and other legal proceedings for further developments that would make the loss contingency both probable and estimable, and accordingly accruable, or that could affect the amount Second Quarter 2023 Form 10-Q 43 Notes to Condensed Consolidated Financial Statements of accruals that have been previously established. There may continue to be exposure to loss in excess of any amount accrued. Disclosure of the nature and amount of an accrual is made when there have been sufficient legal and factual developments such that the Company’s ability to resolve the matter would not be impaired by the disclosure of the amount of accrual. When the Company assesses it is reasonably possible or probable that a loss has been incurred, it discloses the matter. When it is possible to estimate the reasonably possible loss or range of loss above the amount accrued, if any, for the matters disclosed, that estimate is aggregated and disclosed. Disclosure is not required when an estimate of the reasonably possible loss or range of loss cannot be made. For certain of the matters described below in the “Claims related proceedings” and “Other proceedings” subsections, the Company is able to estimate the reasonably possible loss or range of loss above the amount accrued, if any. In determining whether it is possible to estimate the reasonably possible loss or range of loss, the Company reviews and evaluates the disclosed matters, in conjunction with counsel, in light of potentially relevant factual and legal developments. These developments may include information learned through the discovery process, rulings on dispositive motions, settlement discussions, information obtained from other sources, experience from managing these and other matters, and other rulings by courts, arbitrators or others. When the Company possesses sufficient appropriate information to develop an estimate of the reasonably possible loss or range of loss above the amount accrued, if any, that estimate is aggregated and disclosed below. There may be other disclosed matters for which a loss is probable or reasonably possible, but such an estimate is not possible. Disclosure of the estimate of the reasonably possible loss or range of loss above the amount accrued, if any, for any individual matter would only be considered when there have been sufficient legal and factual developments such that the Company’s ability to resolve the matter would not be impaired by the disclosure of the individual estimate. The Company currently estimates that the aggregate range of reasonably possible loss in excess of the amount accrued, if any, for the disclosed matters where such an estimate is possible is zero to $ 70 million, pre-tax. This disclosure is not an indication of expected loss, if any. Under accounting guidance, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event or events occurring is slight.” This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate. The estimate does not include matters or losses for which an estimate is not possible. Therefore, this estimate represents an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Company’s maximum possible loss exposure. Information is provided below regarding the nature of all of the disclosed matters and, where specified, the amount, if any, of plaintiff claims associated with these loss contingencies. Due to the complexity and scope of the matters disclosed in the “Claims related proceedings” and “Other proceedings” subsections below and the many uncertainties that exist, the ultimate outcome of these matters cannot be predicted and in the Company’s judgment, a loss, in excess of amounts accrued, if any, is not probable. In the event of an unfavorable outcome in one or more of these matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to it, management believes that the ultimate outcome of all matters described below, as they are resolved over time, is not likely to have a material effect on the financial position of the Company. Claims related proceedings The Company is managing various disputes in Florida that raise challenges to the Company’s practices, processes, and procedures relating to claims for personal injury protection benefits under Florida auto policies. Medical providers continue to pursue litigation under various theories that challenge the amounts that the Company pays under the personal injury protection coverage, seeking additional benefit payments, as well as applicable interest, penalties and fees. There is a pending lawsuit, Revival Chiropractic v. Allstate Insurance Company, et al. (M.D. Fla. filed January 2019; appeal pending, 11 th Circuit Court of Appeals), where the federal district court denied class certification and plaintiff’s request to file a renewed motion for class certification. In Revival , on June 2, 2022, the 11 th Circuit certified to the Florida Supreme Court Allstate’s appeal of the federal district court’s interpretation of the state personal injury protection statute. The 11 th Circuit is holding determination on plaintiff’s class certification appeal pending the outcome of the Florida Supreme Court certification. The oral argument before the Florida Supreme Court was on March 8, 2023. The Company is also defending litigation involving individual plaintiffs. The Company is defending putative class actions in various courts that raise challenges to the Company’s depreciation practices in homeowner property claims. In these lawsuits, plaintiffs generally allege that, when calculating actual cash value, the costs of “non-materials” such as labor, general contractor’s overhead and profit, and sales tax should not be subject to depreciation. The Company is currently defending the following lawsuits on this issue: Sims, et al. v. Allstate Fire and Casualty Insurance Company, et al. (W.D. Tex. filed June 2022); Thompson, et al. v. Allstate Insurance Company (Circuit Court of Cole Co., Mo. filed June 2022); Hill v. Allstate Vehicle and Property Insurance Compan y (Circuit Court of Cole Co., Mo. filed October 2022); Tabuga v. Allstate Vehicle and Property Insurance Company (D. Md. filed April 2023); and Shumway, et al. v. Allstate Vehicle and 44 www.allstate.com Notes to Condensed Consolidated Financial Statements Property Insurance Company (D. Ariz. filed April 2023). No classes have been certified in any of these matters. The court granted preliminary approval of a class-wide settlement in the following cases: Perry v. Allstate Indemnity Company, et al . (N.D. Ohio filed May 2016); Lado v. Allstate Vehicle and Property Insurance Company (S.D. Ohio filed March 2020); Maniaci v. Allstate Insurance Company (N.D. Ohio filed March 2020); Ferguson-Luke, et al. v. Allstate Property and Casualty Insurance Company (N.D. Ohio filed April 2020); Mitchell, et al. v. Allstate Vehicle and Property Insurance Company, et al . (S.D. Ala. filed August 2021). The court granted final approval of a class-wide settlement in Hester, et al. v. Allstate Vehicle and Property Insurance Company, et al . (St. Clair Co., Ill. filed June 2020) (as part of the class-wide settlement, the plaintiff and defendant in Thaxton v. Allstate Indemnity Company (Madison Co., Ill. filed July 2020) were added to the Hester complaint). The Company is defending putative class actions pending in multiple states alleging that the Company underpays total loss vehicle physical damage claims on auto policies. The alleged systematic underpayments result from the following theories: (a) the third party valuation tool used by the Company as part of a comprehensive adjustment process is allegedly flawed, biased, or contrary to applicable law; and/or (b) the Company allegedly does not pay sales tax, title fees, registration fees, and/or other specified fees that are allegedly mandatory under policy language or state legal authority. The following cases are currently pending against the Company: Kronenberg v. Allstate Insurance Company and Allstate Fire and Casualty Insurance Company (E.D.N.Y. filed December 2018); Durgin v. Allstate Property and Casualty Insurance Company (W.D. La. filed June 2019); Cotton v. Allstate Fire and Casualty Insurance Company (Cir. Ct. of Cook Co. Ill., Chancery Div. filed October 2020); Bass v. Imperial Fire and Casualty Insurance Company (W.D. La. filed February 2022); Cummings v. Allstate Property and Casualty Insurance Company (M.D. La. filed April 2022); Slaughter v. Esurance Property and Casualty Insurance Company (Cir. Ct. of Cook Co, Ill., Chancery Div. filed September 2022); Kanak v. Allstate Fire and Casualty Insurance Company (Cir. Ct. of Cook Co., Ill., Chancery Div. filed September 2022); Golla v. Allstate Insurance Company (Ct. of Common Pleas, Cuyahoga Co., Ohio filed June 2023); and Moore v. Esurance Property and Casualty Insurance Company (E.D. Mich. filed July 2023). None of the courts in any of the pending matters has ruled on class certification. Other proceedings The Company has pending an investigatory hearing before the California Insurance Commissioner concerning the private passenger automobile insurance rating practices of Allstate Insurance Company and Allstate Indemnity Company in California. The investigatory hearing is captioned: In the Matter of the Rating Practices of Allstate Insurance Company and Allstate Indemnity Company . Pursuant to the Notice of Hearing issued by the California Insurance Commissioner, the California Insurance Commissioner is investigating: (1) whether Allstate has potentially violated California insurance law by using illegal price optimization; (2) how Allstate implemented any such potentially illegal price optimization in its private passenger auto insurance rates and/or class plans; and (3) how such potentially illegal price optimization impacted Allstate’s private passenger auto insurance policyholders. Fact discovery was completed in the investigatory hearing. Allstate and the California Department of Insurance have reached an agreement in principle to resolve the investigatory hearing. The May 22, 2023 hearing was continued. A new hearing date has not been set. In re The Allstate Corp. Securities Litigation is a certified class action filed on November 11, 2016 in the United States District Court for the Northern District of Illinois against the Company and two of its officers asserting claims under the federal securities laws. Plaintiffs allege that they purchased Allstate common stock during the class period and suffered damages as the result of the conduct alleged. Plaintiffs seek an unspecified amount of damages, costs, attorney’s fees, and other relief as the court deems appropriate. Plaintiffs allege that the Company and certain senior officers made allegedly material misstatements or omissions concerning claim frequency statistics and the reasons for a claim frequency increase for Allstate brand auto insurance between October 2014 and August 3, 2015. Plaintiffs further allege that a senior officer engaged in stock option exercises during that time allegedly while in possession of material nonpublic information about Allstate brand auto insurance claim frequency. The Company, its chairman, president and chief executive officer, and its former president are the named defendants. After the court denied their motion to dismiss on February 27, 2018, defendants answered the complaint, denying plaintiffs’ allegations that there was any misstatement or omission or other misconduct. On June 22, 2018, plaintiffs filed their motion for class certification. The court allowed the lead plaintiffs to amend their complaint to add the City of Providence Employee Retirement System as a proposed class representative and on September 12, 2018, the amended complaint was filed. A class was certified on March 26, 2019, vacated by the U.S. Court of Appeals for the Seventh Circuit on July 16, 2020 and remanded for further consideration by the district court. On December 21, 2020, the district court again granted plaintiffs’ motion for class certification and certified a class consisting of all persons who purchased Allstate common stock between October 29, 2014 and August 3, 2015. Defendants’ petition for permission to appeal this ruling was denied on January 28, 2021. Following the close of discovery, defendants moved for summary judgment on March 23, 2022. On July 26, 2022, the court entered its order granting summary judgment in part (as to plaintiffs’ claims relating to certain statements made in October 2014) and denying it as to the remainder of plaintiffs’ claims. On January 10, 2023, the parties filed a joint pre-trial order. A pre-trial conference has not occurred. Subsequently, on June 28, 2023, the parties reached an agreement in principle to settle the action, without Second Quarter 2023 Form 10-Q 45 Notes to Condensed Consolidated Financial Statements any admission of liability or wrongdoing. The settlement is subject to final approval by the District Court and any appeals therefrom. The Company is continuing to defend two putative class actions in California federal court, Holland Hewitt v. Allstate Life Insurance Company (E.D. Cal. filed May 2020) and Farley v. Lincoln Benefit Life Compan y (E.D. Cal. filed Dec. 2020), following the sale of ALIC. On April 19, 2023, the court certified a class in Farley. This ruling is currently being challenged by the Company. There has been no ruling on plaintiff’s motion for class certification in Hewitt. In these cases, plaintiffs generally allege that the defendants failed to comply with certain California statutes which address contractual grace periods and lapse notice requirements for certain life insurance policies. Plaintiffs claim that these statutes apply to life insurance policies that existed before the statutes’ effective date. The plaintiffs seek damages and injunctive relief. Similar litigation is pending against other insurance carriers. In August 2021, the California Supreme Court in McHugh v. Protective Life , a matter involving another insurer, determined that the statutory notice requirements apply to life insurance policies issued before the statutes’ effective date. The Company asserts various defenses to plaintiffs’ claims and to class certification. Note 15 Benefit Plans Components of net cost (benefit) for pension and other postretirement plans Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Pension benefits Service cost $ 32 $ 28 $ 65 $ 57 Interest cost 58 52 118 98 Expected return on plan assets ( 79 ) ( 100 ) ( 156 ) ( 210 ) Amortization of prior service credit — ( 12 ) — ( 25 ) Costs and expenses 11 ( 32 ) 27 ( 80 ) Remeasurement of projected benefit obligation ( 68 ) ( 421 ) 55 ( 1,173 ) Remeasurement of plan assets 30 699 ( 150 ) 1,228 Remeasurement (gains) losses ( 38 ) 278 ( 95 ) 55 Pension net (benefit) cost $ ( 27 ) $ 246 $ ( 68 ) $ ( 25 ) Postretirement benefits Service cost $ — $ 1 $ — $ 1 Interest cost 2 2 5 4 Amortization of prior service credit ( 6 ) ( 6 ) ( 12 ) ( 12 ) Costs and expenses ( 4 ) ( 3 ) ( 7 ) ( 7 ) Remeasurement of projected benefit obligation ( 2 ) ( 19 ) 2 ( 43 ) Remeasurement of plan assets — — — — Remeasurement (gains) losses ( 2 ) ( 19 ) 2 ( 43 ) Postretirement net benefit $ ( 6 ) $ ( 22 ) $ ( 5 ) $ ( 50 ) Pension and postretirement benefits Costs and expenses $ 7 $ ( 35 ) $ 20 $ ( 87 ) Remeasurement (gains) losses ( 40 ) 259 ( 93 ) 12 Total net (benefit) cost $ ( 33 ) $ 224 $ ( 73 ) $ ( 75 ) Differences in actual experience and changes in other assumptions affect our pension and other postretirement obligations and expenses. Differences between expected and actual returns on plan assets affect remeasurement (gains) losses. Pension and other postretirement service cost, interest cost, expected return on plan assets and amortization of prior service credit are reported in property and casualty insurance claims and claims expense, operating costs and expenses, net investment income and (if applicable) restructuring and related charges on the Condensed Consolidated Statements of Operations. 46 www.allstate.com Notes to Condensed Consolidated Financial Statements Pension and postretirement benefits remeasurement gains and losses Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Remeasurement of projected benefit obligation (gains) losses: Discount rate $ ( 73 ) $ ( 420 ) $ 51 $ ( 1,005 ) Other assumptions 3 ( 20 ) 6 ( 211 ) Remeasurement of plan assets (gains) losses 30 699 ( 150 ) 1,228 Remeasurement (gains) losses $ ( 40 ) $ 259 $ ( 93 ) $ 12 Remeasurement gains for the second quarter of 2023 are primarily related to an increase in the liability discount rate, partially offset by unfavorable asset performance compared to expected return on plan assets. Remeasurement gains in the first six months of 2023 are primarily related to favorable asset performance compared to expected return on plan assets, partially offset by a decrease in the liability discount rate. The weighted average discount rate used to measure the pension benefit obligation increased to 5.50 % at June 30, 2023 compared to 5.33 % at March 31, 2023 and decreased compared to 5.64 % at December 31, 2022 resulting in gains for the second quarter and losses for the first six months of 2023. For the second quarter of 2023, the actual return on plan assets was lower than the expected return due to lower fixed income valuations from higher market yields during the quarter partially offset by higher equity returns. For the first six months of 2023, the actual return on plan assets was higher than the expected return due to higher fixed income valuations from lower market yields and positive equity returns. Note 16 Supplemental Cash Flow Information Non-cash investing activities include $ 53 million and $ 51 million related to mergers and exchanges completed with equity securities, fixed income securities, bank loans, real estate and limited partnerships for the six months ended June 30, 2023 and 2022, respectively. Non-cash investing activities include $ 15 million related to right-of-use real estate obtained in exchange for lease obligations and $ 51 million related to debt assumed by purchaser on sale of real estate for the six months ended June 30, 2023. Non-cash financing activities include $ 37 million and $ 64 million related to the issuance of Allstate common shares for vested equity awards for the six months ended June 30, 2023 and 2022, respectively. Cash flows used in operating activities in the Condensed Consolidated Statements of Cash Flows include cash paid for operating leases related to amounts included in the measurement of lease liabilities of $ 66 million and $ 83 million for the six months ended June 30, 2023 and 2022, respectively. Non-cash operating activities include $ 6 million and $ 16 million related to right-of-use assets obtained in exchange for lease obligations for the six months ended June 30, 2023 and 2022, respectively. Liabilities for collateral received in conjunction with the Company’s securities lending program and OTC and cleared derivatives are reported in other liabilities and accrued expenses or other investments. The accompanying cash flows are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows along with the activities resulting from management of the proceeds, as follows: ($ in millions) Six months ended June 30, 2023 2022 Net change in proceeds managed Net change in fixed income securities $ 202 $ ( 373 ) Net change in short-term investments 18 ( 203 ) Operating cash flow provided (used) 220 ( 576 ) Net change in cash — ( 12 ) Net change in proceeds managed $ 220 $ ( 588 ) Cash flows from operating activities Net change in liabilities Liabilities for collateral, beginning of period $ ( 2,011 ) $ ( 1,444 ) Liabilities for collateral, end of period ( 1,791 ) ( 2,032 ) Operating cash flow (used) provided $ ( 220 ) $ 588 Second Quarter 2023 Form 10-Q 47 Notes to Condensed Consolidated Financial Statements Note 17 Other Comprehensive Income (Loss) Components of other comprehensive income (loss) on a pre-tax and after-tax basis ($ in millions) Three months ended June 30, 2023 2022 Pre-tax Tax After-tax Pre-tax Tax After-tax Unrealized net holding gains and losses arising during the period, net of related offsets $ ( 472 ) $ 96 $ ( 376 ) $ ( 1,773 ) $ 376 $ ( 1,397 ) Less: reclassification adjustment of realized capital gains and losses ( 131 ) 27 ( 104 ) ( 320 ) 67 ( 253 ) Unrealized net capital gains and losses ( 341 ) 69 ( 272 ) ( 1,453 ) 309 ( 1,144 ) Unrealized foreign currency translation adjustments 36 ( 8 ) 28 ( 59 ) 12 ( 47 ) Unamortized pension and other postretirement prior service credit (1) ( 6 ) 1 ( 5 ) ( 19 ) 4 ( 15 ) Discount rate for reserve for future policy benefits 10 ( 2 ) 8 108 ( 23 ) 85 Other comprehensive (loss) income $ ( 301 ) $ 60 $ ( 241 ) $ ( 1,423 ) $ 302 $ ( 1,121 ) Six months ended June 30, 2023 2022 Pre-tax Tax After-tax Pre-tax Tax After-tax Unrealized net holding gains and losses arising during the period, net of related offsets $ 257 $ ( 60 ) $ 197 $ ( 3,922 ) $ 834 $ ( 3,088 ) Less: reclassification adjustment of realized capital gains and losses ( 269 ) 56 ( 213 ) ( 443 ) 93 ( 350 ) Unrealized net capital gains and losses 526 ( 116 ) 410 ( 3,479 ) 741 ( 2,738 ) Unrealized foreign currency translation adjustments 99 ( 21 ) 78 ( 59 ) 12 ( 47 ) Unamortized pension and other postretirement prior service credit (1) ( 12 ) 3 ( 9 ) ( 38 ) 8 ( 30 ) Discount rate for reserve for future policy benefits ( 1 ) — ( 1 ) 228 ( 48 ) 180 Other comprehensive (loss) income $ 612 $ ( 134 ) $ 478 $ ( 3,348 ) $ 713 $ ( 2,635 ) (1) Represents prior service credits reclassified out of other comprehensive income and amortized into operating costs and expenses. 48 www.allstate.com Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of The Allstate Corporation Northbrook, Illinois 60062 Results of Review of Interim Financial Information We have reviewed the accompanying condensed consolidated statement of financial position of The Allstate Corporation and subsidiaries (the “Company”) as of June 30, 2023, the related condensed consolidated statements of operations, comprehensive income (loss) and shareholders’ equity for the three and six month periods ended June 30, 2023 and 2022, and of cash flows for the six month periods ended June 30, 2023 and 2022, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of the Company as of December 31, 2022, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the year then ended prior to the retrospective adjustment for a change in the Company’s method of accounting for reserve for future policy benefits and deferred policy acquisition costs for long-duration insurance contracts (not presented herein); and in our report dated February 16, 2023, we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 1 that were applied to retrospectively adjust the December 31, 2022, consolidated statement of financial position of the Company (not presented herein). In our opinion, such adjustments are appropriate and have been properly applied to the previously issued consolidated statement of financial position in deriving the accompanying retrospectively adjusted condensed consolidated statement of financial position as of December 31, 2022. Basis for Review Results This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our reviews in accordance with standards of the PCAOB. A review of the interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. /s/ Deloitte & Touche LLP Chicago, Illinois August 1, 2023 Second Quarter 2023 Form 10-Q 49