ALLSTATE CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as “we,” “our,” “us,” the “Company” or “Allstate”). It should be read in conjunction with the condensed consolidated financial statements and related notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporation annual report on Form 10-K for 2022, filed February 16, 2023. Certain amounts have been reclassified to conform to current year presentation. Further analysis of our insurance segments is provided in the Property-Liability Operations and Segment Results sections, including Allstate Protection and Run-off Property-Liability, Protection Services and Allstate Health and Benefits, of Management’s Discussion and Analysis (“MD&A”). The segments are consistent with the way in which the chief operating decision maker reviews financial performance and makes decisions about the allocation of resources. Macroeconomic Impacts The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”) and subsequent U.S. government fiscal and monetary policies, banking system instability and the Russia/Ukraine conflict have and may continue to affect economic activity through longer-term impacts such as supply chain disruptions, labor shortages and other macroeconomic factors that have increased inflation and affected our operations. These factors may continue to significantly affect results of operations, financial condition and liquidity. The impact from the pandemic and the ongoing effects should be considered when comparing the current period to prior periods. Over the past several quarters, inflation continued to remain elevated, which led to increases in interest rates by the Federal Reserve and a widening of credit spreads reflecting ongoing recession concerns. Many foreign governmental authorities and central banks have also responded to inflationary pressure, generally through more restrictive monetary policy, such as increasing target interest rates. These actions and other ongoing impacts from the pandemic could create significant economic uncertainty. Market volatility resulting from these factors and from disruptions in the banking industry have and may continue to impact our investment valuations and returns. This is not inclusive of all potential impacts and should not be treated as such. Within the MD&A, we have included further disclosures related to macroeconomic impacts on our 2023 results. Corporate Strategy Our strategy has two components: increase personal property-liability market share and expand protection offerings by leveraging the Allstate brand, customer base and capabilities. Transformative Growth is about creating a business model, capabilities and culture that continually transform to better serve customers. This is done by providing affordable, simple and connected protection through multiple distribution methods. The ultimate objective is to create continuous transformative growth in all businesses. In the personal property-liability businesses this has five key components: • Improving customer value • Expanding customer access • Increasing sophistication and investment in customer acquisition • Modernizing the technology ecosystem • Driving organizational transformation We are expanding protection services businesses utilizing enterprise capabilities and resources such as the Allstate brand, distribution, analytics, claims, investment expertise, talent and capital. Measuring segment profit or loss The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Run-off Property-Liability segments and adjusted net income for the Protection Services, Allstate Health and Benefits and Corporate and Other segments. Underwriting income is calculated as premiums earned and other revenue, less claims and claims expense (“losses”), amortization of deferred policy acquisition costs (“DAC”), operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, as determined using accounting principles generally accepted in the United States of America (“GAAP”). We use this measure in our evaluation of results of operations to analyze profitability. Adjusted net income is net income (loss) applicable to common shareholders, excluding: • Net gains and losses on investments and derivatives • Pension and other postretirement remeasurement gains and losses • 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 50 www.allstate.com Highlights Consolidated net income (loss) applicable to common shareholders ($ in millions) Q1 Q2 Consolidated net loss applicable to common shareholders was $1.39 billion and $1.74 billion in the second quarter and first six months of 2023, respectively, compared to a loss of $1.04 billion and $406 million in the second quarter and first six months of 2022, respectively, primarily due to higher catastrophe losses and higher incurred losses driven by severity and frequency, partially offset by increased Property-Liability premiums earned and gains on equity valuations in 2023 compared to losses in 2022. For the six months ended June 30, 2023, return on Allstate common shareholders’ equity was (17.2)%. Total revenue ($ in millions) Total revenues increased 14.4% to $13.98 billion and increased 13.1% to $27.77 billion in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022 due to an increase of 9.8% and 10.3% in property and casualty insurance premiums earned in the second quarter and first six months of 2023, respectively, compared to the second quarter and first six months of 2022 and net gains on equity valuations in 2023 compared to losses in 2022. Net investment income ($ in millions) Net investment income increased $48 million to $610 million in the second quarter of 2023 and increased $29 million to $1.19 billion in the first six months of 2023 compared to the same periods of 2022, primarily due to higher market-based income reflecting higher fixed income portfolio yields and investment balances, partially offset by lower performance-based investment results, mainly from limited partnerships. Second Quarter 2023 Form 10-Q 51 Financial highlights Investments totaled $63.67 billion as of June 30, 2023, increasing from $61.83 billion as of December 31, 2022. Allstate shareholders’ equity was $15.52 billion as of June 30, 2023, decreasing from $17.49 billion as of December 31, 2022, primarily due to a net loss, dividends paid to shareholders and common share repurchases, partially offset by lower unrealized net capital losses on investments. Book value per diluted common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $51.29, a decrease of 22.2% from $65.96 as of June 30, 2022, and a decrease of 11.8% from $58.12 as of December 31, 2022. Return on average Allstate common shareholders’ equity For the twelve months ended June 30, 2023, return on Allstate common shareholders’ equity was (17.2)%, a decrease of 21.4 points from 4.2% for the twelve months ended June 30, 2022. The decrease was primarily due to a net loss applicable to common shareholders for the trailing twelve-month period ending June 30, 2023 and a decrease in average Allstate common shareholders’ equity. Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement gains of $40 million in the second quarter primarily related to an increase in the liability discount rate, partially offset by unfavorable asset performance compared to expected return on plan assets. We recorded gains of $93 million in the first six months of 2023 primarily related to favorable asset performance compared to expected return on plan assets, partially offset by a decrease in the liability discount rate. Summarized consolidated financial results Three months ended June 30, Six months ended June 30, ($ in millions) 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, restructuring and interest expenses (1,911) (1,934) (3,740) (3,931) Pension and other postretirement remeasurement gains (losses) 40 (259) 93 (12) Amortization of purchased intangibles (82) (87) (163) (174) 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) Preferred stock dividends (37) (27) (63) (53) Net loss applicable to common shareholders $ (1,389) $ (1,040) $ (1,735) $ (406) Segment highlights Allstate Protection underwriting loss was $2.09 billion in the second quarter of 2023 compared to underwriting loss of $861 million in the second quarter of 2022. Underwriting loss totaled $3.09 billion in the first six months of 2023 compared to underwriting loss of $579 million in the first six months of 2022. The higher losses in both periods was primarily due to higher catastrophe losses and non-catastrophe losses primarily for auto insurance, partially offset by increased premiums. We are executing a comprehensive plan to improve auto insurance profitability, by raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and enhancing claims processes to manage loss costs. Catastrophe losses were $2.70 billion and $4.39 billion in the second quarter and first six months of 2023, respectively, compared to $1.11 billion and $1.57 52 www.allstate.com billion in the second quarter and first six months of 2022, respectively. Premiums written increased 9.7% to $12.62 billion and 9.6% to $24.40 billion in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, reflecting higher premiums in both Allstate and National General brands. Protection Services adjusted net income was $41 million in the second quarter of 2023 compared to $43 million in the second quarter of 2022. Adjusted net income was $75 million in the first six months of 2023 compared to $96 million in the first six months of 2022. The decrease in both periods was due to Allstate Protection Plans higher appliance and furniture claim severity, a shift in business mix and lower third-party advertising sales by Arity, partially offset by improved margins at Allstate Roadside. Premiums and other revenue increased 9.3% or $54 million and 8.6% or $99 million in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to Allstate Protection Plans and Allstate Dealer Services. Allstate Health and Benefits adjusted net income was $57 million in the second quarter of 2023 compared to $67 million in the second quarter of 2022. Adjusted net income was $113 million in the first six months of 2023 compared to $124 million in the first six months of 2022. The decrease in both periods was primarily due to a decline in employer voluntary benefits and individual health, partially offset by growth in group health. Premiums and contract charges decreased 2.6% to $453 million in the second quarter of 2023 and decreased 1.8% to $916 million in the first six months of 2023 compared to the same periods of 2022, primarily due to a decline in individual health and employer voluntary benefits, partially offset by growth in group health. Adopted accounting standard Accounting for Long-Duration Insurance Contracts Effective January 1, 2023, we adopted the Financial Accounting Standards Board (”FASB”) guidance revising the accounting for certain long-duration insurance contracts using the modified retrospective approach to the transition date of January 1, 2021. Under the new guidance, measurement assumptions, including those for mortality, morbidity and policy lapses, are required to be reviewed at least annually, and updated as appropriate. In addition, reserves under the new guidance are required to be discounted using an upper-medium grade fixed income instrument yield that is updated through other comprehensive income (“OCI”) at each reporting date. Additionally, DAC for all long-duration products are amortized on a simplified basis. Our reserve for future policy benefits and DAC are subject to new disclosure guidance. In addition, the Company met the conditions included in Accounting Standards Update No. 2022-05, Transition for Sold Contracts , and elected to not apply the new guidance for contracts that were part of the 2021 sales of Allstate Life Insurance Company and Allstate Life Insurance Company of New York. After-tax cumulative effect of change in accounting principle on transition date ($ 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. See Note 1 of the condensed consolidated financial statements for further information regarding the impact of the adopted accounting standard on our condensed consolidated financial statements. Second Quarter 2023 Form 10-Q 53 Property-Liability Operations Property-Liability Operations Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Run-off Property-Liability. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources. We do not allocate Property-Liability investment income, net gains and losses on investments and derivatives, or assets to the Allstate Protection and Run-off Property-Liability segments. Management reviews assets at the Property-Liability level for decision-making purposes. GAAP operating ratios are used to measure our profitability to enhance an investor’s understanding of our financial results and are calculated as follows: • Loss ratio: the ratio of claims and claims expense (loss adjustment expenses), to premiums earned. Loss ratios include the impact of catastrophe losses and prior year reserve reestimates. • Expense ratio: the ratio of amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, less other revenue to premiums earned. • Combined ratio: the sum of the loss ratio and the expense ratio. We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between periods. The impacts are calculated by taking the specific items noted below divided by Property-Liability premiums earned: • Effect of catastrophe losses on combined ratio: includes catastrophe losses and prior year reserve reestimates of catastrophe losses included in claims and claims expense • Effect of prior year reserve reestimates on combined ratio • Effect of amortization of purchased intangibles on combined ratio • Effect of restructuring and related charges on combined ratio • Effect of Run-off Property-Liability business on combined ratio: includes claims and claims expense, restructuring and related charges and operating costs and expenses in the Run-off Property-Liability segment Premium measures and statistics are used to analyze our premium trends and are calculated as follows: • PIF : policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy. Commercial lines PIF counts for shared economy agreements typically reflect contracts that cover multiple rather than individual drivers. Lender-placed policies are excluded from policy counts because relationships are with the lenders. • New issued applications : item counts of automobile or homeowner insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate brand. • Average premium-gross written (“average premium”): gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line. • Renewal ratio: renewal policy item counts issued during the period, based on contract effective dates, divided by the total policy item counts issued generally 6 months prior for auto or 12 months prior for homeowners. • Implemented rate changes: represents the impact in the locations (U.S. states, the District of Columbia or Canadian provinces) where rate changes were implemented during the period as a percentage of total brand prior year-end premiums written. Frequency and severity statistics , which are influenced by driving patterns, inflation and other factors, are provided to describe the trends in loss costs. Our reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine our best estimate of recorded reserves. We use the following statistics to evaluate losses: • Gross claim frequency is calculated as annualized notice counts, excluding counts associated with catastrophe events, received in the period divided by the average of PIF with the applicable coverage during the period. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed with a payment or closed without payment). 54 www.allstate.com Property-Liability Operations • Report year incurred claim severity is calculated by dividing the sum of recorded estimated incurred losses and allocated loss adjustment expenses, excluding catastrophes, by the reported notice counts during that report year. Report year incurred claim severity does not include incurred but not reported (“IBNR”) losses or benefits from subrogation and salvage. • Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period. • Percent change in frequency or paid claim severity statistics are calculated as the amount of increase or decrease in gross claim frequency or paid claim severity in the current period compared to the same period in the prior year, divided by the prior year gross claim frequency or paid claim severity. • Percent change in report year incurred claim severity statistic is calculated as the amount of increase or decrease in report year incurred claim severity recorded in the year-to-date period divided by the current estimate of the prior report year incurred claim severity. Underwriting results Three months ended June 30, Six months ended June 30, ($ in millions, except ratios) 2023 2022 2023 2022 Premiums written $ 12,620 $ 11,509 $ 24,403 $ 22,270 Premiums earned $ 11,921 $ 10,874 $ 23,556 $ 21,372 Other revenue 389 355 742 702 Claims and claims expense (11,575) (9,231) (21,755) (16,933) Amortization of DAC (1,496) (1,355) (2,948) (2,703) Other costs and expenses (1,249) (1,450) (2,528) (2,895) Restructuring and related charges (1) (26) 2 (47) (10) Amortization of purchased intangibles (58) (59) (115) (117) Underwriting (loss) income $ (2,094) $ (864) $ (3,095) $ (584) Catastrophe losses Catastrophe losses, excluding reserve reestimates $ 2,665 $ 1,057 $ 4,398 $ 1,532 Catastrophe reserve reestimates (2) 31 51 (11) 38 Total catastrophe losses $ 2,696 $ 1,108 $ 4,387 $ 1,570 Non-catastrophe reserve reestimates (2) $ 182 $ 411 $ 209 $ 569 Prior year reserve reestimates (2) 213 462 198 607 GAAP operating ratios Loss ratio 97.1 84.9 92.3 79.2 Expense ratio (3) 20.5 23.0 20.8 23.5 Combined ratio 117.6 107.9 113.1 102.7 Effect of catastrophe losses on combined ratio 22.6 10.2 18.6 7.3 Effect of prior year reserve reestimates on combined ratio 1.9 4.2 0.8 2.9 Effect of catastrophe losses included in prior year reserve reestimates on combined ratio 0.3 0.4 (0.1) 0.2 Effect of restructuring and related charges on combined ratio (1) 0.2 — 0.2 — Effect of amortization of purchased intangibles on combined ratio 0.5 0.5 0.5 0.5 Effect of Run-off Property-Liability business on combined ratio 0.1 — — — (1) Restructuring and related charges for the second quarter and first six months of 2023 are primarily for real estate costs related to facilities being vacated and employee costs related to global workforce enablement, including outsourcing various elements of operations. See Note 13 of the condensed consolidated financial statements for additional details. (2) Favorable reserve reestimates are shown in parentheses. (3) Other revenue is deducted from operating costs and expenses in the expense ratio calculation. Second Quarter 2023 Form 10-Q 55 Segment Results Allstate Protection Allstate Protection Segment Underwriting results Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Premiums written $ 12,620 $ 11,509 $ 24,403 $ 22,270 Premiums earned $ 11,921 $ 10,874 $ 23,556 $ 21,372 Other revenue 389 355 742 702 Claims and claims expense (11,574) (9,228) (21,752) (16,929) Amortization of DAC (1,496) (1,355) (2,948) (2,703) Other costs and expenses (1,248) (1,450) (2,526) (2,894) Restructuring and related charges (26) 2 (47) (10) Amortization of purchased intangibles (58) (59) (115) (117) Underwriting loss $ (2,092) $ (861) $ (3,090) $ (579) Catastrophe losses $ 2,696 $ 1,108 $ 4,387 $ 1,570 Underwriting loss was $2.09 billion and $3.09 billion in the second quarter and first six months of 2023, respectively, compared to underwriting loss of $861 million and $579 million in the second quarter and first six months of 2022, respectively, due to higher catastrophe losses and non-catastrophe losses primarily for auto insurance, partially offset by increased premiums. We are executing a comprehensive plan to improve auto insurance profitability, by raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and enhancing claims processes to manage loss costs. Change in underwriting results from prior year period - three months ended ($ in millions) Change in underwriting results from prior year period - six months ended ($ in millions) 56 www.allstate.com Allstate Protection Segment Results Underwriting income (loss) by brand and by line of business Allstate brand National General Allstate Protection ($ in millions) 2023 2022 2023 2022 2023 2022 Three months ended June 30, Auto $ (546) $ (578) $ (132) $ — $ (678) $ (578) Homeowners (1) (1,195) (132) (112) (60) (1,307) (192) Other personal lines (70) 5 — 6 (70) 11 Commercial lines (60) (145) (1) 10 (61) (135) Other business lines (1) 24 25 (3) 6 21 31 Answer Financial — — — — 3 2 Total $ (1,847) $ (825) $ (248) $ (38) $ (2,092) $ (861) Six months ended June 30, Auto $ (878) $ (715) $ (146) $ (10) $ (1,024) $ (725) Homeowners (1) (1,703) 236 (138) (28) (1,841) 208 Other personal lines (160) 23 1 6 (159) 29 Commercial lines (124) (164) 3 7 (121) (157) Other business lines (1) 46 46 4 16 50 62 Answer Financial — — — — 5 4 Total $ (2,819) $ (574) $ (276) $ (9) $ (3,090) $ (579) (1) Other business lines represents commissions earned and other costs and expenses for Ivantage, non-proprietary life and annuity products, and lender-placed products and related services. In the first quarter of 2023, National General lender-placed products and related services results were reclassified from homeowners to other business lines. Historical results have been updated to conform with this presentation. Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends. Premiums written is the amount of premiums charged for policies issued during a reporting period. Premiums are considered earned and are included in the financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired term of the policies is recorded as unearned premiums on our Condensed Consolidated Statements of Financial Position. Premiums written by brand and by line of business Allstate brand National General Allstate Protection ($ in millions) 2023 2022 2023 2022 2023 2022 Three months ended June 30, Auto $ 6,821 $ 6,374 $ 1,448 $ 1,096 $ 8,269 $ 7,470 Homeowners 2,937 2,665 444 343 3,381 3,008 Other personal lines 621 576 54 33 675 609 Commercial lines 146 247 54 50 200 297 Other business lines — — 95 125 95 125 Total premiums written $ 10,525 $ 9,862 $ 2,095 $ 1,647 $ 12,620 $ 11,509 Six months ended June 30, Auto $ 13,647 $ 12,682 $ 2,971 $ 2,350 $ 16,618 $ 15,032 Homeowners 5,147 4,685 768 604 5,915 5,289 Other personal lines 1,113 1,045 110 68 1,223 1,113 Commercial lines 323 485 104 106 427 591 Other business lines — — 220 245 220 245 Total premiums written $ 20,230 $ 18,897 $ 4,173 $ 3,373 $ 24,403 $ 22,270 Second Quarter 2023 Form 10-Q 57 Segment Results Allstate Protection Premiums earned by brand and by line of business Allstate brand National General Allstate Protection ($ in millions) 2023 2022 2023 2022 2023 2022 Three months ended June 30, Auto $ 6,772 $ 6,253 $ 1,349 $ 1,095 $ 8,121 $ 7,348 Homeowners 2,537 2,281 346 285 2,883 2,566 Other personal lines 540 510 47 35 587 545 Commercial lines 153 244 49 51 202 295 Other business lines — — 128 120 128 120 Total premiums earned $ 10,002 $ 9,288 $ 1,919 $ 1,586 $ 11,921 $ 10,874 Six months ended June 30, Auto $ 13,432 $ 12,326 $ 2,597 $ 2,103 $ 16,029 $ 14,429 Homeowners 5,025 4,491 668 565 5,693 5,056 Other personal lines 1,061 1,006 88 70 1,149 1,076 Commercial lines 336 476 98 102 434 578 Other business lines — — 251 233 251 233 Total premiums earned $ 19,854 $ 18,299 $ 3,702 $ 3,073 $ 23,556 $ 21,372 Reconciliation of premiums written to premiums earned Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Total premiums written $ 12,620 $ 11,509 $ 24,403 $ 22,270 (Increase) decrease in unearned premiums (753) (599) (880) (857) Other 54 (36) 33 (41) Total premiums earned $ 11,921 $ 10,874 $ 23,556 $ 21,372 Policies in force by brand and by line of business Allstate brand National General Allstate Protection PIF (thousands) 2023 2022 2023 2022 2023 2022 Auto 20,821 21,979 4,699 4,213 25,520 26,192 Homeowners 6,614 6,566 654 631 7,268 7,197 Other personal lines 4,574 4,632 316 287 4,890 4,919 Commercial lines 194 206 113 105 307 311 Total 32,203 33,383 5,782 5,236 37,985 38,619 Auto insurance premiums written increased 10.7% or $799 million in the second quarter of 2023 compared to the second quarter of 2022 and 10.6% or $1.59 billion in the first six months of 2023 compared to the first six months of 2022, primarily due to the following factors: • Increased average premiums driven by rate increases primarily taken in 2022. Additionally, in the six months ended June 30, 2023: – Rate increases of 9.7% were taken for Allstate brand in 47 locations, resulting in total Allstate brand insurance premium impact of 7.5% – Rate increases of 9.8% were taken for National General brand in 38 locations, resulting in total National General brand insurance premium impact of 5.5% • We expect to continue to pursue rate increases for both Allstate and National General brands throughout 2023 to improve auto insurance profitability • PIF decreased 2.6% or 672 thousand to 25,520 thousand as of June 30, 2023 compared to June 30, 2022 • Renewal ratio decreased 2.0 and 1.9 points in the second quarter and the first six months of 2023, respectively, compared to the second quarter and first six months of 2022 • Decreased new issued applications driven by the direct and exclusive agency channels, partially offset by growth in the independent agency channel • The impact of the ongoing rate increases and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio, premiums and future PIF growth 58 www.allstate.com Allstate Protection Segment Results Auto premium measures and statistics Three months ended June 30, Six months ended June 30, 2023 2022 Change 2023 2022 Change New issued applications (thousands) Allstate Protection by brand Allstate brand 724 959 (24.5) % 1,475 1,923 (23.3) % National General 754 672 12.2 % 1,537 1,390 10.6 % Total new issued applications 1,478 1,631 (9.4) % 3,012 3,313 (9.1) % Allstate Protection by channel Exclusive agency channel 574 619 (7.3) % 1,163 1,218 (4.5) % Direct channel 415 571 (27.3) % 878 1,202 (27.0) % Independent agency channel 489 441 10.9 % 971 893 8.7 % Total new issued applications 1,478 1,631 (9.4) % 3,012 3,313 (9.1) % Allstate brand average premium $ 737 $ 644 14.4 % $ 732 $ 635 15.3 % Allstate brand renewal ratio (%) 85.5 87.5 (2.0) 85.6 87.5 (1.9) Homeowners insurance premiums written increased 12.4% or $373 million in the second quarter of 2023 compared to the second quarter of 2022 and increased 11.8% or $626 million in the first six months of 2023 compared to the first six months of 2022, primarily due to the following factors: • Higher Allstate brand average premiums from implemented rate increases primarily taken in 2022 and inflation in insured home replacement costs, combined with policies in force growth • In the six months ended June 30, 2023, rate increases of 13.4% were taken for Allstate brand in 34 locations, resulting in total Allstate brand insurance premium impact of 7.4% • National General policy growth is expected to be negatively impacted in future quarters as we improve underwriting margins to targeted levels through underwriting and rate actions. In the six months ended June 30, 2023, rate increases of 20.0% were taken for National General brand in 15 locations, resulting in total National General brand insurance premium impact of 5.3% • Decreased new issued applications in the direct and exclusive agency channels, partially offset by growth in the independent agency channel • Policy growth is being reduced in states and lines of business that are underperforming. We are no longer writing new homeowners business in California and Florida, and we may take further actions to reduce our exposure, which have and will continue to negatively impact premiums • The impact of the ongoing rate increases and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio, premiums and future PIF growth Homeowners premium measures and statistics Three months ended June 30, Six months ended June 30, 2023 2022 Change 2023 2022 Change New issued applications (thousands) Allstate Protection by brand Allstate brand 234 263 (11.0) % 464 498 (6.8) % National General 46 40 15.0 % 81 67 20.9 % Total new issued applications 280 303 (7.6) % 545 565 (3.5) % Allstate Protection by channel Exclusive agency channel 202 222 (9.0) % 398 423 (5.9) % Direct channel 19 27 (29.6) % 38 50 (24.0) % Independent agency channel 59 54 9.3 % 109 92 18.5 % Total new issued applications 280 303 (7.6) % 545 565 (3.5) % Allstate brand average premium $ 1,800 $ 1,590 13.2 % $ 1,758 $ 1,574 11.7 % Allstate brand renewal ratio (%) 86.3 86.9 (0.6) 86.3 86.6 (0.3) Second Quarter 2023 Form 10-Q 59 Segment Results Allstate Protection Other personal lines premiums written increased 10.8% or $66 million in the second quarter of 2023 compared to the second quarter of 2022 and increased 9.9% or $110 million in the first six months of 2023 compared to the first six months of 2022, primarily due to increases in landlords and condominiums for Allstate brand. We are no longer writing condominium new business in California and Florida, we are non-renewing certain policies in Florida, and we may take further actions to reduce exposure in Florida, which will continue to negatively impact premiums. Commercial lines premiums written decreased 32.7% or $97 million in the second quarter of 2023 compared to the second quarter of 2022 and decreased 27.7% or $164 million in the first six months of 2023 compared to the first six months of 2022, due to profitability actions taken to no longer offer coverage to transportation network companies unless the contracts utilize telematics-based pricing and the Allstate brand exiting traditional commercial insurance in five states, with non-renewals for those states beginning in 2023. Other business lines premiums written decreased 24.0% or $30 million in the second quarter of 2023 compared to the second quarter of 2022 and decreased 10.2% or $25 million in the first six months of 2023 compared to the first six months of 2022. GAAP operating ratios include loss ratio, expense ratio and combined ratio to analyze our profitability trends. Frequency and severity statistics are used to describe the trends in loss costs. Combined ratios by line of business Loss ratio Expense ratio (1) Combined ratio 2023 2022 2023 2022 2023 2022 Three months ended June 30, Auto 87.9 84.9 20.4 23.0 108.3 107.9 Homeowners 125.0 84.5 20.3 23.0 145.3 107.5 Other personal lines 93.5 74.9 18.4 23.1 111.9 98.0 Commercial lines 105.4 127.1 24.8 18.7 130.2 145.8 Other business lines 51.6 35.0 32.0 39.2 83.6 74.2 Total 97.0 84.9 20.5 23.0 117.5 107.9 Impact of amortization of purchased intangibles — — 0.5 0.5 0.5 0.5 Impact of restructuring and related charges — — 0.2 — 0.2 — Six months ended June 30, Auto 85.7 81.3 20.7 23.7 106.4 105.0 Homeowners 111.9 73.4 20.4 22.5 132.3 95.9 Other personal lines 93.6 73.5 20.2 23.8 113.8 97.3 Commercial lines 103.7 107.6 24.2 19.6 127.9 127.2 Other business lines 47.4 33.1 32.7 40.3 80.1 73.4 Total 92.3 79.2 20.8 23.5 113.1 102.7 Impact of amortization of purchased intangibles — — 0.5 0.5 0.5 0.5 Impact of restructuring and related charges — — 0.2 — 0.2 — (1) Other revenue is deducted from operating costs and expenses in the expense ratio calculation. 60 www.allstate.com Allstate Protection Segment Results Loss ratios by line of business Loss ratio Effect of catastrophe losses (1) Effect of prior year reserve reestimates Effect of catastrophe losses included in prior year reserve reestimates 2023 2022 2023 2022 2023 2022 2023 2022 Three months ended June 30, Auto 87.9 84.9 4.2 1.5 1.2 3.3 (0.2) (0.5) Homeowners 125.0 84.5 75.9 35.6 3.2 5.2 1.8 3.3 Other personal lines 93.5 74.9 24.2 13.0 0.5 (0.4) (0.9) 0.5 Commercial lines 105.4 127.1 4.0 2.7 3.9 31.2 1.0 0.4 Other business lines 51.6 35.0 9.4 6.7 7.8 (2.5) — — Total 97.0 84.9 22.6 10.2 1.8 4.2 0.3 0.4 Six months ended June 30, Auto 85.7 81.3 2.7 1.0 0.5 2.6 (0.3) (0.3) Homeowners 111.9 73.4 63.9 25.6 1.3 2.6 0.8 1.5 Other personal lines 93.6 73.5 24.0 9.8 0.5 (0.8) (1.1) 0.7 Commercial lines 103.7 107.6 3.9 1.4 7.4 19.2 0.7 — Other business lines 47.4 33.1 7.2 4.3 4.4 (2.6) — 1.7 Total 92.3 79.2 18.6 7.3 0.8 2.9 (0.1) 0.2 (1) The ten-year average effect of catastrophe losses on the total combined ratio was 13.1 points in the second quarter of 2023. Auto underwriting results For the periods ended 2023 2022 2021 ($ in millions, except ratios) Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Underwriting income (loss) (678) (346) (974) (1,315) (578) (147) (300) (159) 394 1,327 Loss ratio 87.9 83.4 90.6 95.3 84.9 77.6 78.9 76.9 68.7 57.2 Effect of prior year non-catastrophe reserve reestimates on combined ratio 1.4 (0.1) 2.3 8.5 3.8 2.1 2.1 1.1 (0.4) (0.2) Frequency and severity are influenced by: • Supply chain disruptions and labor shortages • Value of total losses due to higher used car prices • Labor and part cost increases • Changes in commuting activity • Driving behavior (e.g., speed, time of day) impacting severity and mix of claim types • Organizational and process changes impacting claim opening and closing practices and shifts in timing, if any, can impact comparisons to prior periods The quarterly auto loss ratio has been more variable due to these and additional factors discussed below. Auto loss ratio increased 3.0 and 4.4 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022. Estimated report year 2023 incurred claim severity for Allstate brand, excluding Esurance and Canada, had a weighted average increase of 11% compared to report year 2022 for major coverages due to higher part costs and labor rates for repairable vehicles, a higher mix of total losses, an increase in claims with attorney representation, higher medical consumption, and inflation. Gross claim frequency increased but remains below pre-pandemic levels. We are enhancing our claims practices to manage loss costs by increasing resources and expanding re-inspections, accelerating resolution of bodily injury claims, and negotiating improved vendor services and parts agreements. Homeowners loss ratio increased 40.5 and 38.5 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to higher catastrophe losses and severity, partially offset by increased premiums earned. Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses) (% change year-over-year) Three months ended June 30, 2023 Gross claim frequency (5.5) % Paid claim severity 11.3 Six months ended June 30, 2023 Gross claim frequency (2.3) % Paid claim severity 11.2 Gross claim frequency decreased in the second quarter of 2023 compared to the same period of 2022 due to wind/hail perils and decreased in the first six months of 2023 compared to the same period of 2022, primarily due to water and wind/hail perils. Paid claim severity increased in the second quarter and first six months of 2023 compared to the same periods of 2022 Second Quarter 2023 Form 10-Q 61 Segment Results Allstate Protection due to inflationary loss cost pressure driven by increases in labor and materials costs. Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the quarter. Other personal lines loss ratio increased 18.6 and 20.1 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to higher catastrophe losses and increased severity, partially offset by increased premiums earned. Commercial lines loss ratio decreased 21.7 and 3.9 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to the result of profitability actions taken and less unfavorable reserve reestimates, partially offset by continued elevated frequency and severity. Other business lines loss ratio increased 16.6 and 14.3 points in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to higher catastrophe and non-catastrophe losses. Catastrophe losses increased $1.59 billion to $2.70 billion in the second quarter of 2023 compared to the second quarter of 2022 and increased $2.82 billion to $4.39 billion in the first six months of 2023 compared to the first six months of 2022, primarily related to an increased number of wind/hail events and larger losses per event. The catastrophe losses for the second quarter and first six months of 2023 represent the highest and second highest level for the respective periods in the Company’s history. We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes. We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest, wildfires or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted. Loss estimates are generally based on claim adjuster inspections and the application of historical loss development factors. Our loss estimates are calculated in accordance with the coverage provided by our policies. The establishment of appropriate reserves, including reserves for catastrophe losses, is an inherently uncertain and complex process. Reserving for hurricane losses is complicated by the inability of insureds to promptly report losses, limitations placed on claims adjusting staff affecting their ability to inspect losses, determining whether losses are covered by our homeowners policy (generally for damage caused by wind or wind driven rain) or specifically excluded coverage caused by flood, exposure to mold damage, and the effects of numerous other considerations, including the timing of a catastrophe in relation to other events, such as at or near the end of a financial reporting period, which can affect the availability of information needed to estimate reserves for that reporting period. In these situations, we may need to adapt our practices to accommodate these circumstances in order to determine a best estimate of our losses from a catastrophe. Over time, we have limited our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes by our participation in various state facilities. Catastrophe losses by the type of event Three months ended June 30, Six months ended June 30, ($ in millions) Number of events 2023 Number of events 2022 Number of events 2023 Number of events 2022 Tornadoes 1 $ 25 2 $ 93 3 $ 138 3 $ 158 Wind/hail 39 2,858 32 966 63 4,230 46 1,328 Wildfires 2 26 4 28 2 26 4 28 Freeze/other events — — — — 2 4 1 18 Prior year reserve reestimates 31 61 (11) 48 Prior year aggregate reinsurance recoveries — (10) — (10) Prior quarter reserve reestimates (244) (30) — — Total catastrophe losses 42 $ 2,696 38 $ 1,108 70 $ 4,387 54 $ 1,570 Catastrophe reinsurance Our current catastrophe reinsurance program supports the Company’s risk tolerance framework which utilizes a modeled 1-in-100 annual aggregate limit for catastrophe losses from hurricanes, earthquakes and wildfires of $2.5 billion, net of reinsurance. These reinsurance agreements are part of our catastrophe management strategy, which is intended to provide our shareholders with an acceptable return on the risks assumed in our property business, and to 62 www.allstate.com Allstate Protection Segment Results reduce variability of earnings, while providing protection to our customers. During the second quarter of 2023, we completed the placement of our 2023-2024 Florida Excess Catastrophe Reinsurance Program (“Florida program”) and the National General Lender Services Standalone Program. Additionally, we placed four single-year term contracts as part of our 2023-2024 Nationwide Excess Catastrophe Reinsurance Program, which provide $120 million of coverage. Florida program updates Our 2023 Florida program provides coverage for property policies of Castle Key Insurance Company and certain affiliate companies for Florida catastrophe events up to $1.29 billion of loss less a $40 million retention. The Florida program includes reinsurance agreements placed in the traditional market, the Florida Hurricane Catastrophe Fund (“FHCF”), the Florida Reinsurance to Assist Policyholders Program (“RAP”) and the insurance-linked securities (“ILS”) market as follows: • Traditional market placements comprise reinsurance limits for losses to personal lines property in Florida arising out of multiple perils. These contracts provide a combined $695 million of limits, with a portion of the traditional market placements providing coverage for perils not covered by the FHCF and RAP contracts, which only cover hurricanes. • Three FHCF contracts provide $330 million of limits for qualifying losses to personal lines property in Florida caused by storms the National Hurricane Center declares to be hurricanes. The three contracts are 90% placed. • Three RAP contracts provide $49 million of limits for qualifying losses to personal lines property in Florida caused by storms the National Hurricane Center declares to be hurricanes. The three contracts are 90% placed. • ILS placements provide $620 million of reinsurance limits for qualifying losses to personal lines property in Florida caused by a named storm event, a severe weather event, an earthquake event, a fire event, a volcanic eruption event, or a meteorite impact event. National General Lender Services Standalone Program is placed in the traditional market and provides $255 million of coverage, subject to a $60 million retention, with one reinstatement of limits. Inuring contracts include the National General Florida Hurricane Catastrophe Fund contract providing $64 million of limits in excess of a $33 million retention, 90% placed, and the National General RAP Contract providing $10 million of limits in excess of a $24 million retention, 90% placed. For a complete summary of the 2023 reinsurance placement, please read this in conjunction with the discussion and analysis in Part I. Item 2. Management’s Discussion and Analysis - Allstate Protection Segment Results, Catastrophe Reinsurance of The Allstate Corporation Form 10-Q for the quarterly period ended March 31, 2023. The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the second quarter and first six months of 2023 was $242 million and $461 million, respectively, compared to $173 million and $317 million in the second quarter and first six months of 2022, respectively. Catastrophe placement premiums reduce net written and earned premium with approximately 75% of the reduction related to homeowners premium. Prior year reserve reestimates Unfavorable reserve reestimates were $212 million and $195 million in the second quarter and the first six months of 2023, respectively, primarily due to National General personal auto lines, primarily injury coverages, and unfavorable reserve reestimates in homeowners lines. For a more detailed discussion on reinsurance and reserve reestimates, see Note 8 of the condensed consolidated financial statements. Prior year reserve reestimates Three months ended June 30, Six months ended June 30, Prior year reserve reestimates (1) Effect on combined ratio (2) Prior year reserve reestimates (1) Effect on combined ratio (2) ($ in millions, except ratios) 2023 2022 2023 2022 2023 2022 2023 2022 Auto $ 97 $ 237 0.8 2.2 $ 72 $ 379 0.3 1.8 Homeowners 94 135 0.8 1.2 74 128 0.3 0.6 Other personal lines 3 (2) — — 6 (9) — — Commercial lines 8 92 0.1 0.8 32 111 0.1 0.5 Other business lines 10 (3) 0.1 — 11 (6) 0.1 — Total Allstate Protection $ 212 $ 459 1.8 4.2 $ 195 $ 603 0.8 2.9 Allstate brand $ 36 $ 442 0.3 4.1 $ (18) $ 590 (0.1) 2.8 National General 176 17 1.5 0.1 213 13 0.9 0.1 Total Allstate Protection $ 212 $ 459 1.8 4.2 $ 195 $ 603 0.8 2.9 (1) Favorable reserve reestimates are shown in parentheses. (2) Ratios are calculated using Allstate Protection premiums earned. Second Quarter 2023 Form 10-Q 63 Segment Results Allstate Protection Expense ratio decreased 2.5 and 2.7 points in the second quarter and the first six months of 2023, respectively, compared to the second quarter and the first six months of 2022, primarily due to higher earned premium growth relative to fixed costs, and lower advertising, agent and employee-related costs. Impact of specific costs and expenses on the expense ratio Three months ended June 30, Six months ended June 30, ($ in millions, except ratios) 2023 2022 Change 2023 2022 Change Amortization of DAC $ 1,496 $ 1,355 $ 141 $ 2,948 $ 2,703 $ 245 Advertising expense 113 253 (140) 271 596 (325) Amortization of purchased intangibles 58 59 (1) 115 117 (2) Other costs and expenses, net of other revenue 746 842 (96) 1,513 1,596 (83) Restructuring and related charges 26 (2) 28 47 10 37 Total underwriting expenses $ 2,439 $ 2,507 $ (68) $ 4,894 $ 5,022 $ (128) Premiums earned $ 11,921 $ 10,874 $ 1,047 $ 23,556 $ 21,372 $ 2,184 Expense ratio Amortization of DAC 12.6 12.5 0.1 12.5 12.7 (0.2) Advertising expense 0.9 2.3 (1.4) 1.2 2.8 (1.6) Other costs and expenses 6.3 7.7 (1.4) 6.4 7.5 (1.1) Subtotal 19.8 22.5 (2.7) 20.1 23.0 (2.9) Amortization of purchased intangibles 0.5 0.5 — 0.5 0.5 — Restructuring and related charges 0.2 — 0.2 0.2 — 0.2 Total expense ratio 20.5 23.0 (2.5) 20.8 23.5 (2.7) 64 www.allstate.com Run-off Property-Liability Segment Results Run-off Property-Liability Segment Underwriting results ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Claims and claims expense $ (1) $ (3) $ (3) $ (4) Operating costs and expenses (1) — (2) (1) Underwriting loss $ (2) $ (3) $ (5) $ (5) Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance ($ in millions) June 30, 2023 December 31, 2022 Asbestos claims Gross reserves $ 1,156 $ 1,190 Reinsurance (368) (379) Net reserves 788 811 Environmental claims Gross reserves 318 328 Reinsurance (61) (61) Net reserves 257 267 Other run-off claims Gross reserves 429 437 Reinsurance (64) (64) Net reserves 365 373 Total Gross reserves 1,903 1,955 Reinsurance (493) (504) Net reserves $ 1,410 $ 1,451 Reserves by type of exposure before and after the effects of reinsurance ($ in millions) June 30, 2023 December 31, 2022 Direct excess commercial insurance Gross reserves $ 1,073 $ 1,106 Reinsurance (375) (385) Net reserves 698 721 Assumed reinsurance coverage Gross reserves 600 618 Reinsurance (54) (56) Net reserves 546 562 Direct primary commercial insurance Gross reserves 147 148 Reinsurance (63) (62) Net reserves 84 86 Other run-off business Gross reserves 1 1 Reinsurance — — Net reserves 1 1 Unallocated loss adjustment expenses Gross reserves 82 82 Reinsurance (1) (1) Net reserves 81 81 Total Gross reserves 1,903 1,955 Reinsurance (493) (504) Net reserves $ 1,410 $ 1,451 Second Quarter 2023 Form 10-Q 65 Segment Results Run-off Property-Liability Percentage of gross and ceded reserves by case and IBNR June 30, 2023 December 31, 2022 Case IBNR Case IBNR Direct excess commercial insurance Gross reserves (1) 64 % 36 % 58 % 42 % Ceded (2) 69 31 63 37 Assumed reinsurance coverage Gross reserves 31 69 31 69 Ceded 41 59 33 67 Direct primary commercial insurance Gross reserves 59 41 57 43 Ceded 81 19 81 19 (1) Approximately 66% and 64% of gross case reserves as of June 30, 2023 and December 31, 2022, respectively, are subject to settlement agreements. (2) Approximately 70% and 70% of ceded case reserves as of June 30, 2023 and December 31, 2022, respectively, are subject to settlement agreements. Gross payments from case reserves by type of exposure ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Direct excess commercial insurance Gross (1) $ 9 $ 10 $ 32 $ 28 Ceded (2) (4) (3) (9) (10) Assumed reinsurance coverage Gross 14 5 19 11 Ceded (2) — (3) (1) Direct primary commercial insurance Gross 1 2 2 3 Ceded — (1) — (1) (1) In the second quarter and first six months of 2023, 79% and 85% of payments related to settlement agreements, respectively, compared to 77% and 84% of the second quarter and first six months of 2022, respectively. (2) In the second quarter and first six months of 2023, 74% and 87% of payments related to settlement agreements, respectively, compared to 85% and 91% of the second quarter and first six months of 2022, respectively. Total net reserves as of June 30, 2023, included $700 million or 50% of estimated IBNR reserves compared to $765 million or 53% of estimated IBNR reserves as of December 31, 2022. Total gross payments were $24 million and $53 million for the second quarter and first six months of 2023, respectively, compared to $16 million and $41 million for the second quarter and first six months of 2022, respectively. Payments for both periods primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos related losses, where the scope of coverages has been agreed upon. The claims associated with these settlement agreements are expected to be substantially paid out over the next several years as qualified claims are submitted by these insureds. Reinsurance collections were $9 million and $24 million for the second quarter and first six months of 2023, respectively, compared to $11 million and $21 million for the second quarter and first six months of 2022, respectively. 66 www.allstate.com Protection Services Segment Results Protection Services Segment Summarized financial information ($ in millions) Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 Premiums written $ 658 $ 670 $ 1,277 $ 1,300 Revenues Premiums $ 549 $ 488 $ 1,087 $ 971 Other revenue 84 91 168 185 Intersegment insurance premiums and service fees (1) 35 38 68 79 Net investment income 18 12 34 21 Costs and expenses Claims and claims expense (153) (128) (306) (251) Amortization of DAC (259) (228) (510) (449) Operating costs and expenses (218) (213) (439) (431) Restructuring and related charges — — (1) — Income tax expense on operations (15) (16) (26) (28) Less: noncontrolling interest — 1 — 1 Adjusted net income $ 41 $ 43 $ 75 $ 96 Allstate Protection Plans $ 31 $ 36 $ 59 $ 79 Allstate Dealer Services 6 8 13 17 Allstate Roadside 6 1 10 3 Arity (3) (1) (7) (2) Allstate Identity Protection 1 (1) — (1) Adjusted net income $ 41 $ 43 $ 75 $ 96 Allstate Protection Plans 138,172 137,292 Allstate Dealer Services 3,825 3,921 Allstate Roadside 545 519 Allstate Identity Protection 3,222 2,961 Policies in force as of June 30 (in thousands) 145,764 144,693 (1) Primarily related to Arity and Allstate Roadside and are eliminated in our condensed consolidated financial statements. Adjusted net income decreased 4.7% or $2 million in the second quarter of 2023 and decreased 21.9% or $21 million in the first six months of 2023 compared to the same periods of 2022, due to Allstate Protection Plans higher appliance and furniture claim severity, a shift in business mix and lower third-party advertising sales by Arity, partially offset by improved margins at Allstate Roadside. Premiums written decreased 1.8% or $12 million in the second quarter of 2023 and decreased 1.8% or $23 million in the first six months of 2023 compared to the same periods of 2022, primarily due to a decrease in sales at Allstate Dealer Services and lower rescue volumes at Allstate Roadside, partially offset by growth at Allstate Protection Plans. PIF increased 0.7% or 1 million as of June 30, 2023 compared to June 30, 2022 due to an increase in Allstate Protection Plans. Other revenue decreased 7.7% or $7 million in the second quarter of 2023 and decreased 9.2% or $17 million in the first six months of 2023 compared to the same periods of 2022, primarily due to lower revenue from reductions in customer advertising at Arity. Intersegment premiums and service fees decreased 7.9% or $3 million in the second quarter of 2023 and decreased 13.9% or $11 million in the first six months of 2023 compared to the same periods of 2022, driven by decreased device sales for the Drivewise® offering at Arity due to a shift from devices to a mobile phone program. Claims and claims expense increased 19.5% or $25 million in the second quarter 2023 and increased 21.9% or $55 million in the first six months of 2023 compared to the same periods of 2022, primarily driven by growth in the business and higher severity at both Allstate Protection Plans and Allstate Dealer Services, partially offset by lower frequency at Allstate Protection Plans. Second Quarter 2023 Form 10-Q 67 Segment Results Protection Services Amortization of DAC increased 13.6% or $31 million in the second quarter of 2023 and increased 13.6% or $61 million in the first six months of 2023 compared to the same periods of 2022, driven by revenue growth at both Allstate Protection Plans and Allstate Dealer Services. Operating costs and expenses increased 2.3% or $5 million in the second quarter of 2023 and increased 1.9% or $8 million in the first six months of 2023 compared to the same periods of 2022, primarily due to growth at Allstate Protection Plans. 68 www.allstate.com Allstate Health and Benefits Segment Results Allstate Health and Benefits Segment Effective January 1, 2023, we adopted the FASB guidance revising the accounting for certain long-duration insurance contracts in the Allstate Health and Benefits segment using the modified retrospective approach at the transition date of January 1, 2021. See Note 1 of the condensed consolidated financial statements for further information regarding the impact of the adopted accounting standard on our condensed consolidated financial statements. Summarized financial information Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Revenues Accident and health insurance premiums and contract charges $ 453 $ 465 $ 916 $ 933 Other revenue 101 92 202 187 Net investment income 21 16 40 33 Costs and expenses Accident, health and other policy benefits (258) (265) (523) (533) Amortization of DAC (34) (35) (75) (74) Operating costs and expenses (210) (185) (413) (387) Restructuring and related charges — (2) (4) (2) Income tax expense on operations (16) (19) (30) (33) Adjusted net income $ 57 $ 67 $ 113 $ 124 Benefit ratio (1) 55.0 55.1 55.2 55.3 Employer voluntary benefits (2) 3,736 3,832 Group health (3) 131 115 Individual health (4) 406 421 Policies in force as of June 30 (in thousands) 4,273 4,368 (1) Benefit ratio is calculated as accident, health and other policy benefits less interest credited to contractholder funds of $9 million for both the three months ended June 30, 2023 and 2022, and $17 million for both the six months ended June 30, 2023 and 2022, divided by premiums and contract charges. (2) Employer voluntary benefits include supplemental life and health products offered through workplace enrollment. (3) Group health includes health products and administrative services sold to employers. (4) Individual health includes short-term medical and other health products sold directly to individuals. Adjusted net income decreased $10 million in the second quarter of 2023 and decreased $11 million in the first six months of 2023 compared to the same periods of 2022, primarily due to a decline in employer voluntary benefits and individual health, partially offset by growth in group health. Premiums and contract charges decreased 2.6% or $12 million in the second quarter of 2023 and decreased 1.8% or $17 million in the first six months of 2023 compared to the same periods of 2022, primarily due to a decline in individual health and employer voluntary benefits, partially offset by growth in group health. Premiums and contract charges by line of business Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Employer voluntary benefits $ 245 $ 257 $ 500 $ 520 Group health 110 95 217 189 Individual health 98 113 199 224 Premiums and contract charges $ 453 $ 465 $ 916 $ 933 Other revenue increased $9 million in the second quarter of 2023 and increased $15 million in the first six months of 2023 compared to the same periods of 2022, primarily due to an increase in group health administrative fees. Accident, health and other policy benefits decreased 2.6% or $7 million in the second quarter of 2023 and decreased 1.9% or $10 million in the first six months of 2023 compared to the same periods of 2022, primarily due to lower benefit utilization in group and individual health, partially offset by increased contract benefits for employer voluntary benefits and growth in group health. Second Quarter 2023 Form 10-Q 69 Segment Results Allstate Health and Benefits Accident, health and other policy benefits include changes in the reserve for future policy benefits, expected development on reported claims, and reserves for incurred but not reported claims as shown in Note 9. Benefit ratio decreased 0.1 points to 55.0 in the second quarter of 2023 compared to 55.1 in the second quarter of 2022. Benefit ratio decreased 0.1 points to 55.2 in the first six months of 2023 compared to 55.3 in the same period of 2022. Amortization of DAC decreased 2.9% or $1 million in the second quarter of 2023 and increased 1.4% or $1 million in the first six months of 2023 compared to the same periods of 2022. Operating costs and expenses Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Non-deferrable commissions $ 78 $ 72 $ 157 $ 153 General and administrative expenses 132 113 256 234 Total operating costs and expenses $ 210 $ 185 $ 413 $ 387 Operating costs and expenses increased $25 million in the second quarter of 2023 and increased $26 million in the first six months of 2023 compared to the same periods of 2022, primarily due to growth in group health. 70 www.allstate.com Investments Investments Portfolio composition and strategy by reporting segment (1) June 30, 2023 ($ in millions) Property-Liability Protection Services Allstate Health and Benefits Corporate and Other Total Fixed income securities (2) $ 40,034 $ 1,785 $ 1,579 $ 2,152 $ 45,550 Equity securities (3) 1,490 178 46 576 2,290 Mortgage loans, net 711 — 112 — 823 Limited partnership interests 8,135 — — 15 8,150 Short-term investments (4) 4,462 165 120 390 5,137 Other investments, net 1,594 — 121 3 1,718 Total $ 56,426 $ 2,128 $ 1,978 $ 3,136 $ 63,668 Percent to total 88.6 % 3.4 % 3.1 % 4.9 % 100.0 % Market-based $ 47,003 $ 2,128 $ 1,978 $ 3,133 $ 54,242 Performance-based 9,423 — — 3 9,426 Total $ 56,426 $ 2,128 $ 1,978 $ 3,136 $ 63,668 (1) Balances reflect the elimination of related party investments between segments. (2) Fixed income securities are carried at fair value. Amortized cost, net for these securities was $42.05 billion, $1.90 billion, $1.73 billion, $2.23 billion and $47.90 billion for Property-Liability, Protection Services, Allstate Health and Benefits, Corporate and Other, and in total, respectively. (3) Equity securities are carried at fair value. The fair value of equity securities held as of June 30, 2023, was $59 million in excess of cost. These net gains were primarily concentrated in the technology, banking and consumer goods sectors. Equity securities include $1.09 billion of funds with underlying investments in fixed income securities as of June 30, 2023. (4) Short-term investments are carried at fair value. Investments totaled $63.67 billion as of June 30, 2023, increasing from $61.83 billion as of December 31, 2022, primarily due to higher fixed income and equity valuations and positive operating cash flows, partially offset by dividends paid to shareholders and common share repurchases. Portfolio composition by investment strategy We utilize two primary strategies to manage risks and returns and to position our portfolio to take advantage of market opportunities while attempting to mitigate adverse effects. As strategies and market conditions evolve, the asset allocation may change. Market-based strategy seeks to deliver predictable earnings aligned to business needs and provide flexibility to adjust investment risk profile based on enterprise objectives and market opportunities primarily through public and private fixed income investments and public equity securities. Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity, including infrastructure investments, and real estate with a majority being limited partnerships. These investments include investee level expenses, reflecting asset level operating expenses on directly held real estate and other consolidated investments. Portfolio composition by investment strategy June 30, 2023 ($ in millions) Market- based Performance-based Total Fixed income securities $ 45,458 $ 92 $ 45,550 Equity securities 1,850 440 2,290 Mortgage loans, net 823 — 823 Limited partnership interests 164 7,986 8,150 Short-term investments 5,137 — 5,137 Other investments, net 810 908 1,718 Total $ 54,242 $ 9,426 $ 63,668 Percent to total 85.2 % 14.8 % 100.0 % Unrealized net capital gains and losses Fixed income securities $ (2,353) $ (1) $ (2,354) Short-term investments (1) — (1) Other (2) — (2) Total $ (2,356) $ (1) $ (2,357) Second Quarter 2023 Form 10-Q 71 Investments Fixed income securities Fixed income securities by type Fair value as of ($ in millions) June 30, 2023 December 31, 2022 U.S. government and agencies $ 7,729 $ 7,898 Municipal 6,840 6,210 Corporate 28,954 26,263 Foreign government 1,044 957 Asset-backed securities (“ABS”) 983 1,157 Total fixed income securities $ 45,550 $ 42,485 Fixed income securities are rated by third-party credit rating agencies or are internally rated. The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”) evaluates the fixed income securities of insurers for regulatory reporting and capital assessment purposes. The NAIC assigns securities to one of six credit quality categories defined as “NAIC designations”. In general, securities with NAIC designations of 1 and 2 are considered investment grade and securities with NAIC designations of 3 through 6 are considered below investment grade. The rating is either received from the SVO based on availability of applicable ratings from rating agencies on the NAIC Nationally Recognized Statistical Rating Organizations (“NRSRO”) provider list, including Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”), Fitch Ratings (“Fitch”), or a comparable internal rating. As a result of time lags between the funding of investments, the finalization of legal documents, and the completion of the SVO filing process, the portfolio includes certain securities that have not yet been designated by the SVO as of each balance sheet date and the categorization of these securities is based on the expected ratings indicated by internal analysis . As of June 30, 2023, 91.2% of the consolidated fixed income securities portfolio was rated investment grade. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Our initial investment decisions and ongoing monitoring procedures for fixed income securities are based on a due diligence process which includes, but is not limited to, an assessment of the credit quality, sector, structure, and liquidity risks of each issuer. Fixed income portfolio monitoring is a comprehensive process to identify and evaluate each fixed income security that may require a credit loss allowance. The process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. For further detail on our fixed income portfolio monitoring process, see Note 4 of the condensed consolidated financial statements. 72 www.allstate.com Investments The following table presents total fixed income securities by the applicable NAIC designation and comparable S&P rating. Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating June 30, 2023 NAIC 1 NAIC 2 NAIC 3 A and above BBB BB ($ in millions) Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) U.S. government and agencies $ 7,729 $ (228) $ — $ — $ — $ — Municipal 6,730 (222) 101 (9) 7 1 Corporate Public 6,264 (245) 14,059 (904) 758 (66) Privately placed 1,773 (105) 2,927 (217) 1,605 (138) Total corporate 8,037 (350) 16,986 (1,121) 2,363 (204) Foreign government 1,043 (31) 1 — — — ABS 917 (16) 14 (1) 9 (1) Total fixed income securities $ 24,456 $ (847) $ 17,102 $ (1,131) $ 2,379 $ (204) NAIC 4 NAIC 5-6 Total B CCC and lower Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) Fair value Unrealized gain (loss) U.S. government and agencies $ — $ — $ — $ — $ 7,729 $ (228) Municipal — — 2 1 6,840 (229) Corporate Public 158 (12) — — 21,239 (1,227) Privately placed 1,263 (120) 147 (40) 7,715 (620) Total corporate 1,421 (132) 147 (40) 28,954 (1,847) Foreign government — — — — 1,044 (31) ABS 1 — 42 (1) 983 (19) Total fixed income securities $ 1,422 $ (132) $ 191 $ (40) $ 45,550 $ (2,354) Municipal bonds , including tax-exempt and taxable securities, include general obligations of state and local issuers and revenue bonds. Corporate bonds include publicly traded and privately placed securities. Privately placed securities primarily consist of corporate issued senior debt securities that are negotiated with the borrower or are issued by public entities in unregistered form. ABS includes collateralized debt obligations, consumer and other ABS. Credit risk is managed by monitoring the performance of the underlying collateral. Many of the securities in the ABS portfolio have credit enhancement with features such as overcollateralization, subordinated structures, reserve funds, guarantees or insurance. ABS also includes residential mortgage-backed securities and commercial mortgage back securities. Equity securities of $2.29 billion primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments. Mortgage loans of $823 million mainly comprise loans secured by first mortgages on developed commercial real estate. Key considerations used to manage our exposure include property type and geographic diversification. For further detail on our mortgage loan portfolio, see Note 4 of the condensed consolidated financial statements. Limited partnership interests include $6.92 billion of interests in private equity funds, $1.06 billion of interests in real estate funds and $164 million of interests in other funds as of June 30, 2023. We have commitments to invest additional amounts in limited partnership interests totaling $2.74 billion as of June 30, 2023. Other investments include $667 million of bank loans, net, and $825 million of direct investments in real estate as of June 30, 2023. Second Quarter 2023 Form 10-Q 73 Investments Unrealized net capital gains (losses) June 30, December 31, ($ in millions) 2023 2022 U.S. government and agencies $ (228) $ (225) Municipal (229) (290) Corporate (1,847) (2,299) Foreign government (31) (40) ABS (19) (31) Fixed income securities (2,354) (2,885) Short-term investments (1) (1) Derivatives (2) (3) Equity method of accounting (“EMA”) limited partnerships — 2 Unrealized net capital gains and losses, pre-tax $ (2,357) $ (2,887) Gross unrealized gains (losses) on fixed income securities by type and sector ($ in millions) Amortized cost, net Gross unrealized Fair value Gains Losses June 30, 2023 Corporate Banking (1) $ 4,078 $ 5 $ (223) $ 3,860 Basic industry 975 3 (65) 913 Capital goods 2,506 6 (155) 2,357 Communications 2,806 3 (216) 2,593 Consumer goods (cyclical and non-cyclical) 6,824 16 (418) 6,422 Financial services 2,233 3 (154) 2,082 Energy 2,660 5 (124) 2,541 Technology 2,956 7 (237) 2,726 Transportation 1,027 1 (58) 970 Utilities 4,373 14 (211) 4,176 Other 363 — (49) 314 Total corporate fixed income portfolio 30,801 63 (1,910) 28,954 U.S. government and agencies 7,957 3 (231) 7,729 Municipal 7,069 34 (263) 6,840 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 Corporate Banking $ 5,153 $ 16 $ (314) $ 4,855 Basic industry 1,019 2 (75) 946 Capital goods 2,288 3 (197) 2,094 Communications 2,422 1 (261) 2,162 Consumer goods (cyclical and non-cyclical) 5,984 6 (531) 5,459 Financial services 2,243 4 (176) 2,071 Energy 2,364 2 (156) 2,210 Technology 3,137 4 (298) 2,843 Transportation 959 1 (73) 887 Utilities 2,633 7 (203) 2,437 Other 360 — (61) 299 Total corporate fixed income portfolio 28,562 46 (2,345) 26,263 U.S. government and agencies 8,123 6 (231) 7,898 Municipal 6,500 36 (326) 6,210 Foreign government 997 — (40) 957 ABS 1,188 4 (35) 1,157 Total fixed income securities $ 45,370 $ 92 $ (2,977) $ 42,485 (1) As of June 30, 2023, we have exposure of approximately $115 million to regional banks primarily through investment grade corporate bonds. 74 www.allstate.com Investments Gross unrealized losses are related to an increase in market yields which may include increased risk-free interest rates and wider credit spreads since the time of initial purchase. Similarly, gross unrealized gains reflect a decrease in market yields since the time of initial purchase. Equity securities by sector June 30, 2023 December 31, 2022 ($ in millions) Cost Over (under) cost Fair value Cost Over (under) cost Fair value Banking $ 39 $ 33 $ 72 $ 135 $ 56 $ 191 Basic Industry 14 2 16 57 16 73 Capital Goods 88 (31) 57 196 3 199 Energy 45 1 46 110 44 154 Funds Equities 228 2 230 904 (19) 885 Fixed income 1,157 (68) 1,089 1,067 (84) 983 Other — — — 3 — 3 Total funds 1,385 (66) 1,319 1,974 (103) 1,871 Utilities 59 (10) 49 67 12 79 Transportation 24 16 40 48 19 67 Other (1) 577 114 691 1,666 267 1,933 Total equity securities $ 2,231 $ 59 $ 2,290 $ 4,253 $ 314 $ 4,567 (1) As of June 30, 2023, other is generally comprised of consumer goods, technology, REITs, financial services and communications sectors. Net investment income Three months ended June 30, Six months ended June 30, ($ in millions) 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 Investee level expenses (18) (14) (35) (30) Securities lending expense (22) (3) (43) (3) Operating costs and expenses (31) (39) (68) (74) Total investment expense (71) (56) (146) (107) Net investment income $ 610 $ 562 $ 1,185 $ 1,156 Property-Liability $ 544 $ 506 $ 1,053 $ 1,064 Protection Services 18 12 34 21 Allstate Health and Benefits 21 16 40 33 Corporate and Other 27 28 58 38 Net investment income $ 610 $ 562 $ 1,185 $ 1,156 Market-based $ 538 $ 369 $ 1,046 $ 694 Performance-based 143 249 285 569 Investment income, before expense $ 681 $ 618 $ 1,331 $ 1,263 Net investment income increased $48 million and $29 million in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to higher market-based results driven by reinvesting into fixed income securities with higher yields and to a lesser extent, the reinvestment of proceeds from sales of equity securities into fixed income securities, partially offset by lower performance-based results, mainly from limited partnerships. Second Quarter 2023 Form 10-Q 75 Investments Performance-based investment income Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Private equity $ 112 $ 129 $ 217 $ 377 Real estate 31 120 68 192 Total performance-based income before investee level expenses $ 143 $ 249 $ 285 $ 569 Investee level expenses (1) (16) (13) (32) (27) Total performance-based income $ 127 $ 236 $ 253 $ 542 (1) Investee level expenses include asset level operating expenses on directly held real estate and other consolidated investments reported in investment expense. Performance-based investment income decreased $109 million and $289 million in the second quarter and first six months of 2023, respectively, compared to the same periods of 2022, primarily due to lower valuation increases and lower net gains on the sales of underlying investments. Performance-based investment results and income can vary significantly between periods and are influenced by economic conditions, equity market performance, comparable public company earnings multiples, capitalization rates, operating performance of the underlying investments and the timing of asset sales. The Company typically employs a lag in recording and recognizing changes in valuations of limited partnership interests due to the availability of investee financial statements. Components of net gains (losses) on investments and derivatives and the related tax effect Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Sales $ (130) $ (303) $ (250) $ (430) Credit losses (37) (13) (49) (24) Valuation change of equity investments - appreciation (decline): Equity securities 26 (508) 174 (855) Equity fund investments in fixed income securities (5) (128) 14 (128) Limited partnerships (1) 2 (53) 33 (153) Total valuation of equity investments 23 (689) 221 (1,136) Valuation change and settlements of derivatives (7) 272 (59) 590 Net gains (losses) on investments and derivatives, pre-tax (151) (733) (137) (1,000) Income tax benefit 35 160 29 216 Net gains (losses) on investments and derivatives, after-tax $ (116) $ (573) $ (108) $ (784) Property-Liability $ (104) $ (517) $ (98) $ (678) Protection Services (3) (23) (4) (33) Allstate Health and Benefits 1 (10) 3 (15) Corporate and Other (10) (23) (9) (58) Net gains (losses) on investments and derivatives, after-tax $ (116) $ (573) $ (108) $ (784) Market-based $ (124) $ (778) $ (127) $ (1,082) Performance-based (27) 45 (10) 82 Net gains (losses) on investments and derivatives, pre-tax $ (151) $ (733) $ (137) $ (1,000) (1) Relates to limited partnerships where the underlying assets are predominately public equity securities. Net losses on investments and derivatives in the second quarter of 2023 related primarily to losses on sales and credit losses, partially offset by higher valuation on equity investments. Net losses in the first six months of 2023 related primarily to losses on sales and valuation change and settlements of derivatives, partially offset by higher valuation on equity investments. Net losses on sales in the second quarter and first six months of 2023 related primarily to sales of fixed income securities in connection with ongoing portfolio management. Net losses on valuation change and settlements of derivatives were $7 million and $59 million in the second quarter and first six months of 2023, respectively. Losses in the second quarter of 2023 primarily related to net losses on equity futures used to mitigate impacts to equity exposure, partially offset by net gains on rate futures used to manage duration. Losses in the first six months of 2023 primarily related to losses on credit default swaps used to reduce credit risk, net losses on equity futures used to mitigate impacts to equity exposure and losses on interest rate futures used to manage duration. 76 www.allstate.com Investments Net gains (losses) on performance-based investments and derivatives Three months ended June 30, Six months ended June 30, ($ in millions) 2023 2022 2023 2022 Sales $ (5) $ 27 $ 3 $ 50 Credit losses (24) (3) (27) (7) Valuation change of equity investments 6 (16) 25 (5) Valuation change and settlements of derivatives (4) 37 (11) 44 Total performance-based $ (27) $ 45 $ (10) $ 82 Net losses on performance-based investments and derivatives in the second quarter of 2023 primarily related to increased credit losses from limited partnerships. Net losses on performance-based investments and derivatives in the first six months of 2023 primarily related to increased credit losses from limited partnerships and decreased valuation change and settlements of derivatives, partially offset by increased valuation of equity investments. Second Quarter 2023 Form 10-Q 77 Capital Resources and Liquidity Capital Resources and Liquidity Capital resources consist of shareholders’ equity and debt, representing funds deployed or available to be deployed to support business operations or for general corporate purposes. Capital resources ($ in millions) June 30, 2023 December 31, 2022 Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items $ 17,431 $ 19,880 Accumulated other comprehensive loss (1,914) (2,392) Total Allstate shareholders’ equity 15,517 17,488 Debt 7,949 7,964 Total capital resources $ 23,466 $ 25,452 Ratio of debt to Allstate shareholders’ equity 51.2 % 45.5 % Ratio of debt to capital resources 33.9 31.3 Allstate shareholders’ equity decreased in the first six months of 2023, primarily due to a net loss, dividends paid to shareholders and common share repurchases, partially offset by lower unrealized net capital losses on investments. In the six months ended June 30, 2023, we paid dividends of $459 million and $53 million related to our common and preferred shares, respectively. Repayment of debt On March 29, 2023, the Company repaid, at maturity, $250 million of Floating Rate Senior Notes that bear interest at a floating rate equal to three-month London Interbank Offered Rate (“LIBOR”) plus 0.63% per year. On June 15, 2023, the Company repaid, at maturity, $500 million of 3.15% Senior Notes. Issuance of debt On March 31, 2023, the Company issued $750 million of 5.250% Senior Notes due 2033. 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 $500 million senior debt maturity and for general corporate purposes. Debt maturities Debt maturities for each of the next five years and thereafter (excluding issuance costs and other) ($ in millions) 2024 $ 350 2025 600 2026 550 2027 — 2028 — Thereafter 6,491 Total long-term debt principal $ 7,991 Redemption of preferred stock On April 17, 2023, the Company redeemed all 23,000 shares of Fixed Rate Noncumulative Preferred Stock, Series G, par value $1.00 per share and liquidation preference $25,000 per share, and the corresponding depositary shares for a total redemption payment of $575 million. The Company recognized $18 million of original issuance costs in preferred stock dividends on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Shareholders’ Equity. Issuance of preferred stock On May 18, 2023, the Company issued 24,000 shares of Fixed Rate Noncumulative Preferred Stock, Series J, par value $1.00 per share and liquidation preference amount of $25,000 per share, and the corresponding depositary shares for gross proceeds of $600 million. The preferred stock is perpetual and has no maturity date. The preferred stock is redeemable at the Company’s option in whole or in part, on or after July 15, 2028 at a redemption price of $25,000 per share, plus declared and unpaid dividends. Prior to July 15, 2028, the preferred stock is redeemable at the Company’s option, in whole but not in part, within 90 days of the occurrence of certain rating agency events at a redemption price equal to $25,500 per share, plus declared and unpaid dividends, or in whole but not in part, within 90 days after the occurrence of a regulatory capital event, at a redemption price equal to $25,000 per share, plus declared and unpaid dividends. Common share repurchases As of June 30, 2023, there was $495 million remaining in the $5.00 billion common share repurchase program. In July, we suspended repurchasing shares under the current authorization. The authorization for the share repurchase program expires in March 2024. During the first six months of 2023, we repurchased 2.6 million common shares, or 1.0% of total common shares outstanding at December 31, 2022, for $307 million. Common shareholder dividends On January 3, 2023 and April 3, 2023, we paid a common shareholder dividend of $0.85 and $0.89, respectively. On May 22, 2023, we declared a common shareholder dividend of $0.89 payable on July 3, 2023. Financial ratings and strength Our ratings are influenced by many factors including our operating and financial performance, asset quality, liquidity, overall portfolio mix, financial leverage (i.e., debt), exposure to risks such as catastrophes and the current level of operating leverage. The preferred stock and subordinated debentures are viewed as having a common equity component by certain rating agencies and are given equity credit up to a pre-determined limit in our capital structure as determined by their 78 www.allstate.com Capital Resources and Liquidity respective methodologies. These respective methodologies consider the existence of certain terms and features in the instruments such as the noncumulative dividend feature in the preferred stock. In March 2023, Moody’s affirmed the A3 and P-2 senior debt and short-term issuer ratings of The Allstate Corporation (the “Corporation”) and the Aa3 insurance financial strength ratings of Allstate Insurance Company (“AIC”). The rating outlook for Allstate was changed from stable to negative. In March 2023, A.M. Best placed under review with negative implications the B+ insurance financial strength rating of the members of Castle Key Group (Castle Key Insurance Company, Castle Key Indemnity Company, Encompass Floridian Insurance Company, Encompass Floridian Indemnity Company). In May 2023, S&P affirmed the Corporation’s debt and short-term issuer ratings of A- and A-2, respectively, and the insurance financial strength rating of AA- for AIC. The outlook for the ratings is negative. Liquidity sources and uses We actively manage our financial position and liquidity levels in light of changing market, economic and business conditions. Liquidity is managed at both the entity and enterprise level across the Company and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across the Company to enhance flexibility. The Corporation is party to an Amended and Restated Intercompany Liquidity Agreement (“Liquidity Agreement”) with certain subsidiaries, which includes, but is not limited to AIC. The Liquidity Agreement allows for short-term advances of funds to be made between parties for liquidity and other general corporate purposes. The Liquidity Agreement does not establish a commitment to advance funds on the part of any party. AIC serves as a lender and borrower, certain other subsidiaries serve only as borrowers, and the Corporation serves only as a lender. The maximum amount of potential funding under each of these agreements is $1.00 billion. In addition to the Liquidity Agreement, the Corporation also has an intercompany loan agreement with certain of its subsidiaries, which includes, but is not limited to, AIC. The amount of intercompany loans available to the Corporation’s subsidiaries is at the discretion of the Corporation. The maximum amount of loans the Corporation will have outstanding to all its eligible subsidiaries at any given point in time is limited to $1.00 billion. The Corporation may use commercial paper borrowings, bank lines of credit and securities lending to fund intercompany borrowings. Parent company capital capacity At the parent holding company level, we have deployable assets totaling $3.28 billion as of June 30, 2023, primarily comprised of cash and investments that are generally saleable within one quarter. The earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation. As of June 30, 2023, we held $15.32 billion of cash, U.S. government and agencies fixed income securities, public equity securities, and short-term investments, which we would expect to be able to liquidate within one week. Intercompany dividends of $40 million were paid from American Heritage Life Insurance Company to Allstate Financial Insurance Holdings Corporation in the first six months of 2023. Based on the greater of 2022 statutory net income or 10% of statutory surplus, the maximum amount of dividends that AIC will be able to pay, without prior Illinois Department of Insurance approval, at a given point in time through February 2024, is estimated at $1.22 billion, less dividends paid during the preceding twelve months measured at that point in time. As of June 30, 2023, no dividends have been paid. Dividends may not be paid or declared on our common stock and shares of common stock may not be repurchased unless the full dividends for the latest completed dividend period on our preferred stock have been declared and paid or provided for. The terms of our outstanding subordinated debentures also prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions. In the first six months of 2023, we did not defer interest payments on the subordinated debentures. Additional resources to support liquidity are as follows: • The Corporation and AIC have access to a $750 million unsecured revolving credit facility that is available for short-term liquidity requirements. The maturity date of this facility is November 2027. The facility is fully subscribed among 11 lenders with the largest commitment being $95 million. The commitments of the lenders are several and no lender is responsible for any other lender’s commitment if such lender fails to make a loan under the facility. This facility contains an increase provision that would allow up to an additional $500 million of borrowing, subject to the lenders’ commitment. This facility has a financial covenant requiring that we not exceed a 37.5% debt to capitalization ratio as defined in the agreement. This ratio was 24.4% as of June 30, 2023. Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior unsecured, unguaranteed long-term debt. There were no borrowings under the credit facility during 2023. • To cover short-term cash needs, the Corporation has access to a commercial paper facility with a Second Quarter 2023 Form 10-Q 79 Capital Resources and Liquidity borrowing capacity limited to any undrawn credit facility balance up to $750 million. • As of June 30, 2023, there were no balances outstanding for the credit facility or the commercial paper facility and therefore the remaining borrowing capacity was $750 million. • The Corporation has access to a universal shelf registration statement with the Securities and Exchange Commission that expires in 2024. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 638 million shares of treasury stock as of June 30, 2023), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of trust subsidiaries. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements. 80 www.allstate.com Forward-Looking Statements This report contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe exposure management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation and reserves. We believe that these statements are based on reasonable estimates, assumptions and plans. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments. In addition, forward-looking statements are subject to certain risks or uncertainties that could cause actual results to differ materially from those communicated in these forward-looking statements. Factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements include risks related to: Insurance and Financial Services (1) unexpected increases in claim frequency and severity; (2 ) catastrophes and severe weather events; (3) limitations in analytical models used for loss cost estimates; (4) price competition and changes in regulation and underwriting standards; (5) actual claim costs exceeding current reserves; (6) market risk, inflation, and declines in credit quality of our investment portfolios; (7) our subjective determination of fair value and amount of credit losses for investments; (8) our participation in indemnification programs, including state industry pools and facilities; (9) inability to mitigate the impact associated with changes in capital requirements; (10) a downgrade in financial strength ratings; Business, Strategy and Operations (11) competition in the industries in which we compete and new or changing technologies; (12) implementation of our Transformative Growth strategy; (13) our catastrophe management strategy; (14) restrictions on our subsidiaries’ ability to pay dividends; (15) restrictions under terms of certain of our securities on our ability to pay dividends or repurchase our stock; (16) the availability of reinsurance at current levels and prices; (17) counterparty risk related to reinsurance; (18) acquisitions and divestitures of businesses; (19) intellectual property infringement, misappropriation and third-party claims; Macro, Regulatory and Risk Environment (20) conditions in the global economy and capital markets; (21) a large-scale pandemic, the occurrence of terrorism, military actions or social unrest; (22) the failure in cyber or other information security controls, as well as the occurrence of events unanticipated in our disaster recovery processes and business continuity planning; (23) changing climate and weather conditions; (24) evolving environmental, social and governance standards and expectations; (25) restrictive regulations and regulatory reforms, including limitations on rate increases and requirements to underwrite business and participate in loss sharing arrangements; (26) losses from legal and regulatory actions; (27) changes in or the application of accounting standards; (28) vendor-related business disruptions or failure of a vendor to provide and protect data, confidential and proprietary information, or personal information of our customers, claimants or employees; (29) our ability to attract, develop and retain talent; and (30) misconduct or fraudulent acts by employees, agents and third parties. Additional information concerning these and other factors may be found in our filings with the Securities and Exchange Commission, including the “Risk Factors” section in our most recent annual report on Form 10-K.