What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-01 compared with 2023-08-01 · 261 added, 242 removed, 898 unchanged (36% of the section changed)

8 unchanged sentences

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.

Macroeconomic factors have and may continue to impact the results of our operations, financial condition and liquidity, such as U.S.

government fiscal and monetary policies, banking system instability, the Russia/Ukraine and Israel/Hamas conflicts and the remaining impacts of the Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”), through longer-term impacts such as supply chain disruptions, labor shortages and other macroeconomic factors that have increased inflation.

Inflation continues 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.

These actions 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.

These factors have affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity and should be considered when comparing the current period to prior periods.

This is not inclusive of all potential impacts and should not be treated as such.

27 unchanged sentences

($ in millions)

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)%.

Consolidated net loss applicable to common shareholders was $41 million in the third quarter of 2023 compared to a loss of $685 million in the third quarter of 2022, primarily due to higher Property-Liability premiums earned and lower unfavorable prior year reserve reestimates.

Net loss was $1.78 billion in the first nine months of 2023 compared to a loss of $1.09 billion in the first nine months of 2022 primarily due to higher catastrophe losses and higher incurred losses driven by severity, partially offset by increased Property-Liability premiums earned, lower unfavorable prior year reserve reestimates and gains on equity valuations in 2023 compared to losses in 2022.

For the nine months ended September 30, 2023, return on Allstate common shareholders’ equity was (14.7)%.

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.

Total revenues increased 9.8% to $14.50 billion and increased 11.9% to $42.26 billion in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022 due to an increase of 10.1% and 10.2% in property and casualty insurance premiums earned in the third quarter and first nine months of 2023, respectively, compared to the third quarter and first nine months of 2022 and net gains on equity valuations in the first nine months of 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

Net investment income decreased $1 million to $689 million in the third quarter of 2023, primarily due to lower performance-based investment results, partially offset by higher market-based income reflecting higher fixed income portfolio yields and investment balances.

Net investment income increased $28 million to $1.87 billion in the first nine 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.

Third Quarter 2023 Form 10-Q 53

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.

Investments totaled $63.36 billion as of September 30, 2023, increasing from $61.83 billion as of December 31, 2022.

Allstate shareholders’ equity was $14.59 billion as of September 30, 2023, decreasing from $17.49 billion as of December 31, 2022, primarily due to a net loss, dividends paid to shareholders, common share repurchases, and higher 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 $47.79, a decrease of 18.2% from $58.39 as of September 30, 2022, and a decrease of 17.8% from $58.12 as of December 31, 2022.

Return on average Allstate common shareholders’ equity For the twelve months ended September 30, 2023, return on Allstate common shareholders’ equity was (14.7)%, a decrease of 13.2 points from (1.5)% for the twelve months ended September 30, 2022.

The decrease was primarily due to a net loss applicable to common shareholders for the trailing twelve-month period ending September 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 losses of $149 million in the third quarter due to lower equity and fixed income valuations from higher market yields during the quarter.

We recorded losses of $56 million in the first nine months of 2023 due to lower fixed income valuations from higher market yields, partially offset by higher equity valuations.

Summarized consolidated financial results

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

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

16 unchanged sentences

Net loss (4) (674) (1,700) (1,046)

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

Net income (loss) attributable to noncontrolling interest 1 (15) (23) (34)

Net loss attributable to Allstate (5) (659) (1,677) (1,012)

2 unchanged sentences

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.

Allstate Protection underwriting loss was $331 million in the third quarter of 2023 compared to underwriting loss of $1.17 billion in the third quarter of 2022 due to increased premiums earned and lower unfavorable non-catastrophe reserve reestimates, partially offset by higher losses.

Underwriting loss totaled $3.42 billion in the first nine months of 2023 compared to underwriting loss of $1.75 billion in the first nine months of 2022 due to higher losses primarily for auto insurance, partially offset by increased premiums and lower unfavorable reserve reestimates.

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

Catastrophe losses were $1.18 billion and $5.57 billion in the third quarter and first nine months of 2023, respectively, compared to $763 million and $2.33 billion in the third quarter and first nine months of 2022, respectively.

54 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.

Premiums written increased 10.5% to $13.30 billion and 9.9% to $37.71 billion in the third quarter and first nine 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 $27 million in the third quarter of 2023 compared to $35 million in the third quarter of 2022.

Adjusted net income was $102 million in the first nine months of 2023 compared to $131 million in the first nine months of 2022.

The decrease in both periods was due to Allstate Protection Plans higher appliance and furniture claim severity, lower margins at Allstate Dealer Services, lower third-party advertising sales at Arity and higher restructuring charges across multiple businesses, partially offset by improved margins at Allstate Roadside and lower expenses at Allstate Identity Protection.

Premiums and other revenue increased 9.5% or $56 million and 8.9% or $155 million in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022, primarily due to Allstate Protection Plans.

Allstate Health and Benefits adjusted net income was $69 million in the third quarter of 2023 compared to $63 million in the third quarter of 2022, primarily due to increases in group and individual health, partially offset by a decline in employer voluntary benefits.

Adjusted net income was $182 million in the first nine months of 2023 compared to $187 million in the first nine months of 2022, primarily due to a decline in employer voluntary benefits, partially offset by increases in group and individual health.

Premiums and contract charges were $463 million in the third quarter of 2023 and comparable to the third quarter of 2022.

Premiums and contract charges decreased 1.2% to $1.38 billion in the first nine months of 2023 compared to the same period of 2022, primarily due to a decline in individual health and employer voluntary benefits, partially offset by growth in group health.

Adopted accounting standard

14 unchanged sentences

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

Third Quarter 2023 Form 10-Q 55

Property-Liability Operations

51 unchanged sentences

Underwriting results

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

Three months ended September 30, Nine months ended September 30,

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

12 unchanged sentences

Catastrophe reserve reestimates (2)

31 51 (11) 38

Total catastrophe losses $ 1,181 $ 763 $ 5,568 $ 2,333

12 unchanged sentences

Effect of restructuring and related charges on combined ratio (1)

0.6 0.1 0.3 0.1

Effect of amortization of purchased intangibles on combined ratio 0.5 0.6 0.5 0.5

Effect of Run-off Property-Liability business on combined ratio 0.7 1.1 0.3 0.4

(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.

(1) Restructuring and related charges for the third quarter of 2023 primarily relate to implementing actions to achieve the organizational transformation component of the Transformative Growth plan designed to streamline the organization and outsource operations .

Restructuring and related charges for the first nine months of 2023 primarily relate to the organizational transformation and real estate costs related to facilities being vacated.

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

1 unchanged sentence

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

Second Quarter 2023 Form 10-Q 55

Third Quarter 2023 Form 10-Q 57

Segment Results Allstate Protection

1 unchanged sentence

Underwriting results

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

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

9 unchanged sentences

Catastrophe losses $ 1,181 $ 763 $ 5,568 $ 2,333

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.

Underwriting loss improved to $331 million in the third quarter compared to underwriting loss of $1.17 billion in the third quarter of 2022 due to increased premiums earned and lower unfavorable non-catastrophe reserve reestimates, partially offset by higher losses.

Underwriting loss was $3.42 billion in the first nine months of 2023 compared to underwriting loss of $1.75 billion in the first nine months of 2022 due to higher losses primarily for auto insurance, partially offset by increased premiums and lower unfavorable reserve reestimates.

1 unchanged sentence

($ in millions)

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

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

($ in millions)

4 unchanged sentences

($ in millions) 2023 2022 2023 2022 2023 2022

Three months ended June 30,

Three months ended September 30,

$ (75) $ (1,222) $ (103) $ (93) $ (178) $ (1,315)

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Total $ (168) $ (1,049) $ (167) $ (124) $ (331) $ (1,170)

Six months ended June 30,

Nine months ended September 30,

$ (953) $ (1,937) $ (249) $ (103) $ (1,202) $ (2,040)

17 unchanged sentences

($ in millions) 2023 2022 2023 2022 2023 2022

Three months ended June 30,

Three months ended September 30,

Auto $ 7,206 $ 6,704 $ 1,564 $ 1,156 $ 8,770 $ 7,860

4 unchanged sentences

Total premiums written $ 11,020 $ 10,304 $ 2,284 $ 1,733 $ 13,304 $ 12,037

Six months ended June 30,

Nine months ended September 30,

Auto $ 20,853 $ 19,386 $ 4,535 $ 3,506 $ 25,388 $ 22,892

4 unchanged sentences

Total premiums written $ 31,250 $ 29,201 $ 6,457 $ 5,106 $ 37,707 $ 34,307

Second Quarter 2023 Form 10-Q 57

Third Quarter 2023 Form 10-Q 59

Segment Results Allstate Protection

2 unchanged sentences

($ in millions) 2023 2022 2023 2022 2023 2022

Three months ended June 30,

Three months ended September 30,

Auto $ 6,910 $ 6,416 $ 1,435 $ 1,129 $ 8,345 $ 7,545

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Total premiums earned $ 10,215 $ 9,517 $ 2,055 $ 1,640 $ 12,270 $ 11,157

Six months ended June 30,

Nine months ended September 30,

Auto $ 20,342 $ 18,742 $ 4,032 $ 3,232 $ 24,374 $ 21,974

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Reconciliation of premiums written to premiums earned

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

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

12 unchanged sentences

Total 31,902 33,293 5,951 5,315 37,853 38,608

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:

Auto insurance premiums written increased 11.6% or $910 million in the third quarter of 2023 compared to the third quarter of 2022 and 10.9% or $2.50 billion in the first nine months of 2023 compared to the first nine 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:

Additionally, in the nine months ended September 30, 2023:

– Rate increases of 11.0% were taken for Allstate brand in 51 locations, resulting in total Allstate brand insurance premium impact of 9.5%

– Rate increases of 12.7% were taken for National General brand in 46 locations, resulting in total National General brand insurance premium impact of 8.8%

• 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

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

• PIF decreased 2.9% or 755 thousand to 25,376 thousand as of September 30, 2023 compared to September 30, 2022

• Renewal ratio decreased 2.1 and 1.9 points in the third quarter and the first nine months of 2023, respectively, compared to the third quarter and first nine 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

• The impact of the ongoing rate increases, underwriting restrictions in markets with returns below target levels and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio, premiums and future PIF growth

60 www.allstate.com

1 unchanged sentence

Auto premium measures and statistics

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

Three months ended September 30, Nine months ended September 30,

2023 2022 Change 2023 2022 Change

11 unchanged sentences

Allstate brand renewal ratio (%) 84.9 87.0 (2.1) 85.4 87.3 (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:

Homeowners insurance premiums written increased 12.1% or $380 million in the third quarter of 2023 compared to the third quarter of 2022 and increased 11.9% or $1.01 billion in the first nine months of 2023 compared to the first nine 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.

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%

• In the nine months ended September 30, 2023, rate increases of 14.4% were taken for Allstate brand in 39 locations, resulting in total Allstate brand insurance premium impact of 9.5%

• National General policy growth may be negatively impacted in future quarters as we improve underwriting margins to targeted levels in current books of business through underwriting and rate actions.

In the nine months ended September 30,

2023, rate increases of 19.5% were taken for National General brand in 22 locations, resulting in total National General brand insurance premium impact of 6.5%

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

3 unchanged sentences

Homeowners premium measures and statistics

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

Three months ended September 30, Nine months ended September 30,

2023 2022 Change 2023 2022 Change

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Allstate brand renewal ratio (%) 86.8 87.4 (0.6) 86.5 86.9 (0.4)

Second Quarter 2023 Form 10-Q 59

Other personal lines premiums written increased 11.6% or $70 million in the third quarter of 2023 compared to the third quarter of 2022 and increased 10.5% or $180 million in the first nine months of 2023 compared to the first nine 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 are taking

Third Quarter 2023 Form 10-Q 61

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.

further actions to reduce exposure in Florida, which will continue to negatively impact premiums.

Commercial lines premiums written decreased 50.9% or $145 million in the third quarter of 2023 compared to the third quarter of 2022 and decreased 35.3% or $309 million in the first nine months of 2023 compared to the first nine 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, including non-renewals in 2023.

Other business lines premiums written increased 36.9% or $52 million in the third quarter of 2023 compared to the third quarter of 2022 and increased 7.0% or $27 million in the first nine months of 2023 compared to the first nine months of 2022.

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

4 unchanged sentences

2023 2022 2023 2022 2023 2022

Three months ended June 30,

Three months ended September 30,

81.4 95.3 20.7 22.1 102.1 117.4

6 unchanged sentences

Impact of restructuring and related charges 0.6 0.1 0.6 0.1

Six months ended June 30,

Nine months ended September 30,

Auto 84.2 86.1 20.7 23.2 104.9 109.3

7 unchanged sentences

(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

2 unchanged sentences

2023 2022 2023 2022 2023 2022 2023 2022

Three months ended June 30,

Three months ended September 30,

Auto 81.4 95.3 2.6 4.4 0.4 8.4 0.1 (0.1)

4 unchanged sentences

Total 81.5 88.0 9.6 6.8 0.8 6.7 0.1 (0.1)

Six months ended June 30,

Nine months ended September 30,

Auto 84.2 86.1 2.7 2.2 0.4 4.6 (0.1) (0.3)

4 unchanged sentences

Total 88.6 82.2 15.5 7.2 0.8 4.2 — 0.1

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

(1) The ten-year average effect of catastrophe losses on the total combined ratio was 8.3 points in the third quarter of 2023.

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Allstate Protection Segment Results

Auto underwriting results

1 unchanged sentence

2023 2022 2021

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

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

Underwriting income (loss) (178) (678) (346) (974) (1,315) (578) (147) (300) (159) 394 1,327

10 unchanged sentences

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.

Auto loss ratio decreased 13.9 and 1.9 points in the third quarter and first nine 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 9% 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.

Gross claim frequency increased relative to the prior year.

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 15.0 and 30.5 points in the third quarter and first nine 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

Three months ended September 30, 2023

Gross claim frequency (4.3) %

Paid claim severity 16.0

Six months ended June 30, 2023

Nine months ended September 30, 2023

Gross claim frequency (3.0) %

Paid claim severity 12.9

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.

Gross claim frequency decreased in the third quarter and in the first nine months of 2023 compared to the same periods of 2022 due to water and fire

Paid claim severity increased in the third quarter and first nine months of 2023 compared to the same periods of 2022 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.

Other personal lines loss ratio increased 2.5 points in the third quarter of 2023 compared to the third quarter of 2022, primarily due to increased severity and higher catastrophe losses, partially offset by increased premiums earned.

Other personal lines loss ratio increased 14.0 points in the first nine months of 2023 compared to the first nine months of 2022, primarily due to higher catastrophe losses and increased severity, partially offset by increased premiums earned.

Commercial lines loss ratio decreased 18.6 and 8.8 points in the third quarter and first nine 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 decreased 7.4 points in the third quarter of 2023 compared to the third quarter of 2022, primarily due to increased premiums earned.

Other business lines loss ratio increased 6.4 points in the first nine months of 2023 compared to the first nine months of 2022, primarily due to higher non-catastrophe losses and unfavorable prior year reserve reestimates.

Catastrophe losses increased $418 million to $1.18 billion in the third quarter of 2023 compared to the third quarter of 2022 and increased $3.24 billion to $5.57 billion in the first nine months of 2023 compared to the first nine months of 2022 primarily related to an increased number of wind/hail events and larger losses per event.

The catastrophe losses for the first nine months of 2023 represent the highest level for the period in the Company’s history.

Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes.

Third Quarter 2023 Form 10-Q 63

Segment Results Allstate Protection

We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest, wildfires or industrial accidents.

3 unchanged sentences

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.

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.

1 unchanged sentence

Catastrophe losses by the type of event

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

Three months ended September 30, Nine months ended September 30,

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

Hurricanes/tropical storms 3 $ 76 1 $ 378 3 $ 76 1 $ 378

Tornadoes — — — — 3 133 3 148

4 unchanged sentences

Prior year aggregate reinsurance recoveries

— (10) — (10)

Prior quarter reserve reestimates (214) (71) — —

Total catastrophe losses 53 $ 1,181 37 $ 763 123 $ 5,568 91 $ 2,333

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

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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.

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 reinsurance Our current catastrophe reinsurance program supports the Company’s risk framework which is intended to provide our shareholders with an acceptable return on the risks assumed in our property business, and to reduce variability of earnings, while providing protection to our customers.

This framework incorporates our robust economic capital model and is informed by catastrophe risk models including hurricanes, earthquakes and wildfires and adjusts based on premium and insured value growth.

Our reinsurance agreements are part of our capital models and our catastrophe management strategy.

As of September 30, 2023, our risk framework supports an aggregate catastrophe loss of approximately $2.5 billion, net of reinsurance.

We continually review our aggregate risk appetite and the cost and availability of reinsurance to optimize the risk and return profile of this exposure.

The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the third quarter and first nine months of 2023 was $268 million and $729 million, respectively, compared to $211 million and $528 million in the third quarter and first nine 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.

Prior year reserve reestimates Unfavorable reserve reestimates, including catastrophes, were $101 million and $296 million in the third quarter and the first nine months of 2023, respectively, primarily due to National General personal auto lines 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.

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Allstate Protection Segment Results

Prior year reserve reestimates

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

Three months ended September 30, Nine months ended September 30,

Prior year reserve

16 unchanged sentences

(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.

Expense ratio decreased 1.3 and 2.3 points in the third quarter and the first nine months of 2023, respectively, compared to the third quarter and the first nine months of 2022, primarily due to higher earned premium growth relative to fixed costs, and lower advertising, agent and employee-related costs, partially offset by higher restructuring costs.

Impact of specific costs and expenses on the expense ratio

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

Three months ended September 30, Nine months ended September 30,

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

14 unchanged sentences

Total expense ratio 21.2 22.5 (1.3) 20.9 23.2 (2.3)

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Run-off Property-Liability Segment Results

Third Quarter 2023 Form 10-Q 65

Segment Results Run-off Property-Liability

Run-off Property-Liability Segment

Underwriting results

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

($ in millions) Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

Claims and claims expense

Asbestos claims

$ (44) $ (34) $ (44) $ (34)

Environmental claims

(18) (56) (18) (56)

Other run-off lines (20) (30) (23) (34)

Total claims and claims expense

(82) (120) (85) (124)

Operating costs and expenses (1) (2) (3) (3)

1 unchanged sentence

$ (83) $ (122) $ (88) $ (127)

Annual reserve review In the third quarter of 2023 and 2022, we performed our annual reserve review using established industry and actuarial best practices.

The annual review resulted in unfavorable reserve reestimates totaling $80 million and $118 million in 2023 and 2022, respectively.

The reserve reestimates are included as part of claims and claims expense.

The reserve reestimates in 2023 primarily related to new reported information and defense costs for asbestos and other run-off exposures and higher than expected environmental reported losses.

The reserve reestimates in 2022 primarily related to new reported information and defense costs for

asbestos and higher than expected reported losses for environmental and other run-off exposures.

We believe that our reserves are appropriately established based on available facts, technology, laws, regulations, and assessments of other pertinent factors and characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment.

However, as we progress with the resolution of disputed claims in the courts and arbitrations and with negotiations and settlements, our reported losses may be more variable.

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

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

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

Asbestos claims

13 unchanged sentences

Net reserves $ 1,477 $ 1,451

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Run-off Property-Liability Segment Results

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

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

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

Direct excess commercial insurance

22 unchanged sentences

Net reserves $ 1,477 $ 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

September 30, 2023 December 31, 2022

Case IBNR Case IBNR

8 unchanged sentences

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.

(1) Approximately 68% and 64% of gross case reserves as of September 30, 2023 and December 31, 2022, respectively, are subject to settlement agreements.

(2) Approximately 72% and 70% of ceded case reserves as of September 30, 2023 and December 31, 2022, respectively, are subject to settlement agreements.

Third Quarter 2023 Form 10-Q 67

Segment Results Run-off Property-Liability

Gross payments from case reserves by type of exposure

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

($ in millions) Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

6 unchanged sentences

Ceded — — — (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.

(1) In the third quarter and first nine months of 2023, 82% and 84% of payments related to settlement agreements, respectively, compared to 75% and 82% of the third quarter and first nine months of 2022, respectively.

(2) In the third quarter and first nine months of 2023, 56% and 77% of payments related to settlement agreements, respectively, compared to 88% and 90% of the third quarter and first nine months of 2022, respectively.

Total net reserves as of September 30, 2023, included $766 million or 52% of estimated IBNR reserves compared to $765 million or 53% of estimated IBNR reserves as of December 31, 2022.

Total gross payments were $20 million and $73 million for the third quarter and first nine months of 2023, respectively, compared to $25 million and $66 million for the third quarter and first nine months of 2022, respectively.

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

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.

Reinsurance collections were $6 million and $30 million for the third quarter and first nine months of 2023, respectively, compared to $6 million and $27 million for the third quarter and first nine months of 2022, respectively.

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2 unchanged sentences

Summarized financial information

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

($ in millions) Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

3 unchanged sentences

Intersegment insurance premiums and service fees (1)

34 39 102 118

Net investment income 19 13 53 34

17 unchanged sentences

Allstate Identity Protection 2,965 2,968

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

Policies in force as of September 30 (in thousands) 147,980 142,079

(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

Adjusted net income decreased 22.9% or $8 million in the third quarter of 2023 and decreased 22.1% or $29 million in the first nine months of 2023 compared to the same periods of 2022, due to Allstate Protection Plans higher appliance and furniture claim severity, lower margins at Allstate Dealer Services, lower third-party advertising sales at Arity and higher restructuring charges across multiple businesses, partially offset by improved margins at Allstate Roadside and lower expenses at Allstate Identity Protection.

Premiums written increased 0.2% or $1 million in the third quarter of 2023 compared to the third quarter of 2022, primarily due to growth at Allstate Protection Plans, partially offset by a decrease at Allstate Dealer Services.

Premiums written decreased 1.1% or $22 million in the first nine months of 2023 compared to the same period of 2022, primarily due to a decrease at Allstate Dealer Services and lower rescue volumes at Allstate Roadside, partially offset by growth at Allstate Protection Plans.

PIF increased 4.2% or 6 million as of September 30, 2023 compared to September 30, 2022 due to an increase at Allstate Protection Plans.

Other revenue decreased 10.7% or $9 million in the third quarter of 2023 and decreased 9.7% or $26 million in the first nine 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 12.8% or $5 million in the third quarter of 2023 and decreased 13.6% or $16 million in the first nine 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 lower cost mobile phone program.

Third Quarter 2023 Form 10-Q 69

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.

Claims and claims expense increased 17.7% or $25 million in the third quarter 2023 and increased 20.4% or $80 million in the first nine 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.

Amortization of DAC increased 14.0% or $33 million in the third quarter of 2023 and increased 13.7% or $94 million in the first nine 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 5.1% or $11 million in the third quarter of 2023 and increased 2.9% or $19 million in the first nine months of 2023 compared to the same periods of 2022, primarily due to growth at Allstate Protection Plans, partially offset by lower expenses at Arity.

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4 unchanged sentences

Summarized financial information

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

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

14 unchanged sentences

Individual health (4)

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.

Policies in force as of September 30 (in thousands) 4,256 4,320

(1) Benefit ratio is calculated as accident, health and other policy benefits less interest credited to contractholder funds of $8 million for both the three months ended September 30, 2023 and 2022, and $25 million for both the nine months ended September 30, 2023 and 2022, divided by premiums and contract charges.

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

1 unchanged sentence

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

Adjusted net income decreased $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.

Adjusted net income increased $6 million in the third quarter of 2023 compared to the third quarter of 2022 primarily due to increases in group and individual health, partially offset by a decline in employer voluntary benefits.

Adjusted net income decreased $5 million in the first nine months of 2023 compared to the first nine months of 2022, primarily due to a decline in employer voluntary benefits, partially offset by increases in group and individual health.

Premiums and contract charges in the third quarter of 2023 were comparable to the third quarter of 2022.

Premiums and contract charges decreased 1.2% or $17 million in the first nine months of 2023 compared to the first nine months 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,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

3 unchanged sentences

Premiums and contract charges $ 463 $ 463 $ 1,379 $ 1,396

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

Other revenue increased $14 million in the third quarter of 2023 and increased $29 million in the first nine 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 increased 4.0% or $10 million in the third quarter of 2023 compared to the third quarter of 2022, primarily due to higher benefit utilization and growth in group health, partially offset by decreased contract benefits for individual health and employer voluntary benefits.

Accident, health and other policy benefits in the first

Third Quarter 2023 Form 10-Q 71

Segment Results Allstate Health and Benefits

nine months of 2023 were comparable to the first nine months of 2022.

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.

Benefit ratio increased 2.2 points to 54.9 in the third quarter of 2023 compared to 52.7 in the third quarter of 2022 primarily due to higher benefit

utilization in group health.

Benefit ratio increased 0.7 points to 55.1 in the first nine months of 2023 compared to 54.4 in the same period of 2022.

Amortization of DAC increased 18.2% or $6 million in the third quarter of 2023 and increased 6.5% or $7 million in the first nine months of 2023 compared to the same periods of 2022 primarily due to accelerated amortization related to large account terminations, partially offset by a reduction in policy benefits.

Operating costs and expenses

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

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

2 unchanged sentences

Total operating costs and expenses $ 197 $ 207 $ 610 $ 594

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.

Operating costs and expenses decreased $10 million in the third quarter of 2023 compared to the third quarter of 2022, primarily due to lower non-deferrable commissions.

Operating costs and expenses increased $16 million in the first nine months of 2023 compared to the first nine months of 2022, primarily due to growth in group health and investments in the business.

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Portfolio composition and strategy by reporting segment (1)

June 30, 2023

September 30, 2023

($ in millions) Property-Liability Protection Services

19 unchanged sentences

(3) Equity securities are carried at fair value.

The fair value of equity securities held as of 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.

The fair value of equity securities held as of September 30, 2023, was $26 million in excess of cost.

These net gains were primarily concentrated in the technology and banking.

Equity securities include $1.28 billion of funds with underlying investments in fixed income securities as of September 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.

Investments totaled $63.36 billion as of September 30, 2023, increasing from $61.83 billion as of December 31, 2022, primarily due to positive operating cash flows, partially offset by dividends paid to shareholders and common share repurchases and lower fixed income valuations.

Portfolio composition by investment strategy We utilize two primary strategies to manage risks and returns and to position our portfolio to take advantage of market opportunities while attempting to mitigate adverse effects.

As strategies and market conditions evolve, the asset allocation may change.

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

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

Market-based strategy seeks to deliver predictable earnings aligned to business needs and provide flexibility to adjust investment risk profile based on enterprise objectives and market opportunities primarily through public and private fixed income investments and public equity securities.

Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk primarily through investments in private equity, including infrastructure investments, and real estate with a majority being limited partnerships.

These investments include investee level expenses, reflecting asset level operating expenses on directly held real estate and other consolidated investments.

Investments in the Middle East As of September 30, 2023, we have approximately $47 million investment exposure in the Middle East, of which approximately $42 million is held in Israel, which is primarily indirect exposure through foreign funds managed by external asset managers.

Third Quarter 2023 Form 10-Q 73

Portfolio composition by investment strategy

June 30, 2023

September 30, 2023

($ in millions) Market-

10 unchanged sentences

Fixed income securities $ (3,206) $ (2) $ (3,208)

Limited partnership interests — (1) (1)

Short-term investments (1) — (1)

1 unchanged sentence

Total $ (3,209) $ (3) $ (3,212)

Second Quarter 2023 Form 10-Q 71

Fixed income securities

1 unchanged sentence

Fair value as of

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

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

government and agencies $ 8,245 $ 7,898

10 unchanged sentences

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.

As of September 30, 2023, 91.4% of the consolidated fixed income securities portfolio was rated investment grade.

Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds.

7 unchanged sentences

Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating

June 30, 2023

September 30, 2023

NAIC 1 NAIC 2 NAIC 3

25 unchanged sentences

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.

ABS also includes residential mortgage-backed securities and commercial mortgage-backed securities.

Equity securities of $2.42 billion primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments.

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

Limited partnership interests include $6.92 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

Limited partnership interests include $7.09 billion of interests in private equity funds, $1.10 billion of interests in real estate funds and $168 million of interests in other funds as of September 30, 2023.

We have commitments to invest additional amounts in limited partnership interests totaling $2.71 billion as of September 30, 2023.

Other investments include $679 million of bank loans, net, and $700 million of direct investments in real estate as of September 30, 2023.

Third Quarter 2023 Form 10-Q 75

Unrealized net capital gains (losses)

June 30, December 31,

September 30, December 31,

($ in millions) 2023 2022

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Foreign government (61) (40)

ABS (19) (31)

Fixed income securities (3,208) (2,885)

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Gross unrealized Fair

June 30, 2023

September 30, 2023

$ 4,228 $ 1 $ (242) $ 3,987

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

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

(1) As of September 30, 2023, we have exposure of approximately $85 million to regional banks primarily through investment grade corporate bonds.

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Equity securities by sector

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

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

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Total equity securities $ 2,393 $ 26 $ 2,419 $ 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.

(1) As of September 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,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

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Investment income, before expense $ 771 $ 754 $ 2,102 $ 2,017

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

Net investment income decreased $1 million in the third quarter of 2023 compared to the same period of 2022, primarily due to lower performance-based investment results, partially offset by higher market-based income reflecting higher fixed income portfolio yields and investment balances.

Net investment income increased $28 million in the first nine months of 2023 compared to the same period 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.

Third Quarter 2023 Form 10-Q 77

Performance-based investment income

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

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

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(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.

Performance-based investment income decreased $149 million and $438 million in the third quarter and first nine months of 2023, respectively, compared to the same periods of 2022, primarily due to 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,

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

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(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.

Net losses on investments and derivatives in the third quarter of 2023 related primarily to losses on sales of fixed income securities.

Net losses in the first nine months of 2023 related primarily to losses on sales, partially offset by higher valuation on equity investments.

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

Net gains on valuation change and settlements of derivatives of $31 million in the third quarter of 2023 primarily related to gains on foreign currency contracts due to the strengthening of the U.S.

dollar and net gains on equity futures used to manage equity exposure, and net gains on rate futures used to manage duration.

Net losses on valuation change and settlements of derivatives of $28 million in the first nine months of 2023 primarily related to losses on credit default swaps used to reduce credit risk, and net losses on interest rate futures used to manage duration.

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

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

Three months ended September 30, Nine months ended September 30,

($ in millions) 2023 2022 2023 2022

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Total performance-based $ 80 $ (11) $ 70 $ 71

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

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

Third Quarter 2023 Form 10-Q 79

Capital Resources and Liquidity

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Capital resources

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

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

Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items $ 17,163 $ 19,880

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Ratio of debt to capital resources 35.3 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.

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

In the nine months ended September 30, 2023, we paid dividends of $692 million and $71 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.

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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.

Common share repurchases As of September 30, 2023, there was $472 million remaining in the $5.00 billion common share repurchase program.

In July 2023, 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.

During the first nine months of 2023, we repurchased 2.8 million common shares, or 1.1% of total common shares outstanding at December 31, 2022, for $330 million.

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

On July 14, 2023, we declared a common shareholder dividend of $0.89 payable on October 2, 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

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

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Capital Resources and Liquidity

respective methodologies.

limit in our capital structure as determined by their respective methodologies.

These respective methodologies consider the existence of certain terms and features in the instruments such as the noncumulative dividend feature in the preferred stock.

In 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.

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

The outlook for the ratings was changed from stable to negative.

In August 2023, A.M.

Best downgraded the Corporation’s senior debt and short-term issuer ratings to a- and AMB-1, respectively, and affirmed AIC’s insurance financial strength rating of A+.

The outlook for the ratings is stable.

In August 2023, A.M.

Best downgraded the insurance financial strength ratings of the members of Castle Key Group (Castle Key Insurance Company, Castle Key Indemnity Company, Encompass Floridian Insurance Company, Encompass Floridian Indemnity Company) to B.

The outlook for the ratings changed from negative to stable.

In August 2023, A.M.

Best affirmed the insurance financial strength rating of A of the members of Allstate New Jersey Group (Allstate New Jersey Insurance Company, Allstate New Jersey Property and Casualty Insurance Company, Encompass Insurance Company of New Jersey, Encompass Property and Casualty Insurance Company of New Jersey, Esurance Insurance Company of New Jersey).

The outlook for the rating changed from stable to negative.

In August 2023, S&P downgraded the Corporation’s senior debt rating and AIC’s insurance financial strength rating to BBB+ and A+, respectively, and affirmed the Corporation’s short-term issuer rating of A-2.

The outlook for the ratings changed from negative to stable.

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

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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.

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.

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

Parent company capital capacity At the parent holding company level, we have deployable assets totaling $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.

Parent company capital capacity At the parent holding company level, we have deployable assets totaling $2.92 billion as of September 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 September 30, 2023, we held $14.36 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.

Intercompany dividends were paid in the first nine months of 2023 between the following companies:

American Heritage Life Insurance Company (“AHL”), Allstate Financial Insurance Holdings Corporation (“AFIHC”) and the Corporation.

Intercompany dividends

($ in millions)

AHL to AFIHC $ 40

AFIHC to the Corporation 40

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.

In the first nine months of 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.

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

Additional resources to support liquidity are as follows:

Third Quarter 2023 Form 10-Q 81

Capital Resources and Liquidity

• The Corporation and AIC have access to a $750 million unsecured revolving credit facility that is available for short-term liquidity requirements.

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This facility has a financial covenant requiring that we not exceed a 37.5% debt to capitalization ratio as defined in the agreement.

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

This ratio was 24.6% as of September 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.

• To cover short-term cash needs, the Corporation has access to a commercial paper facility with a borrowing capacity limited to any undrawn credit facility balance up to $750 million.

• As of September 30, 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.

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 September 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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis