Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)


($ in millions)	Three months ended September 30,					Nine months ended September 30,				($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2017		2016			2017		2016
	(unaudited)					(unaudited)
($ in millions)										($ in millions)	2021		2020		2021		2020
	$	666	$	520		$	1,940	$	1,037		$	531	$	1,153	$	775	$	2,952

Other comprehensive income, after-tax
Other comprehensive (loss) income, after-tax										Other comprehensive (loss) income, after-tax
Changes in:										Changes in:
Unrealized net capital gains and losses	125		193			598		1,197		Unrealized net capital gains and losses	(336)		142		(1,352)		857
Unrealized foreign currency translation adjustments	28		(7		)	36		12		Unrealized foreign currency translation adjustments	(21)		25		10		(5)
Unrecognized pension and other postretirement benefit cost	73		21			110		48
Other comprehensive income, after-tax	226		207			744		1,257
Unamortized pension and other postretirement prior service credit										Unamortized pension and other postretirement prior service credit	(15)		38		(44)		31
Other comprehensive (loss) income, after-tax										Other comprehensive (loss) income, after-tax	(372)		205		(1,386)		883

Comprehensive income	$	892	$	727		$	2,684	$	2,294
Comprehensive income (loss)										Comprehensive income (loss)	159		1,358		(611)		3,835
Less: Comprehensive loss attributable to noncontrolling interest										Less: Comprehensive loss attributable to noncontrolling interest	(7)		—		(8)		—
Comprehensive income (loss) attributable to Allstate										Comprehensive income (loss) attributable to Allstate	$	166	$	1,358	$	(603)	$	3,835

See notes to condensed consolidated financial statements.

2www.allstate.com

2 ~~www.allstate.com~~

Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Financial Position (unaudited)

($ in millions, except par value data) September 30, 2017 December 31, 2016
Assets (unaudited)
Investments

Fixed income securities, at fair value (amortized cost $57,608 and $56,576) $ 59,391
$ 57,839
Equity securities, at fair value (cost $5,468 and $5,157) 6,434
5,666
Mortgage loans 4,322
4,486
Limited partnership interests 6,600
5,814
Short-term, at fair value (amortized cost $2,198 and $4,288) 2,198
4,288
Other 3,826
3,706
Total investments 82,771
81,799
Cash 690
436
Premium installment receivables, net 5,922
5,597
Deferred policy acquisition costs 4,147
3,954
Reinsurance recoverables, net 9,748
8,745
Accrued investment income 590
567
Property and equipment, net 1,067
1,065
Goodwill 2,309
1,219
Other assets 2,966
1,835
Separate Accounts 3,422
3,393
Total assets $ 113,632
$ 108,610
Liabilities

Reserve for property-liability insurance claims and claims expense $ 27,154
$ 25,250
Reserve for life-contingent contract benefits 12,227
12,239
Contractholder funds 19,650
20,260
Unearned premiums 13,535
12,583
Claim payments outstanding 959
879
Deferred income taxes 1,249
487
Other liabilities and accrued expenses 6,968
6,599
Long-term debt 6,349
6,347
Separate Accounts 3,422
3,393
Total liabilities 91,513
88,037
Commitments and Contingent Liabilities (Note 11)

Shareholders’ equity

Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 72.2 thousand shares issued and outstanding, and $1,805 aggregate liquidation preference 1,746
1,746
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 360 million and 366 million shares outstanding 9
9
Additional capital paid-in 3,330
3,303
Retained income 42,125
40,678
Deferred ESOP expense (6 ) (6 )
Treasury stock, at cost (540 million and 534 million shares) (25,413 ) (24,741 )
Accumulated other comprehensive income:

Unrealized net capital gains and losses:

Unrealized net capital gains and losses on fixed income securities with OTTI 68
57
Other unrealized net capital gains and losses 1,715
1,091
Unrealized adjustment to DAC, DSI and insurance reserves (132 ) (95 )
Total unrealized net capital gains and losses 1,651
1,053
Unrealized foreign currency translation adjustments (14 ) (50 )
Unrecognized pension and other postretirement benefit cost (1,309 ) (1,419 )
Total accumulated other comprehensive income (loss) 328
(416 )
Total shareholders’ equity 22,119
20,573
Total liabilities and shareholders’ equity $ 113,632
$ 108,610


($ in millions, except par value data)	September 30, 2021		December 31, 2020
Assets
Investments
Fixed income securities, at fair value (amortized cost, net $38,811 and $40,034)	$	39,989	$	42,565
Equity securities, at fair value (cost $2,939 and $2,740)	3,807		3,168
Mortgage loans, net	752		746
Limited partnership interests	7,578		4,563
Short-term, at fair value (amortized cost $6,428 and $6,807)	6,428		6,807
Other, net	3,286		1,691
Total investments	61,840		59,540
Cash	690		311
Premium installment receivables, net	8,406		6,463
Deferred policy acquisition costs	4,600		3,774
Reinsurance and indemnification recoverables, net	10,442		7,215
Accrued investment income	339		371
Property and equipment, net	965		1,057
Goodwill	3,389		2,369
Other assets, net	5,966		2,756

Assets held for sale	36,803		42,131
Total assets	$	133,440	$	125,987
Liabilities
Reserve for property and casualty insurance claims and claims expense	$	33,286	$	27,610
Reserve for future policy benefits	1,263		1,028
Contractholder funds	863		857
Unearned premiums	19,627		15,946
Claim payments outstanding	1,179		957
Deferred income taxes	711		382
Other liabilities and accrued expenses	9,403		7,840
Long-term debt	7,980		7,825

Liabilities held for sale	32,421		33,325
Total liabilities	106,733		95,770
Commitments and Contingent Liabilities (Note 13)	0		0
Equity
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 81.0 thousand shares issued and outstanding, $2,025 aggregate liquidation preference	1,970		1,970
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 288 million and 304 million shares outstanding	9		9
Additional capital paid-in	3,700		3,498
Retained income	52,736		52,767

Treasury stock, at cost (612 million and 596 million shares)	(33,604)		(31,331)
Accumulated other comprehensive income:



Unrealized net capital gains and losses	1,828		3,180
Unrealized foreign currency translation adjustments	3		(7)
Unamortized pension and other postretirement prior service credit	87		131
Total accumulated other comprehensive income (“AOCI”)	1,918		3,304
Total Allstate shareholders’ equity	26,729		30,217
Noncontrolling interest	(22)		—
Total equity	26,707		30,217
Total liabilities and equity	$	133,440	$	125,987

See notes to condensed consolidated financial statements.

~~The Allstate Corporation~~

Third Quarter 2021 Form 10-Q 3

~~The Allstate Corporate and Subsidiaries~~

Condensed Consolidated Financial Statements ~~of Shareholders’ Equity~~

($ in millions) Nine months ended September 30,
2017 2016
(unaudited)
Preferred stock par value $ —
$ —

Preferred stock additional capital paid-in 1,746
1,746

Common stock 9
9

Additional capital paid-in

Balance, beginning of period 3,303
3,245
Forward contract on accelerated share repurchase agreement —
(37 )
Equity incentive plans activity 27
29
Balance, end of period 3,330
3,237

Retained income

Balance, beginning of period 40,678
39,413
Net income 1,940
1,037
Dividends on common stock (406 ) (373 )
Dividends on preferred stock (87 ) (87 )
Balance, end of period 42,125
39,990

Deferred ESOP expense (6 ) (13 )

Treasury stock

Balance, beginning of period (24,741 ) (23,620 )
Shares acquired (845 ) (1,094 )
Shares reissued under equity incentive plans, net 173
177
Balance, end of period (25,413 ) (24,537 )

Accumulated other comprehensive income

Balance, beginning of period (416 ) (755 )
Change in unrealized net capital gains and losses 598
1,197
Change in unrealized foreign currency translation adjustments 36
12
Change in unrecognized pension and other postretirement benefit cost 110
48
Balance, end of period 328
502
Total shareholders’ equity $ 22,119
$ 20,934

~~See notes to condensed consolidated financial statements.~~

4 ~~www.allstate.com~~

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of ~~Cash Flows~~Shareholders’ Equity (unaudited)


($ in millions, except per share data)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020




Preferred stock par value	$	—	$	—	$	—	$	—

Preferred stock additional capital paid-in
Balance, beginning of period	2,170		1,970		1,970		2,248
Acquisition	—		—		450		—

Preferred stock redemption	(200)		—		(450)		(278)
Balance, end of period	1,970		1,970		1,970		1,970

Common stock par value	9		9		9		9

Common stock additional capital paid-in
Balance, beginning of period	3,668		3,541		3,498		3,463
Forward contract on accelerated share repurchase agreement	—		(113)		113		(38)
Equity incentive plans activity	32		25		89		28
Balance, end of period	3,700		3,453		3,700		3,453

Retained income
Balance, beginning of period	52,464		49,380		52,767		48,074
Cumulative effect of change in accounting principle	—		—		—		(88)
Net income	538		1,153		782		2,952
Dividends on common stock (declared per share of $0.81, $0.54, $2.43 and $1.62)	(236)		(170)		(726)		(513)
Dividends on preferred stock	(30)		(27)		(87)		(89)


Balance, end of period	52,736		50,336		52,736		50,336






Treasury stock
Balance, beginning of period	(32,394)		(30,542)		(31,331)		(29,746)
Shares acquired	(1,227)		(798)		(2,390)		(1,700)
Shares reissued under equity incentive plans, net	17		2		117		108
Balance, end of period	(33,604)		(31,338)		(33,604)		(31,338)

Accumulated other comprehensive income
Balance, beginning of period	2,290		2,628		3,304		1,950

Change in unrealized net capital gains and losses	(336)		142		(1,352)		857
Change in unrealized foreign currency translation adjustments	(21)		25		10		(5)
Change in unamortized pension and other postretirement prior service credit	(15)		38		(44)		31


Balance, end of period	1,918		2,833		1,918		2,833
Total Allstate shareholders’ equity	26,729		27,263		26,729		27,263

Noncontrolling interest
Balance, beginning of period	(15)		—		—		—
Acquisition	—		—		(14)		—
Change in unrealized net capital gains and losses	—		—		(1)		—
Noncontrolling loss	(7)		—		(7)		—
Balance, end of period	(22)		—		(22)		—

Total equity	$	26,707	$	27,263	$	26,707	$	27,263

($ in millions) Nine months ended September 30,
2017 2016
Cash flows from operating activities (unaudited)
Net income $ 1,940
$ 1,037
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization and other non-cash items 358
285
Realized capital gains and losses (318 ) 92
Gain on disposition of operations (15 ) (4 )
Interest credited to contractholder funds 522
558
Changes in:

Policy benefits and other insurance reserves 1,276
978
Unearned premiums 525
540
Deferred policy acquisition costs (176 ) (159 )
Premium installment receivables, net (267 ) (236 )
Reinsurance recoverables, net (1,017 ) (420 )
Income taxes 119
30
Other operating assets and liabilities 267
41
Net cash provided by operating activities 3,214
2,742
Cash flows from investing activities

Proceeds from sales

Fixed income securities 19,508
19,132
Equity securities 5,179
4,069
Limited partnership interests 767
634
Other investments 170
206
Investment collections

Fixed income securities 3,038
3,430
Mortgage loans 477
403
Other investments 458
281
Investment purchases

Fixed income securities (23,935 ) (22,282 )
Equity securities (5,296 ) (4,113 )
Limited partnership interests (1,082 ) (1,128 )
Mortgage loans (311 ) (460 )
Other investments (700 ) (674 )
Change in short-term investments, net 2,257
94
Change in other investments, net (28 ) (60 )
Purchases of property and equipment, net (216 ) (190 )
Acquisition of operations (1,356 ) —
Net cash used in investing activities (1,070 ) (658 )
Cash flows from financing activities

Repayments of long-term debt —
(16 )
Contractholder fund deposits 767
785
Contractholder fund withdrawals (1,416 ) (1,537 )
Dividends paid on common stock (391 ) (364 )
Dividends paid on preferred stock (87 ) (87 )
Treasury stock purchases (848 ) (1,154 )
Shares reissued under equity incentive plans, net 132
123
Excess tax benefits on share-based payment arrangements —
25
Other (47 ) 35
Net cash used in financing activities (1,890 ) (2,190 )
Net increase (decrease) in cash 254
(106 )
Cash at beginning of period 436
495
Cash at end of period $ 690
$ 389

See notes to condensed consolidated financial statements.

4www.allstate.com

Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)


($ in millions)	Nine months ended September 30,
	2021		2020
Cash flows from operating activities
Net income	$	775	$	2,952

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and other non-cash items	818		500
Realized capital (gains) losses	(1,011)		(682)

Pension and other postretirement remeasurement (gains) losses	(404)		320
Amortization of deferred gain on reinsurance	(5)		(3)
Interest credited to contractholder funds	396		482

Loss on disposition of operations, net of tax	3,754		—
Changes in:
Policy benefits and other insurance reserves	2,375		(73)
Unearned premiums	1,490		710
Deferred policy acquisition costs	(492)		(55)
Premium installment receivables, net	(606)		(153)
Reinsurance recoverables, net	(1,973)		121
Income taxes	31		(617)
Other operating assets and liabilities	(903)		670

Net cash provided by operating activities	4,245		4,172
Cash flows from investing activities
Proceeds from sales
Fixed income securities	22,610		25,567
Equity securities	3,151		7,544
Limited partnership interests	574		991

Other investments	696		209
Investment collections
Fixed income securities	1,965		1,676
Mortgage loans	747		278
Other investments	421		158
Investment purchases
Fixed income securities	(22,682)		(31,743)
Equity securities	(1,790)		(3,882)
Limited partnership interests	(927)		(796)
Mortgage loans	(97)		(197)
Other investments	(1,470)		(299)
Change in short-term and other investments, net	854		(515)
Purchases of property and equipment, net	(286)		(235)

Acquisition of operations, net of cash acquired	(3,481)		1
Other	4		—
Net cash provided by (used in) investing activities	289		(1,243)
Cash flows from financing activities

Redemption and repayment of long-term debt	(422)		—

Redemption of preferred stock	(450)		(288)
Contractholder fund deposits	741		749
Contractholder fund withdrawals	(1,036)		(1,151)
Dividends paid on common stock	(650)		(500)
Dividends paid on preferred stock	(87)		(82)
Treasury stock purchases	(2,257)		(1,737)
Shares reissued under equity incentive plans, net	108		54

Other	(12)		58
Net cash used in financing activities	(4,065)		(2,897)
Net increase in cash, including cash classified as assets held for sale	469		32
Cash from continuing operations at beginning of period	311		273
Cash classified as assets held for sale at beginning of period	66		65
Less: Cash classified as assets held for sale at end of period	156		66
Cash from continuing operations at end of period	$	690	$	304

See notes to condensed consolidated financial statements.

Third Quarter 2021 Form 10-Q 5

Notes to Condensed Consolidated Financial Statements

The Allstate Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)


Note 1			General

Basis of presentation

The accompanying condensed consolidated financial statements include the accounts of The Allstate Corporation (the “Corporation”) and its wholly owned subsidiaries, primarily Allstate Insurance Company (“AIC”), a ~~property-liability~~property and casualty insurance company with various ~~property-liability~~property and casualty and life and investment subsidiaries ~~including Allstate Life Insurance Company (“ALIC”)~~ (collectively referred to as the “Company” or “Allstate”). and variable interest entities in which the Company is considered a primary beneficiary. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The condensed consolidated financial statements and notes as of September 30, ~~2017~~2021 and for the ~~three-month~~three and ~~nine-month~~nine month periods ended September 30, ~~2017~~2021 and ~~2016~~2020 are unaudited. The condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods.

These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s ~~Annual Report~~annual report on Form 10-K for the year ended December 31, ~~2016.~~2020. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. All significant intercompany accounts and transactions have been eliminated.

The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”)

The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures have moderated in 2021 as vaccines have become more widely available in the United States and Canada. There is no way of predicting with certainty how long the pandemic might last. The Company continues to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to its operations, but the effects have been and could be material.

Adopted accounting standards

~~Employee Share-Based Payment~~Simplifications to the Accounting

for Income TaxesEffective January 1, ~~2017,~~2021, the Company adopted new Financial Accounting Standards Board (“FASB”) guidance ~~that amends~~which simplified the accounting for share-based payments on a prospective basis. Under the new guidance, reporting entities are required to recognize all tax effects related to share-based payments at settlement or expiration through the income ~~statement~~taxes by eliminating certain exceptions and ~~the requirement to delay recognition of~~clarifying certain tax benefits until they reduce current taxes payable is eliminated. The new guidance also permits employers to withhold shares issued in connection with an employee’s exercise of options or the settlement of stock awards, up to the employee’s maximum individual statutory tax rate, to meet tax withholding requirements without causing liability classification of the award. In addition, all tax-related cash flows resulting from share-based payments are reported as operating activities on the statement of cash flows whereas cash payments made to taxing authorities on an employee’s behalf for withheld shares are presented as financing activities.guidance. The adoption ~~of this guidance~~ had noan immaterial impact on the Company’s results of operations orand financial ~~position on~~position.

Changes to the ~~date of adoption.~~

~~Transition to Equity Method Accounting~~

Disclosure Requirements for Defined Benefit PlansEffective January 1, ~~2017,~~2021, the Company adopted new FASB guidance ~~amending the accounting~~to modify certain annual disclosure requirements for ~~transitioning~~defined benefit plans. New disclosures include the weighted-average interest crediting rates for cash balance plans and other plans with interest crediting rates and explanations for significant gains and losses related to changes in the benefit obligation during the reporting period. Disclosures to be eliminated include amounts expected to be reclassified out of AOCI and into the income statement in the coming year and the anticipated impact of a one-percentage point change in the assumed health care cost trend rate on service and interest cost and on the accumulated benefit obligation. The impacts of adoption are to the Company’s annual disclosures only.

Significant accounting policies

Consolidation of Variable Interest Entities (“VIEs”)A VIE is a legal entity that does not have sufficient equity ~~method of accounting (“EMA”), including a transition from~~at risk to finance its activities without additional financial support or is structured such that equity investors lack the ~~cost method. The guidance requires the cost of acquiring an additional interest in an investee~~ability to ~~be added~~make significant decisions relating to the ~~existing carrying value to establish~~entity’s operations through voting rights or do not participate in the ~~initial basis~~gains and losses of the ~~EMA investment. Under~~entity. The Company consolidates VIEs in which the ~~new guidance, no retroactive adjustment~~Company is ~~required when an investment initially qualifies for EMA treatment.~~deemed the primary beneficiary. The ~~guidance~~primary beneficiary is ~~applied prospectively~~the entity that has both (1) the obligation to ~~investments~~absorb losses or the right to receive benefits that ~~qualify for EMA after application~~could be potentially significant to the VIE and (2) the power to direct the activities of the VIE that most significantly affect that entity’s economic performance.

Discontinued Operations and Held for Sale
A business is classified as held for sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value and certain other criteria are met. A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost ~~method~~to sell. When the carrying amount of ~~accounting. Accordingly,~~ the ~~adoption of this guidance had no impact on the Company’s~~business exceeds its estimated fair value less cost to sell, a loss is recognized and updated each reporting period as appropriate.

6www.allstate.com

Notes to Condensed Consolidated Financial Statements

The results of operations orof business classified as held for sale are reported as discontinued operations if the disposal represents a strategic shift that will have a major effect on the entity’s operations and financial ~~position.~~results. The disposal of a reportable segment generally qualifies for discontinued operations presentation.

When a business is identified for discontinued operations reporting:

•Results for prior periods are retrospectively reclassified as discontinued operations

•Results of operations are reported in a single line, net of tax, in the Condensed Consolidated Statements of Operations

•Assets and liabilities are reported as held for sale in the Condensed Consolidated Statements of Financial Position in the period in which the business is classified as held for sale

Additional details by major classification of operating results and financial position are included in Note 3.

Pending accounting standards

~~Revenue from Contracts with Customers~~

In May 2014, the FASB issued guidance which revises the criteria for revenue recognition. Insurance contracts are excluded from the scope of the new guidance. Under the guidance, the transaction price is attributed to underlying performance obligations in the contract and revenue is recognized as the entity satisfies the performance obligations and transfers control of a good or service to the customer. Incremental costs of obtaining a contract may be capitalized to the extent the entity expects to recover those costs. The guidance is effective for reporting periods beginning after December 15, 2017 and is to be applied retrospectively. The Company’s principal activities impacted by the standard are those related to the issuance of protection plans for consumer products and automobiles and service contracts that provide roadside assistance. The impacts include an increase in deferred revenue with a corresponding increase in deferred costs for protection plans that are sold directly to retailers for which Allstate is deemed to be the principal in the transaction. The anticipated impacts of this adjustment offset and will not impact net income, but result in an increase in unearned premiums and deferred policy acquisition costs of approximately $145 million to $175 million, pre-tax. The Company also anticipates impacts related to recognizing revenue for SquareTrade based on expected losses, accounting for variable consideration and the deferral of certain costs associated with acquiring service contracts that provide roadside

6 ~~www.allstate.com~~

assistance, the net impact of which is not expected to materially reduce shareholders’ equity at the date of adoption. Based on the Company’s assessment, the total impact of adoption will not be material to the Company’s results of operations or financial position.

~~Recognition and Measurement of Financial Assets and Financial Liabilities~~

In January 2016, the FASB issued guidance requiring equity investments, including equity securities and limited partnership interests, that are not accounted for under the equity method of accounting or result in consolidation to be measured at fair value with changes in fair value recognized in net income. Equity investments without readily determinable fair values may be measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. When a qualitative assessment of equity investments without readily determinable fair values indicates that impairment exists, the carrying value is required to be adjusted to fair value, if lower. The guidance clarifies that an entity should evaluate the realizability of a deferred tax asset related to available-for-sale fixed income securities in combination with the entity’s other deferred tax assets. The guidance also changes certain disclosure requirements. The guidance is effective for interim and annual periods beginning after December 15, 2017, and is to be applied through a cumulative-effect adjustment to beginning retained income which results in no impact to the Company’s results of operations at the date of adoption. The new guidance related to equity investments without readily determinable fair values is applied prospectively as of the date of adoption. The most significant anticipated impacts, using values as of September 30, 2017, relate to the change in accounting for equity securities, where $966 million of pre-tax unrealized net capital gains would be reclassified from accumulated other comprehensive income to retained income, and cost method limited partnership interests (excluding limited partnership interests accounted for on a cost recovery basis), where the carrying value of these investments would increase by approximately $200 million, pre-tax, with the offsetting after-tax adjustment recognized in retained income. The after-tax change in accounting for equity securities will not affect the Company’s shareholders’ equity and the unrealized net capital gains reclassified to retained income will never be recognized in net income. The after-tax change in accounting for cost method limited partnerships, if adopted at the end of this reporting period, would increase the Company’s shareholders’ equity, while also decreasing net income return on shareholders’ equity. The amount by which the fair value of cost method limited partnerships exceeds their carrying value will never be recognized in net income.

Accounting for ~~Leases~~

Long-Duration Insurance ContractsIn ~~February 2016,~~August 2018, the FASB issued guidance revising the accounting for ~~leases.~~ certain long-duration insurance contracts. As disclosed in Note 3, the Company sold substantially all of its life and annuity business in scope of the new standard. The Company’s reserves and deferred policy acquisition costs (“DAC”) for certain voluntary and individual life and accident and health insurance products not held for sale are subject to the new guidance.

Under the new guidance, ~~lessees~~measurement assumptions, including those for mortality, morbidity and policy terminations, will be required to ~~recognize a right-of-use asset~~be reviewed at least annually, and ~~lease liability for all leases~~updated as appropriate. The effects of updating assumptions other than ~~those that meet~~ the ~~definition of~~discount rate are required to be measured on a short-term lease. The lease liability will be equal to the present value of lease payments. A right-of-use asset will be based on the lease liability adjusted for qualifying initial direct costs. The expense of operating leasesretrospective basis and reported in net income. In addition, reserves under the new guidance ~~will~~are required to be ~~recognized~~discounted using an upper-medium grade fixed income instrument yield that is updated through other comprehensive income (“OCI”) at each reporting date. Current GAAP requires the measurement of reserves to utilize assumptions set at policy issuance unless updated current assumptions indicate that recorded reserves are deficient.

The new guidance also requires DAC and other capitalized balances currently amortized in the income statement on a straight-line basis after combining the lease expense components (interest expense on the lease liability and amortization of the right-of-use asset) over the term of the lease. For finance leases, the expense components are computed separately and produce greater up-front expense comparedproportion to ~~operating leases as interest expense on the lease liability is higher in early years and the right-of-use asset is~~premiums or gross profits to be amortized on a ~~straight-line basis. Lease classification~~constant level basis over the expected term for all long-duration insurance contracts. DAC will not be subject to loss recognition testing but will be ~~based on criteria similar to those currently applied.~~ reduced when actual lapse experience exceeds expected experience.

The accounting model for lessors will be similar to the current model with modifications to reflect definition changes for components such as initial direct costs. Lessors will continue to classify leases as operating, direct financing, or sales-type. Thenew guidance is effective for financial statements issued for reporting periods beginning after December 15, ~~2018 using a modified retrospective approach~~2022 and restatement of prior periods presented is required. The new guidance will be applied atto affected contracts and DAC on the ~~beginning~~basis of existing carrying amounts at the earliest period presented.

The Company is ~~in the process of~~ evaluating the anticipated impacts of applying the new guidance to both retained income and AOCI and does not anticipate the financial statement impact of ~~adoption, which is not expected~~adopting the new guidance to be material to the Company’s results of operations or financial ~~position.~~

~~Measurement of Credit Losses on Financial Instruments~~

In June 2016, the FASB issued guidance which revises the credit loss recognition criteria for certain financial assets measured at amortized cost, including reinsurance recoverables. The new guidance replaces the existing incurred loss recognition model with an expected loss recognition model. The objective of the expected credit loss model is for the reporting entity to recognize its estimate of expected credit losses for affected financial assets in a valuation allowance deducted from the amortized cost basis of the related financial assets that results in presenting the net carrying value of the financial assets at the amount expected to be collected. The reporting entity must consider all available relevant information when estimating expected credit losses, including details about past events, current conditions, and reasonable and supportable forecasts over the life of an asset. Financial assets may be evaluated individually or on a pooled basis when they share similar risk characteristics. The measurement of credit losses for available-for-sale debt securities measured at fair value is not affected except that credit losses recognized are limitedposition due to the ~~amount by which fair value is below amortized cost~~dispositions of Allstate Life Insurance Company and the carrying value adjustment is recognized through a valuation allowance and not as a direct write-down. The guidance is effective for interim and annual periods beginning after December 15, 2019, and for most affected instruments must be adopted using a modified retrospective approach, with a cumulative effect adjustment recordedAllstate Life Insurance Company of New York.

Third Quarter 2021 Form 10-Q 7

Notes to ~~beginning retained income. The Company is in the process of evaluating the impact of adoption.~~Condensed Consolidated Financial Statements

~~Goodwill Impairment~~

In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment which removes the second step of the goodwill impairment test that requires a hypothetical purchase price allocation. Under the new guidance, goodwill


Note 2			Earnings per Common Share

~~The Allstate Corporation~~ 7

impairment will be measured and recognized as the amount by which a reporting unit’s carrying value, including goodwill, exceeds its fair value, not to exceed the carrying amount of goodwill allocated to the reporting unit. The revised guidance does not affect a reporting entity’s ability to first assess qualitative factors by reporting unit to determine whether to perform the quantitative goodwill impairment test. The guidance is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted. The guidance is to be applied on a prospective basis, with the effects, if any, recognized in net income in the period of adoption. The impact to the Company upon adoption is dependent upon the excess, if any, of carrying value of the Company’s reporting units, including goodwill, over their respective fair values, a measure that is not currently determinable.

~~Presentation of Net Periodic Pension and Postretirement Benefits Costs~~

In March 2017, the FASB issued guidance to improve the presentation of net periodic pension and postretirement benefits costs that requires the service cost component to be reported in operating expenses together with other employee compensation costs and all other components of net periodic pension and postretirement benefits costs reported in non-operating expenses. If the reporting entity does not separately report operating and non-operating expenses on the statement of operations it is required to identify, on the statement of operations or in disclosures, the line items in which the components of net periodic pension and postretirement benefits costs are presented. The new guidance permits only the service cost component to be eligible for capitalization where applicable. The guidance is effective for annual periods beginning after December 15, 2017 and for interim periods within those annual periods. The guidance is to be applied on a prospective basis for capitalization of service costs where applicable and on a retrospective basis for the presentation of the service cost and other components of net periodic pension benefit costs in the statements of operations or in disclosures. The impact of adoption is not expected to be material to the Company’s results of operations or financial position.

~~Accounting for Hedging Activities~~

In August 2017, the FASB issued amendments intended to better align hedge accounting with an organization’s risk management activities. The amendments expand hedge accounting for nonfinancial and financial risk components and revise the measurement methodologies to better align with an organization’s risk management activities. Separate presentation of hedge ineffectiveness is eliminated to provide greater transparency of the full impact of hedging by requiring presentation of the results of the hedged item and hedging instrument in a single financial statement line item. In addition, the amendments reduce complexity by simplifying the manner in which assessments of hedge effectiveness may be performed. The guidance is effective for annual periods beginning after December 15, 2018 and for interim periods within those annual periods. The presentation and disclosure guidance is effective on a prospective basis. The impact of adoption is not expected to be material to the Company’s results of operations or financial position.

~~2. Earnings per Common Share~~

Basic earnings per common share is computed using the weighted average number of common shares outstanding, including vested unissued participating restricted stock units. Diluted earnings per common share is computed using the weighted average number of common and dilutive potential common shares outstanding.

For the Company, dilutive potential common shares consist of outstanding stock options, ~~and~~ unvested

non-participating restricted stock units and contingently issuable performance stock awards.

8 ~~www.allstate.com~~

~~The computation of basic and diluted earnings per common share is presented in the following table.~~

($ in millions, except per share data) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Numerator:

Net income $ 666
$ 520
$ 1,940
$ 1,037
Less: Preferred stock dividends 29
29
87
87
Net income applicable to common shareholders ⁽¹⁾
$ 637
$ 491
$ 1,853
$ 950

Denominator:

Weighted average common shares outstanding 361.3
371.5
363.5
374.4
Effect of dilutive potential common shares:

Stock options 4.4
3.2
4.3
3.3
Restricted stock units (non-participating) and performance stock awards 1.4
1.2
1.3
1.2
Weighted average common and dilutive potential common shares outstanding 367.1
375.9
369.1
378.9

Earnings per common share - Basic $ 1.76
$ 1.32
$ 5.10
$ 2.54
Earnings per common share - Diluted $ 1.74
$ 1.31
$ 5.02
$ 2.51

~~_____________________________~~


⁽¹⁾	~~Net income applicable to common shareholders is net income less preferred stock dividends.~~

The effect of dilutive potential common shares does not include the effect of options with an anti-dilutive effect on earnings per common share because their exercise prices exceed the average market price of Allstate common shares during the period or for which the unrecognized compensation cost would have an anti-dilutive effect. ~~Options~~

The Company undertakes various programs to reduce expenses. These programs generally involve a reduction in staffing levels, and in certain cases, office closures. Restructuring and related charges primarily include ~~employee termination~~the following costs related to these programs:

•Employee- severance and relocation benefits and post-exit rent expenses in connection with these programs, and non-cash charges resulting from pension benefit payments made to agents and certain legal expenses incurred in connection with the 1999 reorganization of Allstate’s multiple agency programs to a single exclusive agency program.

•Exit - contract termination penalties

The expenses related to these activities are included in the Condensed Consolidated Statements of Operations as restructuring and related charges and totaled ~~$14~~$23 million and $5$196 million during the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively, and ~~$77~~$145 million and ~~$21~~$213 million during the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

Restructuring expenses during the third quarter and first nine months of 2021 are primarily due to the future work environment. The Company continues to identify ways to improve operating efficiency and reduce cost which may result in ~~2017~~additional restructuring charges in the future.


Restructuring programs
($ in millions)	Future work environment		Transformative Growth
Expected program charges	$	110	$	290
2020 expenses	—		(238)
2021 expenses	(108)		7
Change in estimated program costs in 2021	30		(52)
Remaining program charges	$	32	$	7

These charges are primarily recorded in the Allstate Protection segment. The Company expects that a majority of these actions will be completed in 2021.

Employee costs include severance and employee benefits primarily impacting claims, sales, service and support functions. Exit costs, primarily related to ~~Allstate brand claims process changes and office closures~~future work environment, reflect real estate costs due to ~~increased efficiencies~~accelerated amortization of right of use assets and related leasehold improvements ~~in digital technology, a voluntary termination program extended~~at facilities to ~~certain employees, outsourcing of certain functions, and realigning or consolidating departments within the Allstate, Esurance and Encompass operations.~~be vacated.

~~The following table presents changes in the restructuring liability during the nine months ended September 30, 2017.~~


Restructuring activity during the period										Restructuring activity during the period
($ in millions)	Employee costs			Exit costs			Total liability			($ in millions)	Employee costs		Exit costs		Total liability
Balance as of December 31, 2016	$	—		$	2		$	2
Restructuring liability as of December 31, 2020										Restructuring liability as of December 31, 2020	$	72	$	—	$	72
Expense incurred	46			18			64			Expense incurred	50		120		170
Adjustments to liability	(4		)	—			(4		)	Adjustments to liability	(25)		—		(25)
Payments applied against liability	(24		)	(7		)	(31		)
Balance as of September 30, 2017	$	18		$	13		$	31
Payments and non-cash charges										Payments and non-cash charges	(51)		(112)		(163)
Restructuring liability as of September 30, 2021										Restructuring liability as of September 30, 2021	$	46	$	8	$	54

The payments applied against the liability for employee costs primarily reflect severance costs, and the payments for exit costs generally consist of post-exit rent expenses and contract termination penalties. As of September 30, ~~2017,~~2021, the cumulative amount incurred to date for active programs related to employee severance, relocation benefits and exit expenses totaled ~~$101~~$247 million for employee costs and ~~$80~~$133 million for exit costs.

~~11.~~


Note 13			Guarantees and Contingent Liabilities

Shared markets and state facility assessments

The Company is required to participate in assigned risk plans, reinsurance facilities and joint underwriting associations in various states that provide insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers.

The Company routinely reviews its exposure to assessments from these plans, facilities and government programs. Underwriting results related to these arrangements, which tend to be adverse, have been immaterial to the Company’s results of ~~operations.~~operations in the last two years. Because of the Company’s participation, it may be exposed to losses that surpass the capitalization of these facilities ~~and/~~or assessments from these facilities.

Guarantees

The Company provides residual value guarantees on Company leased automobiles. If all outstanding leases were terminated effective September 30, 2017, the Company’s maximum obligation pursuant to these guarantees, assuming the automobiles have no residual value, would be $32 million as of September 30, 2017. The remaining term of each residual value guarantee is equal to the term of the underlying lease that ranges from less than one year to four years. Historically, the Company has not made any material payments pursuant to these guarantees.

Related to the sale of LBL on April 1, 2014, ALIC agreed to indemnify Resolution Life Holdings, Inc. in connection with certain representations, warranties and covenants of ALIC, and certain liabilities specifically excluded from the transaction, subject to specific contractual limitations regarding ALIC’s maximum obligation. Management does not believe these indemnifications will have a material effect on results of operations, cash flows or financial position of the Company.

Related to the disposal through reinsurance of substantially all of Allstate Financial’s variable annuity business to Prudential in 2006, the Company and its consolidated subsidiaries, ALIC and ALNY, have agreed to indemnify Prudential for certain pre-closing contingent liabilities (including extra-contractual liabilities of ALIC and ALNY and liabilities specifically excluded from the transaction) that ALIC and ALNY have agreed to retain. In addition, the Company, ALIC and ALNY will each indemnify Prudential for certain post-closing liabilities that may arise from the acts of ALIC, ALNY and their agents, including certain liabilities arising from ALIC’s and ALNY’s provision of transition services. The reinsurance agreements contain no limitations or indemnifications with regard to insurance risk transfer and transferred all of the future risks and responsibilities for performance on the underlying variable annuity contracts to Prudential, including those related to benefit guarantees. Management does not believe this agreement will have a material effect on results of operations, cash flows or financial position of the Company.

In the normal course of business, the Company provides standard indemnifications to contractual

counterparties in connection with numerous transactions, including acquisitions and divestitures. The types of indemnifications typically provided include indemnifications for breaches of representations and warranties, taxes and certain other liabilities, such as ~~third party~~third-party lawsuits.

~~The Allstate Corporation~~ 39

The indemnification clauses are often standard contractual terms and are entered into in the normal course of business based on an assessment that the risk of loss would be remote. The terms of the indemnifications vary in duration and nature. In many cases, the maximum obligation is not explicitly stated and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur. Consequently, the maximum amount of the obligation under such indemnifications is not determinable. Historically, the Company has not made any material payments pursuant to these obligations.

The aggregate liability balance related to all guarantees was not material as of September 30, ~~2017.~~2021.

Third Quarter 2021 Form 10-Q 43

Notes to Condensed Consolidated Financial Statements

Regulation and ~~Compliance~~compliance

The Company is subject to extensive laws, regulations, administrative directives, and regulatory actions. From time to time, regulatory authorities or legislative bodies seek to influence and restrict premium rates, require premium refunds to policyholders, require reinstatement of terminated policies, prescribe rules or guidelines on how affiliates compete in the marketplace, restrict the ability of insurers to cancel or non-renew policies, require insurers to continue to write new policies or limit their ability to write new policies, limit insurers’ ability to change coverage terms or to impose underwriting standards, impose additional regulations regarding ~~agent~~agency and broker compensation, regulate the nature of and amount of investments, impose fines and penalties for unintended errors or mistakes, impose additional regulations regarding cybersecurity and privacy, and otherwise expand overall regulation of insurance products and the insurance industry. In addition, the Company is subject to laws and regulations administered and enforced by federal agencies, international agencies, and other organizations, including but not limited to the Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority, ~~the Department of Labor,~~ the U.S. Equal Employment Opportunity Commission, and the U.S. Department of Justice. The Company has established procedures and policies to facilitate compliance with laws and regulations, to foster prudent business operations, and to support financial reporting. The Company routinely reviews its practices to validate compliance with laws and regulations and with internal procedures and policies. As a result of these reviews, from time to time the Company may decide to modify some of its procedures and policies. Such modifications, and the reviews that led to them, may be accompanied by payments being made and costs being incurred. The ultimate changes and eventual effects of these actions on the Company’s business, if any, are uncertain.

Legal and regulatory proceedings and inquiries

The Company and certain subsidiaries are involved in a number of lawsuits, regulatory inquiries, and other legal proceedings arising out of various aspects of its business.

Background

These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities, including the underlying facts of each matter; novel legal issues; variations between jurisdictions in which matters are being litigated, heard, or investigated; changes in assigned judges; differences or developments in applicable laws and judicial interpretations; judges reconsidering prior rulings; the length of time before many of these matters might be resolved by settlement, through litigation, or otherwise; adjustments with respect to anticipated trial schedules and other proceedings; developments in similar actions against other companies; the fact that some of the lawsuits are putative class actions in which a class has not been certified and in which the purported class may not be clearly defined; the fact that some of the

lawsuits involve multi-state class actions in which the applicable law(s) for the claims at issue is in dispute and therefore unclear; and the challenging legal environment faced by corporations and insurance companies.

The outcome of these matters may be affected by decisions, verdicts, and settlements, and the timing of such decisions, verdicts, and settlements, in other individual and class action lawsuits that involve the Company, other insurers, or other entities and by other legal, governmental, and regulatory actions that involve the Company, other insurers, or other entities. The outcome may also be affected by future state or federal legislation, the timing or substance of which cannot be predicted.

In the lawsuits, plaintiffs seek a variety of remedies which may include equitable relief in the form of injunctive and other remedies and monetary relief in the form of contractual and extra-contractual damages. In some cases, the monetary damages sought may include punitive or treble damages. Often specific information about the relief sought, such as the amount of damages, is not available because plaintiffs have not requested specific relief in their pleadings. When specific monetary demands are made, they are often set just below a state court jurisdictional limit in order to seek the maximum amount available in state court, regardless of the specifics of the case, while still avoiding the risk of removal to federal court. In Allstate’s experience, monetary demands in pleadings bear little relation to the ultimate loss, if any, to the Company.

In connection with regulatory examinations and proceedings, government authorities may seek various forms of relief, including penalties, restitution, and changes in business practices. The Company may not be advised of the nature and extent of relief sought until the final stages of the examination or proceeding.

Accrual and disclosure policy

The Company reviews its lawsuits, regulatory inquiries, and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for such matters at management’s best estimate when the Company assesses that it is probable that a loss has been incurred and the amount

40 ~~www.allstate.com~~

of the loss can be reasonably estimated. The Company does not establish accruals for such matters when the Company does not believe both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company’s assessment of whether a loss is reasonably possible, or probable, is based on its assessment of the ultimate outcome of the matter following all appeals. The Company does not include potential recoveries in its estimates of reasonably possible or probable losses. Legal fees are expensed as incurred.

The Company continues to monitor its lawsuits, regulatory inquiries, and other legal proceedings for further developments that would make the loss contingency both probable and estimable, and accordingly accruable, or that could affect the amount

44www.allstate.com

Notes to Condensed Consolidated Financial Statements

of accruals that have been previously established. There may continue to be exposure to loss in excess of any amount accrued. Disclosure of the nature and amount of an accrual is made when there have been sufficient legal and factual developments such that the Company’s ability to resolve the matter would not be impaired by the disclosure of the amount of accrual.

When the Company assesses it is reasonably possible or probable that a loss has been incurred, it discloses the matter. When it is possible to estimate the reasonably possible loss or range of loss above the amount accrued, if any, for the matters disclosed, that estimate is aggregated and disclosed. Disclosure is not required when an estimate of the reasonably possible loss or range of loss cannot be made.

For certain of the matters described below in the “Claims related proceedings” and “Other proceedings” subsections, the Company is able to estimate the reasonably possible loss or range of loss above the amount accrued, if any. In determining whether it is possible to estimate the reasonably possible loss or range of loss, the Company reviews and evaluates the disclosed matters, in conjunction with counsel, in light of potentially relevant factual and legal developments.

These developments may include information learned through the discovery process, rulings on dispositive motions, settlement discussions, information obtained from other sources, experience from managing these and other matters, and other rulings by courts, arbitrators or others. When the Company possesses sufficient appropriate information to develop an estimate of the reasonably possible loss or range of loss above the amount accrued, if any, that estimate is aggregated and disclosed below. There may be other disclosed matters for which a loss is probable or reasonably possible, but such an estimate is not possible. Disclosure of the estimate of the reasonably possible loss or range of loss above the amount accrued, if any, for any individual matter would only be considered when there have been sufficient legal and factual developments such that the Company’s ability to resolve the matter would not be impaired by the disclosure of the individual estimate.

The Company currently estimates that the aggregate range of reasonably possible loss in excess of the amount accrued, if any, for the disclosed matters where such an estimate is possible is zero to ~~$300~~$85 million, pre-tax. This disclosure is not an indication of expected loss, if any. Under accounting guidance, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event or events occurring is slight.” This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions and known and unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate. The estimate does not include matters or losses for which an estimate is not possible. Therefore, this estimate represents an estimate of possible loss only for certain matters meeting these criteria. It does not represent

the Company’s maximum possible loss exposure. Information is provided below regarding the nature of all of the disclosed matters and, where specified, the amount, if any, of plaintiff claims associated with these loss contingencies.

Due to the complexity and scope of the matters disclosed in the “Claims related proceedings” and “Other proceedings” subsections below and the many uncertainties that exist, the ultimate outcome of these matters cannot be predicted and in the Company’s judgment, a loss, in excess of amounts accrued, if any, is not probable. In the event of an unfavorable outcome in one or more of these matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to it, management believes that the ultimate outcome of all matters described below, as they are resolved over time, is not likely to have a material effect on the financial position of the Company.

Claims related proceedings

The Company is ~~litigating two class action cases~~managing various disputes in California in which the plaintiffs allege off-the-clock wage and hour claims. Plaintiffs in both cases seek recovery of unpaid compensation, liquidated damages, penalties, and attorneys’ fees and costs.

~~The first case is~~ ~~Christopher Williams, et al. v. Allstate Insurance Company. The~~ ~~Williams~~ case is pending in Los Angeles Superior Court and was filed in December 2007. The case involves two classes. The first class includes auto field physical damage adjusters employed in the state of California from January 1, 2005Florida that raise challenges to the ~~date of final judgment,~~Company’s practices, processes, and procedures relating to ~~the extent the Company failed to pay~~claims for off-the-clock work to those adjusters who performed certain duties prior to their first assignments. The other class includes all non-exempt employees in California from December 19, 2006 until June 2011 who received pay statements from Allstate which allegedly did not comply with California law. On April 13, 2016, the court granted the Company’s motion to

~~The Allstate Corporation~~ 41

decertify both classes; both classes are thus dissolved unless and until the appellate court orders the classes recertified. On May 17, 2016, plaintiffs filed their notice of appeal. Plaintiff’s opening brief was filed on November 22, 2016. Allstate’s response was filed on May 16, 2017. Plaintiff’s reply brief was filed on July 6, 2017. Oral argument occurred on October 26, 2017.

~~The second case is~~ ~~Jack Jimenez, et al. v. Allstate Insurance Company~~. ~~Jimenez~~ was filed in the U.S. District Court for the Central District of California in September 2010. The plaintiffs allege that they worked off-the-clock; they also allege other California Labor Code violations resulting from purported unpaid overtime. In April 2012, the court certified a class that includes all adjusters in the state of California, except auto field adjusters, from September 29, 2006 to final judgment. Allstate appealed the court’s decision to certify the class, first to the Ninth Circuit Court of Appeals and then to the U.S. Supreme Court. On June 15, 2015, the U.S. Supreme Court denied Allstate’s petition for a writ of certiorari. The case was scheduled for trial on September 27, 2016. On May 4, 2016, the court vacated that trial date in part because the court had not approved a trial plan. No trial date has been scheduled because the parties continue to wait for the court’s approval of a trial plan.

~~In addition to the California class actions, the case of~~ ~~Maria Victoria Perez and Kaela Brown, et al. v. Allstate Insurance Company~~ was filed in the U.S. District Court for the Eastern District of New York. Plaintiffs allege that no-fault claim adjusters have been improperly classified as exempt employees under New York Labor Law and the Fair Labor Standards Act. The case was filed in April 2011, and the plaintiffs are seeking unpaid wages, liquidated damages, injunctive relief, compensatory and punitive damages, and attorneys’ fees. On September 16, 2014, the court certified a class of no-fault adjusters under New York Labor Law and refused to decertify a Fair Labor Standards Act class of no-fault adjusters. There are 105 members of the Fair Labor Standards Act class and 137 members of the New York Labor Law class. The parties are engaged in discovery.

The Company has been involved in litigation challenging whether the Company’s personal injury protection policies include sufficient language providing notice of the Company’s election to apply the fee schedules. The Florida personal injury protection statute permits insurers to pay personal injury protection benefits for reasonable medical expenses based on certain benefit reimbursement limitations which are authorized by the personal injury protection statute (generally referred to as “fee schedules”) resulting from automobile accidents.

~~On January 26, 2017, the Florida Supreme Court issued its decision in~~ ~~Allstate Insurance Company v. Orthopedic Specialists, et al.~~, holding that Allstate’s language was clear and unambiguous and provided adequate notice of its intent to use the fee schedules. On February 7, 2017, Orthopedic Specialists filed a motion for rehearing, which the Florida Supreme Court denied on March 27, 2017. Thus, the Florida Supreme Court’s decision is final.

In light of this ruling, the fee schedule issue is expected to be resolved favorably to Allstate in other pending cases. There were three other cases with petitions for leave to appeal to the Florida Supreme Court pending. In those cases, three District Courts of Appeal had previously ruled in favor of Allstate. The Florida Supreme Court issued “show cause” orders in each of those appeals directing the providers to file a response explaining why the ~~Orthopedic Specialists~~ ~~decision is not controlling and why the Florida Supreme Court should not decline to exercise jurisdiction. In one appeal, the provider acknowledged that~~ ~~Orthopedic Specialists~~ ~~governs and the court declined jurisdiction in that appeal. In the other two appeals, the providers asserted that their petitions to appeal should be granted because~~ ~~Orthopedic Specialists~~ was wrongly decided, repeating the arguments previously asserted. Allstate’s responses were filed on May 8, 2017. On August 4, 2017, the Florida Supreme Court issued orders in both of those cases stating that the court was declining to exercise jurisdiction in those appeals. Accordingly, all proceedings on the fee schedule issue in the Florida Supreme Court have been concluded in Allstate’s favor.

~~This fee schedule issue has also been the subject of thousands of individual lawsuits filed against Allstate in Florida. The decision by the Florida Supreme Court~~has established Florida law on the sufficiency of Allstate’s fee schedule policy language that is binding on all Florida courts. Allstate intends to seek final resolution in its favor of all fee schedule claims currently in litigation as well as those not in litigation. Allstate may seek restitution from some plaintiffs for attorneys’ fees and costs.

~~Providers continue to pursue individual suits under various theories challenging the amounts paid when Allstate pays~~ personal injury protection benefits under Florida auto policies. Medical providers continue to pursue litigation under various theories that challenge the ~~fee schedule limitations. Allstate is vigorously asserting both procedural and substantive defenses to these suits.~~

~~Other proceedings~~

~~The Company is defending a consolidated proceeding relating to the reorganization of its agent sales force in 2000, when~~amounts that the Company ~~discontinued employee agent programs, terminated~~pays under the ~~contracts of its employee agents,~~personal injury protection coverage, seeking additional benefit payments, as well as applicable interest, penalties and ~~offered those agents the opportunity to become Allstate Exclusive Agent independent contractors or to take severance benefits in exchange for~~fees. There is a ~~release of claims. The consolidated proceeding, captioned~~ ~~Gene Romero, et al.~~pending class action, Revival Chiropractic v. Allstate Insurance Company, et al. (M.D. Fla. filed January 2019; appeal pending, 11th Circuit Court of Appeals), where the court denied class certification and plaintiff’s request to file a renewed motion for class certification. The Company is ~~pending in the United States District Court for the Eastern District of Pennsylvania.~~also defending litigation involving individual plaintiffs.

~~This matter has a long and complex history, only relevant portions of which are summarized here.~~ The ~~case began in 2001 as two separate~~Company is defending putative class actions in various courts that raise challenges to the Company’s depreciation practices in homeowner property claims. In these lawsuits, plaintiffs generally allege that, when calculating actual cash value, the costs of “non-materials” such as labor, general contractor’s overhead and profit, and sales tax should not be subject to depreciation. The Company is currently defending the following lawsuits on this issue: Perry v. Allstate Indemnity Company, et al. (N.D. Ohio filed ~~by approximately 32 former employee agents. In one case, plaintiffs challenged the reorganization alleging claims under the Age Discrimination in Employment Act (“ADEA”)~~May 2016); Lado v. Allstate Vehicle and Property Insurance Company (S.D. Ohio filed March 2020); Maniaci v. Allstate Insurance Company (N.D. Ohio filed March 2020); Ferguson-Luke et al. v. Allstate Property and Casualty Insurance Company (N.D. Ohio filed April 2020); Huey v. Allstate Vehicle and Property Insurance Company (N.D. Miss. filed October 2019); Clark v. Allstate Vehicle and Property Insurance Company (Circuit Court of Independence Co., ~~interference with benefits under ERISA, breach of contract,~~Ark. filed February 2016); Thaxton v. Allstate Indemnity Company (Madison Co., Ill. filed July 2020); Hester v. Allstate Vehicle and ~~breach of fiduciary duty. Plaintiffs also challenged the release of claims on various grounds~~Property Insurance Company (St. Clair Co., Ill. filed June 2020); Mitchell, et al. v. Allstate Vehicle and Property Insurance Company, et al. (S.D. Ala. filed

42 ~~www.allstate.com~~

Third Quarter 2021 Form 10-Q 45

Notes to Condensed Consolidated Financial Statements

~~including~~

August 2021). No classes have been certified in these matters.

The Company is defending putative class actions pending in multiple states alleging that the ~~release was retaliatory~~Company underpays total loss vehicle physical damage claims on auto policies. The allegedly systematic underpayments result from one or more of the following theories: (a) the third party valuation tool used by the Company as part of a comprehensive adjustment process is allegedly flawed, biased, or contrary to applicable law; (b) the Company allegedly does not pay sales tax, title fees, registration fees, and/or other specified fees that are allegedly mandatory under policy language or state legal authority; or (c) after paying for the ~~ADEA~~value of the loss vehicle, then the Company allegedly is not entitled to retain the residual salvage value, and ~~ERISA.~~the Company allegedly must pay salvage value to the owner (or if the loss vehicle is retained by the owner, then the Company allegedly may not apply any offset for the salvage value).

The following cases are currently pending against the Company: Olberg v. Allstate Insurance Company, Allstate Fire and Casualty Insurance Company, and CCC Information Services, Inc. (W.D. Wash., filed April 2018); Bloomgarden v. Allstate Fire and Casualty Insurance Company (S.D. Fla., filed July 2018, dismissed August 2019, refiled on September 2019, remanded to 17th Judicial Circuit, Broward County October 2020); Erby v. Allstate Fire and Casualty Insurance Company (E.D. Pa., filed October 2018); Kronenberg v. Allstate Insurance Company and Allstate Fire and Casualty Insurance Company (E.D. N.Y., filed December 2018); Durgin v. Allstate Property and Casualty Insurance Company (W.D. LA, filed June 7, 2019); Anderson v. Allstate Insurance Company (20th Judicial Circuit, Collier County, Fla.; filed August 2019); Cody v. Allstate Fire and Casualty Insurance Company and Allstate County Mutual Insurance Company (N.D. Tex., filed August 2019); Saad v. National General Insurance Company (Superior Ct., Los Angeles County, Cal.; filed May 2020); Williams v. Esurance Property and Casualty Insurance Company (C.D. Cal,; filed September 2020); Cotton v. Allstate Fire and Casualty Insurance Company (Cir. Ct. of Cook County, Chancery Div., Ill.; filed October 2020); Romaniak v. Esurance Property and Casualty Insurance Company (N.D. Ohio, filed December 2020); Rawlins v. Esurance Property and Casualty Insurance Company (E.D. Missouri; filed February 2021).

None of the courts in any of the pending matters has ruled on class certification.

Other proceedings The Company is defending against an investigatory hearing before the California Insurance Commissioner concerning the private passenger automobile insurance rating practices of Allstate Insurance Company and Allstate Indemnity Company in California. The investigatory hearing is captioned: In the ~~other case, plaintiffs challenged certain amendments~~Matter of the Rating Practices of Allstate Insurance Company and Allstate Indemnity Company. Pursuant to the ~~Agents Pension Plan~~Notice of Hearing issued by the California Insurance Commissioner, the California Insurance Commissioner is investigating: (1) whether Allstate has potentially violated California insurance

law by using illegal price optimization; (2) how Allstate implemented any such potentially illegal price optimization in its private passenger auto insurance rates and/or class plans; and ~~sought~~(3) how such potentially illegal price optimization impacted Allstate’s private passenger auto insurance policyholders. Fact discovery has been completed in the investigatory hearing and an administrative hearing is scheduled to have service as Exclusive Agent independent contractors count toward eligibility for benefits. Plaintiffs sought various relief, including back pay, compensatory and punitive damages, liquidated damages, lost investment capital, loss of benefits, repeal of the challenged plan amendments and attorneys’ fees.

In February, 2014, the court addressed the validity and enforceability of the release and determined that the question of whether the releases were voluntarily signed raised disputed issues of fact to be resolved at trial. The court also held that the release, if valid, would bar all claims. ~~In late 2014, the court~~denied plaintiffs’ motion to certify a class for purposes of determining whether the releases were signed voluntarily and ordered that all statutes of limitations would resume running, after which approximately 460 additional individual plaintiffs filed separate similar lawsuits or sought to intervene.

A jury trial was held in June, 2015, to determine whether the releases of ten plaintiffs were knowingly and voluntarily signed. The jury found that two plaintiffs signed their releases voluntarily and eight plaintiffs did not.

Onbegin on May 2, 2016, a consolidated amended complaint was filed on behalf of 498 plaintiffs, most of whom had previously filed separate lawsuits or intervened. On July 6, 2016, the court denied the Company’s motion to dismiss plaintiffs’ state law breach of contract and fiduciary duty claims but granted dismissal of plaintiffs’ retaliation claims under the ADEA and ERISA challenging the release of claims.10, 2022.

The court then separated the case into phases to address “common issues” in plaintiffs’ claims, beginning with: (a) “Phase I” addressing claims by 118 plaintiffs alleging that certain plan amendments violated ERISA’s anti-cutback provision by eliminating an accrued benefit and (b) “Phase II” addressing all plaintiffs’ claims for alleged interference with employee benefits under ERISA and disparate impact under the ADEA.

A bench trial on Phase I claims was held in December, 2016. The court ruled that (i) the Company’s 1991 amendments to the Plan did not violate ERISA by improperly cutting back on plaintiffs’ benefits, and (ii) the Company’s interpretation of the Plan’s definition of “retire” violated ERISA’s anti-cutback rule. The court required the parties to provide further information, in the form of an accounting, to determine whether any plaintiffs suffered a loss based on any such cutback. Plaintiffs have asserted that only two of the 118 plaintiffs suffered a loss as a result of the court’s order. The Company contends that no plaintiff suffered a compensable loss and that judgment should be entered in favor of the Company. We await a final ruling by the court.

In Phase II, the court granted the Company’s motion for summary judgment on both the ADEA disparate impact and ERISA interference with benefits claims. This ruling resolved these claims in the trial court as to all plaintiffs.

In June, 2017, the court entered an order establishing Phases III and IV of the litigation. In Phase III, the remaining claims of the eight individual plaintiffs who reside in the Eastern District of Pennsylvania were to be litigated, possibly culminating in two separate jury trials in early 2018. The Company filed several motions for summary judgment on the Phase III claims. The court granted the Company’s motion as to the Phase III plaintiffs’ ADEA disparate treatment claims and as to a retaliation claim that had been asserted by one of the Phase III plaintiffs. The court denied the Company’s motion on the Phase III plaintiffs’ breach of contract and breach of fiduciary duty claims.

The Company and 82 individual plaintiffs, including all eight of the Phase III plaintiffs whose remaining claims were set for trial in early 2018, recently reached agreements in principle to settle all claims of those plaintiffs on a confidential basis, subject to negotiating and executing appropriate written settlement agreements. Three other plaintiffs voluntarily dismissed their claims leaving 413 plaintiffs in this litigation.

~~The parties~~stockholder derivative actions described below are currently engaging in further written discovery relating to the claims of the remaining plaintiffs (Phase IV of the litigation) pending the court’s determination of the proper venue for depositions, dispositive motions, and trials of those claims.

The final resolution of these matters is subject to various uncertainties and complexities including how trials, post-trial motions, possible appeals with respect to the validity of the release, and any rulings on the merits will be resolved.

~~The below shareholder derivative action is~~ disclosed pursuant to SEC disclosure requirements for these types of ~~matters, and the~~matters. The putative class action ~~has been~~alleging violations of the federal securities laws is disclosed because ~~both matters involve~~it involves similar ~~allegations. On August 3, 2017, a plaintiff alleging~~allegations to ~~be a stockholder~~those made in the ~~Company~~stockholder derivative actions.

Biefeldt / IBEW Consolidated Action. Two separately filed stockholder derivative actions have been consolidated into a ~~shareholder derivative complaint~~single proceeding that is pending in the Circuit Court for Cook County, Illinois, Chancery Division. The ~~action is styled~~ original complaint in the first-filed of those actions, Biefeldt v. Wilson, et al., ~~Case~~was filed on August 3, 2017, in that court by a plaintiff alleging that she is a stockholder of the Company. On June 29, 2018, the court granted defendants’ motion to dismiss that complaint for failure to make a pre-suit demand on the Allstate Board but granted plaintiff permission to file an amended complaint. The original complaint in IBEW Local No. ~~2017 CH 10676 (Cook County, Ill.)~~98 Pension Fund v. Wilson, et al., was filed on April 12, 2018, in the same court by another plaintiff alleging to be a stockholder of the Company. After the court issued its dismissal decision in the Biefeldt action, plaintiffs agreed to consolidate the two actions and filed a consolidated amended complaint naming as defendants the Company’s chairman, president and chief executive officer, its former president, and certain present or former members of the board of directors. In that complaint, plaintiffs allege that the directors and officer defendants breached their fiduciary duties to the Company in connection with allegedly material misstatements or omissions concerning the Company’s automobile insurance claim frequency statistics and the reasons for a claim frequency increase for Allstate brand auto insurance between October 2014 and August 3, 2015. The factual allegations are substantially similar to those at issue in In re The Allstate Corp. Securities Litigation. ~~In the complaint, plaintiff purports to assert claims~~Plaintiffs further allege that a senior officer and several outside directors engaged in stock option exercises allegedly while in possession of material nonpublic information. Plaintiffs seek, on behalf of the Company, an unspecified amount of damages and various forms of equitable relief. Defendants moved to dismiss the consolidated complaint on September 24, 2018 for ~~alleged breaches~~failure to make a demand on the Allstate Board. On May 14, 2019, the court granted defendants’ motion to dismiss the complaint, but allowed plaintiffs leave to file a second consolidated amended complaint which they filed on September 17, 2019. Defendants moved to dismiss the complaint on November 1, 2019 for failure to make a demand on the Allstate Board. The court subsequently requested supplemental briefing on the motion which concluded on February 1, 2021. On February 24, 2021, the court dismissed the second amended consolidated complaint with prejudice.

46www.allstate.com

Notes to Condensed Consolidated Financial Statements

Plaintiffs filed a notice of ~~fiduciary duty based~~appeal on ~~allegations that are similar~~March 26, 2021 and the appeal will be fully briefed as of November 8, 2021.

In Sundquist v. Wilson, et al., another plaintiff alleging to ~~those asserted~~be a stockholder of the Company filed a stockholder derivative complaint in the ~~securities action described below. The complaint names as defendants~~United States District Court for the ~~Company’s chairman and chief executive officer, its president, its chief financial officer and the members~~Northern District of the board of directors during the period of the alleged misstatements or omissions regarding auto claims frequency. By agreement, the time to respond to the complaint has been extended through and including November 13, 2017. The complaintIllinois on May 21, 2018. Plaintiff seeks, on behalf of the Company, an unspecified amount of damages and various forms of equitable relief. The complaint names as defendants the Company’s chairman, president and chief executive officer, its former president, its former vice chairman, and certain present or former members of the board of directors.

The complaint alleges breaches of fiduciary duty based on allegations similar to those asserted in In re TheAllstate Corp. Securities Litigation as well as state law “misappropriation” claims based on stock option transactions by the Company’s chairman, president and chief executive officer, its former vice chairman, and certain members of the board of directors. Defendants moved to dismiss and/or stay the complaint on August 7, 2018. On December 4, 2018, the court granted defendants’ motion and stayed the case pending the final resolution of the consolidated Biefeldt/IBEW matter.

Mims v. Wilson, et al., is an additional stockholder derivative action filed on February 12, 2020 in the United States District Court for the Northern District of Illinois. Plaintiff alleges that she previously made a demand on the Allstate board of directors and seeks, on behalf of the Company, an unspecified amount of damages and various forms of equitable relief. The complaint names as defendants the Company’s chairman, president and chief executive officer, its former president, its former vice chairman, and certain present or former members of the board of directors. The complaint alleges breaches of fiduciary duty and unjust enrichment based on allegations similar to those asserted in In re The Allstate ~~Corporation~~ 43

Corp. Securities Litigation. On February 20, 2020, the Allstate board of directors appointed a special committee to investigate the allegations in plaintiff’s demand. The Company moved to dismiss the complaint on August 24, 2020 and on December 8, 2020, the court granted defendants’ motion, and dismissed the complaint with prejudice. On January 5, 2021, plaintiff filed a motion to alter the judgment and requested leave to file an amended complaint and defendants opposed the motion. On February 10, 2021, the court denied plaintiff’s motion to alter the judgment. No appeal was filed.

In ~~November 2016,~~re The Allstate Corp. Securities Litigation is a ~~putative~~certified class action ~~was~~ filed on November 11, 2016 in the United States District Court for the Northern District of Illinois against the Company and ~~several~~two of its officers asserting claims under the federal securities laws. ~~The action is titled~~ ~~In re The~~Plaintiffs allege that they purchased Allstate ~~Corp. Securities Litigation, No. 1:16-cv-10510 (N.D. Ill.). In March 2017, lead plaintiffs filed a consolidated amended complaint. In~~common stock during the ~~complaint, plaintiffs~~class period and suffered damages as the result of the conduct alleged. Plaintiffs seek an unspecified amount of damages, costs, attorney’s fees, and other relief as the court deems appropriate. Plaintiffs allege that the Company and certain senior officers made allegedly material misstatements or

omissions concerning claim frequency statistics and the reasons for a claim frequency increase for Allstate brand auto insurance ~~during the period from~~between October ~~29,~~ 2014 toand August 3, 2015. ~~The complaint~~

Plaintiffs further ~~alleges~~allege that a senior officer engaged in stock option exercises ~~and sales~~ during that time allegedly while in possession of material nonpublic information about Allstate brand auto insurance claim ~~frequency that had not been disclosed.~~frequency. The ~~consolidated amended complaint names as defendants the~~ Company, its chairman, president and chief executive officer, and its ~~president. Plaintiffs assert claims under sections 10(b) and 20(a) of~~former president are the ~~Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. On June 1, 2017, all defendants filed motions~~named defendants. After the court denied their motion to dismiss on February 27, 2018, defendants answered the ~~consolidated amended~~ complaint, ~~for failure to state a claim. Briefing on the motion was completed in September 2017. The Company and the other defendants dispute~~denying plaintiffs’ allegations that there was any misstatement or omission or other misconduct. On June 22, 2018, plaintiffs filed their motion for class certification. The court allowed the lead plaintiffs to amend their complaint ~~seeks an unspecified amount~~to add the City of ~~damages, costs~~Providence Employee Retirement System as a proposed class representative and ~~attorney’s fees and such other relief as~~on September 12, 2018, the amended complaint was filed. On March 26, 2019, the court ~~deems appropriate.~~granted plaintiffs’ motion for class certification and certified a class consisting of all persons who purchased Allstate common stock between October 29, 2014 and August 3, 2015. On April 9, 2019, defendants filed with the U.S. Court of Appeals for the Seventh Circuit a petition for permission to appeal this ruling and the Seventh Circuit granted that petition on April 25, 2019. On July 16, 2020, the Seventh Circuit vacated the class certification order and remanded the matter for further consideration by the district court. Discovery in this matter concluded on October 5, 2020. On December 21, 2020, the district court again granted plaintiffs’ motion for class certification and certified a class consisting of all persons who purchased Allstate common stock between October 29, 2014 and August 3, 2015. On January 4, 2021, defendants filed with the Seventh Circuit a petition for permission to appeal this ruling. The petition was denied on January 28, 2021. The parties concluded briefing Daubert motions on April 22, 2021.

~~Asbestos~~The Company is defending 2 putative class actions in California federal court, Holland Hewitt v. Allstate Life Insurance Company (E.D. Cal., filed May 2020) and ~~environmental~~

~~Allstate’s reserves~~Farley v. Lincoln Benefit Life Company (E.D. Cal., filed Dec. 2020), where the plaintiffs generally allege that the defendants failed to comply with certain California statutes which address contractual grace periods and lapse notice requirements for ~~asbestos claims were $908 million~~certain life insurance policies. Plaintiffs claim that these statutes apply to life insurance policies that existed before the statutes’ effective date. The plaintiffs seek damages and $912 million, net of reinsurance recoverables of $428 million and $444 million, as of September 30, 2017 and December 31, 2016, respectively. Reserves for environmental claims were $175 million and $179 million, net of reinsurance recoverables of $35 million and $40 million, as of September 30, 2017 and December 31, 2016, respectively.

Management believes its net loss reserves for asbestos, environmental and other discontinued lines exposures are appropriately established based on available facts, technology, laws and regulations. However, establishing net loss reserves for asbestos, environmental and other discontinued lines claims is subjectinjunctive relief. No classes have been certified in these matters. In August 2021, the California Supreme Court in McHugh v. Protective Life, a matter involving another insurer, determined that the statutory notice requirements apply to uncertainties that are much greater than those presented by other types of claims. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimate. Amonglife insurance policies issued before the ~~complications are lack of historical data, long reporting delays, uncertainty as~~statutes’ effective date. In continuing to defend these matters, the Company maintains various defenses to the number and identity of insureds with potential exposure and unresolved legal issues regarding policy coverage; unresolved legal issues regarding the determination, availability and timing of exhaustion of policy limits; plaintiffs’ evolving and expanding theories of liability; availability and collectability of recoveries from reinsurance; retrospectively determined premiums and other contractual agreements; estimatesmerits of the ~~extent~~plaintiffs’ claims and ~~timing of any contractual liability; the impact of bankruptcy protection sought by various asbestos producers~~to class certification.

Third Quarter 2021 Form 10-Q 47

Notes to Condensed Consolidated Financial Statements


Note 14			Benefit Plans


Components of net cost (benefit) for pension and other postretirement plans
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Pension benefits
Service cost	$	27	$	25	$	78	$	78
Interest cost	47		49		145		161
Expected return on plan assets	(112)		(104)		(338)		(303)
Amortization of prior service credit	(13)		(14)		(38)		(42)
Curtailment loss	—		10		—		10
Costs and expenses	(51)		(34)		(153)		(96)
Remeasurement of projected benefit obligation	(25)		130		(292)		686
Remeasurement of plan assets	68		(202)		(99)		(391)
Remeasurement (gains) losses	43		(72)		(391)		295
Pension net (benefit) cost	$	(8)	$	(106)	$	(544)	$	199

Postretirement benefits
Service cost	$	—	$	1	$	1	$	4
Interest cost	2		2		6		8
Amortization of prior service credit	(5)		(1)		(18)		(3)
Curtailment gain	—		(8)		—		(8)
Costs and expenses	(3)		(6)		(11)		1
Remeasurement of projected benefit obligation	(3)		1		(13)		25
Remeasurement of plan assets	—		—		—		—
Remeasurement (gains) losses	(3)		1		(13)		25
Postretirement net (benefit) cost	$	(6)	$	(5)	$	(24)	$	26

Pension and postretirement benefits
Costs and expenses	$	(54)	$	(40)	$	(164)	$	(95)
Remeasurement (gains) losses	40		(71)		(404)		320
Total net (benefit) cost	$	(14)	$	(111)	$	(568)	$	225

Differences between expected and ~~other asbestos defendants;~~actual returns on plan assets and other uncertainties. There are also complex legal issues concerning the interpretation of various insurance policy provisions and whether those losses are covered, or were ever intended to be covered, and could be recoverable through retrospectively determined premium, reinsurance or other contractual agreements. Courts have reached different and sometimes inconsistent conclusions as to when losses are deemed to have occurred and which policies provide coverage; what types of losses are covered; whether there is an insurer obligation to defend; how policy limits are determined; how policy exclusions and conditions are applied and interpreted; and whether clean-up costs represent insured property damage. Further, insurers and claims administrators acting on behalf of insurers are increasingly pursuing evolving and expanding theories of reinsurance coverage for asbestos and environmental losses. Adjudication of reinsurance coverage is predominately decided in confidential arbitration proceedings which may have limited precedential or predictive value further complicating management’s ability to estimate probable loss for reinsured asbestos and environmental claims. Management believes these issues are not likely to be resolved in the near future, and the ultimate costs may vary materially from the amounts currently recorded resulting in material changes in loss reserves. In addition, while the Company believes that improved actuarial techniques and databases have assisted in its ability to estimate asbestos, environmental, and other discontinued lines net loss reserves, these refinements may subsequently prove to be inadequate indicators of the extent of probable losses. Due to the uncertainties and factors described above, management believes it is not practicable to develop a meaningful range for any such additional net loss reserves that may be required.

44 ~~www.allstate.com~~

~~12. Benefit Plans~~

~~The components of net periodic cost for~~assumptions affect the Company’s pension and other postretirement ~~benefit plans~~obligations, plan assets and expenses.

Pension and other postretirement service cost, interest cost, expected return on plan assets, amortization of prior service credit and curtailment gains and losses are ~~as follows:~~reported in property and casualty insurance claims and claims expense, operating costs and expenses, net investment income and (if applicable) restructuring and related charges on the Condensed Consolidated Statement of Operations.


Pension and postretirement benefits remeasurement gains and losses
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Remeasurement of projected benefit obligation (gains) losses:
Discount rate	$	(32)	$	57	$	(271)	$	454
Other assumptions	4		74		(34)		257
Remeasurement of plan assets (gains) losses	68		(202)		(99)		(391)
Remeasurement (gains) losses	$	40	$	(71)	$	(404)	$	320

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Pension benefits
Service cost $ 28
$ 28
$ 85
$ 84
Interest cost 66
71
198
214
Expected return on plan assets (102 ) (99 ) (306 ) (298 )
Amortization of:

Prior service credit (14 ) (14 ) (42 ) (42 )
Net actuarial loss 48
44
142
131
Settlement loss 94
7
110
23
Net periodic pension cost $ 120
$ 37
$ 187
$ 112

Postretirement benefits
Service cost $ 2
$ 2
$ 6
$ 7
Interest cost 4
4
11
13
Amortization of:
Prior service credit (6 ) (5 ) (18 ) (16 )
Net actuarial gain (6 ) (2 ) (18 ) (18 )
Net periodic postretirement credit $ (6 ) $ (1 ) $ (19 ) $ (14 )

~~During~~Remeasurement losses for the third quarter of ~~2017,~~2021 primarily related to unfavorable asset performance compared to the ~~Company concluded that its qualified employee pension~~expected return on plan ~~2017 lump sum payments are~~assets, partially offset by an increase in the liability discount rate. Remeasurement gains in the first nine months of 2021 primarily related to an increase in the liability discount rate and favorable asset performance compared to the expected return on plan assets.

The weighted average discount rate used to ~~exceed a threshold~~measure the benefit obligation increased to 2.90% at

September 30, 2021 compared to 2.85% at June 30, 2021, decreased compared to 3.13% at March 31, 2021 and increased compared to 2.51% at December 31, 2020 resulting in gains for the third quarter and first nine months of ~~service and interest cost~~2021.

For the third quarter of 2021, the actual return on plan assets was lower due to ~~higher-than-expected retirement levels, rising interest rates that reduce benefit lump sum payments~~higher market yields resulting in decreased fixed income valuations and modest public equity performance. For the ~~future and reductions in force. As a result, a pension settlement loss~~first nine

Non-cash investing activities include $31 million and ~~$290~~$42 million related to mergers and exchanges completed with equity securities, fixed income securities, limited partnerships, and ~~modifications~~modification of ~~certain mortgage loans and~~ other investments for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

Non-cash financing activities include ~~$42~~$52 million and ~~$40~~$56 million related to the issuance of Allstate common shares for vested equity awards for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

Cash flows used in operating activities in the Condensed Consolidated Statements of Cash Flows include cash paid for operating leases related to amounts included in the measurement of lease liabilities of $137 million and $118 million for the nine

months ended September 30, 2021 and 2020, respectively. Non-cash ~~financing~~operating activities ~~also included $34~~include $96 million and $47 million related to ~~debt acquired~~right-of-use assets obtained in ~~conjunction with the purchase of an investment~~exchange for lease obligations for the nine months ended September 30, ~~2016.~~2021 and 2020, respectively.

Liabilities for collateral received in conjunction with the Company’s securities lending program and ~~over-the-counter~~OTC and cleared derivatives are reported in other liabilities and accrued expenses or other investments. The accompanying cash flows are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows along with the activities resulting from management of the proceeds, ~~which are~~ as follows:


($ in millions)							($ in millions)	Nine months ended September 30,
	Nine months ended September 30,							2021		2020
	2017			2016
Net change in proceeds managed							Net change in proceeds managed
Net change in fixed income securities	$	129		$	(436	)

Net change in short-term investments	(157		)	181			Net change in short-term investments	$	(579)	$	211
Operating cash flow used	(28		)	(255		)
Operating cash flow (used) provided							Operating cash flow (used) provided	(579)		211
Net change in cash	1			—			Net change in cash	12		(6)
Net change in proceeds managed	$	(27	)	$	(255	)	Net change in proceeds managed	$	(567)	$	205

Cash flows from operating activities							Cash flows from operating activities
Net change in liabilities							Net change in liabilities
Liabilities for collateral, beginning of period	$	(1,129	)	$	(840	)	Liabilities for collateral, beginning of period	$	(914)	$	(1,298)
Liabilities for collateral, end of period	(1,156		)	(1,095		)	Liabilities for collateral, end of period	(1,481)		(1,093)
Operating cash flow provided	$	27		$	255
Operating cash flow provided (used)							Operating cash flow provided (used)	$	567	$	(205)

~~The Allstate Corporation~~ 45

Third Quarter 2021 Form 10-Q 49

Notes to Condensed Consolidated Financial Statements

~~14.~~


Note 16			Other Comprehensive Income

~~The components~~


Components of other comprehensive income (loss) on a pre-tax and after-tax basis
($ in millions)	Three months ended September 30,
	2021						2020
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets	$	(343)	$	73	$	(270)	$	414	$	(88)	$	326
Less: reclassification adjustment of realized capital gains and losses	84		(18)		66		233		(49)		184
Unrealized net capital gains and losses	(427)		91		(336)		181		(39)		142
Unrealized foreign currency translation adjustments	(26)		5		(21)		32		(7)		25


Unamortized pension and other postretirement prior service credit (1)	(19)		4		(15)		48		(10)		38
Other comprehensive (loss) income	$	(472)	$	100	$	(372)	$	261	$	(56)	$	205

	Nine months ended September 30,
	2021						2020
	Pre-tax		Tax		After-tax		Pre-tax		Tax		After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets	$	(1,350)	$	288	$	(1,062)	$	1,777	$	(376)	$	1,401
Less: reclassification adjustment of realized capital gains and losses	367		(77)		290		689		(145)		544
Unrealized net capital gains and losses	(1,717)		365		(1,352)		1,088		(231)		857
Unrealized foreign currency translation adjustments	13		(3)		10		(6)		1		(5)


Unamortized pension and other postretirement prior service credit (1)	(56)		12		(44)		40		(9)		31
Other comprehensive (loss) income	$	(1,760)	$	374	$	(1,386)	$	1,122	$	(239)	$	883

(1) Represents prior service credits reclassified out of other comprehensive income ~~on a pre-tax~~ and ~~after-tax basis are as follows:~~amortized into operating costs and expenses.

50www.allstate.com

($ in millions) Three months ended September 30,
2017 2016
Pre-tax Tax After-tax Pre-tax Tax After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets $ 300
$ (105 ) $ 195
$ 350
$ (123 ) $ 227
Less: reclassification adjustment of realized capital gains and losses 107
(37 ) 70
53
(19 ) 34
Unrealized net capital gains and losses 193
(68 ) 125
297
(104 ) 193
Unrealized foreign currency translation adjustments 43
(15 ) 28
(11 ) 4
(7 )
Unrecognized pension and other postretirement benefit cost arising during the period (5 ) 3
(2 ) 1
—
1
Less: reclassification adjustment of net periodic cost recognized in operating costs and expenses (116 ) 41
(75 ) (30 ) 10
(20 )
Unrecognized pension and other postretirement benefit cost 111
(38 ) 73
31
(10 ) 21
Other comprehensive income $ 347
$ (121 ) $ 226
$ 317
$ (110 ) $ 207

Nine months ended September 30,
2017 2016
Pre-tax Tax After-tax Pre-tax Tax After-tax
Unrealized net holding gains and losses arising during the period, net of related offsets $ 1,165
$ (408 ) $ 757
$ 1,685
$ (589 ) $ 1,096
Less: reclassification adjustment of realized capital gains and losses 245
(86 ) 159
(156 ) 55
(101 )
Unrealized net capital gains and losses 920
(322 ) 598
1,841
(644 ) 1,197

Unrealized foreign currency translation adjustments 55
(19 ) 36
18
(6 ) 12

Unrecognized pension and other postretirement benefit cost arising during the period (8 ) 5
(3 ) (6 ) 3
(3 )
Less: reclassification adjustment of net periodic cost recognized in operating costs and expenses (174 ) 61
(113 ) (78 ) 27
(51 )
Unrecognized pension and other postretirement benefit cost 166
(56 ) 110
72
(24 ) 48
Other comprehensive income $ 1,141
$ (397 ) $ 744
$ 1,931
$ (674 ) $ 1,257

46 ~~www.allstate.com~~

~~15. Subsequent Events~~

Effective October 2017, the Company changed from four to seven reportable segments: Allstate Protection, Discontinued Lines and Coverages, Service Businesses, Allstate Life, Allstate Benefits, Allstate Annuities and Corporate and Other. These segments align with the Company’s key product and service offerings, including the acquisitionReport of SquareTrade and the strategic focus and expansion of Arity and other emerging businesses. These new segments reflect the manner in which the Company’s chief operating decision maker will review performance and make decisions about the allocation of resources.

~~Goodwill~~

Upon adoption of the new segments in the fourth quarter 2017, the Company is required to evaluate goodwill, including the allocation of goodwill to any new reporting units on a relative fair value basis. The Company allocated the $1.09 billion of goodwill recorded in conjunction with the acquisition of SquareTrade to the Service Businesses reporting unit along with an immaterial amount of goodwill from the Allstate Protection segment related to other businesses included in this segment. The Allstate Financial segment had goodwill that will be reallocated between the new Allstate Life, Allstate Benefits, and Allstate Annuities segments. While substantially all of Allstate Financial goodwill related to the acquisition of Allstate Benefits, the Company is required to allocate a portion of the goodwill to the Allstate Life and Allstate Annuities segments. The estimated allocation is $170 million to Allstate Life, $100 million to Allstate Benefits and $125 million to Allstate Annuities.

The reallocation was computed using fair values for the goodwill reporting units determined using discounted cash flow (“DCF”) calculations and market to book multiples derived from a peer company analysis. The DCF analysis utilizes long term assumptions for revenues, investment income, benefits, claims, other operating expenses and income taxes to produce projections of both income and cash flows available for dividends that are present valued using weighted average cost of capital. Market to book multiples represent the mean market to book multiple for selected peer companies with operations similar to the Company’s goodwill reporting units to which the multiple is applied. The outputs from these methods are weighted based on the nature of the business and the relative amount of market observable assumptions supporting the estimates. The computed values were then weighted to reflect the fair value estimate based on the specific attributes of each goodwill reporting unit.

A goodwill impairment assessment is required to be completed in conjunction with the segment changes. The Company estimates it will recognize an impairment of approximately $125 million in the fourth quarter of 2017 related to the goodwill allocated to the Allstate Annuities reporting unit reflecting a market-based valuation.

~~Reserve for life-contingent contract benefits~~

Prior to fourth quarter 2017, the Company evaluated the adequacy of reserves and recoverability of DAC for traditional life insurance products and immediate annuities with life contingencies on an aggregate basis. The Company also evaluated these policies on an aggregate basis for circumstances where projected profits would be recognized in early years followed by projected losses in later years. As of September 30, 2017, both traditional life insurance and immediate annuities with life contingencies had projected profit as measured using actual and expected investment holdings and returns; however, the aggregate sufficiency substantially related to traditional life insurance with a marginal sufficiency related to immediate annuities with life contingencies. In conjunction with the segment change in fourth quarter 2017, the Company will review traditional life insurance products and immediate annuities with life contingencies separately.

The Company records an adjustment to the reserve for life-contingent contract benefits that represents the amount by which the reserve balance would increase if the net unrealized gains in the applicable product investment portfolios were realized and reinvested at current lower interest rates, resulting in a premium deficiency. The offset to this liability is recorded as a reduction of the unrealized net capital gains included in accumulated other comprehensive income. As of September 30, 2017, no adjustment was recorded. In conjunction with the segment change in fourth quarter 2017, the Company will evaluate the need for a reserve adjustment separately for traditional life insurance and immediate annuities with life contingencies. The estimated impact, using values as of September 30, 2017, is approximately a $550 million increase to the reserve for life-contingent contract benefits, and a $350 million decrease to unrealized net capital gains, after-tax, included in shareholders’ equity.

~~The Allstate Corporation~~ 47

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

The Allstate Corporation

Northbrook, Illinois 60062

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated statement of financial position of The Allstate Corporation and subsidiaries (the “Company”) as of September 30, ~~2017, and~~2021, the related condensed consolidated statements of operations, comprehensive income and shareholders’ equity for the ~~three-month~~three and ~~nine-month~~nine month periods ended September 30, ~~2017~~2021 and ~~2016, and of shareholders’ equity~~2020, and cash flows for the ~~nine-month~~nine month periods ended September 30, ~~2017~~2021 and ~~2016. These interim~~2020, and the related notes (collectively referred to as the “condensed consolidated financial ~~statements are the responsibility of the Company’s management.~~

~~We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States)~~statements”). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to ~~such~~the accompanying condensed consolidated ~~interim~~ financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated statement of financial position of The Allstate Corporation and subsidiaries as of December 31, ~~2016,~~2020, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year then ended prior to the reclassification for the discontinued operations described in Note 3 to the accompanying interim financial information (not presented herein); and in our report dated February ~~17, 2017,~~19, 2021, we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 3 that were applied to reclassify the December 31, 2020 consolidated statement of financial position of The Allstate Corporation and subsidiaries (not presented herein) for discontinued operations. In our opinion, such adjustments are appropriate and have been properly applied to the ~~information set forth~~previously issued consolidated statement of financial position in deriving the accompanying ~~condensed~~retrospectively adjusted consolidated statement of financial position as of December 31, ~~2016 is fairly stated, in all material respects, in relation~~2020.

Basis for Review Results

These condensed consolidated financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of the condensed consolidated ~~statement~~financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial ~~position from~~and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which ~~it has been derived.~~is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ DELOITTE & TOUCHE LLP

Chicago, Illinois

November ~~1, 2017~~

3, 2021

48 ~~www.allstate.com~~

Third Quarter 2021 Form 10-Q 51

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~for the Three and Nine Month Periods Ended September 30, 2017 and 2016~~

~~Overview~~

~~Allstate is focused on the following priorities:~~

~~better serve our customers;~~

~~achieve target economic returns on capital;~~

~~grow customer base;~~

~~proactively manage investments; and~~

~~build long-term growth platforms.~~Overview

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as “we,” “our,” “us,” the “Company” or “Allstate”). It should be read in conjunction with the condensed consolidated financial statements and related notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporation ~~Annual Report~~annual report on Form 10-K for ~~2016.~~ 2020, filed February 19, 2021.

Further analysis of our insurance segments is provided in the Property-Liability Operations ~~(which includes the~~and Segment Results sections, including Allstate Protection and ~~the~~Run-off Property-Liability (previously Discontinued Lines and ~~Coverages segments)~~Coverages), Protection Services and ~~in the~~ Allstate ~~Financial Segment sections~~Health and Benefits (previously Allstate Benefits), of Management’s Discussion and Analysis (“MD&A”). The segments are consistent with the way in which ~~we use financial information to evaluate business performance and to determine the allocation of resources. Resources are allocated by~~ the chief operating decision maker ~~and performance is assessed for Allstate Protection, Discontinued Lines and Coverages and Allstate Financial. Allstate Protection and Allstate Financial~~reviews financial performance and ~~resources are managed by committees of senior officers of the respective segments. The Allstate Protection segment also includes SquareTrade and Arity.~~

Effective October 2017, we changed from four to seven reportable segments: Allstate Protection, Discontinued Lines and Coverages, Service Businesses, Allstate Life, Allstate Benefits, Allstate Annuities and Corporate and Other. These segments align with our key product and service offerings, including the acquisition of SquareTrade and the strategic focus and expansion of Arity and other emerging businesses. These new segments also reflect the manner in which our chief operating decision maker will review performance and makemakes decisions about the allocation of resources.

The ~~change~~Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”)

The Coronavirus resulted in ~~reporting segments impacts goodwill and reserves for life-contingent contract benefits. For additional detail see Note 15 “Subsequent Events”~~governments worldwide enacting emergency measures to combat the spread of the ~~condensed consolidated financial statements~~virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures have moderated in ~~Item 1. of this Form 10-Q.~~

~~The Allstate Corporation~~ 49

~~Highlights~~

Consolidated net income applicable to common shareholders was $637 million in the third quarter of 2017 compared to $491 million in the third quarter of 2016, and $1.85 billion in the first nine months of 2017 compared to $950 million in the first nine months of 2016. Net income applicable to common shareholders per diluted common share was $1.74 in the third quarter of 2017 compared to $1.31 in the third quarter of 2016, and $5.02 in the first nine months of 2017 compared to $2.51 in the first nine months of 2016.

Property-Liability net income applicable to common shareholders was $604 million in the third quarter of 2017 compared to $483 million in the third quarter of 2016, and $1.74 billion in the first nine months of 2017 compared to $903 million in the first nine months of 2016.

The Property-Liability combined ratio was 94.7 in the third quarter of 2017 compared to 95.5 in the third quarter of 2016, and 95.2 in the first nine months of 2017 compared to 98.2 in the first nine months of 2016.

Allstate Financial net income applicable to common shareholders was $168 million in the third quarter of 2017 compared to $80 million in the third quarter of 2016, and $422 million in the first nine months of 2017 compared to $264 million in the first nine months of 2016.

Total revenues were $9.66 billion in the third quarter of 2017 compared to $9.22 billion in the third quarter of 2016, and $28.68 billion in the first nine months of 2017 compared to $27.26 billion in the first nine months of 2016.

Property-Liability premiums earned totaled $8.12 billion in the third quarter of 2017, an increase of 3.2% from $7.87 billion in the third quarter of 2016, and $24.10 billion in the first nine months of 2017, an increase of 3.0% from $23.41 billion in the first nine months of 2016.

~~Investments totaled $82.77 billion~~2021 as of September 30, 2017, increasing from $81.80 billion as of December 31, 2016. Net investment income was $843 million in the third quarter of 2017, an increase of 12.7% from $748 million in the third quarter of 2016, and $2.49 billion in the first nine months of 2017, an increase of 11.0% from $2.24 billion in the first nine months of 2016.

Net realized capital gains were $103 million in the third quarter of 2017 compared to $33 million in the third quarter of 2016, and net realized capital gains were $318 million in the first nine months of 2017 compared to net realized capital losses of $92 million in the first nine months of 2016.

Book value per diluted common share (ratio of common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $55.69 as of September 30, 2017, an increase of 8.2% from $51.48 as of September 30, 2016, and an increase of 9.7% from $50.77 as of December 31, 2016.

For the twelve months ended September 30, 2017, return on the average of beginning and ending period common shareholders’ equity of 13.5% increased by 6.1 points from 7.4% for the twelve months ended September 30, 2016.

As of September 30, 2017, shareholders’ equity was $22.12 billion. This total included $2.47 billion in deployable assets at the parent holding company level comprising cash and investments that are generally saleable within one quarter.

On January 3, 2017, we acquired SquareTrade Holding Company, Inc. (“SquareTrade”), a consumer product protection plan provider that distributes through many of America’s major retailers and Europe’s mobile operators, for $1.4 billion in cash. SquareTrade provides protection plans primarily covering consumer appliances and electronics, such as TVs, smartphones and computers. This acquisition broadens Allstate’s unique product offerings to better meet consumers’ needs.

During the third quarter of 2017, the Company concluded that its qualified employee pension plan 2017 lump sum payments are expected to exceed a threshold of service and interest cost, which resulted in a pension settlement loss of $86 million, pre-tax, and was recorded as part of operating costs and expenses in the Corporate and Other segment.

50 ~~www.allstate.com~~

~~Consolidated Net Income~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Revenues

Property-liability insurance premiums $ 8,121
$ 7,869
$ 24,098
$ 23,406
Life and annuity premiums and contract charges 593
571
1,777
1,701
Net investment income 843
748
2,488
2,241
Realized capital gains and losses:

Total other-than-temporary impairment (“OTTI”) losses (26 ) (73 ) (135 ) (241 )
OTTI losses reclassified to (from) other comprehensive income (2 ) —
(2 ) 8
Net OTTI losses recognized in earnings (28 ) (73 ) (137 ) (233 )
Sales and other realized capital gains and losses 131
106
455
141
Total realized capital gains and losses 103
33
318
(92 )
Total revenues 9,660
9,221
28,681
27,256

Costs and expenses

Property-liability insurance claims and claims expense (5,545 ) (5,553 ) (16,650 ) (17,138 )
Life and annuity contract benefits (456 ) (484 ) (1,416 ) (1,393 )
Interest credited to contractholder funds (174 ) (183 ) (522 ) (558 )
Amortization of deferred policy acquisition costs (1,200 ) (1,138 ) (3,545 ) (3,393 )
Operating costs and expenses (1,218 ) (1,021 ) (3,401 ) (3,043 )
Restructuring and related charges (14 ) (5 ) (77 ) (21 )
Interest expense (83 ) (73 ) (251 ) (218 )
Total costs and expenses (8,690 ) (8,457 ) (25,862 ) (25,764 )

Gain on disposition of operations⁽¹⁾
1
1
15
4
Income tax expense ⁽²⁾
(305 ) (245 ) (894 ) (459 )
Net income 666
520
1,940
1,037

Preferred stock dividends (29 ) (29 ) (87 ) (87 )
Net income applicable to common shareholders $ 637
$ 491
$ 1,853
$ 950

Property-Liability $ 604
$ 483
$ 1,740
$ 903
Allstate Financial 168
80
422
264
Corporate and Other (135 ) (72 ) (309 ) (217 )
Net income applicable to common shareholders $ 637
$ 491
$ 1,853
$ 950


⁽¹⁾	~~The nine months ended September 30, 2017 includes $10 million related to the conclusion of a contractual arrangement related to the sale of Sterling Collision Centers, Inc. in 2014.~~


⁽²⁾	Income tax expense includes a tax benefit of $9 million and $42 million in the third quarter and nine months ended September 30, 2017, respectively, related to the adoption of the new accounting standard on January 1, 2017 for share-based payments.

~~The Allstate Corporation~~ 51

~~Property-Liability~~

~~Property-Liability Operations~~

~~Overview~~ Our Property-Liability operations consist of two reporting segments: Allstate Protection and Discontinued Lines and Coverages. Allstate Protection comprises three brands where we accept underwriting risk: Allstate, Esurance and Encompass. Allstate Protection is principally engaged in the sale of personal property and casualty insurance, primarily private passenger auto and homeowners insurance, to individualsvaccines have become more widely available in the United States and Canada. There is no way of predicting with certainty how long the pandemic might last. We continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to our operations, but the effects have been and could be material.

The Coronavirus has affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity, including:

•Sales of new and retention of existing policies

•Premium for transportation network products

•Driving behavior and auto accident frequency

•Supply chain disruptions and labor shortages could increase the cost of settling claims

•Hospital and outpatient claim costs

•Investment valuations and returns

•Bad debt and credit allowance exposure

•Consumer utilization of Milewise®,our pay-per-mile insurance product

•Retail sales in Allstate Protection ~~also includes service businesses Allstate Roadside Services, Allstate Dealer Services~~Plans

This list is not inclusive of all potential impacts and ~~Arity, which are~~should not be treated as such. Within the MD&A we

have included infurther disclosures related to the impacts of the Coronavirus on our 2021 results.

Corporate Strategy

Our strategy has two components: increase personal property-liability market share and expand protection offerings by leveraging the Allstate brand, customer base and ~~SquareTrade. These~~other core capabilities.

Transformative Growth is about creating business models, capabilities and culture to build growth businesses ~~have~~that deliver affordable, simple and connected protection solutions for consumers.

In the personal property-liability businesses this has four key components:

•Improving customer value

•Expanding customer access

•Increasing customer acquisition sophistication and investment

•Building new technology applications

The protection businesses are being expanded by leveraging enterprise capabilities and resources such as distribution, brand, analytics, claims, investment expertise, talent and capital.

Enhancing strategic position in the independent agent channel On January 4, 2021, we completed the acquisition of National General Holdings Corp. (“National General”), significantly enhancing our strategic position in the independent agency channel. The transaction increased our market share in personal property-liability by over one percentage point and enhanced our independent agent-facing technology. It will significantly expand our distribution footprint, leading us to be a ~~higher service component~~top five personal lines carrier in the independent agency distribution channel.

As part of the acquisition, Allstate Independent Agency and Encompass organizations will be integrated into National General by:

•Migrating Encompass policyholders and business operations to National General and retiring Encompass’s technology

•Transitioning Allstate Independent Agent new business to National General as mid-market products roll out

52www.allstate.com

Discontinued operations and held for sale During the first quarter of 2021, we announced the pending sales of Allstate Life Insurance Company (“ALIC”), Allstate Life Insurance Company of New York (“ALNY”) and certain affiliates. We are no longer accepting new proprietary life insurance applications through Allstate exclusive agents. On October 1, 2021, we closed the sale of ALNY to Wilton Reassurance Company for $400 million. On November 1, 2021, we closed the sale of ALIC and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including purchase price of $2.8 billion as well as increases in statutory surplus.

A loss on disposition of $4 billion, after-tax, was recorded in the first quarter of 2021 related to these transactions. For the nine months ended September 30, 2021, the loss on disposition was $3.8 billion, after-tax, and reflects purchase price adjustments associated with certain pre-close transactions specified in the stock purchase agreements, changes in statutory capital and surplus prior to the closing dates and the closing date equity of the sold entities determined under GAAP, excluding unrealized gains and losses on fixed income securities.

Beginning in the first quarter of 2021, the assets and liabilities of the business ~~model than our traditional property~~were reclassified as held for sale and ~~casualty products such~~results are presented as discontinued operations. This change was applied on a retrospective basis.

SafeAuto On June 1, 2021, we announced an agreement to acquire Safe Auto Insurance Group, Inc., a non-standard auto ~~or homeowners insurance. Discontinued Lines and Coverages includes results from property-liability~~ insurance ~~coverage that~~carrier. On October 1, 2021, we no longer write. Our exposure to asbestos, environmental and other discontinued lines claims arises principally from direct excess insurance, assumed reinsurance coverage, direct primary commercial insurance and other businessescompleted the acquisition for $262 million in run-off. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources. In fourth quarter 2017, we are changing our reportable segments. cash.

See Note ~~15 “Subsequent Events”~~3 of the condensed consolidated financial statements for further ~~information.~~information on acquisitions and dispositions.

Measuring segment profit or loss

The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Run-off Property-Liability segments and adjusted net income for the Protection Services, Allstate Health and Benefits and Corporate and Other segments.

Underwriting income is calculated as premiums earned and other revenue, less claims and claims expense (“losses”), Shelter-in-Place Payback expense, amortization of deferred policy acquisition costs (“DAC”), operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, as determined using accounting principles generally accepted in the United States of America (“GAAP”). We use this measure in our evaluation of results of operations to analyze ~~the profitability of the Property-Liability insurance operations separately from investment results. Underwriting~~profitability.

Adjusted net income is ~~reconciled to~~ net income (loss) applicable to common shareholders, ~~below.~~excluding:


•			Realized capital gains and losses except for periodic settlements and accruals on non-hedge derivative instruments, which are reported with realized capital gains and losses but included in adjusted net income
•			Pension and other postretirement remeasurement gains and losses
•			Business combination expenses and the amortization or impairment of purchased intangibles
•			Income or loss from discontinued operations
•			Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years
•			Income tax expense or benefit on reconciling items

Third Quarter 2021 Form 10-Q 53

Highlights

Consolidated net income

($ in millions)


Consolidated net income applicable to common shareholders decreased 54.9% to $508 million in the third quarter of 2021 compared to the same period of 2020primarily due to higher non-catastrophe and catastrophe losses, lower realized capital gains, partially offset by higher property and casualty insurance premiums and higher net investment income. Consolidated net income applicable to common shareholders decreased 75.7% to $695 million in the first nine months of 2021 compared to the same period of 2020 primarily due to a loss from discontinued operations and higher non-catastrophe losses. Partially offsetting were higher property and casualty insurance premiums, net investment income, and pension and other postretirement gains in 2021 compared to losses in 2020. For the twelve months ended September 30, 2021, return on Allstate common shareholders’ equity was 13.2%, a decrease of 5.7 points from 18.9% for the twelve months ended September 30, 2020.

Total revenue

( ($ in millions)


Total revenue increased 16.9% to $12.48 billion and 21.4% to $37.58 billion in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, driven by 13.7% and 12.9% increase in property and casualty insurance premiums in the third quarter and first nine months of 2021, respectively, and higher net investment income. Insurance premiums earned increased in both Property-Liability, primarily due to the acquisition of National General, and Protection Services.

Net investment income

($ in millions)


Net investment income increased $300 million to $764 million in the third quarter of 2021 compared to the same period of 2020 and increased $1.52 billion to $2.45 billion in the first nine months of 2021 compared to the same period of 2020. The increase in both periods was primarily due to increases in performance-based income results, mainly from limited partnerships.

54www.allstate.com

Financial highlights

Investments totaled $61.84 billion as of September 30, 2021, increasing from $59.54 billion as of December 31, 2020.

Allstate shareholders’ equity As of September 30, 2021, Allstate shareholders’ equity was $26.73 billion.

Book value per common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $84.62, an increase of 2.7% from $82.39 as of September 30, 2020, and a decrease of 7.5% from $91.50 as of December 31, 2020.

Return on average Allstate common shareholders’ equity For the twelve months ended September 30, 2021, return on Allstate common shareholders’ equity was 13.2%, a decrease of 5.7 points from 18.9% for the twelve months ended September 30, 2020. The ~~table below includes~~ decrease was primarily due to lower net income

applicable to common shareholders for the trailing twelve-month period ended September 30, 2021 and an increase in average Allstate common shareholders’ equity.

Pension and other postretirement remeasurement gains and lossesWe recorded pension and other postretirement remeasurement losses of $40 million in the third quarter of 2021 primarily related to unfavorable asset performance compared to the expected return on plan assets, partially offset by an increase in the liability discount rate. Pension and other postretirement remeasurement gains of $404 million in the first nine months of 2021 primarily related to an increase in the liability discount rate and favorable asset performance compared to the expected return on plan assets.

Summarized consolidated financial results


	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Revenues
Property and casualty insurance premiums	$	10,615	$	9,336	$	31,366	$	27,794
Accident and health insurance premiums and contract charges	460		287		1,362		832
Other revenue	536		272		1,585		794
Net investment income	764		464		2,446		930
Realized capital gains (losses)	105		319		818		597
Total revenues	12,480		10,678		37,577		30,947

Costs and expenses
Property and casualty insurance claims and claims expense	(8,264)		(6,072)		(21,514)		(16,635)
Shelter-in-Place Payback expense	—		—		(29)		(948)
Accident and health insurance policy benefits	(269)		(128)		(746)		(392)
Interest credited to contractholder funds	(8)		(8)		(25)		(26)
Amortization of deferred policy acquisition costs	(1,582)		(1,386)		(4,650)		(4,095)
Operating, restructuring and interest expenses	(1,982)		(1,596)		(5,695)		(4,505)
Pension and other postretirement remeasurement gains (losses)	(40)		71		404		(320)
Amortization of purchased intangibles	(109)		(31)		(267)		(88)

Total costs and expenses	(12,254)		(9,150)		(32,522)		(27,009)

Income from operations before income tax expense	226		1,528		5,055		3,938

Income tax expense	(20)		(312)		(1,008)		(779)

Net income from continuing operations	206		1,216		4,047		3,159

Income (loss) from discontinued operations, net of tax	325		(63)		(3,272)		(207)

Net income	531		1,153		775		2,952

Less: Net loss attributable to noncontrolling interest	(7)		—		(7)		—

Net income attributable to Allstate	538		1,153		782		2,952

Preferred stock dividends	(30)		(27)		(87)		(89)

Net income applicable to common shareholders	$	508	$	1,126	$	695	$	2,863

Third Quarter 2021 Form 10-Q 55

Segment highlights

Allstate Protection underwriting loss was $421 million in the third quarter of 2021, compared to underwriting income of $887 million in the third quarter of 2020 primarily due to higher auto and home non-catastrophe losses, lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020 and increased underwriting expenses, partially offset by premiums from the acquisition of National General. Underwriting income totaled $1.67 billion in the first nine months of 2021, a $1.47 billion decrease from $3.14 billion in the first nine months of 2020 primarily due to higher auto and home non-catastrophe and catastrophe losses and increased underwriting expenses, partially offset by premiums from the acquisition of National General and lower Shelter-in-Place Payback expense.

Catastrophe losses were $1.27 billion and $2.81 billion in the third quarter and first nine months of 2021, respectively, compared to $990 million and $2.39 billion in the third quarter and first nine months of 2020, respectively.

Premiums written increased 16.7% to $10.97 billion in the third quarter of 2021 and 14.4% to $31.06 billion in the first nine months of 2021 compared to the same periods of 2020, reflecting the acquisition of National General and higher Allstate brand homeowners premiums.

Protection Services adjusted net income was $45 million in the third quarter of 2021 compared to $40 million in the third quarter of 2020. Adjusted net income was $150 million in the first nine months of 2021 compared to $115 million in the first nine months of 2020. The increase in both periods was primarily due to growth, partially offset by higher operating costs and expenses related to investments in growth.

Premiums and other revenue increased 24.1% or $105 million in the third quarter of 2021 and 24.9% or $312 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to Allstate Protection Plan’s growth through its U.S. retail and international channels and the addition of LeadCloud and Transparent.ly, which were acquired as part of the National General acquisition.

Allstate Health and Benefits adjusted net income was $33 million in the third quarter of both 2021 and 2020. Adjusted net income was $160 million in the first nine months of 2021 compared to $62 million in the first nine months of 2020 primarily due to the acquisition of National General’s group health and individual accident and health business, which resulted in higher premiums and contract charges and the addition of other revenue, partially offset by higher policy benefits and operating costs and expenses.

Premiums and contract charges increased 60.3% to $460 million in the third quarter of 2021 and 63.7% to $1.36 billion in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of group health and individual accident and health business.

56www.allstate.com

Property-Liability Operations

Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Run-off Property-Liability. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources.

We do not allocate Property-Liability investment income, realized capital gains and losses, or assets to the Allstate Protection and Run-off Property-Liability segments. Management reviews assets at the Property-Liability level for decision-making purposes.

GAAP operating ratios ~~we use~~ are used to measure our ~~profitability. We believe that they~~profitability to enhance an investor’s understanding of our ~~profitability. They~~financial results and are calculated as follows:

~~Claims and claims expense (“loss”)~~•Loss ratio -: the ratio of claims and claims expense (loss adjustment expenses), to premiums earned. Loss ratios include the impact of catastrophe losses.

•Expense ratio -: the ratio of amortization of DAC, operating costs and expenses, ~~and~~amortization or impairment of purchased intangibles, restructuring and related charges and Shelter-in-Place Payback expense, less other revenue to premiums earned.

•Combined ratio ~~- the ratio of claims and claims expense, amortization of DAC, operating costs and expenses, and restructuring and related charges to premiums earned. The combined ratio is~~: the sum of the loss ratio and the expense ratio. ~~The difference between 100% and the combined ratio represents underwriting income as a percentage of premiums earned, or underwriting margin.~~

We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between ~~fiscal~~ periods. The impacts are calculated by taking the specific items noted below divided by Property-Liability premiums earned:

•Effect of catastrophe losses on combined ratio ~~- the percentage~~,includes catastrophe losses and prior year reserve reestimates of catastrophe losses, included in claims and claims expense ~~to premiums earned. This ratio includes prior year reserve reestimates of catastrophe losses.~~

•Effect of prior year reserve reestimates on combined ratio ~~- the percentage of prior year reserve reestimates included in claims and claims expense to premiums earned. This ratio~~, includes prior year reserve reestimates of catastrophe ~~losses.~~losses

•Effect of amortization of purchased ~~intangible assets~~intangibles on combined ratio - the percentage of amortization of purchased intangible assets to premiums earned. Amortization of purchased intangible assets is reported in operating costs and expenses on the Condensed Consolidated Statements of Operations.

•Effect of restructuring and related charges on combined ratio ~~- the percentage~~

•Effect of Shelter-in-Place Payback expense on combined and expense ratios

•Effect of Run-off Property-Liability business on combined ratio, includes claims and claims expense, restructuring and related charges ~~to premiums earned.~~

~~Effect of Discontinued Lines and Coverages on combined ratio - the ratio of claims and claims expense~~ and operating costs and expenses in Run-off Property-Liability segment

Premium measures and statistics are used to analyze our premium trends and are calculated as follows:

•PIF: Policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy. Commercial lines PIF counts for shared economy agreements typically reflect contracts that cover multiple rather than individual drivers.

•New issued applications: Item counts of automobile or homeowner insurance applications for insurance policies that were issued during the ~~Discontinued Lines~~period, regardless of whether the customer was previously insured by another Allstate brand.

•Average premium-gross written (“average premium”): Gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ~~Coverages segment~~ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line.

•Renewal ratio: Renewal policy item counts issued during the period, based on contract effective dates, divided by the total policy item counts issued generally 6 months prior for auto or 12 months prior for homeowners.

Frequency and severity statistics, which are influenced by driving patterns, inflation and other factors, are provided to ~~Property-Liability premiums earned. The~~describe the trends in loss costs. Our reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine our best estimate of recorded reserves. We use the following statistics to evaluate losses:

•Gross claim frequency is calculated as annualized notice counts, excluding counts associated with catastrophe events, received in the period divided by the average of PIF with the applicable coverage during the period. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed with a payment or closed without payment).

•Paid claim severityis calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the ~~effect~~period.

•Percent change in frequency or severity statistics is calculated as the amount of ~~Discontinued Lines and Coverages on~~increase or decrease in gross claim frequency or paid claim severity in the ~~combined ratio and the Allstate Protection combined ratio is equal~~current period compared to the ~~Property-Liability combined ratio.~~same period in the prior year divided by the prior year gross claim frequency or paid claim severity.

52 ~~www.allstate.com~~

Third Quarter 2021 Form 10-Q 57

~~Property-Liability~~

Property-Liability Operations


Underwriting results
	Three months ended September 30,				Nine months ended September 30,
($ in millions, except ratios)	2021		2020		2021		2020
Premiums written	$	10,966	$	9,395	$	31,057	$	27,159
Premiums earned	$	10,159	$	8,952	$	30,064	$	26,696
Other revenue	365		220		1,071		639
Claims and claims expense	(8,145)		(5,968)		(21,193)		(16,358)
Shelter-in-Place Payback expense	—		—		(29)		(948)
Amortization of DAC	(1,346)		(1,158)		(3,968)		(3,474)
Other costs and expenses	(1,552)		(1,107)		(4,280)		(3,354)
Restructuring and related charges (1)	(15)		(187)		(113)		(199)
Underwriting (loss) income	$	(534)	$	752	$	1,552	$	3,002

Catastrophe losses
Catastrophe losses, excluding reserve reestimates	$	1,270	$	1,497	$	3,018	$	2,889
Catastrophe reserve reestimates (2) (3)	(1)		(507)		(207)		(502)
Total catastrophe losses	$	1,269	$	990	$	2,811	$	2,387

Non-catastrophe reserve reestimates (2)	162		70		144		63
Prior year reserve reestimates (2) (3)	161		(437)		(63)		(439)

GAAP operating ratios
Loss ratio	80.2		66.7		70.5		61.3
Expense ratio (4)	25.1		24.9		24.3		27.5
Combined ratio	105.3		91.6		94.8		88.8
Effect of catastrophe losses on combined ratio	12.5		11.1		9.4		8.9
Effect of prior year reserve reestimates on combined ratio	1.6		(4.9)		(0.3)		(1.6)
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio	—		(5.7)		(0.7)		(1.9)
Effect of amortization of purchased intangibles on combined ratio	0.8		—		0.5		—
Effect of restructuring and related charges on combined ratio (1)	0.1		2.1		0.4		0.7
Effect of Shelter-in-Place Payback expense on combined and expense ratios	—		—		0.1		3.6
Effect of Run-off Property-Liability business on combined ratio	1.2		1.5		0.4		0.6

~~Property-Liability Highlights~~

~~Net income applicable to common shareholders was $604 million in the third quarter of 2017 compared to $483 million in the third quarter of 2016,~~(1)Restructuring and ~~$1.74 billion in the first nine months of 2017 compared to $903 million in the first nine months of 2016.~~

Premiums written totaled $8.58 billion in the third quarter of 2017, an increase of 3.3% from $8.31 billion in the third quarter of 2016, and $24.60 billion in the first nine months of 2017, an increase of 3.0% from $23.88 billion in the first nine months of 2016. Premiums written related ~~to SquareTrade were $104 million and $270 million in~~charges for the third quarter and first nine months of ~~2017, respectively. Excluding SquareTrade, premiums written totaled $8.48 billion~~2021 primarily related to future work environment. See Note 12 of the condensed consolidated financial statements for additional details.

(2)Favorable reserve reestimates are shown in parentheses.

(3)2020 includes approximately $495 million of favorable reserve reestimates related to the PG&E Corporation and ~~$24.33 billion, respectively.~~Southern California Edison subrogation settlements, which primarily impacted homeowners.

~~Premiums earned totaled $8.12 billion~~(4)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.

58www.allstate.com

Allstate ProtectionSegment Results

Allstate Protection Segment

Allstate Protection consists of the Allstate brand, National General and Answer Financial. The Encompass brand was combined into National General beginning in the first quarter of 2021 and results prior to 2021 reflect Encompass brand results only.


Underwriting results
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Premiums written	$	10,966	$	9,395	$	31,057	$	27,159
Premiums earned	$	10,159	$	8,952	$	30,064	$	26,696
Other revenue	365		220		1,071		639
Claims and claims expense	(8,032)		(5,833)		(21,078)		(16,219)
Shelter-in-Place Payback expense	—		—		(29)		(948)
Amortization of DAC	(1,346)		(1,158)		(3,968)		(3,474)
Other costs and expenses	(1,551)		(1,107)		(4,277)		(3,352)
Restructuring and related charges	(16)		(187)		(113)		(199)
Underwriting (loss) income	$	(421)	$	887	$	1,670	$	3,143
Catastrophe losses	$	1,269	$	990	$	2,811	$	2,387

Underwriting loss was $421 million in the third quarter of ~~2017, an increase~~2021 compared to underwriting income of ~~3.2% from $7.87 billion~~$887 million in the third quarter of ~~2016,~~2020 primarily due to higher auto and ~~$24.10~~home non-catastrophe losses, lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020 and increased underwriting expenses, partially offset by premiums from the acquisition of National General. Underwriting income decreased 46.9% or $1.47 billion in the first nine months of 2017, an increase of 3.0% from $23.41 billion in the first nine months of 2016. Premiums earned related to SquareTrade included $78 million and $207 million in the third quarter and first nine months of 2017, respectively. Excluding SquareTrade, premiums earned totaled $8.04 billion and $23.89 billion, respectively.

~~The loss ratio was 68.3 in the third quarter of 2017~~2021, compared to ~~70.6 in~~ the ~~third quarter~~same period of ~~2016,~~2020 primarily due to higher auto and ~~69.1 in~~home non-catastrophe and catastrophe losses and increased underwriting expenses, partially offset by premiums from the ~~first nine months~~acquisition of ~~2017 compared to 73.2 in the first nine months of 2016.~~National General and lower Shelter-in-Place Payback expense.

Catastrophe losses were $861 million in the third quarter of 2017 compared to $481 million in the third quarter of 2016, and $2.64 billion in the first nine months of 2017 compared to $2.27 billion in the first nine months of 2016. The effect of catastrophes on the combined ratio was 10.6 in the third quarter of 2017 compared to 6.1 in the third quarter of 2016, and 11.0 in the first nine months of 2017 compared to 9.7 in the first nine months of 2016.

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

($ in millions)

Prior year reserve reestimates totaled $135 million favorable in the third quarter of 2017 compared to $99 million unfavorable in the third quarter of 2016, and $321 million favorable in the first nine months of 2017 compared to $120 million unfavorable in the first nine months of 2016. These amounts include unfavorable reestimates of $85 million and $96 million from our annual Discontinued Lines and Coverages reserve review performed in the third quarter of 2017 and 2016, respectively.

Underwriting income was $429 million in the third quarter of 2017 compared to $355 million in the third quarter of 2016, and underwriting income was $1.16 billion in the first nine months of 2017 compared to $414 million in the first nine months of 2016.

Investments were $43.84 billion as of September 30, 2017, an increase of 2.6% from $42.72 billion as of December 31, 2016. Net investment income was $372 million in the third quarter of 2017, an increase of 20.0% from $310 million in the third quarter of 2016, and $1.07 billion in the first nine months of 2017, an increase of 15.7% from $928 million in the first nine months of 2016.

Net realized capital gains were $82 million in the third quarter of 2017 compared to $53 million in the third quarter of 2016, and net realized capital gains were $302 million in the first nine months of 2017 compared to net realized capital losses of $20 million in the first nine months of 2016.

~~The Allstate Corporation~~ 53

Third Quarter 2021 Form 10-Q 59

Segment Results Allstate Protection

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

($ in millions)

~~Property-Liability~~

Summarized financial data, a reconciliation of underwriting income to net income applicable to common shareholders, and GAAP operating ratios for our Property-Liability operations are presented in the following table.

($ in millions, except ratios) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 8,583
$ 8,311
$ 24,595
$ 23,877

Revenues

Premiums earned $ 8,121
$ 7,869
$ 24,098
$ 23,406
Net investment income 372
310
1,074
928
Realized capital gains and losses 82
53
302
(20 )
Total revenues 8,575
8,232
25,474
24,314

Costs and expenses

Claims and claims expense (5,545 ) (5,553 ) (16,650 ) (17,138 )
Amortization of DAC (1,138 ) (1,068 ) (3,331 ) (3,181 )
Operating costs and expenses (996 ) (888 ) (2,879 ) (2,653 )
Restructuring and related charges (13 ) (5 ) (75 ) (20 )
Total costs and expenses (7,692 ) (7,514 ) (22,935 ) (22,992 )

Gain on disposition of operations —
—
10
⁽¹⁾
—
Income tax expense ⁽²⁾
(279 ) (235 ) (809 ) (419 )
Net income applicable to common shareholders $ 604
$ 483
$ 1,740
$ 903

Underwriting income $ 429
$ 355
$ 1,163
$ 414
Net investment income 372
310
1,074
928
Income tax expense on operations (252 ) (218 ) (703 ) (429 )
Realized capital gains and losses, after-tax 54
36
199
(10 )
Gain on disposition of operations, after-tax 1
—
7
—
Net income applicable to common shareholders $ 604
$ 483
$ 1,740
$ 903

Catastrophe losses $ 861
$ 481
$ 2,635
$ 2,269

GAAP operating ratios

Claims and claims expense ratio 68.3
70.6
69.1
73.2
Expense ratio 26.4
24.9
26.1
25.0
Combined ratio 94.7
95.5
95.2
98.2
Effect of catastrophe losses on combined ratio 10.6
6.1
11.0
9.7
Effect of prior year reserve reestimates on combined ratio ⁽³⁾
(1.7 ) 1.3
(1.3 ) 0.5
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio ⁽⁴⁾
(0.1 ) —
—
0.1
Effect of amortization of purchased intangible assets on combined ratio ⁽⁵⁾
0.3
0.1
0.3
0.1
Effect of restructuring and related charges on combined ratio 0.2
0.1
0.3
0.1
Effect of Discontinued Lines and Coverages on combined ratio 1.1
1.3
0.4
0.4

~~_______________~~


⁽¹⁾			~~Represents the conclusion of a contractual arrangement related to the sale of Sterling Collision Centers, Inc. in 2014.~~


⁽²⁾			Income tax expense includes a tax benefit of $9 million and $42 million in the third quarter and nine months ended September 30, 2017, respectively, related to the adoption of the new accounting standard on January 1, 2017 for share-based payments.


⁽³⁾			Favorable prior year reserve reestimates in the three and nine months ended September 30, 2017 were primarily related to severity development for auto injury coverages that was better than expected, partially offset by our annual reserve review in Discontinued Lines and Coverages.


⁽⁴⁾			Prior year reserve reestimates included in catastrophe losses totaled $7 million and $10 million favorable in the three and nine months ended September 30, 2017, respectively, compared to $3 million and $13 million unfavorable in the three and nine months ended September 30, 2016, respectively.


⁽⁵⁾			Amortization of purchased intangible assets totaled $25 million and $74 million for the three and nine months ended September 30, 2017, respectively, of which $23 million and $69 million related to the acquisition of SquareTrade.

54 ~~www.allstate.com~~

~~Property-Liability~~


Underwriting income (loss) by brand and by line of business
	Allstate brand				National General			Allstate Protection
($ in millions)	2021		2020			2021		2020		2021		2020
Three months ended September 30,
Auto (1)	$	(123)	$	897		$	(36)	$	9	$	(159)	$	906
Homeowners (2)	(208)		(93)			(69)		26		(277)		(67)
Other personal lines	47		34			(7)		8		40		42
Commercial lines	(54)		(14)			—		—		(54)		(14)
Other business lines (3)	27		18			—		—		27		18
Answer Financial	—		—			—		—		2		2
Total	$	(311)	$	842		$	(112)	$	43	$	(421)	$	887

Nine months ended September 30,
Auto (1)	$	1,444	$	2,522		$	118	$	39	$	1,562	$	2,561
Homeowners (2)	61		356			(77)		19		(16)		375
Other personal lines	112		170			—		5		112		175
Commercial lines	(81)		(20)			—		—		(81)		(20)
Other business lines (3)	82		49			—		—		82		49
Answer Financial	—		—			—		—		11		3
Total	$	1,618	$	3,077		$	41	$	63	$	1,670	$	3,143

(1)2021 results include National General commercial lines insurance products.

(2)2021 results include National General packaged policies, which include auto and other personal lines insurance products.

(3)Other business lines includes revenue and direct operating expenses for distribution of non-proprietary life and annuity products.

Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends. Premiums writtenis the amount of premiums charged for policies issued during a fiscal period. Premiums are considered earned and are included in the financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired term of the policies is recorded as unearned premiums on our Condensed Consolidated Statements of Financial Position.

~~A reconciliation~~

60www.allstate.com

Allstate ProtectionSegment Results


Premiums written by brand and by line of business
	Allstate brand				National General				Allstate Protection
($ in millions)	2021		2020		2021		2020		2021		2020
Three months ended September 30,
Auto	$	6,153	$	6,192	$	1,018	$	134	$	7,171	$	6,326
Homeowners	2,452		2,234		552		105		3,004		2,339
Other personal lines	543		521		41		21		584		542
Commercial lines	207		188		—		—		207		188

Total premiums written	$	9,355	$	9,135	$	1,611	$	260	$	10,966	$	9,395

Nine months ended September 30,
Auto	$	18,165	$	18,337	$	2,836	$	388	$	21,001	$	18,725
Homeowners	6,492		6,057		1,317		298		7,809		6,355
Other personal lines	1,519		1,441		120		59		1,639		1,500
Commercial lines	608		579		—		—		608		579

Total premiums written	$	26,784	$	26,414	$	4,273	$	745	$	31,057	$	27,159


Premiums earned by brand and by line of business
	Allstate brand				National General			Allstate Protection
($ in millions)	2021		2020			2021		2020		2021		2020
Three months ended September 30,
Auto	$	6,009	$	6,081		$	903	$	129	$	6,912	$	6,210
Homeowners	2,080		1,974			442		99		2,522		2,073
Other personal lines	481		466			40		20		521		486
Commercial lines	204		183			—		—		204		183

Total premiums earned	$	8,774	$	8,704		$	1,385	$	248	$	10,159	$	8,952

Nine months ended September 30,
Auto	$	18,059	$	18,138		$	2,545	$	399	$	20,604	$	18,537
Homeowners	6,120		5,865			1,205		299		7,325		6,164
Other personal lines	1,432		1,376			113		59		1,545		1,435
Commercial lines	590		560			—		—		590		560

Total premiums earned	$	26,201	$	25,939		$	3,863	$	757	$	30,064	$	26,696


Reconciliation of premiums written to premiums earned
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Total premiums written	$	10,966	$	9,395	$	31,057	$	27,159
(Increase) decrease in unearned premiums (1)	(672)		(470)		(1,264)		(449)
Other	(135)		27		271		(14)
Total premiums earned	$	10,159	$	8,952	$	30,064	$	26,696

(1)2021 results include unearned premiums related to acquisition of National General.


Policies in force by brand and by line of business
	Allstate brand		National General		Allstate Protection
PIF (thousands)	2021	2020		2021	2020	2021	2020
Auto	21,951	21,900		3,703	460	25,654	22,360
Homeowners	6,496	6,414		642	220	7,138	6,634
Other personal lines	4,560	4,455		288	73	4,848	4,528
Commercial lines	212	219		107	—	319	219

Total	33,219	32,988		4,740	753	37,959	33,741

Third Quarter 2021 Form 10-Q 61

Segment Results Allstate Protection

Auto insurance premiums written ~~to premiums earned is shown~~increased 13.4% or $845 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 12.2% or 2.28 billion in the first nine months of 2021 compared to the first nine months of 2020, primarily due to the following ~~table.~~factors:

•Acquisition of National General

•Increased new issued applications in the Allstate brand driven by increased advertising and higher close rates

•Decreased Allstate brand average premium reflecting approved rate decreases of approximately 3% for the trailing twelve months ended September 30, 2021

•Rate increases are being implemented broadly to improve underwriting results given the higher inflationary trends adversely impacting loss costs

•PIF increased 14.7% or 3,294 thousand to 25,654 thousand as of September 30, 2021 compared to September 30, 2020 due to the acquisition of National General

–PIF increased by 40 thousand as of September 30, 2021 compared to June 30, 2021, with increases in both Allstate brand and National General


Auto premium measures and statistics
	Three months ended September 30,						Nine months ended September 30,
	2021		2020		Change		2021		2020		Change




New issued applications (thousands)
Agency channel	648		682		(5.0)	%	1,957		2,018		(3.0)	%
Direct channel	284		206		37.9	%	830		619		34.1	%
Allstate brand	932		888		5.0	%	2,787		2,637		5.7	%
National General	516		14		NM		1,553		44		NM
Total new issued applications	1,448		902		60.5	%	4,340		2,681		61.9	%





Allstate brand average premium	$	604	$	621	(2.7)	%	$	604	$	616	(1.9)	%
Allstate brand renewal ratio (%)	87.2		87.9		(0.7)		87.0		87.6		(0.6)

Homeowners insurance premiums writtenincreased 28.4% or $665 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 22.9% or $1.45 billion in the first nine months of 2021 compared to the first nine months of 2020, primarily due to the following factors:

•Acquisition of National General

•Higher Allstate brand average premiums from approved rate increases of approximately 3.4% for the trailing twelve months ended September 30, 2021 and inflation adjustments to premium due to higher insured home valuations

•Increased new issued applications in the Allstate brand driven by higher quote volumes and improved close rates


Homeowners premium measures and statistics
	Three months ended September 30,						Nine months ended September 30,
	2021		2020		Change		2021		2020		Change




New issued applications (thousands)
Agency channel	236		231		2.2	%	676		636		6.3	%
Direct channel	23		16		43.8	%	61		45		35.6	%
Allstate brand	259		247		4.9	%	737		681		8.2	%
National General	28		9		NM		77		25		NM
Total new issued applications	287		256		12.1	%	814		706		15.3	%





Allstate brand average premium	$	1,443	$	1,334	8.2	%	$	1,406	$	1,324	6.2	%
Allstate brand renewal ratio (%)	87.1		87.8		(0.7)		87.1		87.6		(0.5)

Other personal linespremiums written increased 7.7% or $42 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 9.3% or $139 million in the first nine months of 2021 compared to the first nine months of 2020. The increase in both periods was primarily due to the acquisition of National General and increases in condominiums and personal umbrella premiums for Allstate brand.

Commercial lines premiums written increased 10.1% or $19 million in the third quarter of 2021 compared to the third quarter of 2020 and increased 5.0% or $29 million in the first nine months of 2021 compared to the first nine months of 2020. The increase in both periods was primarily due to the addition of a large transportation network company, higher miles driven in our shared economy business as the impacts of the Coronavirus decrease and an increase in average premiums.

62www.allstate.com

Allstate ProtectionSegment Results

GAAP operating ratiosinclude loss ratio, expense ratio and combined ratio to analyze our profitability trends. Frequency and severity statistics are used to describe the trends in loss costs.


Combined ratios by line of business
	Loss ratio		Expense ratio (1)		Combined ratio
	2021	2020	2021	2020	2021	2020
Three months ended September 30,
Auto	76.9	59.7	25.4	25.7	102.3	85.4


Homeowners	85.9	80.4	25.1	22.8	111.0	103.2
Other personal lines	64.9	63.0	27.4	28.4	92.3	91.4
Commercial lines	104.4	83.6	22.1	24.1	126.5	107.7
Impact of Shelter-in-Place Payback expense	—	—	—	—	—	—


Total	79.0	65.2	25.1	24.9	104.1	90.1
Impact of amortization of purchased intangibles	—	—	0.8	—	0.8	—

Impact of restructuring and related charges	—	—	0.2	2.1	0.2	2.1
Impact of Allstate Special Payment plan bad debt expense (2)	—	—	—	0.2	—	0.2

Nine months ended September 30,
Auto	67.7	56.6	24.7	29.6	92.4	86.2
Impact of Shelter-in-Place Payback expense	0.1	—	0.1	5.1	0.1	5.1

Homeowners	75.9	71.4	24.3	22.5	100.2	93.9
Other personal lines	67.0	60.8	25.8	27.0	92.8	87.8
Commercial lines	91.5	80.2	22.2	23.4	113.7	103.6
Impact of Shelter-in-Place Payback expense	—	—	—	0.7	—	0.7


Total	70.1	60.7	24.3	27.5	94.4	88.2
Impact of amortization of purchased intangibles	—	—	0.5	—	0.5	—
Impact of Shelter-in-Place Payback expense	—	—	0.1	3.6	0.1	3.6
Impact of restructuring and related charges	—	—	0.4	0.7	0.4	0.7
Impact of Allstate Special Payment plan bad debt expense (2)	—	—	(0.1)	0.2	(0.1)	0.2

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

(2)Relates to the Allstate Special Payment plan offered in 2020 to customers as a result of the Coronavirus to provide more flexible payment options. Approximately 70% of the higher bad debt expense was attributed to auto.


Loss ratios by line of business
	Loss ratio		Effect of catastrophe losses (1)		Effect of prior year reserve reestimates		Effect of catastrophe losses included in prior year reserve reestimates
	2021	2020	2021	2020	2021	2020	2021	2020
Three months ended September 30,
Auto	76.9	59.7	2.9	1.6	1.0	(0.9)	(0.1)	(0.4)
Homeowners	85.9	80.4	38.0	39.1	0.7	(22.0)	0.1	(21.3)
Other personal lines	64.9	63.0	19.6	13.4	(12.7)	(11.9)	—	(8.0)
Commercial lines	104.4	83.6	4.9	6.6	12.3	1.1	0.5	(1.1)

Total	79.0	65.2	12.5	11.1	0.4	(6.4)	—	(5.7)

Nine months ended September 30,
Auto	67.7	56.6	1.9	1.4	—	(0.5)	(0.1)	(0.2)
Homeowners	75.9	71.4	29.8	31.6	(2.1)	(7.1)	(2.3)	(6.8)
Other personal lines	67.0	60.8	14.4	11.6	(5.4)	(4.6)	(0.9)	(2.9)
Commercial lines	91.5	80.2	4.2	4.1	9.8	5.2	0.5	0.2

Total	70.1	60.7	9.4	8.9	(0.6)	(2.2)	(0.7)	(1.9)

(1) The ten-year average effect of catastrophe losses on the total combined ratio was 7.3 points in the third quarter of 2021.

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written

Allstate Protection $ 8,583
$ 8,309
$ 24,595
$ 23,875
Discontinued Lines and Coverages ⁽¹⁾
—
2
—
2
Property-Liability premiums written 8,583
8,311
24,595
23,877
Increase in unearned premiums (513 ) (472 ) (580 ) (570 )
Other 51
30
83
99
Property-Liability premiums earned $ 8,121
$ 7,869
$ 24,098
$ 23,406

Premiums earned

Allstate Protection $ 8,121
$ 7,869
$ 24,098
$ 23,406
Discontinued Lines and Coverages —
—
—
—
Property-Liability $ 8,121
$ 7,869
$ 24,098
$ 23,406

Third Quarter 2021 Form 10-Q 63

Segment Results Allstate Protection

~~_______________~~

Auto loss ratio increased 17.2 and 11.1 points in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to:

•Higher gross claim frequency in all coverages, as miles driven continue to rebound toward pre-pandemic levels

•While frequency increased relative to the prior year quarter, it remains below pre-pandemic levels

•Increased severity, primarily for property damage, collision and bodily injury coverages, driven by inflationary pressures and accident type mix

•Prior quarter development impact of 2.2 points on the third quarter 2021 loss ratio for reserve strengthening of first and second quarter 2021 claims

The impacts of the Coronavirusaffect frequency and severity statistics including:

•Shelter-in-place and travel restrictions, which have moderated in 2021 as vaccines have become more widely available in the US and Canada

•Unemployment levels

•Changes in commuting activity

•Supply chain disruptions and labor shortages

•Shifts in the frequency environment may impact the speed claims are settled

•Driving behavior (e.g., speed, time of day) impacting mix of claim types

•Value of total losses due to higher used car prices

•Labor and part cost increases

⁽¹⁾

Allstate brand frequency and paid claim severity statistics (excluding catastrophe losses)

(% change year-over-year)

~~2016 results represent retrospective reinsurance premium recognized when billed.~~

~~The Allstate Corporation~~ 55

Three months ended September 30, 2021

Property damage gross claim frequency

16.6

Property damage paid claim severity

15.1

~~Allstate Protection~~

~~Allstate brand~~

~~Esurance brand~~

~~Encompass brand~~

~~SquareTrade~~

~~Allstate Protection Segment~~

~~Underwriting results~~ ~~are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 8,583
$ 8,309
$ 24,595
$ 23,875
Premiums earned $ 8,121
$ 7,869
$ 24,098
$ 23,406
Claims and claims expense (5,457 ) (5,454 ) (16,557 ) (17,036 )
Amortization of DAC (1,138 ) (1,068 ) (3,331 ) (3,181 )
Other costs and expenses (996 ) (887 ) (2,877 ) (2,651 )
Restructuring and related charges (13 ) (5 ) (75 ) (20 )
Underwriting income $ 517
$ 455
$ 1,258
$ 518
Catastrophe losses $ 861
$ 481
$ 2,635
$ 2,269

Underwriting income (loss) by line of business

Auto $ 244
$ 24
$ 878
$ (44 )
Homeowners 335
395
431
528
Other personal lines ⁽¹⁾
(15 ) 50
54
104
Commercial lines (15 ) (19 ) (21 ) (90 )
Other business lines ⁽²⁾
(3 ) 7
3
25
SquareTrade⁽³⁾
(29 ) —
(86 ) —
Answer Financial —
(2 ) (1 ) (5 )
Underwriting income $ 517
$ 455
$ 1,258
$ 518

~~_______________~~

⁽¹⁾~~Other personal lines include renter, condominium, landlord and other personal lines products.~~

⁽²⁾ ~~Other business lines primarily include Allstate Roadside Services, Allstate Dealer Services, Arity and Ivantage.~~

⁽³⁾ ~~SquareTrade includes protection plans covering a wide range of consumer appliance and electronic products.~~

56 ~~www.allstate.com~~

Nine months ended September 30, 2021

Property damage gross claim frequency

10.1

~~Allstate Protection~~Property damage paid claim severity

~~Allstate brand~~

~~Esurance brand~~

~~Encompass brand~~

~~SquareTrade~~5.6

The following table summarizes the changes in underwriting results from the prior year by the components of the increase (decrease) in underwriting income (loss) by line of business. The 2017 columns present changesProperty damage gross claim frequency increased in the third quarter and the first nine months of ~~2017, respectively,~~2021 compared to the same periods of ~~2016. The 2016 columns present changes~~2020 due to factors including:

•Increases in miles driven compared to the third quarter of 2020 which was impacted by the continuation of shelter-in-place restrictions due to the Coronavirus

Gross claim frequency decreased 16.8% and 22.1% in the third quarter and first nine months of ~~2016,~~2021, respectively, when compared to pre-pandemic levels of 2019 as auto miles driven, particularly during peak commuting hours, is lower.

Property damage paid claim severity increased in the third quarter and the first nine months of 2021 compared to the same periods of ~~2015.~~2020.

($ in millions) Three months ended September 30,
Auto Homeowners Other personal lines Commercial lines SquareTrade
Allstate Protection ⁽¹⁾⁽²⁾
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Underwriting income (loss) - prior period $ 24
$ 22
$ 395
$ 465
$ 50
$ 43
$ (19 ) $ (5 ) $ —
$ —
$ 455
$ 540
Changes in underwriting income (loss) from:
Increase (decrease) premiums earned 149
199
19
18
13
1
(3 ) (1 ) 78
—
252
219
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates 213
(50 ) 3
(11 ) (29 ) 3
8
14
(40 ) —
164
(40 )
Catastrophe losses, excluding reserve reestimates (221 ) (139 ) (119 ) (57 ) (40 ) (6 ) (5 ) (4 ) —
—
(390 ) (206 )
Non-catastrophe reserve reestimates 176
24
30
(6 ) (2 ) 13
7
(25 ) —
—
213
4
Catastrophe reserve reestimates 3
—
8
(5 ) —
—
(1 ) —
—
—
10
(5 )
Losses subtotal 171
(165 ) (78 ) (79 ) (71 ) 10
9
(15 ) (40 ) —
(3 ) (247 )
(Increase) decrease expenses (100 ) (32 ) (1 ) (9 ) (7 ) (4 ) (2 ) 2
(67 ) —
(187 ) (57 )
Underwriting income (loss) - current period $ 244
$ 24
$ 335
$ 395
$ (15 ) $ 50
$ (15 ) $ (19 ) $ (29 ) $ —
$ 517
$ 455

Nine months ended September 30,
Auto Homeowners Other personal lines Commercial lines SquareTrade
Allstate Protection ^{(1) (2)}
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Underwriting income (loss) - prior period $ (44 ) $ (13 ) $ 528
$ 922
$ 104
$ 104
$ (90 ) $ (33 ) $ —
$ —
$ 518
$ 1,001
Changes in underwriting income (loss) from:

Increase (decrease) premiums earned 448
660
24
107
35
3
(16 ) 2
207
—
692
781
(Increase) decrease incurred claims and claims expense (“losses”):

Incurred losses, excluding catastrophe losses and reserve reestimates 560
(491 ) (49 ) 55
(27 ) 28
29
(4 ) (105 ) —
436
(399 )
Catastrophe losses, excluding reserve reestimates (179 ) (319 ) (182 ) (514 ) (26 ) (55 ) 3
(8 ) —
—
(389 ) (896 )
Non-catastrophe reserve reestimates 289
90
73
(5 ) (1 ) 25
46
(54 ) —
—
409
55
Catastrophe reserve reestimates 6
—
21
(13 ) (7 ) 1
3
—
—
—
23
(12 )
Losses subtotal 676
(720 ) (137 ) (477 ) (61 ) (1 ) 81
(66 ) (105 ) —
479
(1,252 )
(Increase) decrease expenses (202 ) 29
16
(24 ) (24 ) (2 ) 4
7
(188 ) —
(431 ) (12 )
Underwriting income (loss) - current period $ 878
$ (44 ) $ 431
$ 528
$ 54
$ 104
$ (21 ) $ (90 ) $ (86 ) $ —
$ 1,258
$ 518

~~_______________~~

⁽¹⁾

Includes other business lines underwriting loss of $3 million and underwriting income of $7 million in the third quarter of 2017 and 2016, respectively, and underwriting income of $3 million and $25 million in the first nine months of 2017 and 2016, respectively. Includes Answer Financial underwriting loss of zero and $2 million in the third quarter of 2017 and 2016, respectively, and $1 million and $5 million in the first nine months of 2017 and 2016, respectively.


⁽²⁾	Arity had affiliate revenues and expenses of $19 million and $26 million in the third quarter of 2017, respectively, and $59 million and $72 million the first nine months of 2017, respectively, which have been eliminated in consolidation.

~~The Allstate Corporation~~ 57



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Underwriting income totaled $517 million in the third quarter of 2017~~•When compared to ~~$455 million in the third quarter~~pre-pandemic levels of ~~2016~~2019, property damage paid claim severity increased 24.2% and $1.26 billion in the first nine months of 2017 compared to $518 million in the first nine months of 2016. The increases in both periods were primarily due to increased premiums earned, lower claim frequency and favorable prior year reserve reestimates, partially offset by higher catastrophe losses.

Investment results are not included in the underwriting income analysis above. We do not allocate Property-Liability investment income, realized capital gains and losses, or assets to the Allstate Protection and Discontinued Lines and Coverages segments. Management reviews assets at the Property-Liability level for decision-making purposes. For a more detailed discussion on investment results, see the Property-Liability Investment Results section of the MD&A and Reportable Segments Footnote (Note 4) of the condensed consolidated financial statements.

~~Premiums written and earned~~ ~~by line of business are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
Premiums written 2017
2016 2017 2016
Auto $ 5,664
$ 5,521
$ 16,569
$ 16,149
Homeowners 2,053
2,006
5,542
5,484
Other personal lines 478
474
1,336
1,307
Subtotal – Personal lines 8,195
8,001
23,447
22,940
Commercial lines 116
123
363
384
Other business lines 168
185
515
551
SquareTrade 104
—
270
—
Total $ 8,583
$ 8,309
$ 24,595
$ 23,875
Premiums earned
Auto $ 5,502

$ 5,353
$ 16,327
$ 15,879
Homeowners 1,832

1,813
5,462
5,438
Other personal lines 439

426
1,306
1,271
Subtotal – Personal lines 7,773
7,592
23,095
22,588
Commercial lines 124

127
367
383
Other business lines 146
150
429
435
SquareTrade 78

—
207
—
Total $ 8,121
$ 7,869
$ 24,098
$ 23,406

~~Combined ratios~~ ~~by line of business are analyzed in the following table.~~

Loss ratio ⁽¹⁾

Expense ratio⁽¹⁾

Combined ratio ⁽¹⁾
2017
2016
2017
2016
2017
2016
Three months ended September 30,
Auto 70.3
75.5
25.3
24.1
95.6
99.6
Homeowners 57.6
53.9
24.1
24.3
81.7
78.2
Other Personal lines 74.3
59.9
29.1
28.4
103.4
88.3
Commercial lines 83.1
88.2
29.0
26.8
112.1
115.0
Other business lines 43.2
46.0
58.9
49.3
102.1
95.3
SquareTrade 51.3
—
85.9
—
137.2
—
Total 67.2
69.3
26.4
24.9
93.6
94.2

Nine months ended September 30,
Auto 69.6
75.9
25.0
24.4
94.6
100.3
Homeowners 68.6
66.4
23.5
23.9
92.1
90.3
Other Personal lines 67.6
64.6
28.3
27.2
95.9
91.8
Commercial lines 77.6
95.6
28.1
27.9
105.7
123.5
Other business lines 39.4
44.6
59.9
49.7
99.3
94.3
SquareTrade 50.7
—
90.8
—
141.5
—
Total 68.7
72.8
26.1
25.0
94.8
97.8

~~_______________~~


⁽¹⁾	~~Ratios are calculated using the premiums earned for the respective line of business.~~

58 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Loss ratios~~ ~~by line of business are analyzed in the following table and discussed in detail in the brand sections below.~~

Loss ratio Effect of catastrophe losses Effect of prior year reserve reestimates Effect of catastrophe losses included in prior year reserve reestimates
2017
2016
2017
2016
2017
2016
2017
2016
Three months ended September 30,
Auto 70.3
75.5
6.9
3.1
(3.4 ) (0.2 ) (0.1 ) (0.1 )
Homeowners 57.6
53.9
21.6
15.7
(2.3 ) (0.2 ) (0.1 ) 0.3
Other Personal lines 74.3
59.9
14.8
5.9
—
(0.5 ) (0.2 ) (0.3 )
Commercial lines 83.1
88.2
10.5
5.5
5.6
10.3
0.8
—
Other business lines 43.2
46.0
3.4
—
0.7
2.0
—
—
SquareTrade 51.3
—
—
—
—
—
—
—
Total 67.2
69.3
10.6
6.1
(2.8 ) —
(0.1 ) —

Nine months ended September 30,
Auto 69.6
75.9
4.2
3.2
(2.1 ) (0.3 ) (0.1 ) (0.1 )
Homeowners 68.6
66.4
31.8
29.0
(1.6 ) 0.1
(0.1 ) 0.3
Other Personal lines 67.6
64.6
14.3
12.0
—
(0.6 ) 0.4
(0.1 )
Commercial lines 77.6
95.6
6.0
7.3
1.9
14.6
0.3
1.0
Other business lines 39.4
44.6
1.2
—
0.2
0.7
—
—
SquareTrade 50.7
—
—
—
—
—
—
—
Total 68.7
72.8
11.0
9.7
(1.7 ) 0.1
—
0.1

~~The Allstate Corporation~~ 59



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Catastrophe losses~~ ~~were $861 million and $2.64 billion~~17.8% in the third quarter and first nine months of ~~2017,~~2021, respectively, or an average annual increase of approximately 12.0% and 9.0%, respectively

•The increases are due to rising inflationary impacts in both used car values and replacement part costs, including higher costs to repair more sophisticated newer model vehicles and increased costs associated with total losses

Collision severity trends increased in the third quarter and the first nine months of 2021 compared to ~~$481 million~~the same periods of 2020 due to inflationary pressures from higher used car values that increases total losses and ~~$2.27 billion~~parts and labor costs associated with repairs.

Bodily injury severity trends increased in the third quarter and the first nine months of 2021 compared to the same periods of 2020 due to injury mix and higher medical care inflation.

Homeowners loss ratio increased 5.5 and 4.5 points in the third quarter and first nine months of ~~2016, respectively. Catastrophe losses included $507 million~~2021 compared to the same periods of 2020, respectively, primarily due to increased non-catastrophe claim frequency and ~~$134 million related to Hurricanes Harvey~~severity and ~~Irma, respectively,~~lower favorable catastrophe reserve reestimates driven by subrogation settlements in 2020, partially offset by increased premiums earned.


Allstate brand homeowners frequency and severity statistics (excluding catastrophe losses)
(% change year-over-year)
Three months ended September 30, 2021
Gross claim frequency	3.4	%
Paid claim severity	15.0

Nine months ended September 30, 2021
Gross claim frequency	10.4	%

Paid claim severity	8.4

Gross claim frequency increased in the third quarter of ~~2017, with over 100 thousand auto and homeowners reported claims, excluding flood related homeowners claims. Over 85%~~2021 compared to the third quarter of ~~the reported claims have been closed.~~

Loss estimates are generally based on claim adjuster inspections and the application of historical loss development factors. Our loss estimates are calculated in accordance with the coverage provided by our policies. Auto policyholders generally have coverage for physical damage2020, primarily due to flood if they have purchased optional auto comprehensive coverage. Our homeowners policies specifically exclude coverage for losses caused by flood. We voluntarily participate as a Write Your Own carrierincreases in the National Flood Insurance Program (“NFIP”). The NFIP is administered and regulated by the Federal Emergency Management Agency. We write the policy for the NFIP, which assumes 100% of the flood risk, while we retain a commission for our service. We operatewater perils. Gross claim frequency increased in ~~a fiduciary capacity as a fiscal agent of~~ the federal government in the issuing and administering of the Standard Flood Insurance Policy. The federal government is obligated to pay all claims and certain allocated loss adjustment expenses in accordance with the arrangement. Congress is considering reforms to the program that would be incorporated in legislation to reauthorize the NFIP as well as evaluating the funding of the program.

Hurricane Irma property losses are covered by our Florida Excess Catastrophe Reinsurance Agreement which is comprised of five contracts and provides $658 million of coverage for personal lines property excess catastrophe losses caused by multiple perils in Florida subject to a $20 million retention. We ceded approximately $90 million of claims and claims expense related to these reinsurance agreements. Hurricane Harvey catastrophe losses were $507 million. These losses were subject to our personal lines property and auto nationwide reinsurance agreement. However, the losses qualifying under this agreement did not exceed the program’s $500 million retention. For details of our catastrophe reinsurance program see Note 10 on our Form 10-K for the year-ended December 31, 2016 and Item 2. Management’s Discussion and Analysis on our Form 10-Q for the periods ended March 31, 2017 and June 30, 2017.

We are subject to assessments from Citizens Property Insurance Corporation in the state of Florida (“FL Citizens”). FL Citizens, at the discretion and direction of its Board of Governors, can levy a regular assessment on assessable insurers and assessable insureds for a deficit in any calendar year up to a specified amount with the insurer having the ability to recoup a regular assessment through a surcharge to policyholders. Based on initial estimates by the Board of Governors, FL Citizens has sufficient resources to cover the losses from Hurricane Irma, and the impact of the storm will not put the program in a deficit position. See Note 14 on our Form 10-K for the year-ended December 31, 2016 for additional information.

We also participate as a member of the Texas Windstorm Insurance Association (“TWIA”) which provides wind and hail coverage to coastal risks unable to procure coverage in the voluntary market. Wind and hail coverage is written on a TWIA-issued policy. The TWIA board has the ability to assess insurers operating in the state, but has not indicated any assessments to insurers at this time. See Note 14 on our Form 10-K for the year-ended December 31, 2016 for additional information.

~~The~~ first nine months of ~~2017 and 2016 have been impacted by higher than normal historical year-to-date catastrophe losses~~2021 compared to the ~~past five years. For additional information on~~same period of 2020 primarily due to increases in wind/hail, water and fire perils. Paid claim severity increased in the ~~impacts~~third quarter and first nine months of ~~Hurricanes Harvey~~2021 compared to the same periods of 2020 due to inflationary loss cost pressure driven by increases in labor and ~~Irma see~~materials costs. Homeowner paid claim severity can be impacted by both the ~~brand discussions below.~~mix of perils and the magnitude of specific losses paid during the quarter.

Other personal lines loss ratioincreased 1.9 and 6.2 points in the third quarter and first nine months of 2021, respectively, compared to the same periods of 2020, primarily due to higher non-catastrophe losses, partially offset by increased premiums earned.

Commercial lines loss ratioincreased 20.8 and 11.3 points in the third quarter and the first nine months of

64www.allstate.com

Allstate ProtectionSegment Results

2021, respectively, compared to the same periods of 2020 due to higher auto frequency and severity and higher unfavorable non-catastrophe prior year reserves reestimates, partially offset by increased premiums earned.

Catastrophe lossesincreased 28.2% or $279 million in the third quarter of 2021 compared to the third quarter of 2020. Catastrophe losses increased 17.8% or $424 million in the first nine months of 2021 compared to the first nine months of 2020.

Catastrophe losses in the third quarter of 2021, included gross and net losses related to Hurricane Ida of $1.5 billion and $689 million, respectively. Net losses include reinsurance recoveries of $986 million and reinstatement premiums of $181 million.

We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes.

We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.

Loss estimates are generally based on claim adjuster inspections and the application of historical

60 ~~www.allstate.com~~loss development factors. Our loss estimates are calculated in accordance with the coverage provided by our policies. Auto policyholders generally have coverage for physical damage due to flood if they have purchased optional auto comprehensive coverage. Our homeowners policies specifically exclude coverage for losses caused by flood.

Over time, we have limited our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes, limited by our participation in various state facilities.

In the third quarter of 2021, our catastrophe reinsurance program risk tolerance framework that targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes, earthquakes and wildfires, excluding other catastrophe losses, net of reinsurance, increased from $2 billion to $2.5 billion, reflecting the addition of wildfires to the target.

Catastrophe reinsurance The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during the third quarter and first nine months of 2021 were $109 million and $345 million, respectively, compared to $106 million and $310 million in the third quarter and first nine months of 2020. The increases were driven by higher Nationwide and Florida program costs due to program expansion for growth in policies, including National General exposures. Catastrophe placement premiums are a reduction of premium with approximately 70% related to homeowners.


Catastrophe losses by the type of event
	Three months ended September 30,						Nine months ended September 30,
($ in millions)	Number of events	2021		Number of events	2020		Number of events	2021		Number of events	2020
Hurricanes/Tropical storms	5	$	747	6	$	771	6	$	754	6	$	771
Tornadoes	1	9		1	4		2	26		3	43
Wind/Hail	35	389		23	399		68	1,650		54	1,768
Wildfires	4	49		12	293		4	48		13	295
Freeze/other events	—	—		—	—		1	605		2	12
Prior year reserve reestimates		38			(507)			30			(502)
Prior year aggregate reinsurance cover		(38)			—			(237)			—
Current year aggregate reinsurance cover		(11)			—			(65)			—
Prior quarter reserve reestimates		86			30			—			—
Total catastrophe losses (1)	45	$	1,269	42	$	990	81	$	2,811	78	$	2,387

(1)Includes $173 million and $256 million of reinstatement premiums for the three and nine months ended September 30, 2021, related to the Nationwide Catastrophe Reinsurance Program, primarily due to Hurricane Ida

Third Quarter 2021 Form 10-Q 65

Segment Results Allstate Protection



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

Reserve reestimateswere unfavorable in the third quarter of 2021 primarily due to strengthening of reserves in auto and commercial lines, partially offset by favorable reserve reestimates in other personal lines. Reserve reestimates were favorable in the first nine months of 2021 due to estimated recoveries related to our aggregate reinsurance coverage and subrogation settlements arising from the Woolsey wildfire, partially offset by strengthening of reserves in commercial lines.

For a more detailed discussion on reinsurance and reserve reestimates, see Note 9 of the condensed consolidated financial statements.

~~Catastrophe losses by the size of event~~


Reserve reestimates
	Three months ended September 30,						Nine months ended September 30,
	Reserve reestimate (1)				Effect on combined ratio (2)		Reserve reestimate (1)				Effect on combined ratio (2)
($ in millions, except ratios)	2021		2020		2021	2020	2021		2020		2021	2020
Auto	$	72	$	(60)	0.7	(0.7)	$	3	$	(101)	—	(0.4)
Homeowners	17		(456)		0.1	(5.1)	(156)		(440)		(0.5)	(1.7)
Other personal lines	(66)		(58)		(0.6)	(0.6)	(83)		(66)		(0.3)	(0.2)
Commercial lines	25		2		0.2	—	58		29		0.2	0.1

Total Allstate Protection (3)	$	48	$	(572)	0.4	(6.4)	$	(178)	$	(578)	(0.6)	(2.2)

Allstate brand	$	40	$	(529)	0.4	(5.9)	$	(176)	$	(532)	(0.6)	(2.0)
National General	8		(43)		—	(0.5)	(2)		(46)		—	(0.2)
Total Allstate Protection (3)	$	48	$	(572)	0.4	(6.4)	$	(178)	$	(578)	(0.6)	(2.2)

(1)Favorable reserve reestimates are shown in parentheses.

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

(3)2020 includes approximately $495 million of favorable reserve reestimates related to subrogation settlements, which primarily impacted homeowners. The favorable reserve reestimates decreased the ~~following table.~~

($ in millions) Three months ended September 30, 2017
Number of events Claims and claims expense
Combined
ratio
impact
Average catastrophe loss per event
Size of catastrophe loss

Greater than $250 million 1
4.5 % $ 507
58.9 % 6.2
$ 507
$101 million to $250 million 1
4.5
134
15.6
1.7
134
$50 million to $100 million —
—
—
—
—
—
Less than $50 million 20
91.0
188
21.8
2.3
9
Total 22
100.0 % 829
96.3
10.2
38
Prior year reserve reestimates

(7 ) (0.8 ) (0.1 )
Prior quarter reserve reestimates 39
4.5
0.5

Total catastrophe losses

$ 861
100.0 % 10.6

Nine months ended September 30, 2017
Number of events Claims and claims expense
Combined
ratio
impact
Average catastrophe loss per event
Size of catastrophe loss

Greater than $250 million 1
1.1 % $ 507
19.2 % 2.1
$ 507
$101 million to $250 million 4
4.4
695
26.4
2.9
174
$50 million to $100 million 7
7.7
465
17.7
1.9
66
Less than $50 million 79
86.8
978
37.1
4.1
12
Total 91
100.0 % 2,645
100.4
11.0
29
Prior year reserve reestimates

(10 ) (0.4 ) —

Total catastrophe losses

$ 2,635
100.0 % 11.0

~~Catastrophe losses~~combined ratio by ~~the type of event are shown in the following table.~~

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

Number
of events
2017 Number of events 2016 Number of events 2017 Number of events 2016
Hurricanes/Tropical storms 2
$ 641
1
$ 17
2
$ 641
1
$ 17
Tornadoes —
—
2
9
3
101
2
9
Wind/Hail 17
180
28
434
81
1,872
64
2,120
Wildfires 3
8
4
32
3
8
6
53
Other events —
—
—
—
2
23
2
57
Prior year reserve reestimates (7 ) 3
(10 ) 13
Prior quarter reserve reestimates 39
(14 ) —
—
Total catastrophe losses 22
$ 861
35
$ 481
91
$ 2,635
75
$ 2,269

~~Expense ratio~~ ~~increased 1.5~~5.5 points and ~~1.1~~1.9 points in the third quarter and first nine months of ~~2017, respectively, compared to the same periods of 2016. The expense ratios by line of business are shown in the following table.~~2020, respectively.

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Auto 25.3
24.1
25.0
24.4
Homeowners 24.1
24.3
23.5
23.9
Other personal lines 29.1
28.4
28.3
27.2
Commercial lines 29.0
26.8
28.1
27.9
Other business lines 58.9
49.3
59.9
49.7
SquareTrade ⁽¹⁾
85.9
—
90.8
—
Total expense ratio ⁽¹⁾
26.4
24.9
26.1
25.0

~~_______________~~

⁽¹⁾ Includes $23 million and $69 million in the third quarter and first nine months of 2017, respectively, of amortization of purchased intangible assets related to the acquisition of SquareTrade that was completed on January 3, 2017, an impact of 29.5 points and 33.3 points to the SquareTrade expenseExpense ratio ~~in the third quarter and first nine months of 2017, respectively, and an impact of 0.3 points to the total expense ratio in both the third quarter and first nine months of 2017.~~

~~The Allstate Corporation~~ 61



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~The impact of specific costs and expenses on the expense ratio are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017
2016 2017 2016
Amortization of DAC 14.0
13.5
13.9
13.6
Advertising expense 2.3
2.6
2.3
2.4
Amortization of purchased intangible assets 0.3
0.1
0.3
0.1
Other costs and expenses 9.6
8.6
9.3
8.8
Restructuring and related charges 0.2
0.1
0.3
0.1
Total expense ratio 26.4
24.9
26.1
25.0

~~Reserve reestimates~~ The tables below show reserves, net of reinsurance, representing the estimated cost of outstanding claims as they were recorded at the beginning of years 2017 and 2016 and the effect of reestimates in each year.

($ in millions) January 1 reserves
2017 2016
Auto $ 13,530
$ 12,459
Homeowners 1,990
1,937
Other personal lines 1,456
1,490
Commercial lines 621
554
Other business lines 24
21
Total Allstate Protection $ 17,621
$ 16,461

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

Reserve
reestimate ⁽¹⁾

Effect on
combined ratio⁽²⁾

Reserve
reestimate ⁽¹⁾

Effect on
combined ratio ⁽²⁾
2017 2016 2017 2016 2017 2016 2017 2016
Auto $ (189 ) $ (10 ) (2.4 ) (0.1 ) $ (336 ) $ (41 ) (1.4 ) (0.2 )
Homeowners (42 ) (4 ) (0.5 ) (0.1 ) (86 ) 8
(0.3 ) —
Other personal lines —
(2 ) —
—
—
(8 ) —
—
Commercial lines 7
13
0.1
0.2
7
56
—
0.3
Other business lines 1
3
—
—
1
3
—
—
Total Allstate Protection ⁽³⁾
$ (223 ) $ —
(2.8 ) —
$ (414 ) $ 18
(1.7 ) 0.1

Allstate brand $ (220 ) $ 3
(2.8 ) —
$ (408 ) $ 14
(1.7 ) 0.1
Esurance brand (1 ) (4 ) —
—
(2 ) (12 ) —
(0.1 )
Encompass brand (2 ) 1
—
—
(4 ) 16
—
0.1
Total Allstate Protection $ (223 ) $ —
(2.8 ) —
$ (414 ) $ 18
(1.7 ) 0.1

~~_______________~~


⁽¹⁾	~~Favorable reserve reestimates are shown in parentheses.~~


⁽²⁾	~~Ratios are calculated using Property-Liability premiums earned.~~


⁽³⁾	Prior year reserve reestimates included in catastrophe losses totaled $7 million and $10 million favorable in the three and nine months ended September 30, 2017, respectively, compared to $3 million and $13 million unfavorable in the three and nine months ended September 30, 2016, respectively.

Favorable reserve reestimates in the third quarter and first nine months of 2017 primarily relate to severity development for auto injury coverages that was better than expected. Severity development for auto injury coverages was due in part to claims process improvements.

62 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

The following table presents premiums written, policies in force (“PIF”) and underwriting income (loss) by line of business for Allstate brand, Esurance brand, Encompass brand and Allstate Protection for the nine months ended September 30, 2017. Detailed analysis of underwriting results, premiums written and earned, and the combined ratios, including loss and expense ratios are discussed in the brand sections below.

($ in millions) Allstate brand Esurance brand Encompass brand Allstate Protection
Premiums written Amount Percent to total Amount Percent to total Amount Percent to total Amount Percent to total
Auto $ 14,903
67.1 % $ 1,252
95.0 % $ 414
52.3 % $ 16,569
67.4 %
Homeowners 5,171
23.3
60
4.5
311
39.3
5,542
22.5
Other personal lines 1,263
5.7
6
0.5
67
8.4
1,336
5.4
Commercial lines 363
1.6
—
—
—
—
363
1.5
Other business lines 515
2.3
—
—
—
—
515
2.1
SquareTrade —
—
—
—
—
—
270
1.1
Total $ 22,215
100.0 % $ 1,318
100.0 % $ 792
100.0 % $ 24,595
100.0 %

Percent to total Allstate Protection 90.3 % 5.4 % 3.2 %

PIF (thousands)
Auto 19,513
55.9 % 1,369
91.9 % 548
61.0 % 21,430
30.0 %
Homeowners 6,071
17.4
76
5.1
262
29.2
6,409
9.0
Other personal lines 4,212
12.1
45
3.0
88
9.8
4,345
6.1
Commercial lines 251
0.7
—
—
—
—
251
0.4
Other business lines 4,838
13.9
—
—
—
—
4,838
6.8
SquareTrade —
—
—
—
—
—
34,078
47.7
Total 34,885
100.0 % 1,490
100.0 % 898
100.0 % 71,351
100.0 %

Percent to total Allstate Protection 48.9 % 2.1 % 1.3 %

Underwriting income (loss)
Auto $ 913
64.5 % $ (32 ) 58.2 % $ (3 ) 18.8 % $ 878
69.8 %
Homeowners 473
33.4
(24 ) 43.6
(18 ) 112.5
431
34.3
Other personal lines 48
3.4
1
(1.8 ) 5
(31.3 ) 54
4.3
Commercial lines (21 ) (1.5 ) —
—
—
—
(21 ) (1.7 )
Other business lines 3
0.2
—
—
—
—
3
0.2
SquareTrade —
—
—
—
—
—
(86 ) (6.8 )
Answer Financial —
—
—
—
—
—
(1 ) (0.1 )
Total $ 1,416
100.0 % $ (55 ) 100.0 % $ (16 ) 100.0 % $ 1,258
100.0 %

~~When analyzing premium measures and statistics for all three brands the following calculations are used as described below.~~

~~PIF: Policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy.~~

New issued applications: Item counts of automobiles or homeowners insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate Protection brand. Allstate brand includes automobiles added by existing customers when they exceed the number allowed (currently 10) on a policy.

Average premium-gross written (“average premium”): Gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line. Allstate and Esurance brands policy terms are 6 months for auto and 12 months for homeowners. Encompass brand policy terms are 12 months for auto and homeowners.

Renewal ratio: Renewal policies issued during the period, based on contract effective dates, divided by the total policies issued 6 months prior for auto (12 months prior for Encompass brand) or 12 months prior for homeowners.

~~The Allstate Corporation~~ 63



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Underwriting results~~ ~~are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 7,755
$ 7,564
$ 22,215
$ 21,708
Premiums earned $ 7,342
$ 7,152
$ 21,785
$ 21,257
Claims and claims expense (4,922 ) (4,920 ) (14,865 ) (15,419 )
Amortization of DAC (1,067 ) (1,003 ) (3,119 ) (2,982 )
Other costs and expenses (804 ) (731 ) (2,318 ) (2,183 )
Restructuring and related charges (13 ) (5 ) (67 ) (19 )
Underwriting income $ 536
$ 493
$ 1,416
$ 654
Catastrophe losses $ 832
$ 440
$ 2,455
$ 2,136

Underwriting income (loss) by line of business
Auto $ 253
$ 49
$ 913
$ 37
Homeowners 319
406
473
568
Other personal lines ⁽¹⁾
(18 ) 50
48
114
Commercial lines (15 ) (19 ) (21 ) (90 )
Other business lines ⁽²⁾
(3 ) 7
3
25
Underwriting income $ 536
$ 493
$ 1,416
$ 654

~~_______________~~


⁽¹⁾	~~Other personal lines include renter, condominium, landlord and other personal lines products.~~


⁽²⁾	~~Other business lines primarily include Allstate Roadside Services, Allstate Dealer Services, Arity and Ivantage.~~

The following table summarizes the changes in underwriting results from the prior year by the components of the increase (decrease) in underwriting income. The 2017 columns present changes in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. The 2016 columns present changes in the third quarter and first nine months of 2016, respectively, compared to the same periods of 2015.

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Underwriting income (loss) - prior period $ 493
$ 571
$ 654
$ 1,183
Changes in underwriting income from:
Increase (decrease) premiums earned 190
220
528
776
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates 176
(36 ) 473
(423 )
Catastrophe losses, excluding reserve reestimates (401 ) (184 ) (341 ) (870 )
Non-catastrophe reserve reestimates 214
(10 ) 400
58
Catastrophe reserve reestimates 9
(6 ) 22
(12 )
Losses subtotal (2 ) (236 ) 554
(1,247 )
(Increase) decrease expenses (145 ) (62 ) (320 ) (58 )
Underwriting income (loss) - current period $ 536
$ 493
$ 1,416
$ 654

Underwriting income totaled $536 million in the third quarter of 2017 compared to $493 million in the third quarter of 2016 and $1.42 billion in the first nine months of 2017, an increase from $654 million in the first nine months of 2016. Both period increases were primarily due to increased premiums earned, lower claim frequency and favorable prior year reserve reestimates compared to unfavorable reserve reestimates in 2016, partially offset by higher catastrophe losses primarily related to Hurricanes Harvey and Irma, and higher employee-related and agent compensation costs.

64 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

For auto insurance, we continued to take a balanced approach to profitable growth. As auto margins have improved, we have expanded the number of states in which we are implementing growth plans. While we continue to file rate increases to keep pace with loss trends, the overall magnitude of rates taken has moderated as profitability trends have improved.

Our trusted advisor strategy for Allstate exclusive agencies remains critical. This includes enhancements to our approach to initiating relationships, building personalized solutions and cultivating trust based relationships. We are also focused on broadening our distribution footprint, both in terms of agency owners and licensed sales professionals, to expand sales and service capacity and making other sales and marketing investments to increase new business volume.

We are leveraging data and analytic capabilities to generate business value. This includes the strategic deployment of new agencies, improved operational efficiency to create a better customer experience, enhanced target marketing as well as enhanced sophistication of product and pricing capabilities.

For homeowners insurance, we continue to be disciplined in how we manage margins through underwriting guidelines, risk management policies, property inspections and implement rate and other actions to maintain or improve returns where required. Our growth actions include continuing to implement updated competitive products, including our House & Home product and a new condominium product, leveraging agency sales practices focused on multi-line households, increasing availability in coastal markets, improving penetration in underserved markets in the middle of the country and targeted advertising campaigns.

~~Premiums written and earned~~ ~~by line of business are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
Premiums written 2017 2016 2017 2016
Auto $ 5,096
$ 4,940
$ 14,903
$ 14,453
Homeowners 1,921
1,869
5,171
5,092
Other personal lines 454
447
1,263
1,228
Subtotal – Personal lines 7,471
7,256
21,337
20,773
Commercial lines 116
123
363
384
Other business lines 168
185
515
551
Total $ 7,755
$ 7,564
$ 22,215
$ 21,708
Premiums earned
Auto $ 4,951
$ 4,793
$ 14,673
$ 14,205
Homeowners 1,707
1,683
5,086
5,045
Other personal lines 414
399
1,230
1,189
Subtotal – Personal lines 7,072
6,875
20,989
20,439
Commercial lines 124
127
367
383
Other business lines 146
150
429
435
Total $ 7,342
$ 7,152
$ 21,785
$ 21,257

~~The Allstate Corporation~~ 65



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Auto insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 19,513
19,852
19,513
19,852
New issued applications (thousands) 651
584
1,900
1,750
Average premium
$ 556
$ 532
$ 546
$ 518
Renewal ratio (%) 87.7
87.5
87.5
87.9
Approved rate changes ⁽¹⁾:

# of locations⁽²⁾
17
25
43
51
Total brand (%) ⁽³⁾
0.4
1.0
2.8
⁽⁶⁾
5.9
Location specific (%) ^(4) (5)
3.0
7.1
4.7
⁽⁶⁾
7.0

~~____________~~

⁽¹⁾

Rate changes that are indicated based on loss trend analysis to achieve a targeted return will continue to be pursued. Rate changes do not include rating plan enhancements, including the introduction of discounts and surcharges that result in no change in the overall rate level in a location. These rate changes do not reflect initial rates filed for insurance subsidiaries initially writing business in a location.


⁽²⁾	~~Allstate brand operates in 50 states, the District of Columbia, and 5 Canadian provinces.~~


⁽³⁾	~~Represents the impact in the states, the District of Columbia and Canadian provinces where rate changes were approved during the period as a percentage of total brand prior year-end premiums written.~~


⁽⁴⁾	Represents the impact in the states, the District of Columbia and Canadian provinces where rate changes were approved during the period as a percentage of its respective total prior year-end premiums written in those same locations.

⁽⁵⁾

Based on historical premiums written in the locations noted above, the annual impact of rate changes approved for auto totaled $76 million and $551 million in the three and nine months ended September 30, 2017, respectively, compared to $192 million and $1.09 billion in the three and nine months ended September 30, 2016, respectively. Approximately 38% of the Allstate brand rate increases approved in the first nine months of 2017 are expected to be earned in 2017, with the remainder expected to be earned in 2018 and 2019.

⁽⁶⁾Includes a rate increase in California in first quarter 2017. Excluding California, Allstate brand auto total brand and location specific rate changes were 2.2% and 4.3% for the nine months ended September 30, 2017, respectively.

~~Auto insurance premiums written~~ totaled $5.10 billion in the third quarter of 2017, a 3.2% increase from $4.94 billion in the third quarter of 2016, and $14.90 billion in the first nine months of 2017, a 3.1% increase from $14.45 billion in the first nine months of 2016. Factors impacting premiums written were the following:

1.7% or 339 thousand decrease in PIF as of September 30, 2017 compared to September 30, 2016. PIF decreased slightly by 0.2% or 35 thousand as of September 30, 2017 compared to June 30, 2017. Auto PIF increased in 14 states, including 3 of our largest 10 states, as of September 30, 2017 compared to September 30, 2016.

11.5% and 8.6% increase in new issued applications in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. 41 states, including all of our 10 largest states, experienced increases in new issued applications in the third quarter of 2017 compared to the same period of 2016, with 29 states experiencing double digit increases. 40 states, including 8 of our 10 largest states, experienced increases in new issued applications in the first nine months of 2017 compared to the same period of 2016, with 22 states experiencing double digit increases. Hurricanes disrupted business operations and constrained new business volume in the impacted areas in the third quarter of 2017.

4.5% and 5.4% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to rate increases. Rate changes approved for auto do not assume customer choices such as non-renewal or changes in policy terms which might reduce future premiums.

0.2 point increase and 0.4 point decrease in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. 29 states, including 6 of our 10 largest states, and 20 states, including 3 of our 10 largest states, experienced increases in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. The renewal ratio in third quarter 2017 sequentially increased by 0.3 points compared to second quarter 2017.

66 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Homeowners insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 6,071
6,131
6,071
6,131

New issued applications (thousands) 198
188
556
545

Average premium $ 1,203
$ 1,181
$ 1,194
$ 1,176

Renewal ratio (%)
87.5
87.9
87.2
87.9

Approved rate changes ⁽¹⁾:

# of locations ⁽²⁾
8
10
23
33

Total brand (%) 0.5
0.2
1.6
0.6
⁽⁴⁾
Location specific (%) ⁽³⁾
5.3
4.6
4.2
1.6
⁽⁴⁾

~~_______________~~


⁽¹⁾	~~Includes rate changes approved based on our net cost of reinsurance.~~


⁽²⁾	~~Allstate brand operates in 50 states, the District of Columbia, and 5 Canadian provinces.~~


⁽³⁾	Based on historical premiums written in the locations noted above, the annual impact of rate changes approved for homeowners totaled $38 million and $113 million in the three and nine months ended September 30, 2017, respectively, compared to $16 million and $43 million in the three and nine months ended September 30, 2016, respectively.


⁽⁴⁾	Includes the impact of a rate decrease in California in first quarter 2016. Excluding California, Allstate brand homeowners total brand and location specific rate changes were 1.6% and 5.2% for the nine months ended September 30, 2016, respectively.

~~Homeowners insurance premiums written~~ totaled $1.92 billion in the third quarter of 2017, a 2.8% increase from $1.87 billion in the third quarter of 2016, and $5.17 billion in the first nine months of 2017, a 1.6% increase from $5.09 billion in the first nine months of 2016. Factors impacting premiums written were the following:

1.0% or 60 thousand decrease in PIF as of September 30, 2017 compared to September 30, 2016. PIF decreased slightly by 2 thousand as of September 30, 2017 compared to June 30, 2017. Allstate brand homeowners PIF increased in 18 states, including 2 of our largest 10 states, as of September 30, 2017 compared to September 30, 2016.

5.3% and 2.0% increase in new issued applications in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Of our largest 10 states, 6 experienced increases in new issued applications in both the third quarter and first nine months of 2017 compared to the same periods of 2016. Hurricanes disrupted business operations and constrained new business volume in the impacted areas in the third quarter of 2017.

1.9% and 1.5% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to rate changes and increasing insured home valuations due to inflationary costs.

0.4 point and 0.7 point decrease in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Of our largest 10 states, 3 and 2 experienced an increase in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. The renewal ratio in third quarter 2017 sequentially increased by 0.5 points compared to second quarter 2017.

$11 million decrease in the cost of our catastrophe reinsurance program to $69 million in the third quarter of 2017 from $80 million in the third quarter of 2016, and $33 million decrease to $223 million in the first nine months of 2017 from $256 million in the first nine months of 2016. Catastrophe reinsurance premiums are recorded primarily in Allstate brand and are a reduction of premium.

~~Premiums written for Allstate’s House and Home~~product, our homeowners offering currently available in 41 of the 50 states we operate in, totaled $668 million in the third quarter of 2017 compared to $532 million in the third quarter of 2016, and $1.73 billion in the first nine months of 2017 compared to $1.08 billion in the first nine months of 2016.

~~Other personal lines~~ premiums written totaled $454 million in the third quarter of 2017, a 1.6% increase from $447 million in the third quarter of 2016, and $1.26 billion in the first nine months of 2017, a 2.9% increase from $1.23 billion in the first nine months of 2016. The increases in both periods were primarily due to personal umbrella insurance premiums.

~~Commercial lines~~ premiums written totaled $116 million in the third quarter of 2017, a 5.7% decrease from $123 million in the third quarter of 2016, and $363 million in the first nine months of 2017, a 5.5% decrease from $384 million in the first nine months of 2016. The decreases in both periods were driven by decreased new business and lower renewals due to profit improvement actions, partially offset by increased average premiums.

~~Other business lines~~ premiums written totaled $168 million in the third quarter of 2017, a 9.2% decrease from $185 million in the third quarter of 2016, and $515 million in the nine months of 2017, a 6.5% decrease from $551 million in the first nine

~~The Allstate Corporation~~ 67



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

months of 2016. The decreases in both periods were primarily driven by lower wholesale rescue volume primarily due to lower partner renewals and retail memberships in force at Allstate Roadside Services. Allstate Roadside Services continues to implement profit improvement actions, which have impacted premium, but are reducing loss costs.

~~Combined ratios~~ ~~by line of business are analyzed in the following table.~~

Loss ratio ⁽¹⁾

Expense ratio⁽¹⁾

Combined ratio ⁽¹⁾
2017 2016 2017 2016 2017 2016
Three months ended September 30,
Auto 69.8
75.3
25.1
23.7
94.9
99.0
Homeowners 57.9
53.1
23.4
22.8
81.3
75.9
Other personal lines 75.3
59.2
29.0
28.3
104.3
87.5
Commercial lines 83.1
88.2
29.0
26.8
112.1
115.0
Other business lines 43.2
46.0
58.9
49.3
102.1
95.3
Total 67.0
68.8
25.7
24.3
92.7
93.1

Nine months ended September 30,
Auto 69.0
75.8
24.8
23.9
93.8
99.7
Homeowners 67.9
66.2
22.8
22.5
90.7
88.7
Other Personal lines 67.9
63.3
28.2
27.1
96.1
90.4
Commercial lines 77.6
95.6
28.1
27.9
105.7
123.5
Other business lines 39.4
44.6
59.9
49.7
99.3
94.3
Total 68.2
72.5
25.3
24.4
93.5
96.9

~~_______________~~


⁽¹⁾	~~Ratios are calculated using the premiums earned for the respective line of business.~~

~~Loss ratios~~ ~~by line of business are analyzed in the following table.~~

Loss ratio Effect of catastrophe losses Effect of prior year reserve reestimates Effect of catastrophe losses included in prior year reserve reestimates
2017 2016 2017 2016 2017 2016 2017 2016
Three months ended September 30,
Auto 69.8
75.3
7.4
3.1
(3.8 ) (0.1 ) (0.1 ) (0.1 )
Homeowners 57.9
53.1
22.4
15.4
(2.5 ) (0.3 ) (0.2 ) 0.3
Other personal lines 75.3
59.2
15.7
6.0
0.7
(0.8 ) —
(0.3 )
Commercial lines 83.1
88.2
10.5
5.5
5.6
10.3
0.8
—
Other business lines 43.2
46.0
3.4
—
0.7
2.0
—
—
Total 67.0
68.8
11.3
6.2
(3.0 ) —
(0.1 ) —

Nine months ended September 30,
Auto 69.0
75.8
4.4
3.4
(2.3 ) (0.2 ) (0.1 ) —
Homeowners 67.9
66.2
31.6
29.3
(1.7 ) 0.1
(0.1 ) 0.4
Other Personal lines 67.9
63.3
14.7
12.5
0.5
(1.3 ) 0.4
(0.1 )
Commercial lines 77.6
95.6
6.0
7.3
1.9
14.6
0.3
1.0
Other business lines 39.4
44.6
1.2
—
0.2
0.7
—
—
Total 68.2
72.5
11.3
10.0
(1.9 ) 0.1
—
0.1

~~Auto loss ratio~~ decreased 5.5 points and 6.8 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to increased premiums earned, lower claim frequency and higher favorable prior year reserve reestimates, partially offset by higher catastrophe losses.

Frequency and severity statistics, which are influenced by driving patterns, inflation and other factors, are provided to describe the trends in loss costs of the business. Our reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine our best estimate of recorded reserves.

Paid claim frequency is calculated as annualized notice counts closed with payment in the period divided by the average of policies in force with the applicable coverage during the period. Gross claim frequency is calculated as annualized notice counts received in the period divided by the average of policies in force with the applicable coverage during the period. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed

68 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

with a payment or closed without payment). Frequency statistics exclude counts associated with catastrophe events. The percent change in paid or gross claim frequency is calculated as the amount of increase or decrease in the paid or gross claim frequency in the current period compared to the same period in the prior year; divided by the prior year paid or gross claim frequency.

Paid claim frequency trends will often differ from gross claim frequency trends due to differences in the timing of when notices are received and when claims are settled. For property damage claims, paid frequency trends reflect little differences as timing between opening and settlement is minimal. For bodily injury, gross frequency trends reflect emerging trends since the difference in timing between opening and settlement is much greater and gross frequency does not experience the same volatility in quarterly fluctuations seen in paid frequency. In evaluating frequency, we typically rely upon paid frequency trends for physical damage coverages such as property damage and gross frequency for casualty coverages such as bodily injury to provide an indicator of emerging trends in overall claim frequency while also providing insights for our analysis of severity.

Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period. The percent change in paid claim severity is calculated as the amount of increase or decrease in paid claim severity in the current period compared to the same period in the prior year; divided by the prior year paid claims severity.

Claims is operating in a continuous improvement environment, actively focusing on effective loss cost management, process efficiency and leveraging emerging technologies to enhance the customer experience. The aim is to ensure a fast, fair and easy claims experience. We have been simplifying and streamlining the claim handling process using leading technology, self-servicing capabilities and electronic payments.

We have opened several Digital Operating Centers to handle auto claims countrywide utilizing our virtual estimation capabilities, which includes estimating damage through photos with the use of QuickFoto Claim^®~~and Virtual Assist~~^SM (video chat technology used to review supplemental damage with auto body shops). We are assessing wind and hail property claims through the use of drones, piloted airplanes and satellite imagery. We are continuing to aggressively seek new technology and process solutions to provide continued loss cost accuracy, efficient processes and customer experiences that are simple, fast and produce high degrees of satisfaction. While these claims organizational and process changes are occurring, frequency and severity statistics may be impacted as changes in claim opening and closing practices, if any, can impact comparisons to prior periods.

~~Property damage~~ paid claim frequency decreased 9.0% and 5.2% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. 47 states experienced a year over year decrease in property damage paid claim frequency in third quarter 2017 when compared to third quarter 2016.Property damage paid claim severities increased 4.9% and 3.8% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Property damage paid claim severity trend is being impacted by claims process changes involving QuickFoto Claim and Virtual Assist, which impacts the timing of claim payments.

~~Bodily injury~~ gross claim frequency decreased 5.6% and 5.5% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Bodily injury paid claim frequency decreased 9.1% and 18.5% while bodily injury paid claim severity increased 15.0% and 23.3% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Claim process changes in the second half of 2016 related to enhanced documentation of injuries and related medical treatments are having a related impact on paid claim frequency and severity due to payment mix and claim closure patterns. These process changes normalized during the first half of 2017 and the related impacts on the percent change in paid claim frequency and severity have begun to moderate in third quarter 2017.

~~Homeowners loss ratio~~ increased 4.8 points and 1.7 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to higher catastrophe losses, partially offset by higher favorable prior year reserve reestimates and increased premiums earned. Paid claim frequency excluding catastrophe losses decreased 5.4% and increased 1.0% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. Paid claim severity excluding catastrophe losses increased 8.1% and 4.1% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. 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 16.1 points and 4.6 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to higher catastrophe losses, unfavorable prior year reserve reestimates and higher claim severity, partially offset by increased premiums earned.

~~Commercial lines loss ratio~~ ~~decreased 5.1~~ points in the third quarter of ~~2017~~2021 compared to the third quarter of ~~2016,~~2020 primarily due to ~~lower unfavorable prior year reserve reestimates~~higher advertising expenses and ~~lower claim frequency,~~operating costs, increased amortization of purchased intangibles and DAC, partially offset by ~~higher catastrophe losses. Commercial lines loss~~lower restructuring and related charges. The expense ratio decreased ~~18.0~~3.2 points in the first nine months of ~~2017 compared to the first nine months of 2016, primarily due to lower unfavorable prior year reserve reestimates, lower catastrophe losses and claim frequency.~~

~~The Allstate Corporation~~ 69



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Catastrophe losses~~ were $832 million and $2.46 billion in the third quarter and first nine months of 2017, respectively, compared to $440 million and $2.14 billion in the third quarter and first nine months of 2016, respectively. Catastrophe losses included $617 million in the third quarter and first nine months of 2017 related to Hurricanes Harvey and Irma.

~~Expense ratio~~ ~~The expense ratios by line of business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Auto 25.1
23.7
24.8
23.9
Homeowners 23.4
22.8
22.8
22.5
Other personal lines 29.0
28.3
28.2
27.1
Commercial lines 29.0
26.8
28.1
27.9
Other business lines ⁽¹⁾
58.9
49.3
59.9
49.7
Total expense ratio 25.7
24.3
25.3
24.4

~~_______________~~


⁽¹⁾	Increases in the third quarter and first nine months of 2017 compared to the same periods of 2016 are primarily due to Allstate Roadside Services increase in strategic investments in the Good Hands Rescue Network and Allstate Dealer Services increase in employee-related costs and an overall decrease in earned premiums.

~~The impact of specific costs and expenses on the expense ratio are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Amortization of DAC 14.5
14.0
14.3
14.0
Advertising expense 2.0
2.2
2.0
2.0
Other costs and expenses 9.0
8.0
8.7
8.3
Restructuring and related charges 0.2
0.1
0.3
0.1
Total expense ratio 25.7
24.3
25.3
24.4

~~Expense ratio~~ increased 1.4 points and 0.9 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to higher employee-related compensation costs, resulting from higher year-to-date profitability, and agent compensation costs. Amortization of DAC primarily includes agent remuneration and premium taxes. Allstate agency total incurred base commissions, variable compensation and bonuses in the third quarter and first nine months of 2017 were higher than the same periods of 2016.

70 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Underwriting results~~ ~~are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 453
$ 446
$ 1,318
$ 1,290
Premiums earned $ 432
$ 418
$ 1,280
$ 1,237
Claims and claims expense (337 ) (326 ) (997 ) (939 )
Amortization of DAC (11 ) (10 ) (31 ) (30 )
Other costs and expenses (103 ) (123 ) (304 ) (371 )
Restructuring and related charges —
—
(3 ) —
Underwriting loss $ (19 ) $ (41 ) $ (55 ) $ (103 )
Catastrophe losses $ 17
$ 14
$ 49
$ 31

Underwriting income (loss) by line of business
Auto $ (15 ) $ (19 ) $ (32 ) $ (49 )
Homeowners (4 ) (22 ) (24 ) (54 )
Other personal lines —
—
1
—
Underwriting loss $ (19 ) $ (41 ) $ (55 ) $ (103 )

The following table summarizes the changes in underwriting results from the prior year by the components of the increase (decrease) in underwriting income (loss). The 2017 columns present changes in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016. The 2016 columns present changes in the third quarter and first nine months of 2016, respectively, compared to the same periods of 2015.

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Underwriting income (loss) - prior period $ (41 ) $ (26 ) $ (103 ) $ (136 )
Changes in underwriting income (loss) from:
Increase (decrease) premiums earned 14
19
43
49
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates (5 ) (23 ) (29 ) (25 )
Catastrophe losses, excluding reserve reestimates (3 ) (12 ) (19 ) (21 )
Non-catastrophe reserve reestimates (3 ) (2 ) (11 ) (1 )
Catastrophe reserve reestimates —
1
1
1
Losses subtotal (11 ) (36 ) (58 ) (46 )
(Increase) decrease expenses 19
2
63
30
Underwriting income (loss) - current period $ (19 ) $ (41 ) $ (55 ) $ (103 )

Underwriting loss totaled $19 million in the third quarter of 2017, an improvement from $41 million in the third quarter of 2016 and $55 million in the first nine months of 2017, compared to $103 million in the first nine months of 2016. The improvements in both periods were primarily due to increased premiums earned, decreased homeowners marketing and lower amortization of purchased intangible assets, partially offset by higher catastrophe losses and lower favorable prior year reserve reestimates.

We are focused on improving our results through profit improvement actions that include rate increases, a shift to lower risk customers, and decreased homeowners marketing while enhancing processes and operations to improve the customer experience.

~~The Allstate Corporation~~ 71



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Premiums written and earned~~ ~~by line of business are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
Premiums written 2017 2016 2017 2016
Auto $ 427
$ 428
$ 1,252
$ 1,243
Homeowners 24
16
60
41
Other personal lines 2
2
6
6
Total $ 453
$ 446
$ 1,318
$ 1,290
Premiums earned
Auto $ 411
$ 405
$ 1,225
$ 1,202
Homeowners 19
11
49
29
Other personal lines 2
2
6
6
Total $ 432
$ 418
$ 1,280
$ 1,237

~~Auto insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 1,369
1,395
1,369
1,395
New issued applications (thousands) 116
151
379
460
Average premium
$ 574
$ 546
$ 570
$ 544
Renewal ratio (%) 81.8
78.9
81.3
79.5
Approved rate changes ⁽¹⁾:

# of locations⁽²⁾
16
9
19
26
Total brand (%) ⁽³⁾
2.0
0.4
4.4
2.0
Location specific (%) ^(4) (5)
5.6
2.3
5.7
4.4

~~____________~~

⁽¹⁾


⁽²⁾	~~Esurance brand operates in 43 states and 2 Canadian provinces.~~


⁽³⁾	~~Represents the impact in the states and Canadian provinces where rate changes were approved during the period as a percentage of total brand prior year-end premiums written.~~


⁽⁴⁾	Represents the impact in the states and Canadian provinces where rate changes were approved during the period as a percentage of its respective total prior year-end premiums written in those same locations.


⁽⁵⁾	Based on historical premiums written in the locations noted above, the annual impact of rate changes approved for auto totaled $32 million and $71 million in the three and nine months ended September 30, 2017, respectively, compared to $6 million and $31 million in the three and nine months ended~~September 30, 2016, respectively.~~

~~Auto premiums written~~ totaled $427 million in the third quarter of 2017, a 0.2% decrease from $428 million in the third quarter of 2016, $1.25 billion in the first nine months of 2017, a 0.7% increase from $1.24 billion in the first nine months of 2016. Factors impacting premiums written were the following:

•~~1.9% or 26 thousand decrease in PIF as of September 30, 2017 compared to September 30, 2016.~~

23.2% and 17.6% decrease in new issued applications in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to the impact of rate increases and the shift to lower risk customers.

~~5.1% and 4.8% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016.~~

2.9 point and 1.8 point increase in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to the shift to lower risk customers and improved customer experience.

72 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Homeowners insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 76
52
76
52
New issued applications (thousands) 10
10
27
28
Average premium $ 924
$ 872
$ 919
$ 877
Renewal ratio (%) ⁽¹⁾
85.8
83.1
85.3
83.3
Approved rate changes ⁽²⁾:

# of locations ⁽³⁾
—
N/A
—
N/A
Total brand (%) —
N/A
—
N/A
Location specific (%) —
N/A
—
N/A

~~_______________~~


⁽¹⁾	Esurance’s renewal ratios exclude the impact of risk related cancellations. Customers can enter into a policy without a physical inspection. During the underwriting review period, a number of policies may be canceled if upon inspection the condition is unsatisfactory.


⁽²⁾	~~Includes rate changes approved based on our net cost of reinsurance.~~


⁽³⁾	~~Esurance brand operates in 31 states and 2 Canadian provinces.~~

~~N/A reflects not applicable.~~

~~Homeowners insurance premiums written~~ totaled $24 million in the third quarter of 2017 compared to $16 million in the third quarter of 2016, and $60 million in the first nine months of 2017 compared to $41 million in the first nine months of 2016. Factors impacting premiums written were the following:

~~24 thousand increase in PIF as of September 30, 2017 compared to September 30, 2016.~~

~~3.6% decrease in new issued applications in the first nine months of 2017~~2021 compared to the same period of ~~2016, due to reduced advertising spending.~~

~~6.0% and 4.8% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016,~~2020, primarily due to ~~rate changes. As of September 30, 2017, Esurance is writing homeowners insurance in 31 states with~~ lower ~~hurricane risk, contributing to lower average premium.~~

~~Combined ratios~~ ~~by line of business are analyzed in the following table.~~

Loss ratio ⁽¹⁾

Expense ratio ⁽¹⁾

Combined ratio ⁽¹⁾
2017 2016 2017 2016 2017 2016
Three months ended September 30,
Auto 78.3
77.3
25.3
27.4
103.6
104.7
Homeowners 73.7
100.0
47.4
200.0
121.1
300.0
Other personal lines 50.0
100.0
50.0
—
100.0
100.0
Total 78.0
78.0
26.4
31.8
104.4
109.8

Nine months ended September 30,
Auto 77.2
75.7
25.4
28.4
102.6
104.1
Homeowners 98.0
86.2
51.0
200.0
149.0
286.2
Other Personal lines 50.0
66.7
33.3
33.3
83.3
100.0
Total 77.9
75.9
26.4
32.4
104.3
108.3

~~_______________~~


⁽¹⁾	~~Ratios are calculated using the premiums earned for the respective line of business.~~

~~The Allstate Corporation~~ 73



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Loss ratios~~ ~~by line of business are analyzed in the following table.~~

~~Auto loss ratio~~ ~~increased 1.0 point and 1.5 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to higher catastrophe losses.~~

~~Catastrophe losses~~ were $17 million and $49 million in the third quarter and first nine months of 2017, respectively, compared to $14 million and $31 million in the third quarter and first nine months of 2016, respectively. Catastrophe losses included $14 million in the third quarter and first nine months of 2017 related to Hurricanes Harvey and Irma. As Esurance increases its homeowners business, we are exposed to more catastrophe losses.

~~Expense ratio~~ ~~The~~Shelter-in-Place Payback expense, ~~ratios by line of business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Auto 25.3
27.4
25.4
28.4
Homeowners 47.4
200.0
51.0
200.0
Other personal lines 50.0
—
33.3
33.3
Total expense ratio 26.4
31.8
26.4
32.4

~~The impact of specific~~operating costs and expenses, ~~on the expense ratio are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Amortization of DAC 2.5
2.4
2.4
2.4
Advertising expense 9.3
11.7
8.8
11.9
Amortization of purchased intangible assets 0.2
1.5
0.2
1.5
Other costs and expenses 14.4
16.2
14.8
16.6
Restructuring and related charges —
—
0.2
—
Total expense ratio 26.4
31.8
26.4
32.4

~~Expense ratio~~ ~~decreased 5.4 points~~restructuring and ~~6.0 points in the third quarter~~related charges, partially offset by increased advertising and first nine months of 2017, respectively, compared to the same periods of 2016. Esurance uses a direct distribution model, therefore its primary acquisition-related costs are advertising as opposed to commissions. Esurance advertising expense ratio decreased 2.4 points and 3.1 points in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to reductions in homeowners marketing spending.

Other costs and expenses, including salaries of telephone sales personnel and other underwriting costs related to customer acquisition, were lower in the third quarter and first nine months of 2017 compared to the same periods of 2016. Expense ratio includes amortization of purchased intangible assets from the original acquisition in 2011. Starting in 2017, the portion of the remaining purchased intangible asset related to the Esurance brand name was classified as an infinite-lived intangibleintangibles and ~~is no longer being amortized, but instead tested for impairment on an annual basis.~~DAC.

74 ~~www.allstate.com~~


Impact of specific costs and expenses on the expense ratio
	Three months ended September 30,						Nine months ended September 30,
($ in millions, except ratios)	2021		2020		Change		2021		2020		Change

Amortization of DAC	$	1,346	$	1,158	$	188	$	3,968	$	3,474	$	494
Advertising expense	325		202		123		949		615		334
Amortization of purchased intangibles	75		3		72		165		7		158
Other costs and expenses, net of other revenue	786		663		123		2,111		2,025		86
Restructuring and related charges	16		187		(171)		113		199		(86)
Shelter-in-Place Payback expense	—		—		—		29		948		(919)
Allstate Special Payment plan bad debt expense	—		19		(19)		(19)		66		(85)
Total underwriting expenses	$	2,548	$	2,232	$	316	$	7,316	$	7,334	$	(18)


Premiums earned	$	10,159	$	8,952	$	1,207	$	30,064	$	26,696	$	3,368

Expense ratio
Amortization of DAC	13.2		12.9		0.3		13.2		13.0		0.2
Advertising expense	3.2		2.3		0.9		3.2		2.3		0.9
Other costs and expenses	7.7		7.4		0.3		7.0		7.7		(0.7)
Subtotal	24.1		22.6		1.5		23.4		23.0		0.4
Amortization of purchased intangibles	0.8		—		0.8		0.5		—		0.5
Restructuring and related charges	0.2		2.1		(1.9)		0.4		0.7		(0.3)
Shelter-in-Place Payback expense	—		—		—		0.1		3.6		(3.5)
Allstate Special Payment plan bad debt expense	—		0.2		(0.2)		(0.1)		0.2		(0.3)
Total expense ratio	25.1		24.9		0.2		24.3		27.5		(3.2)

66www.allstate.com



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Underwriting results~~ ~~are shown in the following table.~~

Run-off Property-LiabilitySegment Results

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums written $ 271
$ 299
$ 792
$ 877
Premiums earned $ 269
$ 299
$ 826
$ 912
Claims and claims expense (158 ) (208 ) (590 ) (678 )
Amortization of DAC (49 ) (55 ) (152 ) (169 )
Other costs and expenses (33 ) (31 ) (95 ) (92 )
Restructuring and related charges —
—
(5 ) (1 )
Underwriting income (loss) $ 29
$ 5
$ (16 ) $ (28 )
Catastrophe losses $ 12
$ 27
$ 131
$ 102

Underwriting income (loss) by line of business

Auto $ 6
$ (6 ) $ (3 ) $ (32 )
Homeowners 20
11
(18 ) 14
Other personal lines 3
—
5
(10 )
Underwriting income (loss) $ 29
$ 5
$ (16 ) $ (28 )
Run-off Property-Liability Segment


Underwriting results
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020



Claims and claims expense
Asbestos claims	$	(64)	$	(78)	$	(64)	$	(78)
Environmental claims	(40)		(44)		(40)		(44)
Other run-off lines	(9)		(13)		(11)		(17)
Total claims and claims expense	(113)		(135)		(115)		(139)

Operating costs and expenses	—		—		(3)		(2)
Underwriting loss	$	(113)	$	(135)	$	(118)	$	(141)

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Underwriting income (loss) - prior period $ 5
$ (4 ) $ (28 ) $ (40 )
Changes in underwriting loss from:
Increase (decrease) premiums earned (30 ) (20 ) (86 ) (44 )
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates 33
19
97
49
Catastrophe losses, excluding reserve reestimates 14
(10 ) (29 ) (5 )
Non-catastrophe reserve reestimates 2
16
20
(2 )
Catastrophe reserve reestimates 1
—
—
(1 )
Losses subtotal 50
25
88
41
(Increase) decrease expenses 4
4
10
15
Underwriting income (loss) - current period $ 29
$ 5
$ (16 ) $ (28 )

~~Underwriting income totaled $29 million in~~Annual reserve review In the third quarter of ~~2017 compared to $5 million in the third quarter of 2016, primarily due to the improvement in auto~~2021 and homeowner underwriting income resulting from decreased loss costs, including lower catastrophe losses. Underwriting loss totaled $16 million in the first nine months of 2017, an improvement from $28 million in the first nine months of 2016, primarily due to improved auto loss costs, partially offset by higher homeowners catastrophe losses.

We continue to implement actions to improve profitability in states with inadequate returns, including announcing exiting operations in Massachusetts in the second quarter of 2017. These actions have led to a reduction of PIF, new issued applications, and the renewal ratio compared to prior year for both auto and homeowners. Targeted growth plans have been tailored and focused on eight states that are growing or have improved trends. New issued applications in these eight states increased approximately 20% in the first nine months of 2017 compared to the same period of 2016. PIF decreased approximately 5% in these same eight states compared to an approximate 15% decrease in all states. Our growth plan includes leveraging competitive rates, enhancing pricing and underwriting sophistication, implementing best in class underwriting and claim processes, enhancing product analytics, and focusing on geographic diversification.

~~The Allstate Corporation~~ 75



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Premiums written and earned~~ ~~by line of business are shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
Premiums written 2017 2016 2017 2016
Auto $ 141
$ 153
$ 414
$ 453
Homeowners 108
121
311
351
Other personal lines 22
25
67
73
Total $ 271
$ 299
$ 792
$ 877
Premiums earned
Auto $ 140
$ 155
$ 429
$ 472
Homeowners 106
119
327
364
Other personal lines 23
25
70
76
Total $ 269
$ 299
$ 826
$ 912

~~Auto insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 548
649
548
649
New issued applications (thousands) 13
13
38
43
Average premium
$ 1,087
$ 1,022
$ 1,070
$ 997
Renewal ratio (%) ⁽¹⁾
72.0
73.1
73.2
74.9
Approved rate changes ⁽²⁾:

# of locations⁽³⁾
8
9
22
22
Total brand (%) ⁽⁴⁾
0.8
1.6
4.5
7.3
Location specific (%) ^(5) (6)
4.5
8.8
7.1
10.1

~~____________~~

⁽¹⁾

Encompass announced a plan to exit business in Massachusetts in the second quarter of 2017 and previously announced a plan to exit business in North Carolina in the first half of 2016, which has impacted the renewal ratio. Excluding Massachusetts and North Carolina, the renewal ratios were 74.4 points and 74.3 points for the three and nine months ended September 30, 2017, respectively, compared to 73.9 points and 75.3 points for the three and nine months ended September 30, 2016, respectively.

⁽²⁾


⁽³⁾	~~Encompass brand operates in 39 states and the District of Columbia.~~


⁽⁴⁾	~~Represents the impact in the states and the District of Columbia where rate changes were approved during the period as a percentage of total brand prior year-end premiums written.~~


⁽⁵⁾	Represents the impact in the states and the District of Columbia where rate changes were approved during the period as a percentage of its respective total prior year-end premiums written in those same locations.

⁽⁶⁾

Based on historical premiums written in the locations noted above, the annual impact of rate changes approved for auto totaled $5 million and $27 million in the three and nine months ended September 30, 2017, respectively, compared to $11 million and $48 million in the three and nine months ended September 30, 2016, respectively. Approximately 27% of the Encompass brand rate increases approved in the first nine months of 2017 are expected to be earned in 2017, with the remainder expected to be earned in 2018 and 2019.

~~Auto insurance premiums written~~ totaled $141 million in the third quarter of 2017, a 7.8% decrease from $153 million in the third quarter of 2016, and $414 million in the first nine months of 2017, an 8.6% decrease from $453 million in the first nine months of 2016. Factors impacting premiums written were the following:

~~15.6% or 101 thousand decrease in PIF as of September 30, 2017 compared to September 30, 2016.~~

11.6% decrease in new issued applications in the first nine months of 2017 compared to the same period of 2016. New issued applications in the third quarter of 2017 was comparable to the same period of 2016.

~~6.4% and 7.3% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016.~~

1.1 point and 1.7 point decrease in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to profit improvement actions taken to exit states with inadequate returns. Encompass sells a high percentage of package policies that include both auto and homeowners; therefore, declines in one coverage can contribute to declines in the other.

76 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Homeowners insurance premium measures and statistics used to analyze the business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
PIF (thousands) 262
305
262
305
New issued applications (thousands) 8
9
23
27
Average premium $ 1,703
$ 1,659
$ 1,677
$ 1,636
Renewal ratio (%) ⁽¹⁾
77.7
77.9
78.2
79.7
Approved rate changes ⁽²⁾:

# of locations ⁽³⁾
6
5
17
16
Total brand (%) 0.9
1.4
3.9
4.5
Location specific (%) ⁽⁴⁾
6.0
9.2
8.0
9.4

~~_______________~~

⁽¹⁾

Encompass announced a plan to exit business in Massachusetts in the second quarter of 2017 and previously announced a plan to exit business in North Carolina in the first half of 2016, which has impacted the renewal ratio. Excluding Massachusetts and North Carolina, the renewal ratios were 79.1 points and 79.0 points for the three and nine months ended September 30, 2017, respectively, compared to 78.7 points and 80.1 points for the three and nine months ended September 30, 2016, respectively.

⁽²⁾~~Includes rate changes approved based on~~2020, we performed our ~~net cost of reinsurance.~~


⁽³⁾	~~Encompass brand operates in 39 states and the District of Columbia.~~


⁽⁴⁾	Based on historical premiums written in the locations noted above, the annual impact of rate changes approved for homeowners totaled $5 million and $19 million in the three and nine months ended September 30, 2017, respectively, compared to $7 million and $23 million in the three and nine months ended September 30, 2016, respectively.

~~Homeowners insurance premiums written~~ totaled $108 million in the third quarter of 2017, a 10.7% decrease from $121 million in the third quarter of 2016, and $311 million in the first nine months of 2017, an 11.4% decrease from $351 million in the first nine months of 2016. Factors impacting premiums written were the following:

~~14.1% or 43 thousand decrease in PIF as of September 30, 2017 compared to September 30, 2016.~~

~~11.1% and 14.8% decrease in new issued applications in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016.~~

~~2.7% and 2.5% increase in average premium in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to rate changes.~~

0.2 point and 1.5 point decrease in the renewal ratio in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to profit improvement actions taken to exit states with inadequate returns. Encompass sells a high percentage of package policies that include both auto and homeowners; therefore, declines in one product can contribute to declines in the other.

~~Combined ratios~~ ~~by line of business are analyzed in the following table.~~

Loss ratio ⁽¹⁾

Expense ratio ⁽¹⁾

Combined ratio ⁽¹⁾
2017 2016 2017 2016 2017 2016
Three months ended September 30,
Auto 65.0
75.5
30.7
28.4
95.7
103.9
Homeowners 50.9
62.2
30.2
28.6
81.1
90.8
Other personal lines 56.5
68.0
30.5
32.0
87.0
100.0
Total 58.7
69.6
30.5
28.7
89.2
98.3

Nine months ended September 30,
Auto 69.9
78.4
30.8
28.4
100.7
106.8
Homeowners 75.2
67.1
30.3
29.1
105.5
96.2
Other personal lines 62.9
84.2
30.0
29.0
92.9
113.2
Total 71.4
74.4
30.5
28.7
101.9
103.1

~~_______________~~


⁽¹⁾	~~Ratios are calculated using the premiums earned for the respective line of business.~~

~~The Allstate Corporation~~ 77



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Loss ratios~~ ~~by line of business are analyzed in the following table.~~

~~Auto loss ratio~~ decreased 10.5 points in the third quarter of 2017 compared to the same period of 2016, primarily due to lower frequency and severity, and lower catastrophe losses, partially offset by lower favorable prior year reserve reestimates. Auto loss ratio decreased 8.5 points in the first nine months of 2017 compared to the same period of 2016, primarily due to lower frequency and severity, favorable prior year reserve reestimates in 2017 compared to unfavorable reserve reestimates in 2016, partially offset by higher catastrophe losses.

~~Homeowners loss ratio~~ decreased 11.3 points in the third quarter of 2017 compared to the same period of 2016, primarily due to lower catastrophe losses, partially offset by decreased premiums earned. Homeowners loss ratio increased 8.1 points in the first nine months of 2017 compared to the same period of 2016, primarily due to higher catastrophe losses.

~~Catastrophe losses~~ were $12 million and $131 million in the third quarter and first nine months of 2017, respectively, compared to $27 million and $102 million in the third quarter and first nine months of 2016, respectively. Catastrophe losses included $10 million in the third quarter and first nine months of 2017 related to Hurricanes Harvey and Irma.

~~Expense ratio~~ ~~The expense ratios by line of business are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Auto 30.7
28.4
30.8
28.4
Homeowners 30.2
28.6
30.3
29.1
Other personal lines 30.5
32.0
30.0
29.0
Total expense ratio 30.5
28.7
30.5
28.7

~~The impact of specific costs and expenses on the expense ratio are shown in the following table.~~

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Amortization of DAC 18.2
18.4
18.4
18.5
Advertising expense 0.4
—
0.1
0.1
Other costs and expenses 11.9
10.3
11.4
10.0
Restructuring and related charges —
—
0.6
0.1
Total expense ratio 30.5
28.7
30.5
28.7

~~Expense ratio~~ increased 1.8 points in both the third quarter and first nine months of 2017 compared to the same periods of 2016, primarily due to higher employee-related costs and restructuring and related charges. During the first half of 2017, Encompass exited certain operations and right-sized certain departments consistent with business volume. The costs associated with these changes have been recorded as restructuring and related charges.

78 ~~www.allstate.com~~



~~Allstate Protection~~	~~Allstate brand~~	~~Esurance brand~~	~~Encompass brand~~	~~SquareTrade~~

~~Underwriting results~~ ~~are shown in the following table.~~

($ in millions)

Three months ended September 30, 2017 Nine months ended September 30, 2017
Premiums written $ 104
$ 270
Premiums earned $ 78
$ 207
Claims and claims expense (40 ) (105 )
Amortization of DAC (11 ) (29 )
Other costs and expenses (33 ) (90 )
Amortization of purchased intangible assets (23 ) (69 )
Underwriting loss $ (29 ) $ (86 )

SquareTrade was acquired on January 3, 2017 and provides protection plans covering a wide range of consumer appliance and electronic products through retail distribution and mobile operator channels. Under these protection plans, SquareTrade agrees to repair, replace or indemnify the customer for the cost to repair or replace such products from mechanical or electrical failure due to normal wear and tear. Protection plans also provide additional coverages beyond the manufacturer’s warranty, and in certain cases, accidental damage from handling. Premium revenue and claims and claims expense are recognized over the term of the protection plans. SquareTrade purchases contractual liability insurance from third party insurance companies to support claims settlements in the event SquareTrade is unable to fulfill its contractual obligations. The arrangement results in SquareTrade recognizing the claims settlement costs. The insurer would recognize claims settlement costs only in the event SquareTrade is unable to fulfill its contractual obligation or if claims costs are in excess of pre-determined thresholds. SquareTrade is generally required to deposit amounts expected to cover losses into a trust held for paying claims. Allstate Insurance Company (“AIC”) reinsures certain of the third party insurers, including SquareTrade’s largest third party insurer. SquareTrade’s results include the effects of this reinsurance.

~~Underwriting loss~~ totaled $29 million and $86 million in the third quarter and first nine months of 2017, respectively, primarily due to $23 million and $69 million, respectively, of amortization of purchased intangible assets. In conjunction with the acquisition, we recognized $555 million of intangible assets for which we anticipate recognizing pre-tax amortization expense of approximately $90 million in 2017. Intangible assets are being amortized on an accelerated basis, with approximately 75% of the balance expected to be amortized by 2021. The SquareTrade brand name was classified as an infinite-lived intangible and will be tested for impairment on an annual basis.

~~Premiums written~~ increased 22.4% or $19 million to $104 million in the third quarter of 2017 from $85 million in the second quarter of 2017, primarily due to continued growth through our US retail channel. PIF increased by 2.8 million to 34.1 million as of September 30, 2017 compared to 31.3 million as of June 30, 2017.

~~Claims and claims expense~~ totaled $40 million and $105 million in the third quarter and first nine months of 2017, respectively, and the third quarter of 2017 increased compared to the second quarter of 2017, primarily due to business growth.

~~Other costs and expenses~~ ~~primarily include employee-related costs and professional service fees.~~

~~The Allstate Corporation~~ 79

~~Discontinued~~

~~Discontinued Lines and Coverages Segment~~

~~Overview~~ The Discontinued Lines and Coverages segment includes results from property-liability insurance coverage that primarily relates to polices written during the 1960's through the mid-1980's. Our exposure to asbestos, environmental and other discontinued lines claims arises principally from direct excess insurance, assumed reinsurance coverage, direct primary commercial insurance and other businesses in run-off. We have assigned management of this segment to a designated group of professionals with expertise in claims handling, policy coverage interpretation, exposure identification and reinsurance collection. As part of its responsibilities, this group may at times be engaged in policy buybacks, settlements and reinsurance assumed and ceded commutations.

~~Summarized underwriting results are presented in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Premiums earned $ —
$ —
$ —
$ —
Claims and claims expense (88 ) (99 ) (93 ) (102 )
Operating costs and expenses —
(1 ) (2 ) (2 )
Underwriting loss $ (88 ) $ (100 ) $ (95 ) $ (104 )

Underwriting losses were $88 million and $95 million in the third quarter and first nine months of 2017, respectively, compared to $100 million and $104 million in the third quarter and first nine months of 2016, respectively, primarily related to our annual reserve review, resulting in unfavorable reestimates of $85 million in the third quarter of 2017 and $96 million in the third quarter of 2016.

~~Claims and claims expense are shown in the table below.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Asbestos claims $ 61
$ 67
$ 61
$ 67
Environmental claims 10
23
10
23
Other discontinued lines 17
9
22
12
Total $ 88
$ 99
$ 93
$ 102

~~Our 2017~~ annual reserve review using established industry and actuarial best ~~practices,~~practices. The annual review resulted in unfavorable reserve reestimates totaling $111 million and $132 million in 2021 and 2020. The reserve reestimates are included as part of ~~$85 million, including $61 million for asbestos exposures,~~claims and claims expense.

The reserve reestimates in 2021 primarily related to new reported information for asbestos and ~~settlement agreements, including bankruptcy proceedings; $10 million~~environmental and higher than expected reported losses for environmental ~~exposures; $27 million for~~and other exposures, partially offset by a $13 million decrease in the allowance for future uncollectible reinsurance. Our 2016 annual reserve review resulted in unfavorable reestimates of $96 million, including $67 million of asbestos reserves, $23 million of environmental reserves and a $6 million increase in the allowance for future uncollectible reinsurance with other exposure reserves essentially unchanged.run-off exposures.

The ~~allowance~~reserve reestimates in 2020 primarily related to new reported information, court decisions and policy buyback settlements for ~~uncollectible reinsurance recoverables was $70 million~~asbestos exposures and ~~$84 million as of September 30, 2017~~higher than expected reported losses for environmental and ~~December 31, 2016, respectively. The allowance represents 11.7% and 13.3% of the related reinsurance recoverable balances as of September 30, 2017 and December 31, 2016, respectively.~~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 ~~(i.e.~~(e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. However, as we progress with the resolution of disputed claims in the courts and arbitrations and with negotiations and settlements, our reported losses may be more variable.


Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance
($ in millions)	September 30, 2021		December 31, 2020
Asbestos claims
Gross reserves	$	1,249	$	1,204
Reinsurance	(396)		(377)
Net reserves	853		827
Environmental claims
Gross reserves	285		249
Reinsurance	(51)		(43)
Net reserves	234		206
Other run-off claims
Gross reserves	438		435
Reinsurance	(65)		(60)
Net reserves	373		375
Total
Gross reserves	1,972		1,888
Reinsurance	(512)		(480)
Net reserves	$	1,460	$	1,408

80 ~~www.allstate.com~~

Third Quarter 2021 Form 10-Q 67

Segment ResultsRun-off Property-Liability

~~Discontinued Lines and Coverages~~


Reserves by type of exposure before and after the effects of reinsurance
($ in millions)	September 30, 2021		December 31, 2020
Direct excess commercial insurance
Gross reserves	$	1,095	$	1,011
Reinsurance	(381)		(358)
Net reserves	714		653
Assumed reinsurance coverage
Gross reserves	627		636
Reinsurance	(56)		(58)
Net reserves	571		578
Direct primary commercial insurance
Gross reserves	168		160
Reinsurance	(74)		(63)
Net reserves	94		97
Other run-off business
Gross reserves	1		2
Reinsurance	—		—
Net reserves	1		2
Unallocated loss adjustment expenses
Gross reserves	81		79
Reinsurance	(1)		(1)
Net reserves	80		78
Total
Gross reserves	1,972		1,888
Reinsurance	(512)		(480)
Net reserves	$	1,460	$	1,408


Percentage of gross and ceded reserves by case and incurred but not reported (“IBNR”)
	September 30, 2021				December 31, 2020
	Case		IBNR		Case		IBNR
Direct excess commercial insurance
Gross reserves (1)	62	%	38	%	65	%	35	%
Ceded (2)	69		31		71		29
Assumed reinsurance coverage
Gross reserves	31		69		34		66
Ceded	29		71		35		65
Direct primary commercial insurance
Gross reserves	49		51		55		45
Ceded	62		38		79		21

~~The table below summarizes reserves for asbestos, environmental and other discontinued lines claims before and after the effects~~(1)Approximately 62% of ~~reinsurance.~~

($ in millions) September 30, 2017 December 31, 2016
Asbestos claims
Gross reserves $ 1,336
$ 1,356
Reinsurance (428 ) (444 )
Net reserves 908
912
Environmental claims
Gross reserves 210
219
Reinsurance (35 ) (40 )
Net reserves 175
179
Other discontinued lines

Gross reserves 406
378
Reinsurance (43 ) (25 )
Net reserves 363
353
Total

Gross reserves⁽¹⁾
1,952
1,953
Reinsurance⁽²⁾
(506 ) (509 )
Net reserves $ 1,446
$ 1,444

⁽¹⁾

Gross reserves as of September 30, 2017 included $1.04 billion or 53% for the direct excess insurance business, which comprised 68% case reserves and 32% incurred but not reported (“IBNR”) reserves. Approximately 76% of the direct excess insurance total gross case reserves are subject to settlement agreements. Reserves as of December 31, 2016 included $1.05 billion or 54% reserves for the direct excess insurance business, which comprised 60% case reserves and 40% IBNR. Reserves as of September 30, 2016 included $1.11 billion or 55% reserves for the direct excess insurance business, which comprised 53% case reserves and 47% IBNR.

⁽²⁾

Ceded reserves as of September 30, 2017 included $432 million or 86% for the direct excess insurance business, which comprised 72% case reserves and 28% IBNR. Approximately 83% of the direct excess insurance total ceded case reserves are subject to settlement agreements. Reserves as of December 31, 2016 included $451 million or 89% reserves for the direct excess insurance business, which comprised 65% case reserves and 35% IBNR. Reserves as of September 30, 2016 included $474 million or 89% reserves for the direct excess insurance business, which comprised 55% case reserves and 45% IBNR.

~~Total net asbestos and environmental reserves included $559 million or 52% of estimated IBNR losses~~ as of September 30, ~~2017~~2021 are subject to settlement agreements.

(2)Approximately 70% of ceded case reserves as of September 30, 2021 are subject to settlement agreements.


Gross payments from case reserves by type of exposure
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Direct excess commercial insurance
Gross (1)	$	12	$	15	$	46	$	53
Ceded (2)	(6)		(6)		(21)		(20)
Assumed reinsurance coverage
Gross	11		11		33		33
Ceded	(1)		(2)		(4)		(4)
Direct primary commercial insurance
Gross	(1)		4		5		7
Ceded	2		(3)		(1)		(4)

(1) In the third quarter and first nine months of 2021, 66% and 72% of payments related to settlement agreements.

(2) In the third quarter and first nine months of 2021, 53% and 71% of payments related to settlement agreements.

68www.allstate.com

Run-off Property-LiabilitySegment Results

Total net reserves as of September 30, 2021, included $744 million or 51% of estimated IBNR reserves compared to ~~$618~~$695 million or ~~57%~~49% of estimated IBNR reserves as of December 31, ~~2016~~2020.

Total gross payments were $22 million and ~~$666~~$84 million ~~or 59% as~~for the third quarter and first nine months of ~~September 30, 2016. The decrease~~2021, respectively. Payments for the third quarter and first nine months of ~~$59 million from year-end 2016 relates~~2021 primarily related to ~~the transfer of IBNR to case reserves through~~asbestos claims, mainly settlement agreements reached with

several insureds on large claims ~~mainly asbestos related losses,~~ where the scope of coverages ~~have~~has been ~~agreed.~~agreed upon. The claims associated with these settlement agreements are expected to be substantially paid out over the next several years as qualified claims ~~conforming to the settlement agreements~~ are submitted by these insureds. Reinsurance collections were $7 million and $31 million for the third quarter and first nine months of 2021, respectively.

~~The Allstate Corporation~~ 81

Third Quarter 2021 Form 10-Q 69

~~Property-Liability Investments~~

Segment ResultsProtection Services

Protection Services Segment

~~Property-Liability Investment~~

Protection Services include National General’s LeadCloud and Transparent.ly’s results within Arity starting in the first quarter of 2021. These businesses provide marketing and integration platforms connecting data buyers and sellers. Results prior to 2021 reflect historical Arity results only.

~~Net investment income~~ ~~The following table presents net investment income.~~


Summarized financial information
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Premiums written	$	651	$	485	$	1,926	$	1,331

Revenues
Premiums	$	456	$	384	$	1,302	$	1,098
Other revenue	85		52		263		155
Intersegment insurance premiums and service fees (1)	46		36		133		109
Net investment income	10		12		32		33


Costs and expenses
Claims and claims expense	(122)		(107)		(334)		(284)
Amortization of DAC	(206)		(169)		(581)		(482)
Operating costs and expenses	(209)		(160)		(610)		(484)
Restructuring and related charges	1		2		(12)		(1)





Income tax expense on operations	(16)		(10)		(43)		(29)
Adjusted net income	$	45	$	40	$	150	$	115








Allstate Protection Plans	$	32	$	36	$	119	$	105
Allstate Dealer Services	7		7		25		22
Allstate Roadside	1		4		7		8
Arity	1		(3)		4		(9)
Allstate Identity Protection	4		(4)		(5)		(11)
Adjusted net income	$	45	$	40	$	150	$	115

Allstate Protection Plans					141,809		125,831
Allstate Dealer Services					3,980		4,075
Allstate Roadside					533		558
Allstate Identity Protection					3,197		2,490
Policies in force as of September 30 (in thousands)					149,519		132,954

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

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Fixed income securities $ 232
$ 215
$ 691
$ 659
Equity securities 28
21
90
71
Mortgage loans 4
3
9
9
Limited partnership interests 108
69
281
187
Short-term investments 5
3
13
6
Other 25
22
74
65
Investment income, before expense 402
333
1,158
997
Investment expense (30 ) (23 ) (84 ) (69 )
Net investment income $ 372
$ 310
$ 1,074
$ 928

~~Net investment~~Adjusted net income increased ~~20.0%~~12.5% or ~~$62 million to $372~~$5 million in the third quarter of ~~2017~~2021 and ~~15.7%~~increased 30.4% or ~~$146 million to $1.07 billion in the first nine months of 2017 from $310 million in the third quarter of 2016 and $928~~$35 million in the first nine months of ~~2016. Both~~2021 compared to the same periods ~~benefited from strong performance-based~~of 2020, primarily due to growth, partially offset by higher operating costs and expenses related to investments in growth.

Premiums written increased 34.2% or $166 million in the third quarter of 2021 and increased 44.7% or $595 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to growth at Allstate Protection Plans and increased sales at Allstate Dealer Services.

PIF increased 12.5% or 17 million to 150 million as of September 30, 2021 compared to September 30, 2020 due to continued growth at Allstate Protection Plans and Allstate Identity Protection.

Other revenue increased 63.5% or $33 million in the third quarter of 2021 and increased 69.7% or $108 million in the first nine months of 2021 compared to the same periods of 2020, reflecting the addition of LeadCloud and Transparent.ly, which were acquired as part of the National General acquisition.

Intersegment premiums and service fees increased 27.8% or $10 million in the third quarter of 2021 and increased 22.0% or $24 million in the first nine months of 2021 compared to the same periods of 2020, primarily related to increased device sales through Arity driven by growth in the Allstate brand Milewise® product and growth in automotive rescue services provided by Allstate Roadside for Allstate brand auto customers.

70www.allstate.com

Protection ServicesSegment Results

Claims and claims expense increased 14.0% or $15 million in the third quarter 2021 and increased 17.6% or $50 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to higher levels of claims at Allstate Protection Plans driven by growth of the business and increased claims at Allstate Roadside due to higher severity and rescue volumes.

Amortization of DAC increased 21.9% or $37 million in the third quarter of 2021 and increased 20.5% or $99 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the growth experienced at Allstate Protection Plans and Allstate Dealer Services.

Operating costs and expenses increased 30.6% or $49 million in the third quarter of 2021 and increased 26.0% or $126 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to higher operating costs at Arity driven by the addition of LeadCloud and Transparent.ly and growth experienced at Allstate Protection Plans.

Restructuring and related charges in the third quarter of 2021werecomparable to the third quarter of 2020 and increased $11 million in the first nine months of 2021 compared to the first nine months of 2020, primarily due to a facility closure at Allstate Identity Protection in the first quarter of 2021 and accelerated lease costs at Allstate Protection Plans.

Third Quarter 2021 Form 10-Q 71

Segment Results Allstate Health and Benefits

Allstate Health and Benefits Segment

Allstate Health and Benefits results include National General’s accident and health business, starting in the first quarter of 2021. Results prior to 2021 reflect historical Allstate Benefits results only.


Summarized financial information
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Revenues
Accident and health insurance premiums and contract charges	$	460	$	287	$	1,362	$	832
Other revenue	85		—		248		—
Net investment income	18		18		56		58

Costs and expenses
Accident and health insurance policy benefits	(269)		(128)		(746)		(392)
Interest credited to contractholder funds	(8)		(8)		(25)		(26)
Amortization of DAC	(30)		(59)		(101)		(139)
Operating costs and expenses	(206)		(68)		(582)		(253)
Restructuring and related charges	(8)		—		(9)		(1)

Income tax expense on operations	(9)		(9)		(43)		(17)

Adjusted net income	$	33	$	33	$	160	$	62












Benefit ratio (1)	58.5		44.6		54.8		47.1







Employer voluntary benefits (2)					3,835		4,092
Group health (3)					126		—
Individual accident and health (4)					417		—
Policies in force as of September 30 (in thousands)					4,378		4,092

(1)Benefit ratio is calculated as accident and health insurance policy benefits divided by premiums and contract charges.

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

(3)Group health includes health products sold to employers for use by their employees.

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

Adjusted net income in the third quarter of 2021 was comparable to the third quarter of 2020. Adjusted net income increased $98 million in the first nine months of 2021 compared to the first nine months of 2020, primarily ~~from limited partnerships,~~due to the acquisition of National General’s group health and individual accident and health business, which resulted in higher premiums and contract charges and the addition of other revenue, partially offset by higher policy benefits and operating costs and expenses. Results for the first nine months of 2020 included an ~~increase in invested assets and higher market-based income. Limited partnership income in both periods included private equity value appreciation and distributions~~after-tax charge of $32

million related to the ~~sales~~write-off of ~~underlying investments.~~previously capitalized software.

~~The average pre-tax investment yields were 3.7%~~Premiums and ~~3.6%~~contract charges increased 60.3% or $173 million in the third quarter of 2021 and increased 63.7% or $530 million in the first nine months of 2021 compared to the same periods of 2020, primarily due to the addition of group health and individual accident and health business.


Premiums and contract charges by line of business
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Employer voluntary benefits	$	251	$	287	$	769	$	832
Group health	90		—		260		—
Individual accident and health	119		—		333		—
Premiums and contract charges	$	460	$	287	$	1,362	$	832

Other revenue of $85 million and $248 million in the third quarter and first nine months of ~~2017, compared to 3.3%~~2021, respectively, reflects National General’s commission revenue, group health administrative fees, agency fees and ~~3.4%~~technology fees.

Accident and health insurance policy benefits increased $141 million in the third quarter of 2021 and increased 90.3% or $354 million in the first nine months of ~~2016. Quarterly pre-tax yield is calculated as annualized quarterly investment income, before investment expense divided by~~2021 compared to the ~~average~~same periods of 2020, primarily due to the addition of the ~~current~~group health and individual accident and health products and increased benefit utilization compared to the prior quarter investment balances. Year-to-date pre-tax yield is calculated as annualized year-to-date investment income, before investment expense divided by the average of investment balances at the beginning of the year and the end of each quarter during the year. For the purposes of the pre-tax yield calculation, income for directly held real estate, timber and other consolidated investments is net of investee level expenses (depreciation and asset level operating expenses reported in investment expense). For investments carried at fair value, investment balances exclude unrealized capital gains and losses.quarter.

~~Realized capital gains and losses~~ ~~are presented in the following table.~~

72www.allstate.com

Allstate Health and Benefits Segment Results

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Impairment write-downs $ (17 ) $ (26 ) $ (55 ) $ (103 )
Change in intent write-downs (5 ) (8 ) (39 ) (39 )
Net other-than-temporary impairment losses recognized in earnings (22 ) (34 ) (94 ) (142 )
Sales and other 117
101
423
142
Valuation and settlements of derivative instruments (13 ) (14 ) (27 ) (20 )
Realized capital gains and losses, pre-tax 82
53
302
(20 )
Income tax (expense) benefit (28 ) (17 ) (103 ) 10
Realized capital gains and losses, after-tax $ 54
$ 36
$ 199
$ (10 )

~~Realized capital gains~~

Benefit ratio increased to 58.5 and 54.8 in the third quarter and the first nine months of ~~2017, primarily relate~~2021 compared to ~~net gains on sales, partially offset by impairment~~44.6 and ~~change in intent write-downs, and derivative valuation losses.~~

82 ~~www.allstate.com~~



~~Allstate Financial~~	~~Allstate Life~~	~~Allstate Benefits~~	~~Allstate Annuities~~

~~Allstate Financial Highlights~~

~~Net income applicable to common shareholders was $168 million and $422 million~~47.1 in the ~~third quarter~~same periods of 2020, primarily due to a higher benefit ratio associated with group health products added in 2021 and ~~first nine months of 2017, respectively, compared~~a higher benefit ratio for employer voluntary benefit products due to ~~$80 million and $264 million~~lower claim experience in the ~~third quarter and first nine months~~prior year, primarily driven by the impacts of ~~2016, respectively.~~the pandemic on benefit utilization.

~~Premiums and contract charges totaled $593~~Amortization of DAC decreased 49.2% or $29 million in the third quarter of ~~2017, an increase of 3.9% from $571 million in the third quarter of 2016,~~2021 and ~~$1.78 billion in the first nine months of 2017, an increase of 4.5% from $1.70 billion in the first nine months of 2016.~~

Investments totaled $36.71 billion as of September 30, 2017, reflecting a decrease of $129 million from $36.84 billion as of December 31, 2016. Net investment income increased 8.0% to $461 million in the third quarter of 2017 and 8.0% to $1.38 billion in the first nine months of 2017 from $427 million and $1.28 billion in the third quarter and first nine months of 2016, respectively.

Net realized capital gains totaled $21 million and $16 million in the third quarter and first nine months of 2017, respectively, compared to net realized capital losses of $21 million and $70 million in the third quarter and first nine months of 2016, respectively.

During third quarter 2017, our annual comprehensive review of the deferred policy acquisition costs (“DAC”), deferred sales inducement costs and secondary guarantee liability balances resulted in no net impact to income. This compares to a $7 million pre-tax decrease to income in the third quarter of 2016.

~~Contractholder funds totaled $19.65 billion as of September 30, 2017, reflecting a decrease of $610 million from $20.26 billion as of December 31, 2016.~~

~~Allstate Financial Segment~~

~~Summary analysis~~ ~~Summarized financial data is presented in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Revenues

Premiums and contract charges $ 593
$ 571
$ 1,777
$ 1,701
Net investment income 461
427
1,383
1,281
Realized capital gains and losses 21
(21 ) 16
(70 )
Total revenues 1,075
977
3,176
2,912

Costs and expenses

Contract benefits (456 ) (484 ) (1,416 ) (1,393 )
Interest credited to contractholder funds (174 ) (183 ) (522 ) (558 )
Amortization of DAC (62 ) (70 ) (214 ) (212 )
Operating costs and expenses (130 ) (126 ) (395 ) (370 )
Restructuring and related charges (1 ) —
(2 ) (1 )
Total costs and expenses (823 ) (863 ) (2,549 ) (2,534 )

Gain on disposition of operations 1
1
5
4
Income tax expense (85 ) (35 ) (210 ) (118 )
Net income applicable to common shareholders $ 168
$ 80
$ 422
$ 264

Life insurance $ 74
$ 44
$ 199
$ 170
Accident and health insurance 28
24
67
65
Annuities and institutional products 66
12
156
29
Net income applicable to common shareholders $ 168
$ 80
$ 422
$ 264

Allstate Life $ 73
$ 43
$ 190
$ 161
Allstate Benefits 29
25
76
74
Allstate Annuities 66
12
156
29
Net income applicable to common shareholders $ 168
$ 80
$ 422
$ 264

Investments as of September 30 $ 36,711
$ 37,516

~~In fourth quarter 2017, we are changing our reportable segments. See Note 15 “Subsequent Events” of the condensed consolidated financial statements for further information.~~

~~The Allstate Corporation~~ 83



~~Allstate Financial~~	~~Allstate Life~~	~~Allstate Benefits~~	~~Allstate Annuities~~

~~Allstate Life~~

~~Summarized financial data is presented in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Revenues

Premiums and contract charges $ 316
$ 310
$ 956
$ 932
Net investment income 119
120
362
358
Realized capital gains and losses 2
(10 ) 4
(25 )
Total revenues 437
420
1,322
1,265

Costs and expenses

Contract benefits (173 ) (197 ) (555 ) (554 )
Interest credited to contractholder funds (71 ) (72 ) (211 ) (213 )
Amortization of DAC (29 ) (31 ) (104 ) (98 )
Operating costs and expenses (56 ) (59 ) (173 ) (169 )
Restructuring and related charges (1 ) —
(1 ) (1 )
Total costs and expenses (330 ) (359 ) (1,044 ) (1,035 )

Income tax expense (34 ) (18 ) (88 ) (69 )
Net income applicable to common shareholders $ 73
$ 43
$ 190
$ 161

Policies in force as of September 30 (in thousands) 2,019
2,019

~~Net income applicable to common shareholders~~ was $73 million in the third quarter of 2017 compared to $43 million in the third quarter of 2016. The increase was primarily due to lower contract benefits, net realized capital gains in the third quarter of 2017 compared to net realized capital losses in the third quarter of 2016, and higher premiums and contract charges. Net income applicable to common shareholders was $190decreased 27.3% or $38 million in the first nine months of 2017 compared to $161 million in the first nine months of 2016. The increase was primarily due to net realized capital gains in the first nine months of 2017 compared to net realized capital losses in the first nine months of 2016 and higher premiums and contract charges.

~~The following table summarizes premiums and contract charges by product.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Traditional life insurance premiums $ 141
$ 133
$ 420
$ 393
Accident and health insurance premiums —
1
1
2
Interest-sensitive life insurance contract charges 175
176
535
537
Premiums and contract charges ⁽¹⁾
$ 316
$ 310
$ 956
$ 932

~~____________________~~


⁽¹⁾	Contract charges related to the cost of insurance totaled $121 million and $120 million for the third quarter of 2017 and 2016, respectively, and $368 million and $367 million for the first nine months of 2017 and 2016, respectively.

~~Premiums and contract charges~~ ~~increased 1.9% or $6 million in the third quarter of 2017 and 2.6% or $24 million in the first nine months of 2017~~2021 compared to the same periods of ~~2016. The increase in both periods primarily relates to higher traditional life insurance renewal premiums as well as lower levels of reinsurance premiums ceded.~~

~~Contract benefits~~ ~~decreased 12.2% or $24 million in the third quarter of 2017 compared to the third quarter of 2016,~~2020, primarily due to ~~more favorable life insurance mortality experience. Contract benefits increased 0.2% or $1 million in the first nine months of 2017 compared to the first nine months of 2016.~~

~~Our~~unfavorable adjustments associated with our annual review of assumptions in third quarter 2017 resulted in a $12 million increase in reserves primarily for secondary guarantees on interest-sensitive life insurance due to increased projected exposure to benefits paid under secondary guarantees resulting from continued low interest rates. In third quarter 2016, the review resulted in an $8 million increase in reserves primarily for secondary guarantees on interest-sensitive life insurance due to higher than anticipated retention on guaranteed interest-sensitive life business.

We analyze our mortality and morbidity results using the difference between premiums and contract charges earned for the cost of insurance and contract benefits (“benefit spread”). Benefit spread increased 56.1% to $89 million in the third quarter of 2017 and 12.5% to $234 million in the first nine months of 20172020 compared to ~~$57 million and $208 million~~favorable adjustments in ~~the third quarter~~

84 ~~www.allstate.com~~



~~Allstate Financial~~	~~Allstate Life~~	~~Allstate Benefits~~	~~Allstate Annuities~~

~~and first nine months of 2016, respectively, primarily due to more favorable life insurance mortality experience and higher life insurance premiums.~~

In order to analyze the impact of net investment income and interest credited to contractholders on net income, we monitor the difference between net investment income and interest credited to contractholder funds (“investment spread”).

~~The investment spread by product group is shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Life insurance $ 29
$ 27
$ 90
$ 85
Accident and health insurance 2
1
4
4
Net investment income on investments supporting capital 17
20
57
56
Total investment spread $ 48
$ 48
$ 151
$ 145

Investment spread in the third quarter of 2017 was comparable to the third quarter of 2016. Investment spread increased 4.1% or $6 million in the first nine months of 2017 compared to the first nine months of 2016, primarily due to higher net investment income.

~~Amortization of DAC~~ ~~The components of amortization of DAC are summarized in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Amortization of DAC before amortization relating to realized capital gains and losses and changes in assumptions $ 39
$ 36
$ 106
$ 99
Amortization relating to realized capital gains and losses⁽¹⁾
4
1
12
5
Amortization deceleration for changes in assumptions (‘‘DAC unlocking’’) (14 ) (6 ) (14 ) (6 )
Total amortization of DAC $ 29
$ 31
$ 104
$ 98

~~____________________~~


⁽¹⁾	The impact of realized capital gains and losses on amortization of DAC is dependent upon the relationship between the assets that give rise to the gain or loss and the product liability supported by the assets. Fluctuations result from changes in the impact of realized capital gains and losses on actual and expected gross profits.

Amortization of DAC decreased 6.5% or $2 million in the third quarter of 2017 compared to the third quarter of 2016, primarily due to higher amortization deceleration for changes in assumptions. Amortization of DAC increased 6.1% or $6 million in the first nine months of 2017 compared to the first nine months of 2016, primarily due to higher gross profits and net realized capital gains on interest-sensitive life insurance, partially offset by higher amortization deceleration for changes in assumptions.

Our annual comprehensive review of assumptions underlying estimated future gross profits for our interest-sensitive life contracts covers assumptions for mortality, persistency, expenses, investment returns, including capital gains and losses, interest crediting rates to policyholders, and the effect of any hedges. In the third quarter of 2017, the review resulted in a deceleration of DAC amortization (increase to income) of $14 million. In the third quarter of 2016, the review resulted in a deceleration of DAC amortization of $6 million.

The following table provides the effect on DAC amortization of changes in assumptions relating to the gross profit components of investment margin, benefit margin and expense margin for the nine months ended September 30.

($ in millions) 2017 2016
Investment margin $ 10
$ (3 )
Benefit margin (23 ) —
Expense margin (1 ) (3 )
Net deceleration $ (14 ) $ (6 )

~~In 2017, DAC amortization acceleration for changes in the investment margin component of estimated gross profits was due to continued low interest rates~~2021, and lower ~~projected investment returns. The deceleration related to benefit margin was due to a decrease in projected mortality.~~health product lapses for employer voluntary benefits.

~~The Allstate Corporation~~ 85



~~Allstate Financial~~	~~Allstate Life~~	~~Allstate Benefits~~	~~Allstate Annuities~~

~~Operating costs and expenses~~ decreased 5.1% or $3 million in the third quarter of 2017 compared to the third quarter of 2016, primarily due to lower non-deferrable commissions and regulatory compliance costs. Operating costs and expenses increased 2.4% or $4 million in the first nine months of 2017 compared to the first nine months of 2016, primarily due to higher employee related costs and higher net distribution expenses reflecting increased regulatory compliance costs and lower fees from sales of third party financial products, partially offset by lower non-deferrable commissions. The following table summarizes operating costs and expenses.

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Non-deferrable commissions $ 3
$ 5
$ 10
$ 14
General and administrative expenses 53
54
163
155
Total operating costs and expenses $ 56
$ 59
$ 173
$ 169

~~Analysis of reserves and contractholder funds~~

~~The following table summarizes our reserve for life-contingent contract benefits by product.~~

($ in millions) September 30,
2017 2016
Traditional life insurance $ 2,426
$ 2,372
Accident and health insurance 178
180
Reserve for life-contingent contract benefits $ 2,604
$ 2,552

~~Contractholder funds~~ represent interest-bearing liabilities arising from the sale of products such as interest-sensitive life insurance. The balance of contractholder funds is equal to the cumulative deposits received and interest credited to the contractholder less cumulative contract benefits, surrenders, withdrawals and contract charges for mortality or administrative expenses. The following table shows the changes in contractholder funds.

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Contractholder funds, beginning balance $ 7,514
$ 7,410
$ 7,464
$ 7,359

Deposits 236
250
730
748

Interest credited 71
71
211
212

Benefits, withdrawals and other adjustments

Benefits (54 ) (65 ) (183 ) (186 )
Surrenders and partial withdrawals (62 ) (61 ) (190 ) (187 )
Contract charges (175 ) (176 ) (527 ) (528 )
Net transfers from separate accounts —
2
3
4
Other adjustments ⁽¹⁾
29
15
51
24
Total benefits, withdrawals and other adjustments (262 ) (285 ) (846 ) (873 )
Contractholder funds, ending balance $ 7,559
$ 7,446
$ 7,559
$ 7,446

~~_______________~~

⁽¹⁾

The table above illustrates the changes in contractholder funds, which are presented gross of reinsurance recoverables on the Condensed Consolidated Statements of Financial Position. The table above is intended to supplement our discussion and analysis of revenues, which are presented net of reinsurance on the Condensed Consolidated Statements of Operations. As a result, the net change in contractholder funds associated with products reinsured is reflected as a component of the other adjustments line.

~~Contractholder deposits decreased 5.6% and 2.4% in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016.~~

86 ~~www.allstate.com~~



~~Allstate Financial~~	~~Allstate Life~~	~~Allstate Benefits~~	~~Allstate Annuities~~

~~Allstate Benefits~~

~~Summarized financial data is presented in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Revenues

Premiums and contract charges $ 273
$ 257
$ 811
$ 759
Net investment income 18
18
54
54
Realized capital gains and losses 1
(1 ) 1
(6 )
Total revenues 292
274
866
807

Costs and expenses

Contract benefits (142 ) (131 ) (421 ) (380 )
Interest credited to contractholder funds (8 ) (9 ) (26 ) (28 )
Amortization of DAC (31 ) (37 ) (105 ) (109 )
Operating costs and expenses (65 ) (59 ) (196 ) (178 )
Restructuring and related charges (1 ) —
(1 ) —
Total costs and expenses (247 ) (236 ) (749 ) (695 )

Income tax expense (16 ) (13 ) (41 ) (38 )
Net income applicable to common shareholders $ 29
$ 25
$ 76
$ 74

Policies in force as of September 30 (in thousands) 4,035
3,733

~~Net income applicable to common shareholders~~ was $29 million in the third quarter of 2017 compared to $25 million in the third quarter of 2016. The increase was primarily due to higher premiums and contract charges, partially offset by higher contract benefits. Net income applicable to common shareholders was $76 million in the first nine months of 2017 compared to $74 million in the first nine months of 2016. The increase was primarily due to higher premiums and contract charges, partially offset by higher contract benefits and operating costs and expenses.

~~The following table summarizes premiums and contract charges by product.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Traditional life insurance premiums $ 12
$ 12
$ 30
$ 29
Accident and health insurance premiums 232
215
696
644
Interest-sensitive life insurance contract charges 29
30
85
86
Premiums and contract charges ⁽¹⁾
$ 273
$ 257
$ 811
$ 759

~~____________________~~


⁽¹⁾	Contract charges related to the cost of insurance totaled $15 million and $14 million for the third quarter of 2017 and 2016, respectively, and $45 million and $44 million for the first nine months of 2017 and 2016, respectively.

~~Premiums and contract charges~~ increased 6.2% or $16 million in the third quarter of 2017 and 6.9% or $52 million in the first nine months of 2017 compared to the same periods of 2016. The increase in both periods primarily relates to growth in critical illness, disability, hospital indemnity and accident products. Policies in force increased 8.1% as of September 30, 2017 compared to September 30, 2016.

~~Contract benefits~~ increased 8.4% or $11 million in the third quarter of 2017 and 10.8% or $41 million in the first nine months of 2017 compared to the same periods of 2016, primarily due to growth and higher claim experience.

Benefit spread increased 6.4% to $117 million in the third quarter of 2017 and 3.9% to $350 million in the first nine months of 2017 compared to $110 million and $337 million in the third quarter and first nine months of 2016, respectively, primarily due to growth in business in force, partially offset by higher claim experience.

Amortization of DAC decreased 16.2% or $6 million in the third quarter of 2017 and 3.7% or $4 million in the first nine months of 2017 compared to the same periods of 2016, primarily due to lower amortization associated with our annual comprehensive review of assumptions and more favorable persistency. Our annual comprehensive review of assumptions underlying estimated future gross profits for our interest-sensitive life contracts resulted in ana deceleration of DAC amortization (increase to income) of $2 million of the unamortized DAC asset balance in the third quarter of 2021 compared to $28 million acceleration of DAC amortization (decrease to income) ~~of $1 million~~ in the third quarter ~~2017 compared~~of 2020. In 2020, DAC amortization acceleration primarily related to ~~$4 million in third quarter 2016.~~

~~The Allstate Corporation~~ 87

lower projected investment returns, partially offset by favorable projected mortality.



~~Allstate Financial~~	~~Allstate Life~~	~~Allstate Benefits~~	~~Allstate Annuities~~


Operating costs and expenses
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Non-deferrable commissions	$	80	$	25	$	231	$	76
General and administrative expenses	126		43		351		177
Total operating costs and expenses	$	206	$	68	$	582	$	253

Operating costs and expenses increased ~~10.2% or $6~~$138 million in the third quarter of ~~2017~~2021 and ~~10.1% or $18~~increased $329 million in the first nine months of ~~2017~~2021 compared to the same periods of ~~2016,~~2020, primarily due to ~~higher employee-related costs~~the addition of the group health and ~~non-deferrable commissions related to growth, as well as higher technology expenses. The following table summarizes operating costs~~individual accident and ~~expenses.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Non-deferrable commissions $ 24
$ 23
$ 73
$ 68
General and administrative expenses 41
36
123
110
Total operating costs and expenses $ 65
$ 59
$ 196
$ 178

~~Analysis of reserves and contractholder funds~~

~~The following table summarizes our reserve~~health business in 2021. Results for ~~life-contingent contract benefits by product.~~

($ in millions) September 30,
2017 2016
Traditional life insurance $ 256
$ 241
Accident and health insurance 723
683
Reserve for life-contingent contract benefits $ 979
$ 924

Contractholder funds relate to interest-sensitive life insurance and totaled $887 million as of September 30, 2017 compared to $881 million as of December 31, 2016 and $878 million as of September 30, 2016.

88 ~~www.allstate.com~~



~~Allstate Financial~~	~~Allstate Life~~	~~Allstate Benefits~~	~~Allstate Annuities~~

~~Allstate Annuities~~

~~Summarized financial data is presented in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Revenues

Contract charges $ 4
$ 4
$ 10
$ 10
Net investment income 324
289
967
869
Realized capital gains and losses 18
(10 ) 11
(39 )
Total revenues 346
283
988
840

Costs and expenses

Contract benefits (141 ) (156 ) (440 ) (459 )
Interest credited to contractholder funds (95 ) (102 ) (285 ) (317 )
Amortization of DAC (2 ) (2 ) (5 ) (5 )
Operating costs and expenses (9 ) (8 ) (26 ) (23 )
Restructuring and related charges 1
—
—
—
Total costs and expenses (246 ) (268 ) (756 ) (804 )

Gain on disposition of operations 1
1
5
4
Income tax expense (35 ) (4 ) (81 ) (11 )
Net income applicable to common shareholders $ 66
$ 12
$ 156
$ 29

Reserve for life-contingent contract benefits as of September 30 $ 8,644
$ 8,752

Contractholder funds as of September 30 $ 11,204
$ 12,259

Policies in force as of September 30 (in thousands) 236
256

We discontinued the sale of annuities over an eight year period from 2006 to 2014, reflecting our expectations of declining returns. Policies in force as of September 30, 2017 were 145 thousand and 91 thousand for deferred annuities and immediate annuities, respectively.

~~Net income applicable to common shareholders~~ was $66 million and $156 million in the third quarter and first nine months of 2017, respectively, compared to $12 million and $29 million in the third quarter and first nine months of 2016, respectively. The increase in both periods was primarily due to higher net investment income, net realized capital gains in 2017 compared to net realized capital losses in 2016, lower interest credited to contractholder funds and lower contract benefits.

~~Net investment income~~ ~~increased 12.1% or $35 million in the third quarter of 2017 and 11.3% or $98 million in~~ the first nine months of 2017 compared to the same periods of 2016, primarily due to higher limited partnership income, reflecting growth of our performance-based portfolio and including private equity value appreciation and distributions related to the sales of underlying investments. The investment portfolio supporting our immediate annuities is managed to ensure the assets match the characteristics of the liabilities and provide the long-term returns needed to support this business. To better match the long-term nature of our immediate annuities, we continue to increase performance-based investments in which we have ownership interests and a greater proportion of return is derived from idiosyncratic asset or operating performance. Economic conditions and equity market performance are reflected in performance-based investment results and income could vary significantly between periods.

~~Net realized capital gains~~ ~~in the third quarter and the first nine months of 2017 primarily related to net gains on sales in connection with ongoing portfolio management, partially offset by impairment write-downs.~~

~~Contract benefits~~ decreased 9.6% or $15 million in the third quarter of 2017 and 4.1% or $19 million in the first nine months of 2017 compared to the same periods of 2016, primarily due to immediate annuity mortality experience.

We analyze our mortality results using the difference between contract charges earned and contract benefits excluding the portion related to the implied interest on immediate annuities with life contingencies (“benefit spread”). This implied interest totaled $124 million and $376 million in the third quarter and first nine months of 2017, respectively, compared to $126 million and $383 million in the third quarter and first nine months of 2016, respectively. Benefit spread improved 50.0% to $(14) million in the third quarter of 2017 and 17.1% to $(58) million in the first nine months of 2017 compared to $(28) million and $(70) million in the third quarter and first nine months of 2016, respectively.

~~Interest credited to contractholder funds~~ decreased 6.9% or $7 million in the third quarter of 2017 and 10.1% or $32 million in the first nine months of 2017 compared to the same periods of 2016, primarily due to lower average contractholder funds. Valuation changes on derivatives embedded in equity-indexed annuity contracts that are not hedged increased interest credited to

~~The Allstate Corporation~~ 89



~~Allstate Financial~~	~~Allstate Life~~	~~Allstate Benefits~~	~~Allstate Annuities~~

contractholder funds by $2 million and $3 million in the third quarter and first nine months of 2017, respectively, compared to increases of zero and $12 million in the third quarter and first nine months of 2016, respectively.

In order to analyze the impact of net investment income and interest credited to contractholders on net income, we monitor the difference between net investment income and the sum of interest credited to contractholder funds and the implied interest on immediate annuities with life contingencies, which is included as a component of contract benefits (“investment spread”).

~~The investment spread by product group is shown in the following table.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Annuities and institutional products $ 64
$ 25
$ 186
$ 77
Net investment income on investments supporting capital 43
36
123
104
Investment spread before valuation changes on embedded derivatives that are not hedged 107
61
309
181
Valuation changes on derivatives embedded in equity-indexed annuity contracts that are not hedged (2 ) —
(3 ) (12 )
Total investment spread $ 105
$ 61
$ 306
$ 169

Investment spread before valuation changes on embedded derivatives that are not hedged increased 75.4% to $107 million in the third quarter of 2017 and 70.7% to $309 million in the first nine months of 2017 compared to $61 million and $181 million in the third quarter and first nine months of 2016, respectively, due to higher net investment income and lower credited interest.

To further analyze investment spreads, the following table summarizes the weighted average investment yield on assets supporting product liabilities, interest crediting rates and investment spreads. Investment spreads may vary significantly between periods due to the variability in investment income, particularly for immediate fixed annuities where the investment portfolio includes limited partnerships.

Three months ended September 30,

Weighted average
investment yield

Weighted average
interest crediting rate

Weighted average
investment spreads
2017 2016 2017 2016 2017 2016
Deferred fixed annuities and institutional products 4.4 % 4.2 % 2.9 % 2.8 % 1.5 % 1.4 %
Immediate fixed annuities with and without life contingencies 7.8
6.2
6.0
6.0
1.8
0.2

Nine months ended September 30,

Weighted average
investment yield

Weighted average
interest crediting rate

Weighted average
investment spreads
2017 2016 2017 2016 2017 2016
Deferred fixed annuities and institutional products 4.3 % 4.1 % 2.8 % 2.8 % 1.5 % 1.3 %
Immediate fixed annuities with and without life contingencies 7.7
6.2
6.0
5.9
1.7
0.3

~~Operating costs and expenses~~ increased 12.5% or $1 million in the third quarter of 2017 compared to the third quarter of 2016, primarily due to higher employee related costs. Operating costs and expenses increased 13.0% or $3 million in the first nine months of 2017 compared to the first nine months of 2016, primarily due to higher guaranty fund expenses. The first nine months of 20162020 included a ~~reduction in the accrual for anticipated guaranty fund expenses.~~

90 ~~www.allstate.com~~



~~Allstate Financial~~	~~Allstate Life~~	~~Allstate Benefits~~	~~Allstate Annuities~~

write-off of capitalized software costs associated with a billing system.

Analysis of reserves


Reserve for future policy benefits
($ in millions)	September 30, 2021		December 31, 2020
Traditional life insurance	$	305	$	299
Accident and health insurance	958		729
Reserve for future policy benefits	$	1,263	$	1,028

Third Quarter 2021 Form 10-Q 73

Investments


Portfolio composition and strategy by reporting segment (1)
	September 30, 2021
($ in millions)	Property-Liability			Protection Services			Allstate Health and Benefits			Corporate and Other			Total
Fixed income securities (2)	$	35,185		$	1,628		$	1,794		$	1,382		$	39,989
Equity securities (3)	2,970			122			99			616			3,807
Mortgage loans, net	681			—			71			—			752
Limited partnership interests	7,578			—			—			—			7,578
Short-term investments (4)	4,741			177			67			1,443			6,428
Other, net	3,140			—			144			2			3,286
Total	$	54,295		$	1,927		$	2,175		$	3,443		$	61,840
Percent to total	87.8		%	3.1		%	3.5		%	5.6		%	100.0		%

Market-based	$	45,784		$	1,927		$	2,175		$	3,441		$	53,327
Performance-based	8,511			—			—			2			8,513
Total	$	54,295		$	1,927		$	2,175		$	3,443		$	61,840

(1) Balances reflect the elimination of related party investments between segments.

(2) Fixed income securities are carried at fair value. Amortized cost, net for these securities was $34.16 billion, $1.59 billion, $1.72 billion, $1.34 billion and ~~contractholder funds~~$38.81 billion for Property-Liability, Protection Services, Allstate Health and Benefits, Corporate and Other, and in total, respectively.

(3) Equity securities are carried at fair value. The ~~following table summarizes our product liabilities.~~

($ in millions) September 30,
2017 2016
Immediate fixed annuities with life contingencies $ 8,552
$ 8,645
Other 92
107
Reserve for life-contingent contract benefits $ 8,644
$ 8,752

Deferred fixed annuities $ 8,341
$ 9,115
Immediate fixed annuities without life contingencies 2,744
2,928
Institutional products —
85
Other 119
131
Contractholder funds $ 11,204
$ 12,259

~~Contractholder funds~~ ~~represent interest-bearing liabilities arising from the sale~~fair value of ~~products such~~equity securities held as ~~fixed annuities. The balance~~ of contractholder funds is equal to the cumulative deposits received and interest credited to the contractholder less cumulative contract benefits, surrenders, withdrawals, maturities and contract charges for mortality or administrative expenses. The following table shows the changesSeptember 30, 2021, was $868 million in ~~contractholder funds.~~

($ in millions) Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
Contractholder funds, beginning balance $ 11,428
$ 12,560
$ 11,915
$ 13,070

Deposits 6
8
23
29

Interest credited 94
102
282
316

Benefits, withdrawals, maturities and other adjustments

Benefits (163 ) (188 ) (489 ) (537 )
Surrenders and partial withdrawals (165 ) (205 ) (526 ) (611 )
Contract charges (3 ) (2 ) (6 ) (6 )
Net transfers from separate accounts —
—
1
—
Other adjustments ⁽¹⁾
7
(16 ) 4
(2 )
Total benefits, withdrawals, maturities and other adjustments (324 ) (411 ) (1,016 ) (1,156 )
Contractholder funds, ending balance $ 11,204
$ 12,259
$ 11,204
$ 12,259

~~_______________~~

⁽¹⁾

~~Contractholder funds decreased 2.0% and 6.0%~~excess of cost. These net gains were primarily concentrated in the ~~third quarter~~consumer goods, technology and ~~first nine months~~banking sectors. Equity securities include $962 million of ~~2017, respectively, primarily due to the continued runoff~~funds with underlying investments in fixed income securities as of ~~our deferred fixed annuity business. We discontinued the sale of annuities but still accept additional deposits on existing contracts.~~September 30, 2021.

Contractholder deposits decreased $2 million and $6 million in the third quarter and first nine months of 2017, respectively, compared to the same periods of 2016, primarily due to lower additional deposits on fixed annuities.

Surrenders and partial withdrawals decreased 19.5% to $165 million in the third quarter of 2017 and 13.9% to $526 million in the first nine months of 2017 from $205 million and $611 million in the third quarter and first nine months of 2016, respectively. The annualized surrender and partial withdrawal rate on deferred fixed annuities products, based on the beginning of year contractholder funds, was 8.5% in the first nine months of 2017 compared to 9.0% in the first nine months of 2016.

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

~~The Allstate Corporation~~ 91

~~Investments~~

~~Consolidated Investment Highlights~~

Investments totaled ~~$82.77~~$61.84 billion as of September 30, ~~2017,~~2021, increasing from ~~$81.80~~$59.54 billion as of December 31, ~~2016.~~

~~Unrealized net capital gains totaled $2.75 billion as of September 30, 2017, increasing from $1.77 billion as of December 31, 2016.~~

Net investment income was $843 million in the third quarter of 2017, an increase of 12.7% from $748 million in the third quarter of 2016, and $2.49 billion in the first nine months of 2017, an increase of 11.0% from $2.24 billion in the first nine months of 2016.

Net realized capital gains were $103 million in the third quarter of 2017 compared to $33 million in the third quarter of 2016. Net realized capital gains were $318 million in the first nine months of 2017 compared to net realized capital losses of $92 million in the first nine months of 2016.

~~Investments~~

~~Portfolio composition by reporting segment~~ ~~The composition of the investment portfolios by reporting segment as of September 30, 2017 is presented in the following table.~~

($ in millions)
Property-Liability⁽⁵⁾

Allstate Financial ⁽⁵⁾

Corporate and Other ⁽⁵⁾
Total

Percent
to total

Percent
to total

Percent
to total

Percent
to total
Fixed income securities ⁽¹⁾
$ 32,647
74.4 % $ 24,863
67.7 % $ 1,881
84.8 % $ 59,391
71.7 %
Equity securities ⁽²⁾
4,677
10.7
1,749
4.8
8
0.4
6,434
7.8
Mortgage loans 334
0.8
3,988
10.9
—
—
4,322
5.2
Limited partnership interests ⁽³⁾
3,467
7.9
3,132
8.5
1
0.1
6,600
8.0
Short-term investments ⁽⁴⁾
1,052
2.4
819
2.2
327
14.7
2,198
2.7
Other 1,666
3.8
2,160
5.9
—
—
3,826
4.6
Total $ 43,843
100.0 % $ 36,711
100.0 % $ 2,217
100.0 % $ 82,771
100.0 %

~~____________________~~


⁽¹⁾	Fixed income securities are carried at fair value. Amortized cost basis for these securities was $32.29 billion, $23.46 billion, $1.86 billion and $57.61 billion for Property-Liability, Allstate Financial, Corporate and Other, and in Total, respectively.


⁽²⁾	Equity securities are carried at fair value. Cost basis for these securities was $4.00 billion, $1.47 billion, $8 million and $5.47 billion for Property-Liability, Allstate Financial, Corporate and Other, and in Total, respectively.


⁽³⁾	We have commitments to invest in additional limited partnership interests totaling $1.88 billion, $1.44 billion and $3.32 billion for Property-Liability, Allstate Financial, and in Total, respectively.


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


⁽⁵⁾	~~Balances reflect the elimination of related party investments between segments.~~

~~Investments totaled $82.77 billion as of September 30, 2017, increasing from $81.80 billion as of December 31, 2016,~~2020, primarily due to ~~higher fixed income and equity valuations and~~ positive operating cash flows, partially offset by ~~the $1.4 billion SquareTrade acquisition on January 3, 2017,~~ common share repurchases and dividends paid to ~~shareholders and net reductions in contractholder funds.~~shareholders.

The Property-Liability investment portfolio totaled $43.84 billion as of September 30, 2017, increasing from $42.72 billion as of December 31, 2016, primarily due to positive operating cash flows, higher equity and fixed income valuations and dividends paid by Allstate Life Insurance Company (“ALIC”) to AIC, partially offset by the SquareTrade acquisition and dividends paid by AIC to The Allstate Corporation (the “Corporation”).

The Allstate Financial investment portfolio totaled $36.71 billion as of September 30, 2017, decreasing from $36.84 billion as of December 31, 2016, primarily due to net reductions in contractholder funds and dividends paid by ALIC to AIC, partially offset by higher fixed income and equity valuations and positive operating cash flows.

The Corporate and Other investment portfolio totaled $2.22 billion as of September 30, 2017, decreasing from $2.24 billion as of December 31, 2016, primarily due to dividends paid to shareholders and common share repurchases, largely offset by dividends paid by AIC to the Corporation.

92 ~~www.allstate.com~~

~~Investments~~

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, or assets may be moved between strategies.

~~Market-Based~~ ~~strategies include~~Market-basedstrategy includes investments primarily in public fixed income and equity securities. ~~Market-Based Core~~It seeks to deliver predictable earnings aligned to business needs and returns consistent with the markets in which we invest. Private fixed income assets, such as commercial mortgages, bank loans and privately placed debt that provide liquidity premiums are also included in this category. ~~Market-Based Activeseeks to outperform within the public markets through tactical positioning and by taking~~take advantage of short-term ~~opportunities. This category may generate results that meaningfully deviate from those achieved by~~opportunities primarily through public and private fixed income investments and public equity securities.

As long as market ~~indices, both favorably and unfavorably.~~yields remain below the current portfolio yield, market-based portfolio yield is expected to decline resulting in lower net investment income for the market-based portfolio in future periods.

~~Performance-Based~~

Performance-basedstrategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic ~~risk. Returns are impacted~~risk primarily through investments in private equity and real estate. These investments include investee level expenses, reflecting asset level operating expenses on directly held real estate and other consolidated investments.

Coronavirus impacts Future investment results will be influenced by ~~a variety of factors including general macroeconomic~~the magnitude and ~~public market conditions as public benchmarks are often used in the valuation of underlying investments. Variability in earnings will also result from the performance~~duration of the ~~underlying assets or business~~global pandemic and the ~~timing~~impact of ~~sales~~actions taken by governmental authorities, businesses and consumers, including the availability, utilization rate and effectiveness of ~~those investments. Earnings from the sales of investments~~vaccines, to mitigate health risks, which creates significant uncertainty. Supply chain disruptions and labor shortages could increase inflation, which may ~~be recorded as net~~have an adverse impact on investment ~~income or realized capital gains~~valuations and losses. The portfolio, which primarily includes private equity, real estate, infrastructure, timber and agriculture-related assets, is diversified across a number of characteristics, including managers or partners, vintage years, strategies, geographies (including international) and industry sectors or property types. These investments are generally illiquid in nature, often require specialized expertise, typically involve a third party manager, and often enhance returns and income through transformation at the company or property level. A portion of these investments seek returns in markets or asset classes that are dislocated or special situations, primarily in private markets.returns.

~~The following table presents the investment portfolio by strategy as of September 30, 2017.~~

74www.allstate.com

Investments


Portfolio composition by investment strategy													Portfolio composition by investment strategy
														September 30, 2021
($ in millions)	Total			Market-Based Core			Market-Based Active			Performance-Based			($ in millions)	Market-based			Performance-based			Total
Fixed income securities	$	59,391		$	51,735		$	7,583		$	73		Fixed income securities	$	39,913		$	76		$	39,989
Equity securities	6,434			4,840			1,496			98			Equity securities	3,455			352			3,807
Mortgage loans	4,322			4,322			—			—
Mortgage loans, net													Mortgage loans, net	752			—			752
Limited partnership interests	6,600			654			—			5,946			Limited partnership interests	441			7,137			7,578
Short-term investments	2,198			1,891			307			—			Short-term investments	6,428			—			6,428
Other	3,826			3,094			178			554
Other, net													Other, net	2,338			948			3,286
Total	$	82,771		$	66,536		$	9,564		$	6,671		Total	$	53,327		$	8,513		$	61,840
% of total				80		%	12		%	8		%

Property-Liability	$	43,843		$	32,008		$	8,323		$	3,512
Allstate Financial	36,711			32,311			1,241			3,159
Corporate & Other	2,217			2,217			—			—
Percent to total													Percent to total	86.2		%	13.8		%	100.0		%

Unrealized net capital gains and losses													Unrealized net capital gains and losses
Fixed income securities	$	1,783		$	1,690		$	93		$	—		Fixed income securities	$	1,177		$	1		$	1,178
Equity securities	966			894			57			15

Other	(2		)	(2		)	—			—			Other	(3)			—			(3)
Total	$	2,747		$	2,582		$	150		$	15		Total	$	1,174		$	1		$	1,175

Fixed income securities ~~by type are listed in the following table.~~


Fixed income securities by type
	Fair value as of
($ in millions)	September 30, 2021		December 31, 2020
U.S. government and agencies	$	3,042	$	2,107
Municipal	7,417		7,578
Corporate	27,367		31,017
Foreign government	1,059		958
Asset-backed securities (“ABS”)	1,070		846
Mortgage-backed securities (“MBS”)	34		59
Total fixed income securities	$	39,989	$	42,565

($ in millions) Fair value as of September 30, 2017 Fair value as of December 31, 2016
U.S. government and agencies $ 3,900
$ 3,637
Municipal 7,794
7,333
Corporate 44,546
43,601
Foreign government 1,093
1,075
Asset-backed securities (“ABS”) 1,270
1,171
Residential mortgage-backed securities (“RMBS”) 611
728
Commercial mortgage-backed securities (“CMBS”) 153
270
Redeemable preferred stock 24
24
Total fixed income securities $ 59,391
$ 57,839

~~The Allstate Corporation~~ 93

~~Investments~~

Fixed income securities are rated by ~~third party~~third-party credit rating agencies and/or are internally rated. As of September 30, ~~2017, 86.3%~~2021, 83.8% of the consolidated fixed income securities portfolio was rated investment grade, which is defined as a security having a rating of Aaa, Aa, A or Baa from Moody’s, a rating of AAA, AA, A or BBB from S&P, ~~Global Ratings (“S&P”),~~ a comparable rating from another nationally recognized rating agency, or a comparable internal rating if an externally provided rating is not available. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current ~~third party~~third-party rating. Our initial investment decisions and ongoing monitoring procedures for fixed income



Title of each class	~~2775 Sanders Road, Northbrook, Illinois~~Trading Symbols	~~60062~~	Name of each exchange on which registered
Common Stock, par value $.01 per share	~~(Address~~ALL	New York Stock Exchange Chicago Stock Exchange
5.100% Fixed-to-Floating Rate Subordinated Debentures due 2053	ALL.PR.B	New York Stock Exchange
Depositary Shares represent 1/1,000th of ~~principal executive offices)~~a share of 5.625% Noncumulative Preferred Stock, Series G	~~(Zip Code)~~ALL PR G	New York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 5.100% Noncumulative Preferred Stock, Series H	ALL PR H	New York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 4.750% Noncumulative Preferred Stock, Series I	ALL PR I	New York Stock Exchange



Large accelerated filer	X ☒	Accelerated filer	~~____~~☐

Non-accelerated filer	~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	~~____~~☐

		Emerging growth company	~~____~~☐



Part I					Financial Information	Page

Item 1.							Financial Statements	(unaudited) as of September 30, 2021 and December 31, 2020 and for the Three Month and Nine Month Periods Ended September 30, 2021 and 2020

			Condensed Consolidated Statements of Operations ~~for the Three-Month and Nine-Month Periods Ended September 30, 2017 and 2016 (unaudited)~~		1
			Condensed Consolidated Statements of Comprehensive Income ~~for the Three-Month and Nine-Month Periods Ended September 30, 2017 and 2016 (unaudited)~~		2
			Condensed Consolidated Statements of Financial Position ~~as of September 30, 2017 (unaudited) and December 31, 2016~~		3
			Condensed Consolidated Statements of Shareholders’ Equity ~~for the Nine-Month Periods Ended September 30, 2017 and 2016 (unaudited)~~		4
			Condensed Consolidated Statements of Cash Flows ~~for the Nine-Month Periods Ended September 30, 2017 and 2016 (unaudited)~~		5
			Notes to Condensed Consolidated Financial Statements (unaudited)		6
			Report of Independent Registered Public Accounting Firm		4751

Item 2.					Management’s Discussion and Analysis of Financial Condition and Results of Operations

			~~Overview~~Highlights		4952

			Property-Liability Operations		~~Consolidated Net Income~~57		51
			Segment results
			~~Property-Liability~~ Allstate Protection~~Results~~		5259



			Run-off Property-Liability		~~Allstate Protection Segment~~67		56
					~~Allstate brand~~Protection Services	6470
					~~Esurance brand~~Allstate Health and Benefits	7172
					~~Encompass brand~~
			Investments		7574
			~~SquareTrade~~	79
	~~Discontinued Lines and Coverages Segment~~	80
	~~Allstate Financial Segment~~	83
	~~Allstate Life~~	84
	~~Allstate Benefits~~	87
	~~Allstate Annuities~~	89
	~~Investment~~s	92
	Capital Resources and Liquidity	~~101~~82

			Forward-Looking Statements		~~106~~85

Item 4.					Controls and Procedures	~~106~~85

Part II							Other Information
Item 1.					Legal Proceedings	~~107~~86
Item 1A.					Risk Factors	~~107~~86
Item 2.					Unregistered Sales of Equity Securities and Use of Proceeds	~~107~~86

Item 6.Exhibits					~~Exhibits~~87		~~108~~


Intangible assets by type
($ in millions)	January 4, 2021
Distribution and customer relationships	$	795
Trade names	102
Licenses	97
Technology	205
Total	$	1,199


Major classes of assets and liabilities to be transferred in transactions
($ in millions)	September 30, 2021		December 31, 2020
Assets
Investments
Fixed income securities, at fair value (amortized cost, net $25,673 and $21,417)	$	27,469	$	23,789
Equity securities, at fair value (cost $23 and $1,113)	16		1,542
Mortgage loans, net	2,719		3,329
Limited partnership interests	1,633		3,046
Short-term, at fair value (amortized cost $1,155 and $993)	1,155		993
Other, net	827		1,998
Total investments	33,819		34,697
Cash	156		66
Deferred policy acquisitions costs	992		925
Reinsurance recoverables, net	1,930		2,005
Accrued investment income	242		229
Other assets	359		865
Separate accounts	3,335		3,344
Assets held for sale	40,833		42,131
Less: loss accrual	4,030		—
Total assets held for sale	$	36,803	$	42,131

Liabilities
Reserve for future policy benefits	$	11,579	$	11,740
Contractholder funds	15,897		16,356

Deferred income taxes	945		973
Other liabilities and accrued expenses	665		912
Separate accounts	3,335		3,344
Total liabilities held for sale	$	32,421	$	33,325


($ in millions, except per share data)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Revenues
Property and casualty insurance premiums	$	10,615	$	9,336	$	31,366	$	27,794
Accident and health insurance premiums and contract charges	460		287		1,362		832
Other revenue	536		272		1,585		794
Net investment income	764		464		2,446		930
Realized capital gains (losses)	105		319		818		597
Total revenues	12,480		10,678		37,577		30,947

Costs and expenses
Property and casualty insurance claims and claims expense	8,264		6,072		21,514		16,635
Shelter-in-Place Payback expense	—		—		29		948
Accident and health insurance policy benefits	269		128		746		392
Interest credited to contractholder funds	8		8		25		26
Amortization of deferred policy acquisition costs	1,582		1,386		4,650		4,095
Operating costs and expenses	1,890		1,322		5,304		4,054
Pension and other postretirement remeasurement (gains) losses	40		(71)		(404)		320
Restructuring and related charges	23		196		145		213
Amortization of purchased intangibles	109		31		267		88


Interest expense	69		78		246		238
Total costs and expenses	12,254		9,150		32,522		27,009

Income from operations before income tax expense	226		1,528		5,055		3,938

Income tax expense	20		312		1,008		779

Net income from continuing operations	206		1,216		4,047		3,159

Income (loss) from discontinued operations, net of tax	325		(63)		(3,272)		(207)

Net income	531		1,153		775		2,952

Less: Net loss attributable to noncontrolling interest	(7)		—		(7)		—

Net income attributable to Allstate	538		1,153		782		2,952

Less: Preferred stock dividends	30		27		87		89

Net income applicable to common shareholders	$	508	$	1,126	$	695	$	2,863

Earnings per common share applicable to common shareholders
Basic
Continuing operations	$	0.62	$	3.82	$	13.31	$	9.77
Discontinued operations	1.11		(0.20)		(10.98)		(0.66)
Total	$	1.73	$	3.62	$	2.33	$	9.11

Diluted
Continuing operations	$	0.62	$	3.78	$	13.11	$	9.66
Discontinued operations	1.09		(0.20)		(10.81)		(0.65)
Total	$	1.71	$	3.58	$	2.30	$	9.01

Weighted average common shares - Basic	293.1		311.2		298.1		314.1
Weighted average common shares - Diluted	297.9		314.1		302.6		317.9



($ in millions, except par value data)	September 30, 2017			December 31, 2016
Assets	(unaudited)
Investments
Fixed income securities, at fair value (amortized cost $57,608 and $56,576)	$	59,391		$	57,839
Equity securities, at fair value (cost $5,468 and $5,157)	6,434			5,666
Mortgage loans	4,322			4,486
Limited partnership interests	6,600			5,814
Short-term, at fair value (amortized cost $2,198 and $4,288)	2,198			4,288
Other	3,826			3,706
Total investments	82,771			81,799
Cash	690			436
Premium installment receivables, net	5,922			5,597
Deferred policy acquisition costs	4,147			3,954
Reinsurance recoverables, net	9,748			8,745
Accrued investment income	590			567
Property and equipment, net	1,067			1,065
Goodwill	2,309			1,219
Other assets	2,966			1,835
Separate Accounts	3,422			3,393
Total assets	$	113,632		$	108,610
Liabilities
Reserve for property-liability insurance claims and claims expense	$	27,154		$	25,250
Reserve for life-contingent contract benefits	12,227			12,239
Contractholder funds	19,650			20,260
Unearned premiums	13,535			12,583
Claim payments outstanding	959			879
Deferred income taxes	1,249			487
Other liabilities and accrued expenses	6,968			6,599
Long-term debt	6,349			6,347
Separate Accounts	3,422			3,393
Total liabilities	91,513			88,037
Commitments and Contingent Liabilities (Note 11)
Shareholders’ equity
Preferred stock and additional capital paid-in, $1 par value, 25 million shares authorized, 72.2 thousand shares issued and outstanding, and $1,805 aggregate liquidation preference	1,746			1,746
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 360 million and 366 million shares outstanding	9			9
Additional capital paid-in	3,330			3,303
Retained income	42,125			40,678
Deferred ESOP expense	(6		)	(6		)
Treasury stock, at cost (540 million and 534 million shares)	(25,413		)	(24,741		)
Accumulated other comprehensive income:
Unrealized net capital gains and losses:
Unrealized net capital gains and losses on fixed income securities with OTTI	68			57
Other unrealized net capital gains and losses	1,715			1,091
Unrealized adjustment to DAC, DSI and insurance reserves	(132		)	(95		)
Total unrealized net capital gains and losses	1,651			1,053
Unrealized foreign currency translation adjustments	(14		)	(50		)
Unrecognized pension and other postretirement benefit cost	(1,309		)	(1,419		)
Total accumulated other comprehensive income (loss)	328			(416		)
Total shareholders’ equity	22,119			20,573
Total liabilities and shareholders’ equity	$	113,632		$	108,610


Computation of basic and diluted earnings per common share
(In millions, except per share data)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Numerator:
Net income from continuing operations	$	206	$	1,216	$	4,047	$	3,159
Less: Net loss attributable to noncontrolling interest	(7)		—		(7)		—
Net income from continuing operations attributable to Allstate	213		1,216		4,054		3,159
Less: Preferred stock dividends	30		27		87		89
Net income from continuing operations applicable to common shareholders	183		1,189		3,967		3,070
Income (loss) from discontinued operations, net of tax	325		(63)		(3,272)		(207)
Net income applicable to common shareholders	$	508	$	1,126	$	695	$	2,863

Denominator:
Weighted average common shares outstanding	293.1		311.2		298.1		314.1
Effect of dilutive potential common shares:
Stock options	3.1		1.6		2.9		2.3
Restricted stock units (non-participating) and performance stock awards	1.7		1.3		1.6		1.5
Weighted average common and dilutive potential common shares outstanding	297.9		314.1		302.6		317.9

Earnings per common share applicable to common shareholders
Basic
Continuing operations	$	0.62	$	3.82	$	13.31	$	9.77
Discontinued operations	1.11		(0.20)		(10.98)		(0.66)
Total	$	1.73	$	3.62	$	2.33	$	9.11

Diluted
Continuing operations	$	0.62	$	3.78	$	13.11	$	9.66
Discontinued operations	1.09		(0.20)		(10.81)		(0.65)
Total	$	1.71	$	3.58	$	2.30	$	9.01

Anti-dilutive options excluded from diluted earnings per common share	0.6		4.2		1.3		3.0


Assets and liabilities recognized in the National General acquisition (1)
($ in millions)	January 4, 2021
Assets
Investments	$	4,957
Cash	400
Premiums and other receivables, net	1,539
Deferred acquisition costs (value of business acquired)	317
Reinsurance recoverables, net	1,212
Intangible assets	1,199
Other assets	736
Goodwill (2)	1,010
Total assets	11,370

Liabilities
Reserve for property and casualty insurance claims and claims expense	2,765
Reserve for future policy benefits	186
Unearned premiums	2,245
Reinsurance payable	363
Debt (3)	593
Deferred tax liabilities	145
Other liabilities	763
Total liabilities	$	7,060


Estimated amortization expense of National General intangible assets for the next five years and thereafter
($ in millions)
2022	$	218
2023	185
2024	135
2025	103
2026	70
Thereafter	140
Total amortization	$	851


Financial results from discontinued operations
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Revenues
Life premiums and contract charges	$	331	$	333	$	1,007	$	1,009
Net investment income	427		368		1,251		732
Realized capital gains (losses)	4		121		193		85
Total revenues	762		822		2,451		1,826

Costs and expenses
Life contract benefits	411		599		1,207		1,333
Interest credited to contractholder funds	127		142		371		456
Amortization of DAC	27		106		84		147
Operating costs and expenses	45		58		151		176
Restructuring and related charges	7		4		30		6
Total costs and expenses	617		909		1,843		2,118

Amortization of deferred gain on reinsurance	1		1		5		3

Income (loss) from discontinued operations before income tax expense	146		(86)		613		(289)

Income tax expense (benefit)	38		(23)		131		(82)

Income (loss) from discontinued operations, net of tax	108		(63)		482		(207)

Loss on disposition of operations	89		—		(4,048)		—
Income tax benefit	(128)		—		(294)		—
Loss on disposition of operations, net of tax	217		—		(3,754)		—

Income (loss) from discontinued operations, net of tax	$	325	$	(63)	$	(3,272)	$	(207)



($ in millions)	Amortized cost		Gross unrealized					Fair value
	Amortized cost		Gains		Losses			Fair value
September 30, 2017
U.S. government and agencies	$	3,843	$	65	$	(8	)	$	3,900
Municipal	7,484		332		(22		)	7,794
Corporate	43,259		1,419		(132		)	44,546
Foreign government	1,077		30		(14		)	1,093
Asset-backed securities (“ABS”)	1,263		16		(9		)	1,270
Residential mortgage-backed securities (“RMBS”)	512		101		(2		)	611
Commercial mortgage-backed securities (“CMBS”)	149		8		(4		)	153
Redeemable preferred stock	21		3		—			24
Total fixed income securities	$	57,608	$	1,974	$	(191	)	$	59,391


December 31, 2016
U.S. government and agencies	$	3,572	$	74	$	(9	)	$	3,637
Municipal	7,116		304		(87		)	7,333
Corporate	42,742		1,178		(319		)	43,601
Foreign government	1,043		36		(4		)	1,075
ABS	1,169		13		(11		)	1,171
RMBS	651		85		(8		)	728
CMBS	262		17		(9		)	270
Redeemable preferred stock	21		3		—			24
Total fixed income securities	$	56,576	$	1,710	$	(447	)	$	57,839


Cash flows from discontinued operations
	Nine months ended September 30,
($ in millions)	2021		2020
Net cash provided by operating activities from discontinued operations	$	888	$	104
Net cash (used in) provided by investing activities from discontinued operations	(405)		264



($ in millions)	Amortized cost		Fair value
Due in one year or less	$	4,392	$	4,415
Due after one year through five years	29,466		30,044
Due after five years through ten years	16,604		17,042
Due after ten years	5,222		5,856
	55,684		57,357
ABS, RMBS and CMBS	1,924		2,034
Total	$	57,608	$	59,391


Reportable segments financial performance
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Underwriting income (loss) by segment
Allstate Protection	$	(421)	$	887	$	1,670	$	3,143
Run-off Property-Liability	(113)		(135)		(118)		(141)
Total Property-Liability	(534)		752		1,552		3,002

Adjusted net income (loss) by segment, after-tax
Protection Services	45		40		150		115
Allstate Health and Benefits	33		33		160		62
Corporate and Other	(95)		(111)		(330)		(317)

Reconciling items
Property-Liability net investment income	710		422		2,314		802
Realized capital gains (losses)	105		319		818		597
Pension and other postretirement remeasurement gains (losses)	(40)		71		404		(320)
Curtailment gains (losses)	—		8		—		8
Business combination expenses and amortization of purchased intangibles (1)	(34)		(28)		(124)		(81)
Business combination fair value adjustment	—		—		6		—
Income tax expense on reconciling items	(14)		(317)		(990)		(798)
Total reconciling items	727		475		2,428		208

Income (loss) from discontinued operations	235		(86)		(3,435)		(289)
Income tax benefit from discontinued operations	90		23		163		82
Total from discontinued operations	$	325	$	(63)	$	(3,272)	$	(207)

Less: Net loss attributable to noncontrolling interest	(7)		—		(7)		—

Net income applicable to common shareholders	$	508	$	1,126	$	695	$	2,863



	~~Yes~~ X	~~No ___~~



	~~Yes~~ X	~~No ___~~



	~~Yes~~	No X


Note 3			Acquisitions and Dispositions


Reportable segments revenue information
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Property-Liability
Insurance premiums
Auto	$	6,912	$	6,210	$	20,604	$	18,537
Homeowners	2,522		2,073		7,325		6,164
Other personal lines	521		486		1,545		1,435
Commercial lines	204		183		590		560
Allstate Protection	10,159		8,952		30,064		26,696
Run-off Property-Liability	—		—		—		—
Total Property-Liability insurance premiums	10,159		8,952		30,064		26,696
Other revenue	365		220		1,071		639
Net investment income	710		422		2,314		802
Realized capital gains (losses)	94		292		763		571
Total Property-Liability	11,328		9,886		34,212		28,708

Protection Services
Protection plans	295		236		834		661
Roadside assistance	50		48		144		143
Finance and insurance products	111		100		324		294
Intersegment premiums and service fees (1)	46		36		133		109
Other revenue	85		52		263		155
Net investment income	10		12		32		33
Realized capital gains (losses)	4		14		20		9
Total Protection Services	601		498		1,750		1,404

Allstate Health and Benefits
Employer voluntary benefits	251		287		769		832
Group health	90		—		260		—
Individual accident and health	119		—		333		—
Other revenue	85		—		248		—
Net investment income	18		18		56		58
Realized capital gains (losses)	(1)		3		5		—
Total Allstate Health and Benefits	562		308		1,671		890

Corporate and Other
Other revenue	1		—		3		—
Net investment income	26		12		44		37
Realized capital gains (losses)	8		10		30		17
Total Corporate and Other	35		22		77		54

Intersegment eliminations (1)	(46)		(36)		(133)		(109)
Consolidated revenues	$	12,480	$	10,678	$	37,577	$	30,947


Portfolio composition

($ in millions)	September 30, 2021		December 31, 2020
Fixed income securities, at fair value	$	39,989	$	42,565
Equity securities, at fair value	3,807		3,168
Mortgage loans, net	752		746
Limited partnership interests	7,578		4,563
Short-term investments, at fair value	6,428		6,807
Other, net	3,286		1,691
Total	$	61,840	$	59,540


Amortized cost, gross unrealized gains (losses) and fair value for fixed income securities
($ in millions)	Amortized cost, net		Gross unrealized				Fair value
			Gains		Losses
September 30, 2021
U.S. government and agencies	$	3,035	$	22	$	(15)	$	3,042
Municipal	7,117		318		(18)		7,417
Corporate	26,515		963		(111)		27,367
Foreign government	1,054		12		(7)		1,059
ABS	1,057		14		(1)		1,070
MBS	33		1		—		34
Total fixed income securities	$	38,811	$	1,330	$	(152)	$	39,989



December 31, 2020
U.S. government and agencies	$	2,058	$	50	$	(1)	$	2,107
Municipal	7,100		480		(2)		7,578
Corporate	29,057		1,986		(26)		31,017
Foreign government	921		37		—		958
ABS	840		9		(3)		846
MBS	58		1		—		59
Total fixed income securities	$	40,034	$	2,563	$	(32)	$	42,565


Scheduled maturities for fixed income securities
($ in millions)	September 30, 2021
	Amortized cost, net		Fair value
Due in one year or less	$	920	$	928
Due after one year through five years	17,788		18,257
Due after five years through ten years	13,763		14,209
Due after ten years	5,250		5,491
	37,721		38,885
ABS and MBS	1,090		1,104
Total	$	38,811	$	39,989


Realized capital gains (losses) by asset type
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Fixed income securities	$	86	$	216	$	355	$	758
Equity securities	6		114		322		(148)
Mortgage loans	—		1		19		(2)
Limited partnership interests	(15)		15		1		(56)
Derivatives	46		(30)		54		62
Other	(18)		3		67		(17)
Realized capital gains (losses)	$	105	$	319	$	818	$	597


Realized capital gains (losses) by transaction type
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Sales	$	80	$	214	$	441	$	762
Credit losses	(12)		7		2		(29)

Valuation of equity investments (1)	(9)		128		321		(198)
Valuation and settlements of derivative instruments	46		(30)		54		62
Realized capital gains (losses)	$	105	$	319	$	818	$	597


Gross realized gains (losses) on sales of fixed income securities
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Gross realized gains	$	104	$	228	$	460	$	926
Gross realized losses	(18)		(11)		(106)		(164)



($ in millions)	Three months ended September 30, 2017									Three months ended September 30, 2016
	Gross			Included in OCI			Net			Gross			Included in OCI		Net
Fixed income securities:
Corporate	$	—		$	—		$	—		$	(13	)	$	—	$	(13	)
ABS	—			(1		)	(1		)	—			—		—
RMBS	—			—			—			(1		)	—		(1		)
CMBS	(1		)	(1		)	(2		)	(3		)	—		(3		)
Total fixed income securities	(1		)	(2		)	(3		)	(17		)	—		(17		)
Equity securities	(8		)	—			(8		)	(27		)	—		(27		)
Mortgage loans	(1		)	—			(1		)	—			—		—
Limited partnership interests	(16		)	—			(16		)	(22		)	—		(22		)
Other	—			—			—			(7		)	—		(7		)
Other-than-temporary impairment losses	$	(26	)	$	(2	)	$	(28	)	$	(73	)	$	—	$	(73	)

	Nine months ended September 30, 2017									Nine months ended September 30, 2016
	Gross			Included in OCI			Net			Gross			Included in OCI		Net
Fixed income securities:
Municipal	$	(1	)	$	(2	)	$	(3	)	$	—		$	—	$	—
Corporate	(9		)	3			(6		)	(30		)	7		(23		)
ABS	(1		)	(1		)	(2		)	(6		)	—		(6		)
RMBS	(1		)	(3		)	(4		)	(1		)	—		(1		)
CMBS	(9		)	1			(8		)	(7		)	1		(6		)
Total fixed income securities	(21		)	(2		)	(23		)	(44		)	8		(36		)
Equity securities	(77		)	—			(77		)	(155		)	—		(155		)
Mortgage loans	(1		)	—			(1		)	—			—		—
Limited partnership interests	(32		)	—			(32		)	(33		)	—		(33		)
Other	(4		)	—			(4		)	(9		)	—		(9		)
Other-than-temporary impairment losses	$	(135	)	$	(2	)	$	(137	)	$	(241	)	$	8	$	(233	)


Net appreciation (decline) recognized in net income
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Equity securities	$	(20)	$	105	$	170	$	(5)

Limited partnership interests carried at fair value	137		73		415		20
Total	$	117	$	178	$	585	$	15


Credit losses recognized in net income
($ in millions)	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Assets
Fixed income securities:

Corporate	$	—	$	(1)	$	—	$	(2)
ABS	—		—		1		(2)

Total fixed income securities	—		(1)		1		(4)
Mortgage loans	—		1		17		(2)
Limited partnership interests	—		—		—		(6)
Other investments
Bank loans	(13)		6		(16)		(18)
Agent loans	1		—		—		—
Total credit losses by asset type	$	(12)	$	6	$	2	$	(30)

Liabilities
Commitments to fund commercial mortgage loans, bank loans and agent loans	—		1		—		1
Total	$	(12)	$	7	$	2	$	(29)


⁽¹⁾ Change in unrealized net capital gains (losses)
($ in millions)	~~Included in the fair value of derivative instruments is $1 millionclassified as assets.~~	Nine months ended September 30, 2021

Fixed income securities		$	(1,353)
⁽²⁾ Short-term investments	~~Unrealized~~	—
Derivative instruments		—
EMA limited partnerships		1
Investments classified as held for sale		(573)
Total		(1,925)
Amounts recognized for:
Insurance reserves		113
DAC and DSI		93
Reclassification of noncontrolling interest		2
Amounts recognized		208
Deferred income taxes		365
Decrease in unrealized net capital gains and losses, ~~for limited partnership interests represent the Company’s share of EMA limited partnerships’ other comprehensive income. Fair value and gross unrealized gains and losses are not applicable.~~after-tax


⁽⁴⁾	The DAC and DSI adjustment balance represents the amount by which the amortization of DAC and DSI would increase or decrease if the unrealized gains or losses in the respective product portfolios were realized.


Carrying value for limited partnership interests
($ in millions)	September 30, 2021						December 31, 2020
	EMA		Fair Value		Total		EMA		Fair Value		Total
Private equity	$	4,679	$	1,496	$	6,175	$	2,667	$	988	$	3,655
Real estate	903		59		962		623		74		697
Other (1)	441		—		441		211		—		211
Total (2)	$	6,023	$	1,555	$	7,578	$	3,501	$	1,062	$	4,563


Other investments by asset type
($ in millions)	September 30, 2021		December 31, 2020
Bank loans, net	$	1,592	$	772
Real estate	849		659
Agent loans, net	567		—
Policy loans	144		181
Derivatives	20		20
Other	114		59
Total (1)	$	3,286	$	1,691


Rollforward of credit loss allowance for fixed income securities
	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2021		2020		2021		2020
Beginning balance	$	(2)	$	(7)	$	(3)	$	—
Credit losses on securities for which credit losses not previously reported	—		(1)		—		(10)
Net (increases) decreases related to credit losses previously reported	—		(1)		1		—
Reduction of allowance related to sales	—		1		—		2
Write-offs	—		—		—		—



Ending balance (1) (2)	$	(2)	$	(8)	$	(2)	$	(8)


Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position
($ in millions)	Less than 12 months					12 months or more					Total unrealized losses
	Number of issues	Fair value		Unrealized losses		Number of issues	Fair value		Unrealized losses
September 30, 2021
Fixed income securities
U.S. government and agencies	112	$	2,271	$	(14)	5	$	6	$	(1)	$	(15)
Municipal	804	1,205		(17)		2	14		(1)		(18)
Corporate	939	6,816		(96)		22	122		(15)		(111)
Foreign government	66	373		(7)		3	2		—		(7)
ABS	26	92		(1)		5	8		—		(1)
MBS	18	2		—		47	—		—		—

Total fixed income securities	1,965	$	10,759	$	(135)	84	$	152	$	(17)	$	(152)
Investment grade fixed income securities	1,813	$	9,593	$	(115)	69	$	99	$	(5)	$	(120)
Below investment grade fixed income securities	152	1,166		(20)		15	53		(12)		(32)
Total fixed income securities	1,965	$	10,759	$	(135)	84	$	152	$	(17)	$	(152)

December 31, 2020
Fixed income securities
U.S. government and agencies	26	$	215	$	(1)	—	$	—	$	—	$	(1)
Municipal	43	116		(2)		—	—		—		(2)
Corporate	107	730		(21)		14	46		(5)		(26)
Foreign government	7	7		—		—	—		—		—
ABS	21	157		(2)		12	43		(1)		(3)
MBS	11	—		—		57	—		—		—
Total fixed income securities	215	$	1,225	$	(26)	83	$	89	$	(6)	$	(32)
Investment grade fixed income securities	146	$	855	$	(8)	66	$	45	$	—	$	(8)
Below investment grade fixed income securities	69	370		(18)		17	44		(6)		(24)
Total fixed income securities	215	$	1,225	$	(26)	83	$	89	$	(6)	$	(32)


Gross unrealized losses by unrealized loss position and credit quality as of September 30, 2021
($ in millions)	Investment grade		Below investment grade		Total
Fixed income securities with unrealized loss position less than 20% of amortized cost, net (1) (2)	$	(120)	$	(20)	$	(140)
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost, net (3) (4)	—		(12)		(12)
Total unrealized losses	$	(120)	$	(32)	$	(152)


Mortgage loans amortized cost by debt service coverage ratio distribution and year of origination
	September 30, 2021														December 31, 2020
($ in millions)	2016 and prior		2017		2018		2019		2020		Current		Total		Total
Below 1.0	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1.0 - 1.25	11		—		—		25		10		—		46		46
1.26 - 1.50	43		5		—		105		—		—		153		201
Above 1.50	66		40		146		149		67		92		560		507
Amortized cost before allowance	$	120	$	45	$	146	$	279	$	77	$	92	$	759	$	754
Allowance													(7)		(8)
Amortized cost, net													$	752	$	746


Bank loans amortized cost by credit rating and year of origination
	September 30, 2021														December 31, 2020
($ in millions)	2016 and prior		2017		2018		2019		2020		Current		Total		Total
BBB	$	—	$	—	$	6	$	14	$	7	$	68	$	95	$	38
BB	9		17		20		23		35		548		652		168
B	—		29		58		42		71		581		781		456
CCC and below	3		21		18		47		9		23		121		161




Amortized cost before allowance	$	12	$	67	$	102	$	126	$	122	$	1,220	$	1,649	$	823
Allowance													(57)		(51)
Amortized cost, net													$	1,592	$	772