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ALL Allstate Corp (The)

Filed: 21 Feb 21, 7:00pm
0000899051all:AccidentAndHealthInsuranceMember2020-12-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                           to                           
Commission file number 1-11840
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THE ALLSTATE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware36-3871531
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
2775 Sanders Road, Northbrook, Illinois    60062
(Address of principal executive offices)    (Zip Code)
Registrant’s telephone number, including area code: (847) 402-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolsName of each exchange on which registered
Common Stock, par value $0.01 per shareALL
New York Stock Exchange
Chicago Stock Exchange
5.100% Fixed-to-Floating Rate Subordinated Debentures due 2053ALL.PR.BNew York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 5.625% Noncumulative Preferred Stock, Series GALL PR GNew York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 5.100% Noncumulative Preferred Stock, Series HALL PR HNew York Stock Exchange
Depositary Shares represent 1/1,000th of a share of 4.750% Noncumulative Preferred Stock, Series IALL PR INew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      Yes   No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes    No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes     No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No
The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2020, was approximately $29.94 billion.
As of January 29, 2021, the registrant had 302,873,426 shares of common stock outstanding.
Documents Incorporated By Reference
Portions of the following documents are incorporated herein by reference as follows:
Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive proxy statement for its annual stockholders meeting to be held on May 25, 2021, (the “Proxy Statement”) to be filed not later than 120 days after the end of the fiscal year covered by this Form 10-K.



Table of Contents
Part IPage
Overview
Strategy and Segment Information
Protection Services (previously Service Businesses)
Allstate Benefits
Allstate Life
Allstate Annuities
Information about our Executive Officers
Part II
Part III
Part IV
S-1



2020 Form 10-K Item 1. Business
Part I
Item 1.  Business
The Allstate Corporation was incorporated under the laws of the State of Delaware on November 5, 1992, to serve as the holding company for Allstate Insurance Company. Its business is conducted principally through Allstate Insurance Company, Allstate Life Insurance Company and other subsidiaries (collectively, including The Allstate Corporation, “Allstate”).
Allstate protects people from life’s uncertainties with a wide array of protection for autos, homes, electronic devices and identity theft. Allstate is primarily engaged in the property and casualty insurance business in the United States and Canada. Additionally, Allstate provides customers other protection solutions such as life, accident and health insurance and protection plans that cover electronic devices and personal identities.
The Allstate Corporation is one of the largest publicly held personal lines insurers in the United States. Allstate’s personal property-liability strategy is to increase market share by offering consumers a broad suite of personal lines solutions and a competitive value proposition across distribution channels. The Allstate brand is widely known through the “You’re In Good Hands With Allstate®” slogan. Allstate is the fourth largest personal property and casualty insurer in the United States on the basis of 2019 statutory direct premiums written according to A.M. Best.
Allstate also has strong market positions in other protection solutions. Allstate Benefits provides accident, health and life insurance through employers and is one of the top voluntary benefits carriers in the market based on a 2019 voluntary/worksite industry survey. Allstate Protection Plans provides protection plans on a wide variety of consumer goods such as cell phones, tablets, computers, furniture and appliances, and has a leading position in distribution through major retailers. Allstate Identity Protection, which provides identity protection, has a leading position in worksite distribution. In total, Allstate had 175.9 million policies in force (“PIF”) as of December 31, 2020.

In this Annual Report on Form 10-K, we occasionally refer to statutory financial information. All domestic United States insurance companies are required to prepare statutory-basis financial statements. As a result, industry data is available that enables comparisons between insurance companies, including competitors that are not required to prepare financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). We frequently use industry publications containing statutory financial information to assess our competitive position.
Subsequent event On January 26, 2021, Allstate announced an agreement to sell Allstate Life Insurance Company (“ALIC”) and certain affiliates for $2.8 billion to Antelope US Holdings Company, an affiliate of an investment fund associated with The Blackstone Group Inc. Allstate will retain ownership of Allstate Life Insurance Company of New York (“ALNY”) while pursuing alternatives to sell or otherwise transfer risk to a third party. ALIC and certain affiliates represent approximately 80% of Allstate Life and Allstate Annuity reserves for life-contingent contract benefits and contractholder funds as of December 31, 2020 and generated net income of approximately $290 million and $470 million in 2020 and 2019, respectively. A loss on disposition estimated at $3 billion, after-tax, will be recorded in the first quarter of 2021. The ultimate amount of the loss on sale will be impacted by purchase price adjustments associated with certain pre-close transactions specified in the stock purchase agreement, changes in statutory capital and surplus prior to the closing date and the closing date equity of ALIC determined under GAAP, excluding unrealized gains and losses. The transaction is expected to close in the second half of 2021, subject to regulatory approvals and other customary closing conditions.
On January 4, 2021, Allstate completed the acquisition of National General Holdings Corp. (“National General”), expanding its independent agent channel business.
For additional information, see Part II, Item 8 - Note 3 of the consolidated financial statements of this report.

The Allstate Corporation 1


2020 Form 10-K Item 1. Business
Strategy, Transformative Growth, Our Shared Purpose and Segment Information
Our strategy has two components: increase personal property-liability market share (see Allstate Protection segment) and expand protection offerings by leveraging the Allstate brand, customer base and capabilities.
Transformative Growth is about creating a business model, capabilities and culture that continually transform to deliver market share. This is done by focusing on the customer by expanding access and improving value. The ultimate objective is to create continuous transformative growth in all businesses by delivering affordable, simple and connected protection solutions.
We are expanding protection businesses utilizing enterprise capabilities and resources such as distribution, analytics, claims, investment expertise, talent and capital. Using innovative growth platforms (such as telematics and identity protection) and broad distribution including: Allstate exclusive agents, independent agents, contact centers, online, retailers, workplace benefits brokers, auto dealers, original equipment manufacturers and telecom providers further enhance our customer value proposition.
Allstate has thrived for 89 years by adapting to better serve customers. Our two-part strategy builds on this success by leveraging the Allstate brand, people and technology to improve our long-term competitive position and accelerate growth.
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(1)ALIC and certain affiliates to be divested and we will broaden non-proprietary product distribution to include life insurance.
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2020 Form 10-K Item 1. Business

Our Shared Purpose
As the good hands...our valuesour operating standardsour behaviors
We empower customers with protection to help them achieve their hopes and dreams.
We provide affordable, simple and connected protection solutions.
We create opportunity for our team, economic value for our shareholders and improve communities.
Integrity is non-negotiable.
Inclusive Diversity & Equity values and leverages unique identities with equitable opportunity and rewards.
Collective Success is achieved through empathy and prioritizing enterprise outcomes ahead of individuals.
Focus on Customers by anticipating and exceeding service expectations at low costs.
Be the Best at protecting customers, developing talent and running our businesses.
Be Bold with original ideas using speed and conviction to beat the competition.
Earn Attractive Returns by providing customer value, proactively accepting risk and using analytics.
Collaborate early and often to develop and implement comprehensive solutions and share learnings.
Challenge Ideas to leverage collective expertise, evaluate multiple alternatives and create the best path forward.
Provide Clarity for expected outcomes, decision authority and accountability.
Provide Feedback that is candid, actionable, independent of hierarchy and safe.

Reportable segments
Allstate Protection (1)
Includes the Allstate and Encompass brands and Answer Financial. Offers private passenger auto, homeowners, other personal lines and commercial insurance through agents, contact centers and online. Esurance results were combined into the Allstate brand in the third quarter of 2020.
Protection Services (previously Service Businesses)Includes Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside, Arity and Allstate Identity Protection, which offer a broad range of solutions and services that expand and enhance our customer value propositions.
Allstate Life (2)
Consists of traditional, interest-sensitive and variable life insurance products primarily through Allstate exclusive agents and exclusive financial specialists.
Allstate BenefitsOffers voluntary benefits products, including life, accident, critical illness, short-term disability and other health insurance products sold through independent agents, benefits brokers and Allstate exclusive agents.
Allstate Annuities (2)
Consists of deferred fixed annuities and immediate fixed annuities (including standard and sub-standard structured settlements) in run-off.
Discontinued Lines and Coverages (1)
Relates to property and casualty insurance policies written during the 1960's through the mid-1980's with exposure to asbestos, environmental and other claims in run-off.
Corporate and OtherIncludes holding company activities and certain non-insurance operations.
(1)Allstate Protection and Discontinued Lines and Coverages segments comprise Property-Liability.
(2)The pending sale of ALIC and certain affiliates represents approximately 90% of Allstate Life and 75% of Allstate Annuities reserves for life-contingent contract benefits and contractholder funds.


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2020 Form 10-K Item 1. Business
Allstate Protection Segment
Our Allstate Protection segment accounted for 90.0% of Allstate’s 2020 consolidated insurance premiums and contract charges and 19.1% of Allstate’s December 31, 2020 PIF. Private passenger auto, homeowners, other personal lines and commercial insurance products offered through both exclusive and independent agents and directly through contact centers and online are included in this segment. Our strategy is to provide open access and choice of interaction, while offering affordable, simple and connected solutions to meet customers’ evolving needs and protect them from life’s uncertainties.
Strategy Allstate Protection segment is key to the strategy of increasing personal lines market share through Transformative Growth focusing on:
Allstate brand growth, while making it easier to do business with us and reducing our cost structure
Expanding Independent Agency channel business with the acquisition of National General in January 2021
We have three market-facing property-liability businesses, Allstate brand, Encompass brand and Answer Financial with products and services that cater to different customer preferences for advice and brand recognition. Starting in 2021, Allstate Independent Agency and Encompass organizations will be integrated into National General.
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We serve our consumers using differentiated products, analytical expertise, telematics and an integrated digital enterprise that leverages data and technology to execute processes with a focus on greater effectiveness and efficiency.
Transformative Growth
Expanding Customer AccessExpanding open access and customer choice of solutions under the Allstate brand across multiple channels, including Exclusive Agency and direct (online or call centers)
Driving direct growth through improving online quote flow and enhancing call center practices
Continuing to emphasize growth and customer service in existing Exclusive Agencies
Stopped appointing new agents while building and scaling new agent models, such as the Allstate Sales Agent, to offer different access points to Allstate brand products at a lower distribution cost
Lowering the Allstate brand distribution expense ratio
Establishing a market leading position in the independent agency channel as a top five personal lines carrier with the National General acquisition, utilizing its broad range of products and strong technology platform
Improving Customer ValueBuilding affordable, simple and connected protection solutions
Improving the competitive prices of products through efficiencies, automation, optimized vendor management, lower distribution costs, and retirement of legacy technologies
Enhancing pricing sophistication to price products based on customer needs and risks and improving our purchase process with automated decision support
Increasing engagement with the Allstate Mobile app and new business penetration of telematics products, including pay-per-mile insurance
Leveraging our circle of protection to provide added protection solutions
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Item 1. Business 2020 Form 10-K

Additional Information and Strategy Updates
Commercial lines strategy We continue to focus on profitable expansion of our shared economy commercial lines business, which is primarily comprised of transportation network companies. Traditional small business commercial insurance is being enhanced through new product development using technology to improve customer experience and reduce costs while leveraging enterprise capabilities. Profit improvement actions continue for our traditional commercial lines insurance products, emphasizing pricing, claims, governance and operational improvements.
Independent agent strategy On January 4, 2021, we completed the acquisition of National General, significantly enhancing our strategic position in the independent agency channel. The transaction will increase our market share in personal property-liability by over one percentage point and enhance our independent agent-facing technology. It will significantly expand our distribution footprint, leading us to be a top five personal lines carrier in the independent agency distribution channel. Additional expansion opportunities through independent agents also exist in standard auto and homeowners insurance by leveraging Allstate’s capabilities.
National General provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed property, supplemental health and other niche insurance products. Auto insurance represents approximately 60% of premium with a significant presence in the non-standard auto market.
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 sunset Encompass infrastructure
Transitioning Allstate Independent Agent new business to National General as mid-market products roll out
Answer Financial strategy Answer Financial is an insurance agency that sells other insurance companies’ products directly to customers online. Our strategy as a technology-enabled insurance agency is to provide comparison shopping and related services for businesses, offering customers choice, convenience and ease of use.
Allstate Protection pricing and risk management strategies Our pricing and underwriting strategies and decisions are designed to generate sustainable profitable growth.
A proprietary database of underwriting and loss experience enables sophisticated pricing algorithms and methodologies to more accurately price risks while also seeking to attract and retain customers in multiple risk segments.
For auto insurance, risk evaluation factors can include, but are not limited to: vehicle make, model and year; driver age and marital status; territory; years licensed; loss history; years insured with prior carrier; prior liability limits; prior lapse in coverage; and insurance scoring utilizing telematics data and other consumer information.
For property insurance, risk evaluation factors can include, but are not limited to: the amount of insurance purchased; geographic location of the property; loss history; age, condition and construction characteristics of the property; and characteristics of the insured including insurance scoring utilizing other consumer information.
A combination of underwriting information, pricing and discounts are also used to achieve a more competitive position and growth. The pricing strategy involves local marketplace pricing and underwriting decisions based on risk evaluation factors to the extent permissible by applicable law and an evaluation of competitors.
Pricing of property products is intended to generate risk-adjusted returns that are acceptable over a long-term period. Rate increases are pursued to keep pace with loss trends, including losses from catastrophic events and those that are weather-related (such as wind, hail, lightning and freeze not meeting our criteria to be declared a catastrophe). We also take into consideration potential customer disruption, the impact on our ability to market our products, regulatory limitations, our competitive position and profitability.
In any reporting period, loss experience from catastrophic events and weather-related losses may contribute to negative or positive underwriting performance relative to the expectations incorporated into product pricing.
Property catastrophe exposure is managed with the goal of providing shareholders an acceptable return on the risks assumed in the property business. Catastrophe exposure management includes purchasing reinsurance to provide coverage for known exposure to hurricanes, earthquakes and fires following earthquakes, wildfires and other catastrophes. Our current catastrophe reinsurance program supports our risk tolerance framework that targets less than a 1% likelihood of annual aggregate catastrophe losses from hurricanes and earthquakes, excluding other catastrophe losses and, net of reinsurance, exceeding $2 billion.
The use of different assumptions and updates to industry models and to our risk transfer program could materially change the projected loss. Growth strategies include areas where we believe diversification can be enhanced and an appropriate return can be earned for the risk. As a result, our modeled exposure may increase, but in aggregate remain lower than $2 billion as noted above. In addition, we have exposure to other severe weather events and wildfires, which impact catastrophe losses.
The Allstate Corporation 5


2020 Form 10-K Item 1. Business
We are promoting measures to prevent and mitigate losses and make homes and communities more resilient, including enactment of stronger building codes and effective enforcement of those
codes, adoption of sensible land use policies, and development of effective and affordable methods of improving the resilience of existing structures.
Products and distribution
Allstate Protection differentiates itself by offering solutions to meet broad-based household protection needs and a comprehensive range of innovative product options and features across distribution channels that best suit each consumer segment.
Products
Insurance products (1)
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Auto
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Homeowners
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Specialty auto (motorcycle, trailer, motor home and off-road vehicle)
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Other personal lines (renters, condominium, landlord, boat, umbrella, manufactured home and stand-alone scheduled personal property)
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Commercial lines
Answer Financial
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Comparison quotes and sales of non-proprietary auto, homeowners and other personal lines (condominium, renters, motorcycle, recreational vehicle and boat)
(1)Insurance products are offered by the Allstate and Encompass brands.
Distribution
Allstate brandIn the U.S., we offer products through 10,400 Allstate exclusive agents operating in 10,300 locations, supported by 23,900 licensed sales professionals, and 1,000 exclusive financial specialists. We also offer products through 5,200 independent agents, contact centers and online. In Canada, we offer Allstate brand products through 1,000 employee sales agents.
Encompass brandDistributed through 3,100 independent agents.
Answer FinancialComparison quotes and sales offered to customers online or through contact centers.
Allstate exclusive agents also support the Protection Services, Allstate Life and Allstate Benefits segments through offering roadside assistance, consumer protection plans, identity protection, life insurance and voluntary benefits products. We expect to discontinue sales of proprietary life insurance products during the second quarter of 2021, and will expand the non-proprietary product suite to include a range of life insurance products offered by third-party providers.
Exclusive agent compensation structure The compensation structure for Allstate exclusive agents rewards them for delivering high value to customers and achieving certain business outcomes such as profitable growth and household penetration. Allstate exclusive agent remuneration comprises a base commission, variable compensation and a bonus.
Agents receive a monthly base commission payment as a percentage of their total eligible written premium.
Variable compensation rewards agents for acquiring new customers by exceeding a base production goal.
Bonus compensation is based on a percentage of premiums and can be earned by agents who are meeting certain sales goals and selling additional policies to meet customer needs profitably.
Compensation for 2021 includes a shift in variable compensation toward new business, including homeowners, and eliminates variable compensation for renewing customers. We are aligning agent compensation to emphasize growth while simultaneously improving customer service consistency.
Agents have the ability to earn commissions and additional bonuses on non-proprietary products provided to customers when an Allstate product is not available through Ivantage, a leading provider of property and casualty brokerage services, and arrangements made with other companies, agencies, and brokers. As of December 31, 2020, Ivantage had $1.94 billion non-proprietary premiums under management, consisting of approximately $1.72 billion of personal insurance premiums primarily related to property business in hurricane exposed areas, and approximately $222 million of commercial insurance premiums.
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Item 1. Business 2020 Form 10-K

Additionally, we offer a homeowners product through our excess and surplus lines carrier, North Light Specialty Insurance Company, in certain areas with higher risk of catastrophes or where customers do not meet the Allstate brand standard underwriting profile.
Allstate agents and exclusive financial specialists receive commissions for proprietary and non-proprietary life and retirement sales and are eligible for a quarterly bonus based on the volume of non-proprietary sales. 
Allstate independent agent remuneration comprises a base commission and a bonus that can be earned by agents who achieve sales goals and a target loss ratio.
Innovative product offerings and features
Market-leading solutions
Allstate brand
Your Choice Auto®
Qualified customers choose from a variety of options, such as Accident Forgiveness, Deductible Rewards®, Safe Driving Bonus® and New Car Replacement.
Allstate House and Home®
Featured options include Claim RateGuard®, Claim-Free Bonus, Deductible Rewards® and flexibility in options and coverages, including graduated roof coverage and pricing based on roof type and age for damage related to wind and hail events.
Claim Satisfaction Guarantee®
Promised return of premium to standard auto insurance customers dissatisfied with their claims experience.
Bundling BenefitsAuto customers with a qualifying property policy are provided an auto renewal guarantee and a deductible waiver (when the same event, with the same covered cause of loss, damages both auto and property). Offered in 47 states and District of Columbia (“D.C.”) as of December 31, 2020.
New Car Replacement
Protection
Replaces a qualifying customer’s vehicle (two model years old or less) involved in a total loss accident with a vehicle of the same or similar make and model. Offered in 50 states and D.C. as of December 31, 2020.
Encompass brand
EncompassOne® Policy
Packaged insurance product with one premium, one bill, one policy deductible and one renewal date. Broad coverage options include customizable features such as enhanced accident forgiveness, new-car replacement coverage, walk-away home coverage option should the insured decide not to rebuild, flexible additional living expense coverage, water-sewer backup coverage options and roadside assistance. This product is offered in 36 states and the District of Columbia (“D.C.”) as of December 31, 2020.
Surround Solutions by Encompass®
Offers auto (6-months), homeowner and specialty lines products, pricing, services and support designed to provide flexibility and be customized based on consumer needs. Offered exclusively in four states for Encompass as of December 31, 2020.
Telematics solutions
Allstate brand
Drivewise®
Telematics-based program, available in 50 states and the District of Columbia as of December 31, 2020, that uses a mobile application or an in-car device to capture driving behaviors and encourage safe driving. It provides customers with information and tools, incentives and driving challenges. For example, in most states, Allstate Rewards® provides reward points for safe driving.
Milewise®
Usage-based insurance product, available in 17 states as of December 31, 2020, that gives customers flexibility to customize their insurance and pay based on the number of miles they drive.
DriveSense®
Telematics-based insurance program offered by Esurance, available in 37 states as of December 31, 2020, that primarily uses a mobile application to capture driving behaviors and reward customers for safe driving.
Encompass brand
Routely®
Telematics application, available in 18 states as of December 31, 2020, used to capture driving behaviors and reward customer participation.
Shared economy solutions
Allstate brandTransportation Network Company Commercial AutoCommercial coverage of transportation networking company independent drivers during various phases of the ride sharing service.
Allstate Ride for Hire®/ HostAdvantage®
Supplemental personal insurance coverage for those using their vehicle to drive for a transportation network company or their house for peer-to-peer property sharing.
The Allstate Corporation 7


2020 Form 10-K Item 1. Business
Competition
The personal lines insurance markets, including private passenger auto and homeowners insurance, are highly competitive. The following charts provide Allstate Protection’s combined market share compared to our principal U.S. competitors using statutory direct written premium for the year ended December 31, 2019, according to A.M. Best.
On January 4, 2021, we completed the acquisition of National General and we estimate that our market share in personal lines insurance will increase by 1.1%, totaling 10.0%, ranking Allstate as the second largest personal lines insurer in the United States, based on statutory direct written premium for the year ended December 31, 2019, according to A.M. Best.
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Geographic markets
We primarily operate in the U.S (all 50 states and D.C.) and Canada. Our top geographic markets based on 2020 statutory direct premiums are reflected below. The geographic distribution does not include National General results.
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Item 1. Business 2020 Form 10-K

Protection Services Segment
Our Protection Services segment accounted for 4.3% of Allstate’s 2020 consolidated total revenue and 77.5% of Allstate’s December 31, 2020 PIF. Protection Services includes AllstateSM Protection Plans, Allstate Dealer Services®, Allstate Roadside, Arity® and AllstateSM Identity Protection, which offer a broad range of products and services that expand and enhance customer value propositions.
Strategy - Protection Services are a key part of our strategy by expanding other protection businesses and increasing our total addressable market by delivering superior value propositions and building strategic platforms to connect and engage with customers and effectively address their changing needs and preferences.
Allstate Protection PlansExpand distribution of consumer protection plan and technical support products through new and existing retail and mobile operator accounts while increasing profitability and returns.
Allstate Dealer ServicesExpand distribution of Allstate branded finance and insurance products and services through auto dealerships.
Allstate RoadsideModernize the roadside assistance business through technology and enhance capabilities to deliver a superior customer experience while improving efficiency and returns.
ArityLeverage analytics and deep understanding of driver risk to create a strategic platform.  The platform will be used by those industries affected most by the changing face of transportation, including insurance companies, shared mobility companies and the automotive ecosystem.
Allstate Identity ProtectionCreate a leading position in the identity protection market, offering full identity protection monitoring with proactive alerts, digital exposure reporting and identity theft reimbursement as well as expanding into other distribution channels.
Products and distribution
Products and services
Allstate Protection PlansProvides consumer protection plans and related technical support for mobile phones, consumer electronics, furniture and appliances which provide customers protection from mechanical or electrical failure, and in certain cases, accidental damage from handling.
Allstate Dealer ServicesOffers finance and insurance products, including vehicle service contracts, guaranteed asset protection waivers, road hazard tire and wheel protection, and paintless dent repair protection.
Allstate Roadside
Offers towing, jump-start, lockout, fuel delivery and tire change services to retail customers and customers of our wholesale partners.
Arity
Provides data and analytics solutions with the Arity platform using automotive telematics information.  Customers receive value from our solutions either by using web-based software tools, white labeled mobile applications or through embedding our technology in their mobile applications.
Allstate Identity ProtectionProvides identity protection services including monitoring, alerts, remediation and a proprietary indicator of identity health.
Distribution channels
Allstate Protection PlansMajor retailers in the U.S. and mobile operators in Europe.
Allstate Dealer ServicesIndependent agents and brokers through auto dealerships in the U.S. in conjunction with the purchase of a new or used vehicle. 
Allstate RoadsideAllstate exclusive agents, wholesale partners, affinity groups and a mobile application.
AritySells directly to affiliate and non-affiliate customers and through strategic partners.
Allstate Identity ProtectionPrimarily through workplace benefit programs and direct to consumer using the mobile application and online.
Geographic markets
Protection Services primarily operate in the U.S. and Canada, with Allstate Protection Plans also offering services in Europe and Japan.
Competition
We compete on a variety of factors, including product offerings, brand recognition, financial strength, price, distribution and the customer experience. The market for these services is highly fragmented and competitive.
The Allstate Corporation 9


2020 Form 10-K Item 1. Business
Allstate Benefits Segment
Strategy  
Our Allstate Benefits segment accounted for 2.6% of Allstate’s 2020 consolidated total revenue and 2.2% of Allstate’s December 31, 2020 PIF. The Allstate Benefits segment provides consumers with financial protection against the risk of accidents, illness and mortality. We are among the industry leaders in the growing and highly competitive voluntary benefits market, offering a broad range of products through workplace enrollment. Our life insurance portfolio includes individual and group permanent life solutions. Target customers are middle market consumers with family and financial protection needs employed by small, medium and large sized firms. Allstate Benefits is well represented in all market segments and is a leader in the large and mega (over 10,000 employees) market segments.
Our products are offered through independent agents, benefits brokers and Allstate exclusive agents. Allstate Benefits is differentiated through its broad product portfolio, flexible enrollment solutions, strong national accounts team and well-recognized brand.
Our strategy for growth is to deliver substantially more value through innovative products and technology, tailored solutions and exceptional service through investments in future-state technologies and data and analytics capabilities.
Products and distribution
Voluntary benefits products
LifeHospital
AccidentShort-term disability
Critical illness

Other health
Distribution channels
4,160 workplace enrolling independent agents and benefits brokers.
Allstate exclusive agents, focusing on small employers.
On January 4, 2021, we completed the acquisition of National General. National General’s accident and health products include accident and non-major medical health insurance products and will be included in the Allstate Benefits segment. These products are offered direct to consumers through call centers and the internet, and through independent agents, general agencies, affinity relationships and the workplace.

Competition
We compete on a wide variety of factors, including product offerings, brand recognition, financial strength and ratings, price, distribution and customer service.
The market for voluntary benefits is growing as these products help employees fill the increasing gaps associated with continued medical cost inflation and the shifting of costs from employers to employees to cover co-pays and deductibles. Favorable industry and economic trends have increased competitive pressure and attracted new traditional and non-traditional entrants to the voluntary benefits market. Recent entrants, including large group medical, life and disability insurance carriers, are leveraging core benefit capabilities by bundling and discounting to capture voluntary market share.
Geographic markets
We primarily operate in the U.S. (all 50 states and D.C.) and Canada. The top geographic markets based on 2020 statutory direct premiums are reflected below. all-20201231_g14.jpg


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Item 1. Business 2020 Form 10-K

Pending Sale of ALIC and Certain Affiliates
We announced the pending sale of ALIC and certain affiliates, which represents approximately 90% of Allstate Life and 75% of Allstate Annuities reserves for life-contingent contract benefits and contractholder funds. Allstate will retain ownership of ALNY while pursuing alternatives to sell or otherwise transfer risk to a third party. We expect to discontinue sales of proprietary life insurance products during the second quarter of 2021.
Allstate Life Segment
Strategy  
Our Allstate Life segment accounted for 4.4% of Allstate’s 2020 consolidated total revenue and 1.1% of Allstate’s December 31, 2020 PIF.
Our strategy is to broaden Allstate’s customer relationships and value proposition. Target customers are middle market consumers with family and financial protection needs. Our business consists of traditional, interest-sensitive and variable life insurance sold through Allstate exclusive agents and exclusive financial specialists. Allstate exclusive agents and exclusive financial specialists also sell certain non-proprietary products offered by third-party providers, including mutual funds, fixed and variable annuities, disability insurance, and long-term care insurance to provide a broad suite of protection and retirement products. As of December 31, 2020, Allstate agencies had approximately $17.9 billion of non-proprietary mutual funds and fixed and variable annuity account balances under management. New and additional deposits into these non-proprietary products were $2.2 billion in 2020.
We will expand the non-proprietary product suite available for distribution to include a range of life insurance products offered by third-party providers.
Competition
We compete on a variety of factors, including product offerings, brand recognition, financial strength and ratings, price, distribution and customer service. The market for life insurance continues to be highly fragmented and competitive. As of December 31, 2019, there were approximately 335 groups of life insurance companies in the United States.
Geographic markets
We operate in the U.S. (all 50 states and D.C.). Our top geographic markets based on 2020 statutory direct premiums are reflected below.
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Allstate Annuities Segment
Strategy
Our Allstate Annuities segment accounted for 2.3% of Allstate’s 2020 consolidated total revenue and 0.1% of Allstate’s December 31, 2020 PIF. The Allstate Annuities segment consists primarily of deferred fixed annuities and immediate fixed annuities (including standard and sub-standard structured settlements).
The segment is in run-off and is focused on increasing lifetime economic value. Both the deferred and immediate annuity businesses have been adversely impacted by the historically low interest rate environment. Our immediate annuity business has also been impacted by medical advancements that have resulted in annuitants living longer than anticipated when many of these contracts were originated.
Allstate Annuities focuses on the distinct risk and return profiles of the specific products when developing investment and liability management strategies. The level of legacy deferred annuities in force has been significantly reduced and the investment portfolio and crediting rates are proactively managed to improve profitability of the business while providing appropriate levels of liquidity.
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 use performance-based investments (primarily limited partnership investments) in which we have ownership interests and a greater proportion of return is derived from idiosyncratic asset or operating performance.



The Allstate Corporation 11


2020 Form 10-K Item 1. Business
Other Business Segments
Discontinued Lines and Coverages Segment
The Discontinued Lines and Coverages segment includes results from property and casualty insurance coverage that primarily relates to policies written during the 1960s through the mid-1980s.
Strategy Management of this segment has been assigned to a designated group of professionals with expertise in claims handling, policy coverage interpretation, exposure identification, litigation and reinsurance collection. As part of its responsibilities, this group pursues settlement agreements including policy buybacks on direct excess commercial business when appropriate to improve the certainty of the liabilities.  At the end of 2020, 67.0% of the direct excess gross case reserves were attributable to settlement agreements. This group also manages other direct commercial and assumed reinsurance business in runoff and engages in reinsurance ceded and assumed commutations as required or when considered economically advantageous.
Changes in the reserves established for asbestos, environmental and other discontinued lines losses have occurred and may continue. Reserve changes can be caused by new information relating to new and additional claims, new exposures or the impact of resolving unsettled claims based on unanticipated events such as arbitrations, litigation, legislative, judicial or regulatory actions. Environmental losses may also increase as the result of additional funding for environmental site clean-up.
Challenges related to the concentration of insurance and reinsurance claims from companies who specialize in this business continue to be addressed.
Corporate and Other Segment
Our Corporate and Other segment is comprised of holding company activities and certain non-insurance operations, including expenses associated with strategic initiatives.

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Item 1. Business 2020 Form 10-K

Regulation
Allstate is subject to extensive regulation, primarily at the state level. The method, extent and substance of such regulation vary by state but generally have their source in statutes that establish standards and requirements for conducting the business of insurance and that also delegate regulatory authority to a state agency. These rules have a substantial effect on our business and relate to a wide variety of matters, including insurer solvency and statutory surplus sufficiency, reserve adequacy, insurance company licensing and examination, agent and adjuster licensing, agent and broker compensation, policy forms, rate setting, the nature and amount of investments, claims practices, participation in shared markets and guaranty funds, transactions with affiliates, the payment of dividends, underwriting standards, statutory accounting methods, trade practices, privacy regulation and data security, corporate governance and risk management. In addition, state legislators and insurance regulators continue to examine the appropriate nature and scope of state insurance regulation. For a discussion of statutory financial information, see Note 16 of the consolidated financial statements.
all-20201231_g16.jpgFor a discussion of regulatory contingencies, see Note 14 of the consolidated financial statements. Notes 14 and 16 are incorporated in this Part I, Item 1 by reference.
As part of an effort to strengthen the regulation of the financial services market, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) was enacted in 2010. Dodd-Frank created the Federal Insurance Office (“FIO”) within the U.S. Department of the Treasury (“Treasury”). The FIO monitors the insurance industry, provides advice to the Financial Stability Oversight Council (“FSOC”), represents the U.S. on international insurance matters, and studies the current regulatory system.
Additional regulations or new requirements may emerge from the activities of various regulatory entities, including the Federal Reserve Board, FIO, FSOC, the National Association of Insurance Commissioners (“NAIC”), and the International Association of Insurance Supervisors (“IAIS”), that are evaluating solvency and capital standards for insurance company groups. In addition, the NAIC has adopted amendments to its model holding company law that have been adopted by some jurisdictions. The outcome of these actions is uncertain; however, these actions may result in an increase in the level of capital and liquidity required by insurance holding companies.
We cannot predict whether any specific state or federal measures will be adopted to change the nature or scope of the regulation of insurance or what effect any such measures would have on Allstate. We are working for changes in the regulatory environment to make insurance more available and affordable for customers, encourage market innovation, improve driving safety, strengthen cybersecurity, promote better catastrophe preparedness and loss mitigation
and advocate for appropriate long-term capital standards to support optimal risk adjusted returns.
Limitations on Dividends by Insurance Subsidiaries.    As a holding company with no significant business operations of its own, The Allstate Corporation relies on dividends from Allstate Insurance Company as one of the principal sources of cash to pay dividends and to meet its obligations, including the payment of principal and interest on debt or to fund non-insurance-related businesses. Allstate Insurance Company is regulated as an insurance company in Illinois, and its ability to pay dividends is restricted by Illinois law. The laws of the other jurisdictions that generally govern our other insurance subsidiaries contain similar limitations on the payment of dividends. However, such laws in some jurisdictions may be more restrictive.
all-20201231_g16.jpgFor additional information regarding limitations, see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.
In addition, the NAIC has formed a working group for the development of a group capital calculation covering all entities of the insurance company group for use in solvency monitoring activities. The calculation is intended to provide analytical information and we do not expect potential revisions to impact our current dividend plans, any increase in the amount of capital or reserves our insurance subsidiaries are required to hold could reduce the amount of future dividends such subsidiaries are able to distribute to the holding company.  Any reduction in the RBC ratios of our insurance subsidiaries could also adversely affect their financial strength ratings as determined by statistical rating agencies.
Insurance Holding Company Regulation – Change of Control.    The Allstate Corporation and Allstate Insurance Company are insurance holding companies subject to regulation in the jurisdictions in which their insurance subsidiaries, including the insurance subsidiaries of National General, do business. In the U.S., these subsidiaries are organized under the insurance codes of Alabama, California, Florida, Illinois, Indiana, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, South Carolina and Texas. Additionally, some of these subsidiaries are considered commercially domiciled in California and Florida.
Generally, the insurance codes in these states provide that the acquisition or change of “control” of a domestic or commercially domiciled insurer or of any person that controls such an insurer cannot be consummated without the prior approval of the relevant insurance regulator. In general, a presumption of “control” arises from the ownership, control, possession with the power to vote, or possession of proxies with respect to ten percent or more of the voting securities of an insurer or of a person who controls an insurer. In addition, certain state insurance laws require pre-acquisition notification to state
The Allstate Corporation 13

2020 Form 10-K Item 1. Business
agencies of a change in control with respect to a non-domestic insurance company licensed to do business in that state. While such pre-acquisition notification statutes do not authorize the state agency to disapprove the change of control, such statutes do authorize certain remedies, including the issuance of a cease-and-desist order with respect to the non-domestic insurer if certain conditions exist, such as undue market concentration.
Thus, any transaction involving the acquisition of ten percent or more of The Allstate Corporation’s common stock would generally require prior approval by the state insurance departments in Alabama (where the threshold is five percent or more of The Allstate Corporation’s common stock), California, Florida, Illinois, Indiana, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, South Carolina and Texas. Moreover, notification would be required in those other states that have adopted pre-acquisition notification provisions and where the insurance subsidiaries are admitted to transact business. Such approval requirements may deter, delay or prevent certain transactions affecting the ownership of The Allstate Corporation’s common stock.
Rate Regulation.    Nearly all states have insurance laws requiring personal property and casualty insurers to file rating plans, policy or coverage forms, and other information with the state’s regulatory authority. In many cases, such rating plans, policy forms, or both must be approved prior to use.
The speed with which an insurer can change rates in response to competition or increasing costs depends on the state rating laws, which include the following categories:
Prior approval — Regulators must approve a rate before the insurer may use it
File-and-use — Insurers do not have to wait for the regulator’s approval to use a rate, but the rate must be filed with the regulatory authority prior to being used
Use-and-file — Requires an insurer to file rates within a certain period of time after the insurer begins using them
No approval — One state, with an immaterial amount of written premiums, does not impose a rate filing requirement
Under these rating laws, the regulator has the authority to disapprove a rate filing. The percentage of 2020 statutory direct written premiums based on state rating laws are reflected below.
all-20201231_g17.jpg
An insurer’s ability to adjust its rates in response to competition or to changing costs is dependent on an insurer’s ability to demonstrate to the regulator that its rates or proposed rating plan meets the requirements of the rating laws. In those states that significantly restrict an insurer’s discretion in selecting the business that it wants to underwrite, an insurer can manage its risk of loss by charging a rate that reflects the cost and expense of providing the insurance. In those states that significantly restrict an insurer’s ability to charge a rate that reflects the cost and expense of providing the insurance, the insurer can manage its risk of loss by being more selective in the type of business it underwrites. When a state significantly restricts both underwriting and pricing, it becomes more difficult for an insurer to maintain its profitability.
From time to time, the personal lines insurance industry comes under pressure from state regulators, legislators, and special-interest groups to reduce, freeze, or set rates at levels that do not correspond with our analysis of underlying costs, catastrophe loss exposure, and expenses. We expect this kind of pressure to persist. Allstate and other insurers are using increasingly sophisticated pricing models and rating plans that are reviewed by regulators and special-interest groups. State regulators may interpret existing law or rely on future legislation or regulations to impose new restrictions that adversely affect profitability or growth. We cannot predict the impact on our business of possible future legislative and regulatory measures regarding insurance rates.
Involuntary Markets.    As a condition of maintaining our licenses to write personal property and casualty insurance in various states, we are required to participate in assigned risk plans, reinsurance facilities, and joint underwriting associations that provide various types of insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers. Underwriting results related to these arrangements, which tend to be adverse, have been immaterial to our results of operations.
all-20201231_g16.jpgFor a discussion of these items see Note 14 of the consolidated financial statements. Note 14 is incorporated in this Part I, Item 1 by reference.
Indemnification Programs.    We are a participant in state-based industry pools, facilities or associations, mandating participation by insurers offering certain coverage in their state, including the Michigan Catastrophic Claims Association (“MCCA”), the New Jersey Property-Liability Insurance Guaranty Association, the North Carolina Reinsurance Facility and the Florida Hurricane Catastrophe Fund. We also participate in the Federal Government National Flood Insurance Program.
Recent regulatory changes have occurred related to the MCCA. At this time, we are unable to determine whether, or to what extent, these changes will have on our claims and claims expense reserves and corresponding MCCA indemnification recoverables.
On August 6, 2020, member companies of the MCCA were notified of the ratification of
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Item 1. Business 2020 Form 10-K

amendments to the MCCA’s Plan of Operation. The amendments were designed to align the Plan of Operation with Public Acts 21 and 22, which passed in 2019.
On July 2, 2020, portions of Public Acts 21 and 22 went into effect. The changes under those laws include:
Allowing insureds to choose levels of personal injury protection coverage, including the option to opt-out of personal injury protection coverage in certain circumstances.
Implementing mandated rate reductions that correspond to the level of personal injury protection coverage chosen by insureds.
Implementing or creating new processes for reviewing claims, assessing allowable expenses and setting limits on certain allowable expenses.
On July 2, 2021, legislation passed in 2019 will become effective, setting fee schedules for personal injury protection claims. Such fee schedules will be set at 200% of Medicare rates in 2021, declining to 195% in 2022 and 190% in 2023, for any providers other than certain unique categories of providers and applying to treatment on existing and new claims.
Other legislative proposals to change the MCCA operation in the future and to adjust Public Acts 21 and 22 are put forth periodically.
all-20201231_g16.jpgFor a discussion of these items see Note 10 of the consolidated financial statements. Note 10 is incorporated in this Part I, Item 1 by reference.
Guaranty Funds.    Under state insurance guaranty fund laws, insurers doing business in a state can be assessed, up to prescribed limits, in order to cover certain obligations of insolvent insurance companies. We do not anticipate any material adverse financial impact on Allstate from these assessments.
Investment Regulation.    Our insurance subsidiaries are subject to state regulation that specifies the types of investments that can be made and concentration limits of invested assets. Failure to comply with these rules leads to the treatment of non-conforming investments as non-admitted assets for purposes of measuring statutory surplus. Further, in some instances, these rules require divestiture of non-conforming investments.
Exiting Geographic Markets; Canceling and Non-Renewing Policies.    Most states regulate an insurer’s ability to exit a market. For example, states may limit, to varying degrees, an insurer’s ability to cancel and non-renew policies. Some states restrict or prohibit an insurer from withdrawing one or more types of insurance business from the state, except pursuant to a plan that is approved by the state insurance department. Regulations that limit cancellation and non-renewal and that subject withdrawal plans to prior approval requirements may restrict an insurer’s ability to exit unprofitable markets.
Variable Life Insurance and Registered Fixed Annuities.    The sale and administration of variable life insurance and registered fixed annuities with market value adjustment features are subject to extensive regulatory oversight at the federal and state level, including regulation and supervision by the Securities and Exchange Commission (“SEC”) and the Financial Industry Regulatory Authority (“FINRA”).
Broker-Dealers, Investment Advisors and Investment Companies.    The Allstate entities that operate as broker-dealers, registered investment advisors, and investment companies are subject to regulation and supervision by the SEC, FINRA and/or, in some cases, state securities administrators. Certain state and federal regulators are considering or have implemented best interest or fiduciary standards. Such standards could impact products provided by Allstate agents and Allstate’s broker-dealers, their sales processes, sales volume, and producer compensation arrangements.
Dodd-Frank: Covered Agreement. The Secretary of the Treasury (operating through FIO) and the Office of the U.S. Trade Representative (“USTR”) are jointly authorized, pursuant to the Dodd-Frank, to negotiate Covered Agreements. A Covered Agreement is a bilateral or multilateral agreement that “relates to the recognition of prudential measures with respect to the business of insurance or reinsurance that achieves a level of protection for insurance or reinsurance consumers that is substantially equivalent to the level of protection achieved under State insurance or reinsurance regulation.”
On September 22, 2017, the U.S. and European Union (“EU”) signed a Covered Agreement. In addition to signing the Covered Agreement, Treasury and the USTR jointly issued a policy statement clarifying how the U.S. views implementation of certain provisions of the Covered Agreement. The policy statement affirms the U.S. system of insurance regulation, including the role of state insurance regulators as the primary supervisors of the business of insurance and addresses several other key provisions of the Covered Agreement for which constituents sought clarity, including prospective application to reinsurance agreements and an affirmation that the Covered Agreement does not require development of a group capital standard or group capital requirement in the U.S.
The U.S. has five years from the date of signing to amend its credit for reinsurance laws and regulations to conform with the requirements of the Covered Agreement or face federal preemption determinations by the FIO. To address the requirements of the Covered Agreement, the NAIC has formally adopted revisions to its existing credit for reinsurance model law and model regulation to conform with the requirements of the Covered Agreement with the expectation that states will adopt and implement the modified model law and regulation by September 2022.
On December 19, 2018, the U.S. and the United Kingdom (“UK”) signed a separate Covered Agreement consistent with the U.S.-EU Covered Agreement to
The Allstate Corporation 15

2020 Form 10-K Item 1. Business
coordinate regulation of the insurance industry doing business in the U.S. and UK. Consistent with the U.S.-EU Covered Agreement (the “Agreement”) signed in 2017, Treasury and the USTR also issued a policy statement regarding implementation of the Agreement affirming the role that state insurance regulators play as the primary supervisors of the U.S. insurance industry.
Division Statute. On November 27, 2018, the Illinois General Assembly passed legislation authorizing a statute that makes available a process by which a domestic insurance company may divide into two or more domestic insurance companies. The statute, which became effective January 1, 2019, can be used to divide continuing blocks of insurance business from insurance business no longer marketed, or otherwise has been discontinued, into separate companies with separate capital. The statute can also be used for sale to a third party or to manage risks associated with indemnification programs. Before a plan of division can be effected it must be approved according to the organizational documents of the dividing insurer and submitted for approval by the Illinois Department of Insurance.
Privacy Regulation and Data Security.    Federal law and the laws of many states require financial institutions to protect the security and confidentiality of consumer information and to notify consumers about their policies and practices relating to collection, use, and disclosure of consumer information and their policies relating to protecting the security and confidentiality of that information. Federal law and the laws of many states also regulate disclosures and disposal of consumer information. Congress, state legislatures, and regulatory authorities are expected to consider additional regulation relating to privacy and other aspects of consumer information.
For example, the California Consumer Privacy Act, which took effect in January 2020, adopted significant compliance requirements for businesses that collect personal information on California residents. In addition, the California Privacy Rights Act, which expands consumer privacy rights and establishes a new privacy regulatory agency, was passed in November 2020 and will become effective in January 2023. Further, the New York State Department of Financial Services cybersecurity regulation and the NAIC Insurance Data Security Model Law, which has been adopted in some form by several states, establish standards for data security and for the investigation of and notification to insurance commissioners of cybersecurity events. Additional states are also likely to adopt similarly themed cybersecurity requirements in the future. We cannot predict the impact on our business of possible future legislative measures regarding privacy or cybersecurity.
Asbestos.    Congress has repeatedly considered legislation to address asbestos claims and litigation in the past. We cannot predict the impact on our business of possible future legislative measures regarding asbestos.
Environmental.    Environmental pollution and clean-up of polluted waste sites is the subject of federal and state regulation. The Comprehensive Environmental Response Compensation and Liability Act of 1980 (the “Superfund”) and comparable state statutes (the “mini-Superfunds”) govern the clean-up and restoration of waste sites by Potentially Responsible Parties (“PRPs”). The Superfund and the mini-Superfunds (collectively, the “Environmental Clean-up Laws” or “ECLs”) establish a mechanism to assign liability to PRPs or to fund the clean-up of waste sites if PRPs fail to do so. The extent of liability to be allocated to a PRP depends on a variety of factors. The insurance industry is involved in extensive litigation regarding coverage issues arising out of the clean-up of waste sites by insured PRPs and the insured parties’ alleged liability to third parties responsible for the clean-up. The insurance industry, including Allstate, has disputed and is disputing many such claims. Key coverage issues include whether the Superfund response, investigation, and clean-up costs are considered damages under the policies; whether coverage has been triggered; whether any pollution exclusion applies; whether there has been proper notice of claims; whether administrative liability triggers the duty to defend; whether there is an appropriate allocation of liability among potentially responsible insurers; and whether the liability in question falls within the definition of an “occurrence.” Identical coverage issues exist for clean-up and waste sites not covered under the Superfund. To date, courts have been inconsistent in their rulings on these issues.
Allstate’s exposure to liability with regard to its insureds that have been, or may be, named as PRPs is uncertain. While comprehensive Superfund reform proposals have been introduced in Congress, only modest reform measures have been enacted. In May 2017, the Environmental Protection Agency created a Superfund Task Force that issued proposed reforms in a July 2018 report. These recommendations address expediting clean-up and remediation processes, reducing the financial burden of the clean-up process, encouraging private investment, promoting redevelopment and community revitalization, and building and strengthening partnerships. We cannot predict which, if any, of these reforms will be enacted.
Developments in the insurance and reinsurance industries have fostered a movement to segregate asbestos, environmental and other discontinued lines exposures into separate legal entities with dedicated capital. Regulatory bodies in certain cases have supported these actions. We are unable to determine the impact, if any, that these developments will have on the collectability of reinsurance recoverables in the future.
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Item 1. Business 2020 Form 10-K

all-20201231_g18.jpgHuman Capital
Allstate’s success is highly dependent on human capital. The wellbeing of our employees is a key priority, and Allstate strives to promote a dynamic and welcoming workplace that promotes inclusive diversity and equity, fosters collaboration and encourages employees to bring their best ideas to work every day. As of December 31, 2020, Allstate had approximately 41,860 full-time employees and 300 part-time employees.
Allstate’s human capital management focuses on the following priorities:
Inclusive Diversity and Equity (“IDE”) We strive for a workforce where the breadth of our diversity makes us a better company. IDE is one of Allstate’s core values and serves as a foundation of Our Shared Purpose.
U.S. workforce diversity as of December 31, 2020
Women55%
Racially and ethnically diverse39%
We track our workforce composition data over time to determine if we are making appropriate progress in advancing gender and racial representation in our employee population and we disclose our progress. In our Sustainability Report, we provide, among other things, five years of workforce composition data that shows a breakdown of salaried, hourly and management employees by gender and race.
As part of our commitment to fair and equitable compensation practices, we complete an annual pay equity analysis. Over the past two years, we engaged an external firm to provide a more detailed analysis to identify potential pay gaps across substantially similar employee groups as well as identify policies, practices or systematic issues that may contribute to pay gaps now or over time. The external analyses found that Allstate’s results compared well to benchmarks for companies of similar size and scope.
Allstate’s Employee Resource Group (“ERG”) Program and the Enterprise Diversity Leadership Council (“EDLC”) help advance IDE.
ERGs: We support and fund 11 ERGs. ERGs offer specific opportunities for employees to partner and collaborate with each other through professional development workshops, recruiting events, volunteer projects and mentoring. Officers from across the enterprise, leverage their time, networks and resources to support the ERGs and advance IDE at Allstate.
EDLC: The EDLC is made up of senior leaders throughout the organization and focuses on driving targeted results for IDE by identifying and prioritizing action, taking accountability for achieving targeted results and ensuring
clarity and understanding of the business relevance of IDE. The EDLC provides updates to our chief executive officer.
In 2020, employees completed 30,827 courses on IDE. The number of courses completed in June through December 2020 comprised more than double the total of IDE courses completed in all of 2019. Three new virtual, instructor-led sessions were launched in July 2020, in line with our focus on reflection, learning and action.
Allstate continues to look for ways to build awareness and drive action. In response to the unprecedented events in 2020, we:
Began observing Juneteenth as an annual company holiday
Launched an Anti-Racism Resource Center for employees
Expanded the “Inclusive Conversations” series to monthly, hosted, enterprise-level sessions to build off themes of racial inequity, allyship, privilege and other relevant topics
Founding member of OneTen (with other leading CEOs and organizations), an organization committed to upskilling, hiring and promoting one million Black Americans over the next 10 years into family-sustaining jobs with opportunities for advancement
An external comprehensive IDE assessment will be completed in 2021 and will include a full assessment of our programs, policies, processes, procedures, and practices to ensure that we are building, maintaining and supporting fully sustainable and equitable programs at Allstate.
Employee Wellbeing and Safety We take seriously our responsibility to care for employees’ well-being, devoting resources to employee health and safety.
The Coronavirus made Allstate even more focused on employees’ health and safety.
In just one week, we transitioned 95% of our workforce to working remotely.
As part of the Good Office program, we shipped over 50,000 office items to our employees to help them work more productively at home.
We established Coronavirus hotlines for employees and continued to pay employees who could not work remotely under shelter-in-place orders.
During the fourth quarter of 2020, we announced the Holiday Support Program, which helped provide financial relief to approximately 5,000 employees experiencing financial hardships due to the Coronavirus.
Enhanced safety guidelines, cleaning protocols and social distancing practices remain in place for in-office workers.
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2020 Form 10-K Item 1. Business
We conduct wellbeing assessments for employees to help determine which services, programming and benefits to offer the workforce. The assessment asks about physical, emotional, mental and financial wellbeing. Completing the assessment lowers the cost of benefits to employees.
We offer resilience and stress management programs to improve employee wellbeing, including Energy for Life, a workshop on employee wellness to help employees articulate and pursue their individual purpose and embrace new challenges with ease. Over 39,000 employees have taken this wellness workshop since 2010.
The ERGs provided multiple forums in 2020 to share wellness resources and support for their members.
Wellbeing Champions promote Allstate’s health and wellness resources across the enterprise, including yoga and meditation classes and flu shots.
Talent Recruitment and Management We seek to provide employees with rewarding work, professional growth and educational opportunities.
Our flexible work and equal opportunity policies support talent attraction and retention.
Employees receive an annual performance review, with additional performance conversations taking place throughout the year. Allstate invests in training and re-skilling opportunities so employees can be successful throughout their careers. In 2020:
Employees completed over 139,000 hours in formal learning opportunities.
7,000 employees attended Allstate’s Global Learning Week, with over 2,000 development commitments made to grow one new skill by the end of the year.
Over 1,000 employees attended Quarterly Skill Builders featuring external experts facilitating topics including data visualization, storytelling and talent development.
702 employees participated in Allstate’s tuition reimbursement program, with $3.3 million paid in tuition reimbursement.
42% of open positions were filled with internal applicants.
The Power of Mentoring for Inclusive Diversity (“MInD”) program engaged 74 women and racially and ethnically diverse high potential managers, senior managers and directors who were nominated to receive sponsorship, job shadowing, and networking opportunities.
Organizational Culture At Allstate, we believe that when your passion fuels your purpose, you can achieve anything. We expect all employees to be leaders and dedicate extensive resources to developing leaders at all levels.
Allstate defines culture as a self-sustaining system of shared values, priorities and principles that shape beliefs and drive behaviors and decision-making within an organization.
In 2020, we updated Our Shared Purpose to reflect the evolution of our culture to drive our business strategy.
all-20201231_g16.jpgFor additional information, please see the section titled “Spotlight on Human Capital Management” in our 2020 Proxy Statement.
all-20201231_g16.jpgIn addition to the above discussion of our employees, please see information about Allstate agents under the caption “Allstate Protection Segment - Products and Distribution” in Part I, Item 1 of this report.


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Item 1. Business 2020 Form 10-K

Website
Our website is allstate.com. The Allstate Corporation’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports that we file or furnish pursuant to Section 13(a) of the Securities Exchange Act of 1934 are available on the Investor Relations section of our website (www.allstateinvestors.com), free of charge, as soon as reasonably practicable after they are electronically filed or furnished to the SEC. In addition, our Corporate Governance Guidelines, our Global Code of Business Conduct, and the charters of our Audit Committee, Compensation and Succession Committee, Nominating, Governance and Social Responsibility Committee, Executive Committee and Risk and Return Committee are available on the Investor Relations section of our website and in print to any stockholder who requests copies by contacting Investor Relations, The Allstate Corporation, 2775 Sanders Road, Northbrook, Illinois 60062-6127, 1-847-402-2800. The information found on our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document filed with the SEC.

Other Information About Allstate
Allstate’s seven reportable segments use shared services, including human resources, investment, finance, information technology and legal services, provided by Allstate Insurance Company and other affiliates.
Although the insurance business generally is not seasonal, claims and claims expense for the Allstate Protection segment tend to be higher for periods of severe or inclement weather.
“Allstate®” is a very well-recognized brand name in the United States. We use the “Allstate®, “Encompass®” and “Answer Financial®” brands extensively in our business. We also provide additional protection products and services through “AllstateSM Protection Plans”, “Allstate Dealer Services®”, “Allstate Roadside”, “Arity®”, “AllstateSM Identity Protection” and “Allstate Benefits®”. These brands, products and services are supported with the related service marks, logos, and slogans. Our rights in the United States to these names, service marks, logos and slogans continue as long as we continue to use them in commerce. Many service marks used by Allstate are the subject of renewable U.S. and/or foreign service mark registrations. We believe that these service marks are important to our business and we intend to maintain our rights to them.
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2020 Form 10-K Item 1. Business
Information about our Executive Officers
The following table sets forth the names of our executive officers, their ages as of February 1, 2021, their positions, business experience, and the years of their first election as officers. “AIC” refers to Allstate Insurance Company. Each of the officers named below may be removed from office at any time, with or without cause, by the board of directors of the relevant company.
NameAgePosition with Allstate and Business Experience
Year First
Elected
Officer
Thomas J. Wilson63Chair of the Board (May 2008 to present), President (June 2005 to January 2015 and February 2018 to present), and Chief Executive Officer (January 2007 to present) of The Allstate Corporation and AIC.1995
Carolyn D. Blair52Executive Vice President and Chief Human Resources Officer of AIC (October 2019 to present); President of Tartan Advisory Group, Inc. (November 2018 to October 2019); Executive Vice President, Chief Human Resources & Communications Officer of Sun Life Financial (April 2014 to June 2018).2019
Elizabeth A. Brady56Executive Vice President, Chief Marketing, Customer and Communications Officer of AIC (January 2020 to present); Executive Vice President and Chief Marketing, Innovation and Corporate Relations Officer of AIC (August 2018 to January 2020); Senior Vice President, Global Brand Management of Kohler Co. (November 2013 to July 2018).2018
Don Civgin59Vice Chair of The Allstate Corporation and AIC (March 2020 to present) and Chief Executive Officer, Protection Products and Services of AIC (January 2020 to present); President, Service Businesses of AIC (January 2018 to January 2020); President, Emerging Businesses of AIC (February 2015 to January 2018).2008
John E. Dugenske
54President, Investments and Financial Products of AIC (January 2020 to present); Executive Vice President and Chief Investment and Corporate Strategy Officer of AIC (January 2018 to January 2020); Executive Vice President and Chief Investment Officer of AIC (March 2017 to January 2018); Group Managing Director and Global Head of Fixed Income at UBS Global Asset Management (December 2008 to February 2017).2017
Rhonda S. Ferguson51
Executive Vice President, Chief Legal Officer, General Counsel, and Secretary of The Allstate Corporation and AIC (November 2020 to present); Executive Vice President and General Counsel of The Allstate Corporation and AIC (September 2020 to November 2020); Executive Vice President, Chief Legal Officer and Corporate Secretary of Union Pacific Railroad (December 2017 to September 2020); Executive Vice President and Chief Legal Officer of Union Pacific Railroad (July 2016 to December 2017); Vice President, Corporate Secretary and Chief Ethics Officer of FirstEnergy Corp. (April 2007 to June 2016).
2020
Suren Gupta59Executive Vice President, Chief Information Technology and Enterprise Services Officer of AIC (January 2020 to present); Executive Vice President, Enterprise Technology and Strategic Ventures of AIC (February 2015 to January 2020).2011
Susan L. Lees63
Executive Vice President, Chief Sustainability Officer of AIC (November 2020 to present); Executive Vice President, Chief Legal Officer and Secretary of The Allstate Corporation and AIC (September 2020 to November 2020); Executive Vice President, Chief Legal Officer, General Counsel, and Secretary of The Allstate Corporation and AIC (January 2020 to September 2020); Executive Vice President, General Counsel, and Secretary of The Allstate Corporation (May 2013 to January 2020) and of AIC (June 2013 to January 2020).
2008
Jesse E. Merten46
President, Financial Products of AIC (May 2020 to present); Executive Vice President and Chief Risk Officer of AIC (December 2017 to May 2020); Treasurer of The Allstate Corporation (January 2015 to April 2019) and of AIC (February 2015 to May 2019).

2012
John C. Pintozzi55Senior Vice President, Controller and Chief Accounting Officer of The Allstate Corporation (August 2019 to present) and of AIC (September 2019 to present); Senior Vice President and Chief Financial Officer, Allstate Investments (May 2012 to August 2019)2005
Mark Q. Prindiville53Executive Vice President and Chief Risk Officer of AIC (May 2020 to present); Senior Vice President of AIC (September 2016 to May 2020); Vice President of AIC (March 2011 to September 2016).2016
Mario Rizzo54Executive Vice President and Chief Financial Officer of The Allstate Corporation and AIC (January 2018 to present); Senior Vice President and Chief Financial Officer, Allstate Personal Lines of AIC (February 2015 to January 2018).
2010
Glenn T. Shapiro55President, Personal Property-Liability of AIC (January 2020 to present); President, Allstate Personal Lines of AIC (January 2018 to January 2020); Executive Vice President, Claims of AIC (April 2016 to January 2018); Executive Vice President and Chief Claims Officer of Liberty Mutual Commercial Insurance (May 2011 to March 2016).2016
20 www.allstate.com

Item 1. Business 2020 Form 10-K

Forward-Looking Statements
This report contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe exposure management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation and reserves. We believe that these statements are based on reasonable estimates, assumptions and plans. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments. In addition, forward-looking statements are subject to certain risks or uncertainties that could cause actual results to differ materially from those communicated in these forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Part 1, “Item 1A. Risk Factors” and elsewhere in this report and those described from time to time in our other reports filed with the Securities and Exchange Commission.
The Allstate Corporation 21

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

Item 1A.  Risk Factors
Summary Risks are categorized by (1) insurance and financial services, (2) business, strategy and operations and (3) macro, regulatory and risk environment. Many risks may affect more than one category and are included where the impact is most significant. If some of these risk factors occur, they may cause the emergence of or exacerbate the impact of other risk factors, which could materially increase the severity of the impact of these risks on our business, results of operations, financial condition or liquidity. The table below includes examples of risks from each category.
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Insurance and financial services
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Business, strategy and operations
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Macro, regulatory
 and risk environment
Risks that are unique to the insurance and financial services industriesRisks that are unique to Allstate’s business and operating modelRisks that impact most companies
Claim frequency and severity volatility
Catastrophes and severe weather
Loss cost estimates are complex and losses are unknown at the time policies are sold
Investment results are subject to volatility and valuation judgments
Highly competitive industry, impacted by new and changing technologies
Operating model effectiveness in light of changing customer preferences
Ability to maintain catastrophe reinsurance programs and limits
Fluctuations in financial strength and ratings

Adverse changes in economic and capital market conditions
Large-scale pandemic events
Cybersecurity controls and privacy
Changing climate conditions
Regulatory and political changes
Loss of key business relationships
Ability to attract, develop and retain talent

Allstate manages these risks through an Enterprise Risk and Return Management framework on an integrated basis following our risk and return principles.
all-20201231_g16.jpgSee Management’s Discussion and Analysis (“MD&A”), Enterprise Risk and Return Management for further details.
Consider these cautionary statements carefully together with other factors discussed elsewhere in this document, in filings with the Securities and Exchange Commission (“SEC”) or in materials incorporated therein by reference.
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Insurance and financial services
Unexpected increases in the frequency or severity of property and casualty claims may adversely affect our results of operations and financial condition
A significant increase in claim frequency could adversely affect our results of operations and financial condition. Changes in mix of business, miles driven, weather, distracted driving or other factors can lead to changes in auto claim frequency. We may experience volatility in claim frequency, and short-term trends may not be predictive of future losses over the longer term.
Increases in claim severity can arise from numerous causes that are inherently difficult to predict. The following factors may impact claim severity for auto bodily injury, property damage and homeowners coverages:
Bodily injury — inflation in medical costs, litigation trends and precedents and regulation
Vehicle property damage — inflation in repair costs, including parts and labor rates, mix of total losses declared, costs associated with repairing sophisticated newer vehicles, model year and used-car values
Homeowners — inflation in the construction industry, building materials and home furnishings, changes in the mix of loss type, and other economic and environmental factors, including
short-term supply imbalances for services and supplies in areas affected by catastrophes
Catastrophes and severe weather events may subject us to significant losses
Catastrophic events could adversely affect operating results and cause them to vary significantly from one period to the next. Also, our liquidity could be constrained by a catastrophe, or multiple catastrophes, which could result in extraordinary losses, sales of investments or a downgrade of our debt or financial strength ratings.
Catastrophic losses are caused by wind and hail, wildfires, tornadoes, hurricanes, tropical storms, earthquakes, volcanic eruptions, terrorism and industrial accidents and other such events.
Our personal property insurance business may incur catastrophe losses greater than:
Those experienced in prior years
The average expected level used in pricing
Current reinsurance coverage limits
Loss estimates from hurricane and earthquake models at various levels of probability
Property and casualty businesses are subject to claims arising from severe weather events such as winter storms, rain, hail and high winds. The incidence and severity of weather conditions resulting in claims are unpredictable.
The total number of policyholders affected by the event, the severity of the event and the coverage
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                     Part I - Item 1A. Risk Factors and Other Disclosures 2020 Form 10-K
provided contribute to catastrophe and severe weather losses. Increases in the insured values of covered property, geographic concentration and the number of policyholders exposed to certain events could increase the severity of claims from catastrophic and severe weather events.
Limitations in analytical models used to assess and predict the exposure to catastrophe losses may adversely affect our results of operations and financial condition
We use internally developed and third-party vendor models along with our own historical data to assess exposure to catastrophe losses. The models assume various conditions and probability scenarios and may not accurately predict future losses or measure losses currently incurred.
Price competition and changes in underwriting standards in property and casualty businesses may adversely affect our results of operations and financial condition
The personal property-liability market is highly competitive with carriers competing through underwriting, advertising, price, customer service, innovation and distribution.  Companies can alter underwriting standards, lower prices and increase advertising, which could result in lower growth or profitability for Allstate.   A decline in the growth or profitability of the property and casualty businesses could have a material effect on our results of operations and financial condition.
Property and casualty actual claims costs may exceed current reserves established for claims due to changes in the inflationary, regulatory and litigation environment
Estimating claim reserves is an inherently uncertain and complex process as losses are unknown at the time policies are sold. We continually refine our best estimates of losses after considering known facts and interpretations of the circumstances.
Our reserving methodology may be impacted by the following:
Models that rely on the assumption that past loss development patterns will persist into the future
Internal factors including experience with similar cases, actual claims paid, historical trends involving claim payment patterns, pending levels of unpaid claims, loss management programs, product mix, contractual terms and changes in claim reporting and settlement practices
External factors such as inflation, court decisions, changes in law or litigation imposing unintended coverage, regulatory requirements, changes in driving patterns and economic conditions
The ultimate cost of losses may vary materially from recorded reserves and such variance may adversely affect our results of operations and financial condition as the reserves and amounts due from reinsurers are reestimated.
all-20201231_g16.jpgSee MD&A, Application of Critical Accounting Estimates for further details.
Our investment portfolios are subject to market risk and declines in quality which may adversely affect or create volatility in our investment income and cause realized and unrealized losses
We continually evaluate investment management strategies since we are subject to risk of loss due to adverse changes in interest rates, credit spreads, equity prices, real estate values, currency exchange rates and liquidity. Adverse changes may occur due to changes in monetary and fiscal policy and the economic climate, liquidity of a market or market segment, investor return expectations or risk tolerance, insolvency or financial distress of key market makers or participants, or changes in market perceptions of credit worthiness. Adverse changes in market conditions could cause the value of our investments to decrease significantly and impact our results of operations and financial condition.
Our investments are subject to risks associated with economic and capital market conditions and factors that may be unique to our portfolio, including:
General weakening of the economy, which is typically reflected through higher credit spreads and lower equity and real estate valuations
Declines in credit quality
Declines in market interest rates, credit spreads or sustained low interest rates could lead to further declines in portfolio yields and investment income
Increases in market interest rates, credit spreads or a decrease in liquidity could have an adverse effect on the value of our fixed income securities that form a substantial majority of our investment portfolios
Weak performance of general and joint venture partners and underlying investments unrelated to general market or economic conditions could lead to declines in investment income and cause realized losses in our limited partnership interests
Concentration in any particular issuer, industry, collateral type, group of related industries, geographic sector or risk type
The amount and timing of net investment income, capital contributions and distributions from our performance-based investments, which primarily include limited partnership interests, can fluctuate significantly due to the underlying investments’ performance or changes in market or economic conditions. Additionally, these investments are less liquid than similar, publicly-traded investments and a decline in market liquidity could impact our ability to sell them at their current carrying values.
Declining equity markets or increases in interest rates or credit spreads could cause the value of the investments in our pension plans to decrease. Declines in interest rates could cause the funding ratio to decline and the value of the obligations for our pension and postretirement plans to increase. These factors could decrease the funded status of our pension and postretirement plans, increasing the likelihood or magnitude of future benefit expense and contributions.
The Allstate Corporation 23

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

Determination of the fair value and amount of credit losses for investments includes subjective judgments and could materially impact our results of operations and financial condition
The valuation of the portfolio is subjective, and the value of assets may differ from the actual amount received upon the sale of an asset. The degree of judgment required in determining fair values increases when:
Market observable information is less readily available
The use of different valuation assumptions may have a material effect on the assets’ fair values
Changing market conditions could materially affect the fair value of investments
The determination of the amount of credit losses varies by investment type and is based on ongoing evaluation and assessment of known and inherent risks associated with the respective asset class or investment.
Such evaluations and assessments are highly judgmental and are revised as conditions change and new information becomes available.
We update our evaluations regularly and reflect changes in credit losses in our results of operations. Our conclusions may ultimately prove to be incorrect as assumptions, facts and circumstances change. Historical loss trends, consideration of current conditions, and forecasts may not be indicative of future changes in credit losses and additional amounts may need to be recorded in the future.
Changes in market interest rates or performance-based investment returns may lead to a significant decrease in the profitability of our annuity business
Spread-based products, such as fixed annuities, are dependent upon maintaining profitable spreads between investment returns and interest crediting rates. When market interest rates decrease or remain at low levels, investment income may decline. Lowering interest crediting rates on some products in such an environment can partially offset decreases in investment yield. However, these changes could be limited by regulatory minimum rates or contractual minimum rate guarantees on many contracts and may not match the timing or magnitude of changes in investment yields.
Increases in market interest rates can lead to increased surrenders at a time when fixed income investment asset values are lower due to the increase in interest rates. Liquidating investments to fund surrenders could result in a loss that would adversely impact results of operations.
Performance-based net investment income, capital contributions and distributions can fluctuate significantly due to the underlying investments’ performance or changes in market or economic conditions.
Changes in reserve estimates and amortization of deferred acquisition costs (“DAC”) could materially affect results of operations and financial condition of our life, voluntary benefits and annuity businesses
We use long-term assumptions, including future investment yields, mortality, morbidity, persistency and expenses in pricing and valuation. If experience differs significantly from assumptions, adjustments to reserves and amortization of DAC may be required that could have a material adverse effect on our results of operations and financial condition.
all-20201231_g16.jpgSee MD&A, Application of Critical Accounting Estimates and Note 2 of the consolidated financial statements for further details.
Our participation in indemnification programs subjects us to the risk that reimbursement for qualifying claims and claims expenses may not be received
Participation in state-based industry pools, facilities and associations as well as the National Flood Insurance Program may have a material, adverse effect on our results of operations and financial condition. Our largest exposure is associated with the Michigan Catastrophic Claim Association (“MCCA”), a state-mandated indemnification mechanism for qualified personal injury protection losses that exceed a specified level. To the extent the MCCA’s current and future assessments are insufficient to reimburse its ultimate obligation on existing claims to member companies, our ability to obtain the 100% indemnification of ultimate loss could be impaired.
all-20201231_g16.jpgFor further discussion of these items, see Regulation section, Indemnification Programs and Note 10 of the consolidated financial statements.
We may not be able to mitigate the capital impact associated with statutory reserving and capital requirements
Regulatory capital and reserving requirements affect the amount of capital required to be maintained by our subsidiary insurance companies.  Changes to capital or reserving requirements or regulatory interpretations may result in additional capital held in our insurance companies and could require us to increase prices, reduce our sales of certain products, or accept a return on equity below original levels assumed in pricing.
A downgrade in financial strength ratings may have an adverse effect on our business
Financial strength ratings are important factors in establishing the competitive position of insurance companies and their access to capital markets. Rating agencies could downgrade or change the outlook on our ratings due to:
Changes in the financial profile of one of our insurance companies
Changes in a rating agency’s determination of the amount of capital required to maintain a particular rating
Increases in the perceived risk of our investment portfolio, a reduced confidence in management or
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                     Part I - Item 1A. Risk Factors and Other Disclosures 2020 Form 10-K
our business strategy, or other considerations that may or may not be under our control
A downgrade in our ratings could have a material effect on our sales, competitiveness, customer retention, the marketability of our product offerings, liquidity, access to and cost of borrowing, results of operations and financial condition.
Changes in tax laws may adversely affect the sales and profitability of life insurance products
Changes in taxation of life insurance products could reduce sales and result in the surrender of some existing contracts and policies, which may have a material effect on our profitability and financial condition.
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Business, strategy and operations
We operate in markets that are highly competitive and may be impacted by new or changing technologies
Markets in which we operate are highly competitive, and we must continually allocate resources to refine and improve products and services to remain competitive. If we are unsuccessful in generating new business, retaining customers or renewing contracts, our ability to maintain or increase premiums written or the ability to sell our products could be adversely impacted.
Determining competitive position is complicated in the auto and homeowners insurance business as companies use different underwriting standards to accept new customers and quotes and close rates can fluctuate across companies and locations.  Pricing of products is driven by multiple factors, including loss expectations, expense structure and dissimilar return targets.  Additionally, sophisticated pricing algorithms make it difficult to determine what price potential customers would pay across competitors.
There is also significant competition for producers, such as exclusive and independent agents and their licensed sales professionals. Growth and retention may be materially affected if we are unable to attract and retain effective producers or if those producers are unable to attract and retain their licensed sales professionals or customers. Similarly, growth and retention may be impacted if customer preferences change and we are unable to effectively adapt our business model and processes.
Our business could also be affected by technological changes, such as autonomous or partially autonomous vehicles or technologies that facilitate ride, car or home sharing. Such changes could disrupt the demand for products from current customers, create coverage issues, impact the frequency or severity of losses, or reduce the size of the automobile insurance market causing our auto insurance business to decline. Since auto insurance constitutes a significant portion of our overall business, we may be more sensitive than other insurers and more adversely affected by trends that could decrease auto insurance rates or reduce demand for auto insurance over time.
Technological advancements and innovation are occurring in distribution, underwriting, claims and operations at a rapid pace that may continue to accelerate. Nontraditional competitors could enter the insurance market and further accelerate these trends. Innovations must be implemented in compliance with applicable insurance regulations and may require extensive modifications to our systems and processes and extensive coordination with and reliance on the systems of third parties. If we are unable to adapt to or bring such advancements and innovations to market, the quality of our products, our relationships with customers and agents, competitive position and business prospects may be materially affected. Changes in technology related to collection and analysis of data regarding customers could expose us to regulatory or legal actions and may have a material adverse effect on our business, reputation, results of operations and financial condition.
Technology and customer preference changes may impact the ways in which we interact, do business with our customers and design our products. We may not be able to respond effectively to these changes, which could have a material effect on our results of operations and financial condition.
Our ability to adequately and effectively price our products and services is affected by the evolving nature of consumer needs and preferences, market and regulatory dynamics, broader use of telematics-based rate segmentation and potential reduction in consumer demand.
Many voluntary benefits contracts are renewed annually. There is a risk that employers may be able to obtain more favorable terms from competitors than they could by renewing coverage with us. These competitive pressures may adversely affect the renewal of these contracts, as well as our ability to sell products.
Transformative Growth may not be effectively implemented
Transformative Growth is intended to accelerate growth by expanding customer access, improving customer value and investing in marketing and technology.  The strategy encompasses all aspects of Allstate’s customer experience and business model, spanning product distribution and sales, operations and servicing, and claims processing. If the strategy is not implemented effectively, customer retention and policy growth objectives could be adversely impacted. Lost business opportunities may result due to slower than anticipated speed to market.  External forces including competitor actions or regulatory changes may also have an adverse effect on the value generated from the transformation.
Our catastrophe management strategy may adversely affect premium growth
Catastrophe risk management actions have negatively impacted the size of our homeowners business and customer retention, including customers with auto and other personal lines products and may negatively impact future sales if further actions are
The Allstate Corporation 25

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

taken. Adjustments to our business structure, size and underwriting practices in markets with significant severe weather and catastrophe risk exposure could adversely impact premium growth rates and retention.
The ability of our subsidiaries to pay dividends may affect our liquidity and ability to meet our obligations
The Allstate Corporation is a holding company with no significant operations. Its principal assets are the stock of its subsidiaries and its directly held cash and investment portfolios. Its liabilities include debt and pension and other postretirement benefit obligations related to Allstate Insurance Company employees. State insurance regulatory authorities limit the payment of dividends by insurance subsidiaries, as described in Note 16 of the consolidated financial statements. The limitations are based on statutory income and surplus. In addition, competitive pressures generally require the subsidiaries to maintain insurance financial strength ratings. These restrictions and other regulatory requirements may affect the ability of subsidiaries to make dividend payments. Limits on the ability of the subsidiaries to pay dividends could adversely affect holding company liquidity, including the ability to pay dividends to shareholders, service debt or complete share repurchase programs as planned.
Changes in regulatory capital requirements could decrease deployable capital and potentially reduce future dividends paid by our insurance companies.
all-20201231_g16.jpgFor a discussion of capital requirements, including a potential change to a group capital calculation, see Regulation section, Limitations on Dividends by Insurance Subsidiaries.
Our ability to pay dividends or repurchase stock is subject to limitations under terms of certain of our securities
The terms of the outstanding subordinated debentures prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions.
We are prohibited from declaring or paying dividends on our Series G preferred stock if we fail to meet specified capital adequacy, net income or shareholders’ equity levels. The prohibition is subject to an exception permitting us to declare dividends out of the net proceeds of common stock issued by us during the 90 days before the date of declaration even if we fail to meet such levels.
If the full preferred stock dividends for all preceding dividend periods have not been declared and paid, we generally may not repurchase or pay dividends on common stock during any dividend period while our preferred stock is outstanding.
all-20201231_g16.jpgSee Note 12 of the consolidated financial statements.
Reinsurance may be unavailable at current levels and prices, which may limit our ability to write new business
Market conditions beyond our control impact the availability and cost of the reinsurance we purchase. Reinsurance may not remain continuously available to us to the same extent and on the same terms and rates as is currently available. Our ability to economically justify reinsurance to reduce our catastrophe risk in designated areas may depend on our ability to adjust premium rates to fully or partially recover cost. If we cannot maintain our current level of reinsurance or purchase new reinsurance protection in amounts we consider sufficient at acceptable prices, we would have to either accept an increase in our catastrophe exposure, reduce our insurance exposure or seek other alternatives.
Reinsurance subjects us to counterparty risk and may not be adequate to protect us against losses arising from ceded insurance
Collecting from reinsurers is subject to uncertainty arising from factors that include:
Whether reinsurers, their affiliates or certain indemnitors have the financial capacity and willingness to make payments under the terms of a reinsurance treaty or contract
Whether insured losses meet the qualifying conditions of the reinsurance contract
Our inability to recover from a reinsurer could have a material effect on our results of operations and financial condition.
Disruption, volatility or uncertainty in the insurance linked securities market may decrease our ability to access such market on favorable terms or at all.
Acquisitions or divestitures of businesses may not produce anticipated benefits, resulting in operating difficulties, unforeseen liabilities or asset impairments
The ability to achieve certain anticipated financial benefits from the acquisition of National General or other businesses depends in part on our ability to successfully grow and integrate the businesses consistent with our anticipated acquisition economics. Financial results could be adversely affected by unanticipated performance issues, unforeseen liabilities, transaction-related charges, diversion of management time and resources to acquisition integration challenges or growth strategies, loss of key employees, challenges in integrating information technology systems of acquired companies with our own, amortization of expenses related to intangibles, charges for impairment of long-term assets or goodwill and indemnifications.

Acquired businesses may not perform as projected, cost savings anticipated from the acquisition may not materialize, and costs associated with the integration may be greater than anticipated. As a result, if we do not manage these transitions effectively, the quality of our products as well as our relationships with customers and partners may result in the company not achieving returns on its investment at the level projected at acquisition.
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                     Part I - Item 1A. Risk Factors and Other Disclosures 2020 Form 10-K
We also may divest businesses from time to time, including the pending sale of ALIC and certain affiliates. These transactions may result in continued financial involvement in the divested businesses, such as through reinsurance, guarantees or other financial arrangements, following the transaction. If the acquiring companies do not perform under the arrangements, our financial results could be negatively impacted.
We may be subject to the risks and costs associated with intellectual property infringement, misappropriation and third-party claims
We rely on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish and protect our intellectual property. Third parties may infringe or misappropriate our intellectual property. We may have to litigate to enforce and protect intellectual property and to determine its scope, validity or enforceability, which could divert significant resources and prove unsuccessful. An inability to protect intellectual property or an inability to successfully defend against a claim of intellectual property infringement could have a material effect on our business.
We may be subject to claims by third parties for patent, trademark or copyright infringement or breach of usage rights. Any such claims and any resulting litigation could result in significant expense and liability. If third-party providers or we are found to have infringed a third-party intellectual property right, either of us could be enjoined from providing certain products or services or from utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licenses. Alternatively, we could be required to enter into costly licensing arrangements with third parties or implement costly work-arounds. Any of these scenarios could have a material effect on our business and results of operations.
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Macro, regulatory and risk environment
Conditions in the global economy and capital markets could adversely affect our business and results of operations
Global economic and capital market conditions could adversely impact demand for our products, returns on our investment portfolio and results of operations. The conditions that would have the largest impact on our business include:
Low or negative economic growth
Sustained low interest rates
Rising inflation increasing claims and claims expense
Substantial increases in delinquencies or defaults on debt
Significant downturns in the market value or liquidity of our investment portfolio
Reduced consumer spending and business investment
Stressed conditions, volatility and disruptions in global capital markets or financial asset classes could adversely affect our investment portfolio.
Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs or obtain credit on acceptable terms
In periods of extreme volatility and disruption in the capital and credit markets, liquidity and credit capacity may be severely restricted. Our access to additional financing depends on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to our industry, our credit ratings and credit capacity, as well as lenders’ perception of our long- or short-term financial prospects. In such circumstances, our ability to obtain capital to fund operating expenses, financing costs, capital expenditures or acquisitions may be limited, and the cost of any such capital may be significant.
A large-scale pandemic, the occurrence of terrorism, military actions, social unrest or other actions may have an adverse effect on our business
A large-scale pandemic, such as the Coronavirus and its impacts, the occurrence of terrorism, military actions, social unrest or other actions, may result in loss of life, property damage, and disruptions to commerce and reduced economic activity. Some of the assets in our investment portfolio may be adversely affected by declines in the equity markets, changes in interest rates, reduced liquidity and economic activity caused by a large-scale pandemic. Additionally, a large-scale pandemic or terrorist act could have a material effect on sales, liquidity and operating results.
The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which have included the implementation of travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings, have caused material disruption to businesses globally, resulting in increased unemployment, a recession and increased economic uncertainty. Additionally, there is no way of predicting with certainty how long the pandemic might last, including the potential for restrictions being restored or new restrictions being implemented that could result in further economic volatility.
The Coronavirus has affected our operations and depending on its length and severity may continue to significantly affect our results of operations, financial condition and liquidity, including:
Sales of new and retention of existing policies
Shared economy demand
Claim severity costs, driving behavior and auto accident frequency
Life insurance mortality, hospital and outpatient claim costs and annuity reserves
Investment valuations and returns
Bad debt and credit allowance exposure
The Allstate Corporation 27

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

all-20201231_g16.jpgSee MD&A, Highlights for a summary of the impacts of the Coronavirus on our operations, each of our segments and investments that may continue, emerge, evolve or accelerate into 2021.
The failure in cyber or other information security controls, as well as the occurrence of events unanticipated in our disaster recovery processes and business continuity planning, could result in a loss or disclosure of confidential information, damage to our reputation, additional costs and impair our ability to conduct business effectively
We depend heavily on computer systems, mathematical algorithms and data to perform necessary business functions. There are threats that could impact our ability to protect our data and systems; if the threats are successful, they could impact confidentiality, integrity and availability:
Confidentiality — protecting our data from disclosure to unauthorized parties
Integrity — ensuring data is not changed accidentally or without authorization and is accurate
Availability — ensuring our data and systems are accessible to meet our business needs
We collect, use, store or transmit a large amount of confidential, proprietary and other information (including personal information of customers, claimants or employees) in connection with the operation of our business. Systems are subject to increased attempted cyberattacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering.
We constantly defend against threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. Events like these could jeopardize the information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation, increased costs, regulatory penalties or customer dissatisfaction.
These risks may increase in the future as threats become more sophisticated and we continue to expand internet and mobile strategies, develop additional remote connectivity solutions to serve our employees and customers, develop and expand products and services designed to protect customers’ digital footprint, and build and maintain an integrated digital enterprise.
Our increased use of third-party services (e.g., cloud technology and software as a service) can make it more difficult to identify and respond to cyberattacks in any of the above situations. Although we may review and assess third-party vendor cyber security controls, our efforts may not be successful in preventing or mitigating the effects of such events. Third parties to whom we outsource certain functions are also subject to cybersecurity risks.
Personal information is subject to an increasing number of federal, state, local and international laws and regulations regarding privacy and data security, as well as contractual commitments. Any failure or perceived failure by us to comply with such obligations may result in governmental enforcement actions and fines, litigation or public statements against us by consumer advocacy groups or others and could cause our employees and customers to lose trust in us, which could have an adverse effect on our reputation and business.
all-20201231_g16.jpgSee the Regulation section, Privacy Regulation and Data Security, for additional information.
The occurrence of a disaster, such as a natural catastrophe, pandemic, industrial accident, blackout, terrorist attack, war, cyberattack, computer virus, insider threat, unanticipated problems with our disaster recovery processes, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of employees were unavailable in the event of a disaster, our ability to effectively conduct business could be severely compromised. Our systems are also subject to compromise from internal threats.
Losses from changing climate and weather conditions may adversely affect our financial condition, profitability or cash flows
Climate change may affect the occurrence of certain natural events, such as an increase in the frequency or severity of wind, tornado, hailstorm and thunderstorm events due to increased convection in the atmosphere. There could also be more frequent wildfires in certain geographies, more flooding and the potential for increased severity of hurricanes due to higher sea surface temperatures. As a result, incurred losses from such events and the demand, price and availability of reinsurance coverages for automobile and homeowners insurance may be affected.
Climate change may also impact insurability by impairing our ability to identify and quantify potential hazards that will result in losses and offer our customers products at an affordable price.  Our investment portfolio is also subject to the effects of climate change as economic shifts alter the return dynamic of long-term investments and reduce valuations.
Due to significant variability associated with future changing climate conditions, we are unable to predict the impact climate change will have on our businesses.
We are subject to extensive regulation, and potential further restrictive regulation may increase operating costs and limit growth
Many of our affiliates operate in the highly regulated insurance and broader financial services sector and are subject to extensive laws and regulations that are complex and subject to change.
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                     Part I - Item 1A. Risk Factors and Other Disclosures 2020 Form 10-K
Changes may lead to additional expenses, increased legal exposure, or increased reserve or capital requirements limiting our ability to grow or to achieve targeted profitability. Moreover, laws and regulations are administered and enforced by governmental authorities that exercise interpretive latitude, including:
State insurance regulators
State securities administrators
State attorneys general
Federal agencies including the SEC, the Financial Industry Regulatory Authority, the Department of Labor, the U.S. Department of Justice and the National Labor Relations Board
Consequently, compliance with one regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another’s interpretation of the same issue.
In addition, there is risk that one regulator’s or enforcement authority’s interpretation of a legal issue may change to our detriment. There is also a risk that changes in the overall legal environment may cause us to change our views regarding the actions we need to take from a legal risk management perspective. This could necessitate changes to our practices that may adversely impact our business. In some cases, state insurance laws and regulations are generally intended to protect or benefit purchasers or users of insurance products, not holders of securities that we issue. These laws and regulations may limit our ability to grow or to improve the profitability of our business.
A regulatory environment that requires rate increases to be approved, can dictate underwriting practices and mandate participation in loss sharing arrangements may adversely affect results of operations and financial condition
Political events and positions can affect the insurance market, including efforts to suppress rates to a level that may not allow us to reach targeted levels of profitability. Regulatory challenges to rate increases may restrict rate changes that may be required to achieve targeted levels of profitability and returns on equity. If we are unsuccessful, our results of operations could be negatively impacted.    
In addition, certain states have enacted laws that require an insurer conducting business in that state to participate in assigned risk plans, reinsurance facilities and joint underwriting associations. Certain states also require the insurer to offer coverage to all consumers, often restricting an insurer’s ability to charge the price it might otherwise charge for the risk acceptance. In these markets, we may be compelled to underwrite significant amounts of business at lower-than-desired rates, possibly leading to an unacceptable return on equity. Alternatively, as the facilities recognize a financial deficit, they could have the ability to assess participating insurers, adversely affecting our results of operations and financial condition. Laws and regulations of many states also limit an insurer’s ability to withdraw from one or more lines of insurance, except pursuant to a plan that is approved by the state
insurance department. Certain states require an insurer to participate in guaranty funds for impaired or insolvent insurance companies. These funds periodically assess losses against all insurance companies doing business in the state. Our results of operations and financial condition could be adversely affected by any of these factors.
Regulatory reforms, and the more stringent application of existing regulations, may make it more expensive for us to conduct our business
The federal government has enacted comprehensive regulatory reforms for financial services entities. As part of a larger effort to strengthen the regulation of the financial services market, certain reforms are applicable to the insurance industry.
The Federal Insurance Office (“FIO”) and Financial Stability Oversight Council have been established, and the federal government may enact reforms that affect the state insurance regulatory framework. The potential impact of state or federal measures that change the nature or scope of insurance and financial regulation is uncertain but may make it more expensive for us to conduct business and limit our ability to grow or achieve profitability.
We have business process and information technology operations in Canada, India and the United Kingdom that are subject to operating, regulatory and political risks in those countries. We may incur substantial costs and other negative consequences if any of these occur, including an adverse effect on our business, results of operations and financial condition.
Losses from legal and regulatory actions may be material to our results of operations, cash flows and financial condition
We are involved in various legal actions, including class-action litigation challenging a range of company practices and coverage provided by our insurance products, some of which involve claims for substantial or indeterminate amounts. We are also involved in various regulatory actions and inquiries, including market conduct exams by state insurance regulatory agencies. In the event of an unfavorable outcome in any of these matters, the ultimate liability may be more than amounts currently accrued or disclosed in our reasonably possible loss range and may be material to our results of operations, cash flows and financial condition.
all-20201231_g16.jpgSee Note 14 of the consolidated financial statements.
Changes in or the application of accounting standards issued by standard-setting bodies and changes in tax laws may adversely affect our results of operations and financial condition
Our financial statements are subject to the application of accounting principles generally accepted in the United States of America, which are periodically revised, interpreted or expanded. Accordingly, we may be required to adopt new guidance or interpretations, which may have a material effect on our results of
The Allstate Corporation 29

2020 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures

operations and financial condition and could adversely impact financial strength ratings.
Market declines, changes in business strategies or other events impacting the fair value of goodwill or purchased intangible assets could result in an impairment charge to income
Pending changes to accounting for long-duration insurance contracts such as traditional life, life-contingent immediate annuities and certain voluntary accident and health insurance products will have a material effect on reserves and shareholders’ equity and could adversely impact financial strength ratings
Realization of our deferred tax assets assumes that we can fully utilize the deductions recognized for tax purposes; we may recognize additional tax expense if these assets are not fully utilized
New tax legislative initiatives may be enacted that may impact our effective tax rate and could adversely affect our tax positions or tax liabilities
all-20201231_g16.jpgSee MD&A, Application of Critical Accounting Estimates and Note 2 of the consolidated financial statements for further details.
Loss of key vendor relationships or failure of a vendor to protect our data, confidential and proprietary information, or personal information of our customers, claimants or employees could adversely affect our operations
We rely on services and products provided by many vendors in the U.S. and abroad. These include vendors of computer hardware, software, cloud technology and software as a service, as well as vendors or outsourcing of services such as:
Claim adjustment or call center services
Human resource benefits management
Information technology support
Investment management services
If any vendor becomes unable to continue to provide products or services, or fails to protect our confidential, proprietary, and other information, we may suffer operational impairments and financial losses.
Our ability to attract, develop, and retain talent to maintain appropriate staffing levels and establish a successful work culture is critical to our success
Competition from within the insurance industry and from other industries, including the technology sector, for qualified employees with highly specialized knowledge in areas such as underwriting, data and analytics, technology and e-commerce, has often been intense and we have experienced increased competition in hiring and retaining employees.
Factors that affect our ability to attract and retain such employees include:
Compensation and benefits
Training and re-skilling programs
Reputation as a successful business with a culture
of fair hiring, and of training and promoting qualified employees
Recognition of and response to changing trends and other circumstances that affect employees
The unexpected loss of key personnel could have a material adverse impact on our business because of the loss of their skills, knowledge of our products and offerings and years of industry experience and, in some cases, the difficulty of promptly finding qualified replacement personnel.
Misconduct or fraudulent acts by employees, agents and third parties may expose us to financial loss, disruption of business, regulatory assessments and reputational harm
The company and the insurance industry are inherently susceptible to past and future misconduct or fraudulent activities by employees, representative agents, vendors, customers and other third parties.  These activities could include:
Fraud against the company, its employees and its customers through illegal or prohibited activities
Unauthorized acts or representations, unauthorized use or disclosure of personal or proprietary information, deception, and misappropriation of funds or other benefits  
Item 1B.  Unresolved Staff Comments
None.
Item 2.  Properties
Our home office complex is owned and located in Northbrook, Illinois. As of December 31, 2020, the home office complex consists of several buildings totaling 1.9 million square feet of office space on a 186-acre site.
We also operate from approximately 415 administrative, data processing, claims handling and other support facilities in North America. In addition to our home office facilities, 825 thousand square feet are owned and 5.8 million square feet are leased.
Outside North America, we own one and lease three properties in Northern Ireland comprising approximately 223 thousand square feet. We also have three leased facilities in India for approximately 600 thousand square feet and two leased facilities in London for 7,182 square feet.
The locations where Allstate exclusive agencies operate in the U.S. are normally leased by the agencies.
Item 3.  Legal Proceedings
Information required for Item 3 is incorporated by reference to the discussion under the heading “Regulation and compliance” and under the heading “Legal and regulatory proceedings and inquiries” in Note 14 of the consolidated financial statements.
Item 4.  Mine Safety Disclosures
Not applicable.
30 www.allstate.com

2020 Form 10-K

Part II
Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
As of January 29, 2021, there were 64,567 holders of record of The Allstate Corporation’s common stock. The principal market for the common stock is the New York Stock Exchange, where our common stock trades under the trading symbol “ALL”. Our common stock is also listed on the Chicago Stock Exchange.
Common stock performance graph
The following performance graph compares the cumulative total shareholder return on Allstate common stock for a five-year period (December 31, 2015 to December 31, 2020) with the cumulative total return of the S&P Property and Casualty Insurance Index (S&P P/C) and the S&P’s 500 stock index.
all-20201231_g22.jpg
Value at each year-end of $100 initial investment made on December 31, 2015
12/31/201512/31/201612/31/201712/31/201812/31/201912/31/2020
Allstate$100.00 $121.71 $174.80 $140.67 $195.28 $195.05 
S&P P/C$100.00 $115.71 $141.61 $134.96 $169.88 $180.63 
S&P 500$100.00 $111.95 $136.38 $130.39 $171.44 $202.96 

The Allstate Corporation 31

2020 Form 10-K
Issuer Purchases of Equity Securities
Period
Total number of shares
(or units) purchased (1)
Average price
paid per share
(or unit)
Total number of shares (or units) purchased as part of publicly announced plans or programs
Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (3)
October 1, 2020 - October 31, 2020
     Open Market Purchases288 $93.02 — 
November 1, 2020 - November 30, 2020
     Open Market Purchases703 $90.90 — 
December 1, 2020 - December 31, 2020
     Open Market Purchases162 $104.36 — 
Total (2)
1,153 $93.32  $1.56 billion
(1)In accordance with the terms of its equity compensation plans, Allstate acquired the following shares in connection with the vesting of restricted stock units and performance stock awards and the exercise of stock options held by employees or directors. The shares were acquired in satisfaction of withholding taxes due upon exercise or vesting and in payment of the exercise price of the options.
October: 288
November: 703
December: 162
(2)On September 18, 2020, Allstate entered into an accelerated share repurchase agreement (“ASR agreement”) with Goldman Sachs & Co. LLC (“Goldman Sachs”), to purchase $750 million of our outstanding shares of common stock. In exchange for an upfront payment of $750 million, Goldman Sachs initially delivered 7.0 million shares to Allstate. The ASR agreement settled on January 12, 2021, and we repurchased a total of 7.8 million shares at an average price of $96.21.
(3)In February 2020, we announced the approval of a common share repurchase program for $3 billion that is expected to be completed by the end of 2021.
Item 6.  
None.
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2020 Form 10-K

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
Page
Allstate brand
Encompass brand
Protection Services (previously Service Businesses)
Claims and Claims Expense Reserves
Allstate Life
Allstate Benefits
Allstate Annuities
Application of Critical Accounting Estimates

The Allstate Corporation 33

2020 Form 10-K
2020 Highlights
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 consolidated financial statements and related notes found under Item 8. contained herein.
A discussion of strategy, including updates to the multi-year Transformative Growth initiative, can be found in Part 1, Item 1. Business.
This section of this Form 10-K generally discusses 2020 and 2019 results and year-to-year comparisons between 2020 and 2019. Discussions of 2018 results and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis (“MD&A”) in Part II, Item 7 of our annual report on Form 10-K for 2019, filed February 21, 2020.
The most important factors we monitor to evaluate the financial condition and performance for our reportable segments and the Company include:
Allstate Protection: premium, policies in force (“PIF”), new business sales, policy retention, price changes, claim frequency and severity, catastrophes, loss ratio, expenses, underwriting results, and relative competitive position.
Protection Services: revenues, premium written, PIF, adjusted net income and net income.
���Allstate Life: premiums and contract charges, new business sales, PIF, benefit spread, investment spread, expenses, adjusted net income and net income.
Allstate Benefits: premiums, new business sales, PIF, benefit ratio, expenses, adjusted net income and net income.
Allstate Annuities: investment spread, asset-liability matching, contract benefits, expenses, adjusted net income, net income and invested assets.
Investments: exposure to market risk, asset allocation, credit quality/experience, total return, net investment income, cash flows, realized capital gains and losses, unrealized capital gains and losses, long-term returns, and asset and liability duration.
Financial condition: liquidity, parent holding company deployable assets, financial strength ratings, operating leverage, debt levels, book value per share and return on equity.
Measuring segment profit or loss
The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Discontinued Lines and Coverages segments and adjusted net income for the Protection Services, Allstate Life, Allstate Benefits, Allstate Annuities, 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, restructuring and related charges and amortization or impairment of purchased intangibles, 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 income is reconciled to net income applicable to common shareholders in the Property-Liability Operations section of MD&A.
Adjusted net income is net income applicable to common shareholders, excluding:
Realized capital gains and losses, after-tax, 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, after-tax
Valuation changes on embedded derivatives that are not hedged, after-tax
Amortization of DAC and deferred sales inducement costs (“DSI”), to the extent they resulted from the recognition of certain realized capital gains and losses or valuation changes on embedded derivatives that are not hedged, after-tax
Business combination expenses and the amortization or impairment of purchased intangible assets, after-tax
Gain (loss) on disposition of operations, after-tax
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
Adjusted net income is reconciled to net income applicable to common shareholders in the Protection Services, Allstate Life, Allstate Benefits and Allstate Annuities Segment sections of MD&A.
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2020 Form 10-K

Subsequent event
On January 26, 2021, Allstate announced an agreement to sell Allstate Life Insurance Company (“ALIC”) and certain affiliates for $2.8 billion to Antelope US Holdings Company, an affiliate of an investment fund associated with The Blackstone Group Inc. Allstate will retain ownership of Allstate Life Insurance Company of New York (“ALNY”) while pursuing alternatives to sell or otherwise transfer risk to a third party. ALIC and certain affiliates represent approximately 80% of Allstate Life and Allstate Annuity reserves for life-contingent contract benefits and contractholder funds as of December 31, 2020 and generated net income of approximately $290 million and $470 million in 2020 and 2019, respectively. A loss on disposition estimated at $3 billion, after-tax, will be recorded in the first quarter of 2021. The ultimate amount of the loss on sale will be impacted by purchase price adjustments associated with certain pre-close transactions specified in the stock purchase agreement, changes in statutory capital and surplus prior to the closing date and the closing date equity of ALIC determined under GAAP, excluding unrealized gains and losses. The transaction is expected to close in the second half of 2021, subject to regulatory approvals and other customary closing conditions. Additional information about this transaction can be found in Allstate Life and Allstate Annuities sections of Part 1, Item 1. Business, MD&A and Note 3 of the consolidated financial statements of this report.
The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”)
The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which have included the implementation of travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings, have caused material disruption to businesses globally, resulting in increased unemployment, a recession and increased economic uncertainty. Additionally, there is no way of predicting with certainty how long the pandemic might last, including the potential for restrictions being restored or new restrictions being implemented that could result in further economic volatility.
We have been proactive in protecting the health and safety of our employees and agents, while delivering on our commitment to protect our customers. We executed business continuity plans, maximized work from home, including the use of virtual tools to allow for safe claims handling, provided financial relief to employees experiencing financial hardship, developed exposure escalation protocols and a return to office framework.
A pandemic such as the Coronavirus and its impacts are disclosed in Part 1 “Item 1A. Risk Factors’’, including the risk factors titled “A large-scale pandemic, the occurrence of terrorism, military actions, social unrest or other actions may have an adverse effect on our business” and “Conditions in the global economy and capital markets could adversely affect our business and results of operations”.
The magnitude and duration of the global pandemic and the impact of actions taken by governmental authorities, businesses and consumers, including timing of vaccine distribution, to mitigate health risks create significant uncertainty. We will continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the length and severity of the pandemic or its impact to our operations, but the effects could be material.
We have continued to support our customers during the Coronavirus pandemic as we:
Provided our Shelter-in-Place Payback of over $948 million to customers in 2020, as the significant decline in the number of auto accidents contributed favorably to our underwriting results
Offered the Allstate Special Payment plan to provide more flexible payment options, including the option to delay payments
Extended auto insurance coverage to customers using their personal vehicles to deliver food, medicine and other goods for commercial purposes; coverage for these activities is typically excluded
Continued to provide prompt payments for life insurance and health claims related to Coronavirus
Offered free Allstate Identity Protection to U.S. residents through December 31, 2020, regardless of whether they were already Allstate customers
Increased the utilization of virtual tools such as QuickFoto Claim® and Virtual Assist® to allow for a simple, fast and safe claims handling process for customers and our employees
The following sections summarize the potential impacts of the Coronavirus on our operations, each of our segments and investments that may continue, emerge, evolve or accelerate in 2021. This list is not inclusive of all potential impacts and should not be treated as such. Within the MD&A we have included further disclosures related to the impacts of the Coronavirus on our 2020 results.

The Allstate Corporation 35

2020 Form 10-K
Allstate’s operations
Employee availability and productivity
Increased regulatory restrictions on profitability, rate actions or claim practices, potentially outside the scope of current policies
Availability and performance of third party vendors, including technology development, car or home repair and marketing programs
Cybersecurity risks related to remote workforce
Allstate Protection
Slower written premiums growth and declines in auto new issued applications due to lower car sales
Impact to future rate filings and pricing
Lower auto accident frequency from reduced miles driven, including usage in shared economy products
Expanding the availability of our pay-per-mile insurance product, Milewise®
Increased auto claim severity due to more severe accidents or replacement parts cost variability
Increased exposure to allowances for uncollectible receivables
Validity of statistical models given changes in underlying statistics such as auto frequency or investment projections
Agent availability and productivity
Protection Services
Increased consumer spending and retail sales in Allstate Protection Plans resulting from shelter-in-place orders
Reduced demand for Allstate Dealer Services products due to lower new and used car sales
Decline in claims in Allstate Dealer Services and Allstate Roadside due to lower miles driven
Decreased sales of Allstate Identity Protection products due to higher unemployment
Increased costs from Allstate Identity Protection providing free identity protection to consumers through the end of 2020
Allstate Life
Higher death benefit costs
Decline in sales due to temporary underwriting restrictions placed on new business; agents are able to offer coverage to customers outside the new guidelines through non-proprietary carriers
Statutory reserving requirements could be increased due to low interest rates, which could affect the amount of capital required to be maintained by our insurance companies
Allstate Benefits
Decreased accident injury claims and deferral of non-essential medical procedures, reducing accident, hospital and critical illness product exposure, partially offset by increased claim cost exposure for our life products
Decreased sales and increased policy lapses due to higher employee turnover, business closures and employee layoffs and furloughs
Allstate Annuities
Lower performance-based investment income
Higher reserves released on death of the insured for life-contingent immediate annuities, which lowers contract benefits
Statutory reserving requirements could be increased due to low interest rates, which could affect the amount of capital required to be maintained by our insurance companies
Investments
Impact on the market values, liquidity and valuations of fixed income securities, equity securities and performance-based investments as well as changes in the expected pace of funding performance-based and loan commitments 
Negative impact on fixed income securities in certain sectors such as energy, automotive, retail, travel, lodging and airlines
State and local government budgets may be strained by the costs of responding to the Coronavirus and reduced tax revenues from lower economic activity which may have an adverse impact on valuations and returns of our municipal bond portfolio
Volatility in future investment results due to capital market conditions, including the pace of economic recovery, effectiveness of the fiscal and monetary policy responses and uncertainty resulting from the ongoing pandemic
Volatility in expected credit losses

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2020 Form 10-K

Allstate Delivered on 2020 Operating Priorities (1)
Better Serve CustomersAllstate acted quickly and led the industry in taking care of customers during the pandemic by providing two Shelter-In-Place Paybacks, financial flexibility through Special Payment Plans and offering free identity protection in 2020
Enterprise Net Promoter Score, which measures how likely customers are to recommend us, increased to 59.0 in 2020 compared to 58.6 in 2019
Grow Customer BaseConsolidated policies in force reached 175.9 million, a 20.5% increase from prior year
Property-Liability policies in force were down slightly compared to the prior year as Allstate brand growth was more than offset by a decline in the Encompass brand. Protection Services policies in force grew to 136.3 million, a 28.6% increase to the prior year, driven by continued rapid expansion in Allstate Protection Plans
Achieve Target Returns on CapitalStrong results in Property-Liability insurance with a combined ratio of 87.6
21.0% return on average common shareholders’ equity in 2020
Proactively Manage InvestmentsTotal return on the $94.24 billion investment portfolio was 7.1% in 2020
Net investment income of $2.85 billion in 2020 was 9.7% below prior year reflecting lower reinvestment rates and reduced performance-based income
Build Long-Term Growth PlatformsAllstate made substantial progress in building higher growth business models to increase personal property-liability market share under the Allstate brand
Allstate Protection Plans expanded its total addressable market through new accounts addressing furniture, appliances and international markets
(1)2021 operating priorities will remain consistent with the 2020 priorities.
Consolidated Net Income
($ in millions)
all-20201231_g23.jpg

Consolidated net income applicable to common shareholders increased 16.7% or $783 million to $5.46 billion in 2020 compared to 2019, primarily due to higher Allstate Protection underwriting income and higher Protection Services adjusted net income, partially offset by Shelter-in-Place Payback expense, lower net realized capital gains and lower net investment income.
For the twelve months ended December 31, 2020, return on common shareholders’ equity was 21.0% compared to 21.7% for the twelve months ended December 31, 2019.
Total Revenue
($ in millions)
all-20201231_g24.jpg
Total revenue increased 0.3% to $44.79 billion in 2020 compared to 2019, driven by a 2.8% increase in property and casualty insurance premiums earned, partially offset by lower realized capital gains and lower net investment income. Insurance premiums increased in Allstate brand and Protection Services (Allstate Protection Plans and Allstate Dealer Services).
Net Investment Income
($ in millions)
all-20201231_g25.jpg
Net investment income decreased 9.7% to $2.85 billion in 2020 compared to 2019, primarily due to a decline in market-based income driven by lower interest-bearing portfolio yields and lower performance-based results, primarily from limited partnerships.
The Allstate Corporation 37

2020 Form 10-K
Summarized financial results
Years Ended December 31,
($ in millions)202020192018
Revenues  
Property and casualty insurance premiums$37,073 $36,076 $34,048 
Life premiums and contract charges2,444 2,501 2,465 
Other revenue1,065 1,054 939 
Net investment income2,853 3,159 3,240 
Realized capital gains (losses)1,356 1,885 (877)
Total revenues44,791 44,675 39,815 
Costs and expenses  
Property and casualty insurance claims and claims expense(22,001)(23,976)(22,778)
Shelter-in-Place Payback expense(948)— — 
Life contract benefits and interest credited to contractholder funds(2,881)(2,679)(2,627)
Amortization of deferred policy acquisition costs(5,630)(5,533)(5,222)
Operating, restructuring and interest expenses(6,309)(6,058)(5,993)
Pension and other postretirement remeasurement gains (losses)51 (114)(468)
Amortization of purchased intangibles(118)(126)(105)
Impairment of purchased intangibles— (106)— 
Total costs and expenses(37,836)(38,592)(37,193)
Gain on disposition of operations
Income tax expense(1,383)(1,242)(468)
Net income5,576 4,847 2,160 
Preferred stock dividends(115)(169)(148)
Net income applicable to common shareholders$5,461 $4,678 $2,012 
Segment Highlights
Allstate Protection underwriting income totaled $4.57 billion in 2020, a 56.8% increase from $2.91 billion in 2019, primarily due to lower auto non-catastrophe losses, increased premiums earned and favorable catastrophe reserve reestimates in personal lines homeowners driven by subrogation settlements, partially offset by Shelter-in-Place Payback expense and higher catastrophe losses.
Catastrophe losses were $2.81 billion in 2020 compared $2.56 billion in 2019.
Subrogation settlements Allstate recognized favorable prior year catastrophe reserve reestimates of approximately $450 million and $45 million, pre-tax, net of expenses and adjustments to reinsurance, in the third quarter of 2020 related to PG&E Corporation and Southern California Edison (together “subrogation settlements”), respectively. See Note 8 of the consolidated financial statements for additional details.
Premiums written increased 1.0% to $35.77 billion in 2020 compared to 2019.
Protection Services adjusted net income was $153 million in 2020 compared to $38 million in 2019. The improvement in 2020 was primarily due to growth of Allstate Protection Plans and improved profitability at Allstate Roadside, partially offset by investments at Allstate Identity Protection.
Total revenues increased 16.6% or $273 million to $1.92 billion in 2020 from $1.65 billion in 2019 due to Allstate Protection Plan’s growth through its U.S. retail and international channels, partially offset by declines in revenue at Allstate Roadside.
Allstate Life adjusted net income was $194 million in 2020 compared to $261 million in 2019. The decrease was primarily due to higher contract benefits due to mortality associated with the Coronavirus, partially offset by lower operating costs and expenses.
Premiums and contract charges totaled $1.34 billion in both 2020 and 2019.
Allstate Benefits adjusted net income was $96 million in 2020 compared to $115 million in 2019. The decrease was primarily due to lower premiums and higher operating costs and expenses driven by a $41 million, pre-tax, write-off of capitalized software costs associated with a billing system in the second quarter of 2020, partially offset by lower contract benefits.
Premiums and contract charges totaled $1.09 billion in 2020, a decrease of 4.5% from $1.15 billion in 2019.
Allstate Annuities adjusted net loss was $53 million in 2020 compared to adjusted net income of $10 million in 2019, primarily due to lower net investment income, partially offset by lower contract benefits.
Net investment income decreased 17.0% to $761 million in 2020 from $917 million in 2019. The decrease was primarily due to a decline in market-based income driven by lower interest-bearing portfolio yields as well as lower performance-based investment results and lower average investment balances.
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2020 Form 10-K

Financial Highlights
Investments totaled $94.24 billion as of December 31, 2020, increasing from $88.36 billion as of December 31, 2019.
Shareholders’ equity As of December 31, 2020, shareholders’ equity was $30.22 billion. This total included $5.52 billion in deployable assets at the parent holding company level and approximately $4 billion were used to fund the purchase of National General, which closed on January 4, 2021. Deployable assets include $1.2 billion of proceeds from a debt issuance in November 2020 and comprise cash and investments that are generally saleable within one quarter.
Book value per diluted common share (ratio of common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $91.50 as of December 31, 2020, an increase of 25.1% from $73.12 as of December 31, 2019.
Return on average common shareholders’ equity For the twelve months ended December 31, 2020, return on common shareholders’ equity was 21.0%, a decrease of 0.7 points from 21.7% for the twelve months ended December 31, 2019, primarily due to an increase in average common shareholders’ equity, partially offset by higher net income applicable to common shareholders.
Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement gains of $51 million in 2020, primarily related to favorable asset performance compared to the expected return on plan assets, partially offset by a decrease in the discount rate and changes in actuarial assumptions. See Note 17 of the consolidated financial statements and Application of Critical Accounting Estimates section of the MD&A for further information.
Adopted accounting standard
Effective January 1, 2020, we adopted the measurement of credit losses on financial instruments accounting standard that primarily affected mortgage loans, bank loans and reinsurance recoverables. Subsequent to the adoption, we measure credit losses on financial instruments, including losses related to mortgage loans, bank loans and reinsurance recoverables, using the expected credit loss model. This model requires us to recognize an estimate of expected credit losses for affected financial assets in a valuation allowance that when deducted from the amortized cost basis of the related financial assets results in a net carrying value at the amount expected to be collected.
See Note 2 of the consolidated financial statements for additional details on the adopted accounting standard.
The Allstate Corporation 39

2020 Form 10-K Property-Liability
Property-Liability Operations
Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Discontinued Lines and Coverages. 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 Discontinued Lines and Coverages segments. Management reviews assets at the Property-Liability level for decision-making purposes.
The table below includes GAAP operating ratios we use to measure our profitability. We believe that they enhance an investor’s understanding of our profitability. They are calculated as follows:
Loss ratio: the ratio of claims and claims expense to premiums earned. Loss ratios include the impact of catastrophe losses.
Expense ratio: the ratio of amortization of DAC, operating costs and expenses, 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 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.
Effect of catastrophe losses on combined ratio: the ratio 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 ratio of prior year reserve reestimates included in claims and claims expense to premiums earned. This ratio includes prior year reserve reestimates of catastrophe losses.
Effect of amortization of purchased intangibles on combined ratio: the ratio of amortization of purchased intangibles to premiums earned.
Effect of impairment of purchased intangibles on combined ratio: the ratio of impairment of purchased intangibles to premiums earned.
Effect of restructuring and related charges on combined ratio: the ratio of restructuring and related charges to premiums earned.
Effect of Shelter-in-Place Payback expense on combined and expense ratios: the ratio of Shelter-in-Place Payback expense 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 the Discontinued Lines and Coverages segment to Property-Liability premiums earned. The sum of the effect of Discontinued Lines and Coverages on the combined ratio and the Allstate Protection combined ratio is equal to the Property-Liability combined ratio.
40 www.allstate.com

Property-Liability 2020 Form 10-K

Summarized financial data
($ in millions, except ratios)202020192018
Premiums written$35,768 $35,419 $33,555 
Revenues
Premiums earned$35,580 $34,843 $32,950 
Other revenue736 741 738 
Net investment income1,421 1,533 1,464 
Realized capital gains (losses)990 1,470 (639)
Total revenues38,727 38,587 34,513 
Costs and expenses
Claims and claims expense(21,626)(23,622)(22,435)
Shelter-in-Place Payback expense (1)
(948)— — 
Amortization of DAC(4,642)(4,649)(4,475)
Operating costs and expenses (2)
(4,443)(4,420)(4,465)
Restructuring and related charges (3)
(235)(38)(60)
Impairment of purchased intangibles— (51)— 
Total costs and expenses(31,894)(32,780)(31,435)
Income tax expense
(1,382)(1,196)(613)
Net income applicable to common shareholders$5,451 $4,611 $2,465 
Underwriting income$4,422 $2,804 $2,253 
Net investment income1,421 1,533 1,464 
Income tax expense on operations(1,166)(887)(747)
Realized capital gains (losses), after-tax774 1,161 (500)
Tax Legislation expense— — (5)
Net income applicable to common shareholders$5,451 $4,611 $2,465 
Catastrophe losses
Catastrophe losses, excluding reserve reestimates$3,314 $2,509 $2,830 
Catastrophe reserve reestimates (4) (5)
(503)48 25 
Total catastrophe losses$2,811 $2,557 $2,855 
Non-catastrophe reserve reestimates (4)
68 (176)(278)
Prior year reserve reestimates (4) (5)
(435)(128)(253)
GAAP operating ratios
Loss ratio60.8 67.8 68.1 
Expense ratio (6)
26.8 24.2 25.1 
Combined ratio87.6 92.0 93.2 
Effect of catastrophe losses on combined ratio7.9 7.3 8.7 
Effect of prior year reserve reestimates on combined ratio
(1.2)(0.3)(0.7)
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio(1.4)0.1 0.1 
Effect of restructuring and related charges on combined ratio (3)
0.7 0.1 0.2 
Effect of amortization of purchased intangibles on combined ratio
0.1 — — 
Effect of impairment of purchased intangibles— 0.1 — 
Effect of Shelter-in-Place Payback expense on combined and expense ratios2.7 — — 
Effect of Discontinued Lines and Coverages on combined ratio0.4 0.4 0.3 
(1)Auto and commercial lines customers received a Shelter-in-Place Payback due to the significant declines in the number of auto accidents caused by mandated stay-at-home orders, other pandemic containment actions and reduced economic activity.
(2)As a result of the Coronavirus, we offered customers the Allstate Special Payment plan to provide more flexible payment options, including the option to delay payments, resulting in increased bad debt expense of $60 million in 2020. This increase added 0.2 points to the expense ratio in 2020.
(3)Restructuring and related charges in 2020 primarily related to Transformative Growth. See Note 13 of the consolidated financial statements for additional details.
(4)Favorable reserve reestimates are shown in parentheses.
(5)2020 includes approximately $495 million of favorable reserve reestimates related to the PG&E Corporation and Southern California Edison (together “subrogation settlements”), which primarily impacted homeowners. See Note 8 of the consolidated financial statements for additional details.
(6)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.
The Allstate Corporation 41

2020 Form 10-K Property-Liability
Net investment income decreased 7.3% or $112 million in 2020 compared to 2019, due to a decline in market-based income driven by lower interest-bearing portfolio yields as well as lower performance-based investment results, mainly from limited partnerships. The maturity profile of fixed income securities in our Property-Liability portfolio was a duration of 5.0 years as of December 31, 2020 compared to 5.2 years as of December 31, 2019.
Net investment income
For the years ended December 31,
($ in millions)202020192018
Fixed income securities$1,110 $1,066 $943 
Equity securities60 155 121 
Mortgage loans24 17 17 
Limited partnership interests238 296 378 
Short-term investments12 56 40 
Other101 107 123 
Investment income, before expense1,545 1,697 1,622 
Investment expense
Investee level expenses (1)
(36)(51)(45)
Securities lending expenses(4)(27)(18)
Operating costs and expenses(84)(86)(95)
Total investment expense(124)(164)(158)
Net investment income$1,421 $1,533 $1,464 
(1)    Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses.
Realized capital gains and losses Net realized capital gains in 2020 primarily related to gains on sales of fixed income securities. Net realized capital gains in 2019 primarily related to increased valuation of equity investments and gains on sales of fixed income securities.
Realized capital gains (losses)
For the years ended December 31,
($ in millions)202020192018
Sales (1)
$890 $498 $(148)
Credit losses (2)
(31)(26)(5)
Valuation of equity investments - appreciation (decline):
Equity securities123 840 (434)
Equity fund investments in fixed income securities(20)43 (13)
Limited partnerships (3)
(21)141 (75)
Total valuation of equity investments82 1,024 (522)
Valuation and settlements of derivative instruments49 (26)36 
Realized capital gains (losses), pre-tax990 1,470 (639)
Income tax (expense) benefit(216)(309)139 
Realized capital gains (losses), after-tax$774 $1,161 $(500)
(1)Beginning January 1, 2020, depreciation previously included in investee level expenses is reported as realized capital gains or losses.
(2)Due to the adoption of the measurement of credit losses on financial instruments accounting standard, realized capital losses previously reported as other-than-temporary impairment write-downs are now presented as credit losses.
(3)Relates to limited partnerships where the underlying assets are predominately public equity securities.
42 www.allstate.com

Allstate Protection 2020 Form 10-K

Allstate Protection Segment
Private passenger auto, homeowners, and other personal lines insurance products are offered to consumers through both exclusive and independent agents and directly through contact centers and online. Our strategy is to provide open access and choice of interaction, while offering affordable, simple and connected solutions to meet customers’ evolving needs and protect them from life’s uncertainties. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.
As part of Transformative Growth, Esurance results were combined into the Allstate brand in the third quarter of 2020. Historical results have been updated to conform with this presentation.
Underwriting results
For the years ended December 31,
($ in millions)202020192018
Premiums written$35,768 $35,419 $33,555 
Premiums earned$35,580 $34,843 $32,950 
Other revenue736 741 738 
Claims and claims expense(21,485)(23,517)(22,348)
Shelter-in-Place Payback expense(948)— — 
Amortization of DAC(4,642)(4,649)(4,475)
Other costs and expenses(4,440)(4,417)(4,462)
Restructuring and related charges(235)(38)(60)
Impairment of purchased intangibles— (51)— 
Underwriting income$4,566 $2,912 $2,343 
Catastrophe losses$2,811 $2,557 $2,855 
Underwriting income (loss) by line of business
Auto$3,444 $1,688 $1,791 
Homeowners824 914 483 
Other personal lines (1)
264 224 110 
Commercial lines(36)14 (83)
Other business lines (2)
67 75 49 
Answer Financial(3)(7)
Underwriting income$4,566 $2,912 $2,343 
(1)Other personal lines include renters, condominium, landlord and other personal lines products.
(2)Other business lines primarily represent Ivantage, a general agency for Allstate exclusive agents and reflects revenue and direct operating expenses of the business. Ivantage provides agents a solution for their customers when coverage through Allstate brand underwritten products is not available. 
The Allstate Corporation 43

2020 Form 10-K Allstate Protection
Changes in underwriting results from prior year by component and by line of business (1)
For the year ended December 31,
AutoHomeownersOther personal linesCommercial lines
Allstate Protection (2)
($ in millions)2020201920202019202020192020201920202019
Underwriting income (loss) - prior year$1,688 $1,791 $914 $483 $224 $110 $14 $(83)$2,912 $2,343 
Changes in underwriting income (loss) from:
Increase (decrease) premiums earned452 1,218 342 395 58 53 (115)227 737 1,893 
Increase (decrease) other revenue(11)(2)— (1)(1)— (5)
(Increase) decrease incurred claims and claims expense (“losses”):
Incurred losses, excluding catastrophe losses and reserve reestimates2,450 (1,002)(78)(183)21 116 (219)2,494 (1,383)
Catastrophe losses, excluding reserve reestimates100 (33)(823)294 (70)51 (12)(805)321 
Catastrophe reserve reestimates27 (22)488 (1)39 (1)(3)551 (23)
Non-catastrophe reserve reestimates(243)(110)16 (50)35 (14)(16)90 (208)(84)
             Losses subtotal2,334 (1,167)(397)60 10 57 85 (119)2,032 (1,169)
Shelter-in-Place Payback expense(944)— — — — — (4)— (948)— 
(Increase) decrease expenses(75)(155)(33)(24)(33)(15)(11)(162)(158)
Underwriting income (loss)$3,444 $1,688 $824 $914 $264 $224 $(36)$14 $4,566 $2,912 
(1)The 2020 column presents changes relative to 2019. The 2019 column presents changes relative to 2018.
(2)Includes other business lines and Answer Financial.
Underwriting income increased 56.8% or $1.65 billion in 2020 compared to 2019, primarily due to lower auto non-catastrophe losses, increased premiums earned and favorable catastrophe reserve reestimates in personal lines homeowners driven by subrogation settlements, partially offset by Shelter-in-Place Payback expense and higher catastrophe losses.

44 www.allstate.com

Allstate Protection 2020 Form 10-K

Premiums written is 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 Consolidated Statements of Financial Position.
Premiums written and earned by line of business
For the years ended December 31,
($ in millions)202020192018
Premiums written
Auto$24,611 $24,462 $23,367 
Homeowners8,400 8,165 7,698 
Other personal lines1,965 1,890 1,831 
Subtotal – Personal lines34,976 34,517 32,896 
Commercial lines792 902 659 
Total premiums written$35,768 $35,419 $33,555 
Reconciliation of premiums written to premiums earned:
Increase in unearned premiums(205)(614)(544)
Other17 38 (61)
Total premiums earned$35,580 $34,843 $32,950 
Auto$24,640 $24,188 $22,970 
Homeowners8,254 7,912 7,517 
Other personal lines1,919 1,861 1,808 
Subtotal – Personal lines34,813 33,961 32,295 
Commercial lines767 882 655 
Total premiums earned$35,580 $34,843 $32,950 
Auto insurance premiums written increased 0.6% or $149 million in 2020 compared to 2019.
Homeowners insurance premiums written increased 2.9% or $235 million in 2020 compared to 2019.
Unearned premium balance and the time frame in which we expect to recognize these premiums as earned
($ in millions)As of December 31,% earned after
20202019Three monthsSix monthsNine monthsTwelve months
Allstate brand:
Auto$6,409 $6,405 70.7 %96.3 %99.1 %100.0 %
Homeowners4,379 4,220 43.2 %75.4 %94.1 %100.0 %
Other personal lines1,001 952 43.3 %75.3 %94.1 %100.0 %
Commercial lines295 270 43.3 %74.6 %93.7 %100.0 %
Total Allstate brand12,084 11,847 58.0 %86.6 %96.8 %100.0 %
Encompass brand:
Auto258 276 44.1 %75.8 %94.2 %100.0 %
Homeowners207 214 43.9 %75.8 %94.3 %100.0 %
Other personal lines39 41 44.2 %76.1 %94.3 %100.0 %
Total Encompass brand504 531 44.0 %75.8 %94.2 %100.0 %
Allstate Protection unearned premiums$12,588 $12,378 
The Allstate Corporation 45

2020 Form 10-K Allstate Protection
Combined ratios by line of business
For the years ended December 31,
Loss ratio
Expense ratio (1)
Combined ratio
202020192018202020192018202020192018
Auto57.5 68.2 66.8 28.5 24.8 25.4 86.0 93.0 92.2 
Impact of Shelter-in-Place Payback expense— — — 3.8 — — 3.8 — — 
Homeowners67.3 65.1 69.4 22.7 23.3 24.2 90.0 88.4 93.6 
Other personal lines58.7 61.1 66.0 27.5 26.9 27.9 86.2 88.0 93.9 
Commercial lines82.4 81.3 91.3 22.3 17.1 21.4 104.7 98.4 112.7 
Impact of Shelter-in-Place Payback expense— — — 0.5 — 0.5 — — 
Total60.4 67.5 67.8 26.8 24.1 25.1 87.2 91.6 92.9 
Impact of restructuring and related charges (2)
— — — 0.7 0.1 0.2 0.7 0.1 0.2 
Impact of Shelter-in-Place Payback expense— — — 2.7 — — 2.7 — — 
Impact of Allstate Special Payment plan bad debt expense (3)
— — — 0.2 — — 0.2 — — 
(1)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.
(2)Restructuring and related charges in 2020 primarily related to Transformative Growth.
(3)Relates to the Allstate Special Payment plan offered to customers as a result of the Coronavirus to provide more flexible payment options, including the option to delay payments. Approximately 70% of the higher bad debt expense was attributed to auto.
Loss ratios by line of business
For the years ended December 31,
Loss ratio
Effect of catastrophe losses on
combined ratio
Effect of prior year reserve reestimates on combined ratioEffect of catastrophe losses included in prior year reserve reestimates on combined ratio
202020192018202020192018202020192018202020192018
Auto57.5 68.2 66.8 1.2 1.7 1.6 (0.4)(1.4)(2.0)(0.1)(0.1)(0.2)
Homeowners67.3 65.1 69.4 27.9 24.8 30.0 (5.3)0.8 0.2 (5.1)0.8 0.8 
Other personal lines58.7 61.1 66.0 10.4 9.0 12.1 (3.5)0.5 (0.4)(2.0)— — 
Commercial lines82.4 81.3 91.3 3.5 1.4 3.4 4.7 1.9 16.5 0.2 (0.1)— 
Total60.4 67.5 67.8 7.9 7.3 8.7 (1.6)(0.7)(1.0)(1.4)0.1 0.1 

46 www.allstate.com

Allstate Protection 2020 Form 10-K

Catastrophe losses increased 9.9% or $254 million in 2020 compared to 2019. Catastrophe losses include approximately $495 million favorable subrogation settlements, which decreased the loss ratio by 1.4 points in 2020 compared to the same period of 2019. Excluding subrogation settlements, catastrophe losses increased approximately 30% or $750 million compared to 2019.
We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes. We are also exposed to man-made catastrophic events, such as certain types of terrorism, wildfires or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.
Catastrophe losses in 2020 by the size of event
($ in millions)
Number
of events
Claims
and claims
expense
Combined ratio impactAverage catastrophe loss per event
Size of catastrophe loss
Greater than $250 million0.9 %$518 18.4 %1.4 $518 
$101 million to $250 million5.7 953 33.9 2.7 159 
$50 million to $100 million11 10.5 740 26.3 2.1 67 
Less than $50 million87 82.9 1,103 39.3 3.1 13 
Total105 100.0 %3,314 117.9 9.3 32 
Prior year reserve reestimates(503)(17.9)(1.4)
Total catastrophe losses$2,811 100.0 %7.9 
Catastrophe losses by the type of event
For the years ended December 31,
($ in millions)Number of events2020Number of events2019Number of events2018
Hurricanes/Tropical storms$1,001 $86 $200 
Tornadoes43 551 17 
Wind/Hail73 1,940 91 1,721 99 1,752 
Wildfires17 300 28 10 745 
Other events30 123 116 
Prior year reserve reestimates(503)48 25 
Total catastrophe losses105 $2,811 110 $2,557 117 $2,855 
Catastrophe management
Historical catastrophe experience  For the last ten years, the average annual impact of catastrophes on our loss ratio was 8.2 points, but it has varied from 4.5 points to 14.7 points. The average annual impact of catastrophes on the homeowners loss ratio for the last ten years was 26.6 points. Over time, we have limited our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes by our participation in various state facilities. For further discussion of these facilities, see Note 14 of the consolidated financial statements. However, the impact of these actions may be diminished by the growth in insured values, and the effect of state insurance laws and regulations. In addition, in various states we are required to participate in assigned risk plans, reinsurance facilities and joint underwriting associations that provide insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers. Because of our participation in these and other state facilities such as wind pools, we may be exposed to losses that surpass the capitalization of these facilities and to assessments from these facilities.
We have continued to take actions to maintain an appropriate level of exposure to catastrophic events while continuing to meet the needs of our customers, including the following:
Continuing to limit or not offer new homeowners, manufactured home and landlord package policy business in certain coastal geographies.
Increased capacity in our brokerage platform for customers not offered an Allstate policy.
We began to write a limited number of homeowners policies in select areas of California in 2016, additionally we:
Continue to renew current policyholders and allow replacement policies for existing customers who buy a new home or change their residence to rental property
Have decreased our overall homeowner exposures in California by more than 50% since 2007
Write homeowners coverage through our excess and surplus lines carrier, North Light Specialty Insurance Company (“North Light”), which includes earthquake coverage (other
The Allstate Corporation 47

2020 Form 10-K Allstate Protection
than fire following earthquakes) that is currently ceded via quota share reinsurance.
In certain states, we have been ceding wind exposure related to insured property located in wind pool eligible areas.
Starting in the second quarter of 2017, we began writing a limited number of homeowners policies in select areas of Florida and continue to support existing customers who replace their currently-insured home with an acceptable property. Encompass withdrew from property lines in Florida in 2009.
Tropical cyclone deductibles are generally higher than all peril deductibles and are in place for a large portion of coastal insured properties.
Auto comprehensive damage coverage generally includes coverage for flood-related loss. We have additional catastrophe exposure, beyond the property lines, for auto customers who have purchased comprehensive damage coverage.
We offer a homeowners policy available in 43 states, Allstate House and Home®, that provides options of coverage for roof damage, including graduated coverage and pricing based on roof type and age. In 2020, premiums written totaled $3.92 billion or 46.7% of homeowners premiums written compared to $3.44 billion or 42.1% in 2019.
Hurricanes    We consider the greatest areas of potential catastrophe losses due to hurricanes generally to be major metropolitan centers in counties along the eastern and gulf coasts of the United States. The average premium on a property policy near these coasts is generally greater than in other areas. However, average premiums are often not considered commensurate with the inherent risk of loss. In addition, as explained in Note 14 of the consolidated financial statements, in various states Allstate is subject to assessments from assigned risk plans, reinsurance facilities and joint underwriting associations providing insurance for wind related property losses.
We have addressed our risk of hurricane loss by, among other actions, purchasing reinsurance for specific states and on a countrywide basis for our personal lines property insurance in areas most exposed to hurricanes, limiting personal homeowners, landlord package policy and manufactured home new business writings in coastal areas in southern and eastern states, implementing tropical cyclone deductibles where appropriate, and not offering continuing coverage on certain policies in coastal counties in certain states. We continue to seek appropriate returns for the risks we write. This may require further actions, similar to those already taken, in geographies where we are not getting appropriate
returns. However, we may maintain or opportunistically increase our presence in areas where adequate risk adjusted returns can be achieved.
Earthquakes    We do not offer earthquake coverage in most states. We retain approximately 20,000 PIF with earthquake coverage, primarily in Kentucky, due to regulatory and other reasons. We purchase reinsurance in Kentucky and enter into arrangements in many states to make earthquake coverage available through our brokerage platform.
We continue to have exposure to earthquake risk on certain policies that do not specifically exclude coverage for earthquake losses, including our auto policies, and to fires following earthquakes. Allstate homeowner policyholders in California are offered coverage for damage caused by an earthquake through the California Earthquake Authority (“CEA”), a privately-financed, publicly-managed state agency created to provide insurance coverage for earthquake damage. Allstate is subject to assessments from the CEA under certain circumstances as explained in Note 14 of the consolidated financial statements. While North Light writes property policies in California, which can include earthquake coverage, this coverage is 100% ceded via quota share reinsurance.
Fires following earthquakes    Under a standard homeowners policy we cover fire losses, including those caused by an earthquake. Actions taken related to our risk of loss from fires following earthquakes include restrictive underwriting guidelines in California for new business writings, purchasing reinsurance for Kentucky personal lines property risks, and purchasing nationwide occurrence reinsurance, excluding Florida.
Wildfires    Actions taken related to managing our risk of loss from wildfires include purchasing nationwide occurrence reinsurance, new and renewal inspection programs to identify and remediate wildfire risk as well as leveraging contemporary underwriting tools in select areas.  While these programs are designed to mitigate risk, the exposure to wildfires still exists. We continue to manage our exposure and seek appropriate returns for the risks we write.
To manage the exposure, we may implement further actions, similar to those already taken, in geographies where we are not achieving appropriate returns. However, we may maintain or opportunistically increase our presence in areas where adequate risk adjusted returns can be achieved.
Reinsurance  A description of our current catastrophe reinsurance program appears in Note 10 of the consolidated financial statements.

48 www.allstate.com

Allstate Protection 2020 Form 10-K

Expense ratio increased 2.7 points in 2020 compared to 2019, reflecting Shelter-in-Place Payback expense, higher restructuring charges related to Transformative Growth and bad debt expense. Excluding Shelter-in-Place Payback expense, higher restructuring charges related to Transformative Growth, bad debt expense and impairment of purchased intangibles in 2019, the expense ratio decreased 0.8 points in 2020 compared to 2019, primarily due to lower operating expenses and agent compensation, partially offset by an increase in advertising costs.
Impact of specific costs and expenses on the expense ratio
For the years ended December 31,
202020192018
Amortization of DAC13.0 13.4 13.6 
Advertising expense2.6 2.4 2.5 
Amortization of purchased intangibles0.1 — — 
Other costs and expenses7.5 8.1 8.8 
Subtotal23.2 23.9 24.9 
Restructuring and related charges (1)
0.7 0.1 0.2 
Shelter-in-Place Payback expense2.7 — — 
Allstate Special Payment plan bad debt expense0.2 — — 
Impairment of purchased intangibles— 0.1 — 
Total expense ratio26.8 24.1 25.1 
(1)Restructuring and related charges in 2020 primarily related to Transformative Growth.
Deferred acquisition costs    We establish a DAC asset for costs that are related directly to the successful acquisition of new or renewal insurance policies, principally agent remuneration and premium taxes. DAC is amortized to income over the period in which premiums are earned.
DAC balance as of December 31 by product type
($ in millions)20202019
Auto$826 $849 
Homeowners602 600 
Other personal lines144 141 
Commercial lines36 34 
Total DAC$1,608 $1,624 
The Allstate Corporation 49

2020 Form 10-K Allstate Protection
The following table presents premiums written, PIF and underwriting income (loss) by line of business for Allstate brand, Encompass brand and Allstate Protection as of or for the year ended December 31, 2020. Detailed analysis of underwriting results, premiums written and earned, and the combined ratios, including loss and expense ratios, are discussed in the brand sections.
Premiums written, policies in force and underwriting income (loss)
($ in millions)Allstate brandEncompass brandAllstate Protection
Premiums writtenAmountPercent to total brandAmountPercent to total brandAmountPercent to total
Auto$24,103 69.3 %$508 52.3 %$24,611 68.8 %
Homeowners8,012 23.0 388 39.9 8,400 23.5 
Other personal lines1,889 5.4 76 7.8 1,965 5.5 
Commercial lines792 2.3 — — 792 2.2 
Total$34,796 100.0 %$972 100.0 %$35,768 100.0 %
Percent to total Allstate Protection97.3 %2.7 %100.0 %
PIF (thousands)
Auto21,809 66.3 %451 61.1 %22,260 66.2 %
Homeowners6,427 19.5 216 29.3 6,643 19.7 
Other personal lines4,459 13.5 71 9.6 4,530 13.5 
Commercial lines216 0.7 — — 216 0.6 
Total32,911 100.0 %738 100.0 %33,649 100.0 %
Percent to total Allstate Protection97.8 %2.2 %100.0 %
Underwriting income (loss)
Auto$3,404 75.8 %$40 53.3 %$3,444 75.4 %
Homeowners798 17.8 26 34.7 824 18.0 
Other personal lines255 5.7 12.0 264 5.8 
Commercial lines(36)(0.8)— — (36)(0.8)
Other business lines67 1.5 — — 67 1.5 
Answer Financial— — — — 0.1 
Total$4,488 100.0 %$75 100.0 %$4,566 100.0 %
When analyzing premium measures and statistics for our 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 while 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 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 brand policy terms are 6 months for auto and 12 months for homeowners. Encompass brand
policy terms are generally 12 months for auto and homeowners.
Renewal ratio:  Renewal policy item counts issued during the period, based on contract effective dates, divided by the total policy item counts issued 6 months prior for auto (generally 12 months prior for Encompass brand) or 12 months prior for homeowners.
Total brand rate changes:  Based on historical premiums written, not including rate plan enhancements (such as the introduction of discounts and surcharges that result in no change in the overall rate level) and initial rates filed for insurance subsidiaries initially writing business in a location. Includes rate changes approved based on our net cost of reinsurance. The rate change percentages are calculated using approved rate changes during the period as a percentage of total brand premiums written.
50 www.allstate.com

Allstate Protection: Allstate brand 2020 Form 10-K

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Allstate brand products are sold across multiple channels, including Allstate exclusive agents and direct (online or call centers). In 2020, the Allstate brand represented 97.3% of the Allstate Protection segment’s written premium. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.
Underwriting results
For the years ended December 31,
($ in millions)202020192018
Premiums written$34,796 $34,399 $32,539 
Premiums earned$34,581 $33,825 $31,927 
Other revenue663 666 662 
Claims and claims expense(20,897)(22,828)(21,680)
Shelter-in-Place Payback expense(927)— — 
Amortization of DAC(4,451)(4,457)(4,285)
Other costs and expenses(4,253)(4,213)(4,239)
Restructuring and related charges(228)(34)(53)
Impairment of purchased intangibles— (51)— 
Underwriting income$4,488 $2,908 $2,332 
Catastrophe losses$2,716 $2,442 $2,753 
Underwriting income (loss) by line of business
Auto$3,404 $1,680 $1,777 
Homeowners798 912 481 
Other personal lines (1)
255 227 108 
Commercial lines(36)14 (83)
Other business lines (2)
67 75 49 
Underwriting income$4,488 $2,908 $2,332 
(1)Other personal lines include renters, condominium, landlord and other personal lines products.
(2)Other business lines primarily represent Ivantage.
all-20201231_g27.jpg

Underwriting income increased 54.3% or $1.58 billion in 2020 compared to 2019, primarily due to lower auto non-catastrophe losses, increased premiums earned and favorable catastrophe reserve reestimates in homeowners driven by subrogation settlements, partially offset by Shelter-in-Place Payback expense and higher catastrophe losses.
The Allstate Corporation 51

2020 Form 10-K Allstate Protection: Allstate brand
Premiums written and earned by line of business
For the years ended December 31,
($ in millions)202020192018
Premiums written
Auto$24,103 $23,922 $22,830 
Homeowners (1)
8,012 7,764 7,300 
Other personal lines1,889 1,811 1,750 
Subtotal – Personal lines34,004 33,497 31,880 
Commercial lines792 902 659 
Total$34,796 $34,399 $32,539 
Premiums earned
Auto$24,115 $23,649 $22,434 
Homeowners7,858 7,513 7,114 
Other personal lines1,841 1,781 1,724 
Subtotal – Personal lines33,814 32,943 31,272 
Commercial lines767 882 655 
Total$34,581 $33,825 $31,927 
(1)The cost of our catastrophe reinsurance program increased $35 million to $321 million in 2020 from $286 million in 2019. Catastrophe placement premiums are recorded primarily in the Allstate brand and are a reduction of premium. For a more detailed discussion on reinsurance, see the Claims and Claims Expense Reserves section of the MD&A and Note 10 of the consolidated financial statements.
Auto premium measures and statistics
2020201920182020 vs. 20192019 vs. 2018
PIF (thousands)21,809 21,913 21,592 (0.5)%1.5 %
New issued applications (thousands)3,467 3,535 3,566 (1.9)%(0.9)%
Average premium$617 $603 $586 2.3 %2.9 %
Renewal ratio (%)87.5 88.0 88.0 (0.5)— 
Total brand rate changes (%)(0.2)3.0 1.2 (3.2)1.8 
Auto insurance premiums written increased 0.8% or $181 million in 2020 compared to 2019, primarily due to an increase in average premium. During the second quarter through year-end 2020, growth in premiums written slowed significantly due to lower increases in average premium from fewer approved rate changes related to the Coronavirus.
New issued applications decreased 1.9% compared to 2019 due to impacts from the Coronavirus in the first half of 2020 and fewer new exclusive agent appointments, partially offset by an increase in direct and independent agent business.
Rate changes are maintained on a state by state basis. Auto average premium may decline in 2021 compared to 2020 as some rate changes will reflect the decline in auto miles driven and lower expenses.
PIF decreased 0.5% or 104 thousand policies as of December 31, 2020 compared to December 31, 2019 as higher PIF in Allstate brand, with increases in 20 states, including 3 of our largest 10 states, was offset by lower PIF in Esurance brand as advertising resources are redirected to Allstate brand.
Homeowners premium measures and statistics
2020201920182020 vs. 20192019 vs. 2018
PIF (thousands)6,427 6,359 6,281 1.1 %1.2 %
New issued applications (thousands)899 877 858 2.5 %2.2 %
Average premium$1,328 $1,291 $1,226 2.9 %5.3 %
Renewal ratio (%)87.5 88.2 88.0 (0.7)0.2 
Total brand rate changes (%)2.7 3.3 2.7 (0.6)0.6 
Homeowners insurance premiums written increased 3.2% or $248 million in 2020 compared to 2019, primarily due to higher average premiums, including rate changes and inflation in insured home valuations, and policy growth. Homeowners PIF increased 68 thousand policies with increases in 27 states, including 5 of our largest 10 states, as of December 31, 2020 compared to December 31, 2019.
Other personal lines premiums written increased 4.3% or $78 million in 2020 compared to 2019. The
increase in 2020 was primarily due to increases in condominium, personal umbrella and boat insurance premiums.
Commercial lines premiums written decreased 12.2%or $110 million in 2020 compared to 2019, primarily due to lower miles driven and utilization in our shared economy business related to the impacts of the Coronavirus. PIF for the shared economy agreements typically reflect contracts that cover multiple insureds as opposed to individual insureds.
52 www.allstate.com

Allstate Protection: Allstate brand 2020 Form 10-K

Combined ratios by line of business
For the years ended December 31,
Loss ratio
Expense ratio (1)
Combined ratio
202020192018202020192018202020192018
Auto57.5 68.3 66.8 28.4 24.6 25.3 85.9 92.9 92.1 
Impact of Shelter-in-Place Payback expense— — — 3.8 — — 3.8 — — 
Homeowners67.5 65.0 69.5 22.3 22.9 23.7 89.8 87.9 93.2 
Other personal lines58.8 60.7 66.3 27.3 26.6 27.4 86.1 87.3 93.7 
Commercial lines82.4 81.3 91.3 22.3 17.1 21.4 104.7 98.4 112.7 
Impact of Shelter-in-Place Payback expense— — — 0.5 — — 0.5 — — 
Total60.4 67.5 67.9 26.6 23.9 24.8 87.0 91.4 92.7 
Impact of restructuring and related charges (2)
— — — 0.7 0.1 0.2 0.7 0.1 0.2 
Impact of Shelter-in-Place Payback expense— — — 2.7 — — 2.7 — — 
Impact of Allstate Special Payment plan bad debt expense (3)
— — — 0.2 — — 0.2 — — 
(1)    Other revenue is deducted from operating costs and expenses in the expense ratio calculation.
(2)Restructuring and related charges in 2020 primarily related to Transformative Growth.
(3)Relates to the Allstate Special Payment plan offered to customers as a result of the Coronavirus to provide more flexible payment options, including the option to delay payments. Approximately 70% of the higher bad debt expense was attributed to auto.
Loss ratios by line of business
For the years ended December 31,
Loss ratioEffect of catastrophe lossesEffect of prior year reserve reestimates
Effect of catastrophe losses included in prior year reserve reestimates (1)
202020192018202020192018202020192018202020192018
Auto57.5 68.3 66.8 1.2 1.7 1.6 (0.5)(1.3)(2.0)(0.2)(0.1)(0.2)
Homeowners67.5 65.0 69.5 28.2 24.8 30.5 (5.1)0.7 — (4.9)0.7 0.8 
Other personal lines58.8 60.7 66.3 10.5 9.2 12.2 (3.1)0.6 0.4 (2.0)0.1 (0.2)
Commercial lines82.4 81.3 91.3 3.5 1.4 3.4 4.7 1.9 16.5 0.2 (0.1)— 
Total60.4 67.5 67.9 7.9 7.2 8.6 (1.5)(0.7)(1.0)(1.3)0.1  
(1)    2020 includes approximately $450 million of favorable reserve reestimates related to subrogation settlements, which primarily impacted homeowners. See Note 8 of the consolidated financial statements for additional details.
The Allstate Corporation 53

2020 Form 10-K Allstate Protection: Allstate brand
Frequency and severity statistics, which are influenced by driving patterns, inflation and other factors, are provided to describe the trends in loss costs. Our reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine our best estimate of recorded reserves. We use the following statistics to evaluate losses:
Gross claim frequency (1) is calculated as annualized notice counts 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 severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period.
Percent change in frequency or severity statistics is calculated as the amount of increase or decrease in the paid or gross claim frequency or severity in the current period compared to the same period in the prior year divided by the prior year paid or gross claim frequency or severity.
(1)Excludes counts associated with catastrophe events.
We have expanded our utilization of virtual claims processes in response to the Coronavirus. We are continuing to implement new technology and process improvements that provide continued loss cost accuracy, efficient processing and enhanced customer experiences that are simple, fast and produce high degrees of satisfaction.
Digital Operating Centers handle auto physical damage claims countrywide utilizing our virtual estimation capabilities, which includes estimating damage with photos and video through the use of QuickFoto Claim® and Virtual Assist®.
Virtual Assist and aerial imagery using satellites, airplanes and drones handle property claims by estimating damage through video.
These organizational and process changes impact frequency and severity statistics as changes in claim opening and closing practices and shifts in timing, if any, can impact comparisons to prior periods.
Auto loss ratio decreased 10.8 points in 2020 compared to 2019, primarily due to decline in non-catastrophe losses driven by favorable frequency, higher premiums earned and lower catastrophe losses, partially offset by increased severity and less favorable non-catastrophe prior year reserve reestimates compared to prior year.
Auto property damage frequency and severity statistics
(% change year-over-year)For the year ended December 31, 2020
Gross claim frequency(29.1)%
Paid claim severity10.0 
The impacts of the Coronavirus affect frequency and severity statistics including:
Shelter-in-place restrictions, social distancing requirements, limits on large gatherings and events, and restrictions on non-essential businesses as these become more or less strict
Unemployment levels
Reduced commuting activity
Paid claims settlement rates as the low frequency environment creates capacity to settle claims faster
Driving behavior (e.g., speed, time of day) impacting mix of claim types
Labor and part cost variability
Changes in limits purchased
Court system variability in both timing and magnitude of claim settlement
Property damage gross claim frequency decreased in 2020 compared to 2019 due to factors including:
Declines in auto miles driven.
Declines in gross claim frequency compared to the prior year moderated in the second half of 2020 from earlier in the year, reflecting an increase in miles driven compared to April and May 2020 as shelter-in-place restrictions were lifted in many states.
Property damage paid claim severity increased in 2020 compared to 2019 due to factors including:
Claims settled within days or weeks of the loss tend to be less complex and have lower severity, while higher severity property damage claims generally take longer to resolve.
The reduction in new claims due to lower frequency, as described above, led to an increase in the proportion of more complex, higher severity paid claims to total paid claims.
Higher costs to repair more sophisticated newer model vehicles, higher third-party subrogation demands and increased costs associated with total losses.
Bodily injury gross claim frequency was consistent with trends noted in property damage. Bodily injury severity trends increased at a rate above medical care inflation indices in 2020.
54 www.allstate.com

Allstate Protection: Allstate brand 2020 Form 10-K

Homeowners loss ratio increased 2.5 points in 2020 compared to 2019, primarily due to higher catastrophe losses and increased claim severity, partially offset by favorable catastrophe reserve reestimates driven by subrogation settlements, increased premiums earned and improved claim frequency.
Homeowners frequency and severity statistics (excluding catastrophe losses)
(% change year-over-year)For the year ended December 31, 2020
Gross claim frequency(4.0)%
Paid claim severity7.1 
Gross claim frequency excluding catastrophe losses decreased in 2020 compared to 2019 due to decreases in water and theft claims, partially offset by increases in fire and wind/hail. Paid claim severity excluding catastrophe losses increased in 2020 compared to 2019 as we experienced increased claim
severity in wind/hail and fire perils. Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the year.
Other personal lines loss ratio decreased 1.9 points in 2020 compared to 2019, primarily due to increased premiums earned, favorable catastrophe reserve reestimates driven by the subrogation settlements and favorable non-catastrophe reserve reestimates, partially offset by higher catastrophe losses.
Commercial lines loss ratio increased 1.1 points in 2020 compared to 2019, primarily due to decreased premiums earned, higher claim severity and higher losses related to an underperforming account that was not renewed, partially offset by a decline in non-catastrophe losses driven by favorable auto frequency related to the Coronavirus.
Impact of specific costs and expenses on the expense ratio
For the years ended December 31,
202020192018
Amortization of DAC (1)
12.9 13.2 13.4 
Advertising expense2.7 2.5 2.5 
Other costs and expenses7.4 7.9 8.7 
Subtotal23.0 23.6 24.6 
Restructuring and related charges (2)
0.7 0.1 0.2 
Impairment of purchased intangibles— 0.2 — 
Shelter-in-Place Payback expense2.7 — — 
Allstate Special Payment plan bad debt expense0.2 — — 
Total expense ratio26.6 23.9 24.8 
(1)    Primarily includes agent compensation and premium taxes.
(2)Restructuring and related charges in 2020 primarily related to Transformative Growth.
Expense ratio increased 2.7 points in 2020 compared to 2019, reflecting Shelter-in-Place Payback expense, higher restructuring charges related to Transformative Growth and bad debt expense. Excluding Shelter-in-Place Payback expense, higher restructuring charges related to Transformative Growth, bad debt expense and impairment of purchased intangibles in 2019, the expense ratio decreased 0.7 points in 2020 compared to 2019, primarily due to lower operating expenses and agent compensation, partially offset by an increase in advertising costs.
The Allstate Corporation 55

2020 Form 10-K Allstate Protection: Encompass brand
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Encompass products are sold through independent agents that serve brand-neutral customers who prefer personal service and support from an independent agent. In 2020, the Encompass brand represented 2.7% of the Allstate Protection segment’s written premium. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.
Underwriting results
For the years ended December 31,
($ in millions)202020192018
Premiums written$972 $1,020 $1,016 
Premiums earned$999 $1,018 $1,023 
Other revenue
Claims and claims expense(588)(689)(668)
Shelter-in-Place Payback expense(21)— — 
Amortization of DAC(191)(192)(190)
Other costs and expenses(123)(131)(145)
Restructuring and related charges(6)(4)(7)
Underwriting income$75 $7 $18 
Catastrophe losses$95 $115 $102 
Underwriting income (loss) by line of business
Auto$40 $$14 
Homeowners26 
Other personal lines(3)
Underwriting income$75 $7 $18 

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Underwriting income increased $68 million in 2020 compared to 2019, primarily due to lower auto and homeowners non-catastrophe losses and favorable catastrophe reserve reestimates in personal lines homeowners driven by subrogation settlements, partially offset by higher catastrophe losses and Shelter-in-Place Payback expense.
56 www.allstate.com

Allstate Protection: Encompass brand 2020 Form 10-K

Premiums written and earned by line of business
For the years ended December 31,
($ in millions)202020192018
Premiums written
Auto$508 $540 $537 
Homeowners388 401 398 
Other personal lines76 79 81 
Total$972 $1,020 $1,016 
Premiums earned
Auto$525 $539 $537 
Homeowners396 399 402 
Other personal lines78 80 84 
Total$999 $1,018 $1,023 
Auto premium measures and statistics
2020201920182020 vs. 20192019 vs. 2018
PIF (thousands)451 493 502 (8.5)%(1.8)%
New issued applications (thousands)60 82 76 (26.8)%7.9 %
Average premium$1,156 $1,134 $1,118 1.9 %1.4 %
Renewal ratio (%)76.8 78.1 74.9 (1.3)3.2 
Total brand rate changes (%)(0.4)1.5 2.4 (1.9)(0.9)
Auto insurance premiums written decreased 5.9% or $32 million in 2020 compared to 2019, primarily due to decreased new issued applications and lower retention, partially offset by higher average premiums, with the top 10 states representing approximately 70% of premiums written.
Homeowners premium measure and statistics
2020201920182020 vs. 20192019 vs. 2018
PIF (thousands)216 234 239 (7.7)%(2.1)%
New issued applications (thousands)34 42 37 (19.0)%13.5 %
Average premium$1,892 $1,795 $1,724 5.4 %4.1 %
Renewal ratio (%)81.0 82.5 80.0 (1.5)2.5 
Total brand rate changes (%)4.8 9.2 4.7 (4.4)4.5 
Homeowners insurance premiums written decreased 3.2% or $13 million in 2020 compared to 2019, primarily due to decreased new issued applications and lower retention, partially offset by higher average premiums due to rate changes over the past 12 months, with the top 10 states representing approximately 70% of premiums written.
Combined ratios by line of business
For the years ended December 31,
Loss ratio
Expense ratio (1)
Combined ratio
202020192018202020192018202020192018
Auto56.8 66.8 65.0 35.6 31.7 32.4 92.4 98.5 97.4 
Impact of Shelter-in-Place Payback expense— — — 4.0 — — 4.0 — — 
Homeowners62.1 68.2 66.7 31.3 31.3 33.1 93.4 99.5 99.8 
Other personal lines56.4 71.3 60.7 32.1 32.5 35.7 88.5 103.8 96.4 
Total58.9 67.7 65.3 33.6 31.6 32.9 92.5 99.3 98.2 
Impact of restructuring and related charges (2)
— — — 0.6 0.4 0.7 0.6 0.4 0.7 
Impact of Shelter-in-Place Payback expense— — — 2.1 — — 2.1 — — 
(1)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.
(2)Restructuring and related charges in 2020 primarily related to Transformative Growth.
The Allstate Corporation 57

2020 Form 10-K Allstate Protection: Encompass brand
Loss ratios by line of business
For the years ended December 31,
Loss ratioEffect of catastrophe lossesEffect of prior year reserve reestimates
Effect of catastrophe losses included in prior year reserve reestimates (1)
202020192018202020192018202020192018202020192018
Auto56.8 66.8 65.0 1.3 1.9 1.1 1.0 (1.9)(1.9)(0.4)— (0.2)
Homeowners62.1 68.2 66.7 20.7 25.1 22.1 (9.3)3.7 3.3 (9.8)2.5 3.0 
Other personal lines56.4 71.3 60.7 7.7 6.3 8.3 (12.8)(2.5)(16.7)(2.6)(1.2)1.2 
Total58.9 67.7 65.3 9.5 11.3 10.0 (4.2)0.3 (1.1)(4.3)0.9 1.2 
(1)2020 includes approximately $45 million of favorable reserve reestimates related to subrogation settlements, which primarily impacted homeowners. See Note 8 of the consolidated financial statements for additional details.
Auto loss ratio decreased 10.0 points in 2020 compared to 2019, primarily due to lower claim frequency, partially offset by increased claim severity and unfavorable non-catastrophe reserves reestimates compared to favorable non-catastrophe reserve reestimates in the prior year.
Homeowners loss ratio decreased 6.1 points in 2020 compared to 2019, primarily due to favorable catastrophe reserve reestimates driven by subrogation settlements and lower non-catastrophe claim frequency, partially offset by higher catastrophe losses.
Impact of specific costs and expenses on the expense ratio
For the years ended December 31,
202020192018
Amortization of DAC19.1 18.8 18.5 
Advertising expense0.1 0.2 0.2 
Other costs and expenses11.7 12.2 13.5 
    Subtotal30.9 31.2 32.2 
Restructuring and related charges (1)
0.6 0.4 0.7 
Shelter-in-Place Payback expense2.1 — — 
Total expense ratio33.6 31.6 32.9 
(1)Restructuring and related charges in 2020 primarily related to the Transformative Growth.
Expense ratio increased 2.0 points in 2020 compared to 2019, primarily due to Shelter-in-Place Payback expense and higher restructuring charges related to Transformative Growth, partially offset by lower operating costs.

58 www.allstate.com

Discontinued Lines and Coverages 2020 Form 10-K

Discontinued Lines and Coverages Segment
The Discontinued Lines and Coverages segment includes results from property and casualty insurance coverage that primarily relates to policies written during the 1960s through the mid-1980s. Our exposure to asbestos, environmental and other discontinued lines claims arises principally from direct excess commercial insurance, assumed reinsurance coverage, direct primary commercial insurance and other businesses in run-off. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.
Underwriting results
For the years ended December 31,
($ in millions)202020192018
Claims and claims expense
Asbestos claims$(78)$(28)$(44)
Environmental claims(44)(36)(20)
Other discontinued lines(19)(41)(23)
Total claims and claims expense(141)(105)(87)
Operating costs and expenses(3)(3)(3)
Underwriting loss$(144)$(108)$(90)
Underwriting losses in 2020 and 2019 primarily related to our annual reserve review using established industry and actuarial best practices. The annual review resulted in unfavorable reserve reestimates totaling $132 million and $95 million, in 2020 and 2019, net of $1 million and $6 million reduction in the allowance for future uncollectible reinsurance, respectively. The reserve reestimates are included as part of claims and claims expense.
Reserve reestimates in 2020 primarily related to new reported information, court decisions and policy buyback settlements for asbestos exposures and higher than expected reported losses for environmental and other discontinued lines exposures. Reserve reestimates in 2019 primarily related to new reported information and settlement agreements, including bankruptcy proceedings, impacting asbestos and other discontinued lines and additional environmental clean-up sites.
We believe that our reserves are appropriately established based on available facts, technology, laws, regulations, and assessments of other pertinent factors and characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. However, as we progress with the resolution of disputed claims in the courts and arbitrations and with negotiations and settlements, our reported losses may be more variable.
Reserves for asbestos, environmental and other discontinued lines claims before and after the effects of reinsurance
($ in millions) December 31, 2020December 31, 2019
Asbestos claims
Gross reserves$1,204 $1,172 
Reinsurance(377)(362)
Net reserves827 810 
Environmental claims
Gross reserves249 219 
Reinsurance(43)(40)
Net reserves206 179 
Other discontinued lines
Gross reserves435 427 
Reinsurance(60)(51)
Net reserves375 376 
Total
Gross reserves
1,888 1,818 
Reinsurance
(480)(453)
Net reserves$1,408 $1,365 
The Allstate Corporation 59

2020 Form 10-K Discontinued Lines and Coverages
Reserves by type of exposure before and after the effects of reinsurance
($ in millions)December 31, 2020December 31, 2019
Direct excess commercial insurance
    Gross reserves
$1,011 $948 
    Reinsurance(358)(332)
    Net reserves653 616 
Assumed reinsurance coverage
    Gross reserves
636 606 
    Reinsurance(58)(53)
    Net reserves578 553 
Direct primary commercial insurance
    Gross reserves160 169 
    Reinsurance(63)(54)
    Net reserves97 115 
Other run-off business
    Gross reserves15 
    Reinsurance— (13)
    Net reserves
Unallocated loss adjustment expenses
    Gross reserves79 80 
    Reinsurance(1)(1)
    Net reserves78 79 
Total
    Gross reserves1,888 1,818 
    Reinsurance(480)(453)
    Net reserves$1,408 $1,365 
Percentage of gross and ceded reserves by case and incurred but not reported (“IBNR”)
December 31, 2020December 31, 2019
CaseIBNRCaseIBNR
Direct excess commercial insurance
Gross reserves (1)
65 %35 %68 %32 %
Ceded (2)
71 29 78 22 
Assumed reinsurance coverage
Gross reserves
34 66 34 66 
Ceded35 65 35 65 
Direct primary commercial insurance
Gross reserves55 45 56 44 
Ceded79 21 78 22 
(1)Approximately 67% of gross case reserves as of December 31, 2020 are subject to settlement agreements.
(2)Approximately 75% of ceded case reserves as of December 31, 2020 are subject to settlement agreements.
Gross payments from case reserves by type of exposure
($ in millions)For the years ended December 31,
20202019
Direct excess commercial insurance
Gross (1)
$88 $122 
Ceded (2)
(37)(53)
Assumed reinsurance coverage
Gross
40 43 
Ceded(7)(3)
Direct primary commercial insurance
Gross15 
Ceded(5)(2)
(1) In 2020 77% of payments related to settlement agreements.
(2) In 2020 75% of payments related to settlement agreements.  

60 www.allstate.com

Discontinued Lines and Coverages 2020 Form 10-K

Total net reserves as of December 31, 2020, included $695 million or 49% of estimated IBNR reserves compared to $660 million or 48% of estimated IBNR reserves as of December 31, 2019.
Total gross payments were $137 million and $183 million for 2020 and 2019, respectively, primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos related losses, where the scope of coverages has been agreed upon. The claims associated with these settlement agreements are expected to be substantially paid out
over the next several years as qualified claims are submitted by these insureds.
Reinsurance collections were $53 million and $49 million for 2020 and 2019, respectively. The allowance for uncollectible reinsurance recoverables was $59 million and $60 million as of December 31, 2020 and December 31, 2019, respectively. The allowance represents 10.5% and 11.1% of the related reinsurance recoverable balances as of December 31, 2020 and December 31, 2019, respectively.
The Allstate Corporation 61

2020 Form 10-K Protection Services
Protection Services Segment
all-20201231_g30.jpg
    Protection Services comprise Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside, Arity and Allstate Identity Protection. In 2020, Protection Services represented 4.3% of total revenue, 77.5% of total PIF and 3.3% of total adjusted net income. We offer consumer product protection plans, finance and insurance products (including vehicle service contracts, guaranteed asset protection waivers, road hazard tire and wheel and paintless dent repair protection), roadside assistance, device and mobile data collection services and analytic solutions using automotive telematics information and identity protection. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.
Summarized financial information
For the years ended December 31,
($ in millions)202020192018
Premiums written$1,890 $1,535 $1,431 
Revenues
Premiums$1,493 $1,233 $1,098 
Other revenue208 188 82 
Intersegment insurance premiums and service fees (1)
147 154 122 
Net investment income44 42 27 
Realized capital gains (losses)30 32 (11)
Total revenues1,922 1,649 1,318 
Costs and expenses
Claims and claims expense(386)(363)(350)
Amortization of DAC(658)(543)(463)
Operating costs and expenses(651)(661)(505)
Restructuring and related charges(3)— (4)
Amortization of purchased intangibles(106)(122)(94)
Impairment of purchased intangibles— (55)— 
Total costs and expenses(1,804)(1,744)(1,416)
Income tax (expense) benefit(26)18 19 
Net income (loss) applicable to common shareholders$92 $(77)$(79)
Adjusted net income$153 $38 $8 
Realized capital gains (losses), after-tax23 25 (9)
Amortization of purchased intangibles, after-tax(84)(97)(74)
Impairment of purchased intangibles, after-tax— (43)— 
Tax Legislation (expense) benefit— — (4)
Net income (loss) applicable to common shareholders$92 $(77)$(79)
Allstate Protection Plans$137 $60 $23 
Allstate Dealer Services29 26 15 
Allstate Roadside12 (15)(20)
Arity(11)(7)(11)
Allstate Identity Protection(14)(26)
Adjusted net income$153 $38 $8 
Allstate Protection Plans128,982 99,632 68,588 
Allstate Dealer Services4,042 4,205 4,338 
Allstate Roadside548 599 663 
Allstate Identity Protection2,700 1,511 1,040 
Policies in force as of December 31 (in thousands)136,272 105,947 74,629 
(1)Primarily related to Arity and Allstate Roadside and are eliminated in our consolidated financial statements.

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Protection Services 2020 Form 10-K

Net income applicable to common shareholders was $92 million in 2020 compared to net loss of $77 million in 2019. 2019 results included a $55 million intangible asset impairment related to the SquareTrade trade name that occurred in the second quarter of 2019.
Adjusted net income increased $115 million in 2020 compared to 2019. The increase in 2020 was primarily due to growth of Allstate Protection Plans and improved profitability at Allstate Roadside, partially offset by investments at Allstate Identity Protection.
Total revenues increased 16.6% or $273 million in 2020 compared to 2019, primarily due to Allstate Protection Plan’s growth through its U.S. retail and international channels, partially offset by declines in revenue at Allstate Roadside.
Premiums written increased 23.1% or $355 million in 2020 compared to 2019, primarily due to growth at Allstate Protection Plans benefiting from higher consumer purchases. In late 2020, Allstate Protection Plans launched several new U.S. retailers and was awarded new business for launch in early 2021, which will result in additional premiums written in 2021.
PIF increased 28.6% or 30 million in 2020 compared to 2019 due to continued growth at Allstate Protection Plans.
Intersegment premiums and service fees decreased 4.5% or $7 million in 2020 compared to 2019, primarily related to decreased device sales through Arity’s device and mobile data collection services and analytic solutions.
Other revenue increased 10.6% or $20 million in 2020 compared to 2019, primarily due to increased sales at Allstate Identity Protection.
Claims and claims expense increased 6.3% or $23 million in 2020 compared to 2019, primarily due to higher levels of claims at Allstate Protection Plans driven by growth of the business, partially offset by lower losses at Allstate Roadside and Allstate Dealer Services due to declines in auto miles driven related to the Coronavirus.
Amortization of DAC increased 21.2% or $115 million in 2020 compared to 2019. The increase is driven by growth at Allstate Protection Plans.
Operating costs and expenses decreased 1.5% or $10 million in 2020 compared to 2019, primarily due to lower operating costs at Allstate Roadside, partially offset by expenses associated with continued growth at Allstate Protection Plans.
Amortization of purchased intangibles relates to the acquisitions of Allstate Protection Plans and Allstate Identity Protection. We recorded amortization expense of $106 million in 2020 compared to $122 million in 2019.

The Allstate Corporation 63

2020 Form 10-K Claims and Claims Expense Reserves
Claims and Claims Expense Reserves
Underwriting results are significantly influenced by estimates of claims and claims expense reserves. For a description of our reserve process, see Note 8 of the consolidated financial statements. Further, for a description of our reserving policies and the potential variability in our reserve estimates, see the Application of Critical Accounting Estimates section of the MD&A. These reserves are an estimate of amounts necessary to settle all outstanding claims, including IBNR claims, as of the reporting date.

The facts and circumstances leading to reestimates of reserves relate to changes in claim activity and revisions to the development factors used to predict how losses are likely to develop from the end of a reporting period until all claims have been paid. Reestimates occur when actual losses differ from those predicted by the estimated development factors used in prior reserve estimates.
We believe the net loss reserves exposures are appropriately established based on available facts, technology, laws and regulations.
Total reserves, net of recoverables (“net reserves”), as of December 31, by line of business
($ in millions)202020192018
Allstate brand$18,523 $18,750 $18,134 
Encompass brand613 646 691 
Total Allstate Protection19,136 19,396 18,825 
Discontinued Lines and Coverages1,408 1,365 1,391 
Total Property-Liability20,544 20,761 20,216 
Protection Services33 39 52 
Total net reserves$20,577 $20,800 $20,268 
The year-end 2020 gross reserves of $27.61 billion for insurance claims and claims expense were $8.48 billion more than the net reserve balance of $19.13 billion recorded on the basis of statutory accounting practices for reports provided to state regulatory authorities. The principal differences are recoverables from third parties totaling $7.03 billion, including $5.61 billion of indemnification recoverables related to the Michigan Catastrophic Claims Association (“MCCA”), that reduce reserves for statutory reporting, but are recorded as assets for GAAP reporting, and a liability for the reserves of the Canadian subsidiaries for $1.35 billion that are a component of our consolidated reserves, but not included in our U.S. statutory reserves.
Impact of reserve reestimates by brand on combined ratio and net income applicable to common shareholders(1) (2)
202020192018
($ in millions, except ratios)Reserve reestimateEffect on combined ratioReserve reestimateEffect on combined ratioReserve reestimateEffect on combined ratio
Allstate brand$(534)(1.5)$(236)(0.7)$(329)(1.0)
Encompass brand(42)(0.1)— (11)— 
Total Allstate Protection(576)(1.6)(233)(0.7)(340)(1.0)
Discontinued Lines and Coverages141 0.4 105 0.4 87 0.3 
Total Property-Liability(435)(1.2)(128)(0.3)(253)(0.7)
Protection Services(1)— (2)— (2)— 
Total$(436)$(130)$(255)
Reserve reestimates, after-tax$(344)$(103)$(201)
Consolidated net income applicable to common shareholders$5,461 $4,678 $2,012 
Reserve reestimates as a % impact on consolidated net income applicable to common shareholders6.3 %2.2 %10.0 %
Property-Liability prior year reserve reestimates included in catastrophe losses$(503)$48 $25 
(1)Favorable reserve reestimates are shown in parentheses.
(2)Ratios are calculated using property and casualty premiums earned.

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Claims and Claims Expense Reserves 2020 Form 10-K

The following tables reflect the accident years to which the reestimates shown above are applicable. Favorable reserve reestimates are shown in parentheses.
2020 prior year reserve reestimates
($ in millions)2015 & prior2016201720182019Total
Allstate brand$(58)$46 $(162)$(348)$(12)$(534)
Encompass brand(4)(37)(5)(42)
Total Allstate Protection(56)42 (199)(353)(10)(576)
Discontinued Lines and Coverages141 — — — — 141 
Total Property-Liability85 42 (199)(353)(10)(435)
Protection Services— — — — (1)(1)
Total$85 $42 $(199)$(353)$(11)$(436)
2019 prior year reserve reestimates
($ in millions)2014 & prior2015201620172018Total
Allstate brand$(138)$(46)$(26)$(99)$73 $(236)
Encompass brand(2)(2)
Total Allstate Protection(140)(44)(28)(95)74 (233)
Discontinued Lines and Coverages105 — — — — 105 
Total Property-Liability(35)(44)(28)(95)74 (128)
Protection Services— — — — (2)(2)
Total$(35)$(44)$(28)$(95)$72 $(130)
2018 prior year reserve reestimates
($ in millions)2013 & prior2014201520162017Total
Allstate brand$(66)$(56)$(16)$(133)$(58)$(329)
Encompass brand(12)(11)(15)26 (11)
Total Allstate Protection(78)(67)(31)(132)(32)(340)
Discontinued Lines and Coverages87 — — — — 87 
Total Property-Liability(67)(31)(132)(32)(253)
Protection Services— — — — (2)(2)
Total$9 $(67)$(31)$(132)$(34)$(255)
Allstate Protection
The tables below show Allstate Protection net reserves representing the estimated cost of outstanding claims as they were recorded at the beginning of years 2020, 2019, and 2018, and the effect of reestimates in each year.
Net reserves by line
January 1 reserves
($ in millions)202020192018
Auto$14,728 $14,378 $14,051 
Homeowners2,138 2,157 2,205 
Other personal lines1,459 1,489 1,489 
Commercial lines1,071 801 616 
Total Allstate Protection$19,396 $18,825 $18,361 
Impact of reserve reestimates by line on combined ratio and underwriting income
202020192018
($ in millions, except ratios)Reserve reestimateEffect on combined ratioReserve reestimateEffect on combined ratioReserve reestimateEffect on combined ratio
Auto$(107)(0.3)$(323)(0.9)$(455)(1.3)
Homeowners(439)(1.2)65 0.2 14 — 
Other personal lines(66)(0.2)— (7)— 
Commercial lines36 0.1 17 — 108 0.3 
Total Allstate Protection$(576)(1.6)$(233)(0.7)$(340)(1.0)
Underwriting income$4,566 $2,912 $2,343 
Reserve reestimates as a % impact on underwriting income12.6 %8.0 %14.5 %

The Allstate Corporation 65

2020 Form 10-K Claims and Claims Expense Reserves
Favorable results for homeowners lines in 2020 were primarily due to catastrophe reserve reestimates driven by the subrogation settlements. Favorable reserve reestimates for auto in 2020 primarily related to favorable non-catastrophe reserve reestimates in personal lines auto, partially offset by strengthening in commercial lines auto reserves.  
Favorable reserve reestimates for auto in 2019 primarily related to continued favorable personal lines auto injury coverage development, offset by strengthening in our homeowners lines.  Auto liability claims process changes implemented in prior years, including a program requiring enhanced documentation of injuries and related medical treatments, resulted in favorable severity trends compared to those originally estimated as we developed greater experience in settling claims under these programs. Unfavorable results for homeowners lines in 2019 were primarily due to catastrophe development being higher than anticipated in previous estimates.
Estimating the ultimate cost of claims and claims expenses is an inherently uncertain and complex process involving a high degree of judgment and is subject to the evaluation of numerous variables.
Discontinued Lines and Coverages  

We conduct an annual review in the third quarter of each year to evaluate and establish asbestos, environmental and other discontinued lines reserves. Reserves are recorded in the reporting period in which they are determined. Using established industry and actuarial best practices and assuming no change in the regulatory or economic environment, this detailed and comprehensive methodology determines reserves based on assessments of the characteristics of exposure (e.g. claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by policyholders.
Discontinued Lines and Coverages reserve reestimates
202020192018
($ in millions)January 1 reservesReserve reestimateJanuary 1 reservesReserve reestimateJanuary 1 reservesReserve reestimate
Asbestos claims$810 $78 $866 $28 $884 $44 
Environmental claims179 44 170 36 166 20 
Other discontinued lines376 19 355 41 357 23 
Total$1,365 $141 $1,391 $105 $1,407 $87 
Underwriting loss$(144)$(108)$(90)
Reserve reestimates in 2020 primarily related to new reported information, court decisions and policy buyback settlements for asbestos exposures and higher than expected reported losses for environmental and other discontinued lines exposures.
Reserve reestimates in 2019 primarily related to new reported information and settlement agreements, including bankruptcy proceedings, impacting asbestos and other discontinued lines and additional environmental clean-up sites.
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Claims and Claims Expense Reserves 2020 Form 10-K

Reserves and claim activity before (Gross) and after (Net) the effects of reinsurance
202020192018
($ in millions, except ratios)GrossNetGrossNetGrossNet
Asbestos claims
Beginning reserves$1,172 $810 $1,266 $866 $1,296 $884 
Incurred claims and claims expense132 78 39 28 89 44 
Claims and claims expense paid(100)(61)(133)(84)(119)(62)
Ending reserves$1,204 $827 $1,172 $810 $1,266 $866 
Annual survival ratio12.0 13.6 8.8 9.6 10.6 14.0 
3-year survival ratio10.3 12.0 9.0 10.3 9.1 9.7 
Environmental claims
Beginning reserves$219 $179 $209 $170 $199 $166 
Incurred claims and claims expense49 44 42 36 30 20 
Claims and claims expense paid(19)(17)(32)(27)(20)(16)
Ending reserves$249 $206 $219 $179 $209 $170 
Annual survival ratio13.1 12.1 6.8 6.6 10.5 10.6 
3-year survival ratio10.5 10.3 8.1 8.1 8.4 8.2 
Combined environmental and asbestos claims
Annual survival ratio12.2 13.2 8.4 8.9 10.6 13.3 
3-year survival ratio10.3 11.6 8.8 9.9 9.0 9.5 
Percentage of IBNR in ending reserves50.3 %48.8 %49.6 %
The survival ratio is calculated by taking our ending reserves divided by payments made during the year. This is a commonly used but simplistic and imprecise approach to measuring the adequacy of asbestos and environmental reserve levels. Many factors, such as mix of business, level of coverage provided and settlement procedures have significant impacts on the amount of environmental and asbestos claims and claims expense reserves, claim payments and the resultant ratio. As payments result in corresponding reserve reductions, survival ratios can be expected to vary over time. In 2020 and 2019, the asbestos and environmental net 3-year survival ratio increased due to lower claim payments associated with settlement agreements.
Net asbestos reserves by type of exposure and total reserve additions
December 31, 2020December 31, 2019December 31, 2018
($ in millions)Active policy-holdersNet reserves% of reservesActive policy-holdersNet reserves% of reservesActive policy-holdersNet reserves% of reserves
Direct policyholders:
Primary59 $10 %58 $12 %51 $12 %
Excess303 291 35 299 292 36 295 309 36 
Total362 301 36 357 304 37 346 321 37 
Assumed reinsurance122 15 127 16 138 16 
IBNR404 49 379 47 407 47 
Total net reserves$827 100 %$810 100 %$866 100 %
Total reserve additions$78 $28 $44 
At December 31, 2020, there were 362 active policyholders with open asbestos claims. 
Active policyholders increased by 5 in 2020, including 8 policyholders reporting asbestos claims for the first time and the closing of all claims for 3 policyholders.
Active policyholders increased by 11 in 2019, including 16 policyholders reporting asbestos claims for the first time and the closing of all claims for 5 policyholders.
IBNR net reserves increased $25 million as of December 31, 2020 compared to December 31, 2019. IBNR provides for reserve development of known claims and future reporting of additional unknown
claims from current policyholders and ceding companies.
Reinsurance and indemnification programs  We utilize reinsurance to reduce exposure to catastrophe risk and manage capital, and to support the required statutory surplus and the insurance financial strength ratings of certain subsidiaries such as Castle Key Insurance Company (“CKIC”) and Allstate New Jersey Insurance Company (“ANJ”). We purchase significant reinsurance to manage our aggregate countrywide exposure to an acceptable level. The price and terms of reinsurance and the credit quality of the reinsurer are considered in the purchase process, along with whether the price can be appropriately reflected in the costs that are considered in setting future rates
The Allstate Corporation 67

2020 Form 10-K Claims and Claims Expense Reserves
charged to policyholders. We have also purchased reinsurance to mitigate exposures in our long-tail liability lines, including environmental, asbestos and other discontinued lines as well as our commercial lines, including shared economy. We also participate in various indemnification mechanisms, including state-based industry pool or facility programs mandating
participation by insurers offering certain coverage in their state and the federal government National Flood Insurance Program (“NFIP”). See Note 10 of the consolidated financial statements for additional details on these programs.
Reinsurance and indemnification recoverables, net of the allowance established for uncollectible amounts
S&P financial strength rating (1)
Reinsurance or indemnification
recoverable on paid and unpaid claims, net
($ in millions)20202019
Indemnification programs
State-based industry pool or facility programs
MCCA (2)
N/A$5,646 $5,499 
New Jersey Property-Liability Insurance Guaranty Association (“PLIGA”)N/A389 446 
North Carolina Reinsurance FacilityN/A67 78 
Florida Hurricane Catastrophe Fund (“FHCF”)N/A32 52 
Other
Federal Government - NFIP
N/A30 25 
Subtotal6,172 6,109 
Catastrophe reinsurance recoverables
Renaissance Reinsurance LimitedA+17 27 
Swiss Reinsurance America CorporationAA-12 15 
Everest Reinsurance CompanyA+12 15 
Other156 179 
Subtotal197 236 
Other reinsurance recoverables, net (3)
Lloyd’s of London (“Lloyd’s”) (4)
A+166 158 
Aleka Insurance Inc.N/A165 115 
Westport Insurance CorporationAA-59 55 
TIG Insurance CompanyN/A40 38 
Other, including allowance for credit losses317 293 
Subtotal747 659 
Total Property-Liability7,116 7,004 
Protection Services18 20 
Total$7,134 $7,024 
(1)N/A reflects no S&P Global Ratings (“S&P”) rating available.
(2)As of December 31, 2020 and 2019, MCCA includes $34 million and $39 million of reinsurance recoverable on paid claims, respectively, and $5.61 billion and $5.46 billion of reinsurance recoverable on unpaid claims, respectively.
(3)Other reinsurance recoverables primarily relate to asbestos, environmental and other liability exposures as well as commercial lines, including shared economy.
(4)As of December 31, 2020, case reserves for Lloyd’s were 64% of the reinsurance recoverable for unpaid claims.
Reinsurance and indemnification recoverables include an estimate of the amount of insurance claims and claims expense reserves that are ceded under the terms of the agreements, including IBNR unpaid losses. We calculate our ceded reinsurance and indemnification estimates based on the terms of each applicable agreement, including an estimate of how IBNR losses will ultimately be ceded under the agreement. We also consider other limitations and coverage exclusions under our agreements. Accordingly, our estimate of recoverables is subject to similar risks and uncertainties as our estimate of reserves claims and claims expense. We believe the recoverables are appropriately established; however,
as our underlying reserves continue to develop, the amount ultimately recoverable may vary from amounts currently recorded. We regularly evaluate the reinsurers and the respective amounts of our reinsurance recoverables, and a provision for uncollectible reinsurance recoverables is recorded, if needed. The establishment of reinsurance recoverables and the related allowance for uncollectible reinsurance is also an inherently uncertain process involving estimates. Changes in estimates could result in additional changes to the Consolidated Statements of Operations.
Indemnification recoverables are considered collectible based on the industry pool and facility
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Claims and Claims Expense Reserves 2020 Form 10-K

enabling legislation and the Company has not had any credit losses related to these programs and we do not anticipate losses in the foreseeable future. We also have not experienced credit losses on our catastrophe reinsurance programs, which include highly rated reinsurers.
The allowance for uncollectible reinsurance relates to other reinsurance programs primarily related to our Discontinued Lines and Coverages segment. This allowance was $59 million and $60 million as of December 31, 2020 and 2019, respectively.
The allowance is based upon our ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, and other relevant factors. In addition, in the ordinary course of business, we may become involved in coverage disputes with certain of our reinsurers that may ultimately result in lawsuits and arbitrations brought by or against such reinsurers to determine the parties’ rights and obligations under the various reinsurance agreements. We employ dedicated specialists to manage reinsurance collections and disputes. We also consider recent developments in commutation activity
between reinsurers and cedents, and recent trends in arbitration and litigation outcomes in disputes between cedents and reinsurers in seeking to maximize our reinsurance recoveries.
Adverse developments in the insurance industry have led to a decline in the financial strength of some of our reinsurance carriers, causing amounts recoverable from them and future claims ceded to them to be considered a higher risk. There has also been consolidation activity in the industry, which causes reinsurance risk across the industry to be concentrated among fewer companies.
See Note 2 of the consolidated financial statements for a description of the methodology utilized to calculate the allowance for reinsurance recoverables.
For further details related to our reinsurance and indemnification recoverables, see the Regulation section in Part I and Note 10 of the consolidated financial statements.
Effects of reinsurance ceded and indemnification programs on our premiums earned and claims and claims expense
For the years ended December 31,
($ in millions)202020192018
Allstate Protection - Premiums
Indemnification programs
State-based industry pool or facility programs
MCCA$61 $89 $77 
PLIGA
FHCF10 
Other97 85 90 
Federal Government - NFIP
261 258 258 
Catastrophe reinsurance416 377 344 
Other reinsurance programs110 121 54 
Total Allstate Protection961 947 842 
Discontinued Lines and Coverages— — — 
Total Property-Liability961 947 842 
Protection Services180 175 174 
Total effect on premiums earned$1,141 $1,122 $1,016 
Allstate Protection - Claims
Indemnification programs
State-based industry pool or facility programs
MCCA$256 $208 $233 
PLIGA(40)(6)
FHCF15 31 148 
Other63 67 90 
Federal Government - NFIP
87 150 118 
Catastrophe reinsurance
(105)(1)(166)(2)604 
Other reinsurance programs88 94 40 
Total Allstate Protection364 387 1,227 
Discontinued Lines and Coverages75 39 57 
Total Property-Liability439 426 1,284 
Protection Services91 98 94 
Total effect on claims and claims expense$530 $524 $1,378 
(1)Decline reflects reestimates in claims and claims expense related subrogation settlements.
(2)Decline reflects reestimates in claims and claims expense related to the 2018 Camp Fire.
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2020 Form 10-K Claims and Claims Expense Reserves
In 2020 and 2019, ceded premiums earned increased primarily due to increased catastrophe reinsurance premium rates. In 2020, ceded claims and claims expenses increased $6 million. In 2019, ceded claims and claims expenses decreased $854 million, primarily due to lower amounts related to the catastrophe reinsurance program, partially offset by increased activity with our shared economy business.
Our claim reserve development experience in 2020 is consistent with the prior two years as gross reserves have increased between 2-3% each year. The Governor of Michigan signed new legislation on May 30, 2019 to reform Michigan’s no-fault auto insurance system. For further discussion of these items, see Regulation, Indemnification Programs and Note 10 of the consolidated financial statements.
Michigan personal injury protection reserve and claim activity before and after the effects of MCCA recoverables
For the years ended December 31,
202020192018
($ in millions)GrossNetGrossNetGrossNet
Beginning reserves$6,106 $647 $5,975 $605 $5,799 $565 
Incurred claims and claims expense-current year312 98 446 202 449 189 
Incurred claims and claims expense-prior years107 65 (16)20 35 
Claims and claims expense paid-current year (1)
(47)(42)(55)(53)(52)(51)
Claims and claims expense paid-prior years (1)
(196)(98)(244)(127)(230)(133)
Ending reserves (2)
$6,282 $670 $6,106 $647 $5,975 $605 
(1)Paid claims and claims expenses reported in the table for the current and prior years, recovered from the MCCA totaled $103 million, $119 million and $98 million in 2020, 2019 and 2018, respectively.
(2)Gross reserves for the year ended December 31, 2020, comprise 82% case reserves and 18% IBNR. Gross reserves for the year ended December 31, 2019, comprise 85% case reserves and 15% IBNR. Gross reserves for the year ended December 31, 2018 comprise 88% case reserves and 12% IBNR. The MCCA does not require member companies to report ultimate case reserves.
Pending MCCA claims differ from most personal lines insurance pending claims as other personal lines policies have coverage limits and incurred claims settle in shorter periods. Claims are considered pending as long as payments are continuing pursuant to an outstanding MCCA claim, which can be for a claimant’s lifetime. Many of these injuries are catastrophic in nature, resulting in serious permanent disabilities that
require attendant and residential care for periods that may span decades. A significant portion of the ultimate incurred claim reserves and the recoverables can be attributed to a small number of catastrophic claims that occurred more than five years ago and continue to pay lifetime benefits.
Pending, new and closed claims for Michigan personal injury protection exposure
For the years ended December 31,
Number of claims (1)
202020192018
Pending, beginning of year4,942 4,812 4,983 
New5,896 7,807 7,858 
Closed(5,981)(7,677)(8,029)
Pending, end of year4,857 4,942 4,812 
(1)Total claims includes those covered and not covered by the MCCA indemnification.
As of December 31, 2020, approximately 1,500 of our pending claims have been reported to the MCCA, of which approximately 60% represents claims that occurred more than 5 years ago. There are 68 Allstate brand claims with reserves in excess of $15 million as of December 31, 2020, which comprise approximately 29% of the gross ending reserves in the table above. As a result, significant developments with a single claimant can result in volatility in prior year incurred claims.
Intercompany reinsurance We enter into certain intercompany insurance and reinsurance transactions in order to maintain underwriting control and manage insurance risk among various legal entities. These reinsurance agreements have been approved by the appropriate regulatory authorities. All significant intercompany transactions have been eliminated in consolidation.
Catastrophe reinsurance Our catastrophe reinsurance program is designed to address our exposure to catastrophes nationwide, utilizing our risk management methodology. Our program is designed
to provide reinsurance protection for catastrophes resulting from multiple perils including hurricanes, windstorms, hail, tornadoes, earthquakes, wildfires, and fires following earthquakes. These reinsurance agreements are part of our catastrophe management strategy, which is intended to provide our shareholders an acceptable return on the risks assumed in our property business, while providing protection to our customers.
We anticipate completing the placement of our 2021 nationwide catastrophe reinsurance program in the second quarter of 2021. We expect the program will be similar to our 2020 nationwide catastrophe reinsurance program, but will evaluate opportunities to improve the economic terms and conditions. We are also evaluating opportunities to include National General, which was acquired on January 4, 2021, into the program. For further details of the existing 2020 program, see Note 10 of the consolidated financial statements.
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Allstate Life 2020 Form 10-K
Allstate Life Segment
Allstate Life consists of traditional, interest-sensitive and variable life insurance. In 2020, Allstate Life represented 4.4% of total revenue, 1.1% of total PIF and 4.2% of total adjusted net income. Our target customers are middle market consumers with family and financial protection needs.
On January 26, 2021, we announced an agreement to sell ALIC and certain affiliates, which represent approximately 90% of Allstate Life reserves for life-contingent contract benefits and contractholder funds. Allstate will retain ownership of ALNY unless an agreement can be reached with a third party to assume some or all of ALNY’s liabilities. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.
Summarized financial information
For the years ended December 31,
($ in millions)202020192018
Revenues
Premiums and contract charges$1,340 $1,343 $1,315 
Other revenue121 125 119 
Net investment income502 514 505 
Realized capital gains (losses)(10)(14)
Total revenues1,953 1,983 1,925 
Costs and expenses
Contract benefits(964)(855)(809)
Interest credited to contractholder funds(329)(299)(285)
Amortization of DAC(149)(173)(132)
Operating costs and expenses(329)(354)(361)
Restructuring and related charges(6)(2)(3)
Total costs and expenses(1,777)(1,683)(1,590)
Income tax expense(17)(53)(75)
Net income applicable to common shareholders$159 $247 $260 
Adjusted net income$194 $261 $295 
Realized capital gains (losses), after-tax(9)— (11)
Valuation changes on embedded derivatives that are not hedged, after-tax(34)(9)— 
DAC and DSI amortization related to realized capital gains and losses and valuation changes on embedded derivatives that are not hedged, after-tax(5)(8)
Tax Legislation (expense) benefit— — (16)
Net income applicable to common shareholders$159 $247 $260 
Reserve for life-contingent contract benefits as of December 31$2,755 $2,736 $2,677 
Contractholder funds as of December 31$8,013 $7,805 $7,656 
Policies in force as of December 31 by distribution channel (in thousands)
Allstate agencies1,765 1,816 1,831 
Closed channels98 107 114 
Total1,863 1,923 1,945 
Net income applicable to common shareholders decreased 35.6% or $88 million in 2020 compared to 2019.
Adjusted net income decreased 25.7% or $67 million in 2020 compared to 2019, primarily due to higher contract benefits due to mortality associated with the Coronavirus, partially offset by lower operating costs and expenses.

Premiums and contract charges decreased 0.2% or $3 million in 2020 compared to 2019, primarily due to lower contract charges on interest-sensitive life insurance from a decline in business in force, partially offset by higher premiums from traditional life insurance. Approximately 85% of Allstate Life’s traditional life insurance premium relates to term life insurance products.

The Allstate Corporation 71

2020 Form 10-K Allstate Life
Effective March 31, 2020, in light of uncertainty around the impacts of the Coronavirus, we implemented temporary underwriting restrictions on new life insurance applications. We are approving standard and preferred rate classes only, with a maximum issue age of 69, and suspended sales of our simplified issue term life product that does not require
underwriting. While these restrictions are in place, we expect sales to slow. Allstate agents and exclusive financial specialists are able to offer coverage to customers outside these guidelines through nonproprietary carriers.
Premiums and contract charges by product
For the years ended December 31,
($ in millions)202020192018
Traditi