Municipal bonds The Company maintains a diversified portfolio of municipal bonds, including tax exempt and taxable securities, which totaled $9.59 billion and $8.62 billion as of December 31, 2020 and 2019, respectively.

The municipal bond portfolio includes general obligations of state and local issuers and revenue bonds (including pre-refunded bonds, which are bonds for which an irrevocable trust has been established to fund the remaining payments of principal and interest).


Principal geographic distribution of municipal bond issuers exceeding 5% of the portfolio
	As of December 31,
(% of municipal bond portfolio carrying value)	2020		2019
California	12.8	%	8.6	%
Texas	11.0		12.7
New York	5.3		3.7
Colorado	4.8		5.8
Washington	4.0		5.5

Short-term investments Short-term investments, including money market funds, commercial paper, U.S. Treasury bills and other short-term investments, are carried at fair value. As of December 31, 2020 and 2019, the fair value of short-term investments totaled $7.80 billion and $4.26 billion, respectively.

Other investments Other investments primarily consist of bank loans, real estate, policy loans, agent loans and derivatives. Bank loans are primarily senior secured corporate loans and are carried at amortized cost, net. Policy loans are carried at unpaid principal balances. Real estate is carried at cost less accumulated depreciation. Agent loans are loans issued to exclusive Allstate agents and are carried at amortized cost, net. Derivatives are carried at fair value.


Other investments by asset type
	As of December 31,
($ in millions)	2020		2019
Bank loans, net	$	1,018	$	1,204
Real estate	974		1,005
Policy loans	754		894
Agent loans, net	631		666
Derivatives and other	312		236
Total	$	3,689	$	4,005

Concentration of credit risk As of December 31, 2020, the Company is not exposed to any credit concentration risk of a single issuer and its affiliates greater than 10% of the Company’s shareholders’ equity, other than the U.S. government and its agencies and one government money market fund.

Securities loaned The Company’s business activities include securities lending programs with third parties, mostly large banks. As of December 31, 2020 and 2019, fixed income and equity securities with a carrying value of $1.19 billion and $1.74 billion, respectively, were on loan under these agreements. Interest income on collateral, net of fees, was $3 million, $5 million and $4 million in 2020, 2019 and 2018, respectively.

Other investment information Included in fixed income securities are below investment grade assets totaling $9.00 billion and $7.15 billion as of December 31, 2020 and 2019, respectively.

As of December 31, 2020, fixed income securities and short-term investments with a carrying value of $141 million were on deposit with regulatory authorities as required by law.

As of December 31, 2020, the carrying value of fixed income securities and other investments that were non-income producing was $80 million.

Portfolio monitoring and credit losses

Fixed income securities The Company has a comprehensive portfolio monitoring process to identify and evaluate each fixed income security that may require a credit loss allowance.

For each fixed income security in an unrealized loss position, the Company assesses whether management with the appropriate authority has made the decision to sell or whether it is more likely than not the Company will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If a security meets either of these criteria, any existing credit loss allowance would be written-off against the amortized cost basis of the asset along with any remaining unrealized losses, with incremental losses recorded in earnings.

If the Company has not made the decision to sell the fixed income security and it is not more likely than not the Company will be required to sell the fixed income security before recovery of its amortized cost basis, the Company evaluates whether it expects to receive cash flows sufficient to recover the entire amortized cost basis of the security. The Company calculates the estimated recovery value based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the security’s current effective rate and is compared to the amortized cost of the security.

The determination of cash flow estimates is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the security. All reasonably available information relevant to the collectability of the security is considered when developing the estimate of cash flows expected to be collected. That information generally includes, but is not limited to, the remaining payment terms of the security, prepayment speeds, the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. Other information, such as industry analyst reports and forecasts, credit ratings, financial condition of the bond insurer for insured fixed income securities, and other market data relevant to the realizability of contractual cash flows, may also be considered. The estimated fair value of collateral will be used to estimate recovery value if the Company determines that the security is dependent on the liquidation of collateral for ultimate settlement.

If the Company does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed income security, a credit loss allowance is recorded in earnings for the shortfall in expected cash flows; however, the amortized cost, net of the credit loss allowance, may not be lower than the fair value of the security. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If the Company determines that the fixed income security does not have sufficient cash flow or other information to estimate a recovery value for the security, the Company may conclude that the entire decline in fair value is deemed to be credit related and the loss is recorded in earnings.

When a security is sold or otherwise disposed or when the security is deemed uncollectible and written off, the Company removes amounts previously recognized in the credit loss allowance. Recoveries after write-offs are recognized when received. Accrued interest excluded from the amortized cost of fixed income securities totaled $548 million as of December 31, 2020 and is reported within the accrued investment income line of the Consolidated Statements of Financial Position. The Company monitors accrued interest and writes off amounts when they are not expected to be received.

The Company’s portfolio monitoring process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. The process also includes the monitoring of other credit loss indicators such as ratings, ratings downgrades and payment defaults. The securities identified, in addition to other securities for which the Company may have a concern, are evaluated for potential credit losses using all reasonably available information relevant to the collectability or recovery of the security. Inherent in the Company’s evaluation of credit losses for these securities are assumptions and estimates about the financial condition and future earnings potential of the issue or issuer. Some of the factors that may be considered in evaluating whether a decline in fair value requires a credit loss allowance are: 1) the financial condition, near-term and long-term prospects of the issue or issuer, including relevant industry specific market conditions and trends, geographic location and implications of rating agency actions and offering prices; 2) the specific reasons that a security is in an unrealized loss position, including overall market conditions which could affect liquidity; and 3) the extent to which the fair value has been less than amortized cost.


Rollforward of credit loss allowance for fixed income securities
	For the year ended
($ in millions)	December 31, 2020
Beginning balance	$	—
Credit losses on securities for which credit losses not previously reported	(5)

Reduction of allowance related to sales	2
Write-offs	—



Ending balance (1)	$	(3)

(1)Allowance for fixed income securities as of December 31, 2020 comprised $1 million and $2 million of corporate bonds and ABS, respectively.


Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss position

	Less than 12 months					12 months or more
($ in millions)	Number of issues	Fair value		Unrealized losses		Number of issues	Fair value		Unrealized losses		Total unrealized losses
December 31, 2020
Fixed income securities
U.S. government and agencies	23	$	185	$	(1)	—	$	—	$	—	$	(1)
Municipal	47	148		(2)		—	—		—		(2)
Corporate	127	1,229		(39)		27	187		(26)		(65)
Foreign government	7	7		—		—	—		—		—
ABS	22	160		(2)		13	49		(3)		(5)
MBS	14	—		—		67	—		—		—
Total fixed income securities	240	$	1,729	$	(44)	107	$	236	$	(29)	$	(73)
Investment grade fixed income securities	163	$	1,193	$	(13)	84	$	117	$	(17)	$	(30)
Below investment grade fixed income securities	77	536		(31)		23	119		(12)		(43)
Total fixed income securities	240	$	1,729	$	(44)	107	$	236	$	(29)	$	(73)

December 31, 2019
Fixed income securities
U.S. government and agencies	31	$	1,713	$	(26)	10	$	26	$	—	$	(26)
Municipal	307	576		(9)		1	14		(2)		(11)
Corporate	186	1,392		(20)		65	485		(27)		(47)
Foreign government	55	412		(4)		6	102		(1)		(5)
ABS	36	193		(2)		23	160		(4)		(6)
MBS	27	15		—		123	14		(1)		(1)
Total fixed income securities	642	$	4,301	$	(61)	228	$	801	$	(35)	$	(96)
Investment grade fixed income securities	581	$	3,878	$	(41)	185	$	594	$	(20)	$	(61)
Below investment grade fixed income securities	61	423		(20)		43	207		(15)		(35)
Total fixed income securities	642	$	4,301	$	(61)	228	$	801	$	(35)	$	(96)


Gross unrealized losses by unrealized loss position and credit quality as of December 31, 2020
($ in millions)	Investment grade		Below investment grade		Total
Fixed income securities with unrealized loss position less than 20% of amortized cost, net (1) (2)	$	(15)	$	(24)	$	(39)
Fixed income securities with unrealized loss position greater than or equal to 20% of amortized cost, net (3) (4)	(15)		(19)		(34)
Total unrealized losses	$	(30)	$	(43)	$	(73)

(1)Below investment grade fixed income securities include $17 million that have been in an unrealized loss position for less than twelve months.

(2)Related to securities with an unrealized loss position less than 20% of amortized cost, net, the degree of which suggests that these securities do not pose a high risk of having credit losses.

(3)No below investment grade fixed income securities have been in an unrealized loss position for a period of twelve or more consecutive months.

(4)Evaluated based on factors such as discounted cash flows and the financial condition and near-term and long-term prospects of the issue or issuer and were determined to have adequate resources to fulfill contractual obligations

Investment grade is defined as a security having a rating of Aaa, Aa, A or Baa from Moody’s, a rating of AAA, AA, A or BBB from S&P Global Ratings (“S&P”), a comparable rating from another nationally recognized rating agency, or a comparable internal rating if an externally provided rating is not available. Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Unrealized losses on investment grade securities are principally related to an increase in market yields which may include increased risk-free interest rates or wider credit spreads since the time of initial purchase. The unrealized losses are expected to reverse as the securities approach maturity.

ABS and MBS in an unrealized loss position were evaluated based on actual and projected collateral losses relative to the securities’ positions in the respective securitization trusts, security specific expectations of cash flows, and credit ratings. This evaluation also takes into consideration credit enhancement, measured in terms of (i) subordination from other classes of securities in the trust that are contractually obligated to absorb losses before the class of security the Company owns, and (ii) the expected impact of other structural features embedded in the securitization trust beneficial to the class of securities the Company owns, such as overcollateralization and excess spread. Municipal bonds in an unrealized loss position were evaluated based on the underlying credit quality of the primary obligor, obligation type and quality of the underlying assets.

As of December 31, 2020, the Company has not made the decision to sell and it is not more likely than not the Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost basis.

Loans The Company establishes a credit loss allowance for mortgage loans, bank loans and agent loans when they are originated or purchased, and for unfunded commitments unless they are unconditionally cancellable by the Company. The Company uses a probability of default and loss given default model for mortgage loans and bank loans to estimate current expected credit losses that considers all relevant information available including past events, current conditions, and reasonable and supportable forecasts over the life of an asset. The Company also considers such factors as historical losses, expected prepayments and various economic factors. For mortgage loans the Company considers origination vintage year and property level information such as debt service coverage, property type, property location and collateral value. For bank loans the Company considers the credit rating of the borrower, credit spreads and type of loan. After the reasonable and supportable forecast period, the Company’s model reverts to historical loss trends. Given the less complex and homogenous nature of agent loans, the Company estimates current expected credit losses using historical loss experience over the estimated life of the loans, adjusted for current conditions, reasonable and supportable forecasts and expected prepayments.

Loans are evaluated on a pooled basis when they share similar risk characteristics. The Company monitors loans through a quarterly credit monitoring process to determine when they no longer share similar risk characteristics and are to be evaluated individually when estimating credit losses.

Loans are written off against their corresponding allowances when there is no reasonable expectation of recovery. If a loan recovers after a write-off, the estimate of expected credit losses includes the expected recovery.

Accrual of income is suspended for loans that are in default or when full and timely collection of principal and interest payments is not probable. Accrued income receivable is monitored for recoverability and when not expected to be collected is written off through net investment income. Cash receipts on

loans on non-accrual status are generally recorded as a reduction of amortized cost.

Accrued interest is excluded from the amortized cost of loans and is reported within the accrued investment income line of the Consolidated Statements of Financial Position. As of December 31, 2020, accrued interest totaled $15 million, $4 million and $2 million for mortgage loans, bank loans and agent loans, respectively.

Mortgage loans When it is determined a mortgage loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as using collateral value less estimated costs to sell where applicable, including when foreclosure is probable or when repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. When collateral value is used, the mortgage loans may not have a credit loss allowance when the fair value of the collateral exceeds the loan’s

amortized cost. An alternative approach may be utilized to estimate credit losses using the present value of the loan’s expected future repayment cash flows discounted at the loan’s current effective interest rate.

Individual loan credit loss allowances are adjusted for subsequent changes in the fair value of the collateral less costs to sell, when applicable, or present value of the loan’s expected future repayment cash flows.

Debt service coverage ratio is considered a key credit quality indicator when mortgage loan credit loss allowances are estimated. Debt service coverage ratio represents the amount of estimated cash flow from the property available to the borrower to meet principal and interest payment obligations. Debt service coverage ratio estimates are updated annually or more frequently if conditions are warranted based on the Company’s credit monitoring process.


Mortgage loans amortized cost by debt service coverage ratio distribution and year of origination
	December 31, 2020														December 31, 2019
($ in millions)	2015 and prior		2016		2017		2018		2019		Current		Total		Total
Below 1.0	$	15	$	—	$	—	$	—	$	—	$	—	$	15	$	56
1.0 - 1.25	133		27		36		70		48		24		338		225
1.26 - 1.50	378		41		144		187		333		6		1,089		1,237
Above 1.50	1,037		396		283		373		499		112		2,700		3,302
Amortized cost before allowance	$	1,563	$	464	$	463	$	630	$	880	$	142	$	4,142	$	4,820
Allowance (1)													(67)		(3)
Amortized cost, net													$	4,075	$	4,817

(1)Due to the adoption of the measurement of credit losses on financial instruments accounting standard, prior valuation allowance is now presented as an allowance for expected credit losses.

Mortgage loans with a debt service coverage ratio below 1.0 that are not considered impaired primarily relate to situations where the borrower has the financial capacity to fund the revenue shortfalls from the properties for the foreseeable term, the decrease in cash flows from the properties is considered temporary, or there are other risk mitigating factors such as additional collateral, escrow balances or

borrower guarantees. Payments on all mortgage loans were current as of December 31, 2020, 2019 and 2018. During the fourth quarter of 2020, the Company sold $234 million of mortgage loans, net of a $17 million credit loss allowance, resulting in a net realized capital loss of $4 million.


Rollforward of credit loss allowance for mortgage loans
($ in millions)	For the year ended December 31, 2020
Beginning balance	$	(3)
Cumulative effect of change in accounting principle	(42)
Net increases related to credit losses	(39)
Reduction of allowance related to sales	17
Write-offs	—
Ending balance	$	(67)

Bank loans When it is determined a bank loan shall be evaluated individually, the Company uses various methods to estimate credit losses on individual loans such as the present value of the loan’s expected future repayment cash flows discounted at the loan’s current effective interest rate.

Credit ratings of the borrower are considered a key credit quality indicator when bank loan credit loss allowances are estimated. The ratings are updated quarterly and are either received from a nationally recognized rating agency or

a comparable internal rating is derived if an externally provided rating is not available. The year of origination is determined to be the year in which the asset is acquired.


Bank loans amortized cost by credit rating and year of origination
($ in millions)	As of December 31, 2020
	2015 and prior		2016		2017		2018		2019		Current		Total
BBB	$	—	$	—	$	9	$	7	$	14	$	13	$	43
BB	20		2		25		58		53		54		212
B	11		23		115		141		122		195		607
CCC and below	7		16		44		50		74		32		223
Amortized cost before allowance	$	38	$	41	$	193	$	256	$	263	$	294	$	1,085
Allowance													(67)
Amortized cost, net													$	1,018


Rollforward of credit loss allowance for bank loans
	For the year ended December 31, 2020
($ in millions)
Beginning balance	$	—
Cumulative effect of change in accounting principle	(53)
Net increases related to credit losses	(28)
Reduction of allowance related to sales	9
Write-offs	5
Ending balance	$	(67)

Agent loans The Company monitors agent loans to determine when they should be removed from the pool and assessed for credit losses individually by using internal credit risk grades that classify the loans into risk categories. The categorization is based on relevant information about the ability of borrowers to service their debt, such as historical payment experience, current business trends, cash flow coverage and collateral quality. Internal credit risk grades are updated annually or more frequently if conditions are warranted based on the Company’s credit monitoring process.

As of December 31, 2020, 85% of agent loans balance represents the top three highest credit quality categories. The allowance for agent loans totaled $5 million as of December 31, 2020 and did not change from January 1, 2020.