Basis of presentation

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

The condensed consolidated financial statements and notes as of March 31, 2023 and for the three month periods ended March 31, 2023 and 2022 are unaudited. The condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods.

These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2022. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. All significant intercompany accounts and transactions have been eliminated.

To reflect the application of the new guidance to all in-scope long-duration insurance contracts, certain amounts in the condensed consolidated financial statements and notes for 2022 have been recast.

Macroeconomic impacts

The Novel Coronavirus Pandemic or COVID-19 (“Coronavirus”) and subsequent U.S. government fiscal and monetary policies have and may continue to effect economic activity through longer-term impacts such as supply chain disruptions, labor shortages and other macroeconomic factors that have increased inflation and affected our operations. These factors may continue to significantly affect results of operations, financial condition and liquidity. The impact from the pandemic and the ongoing effects should be considered when comparing the current period to prior periods.

Adopted accounting standard

Accounting for Long-Duration Insurance Contracts Effective January 1, 2023, the Company adopted the Financial Accounting Standards Board (”FASB”) guidance revising the accounting for certain long-duration insurance contracts using the modified retrospective approach to the transition date of January 1, 2021.

Under the new guidance, measurement assumptions, including those for mortality, morbidity and policy lapses, are required to be reviewed at least annually, and updated as appropriate. In addition, reserves under the new guidance are required to be discounted using an upper-medium grade fixed income instrument yield that is updated through other comprehensive income (“OCI”) at each reporting date. Additionally, deferred policy acquisition costs (“DAC”) for all long-duration products will be amortized on a simplified basis. Also, the Company’s reserve for future policy benefits and DAC will be subject to new disclosure guidance.

In addition, the Company met the conditions included in Accounting Standards Update No. 2022-05, Transition for Sold Contracts, and elected to not apply the new guidance for contracts that were part of the 2021 sales of Allstate Life Insurance Company (“ALIC”) and Allstate Life Insurance Company of New York (“ALNY”).


After-tax cumulative effect of change in accounting principle on transition date

($ in millions)	January 1, 2021

Decrease in retained income	$	21
Decrease in accumulated other comprehensive income (“AOCI”)	277
Total decrease in equity	$	298

The decrease in AOCI is primarily attributable to a change in the discount rate used in measuring the reserve for future policy benefits for traditional life contracts and other long-term products with guaranteed terms from a portfolio-based rate at contract issuance to an upper-medium grade fixed income-based rate at the reporting date. The decrease in retained income primarily relates to certain cohorts of long-term contracts whose expected net premiums exceeded expected gross premiums which resulted in an increase in reserves and a decrease in retained income equal to the present value of expected future benefits less the present value of expected future premiums at the transition date.

Transition disclosures The following tables summarize the balance of and changes in the reserve for future policy benefits and DAC on January 1, 2021 upon the adoption of the guidance.


Impact of adoption for reserve for future policy benefits
( $ in millions)	Accident and health		Traditional life		Total
Pre-adoption 12/31/2020 balance (1)	$	728	$	311	$	1,039

Adjustments:
Effect of the remeasurement of the reserve at upper-medium grade fixed income-based rate (2)	232		153		385

Adjustments for contracts with net premiums in excess of gross premiums (3)	77		—		77
Total adjustments	309		153		462
Post-adoption 1/1/2021 balance	1,037		464		1,501
Less: reinsurance recoverables (4)	159		3		162
Post-adoption 1/1/2021 balance, after reinsurance recoverables	$	878	$	461	$	1,339

(1)Traditional life includes $11 million in reserves related to riders of traditional life insurance products reclassified from contractholder funds.

(2)Adjustment reflected with a corresponding decrease to AOCI.

(3)Adjustment reflected with a corresponding decrease to retained income.

(4)Represents post-adoption January 1, 2021 balance of reinsurance recoverables. Adjustments to reinsurance recoverables for accident and health products increased January 1, 2021 AOCI by $33 million due to the remeasurement of the reserve at upper-medium grade fixed income based rate and increased January 1, 2021 retained income by $51 million due to adjustments for contracts with net premiums in excess of gross premiums.


Impact of adoption for DAC
( $ in millions)	Accident and health		Traditional life		Interest- sensitive life		Total
Pre-adoption 12/31/2020 balance	$	343	$	32	$	95	$	470
Adjustment for removal of impact of unrealized gains or losses (1)	—		—		2		2

Post-adoption 1/1/2021 balance	$	343	$	32	$	97	$	472

(1)Adjustment reflected with a corresponding increase to AOCI.

Impacts of the adoption on the financial statements


Consolidated Statements of Operations
	Three months ended March 31, 2022
($ in millions, except per share data)	As reported		Impact of change		As adjusted
Revenues
Accident and health insurance premiums and contract charges	$	469	$	(1)	$	468
Total revenues	12,337		(1)		12,336

Costs and expenses
Accident, health and other policy benefits	269		(1)		268
Amortization of deferred policy acquisition costs	1,612		(4)		1,608

Total costs and expenses	11,540		(5)		11,535

Income from operations before income tax expense	797		4		801
Income tax expense	151		—		151
Net income	646		4		650

Net income attributable to Allstate	656		4		660

Net income applicable to common shareholders	$	630	$	4	$	634

Earnings per common share:
Net income applicable to common shareholders per common share - Basic	$	2.27	$	0.01	$	2.28
Net income applicable to common shareholders per common share - Diluted	$	2.24	$	0.01	$	2.25


Condensed Consolidated Statements of Comprehensive Income (unaudited)
	Three months ended March 31, 2022
($ in millions)	As reported		Impact of change		As adjusted
Net income	$	646	$	4	$	650

Other comprehensive income (loss), after-tax
Changes in:
Unrealized net capital gains and losses	(1,593)		(1)		(1,594)
Discount rate for reserve for future policy benefits	—		95		95
Other comprehensive loss, after-tax	(1,608)		94		(1,514)

Comprehensive loss	(962)		98		(864)
Comprehensive loss attributable to Allstate	$	(940)	$	98	$	(842)














Condensed Consolidated Statements of Financial Position (unaudited)
	December 31, 2022
($ in millions)	As reported		Impact of change		As adjusted
Assets
Deferred policy acquisition costs	$	5,418	$	24	$	5,442
Reinsurance and indemnification recoverables, net	9,606		13		9,619
Deferred income taxes	386		(4)		382
Other assets, net	5,905		(1)		5,904
Total assets	97,957		32		97,989
Liabilities
Reserve for future policy benefits	1,273		49		1,322
Contractholder funds	897		(18)		879
Unearned premiums	22,311		(12)		22,299

Total liabilities	80,607		19		80,626
Equity
Retained income	50,954		16		50,970
Accumulated other comprehensive income:
Unrealized net capital gains and losses	(2,253)		(2)		(2,255)
Discount rate for reserve for future policy benefits	—		(1)		(1)
Total AOCI	(2,389)		(3)		(2,392)
Total Allstate shareholders’ equity	17,475		13		17,488
Total equity	17,350		13		17,363
Total liabilities and equity	$	97,957	$	32	$	97,989


Condensed Consolidated Statements of Shareholders’ Equity (unaudited)
	Three months ended March 31, 2022
($ in millions)	As reported		Impact of change		As adjusted
















Retained income
Balance, beginning of period	$	53,294	$	(6)	$	53,288

Net income	656		4		660



Balance, end of period	53,688		(2)		53,686












Accumulated other comprehensive income (loss)
Balance, beginning of period	655		(229)		426

Change in unrealized net capital gains and losses	(1,593)		(1)		(1,594)


Change in discount rate for reserve for future policy benefits	—		95		95
Balance, end of period	(953)		(135)		(1,088)

Total Allstate shareholders’ equity	23,212		(137)		23,075
Total equity	$	23,138	$	(137)	$	23,001


Condensed Consolidated Statements of Cash Flows (unaudited)
	Three months ended March 31, 2022
($ in millions)	As reported		Impact of change		As adjusted
Cash flows from operating activities
Net income	$	646	$	4	$	650
Adjustments to reconcile net income to net cash provided by operating activities:







Changes in:
Policy benefits and other insurance reserves	(113)		2		(111)
Unearned premiums	392		(2)		390
Deferred policy acquisition costs	(99)		(4)		(103)
Reinsurance recoverables, net	334		(1)		333
Income taxes	92		1		93
Other operating assets and liabilities	(574)		—		(574)
Net cash provided by operating activities	$	432	$	—	$	432

Changes to significant accounting policies

Reserve for future policy benefits

Long-duration voluntary accident and health insurance and traditional life insurance contracts The reserve for future policy benefits (“RFPB”) is calculated using the net premium reserving model, which uses the present value of insurance contract benefits less the present value of net premiums. Under the net premium reserving model, the Company computes a net premium ratio which is the present value of insurance contract benefits divided by the present value of gross premiums. The present value of contract benefits and gross premiums are determined using the discount rate at contract inception. The net premium ratio is applied to premiums due on a periodic basis to compute the RFPB. The net premium ratio is recomputed at least annually using both actual historical cash flows and future cash flows anticipated over the life of cohort of contracts subject to measurement. Assumptions including mortality, morbidity, and lapses affect the timing and amount of estimated cash flows used to calculate the RFPB.

The Company has grouped contracts into cohorts based on product type and issue year. Examples of insurance product types include whole life, term life, critical illness and disability. Issue year is based on the issuance date of the contract to the policyholder,

except in the case of contracts acquired in a business combination, where the issue date is based on the acquisition date of the business combination. The RFPB is calculated for contracts in force at the end of each period, which results in the Company recognizing the effects of actual experience in the period it occurs.

Annually, in the third quarter, the Company obtains historical premiums and benefits information and evaluates future cash flow assumptions that include mortality, morbidity, and terminations, and updates cash flow assumptions as necessary. The Company has elected to not update the expense assumption when annually reviewing and updating future cash flow assumptions. Actual premiums and benefits and any updates to future cash flow assumptions are incorporated into the calculation of an updated net premium ratio. Updates for actual premiums and benefits and changes to future cash flow assumptions will result in a liability remeasurement gain or loss that is recognized in net income. The first step to determining the liability remeasurement gain or loss is to calculate the RFPB using revised net premiums discounted at the locked-in discount rate set at contract issuance. The result of the first step is then compared to the carrying amount of the RFPB before the updates for actual experience and changes to future cash flow assumptions. The decrease (gain) or increase (loss) in the RFPB is reported as liability

remeasurement gain or loss in net income and presented parenthetically as part of Accident, health and other policy benefits on the Consolidated Statements of Operations. The updated net premium ratio is used in future quarters to measure the RFPB until the next annual update or an earlier date if the Company determines it is necessary to revise future cash flow assumptions based on available evidence, including actual experience.

The discount rate assumption is determined using a yield curve approach. The yield curve consists of U.S. dollar-denominated senior unsecured fixed-income securities issued by U.S. companies that have an A credit rating based on the ratings provided by nationally recognized rating agencies that include Moody’s, Standard & Poor’s, and Fitch. For points on the yield curve that do not have observable yields, the Company uses linear interpolation which calculates the unobservable yield based on the two nearest observable yields, except for any points beyond the last observable yield at 30 years, where interest rates are held constant with the last observable point on the yield curve. The Company updates the current discount rate quarterly and the change in the RFPB resulting from the updated current discount rate is recognized in OCI.

Deferred policy acquisition costs

Deferred policy acquisition costs are related directly to the successful acquisition of new or renewal insurance contracts and are deferred and recognized as an expense over the life of the related contracts. These costs are principally agent and broker remuneration, premium taxes and certain underwriting expenses. All other acquisition costs are expensed as incurred and included in operating costs and expenses.

Long-duration voluntary accident and health insurance, traditional life insurance contracts, and interest-sensitive life insurance contracts Voluntary accident and health insurance and traditional life insurance contracts are grouped by product and issue year into cohorts consistent with the cohorts used to calculate the RFPB. Interest-sensitive life insurance contracts are grouped into cohorts by issue year, and the issue year is determined based on contract issue date. DAC is amortized on a constant level basis over the expected contract term and is included in Amortization of deferred policy acquisition costs on the Consolidated Statements of Operations. The constant level basis used for all cohorts is based on policies-in-force. The expected contract term and mortality, morbidity, and termination assumptions are used to calculate both DAC amortization and the RFPB. If actual contract terminations are greater than expected terminations for any cohort, each affected cohort’s DAC balance will be reduced in the current period based on the difference between the actual and expected terminations. No adjustments to DAC amortization are recorded if actual contract terminations are less than expected terminations for any cohort. If the Company makes an update to any of its mortality, morbidity, or termination assumptions, the Company will use the assumptions prospectively to amortize any cohort’s remaining DAC over the remaining expected contract term.

The costs assigned to the right to receive future cash flows from certain business purchased from other insurers are also classified as DAC in the Consolidated Statements of Financial Position. The costs capitalized represent the present value of future profits expected to be earned over the lives of the contracts acquired. The Company amortizes the present value of future profits using the same methodology and assumptions as the amortization of DAC. The present value of future profits is subject to premium deficiency testing.