Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2023

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 Summary of Significant Accounting Policies

Investments

Fixed income securities include bonds and asset-backed securities (“ABS”). Fixed income securities, which may be sold prior to their contractual maturity, are designated as available-for-sale (“AFS”) and are carried at fair value. The difference between amortized cost, net of credit loss allowances (“amortized cost, net”) and fair value, net of deferred income taxes, is reflected as a component of accumulated other comprehensive income (“AOCI”). The Company excludes accrued interest receivable from the amortized cost basis of its AFS fixed income securities. Cash received from calls and make-whole payments is reflected as a component of proceeds from sales and cash received from maturities and pay-downs is reflected as a component of investment collections within the Consolidated Statements of Cash Flows.

Equity securities primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments. Equity securities are carried at fair value. Equity securities without readily determinable or estimable fair values are measured using the measurement alternative, which is cost less impairment, if any, and adjustments resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.

Mortgage loans and bank loans are carried at amortized cost, net, which represent the amount expected to be collected. The Company excludes accrued interest receivable from the amortized cost basis of its mortgage and bank loans. Credit loss allowances are estimates of expected credit losses, established for loans upon origination or purchase, and are established considering all relevant information available, including past events, current conditions, and reasonable and supportable forecasts over the life of the loans. Loans are evaluated on a pooled basis when they share similar risk characteristics; otherwise, they are evaluated individually.

Investments in limited partnership interests are primarily accounted for in accordance with the equity method of accounting (“EMA”) and include interests in private equity funds, real estate funds and other funds. Investments in limited partnership interests purchased prior to January 1, 2018, where the Company’s interest is so minor that it exercises virtually no influence over operating and financial policies, are accounted for at

fair value primarily utilizing the net asset value (“NAV”) as a practical expedient to determine fair value.

Short-term investments, including money market funds, commercial paper, U.S. Treasury bills and other short-term investments, are carried at fair value. Other investments primarily consist of bank loans, policy loans, real estate and derivatives. Bank loans are primarily senior secured corporate loans. Policy loans are carried at unpaid principal balances. Real estate is carried at cost less accumulated depreciation. Derivatives are carried at fair value.

Investment income primarily consists of interest, dividends, income from limited partnership interests, rental income from real estate, and income from certain derivative transactions.

Interest is recognized on an accrual basis using the effective yield method and dividends are recorded at the ex-dividend date. Interest income for ABS is determined considering estimated pay-downs, including prepayments, obtained from third-party data sources and internal estimates. Actual prepayment experience is periodically reviewed, and effective yields are recalculated when differences arise between the prepayments originally anticipated and the actual prepayments received and currently anticipated. For ABS of high credit quality with fixed interest rates, the effective yield is recalculated on a retrospective basis. For all others, the effective yield is generally recalculated on a prospective basis. Net investment income for AFS fixed income securities includes the impact of accreting the credit loss allowance for the time value of money. Accrual of income is suspended for fixed income securities when the timing and amount of cash flows expected to be received is not probable. Accrual of income is suspended for mortgage loans and bank 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 investments on nonaccrual status are generally recorded as a reduction of amortized cost.

Income from limited partnership interests carried at fair value is recognized based upon the changes in fair value of the investee’s equity primarily determined using NAV. Income from EMA limited partnership interests is recognized based on the Company’s share of the partnerships’ earnings. Income from EMA limited partnership interests is generally recognized on a three

month delay due to the availability of the related financial statements from investees.

Net gains and losses on investments and derivatives include gains and losses on investment sales, changes in the credit loss allowances related to fixed income securities, mortgage loans and bank loans, impairments, valuation changes of equity investments, including equity securities and certain limited partnerships where the underlying assets are predominately public equity securities, and periodic changes in fair value and settlements of certain derivatives, including hedge ineffectiveness. Net gains and losses on sales of investments and derivatives are determined on a specific identification basis and are net of credit losses already recognized through an allowance.

Derivative and embedded derivative financial instruments

Derivative financial instruments include interest rate swaps, credit default swaps, futures (interest rate and equity), options (including swaptions), warrants and stock rights, foreign currency forwards and total return swaps.

All derivatives are accounted for on a fair value basis and reported as other investments, other assets and other liabilities and accrued expenses. Embedded derivative instruments subject to bifurcation are also accounted for on a fair value basis and are reported together with the host contract. Cash flows from other derivatives are reported in cash flows from investing activities within the Consolidated Statements of Cash Flows.

 For derivatives for which hedge accounting is not applied, the income statement effects, including fair value gains and losses and accrued periodic settlements, are reported either in net gains and losses on investments and derivatives or in a single line item together with the results of the associated asset or liability for which risks are being managed.

Securities loaned

The Company’s business activities include securities lending transactions, which are used primarily to generate net investment income. The proceeds received in conjunction with securities lending transactions can be reinvested in short-term investments or fixed income securities. These transactions are short-term in nature, usually 30 days or less.

The Company receives cash collateral for securities loaned in an amount generally equal to 102% and 105% of the fair value of domestic and foreign securities, respectively, and records the related obligations to return the collateral in other liabilities and accrued expenses. The carrying value of these obligations approximates fair value because of their relatively short-term nature. The Company monitors the market value of securities loaned on a daily basis and obtains additional collateral as necessary under the terms of the agreements to mitigate counterparty credit risk.

The Company maintains the right and ability to repossess the securities loaned on short notice.

Recognition of premium revenues and contract charges, and related benefits and interest credited

Property and casualty insurance premiums include premiums from personal lines policies, protection plans, other contracts (primarily protection and insurance products) and roadside assistance.

Personal lines insurance premiums are deferred and earned on a pro-rata basis over the terms of the policies, typically periods of six or twelve months.

Revenues related to protection plans, other contracts (primarily protection and insurance products) and roadside assistance are deferred and earned over the term of the contract in a manner that recognizes revenue as obligations under the contracts are fulfilled. Revenues from these products are classified as premiums as the products are backed by insurance. Protection plans and protection and insurance premiums are recognized using a cost-based incurrence method over the term of the contracts, which is generally one to five years. Roadside assistance premiums are recognized evenly over the term of the contract as performance obligations are fulfilled.

The portion of premiums written applicable to the unexpired terms of the policies is recorded as unearned premiums.

Unearned premiums
	December 31,
($ in millions)	2023		2022
Allstate Protection	$	19,542	$	17,538
Protection Services	5,150		4,745
Total	$	24,692	$	22,283

Protection Services For the year ended December 31, 2023, the Company recognized $1.74 billion of property and casualty insurance premiums for Protection Services that were included in the unearned premium balance as of December 31, 2022.

For the year ended December 31, 2022, the Company recognized $1.46 billion of property and casualty insurance premiums for Protection Services that were included in the unearned premium balance as of December 31, 2021.

The Company expects to recognize approximately $1.85 billion, $1.43 billion and $1.87 billion of the December 31, 2023 unearned premium balance in 2024, 2025 and thereafter, respectively.

Health and benefits Voluntary accident and health insurance products are expected to remain in force for an extended period and therefore are primarily classified as long-duration contracts. Traditional life insurance products consist principally of products with fixed and guaranteed premiums and benefits, primarily term and whole life insurance products. Premiums from these products are recognized as revenue when due from policyholders, net of any credit loss allowance for uncollectible premiums. Benefits are reflected in

accident, health and other policy benefits and recognized over the life of the policy in relation to premiums.

Interest-sensitive life contracts, such as universal life, are insurance contracts whose terms are not fixed and guaranteed. The terms that may be changed include premiums paid by the contractholder, interest credited to the contractholder account balance and contract charges assessed against the contractholder account balance. Premiums from these contracts are reported as contractholder fund deposits. Contract charges consist of fees assessed against the contractholder account balance for the cost of insurance (mortality risk), contract administration and surrender of the contract prior to contractually specified dates. These contract charges are recognized as revenue when assessed against the contractholder account balance. Benefit payments in excess of the contractholder account balance are reflected in accident, health and other policy benefits.

Interest credited to contractholder funds, which are reported in accident, health and other policy benefits, represents interest accrued or paid on interest-sensitive life contracts. Crediting rates for interest-sensitive life contracts are adjusted periodically by the Company to reflect current market conditions subject to contractually guaranteed minimum rates.

Premium installment receivables represent premiums written and not yet collected, net of the credit loss allowance for uncollectible premiums. These receivables are primarily outstanding for one year or less. The Company utilizes historical internal data including aging analyses to estimate allowances under current conditions and for the forecast period. The Company regularly evaluates and updates the data and adjusts its allowance as appropriate.

Rollforward of credit loss allowance for premium installment receivables
	For the years ended December 31,
($ in millions)	2023		2022
Beginning balance	$	(132)	$	(107)
Increase in the provision for credit losses	(348)		(313)
Write-off of uncollectible premium installment receivable amounts	342		288
Ending balance	$	(138)	$	(132)

Other revenue

Other revenue represents fees collected from policyholders relating to premium installment payments, commissions on sales of non-proprietary products, sales of identity protection services, fee-based services and other revenue transactions. Other revenue is recognized when performance obligations are fulfilled.

The Company collects service fees in the form of commission and general agent fees by selling policies

issued by third-party insurance companies. The Company recognizes Medicare-related and other accident and health commission revenues equal to the estimated lifetime value of the revenues at the time when the policy is sold, net of an allowance for estimated policy cancellations, as no further performance obligations exist. The allowance for estimated third-party cancellations is periodically evaluated and adjusted as necessary.

Deferred policy acquisition costs

Deferred policy acquisition costs (“DAC”) 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 and are included in amortization of deferred policy acquisition costs on the Consolidated Statements of Operations. All other acquisition costs are expensed as incurred and included in operating costs and expenses.

Customers of the Company may exchange one insurance policy for another offered by the Company, or make modifications to an existing life, accident and health or property and casualty contract issued by the Company. These transactions are identified as internal replacements for accounting purposes. Internal replacement transactions determined to result in replacement contracts that are substantially unchanged from the replaced contracts are accounted for as continuations of the replaced contracts. Unamortized DAC related to the replaced contracts continue to be deferred and amortized in connection with the replacement contracts. For traditional life, accident and health and property and casualty insurance policies, any changes to unamortized DAC that result from replacement contracts are treated as prospective revisions and any costs associated with the issuance of replacement contracts are characterized as maintenance costs and expensed as incurred.

Property and casualty insurance For property and casualty insurance, DAC is amortized into income as premiums are earned pro rata over the period of the policy. DAC associated with property and casualty insurance is periodically reviewed for recoverability and adjusted if necessary. Future investment income is considered in determining the recoverability of DAC.

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 reserve for future policy benefits (“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. The constant level basis used for all cohorts is based on policies-in-force. The expected contract term and mortality, morbidity, and lapse

assumptions are used to calculate both DAC amortization and the RFPB. If actual contract lapses are greater than expected lapses 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 lapses. No adjustments to DAC amortization are recorded if actual contract lapses are less than expected lapses for any cohort. If the Company makes an update to any of its mortality, morbidity, or lapse assumptions, the Company will use the assumptions prospectively to amortize any cohort’s remaining DAC over the remaining expected contract term.

Present value of future profits 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 for long-duration voluntary accident and health insurance, traditional life insurance contracts and interest-sensitive life insurance contracts using the same methodology and assumptions as the amortization of DAC. The present value of future profits for these products is subject to premium deficiency testing.

For property and casualty insurance, these costs are amortized as profits emerge over the lives of the acquired business and are periodically evaluated for recoverability.

The present value of future profits was $8 million and $10 million as of December 31, 2023 and 2022, respectively. Amortization expense of the present value of future profits was $2 million, $11 million and $324 million in 2023, 2022 and 2021, respectively.

Reinsurance and indemnification

Reinsurance In the normal course of business, the Company seeks to limit aggregate and single exposure to losses on large risks by purchasing reinsurance. The Company has also used reinsurance to affect the disposition of certain blocks of business. Reinsurance does not extinguish the Company’s primary liability under the policies written. Therefore, in addition to establishing allowances as appropriate after evaluating reinsurers’ activities related to claims settlement practices and commutations, the Company evaluates reinsurer counterparty credit risk and records reinsurance recoverables net of credit loss allowances. The Company assesses counterparty credit risk for individual reinsurers separately when more relevant or on a pooled basis when shared risk characteristics exist. The evaluation considers the credit quality of the reinsurer and the period over which the recoverable balances are expected to be collected. The Company considers factors including past events, current conditions and reasonable and supportable forecasts in the development of the estimate of credit loss allowances.

Allowances for property and casualty and accident and health reinsurance recoverables are established primarily through risk-based evaluations.

The property and casualty recoverable evaluation considers the credit rating of the reinsurer, the period over which the reinsurance recoverable balances are expected to be recovered and other relevant factors including historical experience of reinsurer failures. Reinsurers in liquidation or in default status are evaluated individually using the Company’s historical liquidation recovery assumptions and any other relevant information available including the most recent public information related to the financial condition or liquidation status of the reinsurer. For accident and health reinsurance recoverables, the Company uses a probability of default and loss given default model developed independently of the Company to estimate current expected credit losses. The accident and health reinsurance recoverable evaluation utilizes factors including historical industry factors based on the probability of liquidation, and incorporates current loss given default factors reflective of the industry.

The Company monitors the credit ratings of reinsurer counterparties and evaluates the circumstances surrounding credit rating changes as inputs into its credit loss assessments. Uncollectible reinsurance recoverable balances are written off against the allowances when there is no reasonable expectation of recovery.

The changes in the allowances are reported in property and casualty insurance claims and claims expense and accident, health and other policy benefits.

Indemnification The Company also participates in various indemnification mechanisms, including industry pools and facilities, which are reimbursement mechanisms that assess participating insurers for expected insured claims, reimburse participating insurers for qualifying paid claims and permit participating insurers to recoup amounts assessed directly from insureds. Indemnification recoverables are backed by the financial resources of the property and casualty insurance company market participants.

The design and function of these indemnification programs does not result in the retention of insurance or reinsurance risk by the indemnitee. Based on the Company’s evaluation of these programs on an individual basis, the establishment of credit loss allowances is not warranted at this time. The Company has not experienced any historical credit losses related to its indemnification programs. The Company continues to monitor these programs to determine whether any changes from historical experience have emerged or are expected to emerge or whether there have been any changes in the design or administration of the programs that would require establishment of credit loss allowances.

Revenue recognition The amounts reported as reinsurance and indemnification recoverables include amounts paid and due from reinsurers and indemnitors as well as estimates of amounts expected to be

recovered from reinsurers and indemnitors on insurance liabilities that have been incurred but not yet paid. Reinsurance and indemnification recoverables on unpaid losses are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying contract. Reinsurance and indemnification premiums are generally reflected in income in a manner consistent with the recognition of premiums on the associated contracts. For catastrophe coverage, the cost of reinsurance premiums is recognized ratably over the contract period to the extent coverage remains available. Certain catastrophe agreements are subject to reinstatement premiums which are recorded as catastrophe losses when earned.

Goodwill

Goodwill represents the excess of amounts paid for acquiring businesses over the fair value of the net assets acquired, less any impairment of goodwill recognized. The Company’s goodwill reporting units are equivalent to its reportable segments to which goodwill has been assigned: Allstate Protection, Protection Services, and Allstate Health and Benefits.

Goodwill by reporting unit
	December 31,
($ in millions)	2023		2022
Allstate Protection	$	1,563	$	1,563
Protection Services	1,494		1,494
Allstate Health and Benefits	445		445
Total	$	3,502	$	3,502

Goodwill is recognized when acquired and allocated to reporting units based on which unit is expected to benefit from the synergies of the business combination. Goodwill is not amortized but is tested for impairment at least annually. The Company performs its annual goodwill impairment testing during the fourth quarter of each year based upon data as of the close of the third quarter. Goodwill impairment is measured and recognized as the amount by which a reporting unit’s carrying value, including goodwill, exceeds its fair value, not to exceed the carrying amount of goodwill allocated to the reporting unit. The Company also reviews goodwill for impairment whenever events or changes in circumstances, such as deteriorating or adverse market conditions, indicate that it is more likely than not that the carrying amount of the reporting unit including goodwill may exceed the fair value of the reporting unit. The goodwill impairment analysis is performed at the reporting unit level.

As of December 31, 2023 and 2022, the fair value of the Company’s goodwill reporting units exceeded their carrying values.

Intangible assets

Intangible assets (reported in other assets) consist of capitalized costs primarily related to acquired distribution and customer relationships, trade names and licenses, technology and other assets. The estimated useful lives of distribution and customer relationships, technology and other intangible assets

are generally 10 years, 5 years and 5 years, respectively. Intangible assets are carried at cost less accumulated amortization.

Intangible assets by type
	December 31,
($ in millions)	2023		2022
Distribution and customer relationships	$	515	$	697
Trade names and licenses	159		179
Technology and other	292		301
Total	$	966	$	1,177

Amortization expense is calculated using an accelerated amortization method. Amortization expense on intangible assets was $329 million, $353 million and $376 million in 2023, 2022 and 2021, respectively.

Amortization expense of intangible assets for the next five years and thereafter
($ in millions)
2024	$	271
2025	215
2026	147
2027	98
2028	54
Thereafter	42
Total amortization	$	827

Accumulated amortization of intangible assets was $1.80 billion and $1.48 billion as of December 31, 2023 and 2022, respectively.

Trade names and licenses are considered to have an indefinite useful life and are reviewed for impairment at least annually or more frequent if circumstances arise that indicate an impairment may have occurred. An impairment is recognized if the carrying amount of the asset exceeds its estimated fair value.

Property and equipment

Property and equipment is carried at cost less accumulated depreciation. Included in property and equipment are capitalized costs related to computer software licenses and software developed for internal use. These costs generally consist of certain external payroll and payroll related costs. Property and equipment depreciation is calculated using the straight-line method over the estimated useful lives of the assets, generally 3 to 10 years for equipment and 40 years for real property. Depreciation expense is reported in operating costs and expenses. Accumulated depreciation on property and equipment was $2.59 billion and $2.45 billion as of December 31, 2023 and 2022, respectively. Depreciation expense on property and equipment was $343 million, $335 million and $411 million in 2023, 2022 and 2021, respectively. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Income taxes

Income taxes are accounted for using the asset and liability method under which deferred tax assets and liabilities are recognized for temporary differences between the financial reporting and tax bases of assets and liabilities at the enacted tax rates. A deferred tax asset valuation allowance is established when it is more likely than not such assets will not be realized. The Company recognizes interest expense related to income tax matters in income tax expense and penalties in operating costs and expenses.

Reserve for property and casualty insurance claims and claims expense

The reserve for property and casualty insurance claims and claims expense is the estimate of amounts necessary to settle all reported and unreported incurred claims for the ultimate cost of insured property and casualty losses, based upon the facts of each case and the Company’s experience with similar cases. Estimated amounts of salvage and subrogation are deducted from the reserve for claims and claims expense. The establishment of appropriate reserves, including reserves for catastrophe losses, is an inherently uncertain and complex process. Reserve estimates are primarily derived using an actuarial estimation process in which historical loss patterns are applied to actual paid losses and reported losses (paid losses plus individual case reserves established by claim adjusters) for an accident or report year to create an estimate of how losses are likely to develop over time. Development factors are calculated quarterly and periodically throughout the year for data elements such as claims reported and settled, paid losses, and paid losses combined with case reserves.

When the Company experiences changes in the mix or type of claims or changing claim settlement patterns or data, it applies actuarial judgment in the determination and selection of development factors to develop reserve liabilities. The effects of inflation are implicitly considered in the reserving process as a development factor using historic data incorporated as a reasonable estimate of future inflation. The historical development patterns for these data elements are used as the assumptions to calculate reserve estimates, including the reserves for reported and unreported claims; however, when the Company experiences changes it may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability. Reserve estimates are regularly reviewed and updated, using the most current data and information available. Any resulting reestimates are reflected in current results of operations.

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 the 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 lapses, 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. 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 other comprehensive income (“OCI”).

Accident and health short-duration contracts The RFPB includes unpaid losses and loss adjustment expense (“LAE”) reserves for individual and certain voluntary accident and health short-duration contracts and is an estimate of the Company’s liability from incurred claims at the end of the reporting period. The unpaid losses and LAE reserves are the result of an ongoing analysis of recent loss development trends and emerging historical experience. Original estimates are increased or decreased as additional information becomes known regarding individual claims. In setting its reserves, the Company reviews its loss data to estimate expected loss development. Management believes that its use of standard actuarial methodology applied to its analyses of its historical experience provides a reasonable estimate of future losses. However, actual future losses may differ from the Company’s estimate, and may be affected by future events, including inflation and changes in law and judicial interpretations, which would favorably or unfavorably impact the ultimate settlement of the Company’s losses and LAE.

The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and LAE. In addition to inflation, the average severity of claims is affected by a number of factors that may vary by types and features of policies written. Future average severities are projected from historical trends, adjusted for implemented changes in underwriting standards and policy provisions, as well as general economic trends. These estimated trends are monitored and revised as necessary based on actual development.

Unpaid losses include a provision for incurred-but-not-reported (“IBNR”) reserve estimates representing claims that have occurred but have not yet been reported, some of which are not yet known to the insured, as well as a provision for future development on reported claims. IBNR reserves are generally calculated by first projecting the ultimate cost of all claims that have occurred and then subtracting reported losses and loss expenses. Reported losses include cumulative paid losses and loss expenses plus case reserves.

Contractholder funds

Contractholder funds represent interest-bearing liabilities arising primarily from the sale of interest-sensitive life insurance contracts. Contractholder funds primarily comprise cumulative deposits received and interest credited to the contractholder less cumulative contract benefits, surrenders, withdrawals and contract charges for mortality or administrative expenses.

Pension and other postretirement remeasurement gains and losses

The Company’s policy is to remeasure its pension and postretirement plans on a quarterly basis. Pension and other postretirement gains and losses represent the remeasurement of projected benefit obligations and differences between the expected and actual return on plan assets, which are immediately recognized in earnings and are referred to as pension and other postretirement remeasurement gains and losses on the Consolidated Statements of Operations.

The primary factors contributing to pension and postretirement remeasurement gains and losses are:

• Changes in the discount rate used to value pension and postretirement obligations as of the measurement date

• Differences between the expected and the actual return on plan assets

• Changes in demographic assumptions, including mortality and participant experience

• Changes in lump sum interest rates used to value pension obligations as of the measurement date

Differences in actual experience and changes in other assumptions affect the Company’s pension and other postretirement obligations and expenses.

Pension and other postretirement service cost, interest cost, expected return on plan assets and amortization of prior service credits are allocated to the Company’s reportable segments. The pension and other postretirement remeasurement gains and losses are reported in the Corporate and Other segment.

Legal contingencies

The Company reviews its lawsuits, regulatory inquiries, and other legal proceedings on an ongoing basis. The Company establishes accruals for such matters at management’s best estimate when the Company assesses that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company’s assessment of whether a loss is reasonably possible or probable is based on its assessment of the ultimate outcome of the matter following all appeals. The Company does not include potential recoveries in its estimates of reasonably possible or probable losses. Legal fees are expensed as incurred.

Debt

Debt includes senior notes, senior debentures, subordinated debentures and junior subordinated debentures issued by the Corporation. Unamortized debt issuance costs and fair value adjustments are reported in debt and are amortized over the expected period the debt will remain outstanding.

Equity incentive plans

The Company has equity incentive plans under which it grants nonqualified stock options, restricted stock units and performance stock awards (“equity awards”) to certain employees and directors of the Company. The Company measures the fair value of equity awards at the grant date and recognizes the

expense over the shorter of the period in which the requisite service is rendered or retirement eligibility is attained. The expense for performance stock awards with no market condition is adjusted each period to reflect the performance factor most likely to be achieved at the end of the performance period. The expense for performance stock awards with a market condition is based on the fair value of the awards at the grant date which incorporates the probability of achieving the market condition. In the event the market condition is not met, any previously recognized expense is not reversed. The Company uses a binomial lattice model to determine the fair value of employee stock options. The Company uses a Monte Carlo simulation model to determine the fair value of performance stock awards with a market condition.

Measurement of credit losses

The Company carries an allowance for expected credit losses for all financial assets measured at

amortized cost on the Consolidated Statements of Financial Position. The Company considers past events, current conditions, and reasonable and supportable forecasts in estimating an allowance for credit losses. The Company also carries a credit loss allowance for fixed income securities where applicable and, when amortized cost is reported, it is net of credit loss allowances. For additional information, refer to the Investments, Reinsurance and indemnification or Recognition of premium revenues and contract charges topics of this section.

The Company also estimates a credit loss allowance for commitments to fund mortgage loans and bank loans unless they are unconditionally cancellable by the Company. The related allowance is reported in other liabilities and accrued expenses.

Allowance for credit losses
	As of December 31,
($ in millions)	2023		2022
Fixed income securities	$	36	$	13
Mortgage loans	11		7
Bank loans	22		57
Investments	69		77
Premium installment receivables	138		132
Reinsurance recoverables	65		65
Other assets	18		19
Assets	290		293
Commitments to fund mortgage loans and bank loans	1		—
Liabilities	1		—
Total	$	291	$	293

Leases

The Company has certain operating leases for office facilities, computer and office equipment, and vehicles. The Company’s leases have remaining lease terms of generally 1 year to 10 years, some of which include options to extend the leases for up to 20 years, and some of which include options to terminate the leases within 45 days.

The Company determines if an arrangement is a lease at inception. Leases with an initial term less than one year are not recorded on the balance sheet and the lease costs for these leases are recorded as an expense on a straight-line basis over the lease term. Operating leases with terms greater than one year result in a lease liability recorded in other liabilities and accrued expenses with a corresponding right-of-use (“ROU”) asset recorded in other assets on the Consolidated Statements of Financial Position. As of December 31, 2023 and 2022, the Company had $265 million and $343 million in lease liabilities and $163 million and $234 million in ROU assets, respectively.

Operating lease liabilities are recognized at the commencement date based on the present value of future minimum lease payments over the lease term. ROU assets are recognized based on the

corresponding lease liabilities adjusted for qualifying initial direct costs, prepaid or accrued lease payments and unamortized lease incentives. As most of the Company’s leases do not disclose the implicit interest rate, the Company uses collateralized incremental borrowing rates based on information available at lease commencement when determining the present value of future lease payments. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease. Lease terms may include options to extend or terminate the lease which are incorporated into the Company’s measurements when it is reasonably certain that the Company will exercise the option.

Operating lease costs are recognized on a straight-line basis over the lease term and include interest expense on the lease liability and amortization of the ROU asset. Variable lease costs are expensed as incurred and include maintenance costs and real estate taxes. Lease costs are reported in operating costs and expenses and totaled $102 million, $131 million and $162 million, including $19 million, $23 million and $30 million of variable lease costs in 2023, 2022 and 2021, respectively.

Other information related to operating leases
	December 31,
	2023		2022
Weighted average remaining lease term (years)	3		4
Weighted average discount rate	3.48	%	3.08	%

Maturity of lease liabilities
($ in millions)	Operating leases
2024	$	92
2025	77
2026	48
2027	30
2028	18
Thereafter	20
Total lease payments	$	285
Less: interest	(20)
Present value of lease liabilities	$	265

Variable interest entities

A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity’s operations through voting rights or do not participate in the gains and losses of the entity. The Company consolidates VIEs in which the Company is deemed the primary beneficiary. The primary beneficiary is the entity that has both (1) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE and (2) the power to direct the activities of the VIE that most significantly affect that entity’s economic performance.

Foreign currency translation

The local currency of the Company’s foreign subsidiaries is deemed to be the functional currency of the country in which these subsidiaries operate. The financial statements of the Company’s foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect at the end of a reporting period for assets and liabilities and at average exchange rates during the period for results of operations.

The unrealized gains and losses from the translation of the net assets are recorded as unrealized foreign currency translation adjustments and included in AOCI. Changes in unrealized foreign currency translation adjustments are included in OCI. Gains and losses from foreign currency transactions are reported in operating costs and expenses and have not been material.

Earnings per common share

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

For the Company, dilutive potential common shares consist of outstanding stock options and unvested non-participating restricted stock units and contingently issuable performance stock awards. The effect of dilutive potential common shares does not include options with an anti-dilutive effect on earnings per common share because their exercise prices exceed the average market price of Allstate common shares during the period or for which the unrecognized compensation cost would have an anti-dilutive effect.

Computation of basic and diluted earnings per common share
	For the years ended December 31,
($ in millions, except per share data)	2023		2022		2021
Numerator:
Net (loss) income from continuing operations	$	(213)	$	(1,342)	$	5,174
Less: Net loss attributable to noncontrolling interest	(25)		(53)		(33)
Net (loss) income from continuing operations attributable to Allstate	(188)		(1,289)		5,207
Less: Preferred stock dividends	128		105		114
Net (loss) income from continuing operations applicable to common shareholders	(316)		(1,394)		5,093
Income (loss) from discontinued operations, net of tax	—		—		(3,593)
Net (loss) income applicable to common shareholders	$	(316)	$	(1,394)	$	1,500
Denominator:
Weighted average common shares outstanding	262.5		271.2		294.8
Effect of dilutive potential common shares (1):
Stock options	—		—		2.7
Restricted stock units (non-participating) and performance stock awards	—		—		1.6
Weighted average common and dilutive potential common shares outstanding	262.5		271.2		299.1
Earnings per share applicable to common shareholders
Basic
Continuing operations	$	(1.20)	$	(5.14)	$	17.28
Discontinued operations	—		—		(12.19)
Total	$	(1.20)	$	(5.14)	$	5.09
Diluted (1)
Continuing operations	$	(1.20)	$	(5.14)	$	17.03
Discontinued operations	—		—		(12.02)
Total	$	(1.20)	$	(5.14)	$	5.01
Anti-dilutive options excluded from diluted earnings per common share	3.0		1.7		1.3
Weighted average dilutive potential common shares excluded due to net loss applicable to common shareholders (1)	2.2		3.1		—

(1)As a result of the net loss reported for the years ended December 31, 2023 and 2022, weighted average shares for basic earnings per share is also used for calculating diluted earnings per share because all dilutive potential common shares are anti-dilutive and are therefore excluded from the calculation.

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 OCI at each reporting date. Additionally, DAC for all long-duration products are amortized on a simplified basis. Also, the Company’s reserve for future policy benefits and DAC are 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 AOCI	277
Total decrease in equity	$	298

The decrease in AOCI was 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. The decrease in retained income primarily related 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
($ in millions, except per share data)	As reported		Impact of change		As adjusted
	Year ended December 31, 2022
Revenues
Accident and health insurance premiums and contract charges	$	1,833	$	(1)	$	1,832
Total revenues	51,412		(1)		51,411
Costs and expenses
Accident, health and other policy benefits	1,061		(19)		$	1,042
Amortization of deferred policy acquisition costs	6,644		(10)		$	6,634
Total costs and expenses	53,270		(29)		53,241
Loss from operations before income tax expense	(1,858)		28		(1,830)
Income tax benefit	(494)		6		(488)
Net loss	(1,364)		22		(1,342)
Net loss attributable to Allstate	(1,311)		22		(1,289)
Net loss applicable to common shareholders	$	(1,416)	$	22	$	(1,394)
Earnings per common share:
Net loss applicable to common shareholders per common share - Basic	$	(5.22)	$	0.08	$	(5.14)
Net loss applicable to common shareholders per common share - Diluted	(5.22)		0.08		(5.14)
	Year ended December 31, 2021
Revenues
Accident and health insurance premiums and contract charges	$	1,821	$	13	$	1,834
Total revenues	50,588		13		50,601
Costs and expenses
Accident, health and other policy benefits	1,049		11		1,060
Amortization of deferred policy acquisition costs	6,252		(16)		6,236
Total costs and expenses	44,140		(5)		44,135
Income from operations before income tax expense	6,448		18		6,466
Income tax benefit	1,289		3		1,292
Net income from continuing operations	5,159		15		5,174
Net income	1,566		15		1,581
Net income attributable to Allstate	1,599		15		1,614
Net income applicable to common shareholders	$	1,485	$	15	$	1,500
Earnings per common share:
Net income from continuing operations applicable to common shareholders per common share - Basic	$	17.23	$	0.05	$	17.28
Net income applicable to common shareholders per common share - Basic	5.04		0.05		5.09
Net income from continuing operations applicable to common shareholders per common share - Diluted	16.98		0.05		17.03
Net income applicable to common shareholders per common share - Diluted	4.96		0.05		5.01

Consolidated Statements of Comprehensive Income (Loss)
($ in millions)	As reported		Impact of change		As adjusted
	Year ended December 31, 2022
Net loss	$	(1,364)	$	22	$	(1,342)
Other comprehensive loss, after-tax
Changes in:
Unrealized net capital gains and losses	(2,851)		(2)		(2,853)
Discount rate for reserve for future policy benefits	—		228		228
Other comprehensive loss, after-tax	(3,044)		226		(2,818)
Comprehensive loss	(4,408)		248		(4,160)
Comprehensive loss attributable to Allstate	$	(4,335)	$	248	$	(4,087)
	Year ended December 31, 2021
Net income	$	1,566	$	15	$	1,581
Other comprehensive loss, after-tax
Changes in:
Unrealized net capital gains and losses	(2,582)		(1)		(2,583)
Discount rate for reserve for future policy benefits	—		49		49
Other comprehensive loss, after-tax	(2,649)		48		(2,601)
Comprehensive loss	(1,083)		63		(1,020)
Comprehensive loss attributable to Allstate	$	(1,047)	$	63	$	(984)

Consolidated Statements of Financial Position
($ in millions)	As reported		Impact of change		As adjusted
	December 31, 2022
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 (loss):
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

Consolidated Statements of Shareholders’ Equity
($ in millions)	As reported		Impact of change		As adjusted
	Year ended December 31, 2022
Retained income
Balance, beginning of period	$	53,294	$	(6)	$	53,288
Net loss	(1,311)		22		(1,289)
Balance, end of period	50,954		16		50,970
Accumulated other comprehensive income (loss)
Balance, beginning of period	655		(229)		426
Change in unrealized net capital gains and losses	(2,851)		(2)		(2,853)
Change in discount rate for reserve for future policy benefits	—		228		228
Balance, end of period	(2,389)		(3)		(2,392)
Total Allstate shareholders’ equity	17,475		13		17,488
Total equity	$	17,350	$	13	$	17,363
	Year ended December 31, 2021
Retained income
Balance, beginning of period	$	52,767	$	—	$	52,767
Cumulative effect of change in accounting principle	—		(21)		(21)
Net income	1,599		15		1,614
Balance, end of period	53,294		(6)		53,288
Accumulated other comprehensive income (loss)
Balance, beginning of period	3,304		—		3,304
Cumulative effect of change in accounting principle	—		(277)		(277)
Change in unrealized net capital gains and losses	(2,582)		(1)		(2,583)
Change in discount rate for reserve for future policy benefits	—		49		49
Balance, end of period	655		(229)		426
Total Allstate shareholders’ equity	25,179		(235)		24,944
Total equity	$	25,127	$	(235)	$	24,892

Consolidated Statements of Cash Flows
($ in millions)	As reported		Impact of change		As adjusted
	Year ended December 31, 2022
Cash flows from operating activities
Net loss	$	(1,364)	$	22	$	(1,342)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Changes in:
Policy benefits and other insurance reserves	4,503		(58)		4,445
Unearned premiums	2,541		(2)		2,539
Deferred policy acquisition costs	(702)		(11)		(713)
Reinsurance recoverables, net	408		43		451
Income taxes	(721)		6		(715)
Net cash provided by operating activities	$	5,121	$	—	$	5,121

Consolidated Statements of Cash Flows
($ in millions)	As reported		Impact of change		As adjusted
	Year ended December 31, 2021
Cash flows from operating activities
Net income	$	1,566	$	15	$	1,581
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Changes in:
Policy benefits and other insurance reserves	2,432		12		2,444
Unearned premiums	1,618		(10)		1,608
Deferred policy acquisition costs	(608)		(16)		(624)
Reinsurance recoverables, net	(1,565)		(5)		(1,570)
Income taxes	349		4		353
Net cash provided by operating activities	$	5,116	$	—	$	5,116

Pending accounting standards

Accounting for joint ventures In August 2023, the FASB issued guidance requiring a joint venture to initially measure assets contributed and liabilities assumed at fair value as of the formation date. The new guidance will be applied prospectively for joint ventures with a formation date on or after January 1, 2025. The impact of the adoption is not expected to be material to the Company’s results of operations or financial position.

Segment reporting In November 2023, the FASB issued guidance expanding segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of reportable segments’ profit or loss and assets. The guidance is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024 and is to be applied retrospectively, with early adoption permitted. The Company is currently evaluating the impact of adopting the guidance on its disclosures.

Income tax disclosures In December 2023, the FASB issued guidance enhancing various aspects of income tax disclosures. The guidance now requires a tabular reconciliation between statutory and effective income tax expense (benefit) with both amounts and percentages for a list of required categories. For certain required categories where an individual category is at least five percent of the statutory tax amount, the required category must be further broken out by nature and, for foreign tax effects, jurisdiction. Additionally, entities must disclose income taxes paid, net of refunds received, broken out between federal, state and foreign, and amounts paid, net of refunds received, to an individual jurisdiction when five percent or more of the total income taxes paid, net of refunds received.

All disclosure requirements in the guidance are annual in nature, and the guidance is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted. The guidance only affects disclosures and will have no impact on the Company’s consolidated financial statements. The Company is currently evaluating the impact of adopting the guidance on its disclosures.