Overview

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as "we," "our," "us," the "Company" or "Allstate"). It should be read in conjunction with the condensed consolidated financial statements and related notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporation annual report on Form 10-K for 2021, filed February 18, 2022.

Further analysis of our insurance segments is provided in the Property-Liability Operations and Segment Results sections, including Allstate Protection and Run-off Property-Liability, Protection Services and Allstate Health and Benefits, of Management's Discussion and Analysis ("MD&A"). The segments are consistent with the way in which the chief operating decision maker reviews financial performance and makes decisions about the allocation of resources.

The Novel Coronavirus Pandemic or COVID-19 ("Coronavirus")

The Coronavirus resulted in governments worldwide enacting emergency measures to combat the spread of the virus, including travel restrictions, government-imposed shelter-in-place orders, quarantine periods, social distancing, and restrictions on large gatherings. These measures have generally moderated, with periodic changes in response to local conditions. There is no way of predicting with certainty how long the pandemic might last. We continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the impact to our operations, but the effects have been and could be material.

Certain growth and profitability comparisons to the prior year were impacted, in part, by the effects the Coronavirus had on our prior year results. Beginning in March 2020, when shelter-in-place orders and other restrictions were initiated, and throughout 2021, we experienced lower accident claim frequency and different claim patterns than historically experienced. Claim frequency has increased through the first quarter of 2022 and during 2021, but remains below pre-pandemic levels.

The Coronavirus has affected our operations and may continue to significantly affect our results of operations, financial condition and liquidity. The impact from the pandemic should be considered when comparing the current period to the prior period, including:

•Sales of new and retention of existing policies

•Rate increases and average gross premiums

•Premium for transportation network products

•Driving behavior and auto accident frequency

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

•Hospital and outpatient claim costs

•Investment valuations and returns

•Bad debt and credit allowance exposure

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

•Retail sales in Allstate Protection Plans

This list is not inclusive of all potential impacts and should not be treated as such. Within the MD&A we have included further disclosures related to the impacts of the Coronavirus on our 2022 results.

Corporate Strategy

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

Transformative Growth is about creating a business model, capabilities and culture that continually transform to better serve customers. This is done by providing affordable, simple and connected protection through multiple distribution partners. The ultimate objective is to create continuous transformative growth in all businesses.

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

•Expanding customer access

•Improving customer value

•Increasing customer acquisition sophistication

•Modernizing the technology ecosystem

•Enhancing organizational capabilities

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

Acquisitions and Dispositions

Acquisitions On January 4, 2021, we completed the acquisition of National General Holdings Corp. ("National General"), significantly enhancing our strategic position in the independent agency channel. The transaction increased our market share in personal property-liability by over one percentage point and enhanced our independent agent-facing technology.

Discontinued operations and held for sale On October 1, 2021, we closed the sale of Allstate Life Insurance Company of New York ("ALNY") to Wilton Reassurance Company for $400 million. On November 1, 2021, we closed the sale of Allstate Life Insurance Company ("ALIC") and certain affiliates to entities managed by Blackstone for total proceeds of $4 billion, including a pre-close dividend of $1.25 billion paid by ALIC.

In 2021 and prior periods, the assets and liabilities of the business were reclassified as held for sale and results were presented as discontinued operations.



                                                 First Quarter 2022 Form 10-Q 43

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See Note 3 of the condensed consolidated financial statements for further information on acquisitions and dispositions.

Measuring segment profit or loss

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

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

Adjusted net income is net income (loss) applicable to common shareholders, excluding:



  •   Net gains and losses on investments and derivatives
  •   Pension and other postretirement remeasurement gains and losses
  •   Business combination expenses and the amortization or impairment of purchased
      intangibles
  •   Income or loss from discontinued operations
  •   Gain or loss on disposition of operations
  •   Adjustments for other significant non-recurring, infrequent or unusual items, when (a)
      the nature of the charge or gain is such that it is reasonably unlikely to recur
      within two years, or (b) there has been no similar charge or gain within the prior two
      years
  •   Income tax expense or benefit on reconciling items

44 www.allstate.com

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Highlights



       Consolidated net income
($ in millions)

[[Image Removed: all-20220331_g2.jpg]] Consolidated net income applicable to common shareholders was $630 million in the first quarter of 2022 compared to a loss of $1.41 billion in the same period of 2021 primarily due to a loss from discontinued operations in 2021, partially offset by lower Allstate Protection underwriting income and equity valuation decreases. For the twelve months ended March 31, 2022, return on Allstate common shareholders' equity was 15.4%, an increase of 0.3 points from 15.1% for the twelve months ended March 31, 2021.





         Total revenue
( ($ in millions)

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Total revenue decreased 0.9% to $12.34 billion in the first quarter of 2022 compared to the same period of 2021, driven by net losses on investments and derivatives in 2022 compared to net gains in 2021, decreases in net investment income, offset by a 6.5% increase in property and casualty insurance premiums earned. Insurance premiums earned increased in Property-Liability and Protection Services.




       Net investment income
($ in millions)

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Net investment income decreased $114 million to $594 million in the first quarter of 2022 compared to the same period of 2021, primarily due to lower performance-based investment results, mainly from limited partnerships, and lower market-based fixed income portfolio yields.






Financial highlights

Investments totaled $61.77 billion as of March 31, 2022, decreasing from $64.70 billion as of December 31, 2021.

Allstate shareholders' equity As of March 31, 2022, Allstate shareholders' equity was $23.21 billion.

Book value per common share (ratio of Allstate common shareholders' equity to total common shares outstanding and dilutive potential common shares outstanding) was $75.95, a decrease of 6.3% from $81.08 as of March 31, 2021, and a decrease of 6.8% from $81.52 as of December 31, 2021.

Return on average Allstate common shareholders' equity For the twelve months ended March 31, 2022, return on Allstate common shareholders' equity was 15.4%, an increase of 0.3 points from 15.1% for the twelve months ended March 31, 2021. The increase was primarily due to a decrease in average Allstate common shareholders' equity.

Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement gains of $247 million in the first quarter of 2022 primarily related to an increase in the liability discount rate and changes in other assumptions, partially offset by unfavorable asset performance compared to the expected return on plan assets.

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