ALLSTATE CORP

Allstate Protection Segment

Private passenger auto, homeowners, and other personal lines insurance products are offered to consumers through agents, directly through contact centers and online. Our strategy is to offer products that allow customers to interact with us when, where and how they want with affordable, simple and connected protection products. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.

Underwriting loss improved to $2.09 billion in 2023 compared to $2.78 billion in 2022, primarily due to increased premiums earned and lower unfavorable non-catastrophe reserve reestimates, partially offset by higher losses. We are executing a comprehensive plan to improve auto insurance profitability, by raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and enhancing claims processes to manage loss costs.

Change in underwriting results from 2022 to 2023

($ in millions)

Change in underwriting results from 2021 to 2022

($ in millions)

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(1)2021 results include certain National General commercial lines insurance products.

(2)2021 results include National General packaged policies, which include auto, and commercial lines insurance products.

(3)Include renters, condominium, landlord and other personal lines products.

(4)Primarily represents revenue and direct operating expenses of Ivantage, distribution of non-proprietary life and annuity products and lender-placed products. Ivantage, a general agency for Allstate exclusive agents, provides agents a solution for their customers when coverage through Allstate brand underwritten products is not available. In the first quarter of 2023, National General lender-placed products results were reclassified to other business lines. Historical results have been updated to conform with this presentation.

Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends. Premiums written is the amount of premiums charged for policies issued during a fiscal period. Premiums are considered earned and are included in the financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired term of the policies is recorded as unearned premiums on our Consolidated Statements of Financial Position.

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Auto insurance premiums written increased 10.7% or $3.29 billion in 2023 compared to 2022, primarily due to the following factors:

•Increased average premiums driven by 2022 and 2023 rate increases. In the year ended December 31, 2023:

–Rate increases of 17.9% were taken for Allstate brand in 55 locations, resulting in total Allstate brand insurance premium impact of 16.4%

–Rate increases of 18.8% were taken for National General brand in 48 locations, resulting in total National General brand insurance premium impact of 12.8%

•We expect to continue to pursue rate increases for both Allstate and National General brands into 2024 to improve auto insurance profitability

•PIF decreased 2.9% or 751 thousand to 25,283 thousand as of December 31, 2023 compared to December 31, 2022

•Renewal ratio decreased 1.6 points as of December 31, 2023 compared to December 31, 2022

•Decreased new issued applications driven by the direct and exclusive agency channels, partially offset by growth in the independent agency channel

•The impact of the ongoing rate increases, underwriting restrictions in markets with returns below target levels and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio, premiums and future PIF growth

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Homeowners insurance premiums written increased 12.3% or $1.38 billion in 2023 compared to 2022, primarily due to the following factors:

•Higher Allstate brand average premiums from implemented rate increases taken in 2022 and 2023 and inflation in insured home replacement costs, combined with policies in force growth

•In 2023 rate increases of 15.0% were taken for Allstate brand in 49 locations, resulting in total Allstate brand insurance premium impact of 11.3%

•National General policy growth may be negatively impacted in future quarters as we improve underwriting margins to targeted levels in the current books of business through underwriting and rate actions. In 2023 rate increases of 23.4% were taken for National General brand in 32 locations, resulting in total National General brand insurance premium impact of 11.0%

•Decreased new issued applications in the direct and exclusive agency channels, partially offset by growth in the independent agency channel

•Policy growth is being reduced in states and lines of business that are underperforming. We are no longer writing new homeowners business in California and Florida, and we are non-renewing certain policies in Florida to reduce our exposure, which have and will continue to negatively impact premiums

•The impact of the ongoing rate increases, underwriting restrictions in markets with returns below target levels and temporary reductions in advertising have and may continue to have an adverse effect on the renewal ratio, premiums and future PIF growth

Other personal lines premiums written increased 12.0% or $270 million in 2023 compared to 2022, primarily due to increases in landlords, condominiums and personal umbrella for Allstate brand. We are no longer writing condominium new business in California and Florida and we are non-renewing certain policies in Florida, which will continue to negatively impact premiums.

Commercial lines premiums written decreased 35.9% or $404 million in 2023 compared to 2022, due to profitability actions taken to no longer offer coverage to transportation network companies unless the contracts utilize telematics-based pricing and the Allstate brand exiting traditional commercial insurance in five states, which will continue to negatively impact premiums.

The Allstate brand commercial insurance strategy is being advanced through an equity investment and commercial partnership with NEXT Insurance, a high-growth, digital platform for small business insurance which will expand the availability of our commercial lines offerings via NEXT product portfolio.

Other business lines premiums written increased 5.0% or $27 million in 2023 compared to 2022.

GAAP operating ratios include loss ratio, expense ratio and combined ratio to analyze our profitability trends. Frequency and severity statistics are used to describe the trends in loss costs.

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(1)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.

Frequency and severity are influenced by:

•Supply chain disruptions and labor shortages

•Mix of repairable losses and total losses

•Value of total losses due to changes in used car prices

•Changes in medical inflation and consumption

•Number of claims with attorney representation

•Labor and part costs

•Changes in commuting activity

•Driving behavior (e.g., speed, time of day) impacting severity and mix of claim types

•Organizational and process changes impacting claim opening and closing practices and shifts in timing, if any, can impact comparisons to prior periods

The quarterly auto loss ratio has been more variable due to these and additional factors discussed below.

Auto loss ratio decreased 4.4 points in 2023 compared to 2022 driven by increased earned premium compared to the prior year. Estimated report year 2023 incurred claim severity for Allstate brand, excluding Esurance and Canada, had a weighted average increase of between 8% to 9% compared to report year 2022 for major coverages due to higher part costs and labor rates for repairable vehicles, a higher mix of total losses, higher costs for claims with attorney representation, higher medical consumption and inflation. Gross claim frequency increased relative to the prior year. We are enhancing our claims practices to manage loss costs by increasing resources and expanding re-inspections, accelerating resolution of bodily injury claims, and negotiating improved vendor services and parts agreements.

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Homeowners loss ratio increased 14.3 points in 2023 compared to 2022, primarily due to higher catastrophe losses and severity, partially offset by increased premiums earned.

Gross claim frequency decreased in 2023 compared to 2022 primarily due to fire and water perils. Paid claim severity increased in 2023 compared to 2022 due to inflationary loss cost pressure driven by increases in labor and materials costs. Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the period.

Other personal lines loss ratio increased 2.3 points in 2023 compared to 2022, primarily due to higher catastrophe losses and increased severity, partially offset by increased premiums earned.

Commercial lines loss ratio decreased 14.9 points in 2023 compared to 2022 primarily due to the result of profitability actions taken and lower unfavorable reserve reestimates, partially offset by continued elevated frequency and severity.

Other business lines loss ratio increased 8.9 points in 2023 compared to 2022 primarily due to higher non-catastrophe losses and unfavorable prior year reserve reestimates.

Catastrophe losses increased 81.1% or $2.52 billion in 2023 compared to 2022 primarily related to an increased number of wind/hail events and larger losses per event.

Reinsurance recoveries in 2021 related to the Nationwide Aggregate Reinsurance Program for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, which primarily impacted homeowners prior year reserve reestimates.

We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes.

We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest, wildfires or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.

(1)2021 includes approximately $250 million of reinstatement premiums for the year ended December 31, 2021, related to the Nationwide Catastrophe Reinsurance Program, primarily due to Hurricane Ida.

Catastrophe management

Historical catastrophe experience For the last ten years, the average annual impact of catastrophes on our loss ratio was 8.3 points, but it has varied from 5.7 points to 11.6 points. The average annual impact of catastrophes on the homeowners loss ratio for the last ten years was 27.1 points. Over time, we have limited our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes by our participation in various state facilities. For further discussion of these facilities, see Note 15 of the consolidated financial statements. However, the impact of these actions may be diminished by the growth in insured values, the effect of state insurance

laws and regulations and we may not be able to maintain our current level of reinsurance or purchase new reinsurance protection in amounts we consider sufficient at acceptable prices. In addition, in various states we are required to participate in assigned risk plans, reinsurance facilities and joint underwriting associations that provide insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers. Because of our participation in these and other state facilities such as wind pools, we may be exposed to losses that surpass the capitalization of these facilities and to assessments from these facilities.

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We have continued to take actions to maintain an appropriate level of exposure to catastrophic events while continuing to meet the needs of our customers, including the following:

•Continuing to limit or not offer new homeowners, manufactured home and landlord package policy business in certain coastal geographies. Additionally, we:

–Wrote a limited number of homeowners policies in select areas of California from 2016 to 2022, but are no longer writing new homeowners and condominium business in the state of California. We may take further action to reduce our exposure.

–Reduced our exposure to high risk areas, including California and Florida. Since December 31, 2022, PIF has declined by an average of approximately 7% in those two states.

–Write homeowners coverage, excluding in Florida, through our excess and surplus lines carrier, North Light Specialty Insurance Company (“North Light”), which includes earthquake coverage (other than fire following earthquakes) that is currently ceded via quota share reinsurance.

•Increased capacity in our brokerage platform for customers not offered an Allstate policy. As of December 31, 2023, Ivantage had $2.19 billion non-proprietary premiums under management.

•Ceded wind exposure related to insured property located in wind pool eligible areas in certain states.

•Generally require higher deductibles for tropical cyclone than all peril deductibles and are in place for a large portion of coastal insured properties.

•Include coverage for flood-related losses for auto comprehensive damage coverage since we have additional catastrophe exposure, beyond the property lines, for auto customers who have purchased comprehensive damage coverage.

•Offer a homeowners policy in 43 states. Allstate House and Home® provides options of coverage for roof damage, including graduated coverage and pricing based on roof type and age. In 2023, premiums written totaled $6.84 billion or 54.3% of homeowners premiums written compared to $5.60 billion or 49.9% in 2022.

Hurricanes We consider the greatest areas of potential catastrophe losses due to hurricanes to be major metropolitan centers in counties along the eastern and gulf coasts of the United States. The average premium on a property policy near these coasts is generally greater than in other areas. However, average premiums are often not considered commensurate with the inherent risk of loss. In addition, as explained in Note 15 of the consolidated financial statements, in various states Allstate is subject to assessments from assigned risk plans, reinsurance facilities and joint underwriting associations providing insurance for wind related property losses.

We have addressed our risk of hurricane loss by, among other actions, purchasing reinsurance for specific states and on a countrywide basis for our personal lines property insurance in areas most exposed to hurricanes, limiting personal homeowners, landlord package policy and manufactured home new business writings in coastal areas in southern and eastern states, implementing tropical cyclone deductibles where appropriate, and not offering continuing coverage on certain policies in coastal counties in certain states. We continue to seek appropriate returns for the risks we write. This may require further actions, similar to those already taken, in geographies where we are not getting appropriate returns. However, we may maintain or opportunistically increase our presence in areas where adequate risk adjusted returns can be achieved.

Earthquakes We do not offer earthquake coverage in most states. We retain approximately 25,000 PIF with earthquake coverage, with the largest number of policies located in Kentucky, due to regulatory and other reasons. We purchase reinsurance in Kentucky and enter into arrangements in many states to make earthquake coverage available through our brokerage platform.

We continue to have exposure to earthquake risk on certain policies that do not specifically exclude coverage for earthquake losses, including our auto policies, and to fires following earthquakes. Allstate homeowner policyholders in California are offered coverage for damage caused by an earthquake through the California Earthquake Authority (“CEA”), a privately-financed, publicly-managed state agency created to provide insurance coverage for earthquake damage. Allstate is subject to assessments from the CEA under certain circumstances as explained in Note 15 of the consolidated financial statements. While North Light writes property policies in California, which can include earthquake coverage, this coverage is 100% ceded via quota share reinsurance.

Fires following earthquakes Under a standard homeowners policy we cover fire losses, including those caused by an earthquake. Actions taken related to our risk of loss from fires following earthquakes include restrictive underwriting guidelines in California for new business writings, purchasing reinsurance for Kentucky personal lines property risks, and purchasing nationwide occurrence reinsurance, excluding Florida.

Wildfires Actions taken related to managing our risk of loss from wildfires include purchasing nationwide occurrence reinsurance, new and renewal inspection programs to identify and remediate wildfire risk as well as leveraging contemporary underwriting tools in select areas. While these programs are designed to mitigate risk, the exposure to wildfires still exists. We continue to manage our exposure and seek appropriate returns for the risks we write.

To manage the exposure, we may implement further actions, similar to those already taken, in geographies where we are not achieving appropriate returns. However, we may maintain or opportunistically

The Allstate Corporation 49 increase our presence in areas where adequate risk adjusted returns can be achieved.

Catastrophe reinsurance The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during 2023 was $1.02 billion compared to $788 million during 2022. Catastrophe placement premiums are a reduction of premium with approximately 74% related to homeowners. The increases were driven by higher Nationwide program

costs. A description of our current catastrophe reinsurance program appears in Note 11 of the consolidated financial statements.

Expense ratio decreased 2.0 points in 2023 compared to 2022, primarily due to higher earned premium growth relative to fixed costs and lower advertising costs, partially offset by higher restructuring costs.

Deferred acquisition costs We establish a DAC asset for costs that are related directly to the acquisition of new or renewal insurance policies, principally agent remuneration and premium taxes. DAC is amortized to income over the period in which premiums are earned.

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