UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-11840
THE ALLSTATE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 36-3871531 | |||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
3100 Sanders Road, Northbrook, Illinois 60062
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (847) 402-5000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||||||
| Common Stock, par value $0.01 per share | ALL | New York Stock Exchange Chicago Stock Exchange | ||||||
| 5.100% Fixed-to-Floating Rate Subordinated Debentures due 2053 | ALL.PR.B | New York Stock Exchange | ||||||
| Depositary Shares represent 1/1,000th of a share of 5.625% Noncumulative Preferred Stock, Series G | ALL PR G | New York Stock Exchange | ||||||
| Depositary Shares represent 1/1,000th of a share of 5.100% Noncumulative Preferred Stock, Series H | ALL PR H | New York Stock Exchange | ||||||
| Depositary Shares represent 1/1,000th of a share of 4.750% Noncumulative Preferred Stock, Series I | ALL PR I | New York Stock Exchange | ||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ | ||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the closing price as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2022, was approximately $33.85 billion.
As of January 31, 2023, the registrant had 263,329,700 shares of common stock outstanding.
Documents Incorporated By Reference
Portions of the following documents are incorporated herein by reference as follows:
Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive proxy statement for its annual stockholders meeting to be held on May 23, 2023, (the “Proxy Statement”) to be filed not later than 120 days after the end of the fiscal year covered by this Form 10-K.
Table of Contents
| Part I | Page | |||||||||||||
• Overview | ||||||||||||||
• Strategy and Segment Information | ||||||||||||||
| Part II | ||||||||||||||
| Item 9C. | ||||||||||||||
| Part III | ||||||||||||||
| Part IV | ||||||||||||||
S-1 | ||||||||||||||
2022 Form 10-K Item 1. Business
Part I
Item 1. Business
The Allstate Corporation was incorporated under the laws of the State of Delaware on November 5, 1992, to serve as the holding company for Allstate Insurance Company. Its business is conducted principally through Allstate Insurance Company and other subsidiaries (collectively, including The Allstate Corporation, “Allstate”).
Allstate protects people from life’s uncertainties with a wide array of protection for autos, homes and personal property. Allstate is primarily engaged in the property and casualty insurance business in the United States and Canada. Additionally, Allstate provides customers other protection solutions such as accident and health insurance, protection plans that cover consumer electronics, mobile phones and appliances and personal identity protection.
The Allstate Corporation is one of the largest publicly held personal lines insurers in the United States. Allstate’s personal property-liability strategy is to increase market share by offering consumers a broad suite of protection solutions and a competitive value proposition across distribution channels. The Allstate brand is widely known through the “You’re In Good Hands With Allstate®” slogan. Allstate is the third largest personal property and casualty insurer in the United States on the basis of 2021 statutory direct premiums written according to A.M. Best.
Allstate also has strong market positions in other protection solutions. Allstate Health and Benefits provides accident, health and life insurance through employers, independent agents and direct-to-consumer, and is one of the top voluntary benefits carriers in the market. Allstate Protection Plans provides protection on a wide variety of consumer goods such as cell phones, tablets, computers, furniture and appliances, and has a leading position in distribution through major retailers. Allstate Identity Protection has a leading position in identity protection through worksite distribution. In total, Allstate had 189.1 million policies in force (“PIF”) as of December 31, 2022.
In this Annual Report on Form 10-K, we occasionally refer to statutory financial information. All domestic United States insurance companies are required to prepare statutory-basis financial statements. As a result, industry data is available that enables comparisons between insurance companies, including competitors that are not required to prepare financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). We frequently use industry publications containing statutory financial information to assess our competitive position.
The Allstate Corporation 1
2022 Form 10-K Item 1. Business
Strategy, Transformative Growth, Our Shared Purpose and Segment Information
Our strategy has two components: increase personal property-liability market share (see Allstate Protection segment) and expand protection offerings by leveraging the Allstate brand, customer base and 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.
We are expanding protection services businesses utilizing enterprise capabilities and resources such as distribution, analytics, claims, investment expertise, talent and capital. Using innovative growth platforms (such as telematics and identity protection) and broad distribution including: Allstate exclusive agents, independent agents, contact centers, online, retailers, workplace benefits brokers, auto dealers, original equipment manufacturers and telecom providers further enhance our customer value proposition.
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2022 Form 10-K Item 1. Business
| Our Shared Purpose | |||||||||||||||||||||||
| As the good hands... | our values | our operating standards | our behaviors | ||||||||||||||||||||
•We empower customers with protection to help them achieve their hopes and dreams. •We provide affordable, simple and connected protection solutions. •We create opportunity for our team, economic value for our shareholders and improve communities. | •Integrity is non-negotiable. •Inclusive Diversity & Equity values and leverages unique identities with equitable opportunity and rewards. •Collective Success is achieved through empathy and prioritizing enterprise outcomes ahead of individuals. | •Focus on Customers by anticipating and exceeding service expectations at low costs. •Be the Best at protecting customers, developing talent and running our businesses. •Be Bold with original ideas using speed and conviction to beat the competition. •Earn Attractive Returns by providing customer value, proactively accepting risk and using analytics. | •Collaborate early and often to develop and implement comprehensive solutions and share learnings. •Challenge Ideas to leverage collective expertise, evaluate multiple alternatives and create the best path forward. •Provide Clarity for expected outcomes, decision authority and accountability. •Provide Feedback that is candid, actionable, independent of hierarchy and safe. | ||||||||||||||||||||
| Reportable segments | ||||||||
Allstate Protection (1) | Includes the Allstate brand, National General and Answer Financial. Offers private passenger auto, homeowners, other personal lines and commercial insurance through agents, contact centers and online. The Encompass brand was combined into National General beginning in the first quarter of 2021 and results prior to 2021 reflect Encompass brand results only. | |||||||
Protection Services | Includes Allstate Protection Plans, Allstate Dealer Services, Allstate Roadside, Arity and Allstate Identity Protection, which offer a broad range of solutions and services that expand and enhance our customer value propositions. | |||||||
Allstate Health and Benefits | Offers voluntary benefits and individual life and health products, including life, accident, critical illness, short-term disability and other health insurance products sold through independent agents, benefits brokers and Allstate exclusive agents. Also provides stop-loss and fully insured group health products to employers and short-term medical and medicare supplement insurance to individuals. | |||||||
Run-off Property-Liability (1) | Relates to property and casualty insurance policies written during the 1960s through the mid-1980s with exposure to asbestos, environmental and other claims in run-off. | |||||||
Corporate and Other | Includes holding company activities and certain non-insurance operations. | |||||||
(1)Allstate Protection and Run-off Property-Liability segments comprise Property-Liability.
The Allstate Corporation 3
2022 Form 10-K Item 1. Business
Allstate Protection Segment
Our Allstate Protection segment accounted for 92.0% of Allstate’s 2022 consolidated insurance premiums and contract charges and 20.4% of Allstate’s December 31, 2022 PIF. Private passenger auto, homeowners, other personal lines and commercial insurance products offered through both exclusive and independent agents and directly through contact centers and online are included in this segment. 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.
Strategy Allstate Protection’s strategy is to increase personal lines market share through Transformative Growth focusing on:
•Improving customer value by making it easier to do business with us, improving price competitiveness and providing competitive differentiated products and experiences
•Expanding customer access to Allstate and National General products and services through the methods of interaction customers want
•Increasing sophistication and investment in customer acquisition
•Modernizing our technology to enhance the customer experience and product management ecosystems
•Driving organizational transformation
We have three market-facing property-liability businesses, Allstate brand, National General and Answer Financial with products and services that cater to different customer preferences for advice and brand recognition.
We serve our consumers using differentiated products, analytical expertise, telematics and an integrated digital enterprise that leverages data and technology to execute processes with a focus on greater effectiveness and efficiency.
Transformative Growth | |||||||||||||||||
| Improve Customer Value | Improving the competitive prices of products through lower costs, increased price sophistication and telematics | ||||||||||||||||
| Increasing engagement with the Allstate Mobile app and new business penetration of telematics products, including pay-per-mile insurance | |||||||||||||||||
| Providing additional consumer-focused protection solutions | |||||||||||||||||
| Expand Customer Access | Transforming our Allstate agent sales system to enable more growth at a lower cost by incenting agents to focus on sales, while expanding our distribution capacity through new agent models | ||||||||||||||||
Increasing direct channel distribution through improved online experience and data-driven insights to enhance call center sales | |||||||||||||||||
Growing National General by leveraging the Allstate brand capabilities and data to expand product offerings and fully utilize our independent agency relationships | |||||||||||||||||
| Increase Sophistication and Investment in Customer Acquisition | Improving the effectiveness of customer acquisition by expanding lead management, building data capabilities and utilizing household insights | ||||||||||||||||
| Modernize Technology Ecosystem | Deploying a new technology ecosystem to deliver affordable, simple, and connected experiences and products at a lower cost. This effort will also lead to the retirement of legacy systems | ||||||||||||||||
| Drive Organizational Transformation | Enhancing and expanding organizational capabilities by increasing digital expertise, process redesign, decision clarity and employee empowerment, agility and diversity | ||||||||||||||||
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Item 1. Business 2022 Form 10-K
Additional Information and Strategy Updates
Allstate Protection pricing and risk management strategies Our pricing and underwriting strategies and decisions are designed to generate sustainable profitable growth.
A proprietary database of underwriting and loss experience enables sophisticated pricing algorithms and methodologies to more accurately price risks while also seeking to attract and retain customers in multiple risk segments.
•For auto insurance, risk evaluation factors can include, but are not limited to: vehicle make, model and year; driver age and marital status; territory; years licensed; loss history; years insured with prior carrier; prior liability limits; prior lapse in coverage; and insurance scoring utilizing telematics data and other consumer information.
•For property insurance, risk evaluation factors can include, but are not limited to: the amount of insurance purchased; geographic location of the property; loss history; age, condition and construction characteristics of the property; and characteristics of the insured including insurance scoring utilizing other consumer information.
A combination of underwriting information, pricing and discounts are also used to achieve a more competitive position and growth. The pricing strategy involves local marketplace pricing and underwriting decisions based on risk evaluation factors to the extent permissible by applicable law and an evaluation of competitors.
Pricing of property products is intended to generate risk-adjusted returns that are acceptable over a long-term period. Rate increases are pursued to keep pace with loss trends, including losses from catastrophic events and those that are weather-related (such as wind, hail, lightning and freeze not meeting our criteria to be declared a catastrophe). We also take into consideration potential customer disruption, the impact on our ability to market our products, regulatory limitations, our competitive position and profitability.
In any reporting period, loss experience from catastrophic events and weather-related losses may contribute to negative or positive underwriting performance relative to the expectations incorporated into product pricing.
Property catastrophe exposure is managed with the goal of providing shareholders an acceptable return on the risks assumed in the property business. Catastrophe exposure management includes purchasing reinsurance to provide coverage for known exposure to hurricanes, earthquakes and fires following earthquakes, wildfires and other catastrophes. Our current catastrophe reinsurance program supports our risk tolerance framework which utilizes a modeled 1-in-100 annual aggregate limit for catastrophe losses from hurricanes, earthquakes and wildfires of $2.5 billion, net of reinsurance.
The use of different assumptions and updates to industry models and to our risk transfer program could materially change the projected loss. Growth strategies include areas where we believe diversification can be enhanced and an appropriate return can be earned for the risk. As a result, our modeled exposure may increase. In addition, we have exposure to other severe weather events, which impact catastrophe losses.
We are promoting measures to prevent and mitigate losses that are increasing due to climate change and increased severe weather including making homes and communities more resilient, enforcement of stronger building codes, adoption of sensible land use policies and expanded disaster response capabilities.
Independent agent strategy The acquisition of National General significantly enhanced our strategic position in the independent agency channel. The transaction increased our total personal property-liability market share by over one percentage point and has enhanced our independent agent-facing technology. It also expanded our distribution footprint, and led us to be a top five personal lines carrier in the independent agency distribution channel.
National General provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed auto and property and other niche insurance products. Auto insurance represents approximately 70% of premium with a significant presence in the non-standard auto market. Allstate’s capabilities are being leveraged to create additional auto and homeowners insurance products to better serve mid-market customers through independent agents.
As part of the acquisition, Allstate Independent Agency and Encompass organizations are being integrated into National General by:
•Migrating Encompass policyholders and business operations to National General and retiring the Encompass technology infrastructure
•Transitioning Encompass and Allstate-branded Independent Agent new business to National General as auto and homeowners insurance products roll out
Commercial lines strategy Traditional small business commercial insurance is being enhanced through new product development using technology to improve customer experience and reduce costs while leveraging enterprise capabilities. Profit improvement actions continue for our traditional commercial lines insurance products, emphasizing pricing, claims, governance and operational improvements. In 2023, Allstate brand will exit traditional commercial insurance in five states. These five states combined made up 47% and 36% of 2022 Allstate brand commercial new issued applications and net written premium, respectively. Additionally, starting in the fourth quarter of 2022, coverage to transportation
The Allstate Corporation 5
2022 Form 10-K Item 1. Business
network companies will no longer be offered unless the contracts utilize telematics-based pricing.
Answer Financial strategy Answer Financial is an insurance agency that sells other insurance companies’ products directly to customers online. Our strategy as a technology-enabled insurance agency is to provide
comparison shopping and related services for businesses, offering customers choice, convenience and ease of use.
Products and distribution
Allstate Protection differentiates itself by offering a comprehensive range of affordable, simple and connected protection solutions across distribution channels for specific consumer segments.
| Protection Products | ||||||||||||||
Insurance products (1) |  | Auto | ||||||||||||
 | Homeowners | |||||||||||||
 | Specialty auto (motorcycle, trailer, motor home and off-road vehicle) | |||||||||||||
 | Other personal lines (renters, condominium, landlord, boat, umbrella, manufactured home and stand-alone scheduled personal property) | |||||||||||||
 | Commercial lines | |||||||||||||
| Answer Financial |  | Comparison quotes and sales of non-proprietary auto, homeowners and other personal lines (condominium, renters, motorcycle, recreational vehicle and boat) | ||||||||||||
(1)Insurance products are primarily offered by the Allstate and National General brands.
| Distribution | |||||
| Allstate brand | In the U.S., we offer products through over 8,400 Allstate exclusive agents operating in approximately 8,500 locations, supported by 20,900 licensed sales professionals, and 700 exclusive financial specialists. We also offer products through approximately 8,700 independent agents, contact centers, online and Market Sales Associates. In Canada, we offer Allstate brand products through approximately 1,000 employee sales agents. | ||||
| National General (including Encompass) | Distributed through over 43,000 independent agent locations, approximately 540 retail stores, contact centers and online. | ||||
| Answer Financial | Comparison quotes and sales offered to customers online or through contact centers. | ||||
Allstate exclusive agents also support the Protection Services and Allstate Health and Benefits segments through offering roadside assistance, consumer protection plans and voluntary benefits products. We also sell a range of non-proprietary life and annuity insurance products offered by third-party providers.
Exclusive agent compensation structure The compensation structure for Allstate exclusive agents rewards them for delivering high value to customers and achieving certain business outcomes such as profitable growth and household penetration. Allstate exclusive agent remuneration comprises a base commission, variable compensation and a bonus.
•Agents receive a monthly base commission payment as a percentage of their total eligible written premium.
•Variable compensation rewards agents for acquiring new customers by exceeding a base production goal.
•Bonus compensation is based on a percentage of premiums and can be earned by agents who are meeting certain sales goals and selling additional policies to meet customer needs profitably.
We are aligning agent compensation to emphasize growth, improve customer service and lower costs. Agent compensation in 2023 will increase the emphasis on bundling multiple lines of business when acquiring new customers. Additionally, new business written by exclusive agents in 2023 will renew at a lower base commission rate with variable compensation available based on bundling.
When an Allstate product is not available, agents have the ability to earn commissions and additional bonuses on non-proprietary products provided to customers through Ivantage, a leading provider of property and casualty brokerage services, and arrangements with other companies, agencies, and brokers. As of December 31, 2022, Ivantage had $1.99 billion non-proprietary premiums under management, consisting of approximately $1.77 billion of
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Item 1. Business 2022 Form 10-K
personal insurance premiums primarily related to property business in hurricane exposed areas, and approximately $222 million of commercial insurance premiums.
Additionally, we offer a homeowners product through our excess and surplus lines carrier, North Light Specialty Insurance Company, in certain areas with higher risk of catastrophes or where customers do not meet the Allstate brand standard underwriting profile.
Allstate agents and exclusive financial specialists receive commissions for non-proprietary life and retirement sales and are eligible for a quarterly bonus based on the volume of non-proprietary sales.
Independent agent remuneration for National General comprises a base commission and a bonus that can be earned by agents who achieve sales goals and a target loss ratio.
The Allstate Corporation 7
2022 Form 10-K Item 1. Business
Competition
The personal lines insurance markets, including private passenger auto and homeowners insurance, are highly competitive. The following charts provide Allstate Protection’s combined market share compared to our principal U.S. competitors using statutory direct written premium for the year ended December 31, 2021, according to A.M. Best.
Geographic markets
We primarily operate in the U.S. (all 50 states and D.C.) and Canada. Our top geographic markets based on 2022 statutory direct premiums are reflected below.
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Item 1. Business 2022 Form 10-K
Protection Services Segment
Our Protection Services segment accounted for 4.8% of Allstate’s 2022 consolidated total revenue and 77.3% of Allstate’s December 31, 2022 PIF. Protection Services includes AllstateSM Protection Plans, Allstate Dealer Services®, Allstate Roadside, Arity® and AllstateSM Identity Protection, which offer a broad range of products and services that expand and enhance customer value propositions.
Strategy - Protection Services’ strategy is to expand distribution and provide affordable solutions that increase customer value and create effortless interactions.
| Allstate Protection Plans | Expand distribution and product breadth of consumer protection plans through new and existing retailers and mobile operators across North America, Europe and Asia. | |||||||
| Allstate Dealer Services | Expand distribution of Allstate branded finance and insurance products through auto dealerships and direct to customers. | |||||||
| Allstate Roadside | Modernize the roadside assistance business through technology and enhance capabilities to deliver a superior customer experience. | |||||||
| Arity | A leading telematics and mobility insights provider to insurance companies, the transportation industry and location-enabled consumer apps. Services include: telematics-enabled mobility insights for consumers and businesses, driving behavior data and scores (Arity IQ) to deliver personalized insurance pricing, and marketing services including lead generation and advertising technology integrations to optimize advertising investments. | |||||||
| Allstate Identity Protection | Create a leading position in the identity protection market, offering full-service identity protection including identity monitoring, digital exposure reporting, and identity theft remediation and reimbursement. Expanding our product breadth into consumer cybersecurity, privacy and family digital safety protection as well as expanding partnership and direct to consumer distribution channels. | |||||||
Products and distribution
| Products and services | ||||||||
| Allstate Protection Plans | Provides consumer protection plans and related technical support for mobile phones, consumer electronics, furniture and appliances which provide customers protection from mechanical or electrical failure, and in certain cases, accidental damage. | |||||||
| Allstate Dealer Services | Offers finance and insurance products, including vehicle service contracts, guaranteed asset protection waivers, road hazard tire and wheel protection, and paint and fabric protection. | |||||||
Allstate Roadside | Offers towing, jump-start, lockout, fuel delivery and tire change services to retail customers and customers of our wholesale partners. | |||||||
Arity | Provides insights and services created from data collected, normalized and analyzed by the Arity platform, including automotive telematics information. Product suite includes on-demand risk scoring, lead generation, digital advertising, data integration, traditional telematics, and data-as-a-service solutions. | |||||||
| Allstate Identity Protection | Provides identity, consumer cybersecurity, privacy and family digital safety protection. | |||||||
| Distribution channels | ||||||||
| Allstate Protection Plans | Retailers and mobile operators, in-store or online, in North America, Europe and Asia Pacific. | |||||||
| Allstate Dealer Services | Independent agents selling through auto dealerships in the U.S. in conjunction with the purchase of a new or used vehicle and direct to consumer. | |||||||
| Allstate Roadside | Allstate exclusive agents, wholesale partners, affinity groups and on-demand mobile application service. | |||||||
| Arity | Sells directly to affiliate and non-affiliate customers and through strategic partners. | |||||||
| Allstate Identity Protection | Primarily through workplace benefit programs with growth in partnerships and direct to consumer delivered through enterprise partnerships, online and mobile application sales. | |||||||
Geographic markets
Protection Services primarily operates in the U.S. and Canada, with Allstate Protection Plans also offering services in Europe, Australia and Asia.
Competition
We compete on a variety of factors, including product offerings, brand recognition, financial strength, price and customer experience. The market for these services is highly competitive.
The Allstate Corporation 9
2022 Form 10-K Item 1. Business
Allstate Health and Benefits Segment
Strategy
Allstate Health and Benefits segment accounted for 4.4% of Allstate’s 2022 consolidated total revenue and 2.3% of Allstate’s December 31, 2022 PIF. The Allstate Health and Benefits segment provides consumers with financial protection against the risk of accidents, illness and mortality. We are among the industry leaders in the growing and highly competitive voluntary benefits market, offering a broad range of accident, health and life products through workplace enrollment. Our life insurance portfolio includes individual and group permanent life solutions. We also provide stop-loss and fully insured group health products to employers and short-term medical and medicare supplement insurance to individuals. Target customers are middle market consumers with family and financial protection needs. Allstate Health and Benefits is well represented in all market segments and is a leader in the large and mega (over 10,000 employees) market segments.
Allstate Health and Benefits is differentiated through its broad product portfolio, flexible enrollment solutions, strong national accounts team and well-recognized brand.
Our strategy for growth is to deliver substantially more value through innovative products and technology, tailored solutions and exceptional service through investments in future-state technologies and data and analytics capabilities.
Products and distribution
| Health and benefits products | ||||||||
| Employer voluntary benefits | ||||||||
| Group health | ||||||||
| Individual health | ||||||||
| Distribution channels | ||
| Over 8,000 independent agents and benefits brokers and Allstate exclusive agents, focusing on workplace benefits on small employers for employer voluntary benefits and group health | ||
| Over 33,000 independent agents, in-house agencies, direct-to-consumer marketing, wholesaling, worksite marketing and the internet for individual health | ||
Competition
We compete on a wide variety of factors, including product offerings, brand recognition, financial strength and ratings, price, distribution and customer service.
The market for voluntary benefits is growing as these products help employees fill the increasing gaps associated with continued medical cost inflation and the shifting of costs from employers to employees to cover co-pays and deductibles. Favorable industry and economic trends have increased competitive pressure and attracted new traditional and non-traditional entrants to the voluntary benefits market. Recent entrants, including large group medical, life and disability insurance carriers, are leveraging core benefit capabilities by bundling and discounting to capture voluntary market share. We also compete with large group medical carriers in our stop-loss, fully insured group health insurance, short-term medical and medicare supplement insurance offerings.
Geographic markets
We primarily operate in the U.S. (all 50 states and D.C.) and Canada. The top geographic markets based on 2022 statutory direct premiums are reflected below. 
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Item 1. Business 2022 Form 10-K
Other Business Segments
Run-off Property-Liability Segment
The Run-off Property-Liability segment includes results from property and casualty insurance coverage that primarily relates to policies written during the 1960s through the mid-1980s.
Strategy Management of this segment has been assigned to a designated group of professionals with expertise in claims handling, policy coverage interpretation, exposure identification, litigation and reinsurance collection. As part of its responsibilities, this group may pursue settlement agreements including policy buybacks on direct excess commercial business when appropriate to improve the certainty of the liabilities. At the end of 2022, 64% of the direct excess gross case reserves were attributable to settlement agreements. This group also manages other direct commercial and assumed reinsurance business in runoff and engages in reinsurance ceded and assumed commutations as required or when considered economically advantageous.
Changes in the reserves established for asbestos, environmental and other run-off lines losses have occurred and may continue. Reserve changes can be caused by new information relating to new and additional claims, new exposures or the impact of resolving unsettled claims based on unanticipated events such as arbitrations, litigation, legislative, judicial or regulatory actions. Environmental losses may also increase as the result of additional funding for environmental site clean-up.
Challenges related to the concentration of insurance and reinsurance claims from companies who specialize in this business continue to be addressed.
Corporate and Other Segment
Our Corporate and Other segment is comprised of holding company activities and certain non-insurance operations, including expenses associated with strategic initiatives.
The Allstate Corporation 11
2022 Form 10-K Item 1. Business
Regulation
Allstate is subject to extensive regulation, primarily at the state level. The method, extent and substance of such regulation vary by state but generally have their source in statutes that establish standards and requirements for conducting the business of insurance and that also delegate regulatory authority to a state agency. These rules have a substantial effect on our business and relate to a wide variety of matters, including insurer solvency and statutory surplus sufficiency, reserve adequacy, insurance company licensing and examination, agent and adjuster licensing, agent and broker compensation, policy forms, rate setting, the nature and amount of investments, claims practices, participation in shared markets and guaranty funds, transactions with affiliates, the payment of dividends, underwriting standards, statutory accounting methods, trade practices, privacy regulation and data security, corporate governance and risk management. In addition, state legislators and insurance regulators continue to examine the appropriate nature and scope of state insurance regulation. For a discussion of statutory financial information, see Note 17 of the consolidated financial statements.
For a discussion of regulatory contingencies, see Note 15 of the consolidated financial statements. Note 15 and Note 17 are incorporated in this Part I, Item 1 by reference.The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) created the Federal Insurance Office (“FIO”) within the U.S. Department of the Treasury (“Treasury”). The FIO monitors the insurance industry, provides advice to the Financial Stability Oversight Council (“FSOC”), represents the U.S. on international insurance matters, and studies the current regulatory system.
Additional regulations or new requirements may emerge from the activities of various regulatory entities, including the Federal Reserve Board, FIO, FSOC, the National Association of Insurance Commissioners (“NAIC”), and the International Association of Insurance Supervisors, that are evaluating solvency and capital standards for insurance company groups. In addition, the NAIC has adopted amendments to its model holding company law that have been adopted by some jurisdictions. The outcome of these actions is uncertain; however, these actions may result in an increase in the level of capital and liquidity required by insurance holding companies.
We cannot predict whether any specific state or federal measures will be adopted to change the nature or scope of the regulation of insurance or what effect any such measures would have on Allstate. We are working for changes in the regulatory environment to make insurance more available and affordable for customers, encourage market innovation, improve driving safety, strengthen cybersecurity and promote better catastrophe preparedness and loss mitigation.
Limitations on Dividends by Insurance Subsidiaries As a holding company with no significant business operations of its own, The Allstate Corporation relies on dividends from Allstate Insurance Company as one of the principal sources of cash to pay dividends and to meet its obligations, including the payment of principal and interest on debt or to fund non-insurance-related businesses. Allstate Insurance Company is regulated as an insurance company in Illinois, and its ability to pay dividends is restricted by Illinois law. The laws of the other jurisdictions that generally govern our other insurance subsidiaries contain similar limitations on the payment of dividends. However, such laws in some jurisdictions may be more restrictive.
For additional information regarding limitations, see Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.In addition, the NAIC formed a working group that has developed and adopted a group capital calculation covering all entities of the insurance company group for use in solvency monitoring activities. The calculation is intended to provide analytical information to regulators, and we do not expect potential revisions to impact our current dividend plans. Any increase in the amount of capital or reserves our insurance subsidiaries are required to hold could reduce the amount of future dividends such subsidiaries are able to distribute to the holding company. Any reduction in the risk-based capital (“RBC”) ratios of our insurance subsidiaries could also adversely affect their financial strength ratings as determined by statistical rating agencies.
Insurance Holding Company Regulation – Change of Control The Allstate Corporation is a holding company and its insurance subsidiaries are subject to regulation in the jurisdictions in which they write business. In the U.S., these subsidiaries are organized under the insurance codes of Alabama, California, Florida, Illinois, Indiana, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, South Carolina and Texas. Additionally, some of these subsidiaries are considered commercially domiciled in California and Florida.
Generally, the insurance codes in these states provide that the acquisition or change of “control” of a domestic or commercially domiciled insurer or of any person that controls such an insurer cannot be consummated without the prior approval of the relevant insurance regulator. In general, a presumption of “control” arises from the ownership, control, possession with the power to vote, or possession of proxies with respect to ten percent or more of the voting securities of an insurer or of a person who controls an insurer. In addition, certain state insurance laws require pre-acquisition notification to state agencies of a change in control with respect to a non-domestic insurance company licensed to do business in that state. While such pre-acquisition notification
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Item 1. Business 2022 Form 10-K
statutes do not authorize the state agency to disapprove the change of control, such statutes do authorize certain remedies, including the issuance of a cease-and-desist order with respect to the non-domestic insurer if certain conditions exist, such as undue market concentration.
Thus, any transaction involving the acquisition of ten percent or more of The Allstate Corporation’s common stock would generally require prior approval by the state insurance departments in Alabama (where the threshold is five percent or more of The Allstate Corporation’s common stock), California, Florida, Illinois, Indiana, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, South Carolina and Texas. Moreover, notification would be required in those other states that have adopted pre-acquisition notification provisions and where the insurance subsidiaries are admitted to transact business. Such approval requirements may deter, delay or prevent certain transactions affecting the ownership of The Allstate Corporation’s common stock.
Rate Regulation Nearly all states have insurance laws requiring personal property and casualty insurers to file rating plans, policy or coverage forms, and other information with the state’s regulatory authority. In many cases, such rating plans, policy forms, or both must be approved prior to use.
The speed with which an insurer can change rates in response to competition or increasing costs depends on the state rating laws, which include the following categories:
•Prior approval — Regulators must approve a rate before the insurer may use it (21 states)
•File-and-use — Insurers do not have to wait for the regulator’s approval to use a rate, but the rate must be filed with the regulatory authority prior to being used (20 states)
•Use-and-file — Requires an insurer to file rates within a certain period of time after the insurer begins using them (9 states)
•No approval — One state, with an immaterial amount of written premiums, does not require a filing to be submitted
Under these rating laws, the regulator has the authority to disapprove a rate filing.
An insurer’s ability to adjust its rates in response to competition or to changing costs is dependent on an insurer’s ability to demonstrate to the regulator that its rates or proposed rating plan meets the requirements of the rating laws. In those states that significantly restrict an insurer’s discretion in selecting the business
that it wants to underwrite, an insurer can manage its risk of loss by charging a rate that reflects the cost and expense of providing the insurance. In those states that significantly restrict an insurer’s ability to charge a rate that reflects the cost and expense of providing the insurance, the insurer may be able to manage its risk of loss by being more selective in the type of business it underwrites. When a state significantly restricts both underwriting and pricing, it becomes more difficult for an insurer to maintain its targeted level of profitability.
From time to time, the personal lines insurance industry comes under pressure from state regulators, legislators, and special-interest groups to reduce, freeze, or set rates at levels that do not correspond with our analysis of underlying costs, catastrophe loss exposure, and expenses. We expect this kind of pressure to persist. Allstate and other insurers are using increasingly sophisticated pricing models and rating plans that are reviewed by regulators and special-interest groups. States may limit the ability of insurers to include variables in their rating plans even though they are indicative of risk. State regulators may interpret existing law or rely on future legislation or regulations to impose new restrictions that adversely affect profitability or growth. We cannot predict the impact on our business of possible future legislative and regulatory measures regarding insurance rates.
Involuntary Markets As a condition of maintaining our licenses to write personal property and casualty insurance in various states, we are required to participate in assigned risk plans, reinsurance facilities, and joint underwriting associations that provide various types of insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers. Underwriting results related to these arrangements, which tend to be adverse, have been immaterial to our results of operations.
For a discussion of these items see Note 15 of the consolidated financial statements. Note 15 is incorporated in this Part I, Item 1 by reference. Indemnification Programs We are a participant in state-based industry pools, facilities or associations, mandating participation by insurers offering certain coverage in their state, including the Michigan Catastrophic Claims Association (“MCCA”), the New Jersey Property-Liability Insurance Guaranty Association, the North Carolina Reinsurance Facility and the Florida Hurricane Catastrophe Fund. We also participate in the Federal Government National Flood Insurance Program.
Recent regulatory changes have occurred related to the MCCA.
•On August 6, 2020, member companies of the MCCA were notified of the ratification of amendments to the MCCA’s Plan of Operation. The amendments were designed to align the Plan of Operation with Public Acts 21 and 22, which passed in 2019.
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2022 Form 10-K Item 1. Business
•On July 2, 2020, portions of Public Acts 21 and 22 went into effect. The changes under those laws include:
–Allowing insureds to choose levels of personal injury protection coverage, including the option to opt-out of personal injury protection coverage in certain circumstances.
–Implementing mandated rate reductions that correspond to the level of personal injury protection coverage chosen by insureds.
–Implementing or creating new processes for reviewing claims, assessing allowable expenses and setting limits on certain allowable expenses.
•On July 2, 2021, legislation passed in 2019 became effective, setting fee schedules for personal injury protection claims. Such fee schedules were set at 200% of Medicare rates in 2021, declining to 195% in 2022 and 190% in 2023, for any providers other than certain unique categories of providers and applying to treatment on existing and new claims.
•Other legislative proposals to change the MCCA operation in the future and to adjust Public Acts 21 and 22 are put forth periodically.
For a discussion of these items see Note 11 of the consolidated financial statements. Note 11 is incorporated in this Part I, Item 1 by reference.Guaranty Funds Under state insurance guaranty fund laws, insurers doing business in a state can be assessed, up to prescribed limits, in order to cover certain obligations of insolvent insurance companies. We do not anticipate any material adverse financial impact on Allstate from these assessments.
Investment Regulation Our insurance subsidiaries are subject to state regulation that specifies the types of investments that can be made and concentration limits of invested assets. Failure to comply with these rules leads to the treatment of non-conforming investments as non-admitted assets for purposes of measuring statutory surplus. Further, in some instances, these rules require divestiture of non-conforming investments.
Exiting Geographic Markets; Canceling and Non-Renewing Policies Most states regulate an insurer’s ability to exit a market. For example, states may limit, to varying degrees, an insurer’s ability to cancel and non-renew policies. Some states restrict or prohibit an insurer from withdrawing one or more types of insurance business from the state, except pursuant to a plan that is approved by the state insurance department. Regulations that limit cancellation and non-renewal and that subject withdrawal plans to prior approval requirements may restrict an insurer’s ability to exit unprofitable markets.
Broker-Dealer and Investment Advisers The Allstate entities that operate as a broker-dealer and registered investment advisers are subject to regulation and supervision by the Securities and Exchange Commission (“SEC”), Financial Institution
Regulatory Authority and/or, in some cases, state securities administrators. Certain state and federal regulators are considering or have implemented best interest or fiduciary standards. Such standards could impact products provided by Allstate agents and Allstate’s broker-dealer, their sales processes, sales volume, and producer compensation arrangements.
Inflation Reduction Act of 2022 The Inflation Reduction Act of 2022 (“Act”), which contains several tax-related provisions, was signed into law in August 2022. The Act creates a 15% corporate alternative minimum tax (“CAMT”) on certain large corporations and an excise tax of 1% on stock repurchases by publicly traded U.S. corporations, both effective after December 31, 2022. The excise tax on common stock repurchases will be classified as an additional cost of the stock acquired included in treasury stock in shareholders' equity. The Company has determined that it is considered an “applicable corporation” under the rules of CAMT, and as such, it is expected to perform the CAMT computation starting January 1, 2023; however, a reasonable estimate cannot be made as of the filing date.
Climate disclosures In March 2022, the SEC released its climate-related proposed regulation, requiring registrants to provide certain climate-related information in their registration statements and annual reports. The proposed rule would require information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant’s greenhouse gas emissions, which have become a commonly used metric to assess a registrant’s exposure to such risks. In addition, under the proposed rule, certain climate-related financial metrics would be required in a registrant’s audited financial statements. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures.
Cybersecurity risk management The SEC issued a proposed rule in March 2022 to mandate cybersecurity disclosures, including information such as: management's and the board’s role and oversight of cybersecurity risks, policies and procedures and how risks and incidents are likely to impact the financial statements. Additionally, certain incidents would have mandatory reporting on a Form 8-K. The Company is evaluating the anticipated impacts of the proposed guidance to its disclosures.
Dodd-Frank: Covered Agreement The Secretary of the Treasury (operating through FIO) and the Office of the U.S. Trade Representative (“USTR”) are jointly authorized, pursuant to Dodd-Frank, to negotiate Covered Agreements. A Covered Agreement is a bilateral or multilateral agreement that “relates to the recognition of prudential measures with respect to the business of insurance or reinsurance that achieves a level of protection for insurance or reinsurance consumers that is substantially equivalent to the level of protection achieved under State insurance or reinsurance regulation.”
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Item 1. Business 2022 Form 10-K
On September 22, 2017, the U.S. and European Union (“EU”) signed a Covered Agreement. In addition to signing the Covered Agreement, Treasury and the USTR jointly issued a policy statement clarifying how the U.S. views implementation of certain provisions of the Covered Agreement. The policy statement affirms the U.S. system of insurance regulation, including the role of state insurance regulators as the primary supervisors of the business of insurance and addresses several other key provisions of the Covered Agreement for which constituents sought clarity, including prospective application to reinsurance agreements and an affirmation that the Covered Agreement does not require development of a group capital standard or group capital requirement in the U.S.
The U.S. had five years from the date of signing to amend its credit for reinsurance laws and regulations to conform with the requirements of the Covered Agreement or face federal preemption determinations by the FIO. To address the requirements of the Covered Agreement, the NAIC formally adopted revisions to its existing credit for reinsurance model law and model regulation to conform with the requirements of the Covered Agreement with the expectation that states would adopt and implement the modified model law and regulation by September 2022. A sufficient number of states adopted the model and/or regulation to avoid federal preemption.
Division Statute On November 27, 2018, the Illinois General Assembly passed legislation authorizing a statute that makes available a process by which a domestic insurance company may divide into two or more domestic insurance companies. The statute, which became effective January 1, 2019, can be used to divide continuing blocks of insurance business from insurance business no longer marketed, or otherwise has been discontinued, into separate companies with separate capital. The statute can also be used for sale to a third party or to manage risks associated with indemnification programs. Before a plan of division can be effected it must be approved according to the organizational documents of the dividing insurer and submitted for approval by the Illinois Department of Insurance. Allstate Insurance Company and certain affiliate insurance companies utilized the division statute to form three Illinois domiciled insurance companies that retained assets and liabilities for certain Michigan automobile insurance policies with catastrophic personal injury claims that are ceded to the MCCA.
Privacy Regulation and Data Security Federal law and the laws of many states require financial institutions to protect the security and confidentiality of consumer information and to notify consumers about their policies and practices relating to collection, use, and disclosure of consumer information and their policies relating to protecting the security and confidentiality of that information. Federal law and the laws of many states also regulate disclosures and disposal of consumer information. Congress, state legislatures, and regulatory authorities are currently considering additional regulation relating to privacy and other aspects of consumer information.
For example, the California Consumer Privacy Act, which took effect in January 2020, as amended by the California Privacy Rights Act, which took effect in January 2023, as well as similar laws in Virginia and Connecticut, adopted significant compliance requirements for businesses in those states. Among other things, the California Privacy Rights Act expanded consumer privacy rights and established a new privacy regulatory agency. In another example, the New York State Department of Financial Services cybersecurity regulation and the NAIC Insurance Data Security Model Law, which has been adopted in some form by several states, establish standards for data security, including the investigation of and notification to insurance commissioners of cybersecurity events. Additional states are also likely to adopt similarly themed cybersecurity requirements in the future. We cannot predict the impact on our business of possible future legislative or regulatory measures regarding privacy or cybersecurity.
Asbestos Congress has repeatedly considered legislation to address asbestos claims and litigation in the past. We cannot predict the impact on our business of possible future legislative measures regarding asbestos.
Environmental Environmental pollution and clean-up of polluted waste sites is the subject of federal and state regulation. The Comprehensive Environmental Response Compensation and Liability Act of 1980 (the “Superfund”) and comparable state statutes (the “mini-Superfunds”) govern the clean-up and restoration of waste sites by Potentially Responsible Parties (“PRPs”). The Superfund and the mini-Superfunds (collectively, the “Environmental Clean-up Laws” or “ECLs”) establish a mechanism to assign liability to PRPs or to fund the clean-up of waste sites if PRPs fail to do so. The extent of liability to be allocated to a PRP depends on a variety of factors. The insurance industry is involved in extensive litigation regarding coverage issues arising out of the clean-up of waste sites by insured PRPs and the insured parties’ alleged liability to third parties responsible for the clean-up. The insurance industry, including Allstate, has disputed and is disputing many such claims. Key coverage issues include whether the Superfund response, investigation, and clean-up costs are considered damages under the policies; whether coverage has been triggered; whether any pollution exclusion applies; whether there has been proper notice of claims; whether administrative liability triggers the duty to defend; whether there is an appropriate allocation of liability among potentially responsible insurers; and whether the liability in question falls within the definition of an “occurrence.” Identical coverage issues exist for clean-up and waste sites not covered under the Superfund. To date, courts have been inconsistent in their rulings on these issues.
Allstate’s exposure to liability with regard to its insureds that have been, or may be, named as PRPs is uncertain. While comprehensive Superfund reform proposals have been introduced in Congress, only modest reform measures have been enacted. In May 2017, the Environmental Protection Agency created a Superfund Task Force that issued proposed reforms in
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2022 Form 10-K Item 1. Business
its 2019 final report. These recommendations address expediting clean-up and remediation processes, reducing the financial burden of the clean-up process, encouraging private investment, promoting redevelopment and community revitalization, and building and strengthening partnerships. We cannot predict which, if any, of these reforms will be enacted or, if enacted, what their impact may be.
Developments in the insurance and reinsurance industries have fostered a movement to segregate asbestos, environmental and other run-off lines exposures into separate legal entities with dedicated capital. Regulatory bodies in certain cases have supported these actions. We are unable to determine the impact, if any, that these developments will have on the collectability of reinsurance recoverables in the future.
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Item 1. Business 2022 Form 10-K
Human Capital
Allstate’s success is highly dependent on human capital. The wellbeing of our employees is a key priority, and Allstate strives to promote a dynamic and welcoming workplace that promotes inclusive diversity and equity, fosters collaboration, and encourages employees to bring their best ideas to work every day. As of December 31, 2022, Allstate had approximately 54,000 full-time employees and 500 part-time employees.
Allstate’s human capital management focuses on the following priorities:
Inclusive Diversity and Equity (“IDE”) We strive for a workforce where the breadth of our diversity makes us a better company. IDE is one of Allstate’s core values and serves as a foundation of Our Shared Purpose.
U.S. workforce diversity as of December 31, 2022 | ||||||||
| Women | 58% | |||||||
| Racially and ethnically diverse | 42% | |||||||
•We track our workforce composition data over time to determine if we are making appropriate progress in advancing gender and racial representation in our employee population and we disclose our progress. In our Sustainability Report, we provide, among other things, five years of workforce composition data that shows a breakdown of salaried, hourly and management employees by gender and race. Beginning in 2021, we also disclose our EEO-1 data.
•As part of our commitment to fair and equitable compensation practices, we complete an annual pay equity analysis. We partner with external law and data analytics firms to provide a more detailed analysis to identify potential pay gaps across substantially similar employee groups as well as identify policies, practices or systematic issues that may contribute to pay gaps now or over time. The external analyses found that Allstate’s results compared well to benchmarks for companies of similar size and scope.
•Allstate’s Employee Impact Groups (“EIG”) help advance IDE.
–In 2022, Allstate rebranded “Employee Resource Groups” to “Employee Impact Groups” to focus on impact and integration into the business. Allstate supports and funds ten EIGs.
–EIGs are diverse communities that enhance the employee experience through engagement, development and collaboration. They bring value to participants and impact Allstate through cultural education and awareness, market and community outreach, professional development, recruiting, retention, and customer engagement.
–Officers from across the enterprise leverage their time, networks and resources to support the EIGs and positively impact employee engagement and feelings of belonging at Allstate.
•In 2022, employees completed more than 31,000 IDE courses.
•Allstate continues to look for ways to build awareness and drive action to be a differentiated leader in IDE. In 2022, we:
–Continued to drive skills-based hiring without 4-year degree requirements on job postings.
–As a member of the OneTen Initiative, launched Apprenticeship Program, Internship Program and Entry Level Rotational Program.
–Launched a new education strategy with offerings to build intercultural competence and an inclusive culture, and established metrics to measure the impact of course offerings on employees and the business.
–Implemented an IDE Talent Scorecard to drive leadership accountability for developing a workforce that mirrors the diversity of the communities and customers Allstate serves.
–Launched Allstate IDE A.C.T. (Accountability, Clarity, Transparency) Framework, integrating IDE strategy, goals, and collaboration across Allstate. This model drives accountability and reduces complexity by clarifying roles.
Employee Wellbeing and Safety We take seriously our responsibility to care for employees’ well-being, devoting resources to employee health and safety.
•Allstate utilized strong guiding principles to drive our response to the pandemic. These principles included complying with regulations, relying on expert medical advice, adapting our approach to individual circumstances, and keeping our employees, agents, and customers safe.
•We conduct wellbeing assessments to solicit employee feedback about physical, emotional, mental and financial wellbeing. Completing the assessment lowers the cost of benefits to employees.
•We offer resilience and stress management programs, including Energy for Life, designed to help employees articulate and pursue their individual purpose and embrace new challenges with ease. Over 40,000 employees have taken this wellness workshop since 2010.
•The EIGs provided multiple forums in 2022 to share wellness resources and support for their members.
•Wellbeing Champions promote Allstate’s health and wellness resources across the enterprise, including yoga and meditation classes.
The Allstate Corporation 17
2022 Form 10-K Item 1. Business
Talent Recruitment and Management We seek to provide employees with rewarding work, professional growth and educational opportunities.
•Our flexible work and equal opportunity policies support talent attraction and retention. This has enabled us to recruit a more geographically dispersed and diverse talent pool, as well as to reduce our facilities footprint.
•Performance review and development takes place throughout the year. Allstate invests in training and re-skilling opportunities, with most of our learning experiences offered virtually to support our remote and global workforce.
•In 2022:
–Employees completed over 1.1 million hours in formal learning opportunities.
–Over 700 employees participated in Allstate’s tuition reimbursement program, with $2.6 million paid in tuition reimbursement.
–40% of open positions were filled with internal applicants.
Organizational Culture At Allstate, we believe that when your passion fuels your purpose, you can achieve anything. We expect all employees to be leaders and dedicate extensive resources to developing leaders at all levels.
•Allstate defines culture as a self-sustaining system of shared values, priorities and principles that shape beliefs and drive behaviors and decision-making within an organization.
•In 2022, we continued to focus on further embedding Our Shared Purpose into the employee experience, including in our recruiting and hiring practices, performance management, learning and development offerings, leadership development and employee feedback and measurement.
For additional information, please see the section titled “Our Key ESG Priorities-People” in our Proxy Statement. In addition to the above discussion of our employees, please see information about Allstate agents under the caption “Allstate Protection Segment - Products and Distribution” in Part I, Item 1 of this report.18 www.allstate.com
Item 1. Business 2022 Form 10-K
Website
Our website is allstate.com. The Allstate Corporation’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports that we file or furnish pursuant to Section 13(a) of the Securities Exchange Act of 1934 are available on the Investor Relations section of our website (www.allstateinvestors.com), free of charge, as soon as reasonably practicable after they are electronically filed or furnished to the SEC. In addition, our Corporate Governance Guidelines, our Global Code of Business Conduct, and the charters of our Audit Committee, Compensation and Human Capital Committee, Executive Committee, Nominating, Governance and Social Responsibility Committee and Risk and Return Committee are available on the Investor Relations section of our website. The information found on our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document filed with the SEC.
Other Information About Allstate
•Allstate’s five reportable segments use shared services, including human resources, investment, finance, information technology and legal services, provided by Allstate Insurance Company and other affiliates.
•Although the insurance business generally is not seasonal, claims and claims expense for the Allstate Protection segment tend to be higher for periods of severe or inclement weather.
•“Allstate®” is a very well-recognized brand name in the United States. We use the “Allstate®”, “National General®” and “Answer Financial®” brands extensively in our business. We also provide additional protection products and services through “AllstateSM Protection Plans”, “Allstate Dealer Services®”, “Allstate® Roadside”, “Arity®”, “AllstateSM Identity Protection” “Allstate® Benefits” and “Allstate® Health Solutions”, among others. These brands, products and services are supported with the related service marks, logos, and slogans. Our rights in the United States to these names, service marks, logos and slogans continue as long as we continue to use them in commerce. Many service marks used by Allstate are the subject of renewable U.S. and/or foreign service mark registrations. We believe that these service marks are important to our business and we intend to maintain our rights to them.
The Allstate Corporation 19
2022 Form 10-K Item 1. Business
Information about our Executive Officers
The following table sets forth the names of our executive officers as of February 1, 2023, their ages, positions, business experience, and the years of their first election as officers. “AIC” refers to Allstate Insurance Company. Each of the officers named below may be removed from office at any time, with or without cause, by the board of directors of the relevant company.
| Name | Age | Position with Allstate and Business Experience | Year First Elected Officer | |||||||||||||||||
| Thomas J. Wilson | 65 | Chairman of the Board (May 2008 to present), President (June 2005 to January 2015 and February 2018 to present), and Chief Executive Officer (January 2007 to present) of The Allstate Corporation and AIC. | 1995 | |||||||||||||||||
| Elizabeth A. Brady | 58 | Executive Vice President, Chief Marketing, Customer and Communications Officer of AIC (January 2020 to present); Executive Vice President and Chief Marketing, Innovation and Corporate Relations Officer of AIC (August 2018 to January 2020); Senior Vice President, Global Brand Management of Kohler Co. (November 2013 to July 2018). | 2018 | |||||||||||||||||
| Christine M. DeBiase | 54 | Executive Vice President, Chief Legal Officer, General Counsel and Corporate Secretary of The Allstate Corporation and AIC (January 2023 to present); Executive Vice President, Chief Administrative Officer and General Counsel of Brighthouse Financial (February 2018 to December 2022); Executive Vice President, General Counsel and Corporate Secretary of Brighthouse Financial (August 2017 to February 2018). | 2023 | |||||||||||||||||
| John E. Dugenske | 56 | President, Investments and Corporate Strategy of AIC (September 2022 to present); President, Investments and Financial Products of AIC (January 2020 to September 2022); Executive Vice President and Chief Investment and Corporate Strategy Officer of AIC (January 2018 to January 2020); Executive Vice President and Chief Investment Officer of AIC (March 2017 to January 2018). | 2017 | |||||||||||||||||
| Suren Gupta | 61 | President, Enterprise Services (October 2022 to present); Executive Vice President, Chief Information Technology and Enterprise Services Officer of AIC (January 2020 to October 2022); Executive Vice President, Enterprise Technology and Strategic Ventures of AIC (February 2015 to January 2020). | 2011 | |||||||||||||||||
| Jesse E. Merten | 48 | Executive Vice President and Chief Financial Officer of The Allstate Corporation and AIC (September 2022 to present); President, Financial Products of AIC (May 2020 to September 2022); Executive Vice President and Chief Risk Officer of AIC (December 2017 to May 2020); Treasurer of The Allstate Corporation (January 2015 to April 2019) and of AIC (February 2015 to May 2019). | 2012 | |||||||||||||||||
| John C. Pintozzi | 57 | Senior Vice President, Controller and Chief Accounting Officer of The Allstate Corporation and AIC (September 2019 to present); Senior Vice President and Chief Financial Officer, Allstate Investments (May 2012 to August 2019). | 2005 | |||||||||||||||||
| Mark Q. Prindiville | 55 | Executive Vice President and Chief Risk Officer of AIC (May 2020 to present); Senior Vice President of AIC (September 2016 to May 2020). | 2016 | |||||||||||||||||
| Mario Rizzo | 56 | President, Property Liability of AIC (September 2022 to present); Executive Vice President and Chief Financial Officer of The Allstate Corporation and AIC (January 2018 to September 2022); Senior Vice President and Chief Financial Officer, Allstate Personal Lines of AIC (February 2015 to January 2018). | 2010 | |||||||||||||||||
| Robert Toohey | 55 | Executive Vice President and Chief Human Resources Officer of AIC (March 2022 to present); Self-Employed Talent and Operations Advisor/Consultant (August 2021 to March 2022); President of Pymetrics (May 2019 to August 2021); Chief People Officer of Verizon Media (August 2016 to September 2018). | 2022 | |||||||||||||||||
| Terrance Williams | 54 | President, Protection Products and Services of AIC (May 2022 to present); Executive Vice President, Allstate Sales and Distribution of AIC (November 2021 to May 2022); General Manager, Allstate Agency (January 2020 to November 2021); President of Emerging Businesses and EVP, Chief Marketing Officer of Nationwide Mutual Insurance Company (May 2017 to October 2019). | 2020 | |||||||||||||||||
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Item 1. Business 2022 Form 10-K
Forward-Looking Statements
This report contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” and other words with similar meanings. These statements may address, among other things, our strategy for growth, catastrophe exposure management, product development, investment results, regulatory approvals, market position, expenses, financial results, litigation and reserves. We believe that these statements are based on reasonable estimates, assumptions and plans. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update any forward-looking statements as a result of new information or future events or developments. In addition, forward-looking statements are subject to certain risks or uncertainties that could cause actual results to differ materially from those communicated in these forward-looking statements. These risks and uncertainties include, but are not limited to, those described in Part 1, “Item 1A. Risk Factors” and elsewhere in this report and those described from time to time in our other reports filed with the Securities and Exchange Commission.
The Allstate Corporation 21
2022 Form 10-K Part I - Item 1A. Risk Factors and Other Disclosures
Item 1A. Risk Factors
Summary Risks are categorized by (1) insurance and financial services, (2) business, strategy and operations and (3) macro, regulatory and risk environment. Many risks may affect more than one category and are included where the impact is most significant. If some of these risk factors occur, they may cause the emergence of or exacerbate the impact of other risk factors, which could materially increase the severity of the impact of these risks on our business, results of operations, financial condition or liquidity. The table below includes examples of risks from each category.
 | Insurance and financial services |  | Business, strategy and operations |  | Macro, regulatory and risk environment | ||||||||||||||||||
| Risks related to the insurance and financial services industries | Risks related to Allstate’s business and operating model | Risks that impact most companies | |||||||||||||||||||||
• Claim frequency and severity volatility • Catastrophes and severe weather • Loss cost estimates are complex and losses are unknown at the time policies are sold • Investment results are subject to market volatility and valuation judgments | • Highly competitive industry, impacted by new and changing technologies • Operating model effectiveness in light of changing customer preferences • Ability to maintain catastrophe reinsurance programs and limits • Fluctuations in financial strength and ratings | • Adverse changes in economic and capital market conditions • Large-scale pandemic events • Cybersecurity and privacy events • Changing climate conditions • Evolving environmental, social and governance expectations and standards • Regulatory and political changes • Loss of key business relationships • Ability to attract, develop and retain talent | |||||||||||||||||||||
The Allstate Corporation Board of Directors (“Allstate Board”) has overall responsibility for oversight of Management’s design and implementation of our Enterprise Risk and Return Management (“ERRM”) framework that manages the business on an integrated basis following our risk and return principles. The Risk and Return Committee of the Allstate Board oversees effectiveness of the ERRM program, governance structure and risk-related decision-making, while focusing on the Company’s overall risk profile.
See Management’s Discussion and Analysis (“MD&A”), Enterprise Risk and Return Management for further details. Consider these cautionary statements carefully together with other factors discussed elsewhere in this document, in filings with the Securities and Exchange Commission (“SEC”) or in materials incorporated therein by reference.
| Insurance and financial services | ||||
Unexpected increases in the frequency or severity of property and casualty claims may adversely affect our results of operations and financial condition
A significant increase in claim frequency could adversely affect our results of operations and financial condition. Changes in mix of business, miles driven, weather, driving behaviors or other factors can lead to changes in claim frequency. We may experience volatility in claim frequency, and short-term trends may not be predictive of future losses over the longer term.
Increases in claim severity can arise from numerous causes that are inherently difficult to predict. The following factors have and may continue to impact claim severity for auto bodily injury, auto physical damage (including collision and property damage) and homeowners coverages:
•Bodily injury — increased claims with attorney representation, litigation costs and higher medical inflation
•Vehicle physical damage — inflation and supply chain shortages impacting used vehicle and parts prices, labor rates, length of claim resolution and delays in the receipt of third-party carrier claims
•Homeowners — inflation in the construction industry, building materials and home furnishings, changes in the mix of loss type, and other economic and environmental factors, including short-term supply imbalances for services and supplies in areas affected by catastrophes
Catastrophes and severe weather events may subject us to significant losses
Catastrophic events could adversely affect operating results and cause them to vary significantly from one period to the next. Also, our liquidity could be constrained by a catastrophe, or multiple catastrophes, which could result in extraordinary losses, sales of investments or a downgrade of our debt or financial strength ratings.
Catastrophic losses are caused by wind and hail, wildfires, tornadoes, hurricanes, tropical storms, earthquakes, severe freeze events, volcanic eruptions, terrorism, cyber-attacks, civil unrest, industrial accidents and other such events.
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Our personal property insurance business may incur catastrophe losses greater than:
•Those experienced in prior years
•The average expected level used in pricing
•Current reinsurance coverage limits
•Loss estimates from hurricane and earthquake models at various levels of probability
Property and casualty businesses are subject to claims arising from severe weather events such as winter storms, rain, hail and high winds. The incidence and severity of weather conditions resulting in claims are extremely volatile.
The total number of policyholders affected by the event, the severity of the event and the coverage provided contribute to catastrophe and severe weather losses. Increases in the insured values of covered property, geographic concentration and the number of policyholders exposed to certain events could increase the severity of claims from catastrophic and severe weather events.
Limitations in analytical models used to assess and predict the exposure to catastrophe losses may adversely affect our results of operations and financial condition
We use internally developed and third-party vendor models along with our own historical data to assess exposure to catastrophe losses. The models assume various conditions and probability scenarios and may not accurately predict future losses or measure losses currently incurred.
Price competition and changes in regulation and underwriting standards in property and casualty businesses may adversely affect our results of operations and financial condition
The personal property-liability market is highly competitive with carriers competing through underwriting, advertising, price, customer service, innovation and distribution. Changes in regulatory standards regarding underwriting and rates could also affect the ability to predict future losses and could impact profitability. Competitors can alter underwriting standards, lower prices and increase advertising, which could result in lower growth or profitability for Allstate. A decline in the growth or profitability of the property and casualty businesses could have a material effect on our results of operations and financial condition.
Property and casualty actual claim costs may exceed current reserves established for claims due to changes in the inflationary, regulatory and litigation environment
Estimating claim reserves is an inherently uncertain and complex process. We continually refine our best estimates of losses after considering known facts and interpretations of the circumstances.
Our reserving methodology may be impacted by the following:
•Models that rely on the assumption that past loss development patterns will persist into the future
•Internal factors including experience with similar cases, actual claims paid, historical trends involving claim payment patterns, pending levels of unpaid claims, loss management programs, product mix, contractual terms and changes in claim reporting and settlement practices
•External factors such as inflation, court decisions, changes in law or litigation imposing unintended coverage, regulatory requirements, changes in driving patterns, delays in reporting of claims and economic conditions
•Supply chain disruptions and labor shortages could increase the cost of settling claims
•The ultimate cost of losses, or our current estimates, have and may continue to vary materially from recorded reserves and such variance may adversely affect our results of operations and financial condition as the reserves and amounts due from reinsurers are reestimated
See MD&A, Application of Critical Accounting Estimates for further details.Our investment portfolios are subject to market risk and declines in credit quality which may adversely affect or create volatility in our investment income and cause realized and unrealized losses
We continually evaluate investment management strategies since we are subject to risk of loss due to adverse changes in interest rates, credit spreads, equity prices, real estate values, currency exchange rates and liquidity. Adverse changes have and may continue to occur due to changes in monetary and fiscal policy, inflation and the economic climate, liquidity of a market or market segment, investor return expectations or risk tolerance, insolvency or financial distress of key market makers or participants, or changes in market perceptions of credit worthiness.
Inflation has and continues to remain elevated, which has led to higher interest rates and a widening of credit spreads reflecting ongoing recession concerns. The U.S. Federal Reserve and other central banks have begun to respond to inflationary pressure, generally through more restrictive monetary policy, including increasing target interest rates. These actions and other ongoing impacts from the pandemic could create significant economic uncertainty. Market volatility resulting from these factors has and may continue to impact our investment valuations and returns and impact our results of operations and financial condition.
Our investments are subject to risks associated with economic and capital market conditions and factors that may be unique to our portfolio, including:
•General weakening of the economy, which is typically reflected through higher credit spreads and lower equity and real estate valuations
•Declines in credit quality
•Declines in interest rates, credit spreads or sustained low interest rates could lead to declines in portfolio yields and investment income
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•Increases in market interest rates, credit spreads or a decrease in liquidity could have an adverse effect on the value of our fixed income securities that form a substantial majority of our investment portfolios
•Supply chain disruptions, labor shortages and other factors have and may continue to increase inflation, which could have an adverse impact on investment valuations and returns
•Weak performance of general and joint venture partners and underlying investments unrelated to general market or economic conditions could lead to declines in investment income and cause realized losses in our limited partnership interests
•Concentration in any particular issuer, industry, collateral type, group of related industries, geographic sector or risk type
The amount and timing of net investment income, capital contributions and distributions from our performance-based investments, which primarily include limited partnership interests that are recorded on a lag, can fluctuate significantly due to the underlying investments’ performance or changes in market or economic conditions. Additionally, these investments are less liquid than similar, publicly-traded investments and a decline in market liquidity could impact our ability to sell them at their current carrying values.
Declining equity markets or increases in interest rates or credit spreads could cause the value of the investments in our pension plans to decrease. Declines in interest rates could cause the funding ratio to decline and the value of the obligations for our pension and postretirement plans to increase. These factors could decrease the funded status of our pension and postretirement plans, increasing the likelihood or magnitude of future benefit expense and contributions.
Determination of the fair value and amount of credit losses for investments includes subjective judgments and could materially impact our results of operations and financial condition
The valuation of the portfolio is subjective, and the value of assets may differ from the actual amount received upon the sale of an asset. The degree of judgment required in determining fair values increases when:
•Market observable information is less readily available
•The use of different valuation assumptions may have a material effect on the assets’ fair values
•Changing market conditions could materially affect the fair value of investments
The determination of the amount of credit losses varies by investment type and is based on ongoing evaluation and assessment of known and inherent risks associated with the respective asset class or investment.
Such evaluations and assessments are highly judgmental and are revised as conditions change and new information becomes available.
We update our evaluations regularly and reflect changes in credit losses in our results of operations. Our conclusions may ultimately prove to be incorrect as assumptions, facts and circumstances change. When estimating credit loss allowances, historical loss trends, consideration of current conditions, and forecasts may not be indicative of future changes in credit losses and additional amounts may need to be recorded in the future.
Our participation in indemnification programs subjects us to the risk that reimbursement for qualifying claims and claims expenses may not be received
Participation in state-based industry pools, facilities and associations may have a material, adverse effect on our results of operations and financial condition. Our largest exposure is associated with the Michigan Catastrophic Claim Association (“MCCA”), a state-mandated indemnification mechanism for qualified personal injury protection losses that exceed a specified level. To the extent the MCCA’s current and future assessments are insufficient to reimburse its ultimate obligation on existing claims to member companies, our ability to obtain the 100% indemnification of ultimate loss could be impaired. We also participate in the Federal Government National Flood Insurance Program.
For further discussion of these items, see Regulation section, Indemnification Programs and Note 11 of the consolidated financial statements.We may not be able to mitigate the impact associated with changes in capital requirements
Regulatory requirements affect the amount of capital to be maintained by our subsidiary insurance companies. Changes to requirements or regulatory interpretations may result in additional capital held in our insurance companies and could require us to increase prices, reduce our sales of certain products, or accept a return on equity below original levels assumed in pricing.
A downgrade in financial strength ratings may have an adverse effect on our business
Financial strength ratings are important factors in establishing the competitive position of insurance companies and their access to capital markets. Rating agencies could downgrade or change the outlook on our ratings due to:
•Changes in the financial profile of one of our insurance companies
•Changes in a rating agency’s determination of the amount of capital required to maintain a particular rating
•Increases in the perceived risk of our investment portfolio, a reduced confidence in management or our business strategy, or other considerations that may or may not be under our control
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A downgrade in our ratings could have an adverse effect on our sales, competitiveness, customer retention, the marketability of our product offerings, liquidity, access to and cost of borrowing, results of operations and financial condition.
| Business, strategy and operations | ||||
We operate in markets that are highly competitive and may be impacted by new or changing technologies
Markets in which we operate are highly competitive, and we must continually allocate resources to refine and improve products and services to remain competitive. If we are unsuccessful in generating new business, retaining customers or renewing contracts, our ability to maintain or increase premiums written or the ability to sell our products could be adversely impacted.
Determining competitive position is complicated in the auto and homeowners insurance business as companies use different underwriting standards to accept new customers and quotes and close rates can fluctuate across companies and locations. Pricing of products is driven by multiple factors, including loss expectations, expense structure and dissimilar return targets. Additionally, sophisticated pricing algorithms make it difficult to determine what price potential customers would pay across competitors.
There is also significant competition for producers, such as exclusive and independent agents and their licensed sales professionals. Growth and retention may be materially affected if we are unable to attract and retain effective producers or if those producers are unable to attract and retain their licensed sales professionals or customers. Similarly, growth and retention may be impacted if customer preferences change and we are unable to effectively adapt our business model and processes.
Our business could also be affected by technological changes, such as autonomous or partially autonomous vehicles or technologies that facilitate ride, car or home sharing. Such changes could disrupt the demand for products from current customers, create coverage issues, impact the frequency or severity of losses, or reduce the size of the automobile insurance market causing our auto insurance business to decline. Since auto insurance constitutes a significant portion of our overall business, we may be more sensitive than other insurers and more adversely affected by trends that could decrease auto insurance rates or reduce demand for auto insurance over time.
Technological advancements and innovation are occurring in distribution, underwriting, claims and operations at a rapid pace that may continue to accelerate. Nontraditional competitors could enter the insurance market and further accelerate these trends. Our competitive position could be impacted if we are unable to deploy, in a cost effective and competitive manner, technology such as artificial intelligence and machine learning that collects and analyzes data to
inform underwriting or other decisions, or if our competitors collect and use data which we do not have the ability to access or use. Innovations must be implemented in compliance with applicable insurance regulations and may require extensive modifications to our systems and processes and extensive coordination with and reliance on the systems and operations of third parties. If we are unable to adapt to or bring such advancements and innovations to market, the quality of our products, our relationships with customers and agents, competitive position and business prospects may be materially affected. Changes in technology related to collection and application of data regarding customers could expose us to regulatory or legal actions and may have a material adverse effect on our business, reputation, results of operations and financial condition.
Technology and customer preference changes may impact the ways in which we interact, do business with our customers and design our products. We may not be able to respond effectively to these changes, which could have a material effect on our results of operations and financial condition.
Our ability to adequately and effectively price our products and services is affected by the evolving nature of consumer needs and preferences, market and regulatory dynamics, broader use of telematics-based rate segmentation and potential reduction in consumer demand.
Many voluntary benefits contracts are renewed annually. There is a risk that employers may be able to obtain more favorable terms from competitors than they could by renewing coverage with us. These competitive pressures may adversely affect the renewal of these contracts, as well as our ability to sell products.
Transformative Growth strategy implementation may not be effective
The Transformative Growth strategy is to accelerate growth by improving customer value, expanding customer access, increasing customer acquisition sophistication and investment, modernizing the technology ecosystem and driving organizational transformation. The strategy encompasses all aspects of Allstate’s customer experience and business model, spanning product distribution and sales, operations and servicing, and claims processing. If the strategy is not implemented effectively, customer retention and policy growth objectives could be adversely impacted. Lost business opportunities may result due to slower than anticipated speed to market. External forces including competitor actions or regulatory changes may also have an adverse effect on the value generated from the transformation.
Our catastrophe management strategy may adversely affect premium growth
Catastrophe risk management actions have led us to reduce the size of our homeowners business, including customers with auto and other personal lines products and may negatively impact future sales. Adjustments to our business structure, size and
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underwriting practices in markets with significant severe weather and catastrophe risk exposure could adversely impact premium growth rates and retention.
The ability of our subsidiaries to pay dividends may affect our liquidity and ability to meet our obligations
The Allstate Corporation is a holding company with no significant operations. Its principal assets are the stock of its subsidiaries and its directly held cash and investment portfolios. Its liabilities include debt and pension and other postretirement benefit obligations related to Allstate Insurance Company employees. State insurance regulatory authorities limit the payment of dividends by insurance subsidiaries, as described in Note 17 of the consolidated financial statements. The limitations are based on statutory income and surplus. In addition, competitive pressures generally require the subsidiaries to maintain insurance financial strength ratings. These restrictions and other regulatory requirements may affect the ability of subsidiaries to make dividend payments. Limits on the ability of the subsidiaries to pay dividends could adversely affect holding company liquidity, including the ability to pay dividends to shareholders, service debt or complete share repurchase programs as planned.
Changes in regulatory or rating agency capital requirements could decrease deployable capital and potentially reduce future dividends paid by our insurance companies.
For a discussion of capital requirements, including a change to a group capital calculation, see Regulation section, Limitations on Dividends by Insurance Subsidiaries.Our ability to pay dividends or repurchase stock is subject to limitations under terms of certain of our securities
The terms of the outstanding subordinated debentures prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions.
We are prohibited from declaring or paying dividends on our Series G preferred stock if we fail to meet specified capital adequacy, net income or shareholders’ equity levels. The prohibition is subject to an exception permitting us to declare dividends out of the net proceeds of common stock issued by us during the 90 days before the date of declaration even if we fail to meet such levels.
If the full preferred stock dividends for all preceding dividend periods have not been declared and paid, we generally may not repurchase or pay dividends on common stock during any dividend period while our preferred stock is outstanding.
See Note 13 of the consolidated financial statements.Reinsurance may be unavailable at current levels and prices, which may limit our ability to write new business
Market conditions impact the availability and cost of the reinsurance we purchase. Reinsurance may not remain continuously available to us to the same extent and on the same terms and rates as is currently available. Our ability to economically justify reinsurance to reduce our catastrophe risk in designated areas may depend on our ability to adjust premium rates to fully or partially recover cost. If we cannot maintain our current level of reinsurance or purchase new reinsurance protection in amounts we consider sufficient at acceptable prices, we would have to either accept an increase in our catastrophe exposure, reduce our insurance exposure or seek other alternatives.
Reinsurance subjects us to counterparty risk and may not be adequate to protect us against losses arising from ceded insurance
Collecting from reinsurers is subject to uncertainty arising from factors that include:
•Whether reinsurers, their affiliates or certain indemnitors have the financial capacity and willingness to make payments under the terms of a reinsurance treaty or contract
•Whether insured losses meet the qualifying conditions of the reinsurance contract
Our inability to recover from a reinsurer could have a material effect on our results of operations and financial condition.
Disruption, volatility or uncertainty in the insurance-linked securities market may decrease our ability to access such market on favorable terms or at all.
Acquisitions or divestitures of businesses may not produce anticipated benefits, resulting in operating difficulties, unforeseen liabilities or asset impairments
The ability to achieve certain anticipated financial benefits from the acquisition of businesses depends in part on our ability to successfully grow and integrate the businesses consistent with our anticipated acquisition economics. Financial results could be adversely affected by unanticipated performance issues, unforeseen liabilities, transaction-related charges, diversion of management time and resources to acquisition integration challenges or growth strategies, loss of key employees, challenges in integrating information technology systems of acquired companies with our own, amortization of expenses related to intangibles, charges for impairment of long-term assets or goodwill and indemnifications.
Acquired businesses may not perform as projected, cost savings anticipated from the acquisition may not materialize, and costs associated with the integration may be greater than anticipated. As a result, if we do not manage these integrations effectively, the quality of our products as well as our relationships with customers and partners may result in the company not achieving returns on its investment at the level projected at acquisition.
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We also may divest businesses from time to time. These transactions may result in continued financial involvement in the divested businesses, such as through reinsurance, guarantees or other financial arrangements, following the transaction. If the acquiring companies do not perform under the arrangements, our financial results could be negatively impacted.
We may be subject to the risks and costs associated with intellectual property infringement, misappropriation and third-party claims
We rely on a combination of contractual rights and copyright, trademark, patent and trade secret laws to establish and protect our intellectual property. Third parties may infringe or misappropriate our intellectual property. We may have to litigate to enforce and protect intellectual property and to determine its scope, validity or enforceability, which could divert significant resources and prove unsuccessful. An inability to protect intellectual property or an inability to successfully defend against a claim of intellectual property infringement could have a material effect on our business.
We may be subject to claims by third parties for patent, trademark or copyright infringement or breach of usage rights. Any such claims and any resulting litigation could result in significant expense and liability. If third-party providers or we are found to have infringed a third-party intellectual property right, either of us could be enjoined from providing certain products or services or from utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets or licenses. Alternatively, we could be required to enter into costly licensing arrangements with third parties or implement costly work-arounds. Any of these scenarios could have a material effect on our business and results of operations.
| Macro, regulatory and risk environment | ||||
Conditions in the global economy and capital markets could continue to adversely affect our business and results of operations
Global economic and capital market conditions could continue to adversely impact demand for our products, returns on our investment portfolio and results of operations. The conditions that would have the largest impact on our business include:
•Low or negative economic growth
•Interest rate levels
•Rising inflation increasing claims and claims expense
•Substantial increases in delinquencies or defaults on debt
•Significant downturns in the market value or liquidity of our investment portfolio
•Prolonged downturn in equity valuations
•Reduced consumer spending and business investment
Stressed conditions, volatility and disruptions in global capital markets or financial asset classes could adversely affect our investment portfolio. Our assumptions about portfolio diversification may not hold across market conditions, which could lead to heightened investment losses.
Capital and credit market conditions may significantly affect our ability to meet liquidity needs or obtain credit on acceptable terms
In periods of extreme volatility and disruption in the capital and credit markets, liquidity and credit capacity may be severely restricted. Our access to additional financing depends on a variety of factors such as market conditions, the general availability of credit, the overall availability of credit to our industry, our credit ratings and credit capacity, as well as lenders’ perception of our long- or short-term financial prospects. In such circumstances, our ability to obtain capital to fund operating expenses, financing costs, capital expenditures or acquisitions may be limited, and the cost of any such capital may be significant.
A large-scale pandemic, the occurrence of terrorism, military actions, social unrest or other actions may have an adverse effect on our business
A large-scale pandemic, such as the Coronavirus and its impacts, the occurrence of terrorism, military actions, social unrest or other actions, may result in loss of life, property damage, and disruptions to commerce and reduced economic activity. Some of the assets in our investment portfolio may be adversely affected by declines in the equity markets, changes in interest rates, reduced liquidity and economic activity caused by a large-scale pandemic. Additionally, a large-scale pandemic or terrorist act could have a material effect on sales, liquidity and operating results.
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 moderated, but new variants of the Coronavirus could result in further economic volatility. 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.
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 prior periods, including:
•Sales of new and retention of existing policies
•Rate changes and average gross premiums
•Supply chain disruptions and labor shortages increase the cost of settling claims
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•Premiums and losses for shared economy products, including transportation network companies and home rentals
•Driving behavior and auto accident frequency
•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
See MD&A, Highlights for a summary of the impacts of the Coronavirus on our operations, each of our segments and investments that may continue, emerge, evolve or accelerate into 2023.The failure in cyber or other information security controls, as well as the occurrence of events unanticipated in our disaster recovery processes and business continuity planning, could result in a loss or disclosure of confidential information, damage to our reputation, additional costs and impair our ability to conduct business effectively
We depend heavily on computer systems, mathematical algorithms and data to perform necessary business functions. There are threats that could impact our ability to protect our data and systems; if the threats materialize, they could impact confidentiality, integrity and availability:
•Confidentiality — protecting our data from disclosure to unauthorized parties
•Integrity — ensuring data is not changed accidentally or without authorization and is accurate
•Availability — ensuring our data and systems are accessible to meet our business needs
We collect, use, store or transmit a large amount of confidential, proprietary and other information (including personal information of customers, claimants or employees) in connection with the operation of our business. Systems are subject to increased cyberattacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering.
We constantly defend against threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. We have experienced breaches of our data and systems, although to date none of these breaches has had a material effect on our business, operations or reputation. Events like these jeopardize the information processed and stored in, and transmitted through, our computer systems and networks and otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation, increased costs, regulatory penalties or customer dissatisfaction.
These risks may increase in the future as threats become more sophisticated and we continue to expand internet and mobile strategies, develop
additional remote connectivity solutions to serve our employees and customers, develop and expand products and services designed to protect customers’ digital footprint, and build and maintain an integrated digital enterprise.
Our increased use of third-party services (e.g., cloud technology and software as a service) can make it more difficult to identify and respond to cyberattacks in any of the above situations. Although we may review and assess third-party vendor cyber security controls, our efforts may not be successful in preventing or mitigating the effects of such events. Third parties to whom we outsource certain functions are also subject to cybersecurity risks.
Personal information is subject to an increasing number of federal, state, local and international laws and regulations regarding privacy and data security, as well as contractual commitments. Any failure or perceived failure by us to comply with such obligations may result in governmental enforcement actions and fines, litigation or public statements against us by consumer advocacy groups or others and could cause our employees and customers to lose trust in us, which could have an adverse effect on our reputation and business.
Our integrated operational risk and return management processes and practices may not be sufficient to timely detect and mitigate operational risks that could have an adverse effect on our reputation and business.
See the Regulation section, Privacy Regulation and Data Security, for additional information.The occurrence of a disaster, such as a natural catastrophe, pandemic, industrial accident, blackout, terrorist attack, war, cyberattack, computer virus, insider threat, unanticipated problems with our disaster recovery processes, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those events affect our computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of employees were unavailable in the event of a disaster, our ability to effectively conduct business could be severely compromised. Our systems are also subject to compromise from internal threats.
Losses from changing climate and weather conditions may adversely affect our financial condition, profitability or cash flows
Climate change affects the occurrence of certain natural events, such as increasing the frequency or severity of wind, tornado, hailstorm and thunderstorm events due to increased convection in the atmosphere. There could also be more frequent wildfires in certain geographies, more flooding and the potential for increased severity of hurricanes due to higher sea surface temperatures. As a result, incurred losses from such events and the demand, price and availability of reinsurance coverages for automobile and homeowners insurance may be affected.
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Climate change may also impact insurability by impairing our ability to identify and quantify potential hazards that will result in losses and offer our customers products at an affordable price. Our investment portfolio is also subject to the effects of climate change as economic shifts alter the return dynamic of long-term investments and increase valuation risk.
Due to significant variability associated with future changing climate conditions, we are unable to predict the impact climate change will have on our businesses.
Our efforts to meet evolving environmental, social, and governance standards may not meet stakeholders' expectationsSome of our existing or potential investors, customers, employees, regulators, and other stakeholders evaluate our business practices according to a variety of environmental, social and governance (“ESG”) standards and expectations, including those related to climate change, inclusive diversity and equity, data privacy, and the well-being of our employees. Some regulators have proposed or adopted, or may propose or adopt, ESG rules or standards applicable to our business. Our Shared Purpose integrates strong ESG principles and practices into our culture, strategy and business practices.
Our business practices and disclosures are evaluated against ESG standards which are continually evolving and not always well defined or readily measurable today. ESG-related expectations may also reflect contrasting or conflicting values or agendas. Our practices may not change in the particular ways or at the rate stakeholders expect. We may fail to meet our commitments or targets. Our policies and processes to evaluate and manage ESG priorities in coordination with other business priorities may not prove completely effective or fully satisfy our stakeholders. Customers and potential customers may choose not to do business with us based on our ESG practices and related policies and actions. We may face adverse regulatory, investor, media, or public scrutiny leading to business, reputational, or legal challenges.
We are subject to extensive regulation, and potential further restrictive regulation may increase operating costs and limit growth
We largely operate in the highly regulated insurance and broader financial services sectors and are subject to extensive laws and regulations that are complex and subject to change. Changes may lead to additional expenses, increased legal exposure, or increased reserve or capital requirements limiting our ability to grow or to achieve targeted profitability. Moreover, laws and regulations are administered and enforced by governmental authorities that exercise interpretive latitude, including:
•State insurance regulators
•State securities administrators
•State attorneys general
•Federal agencies including the SEC, the Financial Industry Regulatory Authority, the Department of
Labor, the U.S. Department of Justice, the Consumer Financial Protection Bureau and the National Labor Relations Board
Consequently, compliance with one regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another’s interpretation of the same issue.
There is risk that one regulator’s or enforcement authority’s interpretation of a legal issue may change to our detriment. There is also a risk that changes in the overall legal environment may cause us to change our views regarding the actions we need to take from a legal risk management perspective. This could necessitate changes to our practices that may adversely impact our business. In some cases, state insurance laws and regulations are generally intended to protect or benefit purchasers or users of insurance products, not holders of securities that we issue. These laws and regulations may limit our ability to grow or to improve the profitability of our business.
A regulatory environment that requires rate increases to be approved, can dictate underwriting practices and mandate participation in loss sharing arrangements, may adversely affect results of operations and financial condition
Political events and positions can affect the insurance market, including efforts to suppress rates to a level that may not allow us to reach targeted levels of profitability. Regulatory challenges to rate increases, especially during inflationary periods with more significant rate changes, may restrict rate changes that may be required to achieve targeted levels of profitability and returns on equity. If we are unsuccessful, our results of operations could be negatively impacted.
In addition, certain states have enacted laws that require an insurer conducting business in that state to participate in assigned risk plans, reinsurance facilities and joint underwriting associations. Certain states also require the insurer to offer coverage to all consumers, often restricting an insurer’s ability to charge the price it might otherwise charge for the risk acceptance. In these markets, we may be compelled to underwrite significant amounts of business at lower-than-desired rates, possibly leading to an unacceptable return on equity. Alternatively, as the facilities recognize a financial deficit, they could have the ability to assess participating insurers, adversely affecting our results of operations and financial condition. Laws and regulations of many states also limit an insurer’s ability to withdraw from one or more lines of insurance, except pursuant to a plan that is approved by the state insurance department. Certain states require an insurer to participate in guaranty funds for impaired or insolvent insurance companies. These funds periodically assess losses against all insurance companies doing business in the state. Our results of operations and financial condition could be adversely affected by any of these factors.
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Regulatory reforms, and the more stringent application of existing regulations, may make it more expensive for us to conduct our business
The federal government has enacted comprehensive regulatory reforms for financial services entities. As part of a larger effort to strengthen the regulation of the financial services market, certain reforms are applicable to the insurance industry.
The Federal Insurance Office and Financial Stability Oversight Council have been established, and the federal government may enact reforms that affect the state insurance regulatory framework. The potential impact of state or federal measures that change the nature or scope of insurance and financial regulation is uncertain but may make it more expensive for us to conduct business and limit our ability to grow or achieve profitability.
We have business process and information technology operations in Canada, India, the United Kingdom and Mexico that are subject to operating, regulatory and political risks in those countries. We may incur substantial costs and other negative consequences if any of these occur, including an adverse effect on our business, results of operations and financial condition.
Losses from legal and regulatory actions may be material to our results of operations, cash flows and financial condition
We are involved in various legal actions, including class-action litigation challenging a range of company practices and coverages provided by our insurance products, some of which involve claims for substantial or indeterminate amounts. We are also involved in various regulatory actions and inquiries, including market conduct exams by state insurance regulatory agencies. In the event of an unfavorable outcome in any of these matters, the ultimate liability may be more than amounts currently accrued or disclosed in our reasonably possible loss range and may be material to our results of operations, cash flows and financial condition.
See Note 15 of the consolidated financial statements. Changes in or the application of accounting standards issued by standard-setting bodies and changes in tax laws may adversely affect our results of operations and financial condition
Our financial statements are subject to the application of accounting principles generally accepted in the United States of America, which are periodically revised, interpreted or expanded. Accordingly, we may be required to adopt new guidance or interpretations, which may have a material effect on our results of operations and financial condition and could adversely impact financial strength ratings.
•Market declines, changes in business strategies or other events impacting the fair value of goodwill or purchased intangible assets could result in an impairment charge to income
•Realization of our deferred tax assets assumes that we can fully utilize the deductions recognized for tax purposes; we may recognize additional tax expense if these assets are not fully utilized
•New tax legislative initiatives may be enacted that may impact our effective tax rate and could adversely affect our tax positions or tax liabilities
See MD&A, Application of Critical Accounting Estimates and Note 2 of the consolidated financial statements for further details.Loss of key vendor relationships, disruptions to the provision of products or services by a vendor, or failure of a vendor to provide and protect reliable data, and proprietary information, or personal information of our customers, claimants or employees could adversely affect our operations
We rely on services and products provided by many vendors in the U.S. and abroad. These include vendors of computer hardware, software, cloud technology and software as a service, as well as vendors or outsourcing of services such as:
•Claim adjustment services
•Call center services for customer support
•Human resource benefits management
•Information technology support
•Investment management services
We continue to identify ways to improve operating efficiency and reduce cost, which may result in additional outsourcing arrangements in the future. If we are not successful transitioning work to a vendor or a key vendor becomes unable to continue to provide products or services, fails to meet service level standards, or if any vendor fails to protect our confidential, proprietary, and other information, or if our business continuity plans do not sufficiently address a vendor-related business interruption, we may suffer operational impairments and financial losses.
Our ability to attract, develop, and retain talent to maintain appropriate staffing levels and establish a successful work culture is critical to our success
Competition for qualified employees with highly specialized knowledge in areas such as underwriting, data and analytics, technology and e-commerce, is intense and we have experienced increased competition in hiring and retaining employees. The increased prevalence of remote-working arrangements that do not require employees to relocate to take a new job could contribute to higher turnover.
Factors that affect our ability to attract and retain such employees include:
•Compensation and benefits
•Training and re-skilling programs
•Reputation as a successful business with a culture of fair hiring, and of training and promoting qualified employees
•Recognition of and response to changing trends and other circumstances that affect employees
30 www.allstate.com
Part I - Item 1A. Risk Factors and Other Disclosures 2022 Form 10-K
The unexpected loss of key personnel could have a material adverse impact on our business because of the loss of their skills, knowledge of our products and offerings and years of industry experience and, in some cases, the difficulty of promptly finding qualified replacement personnel.
Misconduct or fraudulent acts by employees, agents and third parties may expose us to financial loss, disruption of business, regulatory assessments and reputational harm
The company and the insurance industry are susceptible to past and future misconduct or fraudulent activities by employees, representative agents, vendors, customers and other third parties. These activities could include:
•Fraud against the company, its employees and its customers through illegal or prohibited activities
•Unauthorized acts or representations, unauthorized use or disclosure of personal or proprietary information, deception, and misappropriation of funds or other benefits
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
On October 18, 2022, Allstate closed the sale of its headquarters in Northbrook, Illinois. The sale will reduce real estate expenses and further advance Allstate’s multi-year Transformative Growth strategy.
In Illinois, the Company has 49 locations totaling 609 thousand square feet of office space.
In North America, we operate from approximately 862 retail stores, administrative, data processing, claims handling and other support facilities that total 1.1 million square feet owned and 5.0 million square feet leased.
Outside North America, we own one and lease two properties in Northern Ireland comprising approximately 198 thousand square feet. We also have two leased facilities in India for approximately 441 thousand square feet, two leased facilities in London for seven thousand square feet and approximately two thousand square feet in other international locations.
The locations where Allstate exclusive agencies operate in the U.S. are normally leased by the agencies.
Item 3. Legal Proceedings
Information required for Item 3 is incorporated by reference to the discussion under the heading “Regulation and compliance” and under the heading “Legal and regulatory proceedings and inquiries” in Note 15 of the consolidated financial statements.
Item 4. Mine Safety Disclosures
Not applicable.
The Allstate Corporation 31
2022 Form 10-K
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
As of January 31, 2023, there were 59,597 holders of record of The Allstate Corporation’s common stock. The principal market for the common stock is the New York Stock Exchange, where our common stock trades under the trading symbol “ALL”. Our common stock is also listed on the Chicago Stock Exchange.
Common stock performance graph
The following performance graph compares the cumulative total shareholder return on Allstate common stock for a five-year period (December 31, 2017 to December 31, 2022) with the cumulative total return of the S&P Property and Casualty Insurance Index (S&P P/C) and the S&P 500 stock index.
32 www.allstate.com
2022 Form 10-K
Issuer Purchases of Equity Securities
| Period | Total number of shares (or units) purchased (1) | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs (2) | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (3) | ||||||||||||||||||||||
| October 1, 2022 - October 31, 2022 | ||||||||||||||||||||||||||
| Open Market Purchases | 1,645,463 | $ | 128.65 | 1,644,936 | ||||||||||||||||||||||
| November 1, 2022 - November 30, 2022 | ||||||||||||||||||||||||||
| Open Market Purchases | 693,860 | $ | 128.40 | 692,907 | ||||||||||||||||||||||
| December 1, 2022 - December 31, 2022 | ||||||||||||||||||||||||||
| Open Market Purchases | 400,465 | $ | 132.26 | 399,500 | ||||||||||||||||||||||
| Total | 2,739,788 | $ | 129.11 | 2,737,343 | $ | 802 | million | |||||||||||||||||||
(1)In accordance with the terms of its equity compensation plans, Allstate acquired the following shares in connection with the vesting of restricted stock units and performance stock awards and the exercise of stock options held by employees and/or directors. The shares were acquired in satisfaction of withholding taxes due upon exercise or vesting and in payment of the exercise price of the options.
October: 527
November: 953
December: 965
(2)From time to time, repurchases under our programs are executed under the terms of a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Securities Exchange Act of 1934.
(3)In August 2021, we announced the approval of a common share repurchase program for $5 billion which is expected to be completed by September 30, 2023. The Inflation Reduction Act, enacted in August 2022, imposes a 1% excise tax on stock repurchases occurring after December 31, 2022. The excise tax on common stock repurchases will be classified as an additional cost of the stock acquired included in treasury stock in shareholders’ equity.
Item 6. [Reserved]
None.
The Allstate Corporation 33
2022 Form 10-K
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Page | |||||||||||
2022 Highlights | |||||||||||
Property-Liability Operations | |||||||||||
34 www.allstate.com
2022 Form 10-K
2022 Highlights
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 consolidated financial statements and related notes found under Item 8. contained herein.
A discussion of strategy, including updates to the multi-year Transformative Growth initiative, can be found in Part 1, Item 1. Business.
This section of this Form 10-K generally discusses 2022 and 2021 results and year-to-year comparisons between 2022 and 2021. Discussions of 2020 results and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis (“MD&A”) in Part II, Item 7 of our annual report on Form 10-K for 2021, filed February 18, 2022. Certain amounts have been reclassified to conform to current year presentation.
The most important factors we monitor to evaluate the financial condition and performance for our reportable segments and the Company include:
•Allstate Protection: premium, policies in force (“PIF”), new business sales, policy retention, price changes, claim frequency and severity, catastrophes, loss ratio, expenses, underwriting results, combined ratio and relative competitive position
•Protection Services: revenues, premium written, PIF and adjusted net income
•Allstate Health and Benefits: premiums, new business sales, PIF, benefit ratio, expenses and adjusted net income
•Investments: exposure to market risk, asset allocation, credit quality, total return, net investment income, cash flows, net gains and losses on investments and derivatives, unrealized capital gains and losses, long-term returns and asset duration
•Financial condition: liquidity, parent holding company deployable assets, financial strength ratings, operating leverage, debt levels, book value per share and return on equity
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”), Shelter-in-Place Payback expense, 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 | ||||
| • | 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 | ||||
The Allstate Corporation 35
2022 Form 10-K
Sale of Headquarters
On October 18, 2022, Allstate closed the sale of its headquarters for $232 million resulting in a gain of approximately $99 million, pre-tax in the fourth quarter of 2022. $16 million of the gain was classified in Property-Liability net gains and losses on investments and derivatives and $83 million was classified as other revenue within the Corporate and Other segment. The sale reduces real estate expenses and further advances Allstate’s multi-year Transformative Growth initiative.
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.
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, the assets and liabilities of the businesses were reclassified as held for sale and results are presented as discontinued operations. This change was applied on a retrospective basis.
In connection with the sale of ALIC and certain affiliates in 2021, the sale agreement includes a provision related to contingent consideration that may be earned over a ten-year period with the first potential payment date commencing on January 1, 2026 and a final potential payment date of January 1, 2035. The contingent consideration is determined annually based on the average ten-year Treasury rate over the preceding three-year period compared to a designated rate. The contingent consideration meets the definition of a derivative and is accounted for on a fair value basis with periodic changes in fair value reflected in earnings.
See Note 3 of the consolidated financial statements for further information on acquisitions and dispositions.
Macroeconomic Impacts
The Novel Coronavirus Pandemic or COVID-19 (“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 moderated significantly, but new variants of the Coronavirus could result in further economic volatility. We continue to closely monitor and proactively adapt to developments and changing conditions. Currently, it is not possible to reliably estimate the continuing impact to 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 prior year results. Beginning in March 2020, when shelter-in-place orders and other restrictions were initiated, and throughout 2021, we experienced lower auto accident claim frequency and different claim patterns than historically experienced. Total auto claim frequency has since increased, but remains below pre-pandemic levels.
The Coronavirus has affected operations and may continue to significantly affect results of operations, financial condition and liquidity. The impact from the pandemic should be considered when comparing the current year to the prior years, including:
•Sales of new and retention of existing policies
•Rate changes and average gross premiums
•Supply chain disruptions and labor shortages impacts on the cost of settling claims
•Premium for transportation network products
•Driving behavior and auto accident frequency
•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
A pandemic such as the Coronavirus and its impacts are disclosed in Part 1 “Item 1A. Risk Factors’’, including the risk factors titled “A large-scale pandemic, the occurrence of terrorism, military actions, social unrest or other actions may have an adverse effect on our business” and “Conditions in the global economy and capital markets could continue to adversely affect our business and results of operations”.
Supply chain disruptions, labor shortages and other macroeconomic factors have increased inflation, which may have an adverse impact on investment valuations and returns. As inflation continued to remain elevated, the Federal Reserve significantly increased interest rates and credit spreads widened reflecting ongoing recession concerns. These factors along with other ongoing impacts from the pandemic create significant economic uncertainty and the resulting market volatility may continue to impact our investment valuations and returns.
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 macroeconomic impacts on our 2022 results.
Russia/Ukraine Conflict
The Russia-Ukraine war and related sanctions imposed as a result of this conflict have increased global economic and political uncertainty, including inflationary pressures and an increased risk of cybersecurity incidents. Allstate does not have operations or direct investments in Russia, Belarus or Ukraine, but we could experience significant indirect impacts on the investment portfolio, financial position, or results of operations.
36 www.allstate.com
2022 Form 10-K
Allstate Delivered on 2022 Operating Priorities (1) | |||||||||||||||||
| Better Service Customers | Enterprise Net Promoter Score, which measures how likely customers are to recommend us, finished below the prior year, reflecting substantial price increases necessary to offset higher loss costs. | ||||||||||||||||
| Grow Customer Base | Consolidated policies in force reached 189.1 million, a 1.0% decrease from prior year. Property-Liability policies in force increased by 0.7% compared to the prior year, as continued growth at National General was substantially offset by the Allstate brand as new business was limited in many states. | ||||||||||||||||
Protection Services policies in force declined 1.4%, primarily due to expiring low average premium policies from a major retail account that ended in 2019. | |||||||||||||||||
| Achieve Target Economic Returns on Capital | Return on average Allstate common shareholders’ equity was (7.3)% in 2022. | ||||||||||||||||
The Property-Liability combined ratio of 106.6 for the full year increased compared to the prior year primarily driven by higher auto losses. We continued to reduce expenses by lowering direct sales and advertising spend and are reducing exposure in states with unacceptable auto and home insurance margins through underwriting restrictions. Our claims organization is executing a plan to manage the impacts of a higher loss cost environment. | |||||||||||||||||
| Proactively Manage Investments | Net investment income of $2.40 billion in 2022 was $890 million below prior year as higher market-based investment income was more than offset by lower performance-based results. | ||||||||||||||||
Total return on the $61.83 billion investment portfolio was (4.0)% in 2022 and compares favorably to full year 2022 performance of the S&P 500 of (18.1)% and the Bloomberg Intermediate Bond return of (9.4)%. Proactive portfolio actions to reduce inflation and economic risk by shortening fixed income duration mitigated portfolio losses by approximately $2 billion this year. | |||||||||||||||||
| Build Long-Term Growth Platforms | Allstate made substantial progress in advancing Transformative Growth initiatives in 2022, including continued cost reductions, deploying a new property-liability technology platform and a new Affordable, Simple and Connected auto insurance offering in two states. | ||||||||||||||||
| National General is meeting or exceeding acquisition performance targets with the objective of building a strong competitive position in independent agent distribution. | |||||||||||||||||
| Protection Services has increased revenues, particularly Allstate Protection Plans. Arity continued to expand its data acquisition platform with more than one trillion miles of traffic data and launched Arity IQ, a product to improve new business profitability for auto insurers. | |||||||||||||||||
(1)2023 operating priorities will remain mostly consistent with the 2022 priorities, with “Building Long-Term Growth Platforms” expanding to “Execute Transformative Growth” to fully integrate Transformative Growth goals.
| Consolidated Net Income | ||||||||||||||
| ($ in millions) | ||||||||||||||
Consolidated net loss applicable to common shareholders was $1.42 billion in 2022 compared to net income of $1.49 billion in 2021, primarily due to an underwriting loss, equity valuation decreases and losses on investment sales, partially offset by the absence of the 2021 loss on sale of the life and annuities business. For the twelve months ended December 31, 2022, return on Allstate common shareholders’ equity was (7.3)% compared to 5.8% for the twelve months ended December 31, 2021. | ||
| Total Revenue | ||||||||||||||
| ($ in millions) | ||||||||||||||
Total revenue increased 1.6% to $51.41 billion in 2022 compared to 2021, primarily due to an 8.7% increase in property and casualty insurance premiums earned, partially offset by net losses on investments and derivatives in 2022 compared to net gains in 2021 and a decrease in net investment income. | ||
| Net Investment Income | ||||||||||||||
| ($ in millions) | ||||||||||||||
Net investment income decreased $890 million to $2.40 billion in 2022 compared to 2021, primarily due to lower performance-based investment results, mainly from limited partnerships, partially offset by higher market-based fixed income portfolio yields. | ||
The Allstate Corporation 37
2022 Form 10-K
Summarized financial results
| Years Ended December 31, | ||||||||||||||||||||
| ($ in millions) | 2022 | 2021 | 2020 | |||||||||||||||||
| Revenues | ||||||||||||||||||||
| Property and casualty insurance premiums | $ | 45,904 | $ | 42,218 | $ | 37,073 | ||||||||||||||
| Accident and health insurance premiums and contract charges | 1,833 | 1,821 | 1,094 | |||||||||||||||||
| Other revenue | 2,344 | 2,172 | 1,065 | |||||||||||||||||
| Net investment income | 2,403 | 3,293 | 1,590 | |||||||||||||||||
| Net gains (losses) on investments and derivatives | (1,072) | 1,084 | 1,087 | |||||||||||||||||
| Total revenues | 51,412 | 50,588 | 41,909 | |||||||||||||||||
| Costs and expenses | ||||||||||||||||||||
| Property and casualty insurance claims and claims expense | (37,264) | (29,318) | (22,001) | |||||||||||||||||
| Shelter-in-Place Payback expense | — | (29) | (948) | |||||||||||||||||
| Accident, health and other policy benefits | (1,061) | (1,049) | (549) | |||||||||||||||||
| Amortization of deferred policy acquisition costs | (6,644) | (6,252) | (5,477) | |||||||||||||||||
| Operating, restructuring and interest expenses | (7,832) | (7,760) | (6,065) | |||||||||||||||||
| Pension and other postretirement remeasurement gains (losses) | (116) | 644 | 51 | |||||||||||||||||
| Amortization of purchased intangibles | (353) | (376) | (118) | |||||||||||||||||
| Total costs and expenses | (53,270) | (44,140) | (35,107) | |||||||||||||||||
| (Loss) income from operations before income tax expense | (1,858) | 6,448 | 6,802 | |||||||||||||||||
| Income tax benefit (expense) | 494 | (1,289) | (1,373) | |||||||||||||||||
| Net (loss) income from continuing operations | (1,364) | 5,159 | 5,429 | |||||||||||||||||
| (Loss) income from discontinued operations, net of tax | — | (3,593) | 147 | |||||||||||||||||
| Net (loss) income | (1,364) | 1,566 | 5,576 | |||||||||||||||||
| Less: Net loss attributable to noncontrolling interest | (53) | (33) | — | |||||||||||||||||
| Net (loss) income attributable to Allstate | (1,311) | 1,599 | 5,576 | |||||||||||||||||
| Preferred stock dividends | (105) | (114) | (115) | |||||||||||||||||
| Net (loss) income applicable to common shareholders | $ | (1,416) | $ | 1,485 | $ | 5,461 | ||||||||||||||
Segment Highlights
Allstate Protection underwriting loss was $2.78 billion in 2022 compared to income of $1.79 billion in 2021, primarily due to higher auto insurance losses and unfavorable reserve reestimates, both excluding catastrophes, partially offset by increased premiums earned. We are executing a comprehensive plan to improve auto insurance profitability, including broadly raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and executing claims operating actions to manage loss costs.
Catastrophe losses were $3.11 billion in 2022 compared to $3.34 billion in 2021.
Premiums written increased 10.7% to $45.79 billion in 2022 compared to $41.36 billion in 2021, reflecting higher premiums in both Allstate and National General brands.
Protection Services adjusted net income was $169 million in 2022 compared to $179 million in 2021. The decrease in 2022 was primarily due to higher technology expenses at Allstate Identity Protection and lower revenue at Arity.
Premiums and other revenues increased 10.6% or $224 million to $2.34 billion in 2022 from $2.12 billion in 2021 primarily due to Allstate Protection Plans.
Allstate Health and Benefits adjusted net income was $222 million in 2022 compared to $208 million in 2021. The increase was primarily due to increases in group health revenues, partially offset by higher operating costs and expenses and group health contract benefits.
Premiums and contract charges totaled $1.83 billion in 2022, an increase of 0.7% from $1.82 billion in 2021 primarily due to growth in group health, partially offset by a decline in individual health.
38 www.allstate.com
2022 Form 10-K
Financial Highlights
Investments totaled $61.83 billion as of December 31, 2022, decreasing from $64.70 billion as of December 31, 2021.
Allstate shareholders’ equity was $17.48 billion as of December 31, 2022 and $25.18 billion as of December 31, 2021. The decrease is primarily due to net unrealized capital losses on investments in 2022 compared to gains at 2021, common share repurchases, a net loss and dividends paid to shareholders.
Book value per diluted common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $58.07 as of December 31, 2022, a decrease of 28.8% from $81.52 as of December 31, 2021.
Return on average common Allstate shareholders’ equity For the twelve months ended December 31, 2022, return on Allstate common shareholders’ equity was (7.3)%, a decrease of 13.1 points from 5.8% for the twelve months ended December 31, 2021, primarily due to net loss applicable to common shareholders.
Pension and other postretirement remeasurement gains and losses We recorded pension and other postretirement remeasurement losses of $116 million in 2022, primarily related to unfavorable asset performance compared to the expected return on plan assets, partially offset by a reduction in the projected benefit obligation due to an increase in the liability discount rate. See Note 18 of the consolidated financial statements and Application of Critical Accounting Estimates section of the MD&A for further information.
The Allstate Corporation 39
2022 Form 10-K Property-Liability
Property-Liability Operations
Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Run-off Property-Liability. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources.
We do not allocate Property-Liability investment income, net gains and losses on investments and derivatives, or assets to the Allstate Protection and Run-off Property-Liability segments. Management reviews assets at the Property-Liability level for decision-making purposes.
GAAP operating ratios are used to measure our profitability to enhance an investor’s understanding of our financial results and are calculated as follows:
•Loss ratio: the ratio of claims and claims expense (loss adjustment expenses), to premiums earned. Loss ratios include the impact of catastrophe losses and prior year reserve reestimates.
•Expense ratio: the ratio of amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles, restructuring and related charges and Shelter-in-Place Payback expense, less other revenue to premiums earned.
•Combined ratio: the sum of the loss ratio and the expense ratio.
We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between periods. The impacts are calculated by taking the specific items noted below divided by Property-Liability premiums earned:
•Effect of catastrophe losses on combined ratio: includes catastrophe losses and prior year reserve reestimates of catastrophe losses included in claims and claims expense
•Effect of prior year reserve reestimates on combined ratio
•Effect of amortization of purchased intangibles on combined ratio
•Effect of restructuring and related charges on combined ratio
•Effect of Shelter-in-Place Payback expense on combined and expense ratios
•Effect of Run-off Property-Liability business on combined ratio: includes claims and claims expense, restructuring and related charges and operating costs and expenses in the Run-off Property-Liability segment
Premium measures and statistics are used to analyze our premium trends and are calculated as follows:
•PIF: policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy. Commercial lines PIF counts for shared economy agreements typically reflect contracts that cover multiple rather than individual drivers.
•New issued applications: item counts of automobile or homeowner insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate brand.
•Average premium-gross written (“average premium”): gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line.
•Renewal ratio: renewal policy item counts issued during the period, based on contract effective dates, divided by the total policy item counts issued generally 6 months prior for auto or 12 months prior for homeowners.
•Implemented rate changes: represents the impact in the locations (U.S. states, the District of Columbia or Canadian provinces) where rate changes were implemented during the period as a percentage of total brand prior year-end premiums written.
Frequency and severity statistics, which are influenced by driving patterns, inflation and other factors, are provided to describe the trends in loss costs. Our reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine our best estimate of recorded reserves. We use the following statistics to evaluate losses:
•Gross claim frequency is calculated as annualized notice counts, excluding counts associated with catastrophe events, received in the period divided by the average of PIF with the applicable coverage during the period. Gross claim frequency includes all actual notice counts, regardless of their current status (open or closed) or their ultimate disposition (closed with a payment or closed without payment).
•Report year incurred claim severity is calculated by dividing the sum of recorded estimated incurred losses and allocated loss adjustment expenses, excluding catastrophes, by the reported notice counts during that report year. Report year incurred claim severity does not include incurred but not reported (“IBNR”) losses or benefits from subrogation and salvage.
40 www.allstate.com
Property-Liability 2022 Form 10-K
•Paid claim severity is calculated by dividing the sum of paid losses and loss expenses by claims closed with a payment during the period.
•Percent change in frequency or paid claim severity statistics are calculated as the amount of increase or decrease in gross claim frequency or paid claim severity in the current period compared to the same period in the prior year divided by the prior year gross claim frequency or paid claim severity.
•Percent change in report year incurred claim severity statistic is calculated as the amount of increase or decrease in report year incurred claim severity recorded in the current report year divided by the current estimate of the prior report year incurred claim severity.
Underwriting results | ||||||||||||||||||||
| ($ in millions, except ratios) | 2022 | 2021 | 2020 | |||||||||||||||||
| Premiums written | $ | 45,787 | $ | 41,358 | $ | 35,768 | ||||||||||||||
| Premiums earned | $ | 43,909 | $ | 40,454 | $ | 35,580 | ||||||||||||||
| Other revenue | 1,416 | 1,437 | 857 | |||||||||||||||||
| Claims and claims expense | (36,732) | (28,876) | (21,626) | |||||||||||||||||
Shelter-in-Place Payback expense | — | (29) | (948) | |||||||||||||||||
| Amortization of DAC | (5,570) | (5,313) | (4,642) | |||||||||||||||||
| Other costs and expenses | (5,650) | (5,622) | (4,549) | |||||||||||||||||
Restructuring and related charges (1) | (44) | (145) | (235) | |||||||||||||||||
| Amortization of purchased intangibles | (240) | (241) | (12) | |||||||||||||||||
| Underwriting (loss) income | $ | (2,911) | $ | 1,665 | $ | 4,425 | ||||||||||||||
| Catastrophe losses | ||||||||||||||||||||
| Catastrophe losses, excluding reserve reestimates | $ | 3,094 | $ | 3,541 | $ | 3,314 | ||||||||||||||
Catastrophe reserve reestimates (2) | 18 | (202) | (503) | |||||||||||||||||
| Total catastrophe losses | $ | 3,112 | $ | 3,339 | $ | 2,811 | ||||||||||||||
Non-catastrophe reserve reestimates (2) | 1,726 | 326 | 68 | |||||||||||||||||
Prior year reserve reestimates (2) | 1,744 | 124 | (435) | |||||||||||||||||
| GAAP operating ratios | ||||||||||||||||||||
| Loss ratio | 83.6 | 71.4 | 60.8 | |||||||||||||||||
Expense ratio (3) | 23.0 | 24.5 | 26.8 | |||||||||||||||||
| Combined ratio | 106.6 | 95.9 | 87.6 | |||||||||||||||||
| Effect of catastrophe losses on combined ratio | 7.1 | 8.3 | 7.9 | |||||||||||||||||
Effect of prior year reserve reestimates on combined ratio | 3.9 | 0.3 | (1.2) | |||||||||||||||||
| Effect of catastrophe losses included in prior year reserve reestimates on combined ratio | — | (0.5) | (1.4) | |||||||||||||||||
Effect of restructuring and related charges on combined ratio (1) | 0.1 | 0.4 | 0.7 | |||||||||||||||||
| Effect of amortization of purchased intangibles on combined ratio | 0.5 | 0.6 | 0.1 | |||||||||||||||||
| Effect of Shelter-in-Place Payback expense on combined and expense ratios | — | 0.1 | 2.7 | |||||||||||||||||
| Effect of Run-off Property-Liability business on combined ratio | 0.3 | 0.3 | 0.4 | |||||||||||||||||
(1)Restructuring and related charges in 2022 primarily related to future work environment and employee costs. See Note 14 of the consolidated financial statements for additional details.
(2)Favorable reserve reestimates are shown in parentheses.
(3)Other revenue is deducted from operating costs and expenses in the expense ratio calculation.
The Allstate Corporation 41
2022 Form 10-K Allstate Protection
Allstate Protection Segment
Private passenger auto, homeowners, and other personal lines insurance products are offered to consumers through exclusive and independent agents, directly through contact centers and online. The Encompass brand was combined into National General beginning in the first quarter of 2021, and results prior to 2021 reflect Encompass brand results only. 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 results | ||||||||||||||||||||
| For the years ended December 31, | ||||||||||||||||||||
| ($ in millions) | 2022 | 2021 | 2020 | |||||||||||||||||
| Premiums written | $ | 45,787 | $ | 41,358 | $ | 35,768 | ||||||||||||||
| Premiums earned | $ | 43,909 | $ | 40,454 | $ | 35,580 | ||||||||||||||
| Other revenue | 1,416 | 1,437 | 857 | |||||||||||||||||
| Claims and claims expense | (36,607) | (28,760) | (21,485) | |||||||||||||||||
| Shelter-in-Place Payback expense | — | (29) | (948) | |||||||||||||||||
| Amortization of DAC | (5,570) | (5,313) | (4,642) | |||||||||||||||||
| Other costs and expenses | (5,646) | (5,618) | (4,546) | |||||||||||||||||
| Restructuring and related charges | (44) | (145) | (235) | |||||||||||||||||
| Amortization of purchased intangibles | (240) | (241) | (12) | |||||||||||||||||
| Underwriting (loss) income | $ | (2,782) | $ | 1,785 | $ | 4,569 | ||||||||||||||
| Catastrophe losses | $ | 3,112 | $ | 3,339 | $ | 2,811 | ||||||||||||||
Change in underwriting results from 2021 to 2022 | ||||||||||||||
| ($ in millions) | ||||||||||||||
Change in underwriting results from 2020 to 2021 | ||||||||||||||
| ($ in millions) | ||||||||||||||
42 www.allstate.com
Allstate Protection 2022 Form 10-K
(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)Includes lender-placed property.
(4)Other personal lines include renters, condominium, landlord and other personal lines products.
(5)Other business lines primarily represents revenue and direct operating expenses of Ivantage and distribution of non-proprietary life and annuity 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.
Underwriting loss was $2.78 billion in 2022 compared to underwriting income of $1.79 billion in 2021, primarily due to higher auto insurance losses and unfavorable reserve reestimates, both excluding catastrophes, partially offset by increased premiums earned. We are executing a comprehensive plan to improve auto insurance profitability, including broadly raising rates, reducing operating expenses and advertising, implementing underwriting restrictions in underperforming states and executing claims operating actions to manage loss costs. In 2023, Allstate brand will exit traditional commercial insurance in five states. Additionally, starting in the fourth quarter of 2022, coverage to transportation network companies will no longer be offered unless the contracts utilize telematics-based pricing.
Premium measures and statistics include PIF, new issued applications, average premiums and renewal ratio to analyze our premium trends. Premiums written is the amount of premiums charged for policies issued during a fiscal period. Premiums are considered earned and are included in the financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired term of the policies is recorded as unearned premiums on our Consolidated Statements of Financial Position.
The Allstate Corporation 43
2022 Form 10-K Allstate Protection
Unearned premium balance by line of business | ||||||||||||||
| ($ in millions) | As of December 31, | |||||||||||||
| 2022 | 2021 | |||||||||||||
| Allstate brand: | ||||||||||||||
| Auto | $ | 7,039 | $ | 6,426 | ||||||||||
| Homeowners | 5,495 | 4,825 | ||||||||||||
| Other personal lines | 1,151 | 1,078 | ||||||||||||
| Commercial lines | 314 | 315 | ||||||||||||
| Total Allstate brand | 13,999 | 12,644 | ||||||||||||
| National General: | ||||||||||||||
| Auto | 2,016 | 1,764 | ||||||||||||
| Homeowners | 378 | 451 | ||||||||||||
| Other personal lines | 317 | 306 | ||||||||||||
| Commercial lines | 442 | 177 | ||||||||||||
| Total National General | 3,153 | 2,698 | ||||||||||||
| Allstate Protection unearned premiums | $ | 17,152 | $ | 15,342 | ||||||||||
Auto insurance premiums written increased 10.1% or $2.80 billion in 2022 compared to 2021, primarily due to the following factors:
•Increase in average premiums driven by rate increases. In the twelve months ended, December 31, 2022, implemented rate increases of 19.8% were taken for Allstate brand in 54 locations, resulting in total Allstate brand insurance premium impact of 16.9%
•Rate increases of 13.7% were taken for National General brand in 35 locations, resulting in total National General brand insurance premium impact of 10.0%, to improve underwriting results
•Allstate expects to continue to pursue rate increases for both Allstate and National General brands into 2023 to improve auto insurance profitability
•Renewal ratio for Allstate brand in 2022 was comparable to 2021
•PIF increased 0.5% or 118 thousand to 26,034 thousand as of December 31, 2022 compared to December 31, 2021 due to growth in National General
•Increased new issued applications driven by direct channel, including the acquisition of SafeAuto, and growth in the independent agency channel
•The impact of the ongoing rate actions and temporary reductions in advertising may have an adverse effect on the renewal ratio, new issued applications and future PIF growth
Auto premium measures and statistics | ||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||||||
| New issued applications (thousands) | ||||||||||||||||||||||||||||||||
| Allstate Protection by brand | ||||||||||||||||||||||||||||||||
| Allstate brand | 3,644 | 3,616 | 3,467 | 0.8 | % | 4.3 | % | |||||||||||||||||||||||||
| National General | 2,677 | 2,057 | 60 | 30.1 | % | NM | ||||||||||||||||||||||||||
| Total new issued applications | 6,321 | 5,673 | 3,527 | 11.4 | % | 60.8 | % | |||||||||||||||||||||||||
| Allstate Protection by channel | ||||||||||||||||||||||||||||||||
Exclusive agency channel | 2,401 | 2,387 | 2,502 | 0.6 | % | (4.6) | % | |||||||||||||||||||||||||
| Direct channel | 2,202 | 1,773 | 846 | 24.2 | % | 109.6 | % | |||||||||||||||||||||||||
| Independent agency channel | 1,718 | 1,513 | 179 | 13.5 | % | NM | ||||||||||||||||||||||||||
| Total new issued applications | 6,321 | 5,673 | 3,527 | 11.4 | % | 60.8 | % | |||||||||||||||||||||||||
| Allstate brand average premium | $ | 659 | $ | 605 | $ | 617 | 8.9 | % | (1.9) | % | ||||||||||||||||||||||
| Allstate brand renewal ratio (%) | 87.0 | 87.0 | 87.5 | — | (0.5) | |||||||||||||||||||||||||||
44 www.allstate.com
Allstate Protection 2022 Form 10-K
Homeowners insurance premiums written increased 12.0% or $1.26 billion in 2022 compared to 2021, primarily due to the following factors:
•Higher Allstate brand average premiums from inflation in insured home replacement costs and implemented rate increases, combined with policies in force growth. National General premiums and policy growth negatively impacted as we focus on improving underwriting margins to targeted levels through underwriting and rate actions
•Increased new issued applications driven by growth in the independent agency channel in 2022 compared to 2021
•Policy growth is being reduced in states and lines of business that are underperforming. Starting in the fourth quarter of 2022, we no longer write new homeowners business in the state of California, although we will offer continuing coverage to existing customers. We also reduced homeowners new business in Florida. These actions have negatively impacted premiums starting in the fourth quarter