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ALLSTATE CORP

For the period ended Dec 31, 2023. Filed Feb 21, 2024.

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About this filing

A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.

FY2023 · Filed Feb 21, 2024

ALL$253.79-0.4%Stored close · as of Nov 9, 2026

Extracted filing text, with the paragraph anchors used by the comparison.

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Contents

Investments

Overview and strategy

The return on our investment portfolios is an important component of our ability to offer good value to customers, fund business improvements and create value for shareholders. Investment portfolios are held for Property-Liability, Protection Services, Allstate Health and Benefits and Corporate and Other operations. While taking into consideration the investment portfolio in aggregate, management of the underlying portfolios is significantly influenced by the nature of each respective business and its corresponding liability profile. For each business, we identify a strategic asset allocation which considers both the nature of the liabilities and the risk and return characteristics of the various asset classes in which we invest. This allocation is informed by our long-term business and market expectations, as well as other considerations such as risk appetite, portfolio diversification, duration, desired liquidity and capital. Within appropriate ranges relative to strategic allocations, tactical allocations are made in consideration of prevailing and potential future market conditions. We manage risks that involve uncertainty related to interest rates, inflation, credit spreads, equity returns and currency exchange rates.

The Property-Liability portfolio emphasizes protection of principal and consistent income generation, within a total return framework. This approach has produced competitive returns over the long term and is designed to ensure financial strength and stability for paying claims, while maximizing economic value and surplus growth. Products with lower liquidity needs, such as auto insurance and run-off lines, and capital create capacity to invest in less liquid higher yielding fixed income securities, performance-based investments such as limited partnerships and equity securities. Products with higher liquidity needs, such as homeowners insurance, are invested primarily in high quality liquid fixed income securities.

The Protection Services portfolio is focused on protection of principal and consistent income generation, within a total return framework. The portfolio is largely comprised of fixed income securities with a lesser allocation to equity securities and short-term investments.

The Allstate Health and Benefits portfolio is focused on protection of principal and consistent income generation while targeting an appropriate return on capital. The portfolio is largely comprised of fixed income securities with a small allocation to commercial mortgage loans and equity securities.

The Corporate and Other portfolio is focused on liquidity needs and capital preservation within a total return framework. The portfolio is largely comprised of high-quality liquid fixed income securities and short-term investments.

We utilize two primary strategies to manage risks and returns and to position our portfolio to take advantage of market opportunities while attempting to mitigate adverse effects. As strategies and market conditions evolve, the asset allocation may change.

Market-based strategy seeks to deliver predictable earnings aligned to business needs and provide flexibility to adjust investment risk profile based on enterprise objectives and market opportunities primarily through public and private fixed income investments and public equity securities.

Performance-based strategy seeks to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk. Returns are impacted by a variety of factors including general macroeconomic and public market conditions as public benchmarks are often used in the valuation of underlying investments. Variability in earnings will also result from the performance of the underlying assets or business and the timing of sales of those investments. Earnings from the sales of investments may be recorded as net investment income or net gains and losses on investments and derivatives. The portfolio, which primarily includes private equity (including infrastructure investments) and real estate with a majority being limited partnerships, is diversified across a number of characteristics, including managers or partners, vintage years, investment strategies, geographies (including international) and industry sectors or property types. These investments are generally illiquid in nature, often require specialized expertise, typically involve a third-party manager, and enhance returns and income through transformation at the company or property level. A portion of these investments seek returns in markets or asset classes that are dislocated or special situations, primarily in private markets.

Investments in the Middle East As of December 31, 2023, we have approximately $47 million investment exposure in the Middle East, of which approximately $43 million is held in Israel, which is primarily indirect exposure through funds managed by external asset managers.

Investments in Russia and Ukraine As of December 31, 2023, we do not have any direct or indirect investments in Russia, Belarus or Ukraine.

The Allstate Corporation 65

Investments Outlook

We plan to focus on the following priorities:

Enhance investment portfolio returns through use of a dynamic capital allocation framework and focus on tax efficiency.

Leverage our broad capabilities to manage the portfolio to earn higher risk-adjusted returns on capital.

Invest for the specific needs and characteristics of Allstate’s businesses, including its corresponding liability profile.

We utilize our integrated enterprise risk and return management framework to determine the amount of investment risk we are willing to accept. After reducing interest rate risk by shortening the portfolio duration beginning in late 2021, during 2023 we extended the fixed income portfolio duration as the sustained higher

market yields provide an opportunity to increase risk-adjusted returns. As recession risks remain elevated, we also retained defensive positioning to equity risk and credit risk in the portfolio through a reduced allocation to public equity, high yield bonds and bank loans. We expect to maintain performance-based investments in our portfolio, consistent with our strategy to have a greater proportion of return derived from idiosyncratic assets or operating performance.

Contractual maturities and yields of fixed income securities for the next three years
Fixed income securities
($ in millions)Carrying valueInvestment yield
2024$3,3743.0%
20256,2883.5
20265,5653.5
Portfolio composition and strategy by reporting segment (1)
($ in millions)Property-LiabilityProtection ServicesAllstate Health and BenefitsCorporate and OtherTotal
Fixed income securities (2)$43,466$1,796$1,806$1,797$48,865
Equity securities (3)1,516254445972,411
Mortgage loans, net701—121—822
Limited partnership interests8,366——148,380
Short-term investments (4)4,555130923675,144
Other investments, net936—119—1,055
Total$59,540$2,180$2,182$2,775$66,677
Percentage to total89.3%3.3%3.3%4.1%100.0%
Market-based$50,019$2,180$2,182$2,553$56,934
Performance-based9,521——2229,743
Total$59,540$2,180$2,182$2,775$66,677

(1)Balances reflect the elimination of related party investments between segments.

(2)Fixed income securities are carried at fair value. Amortized cost, net for these securities was $44.06 billion, $1.85 billion, $1.91 billion, $1.83 billion and $49.65 billion for Property-Liability, Protection Services, Allstate Health and Benefits, Corporate and Other, and in total, respectively.

(3)Equity securities are carried at fair value. The fair value of equity securities held as of December 31, 2023 was $167 million in excess of cost. These net gains were primarily concentrated in the technology and banking sectors. Equity securities include $1.02 billion of funds with underlying investments in fixed income securities as of December 31, 2023.

(4)Short-term investments are carried at fair value.

Investments totaled $66.68 billion as of December 31, 2023, increasing from $61.83 billion as of December 31, 2022, primarily due to positive operating cash flows, higher fixed income valuations and to support higher reserves, partially offset by dividends paid to shareholders and common share repurchases.

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Portfolio composition by investment strategy
($ in millions)Market-basedPerformance-basedTotal
Fixed income securities$48,749$116$48,865
Equity securities1,7686432,411
Mortgage loans, net822—822
Limited partnership interests1418,2398,380
Short-term investments5,144—5,144
Other investments, net3107451,055
Total$56,934$9,743$66,677
Percent to total85.4%14.6%100.0%
Unrealized net capital gains and losses
Fixed income securities$(784)$—$(784)
Limited partnership interests—(4)(4)
Short-term investments(1)—(1)
Other investments(2)—(2)
Total$(787)$(4)$(791)

During 2023, strategic actions focused on optimizing portfolio yield, return and risk in the more volatile and rising interest rate environment. The sustained higher market yields provide an opportunity to increase risk-adjusted returns, so we extended the fixed income portfolio duration to 4.8 years (including the effect of interest rate derivatives and any call

features associated with the securities) during 2023 from 3.4 years as of December 31, 2022. Considering the ongoing risk of recession, we retained a lower allocation to high-yield bonds, bank loans and public equity relative to year-end 2022. We maintained performance-based investments in the Property-Liability portfolio.

Fixed income securities

Fixed income securities by type
Fair value as of December 31,
($ in millions)20232022
U.S. government and agencies$8,619$7,898
Municipal6,0066,210
Corporate31,20526,263
Foreign government1,290957
Asset-backed securities (“ABS”)1,7451,157
Total fixed income securities$48,865$42,485

Fixed income securities are rated by third-party credit rating agencies or are internally rated. The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”) evaluates the fixed income securities of insurers for regulatory reporting and capital assessment purposes. The NAIC assigns securities to one of six credit quality categories defined as “NAIC designations”. In general, securities with NAIC designations of 1 and 2 are considered investment grade and securities with NAIC designations of 3 through 6 are considered below investment grade. The rating is either received from the SVO based on availability of applicable ratings from rating agencies on the NAIC Nationally Recognized Statistical Rating Organizations provider list, including Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”), Fitch Ratings (“Fitch”), or a comparable internal rating.

As a result of time lags between the funding of investments, the finalization of legal documents, and the completion of the SVO filing process, the portfolio includes certain securities that have not yet been designated by the SVO as of each balance sheet date

and the categorization of these securities is based on the expected ratings indicated by internal analysis.

As of December 31, 2023, 91.5% of the consolidated fixed income securities portfolio was rated investment grade. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds.

Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Our initial investment decisions and ongoing monitoring procedures for fixed income securities are based on a due diligence process which includes, but is not limited to, an assessment of the credit quality, sector, structure and liquidity risks of each issuer.

Fixed income portfolio monitoring is a comprehensive process to identify and evaluate each fixed income security that may require a credit loss allowance. The process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. For further detail on

The Allstate Corporation 67 our fixed income portfolio monitoring process, see Note 5 of the consolidated financial statements.

The following table presents total fixed income securities by the applicable NAIC designation and comparable S&P rating.

Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating
NAIC 1 · NAIC 2 · NAIC 3
A and aboveBBBBB
($ in millions)FairvalueUnrealized gain (loss)FairvalueUnrealized gain (loss)FairvalueUnrealized gain (loss)
U.S. government and agencies$8,619$(5)$—$—$—$—
Municipal5,963(43)34(1)7—
Corporate
Public7,019(55)15,560(392)611(28)
Privately placed1,651(54)2,867(92)1,890(45)
Total corporate8,670(109)18,427(484)2,501(73)
Foreign government1,28941———
ABS1,669(1)16—10—
Total fixed income securities$26,210$(154)$18,478$(485)$2,518$(73)
NAIC 4 · NAIC 5-6 · Total
B · CCC and lower
FairvalueUnrealized gain (loss)FairvalueUnrealized gain (loss)FairvalueUnrealized gain (loss)
U.S. government and agencies$—$—$—$—$8,619$(5)
Municipal——216,006(43)
Corporate
Public108(3)——23,298(478)
Privately placed1,358(59)141(18)7,907(268)
Total corporate1,466(62)141(18)31,205(746)
Foreign government————1,2904
ABS——5071,7456
Total fixed income securities$1,466$(62)$193$(10)$48,865$(784)

Municipal bonds, including tax exempt and taxable securities, include general obligations of state and local issuers and revenue bonds.

Our practice for acquiring and monitoring municipal bonds is predominantly based on the underlying credit quality of the primary obligor. We currently rely on the primary obligor to pay all contractual cash flows and are not relying on bond insurers for payments. As a result of downgrades in the insurers’ credit ratings, the ratings of the insured municipal bonds generally reflect the underlying ratings of the primary obligor.

Corporate bonds include publicly traded and privately placed securities. Privately placed securities primarily consist of corporate issued senior debt securities that are negotiated with the borrower or are issued by entities in unregistered form under SEC Rule 144A which allows purchasers to more easily resell these securities under certain conditions.

Our $7.91 billion portfolio of privately placed securities, primarily 144A bonds, is diversified by issuer, industry sector and country. The portfolio is made up of 455 issuers. Privately placed corporate obligations may contain structural security features such as financial covenants and call protections that provide investors greater protection against credit deterioration, reinvestment risk or fluctuations in interest rates than those typically found in publicly registered debt

securities. Additionally, investments in these securities are made after fundamental analysis of issuers and sectors along with macro and asset class views. Ongoing monitoring includes continuous assessment of operating performance and financial position. Every issue not rated by an independent rating agency is internally rated with a formal rating affirmation at least once a year. Liquidity of securities issued by public entities in unregistered form is similar to public debt markets.

Our corporate bond portfolio includes $4.11 billion of below investment grade bonds, $3.39 billion of which are privately placed, primarily 144A bonds. These securities are diversified by issuer and industry sector. The below investment grade corporate bonds portfolio is made up of 317 issuers. We employ fundamental analyses of issuers and sectors along with macro and asset class views to identify investment opportunities. This results in a portfolio with broad exposure to the high yield market with an emphasis on idiosyncratic positions reflective of our views of market conditions and opportunities.

Foreign government securities consist of Canadian governmental and provincial securities (all of which are held by our Canadian companies).

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ABS are structured securities that are primarily collateralized by consumer or corporate borrowings and residential and commercial real estate loans. The cash flows from the underlying collateral paid to the securitization trust are generally applied in a pre-determined order and are designed so that each security issued by the trust, typically referred to as a “class”, qualifies for a specific original rating.

ABS includes collateralized debt obligations, consumer and other ABS. Credit risk is managed by monitoring the performance of the underlying collateral. Many of the securities in the ABS portfolio have credit enhancement with features such as overcollateralization, subordinated structures, reserve funds, guarantees or insurance. ABS also includes residential mortgage-backed securities and commercial mortgage-backed securities.

For example, the “senior” portion or “top” of the capital structure, or rating class, which would originally qualify for a rating of Aaa typically has priority in receiving principal repayments on the underlying collateral and retains this priority until the class is paid in full. In a sequential structure, underlying collateral principal repayments are directed to the most senior rated Aaa class in the structure until paid in full, after which principal repayments are directed to the next most senior Aaa class in the structure until it is paid in full. Senior Aaa classes generally share any losses from the underlying collateral on a pro-rata basis after losses are absorbed by classes with lower original ratings.

The payment priority and class subordination included in these securities serves as credit enhancement for holders of the senior or top portions of the structures. These securities continue to retain the payment priority features that existed at the origination of the securitization trust. Other forms of credit enhancement may include structural features embedded in the securitization trust, such as overcollateralization, excess spread and bond insurance. The underlying collateral may contain fixed interest rates, variable interest rates (such as adjustable rate mortgages), or both fixed and variable rate features.

Equity securities of $2.41 billion primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments. Certain exchange traded and mutual funds have fixed income securities as their underlying investments.

Mortgage loans of $822 million mainly comprise loans secured by first mortgages on developed commercial real estate. Key considerations used to manage our

exposure include property type and geographic diversification. For further detail on our mortgage loan portfolio, see Note 5 of the consolidated financial statements.

Limited partnership interests include $7.15 billion of interests in private equity funds, $1.09 billion of interests in real estate funds and $141 million of interests in other funds as of December 31, 2023. We have commitments to invest additional amounts in limited partnership interests totaling $2.94 billion as of December 31, 2023.

Private equity limited partnerships by sector
(% of carrying value)December 31, 2023
Industrial20.8%
Healthcare12.5
Information technology11.3
Consumer discretionary10.9
Consumer staples8.8
Other35.7
Total100.0%
Real estate limited partnerships by sector
(% of carrying value)December 31, 2023
Industrial28.8%
Residential19.1
Data centers19.0
Healthcare11.4
Consumer staples5.1
Other16.6
Total100.0%

Short-term investments of $5.14 billion primarily comprise money market funds, commercial paper, U.S. Treasury bills and other short-term investments, including securities lending collateral of $1.59 billion.

Other investments primarily comprise $224 million of bank loans, $709 million of real estate, $119 million of policy loans and $1 million of derivatives as of December 31, 2023. For further detail on our use of derivatives, see Note 7 of the consolidated financial statements.

Direct real estate investments by sector
(% of carrying value)December 31, 2023
Agriculture28.6%
Industrial23.7
Residential20.6
Retail18.5
Other8.6
Total100.0%

The Allstate Corporation 69

Unrealized net capital gains (losses)
As of December 31,
($ in millions)20232022
U.S. government and agencies$(5)$(225)
Municipal(43)(290)
Corporate(746)(2,299)
Foreign government4(40)
ABS6(31)
Fixed income securities(784)(2,885)
Short-term investments(1)(1)
Derivatives(2)(3)
Equity method of accounting (“EMA”) limited partnerships(4)2
Unrealized net capital gains and losses, pre-tax$(791)$(2,887)
Gross unrealized gains (losses) on fixed income securities by type and sector
Amortized cost, net · Gross unrealized · Fair value
($ in millions) · Gains · Losses
Corporate
Banking (1)$4,189$31$(135)$4,085
Basic industry1,0077(42)972
Capital goods2,80033(97)2,736
Communications2,76733(115)2,685
Consumer goods (cyclical and non-cyclical)6,81393(251)6,655
Financial services2,11117(88)2,040
Energy2,64535(63)2,617
Technology2,80021(153)2,668
Transportation1,10413(45)1,072
Utilities5,330109(123)5,316
Other3855(31)359
Total corporate fixed income portfolio31,951397(1,143)31,205
U.S. government and agencies8,624114(119)8,619
Municipal6,049109(152)6,006
Foreign government1,28617(13)1,290
ABS1,73913(7)1,745
Total fixed income securities$49,649$650$(1,434)$48,865

(1)As of December 31, 2023, we have exposure of approximately $90 million to regional banks primarily through investment grade corporate bonds.

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Gross unrealized gains (losses) on fixed income securities by type and sector
Amortized cost, net · Gross unrealized · Fair value
($ in millions) · Gains · Losses
Corporate
Banking$5,153$16$(314)$4,855
Basic industry1,0192(75)946
Capital goods2,2883(197)2,094
Communications2,4221(261)2,162
Consumer goods (cyclical and non-cyclical)5,9846(531)5,459
Financial services2,2434(176)2,071
Energy2,3642(156)2,210
Technology3,1374(298)2,843
Transportation9591(73)887
Utilities2,6337(203)2,437
Other360—(61)299
Total corporate fixed income portfolio28,56246(2,345)26,263
U.S. government and agencies8,1236(231)7,898
Municipal6,50036(326)6,210
Foreign government997—(40)957
ABS1,1884(35)1,157
Total fixed income securities$45,370$92$(2,977)$42,485

In general, the gross unrealized losses are related to an increase in market yields, which may include increased risk-free interest rates and wider credit spreads since the time of initial purchase. Similarly, gross unrealized gains reflect a decrease in market yields since the time of initial purchase.

Equity securities by sector
($ in millions)December 31, 2023December 31, 2022
CostOver (under) costFair valueCostOver (under) costFair value
Banking$30$38$68$135$56$191
Basic Industry9211571673
Capital Goods77(27)501963199
Energy3233511044154
Funds
Equities25812270904(19)885
Fixed income1,038(15)1,0231,067(84)983
Other585633—3
Total funds1,35421,3561,974(103)1,871
Transportation16$2339481967
Utilities59160671279
Other (1)6671257921,6662671,933
Total equity securities$2,244$167$2,411$4,253$314$4,567

(1) Other is comprised of consumer goods, technology, REITs, financial services and communications sectors.

The Allstate Corporation 71

Net investment income
For the years ended December 31,
($ in millions)202320222021
Fixed income securities$1,761$1,255$1,148
Equity securities75132100
Mortgage loans353343
Limited partnership interests4999851,973
Short-term investments253825
Other investments169162195
Investment income, before expense2,7922,6493,464
Investment expense
Investee level expenses(79)(68)(60)
Securities lending expense(93)(30)—
Operating costs and expenses(142)(148)(111)
Total investment expense(314)(246)(171)
Net investment income$2,478$2,403$3,293
Property-Liability$2,218$2,190$3,118
Protection Services734843
Allstate Health and Benefits826974
Corporate and Other1059658
Net investment income$2,478$2,403$3,293
Market-based$2,219$1,566$1,429
Performance-based5731,0832,035
Investment income, before expense$2,792$2,649$3,464

Net investment income increased 3.1% or $75 million in 2023 compared to 2022, primarily due to higher market-based results driven by reinvesting into fixed income securities with higher yields and to a lesser extent, the reinvestment of proceeds from sales of equity securities into fixed income securities, partially offset by lower performance-based results, mainly from limited partnerships.

Performance-based investment income
For the years ended December 31,
($ in millions)202320222021
Private equity$414$798$1,660
Real estate159285375
Total performance-based income before investee level expenses$573$1,083$2,035
Investee level expenses (1)(74)(59)(55)
Total performance-based income$499$1,024$1,980

(1)Investee level expenses include asset level operating expenses on directly held real estate and other consolidated investments reported in investment expense.

Performance-based investment income decreased 51.3% or $525 million in 2023 compared to 2022, primarily due to lower valuation increases compared to the prior year and lower income from the sales of underlying investments.

Performance-based investment results and income can vary significantly between periods and are influenced by economic conditions, equity market performance, comparable public company earnings multiples, capitalization rates, operating performance of the underlying investments and the timing of asset sales. The company typically employs a lag in recording and recognizing changes in valuations of limited partnership interests due to the availability of investee financial statements.

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Components of net gains (losses) on investments and derivatives and the related tax effect
For the year December 31,
($ in millions)202320222021
Sales$(433)$(832)$578
Credit losses(99)(54)(42)
Valuation change of equity investments - appreciation (decline):
Equity securities239(772)544
Equity fund investments in fixed income securities43(128)(24)
Limited partnerships (1)34(160)(21)
Total valuation of equity investments316(1,060)499
Valuation change and settlements of derivatives(84)87449
Net gains (losses) on investments and derivatives, pre-tax(300)(1,072)1,084
Income tax benefit (expense)63230(237)
Net gains (losses) on investments and derivatives, after-tax$(237)$(842)$847
Property-Liability$(230)$(688)$798
Protection Services—(40)19
Allstate Health and Benefits2(35)5
Corporate and Other(9)(79)25
Net gains (losses) on investments and derivatives, after-tax$(237)$(842)$847
Market-based$(352)$(1,083)$917
Performance-based5211167
Net gains (losses) on investments and derivatives, pre-tax$(300)$(1,072)$1,084

(1)Relates to limited partnerships where the underlying assets are predominately public equity securities.

Net losses on investments and derivatives in 2023 related primarily to losses on sales, partially offset by higher valuation on equity investments. Net losses on investments and derivatives in 2022 related primarily to decreased valuation on equity investments and losses on sales of fixed income securities, partially offset by increased valuation change and settlements of derivatives.

Net losses on sales in 2023 and 2022 related primarily to sales of fixed income securities in connection with ongoing portfolio management.

Net losses on valuation change and settlements of derivatives of $84 million in 2023 primarily related to net losses on equity futures used to manage equity exposure, losses on credit default swaps used to reduce credit risk and losses on foreign currency contracts used to manage foreign currency risk. Net gains in 2022 primarily comprised of gains on interest rate futures used to mitigate the impact of increases in interest rates, gains on foreign currency contracts due to the strengthening of the U.S. dollar and gains on equity futures used to manage exposure to equity markets.

Net gains (losses) on performance-based investments and derivatives
For the years ended December 31,
($ in millions)202320222021
Sales$76$29$111
Credit losses(68)(30)(43)
Valuation change of equity investments58(35)71
Valuation change and settlements of derivatives(14)4728
Total performance-based$52$11$167

Net gains on performance-based investments and derivatives in 2023 primarily related to gains on sales and increased valuation of equity investments, partially offset by increased credit losses. 2022 primarily related to increased valuation change and settlements of derivatives and gains on sales, partially offset by decreased valuation of equity investments.

The Allstate Corporation 73

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The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.