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ALLSTATE CORP

For the period ended Sep 30, 2024. Filed Oct 30, 2024.

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About this filing

A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Sep 30, 2024 · Filed Oct 30, 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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Investment

Portfolio composition and strategy by reporting segment (1)
($ in millions)Property-LiabilityProtection ServicesAllstate Health and BenefitsCorporate and OtherTotal
Fixed income securities (2)$50,414$2,065$359$1,123$53,961
Equity securities (3)1,456242—3932,091
Mortgage loans, net649—116—765
Limited partnership interests8,915——108,925
Short-term investments (4)5,959160218546,994
Other investments, net866———866
Total$68,259$2,467$496$2,380$73,602
Percent to total92.7%3.4%0.7%3.2%100.0%
Market-based$58,224$2,467$496$2,108$63,295
Performance-based10,035——27210,307
Total$68,259$2,467$496$2,380$73,602

(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 $49.91 billion, $2.06 billion, $359 million, $1.12 billion and $53.45 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 September 30, 2024, was $262 million in excess of cost. These net gains were primarily concentrated in the technology, equity index funds and banking sectors. Equity securities include $633 million of funds with underlying investments in fixed income securities as of September 30, 2024.

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

Investments totaled $73.60 billion as of September 30, 2024, increasing from $66.68 billion as of December 31, 2023, primarily due to positive operating cash flows and higher fixed income valuations.

Portfolio composition by investment strategy 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 primarily through investments in private equity, including infrastructure investments, and real estate with a majority being limited partnerships. These investments include investee level expenses, reflecting asset level operating expenses on directly held real estate and other consolidated investments.

Portfolio composition by investment strategy
($ in millions)Market-basedPerformance-basedTotal
Fixed income securities$53,840$121$53,961
Equity securities1,4006912,091
Mortgage loans, net765—765
Limited partnership interests1488,7778,925
Short-term investments6,994—6,994
Other investments, net148718866
Total$63,295$10,307$73,602
Percent to total86.0%14.0%100.0%
Unrealized net capital gains and losses
Fixed income securities$513$1$514
Short-term investments(1)—(1)
Other(2)—(2)
Total$510$1$511

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Fixed income securities

Fixed income securities by type
Fair value as of
($ in millions)September 30, 2024December 31, 2023
U.S. government and agencies$9,246$8,619
Municipal8,2586,006
Corporate33,79631,205
Foreign government1,4771,290
Asset-backed securities (“ABS”)1,1841,745
Total fixed income securities$53,961$48,865

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 (“NRSRO”) 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 September 30, 2024, 91.4% 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 our fixed income portfolio monitoring process, see Note 5 of the condensed consolidated financial statements.

Third Quarter 2024 Form 10-Q 67

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)FairvalueUnrealizedgain (loss)FairvalueUnrealizedgain (loss)FairvalueUnrealizedgain (loss)
U.S. government and agencies$9,246$121$—$—$—$—
Municipal8,1083214523—
Corporate
Public6,86016116,75991605(2)
Privately placed2,08793,514282,41623
Total corporate8,94717020,2731193,02121
Foreign government1,476311———
ABS1,089116—30—
Total fixed income securities$28,866$355$20,435$121$3,054$21
NAIC 4 · NAIC 5-6 · Total
B · CCC and lower
FairvalueUnrealizedgain (loss)FairvalueUnrealizedgain (loss)FairvalueUnrealizedgain (loss)
U.S. government and agencies$—$—$—$—$9,246$121
Municipal——218,25835
Corporate
Public95—1—24,320250
Privately placed1,34614113(8)9,47666
Total corporate1,44114114(8)33,796316
Foreign government————1,47731
ABS1—48101,18411
Total fixed income securities$1,442$14$164$3$53,961$514

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

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 public entities in unregistered form.

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.

Equity securities of $2.09 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 loansof $765 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 condensed consolidated financial statements.

Limited partnership interests include $7.53 billion of interests in private equity funds, $1.25 billion of interests in real estate funds and $148 million of interests in other funds as of September 30, 2024. We have commitments to invest additional amounts in limited partnership interests totaling $3.18 billion as of September 30, 2024.

Other investments include $187 million of bank loans, net, and $677 million of direct investments in real estate as of September 30, 2024.

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Unrealized net capital gains (losses)
September 30,December 31,
($ in millions)20242023
U.S. government and agencies$121$(5)
Municipal35(43)
Corporate316(746)
Foreign government314
ABS116
Fixed income securities514(784)
Short-term investments(1)(1)
Derivatives(2)(2)
Equity method of accounting (“EMA”) limited partnerships—(4)
Investments classified as held for sale(50)—
Unrealized net capital gains and losses, pre-tax$461$(791)
Gross unrealized gains (losses) on fixed income securities by type and sector
($ in millions) · Amortizedcost, net · Gross unrealized · Fairvalue
Gains · Losses
Corporate
Banking$4,417$110$(49)$4,478
Basic industry96816(16)968
Capital goods2,91165(41)2,935
Communications2,63353(53)2,633
Consumer goods (cyclical and non-cyclical)7,459171(106)7,524
Energy3,02073(28)3,065
Financial services2,30243(37)2,308
Technology2,90947(72)2,884
Transportation83118(12)837
Utilities5,582193(52)5,723
Other44810(17)441
Total corporate fixed income portfolio33,480799(483)33,796
U.S. government and agencies9,125162(41)9,246
Municipal8,223131(96)8,258
Foreign government1,44637(6)1,477
ABS1,17314(3)1,184
Total fixed income securities$53,447$1,143$(629)$53,961
Corporate
Banking$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
Energy2,64535(63)2,617
Financial services2,11117(88)2,040
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

Third Quarter 2024 Form 10-Q 69

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
September 30, 2024December 31, 2023
($ in millions)CostOver (under) costFairvalueCostOver (under) costFairvalue
Banking$34$46$80$30$38$68
Basic industry83119211
Capital goods77(18)5977(27)50
Energy2953432335
Financial services2091422321012222
Funds
Equities2825433625812270
Fixed income62766331,038(15)1,023
Other6567158563
Total funds974661,0401,35421,356
REITs1553619117921200
Technology1607823813850188
Utilities5635959160
Other (1)1272915615665221
Total equity securities$1,829$262$2,091$2,244$167$2,411

(1)As of September 30, 2024, other is generally comprised of consumer goods and communications sectors.

Net investment income
Three months ended September 30,Nine months ended September 30,
($ in millions)2024202320242023
Fixed income securities$587$457$1,684$1,269
Equity securities17155047
Mortgage loans992725
Limited partnership interests138190440446
Short-term investments8759216194
Other investments254171121
Investment income, before expense8637712,4882,102
Investment expense
Investee level expenses(12)(18)(36)(53)
Securities lending expense(28)(25)(80)(68)
Operating costs and expenses(40)(39)(113)(107)
Total investment expense(80)(82)(229)(228)
Net investment income$783$689$2,259$1,874
Property-Liability$708$627$2,053$1,680
Protection Services24196853
Allstate Health and Benefits26207460
Corporate and Other25236481
Net investment income$783$689$2,259$1,874
Market-based$708$569$2,001$1,615
Performance-based155202487487
Investment income, before expense$863$771$2,488$2,102

Net investment income increased $94 million in the third quarter of 2024, primarily due to higher market-based investment results, partially offset by lower performance-based investment results. Net investment income increased $385 million in the first nine months of 2024 compared to the same period of 2023, due to higher market-based investment results. Market-based results continue to benefit from portfolio repositioning into higher yielding fixed income securities and higher investment balances.

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Performance-based investment income
Three months ended September 30,Nine months ended September 30,
($ in millions)2024202320242023
Private equity$130$131$445$348
Real estate257142139
Total performance-based income before investee level expenses$155$202$487$487
Investee level expenses (1)(12)(16)(36)(48)
Total performance-based income$143$186$451$439

(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 $43 million in the third quarter of 2024 compared to the same period of 2023 primarily due to lower real estate investments results. Performance-based investment income increased $12 million in the first nine months of 2024 compared to the same period of 2023, primarily due to private equity valuation increases offset by lower real estate investment results, inclusive of investee level expenses.

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.

Components of net gains (losses) on investments and derivatives and the related tax effect
Three months ended September 30,Nine months ended September 30,
($ in millions)2024202320242023
Sales$116$(63)$(85)$(313)
Credit losses (1)(12)(20)(143)(69)
Valuation change of equity investments - appreciation (decline):
Equity securities92(14)177160
Equity fund investments in fixed income securities27(21)18(7)
Limited partnerships (2)—11234
Total valuation of equity investments119(34)207187
Valuation change and settlements of derivatives2031(3)(28)
Net gains (losses) on investments and derivatives, pre-tax243(86)(24)(223)
Income tax (expense) benefit(54)19448
Net gains (losses) on investments and derivatives, after-tax$189$(67)$(20)$(175)
Property-Liability (1)$173$(48)$(35)$(146)
Protection Services7(6)3(10)
Allstate Health and Benefits(5)(2)(3)1
Corporate and Other14(11)15(20)
Net gains (losses) on investments and derivatives, after-tax$189$(67)$(20)$(175)
Market-based (1)$231$(166)$(53)$(293)
Performance-based12802970
Net gains (losses) on investments and derivatives, pre-tax$243$(86)$(24)$(223)

(1)Includes $123 million loss for the nine months ended 2024 related to the carrying value of the surplus notes issued by Adirondack Insurance Exchange and New Jersey Skylands Insurance Association (together “Reciprocal Exchanges”). See Note 8 for further details.

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

Net gains on investments and derivatives in the third quarter of 2024 primarily related to valuation gains on equity investments and gains on sales of fixed income securities. Net losses in the first nine months of 2024 primarily related to a loss recognized related to surplus notes issued by the Reciprocal Exchanges and losses on sales of fixed income securities, partially offset by valuation gains on equity securities.

Net gains on sales in the third quarter and losses in the first nine months of 2024 related primarily to sales of fixed income securities in connection with ongoing portfolio management.

Net gains on valuation change and settlements of derivatives of $20 million in the third quarter of 2024 primarily related to net gains on interest rate futures used to manage duration, partially offset by losses on foreign currency contracts used to manage foreign

Third Quarter 2024 Form 10-Q 71 currency risk. Net losses of $3 million for the first nine months of 2024 primarily related to net losses on equity futures used to manage equity exposure and losses on foreign currency contracts used to manage

foreign currency risk, partially offset by net gains on rate futures used to manage duration.

Net gains (losses) on performance-based investments and derivatives
Three months ended September 30,Nine months ended September 30,
($ in millions)2024202320242023
Sales$8$65$6$68
Credit losses(7)(10)(28)(37)
Valuation change of equity investments3486033
Valuation change and settlements of derivatives(23)17(9)6
Total performance-based$12$80$29$70

Net gains on performance-based investments and derivatives in the third quarter of 2024 primarily included increased valuation of equity investments, partially offset by losses on valuation change and settlements of derivatives. Net gains on performance-based investments and derivatives in the first nine months of 2024, primarily related to increased valuation of equity investments, partially offset by credit losses.

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ContentsView on SEC.gov

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