ALLSTATE CORP

Overview

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as “we,” “our,” “us,” the “Company” or “Allstate”). It should be read in conjunction with the condensed consolidated financial statements and related notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporation annual report on Form 10-K for 2024, filed February 24, 2025.

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

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. We use these measures in our evaluation of results of operations to analyze profitability.

Underwriting income is calculated as premiums earned and other revenue, less claims and claims expense (“losses”), amortization of deferred policy acquisition costs (“DAC”), operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, as determined using accounting principles generally accepted in the United States of America (“GAAP”).

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

Macroeconomic impacts

Macroeconomic factors have and may continue to impact the results of our operations, financial condition and liquidity, such as U.S. government fiscal and monetary policies, conflict in the Middle East, the

Russia/Ukraine conflict, supply chain disruptions and labor shortages.

Tariffs Beginning on April 2, 2025, the U.S. government announced additional tariffs on goods imported to the U.S. We regularly evaluate scenarios to understand the potential impact of tariffs on our businesses and incorporate estimates of the impact into our development of reserves for claims. The evolving and uncertain global trade environment makes it difficult to predict the full effect on our business. The following factors may impact operations at levels beyond what we are currently observing:

•Higher new and used vehicle pricing and replacement parts, increasing claims costs in Allstate Protection and Dealer Services

•Increases in building material costs, driving increases in homeowners claim costs

•Lack of availability of replacement parts from disruption in global trade broadly impacting all businesses

•Fewer auto new issued applications due to lower new and used vehicle sales

•Reduced demand in Allstate Dealer Services due to lower new vehicle sales

•Lower premiums written from reduced retail sales in Allstate Protection Plans

•Higher claims costs at Allstate Protection Plans

•Bad debt and credit allowance exposure in all businesses

•Adverse impacts on investment valuations and liquidity for market-based and performance-based investments

This is not inclusive of all potential impacts and should not be treated as such.

Corporate strategy

Our strategy has two components: increase personal property-liability market share and expand protection offerings by leveraging the Allstate brand, customer base and 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 methods. The ultimate objective is to enhance customer value to drive growth in all businesses.

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

•Improving customer value

•Expanding customer access

•Increasing sophistication and investment in customer acquisition

•Deploying new technology ecosystems

•Driving organizational transformation

Second Quarter 2025 Form 10-Q 45

We are expanding Protection Services businesses internationally and by leveraging the Allstate brand, customer base and capabilities.

Dispositions

On April 1, 2025, we closed the sale of American Heritage Life Insurance Company and American Heritage Service Company, comprising our employer voluntary benefits (“EVB”) business, reported in the Allstate Health and Benefits segment. We recorded a gain on the sale of $890 million or $643 million, after-tax in the second quarter of 2025.

On January 30, 2025, Allstate entered into an agreement with Nationwide Life Insurance Company to

sell Direct General Life Insurance Company, NSM Sales Corporation and The Association Benefits Solution, LLC, comprising the group health business, reported in the Allstate Health and Benefits segment. The assets and liabilities of the business are classified as held for sale at June 30, 2025. The transaction closed on July 1, 2025, and we expect to record a gain on sale of approximately $500 million in the third quarter of 2025.

See Note 3 of the condensed consolidated financial statements for further information on the employer voluntary benefits and group health dispositions.

Highlights

Consolidated net income applicable to common shareholders

($ in millions)

Consolidated net income applicable to common shareholders increased $1.78 billion to $2.08 billion in the second quarter of 2025 compared to the second quarter of 2024, primarily due to higher earned premium and a gain on sale of the employer voluntary benefits business. Consolidated net income applicable to common shareholders increased $1.16 billion to $2.65 billion in the first six months of 2025 compared to the same period of 2024, primarily due to higher earned premium and a gain on sale of the employer voluntary benefits business, partially offset by higher catastrophe losses.

Total revenues

($ in millions)

Total revenues increased $919 million to $16.63 billion and increased $2.11 billion to $33.09 billion in the second quarter and first six months of 2025, respectively, compared to the same periods of 2024, primarily due to higher homeowners and auto insurance policies in force and premium rate increases.

Net investment income

($ in millions)

Net investment income increased $42 million to $754 million in the second quarter of 2025 and increased $132 million to $1.61 billion in the first six months of 2025 compared to the same periods of 2024, primarily due to higher market-based investment results, partially offset by lower performance-based investment results.

Financial highlights

Investments totaled $77.44 billion as of June 30, 2025, increasing from $72.61 billion as of December 31, 2024.

Allstate shareholders’ equity was $24.02 billion as of June 30, 2025, increasing from $21.44 billion as of

December 31, 2024, primarily due to net income and unrealized net capital gains on investments in 2025 compared to losses at December 31, 2024, partially offset by dividends to shareholders.

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Book value per diluted common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $82.40 as of June 30, 2025, an increase of 32.6% from $62.14 as of June 30, 2024, and an increase of 13.9% from $72.35 as of December 31, 2024.

Return on average Allstate common shareholders’ equityfor the twelve months ended June 30, 2025, was 29.6%, an increase of 10.3 points from 19.3% for the twelve months ended June 30, 2024. The increase was primarily due to higher net income applicable to common shareholders for the trailing twelve-month period ending June 30, 2025.

Summarized consolidated financial results

Segment highlights

Allstate Protection underwriting income was $1.28 billion in the second quarter of 2025 compared to an underwriting loss of $142 million in the second quarter of 2024, due to increased premiums earned and lower losses, partially offset by higher expenses. Underwriting income totaled $1.65 billion in the first six months of 2025 compared to underwriting income of $761 million in the first six months of 2024, due to increased premiums earned, partially offset by higher catastrophe losses and expenses.

Catastrophe losses were $1.99 billion and $4.19 billion in the second quarter and first six months of 2025, respectively, compared to $2.12 billion and $2.85 billion in the second quarter and first six months of 2024, respectively.

Premiums written increased 5.4% to $15.05 billion and increased 6.9% to $29.34 billion in the second quarter and first six months of 2025, respectively,

compared to the same periods of 2024, reflecting higher homeowners and auto insurance policies in force and premium rate increases.

Protection Services adjusted net income was $60 million in the second quarter of 2025 compared to $55 million in the second quarter of 2024. Adjusted net income was $115 million the first six months of 2025 compared to $109 million in the six months of 2024. The increase in both periods was primarily due to premium growth at Allstate Protection Plans, partially offset by higher expenses at Arity.

Premiums and other revenue increased 13.4% to $806 million and increased 14.0% to $1.61 billion in the second quarter and first six months of 2025, respectively, compared to the same periods of 2024, primarily due to growth at Allstate Protection Plans.

Allstate Health and Benefits adjusted net income decreased $54 million to $4 million in the second quarter of 2025 and decreased $80 million to $34

Second Quarter 2025 Form 10-Q 47 million in the first six months of 2025 compared to the same periods of 2024. Excluding the results of the employer voluntary benefits business sold on April 1, adjusted net income decreased $26 million to $4 million in the second quarter of 2025 and decreased $57 million to $12 million in the first six months of 2025 compared to the same periods of 2024. The declines were primarily due to increased benefit utilization in group health and individual health.

Premiums and contract charges decreased 50.4% to $235 million in the second quarter of 2025 and decreased 24.2% to $722 million in the first six months of 2025 compared to the same periods of 2024. Excluding the results of the employer voluntary benefits business sold on April 1, premiums and contract charges increased 3.1% to $235 million in the second quarter of 2025 and increased 4.6% to $479 million in the first six months of 2025 compared to the same periods of 2024. The increases were due to growth in individual health and group health.

Income taxes The effective tax rate is the ratio of income tax expense (benefit) divided by income (loss) from operations before income tax expense. For the six months ended June 30, 2025, we reported an effective tax rate of 21.2% based on total income tax expense of $727 million on total income from operations before income tax expense of $3.42 billion. The effective rate for the six months ended June 30, 2025, is higher than the federal statutory rate of 21%, primarily due to non-deductible goodwill arising from the sale of the employer voluntary benefits business, offset by tax benefits derived from tax credits, tax-exempt interest income and share-based payments.

For the six months ended June 30, 2024, we reported an effective tax rate of 18.4% based on a total income tax expense of $349 million on income from operations before income tax benefit of $1.89 billion. The effective tax rate for the six months ended 2024 was lower than the federal statutory rate of 21% due to the additional tax benefit derived from tax credits, shared-based payments and tax-exempt interest income.

(1)The sale of the employer voluntary benefits business on April 1, 2025 resulted in the disposal of non-deductible goodwill.

On July 4, 2025, H.R. 1 was signed into law, making a number of changes to the U.S. tax code. The legislation makes many provisions permanent that were originally enacted under the 2017 Tax Cuts and Jobs Act, in addition to implementing new measures that directly affect corporate taxpayers. Key provisions include the permanent reinstatement of full and immediate expensing for domestic research and development expenditures, new limitations on the deductibility of corporate charitable contributions, and a substantial rollback of renewable energy tax credits, including transferability of certain energy-related credits, while at the same time expanding availability of tax incentives for affordable housing developments. Based on our current operations, we do not expect these changes to have a significant impact to our consolidated financial statements.

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