The accompanying condensed consolidated financial statements include the accounts of The Allstate Corporation (the “Corporation”) and its wholly owned subsidiaries, primarily Allstate Insurance Company (“AIC”), a property and casualty insurance company with various property and casualty and life and investment subsidiaries, including Allstate Life Insurance Company (“ALIC”) (collectively referred to as the “Company” or “Allstate”). These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The condensed consolidated financial statements and notes as of March 31, 2019 and for the three month periods ended March 31, 2019 and 2018 are unaudited. The condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2018. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. All significant intercompany accounts and transactions have been eliminated.

Effective January 1, 2019 the Company adopted new Financial Accounting Standards Board ("FASB") guidance related to accounting for leases. Upon adoption of the guidance under the optional transition method that allows application of the transition provisions at the adoption date instead of the earliest period presented, the Company recorded a $585 million lease liability equal to the present value of lease payments and a $488 million right-of-use (“ROU”) asset, which is the corresponding lease liability adjusted for qualifying accrued lease payments. The lease liability and ROU asset were reported as part of other liabilities and other assets on the Condensed Consolidated Statements of Financial Position. The impact of these changes at adoption had no impact on net income or shareholders’ equity. Prior periods were not restated under the new standard. The Company utilized practical expedients which do not require reassessment of existing contracts for the existence of

Upon adoption, the new guidance required sellers in a sale-leaseback transaction to recognize the entire gain from the sale of an underlying asset at the time the sale is recognized rather than over the leaseback term. The carrying value of unrecognized gains on sale-leaseback transactions executed prior to January 1, 2019 was $21 million, after-tax, and was recorded as an increase to retained income at the date of adoption.

Effective January 1, 2019 the Company adopted new FASB guidance intended to better align hedge accounting with an organization’s risk management activities. The new guidance expands hedge accounting to nonfinancial and financial risk components and revises the measurement methodologies to better align with an organization’s risk management activities. Separate presentation of hedge ineffectiveness is eliminated with the intention to provide greater transparency to the full impact of hedging by requiring presentation of the results of the hedged item and hedging instrument in a single financial statement line item. In addition, the amendments were designed to reduce complexity by simplifying hedge effectiveness testing. The adoption had no impact on the Company’s results of operations or financial position.

The Company has certain operating leases for office facilities, computer and office equipment, and transportation vehicles. The Company’s leases have remaining lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 14 years, and some of which include options to terminate the leases within 60 days.

The Company determines if an arrangement is a lease at inception. Leases with an initial term less than one year are not recorded on the balance sheet and the lease costs for these leases are recorded on a straight-line basis over the lease term. Operating leases with terms greater than one year, result in a lease liability recorded in other liabilities with a corresponding ROU asset recorded in other assets. As of March 31, 2019, the Company had $572 million in lease liabilities and $474 million in ROU assets.

Operating lease liabilities are recognized at the commencement date based on the present value of future minimum lease payments over the lease term. ROU assets are recognized based on the corresponding lease liabilities adjusted for qualifying initial direct costs, prepaid or accrued lease payments and unamortized lease incentives. As most of the

Company’s leases do not disclose the implicit interest rate, the Company uses collateralized incremental borrowing rates based on information available at lease commencement when determining the present value of future lease payments. The Company has lease agreements with lease and non-lease components, which are generally accounted for as a single lease. Lease terms may include options to extend or terminate the lease which are incorporated into the Company’s measurements when it is reasonably certain that the Company will exercise the option.

Operating lease costs are recognized on a straight-line basis over the lease term and include interest expense on the lease liability and amortization of the ROU asset. Variable lease costs are expensed as incurred and include maintenance costs and real estate taxes. Lease costs are reported in operating costs and expenses and totaled $41 million, including $7 million of variable lease costs in first quarter 2019.



Maturity of lease liabilities
($ in millions)	Operating leases
2019 ⁽¹⁾	$	85
2020	135
2021	104
2022	86
2023	71
2024	55
Thereafter	104
Total lease payments ⁽²⁾	$	640
Less: interest	(68		)
Present value of lease liabilities	$	572

In June 2016, the FASB issued guidance which revises the credit loss recognition criteria for certain financial assets measured at amortized cost, including reinsurance recoverables. The new guidance replaces the existing incurred loss recognition model with an expected loss recognition model. The objective of the expected credit loss model is for a reporting entity to recognize its estimate of expected credit losses for affected financial assets in a valuation allowance that when deducted from the amortized cost basis of the related financial assets results in a net carrying value of affected financial assets at the amount expected to be

collected. The reporting entity must consider all relevant information available when estimating expected credit losses, including details about past events, current conditions, and reasonable and supportable forecasts over the life of an asset. Financial assets may be evaluated individually or on a pooled basis when they share similar risk characteristics. The measurement of credit losses for available-for-sale debt securities measured at fair value is not affected except that credit losses recognized are limited to the amount by which fair value is below amortized cost and the carrying value adjustment is recognized through a valuation allowance which may change over time but once recorded cannot subsequently be reduced to an amount below zero. The guidance is effective for reporting periods beginning after December 15, 2019, and for most affected instruments must be adopted using a modified retrospective approach, with a cumulative effect adjustment recorded to beginning retained income. The impact of adoption is not expected to be material to the Company’s results of operations or financial position.

In August 2018, the FASB issued amendments to modify certain disclosure requirements for defined benefit plans. Disclosure additions relate to the weighted-average interest crediting rates for cash balance plans and other plans with interest crediting rates and explanations for significant gains and losses related to changes in the benefit obligation for the period. Disclosures to be removed include those that identify amounts that are expected to be reclassified out of AOCI and into the income statement in the coming year and the anticipated impact of a one-percentage point change in assumed health care cost trend rate on service and interest cost and on the accumulated benefit obligation. The amendments are effective for annual reporting periods beginning after December 15, 2020. The impacts of adoption are to the Company’s disclosures only.

In August 2018, the FASB issued guidance revising the accounting for certain long-duration insurance contracts. The new guidance changes the measurement of the Company’s reserves for traditional life, life-contingent immediate annuities and certain voluntary accident and health insurance products.

Under the new guidance, measurement assumptions, including those for mortality, morbidity and policy terminations, will be required to be reviewed and updated at least annually. The effect of updating measurement assumptions other than the discount rate are required to be measured on a retrospective basis and reported in net income. In addition, cash flows under the new guidance are required to be discounted using an upper-medium grade fixed income instrument yield required to be updated through OCI at each reporting date. These changes will replace current GAAP, which utilizes assumptions set at policy issuance until such time as the

assumptions result in reserves that are deficient when compared to reserves computed using current assumptions. Under current GAAP, premium deficiency reserves are recognized when a reserve deficiency is computed using current assumptions.

The new guidance requires deferred policy acquisition costs (“DAC”) and other capitalized balances currently amortized in proportion to premiums or gross profits to be amortized on a constant level basis over the expected term for all long-duration insurance contracts. DAC will not be subject to loss recognition testing but will be reduced when actual experience exceeds expected experience. The new guidance will no longer require adjustments to DAC and deferred sales inducement costs (“DSI”) related to unrealized gains and losses on investment securities supporting the related business.

Market risk benefit product features are required to be measured at fair value with changes in fair value recorded in net income with the exception of changes in the fair value attributable to changes in the reporting entity’s own credit risk, which are required to be recognized in OCI. Substantially all of the Company’s market risk benefits are reinsured and therefore these impacts are not expected to be material to the Company.

The new guidance is to be included in the comparable financial statements issued in reporting periods beginning after December 15, 2020, thereby requiring restatement of prior periods presented. Early adoption is permitted. The new guidance will be applied to affected contracts and DAC on the basis of existing carrying amounts at the earliest period presented or retrospectively using actual historical experience as of contract inception. The new guidance for market risk benefits is required to be adopted retrospectively.

The Company is evaluating the anticipated impacts of applying the new guidance to both retained income and AOCI. While the requirements of the new guidance represent a material change from existing GAAP, the underlying economics of the business and related cash flows are unchanged. The Company has not completed its evaluation of the specific impacts of adopting the new guidance, but anticipates the financial statement impact of migrating from existing GAAP to that required by the new guidance to be material, largely attributed to the impact of transitioning from an original investment-based discount rate to one based on an upper-medium grade fixed income investment yield and updates to mortality assumptions previously locked in at issuance and subject to premium deficiency testing. The Company expects the most significant impacts will occur in the run-off annuity segment. The revised accounting for DAC will be applied prospectively using the new model and any DAC effects existing in AOCI as a result of applying existing GAAP at the date of adoption will be reversed.

In April 2019, the FASB issued Codification Improvements related to Credit Losses, Derivatives and Hedging, and Financial Instruments. The guidance for Credit Losses and Financial Instruments is effective for reporting periods beginning after December 15, 2019. The guidance for Derivatives and Hedging is effective January 1, 2020. The Company is in the process of evaluating the impact of adoption, which is not expected to be material to the Company’s results of operations or financial position.

The Company changed its accounting principle for recognizing actuarial gains and losses and expected return on plan assets for its pension and other postretirement plans to a more preferable policy under U.S. GAAP. Under the new principle, remeasurement of projected benefit obligation and plan assets are immediately recognized in earnings and are referred to as pension and other postretirement remeasurement gains and losses on the Condensed Consolidated Statements of Operations. Previously, actuarial gains and losses and differences between the expected and actual returns on plan assets were recognized as a component of AOCI, and were subject to amortization into earnings in future periods. This change has been applied on a retrospective basis. The Company’s policy is to remeasure its pension and postretirement plans on a quarterly basis.

Differences between expected and actual returns and changes in assumptions affect our pension and other postretirement obligations, plan assets and expenses. The primary factors contributing to pension and other postretirement remeasurement gains and losses are 1) changes in the discount rate used to value pension and postretirement obligations as of the measurement date, 2) differences between the expected and the actual return on plan assets, 3) changes in demographic assumptions, including mortality, and 4) participant experience different from demographic assumptions.

The Company also changed its policy for recognizing expected returns on plan assets by eliminating the permitted accounting practice allowing the five-year smoothing of equity returns and moving to an unadjusted fair value method.

The Company believes that immediately recognizing remeasurement of projected benefit obligation and plan assets in earnings is preferable as it provides greater transparency of the Company’s economic obligations in accounting results and better aligns with fair value accounting principles by recognizing the effects of economic and interest rate changes on pension and other postretirement plan assets and liabilities in the year in which the gains and losses are incurred. These changes have been applied on a retrospective basis and as of January 1, 2018 resulted in a cumulative effect decrease to retained income of $1.58 billion, with a corresponding offset to AOCI and had no impact on total shareholders’ equity.

Pension and other postretirement service cost, interest cost, expected return on plan assets and amortization of prior service credits are allocated to the Company’s reportable segments. The pension and other postretirement remeasurement gains and losses are now reported in the Corporate and Other segment.



Condensed Consolidated Statements of Operations (unaudited)
	Previous accounting principle		Impact of change			As reported
($ in millions, except per share data)	Three months ended March 31, 2019
Property and casualty insurance claims and claims expense	$	5,829	$	(9	)	$	5,820
Operating costs and expenses	1,388		(8		)	1,380
Pension and other postretirement remeasurement gains and losses	—		15			15
Restructuring and related charges	22		(4		)	18
Total costs and expenses	9,377		(6		)	9,371
Income from operations before income tax expense	1,614		6			1,620
Income tax expense	327		1			328
Net income	1,287		5			1,292
Net income applicable to common shareholders	$	1,256	$	5		$	1,261

Earnings per common share:
Net income applicable to common shareholders per common share - Basic	$	3.78	$	0.01		$	3.79
Net income applicable to common shareholders per common share - Diluted	$	3.72	$	0.02		$	3.74



Condensed Consolidated Statements of Operations (unaudited)
	Previously reported		Impact of change			As adjusted
($ in millions, except per share data)	Three months ended March 31, 2018
Property and casualty insurance claims and claims expense	$	5,149	$	(20	)	$	5,129
Operating costs and expenses	1,333		(30		)	1,303
Pension and other postretirement remeasurement gains and losses	—		14			14
Restructuring and related charges	22		(3		)	19
Total costs and expenses	8,547		(39		)	8,508
Income from operations before income tax expense	1,224		39			1,263
Income tax expense	249		8			257
Net income	975		31			1,006
Net income applicable to common shareholders	$	946	$	31		$	977

Earnings per common share:
Net income applicable to common shareholders per common share - Basic	$	2.67	$	0.09		$	2.76
Net income applicable to common shareholders per common share - Diluted	$	2.63	$	0.08		$	2.71



Condensed Consolidated Statements of Comprehensive Income (unaudited)
	Previous accounting principle		Impact of change			As reported
($ in millions)	Three months ended March 31, 2019
Net income	$	1,287	$	5		$	1,292
Other comprehensive income (loss), after-tax
Changes in:
Unrealized net capital gains and losses	974		—			974
Unrealized foreign currency translation adjustments	7		(2		)	5
Unrecognized pension and other postretirement benefit cost⁽¹⁾	10		(22		)	(12		)
Other comprehensive income (loss), after-tax	991		(24		)	967
Comprehensive income	$	2,278	$	(19	)	$	2,259



Condensed Consolidated Statements of Comprehensive Income (unaudited)
	Previously reported			Impact of change			As adjusted
($ in millions)	Three months ended March 31, 2018
Net income	$	975		$	31		$	1,006
Other comprehensive loss, after-tax
Changes in:
Unrealized net capital gains and losses	(565		)	—			(565		)
Unrealized foreign currency translation adjustments	(4		)	2			(2		)
Unrecognized pension and other postretirement benefit cost	23			(37		)	(14		)
Other comprehensive loss, after-tax	(546		)	(35		)	(581		)
Comprehensive income	$	429		$	(4	)	$	425



Condensed Consolidated Statements of Financial Position (unaudited)
	Previous accounting principle			Impact of change			As reported
($ in millions)	March 31, 2019
Deferred income taxes	$	822		$	(5	)	$	817
Other liabilities and accrued expenses	8,953			24			8,977
Total liabilities	92,397			19			92,416
Retained income	46,818			(1,670		)	45,148
Unrealized foreign currency translation adjustments	(57		)	13			(44		)
Unrecognized pension and other postretirement benefit cost⁽¹⁾	(1,481		)	1,638			157
Total AOCI	(566		)	1,651			1,085
Total shareholders’ equity	$	23,437		$	(19	)	$	23,418

Condensed Consolidated Statements of Financial Position (unaudited)
	Previously reported			Impact of change			As adjusted
($ in millions)	December 31, 2018
Retained income	$	45,708		$	(1,675	)	$	44,033
Unrealized foreign currency translation adjustments	(64		)	15			(49		)
Unrecognized pension and other postretirement benefit cost	(1,491		)	1,660			169
Total AOCI	$	(1,557	)	$	1,675		$	118



Condensed Consolidated Statements of Shareholders’ Equity (unaudited)
	Previous accounting principle			Impact of change			As reported
($ in millions)	Three months ended March 31, 2019
Retained income
Balance, beginning of period	$	45,708		$	(1,675	)	$	44,033
Cumulative effect of change in accounting principle	21			—			21
Net income	1,287			5			1,292
Dividends on common stock	(167		)	—			(167		)
Dividends on preferred stock	(31		)	—			(31		)
Balance, end of period	46,818			(1,670		)	45,148

Accumulated other comprehensive income (loss)
Balance, beginning of period	(1,557		)	1,675			118
Cumulative effect of change in accounting principle	—			—			—
Change in unrealized net capital gains and losses	974			—			974
Change in unrealized foreign currency translation adjustments	7			(2		)	5
Change in unrecognized pension and other postretirement benefit cost ⁽¹⁾	10			(22		)	(12		)
Balance, end of period	(566		)	1,651			1,085
Total shareholders’ equity	$	23,437		$	(19	)	$	23,418



Condensed Consolidated Statements of Shareholders’ Equity (unaudited)
	Previously reported			Impact of change			As adjusted
($ in millions)	Three months ended March 31, 2018
Retained income
Balance, beginning of period	$	43,162		$	(1,583	)	$	41,579
Cumulative effect of change in accounting principle	1,088			—			1,088
Net income	975			31			1,006
Dividends on common stock	(165		)	—			(165		)
Dividends on preferred stock	(29		)	—			(29		)
Balance, end of period	45,031			(1,552		)	43,479

Accumulated other comprehensive income (loss)
Balance, beginning of period	306			1,583			1,889
Cumulative effect of change in accounting principle	(910		)	—			(910		)
Change in unrealized net capital gains and losses	(565		)	—			(565		)
Change in unrealized foreign currency translation adjustments	(4		)	2			(2		)
Change in unrecognized pension and other postretirement benefit cost	23			(37		)	(14		)
Balance, end of period	(1,150		)	1,548			398
Total shareholders’ equity	$	23,277		$	(4	)	$	23,273



Condensed Consolidated Statements of Cash Flows (unaudited)
	Previous accounting principle			Impact of change			As reported
($ in millions)	Three months ended March 31, 2019
Cash flows from operating activities
Net income	$	1,287		$	5		$	1,292
Adjustments to reconcile net income to net cash provided by operating activities:
Pension and other postretirement remeasurement gains and losses	—			15			15
Income taxes	302			1			303
Other operating assets and liabilities	(389		)	(21		)	(410		)
Net cash provided by operating activities	$	714		$	—		$	714

Condensed Consolidated Statements of Cash Flows (unaudited)
	Previously reported			Impact of change			As adjusted
($ in millions)	Three months ended March 31, 2018
Cash flows from operating activities
Net income	$	975		$	31		$	1,006
Adjustments to reconcile net income to net cash provided by operating activities:
Pension and other postretirement remeasurement gains and losses	—			14			14
Income taxes	181			8			189
Other operating assets and liabilities	(318		)	(53		)	(371		)
Net cash provided by operating activities	$	626		$	—		$	626