The Company establishes reserves for claims and claims expense on reported and unreported claims of insured losses. The Company’s reserving process takes into account known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes

in law and regulation, judicial decisions, and economic conditions.

When the Company experiences changes in the mix or type of claims or changing claim settlement patterns, it may need to apply actuarial judgment in the determination and selection of development factors to be more reflective of the new trends. For example, the Coronavirus has had a significant impact on driving patterns and auto frequency. Supply chain

disruptions have resulted in higher parts costs and used car values which have combined with labor shortages to increase physical damage loss costs while medical inflation, treatment trends and higher levels of attorney representation have increased liability losses. These factors may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability. Generally, the initial reserves for a new accident year are established based on actual claim frequency and severity assumptions for different business segments, lines and coverages based on historical relationships to relevant inflation indicators. Reserves for prior accident years are statistically determined using several different actuarial estimation methods. Changes in auto claim frequency may result from changes in mix of business, the rate of distracted driving, miles driven or other macroeconomic factors. Changes in auto current year claim severity are generally influenced by inflation in the medical and auto repair sectors, the effectiveness and efficiency of claim practices and changes in mix of claim types. The Company mitigates these effects through various loss management programs. When such changes in claim data occur, actuarial judgment is used to determine appropriate development factors to establish reserves.

As part of the reserving process, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors, and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process.

Because reserves are estimates of unpaid portions of losses that have occurred, including IBNR losses, the establishment of appropriate reserves, including reserves for catastrophes, Run-off Property-Liability and reinsurance and indemnification recoverables, is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates.

The highest degree of uncertainty is associated with reserves for losses incurred in the initial reporting period as it contains the greatest proportion of losses that have not been reported or settled. The Company also has uncertainty in the Run-off Property-Liability reserves that are based on events long since passed and are complicated by lack of historical data, legal interpretations, unresolved legal issues and legislative intent based on establishment of facts.

The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in reserve estimates, which may be material, are reported in property and casualty insurance claims and claims expense in the Consolidated Statements of Operations in the period such changes are determined.


Rollforward of reserve for property and casualty insurance claims and claims expense
($ in millions)	2021		2020		2019
Balance as of January 1	$	27,610	$	27,712	$	27,423
Less recoverables (1)	(7,033)		(6,912)		(7,155)
Net balance as of January 1	20,577		20,800		20,268
National General acquisition as of January 4, 2021	1,797		—		—
SafeAuto acquisition as of October 1, 2021	134		—		—
Incurred claims and claims expense related to:
Current year	29,196		22,437		24,106
Prior years	122		(436)		(130)
Total incurred	29,318		22,001		23,976
Claims and claims expense paid related to:
Current year	(18,438)		(14,245)		(15,160)
Prior years	(9,807)		(7,979)		(8,284)
Total paid	(28,245)		(22,224)		(23,444)
Net balance as of December 31	23,581		20,577		20,800
Plus recoverables	9,479		7,033		6,912
Balance as of December 31	$	33,060	$	27,610	$	27,712

(1) Recoverables comprises reinsurance and indemnification recoverables. See Note 11 for further details.


Reconciliation of total claims and claims expense incurred and paid by coverage
	December 31, 2021
($ in millions)	Incurred		Paid
Allstate Protection
Auto insurance - liability coverage	$	10,830	$	(9,420)
Auto insurance - physical damage coverage	7,170		(7,150)
Homeowners insurance	6,371		(6,045)
Total auto and homeowners insurance	24,371		(22,615)
Other personal lines	1,144		(1,163)
Commercial lines	767		(581)
Protection Services	376		(373)
Run-off Property-Liability	109		(97)
Unallocated loss adjustment expenses (“ULAE”)	2,569		(2,726)
Claims incurred and paid from before 2017	(69)		(622)
Other (1)	51		(68)
Total	$	29,318	$	(28,245)

(1)Paid and incurred includes amounts primarily related to the acquisition of SafeAuto. Additionally, incurred includes the amortization of the fair value adjustment related to the acquisition of National General.

Incurred claims and claims expense represents the sum of paid losses, claim adjustment expenses and reserve changes in the calendar year. This expense includes losses from catastrophes of $3.34 billion, $2.81 billion and $2.56 billion in 2021, 2020 and 2019, respectively, net of recoverables. Catastrophes are an inherent risk of the property and casualty insurance business that have contributed to, and will continue to contribute to, material year-to-year fluctuations in the Company’s results of operations and financial position.

The Company calculates and records a single best reserve estimate for losses from catastrophes, in conformance with generally accepted actuarial standards. As a result, management believes that no other estimate is better than the recorded amount. Due to the uncertainties involved, including the factors described above, the ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates. Accordingly, management believes that it is not practical to develop a meaningful range for any such changes in losses incurred.


Prior year reserve reestimates included in claims and claims expense (1)
	Twelve months ended December 31,
	Non-catastrophe losses						Catastrophe losses						Total
($ in millions)	2021		2020		2019		2021(2)(3)		2020 (4)		2019		2021		2020		2019
Auto	$	178	$	(63)	$	(306)	$	(29)	$	(44)	$	(17)	$	149	$	(107)	$	(323)
Homeowners	12		(17)		(1)		(165)		(422)		66		(153)		(439)		65
Other personal lines	(96)		(27)		8		(11)		(39)		—		(107)		(66)		8
Commercial lines	116		34		18		3		2		(1)		119		36		17
Run-off Property-Liability (5)	116		141		105		—		—		—		116		141		105
Protection Services	(2)		(1)		(2)		—		—		—		(2)		(1)		(2)
Total prior year reserve reestimates	$	324	$	67	$	(178)	$	(202)	$	(503)	$	48	$	122	$	(436)	$	(130)

(1)Favorable reserve reestimates are shown in parentheses.

(2)Includes approximately $240 million of estimated recoveries related to Nationwide Aggregate Reinsurance Program cover for aggregate catastrophe losses occurring between April 1, 2020 and December 31, 2020, which primarily impacted homeowners reestimates.

(3)Includes approximately $110 million favorable subrogation settlements arising from the Woolsey wildfire, which primarily impacted homeowners reestimates.

(4)2020 includes approximately $495 million of favorable reserve reestimates related to the PG&E Corporation and Southern California Edison subrogation settlements, which primarily impacted homeowners.

(5)The Company’s 2021 annual reserve review, using established industry and actuarial best practices, resulted in unfavorable reestimates of $111 million.

The following presents information about incurred and paid claims development as of December 31, 2021, net of recoverables, as well as the cumulative number of reported claims and the total of IBNR reserves plus expected development on reported claims included in the net incurred claims amounts. See Note 2 for the accounting policy and methodology for determining reserves for claims and claims expense, including both reported and IBNR claims. The cumulative number of reported claims is identified by coverage and excludes reported claims for industry pools and facilities where information is not available. The information about incurred and paid claims development for the 2017 to 2021 years, and the average annual percentage payout of incurred claims by age as of December 31, 2021, is presented as required supplementary information.

Auto insurance – liability coverage


($ in millions, except number of reported claims)	Incurred claims and allocated claim adjustment expenses, net of recoverables												IBNR reserves plus expected development on reported claims		Cumulative number of reported claims
	For the years ended December 31,										Prior year reserve reestimates		As of December 31, 2021
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2017		2018		2019		2020		2021
2017	$	9,424	$	9,341	$	9,286	$	9,332	$	9,392	$	60	$	581	2,519,909
2018	—		9,817		9,786		9,825		9,862		37		1,140		2,499,583
2019	—		—		10,557		10,503		10,750		247		2,080		2,632,610
2020	—		—		—		8,773		8,770		(3)		2,901		1,891,726
2021	—		—		—		—		10,489				6,860		2,150,167
							Total		$	49,263	$	341
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2017 accident years											(51)
Prior year reserve reestimates for ULAE											29
Other											(18)
Total prior year reserve reestimates											$	301

	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2017		2018		2019		2020		2021
2017	$	3,554	$	6,058	$	7,386	$	8,241	$	8,811
2018	—		3,672		6,417		7,801		8,722
2019	—		—		3,985		7,096		8,670
2020	—		—		—		3,143		5,869
2021	—		—		—		—		3,629
							Total		$	35,701
All outstanding liabilities before 2017, net of recoverables									1,393
Liabilities for claims and claim adjustment expenses, net of recoverables									$	14,955


Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2021
	1 year		2 years		3 years		4 years		5 years
Auto insurance – liability coverage	38.8	%	28.1	%	13.2	%	8.4	%	5.1	%

Auto insurance – physical damage coverage


($ in millions, except number of reported claims)	Incurred claims and allocated claim adjustment expenses, net of recoverables												IBNR reserves plus expected development on reported claims		Cumulative number of reported claims
	For the years ended December 31,										Prior year reserve reestimates		As of December 31, 2021
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2017		2018		2019		2020		2021
2017	$	5,738	$	5,627	$	5,612	$	5,610	$	5,613	$	3	$	4	4,634,171
2018	—		5,788		5,704		5,659		5,652		(7)		5		4,686,395
2019	—		—		6,269		6,188		6,150		(38)		(2)		4,860,355
2020	—		—		—		5,508		5,419		(89)		(8)		4,008,243
2021	—		—		—		—		7,301				429		4,407,369
							Total		$	30,135	$	(131)
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2017 accident years											(5)
Prior year reserve reestimates for ULAE											(14)
Other											(2)
Total prior year reserve reestimates											$	(152)

	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2017		2018		2019		2020		2021
2017	$	5,398	$	5,625	$	5,614	$	5,609	$	5,609
2018	—		5,475		5,693		5,650		5,647
2019	—		—		5,959		6,158		6,152
2020	—		—		—		5,140		5,427
2021	—		—		—		—		6,872
							Total		$	29,707
All outstanding liabilities before 2017, net of recoverables									7
Liabilities for claims and claim adjustment expenses, net of recoverables									$	435


Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2021
	1 year		2 years		3 years		4 years		5 years
Auto insurance – physical damage coverage	96.2	%	3.9	%	(0.3)	%	(0.1)	%	—	%

Homeowners insurance


($ in millions, except number of reported claims)	Incurred claims and allocated claim adjustment expenses, net of recoverables												IBNR reserves plus expected development on reported claims		Cumulative number of reported claims
	For the years ended December 31,										Prior year reserve reestimates		As of December 31, 2021
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2017		2018		2019		2020		2021
2017	$	4,929	$	5,036	$	5,037	$	4,805	$	4,816	$	11	$	60	977,319
2018	—		5,155		5,262		4,958		4,829		(129)		82		898,425
2019	—		—		4,864		4,924		4,931		7		153		868,577
2020	—		—		—		5,792		5,839		47		280		982,690
2021	—		—		—		—		6,435				1,884		908,890
							Total		$	26,850	$	(64)
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2017 accident years											(13)
Prior year reserve reestimates for ULAE											(70)
Other											(6)
Total prior year reserve reestimates											$	(153)

	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2017		2018		2019		2020		2021
2017	$	3,521	$	4,634	$	4,835	$	4,734	$	4,756
2018	—		3,775		4,883		4,759		4,747
2019	—		—		3,535		4,587		4,778
2020	—		—		—		4,266		5,559
2021	—		—		—		—		4,551
							Total		$	24,391
All outstanding liabilities before 2017, net of recoverables									115
Liabilities for claims and claim adjustment expenses, net of recoverables									$	2,574


Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2021
	1 year		2 years		3 years		4 years		5 years
Homeowners insurance	73.7	%	20.7	%	2.8	%	0.8	%	0.7	%


Reconciliation of the net incurred and paid claims development tables above to the reserve for property and casualty insurance claims and claims expense
($ in millions)	As of December 31, 2021
Net outstanding liabilities
Allstate Protection
Auto insurance - liability coverage	$	14,955
Auto insurance - physical damage coverage	435
Homeowners insurance	2,574
Other personal lines	1,316
Commercial lines	1,316
Protection Services	33
Run-off Property-Liability (1)	1,342
ULAE	1,430
Other (2)	180
Net reserve for property and casualty insurance claims and claims expense	23,581

Recoverables
Allstate Protection
Auto insurance - liability coverage	7,247
Auto insurance - physical damage coverage	81
Homeowners insurance	1,023
Other personal lines	173
Commercial lines	256
Protection Services	9
Run-off Property-Liability	494
ULAE	196
Total recoverables	9,479
Gross reserve for property and casualty insurance claims and claims expense	$	33,060

(1)Run-off Property-Liability includes business in run-off with most of the claims related to accident years more than 30 years ago. IBNR reserves represent $733 million of the total reserves as of December 31, 2021.

(2)Includes amounts primarily related to the acquisition of SafeAuto and the unamortized fair value adjustment related to the acquisition of National General.

Management believes that the reserve for property and casualty insurance claims and claims expense, net of recoverables, is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the Consolidated Statements of Financial Position based on available facts, technology, laws and regulations.