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 or data, it applies actuarial judgment in the determination and selection of development factors to develop reserve liabilities. For example, the Coronavirus has had a significant impact on driving patterns and auto frequency. Supply chain disruptions

have resulted in higher parts costs, used car values and longer time to claim resolution, which have combined with labor shortages to increase physical damage loss costs. Medical inflation, treatment trends, attorney representation, litigation costs and more severe accidents have contributed to higher third-party bodily injury loss costs. The company has also digitized and modified claim processes to increase effectiveness and efficiency. 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 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, driving behaviors, miles driven or other 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. The Company’s reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine its best estimate of recorded 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 as well as heightened uncertainty for claims that involve litigation or take longer to settle during periods of rapidly increasing loss costs. 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.

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, laws and regulations.


Rollforward of reserve for property and casualty insurance claims and claims expense
($ in millions)	2022		2021		2020
Balance as of January 1	$	33,060	$	27,610	$	27,712
Less recoverables (1)	(9,479)		(7,033)		(6,912)
Net balance as of January 1	23,581		20,577		20,800
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	35,523		29,196		22,437
Prior years	1,741		122		(436)
Total incurred	37,264		29,318		22,001
Claims and claims expense paid related to:
Current year	(20,739)		(18,438)		(14,245)
Prior years	(11,741)		(9,807)		(7,979)
Total paid	(32,480)		(28,245)		(22,224)
Net balance as of December 31	28,365		23,581		20,577
Plus recoverables	9,176		9,479		7,033
Balance as of December 31	$	37,541	$	33,060	$	27,610

(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, 2022
($ in millions)	Incurred		Paid
Allstate Protection
Auto insurance - liability coverage	$	14,376	$	(11,173)
Auto insurance - physical damage coverage	9,411		(8,802)
Homeowners insurance	6,971		(5,977)
Total auto and homeowners insurance	30,758		(25,952)
Other personal lines	1,520		(1,317)
Commercial lines	1,256		(817)
Protection Services	440		(438)
Run-off Property-Liability	116		(86)
Unallocated loss adjustment expenses (“ULAE”)	3,048		(2,847)
Claims incurred and paid from before 2018	80		(787)
Other (1)	46		(236)
Total	$	37,264	$	(32,480)

(1)Paid and incurred amounts primarily related to the effect of foreign currency translation adjustments. Additionally, paid includes the acquisition of SafeAuto.

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 $3.11 billion, $3.34 billion and $2.81 billion in 2022, 2021 and 2020, 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)	2022		2021		2020		2022		2021(2)(3)		2020 (4)		2022		2021		2020
Auto	$	1,249	$	178	$	(63)	$	(64)	$	(29)	$	(44)	$	1,185	$	149	$	(107)
Homeowners	113		12		(17)		81		(165)		(422)		194		(153)		(439)
Other personal lines	(34)		(96)		(27)		2		(11)		(39)		(32)		(107)		(66)
Commercial lines	273		116		34		(1)		3		2		272		119		36
Run-off Property-Liability (5)	125		116		141		—		—		—		125		116		141
Protection Services	(3)		(2)		(1)		—		—		—		(3)		(2)		(1)
Total prior year reserve reestimates	$	1,723	$	324	$	67	$	18	$	(202)	$	(503)	$	1,741	$	122	$	(436)

(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)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 2022, 2021 and 2020 annual reserve review, using established industry and actuarial best practices, resulted in unfavorable reestimates of $118 million, $111 million and $132 million, respectively.

Unfavorable reserve reestimates for personal auto are primarily from bodily injury and physical damage coverages. Increases in injury coverages reflect recent data and updated assumptions related to severity of third-party bodily injury claims, increased claims with attorney representation, litigation costs, increased medical treatment utilization and higher medical inflation. Increases in physical damage reflect the ongoing inflationary factors and supply chain shortages impacting used vehicle and parts prices, labor rates and length of claim resolution. Delays in the receipt of claims, including third-party carrier claims also contributed to the adverse development of claims reported in prior

years. The estimate of the year-to-date current report year claim severity increased in the fourth quarter for bodily injury and physical damage coverages to reflect continued increases in loss costs.

Personal auto insurance claim frequency has continued to increase, but remains below 2019 levels. Late reported claim frequency attributable to prior accident years also impacted reserve reestimates.

Unfavorable reserve reestimates for commercial are primarily from auto injury coverages for both shared economy and traditional segments with a large portion of the traditional segment increase related to states where the Company will no longer be selling new business.

The following presents information about incurred and paid claims development as of December 31, 2022, 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 2018 to 2022 years, and the average annual percentage payout of incurred claims by age as of December 31, 2022, 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, 2022
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2018 (1)		2019 (1)		2020 (1)		2021		2022
2018	$	9,788	$	9,758	$	9,798	$	9,835	$	9,928	$	93	$	603	2,500,972
2019	—		10,526		10,471		10,716		10,905		189		1,242		2,637,152
2020	—		—		8,748		8,744		8,984		240		1,813		1,904,004
2021	—		—		—		10,365		10,823		458		3,488		2,291,873
2022	—		—		—		—		13,396				8,904		2,311,893
							Total		$	54,036	$	980
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2018 accident years											152
Prior year reserve reestimates for ULAE											18
Other											4
Total prior year reserve reestimates											$	1,154

	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2018 (1)		2019 (1)		2020 (1)		2021		2022
2018	$	3,663	$	6,404	$	7,785	$	8,703	$	9,325
2019	—		3,974		7,080		8,651		9,663
2020	—		—		3,135		5,858		7,171
2021	—		—		—		3,601		7,335
2022	—		—		—		—		4,492
							Total		$	37,986
All outstanding liabilities before 2018, net of recoverables									1,332
Liabilities for claims and claim adjustment expenses, net of recoverables									$	17,382

(1) Results include certain National General commercial lines insurance products.


Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2022
	1 year		2 years		3 years		4 years		5 years
Auto insurance – liability coverage	37.6	%	28.7	%	13.3	%	8.5	%	5.3	%

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, 2022
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2018 (1)		2019 (1)		2020 (1)		2021		2022
2018	$	5,775	$	5,692	$	5,647	$	5,640	$	5,637	$	(3)	$	—	4,686,877
2019	—		6,255		6,174		6,136		6,134		(2)		(1)		4,861,875
2020	—		—		5,495		5,407		5,381		(26)		(7)		4,013,428
2021	—		—		—		7,285		7,342		57		(23)		4,587,385
2022	—		—		—		—		9,385				1,060		4,711,189
							Total		$	33,879	$	26
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2018 accident years											—
Prior year reserve reestimates for ULAE											3
Other											2
Total prior year reserve reestimates											$	31

	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2018 (1)		2019 (1)		2020 (1)		2021		2022
2018	$	5,464	$	5,681	$	5,638	$	5,635	$	5,637
2019	—		5,947		6,144		6,138		6,135
2020	—		—		5,129		5,415		5,388
2021	—		—		—		6,860		7,365
2022	—		—		—		—		8,325
							Total		$	32,850
All outstanding liabilities before 2018, net of recoverables									11
Liabilities for claims and claim adjustment expenses, net of recoverables									$	1,040

(1)Results include certain National General commercial lines insurance products.


Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2022
	1 year		2 years		3 years		4 years		5 years
Auto insurance – physical damage coverage	95.2	%	4.4	%	(0.3)	%	(1.5)	%	1.6	%

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, 2022
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2018 (1)		2019 (1)		2020 (1)		2021		2022
2018	$	5,145	$	5,251	$	4,947	$	4,818	$	4,852	$	34	$	42	898,857
2019	—		4,853		4,912		4,920		4,931		11		85		869,860
2020	—		—		5,781		5,827		5,921		94		137		989,034
2021	—		—		—		6,404		6,532		128		385		992,897
2022	—		—		—		—		6,704				2,724		705,357
							Total		$	28,940	$	267
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2018 accident years											(72)
Prior year reserve reestimates for ULAE											2
Other											(3)
Total prior year reserve reestimates											$	194

	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2018 (1)		2019 (1)		2020 (1)		2021		2022
2018	$	3,768	$	4,873	$	4,749	$	4,736	$	4,810
2019	—		3,527		4,576		4,768		4,846
2020	—		—		4,257		5,548		5,784
2021	—		—		—		4,538		6,147
2022	—		—		—		—		3,980
							Total		$	25,567
All outstanding liabilities before 2018, net of recoverables									86
Liabilities for claims and claim adjustment expenses, net of recoverables									$	3,459

(1)Results include National General packaged policies, which include auto, and commercial lines insurance products.


Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2022
	1 year		2 years		3 years		4 years		5 years
Homeowners insurance	72.0	%	21.3	%	2.9	%	0.8	%	0.8	%


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, 2022
Net outstanding liabilities
Allstate Protection
Auto insurance - liability coverage	$	17,382
Auto insurance - physical damage coverage	1,040
Homeowners insurance	3,459
Other personal lines	1,558
Commercial lines	1,857
Protection Services	36
Run-off Property-Liability (1)	1,370
ULAE	1,649
Other (2)	14
Net reserve for property and casualty insurance claims and claims expense	28,365

Recoverables
Allstate Protection
Auto insurance - liability coverage	7,214
Auto insurance - physical damage coverage	44
Homeowners insurance	666
Other personal lines	320
Commercial lines	292
Protection Services	11
Run-off Property-Liability	503
ULAE	126
Total recoverables	9,176
Gross reserve for property and casualty insurance claims and claims expense	$	37,541

(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 $765 million of the total reserves as of December 31, 2022.

(2)Primarily related to the unamortized fair value adjustment related to the acquisition of National General.