Pension and other postretirement plans

Defined benefit pension plans cover most full-time employees, certain part-time employees and employee-agents. Benefits under the pension plans are based upon the employee’s length of service, eligible annual compensation and, prior to January 1, 2014, either a cash balance or final average pay formula. A cash balance formula applies to all eligible employees hired after August 1, 2002. Eligible employees hired before August 1, 2002 chose between the cash balance formula and the final average pay formula. In July 2013, the Company amended its primary plans effective January 1, 2014 to introduce a new cash balance formula to replace the previous formulas (including the final average pay formula and the previous cash

balance formula) under which eligible employees accrue benefits.

The Company also provides a medical coverage subsidy for eligible employees hired before January 1, 2003, including their eligible dependents, when they retire and certain life insurance benefits for eligible retirees (“postretirement benefits”). Effective January 1, 2021, the Company eliminated the medical coverage subsidy for employees who were not eligible to retire as of December 31, 2020.

Qualified employees may become eligible for a medical subsidy if they retire in accordance with the terms of the applicable plans and are insured under the Company’s group plans or other approved plans in accordance with the plan’s participation requirements. The Company shares the cost of retiree medical

benefits with non Medicare-eligible retirees based on years of service, with the Company’s share being subject to a 5% limit on future annual medical cost inflation after retirement. For Medicare-eligible retirees, the Company provides a fixed Company contribution based on years of service and other factors, which is not subject to adjustments for inflation.

In July 2013, the Company amended the plan to eliminate the life insurance benefits effective January 1, 2014 for current eligible employees and effective January 1, 2016 for eligible retirees who retired after 1989. Subject to a court order, the Company paid life insurance premiums for certain retiree plaintiffs until their lawsuit seeking to keep their life insurance benefits intact was resolved. In September 2020, the court entered summary judgment in favor of the Company and dismissed the action, releasing the Company from the order requiring the continued payment of premiums for certain retirees. In December 2021, the Court of Appeals affirmed summary judgment in favor of the Company. In October 2022, the U.S. Supreme Court denied the plaintiffs' petition for appeal. On December 13, 2022, the trial court denied the plaintiffs' motions to vacate the summary judgment decision and seek further discovery. On January 12, 2023, the plaintiffs filed a notice of appeal with respect to the December rulings.

The Company has reserved the right to modify or terminate its benefit plans at any time and for any reason.

Obligations and funded status

The Company calculates benefit obligations based upon generally accepted actuarial methodologies using the projected benefit obligation (“PBO”) for pension plans and the accumulated postretirement benefit obligation (“APBO”) for other postretirement plans. Pension costs and other postretirement obligations are determined using a December 31 measurement date. The benefit obligations represent the actuarial present value of all benefits attributed to employee service rendered as of the measurement date. The PBO is measured using the pension benefit formulas and assumptions. A plan’s funded status is calculated as the difference between the benefit obligation and the fair value of plan assets. The Company’s funding policy for the pension plans is to make contributions at a level in accordance with regulations under the Internal Revenue Code (“IRC”) and generally accepted actuarial principles. The Company’s other postretirement benefit plans are not funded.


Change in projected benefit obligation, plan assets and funded status
	As of December 31,
	Pension benefits				Postretirement benefits
($ in millions)	2022		2021		2022		2021
Change in projected benefit obligation
Benefit obligation, beginning of year	$	6,500	$	7,763	$	284	$	318
Service cost	101		103		1		1
Interest cost	219		191		10		8
Participant contributions	—		—		16		16
Remeasurement of projected benefit obligation (gains) losses	(1,382)		(309)		(62)		(16)
Benefits paid	(894)		(1,242)		(42)		(43)

Translation adjustment and other	(33)		(6)		(4)		—

Benefit obligation, end of year	$	4,511	$	6,500	$	203	$	284

Change in plan assets
Fair value of plan assets, beginning of year	$	6,525	$	6,987
Actual return on plan assets	(1,189)		764
Employer contribution	24		22
Benefits paid	(894)		(1,242)
Translation adjustment and other	(36)		(6)
Fair value of plan assets, end of year	$	4,430	$	6,525

Funded status (1)	$	(81)	$	25	$	(203)	$	(284)

Amounts recognized in AOCI
Unamortized pension and other postretirement prior service credit	$	—	$	(28)	$	(39)	$	(65)

(1)The funded status is recorded within other assets or other liabilities and accrued expenses on the Consolidated Statements of Financial Position.


Changes in items not yet recognized as a component of net cost for pension and other postretirement plans
($ in millions)	Pension benefits		Postretirement benefits
Items not yet recognized as a component of net cost – December 31, 2021	$	(28)	$	(65)




Prior service credit amortized to net cost	28		25
Translation adjustment and other	—		1
Items not yet recognized as a component of net cost – December 31, 2022	$	—	$	(39)

The prior service credit is recognized as a component of net cost for pension and other postretirement plans amortized over the average remaining service period of active employees expected to receive benefits.

The accumulated benefit obligation (“ABO”) for all defined benefit pension plans was $4.42 billion and $6.36 billion as of December 31, 2022 and 2021, respectively. The ABO is the actuarial present value of all benefits attributed by the pension benefit formula

to employee service rendered at the measurement date. However, it differs from the PBO due to the

exclusion of an assumption as to future compensation levels.

The PBO, ABO and fair value of plan assets for the Company’s pension plans with an ABO in excess of plan assets were $84 million, $83 million and zero million, respectively, as of December 31, 2022 and $123 million, $121 million and zero , respectively, as of December 31, 2021. Included in the accrued benefit cost of the pension benefits are certain unfunded non-qualified plans with accrued benefit costs of $84 million and $123 million for 2022 and 2021, respectively.


Components of net cost (benefit) for pension and other postretirement plans
	For the years ended December 31,
	Pension benefits						Postretirement benefits						Total pension and postretirement benefits
($ in millions)	2022		2021		2020		2022		2021		2020		2022		2021		2020
Service cost	$	101	$	103	$	104	$	1	$	1	$	4	$	102	$	104	$	108
Interest cost	219		191		210		10		8		11		229		199		221
Expected return on plan assets	(371)		(445)		(414)		—		—		—		(371)		(445)		(414)
Amortization of prior service credit	(27)		(50)		(54)		(25)		(25)		(10)		(52)		(75)		(64)
Curtailment losses (gains)	—		—		10		—		—		(8)		—		—		2
Costs and expenses	(78)		(201)		(144)		(14)		(16)		(3)		(92)		(217)		(147)
Remeasurement of projected benefit obligation	(1,382)		(309)		813		(62)		(16)		22		(1,444)		(325)		835
Remeasurement of plan assets	1,560		(319)		(886)		—		—		—		1,560		(319)		(886)
Remeasurement (gains) losses	178		(628)		(73)		(62)		(16)		22		116		(644)		(51)
Total net (benefit) cost	$	100	$	(829)	$	(217)	$	(76)	$	(32)	$	19	$	24	$	(861)	$	(198)

The service cost component is the actuarial present value of the benefits attributed by the plans’ benefit formula to services rendered by the employees during the period.

Interest cost is the increase in the PBO in the period due to the passage of time at the discount rate.

Interest cost fluctuates as the discount rate changes and is also impacted by the related change in the size of the PBO.

The expected return on plan assets is determined as the product of the expected long-term rate of return on plan assets and the fair value of plan assets.

Pension and other postretirement service cost, interest cost, expected return on plan assets, amortization of prior service credit and curtailment gains and losses are reported in property and casualty insurance claims and claims expense, operating costs and expenses, net investment income and (if applicable) restructuring and related charges on the Consolidated Statements of Operations.

Remeasurement gains and losses relate to changes in discount rates, the differences between actual return on plan assets and the expected long-term rate of return on plan assets, and differences between actual plan experience and actuarial assumptions.


Weighted average assumptions used to determine net pension cost and net postretirement benefit cost
	For the years ended December 31,
	Pension benefits						Postretirement benefits
	2022		2021		2020		2022		2021		2020
Discount rate	4.27	%	2.84	%	3.00	%	4.24	%	2.75	%	2.99	%
Expected long-term rate of return on plan assets	7.06		7.06		7.08		n/a		n/a		n/a
Cash balance interest credit rate	2.74		2.04		1.65		n/a		n/a		n/a


Weighted average assumptions used to determine benefit obligations
	For the years ended December 31,
	Pension benefits				Postretirement benefits
	2022		2021		2022		2021
Discount rate	5.64	%	2.93	%	5.58	%	2.86	%
Cash balance interest credit rate	3.97		1.90		n/a		n/a

The weighted average health care cost trend rate used in measuring the accumulated postretirement benefit cost is 6.8% for 2023, gradually declining to 4.5% in 2035 and remaining at that level thereafter.

Pension plan assets In general, the Company’s pension plan assets are managed in accordance with investment policies approved by pension investment committees. The purpose of the policies is to ensure the plans’ long-term ability to meet benefit obligations by prudently investing plan assets and Company contributions, while taking into consideration regulatory and legal requirements and current market conditions. The investment policies are reviewed periodically and specify target plan asset allocation by asset category. In addition, the policies specify various asset allocation and other risk limits. The target asset allocation takes the plans’ funding status into

consideration, among other factors, including anticipated demographic changes or liquidity requirements that may affect the funding status such as the potential impact of lump sum settlements as well as existing or expected market conditions. In general, the allocation has a lower overall investment risk when a plan is in a stronger funded status position since there is less economic incentive to take risk to increase the expected returns on the plan assets. The pension plans’ asset exposure within each asset category is tracked against widely accepted established benchmarks for each asset class with limits on variation from the benchmark established in the investment policy. Pension plan assets are regularly monitored for compliance with these limits and other risk limits specified in the investment policies.


Weighted average target asset allocation and actual percentage of plan assets by asset category
	As of December 31, 2022
	Target asset allocation (1)	Actual percentage of plan assets
Pension plan’s asset category	2022	2022		2021
Equity securities (2)	22 - 36%	27	%	55	%
Fixed income securities	43 - 54	49		30
Limited partnership interests	1 - 24	21		14
Short-term investments and other	—	3		1
Total without securities lending (3)		100	%	100	%

(1)The target asset allocation considers risk-based exposure while the actual percentage of plan assets utilizes a financial reporting view excluding exposure provided through derivatives.

(2)The actual percentage of plan assets for equity securities includes 0% and 3% of fixed income mutual funds in 2022 and 2021, respectively, that are subject to the fixed income securities target allocation.

(3)Securities lending collateral reinvestment of $297 million and $121 million is excluded from the table above in 2022 and 2021, respectively.

The target asset allocation for an asset category may be achieved either through direct investment holdings, through replication using derivative instruments (e.g., futures or swaps) or net of hedges using derivative instruments to reduce exposure to an asset category. The net notional amount of derivatives used for replication and non-hedging strategies is limited to 115% of total plan assets. Market performance of the different asset categories may, from time to time, cause deviation from the target

asset allocation. The asset allocation mix is reviewed on a periodic basis and rebalanced to bring the allocation within the target ranges.

Outside the target asset allocation, the pension plans participate in a securities lending program to enhance returns. As of December 31, 2022, fixed income securities are lent out and cash collateral is invested in short-term investments.


Fair values of pension plan assets as of December 31, 2022
($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Balance as of December 31, 2022
Equity securities	$	120		$	25		$	—		$	145
Fixed income securities:
Government bonds (1)	496			896			—			1,392
Corporate bonds (2)	—			757			—			757
Short-term investments	163			279			—			442
Free-standing derivatives:
Assets	—			1			—			1
Liabilities	(1)			(5)			—			(6)
Other assets	1			—			—			1
Total plan assets at fair value	$	779		$	1,953		$	—		2,732
% of total plan assets at fair value	28.5		%	71.5		%	—		%	100.0		%

Investments measured using the net asset value practical expedient										1,975
Securities lending obligation (3)										(296)
Derivatives counterparty and cash collateral netting										2
Other net plan assets (4)										17
Total reported plan assets										$	4,430

(1)Includes U.S. government and agencies and foreign government bonds.

(2)Includes ABS securities.

(3)The securities lending obligation represents the plan’s obligation to return securities lending collateral received under a securities lending program. The terms of the program allow both the plan and the counterparty the right and ability to redeem/return the securities loaned on short notice. Due to its relatively short-term nature, the outstanding balance of the obligation approximates fair value.

(4)Other net plan assets represent cash and cash equivalents, interest and dividends receivable and net receivables related to settlements of investment transactions, such as purchases and sales.


Fair values of pension plan assets as of December 31, 2021
($ in millions)	Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Balance as of December 31, 2021
Equity securities	$	311		$	44		$	2		$	357
Fixed income securities:
Government bonds	58			1,206			—			1,264
Corporate bonds	—			696			—			696
Short-term investments	135			65			—			200
Free-standing derivatives:
Assets	—			4			—			4
Liabilities	—			(3)			—			(3)
Other assets	2			—			—			2
Total plan assets at fair value	$	506		$	2,012		$	2		2,520
% of total plan assets at fair value	20.1		%	79.8		%	0.1		%	100.0		%

Investments measured using the net asset value practical expedient										4,109
Securities lending obligation										(121)
Derivatives counterparty and cash collateral netting										(3)
Other net plan assets										20
Total reported plan assets										$	6,525

The fair values of pension plan assets are estimated using the same methodologies and inputs as those used to determine the fair values for the respective asset category of the Company. These methodologies and inputs are disclosed in Note 6.


Rollforward of Level 3 plan assets during December 31, 2022
			Actual return on plan assets:
($ in millions)	Balance as of December 31, 2021		Relating to assets sold during the period		Relating to assets still held at the reporting date		Purchases, sales and settlements, net		Net transfers in (out) of Level 3		Balance as of December 31, 2022
Equity securities	$	2	$	—	$	—	$	—	$	(2)	$	—


Total Level 3 plan assets	$	2	$	—	$	—	$	—	$	(2)	$	—


Rollforward of Level 3 plan assets during December 31, 2021
			Actual return on plan assets:
($ in millions)	Balance as of December 31, 2020		Relating to assets sold during the period		Relating to assets still held at the reporting date		Purchases, sales and settlements, net		Net transfers in (out) of Level 3		Balance as of December 31, 2021
Equity securities	$	—	$	—	$	—	$	2	$	—	$	2
Fixed income securities:
Corporate	$	2	$	—	$	—	$	(2)	$	—	$	—
Total Level 3 plan assets	$	2	$	—	$	—	$	—	$	—	$	2


Rollforward of Level 3 plan assets during December 31, 2020
			Actual return on plan assets:
($ in millions)	Balance as of December 31, 2019		Relating to assets sold during the period		Relating to assets still held at the reporting date		Purchases, sales and settlements, net		Net transfers in (out) of Level 3		Balance as of December 31, 2020

Fixed income securities:
Corporate	$	—	$	—	$	—	$	2	$	—	$	2
Total Level 3 plan assets	$	—	$	—	$	—	$	2	$	—	$	2

The expected long-term rate of return on plan assets reflects the average rate of earnings expected on plan assets. The Company’s assumption for the expected long-term rate of return on plan assets is evaluated annually giving consideration to appropriate data including, but not limited to, the plan asset allocation, forward-looking expected returns for the period over which benefits will be paid, historical returns on plan assets and other relevant market data. Given the long-term forward-looking nature of this assumption, the actual returns in any one year do not immediately result in a change to the expected long-term rate of return on plan assets. In consideration of the targeted plan asset allocation, the Company evaluated expected returns using sources including historical average asset class returns from independent nationally recognized providers of this type of data blended together using the asset allocation policy weights for the Company’s pension plans; asset class return forecasts developed by employees with relevant expertise in such forecasts and who are independent from those charged with managing the pension plan assets; and expected portfolio returns from a proprietary simulation methodology of a widely recognized external

investment consulting firm that performs asset allocation and actuarial services for corporate pension plan sponsors. The above sources support the Company’s weighted average long-term rate of return on plan assets assumption of 7.06% used for 2022 and an estimate of 7.35% that will be used for 2023. As of the 2022 measurement date, the arithmetic average of the annual actual return on plan assets for the most recent 10 and 5 years was 8.4% and 6.9%, respectively.

Cash flows There was no required cash contribution necessary to satisfy the minimum funding requirement under the IRC for the tax qualified pension plan for the year ended December 31, 2022.

The Company currently plans to contribute $19 million to its unfunded non-qualified plans and zero to both its primary and other qualified funded pension plans in 2023.

The Company contributed $26 million and $27 million to the postretirement benefit plans in 2022 and 2021, respectively. Contributions by participants were $16 million and $16 million in 2022 and 2021, respectively.


Estimated future benefit payments expected to be paid in the next 10 years
	As of December 31, 2022
($ in millions)	Pension benefits		Postretirement benefits
2023	$	505	$	25
2024	485		26
2025	470		25
2026	468		23
2027	463		21
2028-2032	1,778		69
Total benefit payments	$	4,169	$	189

Allstate 401(k) Savings Plan

Employees of the Company, with the exception of those employed by the Company’s international, SquareTrade and InfoArmor subsidiaries, are eligible to become members of the Allstate 401(k) Savings Plan (“Allstate Plan”). The Company’s contributions are based on the Company’s matching obligation. The Company is responsible for funding its contribution to the Allstate Plan.

The Company’s contribution to the Allstate Plan was $131 million, $110 million and $103 million in 2022, 2021 and 2020, respectively.

Allstate’s Canadian, SquareTrade and InfoArmor subsidiaries sponsor defined contribution plans for their eligible employees. Expense for subsidiary sponsored defined contribution plans was $9 million, $9 million and $13 million in 2022, 2021 and 2020, respectively.