Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 17 Income Taxes

The Company and its eligible domestic subsidiaries file a U.S. consolidated federal income tax return. The Company also files tax returns in various states and foreign jurisdictions. Tax liabilities and benefits realized by the consolidated group are allocated as generated by the respective entities.

Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted through income tax expense (benefit) as changes in tax laws or rates are enacted.

Inflation Reduction Act of 2022 The Inflation Reduction Act of 2022, which contains several tax-related provisions, was signed into law in August 2022. The law establishes a 15% corporate alternative minimum tax (“CAMT”) for certain large corporations and an excise tax of 1% on stock repurchases by publicly traded U.S. corporations, both effective after December 31, 2022. The excise tax on common stock repurchases is classified as an additional cost of the stock acquired included in treasury stock in shareholders' equity. The Company has determined

that it is considered an “applicable corporation” under the rules of CAMT.

15% Global Minimum Tax The Organization for Economic Cooperation and Development (“OECD”) secured agreement from nearly 140 countries to address how corporate profits are taxed for multinational enterprises (“MNEs”). OECD has released Pillar Two Model Rules, a 15% minimum effective tax rate (also known as the Global Anti-Base Erosion “GloBE” Rules), designed to ensure that large MNEs pay a minimum level of tax on the income arising in each jurisdiction where they operate and mandates sharing of certain company information with taxing authorities on a local and global basis.

The Company is within the scope of OECD Pillar Two model rules, and certain jurisdictions where the Company operates have enacted their respective tax law to comply with the Pillar Two framework beginning on or after December 31, 2023. The Company does not expect the impact to be material to its results of operations. The Company continues to evaluate the impact as additional jurisdictions adopt their own legislation.

Regulatory tax examinations On January 4, 2021 and October 1, 2021, the Company acquired National General and SafeAuto, respectively. For tax years prior to these acquisitions, National General is under a separate audit by the Internal Revenue Service (“IRS”). The IRS has completed its examination of Allstate’s tax

years prior to 2017 and National General’s tax years prior to 2015. Currently, the IRS has concluded its examinations for the 2017 and 2018 tax years with a refund claim under review by the Joint Committee on Taxation. In addition, National General is currently under examination for the 2015 through 2019 tax years with the appeals process pending for certain disputed issues related to these years. The Company believes that adequate provision has been made in the consolidated financial statements for any potential adjustments that may result from IRS examinations or any other tax authorities related to all open tax years.

Unrecognized tax benefits The Company recognizes tax positions in the consolidated financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the consolidated financial statements.

Reconciliation of the change in the amount of unrecognized tax benefits
	For the years ended December 31,
($ in millions)	2024		2023		2022
Balance – beginning of year	$	45	$	17	$	17
(Decrease) increase for tax positions taken in a prior year	(4)		23		—
Increase for tax positions taken in the current year	—		5		—
Balance – end of year	$	41	$	45	$	17

The Company believes that the unrecognized tax benefits balance will not materially change within the next twelve months.

The Company recognizes interest expense related to uncertain tax benefits in income tax expense (benefit) and penalties in operating costs and expenses.

For the year ended December 31, 2024, a reduction of penalties related to the unrecognized tax benefits of $(4) million was recorded. There were no penalties related to the unrecognized tax benefits in

2023 and 2022. As of December 31, 2024 and 2023, the Company recognized a liability for penalties of $3 million and $7 million, respectively.

For the years ended December 31, 2024, 2023, and 2022, interest expense (benefit) related to unrecognized tax benefits of $(2) million, $7 million, and $3 million was recorded, respectively. As of December 31, 2024 and 2023, the Company recognized a liability for interest of $15 million and $17 million, respectively.

Components of the deferred income tax assets and liabilities
	As of December 31,
($ in millions)	2024		2023
Deferred tax assets
Unearned premium reserves	$	978	$	897
Research & development capitalization	317		228
Discount on loss reserves	292		269
Net operating loss carryover	232		258
Unrealized net capital losses	209		174
Accrued compensation	131		121
Pension	8		26
Other postretirement benefits	7		13
General business credits carryover	—		110
Other	185		110
Total deferred tax assets before valuation allowance	2,359		2,206
Valuation allowance	(69)		(69)
Total deferred tax assets after valuation allowance	2,290		2,137
Deferred tax liabilities
DAC	(1,173)		(1,075)
Investments	(479)		(455)
Depreciable assets	(123)		(77)
Intangible assets	(66)		(99)
Other	(218)		(212)
Total deferred tax liabilities	(2,059)		(1,918)
Net deferred tax assets	$	231	$	219

In assessing the realizability of gross deferred tax assets, management considers whether it is more likely than not that some portion or all of the gross deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment, as well as limitations on use in future periods. As of December 31, 2024, the Company has U.S. Federal, state and foreign net operating loss (“NOL”) carryforwards. Management

believes that it is more likely than not that the benefit from certain NOL carryforwards will not be fully realized. Accordingly, the Company has a valuation allowance of $69 million on the deferred tax assets related to these NOL carryforwards.

The following table sets forth the amounts and expiration dates of federal, foreign and state net operating loss carryforwards.

Components of the net operating loss carryforwards as of December 31, 2024
($ in millions)	20-Year Carryforward Expires in 2025-2044		Indefinite		Various
U.S. Federal NOL	$	247	$	9	$	—
Foreign NOL	—		409		—
State NOL (1)	—		—		97

(1)Multiple state net operating loss carryforwards expiring in various periods, beginning in 2029.

Components of income tax expense (benefit)
	For the years ended December 31,
($ in millions)	2024		2023		2022
Current	$	1,179	$	114	$	(35)
Deferred	(17)		(249)		(453)
Total income tax expense (benefit)	$	1,162	$	(135)	$	(488)

The Company paid income taxes of $276 million in 2024, received an income tax refund of $45 million in 2023 and paid income taxes of $95 million in 2022.

The Company had current income tax payable of $91 million and receivable of $663 million as of December 31, 2024 and 2023, respectively.

Reconciliation of the statutory federal income tax rate to the effective income tax rate
	For the years ended December 31,
($ in millions)	2024				2023				2022
Income (loss) before income taxes	$	5,761			$	(348)			$	(1,830)
Statutory federal income tax rate on income from operations	1,210		21.0	%	(73)		21.0	%	(384)		21.0	%
State income taxes	54		0.9		(7)		2.0		—		—
Change in valuation allowance	8		0.1		6		(1.7)		10		(0.6)
Tax credits	(42)		(0.7)		(47)		13.5		(55)		3.0
Share-based payments	(30)		(0.5)		(14)		4.0		(22)		1.2
Tax-exempt income	(29)		(0.5)		(23)		6.6		(17)		0.9
Uncertain tax positions	(8)		(0.1)		33		(9.5)		2		(0.1)
Dividend received deduction	(1)		—		(4)		1.1		(7)		0.4
U.S. shareholder's tax (benefit) expense	—		—		(17)		4.9		13		(0.7)
Other	—		—		11		(3.1)		(28)		1.6
Effective income tax rate on income from operations	$	1,162	20.2	%	$	(135)	38.8	%	$	(488)	26.7	%