Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Page
2025 Highlights
Property-Liability Operations
Allstate Protection
Run-off Property-Liability
Protection Services
Reserve for Property and Casualty Insurance Claims and Claims Expense
Investments
Market Risk
Capital Resources and Liquidity
Enterprise Risk and Return Management
Application of Critical Accounting Estimates
Regulation and Legal Proceedings
Pending Accounting Standards
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2025 Form 10-K
2025 Highlights
Overview
The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as “we,” “our,” “us,” the “Company” or “Allstate”). It should be read in conjunction with the consolidated financial statements and related notes found under Item 8. contained herein.
A discussion of strategy, including updates to the multi-year Transformative Growth initiative, can be found in Part 1, Item 1. Business.
This section of this Form 10-K generally discusses 2025 and 2024 results and year-to-year comparisons between 2025 and 2024. Discussions of 2023 results and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis (“MD&A”) in Part II, Item 7. of our annual report on Form 10-K for 2024, filed February 24, 2025.
Further analysis of our insurance segments Allstate Protection and Run-off Property-Liability, together Property-Liability Operations, and Protection Services, is provided in MD&A. The segments are consistent with the way in which the chief operating decision maker reviews financial performance and makes decisions about the allocation of resources. The dispositions of the employer voluntary benefits (“EVB”) and group health businesses did not qualify for discontinued operations. The Allstate Health and Benefits segment is no longer a reportable segment, with results of this segment recast to reflect only the results of the EVB and group health businesses. The retained individual health business, previously included in the Allstate Health and Benefits segment, is a non-reportable segment with results included in all other for all periods presented.
The most important factors we monitor to evaluate the financial condition and performance for the Company include:
• Allstate Protection : premium, policies in force (“PIF”), new business sales, price changes, claim frequency and severity, catastrophes, loss ratio, expenses, underwriting results and combined ratio
• Protection Services : revenues, premium written, PIF and adjusted net income
• Investments : exposure to market risk, asset allocation, credit quality, total return, net investment income, cash flows, net gains and losses on investments and derivatives, unrealized capital gains and losses, long-term returns and fixed income portfolio duration
• Financial condition : liquidity, parent holding company deployable assets, financial strength ratings, operating leverage, debt levels, book value per share and return on equity
Measuring segment profit or loss
The measure of segment profit or loss used in evaluating performance is underwriting income for the Allstate Protection and Run-off Property-Liability segments and adjusted net income for the Protection Services and Corporate segments. We use these measures in our evaluation of results of operations to analyze profitability.
Underwriting income (loss) is calculated as premiums earned and other revenue, less claims and claims expense (“losses”), amortization of deferred policy acquisition costs (“DAC”), operating costs and expenses, amortization or impairment of purchased intangibles, and restructuring and related charges, as determined using accounting principles generally accepted in the United States of America (“GAAP”).
Adjusted net income (loss) is net income (loss) applicable to common shareholders, excluding:
Net gains and losses on investments and derivatives
Pension and other postretirement remeasurement gains and losses
Amortization or impairment of purchased intangibles
Gain or loss on disposition
Adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years
Income tax expense or benefit on reconciling items
Macroeconomic impacts
Macroeconomic factors have and may continue to impact the results of our operations, financial condition and liquidity, such as U.S. government fiscal and monetary policies, the Russia/Ukraine conflict, supply chain disruptions and labor shortages. These factors should be considered when comparing the current period to prior periods. Macroeconomic impacts are disclosed in Part 1 “Item 1A. Risk Factors’’, including the risk factors titled “ Widespread disruptive or destabilizing events may have an adverse effect on our business ” and “ Conditions in the global economy and capital markets could adversely affect the business and results of operations ”.
Tariffs Beginning on April 2, 2025, the U.S. government announced additional tariffs on goods imported to the U.S. We regularly evaluate scenarios to understand the potential impact of tariffs on our businesses and incorporate estimates of the impact into our development of reserves for claims. The evolving and uncertain global trade environment makes it difficult to predict the full effect on our business and it may take time for the impact of inflation to become evident. The following factors may impact operations at levels beyond what we are currently observing:
• Higher new and used vehicle pricing and replacement parts, increasing claims costs in Allstate Protection and Dealer Services
The Allstate Corporation 35
2025 Form 10-K
• Increases in building material costs, driving increases in homeowners claim costs
• Lack of availability of replacement parts from disruption in global trade broadly impacting all businesses
• Fewer auto new issued applications due to lower new and used vehicle sales
• Reduced demand in Dealer Services due to lower new vehicle sales
• Lower premiums written from reduced U.S. retail sales in Protection Plans
• Higher claims costs at Protection Plans
• Bad debt and credit allowance exposure in all businesses
• Adverse impacts on investment valuations and liquidity for market-based and performance-based investments
This is not inclusive of all potential impacts and should not be treated as such.
Dispositions
On April 1, 2025, we closed the sale of American Heritage Life Insurance Company and American Heritage Service Company, comprising our employer voluntary benefits business. We recorded a gain on the sale of $888 million or $641 million, after-tax for the year ended December 31, 2025.
On July 1, 2025, we closed the sale of Direct General Life Insurance Company, NSM Sales Corporation and The Association Benefits Solution, LLC, comprising the group health business. We recorded a gain on sale of $715 million or $499 million, after-tax for the year ended December 31, 2025.
See Note 4 of the consolidated financial statements for further information on the EVB and group health dispositions.
Financial Highlights
($ in millions)
Consolidated net income applicable to common shareholders was $10.17 billion in 2025 compared to net income of $4.55 billion in 2024, primarily due to higher underwriting income and gains on dispositions.
Total revenue increased 5.6% to $67.69 billion in 2025 compared to 2024, primarily due to higher auto and homeowners insurance policies in force and premium rate increases.
Net investment income increased $357 million to $3.45 billion in 2025 compared to 2024, primarily due to higher market-based and performance-based investment results.
Financial Position
Investments totaled $83.24 billion as of December 31, 2025, increasing from $72.61 billion as of December 31, 2024.
Allstate shareholders’ equity was $30.61 billion as of December 31, 2025 and $21.44 billion as of December 31, 2024. The increase is primarily due to net income and an increase in unrealized net capital gains on investments in 2025, partially offset by common share repurchases and dividends to shareholders.
Book value per diluted common share (ratio of Allstate common shareholders’ equity to total common shares outstanding and dilutive potential common shares outstanding) was $108.45 as of December 31, 2025, an increase of 49.9% from $72.35 as of December 31, 2024.
Return on average Allstate common shareholders’ equity f or the twelve months ended December 31, 2025, was 42.3%, an increase of 16.5 points from 25.8% for the twelve months ended December 31, 2024.
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2025 Form 10-K Property-Liability
Property-Liability Operations
Overview Property-Liability operations consist of two reportable segments: Allstate Protection and Run-off Property-Liability. These segments are consistent with the groupings of financial information that management uses to evaluate performance and to determine the allocation of resources.
We do not allocate Property-Liability investment income, net gains and losses on investments and derivatives, or assets to the Allstate Protection and Run-off Property-Liability segments. Management reviews assets at the Property-Liability level for decision-making purposes.
For segment results, services provided by Protection Services to Allstate Protection are not eliminated as management considers those transactions in assessing the results of the respective segments. The effects of inter-segment transactions are eliminated in the consolidated results.
GAAP operating ratios are used to measure our profitability to enhance an investor’s understanding of our financial results and are calculated as follows:
• Loss ratio: the ratio of claims and claims expense (loss adjustment expenses), to premiums earned. Loss ratios include the impact of catastrophe losses and prior year reserve reestimates.
• Expense ratio: the ratio of amortization of DAC, operating costs and expenses, amortization or impairment of purchased intangibles and restructuring and related charges, less other revenue to premiums earned.
• Combined ratio: the sum of the loss ratio and the expense ratio.
We have also calculated the following impacts of specific items on the GAAP operating ratios because of the volatility of these items between periods. The impacts are calculated by taking the specific items noted below divided by Property-Liability premiums earned:
• Effect of catastrophe losses on combined ratio: includes catastrophe losses and prior year reserve reestimates of catastrophe losses included in claims and claims expense
• Effect of prior year reserve reestimates on combined ratio
• Effect of restructuring and related charges on combined ratio
• Effect of amortization of purchased intangibles on combined ratio
• Effect of Run-off Property-Liability business on combined ratio: includes claims and claims expense, restructuring and related charges and operating costs and expenses in the Run-off Property-Liability segment
Premium measures and statistics are used to analyze our premium trends and are calculated as follows:
• PIF : policy counts are based on items rather than customers. A multi-car customer would generate multiple item (policy) counts, even if all cars were insured under one policy. Lender-placed policies are excluded from policy counts.
• New issued applications : item counts of automobile or homeowner insurance applications for insurance policies that were issued during the period, regardless of whether the customer was previously insured by another Allstate brand.
• Average premium-gross written (“average premium”) : gross premiums written divided by issued item count. Gross premiums written include the impacts from discounts, surcharges and ceded reinsurance premiums and exclude the impacts from mid-term premium adjustments and premium refund accruals. Average premiums represent the appropriate policy term for each line, typically six months for an auto policy and twelve months for a homeowners policy.
• Implemented rate changes : represents the impact in the locations (U.S. states, the District of Columbia or Canadian provinces) where rate changes were implemented during the period as a percentage of total prior year-end premiums written.
The Allstate Corporation 37
2025 Form 10-K Property-Liability
Underwriting results
($ in millions, except ratios)
Premiums written
Premiums earned
Other revenue
Claims and claims expense
Amortization of DAC
Other costs and expenses
Restructuring and related charges
Amortization of purchased intangibles
Underwriting income (loss)
Catastrophe losses
Catastrophe losses, excluding reserve reestimates
Catastrophe reserve reestimates (1)
Total catastrophe losses
Non-catastrophe reserve reestimates (1)
Prior year reserve reestimates (1)
GAAP operating ratios
Loss ratio
Expense ratio (2)
Combined ratio
Effect of catastrophe losses on combined ratio
Effect of prior year reserve reestimates on combined ratio
Effect of catastrophe losses included in prior year reserve reestimates on combined ratio
Effect of restructuring and related charges on combined ratio
Effect of amortization of purchased intangibles on combined ratio
Effect of Run-off Property-Liability business on combined ratio
(1) Reserve releases are shown in parentheses.
(2) Other revenue is deducted from operating costs and expenses in the expense ratio calculation.
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2025 Form 10-K Allstate Protection
Allstate Protection Segment
Private passenger auto, homeowners, and other personal lines insurance products are offered to consumers through exclusive agents, independent agents and directly to the consumer through contact centers and online. Our strategy is to offer products that allow customers to interact with us when, where and how they want affordable, simple and connected protection products. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.
Underwriting results
For the years ended December 31,
($ in millions)
Premiums written
Premiums earned
Other revenue
Claims and claims expense
Amortization of DAC
Other costs and expenses
Restructuring and related charges
Amortization of purchased intangibles
Underwriting income (loss)
Catastrophe losses
Underwriting income was $8.69 billion in 2025 compared to $3.15 billion in 2024, primarily due to increased premiums earned and the benefit of prior year reserve releases, partially offset by higher expenses.
Underwriting income (loss)
For the years ended December 31,
($ in millions)
Auto
Homeowners
Other personal lines (1)
Commercial lines
Other business lines (2)
Answer Financial
Total
(1) Includes renters, condominium, landlord, boat, umbrella, manufactured home, scheduled personal property and valuable item protection products.
(2) Other business lines represents commissions earned from brokered property and casualty and life and annuity products, and lender-placed products.
Change in underwriting results from 2024 to 2025
($ in millions)
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2025 Form 10-K Allstate Protection
Change in underwriting results from 2023 to 2024
($ in millions)
Premium measures and statistics include PIF, new issued applications and average premiums. Premiums written is the amount of premiums charged for policies issued during a fiscal period. Premiums are considered earned and are included in the financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired term of the policies is recorded as unearned premiums on the Consolidated Statements of Financial Position.
Premiums written
For the years ended December 31,
($ in millions)
Auto
Homeowners
Other personal lines
Commercial lines
Other business lines
Total premiums written
Premiums earned
For the years ended December 31,
($ in millions)
Auto
Homeowners
Other personal lines
Commercial lines
Other business lines
Total premiums earned
Policies in force
(In thousands)
Auto
Homeowners
Other personal lines
Commercial lines
Total
Auto insurance premiums written increased 3.6% or $1.35 billion in 2025 compared to 2024, primarily due to the following factors:
• Rate increases that moderated from the prior year. In 2025, rate increases of 3.5% were implemented resulting in a total insurance premium impact of 2.6%
• PIF increased 2.3% or 568 thousand to 25,504 thousand as of December 31, 2025 compared to December 31, 2024
• Increased new issued applications in all channels
• In states where we are achieving acceptable returns, we will focus on implementing rates to keep pace with increasing costs and explore opportunities for rate investments towards growth
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2025 Form 10-K Allstate Protection
Auto premium measures and statistics
New issued applications (in thousands)
Allstate Protection by channel
Exclusive agency
Independent agency
Direct
Total new issued applications
Allstate brand average premium
Homeowners insurance premiums written increased 14.9% or $2.15 billion in 2025 compared to 2024, primarily due to the following factors:
• Higher Allstate brand average premiums resulting from rate increases and inflation in insured home replacement costs, combined with policies in force growth
• In 2025, rate increases of 7.6% were implemented resulting in a total estimated insurance premium impact of 5.1%, excluding the impact of changes in insured home replacement costs
• PIF increased 2.5% or 186 thousand to 7,697 thousand as of December 31, 2025 compared to
December 31, 2024, primarily in the direct and exclusive agency channels, partially offset by a reduction in the independent agency channel
• Increased new issued applications in the exclusive agency and direct channels
In Florida, we are not writing new homeowners business and are substantially complete with the non-renewal of certain policies. We may not be able to grow in certain states without regulatory or legislative reforms that enable customers to be provided coverage at appropriate risk adjusted returns.
Homeowners premium measures and statistics
New issued applications (in thousands)
Allstate Protection by channel
Exclusive agency
Independent agency
Direct
Total new issued applications
Allstate brand average premium
Other personal lines premiums written increased 6.4% or $197 million in 2025 compared to 2024, primarily due to increases in landlords and personal umbrella policies, partially offset by a decrease in auto assigned risk policies purchased from other carriers. We are not writing new condominium business in Florida.
Commercial lines premiums written decreased 18.8% or $93 million in 2025 compared to 2024, due to the strategic decision for the Allstate brand to stop writing new business and non-renew certain policies. We are offering comprehensive commercial products,
including brokered solutions, to customers through our exclusive agency, independent agency and direct channels.
Other business lines premiums written increased 2.2% or $14 million in 2025 compared to 2024, due to growth in the lender-placed homeowners business, partially offset by lower lender-placed auto premiums.
GAAP operating ratios include loss ratio, expense ratio and combined ratio to analyze our profitability trends. Frequency and severity changes are used to describe the trends in loss costs.
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2025 Form 10-K Allstate Protection
Combined ratios
For the years ended December 31,
Loss ratio
Expense ratio (3)
Combined ratio
Auto
Homeowners
Other personal lines (1)
Commercial lines
Other business lines (2)
Total
Impact of amortization of purchased intangibles
Impact of restructuring and related charges
(1) Expense ratio includes other revenue of $185 million, $223 million and $57 million in 2025, 2024 and 2023, respectively, for fees on auto assigned risk policies.
(2) Expense ratio includes profit-sharing commissions on lender-placed business, which increased in 2025 as losses declined and decreased in 2024 due to higher losses.
(3) Other revenue is deducted from operating costs and expenses in the expense ratio calculation.
Loss ratios
For the years ended December 31,
Loss ratio
Effect of catastrophe losses
Effect of prior year reserve reestimates
Effect of catastrophe losses included in
prior year reserve reestimates
Auto
Homeowners
Other personal lines
Commercial lines
Other business lines
Total
Auto loss ratio decreased 9.3 points in 2025 compared to 2024 driven by increased earned premiums, lower claim frequency and the benefit of prior year non-catastrophe reserve releases. Estimated report year 2025 incurred claim severity for Allstate brand increased compared to report year 2024 for major coverages due to higher repair costs, mix of total loss frequency, medical consumption and attorney representation. We continue to enhance our claims practices to manage loss costs by increasing resources and expanding re-inspections and accelerating resolution of bodily injury claims.
Homeowners loss ratio decreased 5.3 points in 2025 compared to 2024, primarily due to increased premiums earned. Gross claim frequency, excluding catastrophes, decreased in 2025 compared to 2024 while paid claim severity, excluding catastrophes, increased due to a mix of fire and wind/hail perils. Homeowner paid claim severity can be impacted by both the mix of perils and the magnitude of specific losses paid during the period.
Other personal lines loss ratio decreased 8.5 points in 2025 compared to 2024, primarily due to increased premiums earned, partially offset by higher non-catastrophe losses.
Commercial lines loss ratio decreased 71.2 points in 2025 compared to 2024, primarily due to the benefit of
prior year reserve releases and lower losses, partially offset by a decrease in premiums earned driven by the strategic decision for the Allstate brand to stop writing new business and non-renew policies.
Other business lines loss ratio decreased 21.1 points in 2025 compared to 2024, primarily due to lower losses and the benefit of prior year non-catastrophe reserve releases.
Catastrophe losses decreased 0.1% or $5 million in 2025 compared to 2024.
We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first-party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes.
We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest, wildfires or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.
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2025 Form 10-K Allstate Protection
Catastrophe losses by the type of event
For the years ended December 31,
($ in millions)
Number of events
Number of events
Number of events
Hurricanes/tropical storms
Tornadoes
Wind/hail
Wildfires
Freeze/other events
Prior year reserve reestimates (1)
Prior year Nationwide aggregate reinsurance recoveries
Current year Nationwide aggregate reinsurance recoveries
Total catastrophe losses
(1) Includes reinsurance recoveries.
(2) Gross losses before reinsurance recoverables and reinstatement premiums were $6.2 billion.
Catastrophe management
Historical catastrophe experience For the last ten years, the average annual impact of catastrophes on our loss ratio was 8.8 points, but it has varied from 7.1 points to 11.6 points. The impact of homeowners catastrophes on the homeowners loss ratio in 2025 was 26.6 points compared to the average annual impact for the last ten years of 28.1 points. Over time, we have limited our aggregate insurance exposure to catastrophe losses in certain regions of the country that are subject to high levels of natural catastrophes by our participation in various state facilities. For further discussion of these facilities, see Note 14 of the consolidated financial statements. However, the impact of these actions may be diminished by the growth in insured values, the effect of state insurance laws and regulations and we may not be able to maintain our current level of reinsurance or purchase new reinsurance protection in amounts we consider sufficient at acceptable prices. In addition, in various states we are required to participate in assigned risk plans, reinsurance facilities and joint underwriting associations that provide insurance coverage to individuals or entities that otherwise are to purchase such coverage from private insurers including the California FAIR Plan Association. Because of our participation in these and other state facilities such as wind pools, we may be to that the capitalization of these facilities and to assessments from these facilities.
We have continued to take actions to maintain an appropriate level of exposure to catastrophic events while continuing to meet the needs of our customers, including the following:
• Continuing to limit or not offer new homeowners, manufactured home and landlord package policy business in certain coastal geographies. Additionally, we:
– Reduced our exposure to high-risk areas, including California and Florida. We have decreased our overall homeowner exposure in California by more than 50% since 2007. Additionally, from 2016 to 2022 we wrote a
limited number of homeowners policies in select areas of California. We stopped writing new homeowners and condominium business in California in 2022. In Florida, we stopped writing new condominium business in 2022 and new homeowners business in 2023. As a result, since December 31, 2024, PIF has declined by approximately 5% and 15% in California and Florida, respectively.
– Continue to write homeowners coverage, excluding in Florida, through our excess and surplus lines carrier, North Light Specialty Insurance Company (“North Light”), for properties with a higher risk of catastrophes or where customers do not meet certain criteria. These policies can include earthquake coverage (other than fire following earthquakes) that is currently ceded via quota share reinsurance.
• Increased capacity in our brokerage platform for customers not offered an Allstate policy. As of December 31, 2025, Ivantage had $2.86 billion non-proprietary premiums under management.
• Ceded wind exposure related to insured property located in wind pool eligible areas in certain states.
• Generally require higher deductibles for tropical cyclone than all peril deductibles which are in place for a large portion of coastal insured properties.
• Include coverage for flood-related auto comprehensive losses within our reinsurance program to reduce the additional catastrophe exposure, beyond the property lines, for auto customers who have purchased comprehensive damage coverage.
• Provide options of coverage for roof damage, including graduated coverage and pricing based on roof type and age.
Hurricanes We consider the greatest areas of potential catastrophe losses due to hurricanes to be major metropolitan centers along the eastern and gulf coasts of the United States. The average premium on a
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2025 Form 10-K Allstate Protection
property policy near these coasts is generally greater than in other areas. However, average premiums are often not considered commensurate with the inherent risk of loss. In addition, as explained in Note 14 of the consolidated financial statements, in various states Allstate is subject to assessments from assigned risk plans, reinsurance facilities and joint underwriting associations providing insurance for wind related property losses.
We have addressed our risk of hurricane loss by, among other actions, purchasing reinsurance for specific states and on a countrywide basis for our personal lines property insurance in areas most exposed to hurricanes, limiting personal homeowners, landlord package policy and manufactured home new business writings in coastal areas in southern and eastern states, implementing tropical cyclone deductibles where appropriate, and not offering continuing coverage on certain policies in coastal counties in certain states. We continue to seek appropriate returns for the risks we write. This may require further actions, similar to those already taken, in geographies where we are not getting appropriate returns. However, we may maintain or opportunistically increase our presence in areas where adequate risk adjusted returns can be achieved.
Earthquakes We do not offer earthquake coverage in most states. We retain approximately 19,000 PIF with earthquake coverage, with the largest number of policies located in Kentucky, due to regulatory and other reasons. We purchase reinsurance in Kentucky and enter into arrangements in many states to make earthquake coverage available through our brokerage platform.
We continue to have exposure to earthquake risk on certain policies that do not specifically exclude coverage for earthquake losses, including our auto policies, and to homeowners insurance fire losses following earthquakes. Allstate homeowner policyholders in California are offered coverage for damage caused by an earthquake through the California Earthquake Authority (“CEA”), a privately financed, publicly managed state agency created to provide insurance coverage for earthquake damage. Allstate is subject to assessments from the CEA under certain circumstances as explained in Note 14 of the consolidated financial statements. While North Light writes property policies in California, which can include earthquake coverage, this coverage is 100% ceded via quota share reinsurance.
Fires following earthquakes Under a standard homeowners policy we cover fire losses, including those caused by an earthquake. Actions taken related to our risk of loss from fires following earthquakes include restrictive underwriting guidelines in California for new business writings, purchasing reinsurance for Kentucky personal lines property risks, and purchasing nationwide reinsurance coverage, excluding Florida.
Wildfires Actions taken related to managing our risk of loss from wildfires include purchasing nationwide occurrence reinsurance, new and renewal inspection programs to identify and remediate wildfire risk as well as leveraging underwriting criteria. While these programs are designed to mitigate risk, the exposure to wildfires still exists. We continue to manage our exposure and seek appropriate returns. In addition, as explained in Note 14 of the consolidated financial statements, Allstate is subject to assessments from the California FAIR Plan Association providing insurance for property losses.
Severe convective storms We consider the areas of highest potential for catastrophic losses from wind, hail and tornado activity to be major metropolitan regions extending from the Great Plains through the Southeastern United States. We have mitigated our risk of severe convective storm loss by purchasing homeowners nationwide reinsurance coverage, utilized enhanced underwriting processes using aerial imagery, and have continued to provide options of coverage and price that are predicated on roof characteristics.
To manage the exposure, we may implement further actions, similar to those already taken, in geographies where we are not achieving appropriate returns. However, we may maintain or opportunistically increase our presence in areas where adequate risk adjusted returns can be achieved.
Catastrophe reinsurance The total cost of our property catastrophe reinsurance programs, excluding reinstatement premiums, during 2025 was $1.23 billion compared to $1.11 billion during 2024. Catastrophe placement premiums reduce net written and earned premium with approximately 83% of the reduction related to homeowners premium. A description of our current catastrophe reinsurance program appears in Note 11 of the consolidated financial statements.
Expense ratio decreased 0.3 points in 2025 compared to 2024, primarily due to higher earned premium growth relative to costs, partially offset by an increase in advertising costs.
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Impact of specific costs and expenses on the expense ratio
For the years ended December 31,
($ in millions, except ratios)
Amortization of DAC
Advertising expense
Other costs and expenses, net of other revenue
Amortization of purchased intangibles
Restructuring and related charges
Total underwriting expenses
Premiums earned
Expense ratio
Amortization of DAC
Advertising expense
Other costs and expenses, net of other revenue
Subtotal
Amortization of purchased intangibles
Restructuring and related charges
Total expense ratio
Deferred acquisition costs We establish a DAC asset for costs that are related directly to the acquisition of new or renewal insurance policies, principally agent, employee and broker remuneration, and premium taxes. DAC is amortized to income over the period in which premiums are earned.
DAC balance as of December 31 by product type
($ in millions)
Auto
Homeowners
Other personal lines
Commercial lines
Other business lines
Total DAC
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2025 Form 10-K Run-off Property-Liability
Run-off Property-Liability Segment
The Run-off Property-Liability segment includes results from property and casualty insurance coverage that primarily relates to policies written from the 1960s through the mid-1980s. Our exposure to asbestos, environmental and other run-off lines claims arises principally from direct excess commercial insurance, assumed reinsurance coverage, direct primary commercial insurance and other businesses in run-off. We may pursue settlement agreements including policy buybacks on direct excess commercial business when appropriate to improve the certainty of the liabilities. Settlement agreements are negotiated contracts between Allstate and third parties that generally set forth the rights and obligations of the parties, including terms of payment for claims. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.
Underwriting results
For the years ended December 31,
($ in millions)
Claims and claims expense
Asbestos claims
Environmental claims
Other run-off lines
Total claims and claims expense
Operating costs and expenses
Underwriting loss
Underwriting losses in 2025 of $154 million and $73 million in 2024 primarily related to our annual reserve review using established industry and actuarial best practices and loss adjustment expenses. The reserve reestimates are included as part of claims and claims expense.
The reserve reestimates in 2025 primarily related to new reported information for asbestos claims, new reported claims for environmental and other mass tort claims and increased projections for claim expenses. The reserve reestimates in 2024 primarily related to new reported information for asbestos-related claims and adverse developments within the other run-off lines.
We believe that our reserves are appropriately established based on available facts, technology, laws, regulations, and assessments of other pertinent factors and characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. However, as we progress with the resolution of disputed claims in the courts and arbitrations and with negotiations and settlements, our reported losses may be more variable.
Reserves for asbestos, environmental and other run-off claims before and after the effects of reinsurance
($ in millions)
December 31, 2025
December 31, 2024
Asbestos claims
Gross reserves
Reinsurance
Net reserves
Environmental claims
Gross reserves
Reinsurance
Net reserves
Other run-off claims
Gross reserves
Reinsurance
Net reserves
Total
Gross reserves
Reinsurance
Net reserves
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2025 Form 10-K Run-off Property-Liability
Reserves by type of exposure before and after the effects of reinsurance
($ in millions)
December 31, 2025
December 31, 2024
Direct excess commercial insurance
Gross reserves
Reinsurance
Net reserves
Assumed reinsurance coverage
Gross reserves
Reinsurance
Net reserves
Direct primary commercial insurance
Gross reserves
Reinsurance
Net reserves
Unallocated loss adjustment expenses
Gross reserves
Reinsurance
Net reserves
Total
Gross reserves
Reinsurance
Net reserves
Percentage of gross and ceded reserves by case and incurred but not reported (“IBNR”)
December 31, 2025
December 31, 2024
Case
IBNR
Case
IBNR
Direct excess commercial insurance
Gross reserves (1)
Ceded (2)
Assumed reinsurance coverage
Gross reserves
Ceded
Direct primary commercial insurance
Gross reserves
Ceded
(1) Approximately 66% and 65% of gross case reserves as of December 31, 2025 and December 31, 2024, respectively, are subject to settlement agreements that define and limit our obligations.
(2) Approximately 73% and 72% of ceded case reserves as of December 31, 2025 and December 31, 2024, respectively, are subject to settlement agreements that define and limit our obligations.
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2025 Form 10-K Run-off Property-Liability
Gross payments from case reserves by type of exposure
($ in millions)
For the years ended December 31,
Direct excess commercial insurance
Gross (1)
Ceded (2)
Assumed reinsurance coverage
Gross
Ceded
Direct primary commercial insurance
Gross
Ceded
(1) In 2025 and 2024, 91% and 87% of payments related to settlement agreements, respectively.
(2) In 2025 and 2024, 92% and 93% of payments related to settlement agreements, respectively.
Total net reserves as of December 31, 2025, included $761 million or 53% of estimated IBNR reserves compared to $723 million or 51% of estimated IBNR reserves as of December 31, 2024.
Total gross payments were $168 million and $118 million for 2025 and 2024, respectively. Payments primarily related to settlement agreements reached with several insureds on large claims, mainly asbestos-related losses, where the scope of coverages has been agreed upon. The claims associated with these settlement agreements are expected to be substantially paid out over the next several years as qualified claims are submitted by these insureds. Reinsurance collections were $38 million and $39 million for 2025 and 2024, respectively. The allowance for uncollectible reinsurance recoverables was $52 million and $61 million as of December 31, 2025 and 2024, respectively. The allowance represents 10.7% and 11.3% of the related reinsurance recoverable balances as of December 31, 2025 and 2024, respectively.
48 www.allstate.com
2025 Form 10-K Protection Services
Protection Services Segment
Protection Services is comprised of Protection Plans, Roadside, Dealer Services, Identity Protection and Arity. In 2025, Protection Services represented 81.6% of total PIF and 4.8% of premiums written. We offer consumer product protection plans, automotive protection and insurance products (including vehicle service contracts, guaranteed asset protection, road hazard tire and wheel and paintless dent repair protection), roadside assistance, mobility intelligence services and analytic solutions using automotive telematics information and identity theft protection and remediation services. For additional information on our strategy and outlook, see Part I, Item 1. Business - Strategy and Segment Information.
Summarized financial information
For the years ended December 31,
($ in millions)
Premiums written
Revenues
Premiums
Other revenue
Intersegment insurance premiums and service fees (1)
Net investment income
Costs and expenses
Claims and claims expense
Amortization of DAC
Operating costs and expenses
Restructuring and related charges
Income tax expense on operations
Less: noncontrolling interest
Adjusted net income
Protection Plans
Roadside
Dealer Services
Identity Protection
Arity
Adjusted net income
Policies in force
Protection Plans
Roadside
Dealer Services
Identity Protection
Policies in force as of December 31 (in thousands)
(1) Primarily related to Arity and Roadside and are eliminated in our consolidated financial statements.
Premiums written increased 7.5% or $209 million in 2025 compared to 2024, primarily due to international growth at Protection Plans.
Adjusted net income increased 0.5% or $1 million in 2025 compared to 2024, primarily due to premium growth at Protection Plans, partially offset by increased claims and higher expenses at Arity.
PIF increased 3.3% or 5 million in 2025 compared to 2024 due to growth at Protection Plans.
Other revenue increased 10.9% or $48 million in 2025 compared to 2024, primarily driven by international growth at Protection Plans and higher lead generation revenue at Arity.
Intersegment premiums and service fees decreased 23.9% to $137 million in 2025 compared to 2024, primarily driven by Arity.
Claims and claims expense increased 9.0% or $58 million in 2025 compared to 2024, primarily driven by growth at Protection Plans.
Amortization of DAC increased 9.1% or $111 million in 2025 compared to 2024, driven by growth at Protection Plans.
Operating costs and expenses increased 13.1% or $143 million in 2025 compared to 2024, primarily due to expenses related to growth at Protection Plans.
The Allstate Corporation 49
2025 Form 10-K Reserve for Property and Casualty Insurance Claims and Claims Expense
Reserve for Property and Casualty Insurance Claims and Claims Expense
Underwriting results are significantly influenced by estimates of claims and claims expense reserves. The facts and circumstances leading to reestimates of reserves relate to claim activity and updates to the development factors used to predict how losses are likely to develop from the end of a reporting period until all claims have been paid. Reestimates occur when actual losses differ from those predicted by the estimated development factors used in prior reserve estimates. For a description of our reserve process, see Note 10 of the consolidated financial statements. For a description of our reserving policies and the potential variability in our reserve estimates, see the Application of Critical Accounting Estimates section of the MD&A. Reserves are an estimate of amounts necessary to settle all outstanding claims, including IBNR claims, as of the reporting date.
We believe the net loss reserves exposures are appropriately established based on available facts, laws and regulations.
Total claims and claims expense reserves, net of recoverables (“net reserves”), as of December 31
($ in millions)
Allstate Protection
Run-off Property-Liability
Total Property-Liability
Protection Services
Total net reserves
Reserve for property and casualty insurance claims and claims expense
Less: reinsurance and indemnification recoverables (1)
Total net reserves
(1) Includes $5.77 billion, $6.41 billion and $6.36 billion of unpaid indemnification recoverables related to the Michigan Catastrophic Claims Association (“MCCA”) as of December 31, 2025, 2024 and 2023, respectively.
Impact of reserve reestimates on combined ratio and net income applicable to common shareholders (1) (2)
($ in millions, except ratios)
Reserve reestimates
Effect on combined ratio
Reserve reestimates
Effect on combined ratio
Reserve reestimates
Effect on combined ratio
Allstate Protection
Run-off Property-Liability
Total Property-Liability
Protection Services
Total
Reserve reestimates, after-tax
Consolidated net income (loss) applicable to common shareholders
Reserve reestimates as a % impact on consolidated net income (loss) applicable to common shareholders
Property-Liability prior year reserve reestimates included in catastrophe losses
(1) Reserve releases are shown in parentheses.
(2) Ratios are calculated using property and casualty premiums earned.
NM = not meaningful
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2025 Form 10-K Reserve for Property and Casualty Insurance Claims and Claims Expense
The following tables reflect the accident years to which the reestimates shown above are applicable. Favorable reserve reestimates are shown in parentheses.
Prior year reserve reestimates
($ in millions)
2020 & prior
Total
Allstate Protection
Run-off Property-Liability
Total Property-Liability
Protection Services
Total
2019 & prior
Total
Allstate Protection
Run-off Property-Liability
Total Property-Liability
Protection Services
Total
2018 & prior
Total
Allstate Protection
Run-off Property-Liability
Total Property-Liability
Protection Services
Total
Allstate Protection
The table below shows Allstate Protection net reserves representing the estimated cost of outstanding claims as they were recorded at the beginning of years 2025, 2024, and 2023, and the effect of reestimates in each year.
Impact of reserve reestimates by line on net reserves, combined ratio and underwriting income
($ in millions)
January 1 reserves
Reserve reestimates
Effect on combined ratio
January 1 reserves
Reserve reestimates
Effect on combined ratio
January 1 reserves
Reserve reestimates
Effect on combined ratio
Auto
Homeowners
Other personal lines
Commercial lines and other
Total Allstate Protection
Underwriting income (loss)
Reserve reestimates, which decreased reserves by $1.96 billion in 2025 and represented 22.6% of underwriting income, were primarily due to favorable severity development of $1.18 billion in personal auto injury coverage and $671 million in all other personal auto coverages.
Reserve reestimates, which decreased reserves by $376 million in 2024 and represented 11.9% of the underwriting income, were primarily due to catastrophe reserve releases in homeowners and non-catastrophe reserve releases in personal auto lines, partially offset by increased reserves in other personal lines and commercial lines driven by transportation network company coverage no longer offered.
The Allstate Corporation 51
2025 Form 10-K Reserve for Property and Casualty Insurance Claims and Claims Expense
Run-off Property-Liability
We conduct an annual review in the third quarter of each year to evaluate and establish asbestos, environmental and other run-off reserves. Reserves are recorded in the reporting period in which they are determined. Using established industry and actuarial best practices and assuming no change in the regulatory or economic environment, this detailed and comprehensive methodology determines reserves based on assessments of the characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by policyholders.
Run-off Property-Liability net reserve reestimates
($ in millions)
January 1 reserves
Reserve reestimates
January 1 reserves
Reserve reestimates
January 1 reserves
Reserve reestimates
Asbestos claims
Environmental claims
Other run-off lines
Total
Underwriting loss
Reserve reestimates in 2025 primarily related to our annual reserve review based on new reported information for asbestos claims, new reported claims for environmental and other mass tort claims and increased projections for claims expenses.
Reserve reestimates in 2024 primarily related to the annual reserve review based on new reported information for asbestos-related claims and adverse developments within the other run-off lines.
Reserves and claim activity before (Gross) and after (Net) the effects of reinsurance
($ in millions, except ratios)
Gross
Net
Gross
Net
Gross
Net
Asbestos claims
Beginning reserves
Incurred claims and claims expense
Claims and claims expense paid
Ending reserves
Annual survival ratio
3-year survival ratio
Environmental claims
Beginning reserves
Incurred claims and claims expense
Claims and claims expense paid
Ending reserves
Annual survival ratio
3-year survival ratio
Combined environmental and asbestos claims
Annual survival ratio
3-year survival ratio
Percentage of IBNR in ending reserves
The survival ratio is calculated by taking our ending reserves divided by payments made during the year. This is a commonly used but simplistic and imprecise approach to measuring the adequacy of asbestos and environmental reserve levels. Many factors, such as mix of business, level of coverage provided and settlement procedures have significant impacts on the amount of environmental and asbestos claims and claims expense reserves, claim payments and the resultant ratio. As payments result in corresponding reserve reductions, survival ratios can be expected to vary over time. The combined asbestos and environmental net 3-year survival ratio in 2025 decreased from 2024 due to larger average payments.
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2025 Form 10-K Reserve for Property and Casualty Insurance Claims and Claims Expense
Net asbestos reserves by type of exposure and total reserve additions
December 31, 2025
December 31, 2024
December 31, 2023
($ in millions)
Net reserves
% of reserves
Net reserves
% of reserves
Net reserves
% of reserves
Direct:
Primary
Excess
Total direct
Assumed reinsurance
IBNR
Total net reserves
Total reserve additions
IBNR net reserves increased $17 million as of December 31, 2025 compared to December 31, 2024. IBNR provides for reserve development of known claims and future reporting of additional unknown claims from current policyholders and ceding companies.
Reinsurance and indemnification programs We purchase significant reinsurance to manage our aggregate countrywide exposure to an acceptable level. The price and terms of reinsurance and the credit quality of the reinsurer are considered in the purchase process. We utilize reinsurance to reduce exposure to catastrophe risk and manage capital, and to support the required statutory surplus and the insurance financial strength ratings of certain subsidiaries such as Castle Key Insurance Company (“CKIC”) and Allstate New Jersey Insurance Company (“ANJ”). We have also purchased reinsurance to mitigate exposures in our long-tail liability lines, including environmental, asbestos and other run-off lines as well as our commercial lines. We also participate in various indemnification mechanisms, including state-based
industry pool or facility programs mandating participation by insurers offering certain coverage in their state and the federal government National Flood Insurance Program (“NFIP”). See Note 11 of the consolidated financial statements for additional details on these programs.
Intercompany reinsurance We enter into certain intercompany insurance and reinsurance transactions in order to maintain underwriting control and manage insurance risk among various legal entities. These reinsurance agreements have been approved by the appropriate regulatory authorities. All significant intercompany transactions have been eliminated in consolidation.
Catastrophe reinsurance We anticipate completing the placement of our 2026 Nationwide Excess Catastrophe Reinsurance Program and Florida Excess Catastrophe reinsurance Program in the first half of 2026. For further details of the existing 2025 program, see Note 11 of the consolidated financial statements.
The Allstate Corporation 53
2025 Form 10-K Reserve for Property and Casualty Insurance Claims and Claims Expense
Reinsurance and indemnification recoverables, net of the allowance established for uncollectible amounts
Financial strength ratings S&P/ A.M. Best (1)
Reinsurance or indemnification
recoverables on paid and unpaid claims, net
($ in millions)
Indemnification programs
State-based industry pool or facility programs
MCCA (2)
North Carolina Reinsurance Facility (“NCRF”)
New Jersey Property-Liability Insurance Guaranty Association (“PLIGA”)
Other
Subtotal
Catastrophe reinsurance recoverables
Renaissance Reinsurance Limited
Sanders RE II Ltd.
Swiss Reinsurance America Corporation
Sanders RE III Ltd.
DaVinci Reinsurance Limited
Other
Subtotal (3)
Other reinsurance recoverables, net (4)
Lloyd’s of London
Swiss Re Corporate Solutions America Insurance Corporation
Other, including allowance for credit losses
Subtotal
Total Allstate Protection and Run-off Property-Liability
Protection Services
Total
(1) N/A reflects no S&P Global Ratings (“S&P”) or A.M. Best ratings available.
(2) As of December 31, 2025 and 2024, MCCA includes $56 million and $71 million of reinsurance recoverable on paid claims, respectively, and $5.77 billion and $6.41 billion of reinsurance recoverable on unpaid claims, respectively.
(3) The increase of $523 million from $377 million at December 31, 2024 to $900 million at December 31, 2025, is primarily related to the January 2025 California wildfire event.
(4) Other reinsurance recoverables primarily relate to commercial lines, including shared economy, as well as asbestos, environmental and other liability exposures.
We regularly evaluate the reinsurers and the respective amounts of our reinsurance recoverables, and a provision for uncollectible reinsurance recoverables is recorded, if needed. The establishment of reinsurance recoverables and the related allowance for uncollectible reinsurance is also an inherently uncertain process involving estimates. Changes in estimates could result in additional changes to the Consolidated Statements of Operations.
Indemnification recoverables are considered collectible based on the industry pool and facility enabling legislation. The Company has not had any credit losses related to these programs, and we do not anticipate losses in the foreseeable future. We also have not experienced credit losses on our catastrophe reinsurance programs, which include highly rated reinsurers.
The allowance for uncollectible reinsurance relates to other reinsurance programs primarily related to our Run-off Property-Liability segment. The allowance was $54 million and $63 million as of December 31, 2025 and 2024, respectively.
The allowance is based upon our ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing and other relevant factors. In addition, in the ordinary course of business, we may become involved in coverage disputes with certain of our reinsurers that may ultimately result in lawsuits and arbitrations brought by or against such reinsurers to determine the parties’ rights and obligations under the various reinsurance agreements. We employ dedicated specialists to manage reinsurance collections and disputes. We also consider recent developments in commutation activity between reinsurers and cedents, and recent trends in arbitration and litigation outcomes in disputes between cedents and reinsurers in seeking to maximize our reinsurance recoveries.
Adverse developments in the insurance industry have led to a decline in the financial strength of some of our reinsurance carriers, causing amounts recoverable from them and future claims ceded to them to be considered a higher risk. There has also been consolidation activity in the industry, which
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2025 Form 10-K Reserve for Property and Casualty Insurance Claims and Claims Expense
causes reinsurance risk across the industry to be concentrated among fewer companies.
See Note 2 of the consolidated financial statements for a description of the methodology utilized to calculate the allowance for reinsurance recoverables.
For further details related to our reinsurance and indemnification recoverables, see the Regulation section in Part I and Note 11 of the consolidated financial statements.
Effects of reinsurance ceded and indemnification programs on premiums earned and claims and claims expense
For the years ended December 31,
($ in millions)
Allstate Protection - Premiums
Indemnification programs
State-based industry pool or facility programs
NCRF
MCCA
PLIGA
FHCF
Other
Federal Government - NFIP (1)
Catastrophe reinsurance
Other reinsurance programs
Total Allstate Protection
Run-off Property-Liability
Total Property-Liability
Protection Services
Total effect on premiums earned
Allstate Protection - Claims
Indemnification programs
State-based industry pool or facility programs
MCCA
NCRF
PLIGA
FHCF
Other
Federal Government - NFIP (1)
Catastrophe reinsurance
Other reinsurance programs
Total Allstate Protection
Run-off Property-Liability
Total Property-Liability
Protection Services
Total effect on claims and claims expense
(1) See Note 11 of the consolidated financial statements for additional details on the National Flood Insurance Program.
In 2025, ceded premiums increased primarily due to catastrophe reinsurance, NFIP and NCRF. In 2024, ceded premiums increased primarily due to NCRF and catastrophe reinsurance.
In 2025, ceded claims and claims expenses decreased primarily due to better than expected auto injury claim emergence related to MCCA, partially
offset by catastrophe reinsurance driven by the California wildfires. In 2024, ceded claims and claims expenses increased $1.08 billion primarily due to NFIP reserves related to Hurricane Helene and catastrophe reinsurance. For further discussion of these items, see Regulation section in Part I and Note 11 of the consolidated financial statements.
The Allstate Corporation 55
2025 Form 10-K Reserve for Property and Casualty Insurance Claims and Claims Expense
Michigan PIP reserve and claim activity before and after the effects of MCCA recoverables
For the years ended December 31,
($ in millions)
Gross
Net
Gross
Net
Gross
Net
Beginning reserves
Incurred claims and claims expense - current year
Incurred claims and claims expense - prior years
Claims and claims expense paid - current year
Claims and claims expense paid - prior years
Ending reserves (1)
(1) Gross reserves for the year ended December 31, 2025, comprise 77% case reserves and 23% IBNR. Gross reserves for the year ended December 31, 2024, comprise 70% case reserves and 30% IBNR. Gross reserves for the year ended December 31, 2023, comprise 77% case reserves and 23% IBNR.
Pending MCCA claims differ from most personal lines insurance pending claims as other personal lines policies incurred claims settle in shorter periods due to having a coverage limit. MCCA claims can be outstanding for a claimant’s lifetime, as there is no contractual limitation on any policy effective July 1, 2020 or prior, and on policies that selected the unlimited PIP benefits option on or after July 2, 2020. Many of these injuries are catastrophic in nature, resulting in serious permanent disabilities that require attendant and residential care for periods that may span decades. A significant portion of the ultimate incurred claim reserves and the recoverables can be attributed to a small number of catastrophic claims that occurred more than five years ago and continue to pay lifetime benefits.
As of December 31, 2025, approximately 95% of our 1,200 catastrophic claims that are eligible for reimbursement by the MCCA occurred more than 5 years ago and continue to incur costs. There are 64 claims with reserves in excess of $15 million as of December 31, 2025, which comprise approximately 25% of the gross ending reserves in the table above. As a result, significant developments with a single claimant can result in volatility in prior year incurred claims.
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2025 Form 10-K Investments
Investments
Overview and strategy
The return on our investment portfolios is an important component of our ability to offer value to customers, fund business improvements and create value for shareholders. Investment portfolios are held for Allstate Protection and Run-off Property-Liability, Protection Services and Corporate operations. While taking into consideration the investment portfolio in aggregate, management of the underlying portfolios is influenced by the nature of each respective business and its corresponding liability profile. We identify a strategic asset allocation which considers both the nature of the liabilities and the risk and return characteristics of the various asset classes in which we invest. This allocation is informed by our long-term business and market expectations, as well as other considerations such as risk appetite, portfolio diversification, duration, desired liquidity and capital. Within appropriate ranges relative to strategic allocations, tactical allocations are made in consideration of prevailing and potential future market conditions. We manage risks that involve uncertainty related to interest rates, inflation, credit spreads, equity returns and currency exchange rates.
The Allstate Protection and Run-off Property-Liability portfolio emphasizes protection of principal and consistent income generation within a total return framework. This approach has produced competitive returns over the long term and is designed to ensure financial strength and stability for paying claims, while maximizing economic value and surplus growth. Products with lower liquidity and capital needs, such as auto insurance and run-off lines, create capacity to invest in less liquid higher yielding fixed income securities, performance-based investments such as limited partnerships and equity securities. Products with higher liquidity needs, such as homeowners insurance, are invested primarily in high quality liquid fixed income securities.
The Protection Services portfolio is focused on protection of principal and consistent income generation within a total return framework. The portfolio is largely comprised of fixed income securities with a lesser allocation to equity securities and short-term investments.
The Corporate portfolio is primarily focused on liquidity needs and capital preservation within a total return framework. The portfolio is largely comprised of high-quality liquid fixed income securities and short-term investments with a lower allocation to performance-based and equity investments.
We utilize two primary strategies to manage risks and returns and to position our portfolio to take
advantage of market opportunities while attempting to mitigate adverse effects. As strategies and market conditions evolve, the asset allocation may change.
Market-based strategies seek to deliver predictable earnings aligned to business needs and provide flexibility to adjust investment risk profile based on enterprise objectives and market opportunities primarily through public and private fixed income investments and public equity securities.
Performance-based strategies seek to deliver attractive risk-adjusted returns and supplement market risk with idiosyncratic risk. Consequently, return patterns can be more volatile than the market-based portfolio. Returns are impacted by a variety of factors including general macroeconomic and public market conditions as public market benchmarks are often used in the valuation of underlying investments. Variability in earnings will also result from the performance of the underlying assets or business and the timing of sales of those investments. Earnings from the sales of investments may be recorded as net investment income or net gains and losses on investments and derivatives. The portfolio, which primarily includes private equity (including infrastructure investments) and real estate with a majority being limited partnerships, is diversified across a number of characteristics, including managers or partners, vintage years, investment strategies, geographies (including international) and industry sectors or property types. These investments often have restrictions on transferability and redemption, making them inherently illiquid, often require specialized expertise, typically involve a third-party manager, and enhance returns and income through transformation at the company or property level. A portion of these investments seek returns in markets or asset classes that are dislocated or special situations, primarily in private markets.
Investments outlook
We utilize our integrated enterprise risk and return management framework to determine the amount of investment risk we are willing to accept.
Our focus is on the following priorities:
• Enhance investment portfolio after-tax returns through use of a dynamic capital allocation framework.
• Leverage our broad capabilities to proactively manage the portfolio to earn attractive risk-adjusted returns on capital.
• Invest for the specific needs and characteristics of Allstate’s businesses, including its corresponding liability profile.
The Allstate Corporation 57
2025 Form 10-K Investments
Portfolio composition and strategy by reporting segment (1)
As of December 31, 2025
($ in millions)
Allstate Protection and Run-off Property-Liability
Protection Services
Corporate
and all other
Total
Fixed income securities (2)
Equity securities (3)
Mortgage loans, net
Limited partnership interests
Short-term investments (4)
Other investments, net
Total
Percentage to total
Market-based
Performance-based
Total
(1) Balances reflect the elimination of related party investments between segments.
(2) Fixed income securities are carried at fair value. Amortized cost, net for these securities was $50.52 billion, $1.72 billion, $6.49 billion and $58.73 billion for Allstate Protection and Run-off Property-Liability, Protection Services, Corporate and all other, and in total, respectively.
(3) Equity securities are carried at fair value. The fair value of equity securities held as of December 31, 2025 was $372 million in excess of cost. Equity securities include $1.27 billion of funds with underlying investments in fixed income and short-term securities as of December 31, 2025.
(4) Short-term investments are carried at fair value.
Investments totaled $83.24 billion as of December 31, 2025, increasing from $72.61 billion as of December 31, 2024, primarily due to operating and investment cash flows.
Portfolio composition by investment strategy
As of December 31, 2025
($ in millions)
Market-
based
Performance-based
Total
Fixed income securities
Equity securities
Mortgage loans, net
Limited partnership interests
Short-term investments
Other investments, net
Total
Percent to total
Unrealized net capital gains and losses
Fixed income securities
Short-term investments
Other investments
Total
Strategic actions focused on optimizing portfolio yield, risk and return in the evolving market and macroeconomic environment. The fixed income portfolio duration ended 2025 at 5.1 years, inclusive of interest rate derivatives and security specific call features, compared to 5.3 years as of December 31, 2024. Equity securities were increased by $3.94 billion in 2025 and $2.05 billion in 2024 primarily funded through the sale of investment grade corporate bonds and short-term investments.
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2025 Form 10-K Investments
Fixed income securities
Fixed income securities by type
Fair value as of December 31,
($ in millions)
U.S. government and agencies
Municipal
Corporate
Foreign government
Asset-backed securities (“ABS”)
Mortgage-backed securities (“MBS”)
Total fixed income securities
Fixed income securities are rated by third-party credit rating agencies or are internally rated. The Securities Valuation Office (“SVO”) of the National Association of Insurance Commissioners (“NAIC”) evaluates the fixed income securities of insurers for regulatory reporting and capital assessment purposes. The NAIC assigns securities to one of six credit quality categories defined as “NAIC designations”. In general, securities with NAIC designations of 1 and 2 are considered investment grade and securities with NAIC designations of 3 through 6 are considered below investment grade. The rating is either received from the SVO based on availability of applicable ratings from rating agencies on the NAIC Nationally Recognized Statistical Rating Organizations provider list, including Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”), Fitch Ratings or a comparable internal rating.
As a result of time lags between the funding of investments, the finalization of legal documents, and the completion of the SVO filing process, the portfolio includes certain securities that have not yet been designated by the SVO as of each balance sheet date and the categorization of these securities is based on the expected ratings indicated by internal analysis .
As of December 31, 2025, 92.1% of the consolidated fixed income securities portfolio was rated investment grade. Credit ratings below these designations are considered lower credit quality or below investment grade, which includes high yield bonds.
Market prices for certain securities may have credit spreads which imply higher or lower credit quality than the current third-party rating. Our initial investment decisions and ongoing monitoring procedures for fixed income securities are based on a due diligence process which includes, but is not limited to, an assessment of the credit quality, sector, structure and liquidity risks of each issuer.
Fixed income portfolio monitoring is a comprehensive process to identify and evaluate each fixed income security that may require a credit loss allowance. The process includes a quarterly review of all securities to identify instances where the fair value of a security compared to its amortized cost is below internally established thresholds. For further detail on our fixed income portfolio monitoring process, see Note 6 of the consolidated financial statements.
The Allstate Corporation 59
2025 Form 10-K Investments
The following table presents total fixed income securities by the applicable NAIC designation and comparable S&P rating.
Fair value and unrealized net capital gains (losses) for fixed income securities by credit rating
December 31, 2025
NAIC 1
NAIC 2
NAIC 3
A and above
BBB
($ in millions)
Fair
value
Unrealized gain (loss)
Fair
value
Unrealized gain (loss)
Fair
value
Unrealized gain (loss)
U.S. government and agencies
Municipal
Corporate
Public
Privately placed
Total corporate
Foreign government
ABS
MBS
Total fixed income securities
NAIC 4
NAIC 5-6
Total
CCC and lower
Fair
value
Unrealized gain (loss)
Fair
value
Unrealized gain (loss)
Fair
value
Unrealized gain (loss)
U.S. government and agencies
Municipal
Corporate
Public
Privately placed
Total corporate
Foreign government
ABS
MBS
Total fixed income securities
Municipal bonds , including tax-exempt and taxable securities, include general obligations of state and local issuers and revenue bonds.
Our practice for acquiring and monitoring municipal bonds is predominantly based on the underlying credit quality of the primary obligor. We currently rely on the primary obligor to pay all contractual cash flows and are not relying on bond insurers for payments.
Corporate bonds include publicly traded and privately placed securities. Privately placed securities primarily consist of corporate issued senior debt securities that are negotiated with the borrower or are issued by public entities in unregistered form under SEC Rule 144A which allows purchasers to more easily resell these securities under certain conditions.
Our $10.48 billion portfolio of privately placed securities, primarily 144A bonds, is diversified by issuer, industry sector and country. The portfolio is made up of 548 issuers. Privately placed corporate obligations may contain structural security features such as financial covenants and call protections that provide investors greater protection against credit deterioration, reinvestment risk or fluctuations in interest rates than those typically found in publicly registered debt securities. Additionally, investments in these securities are made after fundamental analysis of issuers and
sectors along with macro and asset class views. Ongoing monitoring includes continuous assessment of operating performance and financial position. Every issue not rated by an independent rating agency is internally rated with a formal rating affirmation at least once a year. $122 million of the portfolio is internally rated as of December 31, 2025. Liquidity of securities issued by public entities in unregistered form is similar to public debt markets.
Our corporate bond portfolio includes $4.62 billion of below investment grade bonds, $4.04 billion of which are privately placed, primarily 144A bonds. These securities are diversified by issuer and industry sector. The below investment grade corporate bonds portfolio is made up of 318 issuers. We employ fundamental analyses of issuers and sectors along with macro and asset class views to identify investment opportunities. This results in a portfolio with broad exposure to the high yield market with an emphasis on idiosyncratic positions reflective of our views of market conditions and opportunities.
Foreign government securities primarily consist of Canadian governmental and provincial securities (all of which are held by our Canadian companies).
ABS and MBS are structured securities that are primarily collateralized by consumer or corporate
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2025 Form 10-K Investments
borrowings and residential and commercial real estate loans. The cash flows from the underlying collateral paid to the securitization trust are generally applied in a pre-determined order and are designed so that each security issued by the trust, typically referred to as a “class”, qualifies for a specific original rating.
The payment priority and class subordination included in these securities serves as credit enhancement for holders of the senior or top portions of the structures. These securities continue to retain the payment priority features that existed at the origination of the securitization trust. Other forms of credit enhancement may include structural features embedded in the securitization trust, such as overcollateralization, excess spread and bond insurance. The underlying collateral may contain fixed interest rates, variable interest rates (such as adjustable-rate mortgages), or both fixed and variable rate features.
ABS includes collateralized debt obligations, consumer and other ABS. Credit risk is managed by monitoring the performance of the underlying collateral. Many of the securities in the ABS portfolio have credit enhancement with features such as overcollateralization, subordinated structures, reserve funds, guarantees or insurance.
MBS includes residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”). RMBS is subject to interest rate risk, but unlike other fixed income securities, is additionally subject to prepayment risk from the underlying residential mortgage loans. RMBS primarily consists of a U.S. Agency portfolio having collateral issued or guaranteed by U.S. government agencies. CMBS investments are primarily traditional conduit transactions collateralized by commercial mortgage loans, broadly diversified across property types and geographical area.
Equity securities of $8.40 billion primarily include common stocks, exchange traded and mutual funds, non-redeemable preferred stocks and real estate investment trust (“REIT”) equity investments. Exchange traded and mutual funds that have fixed income and short-term securities as their underlying investments total $1.27 billion as of December 31, 2025. Sector exposure within exchange traded and mutual funds align with the respective tracked indices.
Mortgage loans of $879 million comprise loans secured by first mortgages on developed commercial real estate of $619 million and residential mortgage loans of $260 million. Key considerations used to manage our exposure include property type and geographic diversification. For further detail on our mortgage loan
portfolio, see Note 6 of the consolidated financial statements.
Limited partnership interests include $7.25 billion of interests in private equity funds, $1.45 billion of interests in real estate funds and $146 million of interests in other funds as of December 31, 2025. We have commitments to invest additional amounts in limited partnership interests totaling $3.24 billion as of December 31, 2025.
Private equity limited partnerships by sector
(% of carrying value)
December 31, 2025
Industrial
Information technology
Consumer discretionary
Health care
Communication services
Other
Total
Real estate limited partnerships by sector
(% of carrying value)
December 31, 2025
Industrial
Data centers
Health care
Residential
Consumer staples
Other
Total
Short-term investments of $4.89 billion primarily comprise money market funds, commercial paper, U.S. Treasury bills, fixed income securities with a contractual maturity of one year or less at time of acquisition and other short-term investments, including securities lending collateral of $1.47 billion.
Other investments primarily comprise $630 million of direct investments of real estate, $473 million of bank loans, net, and $10 million of derivatives as of December 31, 2025. For further detail on our use of derivatives, see Note 8 of the consolidated financial statements.
Direct real estate investments by sector
(% of carrying value)
December 31, 2025
Residential
Agriculture
Industrial
Retail
Office
Other
Total
The Allstate Corporation 61
2025 Form 10-K Investments
Unrealized net capital gains (losses)
As of December 31,
($ in millions)
U.S. government and agencies
Municipal
Corporate
Foreign government
ABS
MBS
Fixed income securities
Short-term investments
Derivatives
Investments classified as held for sale
Unrealized net capital gains and losses, pre-tax
Gross unrealized gains (losses) on fixed income securities by type and sector
As of December 31, 2025
Amortized cost, net
Gross unrealized
Fair value
($ in millions)
Gains
Losses
Corporate
Banking
Basic industry
Capital goods
Communications
Consumer goods (cyclical and non-cyclical)
Energy
Financial services
Technology
Transportation
Utilities
Other
Total corporate fixed income portfolio
U.S. government and agencies
Municipal
Foreign government
ABS
MBS
Total fixed income securities
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Gross unrealized gains (losses) on fixed income securities by type and sector
As of December 31, 2024
Amortized cost, net
Gross unrealized
Fair value
($ in millions)
Gains
Losses
Corporate
Banking
Basic industry
Capital goods
Communications
Consumer goods (cyclical and non-cyclical)
Energy
Financial services
Technology
Transportation
Utilities
Other
Total corporate fixed income portfolio
U.S. government and agencies
Municipal
Foreign government
ABS
MBS
Total fixed income securities
In general, the gross unrealized losses are related to an increase in market yields, which may include increased risk-free interest rates and wider credit spreads since the time of initial purchase. Similarly, gross unrealized gains reflect a decrease in market yields since the time of initial purchase.
Equity securities by sector
($ in millions)
December 31, 2025
December 31, 2024
Cost
Over (under) cost
Fair value
Cost
Over (under) cost
Fair value
Banking
Basic industry
Capital goods
Communications
Consumer goods
Energy
Financial services
REITs
Technology
Transportation
Utilities
Other
Directly held equity securities
Funds
Equities
Fixed income and short-term
Other
Total funds
Total equity securities
The Allstate Corporation 63
2025 Form 10-K Investments
Net investment income
For the years ended December 31,
($ in millions)
Fixed income securities
Equity securities
Mortgage loans
Limited partnership interests
Short-term investments
Other investments
Investment income, before expense
Investment expense
Investee level expenses
Securities lending expense
Operating costs and expenses
Total investment expense
Net investment income
Market-based
Performance-based
Investment income, before expense
Net investment income increased 11.5% or $357 million in 2025 compared to 2024. Net investment income increase included higher market-based income resulting from higher average investment balances and improved fixed income yields. Performance-based investment results reflected higher real estate investment results, partially offset by lower private equity valuation increases.
Performance-based investment income
For the years ended December 31,
($ in millions)
Private equity
Real estate
Total performance-based income before investee level expenses
Investee level expenses (1)
Total performance-based income
(1) Investee level expenses include asset level operating expenses on directly held real estate and other consolidated investments reported in investment expense.
Performance-based investment income increased 4.9% or $30 million in 2025 compared to 2024, primarily due to higher real estate investment results, partially offset by lower private equity valuation increases.
Performance-based investment results and income can vary significantly between periods and are influenced by economic conditions, equity market performance, comparable public company earnings multiples, capitalization rates, operating performance of
the underlying investments and the timing of asset sales. The Company typically employs a lag in recording and recognizing changes in valuations of limited partnership interests due to the availability of investee financial statements. As a result, performance-based income may not reflect all economic conditions since the U.S.’s imposition of tariffs on goods imported to the U.S.
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2025 Form 10-K Investments
Components of net gains (losses) on investments and derivatives and the related tax effect
For the year December 31,
($ in millions)
Sales
Credit losses (1)
Valuation change of equity investments - appreciation (decline):
Equity securities
Equity fund investments in fixed income securities and short-term investments
Limited partnerships (2)
Total valuation of equity investments
Valuation change and settlements of derivatives
Net gains (losses) on investments and derivatives, pre-tax
Income tax benefit
Net gains (losses) on investments and derivatives, after-tax
Market-based (1)
Performance-based
Net gains (losses) on investments and derivatives, pre-tax
(1) 2025 includes losses recorded for variable interests in Reciprocal Exchanges. 2024 includes losses related to the carrying value of surplus notes issued by Reciprocal Exchanges. See Note 9 for further details.
(2) Relates to limited partnerships where the underlying assets are predominately public equity securities.
Net losses on investments and derivatives in 2025 related primarily to losses on sales of fixed income securities, credit losses primarily related to variable interests in Reciprocal Exchanges and certain real estate-related investments and losses on valuation change and settlements of derivatives, partially offset by valuation increases on equity investments. Net losses on investments and derivatives in 2024 related primarily to losses on sales of fixed income securities and a loss recognized related to surplus notes issued by the Reciprocal Exchanges, partially offset by valuation gains on equity investments.
Net losses on sales in 2025 related to sales of fixed income securities to support portfolio risk repositioning in the second and third quarters and ongoing portfolio
management. Net losses on sales in 2024 related primarily to sales of fixed income securities in connection with ongoing portfolio management.
Net losses on valuation change and settlements of derivatives of $76 million in 2025 primarily related to losses on foreign currency contracts used to manage foreign currency, losses on credit default contracts due to tightening credit spreads, losses on equity futures used to manage equity exposure and losses on interest rate futures used to manage duration. Net losses in 2024 primarily related to net losses on rate futures used to manage duration and equity futures used to manage equity exposure, partially offset by gains on foreign currency contracts used to manage foreign currency risk.
Net gains (losses) on performance-based investments and derivatives
For the years ended December 31,
($ in millions)
Sales
Credit losses
Valuation change of equity investments
Valuation change and settlements of derivatives
Total performance-based
Net losses on performance-based investments and derivatives in 2025 primarily related to sales of private equity investments, credit losses on real estate-related investments and decreased valuations and settlements of derivatives from losses on foreign currency contracts used to manage foreign currency risk. These losses were partially offset by valuation gains on equity investments. Net gains in 2024 primarily related to increased valuation of equity investments, gains on sales and valuation change and settlements of derivatives, partially offset by credit losses.
The Allstate Corporation 65
2025 Form 10-K Market Risk
Market Risk
Market risk is the risk that we will incur losses due to adverse changes in interest rates, credit spreads, equity prices or foreign currency exchange rates. Adverse changes to these rates and prices may occur due to changes in fiscal policy, inflation, the economic climate, the liquidity of a market or market segment, insolvency or financial distress of key market makers or participants or changes in market perceptions of credit worthiness or risk tolerance. Our primary market risk exposures are to changes in interest rates, credit spreads and equity prices, and to a lesser extent, foreign currency exchange rates.
The active management of market risk is integral to our results of operations. We may use the following approaches to manage exposure to market risk within defined tolerance ranges:
1) Rebalance existing asset or liability portfolios
2) Change the type of investments purchased in the future
3) Use derivative instruments to modify the market risk characteristics of existing assets and liabilities or assets expected to be purchased
Overview In formulating and implementing guidelines for investing funds, we seek to earn attractive risk-adjusted returns that enhance our ability to offer competitive prices to customers while contributing to stable profits and long-term capital growth. Accordingly, our investment decisions and objectives are informed by underlying risks. Investment policies define the overall framework for managing market and other investment risks, including accountability and controls over risk management activities. Subsidiaries that conduct investment activities follow policies that have been approved by their respective boards of directors and which specify the investment limits and strategies that are appropriate given the liquidity, surplus, product profile and regulatory requirements of the subsidiary. Executive oversight of investment activities is conducted primarily through the subsidiaries’ boards of directors and legal entity investment committees. The Enterprise Risk and Return Council (“ERRC”) allocates a portion of enterprise risk and capital to the investment portfolio, determining enterprise risk tolerance, which is then cascaded to each subsidiary, as applicable, in conjunction with its board or investment committee.
We use widely accepted quantitative and qualitative approaches to measure, monitor and manage market risk. We evaluate our market risk exposure using multiple measures including but not limited to:
• Duration, a measure of the price sensitivity of assets and liabilities to changes in interest rates
• Value-at-risk, a statistical estimate that the change in fair value of a portfolio will exceed a certain amount over a given time horizon, at a specified probability
• Scenario analysis, an estimate of the potential changes in the fair value of a portfolio that could occur under hypothetical market conditions defined by changes to multiple market risk factors: interest rates, credit spreads, equity prices or currency exchange rates
• Sensitivity analysis, an estimate of the potential changes in the fair value of a portfolio that could occur using hypothetical shocks to a market risk factor
The selection of measures used in our sensitivity analysis should not be construed as our prediction of future market events, but only as an illustration of the potential effect of such an event
In general, we establish investment portfolio asset allocation and market risk limits based upon a combination of these measures. The asset allocation limits place restrictions on the total funds that may be invested within an asset class. Comprehensive day-to-day management of market risk within defined tolerance ranges occurs as portfolio managers buy and sell within their respective markets based upon the acceptable boundaries established by investment policies. Although we apply a similar overall philosophy to market risk, the underlying business frameworks and the accounting and regulatory environments may differ between our products and therefore affect investment decisions and risk parameters. Our actual experience may differ from the results of the sensitivity measurements provided below.
Interest rate risk is the risk that we will incur a loss due to adverse changes in risk-free interest rates. This risk arises from many of our primary activities, as we invest substantial funds in interest-sensitive assets. Changes in interest rates can have favorable and unfavorable effects on our results. For example, increases in rates can improve investment income, but decrease the fair value of our fixed income securities portfolio which may result in sales of assets at losses. Decreases in rates could increase the fair value of our fixed income securities portfolio while decreasing future investment income due to reinvestment at lower market yields and accelerated pay-downs and prepayments of certain investments.
For our issued debt, we monitor market interest rates and evaluate refinancing opportunities as maturity dates approach. To mitigate this risk, we ladder the maturity dates of our debt. For our issued noncumulative perpetual preferred stock, we monitor market dividend rates and evaluate opportunities to redeem or refinance on or after specified dates. For further detail regarding our debt and our preferred stock, see Note 12 of the consolidated financial statements and the Capital Resources and Liquidity section of this Item.
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2025 Form 10-K Market Risk
Our assessment of interest rate risk reflects the effect of changing risk-free interest rates on interest-sensitive assets, including investments with callable or prepayable features. As of December 31, 2025, the fixed income portfolio duration, including the effects of interest rate derivatives, was 5.1 compared to 5.3 as of December 31, 2024.
Change in fair value of interest-sensitive assets (1) (2)
As of December 31,
($ in millions)
-100 bps interest rate change
+100 bps interest rate change
+200 bps interest rate change
(1) Includes the effects of interest rate derivatives.
(2) As of December 31, 2025, we held fixed income securities of $59.11 billion compared to $52.75 billion as of December 31, 2024.
Credit spread risk is the risk that we will incur a loss due to adverse changes in credit spreads (“spreads”). A credit spread is the additional yield on fixed income securities and loans above the risk-free rate that market participants require to compensate them for assuming credit, liquidity or prepayment risks. This risk arises from many of our primary activities, as we invest substantial funds in spread-sensitive fixed income assets.
Our assessment of credit spread risk reflects the effect of changing credit spreads on spread-sensitive assets, including investments with callable or prepayable features. As of December 31, 2025 and 2024, the spread duration (1) was 4.6 and 4.7, respectively.
Change in fair value of spread-sensitive assets (1)
As of December 31,
($ in millions)
+100 bps credit spread change
(1) Includes the effects of credit derivatives.
Equity price risk is the risk that we will incur losses due to adverse changes in the levels of equity indices, the value of individual stocks, or private market valuations related to our limited partnership interests.
Equity investments (1) As of December 31, 2025, we held $7.27 billion in equity investments that comprise equity securities, excluding those with interest-bearing securities as their underlying investments, and including limited partnership interests where the underlying assets are predominately public equity securities, compared to $4.00 billion as of December 31, 2024.
Change in fair value of equity investments (1)
As of December 31,
($ in millions)
-10% change in equity valuations
(1) Includes the effects of equity derivatives.
Limited partnership interests As of December 31, 2025, we held $8.69 billion in limited partnership interests, excluding those limited partnership interests where the underlying assets are predominately public equity securities, compared to $8.95 billion as of December 31, 2024. These illiquid investments are primarily comprised of private equity and real estate funds, with valuation changes typically reflecting the idiosyncratic performance of the underlying asset.
Change in fair value of limited partnership
interests
As of December 31,
($ in millions)
-10% change in private market valuations
For limited partnership interests, quarterly changes in fair values may not be highly correlated to equity indices in the short term.
Foreign currency exchange rate risk is the risk that we will incur economic losses due to adverse changes in foreign currency exchange rates. This risk primarily arises from our foreign equity investments, including common stocks, limited partnership interests, and our foreign operations. We use foreign currency derivative contracts to partially offset this risk.
As of December 31, 2025, we had $4.20 billion in foreign currency denominated investments, including the effects of foreign currency derivative contracts, and $1.53 billion net investment in our foreign subsidiaries, primarily related to our Canada operations. These amounts were $3.74 billion and $1.29 billion, respectively, as of December 31, 2024.
Change in fair value of foreign currency denominated investments
As of December 31,
($ in millions)
–10% change in foreign currency exchange rates (1)
–10% change in net investments in foreign subsidiaries (2)
(1) Includes the effects of foreign currency derivative contracts and excludes the offset from liabilities in foreign currencies.
(2) Includes the effects of foreign currency derivative contracts and the offset from liabilities in foreign currencies.
The Allstate Corporation 67
2025 Form 10-K Capital Resources and Liquidity
Capital Resources and Liquidity
Capital resources consist of shareholders’ equity and debt, representing funds deployed or available to be deployed to support business operations or for general corporate purposes.
Capital resources
As of December 31,
($ in millions)
Preferred stock, common stock, treasury stock, retained income and other shareholders’ equity items
Accumulated other comprehensive income (loss) (“AOCI”)
Total Allstate shareholders’ equity
Debt (1)
Total capital resources
Ratio of debt to Allstate shareholders’ equity
Ratio of debt to capital resources
(1) Net of debt issuance costs of $51 million as of December 31, 2025 and $56 million as of both December 31, 2024 and 2023 .
Allstate shareholders’ equity increased in 2025 primarily due to net income and an increase in unrealized net capital gains on investments in 2025, partially offset by common share repurchases and dividends to shareholders. In 2025, we paid dividends of $1.04 billion and $117 million related to our common and preferred shares, respectively. Allstate shareholders’ equity increased in 2024, primarily due to net income, partially offset by dividends to shareholders. In 2024, we paid dividends of $962 million and $117 million related to our common and preferred shares, respectively.
Repayment of debt On December 15, 2025, the Company repaid, at maturity, $600 million of 0.75% Senior Notes.
Common share repurchases On February 26, 2025, the Board of Directors authorized a $1.50 billion common share repurchase program that must be completed by September 30, 2026. As of December 31, 2025, there was $260 million remaining on the $1.50 billion common share repurchase program. On February 4, 2026, the Board authorized a new 24-month $4.00 billion common share repurchase program which will commence once the existing $1.50 billion program has been completed.
During 2025, we repurchased 6 million common shares, or 2.3% of total common shares outstanding as of December 31, 2024, for $1.24 billion.
Since 1995, we have acquired 799 million shares of our common stock at a cost of $44.51 billion, primarily as part of various stock repurchase programs. We have reissued 160 million common shares since 1995, primarily associated with our equity incentive plans, the 1999 acquisition of American Heritage Life Investment Corporation and the 2001 redemption of certain mandatorily redeemable preferred securities. Since 1995, total common shares outstanding has decreased by 639 million shares or 71.1%, primarily due to our repurchase programs.
Common shareholder dividend per share On January 2, 2025, April 1, 2025, July 1, 2025 and October 1, 2025 we paid a common shareholder dividend of $0.92, $1.00, $1.00 and $1.00 respectively. On November 20, 2025, we declared a common shareholder dividend of $1.00 payable on January 2, 2026.
On February 4, 2026, we announced that our common shareholder dividend will increase to $1.08 and will be payable in cash on April 1, 2026, to stockholders of record at the close of business on March 2, 2026.
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2025 Form 10-K Capital Resources and Liquidity
Financial ratings and strength
Senior long-term debt, commercial paper and insurance financial strength ratings
As of December 31, 2025
Moody’s
S&P Global Ratings
A.M. Best
The Allstate Corporation (debt)
BBB+
The Allstate Corporation (short-term issuer)
AMB-1
Allstate Insurance Company (insurance financial strength)
Our ratings are influenced by many factors including our operating and financial performance, asset quality, liquidity, overall portfolio mix, financial leverage (i.e., debt), exposure to risks such as catastrophes and the current level of operating leverage. The preferred stock and subordinated debentures are viewed as having a common equity component by certain rating agencies and are given equity credit up to a pre-determined limit in our capital structure as determined by their respective methodologies. These respective methodologies consider the existence of certain terms and features in the instruments such as the noncumulative dividend feature in the preferred stock.
The Allstate Corporation (the “Corporation”) and Allstate Insurance Company (“AIC”) In May 2025, Moody’s affirmed the Corporation’s senior debt and short-term issuer ratings of A3 and P-2, respectively, and AIC’s insurance financial strength rating of Aa3. The outlook for the ratings changed from negative to stable.
In May 2025, S&P affirmed the Corporation's senior debt and short-term issuer ratings of BBB+ and A-2, respectively, and AIC's insurance financial strength rating of A+. The outlook for the ratings is stable.
In August 2025, A.M. Best affirmed the Corporation’s senior debt and short-term issuer ratings of a- and AMB-1, respectively, and AIC’s insurance financial strength rating of A+. The outlook for the ratings is stable.
Other property and casualty companies We have distinct and separately capitalized groups of subsidiaries licensed to sell property and casualty insurance that maintain separate group ratings. The ratings of these groups are influenced by the risks that relate specifically to each group. Many mortgage companies require property owners to have property insurance from an insurance carrier with a secure financial strength rating from an accredited rating agency.
In August 2025, A.M. Best affirmed the insurance financial strength ratings of A- for the members of Allstate New Jersey Group (Allstate New Jersey
Insurance Company, Allstate New Jersey Property and Casualty Insurance Company, Encompass Insurance Company of New Jersey, Encompass Property and Casualty Insurance Company of New Jersey and Esurance Insurance Company of New Jersey). The outlook for the ratings is negative. ANJ writes auto and homeowners insurance in New Jersey, which has a financial strength rating of A’ from Demotech, that was affirmed in December 2025.
In August 2025, A.M. Best affirmed the insurance financial strength rating of A+ for North Light, our excess and surplus lines carrier. The outlook for the rating is stable.
In August 2025, A.M. Best affirmed the insurance financial strength ratings of B for the members of Castle Key Group (Castle Key Insurance Company and Castle Key Indemnity Company). The outlook for the ratings is stable. CKIC also has a financial strength rating of A’ from Demotech that was affirmed in December 2025.
ANJ and North Light do not have support agreements with AIC.
Allstate’s domestic property and casualty and accident and health insurance subsidiaries prepare their statutory-basis financial statements in conformity with accounting practices prescribed or permitted by the insurance department of the applicable state of domicile. Statutory surplus is a measure that is often used as a basis for determining dividend paying capacity, operating leverage and premium growth capacity, and it is also reviewed by rating agencies in determining their ratings.
The property and casualty business is comprised of 57 insurance companies as of December 31, 2025, each of which has individual company dividend limitations. As of December 31, 2025, total estimated statutory surplus is $22.95 billion compared to $18.64 billion as of December 31, 2024. Property and casualty subsidiaries surplus was $22.85 billion as of December 31, 2025, compared to $18.24 billion as of December 31, 2024. As of December 31, 2025, our accident and health insurance subsidiary had surplus of $101 million.
The Allstate Corporation 69
2025 Form 10-K Capital Resources and Liquidity
Liquidity sources and uses Our potential sources and uses of funds principally include the following activities below.
Activities for potential sources of funds
Property-Liability
Protection Services
Corporate and all other
Receipt of insurance premiums
Recurring service fees
Reinsurance and indemnification program recoveries
Receipts of principal, interest and dividends on investments
Sales of investments
Funds from securities lending, commercial paper and line of credit agreements
Intercompany loans
Capital contributions from parent (1)
Dividends or return of capital from subsidiaries
Tax refunds/settlements
Funds from periodic issuance of additional securities
Receipt of intercompany settlements related to employee benefit plans
Funds from dispositions
(1) Capital support is generally at management’s discretion unless contractual commitments are in place.
Activities for potential uses of funds
Property-Liability
Protection Services
Corporate and all other
Payment of claims and related expenses
Reinsurance cessions and indemnification program payments
Operating costs and expenses
Purchase of investments
Repayment of securities lending, commercial paper and line of credit agreements
Payment or repayment of intercompany loans
Capital contributions to subsidiaries
Dividends or return of capital to shareholders/parent company
Tax payments/settlements
Payments related to employee benefit plans
Payments for acquisitions
Payment of contract benefits
Common share repurchases
Debt service expenses and repayment
Contractual obligations and commitments We have short-term and long-term contractual obligations and commitments. We manage our short-term liquidity position to ensure the availability of a sufficient amount of liquid assets to extinguish short-term liabilities as they come due in the normal course of business, including utilizing potential sources of liquidity. Long-term obligations include known contractual commitments that require cash needs beyond 12 months.
Short-term contractual obligations are typically settled with cash or short-term investments and operating cash flows. Most of these obligations are paid within one year. These include unconditional purchase obligations, other liabilities and accrued
expenses, including liabilities for collateral and operating leases.
We actively manage our financial position and liquidity levels in light of changing market, economic, and business conditions. Liquidity is managed at both the entity and enterprise level across the Company and is assessed on both base and stressed level liquidity needs. We believe we have sufficient liquidity to meet these needs. Additionally, we have existing intercompany agreements in place that facilitate liquidity management across the Company to enhance flexibility.
As of December 31, 2025, we held $31.31 billion of cash, U.S. government and agencies fixed income securities, public equity securities and short-term investments, which we would expect to be able to
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2025 Form 10-K Capital Resources and Liquidity
liquidate within one week. In addition, we regularly estimate how much of the total portfolio, which includes high quality corporate fixed income and municipal holdings, can be reasonably liquidated within one quarter. These estimates are subject to considerable uncertainty associated with evolving market conditions. As of December 31, 2025, cash and estimated liquidity available within one quarter, under normal market conditions and at current market prices, was $37.38 billion.
Certain remote events and circumstances could constrain our liquidity. Those events and circumstances include, for example, a catastrophe resulting in extraordinary losses, a liquidity decrease in securities markets, dramatic changes in security pricing, a cybersecurity breach, a downgrade in our senior long-term debt ratings to non-investment grade status, or a downgrade in AIC’s financial strength ratings. The rating agencies also consider the interdependence of our individually rated entities; therefore, a rating change in one entity could potentially affect the ratings of other related entities.
The Corporation is party to an Amended and Restated Intercompany Liquidity Agreement (“Liquidity Agreement”) with certain subsidiaries, which includes, but is not limited to AIC. The Liquidity Agreement allows for short-term advances of funds to be made between parties for liquidity and other general corporate purposes. The Liquidity Agreement does not establish a commitment to advance funds on the part of any party. AIC serves as a lender and borrower, certain other subsidiaries serve only as borrowers, and the Corporation serves only as a lender. The maximum amount of potential funding under each of these agreements is $1.00 billion.
In addition to the Liquidity Agreement, the Corporation also has an intercompany loan agreement with certain of its subsidiaries, which includes, but is not limited to, AIC. The amount of intercompany loans available to the Corporation’s subsidiaries is at the discretion of the Corporation. The maximum amount of loans the Corporation will have outstanding to all its eligible subsidiaries at any given point in time is limited to $1.00 billion. The Corporation may use commercial paper borrowings, bank lines of credit and securities lending to fund intercompany borrowings.
Parent company capital capacity At the parent holding company level, we have deployable assets totaling $7.52 billion as of December 31, 2025, primarily comprised of cash and short-term, fixed income and equity securities that are generally saleable within one quarter. The earnings capacity of the operating subsidiaries is the primary source of capital generation for the Corporation.
The payment of dividends by AIC to the Corporation is limited by Illinois insurance law to formula amounts based on statutory net income and statutory surplus, as well as the timing and amount of dividends paid in the preceding twelve months. The maximum amount of dividends that AIC will be able to pay, without prior Illinois Department of Insurance approval, at a given point in time in 2026, based on the
greater of 2025 statutory net income or 10% of actual 2025 statutory surplus. This is estimated to be $7.98 billion, less dividends paid during the preceding twelve months measured at that point in time. AIC paid dividends of $3.95 billion in 2025. For the year ended December 31, 2025, the maximum amount of dividends allowed to be paid by AIC was $3.95 billion. Notification and approval of intercompany lending activities are also required by the Illinois Department of Insurance for those transactions that exceed formula amounts based on statutory admitted assets and statutory surplus.
These holding company assets and subsidiary dividends provide funds for the parent company’s fixed charges and other corporate purposes.
Dividends may not be paid or declared on our common stock and shares of common stock may not be repurchased unless the full dividends for the latest completed dividend period on our preferred stock have been declared and paid or provided for.
The terms of our outstanding subordinated debentures also prohibit us from declaring or paying any dividends or distributions on our common or preferred stock or redeeming, purchasing, acquiring, or making liquidation payments on our common stock or preferred stock if we have elected to defer interest payments on the subordinated debentures, subject to certain limited exceptions. In 2025, we did not defer interest payments on the subordinated debentures.
Additional resources to support liquidity are as follows:
• The Corporation and AIC have access to a $750 million unsecured revolving credit facility that is available for short-term liquidity requirements. The maturity date of this facility is November 2027. The facility is fully subscribed among 11 lenders with the largest commitment being $95 million. The commitments of the lenders are several and no lender is responsible for any other lender’s commitment if such lender fails to make a loan under the facility. This facility contains an increase provision that would allow up to an additional $500 million of borrowing, subject to the lenders’ commitment. This facility has a financial covenant requiring that we not exceed a 37.5% debt to capitalization ratio as defined in the agreement. This ratio was 15.1% as of December 31, 2025. Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior unsecured, unguaranteed long-term debt. There were no borrowings under the credit facility during 2025.
• To cover short-term cash needs, the Corporation has access to a commercial paper facility with a borrowing capacity limited to any undrawn credit facility balance up to $750 million. The total amount outstanding at any point in time under the combination of the credit facility and the commercial paper program cannot exceed the
The Allstate Corporation 71
2025 Form 10-K Capital Resources and Liquidity
amount that can be borrowed under the credit facility.
• As of December 31, 2025, there were no balances outstanding for the credit facility or the commercial paper facility and therefore the remaining borrowing capacity was $750 million under each facility.
• The Corporation has access to a universal shelf registration statement with the Securities and Exchange Commission that was filed on April 30, 2024 and expires in 2027. We can use this shelf registration to issue an unspecified amount of debt securities, common stock (including 640 million shares of treasury stock as of December 31, 2025), preferred stock, depositary shares, warrants, stock purchase contracts and stock purchase units. The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.
Long-term contractual obligations
Defined benefit pension plans and other postretirement benefit plans (“OPEB”) Pension plan obligations within the next 12 months represent our planned contributions to certain unfunded non-qualified plans where the benefit obligation exceeds the assets. Obligations beyond 12 months are projected based on the average remaining service period using the current underfunded status of the plans. The OPEB plans’ obligations are estimated based on the expected benefits to be paid. See Note 17 of the consolidated financial statements for further information.
Reserves for property and casualty insurance claims and claims expense represent estimated amounts necessary to settle all outstanding claims, including claims that have been IBNR as of the balance sheet date. E stimated timing of payments for reserves is based on our historical experience and our expectation of future payment patterns. The ultimate cost of losses may vary materially from recorded amounts that are our best estimates. See Note 10 of the consolidated financial statements and Application of Critical Accounting Estimates section of the MD&A for further information.
Contractual commitments represent investment commitments such as private placements, limited partnership interests and other loans. Limited partnership interests are typically funded over the commitment period, which is shorter than the contractual expiration date of the partnership and as a result, the actual timing of the funding may vary.
We have agreements in place for services we conduct, generally at cost, between subsidiaries relating to insurance, reinsurance, loans and capitalization. All material intercompany transactions have been appropriately eliminated in consolidation. Intercompany transactions among insurance subsidiaries and affiliates have been approved by the appropriate departments of insurance as required.
For a more detailed discussion of our off-balance sheet arrangements, see Note 8 of the consolidated financial statements.
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2025 Form 10-K Enterprise Risk and Return Management
Enterprise Risk and Return Management
Allstate creates shareholder value while serving customers through a comprehensive risk and return framework. These risks are discussed in more detail in the Risk Factors section of this document.
We regularly identify, measure, manage, monitor and report significant risks and assess associated return considerations. Major categories include strategic, insurance, investment, financial, operational and culture risks.
Allstate manages these risks through an Enterprise Risk and Return Management (“ERRM”) framework built on a foundation of risk culture, taxonomy, capacity and governance. Our legal and capital structures are designed to manage capital and solvency on a legal entity basis.
Risk and return principles define how we operate and guide decision-making.
• We ensure a strong foundation by maintaining capital strength, solvency and liquidity, complying with laws, acting with integrity and protecting customers and proprietary information, assets and technology.
• We build strategic value by continually investing in our strategic position, creating flexibility to adapt our business model in a changing world and differentiating through innovation.
• We optimize risk and return through profitable growth, valuing customer relationships in operating and strategic decisions and developing new business offerings and investment opportunities while managing risk concentrations.
Governance ERRM governance includes board oversight, an executive management committee, and enterprise and market-facing business chief risk officers.
• The Allstate Corporation Board of Directors (“Allstate Board”) has overall responsibility for oversight of management’s design and implementation of Allstate’s ERRM framework, supported by the Audit Committee (“AC”) and the Risk and Return Committee (“RRC”).
• The RRC of the Allstate Board oversees the effectiveness of the ERRM program, governance
structure and risk-related decision-making, while focusing on the Company’s aggregate risk profile.
• The AC oversees the effectiveness of internal controls over financial reporting, disclosure controls and procedures, as well as management’s risk and control and cybersecurity program, and assists the Board in fulfilling certain oversight responsibilities as listed in the committee’s charter.
• The Enterprise Risk and Return Council (“ERRC”) directs ERRM activities by establishing risk and return targets, monitoring and targeting capital levels and overseeing integrated strategies and
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2025 Form 10-K Enterprise Risk and Return Management
actions from an enterprise risk and return perspective. For example, such strategies include the deployment of artificial intelligence and the development of enterprise resilience capabilities that protect against cyber threats. The ERRC consists of Allstate’s chief executive officer, chief financial officer, chief risk officer, chief legal officer, chief resilience officer and other senior leaders.
• Other committees work with the ERRC to direct ERRM activities, including the Operational Risk and Return Council, the Information Security Council, the Internal Compliance and Control Committee, liability governance committees and investment committees.
Key risks are assessed and reported through comprehensive ERRM reports prepared for senior management and the RRC. These summary reports communicate the alignment of Allstate’s risk profile with risk and return principles, while providing a perspective on risk positioning. Discussion promotes active engagement with management and the RRC. Internal controls over key risks are managed and reported to senior management and the Audit Committee of the Company through a semi-annual risk control dashboard. Annually, we review risks related to the strategic plan, operating plan and incentive compensation programs with the Allstate Board.
Framework We apply risk and return principles using an integrated ERRM framework that focuses on assessment, transparency and dialogue, which provides a comprehensive view of risks and is used by senior management and business managers to drive risk-informed decisions. We continually validate and improve ERRM practices by benchmarking and obtaining external perspectives.
Management and the ERRC utilize internal and external perspectives to determine an appropriate level of target economic capital. Internal perspectives include enterprise solvency and volatility assessments, review of key operating and model assumptions and management judgment. Sensitivity testing and scenario analysis are used to gauge the robustness of Allstate’s risk, capital and liquidity positions. Analysis of extremely low-frequency scenarios is also used to assess the sufficiency of capital and contingency options under worst-case outcomes, including unlikely but impactful single events, as well as sequences of multiple tail events. External considerations include NAIC risk-based capital as well as S&P’s, Moody’s and A.M. Best’s capital adequacy measurements. Our economic capital reflects management’s view of the aggregate level of capital necessary to satisfy stakeholder interests, manage Allstate’s risk profile and maintain financial strength. The impact of strategic initiatives on enterprise risk is evaluated through this context.
The NAIC has adopted the Risk Management and Own Risk and Solvency Assessment Model Act (“ORSA Model Act”), which has been enacted by our insurance subsidiaries’ domiciliary states. The ORSA Model Act requires that insurers maintain a risk management framework and conduct an internal own risk and
solvency assessment of the insurer’s material risks in normal and stressed environments. Results of the assessment are filed annually.
Allstate’s risk appetite is measured through our economic capital framework, which establishes the amount of capital needed to support the current and projected enterprise risk profile and provides a methodology for measuring risk-adjusted returns and optimizing capital allocations. Enterprise risk appetite is cascaded into individual targets and limits for specific risk types, weighing expected returns, volatility, potential tail losses and impact on the enterprise portfolio.
Process We establish a basis for transparency and dialogue across the enterprise and for continuous learning by embedding risk and return management culture within the organization. Allstate designs strategies that seek to optimize risk-adjusted returns on capital, with risks managed at both the legal entity and enterprise level.
Many risk drivers impact more than one of the key risk categories. Examples include risks related to inflation and the impacts of climate change, which span Allstate’s major risk categories. Such risks are managed within Allstate’s integrated ERRM framework and the processes listed below, but the overall strategy is coordinated at the enterprise level, and holistic governance is provided by cross-functional committees such as the ERRC.
A summary of our process to manage each of our major risk and return categories follows:
Strategic risk and return management encompasses risks and opportunities associated with long-term business planning and strategy setting in the context of the evolving market environment.
Areas of focus include macroeconomic, regulatory and competitive conditions, as well as customer preferences and behavior, Allstate’s reputation and the continuous enhancement of internal capabilities that allow Allstate to compete effectively in chosen markets. Allstate manages strategic risks in part through Allstate Board and senior management reviews that include risk and return assessment of strategic plans and ongoing monitoring of strategic actions, key assumptions and the broader market environment.
Insurance risk and return management encompasses risks and opportunities associated with Allstate’s insurance activities, including expected trends and unanticipated fluctuations in premiums, claims and future profits. Focus areas include policy growth, loss frequency, severity trends and scenarios, severe weather and catastrophe exposures and claim handling processes. Allstate uses sophisticated mathematical modeling techniques to measure, monitor and manage associated risk exposures, including stochastic risk estimation and deterministic scenario analysis.
Investment risk and return management encompasses risks and opportunities associated with
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Allstate’s investment portfolio. Areas of focus include macroeconomic conditions and potential changes to key variables such as interest rates, credit spreads and equity price levels, as well as specific factors that may impact the returns associated with individual investments. Changes in such factors drive daily volatility in the valuations of portfolio holdings and could cause permanent impairments of capital due to credit defaults and equity write-downs.
Investment risk exposures are measured and monitored using tools such as sensitivity analysis, stochastic risk estimation and deterministic scenario analysis, which together are used to assess investment portfolio risk characteristics and how the investment portfolio contributes to the enterprise risk profile.
For further details on investment risk, see the Market Risk section of this Item.
Financial risk and return management addresses the sufficiency of capital and cash flow liquidity to meet enterprise, subsidiary and policyholder needs. We actively manage associated risks and opportunities in light of changing market, economic and business conditions using modeling frameworks and tools that assess potential sources and uses of capital and liquidity and help ensure strategic and financial flexibility.
We generally assess solvency on a statutory accounting basis, but also consider holding company capital and liquidity needs. Capital at the insurance companies significantly exceeds regulatory risk-based capital requirements and capital levels at the parent holding company provide liquidity and financial flexibility to meet enterprise requirements.
Operational risk and return management encompasses risks and opportunities associated with Allstate’s interconnected systems of people, processes and technology. Representative areas of focus include talent, privacy, regulatory compliance, ethics, fraud, system availability, cybersecurity and resilience, disaster recovery and business continuity.
Associated risks are managed using an integrated and iterative Operational Risk and Return Management framework that ensures dynamic and continuous learning process.
Culture risk and return management addresses risks and opportunities associated with company culture, which we define as a self-sustaining system of values, expectations, practices, and beliefs that people learn, follow and transmit that lead to priorities, decisions and outcomes. Allstate’s approach to culture risk and return management is grounded in its risk and return principles and organized by Our Shared Purpose, targeting continual alignment of culture with the company’s mission, values, operating standards and behaviors.
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2025 Form 10-K Application of Critical Accounting Estimates
Application of Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates, presented in the order they appear in the Consolidated Statements of Financial Position, include those used in determining:
• Fair value of financial assets
• Impairment of fixed income securities with credit losses
• Evaluation of goodwill
• Reserve for property and casualty insurance claims and claims expense estimation
• Pension and other postretirement plans net costs and assumptions
In making these determinations, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our businesses and operations. It is reasonably likely that changes in these estimates could occur from period to period and result in a material impact on our consolidated financial statements.
A summary of each of these critical accounting estimates follows. For a more detailed discussion of the effect of these estimates on our consolidated financial statements, and the judgments and assumptions related to these estimates, see the referenced sections of this document. For a more detailed summary of our significant accounting policies, see the notes to the consolidated financial statements.
Fair value of financial assets
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are responsible for the determination of fair value of financial assets and the supporting assumptions and methodologies. We use independent third-party valuation service providers, broker quotes and internal pricing methods to determine fair values for each financial instrument in our financial statements.
Our valuation hierarchy prioritizes the use of observable inputs. When available, fair values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we can access. If unadjusted quoted prices are not available, fair values are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active or valuation models with observable inputs. If observable inputs are not available or determinable, unobservable inputs or adjustments to observable
inputs requiring management judgment are used to determine the estimated fair value of the investment.
For additional information on fair value measurements, see Note 7 of the consolidated financial statements and the risk factor titled “ Determination of the fair value and amount of credit losses for investments includes subjective judgments and could materially impact the results of operations and financial condition ” disclosed in Part 1 “Item 1A. Risk Factors’’. A more detailed discussion of investments is presented in the Investments section of the MD&A and Note 6 of the consolidated financial statements.
Impairment of fixed income securities with credit losses
For fixed income securities classified as available-for-sale, the difference between amortized cost, net of credit loss allowance (“amortized cost, net”) and fair value, net of certain other items and deferred income taxes (as disclosed in Note 6 of the consolidated financial statements), is reported as a component of AOCI on the Consolidated Statements of Financial Position and is not reflected in the operating results of any period until reclassified to net income upon the consummation of a transaction with an unrelated third party or when a credit loss allowance is recorded. We have a comprehensive portfolio monitoring process to identify and evaluate each fixed income security that may require a credit loss allowance.
For each fixed income security in an unrealized loss position, we assess whether management with the appropriate authority has made the decision to sell or whether it is more likely than not we will be required to sell the security before recovery of the amortized cost basis for reasons such as liquidity, contractual or regulatory purposes. If a security meets either of these criteria, any existing credit loss allowance would be written-off against the amortized cost basis of the asset along with any remaining unrealized losses, with the incremental losses recorded in earnings.
If we have not made the decision to sell the fixed income security and it is not more likely than not we will be required to sell the fixed income security before recovery of its amortized cost basis, we evaluate whether we expect to receive cash flows sufficient to recover the entire amortized cost basis of the security. We calculate the estimated recovery value based on the best estimate of future cash flows considering past events, current conditions and reasonable and supportable forecasts. The estimated future cash flows are discounted at the security’s current effective rate and are compared to the amortized cost of the security. The determination of cash flow estimates is inherently subjective, and methodologies may vary depending on facts and circumstances specific to the security. All reasonably available information relevant to the collectability of the security are considered when developing the estimate of cash flows expected to be collected. That information generally includes, but is not limited to, as applicable, the remaining payment terms of the security, prepayment speeds,
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the financial condition and future earnings potential of the issue or issuer, expected defaults, expected recoveries, the value of underlying collateral, origination vintage year, geographic concentration of underlying collateral, available reserves or escrows, current subordination levels, third-party guarantees and other credit enhancements. Other information, such as industry analyst reports and forecasts, sector credit ratings, and other market data relevant to the realizability of contractual cash flows, may also be considered. The estimated fair value of collateral will be used to estimate recovery value if we determine that the security is dependent on the liquidation of collateral for ultimate settlement.
If we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of the fixed income security, a credit loss allowance is recorded in earnings for the shortfall in expected cash flows; however, the amortized cost, net of the credit loss allowance, may not be lower than the fair value of the security. The portion of the unrealized loss related to factors other than credit remains classified in AOCI. If we determine that the fixed income security does not have sufficient cash flow or other information to estimate a recovery value for the security, we may conclude that the entire decline in fair value is deemed to be credit related and the loss is recorded in earnings.
When a security is sold or otherwise disposed or the security is deemed uncollectible and written off, we reverse amounts previously recognized in the credit loss allowance. Recoveries after write-offs are recognized when received.
For additional detail on investment impairments, see Note 6 of the consolidated financial statements.
Evaluation of goodwill
Goodwill impairment testing The Company performs its annual goodwill impairment testing at the reporting unit level during the fourth quarter of each year based upon data as of the close of the third quarter. Goodwill impairment is measured and recognized as the amount by which a reporting unit’s carrying value, including goodwill, exceeds its fair value, not to exceed the carrying amount of goodwill allocated to the reporting unit. The Company also reviews goodwill for impairment whenever events or changes in circumstances, such as deteriorating or adverse market conditions, indicate that it is more likely than not that the carrying amount of the reporting unit including goodwill may exceed the fair value of the reporting unit.
Fair value estimation process Estimating the fair value of reporting units is subjective and involves the use of significant estimates by management. Changes in market inputs or other events impacting the fair value of these businesses could result in goodwill impairments, resulting in a charge to income. Key factors influencing market inputs include changes in: (1) discount rates; (2) operating results; (3) investment returns; (4) strategies; and (5) growth rate assumptions, including the risk of loss of key customers in the Protection Services segment.
Some reporting units comprise both legacy and acquired businesses, resulting in substantial internally generated and unrecognized intangibles and fair values that significantly exceed their carrying values.
Valuation techniques Upon acquisition, the purchase price of the acquired business is assumed to be its fair value. Subsequently, we estimate the fair value of our businesses in each goodwill reporting unit by utilizing a combination of these widely accepted valuation techniques:
• Stock price and market capitalization analysis take into consideration the quoted market price of our outstanding common stock and includes a control premium, derived from relevant historical acquisition activity, in determining the estimated fair value of the consolidated entity before allocating that fair value to individual reporting units.
• Discounted cash flow analysis utilizes long term assumptions for revenues, investment income, benefits, claims, other operating expenses and income taxes to produce projections of both income and cash flows available for dividends that are present valued using the weighted average cost of capital.
• Market to book multiples represent the mean market to book multiple for selected peer companies with operations similar to each goodwill reporting unit to which the multiple is applied.
The outputs from these methods are weighted based on the nature of the business and the relative amount of market observable assumptions supporting the estimates. The computed values are then weighted to reflect the fair value estimate based on the specific attributes of each goodwill reporting unit.
For additional detail on goodwill, see Note 2 of the consolidated financial statements.
Reserve for property and casualty insurance claims and claims expense estimation
Reserves are established to provide for the estimated costs of paying claims and claims expenses under insurance policies we have issued. These reserves are an estimate of amounts necessary to settle all outstanding claims, including estimates of all expenses associated with processing and settling incurred claims as of the financial statement date.
Auto and homeowners liability losses generally take an average of about two years to settle, while auto physical damage, homeowners property and other personal lines generally have an average settlement time of less than one year. Liability losses, especially those involving litigation, can take many years to resolve. Run-off Property-Liability involves long-tail losses, such as those related to asbestos and environmental claims, which often involve substantial reporting lags and extended times to settle.
Estimating the ultimate cost of claims and claims expenses is an inherently uncertain and complex process involving a high degree of judgment and is subject to the evaluation of numerous variables.
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2025 Form 10-K Application of Critical Accounting Estimates
Underwriting results are significantly influenced by estimates of property and casualty insurance claims and claims expense reserves.
The actuarial methods used to develop reserve estimates Reserve estimates are derived by using several different actuarial estimation methods that are mostly variations on one primary actuarial technique known as a “chain ladder” estimation process. In this process, historical loss patterns are applied to actual paid losses and reported losses (paid losses plus individual case reserves established by claim adjusters) for an accident year or a report year to create an estimate of how losses are likely to develop over time.
In the chain ladder estimation technique, development factors are calculated which compare current period results to results in the prior period for each accident year or report year. The effects of inflation are implicitly considered in the reserving process, as development factors use historic data that incorporates inflation from recent prior periods in estimating future loss costs. The estimation methodology may require modification when data changes due to changing claim reporting practices, changing claim settlement patterns, external regulatory or financial influences, or contractual coverage changes. Changes in such items and inflation can result in increased variability in loss costs and reserve estimates. Actuarial judgment is then applied to develop a best estimate of gross ultimate losses. These developments are discussed further in the loss ratio disclosures within the Allstate Protection Segment and the Reserve for Property and Casualty Insurance Claims and Claims Expense sections of the MD&A. See the Run-off Property-Liability reserve estimates section for specific disclosures of industry and actuarial best practices for this segment.
How reserve estimates are established and updated Reserve estimates are developed at a detailed level, and the results are aggregated to form a consolidated reserve estimate. The detailed estimates include each line of insurance, major components of
losses (such as coverages and perils), major states or groups of states for reported losses and IBNR. The significant lines of business are auto, homeowners, and other personal lines for Allstate Protection, and asbestos, environmental, and other run-off lines for Run-off Property-Liability. Reserves are established for each business segment and line of business, independently of business segment management.
Development factors are calculated for data elements such as claim counts reported and settled, paid losses, and paid losses combined with case reserves. The historical development patterns for these data elements are used to calculate reserve estimates. Based on this review, our best estimate of required reserves is recorded.
Reserves are reestimated quarterly and periodically throughout the year, by combining historical results with current actual results to calculate new development factors. This process incorporates the historic and latest actual trends, and other underlying changes in the data elements used to calculate reserve estimates. New development factors are likely to differ from previous development factors used in prior reserve estimates because actual results occur differently than the assumptions contained in the previous development factor calculations. When actual development of these data elements is different than the historical development pattern used in a prior period reserve estimate, a new reserve is determined. The difference between indicated reserves based on new reserve estimates and recorded reserves (the previous estimate) is the amount of reserve reestimate. This amount, which could be material and vary significantly from period to period, is recognized as an increase or decrease in Property and casualty insurance claims and claims expense in the Consolidated Statements of Operations.
A more detailed discussion of reserve reestimates is presented in the Reserve for Property and Casualty Insurance Claims and Claims Expense section of the MD&A.
Net reserves by segment and line of business
As of December 31,
($ in millions)
Allstate Protection
Auto
Homeowners
Other lines
Total Allstate Protection
Run-off Property-Liability
Asbestos
Environmental
Other run-off lines
Total Run-off Property-Liability
Total Protection Services
Total net reserves
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Reserve reestimates
($ in millions)
Reserve reestimates, after-tax (1)
Percentage impact on net income (loss) applicable to common shareholders - favorable (unfavorable)
(1) Reserve releases are shown in parentheses.
3-year average of net reserve reestimates as a percentage of total reserves for its segment (1) (2)
Allstate Protection
Run-off Property-Liability
(1) Reserve releases are shown in parentheses.
(2) Each of these results is consistent within a reasonable actuarial tolerance for the respective businesses.
Allstate Protection reserve estimate
Factors affecting reserve estimates Generally, reserves are informed by analysis of historical relationships to relevant loss development indicators such as inflation. These relationships guide the initial reserve setting for a new report year or accident year using actual claim frequency and severity assumptions across business segments, lines and coverages. For prior report years or accident years, reserve estimates are developed using similar historical relationships and statistical processes on holistic loss costs. These estimates are considered in conjunction with known facts and interpretations of circumstances, including our 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 laws and regulations, judicial decisions and economic conditions.
Changes in auto claim frequency may result from changes in mix of business, driving behaviors, 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, changes in attorney represented and litigated claim behavior, the effectiveness and efficiency of our claim settlements and changes in mix of claim types. Injury claims are affected largely by medical inflation, treatment trends, attorney representation and litigation costs, while physical damage claims are affected largely by auto repair cost inflation, used car prices, length of claim resolution and the timing of receipt of third-party carrier claims.
Changes in homeowners current year claim severity are generally influenced by inflation in the cost of building materials, the cost of construction and property repair services, the cost of replacing home furnishings and other contents, the types of claims that qualify for coverage, deductibles, other economic and environmental factors and the effectiveness of our claim practices.
As loss experience for the current year develops for each type of loss, it is monitored relative to initial
assumptions until it is judged to have sufficient statistical credibility. From that point in time forward, reserves are reestimated using statistical actuarial processes to reflect the impact actual loss trends have on development factors incorporated into the actuarial estimation processes.
Loss experience and reserve variability are impacted by many factors, including but not limited to:
• Supply chain disruptions and labor shortages, changes in used car prices, labor and part cost increases, unemployment levels, changes in commuting activity and driving behavior have and may continue to lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability.
• If a legal change is expected to have a significant impact on the development of claim severity for a coverage which is part of a particular line of insurance in a specific state, judgment is applied to determine appropriate development factors that will most accurately reflect the expected impact on that specific estimate.
• If a change in economic conditions, including the impacts from existing or future U.S. tariffs, is expected to affect the cost of repairs or replacement of damaged autos or property for a particular line, coverage, or state, actuarial judgment is applied to determine appropriate development factors to use in the reserve estimate that will most accurately reflect the expected impacts on severity development.
Causes of reserve estimate uncertainty At each reporting date, the highest degree of uncertainty in estimates for most of our losses from ongoing businesses arises from claims remaining to be settled for the current accident year and the most recent preceding accident year. The greatest degree of uncertainty exists in the current accident year because the current accident year 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 but must be estimated as of the current reporting date. Most of these losses relate to damaged property such as automobiles and homes, and payments related to from . During the first year after the end of an year, a large portion of the total for that year are settled. When year paid through the end of the first year following the initial year are incorporated into updated actuarial estimates, the trends inherent in the settlement of emerge more clearly. After the second year, the that we pay for an year typically relate to that are more to settle, such as those involving or . Private passenger auto insurance provides a illustration of the uncertainty of future estimates: our typical annual percentage payout of reserves remaining at December 31 for an year is approximately 50% in the first year after the end
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of the accident year, 20% in the second year, 10% in the third year, 10% in the fourth year, and the remaining 10% thereafter.
Potential variability in reserve estimates Reserve estimates, by their nature, are very complex to determine, subject to significant judgment, may be subject to litigation and represent estimates rather than an exact determination for each outstanding claim, including claims incurred but not reported. Accordingly, as actual claims, paid losses, and case reserve results emerge, our estimate of the ultimate cost to settle will differ from previous estimates.
The reserve liability recorded in the Consolidated Statements of Financial Position represents the aggregation of numerous analyses by each business segment, line of insurance, major types of losses (such as coverages and perils), and individual states or groups of states for reported losses and IBNR. Because of this detailed approach to our reserve analysis, there is not a single set of assumptions that determines our reserve estimates at the consolidated level or that management believes can produce a statistically credible or reliable actuarial reserve range that would be meaningful.
To develop a statistical measure of potential reserve variability, an actuarial technique (stochastic modeling) is applied to the countrywide data for paid losses combined with case reserves for each of auto liability, auto physical damage and homeowners insurance excluding catastrophes. Based on the combined historical variability of the development factors calculated for these data elements, an estimate of standard deviation around these reserve estimates is calculated within each accident year for the last twelve years for each type of loss. The variability of these reserve estimates within one standard deviation of the mean (a measure of frequency of dispersion often viewed to be an acceptable level of accuracy) is believed by management to represent a reasonable and statistically probable measure of potential variability.
Based on our products and coverages, historical experience, the statistical credibility of our extensive data and stochastic modeling of actuarial methodologies used to develop reserve estimates, we have derived standard deviations and the resulting pre-tax income for Allstate Protection reserves, excluding catastrophe losses, as shown below.
Reserve estimate variability
December 31, 2025
($ in millions)
Carried reserves (1)
Standard deviation
Income effect, pre-tax
Auto insurance - liability coverage
Auto insurance - physical damage coverage
Homeowners insurance
(1) Excludes reserves related to catastrophes.
Although this evaluation reflects most reasonably likely outcomes, it is possible the final outcome may fall below or above these amounts. Historical variability of reserve estimates is reported in the Reserve for Property and Casualty Insurance Claims and Claims Expense section of the MD&A.
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.
Reserves for catastrophe losses Catastrophe losses are an inherent risk of the property and casualty insurance industry that have contributed, and will continue to contribute, to potentially material year-to-year fluctuations in our results of operations and financial position. We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first-party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes.
We are also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest, wildfires or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.
The estimation of claims and claims expense reserves for catastrophe losses also comprises estimates of losses from reported claims and IBNR, primarily for damage to property. In general, our estimates for catastrophe reserves are based on claim adjuster inspections and the application of historical loss development factors as described above. However, depending on the nature of the catastrophe, the estimation process can be further complicated.
For example, for hurricanes, complications could include the inability of insureds to promptly report losses, limitations placed on claims adjusting staff affecting their ability to inspect losses, determining whether losses are covered by our homeowners policy (generally for damage caused by wind or wind-driven rain) or specifically excluded coverage caused by flood, exposure to mold damage, and the effects of numerous other considerations. Additionally, the timing of a catastrophe in relation to other events, such as at or near the end of a financial reporting period, can affect the availability of information needed to estimate reserves for that reporting period. In these situations, we may need to adapt our practices to accommodate these circumstances in order to determine a best estimate of our losses from a catastrophe.
For example, to complete estimates for certain
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areas affected by catastrophes not yet inspected by our claims adjusting staff, or where we believed our historical loss development factors were not predictive, we rely on:
• Analysis of actual claim notices received compared to total PIF.
• Visual, governmental and third-party information, including aerial photos, using satellites, aircrafts and drones, area observations, and data on wind speed and flood depth to the extent available.
Reserves for Michigan and New Jersey unlimited PIP Claims and claims expense reserves include reserves for Michigan unlimited PIP coverage to insureds involved in qualifying motor vehicle accidents. The administration of this program is through the MCCA, a state-mandated, non-profit association of which all insurers actively writing automobile coverage in Michigan are members.
The process employed to estimate MCCA covered losses involves a number of activities including the comprehensive review and interpretation of MCCA actuarial reports, other MCCA members’ reports and our PIP loss trends which have increased in severity over time. A significant portion of incurred claim reserves can be attributed to a small number of catastrophic claims, and thus a large portion of the recoverable is similarly concentrated. We conduct comprehensive claim file reviews to develop case reserve type estimates of specific claims, which inform our view of future claim development and longevity of claimants. Each year, we update the actuarial estimate of our ultimate reserves and recoverables. We report our paid and unpaid claims based on MCCA requirements. The MCCA develops its own reserving estimates based on its own reserve methodologies, which may not align with our estimations. The MCCA does not provide member companies with its estimate of a company’s claim costs.
We provide similar PIP coverage in New Jersey for auto policies issued or renewed in New Jersey prior to 1991 that is administered by PLIGA. We use similar actuarial estimating techniques as for the MCCA exposures to estimate loss reserves for unlimited PIP coverage for policies covered by PLIGA. Unlimited coverage was not offered after 1991; therefore, no new claimants are being added.
For additional information related to indemnification recoverables, see Item 1 - Regulation, Indemnification Programs and Note 11 of the consolidated financial statements.
Run-off Property-Liability reserve estimates
Characteristics of Run-off exposure Our exposure to asbestos, environmental and other run-off claims arise principally from assumed reinsurance coverage written from the 1960s through the mid-1980s, including reinsurance on primary insurance written on large U.S. companies, and from direct excess commercial insurance written from 1972 through 1985, including substantial excess general liability coverages on large U.S. companies. Additional exposure stems
from direct primary commercial insurance written from the 1960s through the mid-1980s. Asbestos claims relate primarily to bodily injuries asserted by claimants who were exposed to asbestos or products containing asbestos. Environmental claims relate primarily to pollution and related clean-up costs. Other run-off claims exposures primarily relate to general liability and product liability mass tort claims, such as those for medical devices and other products, workers’ compensation claims and claims for various other coverage exposures other than asbestos and environmental.
In 1986, the general liability policy form used by us and others in the property and casualty industry was amended to introduce an “absolute pollution exclusion,” which excluded coverage for environmental damage claims, and to add an asbestos exclusion. Most general liability policies issued prior to 1987 contain annual aggregate limits for product liability coverage. General liability policies issued in 1987 and thereafter contain annual aggregate limits for product liability coverage and annual aggregate limits for all coverages. Our experience to date is that these policy form changes have limited the extent of our exposure to environmental and asbestos claim risks.
Our exposure to liability for asbestos, environmental and other run-off claims losses manifests differently depending on whether it arises from assumed reinsurance coverage, direct excess commercial insurance or direct primary commercial insurance. Direct excess commercial insurance and reinsurance involve coverage written by us for specific layers of protection above retentions and other insurance plans and largely has resulted in asbestos, environmental and mass tort claims. The nature of excess coverage and reinsurance provided to other insurers limits our exposure to loss to specific layers of protection in excess of policyholder retention on their primary insurance plans. Our exposure is further limited by the significant reinsurance that we had purchased on our direct excess business.
Our assumed reinsurance business involved writing generally small participations in other insurers’ reinsurance programs. The reinsured losses in which we participate may be a proportion of all eligible losses or eligible losses in excess of defined retentions. Of the majority of our assumed reinsurance exposure, approximately 85% is for excess of loss coverage, while the remaining 15% is for pro-rata coverage.
Our direct primary commercial insurance business comprises a cross section of policyholders engaged in many diverse business sectors throughout the country and did not include coverage to large asbestos companies.
How reserve estimates are established and updated We conduct an annual review in the third quarter to evaluate, establish and adjust as necessary, asbestos, environmental and other run-off claims reserves. Changes to reserves are recorded in the reporting period in which they are determined. Using established industry and actuarial best practices and assuming no change in the regulatory or economic
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environment, this detailed and comprehensive methodology determines asbestos reserves based on assessments of the characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, and determines environmental reserves based on assessments of the characteristics of exposure (e.g., environmental damages, respective shares of liability of potentially responsible parties, appropriateness and cost of remediation) to pollution and related clean-up costs. The number and cost of these claims are affected by advertising by trial lawyers seeking asbestos plaintiffs, and entities with asbestos exposure seeking bankruptcy protection as a result of asbestos liabilities, initially causing a delay in the reporting of claims, often followed by an acceleration and an increase in claims and claims expenses as settlements occur.
After evaluating our insureds’ probable liabilities for asbestos, environmental and other run-off claims, we evaluate our insureds’ coverage programs for such claims. We consider our insureds’ total available insurance coverage, including the coverage we issued. We also consider relevant judicial interpretations of policy language and applicable coverage defenses or determinations, if any.
Evaluation of both the insureds’ estimated liabilities and our exposure to the insureds depends heavily on an analysis of the relevant legal issues and litigation environment. This analysis is conducted by our specialized claims adjusting staff and legal counsel. Based on these evaluations, case reserves are established by claims adjusting staff and actuarial analysis is employed to develop an IBNR reserve, which includes estimated potential reserve development and claims that have occurred but have not been reported. As of December 31, 2025 and 2024, IBNR was 58.2% and 54.0%, respectively, of combined net asbestos and environmental reserves.
For both asbestos and environmental reserves, we also evaluate our historical direct net loss and expense paid and incurred experience to assess any emerging trends, fluctuations or characteristics suggested by the aggregate paid and incurred activity. Other run-off claims reserves are based on considerations similar to those described above, as they relate to the characteristics of specific individual coverage exposures.
Potential reserve estimate variability Establishing net loss reserves for asbestos, environmental and other run-off claims is subject to uncertainties that are much greater than those presented by other types of property and casualty claims. Among the complications are lack of historical data, long reporting delays, uncertainty as to the number and identity of insureds with potential exposure and unresolved legal issues regarding policy coverage; unresolved legal issues regarding the determination, availability and timing of exhaustion of policy limits; plaintiffs’ evolving and expanding theories of liability; availability and collectability of recoveries from reinsurance; retrospectively determined premiums and other contractual agreements; estimates of the extent and
timing of any contractual liability; the impact of bankruptcy protection sought by various asbestos producers and other asbestos defendants; and other uncertainties.
There are also complex legal issues concerning the interpretation of various insurance policy provisions and whether those losses are covered, or were ever intended to be covered, and could be recoverable through retrospectively determined premium, reinsurance or other contractual agreements. Courts have reached different and sometimes inconsistent conclusions as to when losses are deemed to have occurred and which policies provide coverage; what types of losses are covered; whether there is an insurer obligation to defend; how policy limits are determined; how policy exclusions and conditions are applied and interpreted; and whether clean-up costs represent insured property damage.
Our reserves for asbestos, environmental and other run-off exposures could be affected by tort reform, class action litigation, and other potential legislation and judicial decisions. Environmental exposures could also be affected by a change in the existing federal Superfund law and similar state statutes. There can be no assurance that any reform legislation will be enacted or that any such legislation will provide for a fair, effective and cost-efficient system for settlement of asbestos or environmental claims. We believe these issues are not likely to be resolved in the near future, and the ultimate costs may vary materially from the amounts currently recorded resulting in material changes in loss reserves. Due to the uncertainties and factors described above, management believes it is not practicable to develop a meaningful net loss reserve range. Historical variability of reserve estimates is reported in the Property and Casualty Insurance Claims and Claims Expense Reserves section of the MD&A.
Reinsurance and indemnification recoverables
Reinsurance and indemnification recoverables include an estimate of the amount of insurance claims and claims expense reserves that are ceded under the terms of the agreements, including IBNR unpaid losses. We calculate our ceded reinsurance and indemnification estimates based on the terms of each applicable agreement, including an estimate of how IBNR losses will ultimately be ceded under the agreement. We also consider other limitations and coverage exclusions under our agreements. Accordingly, our estimate of recoverables is subject to similar risks and uncertainties as our estimate of reserves for claims and claims expense. We believe the recoverables are appropriately established; however, as our underlying reserves continue to develop, the amount ultimately recoverable may vary from amounts currently recorded. We regularly evaluate the reinsurers and the respective amounts of our reinsurance recoverables, and a provision for uncollectible reinsurance recoverables is recorded, if needed. The establishment of reinsurance recoverables and the related allowance for uncollectible reinsurance is also an inherently uncertain process involving estimates. Changes in estimates
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could result in additional changes to the Consolidated Statements of Operations.
Adequacy of reserve for property and casualty insurance claims and claims expense estimates
We believe our net reserves are appropriately established based on available facts, laws and regulations and assessments of other pertinent factors and characteristics of exposure (e.g., claim activity, potential liability, jurisdiction, products versus non-products exposure) presented by individual policyholders, assuming no change in the legal, legislative or economic environment. Additionally, we rely on historical claims experience to inform the level of the recorded reserve. We derive and record a single best reserve estimate, in conformance with generally accepted actuarial standards and practices, for each line of insurance, its components (coverages and perils) and state, for reported losses and for IBNR losses, and as a result we believe that no other estimate is better than our recorded amount. Due to the uncertainties involved, the ultimate cost of losses may vary materially from recorded amounts, which are based on our best estimates.
For further discussion of these estimates and quantification of the impact of reserve estimates, reserve reestimates and assumptions, see Note 10 and Note 14 of the consolidated financial statements and the Reserve for Property and Casualty Insurance Claims and Claims Expense section of the MD&A.
Pension and other postretirement plans net costs and assumptions
Our pension and other postretirement benefit costs are calculated using various actuarial assumptions and methodologies. These assumptions include discount rates, health care cost trend rates, inflation, expected returns on plan assets, mortality and other factors. The assumptions utilized in recording the obligations under our defined benefit plans represent our best estimates, and we believe they are reasonable based on information as to historical experience and performance as well as other factors that might cause future expectations to differ from past trends. Approximately 89% of our benefit obligation relates to our U.S. qualified defined benefit pension plan.
Net costs for our defined benefit plans are recognized on the Consolidated Statements of
Operations and consist of two elements: 1) costs comprised of service and interest costs, expected return of plan assets, amortization of prior service credit and curtailment gains and losses which are reported in property and casualty claims and claims expense, operating costs and expenses, net investment income and, if applicable, restructuring and related charges and 2) remeasurement gains and losses comprised of changes in actuarial assumptions and the difference between actual and expected returns on plan assets which are recognized immediately in earnings as part of pension and other postretirement remeasurement gains and losses.
We recognize expected returns on plan assets using an unadjusted fair value method. Our policy is to remeasure our pension and postretirement plans on a quarterly basis. We immediately recognize the remeasurement of the benefit obligation and plan assets in earnings as it provides greater transparency of our economic obligations in accounting results and better aligns the recognition of 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.
Differences in actual experience and changes in other assumptions affect our pension and other postretirement obligations and expenses. Differences between expected and actual returns on plan assets affect remeasurement gains and losses. The primary factors contributing to pension and 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 participant experience; and 4) changes in lump sum interest rates and cash balance interest crediting rates used to value pension obligations as of the measurement date.
Pension and other postretirement service cost, interest cost, expected return on plan assets and amortization of prior service credits are allocated to the Allstate Protection and Protection Services segments. The pension and other postretirement remeasurement gains and losses are reported in the Corporate segment.
Pension and postretirement benefits remeasurement gains and losses
For the years ended December 31,
($ in millions)
Remeasurement of benefit obligation (gains) losses:
Discount rate
Other assumptions
Remeasurement of plan assets (gains) losses
Remeasurement (gains) losses
Impact of assumption changes to net cost for pension and other postretirement plans Remeasurement gains in 2025 primarily related to favorable asset performance compared to expected
return on plan assets, partially offset by a decrease in the liability discount rate and changes in actuarial assumptions. Remeasurement gains in 2024 primarily related to an increase in the liability discount rate and
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changes in other assumptions, partially offset by unfavorable asset performance compared to expected return on plan assets.
The discount rate is based on rates at which expected pension benefits attributable to past employee service could effectively be settled on a present value basis at the measurement date. We develop the assumed discount rate by utilizing the weighted average yield of a theoretical dedicated portfolio derived from non-callable bonds and callable bonds with a make-whole provision available or callable within 12 months of maturity in the Bloomberg corporate bond universe having ratings of “AA” by S&P or “Aa” by Moody’s on the measurement date with cash flows that match expected plan benefit requirements. Significant changes in discount rates, such as those caused by changes in the credit spreads, yield curve, the mix of bonds available in the market, the duration of selected bonds and expected benefit payments, may result in volatility in pension cost. The weighted average discount rate used to measure the benefit obligation decreased to 5.52% on December 31, 2025 compared to 5.71% on December 31, 2024, resulting in remeasurement losses for 2025.
The expected long-term rate of return on plan assets reflects the average rate of earnings expected on plan assets. While this rate reflects long-term assumptions and is consistent with long-term historical returns, sustained changes in the market or changes in the mix of plan assets may lead to revisions in the assumed long-term rate of return on plan assets that may result in variability of pension cost. Differences between the actual return on plan assets and the expected long-term rate of return on plan assets are immediately
recognized through earnings at each quarterly remeasurement date. Short-term asset performance can differ significantly from the expected rate of return, especially in volatile markets. In 2025, the actual return on plan assets was higher than the expected return primarily due to higher public equity valuations and higher fixed income valuations, partially offset by lower performance-based equity valuations. In 2024, the actual return on plan assets was lower than the expected return primarily due to lower fixed income valuations driven by higher rates, partially offset by higher equity valuations.
We complete periodic evaluations of demographic information and historical experience that affects our pension and other postretirement obligations to identify any required changes to long-term actuarial assumptions and methodologies. Demographic assumptions affect both our pension and postretirement plans and include elements such as retirement rates and participation rates in our postretirement programs, among other factors.
These actuarial assumption updates affect our pension and other postretirement obligations and are incorporated into our best estimates of these assumptions. Remeasurement losses for other assumptions in 2025 primarily related to plan experience and a decrease in the long-term lump sum interest rate, partially offset by gains from an experience study completed on final average pay retirement rates. Remeasurement losses for other assumptions in 2024 primarily related to an increase in the cash balance interest crediting rate, partially offset by gains from an experience study.
Impact of assumption changes to net periodic pension cost as of December 31, 2025
($ in millions)
Basis/percentage point change
Increase (decrease) to net cost, pre-tax
Pension plans discount rate
+100 basis points
-100 basis points
Expected long-term rate of return on assets
+100 basis points
-100 basis points
See Note 17 of the consolidated financial statements for a discussion of our pension and other postretirement benefit plans and their effect on the consolidated financial statements.
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Regulation and Legal Proceedings
We are subject to extensive regulation and we are involved in various legal and regulatory actions, all of which have an effect on specific aspects of our business. For a detailed discussion of the legal and regulatory actions in which we are involved, see Note 14 of the consolidated financial statements.
Pending Accounting Standards
There are pending accounting standards that we have not implemented because the implementation dates have not yet occurred. For a discussion of these pending standards, see Note 2 of the consolidated financial statements.
