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1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For
2、 the transition period from _ to _Commission file number 1-11840THE ALLSTATE CORPORATION(Exact name of registrant as specified in its charter)Delaware 36-3871531 (State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)3100 Sanders Road,Northbrook,Illinois 600
3、62(Address of principal executive offices)(Zip Code)Registrants telephone number,including area code:(847)402-5000Securities registered pursuant to Section 12(b)of the Act:Title of each classTradingSymbolsName of each exchange on which registeredCommon Stock,par value$.01 per shareALLNew York Stock
4、ExchangeChicago Stock Exchange5.100%Fixed-to-Floating Rate Subordinated Debentures due 2053ALL.PR.BNew York Stock ExchangeDepositary Shares represent 1/1,000th of a share of 5.100%Noncumulative Preferred Stock,Series HALL PR HNew York Stock ExchangeDepositary Shares represent 1/1,000th of a share of
5、 4.750%Noncumulative Preferred Stock,Series IALL PR INew York Stock ExchangeIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12months(or for such shorter period that the regist
6、rant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of thi
7、s chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growthc
8、ompany.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth compa
9、ny,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in R
10、ule 12b-2 of the Exchange Act).Yes No As of April 17,2023,the registrant had 262,851,915 common shares,$.01 par value,outstanding.The Allstate CorporationIndex to Quarterly Report on Form 10-QMarch 31,2023Part I Financial InformationPage Item 1.Financial Statements(unaudited)as of March 31,2023 and
11、December 31,2022 and for the Three Month Periods Ended March 31,2023 and2022Condensed Consolidated Statements of Operations1Condensed Consolidated Statements of Comprehensive Income(Loss)2Condensed Consolidated Statements of Financial Position3Condensed Consolidated Statements of Shareholders Equity
12、4 Condensed Consolidated Statements of Cash Flows5 Notes to Condensed Consolidated Financial Statements(unaudited)6 Report of Independent Registered Public Accounting Firm46Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations Highlights47 Property-Liability Ope
13、rations51Segment resultsAllstate Protection53Run-off Property-Liability60Protection Services62Allstate Health and Benefits64 Investments66 Capital Resources and Liquidity74Forward-Looking Statements76Item 4.Controls and Procedures76 Part II Other InformationItem 1.Legal Proceedings77Item 1A.Risk Fac
14、tors77Item 2.Unregistered Sales of Equity Securities and Use of Proceeds77Item 6.Exhibits78Condensed Consolidated Financial StatementsPart I.Financial InformationItem 1.Financial StatementsThe Allstate Corporation and SubsidiariesCondensed Consolidated Statements of Operations(unaudited)($in million
15、s,except per share data)Three months endedMarch 31,20232022Revenues Property and casualty insurance premiums$12,173$10,981 Accident and health insurance premiums and contract charges463 468 Other revenue561 560 Net investment income575 594 Net gains(losses)on investments and derivatives14(267)Total
16、revenues13,786 12,336 Costs and expenses Property and casualty insurance claims and claims expense10,326 7,822 Accident,health and other policy benefits265 268 Amortization of deferred policy acquisition costs1,744 1,608 Operating costs and expenses1,716 1,902 Pension and other postretirement remeas
17、urement(gains)losses(53)(247)Restructuring and related charges27 12 Amortization of purchased intangibles81 87 Interest expense86 83 Total costs and expenses14,192 11,535(Loss)income from operations before income tax expense(406)801 Income tax(benefit)expense(85)151 Net(loss)income(321)650 Less:Net
18、loss attributable to noncontrolling interest(1)(10)Net(loss)income attributable to Allstate(320)660 Less:Preferred stock dividends26 26 Net(loss)income applicable to common shareholders$(346)$634 Earnings per common share:Net(loss)income applicable to common shareholders per common share-Basic$(1.31
19、)$2.28 Weighted average common shares-Basic263.5 278.1 Net(loss)income applicable to common shareholders per common share-Diluted$(1.31)$2.25 Weighted average common shares-Diluted263.5 281.8 See notes to condensed consolidated financial statements.First Quarter 2023 Form 10-Q 1Condensed Consolidate
20、d Financial StatementsThe Allstate Corporation and SubsidiariesCondensed Consolidated Statements of Comprehensive Income(Loss)(unaudited)($in millions)Three months ended March 31,20232022Net(loss)income$(321)$650 Other comprehensive income(loss),after-tax Changes in:Unrealized net capital gains and
21、losses682(1,594)Unrealized foreign currency translation adjustments50 Unamortized pension and other postretirement prior service credit(4)(15)Discount rate for reserve for future policy benefits(9)95 Other comprehensive income(loss),after-tax719(1,514)Comprehensive income(loss)398(864)Less:Comprehen
22、sive income(loss)attributable to noncontrolling interest4(22)Comprehensive income(loss)attributable to Allstate$394$(842)See notes to condensed consolidated financial statements.2 Condensed Consolidated Financial StatementsThe Allstate Corporation and SubsidiariesCondensed Consolidated Statements of
23、 Financial Position(unaudited)($in millions,except par value data)March 31,2023December 31,2022AssetsInvestments Fixed income securities,at fair value(amortized cost,net$46,120 and$45,370)$44,103$42,485 Equity securities,at fair value(cost$2,147 and$4,253)2,174 4,567 Mortgage loans,net781 762 Limite
24、d partnership interests7,971 8,114 Short-term,at fair value(amortized cost$6,722 and$4,174)6,722 4,173 Other investments,net1,724 1,728 Total investments63,475 61,829 Cash662 736 Premium installment receivables,net9,483 9,165 Deferred policy acquisition costs5,471 5,442 Reinsurance and indemnificati
25、on recoverables,net9,528 9,619 Accrued investment income436 423 Deferred income taxes345 382 Property and equipment,net971 987 Goodwill3,502 3,502 Other assets,net5,758 5,904 Total assets99,631 97,989 Liabilities Reserve for property and casualty insurance claims and claims expense38,644 37,541 Rese
26、rve for future policy benefits1,338 1,322 Contractholder funds878 879 Unearned premiums22,499 22,299 Claim payments outstanding1,333 1,268 Other liabilities and accrued expenses9,114 9,353 Debt8,452 7,964 Total liabilities82,258 80,626 Commitments and Contingent Liabilities(Note 14)Equity Preferred
27、stock and additional capital paid-in,$1 par value,25 million shares authorized,81.0 thousand sharesissued and outstanding,$2,025 aggregate liquidation preference1,970 1,970 Common stock,$.01 par value,2.0 billion shares authorized and 900 million issued,263 million and 263 millionshares outstanding9
28、 9 Additional capital paid-in3,780 3,788 Retained income50,388 50,970 Treasury stock,at cost(637 million and 637 million shares)(36,980)(36,857)Accumulated other comprehensive income:Unrealized net capital gains and losses(1,573)(2,255)Unrealized foreign currency translation adjustments(115)(165)Una
29、mortized pension and other postretirement prior service credit25 29 Discount rate for reserve for future policy benefits(10)(1)Total accumulated other comprehensive income(1,673)(2,392)Total Allstate shareholders equity17,494 17,488 Noncontrolling interest(121)(125)Total equity17,373 17,363 Total li
30、abilities and equity$99,631$97,989 See notes to condensed consolidated financial statements.First Quarter 2023 Form 10-Q 3Condensed Consolidated Financial StatementsThe Allstate Corporation and SubsidiariesCondensed Consolidated Statements of Shareholders Equity(unaudited)($in millions,except per sh
31、are data)Three months ended March 31,20232022Preferred stock par value$Preferred stock additional capital paid-in1,970 1,970 Common stock par value9 9 Common stock additional capital paid-inBalance,beginning of period3,788 3,722 Equity incentive plans activity(8)(16)Balance,end of period3,780 3,706
32、Retained incomeBalance,beginning of period50,970 53,288 Net(loss)income(320)660 Dividends on common stock(declared per share of$0.89 and$0.85)(236)(236)Dividends on preferred stock(26)(26)Balance,end of period50,388 53,686 Treasury stockBalance,beginning of period(36,857)(34,471)Shares acquired(153)
33、(794)Shares reissued under equity incentive plans,net30 57 Balance,end of period(36,980)(35,208)Accumulated other comprehensive incomeBalance,beginning of period(2,392)426 Change in unrealized net capital gains and losses682(1,594)Change in unrealized foreign currency translation adjustments50 Chang
34、e in unamortized pension and other postretirement prior service credit(4)(15)Change in discount rate for reserve for future policy benefits(9)95 Balance,end of period(1,673)(1,088)Total Allstate shareholders equity17,494 23,075 Noncontrolling interestBalance,beginning of period(125)(52)Change in unr
35、ealized net capital gains and losses5(12)Noncontrolling loss(1)(10)Balance,end of period(121)(74)Total equity$17,373$23,001 See notes to condensed consolidated financial statements.4 Condensed Consolidated Financial StatementsThe Allstate Corporation and SubsidiariesCondensed Consolidated Statements
36、 of Cash Flows(unaudited)($in millions)Three months ended March31,20232022Cash flows from operating activitiesNet(loss)income$(321)$650 Adjustments to reconcile net income(loss)to net cash provided by operating activities:Depreciation,amortization and other non-cash items177 236 Net(gains)losses on
37、investments and derivatives(14)267 Pension and other postretirement remeasurement(gains)losses(53)(247)Changes in:Policy benefits and other insurance reserves1,080(111)Unearned premiums199 390 Deferred policy acquisition costs(29)(103)Premium installment receivables,net(317)(502)Reinsurance recovera
38、bles,net91 333 Income taxes(125)93 Other operating assets and liabilities(87)(574)Net cash provided by operating activities601 432 Cash flows from investing activities Proceeds from sales Fixed income securities7,008 12,400 Equity securities3,739 5,216 Limited partnership interests414 300 Other inve
39、stments55 208 Investment collections Fixed income securities646 104 Mortgage loans22 3 Other investments25 49 Investment purchases Fixed income securities(8,424)(13,220)Equity securities(1,187)(3,624)Limited partnership interests(226)(216)Mortgage loans(41)(37)Other investments(73)(186)Change in sho
40、rt-term and other investments,net(2,675)114 Purchases of property and equipment,net(79)(130)Net cash(used in)provided by investing activities(796)981 Cash flows from financing activities Proceeds from issuance of long-term debt744 Redemption and repayment of debt(250)Contractholder fund deposits33 3
41、4 Contractholder fund withdrawals(9)(9)Dividends paid on common stock(224)(230)Dividends paid on preferred stock(26)(26)Treasury stock purchases(153)(802)Shares reissued under equity incentive plans,net6 17 Other(30)Net cash provided by(used in)financing activities121(1,046)Net(decrease)increase in
42、cash(74)367 Cash at beginning of period736 763 Cash at end of period$662$1,130 See notes to condensed consolidated financial statements.First Quarter 2023 Form 10-Q 5Notes to Condensed Consolidated Financial StatementsThe Allstate Corporation and SubsidiariesNotes to Condensed Consolidated Financial
43、 Statements(Unaudited)Note 1GeneralBasis of presentationThe accompanying condensed consolidated financial statementsinclude the accounts of The Allstate Corporation(the“Corporation”)andits wholly owned subsidiaries,primarily Allstate Insurance Company(“AIC”),a property and casualty insurance company
44、(collectively referredto as the“Company”or“Allstate”)and variable interest entities(“VIEs”)inwhich the Company is considered a primary beneficiary.Thesecondensed consolidated financial statements have been prepared inconformity with accounting principles generally accepted in the UnitedStates of Ame
45、rica(“GAAP”).The condensed consolidated financial statements and notes as ofMarch 31,2023 and for the three month periods ended March 31,2023and 2022 are unaudited.The condensed consolidated financialstatements reflect all adjustments(consisting only of normal recurringaccruals)which are,in the opin
46、ion of management,necessary for the fairpresentation of the financial position,results of operations and cash flowsfor the interim periods.These condensed consolidated financial statements and notes shouldbe read in conjunction with the consolidated financial statements andnotes thereto included in
47、the Companys annual report on Form 10-K forthe year ended December 31,2022.The results of operations for theinterim periods should not be considered indicative of results to beexpected for the full year.All significant intercompany accounts andtransactions have been eliminated.To reflect the applica
48、tion of the new guidance to all in-scope long-duration insurance contracts,certain amounts in the condensedconsolidated financial statements and notes for 2022 have been recast.Macroeconomic impactsThe Novel Coronavirus Pandemic or COVID-19(“Coronavirus”)andsubsequent U.S.government fiscal and monet
49、ary policies have and maycontinue to effect economic activity through longer-term impacts such assupply chain disruptions,labor shortages and other macroeconomicfactors that have increased inflation and affected our operations.Thesefactors may continue to significantly affect results of operations,f
50、inancialcondition and liquidity.The impact from the pandemic and the ongoingeffects should be considered when comparing the current period to priorperiods.Adopted accounting standardAccounting for Long-Duration Insurance Contracts Effective January1,2023,the Company adopted the Financial Accounting
51、Standards Board(”FASB”)guidance revising the accounting for certain long-durationinsurance contracts using the modified retrospective approach to thetransition date of January 1,2021.Under the new guidance,measurement assumptions,including thosefor mortality,morbidity and policy lapses,are required
52、to be reviewed atleast annually,and updated as appropriate.In addition,reserves underthe new guidance are required to be discounted using an upper-mediumgrade fixed income instrument yield that is updated through othercomprehensive income(“OCI”)at each reporting date.Additionally,deferred policy acq
53、uisition costs(“DAC”)for all long-duration products willbe amortized on a simplified basis.Also,the Companys reserve for futurepolicy benefits and DAC will be subject to new disclosure guidance.In addition,the Company met the conditions included in AccountingStandards Update No.2022-05,Transition fo
54、r Sold Contracts,and electedto not apply the new guidance for contracts that were part of the 2021sales of Allstate Life Insurance Company(“ALIC”)and Allstate LifeInsurance Company of New York(“ALNY”).After-tax cumulative effect of change in accounting principle ontransition date($in millions)Januar
55、y 1,2021Decrease in retained income$21 Decrease in accumulated othercomprehensive income(“AOCI”)277 Total decrease in equity$298 The decrease in AOCI is primarily attributable to a change in thediscount rate used in measuring the reserve for future policy benefits fortraditional life contracts and o
56、ther long-term products with guaranteedterms from a portfolio-based rate at contract issuance to an upper-medium grade fixed income-based rate at the reporting date.Thedecrease in retained income primarily relates to certain cohorts of long-term contracts whose expected net premiums exceeded expecte
57、d grosspremiums which resulted in an increase in reserves and a decrease inretained income equal to the present value of expected future benefitsless the present value of expected future premiums at the transition date.6 Notes to Condensed Consolidated Financial StatementsTransition disclosures The
58、following tables summarize the balance of and changes in the reserve for future policy benefits and DAC on January 1,2021upon the adoption of the guidance.Impact of adoption for reserve for future policy benefits($in millions)Accident andhealthTraditional lifeTotalPre-adoption 12/31/2020 balance$728
59、$311$1,039 Adjustments:Effect of the remeasurement of the reserve at upper-medium grade fixed income-based rate 232 153 385 Adjustments for contracts with net premiums in excess of gross premiums 77 77 Total adjustments309 153 462 Post-adoption 1/1/2021 balance1,037 464 1,501 Less:reinsurance recove
60、rables 159 3 162 Post-adoption 1/1/2021 balance,after reinsurance recoverables$878$461$1,339 Traditional life includes$11 million in reserves related to riders of traditional life insurance products reclassified from contractholder funds.Adjustment reflected with a corresponding decrease to AOCI.Adj
61、ustment reflected with a corresponding decrease to retained income.Represents post-adoption January 1,2021 balance of reinsurance recoverables.Adjustments to reinsurance recoverables for accident and health products increased January1,2021 AOCI by$33 million due to the remeasurement of the reserve a
62、t upper-medium grade fixed income based rate and increased January 1,2021 retained income by$51 million due to adjustments for contracts with net premiums in excess of gross premiums.Impact of adoption for DAC($in millions)Accident andhealthTraditional lifeInterest-sensitive lifeTotalPre-adoption 12
63、/31/2020 balance$343$32$95$470 Adjustment for removal of impact of unrealized gains or losses 2 2 Post-adoption 1/1/2021 balance$343$32$97$472 Adjustment reflected with a corresponding increase to AOCI.Impacts of the adoption on the financial statementsConsolidated Statements of OperationsThree mont
64、hs ended March 31,2022($in millions,except per share data)As reportedImpact ofchangeAs adjustedRevenuesAccident and health insurance premiums and contract charges$469$(1)$468 Total revenues12,337(1)12,336 Costs and expensesAccident,health and other policy benefits269(1)268 Amortization of deferred p
65、olicy acquisition costs1,612(4)1,608 Total costs and expenses11,540(5)11,535 Income from operations before income tax expense797 4 801 Income tax expense151 151 Net income646 4 650 Net income attributable to Allstate656 4 660 Net income applicable to common shareholders$630$4$634 Earnings per common
66、 share:Net income applicable to common shareholders per common share-Basic$2.27$0.01$2.28 Net income applicable to common shareholders per common share-Diluted$2.24$0.01$2.25(1)(2)(3)(4)(1)(2)(3)(4)(1)(1)First Quarter 2023 Form 10-Q 7Notes to Condensed Consolidated Financial StatementsCondensed Cons
67、olidated Statements of Comprehensive Income(unaudited)Three months ended March 31,2022($in millions)As reportedImpact ofchangeAs adjustedNet income$646$4$650 Other comprehensive income(loss),after-taxChanges in:Unrealized net capital gains and losses(1,593)(1)(1,594)Discount rate for reserve for fut
68、ure policy benefits 95 95 Other comprehensive loss,after-tax(1,608)94(1,514)Comprehensive loss(962)98(864)Comprehensive loss attributable to Allstate$(940)$98$(842)Condensed Consolidated Statements of Financial Position(unaudited)December 31,2022($in millions)As reportedImpact ofchangeAs adjustedAss
69、etsDeferred policy acquisition costs$5,418$24$5,442 Reinsurance and indemnification recoverables,net9,606 13 9,619 Deferred income taxes386(4)382 Other assets,net5,905(1)5,904 Total assets97,957 32 97,989 LiabilitiesReserve for future policy benefits1,273 49 1,322 Contractholder funds897(18)879 Unea
70、rned premiums22,311(12)22,299 Total liabilities80,607 19 80,626 EquityRetained income50,954 16 50,970 Accumulated other comprehensive income:Unrealized net capital gains and losses(2,253)(2)(2,255)Discount rate for reserve for future policy benefits(1)(1)Total AOCI(2,389)(3)(2,392)Total Allstate sha
71、reholders equity17,475 13 17,488 Total equity17,350 13 17,363 Total liabilities and equity$97,957$32$97,989 8 Notes to Condensed Consolidated Financial StatementsCondensed Consolidated Statements of Shareholders Equity(unaudited)Three months ended March 31,2022($in millions)As reportedImpact ofchang
72、eAs adjustedRetained incomeBalance,beginning of period$53,294$(6)$53,288 Net income656 4 660 Balance,end of period53,688(2)53,686 Accumulated other comprehensive income(loss)Balance,beginning of period655(229)426 Change in unrealized net capital gains and losses(1,593)(1)(1,594)Change in discount ra
73、te for reserve for future policy benefits 95 95 Balance,end of period(953)(135)(1,088)Total Allstate shareholders equity23,212(137)23,075 Total equity$23,138$(137)$23,001 Condensed Consolidated Statements of Cash Flows(unaudited)Three months ended March 31,2022($in millions)As reportedImpact ofchang
74、eAs adjustedCash flows from operating activitiesNet income$646$4$650 Adjustments to reconcile net income to net cash provided by operating activities:Changes in:Policy benefits and other insurance reserves(113)2(111)Unearned premiums392(2)390 Deferred policy acquisition costs(99)(4)(103)Reinsurance
75、recoverables,net334(1)333 Income taxes92 1 93 Other operating assets and liabilities(574)(574)Net cash provided by operating activities$432$432 Changes to significant accounting policiesReserve for future policy benefitsLong-duration voluntary accident and health insurance and traditionallife insura
76、nce contracts The reserve for future policy benefits(“RFPB”)iscalculated using the net premium reserving model,which uses the presentvalue of insurance contract benefits less the present value of netpremiums.Under the net premium reserving model,the Companycomputes a net premium ratio which is the p
77、resent value of insurancecontract benefits divided by the present value of gross premiums.Thepresent value of contract benefits and gross premiums are determinedusing the discount rate at contract inception.The net premium ratio isapplied to premiums due on a periodic basis to compute the RFPB.Thene
78、t premium ratio is recomputed at least annually using both actualhistorical cash flows and future cash flows anticipated over the life ofcohort of contracts subject to measurement.Assumptions includingmortality,morbidity,and lapses affect the timing and amount of estimatedcash flows used to calculat
79、e the RFPB.The Company has grouped contracts into cohorts based on producttype and issue year.Examples of insurance product types include wholelife,term life,critical illness and disability.Issue year is based on theissuance date of the contract to the policyholder,except in the case of contracts ac
80、quired in a business combination,wherethe issue date is based on the acquisition date of the businesscombination.The RFPB is calculated for contracts in force at the end ofeach period,which results in the Company recognizing the effects ofactual experience in the period it occurs.Annually,in the thi
81、rd quarter,the Company obtains historicalpremiums and benefits information and evaluates future cash flowassumptions that include mortality,morbidity,and terminations,andupdates cash flow assumptions as necessary.The Company has electedto not update the expense assumption when annually reviewing and
82、updating future cash flow assumptions.Actual premiums and benefits andany updates to future cash flow assumptions are incorporated into thecalculation of an updated net premium ratio.Updates for actual premiumsand benefits and changes to future cash flow assumptions will result in aliability remeasu
83、rement gain or loss that is recognized in net income.Thefirst step to determining the liability remeasurement gain or loss is tocalculate the RFPB using revised net premiums discounted at the locked-in discount rate set at contract issuance.The result of the first step is thencompared to the carryin
84、g amount of the RFPB before the updates foractual experience and changes to future cash flow assumptions.Thedecrease(gain)or increase(loss)in the RFPB is reported as liabilityFirst Quarter 2023 Form 10-Q 9Notes to Condensed Consolidated Financial Statementsremeasurement gain or loss in net income an
85、d presented parentheticallyas part of Accident,health and other policy benefits on the ConsolidatedStatements of Operations.The updated net premium ratio is used infuture quarters to measure the RFPB until the next annual update or anearlier date if the Company determines it is necessary to revise f
86、uturecash flow assumptions based on available evidence,including actualexperience.The discount rate assumption is determined using a yield curveapproach.The yield curve consists of U.S.dollar-denominated seniorunsecured fixed-income securities issued by U.S.companies that have anA credit rating base
87、d on the ratings provided by nationally recognizedrating agencies that include Moodys,Standard&Poors,and Fitch.Forpoints on the yield curve that do not have observable yields,the Companyuses linear interpolation which calculates the unobservable yield basedon the two nearest observable yields,except
88、 for any points beyond thelast observable yield at 30 years,where interest rates are held constantwith the last observable point on the yield curve.The Company updatesthe current discount rate quarterly and the change in the RFPB resultingfrom the updated current discount rate is recognized in OCI.D
89、eferred policy acquisition costsDeferred policy acquisition costs are related directly to the successfulacquisition of new or renewal insurance contracts and are deferred andrecognized as an expense over the life of the related contracts.Thesecosts are principally agent and broker remuneration,premi
90、um taxes andcertain underwriting expenses.All other acquisition costs are expensed asincurred and included in operating costs and expenses.Long-duration voluntary accident and health insurance,traditional lifeinsurance contracts,and interest-sensitive life insurance contractsVoluntary accident and h
91、ealth insurance and traditional life insurancecontracts are grouped by product and issue year into cohorts consistentwith the cohorts used to calculate the RFPB.Interest-sensitive lifeinsurance contracts are grouped into cohorts by issue year,and the issueyear is determined based on contract issue d
92、ate.DAC is amortized on aconstant level basis over the expected contract term and is included inAmortization of deferred policy acquisition costs on the ConsolidatedStatements of Operations.The constant level basis used for all cohorts isbased on policies-in-force.The expected contract term and mort
93、ality,morbidity,and termination assumptions are used to calculate both DACamortization and the RFPB.If actual contract terminations are greaterthan expected terminations for any cohort,each affected cohorts DACbalance will be reduced in the current period based on the differencebetween the actual an
94、d expected terminations.No adjustments to DACamortization are recorded if actual contract terminations are less thanexpected terminations for any cohort.If the Company makes an update toany of its mortality,morbidity,or termination assumptions,the Companywill use the assumptions prospectively to amo
95、rtize any cohorts remainingDAC over the remaining expected contract term.The costs assigned to the right to receive future cash flows fromcertain business purchased from other insurers are also classified as DACin the Consolidated Statements of Financial Position.The costscapitalized represent the p
96、resent value of future profits expected to beearned over the lives of the contracts acquired.The Company amortizesthe present value of future profits using the same methodology andassumptions as the amortization of DAC.The present value of futureprofits is subject to premium deficiency testing.10 No
97、tes to Condensed Consolidated Financial StatementsNote 2Earnings per Common ShareBasic earnings per common share is computed using the weightedaverage number of common shares outstanding,including vestedunissued participating restricted stock units.Diluted earnings per commonshare is computed using
98、the weighted average number of common anddilutive potential common shares outstanding.For the Company,dilutive potential common shares consist ofoutstanding stock options,unvestednon-participating restricted stock units and contingently issuableperformance stock awards.The effect of dilutive potenti
99、al common sharesdoes not include the effect of options with an anti-dilutive effect onearnings per common share because their exercise prices exceed theaverage market price of Allstate common shares during the period or forwhich the unrecognized compensation cost would have an anti-dilutiveeffect.Co
100、mputation of basic and diluted earnings per common share(In millions,except per share data)Three months ended March 31,20232022Numerator:Net(loss)income$(321)$650 Less:Net loss attributable to noncontrolling interest(1)(10)Net(loss)income attributable to Allstate(320)660 Less:Preferred stock dividen
101、ds26 26 Net(loss)income applicable to common shareholders$(346)$634 Denominator:Weighted average common shares outstanding263.5 278.1 Effect of dilutive potential common shares:Stock options 2.6 Restricted stock units(non-participating)and performance stock awards 1.1 Weighted average common and dil
102、utive potential common shares outstanding263.5 281.8 Earnings per common share-Basic$(1.31)$2.28 Earnings per common share-Diluted$(1.31)$2.25 Anti-dilutive options excluded from diluted earnings per common share1.1 1.2 Weighted average dilutive potential common shares excluded due to net loss appli
103、cable to common shareholders 2.6 As a result of the net loss reported for the three month period ended March 31,2023,weighted average shares for basic earnings per share is also used for calculating dilutedearnings per share because all dilutive potential common shares are anti-dilutive and are ther
104、efore excluded from the calculation.Note 3Reportable SegmentsMeasuring segment profit or lossThe measure of segment profit or loss used in evaluatingperformance is underwriting income for the Allstate Protection and Run-offProperty-Liability segments and adjusted net income for the ProtectionService
105、s,Allstate Health and Benefits and Corporate and Othersegments.Underwriting income is calculated as premiums earned and otherrevenue,less claims and claims expenses(“losses”),amortization ofDAC,operating costs and expenses,amortization or impairment ofpurchased intangibles and restructuring and rela
106、ted charges asdetermined using GAAP.Adjusted net income is net income(loss)applicable to commonshareholders,excluding:Net gains and losses on investments and derivativesPension and other postretirement remeasurement gains and lossesAmortization or impairment of purchased intangiblesGain or loss on d
107、ispositionAdjustments for other significant non-recurring,infrequent or unusualitems,when(a)the nature of the charge or gain is such that it isreasonably unlikely to recur within two years,or(b)there has been nosimilar charge or gain within the prior two yearsIncome tax expense or benefit on reconci
108、ling itemsA reconciliation of these measures to net income(loss)applicable tocommon shareholders is provided below.(1)(1)(1)(1)First Quarter 2023 Form 10-Q 11Notes to Condensed Consolidated Financial StatementsReportable segments financial performanceThree months ended March 31,($in millions)2023202
109、2Underwriting income(loss)by segmentAllstate Protection$(998)$282 Run-off Property-Liability(3)(2)Total Property-Liability(1,001)280 Adjusted net income(loss)by segment,after-taxProtection Services34 53 Allstate Health and Benefits56 57 Corporate and Other(89)(111)Reconciling itemsProperty-Liability
110、 net investment income509 558 Net gains(losses)on investments and derivatives14(267)Pension and other postretirement remeasurement gains(losses)53 247 Amortization of purchased intangibles(24)(29)Gain(loss)on disposition9(16)Income tax benefit(expense)on reconciling items92(148)Total reconciling ite
111、ms653 345 Less:Net loss attributable to noncontrolling interest(1)(10)Net(loss)income applicable to common shareholders$(346)$634 Excludes amortization of purchased intangibles in Property-Liability,which is included above in underwriting income.Reflects net loss attributable to noncontrolling inter
112、est in Property-Liability.(1)(2)(1)(2)12 Notes to Condensed Consolidated Financial StatementsReportable segments revenue information($in millions)Three months ended March 31,20232022Property-Liability Insurance premiums Auto$7,908$7,081 Homeowners2,810 2,490 Other personal lines562 531 Commercial li
113、nes232 283 Other business lines123 113 Allstate Protection11,635 10,498 Run-off Property-Liability Total Property-Liability insurance premiums11,635 10,498 Other revenue353 347 Net investment income509 558 Net gains(losses)on investments and derivatives12(203)Total Property-Liability12,509 11,200 Pr
114、otection ServicesProtection plans361 313 Roadside assistance49 53 Finance and insurance products128 117 Intersegment premiums and service fees 33 41 Other revenue84 94 Net investment income16 9 Net gains(losses)on investments and derivatives(1)(13)Total Protection Services670 614 Allstate Health and
115、 BenefitsEmployer voluntary benefits255 263 Group health107 94 Individual health101 111 Other revenue101 95 Net investment income19 17 Net gains(losses)on investments and derivatives2(7)Total Allstate Health and Benefits585 573 Corporate and Other Other revenue23 24 Net investment income31 10 Net ga
116、ins(losses)on investments and derivatives1(44)Total Corporate and Other55(10)Intersegment eliminations(33)(41)Consolidated revenues$13,786$12,336 Intersegment insurance premiums and service fees are primarily related to Arity and Allstate Roadside and are eliminated in the condensed consolidated fin
117、ancial statements.(1)(1)(1)First Quarter 2023 Form 10-Q 13Notes to Condensed Consolidated Financial StatementsNote 4InvestmentsPortfolio composition($in millions)March 31,2023December 31,2022Fixed income securities,at fair value$44,103$42,485 Equity securities,at fair value2,174 4,567 Mortgage loans
118、,net781 762 Limited partnership interests7,971 8,114 Short-term investments,at fair value6,722 4,173 Other investments,net1,724 1,728 Total$63,475$61,829 Amortized cost,gross unrealized gains(losses)and fair value for fixed income securities($in millions)Amortized cost,netGross unrealizedFairvalueGa
119、insLossesMarch 31,2023 U.S.government and agencies$7,826$21$(152)$7,695 Municipal6,499 65(240)6,324 Corporate29,705 118(1,787)28,036 Foreign government1,112 3(24)1,091 ABS978 4(25)957 Total fixed income securities$46,120$211$(2,228)$44,103 December 31,2022 U.S.government and agencies$8,123$6$(231)$7
120、,898 Municipal6,500 36(326)6,210 Corporate28,562 46(2,345)26,263 Foreign government997 (40)957 ABS1,188 4(35)1,157 Total fixed income securities$45,370$92$(2,977)$42,485 Scheduled maturities for fixed income securities($in millions)March 31,2023December 31,2022Amortized cost,netFair valueAmortized c
121、ost,netFair valueDue in one year or less$3,754$3,697$2,870$2,836 Due after one year through five years24,766 23,771 26,546 25,217 Due after five years through ten years11,461 10,697 11,035 9,870 Due after ten years5,161 4,981 3,731 3,405 45,142 43,146 44,182 41,328 ABS978 957 1,188 1,157 Total$46,12
122、0$44,103$45,370$42,485 Actual maturities may differ from those scheduled as a result of calls and make-whole payments by the issuers.ABS is shown separately because ofpotential prepayment of principal prior to contractual maturity dates.Net investment income($in millions)Three months ended March 31,
123、20232022Fixed income securities$390$267 Equity securities11 36 Mortgage loans8 8 Limited partnership interests134 292 Short-term investments66 2 Other investments41 40 Investment income,before expense650 645 Investment expense(75)(51)Net investment income$575$594 14 Notes to Condensed Consolidated F
124、inancial StatementsNet gains(losses)on investments and derivatives by asset type($in millions)Three months ended March 31,20232022Fixed income securities$(136)$(152)Equity securities167(347)Mortgage loans(1)Limited partnership interests22(101)Derivatives(52)318 Other investments13 16 Net gains(losse
125、s)on investments and derivatives$14$(267)Net gains(losses)on investments and derivatives by transaction type($in millions)Three months ended March 31,20232022Sales$(120)$(127)Credit losses(12)(11)Valuation change of equity investments 198(447)Valuation change and settlements of derivatives(52)318 Ne
126、t gains(losses)on investments and derivatives$14$(267)Includes valuation change of equity securities and certain limited partnership interests where the underlying assets are predominately public equity securities.Gross realized gains(losses)on sales of fixed income securities($in millions)Three mon
127、ths ended March 31,20232022Gross realized gains$46$66 Gross realized losses(173)(218)Net appreciation(decline)recognized in net income for assets that are still held($in millions)Three months ended March 31,20232022Equity securities$20$(92)Limited partnership interests carried at fair value16 38 Tot
128、al$36$(54)Credit losses recognized in net income($in millions)Three months ended March 31,20232022AssetsFixed income securities:Corporate$(9)$Total fixed income securities(9)Mortgage loans(1)Other investmentsBank loans(3)(10)Total credit losses by asset type$(12)$(11)LiabilitiesCommitments to fund c
129、ommercial mortgage loans and bank loans Total$(12)$(11)(1)(1)First Quarter 2023 Form 10-Q 15Notes to Condensed Consolidated Financial StatementsUnrealized net capital gains and losses included in AOCI($in millions)FairvalueGross unrealizedUnrealized netgains(losses)March 31,2023GainsLossesFixed inco
130、me securities$44,103$211$(2,228)$(2,017)Short-term investments6,722 Derivative instruments (2)(2)Limited partnership interests 4 Unrealized net capital gains and losses,pre-tax (2,015)Other unrealized net capital gains and losses,pre-tax 18 Deferred income taxes 424 Unrealized net capital gains and
131、losses,after-tax$(1,573)December 31,2022Fixed income securities$42,485$92$(2,977)$(2,885)Short-term investments4,173 (1)(1)Derivative instruments (3)(3)Limited partnership interests 2 Unrealized net capital gains and losses,pre-tax (2,887)Other unrealized net capital gains and losses,pre-tax 23 Defe
132、rred income taxes 609 Unrealized net capital gains and losses,after-tax$(2,255)Unrealized net capital gains and losses for limited partnership interests represent the Companys share of the equity method of accounting(“EMA”)limited partnerships OCI.Fair value and gross unrealized gains and losses are
133、 not applicable.Includes amounts recognized for the reclassification of unrealized gains and losses related to noncontrolling interest.Change in unrealized net capital gains(losses)($in millions)Three months ended March31,2023Fixed income securities$868 Short-term investments1 Derivative instruments
134、1 Limited partnership interests2 Total872 Other unrealized net capital gains and losses,pre-tax(5)Deferred income taxes(185)Increase in unrealized net capital gains and losses,after-tax$682 Carrying value for limited partnership interests($in millions)March 31,2023December 31,2022EMAFair ValueTotalE
135、MAFair ValueTotalPrivate equity$5,546$1,199$6,745$5,372$1,217$6,589 Real estate1,019 29 1,048 1,013 29 1,042 Other 178 178 483 483 Total$6,743$1,228$7,971$6,868$1,246$8,114 Other consists of certain limited partnership interests where the underlying assets are predominately public equity and debt se
136、curities.Short-term investments Short-term investments,including money market funds,commercial paper,U.S.Treasury bills and other short-term investments,arecarried at fair value.As of March 31,2023 and December 31,2022,the fair value of short-term investments totaled$6.72 billion and$4.17 billion,re
137、spectively.(1)(2)(1)(2)(1)(2)(1)(1)16 Notes to Condensed Consolidated Financial StatementsOther investments Other investments primarily consist of bank loans,real estate,policy loans and derivatives.Bank loans are primarily senior securedcorporate loans and are carried at amortized cost,net.Policy l
138、oans are carried at unpaid principal balances.Real estate is carried at cost less accumulateddepreciation.Derivatives are carried at fair value.Other investments by asset type($in millions)March 31,2023December 31,2022Bank loans,net$698$686 Real estate790 813 Policy loans120 120 Derivatives10 1 Othe
139、r106 108 Total$1,724$1,728 Portfolio monitoring and credit lossesFixed income securities The Company has a comprehensiveportfolio monitoring process to identify and evaluate each fixed incomesecurity that may require a credit loss allowance.For each fixed income security in an unrealized loss positi
140、on,theCompany assesses whether management with the appropriate authorityhas made the decision to sell or whether it is more likely than not theCompany will be required to sell the security before recovery of theamortized cost basis for reasons such as liquidity,contractual orregulatory purposes.If a
141、 security meets either of these criteria,anyexisting credit loss allowance would be written-off against the amortizedcost basis of the asset along with any remaining unrealized losses,withincremental losses recorded in earnings.If the Company has not made the decision to sell the fixed incomesecurit
142、y and it is not more likely than not the Company will be required tosell the fixed income security before recovery of its amortized cost basis,the Company evaluates whether it expects to receive cash flows sufficientto recover the entire amortized cost basis of the security.The Companycalculates the
143、 estimated recovery value based on the best estimate offuture cash flows considering past events,current conditions andreasonable and supportable forecasts.The estimated future cash flowsare discounted at the securitys current effective rate and is compared tothe amortized cost of the security.The d
144、etermination of cash flow estimates is inherently subjective,andmethodologies may vary depending on facts and circumstances specificto the security.All reasonably available information relevant to thecollectability of the security is considered when developing the estimate ofcash flows expected to b
145、e collected.That information generally includes,but is not limited to,the remaining payment terms of the security,prepayment speeds,the financial condition and future earnings potentialof the issue or issuer,expected defaults,expected recoveries,the value ofunderlying collateral,origination vintage
146、year,geographic concentration ofunderlying collateral,available reserves or escrows,current subordinationlevels,third-party guarantees and other credit enhancements.Otherinformation,such as industry analyst reports and forecasts,credit ratings,financial condition of the bond insurer for insured fixe
147、d incomesecurities,and other market data relevant to the realizability of contractualcash flows,may also be considered.The estimated fair value of collateralwill be used to estimate recovery value if the Company determines thatthe security is dependent on the liquidation of collateral for ultimatese
148、ttlement.If the Company does not expect to receive cash flows sufficient torecover the entire amortized cost basis of the fixed income security,acredit loss allowance is recorded in earnings for the shortfall in expectedcash flows;however,the amortized cost,net of the credit loss allowance,may not b
149、e lower than the fair value of the security.The portion of theunrealized loss related to factors other than credit remains classified inAOCI.If the Company determines that the fixed income security does nothave sufficient cash flow or other information to estimate a recovery valuefor the security,th
150、e Company may conclude that the entire decline in fairvalue is deemed to be credit related and the loss is recorded in earnings.When a security is sold or otherwise disposed or when the security isdeemed uncollectible and written off,the Company removes amountspreviously recognized in the credit los
151、s allowance.Recoveries after write-offs are recognized when received.Accrued interest excluded from theamortized cost of fixed income securities totaled$400 million and$389million as of March 31,2023 and December 31,2022,respectively,and isreported within the accrued investment income line of the Co
152、ndensedConsolidated Statements of Financial Position.The Company monitorsaccrued interest and writes off amounts when they are not expected to bereceived.The Companys portfolio monitoring process includes a quarterlyreview of all securities to identify instances where the fair value of asecurity com
153、pared to its amortized cost is below internally establishedthresholds.The process also includes the monitoring of other credit lossindicators such as ratings,ratings downgrades and payment defaults.Thesecurities identified,in addition to other securities for which the Companymay have a concern,are e
154、valuated for potential credit losses using allreasonably available information relevant to the collectability or recoveryof the security.Inherent in the Companys evaluation of credit losses forthese securities are assumptions and estimates about the financialcondition and future earnings potential o
155、f the issue or issuer.Some of thefactors that may be considered in evaluating whether aFirst Quarter 2023 Form 10-Q 17Notes to Condensed Consolidated Financial Statementsdecline in fair value requires a credit loss allowance are:1)the financialcondition,near-term and long-term prospects of the issue
156、 or issuer,including relevant industry specific market conditions and trends,geographic location and implications of rating agency actions and offeringprices;2)the specific reasons thata security is in an unrealized loss position,including overall marketconditions which could affect liquidity;and 3)
157、the extent to which the fairvalue has been less than amortized cost.Rollforward of credit loss allowance for fixed income securitiesThree months ended March 31,($in millions)20232022Beginning balance$(13)$(6)Credit losses on securities for which credit losses not previously reported Net increases re
158、lated to credit losses previously reported(9)Reduction of allowance related to sales Write-offs Ending balance$(22)$(6)Components of credit loss allowanceCorporate bonds$(20)$(6)ABS(2)Total$(22)$(6)Gross unrealized losses and fair value by type and length of time held in a continuous unrealized loss
159、 position($in millions)Less than 12 months12 months or moreTotalunrealizedlossesNumberof issuesFairvalueUnrealizedlossesNumberof issuesFairvalueUnrealizedlossesMarch 31,2023 Fixed income securities U.S.government and agencies70$2,576$(41)104$3,216$(111)$(152)Municipal1,183 1,632(27)1,860 2,376(213)(
160、240)Corporate970 8,673(286)1,777 14,543(1,501)(1,787)Foreign government15 197(1)87 452(23)(24)ABS74 160(5)152 669(20)(25)Total fixed income securities2,312$13,238$(360)3,980$21,256$(1,868)$(2,228)Investment grade fixed income securities2,132$12,415$(313)3,601$18,633$(1,509)$(1,822)Below investment g
161、rade fixed income securities180 823(47)379 2,623(359)(406)Total fixed income securities2,312$13,238$(360)3,980$21,256$(1,868)$(2,228)December 31,2022 Fixed income securities U.S.government and agencies112$4,900$(138)75$2,393$(93)$(231)Municipal3,015 3,944(215)507 740(111)(326)Corporate2,085 18,072(1
162、,389)845 6,105(956)(2,345)Foreign government74 739(22)42 200(18)(40)ABS194 874(27)83 109(8)(35)Total fixed income securities5,480$28,529$(1,791)1,552$9,547$(1,186)$(2,977)Investment grade fixed income securities4,959$25,487$(1,409)1,437$8,791$(1,009)$(2,418)Below investment grade fixed income securi
163、ties521 3,042(382)115 756(177)(559)Total fixed income securities5,480$28,529$(1,791)1,552$9,547$(1,186)$(2,977)18 Notes to Condensed Consolidated Financial StatementsGross unrealized losses by unrealized loss position and credit quality as of March 31,2023($in millions)InvestmentgradeBelow investmen
164、tgradeTotalFixed income securities with unrealized loss position less than 20%of amortizedcost,net$(1,669)$(296)$(1,965)Fixed income securities with unrealized loss position greater than or equal to 20%of amortized cost,net(153)(110)(263)Total unrealized losses$(1,822)$(406)$(2,228)Below investment
165、grade fixed income securities include$41 million that have been in an unrealized loss position for less than twelve months.Related to securities with an unrealized loss position less than 20%of amortized cost,net,the degree of which suggests that these securities do not pose a high risk of havingcre
166、dit losses.Below investment grade fixed income securities include$104 million that have been in an unrealized loss position for a period of twelve or more consecutive months.Evaluated based on factors such as discounted cash flows and the financial condition and near-term and long-term prospects of
167、the issue or issuer and were determined tohave adequate resources to fulfill contractual obligations.Investment grade is defined as a security having a NationalAssociation of Insurance Commissioners(“NAIC”)designation of 1 or 2,which is comparable to a rating of Aaa,Aa,A or Baa from Moodys orAAA,AA,
168、A or BBB from S&P Global Ratings(“S&P”),or a comparableinternal rating if an externally provided rating is not available.Marketprices for certain securities may have credit spreads which imply higher orlower credit quality than the current third-party rating.Unrealized losseson investment grade secu
169、rities are principally related to an increase inmarket yields which may include increased risk-free interest rates or widercredit spreads since the time of initial purchase.The unrealized losses areexpected to reverse as the securities approach maturity.ABS in an unrealized loss position were evalua
170、ted based on actualand projected collateral losses relative to the securities positions in therespective securitization trusts,security specific expectations of cashflows,and credit ratings.This evaluation also takes into considerationcredit enhancement,measured in terms of(i)subordination from othe
171、rclasses of securities in the trust that are contractually obligated to absorblosses before the class of security the Company owns,and(ii)theexpected impact of other structural features embedded in thesecuritization trust beneficial to the class of securities the Company owns,such as overcollaterali
172、zation and excess spread.Municipal bonds in anunrealized loss position were evaluated based on the underlying creditquality of the primary obligor,obligation type and quality of the underlyingassets.As of March 31,2023,the Company has not made the decision to selland it is not more likely than not t
173、he Company will be required to sell fixedincome securities with unrealized losses before recovery of the amortizedcost basis.Loans The Company establishes a credit loss allowance formortgage loans and bank loans when they are originated or purchased,and for unfunded commitments unless they are uncon
174、ditionallycancellable by the Company.The Company uses a probability of defaultand loss given default model for mortgage loans and bank loans toestimate current expected credit losses that considers all relevantinformation available including past events,current conditions,andreasonable and supportab
175、le forecasts over the life of an asset.TheCompany also considers such factors as historical losses,expectedprepayments and various economic factors.For mortgage loans theCompany considers origination vintage year and property levelinformation such as debt service coverage,property type,propertylocat
176、ion and collateral value.For bank loans,the Company considers thecredit rating of the borrower,credit spreads and type of loan.After thereasonable and supportable forecast period,the Companys model revertsto historical loss trends.Loans are evaluated on a pooled basis when they share similar riskcha
177、racteristics.The Company monitors loans through a quarterly creditmonitoring process to determine when they no longer share similar riskcharacteristics and are to be evaluated individually when estimating creditlosses.Loans are written off against their corresponding allowances whenthere is no reaso
178、nable expectation of recovery.If a loan recovers after awrite-off,the estimate of expected credit losses includes the expectedrecovery.Accrual of income is suspended for loans that are in default or whenfull and timely collection of principal and interest payments is notprobable.Accrued income recei
179、vable is monitored for recoverability andwhen not expected to be collected is written off through net investmentincome.Cash receipts on loans on non-accrual status are generallyrecorded as a reduction of amortized cost.Accrued interest is excluded from the amortized cost of loans and isreported with
180、in the accrued investment income line of the CondensedConsolidated Statements of Financial Position.Accrued interest($in millions)March 31,December 31,20232022Mortgage loans$3$3 Bank Loans4 3 (1)(2)(3)(4)(1)(2)(3)(4)First Quarter 2023 Form 10-Q 19Notes to Condensed Consolidated Financial StatementsM
181、ortgage loans When it is determined a mortgage loan shall beevaluated individually,the Company uses various methods to estimatecredit losses on individual loans such as using collateral value lessestimated costs to sell where applicable,including when foreclosure isprobable or when repayment is expe
182、cted to be provided substantiallythrough the operation or sale of the collateral and the borrower isexperiencing financial difficulty.When collateral value is used,themortgage loans may not have a credit loss allowance when the fair valueof the collateral exceeds the loans amortized cost.An alternat
183、iveapproach may be utilized to estimate credit losses using the present valueof the loans expected future repayment cash flows discounted at theloans current effective interest rate.Individual loan credit loss allowancesare adjustedfor subsequent changes in the fair value of the collateral less cost
184、s to sell,when applicable,or present value of the loans expected future repaymentcash flows.Debt service coverage ratio is considered a key credit qualityindicator when mortgage loan credit loss allowances are estimated.Debtservice coverage ratio represents the amount of estimated cash flow fromthe
185、property available to the borrower to meet principal and interestpayment obligations.Debt service coverage ratio estimates are updatedannually or more frequently if conditions are warranted based on theCompanys credit monitoring process.Mortgage loans amortized cost by debt service coverage ratio di
186、stribution and year of originationMarch 31,2023December 31,2022($in millions)2018 andprior20022CurrentTotalTotalBelow 1.0$18$18$18 1.0-1.2510 10 20 42 1.26-1.5041 66 12 7 8 134 151 Above 1.50108 172 42 185 77 32 616 558 Amortized cost before allowance$159$238$52$197$102$40$788$769 Allowan
187、ce(7)(7)Amortized cost,net$781$762 Mortgage loans with a debt service coverage ratio below 1.0 that arenot considered impaired primarily relate to situations where the borrowerhas the financial capacity to fund the revenue shortfalls from theproperties for the foreseeable term,the decrease in cash f
188、lows from theproperties is consideredtemporary,or there are other risk mitigating factors such as additionalcollateral,escrow balances or borrower guarantees.Payments on allmortgage loans were current as of March 31,2023 and December 31,2022.Rollforward of credit loss allowance for mortgage loansThr
189、ee months ended March 31,($in millions)20232022Beginning balance$(7)$(6)Net increases related to credit losses(1)Write-offs Ending balance$(7)$(7)Bank loans When it is determined a bank loan shall be evaluatedindividually,the Company uses various methods to estimate credit losseson individual loans
190、such as the present value of the loans expected futurerepayment cash flows discounted at the loans current effective interestrate.Credit ratings of the borrower are considered a key credit qualityindicator when bank loan credit loss allowances are estimated.Theratings are either received from the Se
191、curities Valuation Office of theNAIC based on availability of applicable ratings from rating agencies onthe NAIC credit rating provider list or a comparable internal rating.Theyear of origination is determined to be the year in which the asset isacquired.20 Notes to Condensed Consolidated Financial
192、StatementsBank loans amortized cost by credit rating and year of originationMarch 31,2023December 31,2022($in millions)2018 andprior20022CurrentTotalTotalNAIC 2/BBB$7$5$45$4$61$54 NAIC 3/BB5 4 3 202 16 22 252 266 NAIC 4/B22 17 15 223 38 32 347 329 NAIC 5-6/CCC and below31 34 1 16 6 2 90 9
193、4 Amortized cost before allowance$58$62$24$486$64$56$750$743 Allowance(52)(57)Amortized cost,net$698$686 Rollforward of credit loss allowance for bank loans($in millions)Three months ended March 31,20232022Beginning balance$(57)$(61)Net increases related to credit losses(3)(10)Reduction of allowance
194、 related to sales5 3 Write-offs3 Ending balance$(52)$(68)Note 5Fair Value of Assets and LiabilitiesFair value is defined as the price that would be received to sell anasset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date.The hierarchy for
195、inputsused in determining fair value maximizes the use of observable inputs andminimizes the use of unobservable inputs by requiring that observableinputs be used when available.Assets and liabilities recorded on theCondensed Consolidated Statements of Financial Position at fair valueare categorized
196、 in the fair value hierarchy based on the observability ofinputs to the valuation techniques as follows:Level 1:Assets and liabilities whose values are based on unadjustedquoted prices for identical assets or liabilities in an active market that theCompany can access.Level 2:Assets and liabilities w
197、hose values are based on the following:(a)Quoted prices for similar assets or liabilities in active markets;(b)Quoted prices for identical or similar assets or liabilities in marketsthat are not active;or(c)Valuation models whose inputs are observable,directly or indirectly,for substantially the ful
198、l term of the asset or liability.Level 3:Assets and liabilities whose values are based on prices orvaluation techniques that require inputs that are both unobservable andsignificant to the overall fair value measurement.Unobservable inputsreflect the Companys estimates of the assumptions that market
199、participants would use in valuing the assets and liabilities.The availability of observable inputs varies by instrument.Insituations where fair value is based on internally developed pricing modelsor inputs that are unobservable in the market,the determination of fairvalue requires more judgment.The
200、 degree of judgment exercised by theCompany in determining fair value is typically greatest for instrumentscategorized in Level 3.In many instances,valuation inputs used tomeasure fair value fall into different levels of the fair value hierarchy.Thecategory level in the fair value hierarchy is deter
201、mined based on thelowest level input that is significant to the fair value measurement in itsentirety.The Company uses prices and inputs that are current as of themeasurement date,including during periods of market disruption.Inperiods of market disruption,the ability to observe prices and inputs ma
202、ybe reduced for many instruments.The Company is responsible for the determination of fair value andthe supporting assumptions and methodologies.The Company gainsassurance that assets and liabilities are appropriately valued through theexecution of various processes and controls designed to ensure th
203、eoverall reasonableness and consistent application of valuationmethodologies,including inputs and assumptions,and compliance withaccounting standards.For fair values received from third parties orinternally estimated,the Companys processes and controls are designedto ensure that the valuation method
204、ologies are appropriate andconsistently applied,the inputs and assumptions are reasonable andconsistent with the objective of determining fair value,and the fair valuesare accurately recorded.For example,on a continuing basis,theCompany assesses the reasonableness of individual fair values that have
205、stale security prices or that exceed certain thresholds as compared toFirst Quarter 2023 Form 10-Q 21Notes to Condensed Consolidated Financial Statementsprevious fair values received from valuation service providers or brokersor derived from internal models.The Company performs procedures toundersta
206、nd and assess the methodologies,processes and controls ofvaluation service providers.In addition,the Company may validate the reasonableness of fairvalues by comparing information obtained from valuation serviceproviders or brokers to other third-party valuation sources for selectedsecurities.The Co
207、mpany performs ongoing price validation proceduressuch as back-testing of actual sales,which corroborate the various inputsused in internal models to market observable data.When fair valuedeterminations are expected to be more variable,the Company validatesthem through reviews by members of manageme
208、nt who have relevantexpertise and who are independent of those charged with executinginvestment transactions.The Company has two types of situations where investments areclassified as Level 3 in the fair value hierarchy:(1)Specific inputs significant to the fair value estimation models are notmarket
209、 observable.This primarily occurs in the Companys use ofbroker quotes to value certain securities where the inputs have notbeen corroborated to be market observable,and the use of valuationmodels that use significant non-market observable inputs.(2)Quotes continue to be received from independent thi
210、rd-partyvaluation service providers and all significant inputs are marketobservable;however,there has been a significant decrease in thevolume and level of activity for the asset when compared to normalmarket activity such that the degree of market observability hasdeclined to a point where categori
211、zation as a Level 3 measurement isconsidered appropriate.The indicators considered in determiningwhether a significant decrease in the volume and level of activity for aspecific asset has occurred include the level of new issuances in theprimary market,trading volume in the secondary market,the leve
212、l ofcredit spreads over historical levels,applicable bid-ask spreads,andprice consensus among market participants and other pricingsources.Certain assets are not carried at fair value on a recurring basis,including mortgage loans,bank loans and policy loans and are onlyincluded in the fair value hie
213、rarchy disclosure when the individualinvestment is reported at fair value.In determining fair value,the Company principally uses the marketapproach which generally utilizes market transaction data for the same orsimilar instruments.To a lesser extent,the Company uses the incomeapproach which involve
214、s determining fair values from discounted cashflow methodologies.For the majority of Level 2 and Level 3 valuations,acombination of the market and income approaches is used.Summary of significant inputs and valuation techniques for Level 2and Level 3 assets and liabilities measured at fair value on
215、arecurring basisLevel 2 measurementsFixed income securities:U.S.government and agencies,municipal,corporate-public andforeign government:The primary inputs to the valuation includequoted prices for identical or similar assets in markets that are notactive,contractual cash flows,benchmark yields and
216、credit spreads.Corporate-privately placed:Privately placed are valued using adiscounted cash flow model that is widely accepted in the financialservices industry and uses market observable inputs and inputsderived principally from,or corroborated by,observable market data.The primary inputs to the d
217、iscounted cash flow model include aninterest rate yield curve,as well as published credit spreads forsimilar assets in markets that are not active that incorporate the creditquality and industry sector of the issuer.Corporate-privately placed also includes redeemable preferred stockthat are valued u
218、sing quoted prices for identical or similar assets inmarkets that are not active,contractual cash flows,benchmark yields,underlying stock prices and credit spreads.ABS:The primary inputs to the valuation include quoted prices foridentical or similar assets in markets that are not active,contractualc
219、ash flows,benchmark yields,collateral performance and creditspreads.Certain ABS are valued based on non-binding broker quoteswhose inputs have been corroborated to be market observable.Residential mortgage-backed securities(“MBS”),included in ABS,use prepayment speeds as a primary input for valuatio
220、n.Equity securities:The primary inputs to the valuation include quotedprices or quoted net asset values for identical or similar assets inmarkets that are not active.Short-term:The primary inputs to the valuation include quoted pricesfor identical or similar assets in markets that are not active,con
221、tractual cash flows,benchmark yields and credit spreads.Other investments:Free-standing exchange listed derivatives that arenot actively traded are valued based on quoted prices for identicalinstruments in markets that are not active.Over-the-counter(“OTC”)derivatives,including interest rate swaps,f
222、oreign currency swaps,total return swaps,foreign exchange forwardcontracts,certain options and certain credit default swaps,are valuedusing models that rely on inputs such as interest rate yield curves,implied volatilities,index price levels,currency rates,and creditspreads that are observable for s
223、ubstantially the full term of thecontract.The valuation techniques underlying the models are widelyaccepted in the financial22 Notes to Condensed Consolidated Financial Statementsservices industry and do not involve significant judgment.Level 3 measurementsFixed income securities:Municipal:Comprise
224、municipal bonds that are not rated by third-partycredit rating agencies.The primary inputs to the valuation of thesemunicipal bonds include quoted prices for identical or similar assetsthat are not market observable,contractual cash flows,benchmarkyields and credit spreads.Also included are municipa
225、l bonds valuedbased on non-binding broker quotes where the inputs have not beencorroborated to be market observable and municipal bonds in defaultvalued based on the present value of expected cash flows.Corporate-public and privately placed and ABS:Primarily valuedbased on non-binding broker quotes
226、where the inputs have not beencorroborated to be market observable.Other inputs for corporatefixed income securities include an interest rate yield curve,as well aspublished credit spreads for similar assets that incorporate the creditquality and industry sector of the issuer.Equity securities:The p
227、rimary inputs to the valuation include quotedprices or quoted net asset values for identical or similar assets thatare not market observable.Short-term:For certain short-term investments,amortized cost isused as the best estimate of fair value.Other investments:Certain OTC derivatives,such as intere
228、st ratecaps,certain credit default swaps and certain options(includingswaptions),are valued using models that are widely accepted in thefinancial services industry.These are categorized as Level 3 as aresult of the significance of non-market observable inputs such asvolatility.Other primary inputs i
229、nclude interest rate yield curves andcredit spreads,and quoted prices for identical or similar assets inmarkets that exhibit less liquidity relative to those markets supportingLevel 2 fair value measurements.Other assets:Includes the contingent consideration provision in thesale agreement for ALIC w
230、hich meets the definition of a derivative.This derivative is valued internally using a model that includesstochastically determined cash flows and inputs that include spot andforward interest rates,volatility,corporate credit spreads and aliquidity discount.This derivative is categorized as Level 3
231、due to thesignificance of non-market observable inputs.Assets measured at fair value on a non-recurring basisComprise long-lived assets to be disposed of by sale,including realestate,that are written down to fair value less costs to sell.Investments excluded from the fair value hierarchyLimited part
232、nerships carried at fair value,which do not have readilydeterminable fair values,use NAV provided by the investees and areexcluded from the fair value hierarchy.These investments are generallynot redeemable by the investees and generally cannot be sold withoutapproval of the general partner.The Comp
233、any receives distributions ofincome and proceeds from the liquidation of the underlying assets of theinvestees,which usually takes place in years 4-9 of the typical contractuallife of 10-12 years.As of March 31,2023,the Company has commitmentsto invest$204 million in these limited partnership intere
234、sts.First Quarter 2023 Form 10-Q 23Notes to Condensed Consolidated Financial StatementsAssets and liabilities measured at fair valueMarch 31,2023($in millions)Quoted pricesin active markets foridentical assets(Level 1)Significant otherobservable inputs(Level 2)Significantunobservableinputs(Level 3)C
235、ounterpartyand cash collateralnettingTotalAssets Fixed income securities:U.S.government and agencies$7,678$17$7,695 Municipal 6,307 17 6,324 Corporate-public 20,320 29 20,349 Corporate-privately placed 7,638 49 7,687 Foreign government 1,091 1,091 ABS 930 27 957 Total fixed income securities7,678 36
236、,303 122 44,103 Equity securities1,523 293 358 2,174 Short-term investments2,034 4,682 6 6,722 Other investments 10 2$12 Other assets4 112 116 Total recurring basis assets11,239 41,288 600 53,127 Non-recurring basis 19 19 Total assets at fair value$11,239$41,288$619$53,146%of total assets at fair va
237、lue21.1%77.7%1.2%100.0%Investments reported at NAV1,228 Total$54,374 Liabilities Other liabilities$(5)$(16)$16$(5)Total recurring basis liabilities(5)(16)16(5)Total liabilities at fair value$(5)$(16)$16$(5)%of total liabilities at fair value100.0%320.0%(320.0)%100.0%24 Notes to Condensed Consolidate
238、d Financial StatementsAssets and liabilities measured at fair valueDecember 31,2022($in millions)Quoted pricesin active markets foridentical assets(Level 1)Significant otherobservable inputs(Level 2)Significantunobservableinputs(Level 3)Counterpartyand cash collateralnettingTotalAssets Fixed income
239、securities:U.S.government and agencies$7,878$20$7,898 Municipal 6,189 21 6,210 Corporate-public 18,547 69 18,616 Corporate-privately placed 7,592 55 7,647 Foreign government 957 957 ABS 1,129 28 1,157 Total fixed income securities7,878 34,434 173 42,485 Equity securities3,936 298 333 4,567 Short-ter
240、m investments508 3,659 6 4,173 Other investments 23 3$(22)4 Other assets3 103 106 Total recurring basis assets12,325 38,414 618(22)51,335 Non-recurring basis 23 23 Total assets at fair value$12,325$38,414$641$(22)$51,358%of total assets at fair value24.0%74.8%1.2%100.0%Investments reported at NAV1,2
241、46 Total$52,604 Liabilities Other liabilities$(1)$(25)$21$(5)Total recurring basis liabilities(1)(25)21(5)Total liabilities at fair value$(1)$(25)$21$(5)%of total liabilities at fair value20.0%500.0%(420.0)%100.0%As of March 31,2023 and December 31,2022,Level 3 fair valuemeasurements of fixed income
242、 securities total$122 million and$173million,respectively,and include$30 million and$70 million,respectively,of securities valued based on non-binding broker quotes where the inputshave not been corroborated to be market observable and$16 million and$21 million,respectively,of municipal fixed income
243、 securities that are notrated by third-party credit rating agencies.As the Company does notdevelop the Level 3 fair valueunobservable inputs for these fixed income securities,they are notincluded in the table above.However,an increase(decrease)in creditspreads for fixed income securities valued base
244、d on non-binding brokerquotes would result in a lower(higher)fair value,and an increase(decrease)in the credit rating of municipal bonds that are not rated bythird-party credit rating agencies would result in a higher(lower)fair value.First Quarter 2023 Form 10-Q 25Notes to Condensed Consolidated Fi
245、nancial StatementsRollforward of Level 3 assets and liabilities held at fair value during the three month period ended March 31,2023Balance as of December 31,2022Total gains(losses)included in:TransfersBalance as of March 31,2023($in millions)NetincomeOCIInto Level3Out ofLevel 3PurchasesSalesIssuesS
246、ettlementsAssetsFixed income securities:Municipal$21$(3)$(1)$17 Corporate-public69(1)2 (41)29 Corporate-privately placed55(4)(2)49 ABS28 (1)27 Total fixed income securities173(5)2 (46)(2)122 Equity securities333 42(17)358 Short-term investments6 6 Other investments3(1)2 Other assets103 9 112 Total r
247、ecurring Level 3 assets$618$3$2$42$(63)$(2)$600 Rollforward of Level 3 assets and liabilities held at fair value during the three month period ended March 31,2022Balance as of December 31,2021Total gains(losses)included in:TransfersBalance as of March 31,2022($in millions)NetincomeOCIInto Level3Out
248、ofLevel 3PurchasesSalesIssuesSettlementsAssetsFixed income securities:Municipal$18$(1)$17 Corporate-public20 (2)35(4)49 Corporate-privately placed66 1 63 130 ABS40 1 (28)7 (1)19 Total fixed income securities144 1(1)(28)105(4)(2)215 Equity securities349 25 2(3)373 Short-term investments5 6 11 Other i
249、nvestments2 2 Other assets65 12 77 Total recurring Level 3 assets$565$38$(1)$(28)$113$(7)$(2)$678 Total Level 3 gains(losses)included in net incomeThree months ended March 31,($in millions)20232022Net investment income$(5)$9 Net gains(losses)on investments and derivatives8 29 26 Notes to Condensed C
250、onsolidated Financial StatementsThere were no transfers into Level 3 during the three months endedMarch 31,2023 and 2022.There were no transfers out of Level 3 during the three months endedMarch 31,2023.Transfers out of Level 3 during the three months endedMarch 31,2022 included situations where a b
251、roker quote was used in theprior period and a quote became available from theCompanys independent third-party valuation service provider in thecurrent period.A quote utilizing the new pricing source was not availableas of the prior period,and any gains or losses related to the change invaluation sou
252、rce for individual securities were not significant.Valuation changes included in net income and OCI for Level 3 assets and liabilities held as of March 31,Three months ended March 31,($in millions)20232022Assets Fixed income securities:Corporate-privately placed$(4)$Total fixed income securities(4)E
253、quity securities(1)25 Other investments(1)Other assets9 12 Total recurring Level 3 assets$3$37 Total included in net income$3$37 Components of net incomeNet investment income$(5)$9 Net gains(losses)on investments and derivatives8 28 Total included in net income$3$37 AssetsCorporate-public$1$(2)Corpo
254、rate-privately placed 1 Changes in unrealized net capital gains and losses reported in OCI$1$(1)Financial instruments not carried at fair value($in millions)March 31,2023December 31,2022Financial assetsFair value levelAmortized cost,netFairvalueAmortized cost,netFairvalueMortgage loansLevel 3$781$72
255、4$762$700 Bank loansLevel 3698 706 686 686 Financial liabilitiesFair value levelCarrying valueFairvalueCarrying valueFairvalueContractholder funds on investment contractsLevel 3$48$48$50$50 DebtLevel 28,452 8,089 7,964 7,449 Liability for collateralLevel 21,807 1,807 2,011 2,011 Represents the amoun
256、ts reported on the Condensed Consolidated Statements of Financial Position.Note 6Derivative Financial InstrumentsThe Company uses derivatives for risk reduction and to increaseinvestment portfolio returns through asset replication.Risk reductionactivity is focused on managing the risks with certain
257、assets and liabilitiesarising from the potential adverse impacts from changes in risk-freeinterest rates,changes in equity market valuations,increases in creditspreads and foreign currency fluctuations.Asset replication refers to the“synthetic”creation of assets throughthe use of derivatives.The Com
258、pany replicates fixed income securitiesusing a combination of a credit default swap,index total return swap,options,futures,or a foreign currency forward contractand one or more highly rated fixed income securities,primarily investmentgrade host bonds,to synthetically replicate the economic characte
259、risticsof one or more cash market securities.The Company replicates equitysecurities using futures,index total return swaps,and options to increaseequity exposure.Property-Liability may use interest rate swaps,swaptions,futures andoptions to manage the interest rate risks of existing investments.The
260、seinstruments are utilized to change the duration of the portfolio in order tooffset the economic effect that interest rates would otherwise have on thefair value of its fixed income securities.Fixed income index total return(1)(1)(1)First Quarter 2023 Form 10-Q 27Notes to Condensed Consolidated Fin
261、ancial Statementsswaps are used to offset valuation losses in the fixed income portfolioduring periods of declining market values.Credit default swaps aretypically used to mitigate the credit risk within the Property-Liability fixedincome portfolio.Equity index total return swaps,futures and options
262、 areused by Property-Liability to offset valuation losses in the equity portfolioduring periods of declining equity market values.In addition,equity futuresare used to hedge the market risk related to deferred compensationliability contracts.Forward contracts are primarily used by Property-Liability
263、 to hedge foreign currency risk associated with holding foreigncurrency denominated investments and foreign operations.In 2022,the Company also had derivatives embedded in non-derivative host contracts that were required to be separated from the hostcontracts and accounted for at fair value with cha
264、nges in fair value ofembedded derivatives reported in net income.When derivatives meet specific criteria,they may be designated asaccounting hedges and accounted for as fair value,cash flow,foreigncurrency fair value or foreign currency cash flow hedges.The notional amounts specified in the contract
265、s are used to calculatethe exchange of contractual payments under the agreements and aregenerally not representative of the potential for gain or loss on theseagreements.However,the notional amounts specified in credit defaultswaps where the Company has sold credit protection represent themaximum am
266、ount of potential loss,assuming no recoveries.Fair value,which is equal to the carrying value,is the estimatedamount that the Company would receive or pay to terminate the derivativecontracts at the reporting date.The carrying value amounts for OTCderivatives are further adjusted for the effects,if
267、any,of enforceablemaster netting agreements and are presented on a net basis,bycounterparty agreement,in the Condensed Consolidated Statements of Financial Position.For those derivatives which qualify and have been designated as fairvalue accounting hedges,net income includes the changes in the fair
268、value of both the derivative instrument and the hedged risk.For cash flowhedges,gains and losses are amortized from AOCI and are reported innet income in the same period the forecasted transactions being hedgedimpact net income.Non-hedge accounting is generally used for“portfolio”level hedgingstrate
269、gies where the terms of the individual hedged items do not meet thestrict homogeneity requirements to permit the application of hedgeaccounting.For non-hedge derivatives,net income includes changes infair value and accrued periodic settlements,when applicable.With theexception of non-hedge derivativ
270、es used for asset replication and non-hedge embedded derivatives,all of the Companys derivatives areevaluated for their ongoing effectiveness as either accounting hedge ornon-hedge derivative financial instruments on at least a quarterly basis.In connection with the sale of ALIC and certain affiliat
271、es in 2021,thesale agreement included a provision related to contingent considerationthat may be earned over a ten-year period with the first potential paymentdate commencing on January 1,2026 and a final potential payment dateof January 1,2035.The contingent consideration is determined annuallybase
272、d on the average 10-year Treasury rate over the preceding 3-yearperiod compared to a designated rate.The contingent considerationmeets the definition of a derivative and is accounted for on a fair valuebasis with periodic changes in fair value reflected in earnings.There areno collateral requirement
273、s related to the contingent consideration.28 Notes to Condensed Consolidated Financial StatementsSummary of the volume and fair value positions of derivative instruments as of March 31,2023($in millions,except number of contracts)Volume Balance sheet locationNotionalamountNumber ofcontractsFairvalue
274、,netGrossassetGrossliabilityAsset derivatives Derivatives not designated as accounting hedging instruments Interest rate contracts FuturesOther assetsn/a6,842$2$2$Equity and index contracts FuturesOther assetsn/a1,116 2 2 Foreign currency contracts Foreign currency forwardsOther investments$453 n/a(
275、9)5(14)Contingent considerationOther assets250 n/a112 112 Credit default contracts Credit default swaps buying protectionOther investments51 n/a 1(1)Total asset derivatives$754 7,958$107$122$(15)Liability derivatives Derivatives not designated as accounting hedging instruments Interest rate contract
276、s FuturesOther liabilities&accrued expensesn/a12,394$(3)$(3)Equity and index contracts FuturesOther liabilities&accrued expensesn/a680(2)(2)Foreign currency contracts Foreign currency forwardsOther liabilities&accrued expenses$176 n/a3 4(1)Credit default contracts Credit default swaps buying protect
277、ionOther liabilities&accrued expenses3 n/a Total liability derivatives 179 13,074(2)$4$(6)Total derivatives$933 21,032$105 Volume for OTC and cleared derivative contracts is represented by their notional amounts.Volume for exchange traded derivatives is represented by the number of contracts,which i
278、s the basis on which they are traded.(n/a=not applicable)(1)(1)First Quarter 2023 Form 10-Q 29Notes to Condensed Consolidated Financial StatementsSummary of the volume and fair value positions of derivative instruments as of December 31,2022($in millions,except number of contracts)Volume Balance she
279、et locationNotionalamountNumber ofcontractsFairvalue,netGrossassetGrossliabilityAsset derivatives Derivatives not designated as accounting hedging instruments Interest rate contracts FuturesOther assetsn/a24,380$3$3$Equity and index contracts FuturesOther assetsn/a343 Foreign currency contracts Fore
280、ign currency forwardsOther investments$354 n/a1 14(13)Contingent considerationOther assets250 n/a103 103 Credit default contracts Credit default swaps buying protectionOther investments24 n/a 1(1)Total asset derivatives$628 24,723$107$121$(14)Liability derivatives Derivatives not designated as accou
281、nting hedging instruments Interest rate contracts FuturesOther liabilities&accrued expensesn/a1,624$Equity and index contracts FuturesOther liabilities&accrued expensesn/a1,229(1)(1)Foreign currency contracts Foreign currency forwardsOther liabilities&accrued expenses$283 n/a 7(7)Credit default cont
282、racts Credit default swaps buying protectionOther liabilities&accrued expenses525 n/a(3)1(4)Total liability derivatives 808 2,853(4)$8$(12)Total derivatives$1,436 27,576$103 Volume for OTC and cleared derivative contracts is represented by their notional amounts.Volume for exchange traded derivative
283、s is represented by the number of contracts,which is the basis on which they are traded.(n/a=not applicable)Gross and net amounts for OTC derivatives($in millions)Offsets Gross amountCounter-partynettingCash collateral(received)pledgedNet amount onbalance sheetSecuritiescollateral(received)pledgedNe
284、t amountMarch 31,2023 Asset derivatives$10$(19)$19$10$10 Liability derivatives(16)19(3)December 31,2022 Asset derivatives$23$(22)$1$1 Liability derivatives(22)22(1)(1)(1)All OTC derivatives are subject to enforceable master netting agreements.(1)(1)(1)(1)30 Notes to Condensed Consolidated Financial
285、StatementsGains(losses)from valuation and settlements reported on derivatives not designated as accounting hedges($in millions)Net gains(losses)oninvestments and derivativesOperating costs and expensesTotal gain(loss)recognized innet income on derivativesThree months ended March 31,2023 Interest rat
286、e contracts$(35)$(35)Equity and index contracts4 8 12 Contingent consideration 9 9 Foreign currency contracts(7)(7)Credit default contracts(14)(14)Total$(52)$17$(35)Three months ended March 31,2022 Interest rate contracts$316$316 Equity and index contracts3(13)(10)Contingent consideration 12 12 Fore
287、ign currency contracts7 7 Credit default contracts(8)(8)Total$318$(1)$317 The Company manages its exposure to credit risk by utilizing highlyrated counterparties,establishing risk control limits,executing legallyenforceable master netting agreements(“MNAs”)and obtaining collateralwhere appropriate.T
288、he Company uses MNAs for OTC derivativetransactions that permit either party to net payments due for transactionsand collateral is either pledged or obtained when certain predeterminedexposure limits are exceeded.OTC cash and securities collateral pledged($in millions)March 31,2023Pledged by the Com
289、pany$19 Pledged to the Company 3$1 million of collateral was posted under MNAs for contracts containing credit-risk-contingent provisions that are in a liability provision.The Company has not incurred any losses on derivative financialinstruments due to counterparty nonperformance.Other derivatives,
290、including futures and certain option contracts,are traded on organizedexchanges which require margin deposits and guarantee the execution oftrades,thereby mitigating any potential credit risk.Counterparty credit exposure represents the Companys potentialloss if all of the counterparties concurrently
291、 fail to perform under thecontractual terms of the contracts and all collateral,if any,becomesworthless.This exposure is measured by the fair value of OTC derivativecontracts with a positive fair value at the reporting date reduced by theeffect,if any,of legally enforceable master netting agreements
292、.OTC derivatives counterparty credit exposure by counterparty credit rating($in millions)March 31,2023December 31,2022Rating Number of counter-partiesNotionalamountCreditexposureExposure,netof collateralNumber of counter-partiesNotionalamountCreditexposureExposure,netof collateralA+1$176$3$1$128$5$A
293、 1 192 7 Total1$176$3$2$320$12$Allstate uses the lower of S&Ps or Moodys long-term debt issuer ratings.Only OTC derivatives with a net positive fair value are included for each counterparty.For certain exchange traded and cleared derivatives,margin depositsare required as well as daily cash settleme
294、nts of margin accounts.Exchange traded and cleared margin deposits($in millions)March 31,2023Pledged by the Company$146 Received by the Company Market risk is the risk that the Company will incur losses due toadverse changes in market rates and prices.Market risk exists for all ofthe derivative fina
295、ncial instruments the Company currently holds,as theseinstruments may become less valuable due toadverse changes in market conditions.To limit this risk,the Companyssenior management has established risk control limits.In addition,changes in fair value of the derivative financial instruments that th
296、eCompany uses for risk management purposes are generally offset by thechange in the fair value or cash flows of the hedged risk component of therelated assets,liabilities or forecasted transactions.Certain of the Companys derivative transactions contain credit-risk-contingent termination events and
297、cross-default provisions.Credit-risk-contingent termination events allow the counterparties to terminate thederivative agreement or a specific trade on certain dates if AICs financialstrength credit(1)(1)(1)(2)(2)(2)(2)(2)(2)(1)(2)First Quarter 2023 Form 10-Q 31Notes to Condensed Consolidated Financ
298、ial Statementsratings by Moodys or S&P fall below a certain level.Credit-risk-contingentcross-default provisions allow the counterparties to terminate thederivative agreement if the Company defaults by pre-determinedthreshold amounts on certain debt instruments.The following table summarizes the fai
299、r value of derivativeinstruments with termination,cross-default or collateral credit-risk-contingent features that are in a liability position,as well as the fair valueof assets and collateral that are netted against the liability in accordancewith provisions within legally enforceable MNAs.($in mil
300、lions)March 31,2023December 31,2022Gross liability fair value of contracts containing credit-risk-contingent features$4$21 Gross asset fair value of contracts containing credit-risk-contingent features andsubject to MNAs(3)(11)Collateral posted under MNAs for contracts containing credit-risk-conting
301、entfeatures(1)(10)Maximum amount of additional exposure for contracts with credit-risk-contingent features if all features were triggered concurrently$Note 7Variable Interest EntitiesConsolidated VIEs,of which the Company is the primary beneficiary,primarily include Adirondack Insurance Exchange,a N
302、ew York reciprocalinsurer,and New Jersey Skylands Insurance Association,a New Jerseyreciprocal insurer(together“Reciprocal Exchanges”).The ReciprocalExchanges are insurance carriers organized as unincorporatedassociations.The Company does not own the equity of the ReciprocalExchanges,which is owned
303、by their respective policyholders.The Company manages the business operations of the ReciprocalExchanges and has the power to direct their activities that mostsignificantly impact their economic performance.The Company receives amanagement fee for the services provided to the Reciprocal Exchanges.In
304、 addition,as of March 31,2023 and December 31,2022,the Companyholds interests of$123 million in the form of surplus notes included inother liabilities and expenses on the Statement of Assets and Liabilities ofthe Reciprocal Exchanges that provide capital to the ReciprocalExchanges and would absorb a
305、ny expected losses.The Company isthereforethe primary beneficiary.In addition,the Company provides quota sharereinsurance on the property business of the Reciprocal Exchanges.In the event of dissolution,policyholders would share any residualunassigned surplus but are not subject to assessment for an
306、y deficit inunassigned surplus of the Reciprocal Exchanges.The assets of theReciprocal Exchanges can be used only to settle the obligations of theReciprocal Exchanges and general creditors have no recourse to theCompany.The results of operations of the Reciprocal Exchanges are included inthe Company
307、s Allstate Protection segment and generated$57 million ofearned premiums for the three months ended March 31,2023 comparedto$42 million for the three months ended March 31,2022.Claims and claims expenses were$40 million for the three monthsended March 31,2023 compared to$34 million for the three mon
308、thsended March 31,2022.Assets and liabilities of Reciprocal Exchanges($in millions)March 31,2023December 31,2022AssetsFixed income securities$285$302 Short-term investments16 13 Deferred policy acquisition costs23 15 Premium installment and other receivables,net36 43 Reinsurance recoverables,net88 9
309、7 Other assets37 90 Total assets485 560 LiabilitiesReserve for property and casualty insurance claims and claims expense194 209 Unearned premiums132 171 Other liabilities and expenses285 311 Total liabilities$611$691 32 Notes to Condensed Consolidated Financial StatementsNote 8Reserve for Property a
310、nd Casualty Insurance Claims and Claims ExpenseThe Company establishes reserves for claims and claims expense onreported and unreported claims of insured losses.The Companysreserving process takes into account known facts and interpretations ofcircumstances and factors including the Companys experie
311、nce withsimilar cases,actual claims paid,historical trends involving claim paymentpatterns and pending levels of unpaid claims,loss managementprograms,product mix and contractual terms,changes in law andregulation,judicial decisions,and economic conditions.When the Company experiences changes in the
312、 mix or type of claimsor changing claim settlement patterns or data,it applies actuarialjudgment in the determination and selection of development factors todevelop reserve liabilities.Supply chain disruptions and inflation haveresulted in higher part costs,used car values and longer time to claimre
313、solution,which have combined with labor shortages to increase physicaldamage loss costs.Medical inflation,treatment trends,attorneyrepresentation,litigation costs and more severe accidents havecontributed to higher third-party bodily injury loss costs.The Company hasalso digitized and modified claim
314、 processes to increase effectiveness andefficiency.These factors may lead to historical development trends beingless predictive of future loss development,potentially creating additionalreserve variability.Generally,the initial reserves for a new accident year are establishedbased on claim frequency
315、 and severity assumptions for different businesssegments,lines and coverages based on historical relationships torelevant inflation indicators.Reserves for prior accident years arestatistically determined using several different actuarial estimationmethods.Changes in auto claim frequency may result
316、from changes inmix of business,driving behaviors,miles driven or other factors.Changesin auto current year claim severity are generally influenced by inflation inthe medical and auto repair sectors,the effectiveness and efficiency ofclaim practices and changes in mix of claim types.The Companymitiga
317、tes these effects through various loss management programs.When such changes in claim data occur,actuarial judgment is used todetermine appropriate development factors to establish reserves.TheCompanys reserving process incorporates changes in loss patterns,operational statistics and changes in clai
318、ms reporting processes todetermine its best estimate of recorded reserves.As part of the reserving process,the Company may also supplementits claims processes by utilizing third-party adjusters,appraisers,engineers,inspectors,and other professionals and information sources toassess and settle catast
319、rophe and non-catastrophe related claims.Theeffects of inflation are implicitly considered in the reserving process.Because reserves are estimates of unpaid portions of losses thathave occurred,including IBNR losses,the establishment of appropriatereserves,including reserves for catastrophes,Run-off
320、 Property-Liabilityand reinsurance and indemnification recoverables,is an inherentlyuncertain and complex process.The ultimate cost of losses may varymaterially from recorded amounts,which are based on managementsbest estimates.The highest degree of uncertainty is associated with reserves forlosses
321、incurred in the initial reporting period as it contains the greatestproportion of losses that have not been reported or settled as well asheightened uncertainty for claims that involve litigation or take longer tosettle during periods of rapidly increasing loss costs.The Company alsohas uncertainty
322、in the Run-off Property-Liability reserves that are basedon events long since passed and are complicated by lack of historicaldata,legal interpretations,unresolved legal issues and legislative intentbased on establishment of facts.The Company regularly updates its reserve estimates as newinformation
323、 becomes available and as events unfold that may affect theresolution of unsettled claims.Changes in reserve estimates,which maybe material,are reported in property and casualty insurance claims andclaims expense in the Condensed Consolidated Statements of Operationsin the period such changes are de
324、termined.Management believes that the reserve for property and casualtyinsurance claims and claims expense,net of recoverables,isappropriately established in the aggregate and adequate to cover theultimate net cost of reported and unreported claims arising from losseswhich had occurred by the date o
325、f the Condensed ConsolidatedStatements of Financial Position based on available facts,laws andregulations.First Quarter 2023 Form 10-Q 33Notes to Condensed Consolidated Financial StatementsRollforward of the reserve for property and casualty insurance claims and claims expenseThree months ended Marc
326、h 31,($in millions)20232022Balance as of January 1$37,541$33,060 Less recoverables(9,176)(9,479)Net balance as of January 128,365 23,581 Incurred claims and claims expense related to:Current year10,341 7,677 Prior years(15)145 Total incurred10,326 7,822 Claims and claims expense paid related to:Curr
327、ent year(3,122)(2,751)Prior years(6,036)(4,735)Total paid(9,158)(7,486)Net balance as of March 3129,533 23,917 Plus recoverables9,111 9,074 Balance as of March 31$38,644$32,991 Recoverables comprises reinsurance and indemnification recoverables.Incurred claims and claims expense represents the sum o
328、f paidlosses,claim adjustment expenses and reserve changes in the period.This expense included losses from catastrophes of$1.69 billion and$462million in the three months ended March 31,2023 and 2022,respectively,net of recoverables.Catastrophes are an inherent risk of the property and casualtyinsur
329、ance business that have contributed to,and will continue tocontribute to,material year-to-year fluctuations in the Companys resultsof operations and financial position.Prior year reserve reestimates included in claims and claims expense Non-catastrophe lossesCatastrophe lossesTotal($in millions)2023
330、20222023 202220232022Three months ended March 31,Auto$3$151$(28)$(9)$(25)$142 Homeowners(12)4(8)(11)(20)(7)Other personal lines10(11)(7)4 3(7)Commercial lines23 20 1(1)24 19 Other business lines1(7)4 1(3)Run-off Property-Liability2 1 2 1 Total prior year reserve reestimates$27$158$(42)$(13)$(15)$145
331、 Favorable reserve reestimates are shown in parentheses.(1)(1)(1)(1)34 Notes to Condensed Consolidated Financial StatementsNote 9Reserve for Future Policy Benefits and Contractholder FundsRollforward of reserve for future policy benefits Three months ended March 31,Accident and healthTraditional lif
332、eTotal($in millions)202320222023202220232022Present value of expected net premiumsBeginning balance$1,464$1,785$238$254$1,702$2,039 Beginning balance at original discount rate1,549 1,604 246 215 1,795 1,819 Effect of changes in cash flow assumptions Effect of actual variances from expected experienc
333、e(42)(49)5 20(37)(29)Adjusted beginning balance1,507 1,555 251 235 1,758 1,790 Issuances199 173 17 4 216 177 Interest accrual12 12 3 2 15 14 Net premiums collected(95)(103)(12)(11)(107)(114)Lapses and withdrawals Ending balance at original discount rate1,623 1,637 259 230 1,882 1,867 Effect of changes in discount rate assumptions(62)65(5)20(67)85 Ending balance1,561 1,702 254 250 1,815 1,952 Prese