Reserve for Property and Casualty Insurance Claims and Claims Expense

12 Months Ended

Dec. 31, 2025

Reserve for Property-Liability Insurance Claims and Claims Expense

Reserve for Property and Casualty Insurance Claims and Claims Expense


Note 10			Reserve for Property and Casualty Insurance Claims and Claims Expense

The Company establishes reserves for claims and claims expense on reported and unreported claims of insured losses. The Company’s reserving process considers known facts and interpretations of circumstances and factors including the Company’s experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix and contractual terms, changes in laws and regulations, judicial decisions and economic conditions.

When the Company experiences changes in the mix or type of claims or changing claim settlement patterns or data, it applies actuarial judgment in the determination and selection of development factors to develop reserve liabilities. Recent tort reform measures in certain jurisdictions have altered the legal environment and may affect claim settlement patterns over time. These changes require the Company to evaluate whether historical settlement trends remain appropriate for reserve development. In cases where tort reform is expected to influence claim outcomes, more recent claim settlement experience may be given greater consideration when selecting development

factors. While inflationary pressures have moderated compared to prior periods, factors such as a higher mix of more complex repairs, combined with skilled labor shortages, continue to influence physical damage loss costs. Medical cost trends, increased treatment trends, higher attorney representation, rising litigation costs and more severe accidents have contributed to higher third-party bodily injury loss costs. The Company continues to digitize and modernize claim processes to increase effectiveness and efficiency. These factors may lead to historical development trends being less predictive of future loss development, potentially creating additional reserve variability.

Generally, the initial reserves for a new accident year are established based on claim frequency and severity assumptions for different business segments, lines and coverages based on historical relationships to relevant inflation indicators. Reserves for prior accident years are statistically determined using several different actuarial estimation methods. Changes in auto claim frequency may result from changes in mix of business, driving behaviors, miles driven or other factors. Changes in auto current year claim severity are generally influenced by inflation in the medical and

auto repair sectors, changes in attorney represented and litigated claim behavior, the effectiveness and efficiency of claim settlements and changes in mix of claim types. When changes in claim data occur, actuarial judgment is used to determine appropriate development factors to establish reserves. The Company’s reserving process incorporates changes in loss patterns, operational statistics and changes in claims reporting processes to determine its best estimate of recorded reserves.

As part of the reserving process, the Company may also supplement its claims processes by utilizing third-party adjusters, appraisers, engineers, inspectors and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims. The effects of inflation are implicitly considered in the reserving process.

Because reserves are estimates of unpaid portions of losses that have occurred, including IBNR losses, the establishment of appropriate reserves, including reserves for catastrophes, Run-off Property-Liability and reinsurance and indemnification recoverables, is an inherently uncertain and complex process. The ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates.

The highest degree of uncertainty is associated with reserves for losses incurred in the initial reporting

period as it contains the greatest proportion of losses that have not been reported or settled as well as heightened uncertainty for claims that involve litigation or take longer to settle during periods of rapidly increasing loss costs. The Company also has uncertainty in the Run-off Property-Liability reserves that are based on events long since passed and are complicated by a lack of historical data, legal interpretations, unresolved legal issues and legislative intent based on establishment of facts.

The Company regularly updates its reserve estimates as new information becomes available and as events unfold that may affect the resolution of unsettled claims. Changes in reserve estimates, which may be material, are reported in property and casualty insurance claims and claims expense in the Consolidated Statements of Operations in the period such changes are determined.

Management believes that the reserve for property and casualty insurance claims and claims expense, net of recoverables, is appropriately established in the aggregate and adequate to cover the ultimate net cost of reported and unreported claims arising from losses which had occurred by the date of the Consolidated Statements of Financial Position based on available facts, laws and regulations.


Rollforward of the reserve for property and casualty insurance claims and claims expense
($ in millions)	2025		2024		2023
Balance as of January 1	$	41,917	$	39,858	$	37,541
Less recoverables (1)	8,602		8,396		9,176
Net balance as of January 1	33,315		31,462		28,365


Incurred claims and claims expense related to:
Current year	39,263		40,043		40,521
Prior years	(1,809)		(308)		549
Total incurred	37,454		39,735		41,070
Claims and claims expense paid related to:
Current year	(23,173)		(23,488)		(23,607)
Prior years	(14,529)		(14,394)		(14,366)
Total paid	(37,702)		(37,882)		(37,973)
Net balance as of December 31	33,067		33,315		31,462
Plus recoverables	8,012		8,602		8,396
Balance as of December 31	$	41,079	$	41,917	$	39,858

(1)Recoverables comprises reinsurance and indemnification recoverables. See Note 11 for further details.


Reconciliation of total claims and claims expense incurred and paid by coverage
	December 31, 2025
($ in millions)	Incurred		Paid
Allstate Protection
Auto insurance - liability coverage	$	14,575	$	(13,741)
Auto insurance - physical damage coverage	7,459		(7,584)
Homeowners insurance	8,852		(8,945)
Total auto and homeowners insurance	30,886		(30,270)
Other personal lines	2,281		(1,891)
Commercial lines	145		(667)
Other business lines	213		(254)
Protection Services	604		(598)
Run-off Property-Liability	123		(125)
Unallocated loss adjustment expenses (“ULAE”)	3,241		(3,400)
Claims incurred and paid from before 2021	(15)		(612)
Other (1)	(24)		115
Total	$	37,454	$	(37,702)

(1)Paid and incurred amounts primarily related to the effect of foreign currency translation adjustments.

Incurred claims and claims expense represents the sum of paid losses, claim adjustment expenses and reserve changes in the calendar year. This expense includes losses from catastrophes of $4.96 billion, $4.96 billion and $5.64 billion in 2025, 2024 and 2023, respectively, net of recoverables. Catastrophes are an inherent risk of the property and casualty insurance business that have contributed to, and will continue to contribute to, material year-to-year fluctuations in the Company’s results of operations and financial position.

The Company defines a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1 million and involves multiple first-party policyholders, or a winter weather event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event. Catastrophes are caused by various natural events including high winds, winter storms and freezes, tornadoes, hailstorms, wildfires, tropical storms, tsunamis, hurricanes, earthquakes and volcanoes.

The Company is also exposed to man-made catastrophic events, such as certain types of terrorism, civil unrest, wildfires or industrial accidents. The nature and level of catastrophes in any period cannot be reliably predicted.

The Company derives and records a single best reserve estimate for losses from catastrophes, in conformance with generally accepted actuarial standards. As a result, management believes that no other estimate is better than the recorded amount. Due to the uncertainties involved, including the factors described above, the ultimate cost of losses may vary materially from recorded amounts, which are based on management’s best estimates.


Prior year reserve reestimates included in claims and claims expense (1)
	For the years ended December 31,
	Non-catastrophe losses						Catastrophe losses (2)						Total
($ in millions)	2025		2024		2023		2025		2024		2023		2025		2024		2023
Auto (3)	$	(1,852)	$	(328)	$	294	$	(28)	$	(36)	$	(50)	$	(1,880)	$	(364)	$	244
Homeowners	(59)		(73)		66		43		(322)		36		(16)		(395)		102
Other personal lines	142		224		37		(14)		(7)		(18)		128		217		19
Commercial lines	(147)		171		76		(1)		(5)		8		(148)		166		84
Other business lines	(45)		—		12		—		—		—		(45)		—		12
Run-off Property-Liability (4)	151		68		89		—		—		—		151		68		89
Protection Services	1		—		(1)		—		—		—		1		—		(1)
Total prior year reserve reestimates	$	(1,809)	$	62	$	573	$	—	$	(370)	$	(24)	$	(1,809)	$	(308)	$	549

(1)Reserve releases are shown in parentheses.

(2)2025 includes $60 million of estimated recoveries related to the Nationwide Reinsurance Program aggregate cover for losses occurring between April 1, 2024 and December 31, 2024, and $54 million favorable subrogation settlements related to the 2021 Colorado Marshall Fire.

(3)2025 includes reserve releases primarily related to favorable severity development of $1.18 billion in personal auto injury coverage and $671 million in all other personal auto coverages.

(4)The Company’s 2025, 2024 and 2023 annual reserve reviews, using established industry and actuarial best practices, resulted in reserve reestimates that increased reserves by $146 million, $58 million and $80 million, respectively.

The following presents information about incurred and paid claims development as of December 31, 2025, net of recoverables, as well as the cumulative number of reported claims and the total of IBNR reserves plus expected development on reported claims included in the net incurred claims amounts. See Note 2 for the accounting policy and methodology for determining reserves for claims and claims expense, including both reported and IBNR claims. The cumulative number of reported claims is identified by coverage and excludes reported claims for industry pools and facilities where information is not available. The information about incurred and paid claims development for the 2021 to 2025 years, and the average annual percentage payout of incurred claims by age as of December 31, 2025, is presented as required supplementary information.

Auto insurance – liability coverage


($ in millions, except number of reported claims)	Incurred claims and allocated claim adjustment expenses, net of recoverables												IBNR reserves plus expected development on reported claims		Cumulative number of reported claims (in thousands)
	For the years ended December 31,										Prior year reserve reestimates		As of December 31, 2025
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2021		2022		2023		2024		2025
2021	$	10,468	$	10,917	$	11,236	$	11,291	$	11,119	$	(172)	$	559	2,440
2022	—		13,308		13,307		13,565		13,293		(272)		1,254		2,612
2023	—		—		15,357		14,817		14,452		(365)		2,547		2,602
2024	—		—		—		15,902		15,191		(711)		5,136		2,463
2025	—		—		—		—		16,095				10,635		2,403
							Total		$	70,150	$	(1,520)
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2021 accident years											(34)
Prior year reserve reestimates for ULAE											(70)
Other											—
Total prior year reserve reestimates											$	(1,624)

	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2021		2022		2023		2024		2025
2021	$	3,574	$	7,341	$	9,157	$	10,105	$	10,560
2022	—		4,466		9,098		11,087		12,039
2023	—		—		5,094		9,875		11,905
2024	—		—		—		5,211		10,055
2025	—		—		—		—		5,460
							Total		$	50,019
All outstanding liabilities before 2021, net of recoverables									1,390
Liabilities for claims and claim adjustment expenses, net of recoverables									$	21,521


Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2025
	1 year		2 years		3 years		4 years		5 years		After 5 years
Auto insurance – liability coverage	33.8	%	33.4	%	15.1	%	7.8	%	4.1	%	5.8	%

Auto insurance – physical damage coverage


($ in millions, except number of reported claims)	Incurred claims and allocated claim adjustment expenses, net of recoverables												IBNR reserves plus expected development on reported claims		Cumulative number of reported claims (in thousands)
	For the years ended December 31,										Prior year reserve reestimates		As of December 31, 2025
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2021		2022		2023		2024		2025
2021	$	7,236	$	7,264	$	7,225	$	7,230	$	7,230	$	—	$	3	4,633
2022	—		9,324		9,011		9,052		9,052		—		6		4,979
2023	—		—		9,441		9,099		9,072		(27)		(7)		4,807
2024	—		—		—		8,548		8,337		(211)		8		4,385
2025	—		—		—		—		7,697				576		3,830
							Total		$	41,388	$	(238)
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2021 accident years											(8)
Prior year reserve reestimates for ULAE											(10)
Other											—
Total prior year reserve reestimates											$	(256)

	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2021		2022		2023		2024		2025
2021	$	6,803	$	7,306	$	7,250	$	7,229	$	7,227
2022	—		8,264		9,101		9,059		9,046
2023	—		—		8,498		9,104		9,079
2024	—		—		—		7,826		8,329
2025	—		—		—		—		7,121
							Total		$	40,802
All outstanding liabilities before 2021, net of recoverables									11
Liabilities for claims and claim adjustment expenses, net of recoverables									$	597


Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2025
	1 year		2 years		3 years		4 years		5 years		After 5 years
Auto insurance – physical damage coverage	93.1	%	7.2	%	(0.5)	%	(0.2)	%	—	%	0.4	%

Homeowners insurance


($ in millions, except number of reported claims)	Incurred claims and allocated claim adjustment expenses, net of recoverables												IBNR reserves plus expected development on reported claims		Cumulative number of reported claims (in thousands)
	For the years ended December 31,										Prior year reserve reestimates		As of December 31, 2025
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2021		2022		2023		2024		2025
2021	$	6,318	$	6,465	$	6,522	$	6,563	$	6,510	$	(53)	$	55	999
2022	—		6,562		6,515		6,488		6,516		28		169		795
2023	—		—		9,097		8,626		8,525		(101)		320		1,033
2024	—		—		—		8,608		8,657		49		710		1,091
2025	—		—		—		—		8,929				2,715		819
							Total		$	39,137	$	(77)
Reconciliation to total prior year reserve reestimates recognized by line
Prior year reserve reestimates for pre-2021 accident years											27
Prior year reserve reestimates for ULAE											34
Other											—
Total prior year reserve reestimates											$	(16)

	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2021		2022		2023		2024		2025
2021	$	4,464	$	6,060	$	6,294	$	6,409	$	6,455
2022	—		3,910		5,961		6,231		6,347
2023	—		—		5,798		7,830		8,205
2024	—		—		—		5,753		7,947
2025	—		—		—		—		6,214
							Total		$	35,168
All outstanding liabilities before 2021, net of recoverables									153
Liabilities for claims and claim adjustment expenses, net of recoverables									$	4,122


Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2025
	1 year		2 years		3 years		4 years		5 years		After 5 years
Homeowners insurance	66.5	%	26.3	%	4.0	%	1.8	%	0.7	%	0.7	%


Reconciliation of the net incurred and paid claims development tables above to the reserve for property and casualty insurance claims and claims expense
($ in millions)	As of December 31, 2025
Net outstanding liabilities
Allstate Protection
Auto insurance - liability coverage	$	21,521
Auto insurance - physical damage coverage	597
Homeowners insurance	4,122
Other personal lines	2,664
Commercial lines	1,133
Other business lines	93
Protection Services	60
Run-off Property-Liability (1)	1,326
ULAE	1,551
Other	—
Net reserve for property and casualty insurance claims and claims expense	33,067

Recoverables
Allstate Protection
Auto insurance - liability coverage	6,301
Auto insurance - physical damage coverage	18
Homeowners insurance	679
Other personal lines	204
Commercial lines	231
Other business lines	14
Protection Services	12
Run-off Property-Liability	419
ULAE	134
Total recoverables	8,012
Gross reserve for property and casualty insurance claims and claims expense	$	41,079

(1)Run-off Property-Liability includes business in run-off with most of the claims related to accident years more than 40 years ago. IBNR reserves represent $761 million of the total reserves as of December 31, 2025.