Allstate Reports 2008 Second Quarter Results

Consolidated Highlights Three Months Ended June 30, ---------------------------------- Change ---------------------------------- (in millions, except per share Est. amounts and ratios) 2008 2007 $ Amt % ----------------------------------- ====== ====== ======== =========== Consolidated revenues $7,418 $9,455 $(2,037) (21.5) ----------------------------------- ------ ------ -------- ----------- Net income 25 1,403 (1,378) (98.2) ----------------------------------- ------ ------ -------- ----------- Net income per diluted share 0.05 2.30 (2.25) (97.8) ----------------------------------- ------ ------ -------- ----------- Operating income(a) 683 1,072 (389) (36.3) ----------------------------------- ------ ------ -------- ----------- Operating income per diluted share(a) 1.24 1.76 (0.52) (29.5) ----------------------------------- ------ ------ -------- ----------- Return on equity 10.2 25.0 -- (14.8) pts. ----------------------------------- ------ ------ -------- ----------- Operating income return on equity(a) 15.1 23.1 -- (8.0) pts. ----------------------------------- ------ ------ -------- ----------- Book value per share 35.93 36.39 (0.46) (1.3) ----------------------------------- ------ ------ -------- ----------- Book value per share, excluding the impact of unrealized net capital gains and losses on fixed income securities(a) 36.93 35.70 1.23 3.4 ----------------------------------- ------ ------ -------- ----------- Catastrophe losses 698 433 265 61.2 ----------------------------------- ------ ------ -------- ----------- Property-Liability combined ratio 94.4 87.6 -- 6.8 pts. ----------------------------------- ------ ------ -------- ----------- Property-Liability combined ratio excluding the effect of catastrophes and prior year reserve reestimates ("underlying combined ratio")(a) 84.1 84.1 -- -- pts. ----------------------------------- ------ ------ -------- -----------

(a) Measures used in this release that are not based on accounting principles generally accepted in the United States ("non-GAAP") are defined and reconciled to the most directly comparable GAAP measure and operating measures are defined in the "Definitions of Non-GAAP and Operating Measures" section of this document.

"Our continued focus on profitability in our insurance operations served us well during the quarter," said Thomas J. Wilson, chairman, president and chief executive officer of The Allstate Corporation. "This strategy generated solid operating profit despite record catastrophe losses. This performance offset lower earnings in our financial services operations and a shift in the accounting of unrealized investment losses to realized losses for change in intent write-downs largely resulting from expanded investment risk mitigation programs."

Allstate's second quarter operating income of $683 million was affected by $698 million in pre-tax catastrophe losses, the highest level of second quarter catastrophe losses the Corporation has recorded in its 77-year history. Operating income for the quarter was $389 million lower than the prior year quarter due to higher catastrophe losses and the absence of favorable reserve re-estimates. Allstate's net income for the quarter was $25 million, reflecting the impact of realized after-tax capital losses of $788 million and lower operating income.

"Solid insurance operation results enabled us to maintain our strength for customers and continue to return capital to shareholders," Wilson added. During the quarter, Allstate repurchased 8.8 million shares for $434 million; $1.4 billion remains of the $2 billion share repurchase program which the Corporation expects to complete in the first quarter of 2009. Earlier this week, Allstate announced a quarterly dividend of forty-one cents ($0.41) on each outstanding share of the Corporation's common stock.

Protection

During the quarter, Allstate's Property-Liability operations benefitted from reduced claim frequency and moderate severity, resulting in profitability levels better than expected for the full year. For the quarter, the Property-Liability underlying combined ratio, which excludes the effects of catastrophes and prior year reserve re-estimates, was 84.1, significantly below the full-year outlook of 87.0 to 89.0 provided in January.

Financial Services

Allstate Financial posted operating income of $118 million for the quarter, a decline from $154 million in the prior year quarter due in part to lower investment spreads and increased costs related to the effort to reinvent retirement for consumers. "Our life insurance products continued to perform well and our asset accumulation retirement products had a good quarter with increased new business returns," Wilson said. "Our challenge and opportunity in financial services is increasing consistency in achieving desired results quarter to quarter, especially in light of continued pressures on the economy and investment markets."

Investments

Commenting on Allstate's investment portfolio, which generated $1.4 billion in net investment income for the quarter, Wilson said: "Our investment philosophy emphasizes diversified exposure, high quality assets and continual attention to risk mitigation and return optimization. This approach has helped us to minimize impairments in the face of unprecedented market volatility. As market conditions change, we will continue to adapt our risk and return strategies."

Reflecting its view that pressures on the economy and investment markets will be prolonged, Allstate augmented risk mitigation and return optimization programs in its investment portfolios. "We're positioning our portfolio to further reduce our risk in certain market segments and hedge against significant adverse developments," said Allstate Chief Investment Officer Ric Simonson. The expanded programs are strategically reducing exposure to certain real estate and financial services-related asset classes and guarding against significant adverse moves in equity valuations, interest rates and credit spreads through macro-hedging. Two-thirds of the after-tax realized losses ($557 million) Allstate incurred in the quarter are related to change in intent write-downs resulting from this strategic review of investments in certain sectors. "These strategic actions largely affect assets that are current and continue to pay interest, but we believe these steps better insulate our portfolio and provide greater flexibility to take advantage of new opportunities in the investment markets,"

Outlook

In light of positive first half 2008 performance, Allstate is adjusting the outlook for its Property-Liability underlying combined ratio, excluding the effect of catastrophes and prior year reserve re-estimates. The Corporation now expects its underlying combined ratio will be within 86.0 - 88.0 for the full year of 2008, an improvement from the full-year outlook of 87.0 - 89.0 provided in January.

PERFORMANCE HIGHLIGHTS

Consolidated

-- Consolidated revenues were $7.4 billion in the quarter, a decline from $9.5 billion from the second quarter of 2007, reflecting net realized capital losses in the current year quarter compared to net realized capital gains in the second quarter of 2007.

-- Operating income per diluted share was $1.24 in the quarter, a decline of $0.52 from $1.76 in the second quarter of 2007, reflecting higher catastrophe losses ($0.36 of the decline) and the effects of lower favorable prior year non-catastrophe reserve reestimates ($0.20 of the decline).

-- Net income per diluted share was $0.05 in the quarter, a decline from $2.30 in the second quarter of 2007, reflecting after-tax net realized capital losses in the current year quarter compared to after-tax net realized capital gains in the second quarter of 2007 ($1.78 decline, net of DAC) and lower operating income ($0.52 decline).

BUSINESS HIGHLIGHTS

(in millions, except Three months ended Six months ended ratios) June 30, June 30, ---------------------- ----------------------- Est. % Est. % 2008 2007 Change 2008 2007 Change ------- ------ ------- ------- ------- ------- Property-Liability Premiums written $6,803 $6,939 (2.0) $13,317 $13,548 (1.7) Underwriting income(a) 378 845 (55.3) 786 1,891 (58.4) Net income 439 1,230 (64.3) 942 2,579 (63.5) Combined Ratio 94.4 87.6 6.8 pts 94.2 86.1 8.1 pts Allstate Financial Premiums and deposits(a) $4,453 $2,887 54.2 $7,499 $5,515 36.0 Operating income 118 154 (23.4) 261 310 (15.8) Net (loss) income (379) 200 -- (490) 364 -- Investments Net investment income $1,412 $1,634 (13.6) $2,938 $3,205 (8.3) Realized capital gains and losses (1,215) 545 -- (1,870) 1,016 --

Property-Liability

-- Property-Liability premiums written declined 2.0% in the second quarter of 2008 from the second quarter of 2007. The cost of the catastrophe reinsurance program was $223 million in the second quarter of 2008 compared to $231 million in the second quarter of 2007.

-- Allstate brand standard auto premiums written in the second quarter of 2008 were comparable to the prior year quarter. Contributing to this result were the following:

-- 0.8% decrease in policies in force ("PIF") -- 0.8 point decline in the six month renewal ratio to 89.1% -- 1.4% increase in six month average premium before reinsurance to $427 -- 6.7% decrease in new issued applications

-- Allstate brand homeowners premiums written declined 0.8% in the second quarter of 2008, compared to the prior year quarter, primarily due to our catastrophe risk management actions. Contributing to the overall change were the following:

-- 4.0% decrease in PIF -- 1.0 point decline in the twelve month renewal ratio to 86.3% -- 1.9% increase in twelve month average premium before reinsurance to $867 -- 26.1% decrease in new issued applications

-- We completed our 2008 catastrophe reinsurance program during the second quarter with the acquisition of additional coverage for hurricane catastrophe losses in Texas and four new agreements for our exposure in Florida. Our program allows us to continue to broadly offer protection products. As previously announced, we expect the annualized cost of these programs for the year beginning June 1, 2008 to be approximately $660 million per year or $165 million per quarter. For detailed information on our Allstate Protection catastrophe reinsurance program, see: http://media.corporate-ir.net/media_files/irol/93/93125/report s2/all2q08reinsurance.pdf (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.)

-- Standard auto property damage frequencies decreased 4.2% and bodily injury frequencies decreased 7.6% compared to the second quarter of 2007, which may be in part due to a reduction in the number of miles driven. Auto property damage and bodily injury paid severities increased 2.6% and 7.1%, respectively. The Allstate brand standard auto loss ratio increased 3.6 points compared to the second quarter of 2007 to 67.1 in the second quarter of 2008, due to increased catastrophe losses and the absence of favorable prior year reserve reestimates.

-- Homeowners gross claim frequency, excluding catastrophes, increased 13.7% compared to the second quarter of 2007 fueled by non-catastrophe weather-related claim trends. Homeowners paid severity, excluding catastrophes, increased 0.3% compared to the second quarter of 2007. The Allstate brand homeowners loss ratio increased 18.8 points compared to the second quarter of 2007 to 86.5 in the second quarter of 2008, largely attributable to higher catastrophes. The effect of catastrophe losses on the Allstate brand homeowners loss ratio totaled 38.0 in the second quarter of 2008 compared to 21.6 in the second quarter of 2007.

-- Catastrophe losses for the quarter totaled $698 million, compared to $433 million in the second quarter of 2007, impacting the combined ratio by 10.3 points in the quarter and 6.3 points in the second quarter of 2007. This increase was primarily related to severe weather experienced across the country, including tornado activity, resulting in 43 catastrophe events in the second quarter of 2008 compared to 34 in the second quarter of 2007. Catastrophe losses, excluding prior year reserve reestimates, were $687 million in the quarter compared to $383 million in the second quarter of 2007. Unfavorable reserve reestimates related to catastrophes from prior years totaled $11 million in the quarter, impacting the combined ratio by 0.1 point, compared to unfavorable reserve reestimates related to catastrophes from prior years of $50 million in the second quarter of 2007. The following table presents the type and number of catastrophe losses.

Three months ended June 30, Six months ended June 30, --------------------------- --------------------------- ($ in Est. # # Est. # # millions) 2008 Events 2007 Events 2008 Events 2007 Events ----- ------- ---- ------- ----- ------- ---- ------- Tornadoes $ 302 13 $ 93 5 $ 478 17 $ 140 10 Wind/Hail 382 27 248 28 597 45 294 36 Other, including prior year reserve reestimates 14 3 92 1 191 9 160 6 ----- ------- ---- ------- ----- ------- ---- ------- Total Catastrophe losses $ 698 43 $ 433 34 $1,266 71 $ 594 52 ===== ======= ==== ======= ===== ======= ==== =======

-- Property-Liability prior year reserve reestimates for the second quarter of 2008 were an unfavorable $9 million, compared to favorable prior year reserve reestimates of $143 million in the second quarter of 2007.

-- Underwriting income was $378 million during the second quarter of 2008 compared to $845 million in the same period of 2007. The decrease was primarily due to higher catastrophe losses and the absence of favorable prior year reserve reestimates.

-- Allstate expects the Property-Liability underlying combined ratio will be within the range of 86.0 and 88.0 for the full year 2008. The calculation of the underlying combined ratio for the three months and six months ended June 30 is shown in the table below. Favorable reserve reestimates are shown in parenthesis.

Three months ended Six months ended June 30, June 30, ------------------ ----------------- Est. Est. 2008 2007 2008 2007 ------------ ----- ----------- ----- Combined ratio excluding the effect of catastrophes and prior year reserve reestimates 84.1 84.1 84.9 84.1 Effect of catastrophe losses 10.3 6.3 9.4 4.4 Effect of prior year non- catastrophe reserve reestimates -- (2.8) (0.1) (2.4) ------------ ----- ----------- ----- Combined ratio (GAAP) 94.4 87.6 94.2 86.1 ============ ===== =========== ===== Effect of prior year catastrophe reserve reestimates 0.1 0.7 0.9 0.4 ============ ===== =========== =====

Allstate Financial

-- Premiums and deposits in the second quarter of 2008 were $4.5 billion, an increase of 54.2% from the prior year quarter. This increase is primarily due to issuances of institutional products of $2.5 billion and a $380 million or 57.8% increase in deposits on fixed deferred annuities during the second quarter of 2008.

-- Operating income for the second quarter of 2008 was $118 million, $36 million lower than the prior year quarter. The decline was primarily due to lower investment spread and increased operating expenses partially offset by lower amortization of deferred acquisition costs ("DAC") and higher benefit spread. The decline in investment spreads was driven by lower net investment income resulting primarily from lower investment yields on floating rate assets, increased short-term investment balances held to offset reduced liquidity in some asset classes and lower investment balances reflecting dividends paid by Allstate Life Insurance Company in 2007.

-- Net loss for the second quarter of 2008 was $379 million compared to net income of $200 million in the prior year quarter. The decline was due to pre-tax net realized capital losses of $965 million compared to pre-tax net realized capital gains of $104 million in the prior year quarter and lower operating income. Net realized capital losses were driven by $776 million in losses on investment dispositions, including change in intent write-downs and $199 million in impairment write-downs, partially offset by an $8 million gain in the valuation of derivative instruments and $2 million gain in derivative settlements. For further information on write-downs and the valuation of derivative instruments, see the Realized Capital Gains and Losses Analysis section.

-- During the second quarter of 2008, we acquired in the secondary market and retired a total of $1.14 billion of institutional market deposits, that investors had elected to non-extend their maturity date. In addition, $986 million have been called and will be retired in July 2008. Total non-extended institutional market deposits were $3.1 billion as of June 30, 2008, all of which become due no later than the end of the first quarter of 2009. We have accumulated, and expect to maintain, short-term investments to retire these obligations.

Investments

-- We developed additional risk mitigation and return optimization programs in the second quarter in response to an altered outlook for continued weakness in the U.S. financial markets and economy. These programs comprise overall portfolio protection ("macro-hedging") and potential future reductions in certain real estate and financial-related market sectors. These anticipated reductions resulted in our change in intent to hold certain securities until their value recovers to amortized cost or cost, resulting in the accounting recognition of realized capital losses for the difference between fair value and amortized cost or cost on these securities ("change in intent write-downs"). A comprehensive review identified specific investments that could be significantly impacted by continued deterioration in the economy. For further information on our risk mitigation and return optimization programs, see the Investment Risk Mitigation and Return Optimization Programs section.

-- Net investment income decreased 13.6% to $1.4 billion compared to the prior year quarter. Property-Liability net investment income decreased 16.6% to $431 million, compared to the prior year quarter, due to decreased income on limited partnership interests, lower average asset balances reflecting dividends to the parent company and reduced portfolio yields. Allstate Financial net investment income declined 12.4% to $943 million, compared to the prior year quarter, due to lower yields on higher short-term securities balances, lower yields on floating rate securities and lower average asset balances.

-- Net realized capital losses were $1.2 billion on a pre-tax basis for the quarter, due to $1.1 billion of net losses related to dispositions, including change in intent write-downs, and $250 million of impairment write-downs, partly offset by net gains totaling $123 million on the settlement and valuation of derivative instruments.

-- Impairment write-downs totaled $250 million, comprised $205 million on fixed income securities, primarily related to residential mortgages and other structured securities, and $37 million on equity securities. Over 95% of the fixed income write-downs relate to impaired securities that were performing in line with anticipated or contractual cash flows, but which were written down primarily because of expected deterioration in the performance of the underlying collateral. For further information on the types of securities experiencing write-downs, see the Realized Capital Gains and Losses Analysis section.

-- Dispositions totaling $1.1 billion are comprised almost entirely of losses related to our change in intent as a result of our risk mitigation and return optimization programs, strategic asset allocation and ongoing comprehensive reviews of our portfolios. In the second quarter of the prior year, dispositions resulted in net realized capital gains of $307 million, comprised $378 million of gains on sales and $71 million of losses related to change in intent write-downs. For further information on the types of securities included in dispositions, see the Realized Capital Gains and Losses Analysis section.

-- Net realized capital gains on the valuation and settlement of derivative instruments totaled $123 million for the quarter, primarily comprised $114 million for the valuation of previously established risk reduction programs. For further information on the impact from the valuation and settlement of derivatives, see the Realized Capital Gains and Losses Analysis section.

-- Allstate's investment portfolios totaled $113.6 billion as of June 30, 2008, a decline of $1.9 billion from the end of the first quarter of 2008, due to unrealized net capital losses and net realized capital losses.

-- The increase in unrealized net capital losses during the second quarter of 2008 totaling $219 million was primarily related to investment grade fixed income securities as the yields supporting fair values increased, resulting from higher risk free interest rates, partly offset by narrowing credit spreads. This net increase in fixed income net unrealized capital losses more than offset the realization of capital losses on impairments and dispositions, including change in intent write-downs, during the quarter. Total unrealized gains and losses are shown in the table below.

Est. June 30, March 31, December 31, (in millions) 2008 2008 2007 -------- --------- ------------ U.S. government and agencies $ 854 $ 1,026 $ 918 Municipal 32 342 720 Corporate (530) (204) 90 Foreign government 354 457 394 Mortgage-backed securities (1) (183) (210) (43) Commercial mortgage-backed securities(1) (388) (868) (308) Asset-backed securities (1) (1,351) (1,463) (816) Redeemable preferred stock (2) (3) 1 -------- --------- ------------ Fixed income securities (1,214) (923) 956 Equity securities 467 392 990 Derivatives (42) (39) (33) -------- --------- ------------ Unrealized gains and losses $ (789) $ (570) $ 1,913 ======== ========= ============ (1) For further information on our residential and commercial mortgage loan portfolio, see the Securities Experiencing Illiquid Markets section.

-- Unrealized net capital losses on fixed income securities totaled $1.2 billion as of June 30, 2008, comprised $3.6 billion in gross unrealized losses and $2.4 billion in gross unrealized gains. Included in gross unrealized losses were $1.1 billion of securities with a fair value below 70% of amortized cost, or 1.4% of our fixed income portfolio at June 30, 2008. The percentage of fair value to amortized cost for the remaining fixed income gross unrealized losses at June 30, 2008 are shown in the following table.

% to total Unrealized Fair fixed income (in millions) (loss) gain value investments ----------- ------ ------------ Greater than 80% of amortized cost $ (1,950) $38,964 46.8% 70% to 80% of amortized cost (648) 1,986 2.4 Less than 70% of amortized cost (1,000) 1,150 1.4 ----------- ------ ------------ Gross unrealized losses on fixed income securities $ (3,598) $42,100 50.6 Gross unrealized gains on fixed income securities 2,384 41,124 49.4 ----------- ------ ------------ Net unrealized gains and losses on fixed income securities $ (1,214) $83,224 100.0% =========== ====== ============

Included in the fixed income securities with a fair value less than 70% of amortized cost were ABS RMBS, Alt-A and other CDOs with a fair value totaling $910 million or 79.1% of the total securities with a fair value less than 70% of amortized cost. We continue to believe that the unrealized losses on these securities are not necessarily predictive of the ultimate performance. The unrealized losses should reverse over the remaining lives of the securities, including in the absence of further deterioration in the collateral relative to our positions in the securities' respective capital structures. For further information on these securities, see the Securities Experiencing Illiquid and Disrupted Markets and Other CDO sections.

THE ALLSTATE CORPORATION CONSOLIDATED AND SEGMENT HIGHLIGHTS Three Months Ended June 30, ------------------ ($ in millions, except per share amounts, return data Est. Percent and ratios) 2008 2007 Change Change ---------- ------ ------- ------- Consolidated Highlights Revenues $ 7,418 $9,455 $(2,037) (21.5) Net income 25 1,403 (1,378) (98.2) Operating income 683 1,072 (389) (36.3) Income per diluted share Net 0.05 2.30 (2.25) (97.8) Operating 1.24 1.76 (0.52) (29.5) Weighted average shares outstanding (diluted) 552.9 608.8 (55.9) (9.2) Net shares outstanding Return on equity Net income Operating income Book value per diluted share Book value per diluted share, excluding the impact of unrealized net capital gains and losses on fixed income securities Property-Liability Highlights Property-Liability premiums written $ 6,803 $6,939 $ (136) (2.0) Property-Liability revenues 6,943 7,776 (833) (10.7) Net income 439 1,230 (791) (64.3) Underwriting income 378 845 (467) (55.3) Net investment income 431 517 (86) (16.6) Operating income 592 947 (355) (37.5) Catastrophe losses 698 433 265 61.2 Ratios: Allstate Protection loss ratio 70.7 63.2 - 7.5 pts. Allstate Protection expense ratio 23.7 24.3 - (0.6) pts. ---------- ------ Allstate Protection combined ratio 94.4 87.5 - 6.9 pts. Effect of Discontinued Lines and Coverages on combined ratio - 0.1 - (0.1) pts. ---------- ------ Property-Liability combined ratio 94.4 87.6 - 6.8 pts. Effect of catastrophe losses on combined ratio 10.3 6.3 - 4.0 pts. ---------- ------ Property-Liability combined ratio excluding effect of catastrophes 84.1 81.3 - 2.8 pts. Effect of prior year reserve reestimates on combined ratio 0.1 (2.1) - 2.2 pts. Effect of catastrophe losses included in prior year reserve reestimates on combined ratio (0.1) (0.7) - 0.6 pts. ---------- ------ Property-Liability combined ratio excluding effect of catastrophes and prior year reserve reestimates 84.1 84.1 - - pts. ========== ====== Allstate Financial Highlights Premiums and deposits $ 4,453 $2,887 $ 1,566 54.2 Allstate Financial revenues 449 1,634 (1,185) (72.5) Realized capital gains and losses (pre-tax) (965) 104 (1,069) - Net (loss) income (379) 200 (579) - Operating income 118 154 (36) (23.4) Net income analysis Benefit spread 127 122 5 4.1 Investment spread 242 264 (22) (8.3) Investment Highlights Net investment income $ 1,412 $1,634 $ (222) (13.6) Realized capital gains and losses (pre-tax) (1,215) 545 (1,760) - Total investments Six Months Ended June 30, ------------------ ($ in millions, except per share amounts, return data Est. Percent and ratios) 2008 2007 Change Change -------- -------- ------- ------- Consolidated Highlights Revenues $ 15,505 $ 18,786 $(3,281) (17.5) Net income 373 2,898 (2,525) (87.1) Operating income 1,430 2,269 (839) (37.0) Income per diluted share Net 0.67 4.71 (4.04) (85.8) Operating 2.57 3.69 (1.12) (30.4) Weighted average shares outstanding (diluted) 557.2 615.2 (58.0) (9.4) Net shares outstanding 545.6 587.7 (42.1) (7.2) Return on equity Net income 10.2 25.0 - (14.8) pts. Operating income 15.1 23.1 - (8.0) pts. Book value per diluted share 35.93 36.39 (0.46) (1.3) Book value per diluted share, excluding the impact of unrealized net capital gains and losses on fixed income securities 36.93 35.70 1.23 3.4 Property-Liability Highlights Property-Liability premiums written $ 13,317 $ 13,548 $ (231) (1.7) Property-Liability revenues 13,983 15,517 (1,534) (9.9) Net income 942 2,579 (1,637) (63.5) Underwriting income 786 1,891 (1,105) (58.4) Net investment income 901 1,008 (107) (10.6) Operating income 1,221 2,009 (788) (39.2) Catastrophe losses 1,266 594 672 113.1 Ratios: Allstate Protection loss ratio 69.9 62.2 - 7.7 pts. Allstate Protection expense ratio 24.2 24.2 - - pts. -------- -------- Allstate Protection combined ratio 94.1 86.4 - 7.7 pts. Effect of Discontinued Lines and Coverages on combined ratio 0.1 (0.3) - 0.4 pts. -------- -------- Property-Liability combined ratio 94.2 86.1 - 8.1 pts. Effect of catastrophe losses on combined ratio 9.4 4.4 - 5.0 pts. -------- -------- Property-Liability combined ratio excluding effect of catastrophes 84.8 81.7 - 3.1 pts. Effect of prior year reserve reestimates on combined ratio 0.8 (2.0) - 2.8 pts. Effect of catastrophe losses included in prior year reserve reestimates on combined ratio (0.9) (0.4) - (0.5) pts. -------- -------- Property-Liability combined ratio excluding effect of catastrophes and prior year reserve reestimates 84.9 84.1 - 0.8 pts. ======== ======== Allstate Financial Highlights Premiums and deposits $ 7,499 $ 5,515 $ 1,984 36.0 Allstate Financial revenues 1,484 3,190 (1,706) (53.5) Realized capital gains and losses (pre-tax) (1,397) 127 (1,524) - Net (loss) income (490) 364 (854) - Operating income 261 310 (49) (15.8) Net income analysis Benefit spread 238 232 6 2.6 Investment spread 495 528 (33) (6.3) Investment Highlights Net investment income $ 2,938 $ 3,205 $ (267) (8.3) Realized capital gains and losses (pre-tax) (1,870) 1,016 (2,886) - Total investments 113,603 122,267 (8,664) (7.1)

THE ALLSTATE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Six Months Ended Ended June 30, June 30, -------------- --------------- ($ in millions, except per share Est. Percent Est. Percent data) 2008 2007 Change 2008 2007 Change ------- ----- ------- ------- ------ ------- Revenues Property-liability insurance premiums $ 6,750 $6,822 (1.1) $13,514 $13,628 (0.8) Life and annuity premiums and contract charges 471 454 3.7 923 937 (1.5) Net investment income 1,412 1,634 (13.6) 2,938 3,205 (8.3) Realized capital gains and losses (1,215) 545 - (1,870) 1,016 - ------- ----- ------- ------ Total revenues 7,418 9,455 (21.5) 15,505 18,786 (17.5) ------- ----- ------- ------ Costs and expenses Property-liability insurance claims and claims expense 4,776 4,317 10.6 9,452 8,434 12.1 Life and annuity contract benefits 395 386 2.3 792 814 (2.7) Interest credited to contractholder funds 563 673 (16.3) 1,187 1,322 (10.2) Amortization of deferred policy acquisition costs 959 1,216 (21.1) 2,034 2,369 (14.1) Operating costs and expenses 728 734 (0.8) 1,520 1,461 4.0 Restructuring and related charges (5) 4 - (6) 3 - Interest expense 88 83 6.0 176 155 13.5 ------- ----- ------- ------ Total costs and expenses 7,504 7,413 1.2 15,155 14,558 4.1 ------- ----- ------- ------ Gain (loss) on disposition of operations - 2 (100.0) (9) 2 - ------- ----- ------- ------ (Loss) income from operations before income tax (benefit) expense (86) 2,044 (104.2) 341 4,230 (91.9) Income tax (benefit) expense (111) 641 (117.3) (32) 1,332 (102.4) ------- ----- ------- ------ Net income $ 25 $1,403 (98.2) $ 373 $ 2,898 (87.1) ======= ===== ======= ====== Net income per share - Basic $ 0.05 $ 2.33 $ 0.67 $ 4.75 ======= ===== ======= ====== Weighted average shares - Basic 549.6 604.1 554.2 610.4 ======= ===== ======= ====== Net income per share - Diluted $ 0.05 $ 2.30 $ 0.67 $ 4.71 ======= ===== ======= ====== Weighted average shares - Diluted 552.9 608.8 557.2 615.2 ======= ===== ======= ====== Cash dividends declared per share $ 0.41 $ 0.38 $ 0.82 $ 0.76 ======= ===== ======= ======

THE ALLSTATE CORPORATION CONTRIBUTION TO INCOME Three Months Six Months Ended Ended June 30, June 30, -------------- --------------- ($ in millions, except per share Est. Percent Est. Percent data) 2008 2007 Change 2008 2007 Change ------ ------ ------- ------- ------ ------- Contribution to income Operating income before the impact of restructuring and related charges $ 680 $1,075 (36.7) $ 1,426 $2,271 (37.2) Restructuring and related charges, after-tax (3) 3 - (4) 2 - ------ ------ ------- ------ Operating income 683 1,072 (36.3) 1,430 2,269 (37.0) Realized capital gains and losses, after-tax (788) 352 - (1,213) 657 - DAC and DSI amortization relating to realized capital gains and losses, after-tax 134 (15) - 173 (15) - Reclassification of periodic settlements and accruals on non- hedge derivative instruments, after- tax (4) (7) 42.9 (11) (15) 26.7 Gain (loss) on disposition of operations, after- tax - 1 (100.0) (6) 2 - ------ ------ ------- ------ Net income $ 25 $1,403 (98.2) $ 373 $2,898 (87.1) ====== ====== ======= ====== Income per share - Diluted Operating income before the impact of restructuring and related charges $ 1.23 $ 1.76 (30.1) $ 2.56 $ 3.69 (30.6) Restructuring and related charges, after-tax (0.01) - - (0.01) - - ------ ------ ------- ------ Operating income 1.24 1.76 (29.5) 2.57 3.69 (30.4) Realized capital gains and losses, after-tax (1.42) 0.58 - (2.18) 1.07 - DAC and DSI amortization relating to realized capital gains and losses, after-tax 0.24 (0.02) - 0.31 (0.02) - Reclassification of periodic settlements and accruals on non- hedge derivative instruments, after- tax (0.01) (0.02) 50.0 (0.02) (0.03) 33.3 Gain (loss) on disposition of operations, after- tax - - - (0.01) - - ------ ------ ------- ------ Net income $ 0.05 $ 2.30 (97.8) $ 0.67 $ 4.71 (85.8) ====== ====== ======= ======

THE ALLSTATE CORPORATION SEGMENT RESULTS Three Months Six Months Ended Ended June 30, June 30, ---------------- ---------------- Est. Est. ($ in millions, except ratios) 2008 2007 2008 2007 ------- ------- ------- ------- Property-Liability Premiums written $ 6,803 $ 6,939 $13,317 $13,548 ======= ======= ======= ======= Premiums earned $ 6,750 $ 6,822 $13,514 $13,628 Claims and claims expense 4,776 4,317 9,452 8,434 Amortization of deferred policy acquisition costs 1,000 1,032 2,011 2,056 Operating costs and expenses 601 623 1,271 1,243 Restructuring and related charges (5) 5 (6) 4 ------- ------- ------- ------- Underwriting income 378 845 786 1,891 ------- ------- ------- ------- Net investment income 431 517 901 1,008 Periodic settlements and accruals on non-hedge derivative instruments - - 1 - Income tax expense on operations 217 415 467 890 ------- ------- ------- ------- Operating income 592 947 1,221 2,009 Realized capital gains and losses, after-tax (153) 283 (278) 570 Reclassification of periodic settlements and accruals on non- hedge derivative instruments, after-tax - - (1) - ------- ------- ------- ------- Net income $ 439 $ 1,230 $ 942 $ 2,579 ======= ======= ======= ======= Catastrophe losses $ 698 $ 433 $ 1,266 $ 594 ======= ======= ======= ======= Operating ratios: Claims and claims expense ratio 70.8 63.3 70.0 61.9 Expense ratio 23.6 24.3 24.2 24.2 ------- ------- ------- ------- Combined ratio 94.4 87.6 94.2 86.1 ======= ======= ======= ======= Effect of catastrophe losses on combined ratio 10.3 6.3 9.4 4.4 ======= ======= ======= ======= Effect of prior year reserve reestimates on combined ratio 0.1 (2.1) 0.8 (2.0) ======= ======= ======= ======= Effect of catastrophe losses included in prior year reserve reestimate on combined ratio 0.1 0.7 0.9 0.4 ======= ======= ======= ======= Effect of Discontinued Lines and Coverages on combined ratio - 0.1 0.1 (0.3) ======= ======= ======= ======= Allstate Financial Premiums and deposits $ 4,453 $ 2,887 $ 7,499 $ 5,515 ======= ======= ======= ======= Investments $72,504 $77,113 $72,504 $77,113 ======= ======= ======= ======= Premiums and contract charges $ 471 $ 454 $ 923 $ 937 Net investment income 943 1,076 1,958 2,126 Periodic settlements and accruals on non-hedge derivative instruments 7 12 16 24 Contract benefits 395 386 792 814 Interest credited to contractholder funds 599 670 1,229 1,319 Amortization of deferred policy acquisition costs 130 164 247 293 Operating costs and expenses 125 95 243 200 Restructuring and related charges - (1) - (1) Income tax expense on operations 54 74 125 152 ------- ------- ------- ------- Operating income 118 154 261 310 Realized capital gains and losses, after-tax (627) 67 (908) 82 DAC and DSI amortization relating to realized capital gains and losses, after-tax 134 (15) 173 (15) Reclassification of periodic settlements and accruals on non- hedge derivative instruments, after-tax (4) (7) (10) (15) Gain (loss) on disposition of operations, after-tax - 1 (6) 2 ------- ------- ------- ------- Net (loss) income $ (379) $ 200 $ (490) $ 364 ======= ======= ======= ======= Corporate and Other Net investment income $ 38 $ 41 $ 79 $ 71 Operating costs and expenses 90 99 182 173 Income tax benefit on operations (25) (29) (51) (52) ------- ------- ------- ------- Operating loss (27) (29) (52) (50) Realized capital gains and losses, after-tax (8) 2 (27) 5 ------- ------- ------- ------- Net loss $ (35) $ (27) $ (79) $ (45) ======= ======= ======= ======= Consolidated net income $ 25 $ 1,403 $ 373 $ 2,898 ======= ======= ======= =======

THE ALLSTATE CORPORATION UNDERWRITING RESULTS BY AREA OF BUSINESS Three Months Six Months Ended Ended June 30, June 30, ------------ -------------- ($ in millions, except Est. Percent Est. Percent ratios) 2008 2007 Change 2008 2007 Change ----- ----- ------- ------ ------ ------- Property-Liability Underwriting Summary Allstate Protection $ 381 $ 850 (55.2) $ 796 $ 1,856 (57.1) Discontinued Lines and Coverages (3) (5) 40.0 (10) 35 (128.6) ----- ----- ------ ------ Underwriting income $ 378 $ 845 (55.3) $ 786 $ 1,891 (58.4) ===== ===== ====== ====== Allstate Protection Underwriting Summary Premiums written $6,803 $6,939 (2.0) $13,317 $13,548 (1.7) ===== ===== ====== ====== Premiums earned $6,750 $6,822 (1.1) $13,514 $13,628 (0.8) Claims and claims expense 4,774 4,314 10.7 9,445 8,473 11.5 Amortization of deferred policy acquisition costs 1,000 1,032 (3.1) 2,011 2,056 (2.2) Operating costs and expenses 600 621 (3.4) 1,268 1,239 2.3 Restructuring and related charges (5) 5 - (6) 4 - ----- ----- ------ ------ Underwriting income $ 381 $ 850 (55.2) $ 796 $ 1,856 (57.1) ===== ===== ====== ====== Catastrophe losses $ 698 $ 433 61.2 $ 1,266 $ 594 113.1 ===== ===== ====== ====== Operating ratios: Claims and claims expense ratio 70.7 63.2 69.9 62.2 Expense ratio 23.7 24.3 24.2 24.2 ----- ----- ------ ------ Combined ratio 94.4 87.5 94.1 86.4 ===== ===== ====== ====== Effect of catastrophe losses on combined ratio 10.3 6.3 9.4 4.4 ===== ===== ====== ====== Effect of restructuring and related charges on combined ratio (0.1) 0.1 - - ===== ===== ====== ====== Discontinued Lines and Coverages Underwriting Summary Premiums written $ - $ - - $ - $ - - ===== ===== ====== ====== Premiums earned $ - $ - - $ - $ - - Claims and claims expense 2 3 (33.3) 7 (39) 117.9 Operating costs and expenses 1 2 (50.0) 3 4 (25.0) ----- ----- ------ ------ Underwriting (loss) income $ (3) $ (5) 40.0 $ (10) $ 35 (128.6) ===== ===== ====== ====== Effect of Discontinued Lines and Coverages on the Property-Liability combined ratio - 0.1 0.1 (0.3) ===== ===== ====== ======

THE ALLSTATE CORPORATION PROPERTY-LIABILITY PREMIUMS WRITTEN BY MARKET SEGMENT Three Months Six Months Ended Ended June 30, June 30, ------------ -------------- Est. Percent Est. Percent ($ in millions) 2008 2007 Change 2008 2007 Change ----- ----- ------- ------ ------ ------- Allstate brand Standard auto $3,957 $3,956 - $ 8,034 $ 8,007 0.3 Non-standard auto 261 300 (13.0) 535 621 (13.8) Involuntary auto 17 22 (22.7) 33 44 (25.0) Commercial lines 173 199 (13.1) 340 393 (13.5) Homeowners 1,531 1,543 (0.8) 2,716 2,756 (1.5) Other personal lines 423 422 0.2 794 787 0.9 ----- ----- ------ ------ 6,362 6,442 (1.2) 12,452 12,608 (1.2) Encompass brand Standard auto 272 297 (8.4) 542 563 (3.7) Non-standard auto 11 18 (38.9) 23 39 (41.0) Involuntary auto 3 5 (40.0) 6 11 (45.5) Homeowners 129 147 (12.2) 242 270 (10.4) Other personal lines 26 30 (13.3) 52 57 (8.8) ----- ----- ------ ------ 441 497 (11.3) 865 940 (8.0) ----- ----- ------ ------ Allstate Protection 6,803 6,939 (2.0) 13,317 13,548 (1.7) Discontinued Lines and Coverages - - - - - - ----- ----- ------ ------ Property-Liability $6,803 $6,939 (2.0) $13,317 $13,548 (1.7) ===== ===== ====== ====== Allstate Protection Standard auto $4,229 $4,253 (0.6) $ 8,576 $ 8,570 0.1 Non-standard auto 272 318 (14.5) 558 660 (15.5) Involuntary auto 20 27 (25.9) 39 55 (29.1) Commercial lines 173 199 (13.1) 340 393 (13.5) Homeowners 1,660 1,690 (1.8) 2,958 3,026 (2.2) Other personal lines 449 452 (0.7) 846 844 0.2 ----- ----- ------ ------ $6,803 $6,939 (2.0) $13,317 $13,548 (1.7) ===== ===== ====== ======

THE ALLSTATE CORPORATION PROPERTY-LIABILITY ANNUAL IMPACT OF NET RATE CHANGES APPROVED ON PREMIUMS WRITTEN (1) (6) Three Months Ended June 30, 2008 (Est.) ------------------------------- State Number of Countrywide Specific States (%) (2) (%) (3) --------- ----------- --------- Allstate brand Standard auto (4) 15 (0.4) (1.2) Non-standard auto (7) 5 (0.2) (7.7) Homeowners (5) 16 0.7 2.3 Encompass brand Standard auto 9 0.8 3.4 Non-standard auto - - - Homeowners (7) 13 0.9 4.5 Six Months Ended June 30, 2008 (Est.) ------------------------------- State Number of Countrywide Specific States (%) (2) (%) (3) --------- ----------- --------- Allstate brand Standard auto (4) 23 0.4 0.9 Non-standard auto (7) 7 - 0.4 Homeowners (5) 23 2.0 4.9 Encompass brand Standard auto 24 1.1 2.5 Non-standard auto - - - Homeowners (7) 17 1.4 6.6 (1) Rate increases that are indicated based on a loss trend analysis to achieve a targeted return will continue to be pursued in all locations and for all products. Rate changes include changes approved based on our net cost of reinsurance. These rate changes do not reflect initial rates filed for insurance subsidiaries initially writing new business. Based on historical premiums written in those states, rate changes approved for the three month and six month periods ending June 30, 2008, are estimated to total $(10) million and $212 million, respectively. (2) Represents the impact in the states where rate changes were approved during 2008 as a percentage of total countrywide prior year-end premiums written. (3) Represents the impact in the states where rate changes were approved during 2008 as a percentage of total prior year-end premiums written in those states. (4) Excluding the impact of a 15.9% rate reduction in California related to an order effective in April 2008, the Allstate brand standard auto rate change is 5.5% on a state specific basis and 1.3% on a countrywide basis for the three months ended June 30, 2008 and 5.4% on a state specific basis and 2.2% on a countrywide basis for the six months ended June 30, 2008. We estimate that this rate decrease will have an impact of $135 million on premiums written and $85 million on underwriting income during the remainder of 2008. (5) Excluding the impact of a 3.0% rate reduction in Texas related to a resolution reached in the second quarter of 2008, the Allstate brand homeowners rate change is 3.3% on a state specific basis and 1.0% on a countrywide basis for the three months ended June 30, 2008 and 5.7% on a state specific basis and 2.3% on a countrywide basis for the six months ended June 30, 2008. We estimate that this rate decrease will have an impact of $7 million on premiums written and $1 million on underwriting income during the remainder of 2008. (6) During July 2008, we received an order to reduce Allstate brand homeowners rates in the state of California by 28.5%. We estimate that this rate decrease will have an impact of $88 million on premiums written and $15 million on underwriting income during the remainder of 2008. (7) Includes Washington, D.C.

THE ALLSTATE CORPORATION ALLSTATE PROTECTION MARKET SEGMENT ANALYSIS Three Months Ended June 30, ------------------------------------------------ ($ in millions, Est. Est. Est. Est. except ratios) 2008 2007 2008 2007 2008 2007 2008 2007 ------ ------ ----- ---- ------ ---- ----- ---- Effect of Catastrophe Losses Premiums Loss Ratio on the Loss Expense Earned (2) Ratio Ratio -------------- ---------- ----------- ---------- Allstate brand Standard auto $ 4,014 $ 3,986 67.1 63.5 2.1 1.3 23.5 24.2 Non-standard auto 270 316 60.0 59.2 1.1 0.6 22.6 23.7 Homeowners 1,420 1,437 86.5 67.7 38.0 21.6 21.2 23.3 Other (1) 593 606 63.1 57.4 5.9 6.6 26.8 25.1 ------ ------ Total Allstate brand 6,297 6,345 70.8 63.6 10.5 6.4 23.2 24.1 Encompass brand Standard auto 278 283 65.8 57.2 1.8 0.7 27.7 26.9 Non-standard auto 12 20 83.3 80.0 - - 25.0 25.0 Homeowners 129 139 72.9 55.4 23.3 16.5 31.8 30.2 Other (1) 34 35 88.2 62.9 5.9 5.7 26.5 25.7 ------ ------ Total Encompass brand 453 477 70.0 58.0 8.2 5.7 28.7 27.7 ------ ------ Allstate Protection $ 6,750 $ 6,822 70.7 63.2 10.3 6.3 23.7 24.3 ====== ====== Six Months Ended June 30, ------------------------------------------------ ($ in millions, Est. Est. Est. Est. except ratios) 2008 2007 2008 2007 2008 2007 2008 2007 ------ ------ ----- ---- ------ ---- ---