Allstate Memo



FOR IMMEDIATE RELEASE

Contact: Robert Block (847) 402-8885

Phil Dorn (847) 402-8240

Investor Relations

Allstate reports 2001 second quarter results

NORTHBROOK, Ill., July 19, 2001 -- The Allstate Corporation (NYSE: ALL) today reported that operating income per diluted share for the second quarter of 2001 was $.31 compared to $.58 in the second quarter of 2000. The decline was driven by catastrophe losses, by increased homeowners loss costs and market conditions in the financial services sector.

“The quarter was a particularly trying one for Allstate, as we experienced the highest level of quarterly catastrophe losses since the Northridge, California earthquake in 1994,” said Chairman, President and CEO Edward M. Liddy. “The impact of the spring storms and Tropical Storm Allison was significant, with catastrophes this quarter at $537 million pre-tax, a full $170 million more than last year’s second quarter. Also included in this total are $90 million of additional reserves that were recorded to provide for the resolution of claims remaining from the Northridge earthquake. The catastrophe impact aggravated an already difficult environment in the property insurance market, where we continue to experience significant loss cost pressure.

“The Good HandsSM Network continues to make encouraging progress, with the rollout of three more states in the second quarter. In those states where the Good Hands Network has been fully implemented, we see positive results from the interaction and integration between the three channels of agencies, call centers and the Internet for access to sales and servicing capabilities. We continue to work to fine-tune the Network, to make sure that it is as responsive as possible to the needs of the Allstate customer.”

Operating income was $230 million in the second quarter of 2001, compared to $432 million in the second quarter of 2000. Consolidated revenues for the second quarter were $7.20 billion, compared to the 2000 second quarter consolidated revenues of $7.18 billion. Consolidated net income for the quarter was $168 million or $.23 per diluted share, compared to $459 million or $.61 per diluted share for the same period in 2000. The decline in consolidated net income reflects both decreased operating income and realized capital losses resulting from market conditions affecting investment write-downs and portfolio trading.

For the six months ended June 30, 2001, consolidated revenues were $14.33 billion, operating income was $782 million ($1.07 per diluted share), and net income was $668 million ($.91 per diluted share), compared to consolidated revenues of $14.47 billion, operating income of $895 million ($1.18 per diluted share), and net income of $1.02 billion ($1.34 per diluted share) in the first six months of 2000. Catastrophe losses for the first six months of 2001 were $402 million after-tax, compared to $487 million after-tax in the same period of the previous year. Consolidated realized capital losses were $80 million after-tax through June of 2001, compared to realized capital gains of $147 million after-tax for the first six months of 2000.

Property-Liability Business

Property-Liability written premiums increased 2.6 percent in the second quarter of 2001 to $5.73 billion compared to $5.58 billion during the same period of 2000. For Allstate branded products, written premiums increased 4.3 percent compared to the same period in the prior year. EncompassSM Insurance and DeerbrookSM written premium declined as they continued to improve the profitability of these businesses.

”We continue to see strong progress in the development of the Allstate standard auto book of business,” Liddy said. “Allstate standard auto premiums written increased nearly 5 percent over the second quarter of last year, the volume of new business applications continued to accelerate during the quarter, retention remains on a positive trend and in states where the strategic risk management system has been implemented in connection with the rollout of the Good Hands Network our new business productivity has shown good progress.

“As expected, the steps we have taken to address the adverse profitability trends in our non-standard business continue to reduce written premiums in this line, but the impact from these actions is expected to begin to moderate in the second half. We have been actively pursuing appropriate rate increases for all Allstate product categories.”

Property-Liability revenues in the second quarter of 2001 were $5.92 billion compared to $6.06 billion for the 2000 second quarter. Operating income for the quarter was $134 million versus 2000 second quarter operating income of $302 million, due primarily to increased premiums being more than offset by higher catastrophe losses and increased homeowners loss costs.

“Adverse severity trends in homeowners continue to be an issue,” Liddy said, “and in many cases homeowners’ rates are lagging behind actual loss experience. We are currently examining a range of possible remedial actions in this area, including changes to our product design and our underwriting approach, as well as appropriate rate initiatives.”

The combined ratio for the quarter was 106.3, compared to the 2000 second quarter ratio of 100.9. Excluding catastrophe losses and restructuring charges, the combined ratio was 96.5, compared to 93.9 in the second quarter of 2000. Property-Liability realized capital losses were $11 million after-tax in the second quarter of 2001, compared to realized capital gains of $91 million after-tax for the same period in 2000. Net income was $117 million for the quarter, compared to $393 million for the same period in the previous year.

For the first six months of 2001, Property-Liability written premiums increased 1.9 percent to $11.17 billion compared to $10.96 billion in the first six months of 2000. Revenues for the first six months of 2001 were $11.86 billion, operating income was $579 million, realized capital gains were $6 million after-tax and net income was $576 million, compared to revenues of $12.14 billion, operating income of $644 million, realized capital gains of $210 million after-tax and net income of $854 million in the first six months of 2000.

Allstate Financial Business

For the second quarter of 2001, Allstate Financial GAAP revenues increased 14.1 percent to $1.27 billion, compared to $1.11 billion for the same period in the previous year. Allstate Financial operating income for the quarter was $119 million compared to $145 million for the same period in 2000; with increased investment margins being more than offset by the effects of restructuring charges, decreased margins on fee-based products and increased operating expenses intended to support the generation of future sales.

“Volatile market conditions continue to adversely impact the sales of our fixed and variable annuity products,” Liddy said, “while we saw modest growth in our life insurance and structured settlements business, as well as a strong response to our institutional offerings during the quarter.

“Operating income was also adversely impacted by higher than normal expenses for the business, due in part to the increased servicing cost of the higher number of policies, and in part to the investment in new products currently being brought to market. We are monitoring these expense issues carefully, and will take relevant actions as appropriate.”

Net income for the second quarter of 2001 was $84 million compared to $101 million for the second quarter of 2000, reflecting lower operating income. Statutory premiums and deposits were $2.94 billion in the quarter compared to $3.23 billion in the second quarter of 2000, as increased sales of funding agreements were more than offset by lower annuity sales primarily due to market conditions.

Allstate Financial statutory premiums and deposits for the first six months of 2001 were $5.80 billion, revenues were $2.43 billion, operating income was $246 million, realized capital losses were $87 million after-tax and net income was $153 million. These totals compare to statutory premiums and deposits of $6.24 billion, revenues of $2.31 billion, operating income of $272 million, realized capital losses of $40 million after-tax and net income of $232 million for the first six months of 2000.

This press release contains a forward-looking statement about the steps Allstate has taken to address adverse profitability trends in its non-standard auto insurance business and the impact that those steps will have on written premiums in the second half of 2001. The statement is subject to the Private Securities Litigation Reform Act of 1995 and is based on management’s estimates, assumptions and projections. While management believes that the impact will begin to moderate in the second half of 2001, the negative impact could continue at current rates or increase due to a variety of factors, including unforeseen flaws in Allstate’s pricing model.

The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer. Widely known through the “You’re In Good Hands With Allstate®” slogan, Allstate provides insurance products to more than 14 million households and has approximately 13,000 exclusive agents in the U.S. and Canada. Customers can access Allstate products and services through Allstate agents, or in select states at and 1-800-Allstate. Encompasssm and Deerbrooksm Insurance brand property and casualty products are sold exclusively through independent agents. Allstate Financial Group includes the businesses that provide life insurance, retirement and investment products, through Allstate agents, workplace marketing, independent agents, banks and securities firms.

The Allstate Corporation prepares an interim investor supplement, containing standard information that is not available at the time of the earnings release. A supplement will be posted to the company’s website in approximately 10 days, and can be accessed by going to the Allstate web site at  and clicking on “About Allstate.” From there, go to the “Find Financial Information” button.

Summary of results for the quarter and six months ended June 30, 2001:

|Consolidated Highlights |

| |Quarter Ended |Six Months Ended |

| |June 30 |June 30 |

|($ in millions, except per-share amounts) |Est. | | |Est. | | |

| |2001 |2000 |Change |2001 |2000 |Change |

| |$ |$ |% |$ |$ |% |

|Consolidated Revenues |7,203 |7,183 |0.3 |14,334 |14,469 |(0.9) |

|Operating Income Before Restructuring Charges | | | | | | |

| |233 |435 |(46.4) |790 |916 |(13.8) |

|Operating Income Per Share (Diluted) Before Restructuring Charges | | | | | | |

| |.32 |.59 |(45.8) |1.08 |1.21 |(10.7) |

|Restructuring Charges After-tax |3 |3 |-- |8 |21 |(61.9) |

|Operating Income |230 |432 |(46.8) |782 |895 |(12.6) |

|Operating Income Per Share (Diluted) |.31 |.58 |(46.6) |1.07 |1.18 |(9.3) |

|Realized Capital (Losses) Gains After-tax |(47) |38 |-- |(80) |147 |(154.4) |

|Loss on Disposition of Operations |(6) |-- |-- |(6) |-- |-- |

|Dividends on Preferred Securities of Subsidiary Trusts | | | | | | |

| |(9) |(11) |(18.2) |(19) |(22) |(13.6) |

|Cumulative Effect of a Change in Accounting Principle, After-tax | | | | | | |

| |-- |-- |-- |(9) |-- |-- |

|Net Income |168 |459 |(63.4) |668 |1,020 |(34.5) |

|Net Income per share (Diluted) |.23 |.61 |(62.3) |.91 |1.34 |(32.1) |

|Weighted Average Shares Outstanding (Diluted) | | | | | | |

| |728.5 |747.8 |(2.6) |729.4 |760.0 |(4.0) |

• For the second quarter of 2001, consolidated revenues were $7.20 billion, compared to $7.18 billion in the second quarter of 2000. This increase was due to increased investment income and Allstate Financial premiums and contract charges offset by realized capital losses in the second quarter of 2001 as compared to realized capital gains in the second quarter of 2000. Consolidated operating income was $230 million for the second quarter of 2001, or $.31 per share on a diluted basis, compared to prior year second quarter operating income of $432 million, or $.58 per diluted share.

• Property-Liability written premiums totaled $5.73 billion during the second quarter of 2001 versus $5.58 billion during the same period in 2000. Excluding the impacts of Encompass Insurance, which continues to pursue profit improvement actions, Property-Liability written premiums totaled $5.25 billion during the second quarter of 2001, an increase from $5.08 billion during the same period of 2000. This increase is due to growth in Allstate’s standard auto and homeowners business, partially offset by decreases in its non-standard auto business resulting from planned profitability actions.

• Through the first six months of 2001, standard auto rate changes have been approved in 33 states with a projected average premium written increase in those states of 2.7% on an annual basis, non-standard rate actions have been approved in 27 states with a projected average premium written increase in those states of 9.1% on an annual basis, and homeowners rate changes have been approved in 25 states with a projected average premium written increase in those states of 9.8% on an annual basis.

• Although investment margins for Allstate Financial were better than those in the second quarter of 2000, Allstate Financial operating income was $119 million compared to $145 million in the same period of 2000. The decrease reflects the fact that operating income in the second quarter of 2000 was affected by a non-cash pension curtailment and settlement credit and that in the second quarter of 2001 Allstate Financial faced decreased margins on fee-based products and increased operating expenses intended to support the generation of future sales.

• During the second quarter of 2001, Allstate disposed of its operations in the Philippines and Indonesia. During the quarter the Company also announced a definitive agreement to sell operations in Italy and Germany, which is currently awaiting regulatory approval. These announcements reflect Allstate’s intention to focus its efforts on business in North America.

• During the second quarter of 2001, the company acquired approximately 1.89 million shares of its stock at a cost of $80 million as part of the current stock repurchase program. The total cost of shares repurchased under this $2 billion program is $1.64 billion.

|Property-Liability Highlights |

| |Quarter Ended |Six Months Ended |

| |June 30 |June 30 |

|($ in millions, except ratios) | Est. 2001 | | |Est. | | |

| |$ |2000 |Change |2001 |2000 |Change |

| | |$ |% |$ |$ |% |

|Property-Liability Premiums Written |5,728 |5,581 |2.6 |11,168 |10,960 |1.9 |

|Property-Liability Revenues |5,918 |6,062 |(2.4) |11,864 |12,141 |(2.3) |

|Operating Income before Restructuring Charges | | | | | | |

| |135 |314 |(57.0) |584 |673 |(13.2) |

|Restructuring Charges After-tax |1 |12 |(91.7) |5 |29 |(82.8) |

|Operating Income |134 |302 |(55.6) |579 |644 |(10.1) |

|Realized Capital (Losses) Gains After-tax |(11) |91 |(112.1) |6 |210 |(97.1) |

|Loss on Disposition of Operations |(6) |-- |-- |(6) |-- |-- |

|Cumulative Effect of a Change in Accounting Principle, After-tax | | | | | | |

| |-- |-- |-- |(3) |-- |-- |

|Net Income |117 |393 |(70.2) |576 |854 |(32.6) |

|Catastrophes After-tax |349 |239 |46.0 |402 |487 |(17.5) |

|Combined Ratio before impacts of catastrophes and restructuring | | | | | | |

|charges |96.5 |93.9 |2.6 pts |96.4 |93.1 |3.3 pts |

| | | | | | | |

|Impact of catastrophes |9.8 |6.7 |3.1 pts |5.6 |6.8 |(1.2) pts |

|Impact of restructuring charges |-- |0.3 |(0.3) pts |0.1 |0.4 |(0.3) pts |

| | | | | | | |

|Combined Ratio |106.3 |100.9 |5.4 pts |102.1 |100.3 |1.8 pts |

|Allstate Financial Highlights |

| |Quarter Ended |Six Months Ended |

| |June 30 |June 30 |

| |Est. | | |Est. | | |

| |2001 |2000 |Change |2001 |2000 |Change |

|($ in millions) |$ |$ |% |$ |$ |% |

|Statutory Premiums and Deposits |2,936 |3,233 |(9.2) |5,803 |6,242 |(7.0) |

|Allstate Financial GAAP Revenues |1,266 |1,110 |14.1 |2,427 |2,310 |5.1 |

|Operating Income before Restructuring Charges | | | | | | |

| |121 |136 |(11.0) |249 |264 |(5.7) |

|Restructuring Charges after tax |2 |(9) |(122.2) |3 |(8) |(137.5) |

|Operating Income |119 |145 |(17.9) |246 |272 |(9.6) |

|Realized Capital (Losses)Gains after-tax | | | | | | |

| |(35) |(44) |(20.5) |(87) |(40) |117.5 |

|Cumulative Effect of a Change in Accounting Principle,| | | | | | |

|After-tax |-- |-- |-- |(6) |-- |-- |

|Net Income |84 |101 |(16.8) |153 |232 |(34.1) |

|Investments including Separate Accounts | | | | | | |

| |58,618 |52,479 |11.7 |58,618 |52,479 |11.7 |

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Allstate Insurance Company Street City, State Zip T 888.555.1234 F 888.555.1256 E someone@

Allstate Insurance Company Street City, State Zip T 888.555.1234 F 888.555.1256 E someone@

Allstate Insurance Company Street City, State Zip T 888.555.1234 F 888.555.1256 E someone@

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