Allstate (ALL)

Debt outstanding

        Total debt outstanding at December 31 consisted of the following:

(1)

Senior Notes are subject to redemption at the Company's option in whole or in part at any time at the greater of either 100% of the principal amount plus accrued and unpaid interest to the redemption date or the discounted sum of the present values of the remaining scheduled payments of principal and interest and accrued and unpaid interest to the redemption date.

(2)

The Company classifies any borrowings, which have a maturity of twelve months or less at inception as short-term debt.

        Total debt outstanding by maturity at December 31 consisted of the following:

        In 2006, the Company issued $650 million of 5.95% Senior Notes due 2036. The net proceeds were used for general corporate purposes, including to facilitate the repayment of the $550 million of 5.375% senior notes at their scheduled maturity on December 1, 2006.

        In 2005, the Company issued $800 million of 5.55% senior notes due 2035. The net proceeds of this issuance were used for general corporate purposes, including funding the repayment of a portion of the $900 million of 7⁷/8% senior notes, which were repaid at their scheduled maturity, May 1, 2005.

185

        In 1996, the Company issued junior subordinated debentures to Allstate Financing II ("AF II"), a VIE, which used the junior subordinated debentures as collateral to issue $200 million of 7.83% mandatorily redeemable preferred securities of subsidiary trust ("trust preferred securities") to unrelated third party investors. The Company was not required to consolidate the VIE because the Company owned none of the variable interests issued by the VIE. AF II issued 200,000 shares of trust preferred securities at $1,000 per share. The sole assets of AF II were junior subordinated debentures issued by the Company. In 2006, the Company elected to redeem the junior subordinated debentures, thereby triggering the redemption of the trust preferred securities. The debentures were redeemed on December 1, 2006 at a price of 103.915% plus accrued and unpaid interest from availability liquidity.

        The Company is the primary beneficiary of a consolidated VIE used to acquire up to 38 automotive collision repair stores ("synthetic lease VIE"). In 2006, the Company renewed the synthetic lease for a five-year term at a floating rate due 2011. In 2006, the Company purchased a headquarters office building previously owned by the synthetic lease VIE for $78 million, thus reducing long-term debt by $75 million. The Company's Consolidated Statements of Financial Position include $42 million and $117 million of property and equipment, net, and long-term debt as of December 31, 2006 and 2005, respectively.

        The Company was the primary beneficiary of a consolidated structured investment security VIE. The Company's Consolidated Statements of Financial Position included $54 million of investments and $49 million of long-term debt as of December 31, 2005. In 2006, the debt associated with the VIE was redeemed.

        To manage short-term liquidity, Allstate can issue commercial paper, draw on its credit facilities and engage in securities repurchase agreements (see Note 2). The Company currently maintains a credit facility and a commercial paper program as a potential source of funds. These include a $1.00 billion five-year revolving credit facility expiring in 2009 and a commercial paper program with a borrowing limit of $1.00 billion. The five-year facility contains an increase provision that would make up to an additional $500 million available for borrowing provided the increased portion could be fully syndicated at a later date among existing or new lenders. The right to borrow from the five-year facility is subject to a requirement to maintain a 37.5% debt to capital resources ratio as defined in the agreement. Although the right to borrow under the five-year facility is not subject to a minimum-rating requirement, the costs of maintaining the five-year facility and borrowing under it are based on the ratings of our senior, unsecured, nonguaranteed long-term debt. The total amount outstanding at any point in time under the combination of the commercial paper program and the credit facility cannot exceed the amount that can be borrowed under the credit facility. No amounts were outstanding under the credit facilities as of December 31, 2006 and 2005. The Company had no commercial paper outstanding at December 31, 2006 and $413 million with a weighted average interest rate of 4.22% outstanding at December 31, 2005. The Company paid $322 million, $318 million and $301 million of interest on debt in 2006, 2005 and 2004, respectively.

        During 2006, the Company filed a universal shelf registration statement with the SEC. The registration statement covers an unspecified amount of securities and can be used to issue debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of subsidiaries.

11.       Debt Outstanding

In May 2005, the Company issued $800 million of 5.55% senior notes due 2035.  The net proceeds of this issuance were used for general corporate purposes, including funding the repayment of a portion of the $900 million of 7.875% senior notes, which were repaid at their scheduled maturity, May 1, 2005.

In July 2005, the Company liquidated its consolidated investment management variable interest entity (“VIE”).  As a result of the liquidation, long-term debt and assets decreased by $279 million and $305 million (of which $298 million was classified as investments), respectively.  In September 2005, the Company established a new investment management VIE that holds assets under the management of Allstate Investment Management Company, a subsidiary of the Company, on behalf of unrelated third party investors.  The VIE had assets consisting primarily of investments totaling $318 million and liabilities consisting primarily of long-term debt totaling $288 million at September 30, 2005.  The Company does not consolidate the VIE because it is not the primary beneficiary of this VIE. The Company’s maximum loss exposure related to its investment in the VIE is the current carrying value of its equity investment, which was $10 million at September 30, 2005.

20

11.       Debt Outstanding

In May 2005, the Company issued $800 million of 5.55% senior notes due 2035.  The net proceeds of this issuance will be used for general corporate purposes, including funding the repayment of a portion of the $900 million of 7.875% senior notes, which were repaid at their scheduled maturity, May 1, 2005.

In July 2005, the Company liquidated its consolidated investment management variable interest entity.  As a result of the liquidation, long-term debt and assets decreased by $279 million and $305 million (of which $298 million was classified as investments), respectively.

15