Allstate (ALL)

“Allstate finished the year with a solid performance in the quarter.  Operating income was $975 million despite the sizeable influence on our results from catastrophe losses,” said Edward M. Liddy, chairman and chief executive officer, The Allstate Corporation. “Hurricane Wilma, which struck south Florida as a category 3 hurricane in late October 2005, cost Allstate more than $500 million and will be one of the ten most costly catastrophes in U.S. history. Catastrophe losses in the quarter exceeded the average expected catastrophe losses we use in pricing by $0.30 per diluted share. Our book value per share increased by a strong 4.6 percent over the third quarter of 2005.

“Overall, our property-liability written premium grew 2.4 percent in the fourth quarter compared to the fourth quarter of 2004. Allstate brand standard auto and homeowners written premium grew 3.5 percent and 6.3 percent, respectively in the quarter compared to the prior year’s quarter. Excluding the effects of catastrophe losses the combined ratio of 79.4 was an exceptional result.

“In particular, our auto insurance business generated very good profitability helped by the favorable trends we continue to see in the frequency and severity of automobile accidents. Our superior claim handling practices over the long term are an important differentiator between Allstate and the rest of the industry and the principal reason why our severity experience is better than our competitors.

“For the year, we were able to earn a profit after being hit by three of the ten most costly natural disasters in U.S. history. Our ability to be profitable in such a difficult year is a testament to the effectiveness of our strategy, our focus on superior execution and the diversity of our product offerings. In the quarter, we continued to make great progress in rolling out the company’s newest generation of our sophisticated underwriting and pricing process for automobile and homeowners insurance. Allstate^® Your Choice Auto insurance is continuing its introduction into more states.

“I am especially proud of how our employees and agency owners responded to our customers during the 2005 hurricane season and their dedication to the difficult job they faced. The hurricane season of 2005 tested our company’s ability to respond to those in need and deliver on our promise. We received hundreds of thousands of claims from customers and dispatched thousands of employees to help those who suffered losses from these terrible storms. Agency owners, many of whom were personally affected, also did tremendous work on behalf of their customers during this difficult time. To date, we’ve made significant progress in helping our customers impacted by Hurricanes Katrina, Rita, and Wilma. We have closed approximately 75 percent of the property claims and 97 percent of the auto claims filed from these three huge storms. I am pleased to say that we are once again able to demonstrate how well we deliver on the simple notion expressed by our slogan. Allstate customers are most certainly in “Good Hands^®.”

“We have made great progress on our property catastrophe management strategy by completing the placement of a new catastrophe aggregate excess of loss reinsurance agreement for our personal lines property and auto insurance business.  This agreement covers the entire country, excluding Florida, and has a $2 billion limit on losses in excess of $2 billion, with a retention of 5 percent. This will significantly reduce our exposure to hurricanes and earthquakes as well as the probability of experiencing a loss in excess of $2 billion.

“We are also intentionally slowing the writing of new property insurance business in certain markets to help limit our exposure to catastrophe losses caused by hurricanes and earthquakes. Written premium for our homeowners line of business has slowed and may turn negative as we accelerate our implementation of the company’s property catastrophe management strategy.

“While we manage down our exposure to property insurance in areas that are highly susceptible to significant catastrophe loss, we are continuing our call for public policy change and a more rational approach to how Americans prepare for and protect themselves against the devastating and highly unpredictable effects of catastrophes.

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