Allstate (ALL)

Profitability

“We are driving profitable growth in the competitive auto insurance business, while mitigating our exposure to mega-catastrophes in higher-risk geographic areas. While operating income declined due largely to increased reinsurance and catastrophe costs, the underlying run-rate of our business continues in line with our expectations.”

Allstate’s Property-Liability combined ratio, excluding the effect of catastrophes and prior year reserve reestimates, in the second quarter of 2007 was 84.1, which was at the favorable end of our expectations for 2007.

Allstate Financial net income reached a record $200 million for the quarter. The business unit generated $154 million of operating income for the quarter and continues to make steady progress in elevating returns.

Allstate’s investment portfolios generated strong results, with net investment income up 5.6% over the prior year quarter. In total, investments generated capital gains of $545 million for the quarter and more than $1 billion for the first six months of 2007.

Profitability

“Profitability remained strong in the first quarter of 2007,” added Wilson. Operating income in the quarter was $1.2 billion compared to $1.3 billion for last year’s first quarter. The Property-Liability combined ratio for the quarter was 84.6, an increase of 2.7 points compared with the first quarter of 2006, partly because of higher claim frequencies. “Winter weather in the central and northeast sections of the country partially contributed to the increase in claim frequency in standard auto property damage and in our homeowners line during the quarter. Property damage severity results in the quarter were moderate and better than we expected at the beginning of the year,” continued Wilson. Catastrophe losses for the quarter were $161 million,

(1) 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.

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compared to $107 million in the first quarter of 2006. Allstate Financial generated $156 million of operating income for the quarter and is making progress in raising returns on new business.

Our investment portfolios generated strong results for both Property-Liability and Allstate Financial. Both business units benefited from growth in assets under management.  Allstate Financial’s portfolio yield, in particular, also benefited from a rise in yield on its floating rate investments. Realized capital gain activity also outpaced last year’s results and was primarily driven by non-recurring gains related to the disposition of certain limited partnership interests.