Allstate (ALL)

PROPERTY-LIABILITY 2009 HIGHLIGHTS

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Premiums written, an operating measure that is defined and reconciled to premiums earned in the Property-Liability Operations section of the MD&A, decreased 2.3% to $25.97 billion in 2009 from $26.58 billion in 2008. Allstate brand standard auto premiums written decreased 1.0% to $15.76 billion in 2009 from $15.92 billion in 2008. Allstate brand homeowners premiums written were $5.64 billion in 2009 and were comparable to 2008.

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Premium operating measures and statistics contributing to overall Allstate brand standard auto premiums written decline were the following:

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1.0% decrease in PIF as of December 31, 2009 compared to December 31, 2008

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the six month renewal ratio was 88.9% in 2009 and was comparable to 2008

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1.6% increase in the six month policy term average gross premium before reinsurance to $434 in 2009 from $427 in 2008

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12.3% increase in new issued applications in 2009 compared to 2008

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Premium operating measures and statistics contributing to overall Allstate brand homeowners premiums written were the following:

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3.9% decrease in PIF as of December 31, 2009 compared to December 31, 2008

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1.1 point increase in the twelve month renewal ratio to 88.1% in 2009 compared to 87.0% in 2008

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2.6% increase in the twelve month policy term average gross premium before reinsurance to $883 in 2009 from $861 in 2008

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6.4% decrease in new issued applications in 2009 compared to 2008

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$96 million decrease in catastrophe reinsurance costs to $561 million in 2009 from $657 million in 2008

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Factors contributing to the Allstate brand standard auto loss ratio increase of 1.2 points to 69.3 in 2009 from 68.1 in 2008 were the following:

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6.2% increase in standard auto claim frequency for property damage in 2009 compared to 2008

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13.1% increase in standard auto claim frequency for bodily injury in 2009 compared to 2008

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0.7% decrease in auto claim severities for bodily injury in 2009 compared to 2008

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0.7% decrease in auto claim severities for property damage in 2009 compared to 2008

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Factors contributing to the Allstate brand homeowners loss ratio, which includes catastrophes, decrease of 16.7 points to 79.6 in 2009 from 96.3 in 2008 were the following:

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17.5 percentage point decrease in the effect of catastrophe losses to 29.0 points in 2009 compared to 46.5 points in 2008

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9.0% increase in homeowner claim frequency, excluding catastrophes, in 2009 compared to 2008

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3.0% increase in claim severity, excluding catastrophes, in 2009 compared to 2008

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Factors contributing to the $1.27 billion decrease in catastrophe losses to $2.07 billion in 2009 compared to $3.34 billion in 2008 were the following:

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$169 million of favorable reserve reestimates in 2009 compared to $125 million unfavorable reserve reestimates in 2008

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82 events with $2.24 billion of losses in 2009 compared to 123 events with losses of $3.22 billion in 2008

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2008 losses included $966 million and $342 million related to Hurricanes Ike and Gustav, respectively

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Factors contributing to prior year reserve reestimates of $112 million favorable in 2009 compared to $170 million unfavorable in 2008 included:

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Prior year reserve reestimates related to auto, homeowners and other personal lines in 2009 contributed $57 million favorable, $168 million favorable and $89 million unfavorable, respectively, compared to prior year reserve reestimates in 2008 of $27 million favorable, $124 million unfavorable and $55 million unfavorable, respectively

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prior year reserve reestimates in 2009 and 2008 are largely attributable to prior year catastrophes and a $45 million IBNR reclassification from auto to other personal lines that occurred in 2008

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Property-Liability underwriting income of $995 million in 2009 compared to $164 million in 2008 included the following primary contributing factors:

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Allstate brand standard auto loss ratio increased 1.2 points to 69.3 in 2009 from 68.1 in 2008

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Allstate brand homeowners loss ratio, which includes catastrophes, decreased 16.7 points to 79.6 in 2009 from 96.3 in 2008

       Underwriting income, a measure not based on GAAP, is defined below.

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Property-Liability investments as of December 31, 2009 were $34.53 billion, an increase of 12.0% from $30.84 billion as of December 31, 2008. Net investment income was $1.33 billion in 2009, a decrease of 20.7% from $1.67 billion in 2008.

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Net realized capital losses were $168 million in 2009 compared to $1.86 billion in 2008.