The sources of liquidity for The Allstate Corporation include but are not limited to dividends from AIC and $1.77 billion of investments at Kennett Capital at June 30, 2007.

We have access to additional borrowing to support liquidity as follows:

·               A commercial paper program with a borrowing limit of $1.00 billion to cover short-term cash needs.  As of June 30, 2007, there were no balances outstanding and therefore the remaining borrowing capacity was $1.00

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billion; however, the outstanding balance fluctuates daily.

·               Our new $1.00 billion unsecured revolving credit facility, which replaced our primary credit facility covering short-term liquidity requirements, has an initial term of five years expiring in 2012 with two one year extensions that can be exercised in the first or second year of the facility upon approval of existing or replacement lenders providing more than two thirds of the commitments to lend.  This facility contains an increase provision that would allow up to an additional $500 million of borrowing provided the increased portion could be fully syndicated at a later date among existing or new lenders.  This facility has a financial covenant requiring that we not exceed a 37.5% debt to capital resources ratio as defined in the agreement.  This ratio at June 30, 2007 was 16.9%.  Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior, unsecured, nonguaranteed long-term debt.  There were no borrowings under this line of credit during the first six months of 2007. 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.  A universal shelf registration statement was filed with the SEC in May 2006.  We can use it to issue an unspecified amount of debt securities, common stock (including 312 million shares of treasury stock as of June 30, 2007), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of subsidiaries.  The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.

As described in Note 1, in accordance with Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), at June 30, 2007, the total liability for net unrecognized tax benefits was $61 million.  We believe it is reasonably possible that the liability balance will not significantly increase or decrease within the next 12 months.

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The sources of liquidity for The Allstate Corporation include but are not limited to dividends from AIC and $2.52 billion of investments at Kennett Capital at September 30, 2006.

We have access to additional borrowing to support liquidity as follows:

·               A commercial paper program with a borrowing limit of $1.00 billion to cover short-term cash needs.  As of September 30, 2006, there were no balances outstanding and therefore the remaining borrowing capacity was $1.00 billion; however, the outstanding balance fluctuates daily.

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·               A five-year revolving credit facility expiring in 2009 totaling $1.00 billion to cover short-term liquidity requirements.  This 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.  Although the right to borrow under the facility is not subject to a minimum rating requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our senior, unsecured, nonguaranteed long-term debt.  There were no borrowings under this line of credit during the first nine months of 2006. 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.

·                  In May 2006, we filed a universal shelf registration statement with the SEC.  In accordance with rules adopted by the SEC in 2005, this registration statement covers an unspecified amount of securities.  We can use it to issue debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase units and securities of subsidiaries.  The specific terms of any securities we issue under this registration statement will be provided in the applicable prospectus supplements.  This registration statement, under which we have not yet issued any securities, replaced our 2003 universal shelf registration statement.

Pension Plans  In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 158 (“SFAS No. 158”).  For further information on SFAS No. 158, see Note 1 to the Condensed Consolidated Financial Statements. Based on our current interpretation and the most recent measurement date of our plans as of October 31, 2005, if the standard had been effective and adopted as of December 31, 2005, the impact of adoption would have resulted in a decrease in shareholders’ equity of $1.37 billion and book value per share of $2.10, and an increase in the debt to shareholders’ equity ratio and the debt to capital resources ratio of 1.9 points and 1.2 points, respectively.  Adoption impacts will be based on the most recent measurement date of the plans as of December 31, 2006, which is October 31, 2006.

Certain rating agencies explicitly consider the funded status of the pension plans in the development of non-GAAP debt to capital ratios as part of the determination of company ratings.  While we do not expect any near-term change in our financial strength ratings as a result of these changes, the long term effects of these changes on the ratings process remains uncertain. Upon adoption, we plan to revise our non-GAAP measure of book value excluding the effects of unrealized gains and losses on fixed income securities to also exclude the effects of this new guidance.

Also during the third quarter of 2006, the federal government enacted the Pension Protection Act of 2006 (the “Act”) which changes the manner in which pension funding is determined.  The new rules are effective for funding beginning in 2008.  We are currently reviewing the implications of the Act, but do not expect it to have a material impact on funding.

Our funding policy for the pension plans is to make annual contributions at a minimum level that is at least in accordance with regulations under the Internal Revenue Code (“IRC”) and in accordance with generally accepted actuarial principles.  There was no minimum funding requirement under the IRC for the tax qualified pension plans as of December 31, 2005.

Our obligations have not changed as a result of these developments.  The pension and other postretirement plans are subject to revision at the discretion of management.  Any revisions could result in significant changes to our pension plan obligations and our obligation to fund the plans.

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