Allstate (ALL)

Total Return Measures

        Portfolio excess total return:      Management uses the four following measures to assess the value of active portfolio management relative to the benchmark. The measure is calculated as the excess, in basis points, of the specific portfolio total return over a designated benchmark. Total return is principally determined using industry standards and the same sources used in preparing the financial statements to determine fair value. (See footnote 6 to our audited financial statements for our methodologies for estimating the fair value of our investments.) In general, total return represents the increase or decrease, expressed as a percentage, in the value of the portfolio over one- and three-year periods. Time weighted returns are utilized. The designated benchmark is a composite of pre-determined, customized indices which reflect the investment risk parameters established in the investment policies by the boards of the relevant subsidiaries, weighted in proportion to our investment plan, in accordance with our investment policy. Certain investments that do not have external benchmarks and for which fair value cannot readily be determined, such as investments in limited partnerships, are excluded. The specific measures and investments included are listed below:

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AIC Portfolio excess total return includes Property-liability investments excluding investments held in certain subsidiaries, primarily New Jersey and Florida subsidiaries.



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Allstate Financial Product portfolio excess total return includes Allstate Financial investments but excludes the investments in the Allstate Financial Capital portfolio which has a separate measure. (See below). The designated benchmark is a composite of pre-determined, liability informed, customized indices weighted by actual portfolio holdings as of December 31, 2007 and in accordance with our investment policies, approved by the boards of the relevant subsidiaries. This new one-year period measure adds value through total return management, in addition to the annual spread (see below for further details).



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Allstate Financial Capital portfolio excess total return includes Allstate Financial investments but excludes investments held in certain subsidiaries, primarily Allstate Life Insurance Company of New York.



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Allstate Pension Plans portfolio excess total return includes Allstate Retirement Plan and Allstate Pension Plan investments.

        Other Relative Return:      Management uses this measure to assess its results of the activities described below. The measure is calculated as the average of the following three measures:

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Internal Rate of Return (IRR): Management uses Private Equity IRR and Real Estate Funds IRR measures to assess the value of active portfolio management relative to the benchmark. The measures are calculated as the excess, in basis points, of the portfolios internal rate of return over the designated benchmark. In general, IRR takes into account the time value of money by including cash flows as well as the increase or decrease, expressed as a percentage, in the value of the portfolio over a three-year period. Due to the long term investment period of these instruments, Private Equity and Real Estate Funds are included in the IRR calculation subsequent to their third year of acquisition.



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Private Equity IRR excludes certain investments that do not have readily available benchmarks or pricing, such as secondary fund of funds and distressed funds. The benchmark is computed from Venture Economics customized by Allstate's investments vintage year. Private Equity investments are held in Allstate Insurance Company, Allstate Life Insurance Company, Allstate Retirement Plan, and Allstate Pension Plan.



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Real Estate Funds IRR includes direct and fund of funds investments. The designated benchmark source is the NCREIF (National Council of Real Estate Investment Fiduciaries). Real Estate Funds are held in Allstate Insurance Company, Allstate Life Insurance Company, Allstate Retirement Plan, and Allstate Pension Plan.



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Kennett Capital Partners Absolute Return: Management uses this measure to assess the attractiveness and results from deploying capital to the strategies contemplated by Kennett Capital Partners relative to an internal goal. The return is judged on an absolute basis, after current and deferred taxes, meaning it is not compared against a market benchmark. Total return is principally determined using industry standards and the same sources used in preparing the financial statements to determine fair value. (See footnote 6 to our audited financial statements for our methodologies for estimating the fair value of our investments.) In

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general, total return represents the increase or decrease, expressed as a percentage, in the value of the portfolio over a one- year period. This measure includes all investments held by Kennett Capital Partners.

        Allstate Financial net spread:      Management uses this measure to assess the value provided on each specific fixed income security and commercial mortgage purchase decision, up to specific purchase volumes, relative to a benchmark. Net spread is calculated as the difference between the adjusted purchase yield and the benchmark, calculated on a dollar weighted average basis for the majority of new purchases expressed in basis points. The adjusted purchase yield is the yield at purchase adjusted by a predetermined formula to align with predetermined Allstate Financial investment risk parameters. The benchmark is based on the U. S. Treasury bond yield with a comparable duration at the time of purchase adjusted on a monthly basis to reflect changes in corporate credit market spreads. As a result of this monthly adjustment process, performance ranges are adjusted accordingly.

        Adjusted Net Investment Income:      Management uses this measure to assess the financial operating performance provided from investments relative to internal goals. Adjusted net investment income is calculated as the total of certain amounts reported in 2008 net investment income in the consolidated financial statements. It includes interest and dividends, net investment income from partnership interests, and income from certain derivative transactions, less investment expenses adjusted to exclude the difference between actual and planned expenses for certain employee benefit and incentive expenses. It is the sum of amounts for the following group of subsidiaries: Allstate Insurance Company, Allstate Financial, and Allstate Investment Management Company.