Allstate (ALL)

The Company is vigorously defending its auto and homeowners insurance rates in administrative actions filed by the Texas and California Departments of Insurance.  The Departments are focusing on the reasonableness of the Company’s rates for the risks to which they apply.

·      In 2004, the Company made a homeowners rate filing in Texas requesting to reduce its rates by approximately 1.5%.  In December 2004, the Texas Commissioner of Insurance disapproved that filing and began proceedings to disapprove the Company’s then current rates.  Following an administrative hearing process, in 2006, the Commissioner ordered the Company to reduce its then current homeowners rates by 5% and to pay refunds on the difference plus interest back to December 30, 2004, for which the Company has been accruing.  The Company implemented a 5% rate decrease occurring in two stages, but challenged this 2006 refund order in the Travis County, Texas district court.  In March 2007, the district court affirmed in whole the Texas Commissioner’s rate refund order.  In April 2007, the Company appealed the judgment of the district court to the Third Court of Appeals, Austin, Texas.  In May 2008, the Company resolved the dispute with the Commissioner.  The Company has agreed to dismiss its appeal and the Commissioner has agreed to amend his order.  Instead, the Company will be required to pay refunds in the total amount of principal and interest of $36.8 million for the period of December 1, 2004 through April 23, 2006.

·      Allstate filed and implemented an 8% homeowners rate increase in August 2007 and immediately received an order from the Texas Commissioner of Insurance disapproving the rate change.  In addition, in October 2007 the Commissioner ordered the Company to pay refunds of its homeowners rates amounting to approximately 6.5% for the period between August 20, 2007 and October 5, 2007, and refunds of approximately 18.5% for the period following October 5, 2007, plus interest.  In May 2008, the Company resolved this dispute with the Commissioner.  The Commissioner has agreed to vacate his refund order and vacate his disapproval of the Company’s August 2007 rate increase.  The Company has agreed to provide credits or refunds of 3% to certain policyholders for the period between August 20, 2007 and June 1, 2008, and to also reduce its current rate level by an average of 3%, effective June 1, 2008.

·      In 2006, the Company made an automobile rate filing in California.  Following a rate hearing, the California Department of Insurance (“CDI”) issued an order in March 2008 directing the Company to reduce its rates by 15.9%.  The Company implemented the rate reduction effective April 28, 2008.  The Company has withdrawn its appeal of the order.

·      In 2006, the Company made a homeowners rate filing in California.  Following a rate hearing, the CDI issued an order in July 2008 directing the Company to reduce its rates by 28.5%.  The Company is complying with this order.  Additionally, in May 2007, the CDI issued an Order to Show Cause and commenced an administrative hearing seeking an order directing Allstate to issue refunds to its California homeowners customers for rates dating to May 2007 based upon the allegation that Allstate’s current rates are excessive.  The CDI has made the decision to withdraw the Order to Show Cause.

The Company is vigorously defending its auto and homeowners insurance rates in administrative actions filed by the Texas and California Departments of Insurance.  The Departments are focusing on the reasonableness of the Company’s rates for the risks to which they apply.

·                  In 2004, the Company made a homeowners rate filing in Texas requesting to reduce its rates by approximately 1.5%.  In December 2004, the Texas Commissioner of Insurance disapproved that filing and began proceedings to disapprove the Company’s then current rates.  Following an administrative hearing process, in 2006, the Commissioner ordered the Company to reduce its then current homeowners rates by 5% and to pay refunds on the difference plus interest back to December 30, 2004, for which the Company has been accruing.  The Company implemented a 5% rate decrease occurring in two stages, but challenged this 2006 refund order in the Travis County, Texas district court.  In March 2007, the district court affirmed in whole the Texas Commissioner’s rate refund order.  In April 2007, the Company appealed the judgment of the district court to the Third Court of Appeals, Austin, Texas.  This appeal remains pending.

·                  Allstate filed and implemented an 8% homeowners rate increase in August 2007 and immediately received an order from the Texas Commissioner of Insurance disapproving the rate change.  In addition, in October 2007 the Commissioner ordered the Company to pay refunds of its homeowners rates amounting to approximately 6.5% for the period between August 20, 2007 and October 5, 2007, and refunds of approximately 18.5% for the period following October 5, 2007, plus interest.  The Company was granted a permanent injunction that allows the Company’s August rate change to stay in place while the Company defends the rate change and disputes the refund order at an administrative hearing.

·                  In 2006, the Company made an automobile rate filing in California.  Following a rate hearing, the California Department of Insurance (“CDI”) issued an order in March 2008 directing the Company to reduce its rates by 15.9%.  The Company implemented the rate reduction effective April 28, 2008.  On April 11, 2008, the Company filed an appeal in Superior Court in San Francisco.  This appeal remains pending.

·                  The Company also is vigorously defending its homeowners rates in response to an Order to Show Cause issued by the CDI.  The CDI is seeking an order directing Allstate to issue refunds to its California homeowners customers for rates dating to May 2007 based upon the allegation that Allstate’s current rates are excessive.  The CDI has issued a Notice initiating an administrative hearing with respect to the Order to Show Cause.  The CDI has acknowledged that an action seeking refunds from an insurer charging approved rates based solely on an allegation of excessiveness is unprecedented, and Allstate maintains that this action is inconsistent with California’s prior approval ratemaking scheme and not authorized under California law.