SEC Filing | The Allstate Corporation

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) July 16, 2003

The Allstate Corporation
(Exact name of registrant as specified in charter)

Delaware	1-11840	36-3871531
(State or other jurisdiction of incorporation)	(Commission file number)	(IRS employer identification number)
2775 Sanders Road, Northbrook, Illinois		60062
(Address of principal executive offices)		(Zip code)

Registrant's telephone number, including area code (847) 402-5000

Item 7. Financial Statements and Exhibits

(c)

Exhibits

99: Registrant's press release dated July 16, 2003

Item 9. Regulation FD Disclosure

The registrant is furnishing the information required by Item 12 of Form 8-K, "Results of Operations and Financial Condition," under this Item 9.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE ALLSTATE CORPORATION
		(registrant)
By	/s/ SAMUEL H. PILCH
	Name:	Samuel H. Pilch
	Title:	Controller

July 16, 2003

EXHIBIT INDEX

Exhibit Number		Description
99		Registrant's press release dated July 16, 2003

Exhibit 99

For Immediate Release

Allstate Reports 2003 Second Quarter Net Income of $588 Million,
75% Increase in Net Income EPS,
33% Increase in Operating Income EPS

NORTHBROOK, Ill., July 16, 2003—The Allstate Corporation (NYSE: ALL) today reported for the second quarter of 2003:

Consolidated Highlights(1)

	Three Months Ended June 30,
			Change
	Est. 2003		Change
	Est. 2003	2002	$ Amt		%
(in millions, except per share amounts and ratios)
Consolidated revenues	7,899	7,455	444		6.0
Net income	588	344	244		70.9
Net income per diluted share	0.84	0.48	0.36		75.0
Operating income(1)	599	453	146		32.2
Operating income per diluted share(1)	0.85	0.64	0.21		32.8
Property-Liability combined ratio	97.1	100.4	(3.3	) pts	—
Book value per diluted share	27.33	24.26	3.07		12.7

•: Property-Liability Premiums written(1) grew 6.3% over the second quarter of 2002, with the Allstate brand standard auto and homeowners lines growing 6.9% and 12.7% respectively, reflecting our focus on profitable growth.
•: Allstate brand standard auto policies in force (PIF) grew 0.4% compared to the first quarter of 2003, which is its first sequential quarterly increase since the fourth quarter of 2001. Allstate brand homeowners PIF grew 0.6% compared to the first quarter of 2003 for its third consecutive quarterly increase. Retention in both lines has improved as compared to the first quarter of 2003.
•: Catastrophe losses in the second quarter increased significantly to $566 million compared to $288 million in the second quarter of 2002 and $133 million in the first quarter of 2003.
•: Property-Liability Underwriting income(1) increased $202 million in the second quarter to $181 million from an underwriting loss of $21 million in the second quarter of 2002 due to higher premiums earned, continued improvement in auto and homeowners frequencies and lower prior year reserve strengthening, partially offset by higher catastrophes and operating expenses. The combined ratio improved 3.3 points, 7.5 points before the impact of catastrophes.
•: Allstate increases operating income guidance for 2003 (excluding restructuring charges and assuming the level of average expected catastrophe losses used in pricing for the remainder of the year) to the range of $3.50 to $3.65 per diluted share.(1)

"We have turned in another very solid quarter. Despite a tornado-plagued spring in many parts of the central and southern United States, our Property-Liability business generated much better than expected results," said Chairman, President and CEO Edward M. Liddy. "As anticipated, rate increases approved in previous quarters continue to flow through financial results. We will continue to be disciplined and take rate increases that support our projected loss cost trends and return targets. Just as important, we are seeing signs of positive, sustainable unit growth in both our core standard auto and homeowners

(1): Measures used in this release that are not based on generally accepted accounting principles ("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.

insurance lines. We remain confident that we can grow without sacrificing profitability and that our strategy of becoming better and bigger in our core protection business and broader in our ability to provide a range of financial services to middle America continues to be the right one.

"The policies in force growth numbers for the quarter look especially encouraging in the core lines of standard auto and homeowners. For standard auto, 35 states showed sequential increases and 32 states showed sequential increases in homeowners. We remain on track to deliver consistent sequential quarter over quarter increases for standard auto and homeowners by the end of the year. Retention of current business also showed positive gains.

"Once again, excluding catastrophe losses, we experienced solid improvements in claim frequencies, which continue to offset relatively modest severity increases.

"We received good news from California in the quarter as our new auto rating plan was approved by the department of insurance. This particular approval has enabled us to increase our marketing efforts in the state and we have begun writing business under the new plan.

"It is still too early to declare victory, but our Encompass business turned in good underwriting results as compared to the second of quarter of 2002 as it works toward lowering its combined ratio. The non-standard auto business written by Deerbrook is growing and, like Encompass, is showing good underwriting results compared to the second quarter of 2002.

"We believe we have positive momentum developing within our agency force across the country. Several initiatives are contributing to the agency force's solid performance, including a new compensation package introduced this year that was designed to better align the business objectives of the agency force with those of the company. The formation of an agent advisory council has provided a valuable forum for the company and our agency force to review together new initiatives to enhance the success of the channel. New investments in marketing, advertising, training and technology support have helped drive an increase in sales leads. These moves have enhanced the improving relationship between the company and its agency force.

"Allstate Financial is maintaining strong levels of production and the breadth of its product offering has contributed to good results. In particular, fixed annuity sales were higher compared to the second quarter of 2002 and variable annuity and institutional sales showed a sequential increase from the first quarter of 2003. Allstate Financial operating income, compared to second quarter of 2002, declined 8.4% to $131 million as the business unit continues to be challenged by the current economic environment. Our investment portfolio yield continues to decline as premiums, deposits and investment cash flows are invested at yields that are below the current portfolio average. We have reduced crediting rates on our in-force fixed annuities to maintain investment margins. We are also making product modifications to achieve profit objectives on new business sold in this challenging economic environment.

"As mentioned earlier, the quarter saw a large number of tornadoes with resulting damage to properties in many parts of the country. We are in the business of restoring people's lives when events like this occur, and that's what thousands of Allstate agents and claim adjusters have been doing this quarter. That is the essence of the Allstate promise to its customers—"You're in Good Hands"^SM—and we are proud of the dedicated men and women who prove it day in and day out."

Summary of Consolidated Results

	Three Months Ended June 30,						Six Months Ended June 30,
	Est. 2003			2002			Est. 2003			2002			Discussion of Second Quarter Results
($ in millions, except per share amounts)
Consolidated revenues	$	7,899		$	7,455		$	15,760		$	14,753		Higher Premiums earned in Property-Liability and lower realized capital losses.
Operating income		599			453			1,272			941		Increase in Property-Liability Underwriting income, after-tax of $131, $12 decrease in Allstate Financial Operating income.
Realized capital gains and losses, after-tax		(11	)		(107	)		(16	)		(171	)	See the Components of realized capital gains and losses (pretax) table.
Cumulative effect of change in accounting principle, after-tax		—			—			—			(331	)	Adoption of SFAS No. 142 for goodwill impairment in 2002.
Net income		588			344			1,253			439		Increased Operating income and lower realized capital losses.
Net income per share (diluted)		0.84			0.48			1.78			0.62
Operating income per share (diluted)		0.85			0.64			1.80			1.32		Compared to First Call mean estimate of $0.75, with a range of $0.65 to $0.82.
Weighted average shares outstanding (diluted)		706.6			712.1			705.9			712.9		During the first six months of 2003, Allstate purchased 1.92 million shares of its stock for $61.68 million, or an average cost per share of $32.09.
Return on equity		10.7			5.3			10.7			5.3		Higher Net income and a sequential increase over the prior 5 quarters.
Operating income return on equity(1)		15.4			10.7			15.4			10.7		Higher Operating income and a sequential increase over the prior 5 quarters.
Book value per diluted share		27.33			24.26			27.33			24.26		At June 30, 2003 and 2002 unrealized gains and losses on fixed income securities, after-tax, totaling est. $2,975 and $1,512, respectively, represented $4.21 and $2.13, respectively of book value per diluted share.

•: Book value per diluted share increased 10.4% compared to December 31, 2002.

Property-Liability Highlights

	Three Months Ended June 30,					Six Months Ended June 30,
	Est. 2003		2002			Est. 2003		2002			Discussion of Second Quarter Results
($ in millions, except ratios)
Property-Liability Premiums written	$	6,422	$	6,042		$	12,359	$	11,758		See the Property-Liability Premiums written by market segment and the Net rate changes approved tables.
Property-Liability revenues		6,594		6,117			13,038		12,205		Premiums earned up $343 or 5.9%.
Net investment income		417		428			825		827		Higher portfolio balances due to positive cash flows from operations, offset by lower yields.
Underwriting income (loss)		181		(21	)		594		22		Higher Premiums earned, continued improvement in auto and homeowners frequencies and lower prior year reserve strengthening, partially offset by higher catastrophes and higher operating expenses.
Operating income		496		335			1,114		709		Underwriting income after-tax up $131.
Realized capital gains and losses, after-tax		23		(68	)		50		(80	)	See the Components of realized capital gains and losses (pretax) table.
Cumulative effect of change in accounting principle, after-tax		—		—			—		(48	)	Adoption of SFAS No. 142 for goodwill impairment in 2002.
Net income		521		267			1,166		586		Higher Operating income and higher realized capital gains.
Catastrophe losses		566		288			699		398		Higher than prior year due to a higher number of catastrophic events.
Ratios:
Combined ratio before impact of catastrophes		87.9		95.4			89.3		96.3		See the Effect of prior year reserve reestimates on the combined ratio table.
Impact of catastrophes		9.2		5.0			5.8		3.5
Combined ratio		97.1		100.4			95.1		99.8		Includes the Allstate Protection Combined ratio of 96.2 compared to 100.3 in the second quarter of 2002.

•: Allstate brand standard auto and homeowners PIF increased 0.4% and 0.6%, respectively, from March 31, 2003 levels, driving the first sequential quarterly increase in standard auto PIF since the fourth quarter of 2001 and the third consecutive quarterly increase in homeowners PIF.

For Allstate brand standard auto, 35 states representing 74.1% of the PIF had positive sequential growth compared to March 31, 2003 levels. The state of Texas had positive sequential growth and the state of California showed a slowing rate of decline, while the state of Florida continued to decline during the quarter.

For Allstate brand homeowners, 32 states representing 83.3% of the PIF had positive sequential growth compared to March 31, 2003. The states of Texas, California and Florida each had positive sequential growth during the quarter.

•: Allstate brand has achieved targeted profitability in most states and plans to increase marketing and advertising expenditures, invest in agency productivity such as new sales and retention, while

continuing the implementation of strategic risk management practices which are proving to be working quite well.

•: Operating expenses increased as a result of pension expenses, employee and agent incentives and guarantee fund expenses.
•: Operating income reflects the positive impact of a $31 million adjustment for prior year tax liabilities.

Allstate Financial Highlights

	Three Months Ended June 30,						Six Months Ended June 30,
	Est. 2003			2002			Est. 2003			2002			Discussion of Second Quarter Results
($ in millions)
Premiums and deposits(1)	$	3,296		$	3,325		$	5,792		$	6,115		Continued strong fixed annuity sales more than offset by lower sales of institutional products and variable annuities. See the Allstate Financial Premiums and deposits table.
Allstate Financial Revenues		1,291			1,321			2,693			2,515		Higher Net investment income more than offset by lower Premiums and contract charges.
Operating income		131			143			213			286		Lower mortality and investment margins.
Realized capital gains and losses, after-tax		(33	)		(37	)		(65	)		(89	)	See the components of realized capital gains and losses (pretax) table.
Cumulative effect of change in accounting principle, after-tax		—			—			—			(283	)	Adoption of SFAS No. 142 for goodwill impairment in 2002.
Net income		98			106			148			(86	)	Lower Operating income

•: Premiums and deposits for the second quarter of 2003 increased 32.1% over the first quarter of 2003 due to stronger sales of fixed and variable annuities and institutional products, and were comparable to the prior year second quarter. The continued roll-out of the new Allstate Advisor variable annuity and the rebound in equity markets in the second quarter of 2003 have contributed to six months of increased variable annuity sales.
•: Net cash payments for Allstate Financial's variable annuity guaranteed minimum death benefits (GMDB) were $27 million for the second quarter of 2003, net of reinsurance, hedging gains and losses, and other contractual arrangements. This is $18 million above payments made in the second quarter of 2002, and $6 million above the first quarter of 2003 payments. The increase in the second quarter of 2003 reflects the cost of hedging this exposure in a rising equity market, while net payments in prior periods were benefited by hedging.

GMDB values in excess of contractholders' account values, payable if all contractholders were to have died at June 30, 2003, were estimated to be $3.33 billion net of reinsurance, compared to $4.24 billion at March 31, 2003 and $4.07 billion at December 31, 2002.

•: The weighted average interest crediting rate on fixed annuity and interest-sensitive life products in force, excluding market value adjusted annuities, was approximately 100 basis points more than the underlying long term guaranteed rates on these products.

THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

			Three Months Ended June 30,								Six Months Ended June 30,
			Est. 2003			2002			Percent Change		Est. 2003			2002			Percent Change
($ in millions, except per share data)
Revenues
	Property-liability insurance premiums		$	6,146		$	5,803		5.9		$	12,145		$	11,507		5.5
	Life and annuity premiums and contract charges			533			582		(8.4	)		1,172			1,120		4.6
	Net investment income			1,231			1,223		0.7			2,456			2,382		3.1
	Realized capital gains and losses			(11	)		(153	)	(92.8	)		(13	)		(256	)	(94.9	)

		Total revenues		7,899			7,455		6.0			15,760			14,753		6.8

Costs and expenses
	Property-liability insurance claims and claims expense			4,527			4,493		0.8			8,678			8,862		(2.1	)
	Life and annuity contract benefits			426			449		(5.1	)		956			825		15.9
	Interest credited to contractholder funds			460			423		8.7			913			852		7.2
	Amortization of deferred policy acquisition costs			961			926		3.8			1,974			1,811		9.0
	Operating costs and expenses			728			658		10.6			1,481			1,298		14.1
	Restructuring and related charges			14			35		(60.0	)		37			55		(32.7	)
	Interest expense			67			68		(1.5	)		134			137		(2.2	)

		Total costs and expenses		7,183			7,052		1.9			14,173			13,840		2.4

Gain on disposition of operations				3			—		—			3			7		(57.1	)
Income from operations before income tax expense, dividends on preferred securities and cumulative effect of change in accounting principle, after tax				719			403		78.4			1,590			920		72.8
Income tax expense				129			57		126.3			332			145		129.0

Income before dividends on preferred securities and cumulative effect of change in accounting principle, after tax				590			346		70.5			1,258			775		62.3
Dividends on preferred securities of subsidiary trust				(2	)		(2	)	—			(5	)		(5	)	—
Cumulative effect of change in accounting principle, after tax				—			—		—			—			(331	)	(100.0	)

Net income			$	588		$	344		70.9		$	1,253		$	439		185.4

Net income per share—Basic			$	0.83		$	0.48				$	1.78		$	0.62

Weighted average shares—Basic				704.0			708.7					703.7			710.2

Net income per share—Diluted			$	0.84		$	0.48				$	1.78		$	0.62

Weighted average shares—Diluted				706.6			712.1					705.9			712.9

THE ALLSTATE CORPORATION
CONTRIBUTION TO INCOME

	Three Months Ended June 30,								Six Months Ended June 30,
	Est. 2003			2002			Percent Change		Est. 2003			2002			Percent Change
($ in millions, except per share data)
Contribution to income
Operating income before the impact of restructuring and related charges	$	608		$	476		27.7		$	1,296		$	977		32.7
Restructuring and related charges, after-tax		9			23		(60.9	)		24			36		(33.3	)

Operating income		599			453		32.2			1,272			941		35.2
Realized capital gains and losses		(11	)		(107	)	(89.7	)		(16	)		(171	)	(90.6	)
Gain on disposition of operations		2			—		—			2			5		(60.0	)
Dividends on preferred securities of subsidiary trust		(2	)		(2	)	—			(5	)		(5	)	—
Cumulative effect of change in accounting principle		—			—		—			—			(331	)	(100.0	)

Net income	$	588		$	344		70.9		$	1,253		$	439		185.4

Income per share (Diluted)
Operating income before the impact of restructuring and related charges	$	0.85		$	0.67		26.9		$	1.83		$	1.37		33.6
Restructuring and related charges, after-tax		—			0.03		(100.0	)		0.03			0.05		(40.0	)

Operating income		0.85			0.64		32.8			1.80			1.32		36.4
Realized capital gains and losses		(0.01	)		(0.15	)	(93.3	)		(0.02	)		(0.24	)	(91.7	)
Gain on disposition of operations		—			—		—			—			0.01		(100.0	)
Dividends on preferred securities of subsidiary trust		—			(0.01	)	(100.0	)		—			(0.01	)	(100.0	)
Cumulative effect of change in accounting principle		—			—		—			—			(0.46	)	(100.0	)

Net income	$	0.84		$	0.48		75.0		$	1.78		$	0.62		187.1

Book value per share—Diluted	$	27.33		$	24.26		12.7		$	27.33		$	24.26		12.7

THE ALLSTATE CORPORATION
COMPONENTS OF REALIZED CAPITAL GAINS AND LOSSES (PRETAX)

		Three Months Ended June 30, 2003 (Est.)
		Property- Liability			Allstate Financial			Corporate and Other			Total
($ in millions)
Valuation of derivative instruments		$	11		$	(17	)	$	—		$	(6	)
Settlements of derivative instruments			—			(4	)		—			(4	)
Sales			68			41			(1	)		108
Investment write-downs			(48	)		(61	)		—			(109	)

	Total	$	31		$	(41	)	$	(1	)	$	(11	)

		Six Months Ended June 30, 2003 (Est.)
		Property- Liability			Allstate Financial			Corporate and Other			Total
($ in millions)
Valuation of derivative instruments		$	5		$	(22	)	$	—		$	(17	)
Settlements of derivative instruments			8			(2	)		—			6
Sales			128			64			(1	)		191
Investment write-downs			(73	)		(120	)		—			(193	)

	Total	$	68		$	(80	)	$	(1	)	$	(13	)

		Three Months Ended June 30, 2002
		Property- Liability			Allstate Financial			Corporate and Other			Total
($ in millions)
Valuation of derivative instruments		$	(10	)	$	(4	)	$	—		$	(14	)
Settlements of derivative instruments			(60	)		2			—			(58	)
Sales			(17	)		(3	)		—			(20	)
Investment write-downs			(27	)		(32	)		(2	)		(61	)

	Total	$	(114	)	$	(37	)	$	(2	)	$	(153	)

		Six Months Ended June 30, 2002
		Property- Liability			Allstate Financial			Corporate and Other			Total
($ in millions)
Valuation of derivative instruments		$	(24	)	$	(26	)	$	—		$	(50	)
Settlements of derivative instruments			(66	)		3			—			(63	)
Sales			6			(43	)		(1	)		(38	)
Investment write-downs			(45	)		(58	)		(2	)		(105	)

	Total	$	(129	)	$	(124	)	$	(3	)	$	(256	)

THE ALLSTATE CORPORATION
SEGMENT RESULTS

			Three Months Ended June 30,						Six Months Ended June 30,
			Est. 2003			2002			Est. 2003			2002
($ in millions)
Property-Liability
	Premiums written		$	6,422		$	6,042		$	12,359		$	11,758

	Premiums earned		$	6,146		$	5,803		$	12,145		$	11,507
	Claims and claims expense			4,527			4,493			8,678			8,862
	Amortization of deferred policy acquisition costs			858			802			1,685			1,585
	Operating costs and expenses			566			495			1,151			984
	Restructuring and related charges			14			34			37			54

		Underwriting income (loss)		181			(21	)		594			22

	Net investment income			417			428			825			827
	Income tax expense on operations			102			72			305			140

	Operating income			496			335			1,114			709
	Realized capital gains and losses, after-tax			23			(68	)		50			(80	)
	Gain on disposition of operations, after-tax			2			—			2			5
	Cumulative effect of change in accounting principle, after-tax			—			—			—			(48	)

	Net income		$	521		$	267		$	1,166		$	586

	Catastrophe losses		$	566		$	288		$	699		$	398

	Operating ratios
		Claims and claims expense ratio		73.7			77.4			71.4			77.0
		Expense ratio		23.4			23.0			23.7			22.8

		Combined ratio		97.1			100.4			95.1			99.8

		Effect of catastrophe losses on combined ratio		9.2			5.0			5.8			3.5

		Effect of restructuring and related charges on combined ratio		0.2			0.6			0.3			0.5

		Effect of Discontinued Lines and Coverages on combined ratio		0.9			0.1			0.7			0.1

Allstate Financial
	Premiums and deposits		$	3,296		$	3,325		$	5,792		$	6,115

	Investments including Separate Accounts assets		$	73,336		$	64,427		$	73,336		$	64,427

	Premiums and contract charges		$	533		$	582		$	1,172		$	1,120
	Net investment income			799			776			1,601			1,519
	Contract benefits			426			449			956			825
	Interest credited to contractholder funds			460			423			913			852
	Amortization of deferred policy acquisition costs			92			114			264			222
	Operating costs and expenses			161			163			329			313
	Restructuring and related charges			—			1			—			1
	Income tax expense on operations			62			65			98			140

	Operating income			131			143			213			286
	Realized capital gains and losses, after-tax			(33	)		(37	)		(65	)		(89	)
	Cumulative effect of change in accounting principle, after-tax			—			—			—			(283	)

	Net income (loss)		$	98		$	106		$	148		$	(86	)

Corporate and Other
	Net investment income		$	15		$	19		$	30		$	36
	Operating costs and expenses			68			69			135			139
	Income tax benefit on operations			(25	)		(25	)		(50	)		(49	)

	Operating loss			(28	)		(25	)		(55	)		(54	)
	Realized capital gains and losses, after-tax			(1	)		(2	)		(1	)		(2	)
	Dividends on preferred securities of subsidiary trust			(2	)		(2	)		(5	)		(5	)

	Net loss		$	(31	)	$	(29	)	$	(61	)	$	(61	)

Consolidated net income			$	588		$	344		$	1,253		$	439

THE ALLSTATE CORPORATION
UNDERWRITING RESULTS BY AREA OF BUSINESS

			Three Months Ended June 30,								Six Months Ended June 30,
			Est. 2003			2002			Percent Change		Est. 2003			2002			Percent Change
($ in millions)
Consolidated Underwriting Summary
	Allstate Protection		$	234		$	(15	)	—		$	685		$	32		—
	Discontinued Lines and Coverages			(53	)		(6	)	—			(91	)		(10	)	—

		Underwriting income (loss)	$	181		$	(21	)	—		$	594		$	22		—

Allstate Protection Underwriting Summary
	Premiums written		$	6,415		$	6,040		6.2		$	12,351		$	11,753		5.1

	Premiums earned		$	6,139		$	5,800		5.8		$	12,136		$	11,501		5.5
	Claims and claims expense			4,469			4,484		(0.3	)		8,582			8,850		(3.0	)
	Amortization of deferred policy acquisition costs			858			802		7.0			1,685			1,585		6.3
	Other costs and expenses			564			495		13.9			1,147			980		17.0
	Restructuring and related charges			14			34		(58.8	)		37			54		(31.5	)

		Underwriting income (loss)	$	234		$	(15	)	—		$	685		$	32		—

	Catastrophe losses		$	566		$	288		96.5		$	699		$	398		75.6

	Operating ratios
		Claims and claims expense ratio		72.8			77.3					70.7			76.9
		Expense ratio		23.4			23.0					23.7			22.8

		Combined ratio		96.2			100.3					94.4			99.7

	Effect of catastrophe losses on combined ratio			9.2			5.0					5.8			3.5

	Effect of restructuring and related charges on combined ratio			0.2			0.6					0.3			0.5

Discontinued Lines and Coverages
	Underwriting Summary
	Premiums written		$	7		$	2		—		$	8		$	5		60.0

	Premiums earned		$	7		$	3		133.3		$	9		$	6		50.0
	Claims and claims expense			58			9		—			96			12		—
	Other costs and expenses			2			—		—			4			4		—

		Underwriting loss	$	(53	)	$	(6	)	—		$	(91	)	$	(10	)	—

Note:		*Second quarter 2003 Discontinued Lines and Coverages Premiums written were positively impacted by a $4 million favorable reinsurance settlement.
		*Claims and claims expense for the Discontinued Lines and Coverages segment was negatively impacted by a $38 million prior year asbestos reserve strengthening. This strengthening is to reserve the policy limits for a policyholder that is a Wellington Agreement participant, although Allstate is not a signatory of the Wellington Agreement. The policyholder submitted new and unanticipated claims which were for previously not designated, and therefore unexpected, coverage years.
		*Claims and claims expense for the Discontinued Lines and Coverages segment was also impacted by a $12 million strengthening of an allowance for uncollectible reinsurance recoverables.

THE ALLSTATE CORPORATION
PROPERTY-LIABILITY PREMIUMS WRITTEN BY MARKET SEGMENT

		Three Months Ended June 30,						Six Months Ended June 30,
		Est. 2003		2002		Percent Change		Est. 2003		2002		Percent Change
($ in millions)
ALLSTATE BRAND
	Standard auto	$	3,357	$	3,141	6.9		$	6,701	$	6,336	5.8
	Non-standard auto		498		602	(17.3	)		1,029		1,229	(16.3	)
	Involuntary auto		69		47	46.8			119		97	22.7
	Commercial lines		223		201	10.9			429		389	10.3
	Homeowners		1,365		1,211	12.7			2,407		2,153	11.8
	Other personal lines		357		334	6.9			655		612	7.0

			5,869		5,536	6.0			11,340		10,816	4.8
IVANTAGE
	Standard auto		325		319	1.9			610		605	0.8
	Non-standard auto		45		25	80.0			86		44	95.5
	Involuntary auto		11		2	—			20		2	—
	Homeowners		138		132	4.5			248		240	3.3
	Other personal lines		27		26	3.8			47		46	2.2

			546		504	8.3			1,011		937	7.9

ALLSTATE PROTECTION			6,415		6,040	6.2			12,351		11,753	5.1
DISCONTINUED LINES AND COVERAGES			7		2	—			8		5	60.0

PROPERTY-LIABILITY		$	6,422	$	6,042	6.3		$	12,359	$	11,758	5.1

THE ALLSTATE CORPORATION
PROPERTY-LIABILITY NET RATE CHANGES APPROVED

		Three Months Ended June 30, 2003		Six Months Ended June 30, 2003
		# of States	Weighted Average Rate Change (%)	# of States	Weighted Average Rate Change (%)
ALLSTATE BRAND
	Standard auto	4	0.6	21	6.9
	Non-standard auto	—	—	6	4.7
	Homeowners	1	9.9	13	8.7
IVANTAGE
	Standard auto (Encompass)	11	11.5	31	8.1
	Non-standard auto (Deerbrook)	4	7.1	7	10.4
	Homeowners (Encompass)	8	13.4	29	13.5

Note: Rate increases that are indicated based on a loss trend analysis to achieve a targeted return, will continue to be pursued in all locations and for all products.

THE ALLSTATE CORPORATION
ALLSTATE PROTECTION MARKET SEGMENT ANALYSIS

			Three Months Ended June 30,
			Est. 2003		2002		Est. 2003	2002	Est. 2003	2002	Est. 2003	2002
			Premiums Earned				Loss Ratio		Loss Ratio Excluding the Effect of Catastrophe Losses		Expense Ratio
($ in millions)
ALLSTATE BRAND
	Standard auto		$	3,328	$	3,151	74.1	75.4	69.7	74.0
	Non-standard auto			534		620	71.9	75.6	70.0	75.2
	Homeowners			1,207		1,041	68.8	86.2	42.3	69.5
	Other			579		530	71.7	68.5	62.5	62.8

		Total Allstate brand		5,648		5,342	72.5	76.8	63.2	72.1	22.9	22.1
IVANTAGE
	Standard auto			299		298	73.9	76.5	72.2	74.2
	Non-standard auto			40		18	82.5	116.7	82.5	116.7
	Homeowners			122		116	85.2	102.6	59.8	77.6
	Other			30		26	53.3	46.2	46.7	38.5

		Total Ivantage		491		458	76.2	83.0	68.4	74.7	29.3	33.2

ALLSTATE PROTECTION			$	6,139	$	5,800	72.8	77.3	63.6	72.3	23.4	23.0

			Six Months Ended June 30,
			Est. 2003		2002		Est. 2003	2002	Est. 2003	2002	Est. 2003	2002
			Premiums Earned				Loss Ratio		Loss Ratio Excluding the Effect of Catastrophe Losses		Expense Ratio
($ in millions)
ALLSTATE BRAND
	Standard auto		$	6,568	$	6,245	72.8	74.9	70.6	73.9
	Non-standard auto			1,082		1,245	73.6	75.6	72.6	75.3
	Homeowners			2,381		2,048	62.8	85.6	44.9	73.0
	Other			1,135		1,052	69.9	72.7	64.0	69.5

		Total Allstate brand		11,166		10,590	70.5	76.8	64.7	73.5	23.1	22.0
IVANTAGE
	Standard auto			595		598	73.8	76.8	72.9	75.8
	Non-standard auto			76		31	82.9	106.5	82.9	106.5
	Homeowners			243		232	74.9	91.8	57.6	76.3
	Other			56		50	53.6	18.0	48.2	14.0

		Total Ivantage		970		911	73.6	78.4	68.5	73.5	29.9	32.3

ALLSTATE PROTECTION			$	12,136	$	11,501	70.7	76.9	64.9	73.4	23.7	22.8

Note: Other includes involuntary auto, commercial lines and other personal lines.

THE ALLSTATE CORPORATION
PROPERTY-LIABILITY
EFFECT OF PRETAX PRIOR YEAR RESERVE REESTIMATES ON THE COMBINED RATIO

			Three Months Ended June 30,
			Pretax Reserve Reestimates					Effect of Pretax Reserve Reestimates on the Combined Ratio
			Est. 2003			2002		Est. 2003		Change
($ in millions)
Auto			$	(6	)	$	9	(0.1	)	(0.3	)
Homeowners				1			83	—		(1.4	)
Other				(4	)		9	—		(0.2	)

	Allstate Protection			(9	)		101	(0.1	)	(1.9	)
	Discontinued Lines and Coverages			57			7	0.9		0.8

		Property-Liability	$	48		$	108	0.8		(1.1	)

Allstate Brand			$	(27	)	$	101	(0.4	)	(2.2	)
Ivantage				18			—	0.3		0.3

Allstate Protection			$	(9	)	$	101	(0.1	)	(1.9	)

			Six Months Ended June 30,
			Pretax Reserve Reestimates					Effect of Pretax Reserve Reestimates on the Combined Ratio
			Est. 2003			2002		Est. 2003		Change
($ in millions)
Auto			$	(38	)	$	87	(0.3	)	(1.1	)
Homeowners				15			233	0.1		(1.9	)
Other				21			29	0.2		—

	Allstate Protection			(2	)		349	—		(3.0	)
	Discontinued Lines and Coverages			95			12	0.8		0.7

		Property-Liability	$	93		$	361	0.8		(2.3	)

Allstate Brand			$	(26	)	$	349	(0.2	)	(3.2	)
Ivantage				24			—	0.2		0.2

Allstate Protection			$	(2	)	$	349	—		(3.0	)

Note: Mold claims in the state of Texas during the second quarter of 2003 were insignificant.

THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL PREMIUMS AND DEPOSITS

			Three Months Ended June 30,						Six Months Ended June 30,
			Est. 2003		2002		Percent Change		Est. 2003		2002		Percent Change
($ in millions)
Life Products
	Interest-sensitive life		$	252	$	256	(1.6	)	$	495	$	503	(1.6	)
	Traditional			92		101	(8.9	)		179		188	(4.8	)
	Other			152		143	6.3			304		278	9.4

		Subtotal		496		500	(0.8	)		978		969	0.9
Annuities
	Fixed annuities—deferred			1,354		1,131	19.7			2,280		1,775	28.5
	Fixed annuities—immediate			178		169	5.3			443		353	25.5
	Variable annuities			545		589	(7.5	)		934		1,196	(21.9	)

		Subtotal		2,077		1,889	10.0			3,657		3,324	10.0
Institutional Products
	Indexed funding agreements			151		76	98.7			265		175	51.4
	Funding agreements backing medium-term notes			483		679	(28.9	)		718		1,377	(47.9	)
	Other			—		30	(100.0	)		4		39	(89.7	)

		Subtotal		634		785	(19.2	)		987		1,591	(38.0	)
Bank Deposits				89		151	(41.1	)		170		231	(26.4	)

Total			$	3,296	$	3,325	(0.9	)	$	5,792	$	6,115	(5.3	)

Note: To conform to current period presentations, certain prior period balances have been reclassified.

THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

			June 30, 2003 (Est.)			Dec. 31, 2002
(in millions, except par value data)
Assets
Investments
	Fixed income securities, at fair value (amortized cost $77,182 and $72,123)		$	83,939		$	77,152
	Equity securities, at fair value (cost $3,620 and $3,223)			4,411			3,683
	Mortgage loans			6,310			6,092
	Short-term			3,004			2,215
	Other			1,541			1,508

		Total investments		99,205			90,650
Cash				507			462
Premium installment receivables, net				4,325			4,075
Deferred policy acquisition costs				4,308			4,385
Reinsurance recoverables, net				2,931			2,883
Accrued investment income				974			946
Property and equipment, net				958			989
Goodwill				930			927
Other assets				1,093			984
Separate Accounts				11,823			11,125

		Total assets	$	127,054		$	117,426

Liabilities
Reserve for property-liability insurance claims and claims expense			$	17,063		$	16,690
Reserve for life-contingent contract benefits				10,979			10,256
Contractholder funds				43,358			40,751
Unearned premiums				8,834			8,578
Claim payments outstanding				666			739
Other liabilities and accrued expenses				9,927			7,150
Deferred income taxes				778			259
Short-term debt				95			279
Long-term debt				4,032			3,961
Separate Accounts				11,823			11,125

		Total liabilities		107,555			99,788

Mandatorily Redeemable Preferred Securities of Subsidiary Trust				200			200
Shareholders' equity
Preferred stock, $1 par value, 25 million shares authorized, none issued				—			—
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 704 million and 702 million shares outstanding				9			9
Additional capital paid-in				2,610			2,599
Retained income				20,514			19,584
Deferred compensation expense				(232	)		(178	)
Treasury stock, at cost (196 million and 198 million shares)				(6,247	)		(6,309	)
Accumulated other comprehensive income:
	Unrealized net capital gains and losses and net gains and losses on derivative financial instruments			3,491			2,602
	Unrealized foreign currency translation adjustments			(26	)		(49	)
	Minimum pension liability adjustment			(820	)		(820	)

		Total accumulated other comprehensive income		2,645			1,733

		Total shareholders' equity		19,299			17,438

		Total liabilities and shareholders' equity	$	127,054		$	117,426

Definitions of Non-GAAP and Operating Measures

We believe that investors' understanding of Allstate's performance is enhanced by our disclosure of the following non-GAAP financial measures. Our method of calculating these measures may differ from those used by other companies and therefore comparability may be limited.

Operating income is Income before dividends on preferred securities and cumulative effect of change in accounting principle, after-tax, excluding the effects of Realized capital gains and losses, after-tax, and Gain on disposition of operations, after-tax. In our operating income computation, the net effect of Realized capital gains and losses, after-tax, includes Allstate Financial's DAC amortization and additional future policy benefits only to the extent that they resulted from the recognition of Realized capital gains and losses. Net income is the most directly comparable GAAP measure.

We use this measure to evaluate our results of operations and as an integral component for incentive compensation. It reveals trends in our insurance and financial services business that may be obscured by the net effect of Realized capital gains and losses and Gain on disposition of operations. These items may vary significantly between periods and are generally driven by business decisions and economic developments such as market conditions, the timing of which is unrelated to the insurance underwriting process. Therefore, we believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. We note that the price to earnings multiple commonly used by insurance investors as a forward-looking valuation technique uses operating income as the denominator. Operating income should not be considered as a substitute for Net income and does not reflect the overall profitability of our business.

The following tables reconcile Operating income and Net income for the second quarter and first six months of 2003 and 2002.

For the three months ended June 30,

	Property- Liability						Allstate Financial						Consolidated						Per diluted share
	Est. 2003			2002			Est. 2003			2002			Est. 2003			2002			Est. 2003			2002
($ in millions, except per share data)
Operating income	$	496		$	335		$	131		$	143		$	599		$	453		$	0.85		$	0.64
Realized capital gains and losses		31			(114	)		(41	)		(37	)		(11	)		(153	)
Reclassification of DAC amortization		—			—			(11	)		(9	)		(11	)		(9	)
Income tax benefit (expense)		(8	)		46			19			9			11			55

Realized capital gains and losses, after-tax		23			(68	)		(33	)		(37	)		(11	)		(107	)		(0.01	)		(0.15	)
Gain on disposition of operations, after-tax		2			—			—			—			2			—			—			—

Income before dividends on preferred securities and cumulative effect of change in accounting principle, after-tax		521			267			98			106			590			346			0.84			0.49
Dividends on preferred securities of subsidiary trust(s), after-tax		—			—			—			—			(2	)		(2	)		—			(0.01	)

Net income (loss)	$	521		$	267		$	98		$	106		$	588		$	344		$	0.84		$	0.48

For the six months ended June 30,

	Property- Liability						Allstate Financial						Consolidated						Per diluted share
	Est. 2003			2002			Est. 2003			2002			Est. 2003			2002			Est. 2003			2002
($ in millions, except per share data)
Operating income	$	1,114		$	709		$	213		$	286		$	1,272		$	941		$	1.80		$	1.32
Realized capital gains and losses		68			(129	)		(80	)		(124	)		(13	)		(256	)
Reclassification of DAC amortization		—			—			(25	)		(3	)		(25	)		(3	)
Income tax benefit (expense)		(18	)		49			40			38			22			88

Realized capital gains and losses, after-tax		50			(80	)		(65	)		(89	)		(16	)		(171	)		(0.02	)		(0.24	)
Gain on disposition of operations, after-tax		2			5			—			—			2			5			—			0.01

Income before dividends on preferred securities and cumulative effect of change in accounting principle, after-tax		1,166			634			148			197			1,258			775			1.78			1.09
Dividends on preferred securities of subsidiary trust(s), after-tax		—			—			—			—			(5	)		(5	)		—			(0.01	)
Cumulative effect of change in accounting principle, after-tax		—			(48	)		—			(283	)		—			(331	)		—			(0.46	)

Net income (loss)	$	1,166		$	586		$	148		$	(86	)	$	1,253		$	439		$	1.78		$	0.62

In this press release, we provide guidance on operating income per diluted share for 2003 (excluding restructuring and related charges and assuming a level of average expected catastrophe losses used in pricing for the remainder of the year). A reconciliation of this measure to Net income is not accessible on a forward-looking basis because it is not possible to provide a reliable forecast of Realized capital gains and losses, which can vary substantially from one period to another and may have a significant impact on Net income. Because a forecast of Realized capital gains and losses is not accessible, neither is a forecast of the effects of Realized capital gains and losses on DAC amortization, additional future policy benefits and income taxes. It is also not possible to provide a reliable forecast of restructuring and related charges. The other reconciling items between Operating income and Net income on a forward-looking basis are Gains (loss) on disposition of operations after-tax and Cumulative effect of changes in accounting principle which we assume to be zero for the remainder of 2003 and Dividends on preferred securities of subsidiary trusts, which we estimate to be $0.02 per diluted share for 2003.

Underwriting income (loss) is Premiums earned, less Claims and claims expense ("losses"), Amortization of DAC, Operating costs and expenses and Restructuring and related charges as determined using GAAP. Management uses this measure in its evaluation of results of operations to analyze the profitability of our Property-Liability insurance operations separately from investment results. It is also an integral component of incentive compensation. We believe it is useful for investors to evaluate the components of income separately and in the aggregate when reviewing our performance. Underwriting income (loss) should not be considered as a substitute for Net income and does not reflect the overall profitability of our business. Net income is the most directly comparable GAAP measure. A reconciliation of Property-Liability Underwriting income to Net income is provided in the Segment Results table.

Operating income return on equity is a ratio found useful by investors that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month operating income by the average of the beginning and end of the 12-month period shareholders' equity after excluding the after-tax effect of unrealized net capital gains. We use it to supplement our evaluation of net income and return on equity and because investors often use this measure when evaluating the performance of insurers. Moreover, it enhances investor understanding by eliminating the after-tax effects of realized and unrealized capital gains and losses and the cumulative effect of changes in accounting, which can fluctuate significantly. Return on Equity is the most directly comparable GAAP measure. The following table shows the two computations.

		For the twelve months ended June 30,
		Est. 2003		2002
($ in millions)
Return on equity
Numerator:
	Net income	$	1,948	$	929

Denominator:
	Beginning shareholders' equity		17,217		17,570
	Ending shareholders' equity		19,299		17,217
	Average shareholders' equity	$	18,258	$	17,394

ROE			10.7		5.3

Operating income return on equity
Numerator:
	Operating income	$	2,406	$	1,651

Denominator:
	Beginning shareholders' equity		17,217		17,570
	Unrealized net capital gains		1,870		1,917

	Adjusted beginning shareholders' equity		15,347		15,653
	Ending shareholders' equity		19,299		17,217
	Unrealized net capital gains		3,491		1,870

	Adjusted ending shareholders' equity		15,808		15,347
	Average shareholders' equity	$	15,578	$	15,500

Operating income ROE			15.4		10.7

Operating Measures

We believe that investors' understanding of Allstate's performance is enhanced by our disclosure of the following operating financial measures. Our method of calculating these measures may differ from that used by other companies and therefore comparability may be limited.

Premiums written is the amount of premiums charged for policies issued during a fiscal period. Premiums earned is a GAAP measure. Premiums are considered earned and are included in financial results on a pro-rata basis over the policy period. The portion of premiums written applicable to the unexpired terms of the policies is recorded as Unearned premiums on our Consolidated Statements of Financial Position.

The following table presents a reconciliation of premiums written to premiums earned.

	Three Months Ended June 30,						Six Months Ended June 30,
	Est. 2003			2002			Est. 2003			2002
($ in millions)
Premiums written	$	6,422		$	6,042		$	12,359		$	11,758
(Increase) decrease in Unearned Premiums		(270	)		(248	)		(248	)		(257	)
Other		(6	)		9			34			6

Premiums earned	$	6,146		$	5,803		$	12,145		$	11,507

Premiums and deposits is an operating measure that we use to analyze production trends for Allstate Financial sales. It includes premiums on insurance policies and annuities and all deposits and other funds received from customers on deposit-type products including the net new deposits of Allstate Bank, which we account for under GAAP as increases to liabilities rather than as revenue.

The following table illustrates where Premiums and deposits are reflected in the consolidated financial statements.

	Three Months Ended June 30,				Six Months Ended June 30,
	Est. 2003		2002		Est. 2003		2002
($ in millions)
GAAP premiums(1)	$	297	$	348	$	709	$	656
Deposits to contractholder funds, separate accounts and other		2,999		2,977		5,083		5,459

Total Premiums and deposits	$	3,296	$	3,325	$	5,792	$	6,115

(1): Life and annuity contract charges in the amount of est. $236 million and $234 million for the three months ended June 30, 2003 and 2002, respectively and est. $463 million and $464 million for the six months ended June 30, 2003 and 2002, respectively, which are also revenues recognized for GAAP, have been excluded from the table above, but are a component of the Consolidated Statements of Operations line item Life and annuity premiums and contract charges.

New sales of financial products by Allstate exclusive agencies is an operating measure that we use to quantify the current year sales of financial products by the Allstate proprietary distribution channel. New sales of financial products by Allstate exclusive agencies includes annual premiums on new insurance policies, initial premiums and deposits on annuities, net new deposits in the Allstate Bank, sales of other company's mutual funds, and excludes renewal premiums. New sales of financial products by Allstate exclusive agencies for the six months ended June 30, 2003 and 2002 totaled est. $783 million and $760 million, respectively.

This press release contains forward-looking statements about our operating income for 2003 and increases in PIF in our Property-Liability business. These statements are subject to the Private Securities Litigation Reform Act of 1995 and are based on management's estimates, assumptions and projections. Actual results may differ materially from those projected in the forward-looking statements for a variety of reasons. Projected weighted average rate changes in our Property-Liability business may be lower than projected due to a decrease in PIF. Loss costs in our Property-Liability business, including losses due to catastrophes such as hurricanes and earthquakes, may exceed management's projections. Competitive pressures could lead to sales of Property-Liability products, including private passenger auto and homeowners insurance, that are lower than we have projected, due to our increased prices and our modified underwriting practices. Investment income may not meet management's projections due to poor stock market performance or lower returns on the fixed income portfolio due to worsening credit conditions. Significantly lower interest rates and equity markets could increase deferred acquisition cost amortization, reduce contract charges, investment margins and the profitability of the Allstate Financial segment. We encourage you to review the other risk factors facing Allstate that we disclosed in our Notice of Annual Meeting and Proxy Statement dated March 28, 2003. We undertake no obligation to publicly correct or update any forward-looking statements. This press release contains unaudited financial information.

The Allstate Corporation (NYSE: ALL) is the nation's largest publicly held personal lines insurer. Widely known through the "You're In Good Hands With Allstate®" slogan, Allstate provides insurance products to more than 16 million households and has approximately 12,300 exclusive agents and financial specialists in the U.S. and Canada. Customers can access Allstate products and services through Allstate agents, or in select states at allstate.com and 1-800-Allstate®. Encompass^SM and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. Allstate Financial Group includes the businesses that provide life and supplemental insurance, retirement, banking and

investment products through distribution channels that include Allstate agents, independent agents, and banks and securities firms.

We post an interim investor supplement on our web site. You can access it by going to allstate.com and clicking on "About Allstate." From there, go to the "Find Investor Relations Information" button. We will post additional information to the supplement over the next 30 days as it becomes available.

Contact:

Michael Trevino
Media Relations
(847) 402-5600

Robert Block, Larry Moews, Phil Dorn
Investor Relations
(847) 402-2800

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