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 FORM 10-Q


 
 UNITED STATES

 
SECURITIES AND EXCHANGE COMMISSION

 
 

 
Washington, D.C. 20549

 
 

 
 
 

 
FORM 10-Q

 
 

 
x QUARTERLY REPORT PURSUANT
   TO SECTION 13 OR 15(d)

 
OF

 
THE SECURITIES EXCHANGE ACT OF 1934
   

 
For the quarterly period ended September 30, 1999
   

 
 

 
OR

 
 

 
¨ TRANSITION REPORT PURSUANT
   TO SECTION 13 OR 15(d)

 
OF

 
THE SECURITIES EXCHANGE ACT OF 1934
   

 
 

 
Commission file number 1-11840

 
 

 
THE ALLSTATE CORPORATION

 
(Exact name of registrant as specified in its
   charter)

 
 

 
 

  

    
Delaware
     

   
(State of Incorporation)

   		
   
    

     
     36-3871531

   
(I.R.S. Employer Identification No.)
     

   		
   
  

 
 
 
 
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA
   CODE: 847/402-5000
 
REGISTRANT HAS FILED ALL REPORTS REQUIRED TO BE
   FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH
   FILING REQUIREMENTS FOR THE PAST 90 DAYS.
 
YES x     
      NO ¨
 
AS OF OCTOBER 31, 1999, THE REGISTRANT HAD
   805,396,466 COMMON SHARES, $.01 PAR VALUE, OUTSTANDING.
   
 THE ALLSTATE CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
   
September 30, 1999
 

  

    
2775 Sanders
     Road, Northbrook, Illinois

   
(Address of principal executive offices)
     

   		
   
    

     
     60062

   
(Zip Code)

   		
   
  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
           
           PART I. FINANCIAL INFORMATION
 

           
           ITEM 1. FINANCIAL STATEMENTS
 
THE ALLSTATE
             CORPORATION AND SUBSIDIARIES
 

           
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             
 

  

   
      
     
   
      
     
   
      
  

  

   Part I
     
   
   FINANCIAL INFORMATION
   
     
   
  

  

   
    
   

    Item 1.
      
    
    Financial Statements
    
      
    
   

   

    
     
    

     
        
       
     
     Condensed Consolidated Statements of Operations for
       the Three Month and Nine Month Periods
     

     Ended September 30, 1999 and 1998 (unaudited)
     		
       
     
    

    

     
      
     

       
        
      
      Condensed Consolidated Statements of Financial
        Position as of September 30, 1999 (unaudited)
      

      and December 31, 1998
      		
        
      
     

     

      
       
      

        
         
       
       Condensed Consolidated Statements of Cash Flows
         for the Nine Month Periods Ended September
       

       30, 1999 and 1998 (unaudited)
       		
         
       
      

      

       
        
       

         
          
        
        Notes to Condensed Consolidated Financial
          Statements (unaudited)
        
          
        
       

       

        
         
        

          
           
         
         Independent Accountants’ Review Report
         
           
         
        

        

         
          
         

          Item 2.
            
            
          
          Management’s Discussion and Analysis of
            Financial Condition and Results of Operations
          
            
          
         

         

          
           
          

           Part II
             
             
           
           OTHER INFORMATION
           
             
           
          

          

           
            
           

            Item 5.
              
              
            
            Other Information
            
              
            
           

           

            
             
            

             Item 6.
               
               
             
             Exhibits and Reports on Form 8-K
             
               
             
            

           
           
           
           
           
           
           
           
           
           
 
See notes to condensed
               consolidated financial statements.
 
 THE ALLSTATE
               CORPORATION AND SUBSIDIARIES
 

             
             CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
               
 

            

              
               
             
               Three Months Ended
             

             September 30,

               
             
               Nine Months Ended
             

             September 30,

            

            

              
               
             
               1999

               
             
               1998

               
             
               1999

               
             
               1998

            

            

             (In
               millions except per share data)
               
             
               (Unaudited)
               
             
               (Unaudited)
            

            

             
              
             

              
                Revenues
                
              
              
                
              
              
                
              
              
                
              
              
             

             

               
                         
                Property-liability insurance premiums earned
                
              $4,938
                
               
                
              $4,866
                
               
                
              $14,693
                
               
                
              $14,431
                
               
             

             

               
                         
                Life and annuity premiums and contract charges
                
                
              393
                
               
                
              381
                
               
                
              1,147
                
               
                
              1,122
                
               
             

             

               
                         
                Net investment income
                
              1,058
                
               
                
              977
                
               
                
              3,043
                
               
                
              2,916
                
               
             

             

               
                         
                Realized capital gains and losses
                
              162
                
               
                
              212
                
               
                
              1,067
                
               
                
              956
                
               
             

             

                
                
              

                
                
              

                
                
              

                
                
              

                
             

             

               
                
              6,551
                
               
                
              6,436
                
               
                
              19,950
                
               
                
              19,425
                
               
             

             

                
                
              

                
                
              

                
                
              

                
                
              

                
             

             

              
                Costs and expenses
                
              
              
                
              
              
                
              
              
                
              
              
             

             

               
                         
                Property-liability insurance claims and claims expense
                
                
              3,817
                
               
                
              3,476
                
               
                
              10,669
                
               
                
              10,235
                
               
             

             

               
                         
                Life and annuity contract benefits
                
              635
                
               
                
              604
                
               
                
              1,839
                
               
                
              1,775
                
               
             

             

               
                         
                Amortization of deferred policy acquisition costs
                
                
              808
                
               
                
              784
                
               
                
              2,398
                
               
                
              2,262
                
               
             

             

               
                         
                Operating costs and expenses
                
              564
                
               
                
              501
                
               
                
              1,641
                
               
                
              1,487
                
               
             

             

               
                         
                Interest expense
                
              28
                
               
                
              28
                
               
                
              86
                
               
                
              88
                
               
             

             

                
                
              

                
                
              

                
                
              

                
                
              

                
             

             

               
                
              5,852
                
               
                
              5,393
                
               
                
              16,633
                
               
                
              15,847
                
               
             

             

                
                
              

                
                
              

                
                
              

                
                
              

                
             

             

              
               
              

               
                 Gain on disposition of operations
                 
               —
                  
                
                 
               —
                  
                
                 
               10
                 
                
                 
               87
                 
                
              

              

               
                
               

               
                 Income from operations before income tax expense,
                 dividends on
               

               preferred securities, and equity in net income of
                 unconsolidated
               

               subsidiary		
                 
               699
                 
                
                 
               1,043
                 
                
                 
               3,327
                 
                
                 
               3,665
                 
                
              

              

               
                
               

               
                 Income tax expense
                 
               199
                 
                
                 
               320
                 
                
                 
               1,003
                 
                
                 
               1,112
                 
                
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
              

              

               
                 Income before dividends on preferred securities and
                 equity in net
               

               income of unconsolidated subsidiary		
                 
               500
                 
                
                 
               723
                 
                
                 
               2,324
                 
                
                 
               2,553
                 
                
              

              

               
                
               

               
                 Dividends on preferred securities of subsidiary trusts
                 
                 
               (10
                 
               )
                 
                 
               (10
                 
               )
                 
                 
               (29
                 
               )
                 
                 
               (29
                 
               )
                 
              

              
 
              

               
                 Equity in net income of unconsolidated subsidiary
                 
                 
               —
                  
                
                 
               —
                  
                
                 
               —
                  
                
                 
               10
                 
                
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
              

              

               Net
                 income
                 
               $ 
                  490
                
                 
               $ 
                  713
                
                 
               $ 
                  2,295
                
                 
               $ 
                  2,534
                
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
              

              

               
                 Earnings per share:
                 
               
               
                 
               
               
                 
               
               
                 
               
               
              

              

               
                
               

               Net
                 income per share—basic
                 
               $ 
                  0.63
                
                 
               $ 
                  0.87
                
                 
               $ 
                    2.86
                
                 
               $ 
                    3.03
                
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
              

              

               
                 Weighted average shares—basic
                 
               790.9
                 
                
                 
               826.5
                 
                
                 
               803.8
                 
                
                 
               836.3
                 
                
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
              

              

               Net
                 income per share—diluted
                 
               $ 
                  0.62
                
                 
               $ 
                  0.86
                
                 
               $ 
                    2.84
                
                 
               $ 
                    3.01
                
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
              

              

               
                 Weighted average shares—diluted
                 
               793.9
                 
                
                 
               830.7
                 
                
                 
               807.0
                 
                
                 
               840.8
                 
                
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
              

             
             
             
             
             
             
             
             
             
 
See notes to condensed
               consolidated financial statements.
 
 THE ALLSTATE
               CORPORATION AND SUBSIDIARIES
 

             
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               
 

              

                
                 
               
                 September 30,
               

               1999

                 
               
                 December 31,
               

               1998

              

              

               (In
                 millions except par value data)
                 
               
                 (Unaudited)
                 
                
              

              

               
                
               

               
                 Assets
                 
               
               
                 
               
               
              

              

               
                 Investments
                 
               
               
                 
               
               
              

              

                
                          
                 Fixed income securities, at fair value (amortized cost
                 $52,418 and $49,946)
                 
               $53,236
                 
                
                 
               $53,560
                 
                
              

              

                
                          
                 Equity securities, at fair value (cost $4,408 and
                 $4,231)
                 
               5,841
                 
                
                 
               6,421
                 
                
              

              

                
                          
                 Mortgage loans
                 
               3,837
                 
                
                 
               3,458
                 
                
              

              

                
                          
                 Short-term
                 
               2,497
                 
                
                 
               2,477
                 
                
              

              

                
                          
                 Other
                 
               632
                 
                
                 
               609
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Total investments
                 
               66,043
                 
                
                 
               66,525
                 
                
              

              

               
                
               

               Cash
                 
                 
               230
                 
                
                 
               258
                 
                
              

              

               
                 Premium installment receivables, net
                 
               3,314
                 
                
                 
               3,082
                 
                
              

              

               
                 Deferred policy acquisition costs
                 
               3,511
                 
                
                 
               3,096
                 
                
              

              

               
                 Reinsurance recoverables, net
                 
               2,202
                 
                
                 
               1,932
                 
                
              

              

               
                 Accrued investment income
                 
               854
                 
                
                 
               751
                 
                
              

              

               
                 Deferred income taxes
                 
               371
                 
                
                 
               —
                  
                
              

              

               
                 Property and equipment, net
                 
               822
                 
                
                 
               803
                 
                
              

              

               Other
                 assets
                 
               1,186
                 
                
                 
               1,146
                 
                
              

              

               
                 Separate Accounts
                 
               11,789
                 
                
                 
               10,098
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Total assets
                 
               $90,322
                 
                
                 
               $87,691
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

               
                 Liabilities
                 
               
               
                 
               
               
              

              

               
                 Reserve for property-liability insurance claims and
                 claims expense
                 
               $17,023
                 
                
                 
               $16,881
                 
                
              

              

               
                 Reserve for life-contingent contract benefits
                 
                 
               7,293
                 
                
                 
               7,601
                 
                
              

              

               
                 Contractholder funds
                 
               23,179
                 
                
                 
               21,133
                 
                
              

              

               
                 Unearned premiums
                 
               6,737
                 
                
                 
               6,425
                 
                
              

              

               Claim
                 payments outstanding
                 
               803
                 
                
                 
               778
                 
                
              

              

               Other
                 liabilities and accrued expenses
                 
               4,927
                 
                
                 
               4,578
                 
                
              

              

               
                 Deferred income taxes
                 
               —
                  
                
                 
               461
                 
                
              

              

               
                 Short-term debt
                 
               600
                 
                
                 
               393
                 
                
              

              

               
                 Long-term debt
                 
               1,356
                 
                
                 
               1,353
                 
                
              

              

               
                 Separate Accounts
                 
               11,789
                 
                
                 
               10,098
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Total liabilities
                 
               73,707
                 
                
                 
               69,701
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

               
                
               

               
                 Commitments and Contingent Liabilities (Notes 2 and 4)
                 
                 
               
               
                 
               
               
              

              

               
                
               

               
                 Mandatorily Redeemable Preferred Securities of
                 Subsidiary Trusts
                 
               750
                 
                
                 
               750
                 
                
              

              

               
                
               

               
                 Shareholders’ equity
                 
               
               
                 
               
               
              

              

               
                 Preferred stock, $1 par value, 25 million shares
                 authorized, none issued
                 
               —
                  
                
                 
               —
                  
                
              

              

               Common
                 stock, $.01 par value, 2 billion shares authorized and
                 900 million issued,
                 
               
               
                 
               
               
              

              

                
 

                       
                     771 million and 818 million
                 shares outstanding

               

               		
                 
               9
                 
                
                 
               9
                 
                
              

              

               
                 Additional capital paid-in
                 
               3,098
                 
                
                 
               3,102
                 
                
              

              

               
                 Retained income
                 
               16,425
                 
                
                 
               14,490
                 
                
              

              

               
                 Deferred ESOP expense
                 
               (216
                 
               )
                 
                 
               (252
                 
               )
                 
              

              

               
                 Treasury stock, at cost (129 million and 82 million
                 shares)
                 
               (4,679
                 
               )
                 
                 
               (3,065
                 
               )
                 
              

              

               
                 Accumulated other comprehensive income:
                 
               
               
                 
               
               
              

              

                
                          
                 Unrealized net capital gains
                 
               1,249
                 
                
                 
               2,994
                 
                
              

              

                
                          
                 Unrealized foreign currency translation adjustments
                 
                 
               (21
                 
               )
                 
                 
               (38
                 
               )
                 
              

              

                 
                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Total accumulated other comprehensive income
                 
                 
               1,228
                 
                
                 
               2,956
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Total shareholders’ equity
                 
                 
               15,865
                 
                
                 
               17,240
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Total liabilities and shareholders’
                 equity
                 
               $90,322
                 
                
                 
               $87,691
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

             
             
             
             
             
             
             
             
             
 
See notes to condensed
               consolidated financial statements.
 
THE ALLSTATE
               CORPORATION AND SUBSIDIARIES

             
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               
(Unaudited)
               
 
 1. Basis of
               Presentation
 
    
                     The accompanying
               condensed consolidated financial statements include the
               accounts of The Allstate Corporation and its wholly
               owned subsidiaries, primarily Allstate Insurance Company
               (“AIC”), a property-liability insurance
               company with various property-liability and life and
               savings subsidiaries, including Allstate Life Insurance
               Company (collectively referred to as the “Company
               ” or “Allstate”).
 
    
                     The condensed
               consolidated financial statements and notes as of
               September 30, 1999, and for the three month and nine
               month periods ended September 30, 1999 and 1998 are
               unaudited. The condensed consolidated financial
               statements reflect all adjustments (consisting only of
               normal recurring accruals) which are, in the opinion of
               management, necessary for the fair presentation of the
               financial position, results of operations and cash flows
               for the interim periods. These condensed consolidated
               financial statements and notes should be read in
               conjunction with the consolidated financial statements
               and notes thereto included in Appendix C of the 1999
               Notice of Annual Meeting and Proxy Statement and
               incorporated by reference in the Annual Report on Form
               10-K for 1998. The results of operations for the interim
               periods should not be considered indicative of results
               to be expected for the full year.
 
    
                     Effective January 1,
               1999, the Company adopted Statement of Position (“
               SOP”) 97-3, “Accounting by Insurance and Other
               Enterprises for Insurance-Related Assessments.” The
               SOP provides guidance concerning when to recognize a
               liability for insurance-related assessments and how
               those liabilities should be measured. Specifically,
               insurance-related assessments should be recognized as
               liabilities when all of the following criteria have been
               met: 1) an assessment has been imposed or it is probable
               that an assessment will be imposed, 2) the event
               obligating an entity to pay an assessment has occurred
               and 3) the amount of the assessment can be reasonably
               estimated. The adoption of this statement was not
               material to the Company’s results of operations and
               financial position.
 
    
                     In July 1999, the
               Financial Accounting Standards Board (“FASB”)
               delayed the effective date of Statement of Financial
               Accounting Standard (“SFAS”) No. 133, “
               Accounting for Derivative Instruments and Hedging
               Activities”, which replaces existing pronouncements
               and practices with a single, integrated accounting
               framework for derivatives and hedging activities. The
               delay was effected through the issuance of SFAS No. 137,
               which extends the effective date of the SFAS No. 133
               requirements to fiscal years beginning after June 15,
               2000. As such, the Company plans to adopt the provisions
               of SFAS No. 133 as of January 1, 2001. Based on existing
               interpretations of the requirements of SFAS No. 133, the
               impact of adoption is not expected to be material to the
               results of operations or financial position of the
               Company.
 
    
                     To conform with the
               1999 presentation, certain amounts in the prior year
               ’s financial statements and notes have been
               reclassified.
 
2. Reserve for
               Property-Liability Insurance Claims and Claims Expense
               
 
    
                     The Company
               establishes reserves for claims and claims expense on
               reported and unreported claims of insured losses. These
               reserve estimates are based on known facts and
               interpretation of circumstances, including the Company
               ’s experience with similar cases and historical
               trends involving claim payment patterns, loss payments,
               pending levels of unpaid claims and product mix, as well
               as other factors including court decisions, economic
               conditions and public attitudes. The effects of
               inflation are implicitly considered in the reserving
               process.
 
    
                     The establishment of
               appropriate reserves, including reserves for
               catastrophes, is an inherently uncertain process.
               Allstate regularly updates its reserve estimates as new
               facts become known and further events occur which may
               impact the resolution of unsettled claims. Changes in
               prior year reserve estimates, which may be material, are
               reflected in the results of operations in the period
               such changes are determined to be needed.
THE ALLSTATE
               CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
               CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
               
 
 
    
                       Catastrophes are
               an inherent risk of the property-liability insurance
               business which have contributed, and will continue to
               contribute, to material year-to-year fluctuations in the
               Company’s results of operations and financial
               position. The level of catastrophe losses experienced in
               any year cannot be predicted and could be material to
               the Company’s results of operations, liquidity and
               financial position.
 
    
                     Reserves for
               environmental, asbestos and other mass tort exposures
               are comprised of reserves for reported claims, incurred
               but not reported claims and related expenses.
               Establishing net loss reserves for these types of claims
               is subject to uncertainties that are greater than those
               presented by other types of claims. Among the
               complications are a lack of historical data, long
               reporting delays, uncertainty as to the number and
               identity of insureds with potential exposure, unresolved
               legal issues regarding policy coverage, availability of
               reinsurance and the extent and timing of any such
               contractual liability. The legal issues concerning the
               interpretation of various insurance policy provisions
               and whether these losses are, or were ever intended to
               be covered, are complex. Courts have reached different
               and sometimes inconsistent conclusions as to when losses
               are deemed to have occurred and which policies provide
               coverage; what types of losses are covered; whether
               there is an insured obligation to defend; how policy
               limits are determined; how policy exclusions are applied
               and interpreted; and whether environmental and asbestos
               clean-up costs represent insured property damage.
               Management believes these issues are not likely to be
               resolved in the near future.
 
    
                     In 1986, the general
               liability policy form used by Allstate and others in the
               property-liability industry was amended to introduce an
               “absolute pollution exclusion,” which excluded
               coverage for environmental damage claims and added an
               asbestos exclusion. Most general liability policies
               issued prior to 1987 contain annual aggregate limits for
               product liability coverage, and policies issued after
               1986 also have an annual aggregate limit as to all
               coverages. Allstate’s experience to date is that
               these policy form changes have effectively limited its
               exposure to environmental and asbestos claim risks
               assumed, as well as primary commercial coverages
               written, for most policies written in 1986 and all
               policies written after 1986.
 
    
                     In the third quarter
               of 1999, the Company completed an annual assessment of
               its environmental, asbestos and other mass tort
               exposures. This assessment resulted in a strengthening
               of net asbestos reserves of $333 million and a $155
               million release of net environmental and other reserves.
               Allstate’s reserves for environmental and asbestos
               claims were $1.30 billion and $1.10 billion at September
               30, 1999 and December 31, 1998, net of reinsurance
               recoverables of $464 million and $426 million,
               respectively.
 
    
                     Management believes
               its net loss reserves for environmental, asbestos and
               other mass tort claims are appropriately established
               based on available facts, technology, laws and
               regulations. However, due to the inconsistencies of
               court coverage decisions, plaintiffs’ expanded
               theories of liability, the risks inherent in major
               litigation and other uncertainties, the ultimate cost of
               these claims may vary materially from the amounts
               currently recorded, resulting in an increase in the loss
               reserves. In addition, while the Company believes that
               improved actuarial techniques and databases have
               assisted in its ability to estimate environmental,
               asbestos and other mass tort net loss reserves, these
               refinements may subsequently prove to be inadequate
               indicators of the extent of probable loss. Due to the
               uncertainties and factors described above, management
               believes it is not practicable to develop a meaningful
               range for any such additional net loss reserves that may
               be required.
 
    
                     The underwriting
               results from Discontinued Lines and Coverages (business
               no longer written by Allstate) included a release of the
               reserve held as a provision for future losses on the
               run-off of the mortgage pool business of $110 million.
               This release, which partially offset the asbestos
               reserve strengthening discussed above, was the result of
               a recapture by The PMI Group, Inc. during the third
               quarter of 1999 of the reinsured business and all
               related assets and future liabilities of the mortgage
               pool business. The Company is expecting to exit the
               mortgage insurance business when it completes the sale
               of a minor reinsurance subsidiary to The PMI Group, Inc.
               This sale is awaiting regulatory approval.
THE ALLSTATE
               CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
               CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
               
 
 
 3. Reinsurance
               
 
    
                     Property-liability
               insurance premiums and life and annuity premiums and
               contract charges are net of the following reinsurance
               ceded:
 

              

                
                 
               
                 Nine months ended
               

               September 30,

              

              

                
                 
               
                 1999

                 
               
                 1998

              

              

               (In
                 millions)
                 
               
                 (Unaudited)
              

              

               
                
               

               
                 Cash flows from operating activities
                 
               
               
                 
               
               
              

              

                
                          
                 Net income
                 
               $ 
                  2,295
                
                 
               $ 
                  2,534
                
              

              

                
                          
                 Adjustments to reconcile net income to net cash
                 provided by operating activities:
                 
               
               
                 
               
               
              

              

                
                          
                          
                  Depreciation, amortization and other non-cash
                 items
                 
               (29
                 
               )
                 
                 
               (8)
                 
                
              

              

                
                          
                          
                  Realized capital gains and losses
                 
               (1,067
                 
               )
                 
                 
               (956
                 
               )
                 
              

              

                
                          
                          
                  Gain on disposition of operations
                 
               (10
                 
               )
                 
                 
               (87
                 
               )
                 
              

              

                
                          
                          
                  Interest credited to contractholder funds
                 
                 
               961
                 
                
                 
               930
                 
                
              

              

                
                          
                          
                  Changes in:
                 
               
               
                 
               
               
              

              

                
                          
                          
                          
                   Policy benefit and other insurance reserves
                 
                 
               (376
                 
               )
                 
                 
               (325
                 
               )
                 
              

              

                
                          
                          
                          
                   Unearned premiums
                 
               312
                 
                
                 
               218
                 
                
              

              

                
                          
                          
                          
                   Deferred policy acquisition costs
                 
                 
               (188
                 
               )
                 
                 
               (171
                 
               )
                 
              

              

                
                          
                          
                          
                   Premium installment receivables, net
                 
                 
               (232
                 
               )
                 
                 
               (210
                 
               )
                 
              

              

                
                          
                          
                          
                   Reinsurance recoverables, net
                 
               (107
                 
               )
                 
                 
               171
                 
                
              

              

                
                          
                          
                          
                   Income taxes payable
                 
               83
                 
                
                 
               (85
                 
               )
                 
              

              

                
                          
                          
                          
                   Other operating assets and liabilities
                 
                 
               (67
                 
               )
                 
                 
               251
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

                
                          
                          
                          
                          
                    Net cash provided by operating
                 activities
                 
               1,575
                 
                
                 
               2,262
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

               
                 Cash flows from investing activities
                 
               
               
                 
               
               
              

              

                
                          
                 Proceeds from sales
                 
               
               
                 
               
               
              

              

                
                          
                          
                  Fixed income securities
                 
               15,432
                 
                
                 
               11,420
                 
                
              

              

                
                          
                          
                  Equity securities
                 
               7,126
                 
                
                 
               3,667
                 
                
              

              

                
                          
                          
                  Real estate
                 
               —
                  
                
                 
               813
                 
                
              

              

                
                          
                 Investment collections
                 
               
               
                 
               
               
              

              

                
                          
                          
                  Fixed income securities
                 
               4,293
                 
                
                 
               4,919
                 
                
              

              

                
                          
                          
                  Mortgage loans
                 
               315
                 
                
                 
               329
                 
                
              

              

                
                          
                 Investment purchases
                 
               
               
                 
               
               
              

              

                
                          
                          
                  Fixed income securities
                 
               (21,614
                 
               )
                 
                 
               (17,202
                 
               )
                 
              

              

                
                          
                          
                  Equity securities
                 
               (6,285
                 
               )
                 
                 
               (2,879
                 
               )
                 
              

              

                
                          
                          
                  Mortgage loans
                 
               (693
                 
               )
                 
                 
               (483
                 
               )
                 
              

              

                
                          
                 Change in short-term investments, net
                 
               431
                 
                
                 
               (710
                 
               )
                 
              

              

                
                          
                 Change in other investments, net
                 
               (23
                 
               )
                 
                 
               (82
                 
               )
                 
              

              

                
                          
                 Acquisitions
                 
               (39
                 
               )
                 
                 
               (275
                 
               )
                 
              

              

                
                          
                 Proceeds from disposition of operations
                 
               —
                  
                
                 
               49
                 
                
              

              

                
                          
                 Purchases of property and equipment, net
                 
               (134
                 
               )
                 
                 
               (137
                 
               )
                 
              

              

                 
                 
               

                 
                 
               

                 
              

              

                
                          
                          
                          
                          
                    Net cash used in investing activities
                 
                 
               (1,191
                 
               )
                 
                 
               (571
                 
               )
                 
              

              

                 
                 
               

                 
                 
               

                 
              

              

               
                 Cash flows from financing activities
                 
               
               
                 
               
               
              

              

                
                          
                 Change in short-term debt, net
                 
               207
                 
                
                 
               10
                 
                
              

              

                
                          
                 Repayment of long-term debt
                 
               —
                  
                
                 
               (300
                 
               )
                 
              

              

                
                          
                 Proceeds from issuance of long-term debt
                 
               3
                 
                
                 
               501
                 
                
              

              

                
                          
                 Contractholder fund deposits
                 
               3,931
                 
                
                 
               2,285
                 
                
              

              

                
                          
                 Contractholder fund withdrawals
                 
               (2,585
                 
               )
                 
                 
               (2,571
                 
               )
                 
              

              

                
                          
                 Dividends paid
                 
               (354
                 
               )
                 
                 
               (331
                 
               )
                 
              

              

                
                          
                 Treasury stock purchases
                 
               (1,662
                 
               )
                 
                 
               (1,311
                 
               )
                 
              

              

                
                          
                 Other
                 
               48
                 
                
                 
               66
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

                
                          
                          
                          
                          
                    Net cash used in financing activities
                 
                 
               (412
                 
               )
                 
                 
               (1,651
                 
               )
                 
              

              

                 
                 
               

                 
                 
               

                 
              

              

               Net
                 (decrease) increase in cash
                 
               (28
                 
               )
                 
                 
               40
                 
                
              

              

               
                 Cash at beginning of period
                 
               258
                 
                
                 
               220
                 
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

               
                 Cash at end of period
                 
               $ 
                    230
                
                 
               $ 
                    260
                
              

              

                 
                 
               

                 
                 
               

                 
              

              

               
                 Supplemental disclosure of non cash information
                 
                 
               
               
                 
               
               
              

              

                
                          
                 Conversion of Automatically Convertible Equity
               

                        
                  Securities to common shares of The PMI Group,
                 Inc.		
                 
               $ 
                    — 
                
                 
               $ 
                    357
                
              

              

                 
                 
               

                 
                 
               

                 
              

             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
 
    
                     Property-liability
               insurance claims and claims expense and life and annuity
               contract benefits are net of the following reinsurance
               recoveries:
 

              

                
                 
               
                 Three Months
               

               Ended
               

               September 30,

                 
               
                 Nine Months
               

               Ended
               

               September 30,

              

              

                
                 
               1999
                 

                 
               1998
                 

                 
               1999
                 

                 
               1998
                 

              

              

               (In millions)
              

              
 
              

               
                 Property-liability premiums
                 
               $89
                 
                 
               $109
                 
                 
               $291
                 
                 
               $333
                 
              

              

               Life
                 and annuity premiums and contract charges
                 
               76
                 
                 
               49
                 
                 
               171
                 
                 
               138
                 
              

             
             
             
             
             
 
4. Regulation and
               Legal Proceedings
 
    
                     The Company’s
               insurance businesses are subject to the effects of a
               changing social, economic and regulatory environment.
               Public and regulatory initiatives have varied and have
               included efforts to adversely influence and restrict
               premium rates, restrict the Company’s ability to
               cancel policies, impose underwriting standards and
               expand overall regulation. The ultimate changes and
               eventual effects, if any, of these initiatives are
               uncertain.
 
    
                     Allstate and
               plaintiffs’ representatives have agreed to settle
               certain civil suits filed in California, including a
               class action, related to the 1994 Northridge, California
               earthquake. The class action settlement received final
               approval from the Superior Court of the State of
               California for the County of Los Angeles on June 11,
               1999. The plaintiffs in these civil suits challenged
               licensing and engineering practices of certain firms
               Allstate retained and alleged that Allstate
               systematically pressured engineering firms to improperly
               alter their reports to reduce the loss amounts paid to
               some insureds with earthquake claims. Under the terms of
               the settlement, Allstate sent notice to approximately
               11,500 homeowner customers inviting them to participate
               in a court-administered program which may allow for
               review of their claims by an independent engineer and an
               independent adjusting firm to ensure that they have been
               adequately compensated for all structural damage from
               the 1994 Northridge earthquake covered under the terms
               of their Allstate policies. It is anticipated that
               approximately 2,500 of these customers will ultimately
               participate in this independent review process. Allstate
               has agreed to retain an independent consultant to
               review, among other things, Allstate’s practices
               and procedures for handling catastrophe claims, and will
               help fund a charitable foundation devoted to consumer
               education on loss prevention and consumer protection and
               other insurance issues. The Company does not expect that
               the effect of the proposed settlement will exceed the
               amounts currently reserved. On August 6, 1999, a group
               of 71 objectors to the settlement, representing 46
               claims, filed an appeal from the order approving the
               settlement. That appeal is pending. The time for filing
               appeals has expired.
THE ALLSTATE
               CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
               CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
               
 
 
    
                       In April 1998,
               Federal Bureau of Investigation agents executed search
               warrants at three Allstate offices for documents
               relating to the handling of certain claims for losses
               resulting from the Northridge earthquake. Allstate is
               cooperating with the investigation, which is being
               directed by the United States Attorney’s Office for
               the Central District of California. At present, the
               Company cannot determine the impact of resolving these
               matters.
 
    
                     For the past five
               years, the Company has been distributing to certain
               Personal Property and Casualty (“PP&C”)
               claimants, documents regarding the claims process and
               the role that attorneys may play in that process. Suits
               challenging the use of these documents have been filed
               against the Company, including a suit by the
               Commonwealth of Pennsylvania and purported class actions
               in eight other states. The suit in Pennsylvania alleged
               that the Company, by distributing these documents, had
               engaged in the unauthorized practice of law and violated
               the Pennsylvania Consumer Protection Law. A Pennsylvania
               court has ruled that Allstate did not engage in the
               unauthorized practice of law but did permit the
               Commonwealth to proceed with its case on the claim
               involving the Consumer Protection Law. In addition to
               these suits, the Company has received inquires from
               other states’ attorneys general, bar associations
               and departments of insurance. In certain states, the
               Company continues to use these documents after agreeing
               to make certain modifications. The Company is vigorously
               defending its rights to use these documents. The outcome
               of these disputes is currently uncertain.
 
    
                     There are currently
               pending, several state and nationwide class action
               lawsuits in various state courts seeking actual and
               punitive damages from Allstate for its alleged breach of
               contract and fraud because of its specification of the
               use of aftermarket (non-original equipment manufacturer)
               replacement parts in the repair of vehicles it insures
               under comprehensive or collision coverage. Plaintiffs in
               these suits allege, among other things, that aftermarket
               parts do not meet the standard of “like kind and
               quality” as called for by some insurance policies.
               These lawsuits are in various stages of development with
               no class action having been certified. The outcome of
               these disputes is currently uncertain.
 
    
                     Various other legal
               and regulatory actions are currently pending that
               involve Allstate and specific aspects of its conduct of
               business, including some related to the Northridge
               earthquake. Like other employers and other members of
               the insurance industry, the Company is the target of an
               increasing number of class action lawsuits. These suits
               are based on a variety of issues including the
               classification of workers and insurance practices. In
               the opinion of management, the ultimate liability, if
               any, in one or more of these actions in excess of
               amounts currently reserved is not expected to have a
               material effect on the results of operations, liquidity
               or financial position of the Company.
THE ALLSTATE
               CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
               CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
               
 
 
 5. Comprehensive
               Income
 
    
                     The components of
               other comprehensive income on a pretax and after-tax
               basis are as follows:
 

              

                
                 
               
                 Three Months
               

               Ended
               

               September 30,

                 
               
                 Nine Months
               

               Ended
               

               September 30,

              

              

                
                 
               1999
                 

                 
               1998
                 

                 
               1999
                 

                 
               1998
                 

              

              

               (In millions)
              

              
 
              

               
                 Property-liability insurance claims and claims expense
                 
                 
               $185
                 
                 
               $75
                 
                 
               $356
                 
                 
               $218
                 
              

              

               Life
                 and annuity contract benefits
                 
               50
                 
                 
               36
                 
                 
               116
                 
                 
               98
                 
              

             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
THE ALLSTATE
               CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
               CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
               
 
 6. Business Segments
               
 
    
                     Summarized revenues
               for each of the Company’s business segments are as
               follows:
 

              

                
                 
               
                 Three months ended September 30,
                 

                 		
              

              

               (In
                 millions)
                 
               
                 1999

                 
               
                 1998

              

              

                
                 
               
                 Pretax

                 
               
                 Tax

                 
               
                 After-tax

                 
               
                 Pretax

                 
               
                 Tax

                 
               
                 After-tax

              

              

               
                 Unrealized capital gains and losses:
                 
               
               
                 
               
               
                 
               
               
                 
               
               
                 
               
               
                 
               
              

              

                
                          
                 Unrealized holding gains (losses) arising during
               

                        
                  the period		
                 
               $ 
                    (849
               )
                 
                 
               $ 
                 298
                
                 
               $ 
                    (551
               )
                 
                 
               $ 
                  (4
               )
                 
                 
               $ 
                    2
                
                 
               $ 
                 (2)
              

              

                
                          
                 Less: reclassification adjustment for realized net
               

                        
                  capital gains included in net income		
                 
               127
                 
                
                 
               (44
                 
               )
                 
                 
               83
                 
                
                 
               88
                 
                
                 
               (30
                 
               )
                 
                 
               58
                 
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

              

              

               
                 Unrealized net capital gains (losses)
                 
               (976
                 
               )
                 
                 
               342
                 
                
                 
               (634
                 
               )
                 
                 
               (92
                 
               )
                 
                 
               32
                 
                
                 
               (60)
                 
              

              

               
                 Unrealized foreign currency translation adjustments
                 
                 
               24
                 
                
                 
               (8
                 
               )
                 
                 
               16
                 
                
                 
               (8
                 
               )
                 
                 
               3
                 
                
                 
               (5)
                 
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

              

              

               Other
                 comprehensive income (loss)
                 
               $ 
                    (952
               )
                 
                 
               $ 
                 334
                
                 
               (618
                 
               )
                 
                 
               $(100
                 
               )
                 
                 
               $ 
                  35
                
                 
               (65)
                 
              

              

                 
                 
               

                 
                 
               

                 
                 
                 
                 
                 
               

                 
                 
               

                 
                 
                 
              

              

               Net
                 income
                 
               
               
                 
               
               
                 
               490
                 
                
                 
               
               
                 
               
               
                 
               713
                 
              

              

                 
                 
                 
                 
                 
                 
                 
                 
               

                 
                 
                 
                 
                 
                 
                 
                 
               

              

              

               
                 Comprehensive income (loss)
                 
               
               
                 
               
               
                 
               $ 
                    (128
               )
                 
                 
               
               
                 
               
               
                 
               $648
                 
              

              

                 
                 
                 
                 
                 
                 
                 
                 
               

                 
                 
                 
                 
                 
                 
                 
                 
               

              

              

               
                
               

                
                 
               
                 Three months ended September 30,
                 

                 		
              

              

               (In
                 millions)
                 
               
                 1999

                 
               
                 1998

              

              

                
                 
               
                 Pretax

                 
               
                 Tax

                 
               
                 After-tax

                 
               
                 Pretax

                 
               
                 Tax

                 
               
                 After-tax

              

              

               
                 Unrealized capital gains and losses:
                 
               
               
                 
               
               
                 
               
               
                 
               
               
                 
               
               
                 
               
              

              

                
                          
                 Unrealized holding gains (losses) arising during
               

                        
                  the period		
                 
               $(1,650
                 
               )
                 
                 
               $ 
                  578
                
                 
               $(1,072
                 
               )
                 
                 
               $787
                 
                
                 
               $(275
                 
               )
                 
                 
               $ 
                  512
              

              

                
                          
                 Less: reclassification adjustment for realized net
               

                        
                  capital gains included in net income		
                 
               1,035
                 
                
                 
               (362
                 
               )
                 
                 
               673
                 
                
                 
               767
                 
                
                 
               (268
                 
               )
                 
                 
               499
                 
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

              

              

               
                 Unrealized net capital gains (losses)
                 
               (2,685
                 
               )
                 
                 
               940
                 
                
                 
               (1,745
                 
               )
                 
                 
               20
                 
                
                 
               (7
                 
               )
                 
                 
               13
                 
              

              

               
                 Unrealized foreign currency translation adjustments
                 
                 
               26
                 
                
                 
               (9
                 
               )
                 
                 
               17
                 
                
                 
               —
                  
                
                 
               —
                  
                
                 
               —
                  
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

              

              

               Other
                 comprehensive income (loss)
                 
               $(2,659
                 
               )
                 
                 
               $ 
                  931
                
                 
               (1,728
                 
               )
                 
                 
               $ 20
                 
                
                 
               $ 
                   (7
               )
                 
                 
               13
                 
              

              

                 
                 
               

                 
                 
               

                 
                 
                 
                 
                 
               

                 
                 
               

                 
                 
                 
              

              

               Net
                 income
                 
               
               
                 
               
               
                 
               2,295
                 
                
                 
               
               
                 
               
               
                 
               2,534
                 
              

              

                 
                 
                 
                 
                 
                 
                 
                 
               

                 
                 
                 
                 
                 
                 
                 
                 
               

              

              

               
                 Comprehensive income
                 
               
               
                 
               
               
                 
               $ 
                   567
                
                 
               
               
                 
               
               
                 
               $2,547
                 
              

              

                 
                 
                 
                 
                 
                 
                 
                 
               

                 
                 
                 
                 
                 
                 
                 
                 
               

              

             
             
             
             
             
             
             
             
             
             
THE ALLSTATE
               CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
               CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
               
 
    
                       Summarized
               financial performance data for each of the Company’
               s business segments are as follows:
 

              

                
                 
               
                 Three Months
               

               Ended
               

               September 30,

                 
               
                 Nine Months
               

               Ended
               

               September 30,

              

              

               (In
                 millions)
                 
               
                 1999

                 
               1998
                 

                 
               1999
                 

                 
               1998
                 

              

              

                
                 
               
               
                 
               
                 
               
                 
               
              

              

               
                 Revenues
                 
               
               
                 
               
                 
               
                 
               
              

              

               
                 Property-Liability
                 
               
               
                 
               
                 
               
                 
               
              

              

               
                 Premiums earned
                 
               
               
                 
               
                 
               
                 
               
              

              

                
                          
                 PP&C
                 
               $4,939
                 
                
                 
               $4,866
                 
                 
               $14,687
                 
                 
               $14,431
                 
              

              

                
                          
                 Discontinued Lines and Coverages
                 
               (1
                 
               )
                 
                 
               —
                  
                 
               6
                 
                 
               —
                  
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

                
                          
                          
                  Total premiums earned
                 
               4,938
                 
                
                 
               4,866
                 
                 
               14,693
                 
                 
               14,431
                 
              

              

               Net
                 investment income
                 
               474
                 
                
                 
               443
                 
                 
               1,333
                 
                 
               1,312
                 
              

              

               
                 Realized capital gains and losses
                 
               149
                 
                
                 
               133
                 
                 
               903
                 
                 
               639
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

                
                          
                          
                  Total Property-Liability
                 
               5,561
                 
                
                 
               5,442
                 
                 
               16,929
                 
                 
               16,382
                 
              

              

               
                 Life and Savings
                 
               
               
                 
               
                 
               
                 
               
              

              

               
                 Premiums and contract charges
                 
               393
                 
                
                 
               381
                 
                 
               1,147
                 
                 
               1,122
                 
              

              

               Net
                 investment income
                 
               565
                 
                
                 
               524
                 
                 
               1,653
                 
                 
               1,571
                 
              

              

               
                 Realized capital gains and losses
                 
               21
                 
                
                 
               69
                 
                 
               173
                 
                 
               298
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

                
                          
                          
                  Total Life and Savings
                 
               979
                 
                
                 
               974
                 
                 
               2,973
                 
                 
               2,991
                 
              

              

               
                 Corporate and Other
                 
               
               
                 
               
                 
               
                 
               
              

              

               Net
                 investment income
                 
               19
                 
                
                 
               10
                 
                 
               57
                 
                 
               33
                 
              

              

               
                 Realized capital gains and losses
                 
               (8
                 
               )
                 
                 
               10
                 
                 
               (9)
                 
                 
               19
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

                
                          
                          
                  Total Corporate and Other
                 
               11
                 
                
                 
               20
                 
                 
               48
                 
                 
               52
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

                
                          
                          
                  Consolidated Revenues
                 
               $6,551
                 
                
                 
               $6,436
                 
                 
               $19,950
                 
                 
               $19,425
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

             
             
             
             
             
             
             
             
 
7. Acquisitions
               
 
    
                     On October 1, 1999,
               the Company completed the acquisition of the personal
               lines auto and homeowners insurance business of CNA
               Financial Corporation (“CNA”). At closing, AIC
               made a cash payment of $140 million to CNA for: i)
               certain assets of CNA used in connection with that
               business; ii) renewal rights to the in-force business;
               and iii) an option to acquire certain licensed companies
               of CNA in the future. AIC also will pay a license fee to
               CNA for the use of certain of CNA’s trademarks and
               a distribution channel for a period of six years. At
               closing, Allstate issued a $75 million, 10-year note to
               CNA, the principal repayment of which at maturity is
               contingent upon certain profitability measures of the
               underlying book of business. In addition, as
             consideration for entering into a 100% indemnity
               reinsurance agreement with CNA to reinsure the in-force
               policy obligations of the business, AIC received
               approximately $1.2 billion of cash and other assets. The
               Company is currently conducting a review of the
               statement of financial position of the acquired
               business, including the appropriateness of the valuation
               of certain estimated liabilities and asset allowances
               based on the application of Allstate’s accounting
               policies. The Company expects to complete this review in
               the fourth quarter of 1999, the outcome of which is
               anticipated to result in a charge to earnings. Any
               resulting charges may have a material impact on the
               Consolidated Statement of Operations, but are not
               expected to have material impact on the Consolidated
               Statement of Financial Position.
 
    
                     On October 31, 1999,
               Allstate acquired all of the outstanding shares of
               American Heritage Life Investment Corp. (“AHL”
               ) pursuant to a merger agreement for $32.25 per share in
               cash and Allstate common stock, in a transaction valued
               at $1.1 billion. AHL specializes in selling life, health
               and disability insurance to individuals through their
               workplaces. In connection with the acquisition, Allstate
               became co-obligor with respect to AHL’s obligations
               under the outstanding mandatorily redeemable preferred
               securities issued by AHL and AHL Financing (the “
               Trust”), a Delaware statutory business trust. In
               order to fund the equity component of the consideration,
               the Company reissued 34.1 million shares of Allstate
               common stock held in treasury to AHL shareholders. The
               remaining $87.5 million portion of the consideration was
               funded with cash. The Company is currently conducting a
               review of the statement of financial position of AHL,
               including the appropriateness of the valuation of
               certain estimated liabilities and asset allowances based
               on the application of Allstate’s accounting
               policies. The Company expects to complete this review in
               the fourth quarter of 1999, the outcome of which is
               anticipated to result in a charge to earnings. Any
               resulting charges may have a material impact on the
               results of operations of Allstate’s Life and
               Savings segment, but are not expected to have material
               impact on the Consolidated Statements of Operations or
               Financial Position.
 
8. AHL Summarized
               Historical Financial Information
 
    
                     As of the date of
               this filing, AHL was a wholly-owned subsidiary of the
               Company. On the acquisition date, Allstate became
               co-obligor with respect to AHL’s obligations under
               the outstanding mandatorily redeemable preferred
               securities issued by AHL and the Trust, which are
               currently listed on the New York Stock Exchange. The
               mandatorily redeemable preferred securities represent
               FELINE PRIDES, which consist of a unit with i) a stated
               amount of $50 comprised of a stock purchase contract
               under which the holder will purchase from the Company on
               August 16, 2000, a number of shares of common stock of
               Allstate equal to a specified rate and ii) beneficial
               ownership of a 6.75% trust preferred security
               representing a preferred undivided beneficial interest
               in the assets of the Trust. The sole assets of the Trust
               are 6.75% subordinated debentures due August 16, 2002
               with a principal amount of $107 million for which the
               Company and AHL are co-obligors. Each unit of FELINE
               PRIDES pays quarterly interest and yield enhancement
               payments of 8.5% annually.
THE ALLSTATE
               CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
               CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
               
 
    
                       The following is
               Summarized Historical Financial Information for AHL as
               of September 30, 1999 and for the three month and nine
               month periods ended September 30, 1999 and 1998. These
               amounts have not been included in Allstate’s
               consolidated financial statements, as the acquisition of
               AHL was not completed until the fourth quarter of 1999.
               In addition, AHL will be recording purchase accounting
               and other anticipated conforming adjustments in the
               fourth quarter of 1999 in connection with the
               acquisition. As a result, the amounts below will not
               necessarily be representative of the operating results
               or financial position had the AHL acquisition been
               consummated during the periods presented.
 

              

                
                 
               
                 Three Months
               

               Ended
               

               September 30,

                 
               
                 Nine Months
               

               Ended
               

               September 30,

              

              

               (In
                 millions)
                 
               
                 1999

                 
               1998
                 

                 
               
                 1999

                 
               
                 1998

              

              

                
                 
                
                 
                
                 
                
                 
                
              

              

               
                 Income from operations before income taxes and other
                 items
                 
               
               
                 
               
                 
               
               
                 
               
               
              

              

               
                 Property-Liability
                 
               
               
                 
               
                 
               
               
                 
               
               
              

              

               
                 Underwriting income (loss)
                 
               
               
                 
               
                 
               
               
                 
               
               
              

              

                
                          
                 PP&C
                 
               $ 
                      (4
               )
                 
                 
               $ 
                  323
                 
               $ 
                  577
                
                 
               $1,017
                 
                
              

              

                
                          
                 Discontinued Lines and Coverages
                 
               (74
                 
               )
                 
                 
               (32)
                 
                 
               (45
                 
               )
                 
                 
               (50
                 
               )
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Total underwriting income (loss)
                 
               (78
                 
               )
                 
                 
               291
                 
                 
               532
                 
                
                 
               967
                 
                
              

              

                
                          
                 Net investment income
                 
               474
                 
                
                 
               443
                 
                 
               1,333
                 
                
                 
               1,312
                 
                
              

              

                
                          
                 Realized capital gains and losses
                 
               149
                 
                
                 
               133
                 
                 
               903
                 
                
                 
               639
                 
                
              

              

                
                          
                 Gain on disposition of operations
                 
               —
                  
                
                 
               —
                  
                 
               10
                 
                
                 
               38
                 
                
              

              

                 
                 
               

                 
                 
               

                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Property-Liability income from operations before
               

                        
                          
                   income taxes and equity in net income of
               

                        
                          
                   unconsolidated subsidiary		
                 
               545
                 
                
                 
               867
                 
                 
               2,778
                 
                
                 
               2,956
                 
                
              

              

               
                 Life and Savings
                 
               
               
                 
               
                 
               
               
                 
               
               
              

              

                
                          
                 Premiums and contract charges
                 
               393
                 
                
                 
               381
                 
                 
               1,147
                 
                
                 
               1,122
                 
                
              

              

                
                          
                 Net investment income
                 
               565
                 
                
                 
               524
                 
                 
               1,653
                 
                
                 
               1,571
                 
                
              

              

                
                          
                 Realized capital gains and losses
                 
               21
                 
                
                 
               69
                 
                 
               173
                 
                
                 
               298
                 
                
              

              

                
                          
                 Contract benefits
                 
               635
                 
                
                 
               604
                 
                 
               1,839
                 
                
                 
               1,775
                 
                
              

              

                
                          
                 Operating costs and expenses
                 
               169
                 
                
                 
               186
                 
                 
               535
                 
                
                 
               528
                 
                
              

              

                 
                 
               

                 
                 
               

                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Life and Savings income from operations before
                 income
               

                        
                          
                   taxes		
                 
               175
                 
                
                 
               184
                 
                 
               599
                 
                
                 
               688
                 
                
              

              

               
                 Corporate and Other
                 
               
               
                 
               
                 
               
               
                 
               
               
              

              

                
                          
                 Net investment income
                 
               19
                 
                
                 
               10
                 
                 
               57
                 
                
                 
               33
                 
                
              

              

                
                          
                 Realized capital gains and losses
                 
               (8
                 
               )
                 
                 
               10
                 
                 
               (9
                 
               )
                 
                 
               19
                 
                
              

              

                
                          
                 Gain on disposition of operations
                 
               —
                  
                
                 
               —
                  
                 
               —
                  
                
                 
               49
                 
                
              

              

                
                          
                 Operating costs and expenses
                 
               32
                 
                
                 
               28
                 
                 
               98
                 
                
                 
               80
                 
                
              

              

                 
                 
               

                 
                 
               

                 
               

                 
                 
               

                 
              

              

                
                          
                          
                  Corporate and Other income (loss) from operations
               

                        
                          
                   before income taxes and dividends on
                 preferred
               

                        
                          
                   securities		
                 
               (21
                 
               )
                 
                 
               (8)
                 
                 
               (50
                 
               )
                 
                 
               21
                 
                
              

              

                 
                 
               

                 
                 
               

                 
               

                 
                 
               

                 
              

              

                
                          
                          
                          
                   Consolidated income from operations before
               

                        
                          
                          
                    income taxes and other items
                 		
                 
               $ 699
                 
                
                 
               $1,043
                 
                 
               $3,327
                 
                
                 
               $3,665
                 
                
              

              

                 
                 
               

                 
                 
               

                 
               

                 
                 
               

                 
              

             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
 

              

                
                 
               
                 September 30,
               

               1999

                 
               
                 December 31,
               

               1998

              

              

               (In
                 millions)
                 
               
                 (Unaudited)
              

              

               
                
               

               
                 Consolidated Financial Position:
                 
               
                 
               
              

              

                
                          
                 Investments
                 
               
                 $1,584.1
                 
               
                 $1,598.0
              

              

                
                          
                 Total assets
                 
               2,101.3
                 
                 
               2,055.7
                 
              

              

                
                          
                 Liabilities to policyholders
                 
               1,593.6
                 
                 
               1,523.0
                 
              

              

                
                          
                 Mandatorily redeemable preferred securities of
               

                        
                  subsidiary trusts		
                 
               103.5
                 
                 
               103.5
                 
              

              

                
                          
                 Stockholders’ equity
                 
               265.0
                 
                 
               278.1
                 
              

             
             
             
 
 
             
             INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
               
 
To the Board of
               Directors and Shareholders of
The Allstate Corporation:
               
 
    
                     We have reviewed the
               accompanying condensed consolidated statement of
               financial position of The Allstate Corporation and
               subsidiaries as of September 30, 1999, and the related
               condensed consolidated statements of operations for the
               three-month and nine-month periods ended September 30,
               1999 and 1998, and the condensed consolidated statements
               of cash flows for the nine-month periods ended September
               30, 1999 and 1998. These financial statements are the
               responsibility of the Company’s management.
               
 
    
                     We conducted our
               review in accordance with standards established by the
               American Institute of Certified Public Accountants. A
               review of interim financial information consists
               principally of applying analytical procedures to
               financial data and of making inquiries of persons
               responsible for financial and accounting matters. It is
               substantially less in scope than an audit conducted in
               accordance with generally accepted auditing standards,
               the objective of which is the expression of an opinion
               regarding the financial statements taken as a whole.
               Accordingly, we do not express such an opinion.
               
 
    
                     Based on our review,
               we are not aware of any material modifications that
               should be made to such condensed consolidated financial
               statements for them to be in conformity with generally
               accepted accounting principles.
 
    
                     We have previously
               audited, in accordance with generally accepted auditing
               standards, the consolidated statement of financial
               position of The Allstate Corporation and subsidiaries as
               of December 31, 1998, and the related consolidated
               statements of operations, comprehensive income,
               shareholders’ equity, and cash flows for the year
               then ended, not presented herein. In our report dated
               February 19, 1999, we expressed an unqualified opinion
               on those consolidated financial statements. In our
               opinion, the information set forth in the accompanying
               condensed consolidated statement of financial position
               as of December 31, 1998 is fairly stated, in all
               material respects, in relation to the consolidated
               statement of financial position from which it has been
               derived.
 
Deloitte & Touche LLP
               
 
Chicago, Illinois
               
November 11, 1999
               

             
             Item 2. Management’s Discussion and Analysis of
               Financial Condition and Results of
Operations for the
               Three Month and Nine Month Periods Ended September 30,
               1999 and 1998
 
 
    
                       The following
               discussion highlights significant factors influencing
               results of operations and changes in financial position
               of The Allstate Corporation (the “Company” or
               “Allstate”). It should be read in conjunction
               with the condensed consolidated financial statements and
               notes thereto found under Part I. Item 1. contained
               herein, and with the discussion, analysis, consolidated
               financial statements and notes thereto in Part I. Item
               1. and Part II. Item 7. and Item 8. of The Allstate
               Corporation Annual Report on Form 10-K for 1998 and in
               Appendix C of the 1999 Notice of Annual Meeting and
               Proxy Statement.
 
Consolidated Results
               
 

              

                
                 
               
                 Three Months
               

               Ended
               

               September 30,

                 
               
                 Nine Months
               

               Ended
               

               September 30,

              

              

                
                 
               1999
                 

                 
               1998
                 

                 
               1999
                 

                 
               1998
                 

              

              

               (In
                 millions)
                 
               
                 (Unaudited)
              

              

               
                
               

               
                 Consolidated Operating Results:
                 
               
                 
               
                 
               
                 
               
              

              

                
                          
                 Insurance premiums and contract charges
                 
               $ 
                  85.9
                 
               $81.7
                 
                 
               $240.4
                 
                 
               $231.6
                 
              

              

                
                          
                 Net investment income
                 
               29.7
                 
                 
               28.0
                 
                 
               87.0
                 
                 
               82.3
                 
              

              

                
                          
                 Realized capital gains and losses
                 
               .1
                 
                 
               .2
                 
                 
               .3
                 
                 
               .4
                 
              

              

                
                          
                 Other income
                 
               .9
                 
                 
               .5
                 
                 
               2.3
                 
                 
               1.7
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

                
                          
                          
                  Total revenues
                 
               116.6
                 
                 
               110.4
                 
                 
               330.0
                 
                 
               316.0
                 
              

              

                
                          
                 Benefits, claims and expenses
                 
               100.4
                 
                 
               96.6
                 
                 
               282.9
                 
                 
               275.4
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

                
                          
                 Income before income taxes
                 
               16.2
                 
                 
               13.8
                 
                 
               47.1
                 
                 
               40.6
                 
              

              

                
                          
                 Income tax expense
                 
               5.4
                 
                 
               4.5
                 
                 
               15.8
                 
                 
               13.5
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

                
                          
                          
                  Net income
                 
               $ 10.8
                 
                 
               $ 9.3
                 
                 
               $ 31.3
                 
                 
               $ 27.1
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
 
    
                     Consolidated
               revenues increased 1.8% in the third quarter of 1999,
               and 2.7% for the first nine months of 1999 compared to
               the same periods in 1998.
 
    
                     Net income for the
               third quarter of 1999 was $490 million, or $.62 per
               diluted share, compared with $713 million, or $.86 per
               diluted share, for the third quarter of 1998. The
               decrease was due to increased Property-Liability
               insurance premiums earned and investment income being
               offset by increased Property-Liability claims and claims
               expenses, and increased operating costs and expenses.
               The decrease in earnings per share was the result of the
               decrease in net income, partially offset by the impact
               of share repurchases.
 
    
                     Net income for the
               first nine months of 1999 was $2.30 billion, or $2.84
               per diluted share, compared with $2.53 billion, or $3.01
               per diluted share, for the same period in 1998. During
               the period, growth in Property-Liability earned premiums
               was more than offset by increased Property-Liability
               claims and claims expenses and Property-Liability
               operating costs and expenses. The decrease in earnings
               per share was the result of the decrease in net income,
               partially offset by the impact of share repurchases.
               
 
Property-Liability
               Operations
 

              

                
                 
               
                 Three months ended
               

               September 30,

                 
               
                 Nine months ended
               

               September 30,

              

              

                
                 
               1999
                 

                 
               1998
                 

                 
               1999
                 

                 
               1998
                 

              

              

               (In
                 millions)
                 
                
              

              

               
                 Property-Liability insurance premiums earned
                 
                 
               $4,938
                 
                 
               $4,866
                 
                 
               $14,693
                 
                 
               $14,431
                 
              

              

               Life
                 and Savings premiums and contract charges
                 
               393
                 
                 
               381
                 
                 
               1,147
                 
                 
               1,122
                 
              

              

               Net
                 investment income
                 
               1,058
                 
                 
               977
                 
                 
               3,043
                 
                 
               2,916
                 
              

              

               
                 Realized capital gains and losses
                 
               162
                 
                 
               212
                 
                 
               1,067
                 
                 
               956
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

                
                          
                 Total revenues
                 
               $6,551
                 
                 
               $6,436
                 
                 
               $19,950
                 
                 
               $19,425
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

             
             
             
             
             
             
             
             
             
             
             
 
    
                     The Company’s
               Property-Liability operations consist of two principal
               business segments: Personal Property and Casualty (“
               PP&C”) and Discontinued Lines and Coverages (
               “Discontinued Lines and Coverages”). PP&C
               is principally engaged in the sale of private passenger
               auto and homeowners insurance to individuals in both the
               United States and in other countries. Discontinued Lines
               and Coverages consists of business no longer written by
               Allstate, including results from environmental, asbestos
               and other mass tort exposures, mortgage pool insurance
               business and other commercial business in run-off. Such
               groupings of financial information are consistent with
               that used internally for evaluating segment performance
               and determining the allocation of resources.
 
    
                     
             Underwriting results 
             for each of the Property-Liability business segments are
               discussed separately beginning on page 16.
 
    
                       Summarized
               financial data and key operating ratios for the Company
               ’s Property-Liability operations are set forth in
               the following table:
 

              

               
                
Overview
                 

               		
              

             
             
             
             
             
             
             
             
             
 
 

              

                
                 
               
                 Three months ended
               

               September 30,

                 
               
                 Nine months ended
               

               September 30,

              

              

                
                 
               
                 1999

                 
               1998
                 

                 
               1999
                 

                 
               1998
                 

              

              

               (In
                 millions, except ratios)
                 
                
                 
                
                 
                
                 
                
              

              

               
                 Premiums written
                 
               $5,158
                 
                
                 
               $5,067
                 
                 
               $15,024
                 
                 
               $14,736
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               
                 Premiums earned
                 
               $4,938
                 
                
                 
               $4,866
                 
                 
               $14,693
                 
                 
               $14,431
                 
              

              

               Claims
                 and claims expense
                 
               3,817
                 
                
                 
               3,476
                 
                 
               10,669
                 
                 
               10,235
                 
              

              

               
                 Operating costs and expenses
                 
               1,199
                 
                
                 
               1,099
                 
                 
               3,492
                 
                 
               3,229
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               
                 Underwriting income (loss)
                 
               (78
                 
               )
                 
                 
               291
                 
                 
               532
                 
                 
               967
                 
              

              

               Net
                 investment income
                 
               474
                 
                
                 
               443
                 
                 
               1,333
                 
                 
               1,312
                 
              

              

               Income
                 tax expense on operations
                 
               94
                 
                
                 
               199
                 
                 
               476
                 
                 
               618
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               
                 Operating income
                 
               302
                 
                
                 
               535
                 
                 
               1,389
                 
                 
               1,661
                 
              

              

               
                 Realized capital gains and losses, after-tax
                 
                 
               93
                 
                
                 
               76
                 
                 
               579
                 
                 
               405
                 
              

              

               Gain
                 (loss) on disposition of operations, after-tax
                 
                 
               —
                  
                
                 
               —
                  
                 
               (14)
                 
                 
               25
                 
              

              

               Equity
                 in net income of unconsolidated subsidiary
                 
               —
                  
                
                 
               —
                  
                 
               —
                  
                 
               10
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               Net
                 income
                 
               $ 395
                 
                
                 
               $ 611
                 
                 
               $ 
                  1,954
                 
               $ 2,101
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               
                 Catastrophe losses
                 
               $ 265
                 
                
                 
               $ 192
                 
                 
               $ 
                   667
                 
               $ 
                   614
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               
                 Operating ratios
                 
               
               
                 
               
                 
               
                 
               
              

              

                
                          
                 Claims and claims expense (“loss”) ratio
                 
                 
               77.3
                 
                
                 
               71.4
                 
                 
               72.6
                 
                 
               70.9
                 
              

              

                
                          
                 Expense ratio
                 
               24.3
                 
                
                 
               22.6
                 
                 
               23.8
                 
                 
               22.4
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

                
                          
                 Combined ratio
                 
               101.6
                 
                
                 
               94.0
                 
                 
               96.4
                 
                 
               93.3
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

                
                          
                 Effect of catastrophe losses on combined ratio
                 
                 
               5.4
                 
                
                 
               3.9
                 
                 
               4.5
                 
                 
               4.3
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

             
             
             
             
 
    
                     Net investment
               income increased 7.0% to $474 million in the third
               quarter of 1999, compared to $443 million in the same
               period last year. The increase during the period
               reflected positive cash flows from operations which
               typically increase the investment portfolio, and
               increases in income from partnership interests,
               partially offset by the impact of increased dividends
               paid to The Allstate Corporation during the twelve
               months ended September 30, and lower investment yields.
               For the nine months ended September 30, 1999, net
               investment income increased 1.6% to $1.33 billion from
               $1.31 billion in the first nine months of 1998. Positive
               cash flows from operations were offset by the impact of
               increased dividends paid to The Allstate Corporation
               during the twelve months ended September 30, and lower
               investment yields. The lower investment yields are due,
               in part, to the investment of proceeds from calls and
               maturities and the investment of positive cash flows
               from operations in securities yielding less than the
               average portfolio rate. In relatively low interest rate
               environments, funds from called or maturing investments
               may be reinvested at interest rates lower than those
               which prevailed when the funds were previously invested,
               resulting in lower investment yields.
 
    
                     Net realized capital
               gains for the third quarter of 1999 were $93 million
               after-tax versus $76 million after-tax for the same
               period in 1998. For the first nine months of 1999,
               realized capital gains were $579 million after-tax
               compared with $405 million after-tax for the same period
               in 1998. Period to period fluctuations in realized
               capital gains are largely due to the timing of sales
               decisions reflecting management’s view of the
               positioning of the portfolio, individual securities and
               overall market conditions.
 

              

               
                
Net Investment
                 Income and Realized Capital Gains

               		
              

             
             
             
             
             
             
             
 
    
                     PP&C—
               Summarized financial data and key operating ratios for
               Allstate’s PP&C are as follows:
 

              

               
                
 
               
               Underwriting Results

               		
              

             
             
             
             
             
 
    
                     PP&C provides
               primarily private passenger auto and homeowners
               insurance to individuals. The Company separates the
               voluntary personal auto insurance business into two
               categories for underwriting purposes according to
               insurance risks: the standard market and the
               non-standard market. The standard market consists of
               drivers who meet certain criteria which classify them as
               having low to average risk of loss expectancy. The
               non-standard market consists of drivers who have
               higher-than-average risk profiles due to their driving
               records, lack of prior insurance or the types of
               vehicles they own. These policies are generally written
               at rates higher than standard auto rates.
 
    
                     The Company’s
               marketing strategy for auto and homeowners varies by
               geographic area. The strategy for auto is to grow
               business more rapidly in areas where the regulatory
               climate is more conducive to attractive returns. The
               strategy for homeowners is to manage exposure on
               policies in areas where the potential loss from
               catastrophes exceeds acceptable levels. The process to
               designate geographic areas as growth and limited growth
               is dynamic and may be revised as changes occur in the
               legal, regulatory and economic environments, as
               catastrophe exposure is reduced and as new products are
               approved and introduced. The Company continuously
               monitors its designated growth and limited growth areas,
               and adjusts its actions including limiting premium
               growth, as necessary, to maintain acceptable catastrophe
               exposure levels in these areas. The areas currently
               designated as auto limited growth markets represent an
               insignificant percentage of the total United States
               population. As a result of the Company’s success in
               introducing policy changes and purchasing catastrophe
               reinsurance coverage, the homeowners limited growth
               markets have been reduced to areas where less than 4% of
               the United States population resides.
 
    
                     PP&C premiums
               written increased 1.8% in the third quarter, and 1.9%
               for the first nine months of 1999, respectively,
               compared to the same periods in 1998. The increase for
               both periods was due to an increase in policies in force
               (unit sales), partially offset by decreases in average
               auto premiums.
 
    
                     Standard auto
               premiums written were $2.81 billion in the third quarter
               of 1999, compared to $2.83 billion for the same period
               in 1998. For the nine month period ended September 30,
               1999, standard auto premiums were $8.37 billion compared
               with $8.39 billion for 1998. For both periods increased
               policies in force were offset by decreases in average
               premiums. Favorable loss trends, competitive
               considerations and regulatory pressures in some states
               have affected the Company’s ability to maintain
               rates at historical levels. The Company has filed
             rate changes including decreases in several key states,
               which are expected to continue to adversely impact
               average premium growth in 1999 as compared to the prior
               year. In addition, the Company is subject to regulated
               rate and coverage reductions in the state of New Jersey
               which became effective in the first half of 1999.
               Excluding New Jersey, total standard auto premiums
               written increased approximately 3.2% in the third
               quarter of 1999 as compared to the third quarter of
               1998. For the nine months ended September 30, 1999,
               standard auto premiums written excluding New Jersey
               increased approximately 3.1% over the first nine months
               of 1998. Additional discussion of the changes in New
               Jersey is included in the
             Other Developments 
             section on page 26.
 
    
                     Non-standard auto
               premiums written increased 3.1% to $888 million in the
               third quarter of 1999, from $861 million for the same
               period in 1998. For the nine month period, non-standard
               auto premiums written increased 3.1% to $2.62 billion
               compared with $2.54 billion for 1998. The increase
               during both periods was driven by an increase in new
               policies in force, partially offset by a decrease in
               average premiums. Increases in new policies in force was
               due in part to the expansion of non-standard auto into
               the states of California and South Carolina, and the
               continued expansion of independent agency appointments.
               Management believes non-standard auto premiums written
               continue to be adversely impacted by competitive
               pressures.
 
    
                     Homeowners premiums
               written for the third quarter were $949 million, an
               increase of 4.7% from third quarter 1998 premiums of
               $906 million. For the first nine months of 1999,
               homeowners premiums written were $2.54 billion, an
               increase of 5.0% compared to the same period last year.
               The increases in both periods were driven by increased
               policies in force and average premiums. The higher
               average premiums were due partly to increases in rates
               and insured values. The Company plans to file additional
               rate increases during the fourth quarter of 1999.
               
 
    
                     For the third
               quarter of 1999, PP&C had an underwriting loss of $4
               million versus an underwriting gain of $323 million in
               the third quarter of 1998. Underwriting income for the
               nine month period ended September 30, 1999 was $577
               million compared to $1.02 billion for the first nine
               months of last year. The decline in underwriting results
               in both periods occurred as earned premium growth was
               more than offset by increased auto frequency and
               severity, homeowners loss experience, higher catastrophe
               losses and increased expenses. Moderate increases in
               auto claim severity was due in part to inflationary
               pressures as indicated by increases in the relevant cost
               indices related to medical care, auto body work and used
               car prices.
 
    
                     
             
             Catastrophe Losses and Catastrophe Management—
               Catastrophe losses for the third quarter of 1999 were
               $265 million compared with $192 million for the same
               period in 1998. For the first nine months of 1999,
               catastrophe losses were $667 million, compared to $614
               million in the same period last year. The level of
               catastrophe losses experienced in any year cannot be
               predicted and could be material to results of operations
               and financial position. The Company has experienced two
               severe catastrophes in the past ten years which each
               resulted in losses of approximately $2.00 billion. While
               management believes the Company’s catastrophe
               management initiatives will greatly reduce the severity
               of possible future losses, the Company continues to be
               exposed to catastrophes which could be of similar or
               greater magnitude.
 
    
                     The establishment of
               appropriate reserves for catastrophes, as for all
               outstanding property-liability claims, is an inherently
               uncertain process. Catastrophe reserve estimates are
               regularly reviewed and updated, using the most current
               information. Any resulting adjustments, which may be
               material, are reflected in current operations.
               
 
    
                     Allstate has
               implemented initiatives to limit, over time, its
               insurance exposures in certain regions prone to
               catastrophes, subject to the requirements of insurance
               laws and regulations and as limited by competitive
               considerations. These initiatives include limits on new
               business production, limitations on certain policy
               coverages, increases in deductibles, policy brokering
               and participation in catastrophe pools. In addition,
               Allstate has requested and received rate increases and
               has expanded its use of or the level of deductibles in
               certain regions prone to catastrophes. The Company has
               made substantial progress in reducing its exposure to
               catastrophes in Florida, California and the northeastern
               portion of the United States (“Northeast”).
               
 
    
                       For Allstate,
               major areas of potential losses due to hurricanes
               include major metropolitan centers near the eastern and
               gulf coasts of the United States. Allstate Floridian
               Insurance Company (“Floridian”) and Allstate
               Floridian Indemnity Company (“AFI”) were
               formed to sell and service Allstate’s Florida
               residential property policies, and have access to
               reimbursements, and exposure to assessments from the
               Florida Hurricane Catastrophe Fund. In addition,
               Floridian and AFI are subject to assessments from the
               Florida Windstorm Underwriting Association and the
               Florida Property and Casualty Joint Underwriting
               Association which are organizations created to provide
               coverage for catastrophic losses to property owners
               unable to obtain coverage in the private market.
               
 
    
                     Exposure to
               potential earthquake losses in California is limited by
               the Company’s participation in the California
               Earthquake Authority (“CEA”), except for
               losses incurred on coverages not covered by the CEA.
               Other areas in the United States for which Allstate
               faces exposure to potential earthquake losses include
               areas surrounding the New Madrid fault system in the
               Midwest and faults in and surrounding Seattle,
               Washington and Charleston, South Carolina. Allstate
               continues to evaluate alternative business strategies to
               more effectively manage its exposure to catastrophe
               losses in these and other areas.
 
    
                     Discontinued
               Lines and Coverages—Discontinued Lines and
               Coverages consists of business no longer written by
               Allstate, including results from environmental, asbestos
               and other mass tort exposures, mortgage pool business
               and other commercial business in run-off. Underwriting
               results for Discontinued Lines and Coverages are
               summarized below:
 

              

                
                 
               
                 Three months ended
               

               September 30,

                 
               
                 Nine months ended
               

               September 30,

              

              

                
                 
               
                 1999

                 
               1998
                 

                 
               1999
                 

                 
               1998
                 

              

              

               (In
                 millions, except ratios)
                 
                
                 
                
                 
                
                 
                
              

              

               
                 Premiums written
                 
               $5,158
                 
                
                 
               $5,067
                 
                 
               $15,017
                 
                 
               $14,736
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               
                 Premiums earned
                 
               $4,939
                 
                
                 
               $4,866
                 
                 
               $14,687
                 
                 
               $14,431
                 
              

              

               Claims
                 and claims expense
                 
               3,746
                 
                
                 
               3,450
                 
                 
               10,629
                 
                 
               10,205
                 
              

              

               
                 Operating costs and expenses
                 
               1,197
                 
                
                 
               1,093
                 
                 
               3,481
                 
                 
               3,209
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               
                 Underwriting income (loss)
                 
               $ 
                     (4
               )
                 
                 
               $ 
                  323
                 
               $ 
                    577
                 
               $ 
                  1,017
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               
                 Catastrophe losses
                 
               $ 
                  265
                
                 
               $ 
                  192
                 
               $ 
                    667
                 
               $ 
                    614
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

               
                 Operating ratios
                 
               
               
                 
               
                 
               
                 
               
              

              

                
                          
                 Claims and claims expense (“loss”) ratio
                 
                 
               75.9
                 
                
                 
               70.9
                 
                 
               72.4
                 
                 
               70.7
                 
              

              

                
                          
                 Expense ratio
                 
               24.2
                 
                
                 
               22.5
                 
                 
               23.7
                 
                 
               22.3
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

                
                          
                 Combined ratio
                 
               100.1
                 
                
                 
               93.4
                 
                 
               96.1
                 
                 
               93.0
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

              

                
                          
                 Effect of catastrophe losses on combined ratio
                 
                 
               5.4
                 
                
                 
               3.9
                 
                 
               4.5
                 
                 
               4.3
                 
              

              

                 
                 
               

                 
                 
               

                 
               

                 
               

              

             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
 
    
                     For the quarter
               ended September 30, 1999, the increase in underwriting
               losses as compared to the third quarter of 1998, was the
               result of the strengthening of net asbestos reserves of
               $333 million, partially offset by the reduction of
               reserves for environmental and other losses of $155
               million and the release of a reserve held as a provision
               for future losses on the run-off of the mortgage pool
               business of $110 million. The strengthening of asbestos
               reserves and the release of environmental and other mass
               tort reserves was the result of the Company’s
               annual assessment of these liabilities completed during
               the third quarter of this year. The release of the
               provision for future losses on the mortgage pool
               business was the result of a recapture, by The PMI
               Group, Inc. during the third quarter of 1999, of the
               reinsured business and all related assets and future
               liabilities of the mortgage pool business. The Company
               is expecting to exit the mortgage insurance business
               when it completes the sale of a minor reinsurance
               subsidiary to The PMI Group, Inc. This sale is awaiting
               regulatory approval.
 
Life and Savings
               Operations
 
    
                     Life and Savings
               markets life insurance, savings and group pension
               products. Life insurance products primarily include
               traditional life, including term and whole life, and
               universal life insurance. Savings products consist of
               fixed annuity products, including indexed, market value
               adjusted and structured settlement annuities, as well as
               variable annuities. Life and Savings products are
               distributed through a combination of Allstate agents
               (which include life specialists), banks, independent
               agents, brokers and direct response marketing.
               
 
    
                       Summarized
               financial data for Life and Savings operations and
               investments at or for the three month and nine month
               periods ended September 30, are illustrated in the
               following table:
 

              

                
                 
               
                 Three months ended
               

               September 30,

                 
               
                 Nine months ended
               

               September 30,

              

              

               (In
                 millions)
                 
               
                 1999

                 
               
                 1998

                 
               
                 1999

                 
               
                 1998

              

              

               
                 Underwriting loss
                 
               $(74
                 
               )
                 
                 
               $(32
                 
               )
                 
                 
               $(45
                 
               )
                 
                 
               $(50
                 
               )
                 
              

              

                 
                 
               

                 
                 
               

                 
                 
               

                 
                 
               

                 
              

             
             
             
             
             
             
             
             
             
             
             
 

             (1)
              Net of the effect of
               related amortization of deferred policy acquisition
               costs.
 
    
                     Statutory premiums
               and deposits, which includes premiums and deposits for
               all products, are utilized to analyze sales trends. The
               following table summarizes statutory premiums and
               deposits by product line for the three month and nine
               month periods ended September 30:
 

              

                
                 
               
                 Three months ended
               

               September 30,

                 
               
                 Nine months ended
               

               September 30,

              

              

               (In
                 millions)
                 
               1999
                 

                 
               
                 1998

                 
               1999
                 

                 
               
                 1998

              

              

               
                 Statutory premiums and deposits
                 
               $ 
                  2,282
                 
               $ 
                  1,433
                 
               $ 
                  5,828
                 
               $ 
                  4,313
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

               
                 Investments
                 
               $32,369
                 
                 
               $31,597
                 
                 
               $32,369
                 
                 
               $31,597
                 
              

              

               
                 Separate Account assets
                 
               11,789
                 
                 
               8,839
                 
                 
               11,789
                 
                 
               8,839
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

               
                 Investments including Separate Account assets
                 
                 
               $44,158
                 
                 
               $40,436
                 
                 
               $44,158
                 
                 
               $40,436
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              
 
              

               
                 Premiums and contract charges
                 
               $ 
                    393
                 
               $ 
                   381
                 
               $ 
                  1,147
                 
               $ 
                  1,122
              

              

               Net
                 investment income
                 
               565
                 
                 
               524
                 
                 
               1,653
                 
                 
               1,571
                 
              

              

               
                 Contract benefits
                 
               635
                 
                 
               604
                 
                 
               1,839
                 
                 
               1,775
                 
              

              

               
                 Operating costs and expenses
                 
               165
                 
                 
               138
                 
                 
               503
                 
                 
               463
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

               Income
                 from operations
                 
               158
                 
                 
               163
                 
                 
               458
                 
                 
               455
                 
              

              

               Income
                 tax expense on operations
                 
               55
                 
                 
               63
                 
                 
               157
                 
                 
               159
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

               
                 Operating income
                 
               103
                 
                 
               100
                 
                 
               301
                 
                 
               296
                 
              

              

               
                 Realized capital gains and losses, after-tax
               (1)
               
                 
               11
                 
                 
               15
                 
                 
               91
                 
                 
               147
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

               Net
                 income
                 
               $ 
                    114
                 
               $ 
                    115
                 
               $ 
                    392
                 
               $ 
                   443
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

             
             
             
             
             
             
             
 
    
                     Total statutory
               premiums and deposits increased $849 million or 59.2% in
               the third quarter of 1999 compared with the same period
               last year. The increase was driven by higher annuity and
               pension sales. For the first nine months of 1999, total
               statutory premiums increased $1.52 billion or 35.1%
               compared to the same period in 1998 primarily due to
               higher annuity sales. Variable annuity statutory
               premiums for the three month and nine month periods
               ended September 30, 1999 increased $470 million and $582
               million, respectively, compared to the same periods last
               year. For both periods the increase was driven by sales
               through the Putnam Investment alliance, which began in
               May 1999. Fixed annuity sales for first nine months of
               1999 increased 38.1% over the same period in 1998, due
               to the introduction of new products and new marketing
               partnerships in the independent agents and banking
               distribution channels.
 
    
                       Under generally
               accepted accounting principles (“GAAP”),
               revenues exclude deposits on most annuity contracts and
               premiums on universal life policies, and will vary with
               the mix of business sold during the period. Premiums and
               contract charges increased 3.1% to $393 million for the
               third quarter of 1999, from $381 million for the same
               period in 1998. For the nine month period, premiums and
               contract charges increased 2.2% to $1.15 billion
               compared with $1.12 billion for 1998. For both periods
               increased contract charges, primarily from variable
               annuities and universal life products were partially
               offset by lower premiums from structured settlement
               annuities with life contingencies.
 
    
                     Pretax net
               investment income for the third quarter was $565
               million, an increase of 7.8% from the third quarter 1998
               net investment income. For the first nine months of
               1999, net investment income increased to $1.65 billion,
               an increase of 5.2% compared to the same period last
               year. For both periods, higher investment balances were
               partially offset by lower investment yields. Investments
               at September 30, 1999, excluding Separate Accounts and
               unrealized gains on fixed income securities, grew 9.7%
               from the same period last year. Lower investment yields
               are due, in part, to the investment of proceeds from
               calls and maturities and the investment of positive cash
               flows from operations in securities yielding less than
               the average portfolio rate. In relatively low interest
               rate environments, funds from maturing investments may
               be reinvested at interest rates lower than those which
               prevailed when the funds were previously invested,
               resulting in lower investment yields.
 
    
                     Operating income was
               $103 million for the third quarter of 1999 compared to
               $100 million for the same period last year. For the
               first nine months of 1999, operating income increased
               slightly to $301 million compared to $296 million for
               the same period last year. For both periods, increased
               investment income and contract maintenance charges were
               partially offset by less favorable mortality experience
               and higher expenses.
 
    
                     Realized capital
               gains and losses, after-tax for the three month and nine
               month periods ended September 30, 1999 
               were $11 million and $91 million, respectively, compared
               to $15 million and $147 million of the same periods in
               1998. The decrease in realized capital gains and losses
               for both periods was due primarily to gains recognized
               on the sale of real estate in 1998 and increased losses
               on dispositions and writedowns on certain fixed income
               securities. For the nine month period ended September
               30, 1999 gains on equity linked investments were also
               lower than the same period last year.
 

             
             Liquidity and Capital Resources
 

              

                
                 
               
                 Three months ended
               

               September 30,

                 
               
                 Nine months ended
               

               September 30,

              

              

               (In
                 millions)
                 
               1999
                 
                 
               1998
                 
                 
               1999
                 
                 
               1998
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

               Life
                 products
                 
               
                 
               
                 
               
                 
               
              

              

                
                          
                 Universal
                 
               $ 
                  216
                 
               $ 
                  180
                 
               $ 
                  599
                 
               $ 
                  626
              

              

                
                          
                 Traditional
                 
               106
                 
                 
               75
                 
                 
               265
                 
                 
               230
                 
              

              

                
                          
                 Other
                 
               78
                 
                 
               63
                 
                 
               381
                 
                 
               176
                 
              

              

               
                 Annuity products
                 
               
                 
               
                 
               
                 
               
              

              

                
                          
                 Fixed
                 
               592
                 
                 
               471
                 
                 
               1,653
                 
                 
               1,197
                 
              

              

                
                          
                 Variable
                 
               859
                 
                 
               389
                 
                 
               1,829
                 
                 
               1,247
                 
              

              

               Group
                 pension products
                 
               431
                 
                 
               255
                 
                 
               1,101
                 
                 
               837
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

              

                
                          
                 Total
                 
               $2,282
                 
                 
               $1,433
                 
                 
               $5,828
                 
                 
               $4,313
                 
              

              

                 
                 
               

                 
               

                 
               

                 
               

              

             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
 
    
                     The Company
               maintains two credit facilities totaling $1.55 billion
               as a potential source of funds to meet short-term
               liquidity requirements, including a $1.50 billion,
               five-year revolving line of credit, expiring in 2001 and
               a $50 million, one-year revolving line of credit
               expiring in 2000. In order to borrow on the five-year
               line of credit, Allstate Insurance Company (“AIC
               ”) is required to maintain a specified statutory
               surplus level, and the Company’s debt to equity
               ratio (as defined in the agreement) must not exceed a
               designated level. These requirements are currently being
               met, and management expects to continue to meet them in
               the future. Allstate also has a commercial paper program
               with an authorized borrowing limit of up to $1.00
               billion to cover its short-term cash needs. The proceeds
               from the issuance of commercial paper have been used by
               the Company for general corporate purposes. At September
               30, 1999, the Company had outstanding commercial paper
               borrowings of $600 million. Total borrowings under the
               combined commercial paper program and line of credit are
               limited to $1.55 billion.
 
    
                     The Company
               currently has a shelf registration statement, filed with
               the Securities and Exchange Commission in August 1998,
               under which up to $2.00 billion of debt securities,
               preferred stock or debt warrants may be issued. No
               securities have been issued under this registration
               statement.
 
    
                     The ability of the
               Company to pay dividends is dependent on business
               conditions, income, cash requirements of the Company,
               receipt of dividends from AIC and other relevant
               factors. The payment of shareholder dividends by AIC
               without the prior approval of the Illinois Department of
               Insurance is limited to
             formula amounts based on 1998 statutory net income and
               capital and surplus, determined in accordance with
               statutory accounting practices, as well as the timing
               and amount of dividends paid in the preceding twelve
               months. The maximum amount of dividends that AIC can
               distribute during 1999 without prior approval of the
               Illinois Department of Insurance is $2.96 billion. This
               capacity varies during the year as dividends previously
               paid are excluded from the calculation after twelve
               months, and decreases as AIC continues to pay dividends.
               In the twelve months beginning November 1, 1998, AIC has
               paid approximately $2.02 billion in dividends to The
               Allstate Corporation. At November 1, 1999, AIC has the
               remaining capacity to pay an additional $942 million in
               dividends, and on October 26, 1999 declared, but has not
               yet paid, dividends in the amount of $940 million. The
               dividends declared will be paid during the fourth
               quarter of 1999. Dividends paid have historically been
               used for general corporate purposes including the Company
               ’s stock repurchase program. AIC expects to be able
               to pay dividends, without prior approval of the Illinois
               Department of Insurance, to The Allstate Corporation in
               April 2000. The dividend formula calculation for 2000
               will be updated based on 1999 statutory net income and
               capital and surplus amounts. The maximum amount of
               dividends allowable without prior approval will then be
               compared to dividends paid during the preceding twelve
               months to determine the amount remaining available to
               pay.
 
    
                     On October 1, 1999,
               the Company completed the acquisition of the personal
               lines auto and homeowners insurance business of CNA
               Financial Corporation (“CNA”). At closing, AIC
               made a cash payment of $140 million to CNA for: i)
               certain assets of CNA used in connection with that
               business; ii) renewal rights to the in-force business;
               and iii) an option to acquire certain licensed companies
               of CNA in the future. AIC will pay a license fee to CNA
               for the use of certain of CNA’s trademarks and a
               distribution channel for a period of six years. At
               closing, Allstate also issued a $75 million, 10-year
               note to CNA, the principal repayment of which at
               maturity is contingent upon certain profitability
               measures of the underlying book of business. In
               addition, as consideration for entering into a 100%
               indemnity reinsurance agreement with CNA to reinsure the
               in-force policy obligations of the business, AIC
               received approximately $1.2 billion of cash and other
               assets. The Company is currently conducting a review of
               the statement of financial position of the acquired
               business, including the appropriateness of the valuation
               of certain estimated liabilities and asset allowances
               based on the application of Allstate’s accounting
               policies. The Company expects to complete this review in
               the fourth quarter of 1999, the outcome of which is
               anticipated to result in a charge to earnings in the
               range of approximately $125 to $150 million.
 
    
                     On October 31, 1999,
               Allstate acquired all of the outstanding shares of
               American Heritage Life Investment Corp. (“AHL”
               ) pursuant to a merger agreement for $32.25 per share in
               cash and Allstate common stock, in a transaction valued
               at $1.1 billion. AHL specializes in selling life, health
               and disability insurance to individuals through their
               workplaces. In connection with the acquisition, Allstate
               became co-obligor with respect to AHL’s obligations
               under the outstanding mandatorily redeemable preferred
               securities issued by AHL and AHL Financing (the “
               Trust”), a Delaware statutory business trust. In
               order to fund the equity component of the consideration,
               the Company reissued 34.1 million shares of Allstate
               common stock held in treasury to AHL shareholders. The
               remaining $87.5 million portion of the consideration was
               funded with cash. The Company is currently conducting a
               review of the statement of financial position of AHL,
               including the appropriateness of the valuation of
               certain estimated liabilities and asset allowances based
               on the application of Allstate’s accounting
               policies. The Company expects to complete this review in
               the fourth quarter of 1999, the outcome of which is
               anticipated to result in a charge to earnings in the
               range of approximately $25 to $50 million.
 
    
                     During the third
               quarter of 1999, the Company repurchased approximately
               32.7 million shares of its common stock, at a cost of
               $1.11 billion. Of these 32.7 million shares, 7.1 million
               were purchased under the $2.00 billion repurchase
               program announced by the Company in August 1998 and 25.6
               million shares were repurchased specifically for
               issuance in connection with the acquisition of AHL. As
               of September 30, 1999, 52% of the previously announced
               $2.00 billion repurchase program expected to be complete
               by December 31, 2000, had been acquired. On November 10,
               1999, the Company announced that it had established an
               additional $2.00 billion repurchase program expected to
               be complete by December 31, 2000.
 

              

               
                
Capital Resources
                 

               		
              

             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
 
    
                     Surrenders and
               withdrawals for Allstate Life were $599 million and
               $1.88 billion for the three month and nine month periods
               ended September 30, 1999, compared to $530 million and
               $1.59 billion for the same periods in 1998. As the
               Company’s interest-sensitive life policies and
               annuity contracts in-force grow and age, the dollar
               amount of surrenders and withdrawals could increase.
               
 
Investments
               
 
    
                     The composition of
               the investment portfolio at September 30, 1999, at
               financial statement carrying values, is presented in the
               table below:
 

              

               
                
 Liquidity
                 

               		
              

             
             
             
             
             
             
             
             
             

             (1)
              Fixed income securities
               are carried at fair value. Amortized cost for these
               securities was $25.20 billion, $26.10 billion and $1.12
               billion for Property-Liability, Life and Savings, and
               Corporate and Other, respectively.
 
    
                     Total investments
               decreased to $66.04 billion at September 30, 1999 from
               $66.53 billion at December 31, 1998. Property-Liability
               investments decreased $1.13 billion to $32.60 billion at
               September 30, 1999 from $33.73 billion at December 31,
               1998, due to a decrease in unrealized gains in both the
               fixed income and equity securities portfolios. Life and
               Savings investments at September 30, 1999, increased
               $604 million to $32.37 billion from $31.77 billion at
               December 31, 1998. This increase was primarily
               attributable to amounts invested from positive cash
               flows generated from operations, partially offset by a
               decrease in unrealized capital gains in both the fixed
               income and equity securities portfolios.
 
    
                     Nearly 93.7% of the
               Company’s fixed income securities portfolio is
               rated investment grade, which is defined by the Company
               as a security having an NAIC rating of 1 or 2, a Moody
               ’s rating of Aaa, Aa, A or Baa, or a comparable
               Company internal rating.
 
YEAR 2000
               
 
    
                     The Company is
               heavily dependent upon complex computer systems and
               equipment for all phases of its operations, including
               product distribution, customer service, insurance
               processing, underwriting, loss reserving, investments
               and other enterprise systems. Since many older computer
               software programs recognize only the last two digits of
               the year in any date, some software may fail to operate
               properly in or after the year 1999 if the software is
               not reprogrammed, remediated, or replaced (“Year
               2000”). Also, many systems and equipment that are
               not typically thought of as computer-related (referred
               to as “non-IT”) contain embedded hardware or
               software that may have a Year 2000 sensitive component.
               Allstate believes that many of its counterparties and
               suppliers also have Year 2000 issues and non-IT issues
               which could affect the Company.
 
    
                     In 1995, the Company
               commenced a plan consisting of four phases which are
               intended to mitigate and/or prevent the adverse affects
               of the Year 2000 issues on its systems and equipment: 1)
               inventory and assessment of affected systems and
               equipment, 2) remediation and compliance of systems and
               equipment through strategies that include the
               replacement or enhancement of existing systems, upgrades
               to operating systems already covered
             by maintenance agreements and modifications to existing
               systems to make them Year 2000 compliant, 3) testing of
               systems and equipment using clock-forward testing for
               both current and future dates and for dates which
               trigger specific processing, and 4) contingency planning
               to address possible adverse scenarios and the potential
               financial impact to the Company’s results of
               operations, liquidity or financial position.
 
    
                     The Company believes
               that the first three phases of this plan, assessment,
               remediation and testing, including clock-forward testing
               which was performed on the Company’s systems and
               equipment and non-IT, are complete. It is expected that
               the implementation and rollout of the remediated
               personal computer environment will be completed by
               December 1999. In addition, some systems and equipment
               and non-IT related to discontinued or non-critical
               functions of the Company are planned to be abandoned by
               the end of 1999.
 
    
                     The fourth phase of
               this plan, contingency planning, is currently in
               process. Detailed plans have been created in the event
               that the systems and equipment or major external
               counterparties and suppliers supporting critical
               processes are not Year 2000 compliant in or after the
               year 1999. These plans, created by each corporate
               function and business unit of the Company, identify and
               document the risks associated with Year 2000 on their
               business processes. Appropriate plans have been
               developed to mitigate those risks. A common inclusion in
               many of the plans is a description of manual processes
               and personnel needed in the event of a temporary Year
               2000 failure. Contingency plans will be tested
               appropriately by the corporate function or business unit
               for their effective operation and for achieving their
               desired results. This testing will be complete by
               December 1999. In addition, the Company’s
               management is reviewing all corporate function and
               business units’ plans for accuracy and
               comprehensiveness. This review will also be complete by
               December 1999. Monitoring of these plans will continue
               throughout the end of 1999 and beyond, as needed.
               
 
    
                     The final step of
               the contingency planning phase includes the
               establishment of a Year 2000 Command Center and wellness
               checks for the Company’s systems and equipment. The
               Command Center will be in operation 24 hours a day for
               several days before and after January 1, 2000 and other
               critical Year 2000 dates, to serve as a center of
               expertise in the event a Year 2000 problem is
               encountered at the Company. Wellness checks will be
               performed by designated personnel throughout the Company
               on specified systems and non-IT to determine that they
               are functioning properly on or after January 1, 2000.
               The results of the wellness checks will be reported to
               the Command Center.
 
    
                     The Company has
               considered numerous risk scenarios during the
               contingency planning phase. Through this planning,
               management believes that the scenario which could be
               considered the worst case, includes a widespread,
               prolonged failure of public utility systems which would
               not only cause power outages for the Company, but also
               cause telecommunication, banking or external
               counterparty and supplier service outages. While the
               company has assessed and will continue to assess data on
               the utility, telecommunication and banking industries,
               it acknowledges the possibility that a prolonged
               widespread outage in any or all of these industries
               could lead to a worst case scenario. However, Allstate
               does not consider such prolonged widespread outages to
               be reasonably likely. Therefore, Allstate has focused
               its most reasonably likely worst case scenario
               contingency planning on limited scale outages in order
               to ensure the ability to deal with risks of likely
               scenarios. Because Allstate is prepared for outages on a
               localized basis as part of normal business operations,
               the Company considers the impacts of this most
               reasonably likely scenario to be immaterial to the
               Company’s results of operations, liquidity or
               financial position.
 
    
                     Allstate markets its
               products through a variety of distribution channels,
               with the core of its distribution system being a
               broad-based network of approximately 15,500 exclusive
               agents (including life specialists) in the United States
               and Canada, and independent agents who offer Allstate
               products primarily in rural areas not served by Allstate
               exclusive agents. Life and Savings products are not only
               distributed through exclusive and independent agents,
               but also through banks, brokers and direct response
               marketing. The core of the Company’s distribution
               system, the exclusive agents, have had their systems
               included in the Company-wide four phase plan, therefore
               management believes that assessment, remediation,
               testing and the creation of contingency plans are
               complete for the exclusive agency operations’
               critical systems.
 
    
                       The Company,
               including the CNA personal lines auto and homeowners
               insurance business acquired on October 1, 1999, also
               relies on thousands of independent agencies in its
               multiple channel distribution network. These agencies,
               which are independent of Allstate, have not been
               directly included in the Company-wide four phase plan,
               and potentially may not be Year 2000 compliant during or
               after the year 1999. Because the risk associated with
               this scenario is diffused across thousands of appointed
               independent agencies, located throughout the United
               States, using many different technologies, the impact on
               the Company’s results of operations, liquidity or
               financial condition is not determinable.
 
    
                     In addition, the
               Company is actively working with its major external
               counterparties and suppliers, including public utility
               companies and banks and brokers involved in its
               distribution channels, to assess their compliance
               efforts and the Company’s exposure to both their
               Year 2000 issues and non-IT issues. This assessment has
               included soliciting external counterparties and
               suppliers, evaluating responses received and testing
               third party interfaces and interactions to determine
               compliance. Currently the Company has solicited, and has
               received responses from, the majority of its
               counterparties and suppliers. These responses generally
               state that they believe they will be Year 2000 compliant
               and that no transactions will be affected. However,
               certain vendors are also in ongoing assessment and
               testing of their products whereby they are currently
               unable to identify all potential problems in certain
               products which are used by the Company. The Company
               believes that these vendors will make no statements
               regarding their Year 2000 readiness other than to
               publish declarations addressing specific compliance
               issues identified with their products. The Company is
               working with these key vendors and has procedures in
               place to stay aware of any compliance issues encountered
               by these vendors. The Company has also decided to test
               certain interfaces and interactions to gain additional
               assurance on third party compliance. Currently, the
               Company does not have sufficient information to
               determine whether all of its external counterparties and
               suppliers will be Year 2000 compliant. If they are not
               Year 2000 compliant, the Company is not able to
               determine the impact of any consequent losses on its
               results of operations, liquidity or financial position.
               
 
    
                     The Company is also
               potentially exposed to Year 2000 risks associated with
               certain personal lines policies that have been issued.
               While coverage may exist for some Year 2000 related
               losses under Allstate’s personal auto or homeowners
               insurance policies, many Year 2000 related losses will
               not be covered by these policies. Losses incurred due to
               mere failures of personal electronic devices to function
               as intended by their manufacturer or distributor, or as
               expected by the policyholder, are not the type of losses
               which would be covered by the Company’s personal
               auto or homeowners insurance policies. Such product
               failures are considered to be product warranty issues
               best addressed between the policyholder and the
               manufacturer or distributor of the products. However,
               certain other types of Year 2000-related losses may be
               covered under the Company’s policies, depending
               upon the particular circumstances of the loss and the
               type of policy in force at the time of loss. Some of the
               Company’s homeowners policies, for instance,
               provide significantly broader protection than others,
               and therefore may provide coverage for certain types of
               losses. The Company also is exposed to Year 2000 risks
               associated with certain commercial policies that have
               been issued. Since the commercial business written by
               the Company is not material to the overall results of
               operations of the Company, management believes that Year
               2000-related losses associated with these lines do not
               pose a material risk to the Company. However, with
               respect to both personal lines and commercial policies,
               in determining whether coverage exists in any particular
               circumstance, all facts of the loss as well as the
               applicable policy terms, conditions and exclusions will
               be reviewed. The Company currently does not have
               sufficient information to determine the impacts of such
               losses on its results of operations, liquidity or
               financial position.
 
    
                     The Company may be
               exposed to the risk that the issuers of investments in
               its portfolio will be adversely impacted by Year 2000
               issues. The Company assesses the impact which Year 2000
               issues have on the Company’s investments as part of
               due diligence for proposed new investments and in its
               ongoing review of all current portfolio holdings. Any
               recommended actions with respect to individual
               investments are determined by taking into account the
               potential impact of Year 2000 on the issuer. Based on
               its current review, the Company believes that although
               Year 2000 issues may temporarily affect the market or
               individual issuers, the potential impact of Year 2000 on
               its investment portfolio will not be material.
               
 
    
                       The Company
               performed an assessment of the Year 2000 compliance plan
               used by CNA, as it relates to the systems and equipment
               and non-IT used for the personal lines auto and
               homeowners insurance business. Management believes this
               plan was thorough and is complete.
 
    
                     The Company
               performed an assessment of the Year 2000 compliance plan
               at AHL prior to entering into an acquisition agreement.
               As of the October 31, 1999 acquisition date, the AHL
               Year 2000 compliance plan is complete except for the
               remediation and testing of a billing and reporting
               system. The remediation and testing of this system is
               expected to be complete in December of 1999. In the
               event that the remediation and testing of this system
               exceeds its expected completion date, and the system is
               not Year 2000 compliant at December 31, 1999, American
               Heritage Life and Allstate have redundant contingency
               plans that will be enacted. The primary contingency plan
               utilizes a proven manual process. The secondary
               contingency plan combines AHL’s processing with
               support by Allstate remediation and testing techniques.
               
 
    
                     The Company
               presently believes that it will resolve the Year 2000
               issue in a timely manner. Year 2000 costs are expensed
               as incurred. The majority of the expenses related to
               this project have been incurred as of September 30,
               1999. The Company estimates that approximately $125
               million in costs will be incurred between the years of
               1995 and 2000. These amounts include costs directly
               related to fixing Year 2000 issues, such as modifying
               software and hiring Year 2000 solution providers, as
               well as costs incurred to replace certain non-compliant
               systems which would not have been otherwise replaced.
               
 

             
             Other Developments
 
    
                     On November 10,
               1999, the Company announced a series of strategic
               initiatives to aggressively expand its selling and
               service capabilities. The Company also announced that it
               is implementing a program to reduce current annual
               expenses by approximately $600 million. The reduction in
               expenses will come from field realignment, including the
               reorganization to a single independent contractor
               exclusive agent program and the closing of a field
               support center and four regional offices, and from
               reduced employee related expenses and professional
               services as a result of reductions in force, attrition
               and consolidations. The reduction will result in the
               elimination of 4,000 current non-agent positions by the
               end of 2000, or approximately 10% of the Company’s
               non-agent work force. The reduction will allow
               investment in direct access and internet channels for
               new sales and service capabilities, competitive pricing,
               new agent and claim technology and enhanced marketing
               and advertising. To implement the cost reductions,
               Allstate expects to incur restructuring and related
               expenses of approximately $100 million in the fourth
               quarter of 1999 and approximately $100 million
               throughout 2000. The costs will be incurred as agents
               transition to one program, operations and facilities are
               consolidated, and positions eliminated. To implement the
               new strategy, the Company estimates that it will invest
               approximately $300 million in capital expenditures over
               the next two years. In addition, the Company will spend
               approximately $700 million in systems development and
               implementation costs, rollout costs, and advertising for
               the new strategy over the next two years.
 
    
                     In 1997, the Company
               formed a new company, Allstate New Jersey Insurance
               Company (“ANJ”), which is dedicated to serving
               insurance consumers in New Jersey. ANJ became the
               replacement carrier for AIC and Allstate Indemnity
               Company (“AI”) in New Jersey. AIC and AI have
               legally withdrawn from New Jersey. The Certificates of
               Authority for AIC and AI were officially surrendered as
               of December 31, 1998 pursuant to the requirement that
               they run off all policies and claims. In accordance with
               that legal process, ANJ began writing business in New
               Jersey by offering coverage to customers, and receiving
               property, commercial and assigned risk policies from AIC
               and AI in 1998. In December 1998, ANJ began writing all
               voluntary private passenger auto policies, a process
               that was completed during the third quarter of 1999. Due
               to legislative and regulatory reform of the auto
               insurance system that included regulated rate and
               coverage reductions effective for new policies written
               and renewals processed on and after March 22, 1999, ANJ
               has experienced decreased premiums during the second and
               third quarters of 1999. Management expects to see
               improved loss experience due to this reform as well. The
               overall impact of these statutory and regulatory changes
               is intended to lower costs in the state. Until the
               rating plan and coverage changes are fully implemented,
               the Company can not be assured of improved results of
               operations in New Jersey.
 
    
                       The financial
               services industry has experienced a substantial increase
               in merger and acquisition activity which is leading to a
               consolidation of certain industry segments and a
               broadening of the business scope of some competitors.
               While the ultimate impact to the Company is not
               determinable, Allstate is considering mergers,
               acquisitions, and business alliances in both the United
               States and internationally in the pursuit of its
               business strategy.
 
Pending Accounting
               Standards
 
    
                     In July 1999, the
               Financial Accounting Standards Board (“FASB”)
               delayed the effective date of Statement of Financial
               Accounting Standard (“SFAS”) No. 133, “
               Accounting for Derivative Instruments and Hedging
               Activities”, which replaces existing pronouncements
               and practices with a single, integrated accounting
               framework for derivatives and hedging activities. The
               delay was effected through the issuance of SFAS No. 137,
               which extends the effective date of SFAS No. 133
               requirements to fiscal years beginning after June 15,
               2000. As such, the Company expects to adopt the
               provisions of SFAS No. 133 as of January 1, 2001. Based
               on existing interpretations of the requirements of SFAS
               No. 133, the impact of adoption is not expected to be
               material to the results of operations or financial
               position of the Company.
 
Forward-looking
               statements
 
    
                     The statements
               contained in this Management’s Discussion and
               Analysis that are not historical information are
               forward-looking statements that are based on management
               ’s estimates, assumptions and projections. The
               Private Securities Litigation Reform Act of 1995
               provides a safe harbor under The Securities Act of 1933
               and The Securities Exchange Act of 1934 for
               forward-looking statements. In order to comply with the
               terms of the safe harbor, the Company notes several
               important factors that could cause the Company’s
               actual results and experience with respect to
               forward-looking statements to differ materially from the
               anticipated results or other expectations expressed in
               the Company’s forward-looking statements:
               
 
1. Management believes
               that the Company’s catastrophe management
               initiatives have reduced the severity of possible future
               losses, that initiatives taken in Florida and the
               Northeast have reduced the Company’s exposure to
               catastrophic losses in those areas, and that the Company
               ’s exposure to earthquake losses in California is
               limited as a result of its participation in the CEA.
               (See
             “Catastrophe Losses and Catastrophe
               Management” 
             beginning at 18). These beliefs are based in part on the
               efficacy of techniques adopted by Allstate and the
               accuracy of the data used by Allstate and the CEA which
               are designed to predict the probability of catastrophes
               and the extent of losses to Allstate and the CEA
               resulting from catastrophes. Catastrophic events may
               occur in the future which indicate that such techniques
               and data do not accurately predict Allstate’s or
               the CEA’s losses from catastrophes. In that event,
               the probability and extent of such losses may differ
               materially from that which would have been predicted by
               such techniques and data.
 
2. In order to borrow on
               the five-year line of credit (see
             “Liquidity and Capital Resources”
               
             at page 21), AIC is required to maintain a specified
               statutory surplus level and the Company’s debt to
               equity ratio (as defined in the credit agreement) must
               not exceed a designated level. Management expects to
               continue to meet such borrowing requirements in the
               future. However, the ability of AIC and Allstate to meet
               these requirements is dependent upon the economic
               well-being of AIC. Should AIC sustain significant losses
               from catastrophes, its and Allstate’s ability to
               continue to meet these credit agreement requirements
               could be adversely affected. Consequently, Allstate’
               s right to draw upon the five-year line of credit could
               be diminished or eliminated during a period when it
               would be most in need of financial resources.
               
 
3. The Company presently
               believes that it will resolve the Year 2000 issues
               affecting its computer operations in a timely manner,
               and that the costs incurred between the years of 1995
               and 2000 in resolving those issues will be approximately
               $125 million. However, the extent to which the computer
               operations of the Company’s external counterparties
               and suppliers are adversely affected could, in turn,
               affect the Company’s ability to communicate with
               such counterparties and suppliers, could increase the
               cost of resolving the Year 2000 issues, and could
               materially affect the Company’s results of
               operations, liquidity and financial condition in any
               period or periods.
 
 4. Due to legislative
               and regulatory reform of the auto insurance system in
               New Jersey that included regulated rate and coverage
               reductions effective for new policies written and
               renewals processed on and after March 22, 1999, ANJ has
               experienced decreased premiums during the second and
               third quarters of 1999. Management expects to see
               improved loss experience due to this reform as well.
               (See
             “Other Developments” 
             at page 26.) However, until the rating plan and coverage
               changes are fully implemented, the Company can not be
               assured of improved profitability. It is possible that
               losses may increase or that any decrease will not be
               commensurate with the reductions in premiums.
               
 
5. The Company
               anticipates taking a charge to earnings of approximately
               $125 to $150 million after reviewing the statement of
               financial position for the recently acquired CNA
               personal lines auto and homeowners insurance business.
               However, the amount of the charge to earnings actually
               taken by the Company could be more or less than the
               amount anticipated depending on the Company’s
               valuation of certain estimated liabilities and asset
               allowances.
 
6. The Company
               anticipates taking a charge to earnings of approximately
               $25 to $50 million after reviewing the statement of
               financial position of recently acquired AHL. However the
               amount of the charge to earnings actually taken by the
               Company could be more or less than the amount
               anticipated depending on the Company’s valuation of
               certain estimated liabilities and asset allowances.
               
 
7. In connection with
               the series of strategic initiatives announced on
               November 10, 1999, management expects to reduce current
               annual expenses by approximately $600 million and to
               incur restructuring and related expenses of
               approximately $100 million in the fourth quarter of 1999
               and approximately $100 million throughout 2000. However,
               the amount and timing of the restructuring charges are
               dependent on the number of agents transitioning to the
               exclusive agent program and the expense reductions are
               dependent on the successful consolidation of operations.
               
 
    
                     See the Company’
               s 1998 Annual Report on Form 10-K (the “1998 10-K
               ”) for other important risk factors which may
               affect the results of operations and financial condition
               of the Company. For those risk factors affecting the
               Company as a regulated insurance holding company, see
               “Risk Factors Affecting Allstate” at page 3 of
               the 1998 10-K.
 
 
 
             
             PART II. Other Information
 

             
             Item 5. Other Information
 

              

                
                 
               
                 Property-Liability

                 
               
                 Life and Savings

                 
               
                 Corporate and
               

               Other

                 
               
                 Total

              

              

               (In
                 millions)
                 
                
                 
               
                 Percent
               

               to total

                 
                
                 
               
                 Percent
               

               to total

                 
                
                 
               
                 Percent
               

               to total

                 
                
                 
               
                 Percent
               

               to total

              

              

               Fixed
                 income securities 
               (1)
               
                 
               $25,433
                 
                 
               78.0
                 
               %
                 
                 
               $26,772
                 
                 
               82.7
                 
               %
                 
                 
               $1,031
                 
                 
               96.3
                 
               %
                 
                 
               $53,236
                 
                 
               80.6
                 
               %
                 
              

              

               Equity
                 securities
                 
               5,308
                 
                 
               16.3
                 
                
                 
               531
                 
                 
               1.7
                 
                
                 
               2
                 
                 
               0.2
                 
                
                 
               5,841
                 
                 
               8.8
                 
                
              

              

               
                 Mortgage loans
                 
               179
                 
                 
               0.6
                 
                
                 
               3,658
                 
                 
               11.3
                 
                
                 
               —
                  
                 
               —
                  
                
                 
               3,837
                 
                 
               5.8
                 
                
              

              

               
                 Short-term
                 
               1,671
                 
                 
               5.1
                 
                
                 
               788
                 
                 
               2.4
                 
                
                 
               38
                 
                 
               3.5
                 
                
                 
               2,497
                 
                 
               3.8
                 
                
              

              

               Other
                 
                 
               12
                 
                 
               —
                  
                
                 
               620
                 
                 
               1.9
                 
                
                 
               —
                  
                 
               —
                  
                
                 
               632
                 
                 
               1.0
                 
                
              

              

                 
                 
               

                 
               

                 
                 
               

                 
               

                 
                 
               

                 
               

                 
                 
               

                 
               

                 
              

              

                
                          
                 Total
                 
               $32,603
                 
                 
               100.0
                 
               %
                 
                 
               $32,369
                 
                 
               100.0
                 
               %
                 
                 
               $1,071
                 
                 
               100.0
                 
               %
                 
                 
               $66,043
                 
                 
               100.0
                 
               %
                 
              

              

                 
                 
               

                 
               

                 
                 
               

                 
               

                 
                 
               

                 
               

                 
                 
               

                 
               

                 
              

             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
             
 

              

               
                
Judith A. Sprieser,
                 executive vice president and chief financial officer
                 of Sara Lee Corporation, was elected to the Registrant
                 ’s board of directors on July 12, 1999.
                 

               		
              

             
             
             
 

             
             Item 6. Exhibits and Reports on Form 8-K
 
    
                     (a) Exhibits
               
 

              

               
                
Duane Ackerman,
                 chairman and chief executive officer of BellSouth
                 Corporation, was elected to the Registrant’s
                 board of directors on November 3, 1999, bringing total
                 membership of the board to 12.

               		
              

             
             
             
             
             
             
             
 
    
                     (b) Reports on Form
               8-K.
 

              

               
                

                       
                     An Exhibit Index has been
                 filed as part of this report on Page E-1

               		
              

             
             
             
             
             

              

               
                

                       
                     Registrant filed a Current
                 Report on Form 8-K on July 12, 1999 (Items 5 and 7)
                 

               		
              

             
             

              

               
                

                       
                     Registrant filed a Current
                 Report on Form 8-K on July 14, 1999 (Items 5 and 7)
                 

               		
              

             
             

              

               
                

                       
                     Registrant filed a Current
                 Report on Form 8-K on September 3, 1999 (Items 5 and 7)
                 

               		
              

             
             
 
 SIGNATURE
               
 
    
                     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.
               
 

              

               
                

                       
                     Registrant filed a Current
                 Report on Form 8-K on September 24, 1999 (Items 5 and
                 7)

               		
              

             
             
             
             
             
             
             

              

               
                
The Allstate Corporation

               		
              

             
             
 
November 11, 1999
               

              

               
                
(Registrant)

               		
              

             
             
             
             

              

               
                
/S
               /    SAMUEL 
               H. PILCH
               

               		
              

             
             

              

               
                
By 

               		
              

             
             
 

              

               
                
Samuel H. Pilch, Controller

               		
              

             
             
             

              

               
                
(Principal Accounting Officer and duly
                 

               		
              

             
             
 

              

               
                
authorized Officer of Registrant)

               		
              

             
             
             


                                                                      EXHIBIT 15

To the Board of Directors and Shareholders of
The Allstate Corporation:


We have reviewed, in accordance with standards established by the American
Institute of Certified Public Accountants, the unaudited interim condensed
consolidated financial statements of The Allstate Corporation and subsidiaries
for the three-month and nine-month periods ended September 30, 1999 and 1998, as
indicated in our report dated November 11, 1999; because we did not perform an
audit, we expressed no opinion on such financial statements.

We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999,
is incorporated by reference in Registration Statement No. 333-87799 on Form
S-4, Registration Statement Nos. 333-34583 and 333-61817 on Form S-3 and
Registration Statement Nos. 33-77928, 33-93758, 33-93760, 33-93762, 33-99132,
33-99136, 33-99138, 333-04919, 333-16129, 333-23309, 333-40283, 333-40285 and
333-40289 on Form S-8.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant withiin the meaning of Sections 7 and 11 of that Act.

Deloitte & Touche LLP

Chicago, Illinois
November 11, 1999


                                      E-2

  





 7
 1,000,000

                             
                   9-MOS
                          DEC-31-1999
                             JAN-01-1999
                               SEP-30-1999
                             53236
                                0
                                  0
                                        5841
                                        3837
                                        0
                                   66043
                                             230
                                 257
                            3511
                                   90322
                                  24316
                               6737
                                       0
                            23179
                                   1956
                                0
                                          0
                                             9
                                       15856
                     90322
                                       15840
                               3043
                                1067
                                       0
                                       12508
                       2398
                              1641
                                   3327
                                      1003
                               2295
                                       0
                                      0
                                            0
                                      2295
                                       2.86
                                     2.84
                                       0
                                  0
                                    0
                                   0
                                     0
                                      0
                              0





              

               
                 Exhibit
               

               No.

                 
               
                 Description

                 
               
                 Sequentially
               

               Numbered Page

              

              

                
                     4
                 
               
                 Registrant hereby agrees to furnish the Commission,
                 upon request, with the
               

               instruments defining the rights of holders of each issue
                 of long-term debt of the
               

               Registrant and its consolidated subsidiaries.		
                 
               
              

              

               
                
               

                
                     15
                 
               
                 Acknowledgment of awareness from Deloitte & Touche
                 LLP, dated November 11,
               

               1999, concerning unaudited interim financial information.
                 		
                 
               
                 
              

              

               
                
               

                
                     27
                 
               
                 Financial Data Schedule, which is submitted
                 electronically to the Securities and
               

               Exchange Commission for information only and not filed.