SEC Filing | The Allstate Corporation

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

FORM 8-K

CURRENT REPORT

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

Date of report (Date of earliest event reported) February 4, 2004

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

Delaware (State or other jurisdiction of incorporation)	1-11840 (Commission file number)	36-3871531 (IRS employer identification number)
2775 Sanders Road, Northbrook, Illinois (Address of principal executive offices)		60062 (Zip code)
Registrant's telephone number, including area code (847) 402-5000

Item 7. Financial Statements and Exhibits

(c)

Exhibits

99: Registrant's press release dated February 4, 2004

Item 12. Results of Operations and Financial Condition

On February 4, 2004, the registrant issued a press release announcing its financial results for the fourth quarter of 2003 and for the year ended December 31, 2003. A copy of the press release is furnished as Exhibit 99 to this report.

SIGNATURES

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

	THE ALLSTATE CORPORATION (registrant)
	By	/s/ SAMUEL H. PILCH
	Name:	Samuel H. Pilch
	Title:	Controller
February 4, 2004

EXHIBIT INDEX

Exhibit Number		Description
99		Registrant's press release dated February 4, 2004

Exhibit 99

For Immediate Release

Allstate Reports 2003 Fourth Quarter
71% Increase in Net Income EPS,
22% Increase in Operating Income EPS,

Board Approves Quarterly Dividend Increase and
$1 billion Addition to Share Repurchase Program

NORTHBROOK, Ill., Feb. 4, 2004—The Allstate Corporation (NYSE: ALL) today reported for the fourth quarter of 2003:

Consolidated Highlights(1)

	Three Months Ended December 31,							Twelve Months Ended December 31,
					Change							Change
	Est. 2003		2002		$ Amt		%	Est. 2003		2002		$ Amt		%
	(in millions, except per share amounts and ratios)
Consolidated revenues	$	8,262	$	7,587	$	675	8.9	$	32,149	$	29,579	$	2,570	8.7
Net income		761		447		314	70.2		2,705		1,134		1,571	138.5
Net income per diluted share		1.08		0.63		0.45	71.4		3.83		1.60		2.23	139.4
Operating income(1)		752		618		134	21.7		2,662		2,075		587	28.3
Operating income per diluted share(1)		1.06		0.87		0.19	21.8		3.77		2.92		0.85	29.1
Property-Liability combined ratio		92.3		97.8		—	(5.5) pts		94.6		98.9		—	(4.3) pts
Book value per diluted share		29.04		24.75		4.29	17.3		29.04		24.75		4.29	17.3

•: Property-Liability premiums written(1) grew 6% over the fourth quarter of 2002. Allstate brand standard auto and homeowners new business premiums written increased 31% and 39%, respectively.
•: Property-Liability underwriting income(1) increased 272% or $353 million in the fourth quarter to $483 million from $130 million in the fourth quarter of 2002 due to higher premiums earned and continued favorable auto and homeowners loss frequencies, partially offset by higher catastrophes.
•: Catastrophe losses in the fourth quarter increased to $412 million compared to $237 million in the fourth quarter of 2002. The impact of catastrophe losses on the combined ratio increased to 6.5 pts from 4.0 pts in the fourth quarter of 2002.
•: Allstate Financial had premiums and deposits(1) of $3.30 billion, 20% over the prior year fourth quarter.
•: At its February 3, 2004 meeting, the Board of Directors declared a quarterly dividend of $0.28 per share, which is a 22% increase from the previous quarter. The board also approved a $1 billion increase of the current share repurchase program, which has $350 million remaining. The expanded program is expected to be completed in 2005.
•: Allstate's operating income per diluted share guidance(1) for 2004 (assuming the level of average expected catastrophe losses used in pricing for the year) is in the range of $4.30 to $4.55.

"Allstate had a strong quarter and an outstanding year," said Chairman, President and CEO Edward M. Liddy. "I am very pleased with our performance in the fourth quarter, which showed good top line growth, strong unit growth for Allstate brand standard auto and homeowners and outstanding bottom line results.

"Just as impressive were our results for the entire year. Compared to 2002, net income more than doubled to $2.7 billion, consolidated revenues were up almost 9% to $32.1 billion, and operating income

(1): Measures used in this release that are not based on generally accepted accounting principles ("non-GAAP") are defined and reconciled to the most directly comparable GAAP measure and operating measures are defined in the "Definitions of Non-GAAP and Operating Measures" section of this document.

was up 28% to $2.7 billion. And looking at our results since becoming a public company more than 10 years ago, 2003 marked a year in which we achieved the second highest net income per diluted share, the largest amount of written premium and the highest operating income (in total dollars and per diluted share), all while experiencing the largest amount of catastrophe losses since 1994, which included the Northridge earthquake.

"Despite this year's excellent results, we will not rest on this success. Our goals remain unchanged and our strategy continues to be validated and well executed. We are seeking long-term, sustainable, profitable growth and 2003 helped us continue the momentum that began more than eight quarters ago. We want to be better and bigger in our protection business and broader in financial services and we are very optimistic about our prospects for 2004 and beyond. We have a good record of executing on our strategies and remain focused on underwriting and pricing discipline as we grow the company," said Liddy.

In the quarter, we appointed a new chief marketing officer and launched a new multi-million dollar advertising campaign. Both of these moves are intended to help us grow our business and reach more households. In addition to the investments in advertising, we have invested in our agency force, growing it by 5 percent or some 600 exclusive agencies this year, including approximately 200 exclusive financial specialists, thereby increasing our proprietary distribution capacity for financial services products.

New business growth in our Allstate brand standard auto and homeowners insurance lines was strong. Standard auto and homeowners new business premiums written increased 31% and 39%, respectively, over the fourth quarter of 2002. In addition, policies in force for these two lines continued a trend that began in the second quarter of 2003 by showing sequential positive unit growth of 1.0% and 1.3%, respectively, compared to the third quarter.

"During the quarter, Allstate Protection experienced excellent auto and homeowners loss frequency trends. Catastrophe losses were much higher this quarter, largely as a result of losses suffered by our policyholders in Southern California due to severe wildfires that struck the area. I am particularly proud of our Allstate agents and claim adjusters and their commitment to restoring the lives of our customers in a state that not only experienced devastating fires, but mudslides and even an earthquake during the quarter," continued Liddy.

In an increasingly competitive environment, Allstate Financial had mixed results in the quarter. Premiums and deposits were up 20 percent and revenues were up 6 percent, while operating income was down 36 percent reflecting the impact of several non-recurring items.

To better position itself for the competitive pressures and challenges in the financial services marketplace, Allstate Financial is pursuing a strategy of operational excellence which emphasizes focused product manufacturing for our targeted distribution partners to enable them to serve their clients' financial protection, savings and retirement needs. The results of this concentrated effort started to be realized in the fourth quarter of 2003 as non-deferred operating expenses, net of restructuring charges, were flat with the prior year's fourth quarter. In addition, Allstate Financial introduced an innovative and flexible living benefit guarantee on its variable annuities in January 2004. The TrueReturn^SM Accumulation Benefit feature replaced the income benefit previously offered. These initiatives, along with expectations of improving economic conditions, are expected to drive higher revenue and operating income in 2004 and subsequent years.

"Overall, I am very optimistic about our ability to continue the momentum we generated over the past two years and believe strongly that we can continue to deliver excellent value to our shareholders. We have added $1 billion to our share repurchase program, significantly increased our dividend, continue to maintain a strong competitive position in all our businesses and we know how to execute. More than ever before, 'You're in good hands with Allstate®'," said Liddy.

Consolidated Highlights

	Three Months Ended December 31,						Twelve Months Ended December 31,						Discussion of Results for the Three Months Ended December 31, 2003
	Est. 2003			2002			Est. 2003			2002
	($ in millions, except per share and return amounts)
Consolidated revenues	$	8,262		$	7,587		$	32,149		$	29,579		•	Higher premiums earned in Property-Liability and realized capital gains.
Operating income		752			618			2,662			2,075		•	Increase of $190 in Property-Liability operating income, partially offset by decrease of $57 in Allstate Financial operating income.
Realized capital gains and losses, after-tax		58			(158	)		134			(598	)	•	See the Components of realized capital gains and losses (pretax) table.
(Loss) gain on disposition of operations, after-tax		(20	)		(3	)		(26	)		2		•	Loss related to the disposition of Allstate Financial's direct response distribution business.
Cumulative effect of change in accounting principle, after-tax		(14	)		—			(15	)		(331	)	•	Adoption of Derivatives Implementation Group issue B36 related to modified coinsurance and FIN No. 46 for variable interest entities.
Net income		761			447			2,705			1,134		•	Realized capital gains and higher operating income.
Net income per share (diluted)		1.08			0.63			3.83			1.60
Operating income per share (diluted)		1.06			0.87			3.77			2.92		•	Compared to First Call mean estimate of $1.04, with a range of $0.94 to $1.14.
Weighted average shares outstanding (diluted)		707.2			705.7			706.2			709.9		•	On a year to date basis during 2003, Allstate purchased 4.2 million shares of its stock for $149.97 million, or an average cost per share of $35.68. These repurchases were offset by shares issued in connection with Allstate's equity incentive plans.
Return on equity		14.2			6.5			14.2			6.5		•	See the return on equity calculation in the Definitions of Non-GAAP and Operating Measures section of this document.
Operating income return on equity¹		16.5			13.7			16.5			13.7		•	See the return on equity calculation in the Definitions of Non-GAAP and Operating Measures section of this document.
Book value per diluted share		29.04			24.75			29.04			24.75		•	At December 31, 2003 and 2002, net unrealized gains on fixed income securities, after-tax, totaling $2,307 and $2,302, respectively, represented $3.26 and $3.27, respectively, of book value per diluted share.

•: Book value per diluted share increased 17.3% compared to December 31, 2002. The minimum pension liability adjustment impacted book value per share $0.51 and $1.16 at December 31, 2003 and 2002, respectively. The decline in the minimum pension liability at December 31, 2003 was due to contributions during 2003 totaling $871 million and the impact of market appreciation on the valuation of plan assets.
•: The Board of Directors declared a dividend of twenty-eight cents ($0.28) on each outstanding share of stock. This dividend is payable in cash on April 1, 2004 to stockholders of record at the close of business on February 27, 2004.

Property-Liability Highlights

	Three Months Ended December 31,					Twelve Months Ended December 31,						Discussion of Results for the Three Months Ended December 31, 2003
	Est. 2003		2002			Est. 2003			2002
	($ in millions, except ratios)
Property-Liability Premiums written	$	6,199	$	5,854		$	25,187		$	23,917		•	See the Property-Liability Premiums written by market segment table and the Property-Liability net rate changes approved table.
Property-Liability revenues		6,848		6,234			26,642			24,521		•	Premiums earned increased $352 or 5.9%.
Underwriting income		483		130			1,332			263		•	Higher premiums earned, continued favorable auto and homeowners frequencies, partially offset by higher catastrophes and increased expenses. See the Allstate Protection market segment analysis tables.
Net investment income		435		400			1,677			1,656		•	Higher portfolio balances due to positive cash flows from operations and higher income from partnerships, partially offset by lower yields.
Operating income		680		490			2,327			1,629		•	Increase of $230 in underwriting income, after-tax, partially offset by an unfavorable difference between years of $70 million related to favorable, nonrecurring adjustments to prior years' tax liabilities.
Realized capital gains and losses, after-tax		72		(74	)		192			(314	)	•	See the Components of realized capital gains and losses (pretax) table.
(Loss) gain on disposition of operations, after-tax		—		1			3			6
Cumulative effect of change in accounting principle, after-tax		—		—			(1	)		(48	)
Net income		752		417			2,521			1,273		•	Higher operating income and realized capital gains.
Catastrophe losses		412		237			1,489			731		•	Higher losses due to California wildfires.
Ratios:
Property-Liability combined ratio		92.3		97.8			94.6			98.9
Effect of Discontinued Lines and Coverages		0.1		1.1			2.3			1.0
Allstate Protection combined ratio		92.2		96.7			92.3			97.9
Effect of catastrophe losses		6.5		4.0			6.0			3.1

•: Allstate brand standard auto and homeowners policies in force (PIF) increased 1.0% and 1.3%, respectively, from September 30, 2003 levels, resulting in the third consecutive sequential quarterly increase in standard auto PIF and the fifth consecutive sequential quarterly increase in homeowners PIF. Both standard auto and homeowners experienced growth in most states. In total, Allstate brand standard auto, non-standard auto and homeowners PIF increased 0.8% as of December 31, 2003 when compared to December 31, 2002. These results exclude impacts from Allstate Canada and Allstate Motor Club.
•: In addition to higher new business premiums written during the fourth quarter of 2003 compared to the prior year fourth quarter, the retention ratio for the Allstate brand standard auto increased to 90.1 as of December 31, 2003 compared to 88.9 as of December 31, 2002. The retention ratio for Allstate brand homeowners was 87.5 as of December 31, 2003 compared to 87.8 as of December 31, 2002.These results exclude impacts from Allstate Canada.

Allstate Financial Highlights

	Three Months Ended December 31,						Twelve Months Ended December 31,						Discussion of Results for the Three Months Ended December 31, 2003
	Est. 2003			2002			Est. 2003			2002
	($ in millions)
Premiums and deposits	$	3,303		$	2,761		$	13,095		$	11,834		•	Higher sales of institutional products, variable annuities and life products, partially offset by lower sales of fixed annuities. See the Allstate Financial premiums and deposits table.
Allstate Financial Revenues		1,401			1,325			5,452			4,982		•	Lower realized capital losses and higher net investment income, partially offset by lower premiums and contract charges.
Operating income		101			158			449			556		•	Higher mortality margin, offset by a net unfavorable difference between years of $49 due to nonrecurring adjustments for prior years' tax liabilities, higher amortization of DAC on a closed annuity block of $10, after-tax and lower investment margin.
Realized capital gains and losses, after-tax		(11	)		(92	)		(53	)		(287	)	•	See the Components of realized capital gains and losses (pretax) table.
(Loss) gain on disposition of operations, after-tax		(20	)		(4	)		(29	)		(4	)	•	Loss related to the disposition of the direct response distribution business.
Cumulative effect of change in accounting principle, after-tax		(17	)		—			(17	)		(283	)	•	Adoption of Derivatives Implementation Group issue B36 related to modified coinsurance and FIN No. 46 for variable interest entities.
Net income (loss)		38			55			305			(22	)	•	Lower operating income, cumulative effect of change in accounting principle and loss on disposition of operations, partly offset by lower realized capital losses.

•: Premiums and deposits for the fourth quarter of 2003 increased 19.6% over the prior year fourth quarter due to strong sales of institutional products, variable annuities and life products, partially offset by lower fixed annuity sales.
•: Net cash payments for Allstate Financial's variable annuity guaranteed minimum death benefits (GMDB) were $16 million for the fourth quarter of 2003, net of reinsurance, hedging gains and losses, and other contractual arrangements. This is $6 million less than payments made in the fourth quarter of 2002, and $3 million less than the third quarter of 2003 payments.

GMDB values in excess of contractholders' account values, payable if all contractholders were to have died at December 31, 2003, were estimated to be $2.46 billion, net of reinsurance, compared to $3.13 billion at September 30, 2003 and $4.07 billion at December 31, 2002.
•: The weighted average interest crediting rate on fixed annuity and interest-sensitive life products in force, excluding market value adjusted annuities, was approximately 70 basis points more than the underlying long-term guaranteed rates on these products.

THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

			Three Months Ended December 31,								Twelve Months Ended December 31,
			Est. 2003			2002(1)			Percent Change		Est. 2003			2002(1)			Percent Change
			($ in millions, except per share data)
Revenues
	Property-liability insurance premiums		$	6,302		$	5,950		5.9		$	24,677		$	23,361		5.6
	Life and annuity premiums and contract charges			594			661		(10.1	)		2,304			2,293		0.5
	Net investment income			1,275			1,222		4.3			4,972			4,849		2.5
	Realized capital gains and losses			91			(246	)	137.0			196			(924	)	121.2

		Total revenues		8,262			7,587		8.9			32,149			29,579		8.7

Costs and expenses
	Property-liability insurance claims and claims expense			4,248			4,404		(3.5	)		17,432			17,657		(1.3	)
	Life and annuity contract benefits			471			557		(15.4	)		1,851			1,770		4.6
	Interest credited to contractholder funds			466			448		4.0			1,846			1,764		4.6
	Amortization of deferred policy acquisition costs			1,069			917		16.6			4,058			3,694		9.9
	Operating costs and expenses			804			753		6.8			3,001			2,761		8.7
	Restructuring and related charges			18			24		(25.0	)		74			119		(37.8	)
	Interest expense			71			74		(4.1	)		275			278		(1.1	)

		Total costs and expenses		7,147			7,177		(0.4	)		28,537			28,043		1.8

(Loss) gain on disposition of operations				(32	)		(3	)	—			(41	)		4		—
Income from operations before income tax expense (benefit), dividends on preferred securities and cumulative effect of change in accounting principle, after-tax				1,083			407		166.1			3,571			1,540		131.9
Income tax expense (benefit)				308			(43	)	—			846			65		—

Income before dividends on preferred securities and cumulative effect of change in accounting principle, after-tax				775			450		72.2			2,725			1,475		84.7
Dividends on preferred securities of subsidiary trust				—			(3	)	100.0			(5	)		(10	)	50.0
Cumulative effect of change in accounting principle, after-tax				(14	)		—		—			(15	)		(331	)	95.5

Net income			$	761		$	447		70.2		$	2,705		$	1,134		138.5

Net income per share—Basic			$	1.08		$	0.63				$	3.85		$	1.60

Weighted average shares—Basic				703.5			702.6					703.5			707.1

Net income per share—Diluted			$	1.08		$	0.63				$	3.83		$	1.60

Weighted average shares—Diluted				707.2			705.7					706.2			709.9

(1): To conform to current period presentations, certain prior period balances have been reclassified.

THE ALLSTATE CORPORATION
CONTRIBUTION TO INCOME

		Three Months Ended December 31,								Twelve Months Ended December 31,
		Est. 2003			2002(1)			Percent Change		Est. 2003			2002(1)			Percent Change
		($ in millions, except per share data)
Contribution to income
	Operating income before the impact of restructuring and related charges	$	764		$	633		20.7		$	2,710		$	2,152		25.9
	Restructuring and related charges, after-tax		12			15		(20.0	)		48			77		(37.7	)

Operating income			752			618		21.7			2,662			2,075		28.3
	Realized capital gains and losses, after-tax		58			(158	)	136.7			134			(598	)	122.4
	DAC amortization expense on realized capital gains and losses, after-tax		(10	)		(2	)	—			(30	)		(1	)	—
	Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax		(5	)		(5	)	—			(15	)		(3	)	—
	(Loss) gain on disposition of operations, after-tax		(20	)		(3	)	—			(26	)		2		—
	Dividends on preferred securities of subsidiary trust		—			(3	)	100.0			(5	)		(10	)	50.0
	Cumulative effect of change in accounting principle, after-tax		(14	)		—		—			(15	)		(331	)	95.5

	Net income	$	761		$	447		70.2		$	2,705		$	1,134		138.5

Income per share (Diluted)
	Operating income before the impact of restructuring and related charges	$	1.08		$	0.89		21.3		$	3.84		$	3.03		26.7
	Restructuring and related charges, after-tax		0.02			0.02		—			0.07			0.11		(36.4	)

	Operating income		1.06			0.87		21.8			3.77			2.92		29.1
	Realized capital gains and losses, after-tax		0.09			(0.22	)	140.9			0.19			(0.84	)	122.6
	DAC amortization expense on realized capital gains and losses, after-tax		(0.02	)		—		—			(0.05	)		—		—
	Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax		(0.01	)		(0.01	)	—			(0.02	)		(0.01	)	(100.0	)
	(Loss) gain on disposition of operations, after-tax		(0.03	)		(0.01	)	—			(0.04	)		—		—
	Dividends on preferred securities of subsidiary trust		—			—		—			—			(0.01	)	100.0
	Cumulative effect of change in accounting principle, after-tax		(0.01	)		—		—			(0.02	)		(0.46	)	95.7

Net income		$	1.08		$	0.63		71.4		$	3.83		$	1.60		139.4

Book value per share—Diluted		$	29.04		$	24.75		17.3		$	29.04		$	24.75		17.3

(1): To conform to current period presentations, certain prior period balances have been reclassified.

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

		Three Months Ended December 31, 2003 (Est.)
		Property- Liability			Allstate Financial			Corporate and Other			Total
		($ in millions)
Valuation of derivative instruments		$	4		$	(4	)	$	—		$	—
Settlements of derivative instruments			5			(2	)		—			3
Sales			131			23			—			154
Investment write-downs			(29	)		(34	)		(3	)		(66	)

	Total	$	111		$	(17	)	$	(3	)	$	91

		Three Months Ended December 31, 2003 (Est.)
		Property- Liability			Allstate Financial			Corporate and Other			Total
		($ in millions)
Valuation of derivative instruments		$	10		$	6		$	—		$	16
Settlements of derivative instruments			3			18			—			21
Sales			385			71			(3	)		453
Investment write-downs			(110	)		(180	)		(4	)		(294	)

	Total	$	288		$	(85	)	$	(7	)	$	196

		Three Months Ended December 31, 2002(1)
		Property- Liability			Allstate Financial			Corporate and Other			Total
		($ in millions)
Valuation of derivative instruments		$	8		$	7		$	—		$	15
Settlements of derivative instruments			(32	)		8			—			(24	)
Sales			(20	)		(10	)		12			(18	)
Investment write-downs			(72	)		(146	)		(1	)		(219	)

	Total	$	(116	)	$	(141	)	$	11		$	(246	)

		Twelve Months Ended December 31, 2002(1)
		Property- Liability			Allstate Financial			Corporate and Other			Total
		($ in millions)
Valuation of derivative instruments		$	(24	)	$	(36	)	$	—		$	(60	)
Settlements of derivative instruments			(195	)		19			—			(176	)
Sales			(129	)		(104	)		12			(221	)
Investment write-downs			(148	)		(311	)		(8	)		(467	)

	Total	$	(496	)	$	(432	)	$	4		$	(924	)

(1): To conform to current period presentations, certain prior period balances have been reclassified. The reclassifications result in periodic settlements and accruals on derivative instruments held for economic hedging purposes but categorized as "non-hedge" for accounting purposes, being classified consistent with the corresponding fair value adjustments on such instruments. The tables above include the following reclassifications:

		Three Months Ended December 31,					Twelve Months Ended December 31,
		2003		2002			2003		2002
Valuation of derivative instruments		$	7	$	(2	)	$	6	$	(22	)
Settlements of derivative instruments			1		10			17		27

	Net impact of reclassifications on realized capital gains and losses, pretax	$	8	$	8		$	23	$	5

The net impact of the reclassifications on realized capital gains and losses, pretax, are offset by a corresponding change to net investment income or interest credited to contractholder funds.

THE ALLSTATE CORPORATION
SEGMENT RESULTS

		Three Months Ended December 31,						Twelve Months Ended December 31,
		Est. 2003			2002(1)			Est. 2003			2002(1)
		($ in millions)
Property-Liability
	Premiums written	$	6,199		$	5,854		$	25,187		$	23,917

	Premiums earned	$	6,302		$	5,950		$	24,677		$	23,361
	Claims and claims expense		4,248			4,404			17,432			17,657
	Amortization of deferred policy acquisition costs		930			817			3,520			3,216
	Operating costs and expenses		629			576			2,326			2,108
	Restructuring and related charges		12			23			67			117

	Underwriting income		483			130			1,332			263
	Net investment income		435			400			1,677			1,656
	Income tax expense on operations		238			40			682			290

	Operating income		680			490			2,327			1,629
	Realized capital gains and losses, after-tax		72			(74	)		192			(314	)
	Gain on disposition of operations, after-tax		—			1			3			6
	Cumulative effect of change in accounting principle, after-tax		—			—			(1	)		(48	)

	Net income	$	752		$	417		$	2,521		$	1,273

	Catastrophe losses	$	412		$	237		$	1,489		$	731

	Operating ratios
	Claims and claims expense ratio		67.4			74.0			70.6			75.6
	Expense ratio		24.9			23.8			24.0			23.3

	Combined ratio		92.3			97.8			94.6			98.9

	Effect of catastrophe losses on combined ratio		6.5			4.0			6.0			3.1

	Effect of restructuring and related charges on combined ratio		0.2			0.4			0.3			0.5

	Effect of Discontinued Lines and Coverages on combined ratio		0.1			1.1			2.3			1.0

Allstate Financial
	Premiums and deposits	$	3,303		$	2,761		$	13,095		$	11,834

	Investments including Separate Accounts assets	$	76,320		$	66,389		$	76,320		$	66,389

	Premiums and contract charges	$	594		$	661		$	2,304		$	2,293
	Net investment income		824			805			3,233			3,121
	Periodic settlements and accruals on non-hedge derivative instruments		8			8			23			5
	Contract benefits		471			557			1,851			1,770
	Interest credited to contractholder funds		466			448			1,846			1,764
	Amortization of deferred policy acquisition costs		124			96			492			476
	Operating costs and expenses		174			177			672			649
	Restructuring and related charges		6			1			7			2
	Income tax expense on operations		84			37			243			202

	Operating income		101			158			449			556
	Realized capital gains and losses, after-tax		(11	)		(92	)		(53	)		(287	)
	DAC amortization expense on realized capital gains and losses, after-tax		(10	)		(2	)		(30	)		(1	)
	Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax		(5	)		(5	)		(15	)		(3	)
	Loss on disposition of operations, after-tax		(20	)		(4	)		(29	)		(4	)
	Cumulative effect of change in accounting principle, after-tax		(17	)		—			(17	)		(283	)

	Net income (loss)	$	38		$	55		$	305		$	(22	)

Corporate and Other
	Net investment income	$	16		$	17		$	62		$	72
	Operating costs and expenses		72			74			278			282
	Income tax benefit on operations		(27	)		(27	)		(102	)		(100	)

	Operating loss		(29	)		(30	)		(114	)		(110	)
	Realized capital gains and losses, after-tax		(3	)		8			(5	)		3
	Dividends on preferred securities of subsidiary trust		—			(3	)		(5	)		(10	)
	Cumulative effect of change in accounting principle, after-tax		3			—			3			—

	Net loss	$	(29	)	$	(25	)	$	(121	)	$	(117	)

	Consolidated net income	$	761		$	447		$	2,705		$	1,134

(1): To conform to current period presentations, certain prior period balances have been reclassified.

THE ALLSTATE CORPORATION
UNDERWRITING RESULTS BY AREA OF BUSINESS

			Three Months Ended December 31,								Twelve Months Ended December 31,
			Est. 2003			2002			Percent Change		Est. 2003			2002			Percent Change
			($ in millions)
Consolidated Underwriting Summary
	Allstate Protection		$	492		$	196		151.0		$	1,903		$	497		—
	Discontinued Lines and Coverages			(9	)		(66	)	86.4			(571	)		(234	)	(144.0	)

		Underwriting income	$	483		$	130		—		$	1,332		$	263		—

Allstate Protection Underwriting Summary
	Premiums written		$	6,197		$	5,854		5.9		$	25,175		$	23,910		5.3

	Premiums earned		$	6,300		$	5,948		5.9		$	24,664		$	23,351		5.6
	Claims and claims expense			4,240			4,342		(2.3	)		16,858			17,424		(3.2	)
	Amortization of deferred policy acquisition costs			930			817		13.8			3,520			3,216		9.5
	Other costs and expenses			626			570		9.8			2,316			2,097		10.4
	Restructuring and related charges			12			23		(47.8	)		67			117		(42.7	)

		Underwriting income	$	492		$	196		151.0		$	1,903		$	497		—

Catastrophe losses			$	412		$	237		73.8		$	1,489		$	731		103.7

Operating ratios
	Claims and claims expense ratio			67.3			73.0					68.4			74.6
	Expense ratio			24.9			23.7					23.9			23.3

	Combined ratio			92.2			96.7					92.3			97.9

	Effect of catastrophe losses on combined ratio			6.5			4.0					6.0			3.1

	Effect of restructuring and related charges on combined ratio			0.2			0.4					0.3			0.5

Discontinued Lines and Coverages Underwriting Summary
	Premiums written		$	2		$	—		—		$	12		$	7		71.4

	Premiums earned		$	2		$	2		—		$	13		$	10		30.0
	Claims and claims expense			8			62		(87.1	)		574			233		146.4
	Other costs and expenses			3			6		(50.0	)		10			11		(9.1	)

		Underwriting loss	$	(9	)	$	(66	)	86.4		$	(571	)	$	(234	)	(144.0	)

Effect of Discontinued Lines and Coverages on the Property-Liability combined ratio				0.1			1.1					2.3			1.0

THE ALLSTATE CORPORATION
PROPERTY-LIABILITY PREMIUMS WRITTEN BY MARKET SEGMENT

			Three Months Ended December 31,							Twelve Months Ended December 31,
			Est. 2003		2002			Percent Change		Est. 2003		2002		Percent Change
			($ in millions)
Allstate Brand
	Standard auto		$	3,416	$	3,175		7.6		$	13,632	$	12,825	6.3
	Non-standard auto			455		524		(13.2	)		1,975		2,337	(15.5	)

		Auto		3,871		3,699		4.6			15,607		15,162	2.9
	Involuntary auto			47		55		(14.5	)		226		206	9.7
	Commercial lines			215		196		9.7			854		776	10.1
	Homeowners			1,279		1,173		9.0			5,153		4,653	10.7
	Other personal lines			308		284		8.5			1,313		1,226	7.1

				5,720		5,407		5.8			23,153		22,023	5.1
Ivantage
	Standard auto			277		276		0.4			1,202		1,195	0.6
	Non-standard auto			42		34		23.5			170		114	49.1

		Auto		319		310		2.9			1,372		1,309	4.8
	Involuntary auto			10		(1	)	—			40		4	—
	Homeowners			123		116		6.0			510		484	5.4
	Other personal lines			25		22		13.6			100		90	11.1

				477		447		6.7			2,022		1,887	7.2

Allstate Protection				6,197		5,854		5.9			25,175		23,910	5.3
Discontinued Lines and Coverages				2		—		—			12		7	71.4

Property-Liability			$	6,199	$	5,854		5.9		$	25,187	$	23,917	5.3

THE ALLSTATE CORPORATION
PROPERTY-LIABILITY NET RATE CHANGES APPROVED(1)

		Three Months Ended December 31, 2003
		# of States	Weighted Average Rate Change (%)
Allstate Brand
	Standard auto	3	9.1
	Non-standard auto	2	6.1
	Homeowners	2	29.7
Ivantage
	Standard auto (Encompass)	—	—
	Non-standard auto (Deerbrook)	2	10.3
	Homeowners (Encompass)	—	—

		Twelve Months Ended December 31, 2003
		# of States	Weighted Average Rate Change (%)	Annual Impact of Rate Changes on Premiums Written (%)
Allstate Brand
	Standard auto	25	6.0	4.5
	Non-standard auto	13	8.1	5.7
	Homeowners(2)	20	1.8	1.2
Ivantage
	Standard auto (Encompass)	40	8.1	9.2
	Non-standard auto (Deerbrook)	14	8.6	7.8
	Homeowners (Encompass)	40	11.7	15.3

(1): Rate increases that are indicated based on a loss trend analysis to achieve a targeted return, will continue to be pursued in all locations and for all products.
(2): Allstate brand homeowners rate changes include an 8.7% decrease effective in September in the state of Texas, excluding this decrease the Allstate brand homeowners weighted average rate change for the twelve months ended December 31, 2003 was 4.9%.

THE ALLSTATE CORPORATION
ALLSTATE PROTECTION MARKET SEGMENT ANALYSIS

		Three Months Ended December 31,
		Est. 2003		2002		Est. 2003		2002		Est. 2003		2002		Est. 2003		2002
		($ in millions)

			Premiums Earned				Loss Ratio		Loss Ratio Excluding the Effect of Catastrophe Losses		Expense Ratio
Allstate Brand
	Standard auto		$	3,446	$	3,219	69.1	76.9	68.9	76.3
	Non-standard auto			486		569	59.1	69.8	58.6	69.2

		Auto		3,932		3,788	67.9	75.8	67.7	75.3
	Homeowners			1,269		1,136	67.4	62.8	38.7	46.6
	Other(1)			595		552	61.7	71.4	56.8	66.8

		Total Allstate brand(2)		5,796		5,476	67.1	72.7	60.2	68.5	24.5	23.0
Ivantage
	Standard auto			301		298	61.5	87.9	61.5	88.3
	Non-standard auto			43		32	88.4	93.8	86.0	93.8

		Auto		344		330	64.8	88.5	64.5	88.8
	Homeowners			127		120	73.2	44.2	66.9	39.2
	Other(1)			33		22	100.0	77.3	93.9	72.7

		Total Ivantage		504		472	69.2	76.7	67.1	75.4	29.4	31.8

Allstate Protection			$	6,300	$	5,948	67.3	73.0	60.8	69.0	24.9	23.7

		Twelve Months Ended December 31,
		Est. 2003		2002		Est. 2003		2002		Est. 2003		2002		Est. 2003		2002
		($ in millions)

			Premiums Earned				Loss Ratio		Loss Ratio Excluding the Effect of Catastrophe Losses		Expense Ratio
Allstate Brand
	Standard auto		$	13,406	$	12,667	70.1	74.9	68.7	74.2
	Non-standard auto			2,075		2,413	65.6	72.4	64.9	72.1

		Auto		15,481		15,080	69.5	74.5	68.2	73.9
	Homeowners			4,892		4,275	63.2	75.8	41.4	63.8
	Other(1)			2,316		2,147	68.1	70.7	62.5	67.4

		Total Allstate brand		22,689		21,502	68.0	74.4	61.8	71.2	23.5	22.5
Ivantage
	Standard auto			1,195		1,194	69.4	79.1	68.7	78.6
	Non-standard auto			163		89	84.7	109.0	84.0	109.0

		Auto		1,358		1,283	71.2	81.1	70.5	80.7
	Homeowners			494		470	76.7	75.1	60.1	64.7
	Other(1)			123		96	71.5	40.6	67.5	37.5

		Total Ivantage		1,975		1,849	72.6	77.5	67.7	74.4	29.3	32.5

Allstate Protection			$	24,664	$	23,351	68.4	74.6	62.4	71.5	23.9	23.3

(1): Other includes involuntary auto, commercial lines and other personal lines.
(2): Increases in the expense ratio for the three months ended December 31, 2003 compared to the same period in the prior year resulted from higher agent incentives, charitable contributions, marketing and employee-related expenses.

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

			Three Months Ended December 31,
			Pretax Reserve Reestimates					Effect of Pretax Reserve Reestimates on the Combined Ratio
			Est. 2003			2002		Est. 2003		Change
			($ in millions)
Auto			$	(44	)	$	35	(0.7	)	(1.3	)
Homeowners				30			28	0.5		—
Other				(17	)		8	(0.3	)	(0.4	)

	Allstate Protection			(31	)		71	(0.5	)	(1.7	)
	Discontinued Lines and Coverages			8			60	0.1		(0.9	)

		Property-Liability	$	(23	)	$	131	(0.4	)	(2.5	)

Allstate Brand			$	(45	)	$	34	(0.7	)	(1.3	)
Ivantage				14			37	0.2		(0.4	)

Allstate Protection			$	(31	)	$	71	(0.5	)	(1.7	)

			Twelve Months Ended December 31,
			Pretax Reserve Reestimates					Effect of Pretax Reserve Reestimates on the Combined Ratio
			Est. 2003			2002		Est. 2003		Change
			($ in millions)
Auto			$	(221	)	$	44	(0.9	)	(1.1	)
Homeowners				13			367	0.1		(1.4	)
Other				35			43	0.1		(0.1	)

	Allstate Protection			(173	)		454	(0.7	)	(2.6	)
	Discontinued Lines and Coverages			574			231	2.3		1.3

		Property-Liability	$	401		$	685	1.6		(1.3	)

Allstate Brand			$	(209	)	$	386	(0.8	)	(2.4	)
Ivantage				36			68	0.1		(0.2	)

Allstate Protection			$	(173	)	$	454	(0.7	)	(2.6	)

THE ALLSTATE CORPORATION
ALLSTATE FINANCIAL PREMIUMS AND DEPOSITS

		Three Months Ended December 31,						Twelve Months Ended December 31,
		Est. 2003		2002		Percent Change		Est. 2003		2002		Percent Change
		($ in millions)
Life Products
	Interest-sensitive life	$	323	$	243	32.9		$	1,090	$	990	10.1
	Traditional		105		108	(2.8	)		389		396	(1.8	)
	Other		177		159	11.3			647		586	10.4

			605		510	18.6			2,126		1,972	7.8
Annuities
	Fixed annuities—deferred		1,083		1,287	(15.9	)		4,834		4,457	8.5
	Fixed annuities—immediate		225		298	(24.5	)		842		789	6.7
	Variable annuities		596		492	21.1			2,151		2,297	(6.4	)

			1,904		2,077	(8.3	)		7,827		7,543	3.8
Institutional Products
	Indexed funding agreements		50		73	(31.5	)		440		348	26.4
	Funding agreements backing medium-term notes		601		—	—			2,268		1,462	55.1
	Other		—		26	(100.0	)		7		65	(89.2	)

			651		99	—			2,715		1,875	44.8
Bank Deposits			143		75	90.7			427		444	(3.8	)

Total		$	3,303	$	2,761	19.6		$	13,095	$	11,834	10.7

THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

			December 31, 2003 (Est.)			December 31, 2002
			(In millions, except par value data)
Assets
Investments
	Fixed income securities, at fair value (amortized cost $82,607 and $72,123)		$	87,741		$	77,152
	Equity securities, at fair value (cost $4,028 and $3,223)			5,288			3,683
	Mortgage loans			6,539			6,092
	Short-term			1,815			2,215
	Other			1,698			1,508

		Total investments		103,081			90,650
Cash				366			462
Premium installment receivables, net				4,386			4,075
Deferred policy acquisition costs				4,842			4,385
Reinsurance recoverables, net				3,121			2,883
Accrued investment income				1,068			946
Property and equipment, net				1,046			989
Goodwill				929			927
Other assets				1,878			984
Separate Accounts				13,425			11,125

		Total assets	$	134,142		$	117,426

Liabilities
Reserve for property-liability insurance claims and claims expense			$	17,714		$	16,690
Reserve for life-contingent contract benefits				11,020			10,256
Contractholder funds				47,071			40,751
Unearned premiums				9,187			8,578
Claim payments outstanding				698			739
Other liabilities and accrued expenses				8,283			7,150
Deferred income taxes				1,103			259
Short-term debt				3			279
Long-term debt(1)				5,073			3,961
Separate Accounts				13,425			11,125

		Total liabilities		113,577			99,788

Mandatorily Redeemable Preferred Securities of Subsidiary Trust				—			200
Shareholders' equity
Preferred stock, $1 par value, 25 million shares authorized, none issued				—			—
Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued, 704 million and 702 million shares outstanding				9			9
Additional capital paid-in				2,614			2,599
Retained income				21,641			19,584
Deferred compensation expense				(194	)		(178	)
Treasury stock, at cost (196 million and 198 million shares)				(6,261	)		(6,309	)
Accumulated other comprehensive income:
	Unrealized net capital gains and losses and net gains and losses on derivative financial instruments			3,125			2,602
	Unrealized foreign currency translation adjustments			(10	)		(49	)
	Minimum pension liability adjustment			(359	)		(820	)

		Total accumulated other comprehensive income		2,756			1,733

		Total shareholders' equity		20,565			17,438

		Total liabilities and shareholders' equity	$	134,142		$	117,426

(1): The adoption of FIN No. 46R caused long-term debt to increase by $1.04 billion in 2003. Of the increase, $691 million was recognized in the fourth quarter in connection with the consolidation of two investment management entities used to hold assets on behalf of third party investors. The remaining increase primarily related to the consolidation of an entity used to acquire a headquarters office building and up to 38 automotive collision repair stores, and the deconsolidation of an entity used to issue mandatorily redeemable preferred securities. Although consolidation was required under FIN No. 46R for the two investment management entities, Allstate has no direct legal ownership of the assets consolidated and no obligation to repay the related notes whose only recourse is to the assets of the individual investment management entities. Allstate's maximum loss exposure related to its investment in the two investment management entities is the current carrying value of its equity investment, which totaled $12 million at December 31, 2003.

THE ALLSTATE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

					December 31, 2003 (Est.)			December 31, 2002(1)
					(In millions)
Cash flows from operating activities
	Net income				$	2,705		$	1,134
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation, amortization and other non-cash items				(3	)		(62	)
		Realized capital gains and losses				(196	)		924
		Cumulative effect of change in accounting principle				15			331
		Interest credited to contractholder funds				1,846			1,764
		Changes in:
			Policy benefit and other insurance reserves			1,127			331
			Unearned premiums			546			617
			Deferred policy acquisition costs			(414	)		(309	)
			Premium installment receivables, net			(284	)		(99	)
			Reinsurance recoverables, net			(227	)		(190	)
			Income taxes payable			582			66
			Other operating assets and liabilities			(6	)		(89	)

				Net cash provided by operating activities		5,691			4,418

Cash flows from investing activities
	Proceeds from sales
		Fixed income securities				20,298			17,700
		Equity securities				2,700			3,892
	Investment collections
		Fixed income securities				6,652			5,447
		Mortgage loans				733			603
	Investment purchases
		Fixed income securities				(35,627	)		(31,553	)
		Equity securities				(3,351	)		(3,138	)
		Mortgage loans				(1,175	)		(927	)
	Change in short-term investments, net					419			(440	)
	Change in other investments, net(2)					56			(348	)
	Purchases of property and equipment, net					(169	)		(239	)

		Net cash used in investing activities				(9,464	)		(9,003	)

Cash flows from financing activities
	Change in short-term debt, net					(276	)		52
	Proceeds from issuance of long-term debt					410			599
	Repayment of long-term debt					(332	)		(338	)
	Contractholder fund deposits					10,373			9,484
	Contractholder fund withdrawals					(5,794	)		(4,036	)
	Dividends paid					(633	)		(582	)
	Treasury stock purchases					(153	)		(446	)
	Other					82			51

		Net cash provided by financing activities				3,677			4,784

Net (decrease) increase in cash						(96	)		199
Cash at beginning of year						462			263

Cash at end of year					$	366		$	462

(1): To conform to current period presentations, certain prior period balances have been reclassified.
(2): Change in other investments, net includes $46 million of cash held by the investment management entities included on the Consolidated Statements of Financial Position due to the initial adoption of FIN No. 46R. The adoption of FIN 46R also resulted in an increase to long-term debt and investment assets. However, since these changes are non-cash items, they had no impact to the Consolidated Statements of Cash Flows.

Definitions of Non-GAAP and Operating Measures

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

Operating income is income before dividends on preferred securities and cumulative effect of change in accounting principle, after-tax, excluding:

•: realized capital gains and losses, after-tax, except for periodic settlements and accruals on non-hedge derivative instruments which are reported with realized capital gains and losses but included in operating income,
•: amortization of deferred policy acquisition costs ("DAC"), to the extent that it resulted from the recognition of realized capital gains and losses, and
•: (loss) gain on disposition of operations, after-tax.

In the fourth quarter of 2003 it was necessary to revise our reconciliation of operating income to reflect the reclassification in the consolidated financial statements of the periodic settlements and accruals for non-hedge derivatives to realized capital gains and losses. With the adoption of Financial Accounting Standards Board Interpretation No. 46 in the third quarter of 2003, the mandatorily redeemable preferred securities of a subsidiary trust are deconsolidated, dividends on the preferred securities are no longer reported in the consolidated financial statements and the interest on the related junior debentures is prospectively recognized in interest expense and included in operating income.

Net income is the GAAP measure that is most directly comparable to operating income.

We use operating income to evaluate our results of operations and as an integral component for incentive compensation. It reveals trends in our insurance and financial services business that may be obscured by the net effect of realized capital gains and losses and (loss) gain on disposition of operations. These items may vary significantly between periods and are generally driven by business decisions and economic developments such as market conditions, the timing of which is unrelated to the insurance underwriting process. Moreover, we reclassify periodic settlements on non-hedge derivative instruments into operating income to report them in a manner consistent with the economically hedged investment or product attributes (e.g. net investment income and interest credited to contractholder funds) and thereby appropriately reflect trends in product performance. Therefore, we believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. We note that the price to earnings multiple commonly used by insurance investors as a forward-looking valuation technique uses operating income as the denominator. Operating income should not be considered as a substitute for net income and does not reflect the overall profitability of our business.

The following tables reconcile operating income and net income for the three months and twelve months ended December 31, 2003 and 2002.

For the three months ended December 31,

	Property- Liability						Allstate Financial						Consolidated						Per diluted share
	Est. 2003			2002			Est. 2003			2002			Est. 2003			2002			Est. 2003			2002
	($ In millions, except per share data)
Operating income	$	680		$	490		$	101		$	158		$	752		$	618		$	1.06		$	0.87
Realized capital gains and losses		111			(116	)		(17	)		(141	)		91			(246	)
Income tax benefit (expense)		(39	)		42			6			49			(33	)		88

Realized capital gains and losses, after-tax		72			(74	)		(11	)		(92	)		58			(158	)		0.09			(0.22	)
DAC amortization expense on realized capital gains and losses, after-tax		—			—			(10	)		(2	)		(10	)		(2	)		(0.02	)		—
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax		—			—			(5	)		(5	)		(5	)		(5	)		(0.01	)		(0.01	)
(Loss) gain on disposition of operations, after-tax		—			1			(20	)		(4	)		(20	)		(3	)		(0.03	)		(0.01	)

Income before dividends on preferred securities and cumulative effect of change in accounting principle, after-tax		752			417			55			55			775			450			1.09			0.63
Dividends on preferred securities of subsidiary trust, after-tax		—			—			—			—			—			(3	)		—			—
Cumulative effect of change in accounting principle, after-tax		—			—			(17	)		—			(14	)		—			(0.01	)		—

Net income (loss)	$	752		$	417		$	38		$	55		$	761		$	447		$	1.08		$	0.63

For the twelve months ended December 31,

	Property- Liability						Allstate Financial						Consolidated						Per diluted share
	Est. 2003			2002			Est. 2003			2002			Est. 2003			2002			Est. 2003			2002
	($ In millions, except per share data)
Operating income	$	2,327		$	1,629		$	449		$	556		$	2,662		$	2,075		$	3.77		$	2.92
Realized capital gains and losses		288			(496	)		(85	)		(432	)		196			(924	)
Income tax benefit (expense)		(96	)		182			32			145			(62	)		326

Realized capital gains and losses, after-tax		192			(314	)		(53	)		(287	)		134			(598	)		0.19			(0.84	)
DAC amortization expense on realized capital gains and losses, after-tax		—			—			(30	)		(1	)		(30	)		(1	)		(0.05	)		—
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax		—			—			(15	)		(3	)		(15	)		(3	)		(0.02	)		(0.01	)
(Loss) gain on disposition ofoperations, after-tax		3			6			(29	)		(4	)		(26	)		2			(0.04	)		—

Income before dividends on preferred securities and cumulative effect of change in accounting principle, after-tax		2,522			1,321			322			261			2,725			1,475			3.85			2.07
Dividends on preferred securities ofsubsidiary trust, after-tax		—			—			—			—			(5	)		(10	)		—			(0.01	)
Cumulative effect of change in accounting principle, after-tax		(1	)		(48	)		(17	)		(283	)		(15	)		(331	)		(0.02	)		(0.46	)

Net income (loss)	$	2,521		$	1,273		$	305		$	(22	)	$	2,705		$	1,134		$	3.83		$	1.60

In this press release, we provide guidance on operating income per diluted share for 2004 (assuming a level of average expected catastrophe losses used in pricing for the year). A reconciliation of this measure to net income is not accessible on a forward-looking basis because it is not possible to provide a reliable forecast of

realized capital gains and losses including periodic settlements and accruals on non-hedge derivative instruments, which can vary substantially from one period to another and may have a significant impact on net income. Because a forecast of realized capital gains and losses is not accessible, neither is a forecast of the effects of DAC amortization on realized capital gains and losses nor income taxes. The other reconciling items between operating income and net income on a forward-looking basis are (loss) gain on disposition of operations, after-tax, which we assume to be zero in 2004, and cumulative effect of changes in accounting principle, for which impacts are currently not determinable.

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

Operating income return on equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month operating income by the average of the beginning and end of the 12-month period shareholders' equity after excluding the after-tax effect of unrealized net capital gains. We use it to supplement our evaluation of net income and return on equity. We believe that this measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period: the after-tax effects of realized and unrealized capital gains and losses and the cumulative effect of change in accounting principle. Return on equity is the most directly comparable GAAP measure. The following table shows the two computations.

		For the twelve months ended December 31,
		Est. 2003		2002
		($ in millions)
Return on equity
Numerator:
	Net income	$	2,705	$	1,134

Denominator:
	Beginning shareholders' equity		17,438		17,196
	Ending shareholders' equity		20,565		17,438
	Average shareholders' equity	$	19,002	$	17,317

ROE			14.2		6.5

		For the twelve months ended December 31,
		Est. 2003		2002
		($ in millions)
Operating income return on equity
Numerator:
	Operating income	$	2,662	$	2,075

Denominator:
	Beginning shareholders' equity		17,438		17,196
	Unrealized net capital gains		2,602		1,789

	Adjusted beginning shareholders' equity		14,836		15,407
	Ending shareholders' equity		20,565		17,438
	Unrealized net capital gains		3,125		2,602

	Adjusted ending shareholders' equity		17,440		14,836
	Average shareholders' equity	$	16,138	$	15,122

Operating income ROE			16.5		13.7

Operating Measures

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

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

	Three Months Ended December 31,					Twelve Months Ended December 31,
	Est. 2003		2002			Est. 2003			2002
	($ in millions)
Premiums written	$	6,199	$	5,854		$	25,187		$	23,917
(Increase) decrease in Unearned Premiums		88		98			(581	)		(556	)
Other		15		(2	)		71			—

Premiums earned	$	6,302	$	5,950		$	24,677		$	23,361

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

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

	Three Months Ended December 31,				Twelve Months Ended December 31,
	Est. 2003		2002		Est. 2003		2002
	($ in millions)
Life and annuity premiums(1)	$	347	$	431	$	1,365	$	1,371
Deposits to contractholder funds(2)		2,528		2,103		10,373		9,484
Separate accounts and other		428		227		1,357		979

Total Premiums and deposits	$	3,303	$	2,761	$	13,095	$	11,834

(1): Life and annuity contract charges in the amount of est. $247 million and $230 million for the three months ended December 31, 2003 and 2002, respectively, and est. $939 million and $922 million for the twelve months ended December 31, 2003 and 2002, respectively, which are also revenues recognized for GAAP, have been excluded from the table above, but are a component of the Consolidated Statements of Operations line item "Life and annuity premiums and contract charges."
(2): Derived directly from the Consolidated Statements of Cash Flows.

New sales of financial products by Allstate exclusive agencies is an operating measure that we use to quantify the current year sales of financial products by the Allstate proprietary distribution channel. New sales of financial products by Allstate exclusive agencies includes annual premiums on new insurance policies, initial premiums and deposits on annuities, net new deposits in the Allstate Bank, sales of other company's mutual funds, and excludes renewal premiums. New sales of financial products by Allstate exclusive agencies for the twelve months ended December 31, 2003 and 2002 totaled est. $1.83 billion and $1.61 billion, respectively.

This press release contains forward-looking statements about our operating income for 2004. These statements are subject to the Private Securities Litigation Reform Act of 1995 and are based on management's estimates, assumptions and projections. Actual results may differ materially from those projected in the forward-looking statements for a variety of reasons. Weighted average rate changes and the annual impact of rate changes on premiums written in our Property-Liability business may be lower than projected due to a decrease in PIF. Loss costs in our Property-Liability business, including losses due to catastrophes such as hurricanes and earthquakes, may exceed management's projections. In addition, claim frequency could be higher than expected. Lower interest rates and equity market returns could increase DAC amortization, reduce contract charges, investment margins and the profitability of the Allstate Financial segment. We undertake no obligation to publicly correct or update any forward-looking statements. This press release contains unaudited financial information.

The Allstate Corporation (NYSE: ALL) is the nation's largest publicly held personal lines insurer. Widely known through the "You're In Good Hands With Allstate®" slogan, Allstate provides insurance products to more than 16 million households and has approximately 12,900 exclusive agencies and financial specialists in the U.S. and Canada. Customers can access Allstate products and services through Allstate agents, or in select states at allstate.com and 1-800-Allstate®. Encompass^SM and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. Allstate Financial Group includes the businesses that provide life insurance, annuity, retirement, banking and investment products through distribution channels that include Allstate agents, independent agents, worksite, financial institutions and broker-dealers.

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

Contact:

Michael Trevino
Media Relations
(847) 402-5600

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

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