NORTHBROOK, Ill. — The Allstate Corporation reported financial results for the third quarter of 2011:

“Maintaining auto insurance profitability and proactively managing our investment portfolio enabled us to overcome an increase of $691 million in catastrophe losses from the third quarter of 2010 and still earn a profit,” said Thomas J. Wilson, chairman, president and chief executive officer of The Allstate Corporation.  “Progress was made in improving auto insurance profitability in New York and Florida and raising underlying returns in homeowners insurance.  A small decline in auto insurance policies during the last twelve months is related to the impact of improving profitability in New York and Florida and a 4% decline in homeowners policies. The Property-Liability underlying combined ratio of 88.9 for the first three quarters of 2011 continued to compare favorably with our full-year guidance range of 88 to 91.

“Allstate Financial’s results were solid and investment results were also strong in the quarter.  Allstate Financial’s operating income increased 24.1% from the prior year third quarter to $134 million in the third quarter of 2011 reflecting improved margins and lower expenses.  These improvements were partially offset by the managed reduction in the size of the fixed annuity business.  Proactive risk and return strategies enabled us to maintain the portfolio yield, realize net capital gains and increase the absolute level of fixed income unrealized gains in the quarter.

“We completed the $1 billion share repurchase program in the third quarter, and the acquisition of Esurance and Answer Financial in early October,” Wilson concluded.

Property-Liability Impacted by Catastrophe Losses, Underlying Profitability Within Guidance

Allstate’s Property-Liability combined ratio for the third quarter of 2011 was 104.8, reflecting the previously reported catastrophe losses of $1.1 billion, or 16.7 points.  During the period, Allstate experienced 23 catastrophe loss events, including Hurricane Irene and Tropical Storm Lee.  Excluding catastrophe losses and prior year reserve reestimates, the Property-Liability underlying combined ratio was 89.2 during the third quarter of 2011, consistent with the third quarter of 2010.  Total Allstate brand policies in force declined as of September 30, 2011 compared to the prior year quarter driven by standard auto and homeowners declines, but were partly offset by growth in the Emerging Business lines and Canada.

Allstate brand standard auto premiums written* declined by 0.8% from the prior year third quarter as increased average premiums were offset by lower policies in force.  Average gross premium increased 1.1% in the third quarter of 2011 compared to the third quarter of 2010, as rate increases were partially offset by reduced volumes in New York and Florida where average premiums are above the countrywide average.  Policies in force declined during the quarter, consistent with the company’s expectation, as growth was balanced with a focus on maintaining auto profitability.  New issued applications declined 13.2% in the quarter when compared to the prior year, while retention improved to 89.1 from 88.7 in the third quarter of last year.  The Allstate brand standard auto combined ratio was 94.2, 1.0 points higher than the third quarter of 2010.

Allstate brand homeowners premiums written increased 1.5% in the third quarter of 2011 compared to the same period a year ago, as a 5.0% increase in average gross premium was partly offset by a 4.2% decline in policies in force.  Rate increases averaging 13.9% were approved in 15 states during the third quarter, as Allstate continued to take actions to improve homeowners returns.  Policies in force declined reflecting restrictions in new business and, to a lesser degree, the decision not to offer continuing coverage to some policyholders.  The Allstate brand homeowners combined ratio was 131.9 for the third quarter of 2011 as catastrophe losses impacted the combined ratio by 55.8 points.  Excluding the impact of catastrophes and prior year reserve reestimates, the Allstate brand homeowners underlying combined ratio was 73.3 in the third quarter of 2011, compared to 75.0 in the third quarter of 2010.

Allstate Financial Strategy Produces Improved Financial Results

Allstate Financial’s strategy of reducing concentration in, and improving the profitability of, investment spread products, expanding the sales of underwritten products through Allstate agencies and growing Allstate Benefits resulted in improved financial results.  Operating income increased to $134 million in the third quarter, which was 24.1% above the third quarter of 2010.   Net income increased to $183 million in the third quarter of 2011 compared to $85 million in the same quarter of 2010.

Allstate Financial premiums and contract charges were essentially flat to the prior year quarter as growth in underwritten products was offset by a decline in annuity sales.  Premiums and contract charges on products sold through Allstate agencies were 5.3% higher than the prior year quarter.  Deferred fixed annuity contractholder funds declined $4.0 billion, or 13.4%, as ofSeptember 30, 2011 compared to September 30, 2010, as surrenders and maturities outpaced new sales.  Allstate Benefits’ premiums and contract charges were 2.7% higher than the third quarter of 2010.

Operating income was $26 million higher than the third quarter of 2010 as increases in the investment spread and lower expenses were only partly offset by declines in the benefit spread.  The investment spread increased 11.8% to $142 million in the third quarter when compared to the prior year third quarter, as actions to improve investment portfolio yields and lower crediting rates on annuities and interest-sensitive life insurance more than offset the effect of a continued decline in spread-based business in force.  The benefit spread decreased to $134 million in the third quarter from $141 million in the 2010 third quarter, due primarily to unfavorable mortality experience on annuities and life insurance, partly offset by higher profitability and growth at Allstate Benefits and higher contract charges on interest-sensitive life insurance.  The improvement in net income was due to net realized capital gains in the third quarter, versus net realized capital losses in the third quarter of last year, and increased operating income.

Proactive Management of Investment Portfolio Maintains Yield and Return

Allstate’s proactive management of risk and return during the first nine months of 2011 was focused on enhancing yields and total risk adjusted returns.  The fixed income yields were maintained, despite lower interest rates, by increasing corporate bond allocations, reducing investments in government securities and slightly lengthening duration.  Interest rate derivative positions, which were used for overall risk management purposes in 2010, were also terminated in 2011.  Additional actions to manage risk included reducing select exposures to municipal bonds and European Union banks and reallocating portions of below investment grade exposures from structured securities to high-yield corporate bonds.

Allstate’s consolidated investment portfolio totaled $97.5 billion at September 30, 2011 compared to $100.5 billion atDecember 31, 2010, as the Allstate Financial portfolio declined in size with the reduction in the fixed annuity business.   Net investment income was $994 million for the third quarter of 2011, which was 1.1% below the prior year quarter primarily due to lower portfolio balances.  The total portfolio yield was 4.5% for the third quarter of 2011, which was higher than the prior year quarter and consistent with the second quarter of 2011.  Net realized capital gains for the third quarter of 2011 were $264 million, pre-tax, compared to a net realized capital loss of $144 million, pre-tax, in the third quarter of 2010.  Realized gains in the current year quarter were primarily due to sales of foreign government and U.S. Treasury securities, which were partly offset by losses on the valuation of interest rate derivatives resulting from lower interest rates and impairments on real estate-related and equity securities.   Net unrealized capital gains totaled $2.4 billion, pre-tax, at September 30, 2011 compared to $1.4 billionat December 31, 2010, as the benefit of lower interest rates was only partially offset by realized gains.

Share Repurchases Total $308 Million, Completing $1 Billion Program

“We completed our share repurchase program during the third quarter bringing total share repurchases to $20 billion over the last 17 years,” said Don Civgin, executive vice president and chief financial officer.  Allstate repurchased shares totaling $308 million during the third quarter of 2011, completing the $1 billion share repurchase program authorized in November of 2010.

Statutory surplus at September 30, 2011 was an estimated $14.4 billion for Allstate Insurance Company, including $3.7 billionat Allstate Life Insurance Company.  This compares to Allstate Insurance Company statutory surplus of $15.1 billion at June 30, 2011 and $15.4 billion at December 31, 2010.  During the third quarter of 2011, Allstate Insurance Company paid a $200 million dividend to the holding company.  Deployable assets at the holding company level totaled $3.4 billion at September 30, 2011 compared to $3.5 billion at June 30, 2011 and $3.8 billion at December 31, 2010.

“Book value per share totaled $35.56 at September 30, 2011, compared to $35.95 at June 30, 2011 and $35.48 at September 30, 2010.  Strong auto profitability, realized capital gains and an increase in unrealized gains on the fixed income portfolio so far this year have offset the impact of high catastrophe losses and a decline in the value of our equity portfolio,” Civgin concluded.

Visit www.allstateinvestors.com to view additional information about Allstate’s results, including a webcast of its quarterly conference call and the presentation discussed on the call.  The conference call will be held at 9 a.m. ET on Tuesday, November 1.

The Allstate Corporation (NYSE: ALL) is the nation’s largest publicly held personal lines insurer known for its “You’re In Good Hands With Allstate®” slogan.  Now celebrating its 80th anniversary as an insurer, Allstate is reinventing protection and retirement to help nearly 16 million households insure what they have today and better prepare for tomorrow.  Consumers access Allstate insurance products (auto, home, life and retirement) and services through Allstate agencies, independent agencies, and Allstate exclusive financial representatives in the U.S. and Canada, as well as via www.allstate.com and 1-800 Allstate®.

Forward-Looking Statements and Risk Factors

This news release contains forward-looking statements about our outlook for the combined ratio excluding the effect of catastrophes and prior year reserve reestimates for 2011.  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 based on the risk factors described below.

• Premiums written and premiums earned, the denominator of the underlying combined ratio, may be materially less than projected.  Policyholder attrition may be greater than anticipated resulting in a lower amount of insurance in force.
• Unanticipated increases in the severity or frequency of standard auto insurance claims may adversely affect our underwriting results.  Changes in the severity or frequency of claims may affect the profitability of our Allstate Protection segment.  Changes in bodily injury claim severity are driven primarily by inflation in the medical sector of the economy and litigation.  Changes in auto physical damage claim severity are driven primarily by inflation in auto repair costs, auto parts prices and used car prices.  The short-term level of claim frequency we experience may vary from period to period and may not be sustainable over the longer term.  A decline in gas prices, increase in miles driven, and higher unemployment are examples of factors leading to a short-term frequency change.  A significant long-term increase in claim frequency could have an adverse effect on our underwriting results.

We undertake no obligation to publicly correct or update any forward-looking statements.  This news release contains unaudited financial information.