Allstate - You're in good hands

01/10/2006 Northbrook, Ill. -

The Allstate Corporation announced today new reinsurance agreements for its countrywide personal lines property and auto insurance business, excluding Florida, and for personal property excess losses in California for fires following earthquakes.

"The fundamental goal of Allstate's catastrophe management strategy is to enable our shareholders to earn an acceptable return on the risks assumed in our personal lines property business and to reduce the associated variability in our earnings," said Edward M. Liddy, chairman and CEO, The Allstate Corporation. "While in many areas of the country we are currently achieving returns within acceptable risk management tolerances, we continue to seek solutions to improve returns in areas that have known exposure to hurricanes, earthquakes and other catastrophes."

The new reinsurance agreements augment Allstate's existing reinsurance program and are summarized below:

Countrywide Catastrophe Aggregate Excess Reinsurance Agreement -- $2 billion coverage in excess of $2 billion of retained losses from:

• storms named or numbered by the National Weather Service
• earthquakes
• and fires following earthquakes.
• Agreement is effective June 1, 2006 for a term of one year.
• To date, Allstate has placed $750 million of a limit of $2 billion in excess of $2 billion of aggregate losses during the one-year contract term. The company plans to market the remainder of the limit during January 2006, except for at least 5% Allstate plans to retain. This catastrophe aggregate excess reinsurance agreement will apply to Allstate and Encompass brand personal auto and personal property policies ("Allstate Protection").

California Fire Following Agreement -- coverage not to exceed $1.5 billion for any one loss occurrence in excess of $500 million and $3 billion in total. Coverage is fully placed for Allstate Protection's personal property excess losses in California for fires following earthquakes. Agreement is effective February 1, 2006 and expires May 31, 2008. Allstate retains a 5% share of the agreement's limit.

• With respect to all loss occurrences under the California Fire Following Agreement, the agreement provides in total $3 billion of coverage for all qualifying losses without limitation except when a qualifying loss occurrence exceeds $2 billion. Then for 21 days no additional recovery can occur for any losses within the same seismic geographically affected area. The agreement allows for annual re-measurements, which may produce changes in retention as a result of increases or decreases in our exposure levels.

Allstate also announced changes to its existing multi-year individual state reinsurance program and treaties:

• We expect to exercise our right to increase the coverage limits in our New Jersey and Texas treaties by $100 million for each state treaty effective June 1, 2006.
• We are also considering additional reinsurance for Allstate Protection's personal property excess catastrophe losses in New Jersey, effective June 1, 2006. This new agreement could provide as much as $300 million of coverage in excess of the New Jersey multi-year reinsurance treaty limit on an annual basis.
• We also expect to terminate the existing treaties in the states of North Carolina and South Carolina on May 31, 2006.

We anticipate that the total cost of these agreements will be approximately $600 million per year or $150 million per quarter. This represents an increase of approximately $400 million per year or $100 million per quarter over our current cost once these agreements are fully implemented and effective. Based on the effective dates of these agreements, our costs are expected to increase to approximately $75 million in the second quarter of 2006 and to approximately $150 million in the third quarter of 2006. We continue to evaluate additional purchases of reinsurance to mitigate potential exposure to major hurricanes and earthquakes. Additional purchases, if any, are not included in our estimate of total cost.

"We will aggressively seek to include reinsurance costs in our premium rates in order to mitigate the impact of this increase," said Thomas J. Wilson, president and chief operating officer, The Allstate Corporation. "We also continue to study the efficiencies of our operations and cost structure, which may offset some portion of the increased reinsurance costs."

A high-level, graphic summary (PDF) of the current and proposed 2006 reinsurance program is available for download with this press release. Additional details on Allstate's entire reinsurance program are available in a current report on Form 8-K filed today with the Securities and Exchange Commission.

This press release contains forward-looking statements about changes in Allstate's reinsurance program, the related premium and reductions in costs. These statements are subject to the Private Securities Litigation Reform Act of 1995 and are based on management's estimates, assumptions and projections. The actual changes to the reinsurance program, related premium and cost reductions may differ materially from those discussed in this release, depending on ongoing negotiations between Allstate and participants in the reinsurance market, and the ability to reduce expenses to the desired level.

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 helps individuals in approximately 17 million households protect what they have today and better prepare for tomorrow through approximately 13,600 exclusive agencies and financial professionals in the U.S. and Canada. Customers can access Allstate products and services such as auto insurance and homeowners insurance through Allstate agencies, 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 provides life insurance, supplemental accident and health insurance, annuity, banking and retirement products designed for individual, institutional and worksite customers that are distributed through Allstate agencies, independent agencies, financial institutions and broker-dealers.

FOR MORE INFORMATION:
Michael Trevino, (847) 402-5600 e-mail this page