We believe that through responsible investment of its assets, Allstate can have a positive impact on society. This principle has led to a policy that excludes certain kinds of investments from our portfolio. For example, we:

• Do not directly invest in tobacco companies
• Do not directly invest in liquor companies
• Do not invest in countries, governments, organizations, and individuals specified by the Office of Foreign Assets Control

Allstate also has commercial mortgage lending guidelines that take into account environmental factors. For commercial mortgage loans, Allstate requests its borrowers to comply with environmental laws and expects its borrowers to engage in sound environmental management practices. For example, Allstate requests a site assessment in compliance with the current industry standards in addition to reviewing relevant issues relating to flood plains, wetlands, radon, asbestos, lead-based paint and indoor air quality/mold control.

In the financial services sector, with the issue of subprime mortgages contributing to economic uncertainty, there is concern about corporate investment portfolios and their impact on earnings volatility. At the end of 2007, Allstate’s investment portfolio totals more than $118 billion and is highly diversified. It generates significant annual cash flow and has primarily high-quality fixed-income investments that back up our liabilities. Of the $8.7 billion in asset-backed securities investments that represent about 7 percent of our portfolio, $4 billion is in subprime residential mortgages. Of these, 93 percent are rated AAA or AA. We had unrealized losses at year-end 2007 of $502 million.

As part of our commitment to use our financial resources to strengthen communities, Allstate invests in municipal bonds that fund projects that improve infrastructures and extend vital services in local communities. We also invest in nonrated municipal bonds. These bonds are used to finance specialized, hard-to-fund projects in higher-risk communities. Over the years, these investments have funded new assisted living facilities, day care centers, libraries and hospitals. At the end of 2007, our investment portfolio included $25 billion in municipal bonds in communities that need investment capital. In addition to supporting community development, municipal bonds diversify our investment portfolio and create value for shareholders by contributing to our overall return on invested capital.

Allstate provides low-interest loans that support affordable housing and community development. These loans help families achieve first-time home ownership. For Allstate, supporting homeownership helps create a market for our products and services in the long term. Some examples include:

• Allstate invests in Neighborhood Housing Services of America (NHSA). NHSA is a leading national provider of affordable housing that helps families purchase their first homes and complete necessary home renovations. We significantly increased our commitments to NHSA over the last two years. The total of loans outstanding at the end of 2007 through NHSA was $47.7 million. Allstate’s overall financial commitment to NHSA—money that will be made available if called upon and if the request meets pre-determined criteria—is $ 93.6 million.
• We provide low-interest loans to help redevelopment of communities. Allstate provides long-term below-market-rate loans to established creditworthy institutions across America such as NHSA, Impact Community Capital or Local Initiatives Support Corporation (LISC). These loans support new affordable housing developments; office, commercial and retail properties; nursing homes, childcare and job training facilities; and new charter schools.
• Allstate revitalizes neighborhoods in markets where Allstate has an especially strong history. Allstate makes loans to help local chapters of national organizations such as LISC purchase and develop vacant lots; build new facilities that improve the quality of community life; and provide young adults with services that support job readiness, placement and training.

Allstate Bank is a member of Allstate Financial Group, the group of companies that serve 3 million households. Allstate Bank and its affiliates provide personal and home financing to customers and market a broad range of financial products and services through multiple distribution channels to make it easier for our customers to conduct business with us. In 2007 as part of the bank’s Community Reinvestment Act Performance Evaluation, the Office of Thrift Supervision, Department of the Treasury, rated the Bank’s community development performance as “exemplary.” Of particular note are the quality of community investments and loans and community development services, including significant employee time donated to providing financial expertise through a variety of organizations.

A number of initiatives at Allstate Bank correspond with Allstate’s commitment to investing its financial resources in community development. Allstate Bank provides submarket loans to support organizations that:

• Finance real estate for nonprofit agencies
• Work to rebuild low- and moderate-income neighborhoods
• Fund the child-care facility industry
• Provide permanent housing for homeless adults, families and people at risk

Allstate’s commitment to its Economically Targeted Investment Portfolio stands at $263 million at year-end 2007.