5-Year Summary of Selected
Financial Data

Condensed Consolidated
Income Statements

Condensed Consolidated
Balance Sheets

Condensed Consolidated
Statements of Cash Flow

Consolidated Financial
Highlights

Property-Liability Highlights

Life and Savings Highlights

Property-Liability premiums written were $20.4 billion in 1999, an increase of $874 million from 1998. The improvement in written premiums was driven by increased sales of auto and homeowners policies and the impact of the acquisition of CNA personal lines. Premiums written in our core lines of auto and homeowners increased 3 percent and 9 percent respectively. The increase in auto business was adversely affected by lower average premiums and the impact of auto reform in New Jersey. The improvement in homeowners premiums resulted from increases in new business and higher average premiums.

Property-Liability underwriting income decreased 60 percent from 1998 due to higher loss costs and operating expenses and the impact of restructuring and acquisition charges. The combined ratio for the year was 97.4 [or 93.3 excluding the effects of catastrophes], well below industry averages.

Property-Liability investments decreased slightly from 1998 reflecting the impact of rising interest rates on the value of fixed income securities. Investment income increased 2 percent to $1.8 billion in 1999. Income earned from investments continues to be affected by lower investment yields and the effect of dividends paid to The Allstate Corporation. Realized capital gains for the year increased 18 percent due primarily to gains on sales of equity securities during the first half of the year.

The property-liability industry operates in a fiercely competitive environment. The personal lines industry is expected to grow at a 3 to 4 percent rate and our goal is to continue to outperform the industry and our competitors. To grow our top line we must increase sales of our core auto and homeowners lines through our exclusive agency force and also through new channels. Our new business model will allow us to integrate sales and service to our customers and leverage the strongest brand name in the industry. By adding new access points, such as the Internet, direct call centers and an expanded independent agency strategy, customers will be able to access us when, where and how they want. The combination of the added convenience along with competitive pricing will allow us to attract new customers while retaining our current customers. Although future medical and other claim costs may experience inflationary pressure, we continue to refine and improve our claim settlement processes in order to control these costs, resulting in a loss ratio that is already better than the industry average.