1999 was the year Allstate took bold steps to reposition itself for industry leadership—marked by a major commitment to technology and the Internet—in an effort to make our agents more successful and productive and our customers more satisfied. Simply put, Allstate is taking the lead in transforming our industry and setting new standards for consumer choice and convenience.

In 1999 we announced a groundbreaking initiative to enable consumers to reach us through the Internet or via a toll-free number, and to integrate that ease of access with the expertise and local presence of an Allstate agent. In addition, we announced significant acquisitions and new alliances to expand our scope in the independent agency, workplace and life and savings markets.

These programs and products are designed to significantly accelerate growth by broadening access to the company through important new distribution channels.

For Allstate, profitable growth is crucial. Competition in the insurance and financial services segments is fierce. And while the number of our policies in force increased 3 percent in 1999, auto premium rates declined and the severity and frequency of reported auto injuries increased. Allstate's 1999 results reflected these pressures. Our growth in written premiums was 4.5 percent, well below our stated annual goal of 8 to 10 percent. Our net income was $2.7 billion, down 17.4 percent from the year before.

As a result of these and other factors, our stock price in 1999 declined 37.5 percent, after having increased 185.2 percent over the previous 51/2 years, since we went public. This compared with a decline of 28.8 percent in the average 1999 stock price of peer companies in our industry segment.

At the present time property-casualty insurance is viewed as an unglamorous and slow-growth industry. But there are always good opportunities for smart, swift and aggressive companies in a slow-growth market. Our performance in some key measures far exceeds the industry's. For example, we have a far better combined ratio than the industry as a whole, reflecting our low loss costs due to superior claims management. We have a vibrant and vital Life and Savings business squarely positioned in a fast-growing market, providing life insurance products and investment opportunities. Rigorous capital management helped us generate an 18.4 percent return on equity, putting us in the top quartile of all property-casualty companies. And Allstate, unlike many of our mutual company competitors, is publicly traded, with the financial disciplines that stock ownership imposes.

The fact is Allstate has many sizeable advantages and assets from which to build. We have one of the best known brand names in the business. We have a work force of some 40,000 employees and more than 15,500 agents dedicated to excellence and growth. We distribute Life and Savings products through Allstate agents and life specialists, as well as banks, securities firms, independent agents and through direct response, including the Internet. In 1999 more than 34,000 producers sold our Life and Savings products and more than 35,000 producers sold our annuity products.

In addition, almost 4,000 independent agents sell CNA Personal Insurance and more than 13,000 independent agents sell non-standard auto insurance through our Deerbrook brand.

Most important, we have the right strategies in place to position the company strongly for the future. Our strategic road map dates back to 1995 with our spin-off from Sears, Roebuck and Co. Since going public, we have successfully strengthened the Allstate franchise and focused on the customer. We sold non-core businesses, such as our mortgage, reinsurance and commercial operations, and significantly improved our claims processes and costs. We took steps to reduce our exposure to catastrophes. And through extensive marketing research, we gained valuable insights into insurance buying habits so we could target the most profitable consumer segments. All this work has helped us achieve substantial increases in profitability over the last five years.