Investments

Allstate's strong balance sheet and disciplined financial management includes a highly diversified portfolio of investments. These assets include investment in public infrastructure and local businesses throughout America. Investing and serving customers at the local level strengthens communities and allows businesses to grow and flourish. For Allstate, these investments provide consistent returns for shareholders, improve quality of life for our employees and encourage a more favorable environment for our business.

Our Investment Policy

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.

Our Investments Portfolio

Allstate's broadly diversified investment portfolio totaling $96 billion at December 31, 2008 generates significant annual cash flow and has primarily high-quality fixed-income investments that back up our liabilities, of which 95.2% of the total fixed income portfolio was rated investment grade.

Municipal Bond Investments

As part of Allstate's commitment to use its financial resources to build and strengthen communities, we invest in municipal bonds issued by local governments and project authorities. These investments provide capital to support essential services supplied by governments, such as police and fire protection, as well as funding a diverse array of projects. These projects include assisted-living facilities, hospitals, day-care centers, libraries, airports, K-12 education, colleges and university buildings, mortgage loans to first-time and low-income borrowers, water and sewer services, power generation, and highway construction and maintenance. Also included in Allstate's portfolio are bonds whose proceeds are used to develop or revitalize economically distressed areas in targeted cities and rural areas. At the end of 2008, our investment portfolio included approximately $22 billion in municipal bonds in communities that need investment capital. In addition to supporting community development, municipal bonds diversify Allstate's investment portfolio and create value for shareholders by contributing to our overall return on invested capital.

Investing in Communities

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 2008 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

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.

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 $245 million at year-end 2008.