Allstate Reports 2008 Third Quarter Results

Business Wire, Oct 22, 2008

During the third quarter, Allstate sold 33% of securities identified as part of the targeted $3.3 billion risk mitigation program. These assets were sold at approximately 95% of the fair values reported at June 30, 2008. Also during the quarter, Allstate's macro-hedging program produced gains that partially offset investment losses.

Strong Capital and Liquidity Positions

Allstate maintains strong liquidity and capital supported by on-going catastrophe management actions and proactive investment risk mitigation and return optimization programs. As of September 30, 2008, the Company held capital totaling $16.9 billion, including $5.0 billion in invested assets at the holding company level, including Kennett Capital, Inc. These assets are available to meet general corporate purposes such as dividends, debt servicing and share repurchases and to support operating subsidiaries through capital contributions or intercompany borrowing arrangements. In October, Allstate's board of directors approved infusions of up to $1.25 billion of additional capital into Allstate Life Insurance Company ("ALIC") through Allstate Insurance Company and funded by the holding company.

The Company believes its current portfolio position and strong underlying operating cash flows provide sufficient liquidity to meet its needs. As of September 30, Allstate maintained $5.4 billion, or 5.1% of total investments, in same-day or next-day liquidity and $33.4 billion, or 31.9% of total investments, in assets that are generally saleable within ninety days. The Company also has access to a long-term, untapped revolving $1 billion line of credit available from a group of 13 banks through 2012. Allstate has had no commercial paper obligations outstanding in 2008 and no corporate debt coming due until $750 million is scheduled to mature in December 2009.

During the third quarter, Allstate further enhanced its liquidity position with a series of actions, including reducing its securities lending portfolio to $1.6 billion, shortening its investment portfolio duration, and early retirement of institutional markets deposits. In October, Allstate suspended its $2.0 billion share repurchase program and does not plan to complete it by the original target date of March, 2009. The Company will re-evaluate this program as market conditions develop in 2009. The number of shares repurchased under the program during the quarter was 9.9 million shares for $449 million.

"We've taken proactive and prudent steps to maintain strong capital and liquidity positions," said Don Civgin, Allstate's chief financial officer. "In these uncertain times we will remain vigilant. Our top priority is to ensure we have the capital and liquidity necessary to serve our customers and continue to deliver solid returns to our shareholders."

Continued Underlying Business Profitability

Allstate's Property-Liability business continued to produce strong underlying profitability. Favorable frequency combined with moderate severity to produce an underlying Property-Liability combined ratio of 85.9 for the quarter. Allstate Financial operating income declined to $88 million in the third quarter of 2008 from $147 million in the prior year quarter, reflecting lower investment spreads related to market conditions, proactive actions taken to improve liquidity and lower benefit spreads.