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Letter to the Editor

Allstate Reports 2003 Q4 71% Increase in Net Income EPS and 22% Increase in Operating Income EPS

Property-Liability underwriting income increased an astounding 272 percent or $353 million in the fourth quarter to $483 million from $130 million in the fourth quarter of 2002 due to higher premiums earned and continued favorable auto and homeowners loss frequencies, partially offset by higher catastrophes.

Catastrophe losses in the fourth quarter increased to $412 million compared to $237 million in the fourth quarter of 2002. The impact of catastrophe losses on the combined ratio increased to 6.5 pts from 4.0 pts in the fourth quarter of 2002. Allstate Financial had premiums and deposits(1) of $3.30 billion, 20 percent over the prior year fourth quarter.

The Board of Directors declared a quarterly dividend of $0.28 per share, which is a 22 percent increase from the previous quarter. The board also approved a $1 billion increase of the current share repurchase program, which has $350 million remaining. The expanded program is expected to be completed in 2005.

"Allstate had a strong quarter and an outstanding year," said Chairman, President and CEO Edward M. Liddy. "I am very pleased with our performance in the fourth quarter, which showed good top line growth, strong unit growth for Allstate brand standard auto and homeowners and outstanding bottom line results.

"Just as impressive were our results for the entire year. Compared to 2002, net income more than doubled to $2.7 billion, consolidated revenues were up almost 9 percent to $32.1 billion, and operating income was up 28 percent to $2.7 billion. And looking at our results since becoming a public company more than 10 years ago, 2003 marked a year in which we achieved the second highest net income per diluted share, the largest amount of written premium and the highest operating income (in total dollars and per diluted share), all while experiencing the largest amount of catastrophe losses since 1994, which included the Northridge earthquake."

Liddy continued, "New business growth in our Allstate brand standard auto and homeowners insurance lines was strong. Standard auto and homeowners new business premiums written increased 31 percent and 39 percent, respectively, over the fourth quarter of 2002. In addition, policies in force for these two lines continued a trend that began in the second quarter of 2003 by showing sequential positive unit growth of 1.0 percent and 1.3 percent, respectively, compared to the third quarter.

"Overall, I am very optimistic about our ability to continue the momentum we generated over the past two years and believe strongly that we can continue to deliver excellent value to our shareholders. We have added $1 billion to our share repurchase program, significantly increased our dividend, continue to maintain a strong competitive position in all our businesses and we know how to execute. More than ever before, 'You're in good hands with Allstate,'" Liddy concluded.

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