The Allstate CorporationSummary Annual Report

2004

YEARS LIKE 2004 BRING OUT

THE BEST IN

ALLSTATE.

IFC

Net Income Per Diluted Share

Operating Income

Revenues

Return on Equity

Book Value Per Diluted Share

Shareholders’ Equity

Revenues rose 5.6 percent to $33.9billion in 2004. Revenues indicateAllstate’s total premium and invest-ment results.

Net income per diluted share, whichincreased 18.5 percent in 2004, dividesnet income by the number of weightedaverage diluted shares outstanding. Itdemonstrates the growth of net incomeduring the year that is attributable toeach share of stock.

In 2004, operating income rose to arecord $3.1 billion. This is a commonmeasure used by the investment commu-nity to analyze our results. Operatingincome reveals trends in our insuranceand financial services business that maybe obscured by business decisions andeconomic developments unrelated to theinsurance underwriting process.

2004 2003

15.0% 14.2%

Return on equity, which measures howwell Allstate used shareholders’ equity togenerate earnings, increased to 15.0percent in 2004 from 14.2 percent in2003.

($ in millions) %2004 2003 change

$ 33,936 $ 32,149 5.6

%2004 2003 change

$4.54 $3.83 18.5

($ in millions) %2004 2003 change

$3,091 $2,662 16.1

Shareholders’ equity, which is thecompany’s total assets minus totalliabilities, indicates the value of theownership interest of Allstate share-holders. It increased 6.1 percent in2004 to $21.8 billion from $20.6billion in 2003.

($ in millions) %2004 2003 change

$21,823 $20,565 6.1

Book value per share, which rose 9.2percent in 2004, is shareholders’ equitydivided by the number of diluted sharesoutstanding on December 31. Thisdemonstrates an increasing ownershipinterest in Allstate on a per share basis.

%2004 2003 change

$ 31.72 $ 29.04 9.2

Highlights: In 2004, Allstate incurred $2.0 billion in losses relatedto the four hurricanes in the Southeastern U.S. Nevertheless, net incomegrew to $3.2 billion. Operating income* increased by 16.1 percent to$3.1billion. We generated a record $33.9 billion in total revenues.And we delivered a 15 percent return on equity.

*Measures we use that are not based on generally accepted accounting principles (non-GAAP) are definedand reconciled to the most directly comparable GAAP measure, and operating measures we use are definedin the “Definitions of non-GAAP and Operating Measures” section on page 13 of this report.

Edward M. Liddy Chairman, President and Chief Executive Officer

1

Dear Fellow Shareholders:

Last fall I visited Florida with Tom Wilson, presidentof our Allstate Protection business. Four hurricanes hadjust ravaged the state over six devastating weeks. As weviewed the overwhelming damage, we knew that 2,300claim adjusters were reaching out to customers. At thatmoment, three thoughts came to mind. Insurance plays a critical role in our lives. Scale and financial strengthreally count in this business. And we know how torespond when customers and communities need us most.

People come first. That’s Allstate’s stand.

2

For Allstate, transparency means giving investors clear and easyaccess to all the information they need to assess our performance. Thisfinancial scorecard demonstrates our progress in executing our “better,bigger, broader” strategy.

3,000

6,000

9,000

12,000

15,000

800

1,600

2,400

3,200

4,000

7,000

14,000

21,000

28,000

35,000

3.0

6.0

9.0

12.0

15.0

.80

1.60

2.40

3.20

4.00

.80

1.60

2.40

3.20

4.00

20042003200220012000

20042003200220012000

1.60

2.95

4.54

3.83

1.60

4.41

3.77

2.922.68

2.06

13.0

6.7 6.5

14.215.0

29,134 28,86533,936

29,57932,149

2,0041,492

3,091

2,075

2,662

Non-proprietary channels Proprietary channel

11,217

13,07210,789

9,7709,335

12,245

15,919

13,09511,83410,605

1,0282,8472,3062,0641,270

Net Income Per Diluted Share(in dollars)

Net income per diluted share divides net income by the number of weighted average diluted shares outstanding. Itdemonstrates the growth of net incomeduring the year that is attributable toeach share of stock.

Operating Income Per Diluted Share* (in dollars)

Operating income reveals trends in ourinsurance and financial services busi-ness that may be obscured by businessdecisions and economic developmentsunrelated to the insurance underwritingprocess.

Return on Equity(percent)

Return on equity measures how wellwe used shareholders’ equity to generate earnings.

Revenues($ in millions)

Revenues rose 5.6 percent to $33.9billion in 2004. Revenues indicate ourtotal premium and investment results.

Operating Income($ in millions)

Operating income reveals trends in ourinsurance and financial services busi-ness that may be obscured by business decisions and economic developmentsunrelated to the insurance underwritingprocess.

Premiums and Deposits*($ in millions)

We use this measure to analyze production trends for AllstateFinancial sales.

BetterWe’re becoming moreefficient and profitablein our operations and in our relationships withcustomers.

BiggerOur goal is to drive topline growth in a way thatalso delivers bottom lineprofits.

BroaderWe are expanding in thelife insurance, retirementand investment productsmarketplace.

*See page 13

We also know how to deliver reliable returns andprofitable growth for investors. In 2004 we setmany performance records. And over time, we’vedemonstrated that Allstate is an exceptionalinvestment because of the market we serve, thestrategy we’re successfully executing and thelong-term value our efforts create. Importantly,we understand the critical role that careful capital management, responsible governanceand doing the right thing in our communitiesplay in our ongoing success.

2004 brought out the best in Allstate. By meeting the challenges from nature and themarketplace, we confirmed the value of ourpromise, our products and our expertise. Wealso gave you a yardstick for measuring yourcompany’s capacity for profitable growth –even in the wake of unusually severe catastro-phes. Last year we incurred $17.8 billion intotal Property-Liability insurance claims and

claims expense. We generated $33.9 billion intotal revenues – an all-time high.

Net income per diluted share rose 18.5 percentto $4.54. Operating income rose 16.1 percent to$3.1 billion and operating income return on equity*was 17.0 percent. We raised the dividend paidon our common stock by 22 percent, completedour repurchase of $1.5 billion in stock a yearahead of schedule and announced a new, two-year $4.0 billion share repurchase program.

These results and actions clearly demonstrateour determination to use your capital effectively.The market responded favorably as our stock

price reached a then all-time high closing priceof $51.76 on December 30, 2004.

A Profitable MarketI’m often asked how Allstate can deliver suchstrong performance in mature industries likeinsurance and financial services. Part of theanswer is knowing where the best opportunitiesexist – and what it takes to win customers. TheU.S. personal auto and homeowners market com-prises approximately 111 million households, morethan 169 million insured vehicles and approxi-mately $205 billion in annual premiums. Moststates and banks require consumers to have insurance in order to operate a car or buy ahome. So each year gives us fresh opportunitiesto expand the more than 16 million householdsthat are part of the Allstate family. We also servean increasing share of our customers’ personalfinancial services needs through our life insur-ance, retirement and investment products.

Within a few years, millions of Baby Boomerswill start to reach retirement age. That meansthere’s a solid opportunity to grow revenues and earnings, especially as economic conditionsimprove.

Within the insurance market, several demographicsegments offer especially high growth potential.The personal lines insurance market mirrors this country’s changing ethnic mix and shiftingpopulation patterns, and we’re seizing theseopportunities in a variety of ways. There’s alsocontinuing growth in single-person householdsand increasing sophistication among consumersaged 25-34. In addition, many consumers take

Allstate knows where the best market opportunitiesexist. We’re executing a consistent strategy to driveprofitable growth. We’re acting with integrity andinvesting our capital wisely. As a result, we’re creating long-term value for shareholders.

3

Making an informed invest-ment decision is clear whenyou understand how marketfocus and disciplined strategycreate value.

*See page 13

44

Moving faster than the market. That’s our stand.

fewer risks and have fewer, less severe claims.For these high lifetime value customers, theinsurable assets we help protect – and the valueof these relationships – increase over time.

We’re well-positioned to find and serve thesesegments of the market. Each year, more con-sumers want our financial strength behindthem. They’re drawn to our diverse line of com-petitively priced insurance products. And theyvalue their relationships with agents and thework we do to support their communities.

As the Baby Boom population ages, middle-income customers will require not just protectionfor today, but preparation for tomorrow. Thesecustomers see the value of diversified investmentportfolios that include retirement-oriented finan-cial products in addition to life and long-term care insurance. And they’re looking to consolidatetheir relationships with experienced professionals.

Through our agent and non-proprietary sales networks, we’re targeting those who are activelysaving, in an effort to increase our share of theirlife, savings and retirement business. Total premi-ums and deposits for Allstate Financial in 2004rose to a record $15.9 billion, a 13.4 percentcompound annual growth rate from 1999 to2004, a clear sign the market is responding toour life insurance, retirement and investmentproducts.

To protect our financial strength and yours, wemust also manage several variables that canaffect our market – and our performance. Naturalcatastrophes are part of our business, and weconstantly refine our business to help protect ourcustomers and manage our financial exposure. InFlorida, for example, we’re working closely withstate officials to provide better insurance protec-tion against hurricanes. We hope to have in placebefore the next hurricane season an improvedpublic/private partnership that more effectivelyprotects consumers and investors. We also moni-

tor regulation, competition and claim trendsstate-by-state. This analysis helps us win profitablemarket share by delivering highly competitivepricing, especially to our target customers.

With this disciplined approach, policies in forcefor our Allstate brand auto insurance and home-owners policies sustained a path of growth,demonstrating steady increases over the pastyear. Our aggressive, focused marketing effortshave helped convince one million auto customersto switch to Allstate. And Allstate brand cus-tomer retention closed 2004 at near record lev-els. All these trends indicate that we’re turningmarket knowledge into competitive advantage.

A Consistent StrategyIt’s my job to make sure Allstate has the rightstrategy, people and infrastructure to seize ourmarket opportunities. This enables us to win inthe marketplace and deliver the value you

expect. Sometimes, that means taking a boldnew direction, as we did five years ago whenwe reorganized our agency distribution system,significantly increased our investment in tech-nology and initiated more sophisticated TieredPricing. Since then, we’ve stayed the course,and the results have been terrific. Over the lastfive years, you have seen compound annualgrowth rates of 11.2 percent in operatingincome per diluted share and 19.0 percent in your common stock total return.

In 2004 we focused on several key areas toimprove profitability, increase scale and financialstrength and capture a larger share of theinsurance and financial services marketplace.

More precise underwriting helps us segmentcustomers, better match the premiums individu-als pay for the risks they represent and win prof-itable market share. We continue to refine ourTiered Pricing models, which include ourStrategic Risk Management (SRM) tool, adding

5

Allstate is growing its share of high lifetime valuecustomers. We’re paying special attention to those customers with favorable claim histories. And we’retargeting underserved middle-income consumers whohave a growing need for retirement-oriented financialservices products.

Managingfinancialexposure

Servingmultiplemarketsegments

Diverse,competitivelypriced products

Aggressive,focusedmarketing

Over one million autoinsurance customersswitched to Allstate in2004. Allstate is position-ing itself to retain lifelongrelationships.

▼

Winningprofitable customers.

That’s our stand.

6

7

Tiered Pricing helpsensure that Allstatedoesn’t trade profit forgrowth by identifyingcustomers who maygenerate high valueover time.

▼

new and enhanced variables as competitors continue to adopt tiered rating programs. TieredPricing helps us attract customers that have thepotential to generate greater value over time, sowe can compete vigorously for their business. Aswe gain market share within this segment andmanage expenses carefully, we’re steadily build-ing a higher quality, increasingly profitable prop-erty and casualty portfolio. The evidence: steadyincome growth and a Property-Liability combinedratio that improved to 93.0 percent in 2004 from94.6 percent in 2003. We expect to continue tobenefit from our Tiered Pricing as it expands forboth auto and homeowners in 2005.

Allstate’s superior claim management sharpensour competitive edge in two important ways. Itcreates loyalty by forging strong bonds withconsumers during their time of need. It alsoprotects our company’s assets – and con-tributes to profitability – by more effectively

managing loss costs, keeping those costsbelow industry averages. In 2004 we deliveredon our claim promises, improving our claim sat-isfaction ratings while sustaining our severityadvantage versus the industry overall. Andsince 1996 our bodily injury claim experiencehas averaged 14 points lower than the industryoverall, a significant competitive advantage. Thisperformance testifies to our efficient claimoperations, but it’s not enough. Our NextGeneration Claim System program, now underdevelopment, will help us build on our alreadystrong claim performance while also giving cus-tomers an even better claim experience.

Allstate Protection’s powerful distributionengine gives us the scale to reach consumersacross the country. In 2004 we invested innational and local marketing and advertising toraise our visibility and drive sales across ourexclusive agent, independent agent and directchannels. We worked on several fronts to support some 70,000 employees, agency

owners and their licensed sales professionals,and financial specialists whose knowledge and experience we depend on to exceed ourcustomers’ expectations.

For example, to reinforce our relationship withexclusive agents, we established an agencyadvisory board to help us solve key businessissues. We restructured their compensationplans to better align agency success with thecompany’s mission. We invested in education,technology and operational support to helpthem grow their agencies. The increase in exclu-sive agents and support staff of 11.7 percent in2004 demonstrates that Allstate delivers astrong value proposition to our agency channel.

We also expanded our relationships with independent agents. This segment of the marketcurrently generates approximately one-third of allU.S. personal lines premiums. Simpler processes

and highly competitive pricing will help us win amuch greater share of their business.

In addition, our direct channel – which comple-ments our exclusive agency network to deliverconvenience and local support – handled morethan 6.5 million sales or service calls, and supported 32 million visits to allstate.com andmore than 8 million self-service transactions.

At Allstate Financial, we have a growing opportunity to help middle- and upper-incomecustomers achieve long-term financial security.We have one of the strongest distribution networks in the industry – more than 13,000Allstate agents and Exclusive FinancialSpecialists, as well as nearly 50,000 producingbroker dealers, financial institutions, independ-ent agents and financial advisors. They havehelped us become one of the largest compa-nies in the financial services industry, withmore than $94 billion in assets. In 2004 weachieved record retail, institutional and total

Powerfuldistributionengine

Superior claimmanagement

Preciseunderwritingand risk management

BuildingAllstateFinancial

Enhancingthecustomerexperience

We have defined a consistent strategy to become betterand bigger by achieving operating efficiencies anddriving profitable growth. And we continue to broadenour relationship with customers. We have been executingthis strategy with relentless discipline, and these effortsare rewarding you with steady performance.

8

There is more than one way to deliver great value.

That’s our stand.

8

Premiums and Deposits. New sales of financialproducts by Allstate exclusive agenciesincreased 24.0 percent to $2.27 billion in2004, and have grown at a compound annualrate of 53.0 percent since 2000. And we madesolid progress toward becoming an opera-tionally excellent product manufacturer, thusestablishing a strong foundation to accelerateprofitable growth. We will continue to make iteasier to do business with us and focus onfewer products that are developed from a com-mon platform to achieve greater scale andprofitability. We will also deepen relationshipswith our most profitable and productive distri-bution partners, streamline processes andleverage technology to improve overall effectiveness and efficiency. We expect thisstrategy – of simplifying, standardizing andstrengthening our business – will help usachieve the necessary scale to increase operating income in the future.

A Leader in ValueAllstate is a company that does much more thancollect money, settle claims and return a profit.Each year, we find new ways to create lastingvalue for the shareholders, customers and com-munities we serve. The inherent customer valuethat our business delivers and the caring culturethat our work has created make us better cor-porate citizens – and a better and more valuablecompany.

When thinking about lasting value, investorsshould focus on our proven record of capitalmanagement, where we have demonstrated theability to invest in areas that will drive growthand generate solid returns. Here, Allstate hasan exceptional track record. Since our initialpublic offering in 1993 through the end of2004, the total shareholder return on our stockhas averaged 13.7 percent on a compoundannual basis. Equally impressive, over the sameperiod the total value of Allstate’s return toshareholders exceeded both the Standard &Poor’s Property & Casualty and Standard &Poor’s 500 indices. That’s solid evidence that

we are using shareholders’ equity effectively todeliver profitable returns and strong earnings,and that we are managing a company built forlong-term value.

Investors and regulators also value Allstate’scommitment to sound governance and financialtransparency. The exemplary governance practices adopted by our board of directors are reflected in the very solid rankings andreports we receive from third-party governancerating services. We also benefit from a seniormanagement team whose actions set a tone ofintegrity, accountability and discipline that runsthroughout our company. Our strong corporatereputation has served the company well in theface of fast-changing business, legislative andregulatory environments.

We are equally proud of the value we create bygiving back to the people and communities we

serve. For example, the company matched con-tributions by its employees, agents and agencystaff of some $760,000, to bring the totalAllstate donations to more than $1.5 million for the tsunami disaster recovery efforts inSoutheast Asia. The future of our society – and of our company – depends on stable com-munities that nurture individual achievement.Allstate makes a difference by helping buildsafe and vital communities; by paving the wayfor economic empowerment; and by encourag-ing greater tolerance, inclusion and diversity.

At December 31, 2004, we had more than $30.5billion invested in municipal bonds and low-interestloans to strengthen urban communities. ThroughThe Allstate Foundation, we provided some $14million in grants to 700 not-for-profit organiza-tions across the country. In addition, Allstate agen-cies awarded Foundation grants to more than1,800 local community organizations. And ouremployees and agents volunteered their time andtalents to thousands of national and local causes.

Continuouslyimprovingresults

Wise capital management

Governanceand financial transparency

Committed to community

Allstate measures value in many ways. We have generated long-term financial value for shareholders bymanaging and investing our capital responsibly. Wecreate value for communities by understanding whatmatters and by showing we care. In the process, we forgelong-term relationships with customers.

In Florida, we put our car-ing culture on display inmany ways. We logged75,000 overtime hours incall centers, created25,000 claim reports andcut 42,000 checks. Wealso gave teddy bears tohundreds of kids to startthe healing.

▼

9

Dan HaleSenior Vice President andChief Financial OfficerDevelops financialstrategy and ensuressound governancepractices, adequatefinancial controls,appropriate reportingtransparency and disciplined capitalmanagement.

Joan M. CrockettSenior Vice President, Human ResourcesDevelops and imple-ments workforcestrategies to attract,retain and motivatethe best talent to drivebusiness strategy.

Thomas J. WilsonPresident,Allstate ProtectionDrives innovation andcultural change tomake AllstateProtection the indus-try leader in profitablegrowth and customerloyalty.

Ronald D. McNeilSenior Vice President,Protection DistributionOptimizes perform-ance of Allstate’sdistinct and powerfuldistribution networksto deliver productsand services thatmeet customers’needs.

Eric A. SimonsonSenior Vice President and Chief Investment OfficerManages Allstate’sinvestment portfoliosto generate attrac-tive levels of risk-adjusted income and total return insupport of overallfinancial objectives.

Casey J. SyllaPresident,Allstate Financial Drives profitablegrowth by providingtop-tier financialproducts throughAllstate agenciesand third-partyfinancial servicesprofessionals.

Our senior management team is dedicated to integrityand sets a tone of accountability and discipline.

Catherine S. BruneSenior Vice President andChief Technology OfficerSets and implementsa technology strategythat supports business objectives,protects and deliversinformation andenhances service.

Robert W. PikeExecutive Vice Presidentand Secretary Stewards Allstate’scorporate image and reputation andoversees the corpo-rate secretary andadministrative func-tions of the company.

Edward M. LiddyChairman, President andChief Executive OfficerSets and directs thecorporate strategythat is transformingAllstate into a high-performance insur-ance and financialservices company.

Joseph V. TripodiSenior Vice President andChief Marketing OfficerLeverages Allstate’smarketing power andhighly valued “GoodHands®” promise tostrengthen customerrelationships andattract new customers.

George E. RuebensonSenior Vice President,Property – Casualty Claim ServiceOrganizationOversees a highlyefficient claim serviceorganization that iscontinuously evolvingto better meet theneeds of customersand agents.

Michael J. McCabeSenior Vice President and General Counsel Guides Allstate’s strategy to ensuresound governancepractices and to foster a healthy legal,economic, legislativeand regulatory environment.

Front row left to right:

Our Leadership Team:Back row left to right:

For information on Allstate’s Board of Directors, visitwww.allstate.com or see Notice of 2005 Annual Meetingand Proxy Statement.10

11

1 Year, 12/31/2003–12/31/2004

2 Years, 12/31/2002–12/31/2004

3 Years, 12/31/2001–12/31/2004

4 Years, 12/31/2000–12/31/2004

10 Years, 12/31/1994–12/31/2004

23%

46%

64%

30%

138%

424%

10%

39%

24%

14%

77%

193%

7%

30%

3%

-10%

21%

261%

11%

42%

11%

-2%

-11%

209%

Total Shareholder Returns

Total Shareholder Returns Since IPO on 6/3/1993

S&P 500

S&P Insurance

S&P P/C

Allstate

0 70 140 210 280 350

Allstate S&P P/C S&P Insurance

S&P 500

5 Years, 12/31/1999–12/31/2004

340%

199%

257%

223%

.25

.50

.75

1.00

1.25

0

*IPO as of 6/3/1993

93* 94 95 96 97 98 99 00 01 02 03 04

Dividends per Share (in dollars)

.18

.36 .39 .43.48

.54.60

.68.76

.84.92

1.12

Total shareholder returns as ofDecember 31, 2004, for Allstateinvestors since the company’s initial pub-lic offering on June 3, 1993, exceededmany of its corporate peers and industrybenchmarks. The return assumes quar-terly reinvestment of all dividends.

Dividends per share for Allstateinvestors increased 11 percent ona compound annual basis sincethe company’s IPO.

At Allstate, when we take a stand, we take action. Andin 2004 our decisive actions drove powerful results. Aswe look to 2005, I expect further success as our extraor-dinary leadership team and the entire Allstate familypursue new market opportunities, continue to execute ourstrategy and manage our capital wisely to create thelong-term value that you, our shareholders, deserve. Weare grateful for your ongoing support.

Edward M. LiddyChairman, President and Chief Executive Officer

Respectfully,

12

Customer

Allstate

AssetProtection

AssetManagementand Accumulation

WealthTransfer

Short-termFinancialObjectives

Insurance Products Financial Products

Asset ProtectionAuto InsuranceHomeowners InsuranceCondominium InsuranceRenters InsuranceScheduled Personal PropertyCommercial Auto InsuranceSmall Business Owner Insurance – Customizer and Business

Package PolicyLandlord Package InsuranceManufactured Home InsuranceMotorcycle InsuranceBoat InsurancePersonal Umbrella InsuranceRecreational Vehicle InsuranceMotor ClubFlood Insurance

Access AllstateMany different salesexperiences for our customers:

• Allstate agents• allstate.com• Independent agents•1-800-allstate• Allstate Bank• Financial institutions• Brokerages• Workplaces

Wealth TransferEstate planningproducts:Fixed Survivorship Life InsuranceVariable Survivorship Life Insurance

Asset Managementand AccumulationFixed AnnuitiesVariable AnnuitiesSingle Premium Immediate AnnuitiesUniversal Life InsuranceVariable Universal Life InsuranceStructured Settlement AnnuitiesMutual FundsIRAsRoth IRAsSIMPLE IRAsSEP IRAs529 PlansCoverdell Education Saving AccountsInstitutional Funding Agreements

Asset Management

Short-term Financial

Objectives

Checking AccountsSavings AccountsCertificates of DepositMoney Market AccountsMortgages

FamilyProtectionInsurance

Family ProtectionInsuranceTerm Life InsuranceUniversal Life InsuranceVariable Universal Life InsuranceLong-term Care InsuranceDisability InsuranceSupplemental Accidentand Health Insurance

The Allstate CorporationHelping customers

feel better protected today and better prepared

for tomorrow

AllstateProtectionProducts and services that help customers protect their assets, wealth and family.

AllstateFinancialFinancial services prod-ucts that help customersprepare for the future.

13

Operating income return on equity is a ratio that uses anon-GAAP measure. It is calculated by dividing therolling 12-month operating income by the average ofshareholders’ equity at the beginning and at the end ofthe 12-month period, after excluding the after-tax effectof unrealized net capital gains. We use it to supplement

our evaluation of net income and return on equity. Webelieve that this measure is useful to investors becauseit eliminates the effect of items that can fluctuate signifi-cantly from period to period and that are driven by devel-opments, the magnitude and timing of which are gener-ally not influenced by management: the after-tax effects

of realized and unrealized capital gains and losses andthe cumulative effect of change in accounting principle.Return on equity is the most directly comparable GAAPmeasure. The following tables show the reconciliationsfor the years ended December 31.

extent they resulted from the recognition of realizedcapital gains and losses, and

• (loss) gain on disposition of operations, after-tax.

Net income is the GAAP measure that is most directlycomparable to operating income.

We use operating income to evaluate our results ofoperations. It reveals trends in our insurance and financialservices business that may be obscured by the net effectof realized capital gains and losses and (loss) gain on dis-position of operations. These items may vary significantlybetween periods and are generally driven by businessdecisions and economic developments such as marketconditions, the timing of which is unrelated to the insur-ance underwriting process. Moreover, we reclassify peri-odic settlements on non-hedge derivative instrumentsinto operating income to report them in a manner consis-tent with the economically hedged investments, replicated

assets or product attributes (e.g. net investmentincome and interest credited to contractholder funds)and by doing so, appropriately reflect trends in productperformance. Therefore, we believe it is useful forinvestors to evaluate these components separately andin the aggregate when reviewing our performance. Wenote that the price to earnings multiple commonly usedby insurance investors as a forward-looking valuationtechnique uses operating income as the denominator.We use adjusted measures of operating income andoperating income per diluted share in incentive com-pensation. Operating income should not be consideredas a substitute for net income and does not reflect theoverall profitability of our business.

The following table reconciles operating income andoperating income per diluted share to net income andnet income per diluted share for the years endedDecember 31.

Definitions of Non-GAAP and Operating Measures

We believe that investors’ understanding of Allstate’sperformance is enhanced by our disclosure of the fol-lowing non-GAAP and operating financial measures.Our methods of calculating these measures may differfrom those used by other companies and therefore com-parability may be limited.

Operating income is income before dividends on pre-ferred securities and cumulative effect of change inaccounting principle, after-tax, excluding: • realized capital gains and losses, after-tax, except for

periodic settlements and accruals on non-hedge deriv-ative instruments, which are reported with realized cap-ital gains and losses but included in operating income,

• amortization of deferred policy acquisition costs(“DAC”) and deferred sales inducements (“DSI”), to the

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Operating income($ in millions) Per diluted share (In dollars)

2004 2003 2002 2001 2000 2004 2003 2002 2001 2000

Operating income $3,091 $2,662 $2,075 $1,492 $2,004 $ 4.41 $ 3.77 $ 2.92 $ 2.06 $ 2.68

Realized capital gains and losses 591 196 (924) (352) 425

Income tax (expense) benefit (199) (62) 326 127 (177)

Realized capital gains and losses, after-tax 392 134 (598) (225) 248 0.56 0.19 (0.84) (0.31) 0.33

DAC and DSI amortization related to realized capital gains and losses, after-tax (89) (30) (1) (11) — (0.13) (0.05) — (0.01) —

Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax (32) (15) (3) (4) — (0.04) (0.02) (0.01) (0.01) —

(Loss) gain on disposition of operations, after-tax (6) (26) 2 (40) — (0.01) (0.04) — (0.06) —

Income before dividends on preferred securities and cum-ulative effect of change in accounting principle, after-tax 3,356 2,725 1,475 1,212 2,252 4.79 3.85 2.07 1.67 3.01

Dividends on preferred securities of subsidiary trust, after-tax — (5) (10) (45) (41) — — (0.01) (0.06) (0.06)

Cumulative effect of change in accounting principle, after-tax (175) (15) (331) (9) — (0.25) (0.02) (0.46) (0.01) —

Net income $3,181 $2,705 $1,134 $1,158 $2,211 $ 4.54 $ 3.83 $ 1.60 $ 1.60 $ 2.95

Return on equity($ in millions) 2004 2003 2002 2001 2000

Numerator:

Net income $ 3,181 $ 2,705 $ 1,134 $ 1,158 $ 2,211

Denominator:

Beginning shareholders’ equity 20,565 17,438 17,196 17,451 16,601

Ending shareholders’ equity 21,823 20,565 17,438 17,196 17,451

Average shareholders’ equity $21,194 $19,002 $17,317 $17,324 $17,026

ROE (%) 15.0 14.2 6.5 6.7 13.0

Operating income return on equity($ in millions) 2004 2003 2002 2001 2000

Numerator:

Operating income $ 3,091 $ 2,662 $ 2,075 $ 1,492 $ 2,004

Denominator:

Beginning shareholders’ equity 20,565 17,438 17,196 17,451 16,601

Unrealized net capital gains 3,125 2,602 1,789 1,980 1,369

Adjusted beginning shareholders’ equity 17,440 14,836 15,407 15,471 15,232

Ending shareholders’ equity 21,823 20,565 17,438 17,196 17,451

Unrealized net capital gains 2,988 3,125 2,602 1,789 1,980

Adjusted ending shareholders’ equity 18,835 17,440 14,836 15,407 15,471

Average shareholders’ equity $18,138 $16,138 $15,122 $15,439 $15,352

Operating income ROE (%) 17.0 16.5 13.7 9.7 13.1

Premiums and deposits is an operating measure that weuse to analyze production trends for Allstate Financialsales. It includes premiums on insurance policies andannuities and all deposits and other funds received fromcustomers on deposit-type products including the net newdeposits of Allstate Bank, which we account for underGAAP as increases to liabilities rather than as revenue.

The following table illustrates where premiums anddeposits are reflected in the consolidated financial state-ments for the years ended December 31.

New sales of financial products by Allstate exclusiveagencies is an operating measure that we use to quantify the current year sales of financial products bythe Allstate Agency proprietary distribution channel.New sales of financial products by Allstate exclusiveagencies includes annual premiums on new insurancepolicies, initial premiums and deposits on annuities, netnew deposits in the Allstate Bank and sales of other

companies’ mutual funds, and excludes renewal premiums. New sales of financial products by Allstateexclusive agencies for the twelve months endedDecember 31, 2004, 2003, 2002, 2001 and 2000totaled $2.27 billion, $1.83 billion, $1.61 billion, $702million and $414 million, respectively.

Premiums and deposits ($ in millions) 2004 2003 2002 2001 2000

Life and annuity premiums $ 1,045 $ 1,365 $ 1,371 $ 1,345 $ 1,344

Deposits to contractholder funds 13,616 10,373 9,484 7,970 8,393

Deposits to separate accounts and other 1,258 1,357 979 1,290 2,508

Total premiums and deposits $15,919 $13,095 $11,834 $10,605 $12,245

The Allstate Corporation2775 Sanders RoadNorthbrook, IL 60062-6127(800) 574-3553www.allstate.com

Shareholders may receive without charge a copy of The Allstate Corporation Form10-K annual report (filed withthe Securities and ExchangeCommission) and other publicfinancial information for theyear ended December 31, 2004, by contacting:Investor RelationsThe Allstate Corporation3075 Sanders Road Northbrook, IL 60062-7127(800) 416-8803invrel@allstate.comThe Allstate annual report is available online at:www.allstate.com/investor/annual_report

The Allstate Corporation2775 Sanders RoadNorthbrook, Illinois 60062-6127

We appreciate your helping us improve our communications with you, an Allstate shareholder.

Please evaluate these statements, using a scale from one, you strongly disagree, to four, you strongly agree. Your comments are welcome, too.

Thank you.

March 25, 2005

Dear Fellow Allstate Shareholder:

Welcome. We hope our 2005 Allstate Annual Meeting materials provide a concise, clear summary for how Allstate is taking a stand to deliver outstanding returns to our shareholders.

As always, we encourage you to review the enclosed materials regarding your Company’s performance, and also to exercise your right as a shareholder by voting your proxy. We encourage your feedback on these materials by filling out the prepaid mailer below.

Also, we are pleased to offer you the opportunity to receive future Allstate proxy statements and annual reports electronically over the Internet. By enrolling in this service, you will help reduce printing and postage costs.

Electronic delivery is available to all shareholders who have active e-mail accounts and Internet access. To enroll for electronic delivery of the annual meeting materials, visit https://www.icsdelivery.com/all and complete the simple enrollment steps.

Thank you for investing in Allstate.

Sincerely,

Dan HaleVice President and Chief Financial OfficerThe Allstate Corporation

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The Allstate Corporation 2004 annual report:1. Helped me understand why the financial services market is an opportunity for Allstate.

2. Helped me understand why the insurance market is an opportunity for Allstate.

3. Helped me appreciate the financial value Allstate created in 2004.

4. Helped me appreciate the non-financial value Allstate created in 2004.

5. Helped me to make an informed investment decision.

6. Made it easy for me to make an informed investment decision about

the quality of the strategy.

7. Made it easy for me to find the information I wanted.

8. Was useful because it was divided into two documents.

9. Was easy to read.

10. I have gone online to look for more information.

11. I intend to go online to look for more information.

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Please send me a copy of Allstate’s Corporate Social Responsibility Report for 2004.

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2004

PEOPLE COME FIRST. THAT’S OUR

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The Allstate Corporation 2004 Corporate Social Responsibility Report highlights the investments and community efforts of The Allstate Corporation, its agencies and employees, as well as the national and local partnerships of The Allstate Foundation. View it online at www.allstate.com/csr. Or, insert your return address and checkmark the mail-back survey on the front of this letter to receive a hard copy. Please allow 3-4 weeks for mailing.

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The Allstate CorporationCorporate Social Responsibility Report

2004

PEOPLE COME FIRST. THAT’S OUR

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