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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-11840

THE ALLSTATE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware   36-3871531
(State of Incorporation)   (I.R.S. Employer Identification Number)

2775 Sanders Road, Northbrook, Illinois 60062
(Address of principal executive offices)    (Zip Code)

Registrant's telephone number, including area code: (847) 402-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
  Name of each exchange
on which registered

Common Stock, par value $0.01 per share   New York Stock Exchange
Chicago Stock Exchange

7.125% Senior Quarterly Interest Bonds

 

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None






        On January 31, 2002, Registrant had 711,728,469 shares of common stock outstanding. Approximately 609,123,602 of these shares, having an aggregate market value (based on closing prices on January 31, 2002 at 4:00 p.m. reported in the New York Stock Exchange Composite listing) of approximately $19.65 billion, were owned by stockholders other than the Registrant's directors and executive officers; Northern Trust Corporation, which is the trustee for The Savings and Profit Sharing Fund of Allstate Employees; and any person believed by the Registrant to own five percent or more of Registrant's outstanding common stock.

        The Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [    ]

Documents Incorporated By Reference

        Portions of the following documents are incorporated herein by reference as follows:

        Parts I, II and III of this Form 10-K incorporate by reference certain information from the Registrant's Notice of Annual Meeting and Proxy Statement dated March 25, 2002 (the "Proxy Statement").




TABLE OF CONTENTS

 
   
  Page
PART I    

Item 1.

 

Business

 

1
        Strategy   1
        Personal Property and Casualty Segment   2
        Allstate Financial Segment   8
        Other Business Segments   17
        Property-Liability Claims and Claims Expense Reserves   18
        Reinsurance Ceded   24
        Capital Requirements   24
        Investments   25
        Regulation   25
        Other Information about Allstate   30
        Forward-Looking Statements and Risk Factors Affecting Allstate   30
        Executive Officers   39
Item 2.   Properties   40
Item 3.   Legal Proceedings   40
Item 4.   Submission of Matters to a Vote of Security Holders   40

PART II

 

 
Item 5.   Market for Registrant's Common Equity and Related Stockholders Matters   40
Item 6.   Selected Financial Data   41
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations   41
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk   41
Item 8.   Financial Statements and Supplementary Data   41
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   42

PART III

 

 
Item 10.   Directors and Executive Officers of the Registrant   42
Item 11.   Executive Compensation   42
Item 12.   Security Ownership of Certain Beneficial Owners and Management   43
Item 13.   Certain Relationships and Related Transactions   43

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PART IV

 

 
Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K   43

Signatures

 

44

Index to Financial Statements and Financial Statement Schedules

 

S-1

Exhibit Index

 

E-1

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Part I

Item 1.    Business

        The Allstate Corporation was incorporated under the laws of the State of Delaware on November 5, 1992 to serve as the holding company for Allstate Insurance Company. Its business is conducted principally through Allstate Insurance Company, Allstate Life Insurance Company and their affiliates (collectively, including The Allstate Corporation, "Allstate"). Allstate is engaged in the personal property and casualty insurance business and the life insurance, retirement and investment products business. It conducts its business in the United States and Canada. Allstate is the second largest personal property and casualty insurer in the United States on the basis of 2000 statutory premiums earned and the nation's 11th largest life insurance business on the basis of 2000 ordinary life insurance in force and 22nd on the basis of 2000 statutory admitted assets. Allstate has four business segments: Personal Property and Casualty; Allstate Financial (our life insurance and retirement and investment products business); Discontinued Lines and Coverages; and Corporate and Other.

STRATEGY

        Allstate's goal is to be a leading provider of personal protection and retirement products and services to targeted market segments using our multi-channel, multi-brand and multi-product strategy. This strategy is intended to:

>   Serve customers' needs and preferences by providing access to Allstate when, where and how they choose
>   Leverage a variety of distribution and service channels, including Allstate exclusive agencies, independent agencies, other financial institutions, direct marketing, the workplace and the Internet
>   Capitalize on the strength of the Allstate brand and our other brands such as EncompassSM Insurance and DeerbrookSM Insurance
>   Focus on the profitable growth of our personal property and casualty business and Allstate Financial

        In pursuit of this strategy, we intend to deepen our customer relationships, to enhance distribution capabilities, to offer new products and to engage in selective business start-ups, acquisitions and partnerships.

        While pursuing this strategy, we intend to maintain discipline in our capital and expense management in order to create long-term shareholder value. The components of the strategy applicable to our particular business segments are covered below in the discussion of the segments.

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PERSONAL PROPERTY AND CASUALTY SEGMENT

Strategy

        For the Personal Property and Casualty segment we have adopted the following strategies:

>   Improve the profitability of our non-standard private passenger auto insurance business and our homeowners insurance business
>   Sustain the profitability of our standard private passenger auto insurance business
>   Focus on attracting and retaining customers who represent high lifetime value to Allstate's business, using strategic risk management (SRM), a tier-based pricing, underwriting and marketing program
>   Create and deploy technology to enhance the integration of Allstate's distribution channels, to improve customer service, to facilitate the introduction of new products and services, and to reduce infrastructure costs related to supporting agencies and handling claims
>   Manage expenses by realigning claim offices to fewer and larger locations and redesigning our Customer Information Centers and other back-office operations
>   Make optimum use of Allstate's distribution and service channels by encouraging the growth of larger and stronger exclusive agencies and continuing to enhance The Good Hands® Network
>   Continue to integrate the distribution of Allstate's life insurance, retirement and investment products and our personal property and casualty products through our proprietary distribution channels

Integration in Distribution

        As indicated above, one of our strategies is to integrate the distribution of many of our products through our proprietary distribution channels, particularly the Allstate exclusive agencies. Historically, the Allstate exclusive agencies have focused on the sale of our personal property and casualty products such as auto and homeowners insurance. More recently, we have been aiming to substantially increase cross sales of our life insurance, retirement and investment products through these agencies.

        As part of this initiative, we now require any new Allstate exclusive agents that we appoint to become "Personal Financial Representatives" or PFRs within 15 months after their appointment and we encourage our existing Allstate exclusive agents to earn this designation.

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Almost half of the Allstate exclusive agents were PFRs by the end of 2001. Each PFR earns the designation by completing an education curriculum and obtaining the licenses required to sell products such as variable annuities and variable life insurance.

        In addition we are requiring our exclusive financial specialists to have the PFR designation. Exclusive financial specialists are agents who focus on the sale of life insurance, retirement and investment products and who often team up with agents more focused on the sale of auto and homeowners insurance. Together, they can sell a wide range of products to our customers.

        In the following discussion of our Personal Property and Casualty segment and our Allstate Financial segment, we tell you more about the distribution of our products through the Allstate agencies.

Products

        Our Personal Property and Casualty segment accounted for 68.0% of our statutory written premiums in 2001. In this segment, we sell principally private passenger auto and homeowners insurance in the United States and Canada.

        We also sell many other lines of personal property and casualty insurance, including landlords, personal umbrella, renters, condominium, residential fire, manufactured housing, boat owners and selected commercial property and casualty. In addition, we operate Allstate Motor Club, Inc., which provides members with travel plans and emergency road service.

        We evaluate the results of this segment based primarily upon underwriting results and premium growth.

        Information regarding the last three years' revenues and operating profit or loss attributable to the Personal Property and Casualty segment is contained in Note 18 to the Consolidated Financial Statements beginning on page C-105 of Appendix C to the Notice of Annual Meeting and Proxy Statement dated March 25, 2002 (the "Proxy Statement"). Note 18 also includes information regarding the last three years' identifiable assets attributable to our property-liability operations, which encompasses both our Personal Property and Casualty segment and our Corporate and Other segment. Note 18 is incorporated herein by reference.

Risk Management, Underwriting and Pricing

        Strategic Risk Management.    Historically we have separated both private passenger auto insurance and homeowners insurance into standard and non-standard categories for pricing or underwriting purposes, or both. While we no longer use those categories for homeowners insurance, we do use them for auto insurance. In addition, for the last several years we have been implementing a refined program called strategic risk management (SRM).    The implementation of SRM has led to a change in the mix of business as between standard and non-standard auto.

3


        SRM is a tier-based pricing, underwriting and marketing program. Tier-based pricing and underwriting produces a broader range of premiums that is more refined than the range generated by the standard/non-standard model alone. We believe that tier-based pricing and underwriting will allow Allstate to improve its competitive position with respect to high "lifetime value" market segments while maintaining or improving profitability.

        In many states, SRM uses factors such as the number of years of continuous coverage with a prior insurer, prior bodily injury liability limits and credit history to generate a tier-based pricing and underwriting model for private passenger auto insurance. Likewise, in many states, it uses factors such as claim activity and credit history to generate a tier-based pricing and underwriting model for homeowners insurance. When it uses credit history, SRM takes into consideration aspects of a consumer's credit management history related to the presence of public records (such as judgments and liens), collections or delinquencies, number of accounts of various types, length of account history, frequency of non-promotional inquiries into credit report, and credit utilization (account balance relative to limits).

        Currently, our use of SRM is focused primarily on our new business, business obtained through new applications for insurance, and to a lesser extent on our renewal business. We intend to continue to implement and refine SRM in accordance with state regulatory review processes.

        Lifetime Value.    We regard "lifetime value" as the discounted value of a customer's future cash flow stream. To compute a customer's lifetime value score, we analyze various variables in an algorithm. These variables include characteristics about the customer (for example, age, marital status and driving record) and the product the customer has purchased (for example, coverages, limits, and descriptors of the asset insured). The variables used in the algorithm, and their contributions to the lifetime value score, are derived from analysis of historic data patterns and trends. We have developed algorithms for most major products that we sell.

        Because future loss and retention patterns of customers vary significantly, the distribution of lifetime values for a large group of customers will vary from very negative to very positive. "High lifetime value" generally refers to customers who have above average lifetime values. Within a customer household, the lifetime values of all products owned can be aggregated to provide a comprehensive measure of the economic value to Allstate of our relationship with the household.

        We are developing models that identify high lifetime value prospects and we will be incorporating those models into creating our marketing campaigns. In addition to value scores for products that our customers already own, we have developed models that predict the likelihood that customers will buy additional products, and the lifetime value of those products if they are purchased. We intend to use these model scores to identify opportunities for cross-selling other products to customers who will add the most incremental economic value to Allstate.

4


        Non-Standard Auto.    We have been pursuing various initiatives to address adverse profitability trends in our non-standard private passenger auto insurance business. These initiatives vary by state but include changes such as additional premium down-payment requirements, tightening of underwriting guidelines, price increases, policy non-renewals (where permitted) and other administrative changes.

        Involuntary.    The Personal Property and Casualty segment participates in the "involuntary" or "shared" private passenger auto insurance business. This business provides auto insurance to individuals who would otherwise be unable to obtain it due to their driving records or other factors. Allstate, like all auto insurers, is required to write or share the cost of this business as a condition of its license to do business in many states. When the insurance industry tightens underwriting standards in the voluntary market, the amount of business written by the involuntary market tends to increase. Policies written in this market are generally priced at higher than standard rates. We typically experience losses in this business, but those losses have been immaterial to our results of operations.

        Retention.    As is true for the industry in general, costs attributable to our personal property and casualty products are generally higher during the first year an insurance policy is in effect than for subsequent years. Policy acquisition costs such as advertising, processing and inspection expenses are generally incurred during the first year. Policies that remain in force generally become more profitable over time. Accordingly, customer retention is an important factor in the segment's profitability and a key element of our strategy in this business.

Claims

        In the Personal Property and Casualty segment we seek to efficiently pay fair and correct amounts on all claims. As part of this effort, we employ strategies focused on specific segments of the claim adjustment process and we use the expertise and services provided by vendors where appropriate. To mitigate the effects of external cost pressures, our efforts include focused management oversight of claim costs through the use of medical cost management, fraud detection, litigation management, subrogation, and auto and property investigation and repair strategies. Examples of this work in our property lines include developing specialized knowledge and processes for mold claims, creating a rapid deployment team for flexible handling of periodic weather events, priority dispatching of our adjusters to those claims with the greatest opportunity for mitigation of damages, and employing vendor services to access favorable pricing of replacement materials and contents items along with consistent and accurate estimates of damage.

        We continue to research, develop and implement strategies to eliminate steps in our processes that are not cost-effective, leverage our scale and buying power, leverage our use of technology, reduce operational costs, improve process management and enhance service for our customers. Examples of this work include realignment of the company's claim offices to fewer, larger office locations, centralization of basic auto property damage claim handling and the acquisition of Sterling Collision Centers, Inc. to support the elimination of the redundancies that

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exist in today's auto collision repair process. To aid in cost reduction, we have engaged external vendors to assist with the procurement of auto glass, building supplies and legal services. Allstate's efficient management of the claims process helps maintain competitive and profitable rates.

Distribution Methods

        The Personal Property and Casualty segment sells private passenger auto and homeowners insurance primarily through Allstate exclusive agencies and independent agencies as well as through the independent agencies of our Ivantage business.

        The Allstate brand products are sold primarily through Allstate exclusive agencies and independent agencies. However, in those states where we have implemented The Good Hands Network—a multi-access platform that integrates the local Allstate exclusive agencies, the Internet and our Customer Information Centers—consumers can also purchase certain Allstate personal lines products and obtain service through our Customer Information Centers and, in many of those states, over the Internet. The Good Hands Network was available in 30 states to nearly 90% of the United States population by the end of 2001. We are monitoring customer expectations and behaviors and intend to continue to enhance the network. Our experience since the launch of the network is that customers for the Allstate brand use the Internet and our Customer Information Centers for information and service but continue to rely on Allstate exclusive agencies to complete their insurance purchases. In some states where we have implemented The Good Hands Network, customers cannot use the Internet to purchase our products, but they can use it to obtain information about some of our products, including pricing information, and service.

        Our Ivantage business sells Encompass and Deerbrook brand insurance through independent agencies. The Encompass brand includes standard private passenger auto and homeowners insurance products while the Deerbrook brand includes non-standard private passenger auto insurance.

        Our broad-based network of approximately 12,000 Allstate exclusive agencies in the United States in approximately 10,000 locations produced 92.0% of the Personal Property and Casualty segment's statutory written premiums in 2001. The balance was primarily generated by approximately 15,000 independent agencies. We are the fourth largest provider of personal lines products through independent agencies in the United States, based on 2000 statutory written premium.

Geographic Markets

        The principal geographic markets for our personal property and casualty products are in the United States. Through various Allstate affiliates, we are authorized to sell various lines of personal property and casualty insurance in all 50 states, the District of Columbia and Canada.

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        The following table reflects, in percentages, the principal geographic distribution of statutory premiums earned for the segment for the year ended December 31, 2001. No other jurisdiction accounted for more than five percent of the statutory earned premiums for the Personal Property and Casualty segment.

California   11.5%
Texas   10.8%
New York   10.2%
Florida   9.3%

        Our underwriting strategy for homeowners is to target customers whose risk of loss provides Allstate with the best opportunity for profitable growth. This includes managing exposure on policies in geographic areas where the potential loss from catastrophes exceeds acceptable levels.

Competition

        The personal private passenger auto and homeowners insurance businesses are highly competitive. The following charts provide the market shares of our principal competitors in the U.S. personal property and casualty insurance market by direct written premium for the year ended December 31, 2000 (the most recent date such competitive information is available) according to A. M. Best.

Private Passenger Auto Insurance
  Homeowners Insurance
Insurer

  Market Share
  Insurer

  Market Share
State Farm   18.1%   State Farm   21.7%
Allstate   12.8%   Allstate   12.9%
Farmers   5.7%   Farmers   8.4%
Progressive   4.7%   Nationwide   4.5%
Nationwide   4.6%   Travelers   3.8%
Geico   4.6%   USAA   3.6%

        In this market, we compete principally on the basis of the recognition of our brands, the scope of our distribution system, price, the breadth of our product offerings, product features, customer service, claim handling, and use of technology. In addition, our proprietary database of underwriting and pricing experience enables Allstate to use SRM to divide the market into segments, appropriately price risks and cross sell its products within its customer base.

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        In the United States insurance industry in 2000, approximately the following amounts of personal property and casualty premium were generated in the indicated distribution channel:

Exclusive agencies (employee and independent contractors)   $ 87.4 billion
Independent agencies   $ 51.1 billion
Direct response (call centers and Internet)   $ 18.2 billion

        As stated above, on the basis of 2000 statutory written premium, Allstate is the second largest personal property and casualty insurer in the United States and the fourth largest provider of personal lines products through independent agents in the United States.

Catastrophe Losses and Catastrophe Management

        Information regarding catastrophe losses is incorporated herein by reference to the discussion of "PP&C Catastrophe Losses" beginning on page C-16 of Appendix C to the Proxy Statement.

ALLSTATE FINANCIAL SEGMENT

Strategy

        For the Allstate Financial segment we have adopted the following strategies:

>   Become consumer centric; understand and meet the needs of three primary consumer target markets:
>   Extend the Allstate brand to more products and distribution channels
>   Broaden and strengthen product distribution by focusing on channels and participants with the greatest sales and profit opportunity
>   Invest in technology to drive competitive advantage through scale and accessibility
>   Expand our structured financial products business by increasing scale and diversifying risks through growth in products that leverage the Allstate brand and our investment management and risk management strengths
>   Simplify the business to improve profitability

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        In connection with the strategies outlined above, we plan to use our market research capabilities to develop consumer-driven, needs-based product solutions. To extend the Allstate brand, we plan to introduce additional products to our Allstate brand proprietary distribution channel, extend the Allstate brand to our non-proprietary distribution channels, and focus our advertising to broaden consumer awareness of the range of products offered under the Allstate brand. We are expanding our line of structured financial products to increase operating income and to further diversify risk. We intend to grow Allstate Financial through a combination of organic growth and selective acquisitions and alliances.

Products

        The products that we sell to our three consumer target markets for this segment are listed below. They include a broad range of insurance products that we call "protection" products and a broad range of retirement products. We continue to develop new versions of these products to satisfy evolving consumer needs.

Protection

Whole life

 

Hospital indemnity
Term life   Disability income
Universal life   Cancer
Single premium life   Accident
Variable life   Dental
Variable universal life   Credit life
Long-term care   Credit disability
Accidental death    

Retirement

Fixed annuities
Variable annuities
Immediate annuities

        Our structured financial products listed below include a variety of spread-based products and fee-based products sold to sponsors of qualified defined contribution retirement plans, to other institutional buyers, and to buyers who seek certain specialized long-term immediate annuities. "GICs" are guaranteed investment contracts.

Structured Financial Products

General account GICs
Funding agreements
Structured settlement annuities
Immediate annuities
Synthetic GICs

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Risk Management, Underwriting and Pricing

        For individual life insurance policies, we use detailed and uniform underwriting policies and procedures to assess and quantify the risk of each applicant. In some cases we require medical examinations and in some cases we may order attending physicians statements and consumer investigative reports.

        Generally, our life insurance policies allow us to adjust charges and credits to reflect changes from expected mortality and expense experience or higher or lower investment returns. However, we are subject to contractual maximum charges and minimum credits and state regulatory limits on increasing charges after a policy is issued.

        We price our new protection and retirement products to achieve a target return on required capital based on assumptions regarding mortality, expenses, investment return, persistency, required reserves and capital. Our assumptions are based on regular reviews of our experience in this business. Periodically, we revise in-force products through non-guaranteed charges or credits to reflect changes in experience and to preserve the margins that we originally priced into the product.

        Risk management is particularly important with respect to our structured financial products because of the significant guarantees that we provide as part of our spread-based product offerings. To facilitate risk management and comply with legal requirements, the assets supporting these spread-based products are segregated and managed in a manner distinct from the rest of the assets in the general account of the applicable insurance company subsidiary. For our structured financial products our risk management strategy is based on:

        Underwriting is most significant for structured settlement annuities, immediate annuities, general account GICs and synthetic GICs. Structured settlement annuities and immediate annuities are underwritten using recent mortality experience and an assumption of continued improvement in annuitant longevity. We underwrite general account GICs and synthetic GICs as part of developing pricing proposals for new contracts. Our underwriters evaluate the likely

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variance from base line cash flows due to plan participants reallocating assets from the "stable value" option of their defined contribution plan to other investment options and for benefit payments and withdrawals. Proposals are made only in those situations in which the risk of cash flow variance is projected within strict guidelines, so that the withdrawal risk is minimized.

Distribution

        We distribute our retirement and protection products primarily through five distribution channels: Allstate exclusive agencies, independent broker/dealers (including master brokerage agencies), financial services firms, direct marketing and workplace marketing. This multi-channel distribution strategy results in a broad distribution network and increases operating flexibility while allowing us to focus on niche marketing. We have been expanding distribution of these products by increasing cross sales to existing customers of our personal property and casualty business and by driving increased sales activity through stronger wholesaling efforts.

        Allstate Agency Channel.    Through Allstate agencies, we are using exclusive agents and and exclusive financial specialists to increase cross sales of our protection and retirement products to customers who have already purchased one of our personal property and casualty products, such as auto or homeowners insurance.

        Allstate exclusive agencies primarily serve middle-income consumers with retirement and protection needs and moderate-income consumers with family protection needs. The products distributed through this channel include term life insurance, whole life insurance, fixed annuities, variable annuities, long-term care insurance and nonproprietary mutual funds.

        Independent Agents and Broker/Dealers.    We also distribute our retirement and protection products through independent agents (including master brokerage agencies) and registered representatives of independent broker/dealers. Through these agents and registered representatives, we target affluent, relationship-oriented consumers and middle-income consumers with retirement needs. Products distributed through independent agents include term life insurance, whole life insurance, fixed annuities, variable annuities and long-term care products. Products distributed through registered representatives of independent broker/dealers include variable annuities and variable universal life insurance.

        Financial Services Firms.    Through various investment management firms and banks across the country, we target affluent, relationship-oriented consumers and middle-income consumers who want assistance in investing for retirement. The products that we distribute through these financial services firms include fixed annuities, variable annuities and single premium life products. We have strategic alliances with two firms—Putnam Investments LLC and Morgan Stanley DW Inc.

        Direct Marketing.    We use direct marketing techniques such as telemarketing and direct mail primarily to distribute term life insurance, accidental death and hospital indemnity products to moderate-income consumers who have family protection needs.

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        Workplace.    Through workplace marketing we offer insurance products to individuals where they work. They pay for these products through payroll deductions. The products that we sell through workplace marketing include universal life, term life, interest sensitive whole life, disability income, cancer, accident, hospital indemnity and dental insurance.

        The following table lists our primary protection and retirement products, the major distribution channels that we use for these products and the targeted customer segment.

Distribution Channel

  Primary Products

  Targeted Customer


Allstate Agency

 

Term life insurance
Whole life insurance
Universal life insurance
Variable universal life insurance
Fixed annuities
Variable annuities
Immediate annuities
Long-term care
Disability income
Cancer insurance

 

Middle-income consumers with retirement and protection needs and moderate-income consumers with family protection needs.

Independent agents

 

Term life insurance
Whole life insurance
Universal life insurance
Single premium life insurance
Fixed annuities
Variable annuities
Immediate annuities
Long-term care

 

Affluent, relationship-oriented consumers and middle-income consumers with retirement and protection needs

Independent broker/ dealers

 

Variable annuities
Variable universal life insurance

 

 

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Distribution Channel

  Primary Products

  Targeted Customer


Financial services firms—

 

 

 

Affluent, relationship-oriented consumers and middle-income consumers with retirement needs

Investment management firms

 

Variable annuities
Variable life insurance

 

 

Strategic alliances

 

 

 

 

• Putnam Investments LLC

 

Variable annuities

 

 

• Morgan Stanley DW Inc.

 

Fixed annuities
Variable annuities
Immediate annuities
Variable life insurance

 

 

Banks

 

Fixed annuities
Variable annuities
Single premium life insurance
Variable life insurance

 

Middle-income consumers with retirement needs

Direct marketing

 

Term life insurance
Accidental death
Hospital indemnity
Credit life and disability
insurance
Variable annuities

 

Moderate-income consumers with family protection needs

Workplace marketing

 

Term life insurance
Universal life insurance
Disability income insurance
Cancer insurance
Accident insurance
Hospital indemnity
Dental insurance
Credit life insurance
Credit disability insurance

 

Middle-income consumers with protection needs and moderate-income consumers with family protection needs

        We distribute our structured financial products either directly to institutional buyers or indirectly through financial intermediaries, consultants and brokers. We sell general account and synthetic GICs through direct marketing to retirement plan sponsors or to specialty investment managers who represent sponsors. We market funding agreements both in the United States and internationally through direct marketing, through specialized brokers, or through investment banks to a variety of institutional money management firms including retirement plan funds. Approximately 80% of our funding agreement sales are derived from transactions in which a

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special purpose entity purchases a funding agreement with terms similar to those of debt obligations issued by the special purpose entity. The strength of the GIC and funding agreement markets is dependent on capital market conditions. As a result, sales through this channel can vary widely from one fiscal quarter to another. Structured settlement annuities are marketed through a small group of specialty brokers. Approximately 20% of our structured settlement annuities originate with cases referred from our personal property and casualty business.

        Our experienced sales staff develops and maintains relationships with target customers for our structured financial products, consultants, and other financial intermediaries. Our consistent market presence has created strong and valuable relationships with a large segment of our customer base.

        The following table summarizes the primary distribution method, the primary structured financial products and our target customers for these products.

Distribution Method

  Primary Products

  Targeted Customer


Direct or through specialty investment managers who represent plan sponsors

 

General account and synthetic GICs

 

Qualified defined contribution retirement plan sponsors

Direct or through specialized brokers or investment banks

 

Funding agreements (including funding agreements backing medium term note programs and funding agreements sold to short-term money managers)

 

Institutional money management firms and other institutional buyers (domestic and international)

Specialty brokers

 

Structured settlement annuities

 

Buyers seeking certain specialized long term immediate annuities (typically entities required to fund, or recipients of, large claim or litigation settlements)

Independent agents

 

Immediate annuities

 

Affluent relationship oriented customers

Geographic Markets

        We sell our protection and retirement products throughout the United States. Through subsidiary insurance companies, we are authorized to sell these products in all 50 states, the District of Columbia and Puerto Rico.

        We distribute our structured financial products in the United States and internationally.

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However, our international distribution is generally limited to selling funding agreements to special purpose entities that issue medium term notes distributed through dealer groups of investment bankers to various institutional money managers and a limited number of high net worth individuals. In the United States we provide funding agreements to back medium term note programs that are distributed to qualified investment buyers.

        The following table reflects, in percentages, the principal geographic distribution of statutory premiums and deposits for the Allstate Financial segment for the year ended December 31, 2001. Approximately 97.8% of the statutory premiums and deposits generated in Delaware represent deposits received in connection with funding agreements sold to a special purpose entity domiciled in Delaware.

Delaware   11.4%
California   9.5%
New York   5.7%
Florida   5.4%

No other jurisdiction accounted for more than five percent of the statutory premiums and deposits.

Competition

        With regard to our protection and retirement products, we compete principally on the basis of the scope of our distribution systems, the breadth of our product offerings, the recognition of the Allstate brand name, our financial strength and ratings, our product features and price and the level of customer service that we provide. In addition, with respect to variable life and variable annuity products, we compete on the basis of the variety of choices of funds and the management and performance of those funds within our separate accounts.

        The life insurance and annuity market continues to be highly fragmented and competitive. As of December 31, 2000, there were approximately 800 groups of life insurance companies in the United States, most of which offered one or more products similar to our protection and retirement products and many of which used similar marketing techniques. Based on information contained in statements filed with state insurance departments, in 2000 approximately 46.0% of the life insurance and annuity statutory premiums and deposits were written by 15 insurance company groups. According to the same sources, as of December 31, 2000, the Allstate Financial segment ranked 11th based on ordinary life insurance in force and 22nd based on statutory admitted assets. In some states, we compete with banks and savings and loan associations in the sale of life insurance products. In addition, because certain life insurance and investment products include a savings or investment component, our competition includes securities firms, investment advisors, mutual funds, banks and other financial institutions. Competitive pressure in this line of business is growing due, in part, to demutualization and consolidation activity in the financial services industry.

15


        In the sale of our structured financial products, we operate in a variety of highly competitive institutional markets. Although a large number of companies offer these products, a relatively small number of companies dominate the market. However, customer need for diversification limits significant consolidation. In 2000, the top 15 providers of structured financial products, including Allstate, issued approximately 80% of total general account GICs and funding agreements issued by U.S. life insurance companies; and ten insurers, including Allstate, issued approximately 80% of the total structured settlement annuities. Immediate annuities are marketed by many companies and are not uniquely concentrated. Our competitors include a variety of well-recognized insurance companies, many of which are larger than the Allstate Financial segment.

        We have built a significant market share for structured financial products in several important markets. We are able to successfully compete in these markets due to our strong financial ratings, investment management expertise, our strong distribution network, competitive product design, the highly recognized Allstate brand name and affiliation with our large, established agency force. Competition in this market is restricted almost exclusively to insurance companies with superior or excellent financial ratings. The requirement for strong financial ratings reduces pressure on margins by limiting the number of potential competitors and by lowering our cost of funds.

Separate Accounts and General Accounts

        The assets and liabilities relating to variable annuities, variable life products and some GICs are legally segregated and reflected as assets and liabilities of the separate accounts in the financial statements of the subsidiary insurance companies that provide such products. Absent a contract provision specifying either a guaranteed minimum return or account value upon death or annuitization, variable annuity and variable life contractholders bear the investment risk that the funds in the applicable separate account may not meet their stated investment objectives. The assets and liabilities relating to variable products issued with fixed fund options are divided between the applicable separate account for the variable portion of the product and the general account for the fixed portion of the product.

        The assets and liabilities relating to the other (non-variable) life insurance and annuity products, including any minimum guarantees of separate account products, are reflected in the general account of the applicable subsidiary insurance company.

Reinsurance

        We use reinsurance as a means to share mortality risk with external reinsurers as well as to transfer risk among our subsidiary insurance companies. As of December 31, 2001, we retained a maximum risk of two million dollars on each insured life. The primary uses of reinsurance include ceding amounts greater than the two million dollar retention limit, proportional sharing of certain term insurance policies with external reinsurance pools, and catastrophe reinsurance, which limits overall life insurance losses in catastrophic events.

16


Reserves

        We compute reserves for life-contingent contract benefits (mostly for term life and whole life policies) on the basis of assumptions as to future investment yields, mortality, morbidity, terminations and expenses. These assumptions generally vary by such characteristics as type of coverage, issue age, year of issue, and policy duration.

        Contractholder funds arise from the issuance of policies and contracts that include an investment component, including most fixed annuities and interest-sensitive life policies. We record deposits received as interest-bearing liabilities. Contractholder funds are equal to deposits received and interest credited to the benefit of the contractholder less withdrawals and charges for mortality and administrative expenses.

        We establish and report liabilities for contractholders' funds and future policy benefits to meet the obligations on our policies and contracts. Our liability for general account GICs, period certain structured settlement and immediate annuities, and funding agreements is equal to the cumulative account balances for these products. Cumulative account balances include deposits plus credited interest less expense charges and withdrawals. We calculate future policy benefits for straight life structured settlement annuities and immediate annuities based on a set of actuarial assumptions that we establish and maintain throughout the lives of the contracts. These assumptions include investment yields, mortality and the expected time to retirement.

        Separate account liabilities for variable annuities and variable life policies represent the contractholders' claim to the related assets and are carried at the fair value of the assets.

        The establishment of reserve and contractholder fund liabilities in recognition of the segment's future benefit obligations under life and annuity policies and other products is discussed in Notes 2 and 8 to the Consolidated Financial Statements beginning on pages C-63 and C-87, respectively, of Appendix C to the Proxy Statement, incorporated herein by reference.

OTHER BUSINESS SEGMENTS

        Note 18 to the Consolidated Financial Statements beginning on page C-105 of Appendix C to the Proxy Statement, incorporated herein by reference, contains information regarding the revenues, operating profit or loss, and identifiable assets attributable to our Corporate and Other segment over the last three years. It also contains the last three years' underwriting losses and premium earned for our Discontinued Lines and Coverages segment.

        Our Corporate and Other segment is comprised of holding company activities and certain non-insurance operations.

17


        Our Discontinued Lines and Coverages segment consists of business that we no longer write and certain commercial and other business in run-off (including environmental, asbestos and other mass tort exposures).

        Although we no longer write excess and surplus general liability insurance, we still have exposure for environmental, asbestos and other mass tort claims. These claims stem principally from excess and surplus general liability insurance that we wrote for Fortune 500 companies and reinsurance coverage that we wrote during the 1960s through the mid-1980s, including reinsurance on primary insurance for large U.S. companies. Additional, less material exposure stems from direct commercial insurance that we wrote for small to medium size companies during the 1960s through the mid-1980s. Other mass tort exposures primarily relate to general liability and product liability claims, such as those for medical devices.

        In 1986, the general liability policy form that we and others in the industry used was amended to introduce an asbestos exclusion and to introduce an "absolute pollution exclusion" that excluded coverage for environmental damage claims. Most general liability policies issued prior to 1987 contain annual aggregate limits for product liability coverage. General liability policies issued in 1987 and thereafter contain annual aggregate limits for product liability coverage and annual aggregate limits for all coverages.

        Further information about our Discontinued Lines and Coverages segment is set forth below in "Property-Liability Claims and Claims Expense Reserves."

PROPERTY-LIABILITY CLAIMS AND CLAIMS EXPENSE RESERVES

        The following discussion of property-liability claims and claims expense reserves applies to all of our property-liability operations, encompassing both the Personal Property and Casualty segment and the Discontinued Lines and Coverages segment.

        We establish property-liability loss reserves to cover our estimated ultimate liability for losses and loss adjustment expenses with respect to reported claims and claims incurred but not yet reported as of the end of each accounting period. In accordance with applicable insurance laws and regulations and generally accepted accounting principles (GAAP), no specific claim reserves are established until a loss occurs, including a loss from a catastrophe. Underwriting results of the two property-liability segments are significantly influenced by estimates of property-liability claims and claims expense reserves (see Note 7 to the Consolidated Financial Statements beginning on page C-84 of Appendix C to the Proxy Statement incorporated herein by reference). These reserves are an accumulation of the estimated amounts necessary to settle all outstanding claims, including claims that have been incurred but not reported as of the reporting date. These reserve estimates are based on known facts and interpretations of circumstances, internal factors including Allstate's experience with similar cases, historical trends involving claim payment patterns, loss payments, pending levels of unpaid claims, loss management programs and product mix. In addition, the reserve estimates are influenced by external factors including court decisions, economic conditions and public attitudes. The effects

18


of inflation are implicitly considered in the reserving process.

        The establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain process. The ultimate cost of a loss may vary materially from the recorded amounts. We regularly update our reserve estimates as new information becomes available and as events unfold that may have an impact on the resolution of unsettled claims. We reflect changes in prior year reserve estimates, which may be material, in the results of operations in the period in which we determine that changes are needed.

        Establishing net loss reserves for environmental, asbestos and other mass tort claims is subject to uncertainties that are greater than those presented by other types of claims. Among the complications are the lack of historical data, long reporting delays, uncertainty as to the number and identity of insureds with potential exposure, unresolved legal issues regarding policy coverage, the availability and collectibility of reinsurance, and the extent and timing of any such contractual liability. The legal issues concerning the interpretation of various insurance policy provisions and whether these losses are, or were ever intended to be, covered are complex. Courts have reached different and sometimes inconsistent conclusions as to when losses are deemed to have occurred and which policies provide coverage; what types of losses are covered; whether there is an insurer obligation to defend; how policy limits are determined; how policy exclusions and conditions are applied and interpreted; and whether clean-up costs represent insured property damage. We believe that these issues are not likely to be resolved in the near future. See Note 7 to the Consolidated Financial Statements beginning on page C-84 of Appendix C to the Proxy Statement, incorporated herein by reference.

        The following tables are summary reconciliations of the beginning and ending property-liability insurance claims and claims expense reserves, displayed individually for each of the last three years. The first table presents reserves on a gross (before reinsurance) basis. The end of year gross reserve balances are reflected in the Consolidated Statements of Financial Position on page C-59 of Appendix C to the Proxy Statement, incorporated herein by reference. The second table presents reserves on a net (after reinsurance) basis. The total net property-liability insurance claims and claims expense amounts are reflected in the Consolidated Statements of Operations on page C-57 of Appendix C to the Proxy Statement, incorporated herein by reference.

19


 
  Year Ended December 31,
 
GROSS
(in millions)

  2001
  2000
  1999
 
Gross reserve for property-liability claims and claims expense,                    
  Beginning of year   $ 16,859   $ 17,814   $ 16,881  
  Acquisitions     0     0     1,047  
   
 
 
 
    Total gross reserve adjusted     16,859     17,814     17,928  
Incurred claims and claims expense                    
  Provision attributable to the current year     17,495     17,312     15,389  
  Decrease in provision attributable to prior years     508     (615 )   (392 )
   
 
 
 
    Total claims and claims expense     18,003     16,697     14,997  
Claim payments                    
  Claims and claims expense attributable to current year     11,386     11,429     9,324  
  Claims and claims expense attributable to prior years     6,976     6,223     5,787  
   
 
 
 
    Total payments     18,362     17,652     15,111  
   
 
 
 
Gross reserve for property-liability claims and claims expense,                    
  end of year as shown on 10-K loss reserve development table   $ 16,500   $ 16,859   $ 17,814  
   
 
 
 

 


 

Year Ended December 31,


 
NET
(in millions)

  2001
  2000
  1999
 
Net reserve for property-liability claims and claims expense,                    
  Beginning of year   $ 15,225   $ 16,161   $ 15,423  
  Acquisitions     0     0     1,023  
   
 
 
 
    Total net reserves adjusted     15,225     16,161     16,446  
Incurred claims and claims expense                    
  Provision attributable to the current year     17,190     17,117     15,266  
  Decrease in provision attributable to prior years     342     (722 )   (587 )
   
 
 
 
    Total claims and claims expense     17,532     16,395     14,679  
Claim payments                    
  Claims and claims expense attributable to current year     11,176     11,358     9,349  
  Claims and claims expense attributable to prior years     6,748     5,973     5,615  
   
 
 
 
    Total payments     17,924     17,331     14,964  
   
 
 
 
Net reserve for property-liability claims and claim expense,                    
  end of year as shown on 10-K loss reserve development table(1)   $ 14,833   $ 15,225   $ 16,161  
   
 
 
 
(1)
Reserves for claims and claims expense are net of reinsurance of $1.67 billion, $1.63 billion and $1.65 billion, at December 31, 2001, 2000 and 1999, respectively.

20


        The year-end 2001 gross reserves of $16.5 billion for property-liability insurance claims and claims expense, as determined under GAAP, were $2.5 billion more than the reserve balance of $14.0 billion recorded on the basis of statutory accounting practices for reports provided to state regulatory authorities. The principal differences are reinsurance recoverables from third parties totaling $1.67 billion that reduce reserves for statutory reporting and are recorded as assets for GAAP reporting and a liability for $0.23 billion that represents a deposit on assumed reinsurance from the acquisition of Encompass. Additional differences are caused by the reserves of the Canadian subsidiaries for $0.50 billion, which are not included in the combined United States statutory statement.

        As the tables above illustrate, Allstate's net reserve for property-liability insurance claims and claims expense at the end of 2000 developed unfavorably in 2001 by $342 million, compared to unfavorable development of the gross reserves of $508 million. Net reserve development in 2001, 2000 and 1999 was more favorable than the gross reserve development due to higher anticipated reinsurance cessions on reserve reestimates. For further discussion of Allstate's reinsurance programs, see "Property-Liability Reinsurance Ceded" beginning on page C-24 of Appendix C to the Proxy Statement, incorporated herein by reference.

        The following loss reserve development table illustrates the change over time of the net reserves established for property-liability insurance claims and claims expense at the end of the last eleven calendar years. The first section shows the reserves as originally reported at the end of the stated year. The second section, reading down, shows the cumulative amounts paid as of the end of successive years with respect to that reserve liability. The third section, reading down, shows retroactive reestimates of the original recorded reserve as of the end of each successive year which is the result of Allstate's expanded awareness of additional facts and circumstances that pertain to the unsettled claims. The last section compares the latest reestimated reserve to the reserve originally established, and indicates whether the original reserve was adequate to cover the estimated costs of unsettled claims. The table also presents the gross reestimated liability as of the end of the latest reestimation period, with separate disclosure of the related reestimated reinsurance recoverable. This presentation appears for all periods in which the income recognition provisions of Statement of Financial Accounting Standards No. 113 have been applied. The loss reserve development table is cumulative and, therefore, ending balances should not be added since the amount at the end of each calendar year includes activity for both the current and prior years.

21



Loss Reserve Development

($ in millions)

 
  December 31,(1)
 
  1991
  1992
  1993
  1994
  1995
  1996
  1997
  1998
  1999
  2000
  2001
Gross Reserves for                                                                  
  Unpaid Claims and Claims Expense   $ 13,136   $ 14,902   $ 15,209   $ 16,414   $ 17,326   $ 17,382   $ 17,403   $ 16,881   $ 17,814   $ 16,859   $ 16,500
Deduct:                                                                  
  Reinsurance Recoverable     1,066     1,419     1,338     1,298     1,490     1,784     1,630     1,458     1,653     1,634     1,667
   
 
 
 
 
 
 
 
 
 
 
Reserve For Unpaid                                                                  
  Claims and Claims Expense   $ 12,070   $ 13,483   $ 13,871   $ 15,116   $ 15,836   $ 15,598   $ 15,773   $ 15,423   $ 16,161   $ 15,225   $ 14,833

Paid (cumulative) as of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  One year later     4,550     4,955     4,472     4,748     5,787     5,013     5,488     5,615     5,973     6,748      
  Two years later     6,688     7,068     6,519     7,749     8,232     7,952     8,361     8,638     9,055            
  Three years later     7,935     8,283     8,273     9,247     10,083     9,773     10,336     10,588                  
  Four years later     8,694     9,430     9,140     10,400     11,170     11,040     11,587                        
  Five years later     9,508     9,985     9,849     11,070     12,034     11,847                              
  Six years later     9,907     10,467     10,251     11,702     12,590                                    
  Seven years later     10,284     10,762     10,725     12,128                                          
  Eight years later     10,514     11,169     10,982                                                
  Nine years later     10,885     11,393                                                      
  Ten years later     11,083                                                            

Reserve Reestimated as
    of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  End of year     12,070     13,483     13,871     15,116     15,836     15,598     15,773     15,423     16,161     15,225     14,833
  One year later     11,990     13,081     13,159     14,691     15,500     14,921     15,073     14,836     15,439     15,567      
  Two years later     11,909     12,745     12,890     14,295     14,917     14,450     14,548     14,371     15,330            
  Three years later     11,905     12,735     12,832     13,928     14,700     14,156     14,183     14,296                  
  Four years later     12,010     12,877     12,617     13,835     14,613     13,894     14,168                        
  Five years later     12,322     12,830     12,585     13,915     14,455     13,888                              
  Six years later     12,395     12,895     12,730     13,882     14,452                                    
  Seven years later     12,499     13,070     12,733     13,877                                          
  Eight years later     12,686     13,113     12,617                                                
  Nine years later     12,740     12,995                                                      
  Ten years later     12,631                                                            

Initial reserve in excess

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
  of (less than) reestimated reserve:                                                                  
  Amount   $ (561 ) $ 488   $ 1,254   $ 1,239   $ 1,384   $ 1,710   $ 1,605   $ 1,127   $ 831   $ (342 )    
  Percent     (4.6 )%   3.6 %   9.0 %   8.2 %   8.7 %   11.0 %   10.2 %   7.3 %   5.1 %   (2.2 )%    

Gross Reestimated
    Liability-Latest

 

 

 

 

$

15,145

 

$

14,644

 

$

15,786

 

$

16,348

 

$

16,074

 

$

16,144

 

$

16,144

 

$

17,210

 

$

17,367

 

 

 
Reestimated
    Recoverable-Latest
          2,150     2,027     1,909     1,896     2,186     1,976     1,848     1,880     1,800      
         
 
 
 
 
 
 
 
 
     
Net Reestimated
    Liability-Latest
        $ 12,995   $ 12,617   $ 13,877   $ 14,452   $ 13,888   $ 14,168   $ 14,296   $ 15,330   $ 15,567      
Gross Cumulative
    Excess (Deficiency)
        $ (243 ) $ 565   $ 628   $ 978   $ 1,308   $ 1,259   $ 737   $ 604   $ (508 )    
         
 
 
 
 
 
 
 
 
     

(1)
For 1991 through 1995, this loss reserve development table excludes Allstate Reinsurance Co. Limited (ARCO) claims and claims expense, due to the unavailability of loss reserve development information for these claims on a comparable basis. ARCO was sold in 1996.

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        The subsequent reductions in the net reserves established from December 31, 1993 to December 31, 1999 shown in the foregoing table reflect favorable severity trends that Allstate has experienced, as more fully discussed below. The increase in net reserves established at December 31, 2000 reflects unfavorable development as more fully discussed below. The initial reserves established at the end of 1991 had to be increased over the time frame used in the table principally due to the cumulative adverse reserve development on environmental, asbestos and other mass tort claims, virtually all of which relates to 1984 and prior years.

        Allstate has used complex databases developed by outside experts to estimate its potential environmental losses. In addition, Allstate has its own estimation techniques for environmental and asbestos losses. We have used a combination of these resources, along with an extensive internal review of our current claim exposures, to estimate environmental and asbestos reserves. In addition we have analyzed our reinsurance recoverables in depth. Allstate updates its evaluations of environmental, asbestos and other mass tort reserves annually. While we believe that the actuarial techniques and databases described above have assisted in our ability to estimate environmental, asbestos and other mass tort net loss reserves, these refinements may prove to be inadequate indicators of the extent of probable loss. See Note 7 to the Consolidated Financial Statements beginning on page C-84 of Appendix C to the Proxy Statement, incorporated herein by reference.

        The following table is derived from the Loss Reserve Development table and summarizes the effect of reserve reestimates, net of reinsurance, on calendar year operations for the ten-year period ended December 31, 2001. The total of each column details the amount of reserve reestimates made in the indicated calendar year and shows the accident years to which the reestimates are applicable. The amounts in the total accident year column on the far right represent the cumulative reserve reestimates for the indicated accident year(s).

Effect of Net Reserve Reestimates on
Calendar Year Operations

(in millions)

 
  1992
  1993
  1994
  1995
  1996
  1997
  1998
  1999
  2000
  2001
  TOTAL
 
BY ACCIDENT YEAR 1991 & PRIOR   $ (80 ) $ (81 ) $ (4 ) $ 105   $ 312   $ 73   $ 104   $ 187   $ 54   $ (109 ) $ 561  
1992           (321 )   (332 )   (115 )   (170 )   (120 )   (39 )   (12 )   (11 )   (9 )   (1,129 )
1993                 (376 )   (259 )   (200 )   (168 )   (97 )   (30 )   (40 )   2     (1,168 )
1994                       (156 )   (338 )   (152 )   (61 )   (65 )   (36 )   111     (697 )
1995                             60     (216 )   (124 )   (167 )   (125 )   2     (570 )
1996                                   (94 )   (254 )   (207 )   (104 )   (3 )   (662 )
1997                                         (229 )   (231 )   (103 )   (9 )   (572 )
1998                                               (62 )   (100 )   (60 )   (222 )
1999                                                     (257 )   (34 )   (291 )
2000                                                           451     451  
   
 
 
 
 
 
 
 
 
 
 
 
TOTAL   $ (80 ) $ (402 ) $ (712 ) $ (425 ) $ (336 ) $ (677 ) $ (700 ) $ (587 ) $ (722 ) $ 342   $ (4,299 )
   
 
 
 
 
 
 
 
 
 
 
 

23


        Favorable calendar year reserve development in 1992 through 2000 was the result of favorable severity trends in each of the nine years, which more than offset adverse development in the discontinued lines and coverages segment. The favorable severity trend during this period was primarily the result of favorable injury severity trends, as compared to our anticipated trends. The positive nature of the injury severity trends was largely due to moderate medical cost inflation, mitigated by our loss management programs. The impacts of moderate medical cost inflation have emerged over time as actual claim settlements validated its magnitude.

        In 2001, we increased our reserve estimates for prior years. Unfavorable reserve development in 2001 was due to reduced reserve releases, offset by greater volume of late reported weather-related losses than expected from the end of the year 2000 which were reported in the year 2001, additional incurred losses on the 1994 Northridge earthquake, adverse results of class action and other litigation, upward development of property losses and upward development of losses in the Encompass and Canadian businesses. In 2001, reserve releases were at reduced levels due to increasing claim severity trends, which began to deteriorate in 2000 as a result of higher automobile repair and residential construction costs, and increasing medical cost inflation.

        While we believe that changes to our claim settlement processes have contributed to favorable severity trends on closed claims over time, these changes introduce a greater degree of variability in reserve estimates for the remaining outstanding claims at December 31, 2001. Reserve reestimates, if any, are expected to be adversely impacted by anticipated increases in medical cost inflation rates, physical damage repair costs and inflation in the cost of property repair and replacement. We do not expect either favorable or unfavorable reserve development. See "Forward-Looking Statements and Risk Factors Affecting Allstate" in this Form 10-K.

REINSURANCE CEDED

        Information regarding reinsurance ceded is incorporated herein by reference to the discussion of "Property-Liability Reinsurance Ceded" beginning on page C-24 of Appendix C to the Proxy Statement. The property-liability operations referred to in that discussion include the Personal Property and Casualty segment and the Discontinued Lines and Coverages segment.

CAPITAL REQUIREMENTS

        Information regarding Allstate's capital requirements is incorporated herein by reference to the discussion of "Capital Resources and Liquidity" beginning on page C-42 of Appendix C to the Proxy Statement. The property-liability operations referred to in that discussion include the Personal Property and Casualty segment and the Discontinued Lines and Coverages segment.

24


INVESTMENTS

        We follow an investment strategy that combines the goals of safety, stability, liquidity, growth and total return while complying with the regulatory investment requirements to which we are subject. We seek to balance preservation of principal with after-tax yield while maintaining portfolio diversification. We also take into consideration asset/liability management issues such as cash flow and duration matching. To achieve an economic balance between assets and liabilities, various components of the investment portfolios are aligned with particular types of products. Additional information regarding Allstate's investment portfolios and activities is incorporated herein by reference to the discussion of "Market Risk" beginning on page C-37 of Appendix C to the Proxy Statement and "Investments" beginning on page C-33 of Appendix C to the Proxy Statement. The property-liability operations referred to in those discussions include the Personal Property and Casualty segment and the Discontinued Lines and Coverages segment.

REGULATION

        Allstate is subject to extensive regulation in the jurisdictions in which it does business. In the U.S. the method of such regulation varies from state to state but generally has its source in statutes that delegate regulatory authority to a state insurance official. In general, such regulation is intended for the protection of insurance policyholders rather than security holders. Regulation relates to a wide variety of matters including insurance company licensing and examination, agent licensing, price setting, trade practices, policy forms, accounting methods, the nature and amount of our investments, claims practices, participation in shared markets and guaranty funds, reserve adequacy, insurer solvency, transactions with affiliates, the amount of dividends that we may pay, and underwriting standards. This has a substantial effect on our business, especially our personal property and casualty business. Some of these matters are discussed in more detail below. For discussion of statutory financial information, see Note 15 to the Consolidated Financial Statements beginning on page C-99 of Appendix C to the Proxy Statement, incorporated herein by reference. For discussion of regulatory contingencies, see Note 13 to the Consolidated Financial Statements beginning on page C-94 of Appendix C to the Proxy Statement, incorporated herein by reference.

        Following enactment of the Gramm-Leach-Bliley Act of 1999, federal legislation that allows mergers that combine commercial banks, insurers and securities firms within one holding company group, state insurance regulators have been collectively participating in a reexamination of the regulatory framework that currently governs the U.S. insurance business in an effort to determine the proper role of state insurance regulation in the U.S. financial services industry. We cannot predict whether any state or federal measures will be adopted to change the nature or scope of the regulation of the insurance business or what effect any such measures would have on Allstate.

        Limitations on Dividends By Insurance Subsidiaries—As a holding company with no significant business operations of its own, The Allstate Corporation relies on dividends from Allstate Insurance Company as one of the principal sources of cash to pay dividends and to meet

25


its obligations, including the payment of principal and interest on debt. Allstate Insurance Company is regulated as an insurance company in Illinois. Under Illinois law, it may not pay a dividend without notifying the Illinois Department of Insurance and providing specified financial information. Furthermore, Illinois law requires Allstate Insurance Company to notify and receive approval from the Director of the Illinois Department of Insurance for the payment of any dividend that, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of 10% of Allstate Insurance Company's statutory surplus as of December 31 of the prior year or 100% Allstate Insurance Company's statutory net income for the twelve-month period ending December 31 of the prior year.

        The laws of the other jurisdictions that generally govern our insurance subsidiaries contain similar limitations on the payment of dividends. However, in some jurisdictions the laws may be somewhat more restrictive.

        Holding Company Regulation—The Allstate Corporation and Allstate Insurance Company are insurance holding companies subject to regulation throughout the jurisdictions in which their insurance subsidiaries do business. In the U.S., these subsidiaries are organized under the insurance codes of Arizona, Florida, Illinois, Nebraska, New Hampshire, New York, Pennsylvania and Texas. The insurance codes in these states contain similar provisions (subject to certain variations) to the effect that the acquisition or change of "control" of a domestic insurer or of any person that controls a domestic insurer cannot be consummated without the prior approval of the relevant insurance regulator. In general, a presumption of "control" arises from the ownership, control, possession with the power to vote or possession of proxies with respect to 10% or more of the voting securities of a domestic insurer or of a person that controls a domestic insurer. In Florida, regulatory approval must be obtained prior to the acquisition of 5% or more of the voting securities of a domestic stock insurer or of a controlling company. In addition, certain state insurance laws contain provisions that require pre-acquisition notification to state agencies of a change in control with respect to a non-domestic insurance company licensed to do business in that state. While such pre-acquisition notification statutes do not authorize the state agency to disapprove the change of control, such statutes do authorize certain remedies, including the issuance of a cease and desist order with respect to the non-domestic insurer if certain conditions exist, such as undue market concentration. Thus, any transaction involving the acquisition of 10% (5% in Florida) or more of The Allstate Corporation's common stock would generally require prior approval by the state insurance departments in Arizona, California, Florida, Illinois, Nebraska, New Hampshire, New York, Pennsylvania and Texas and would require the pre-acquisition notification in those other states that have adopted pre-acquisition notification provisions and where the insurance subsidiaries are admitted to transact business. Such approval requirements may deter, delay or prevent certain transactions affecting the ownership of The Allstate Corporation's common stock.

        Price Regulation—Nearly all states have insurance laws requiring personal property and casualty insurers to file price schedules, policy or coverage forms, and other information with the state's regulatory authority. In most cases, such price schedules and/or policy forms must be approved prior to use. While they vary from state to state, the objectives of the pricing laws are

26


generally the same: a price must be adequate, not excessive, and not unfairly discriminatory.

        Personal property and casualty insurers are generally unable to effect price increases with respect to a line of coverage until some time after the costs associated with such coverage have increased. The speed at which an insurer can change prices in response to competition or to increasing costs depends, in part, on whether the pricing laws are administered as (i) prior approval, (ii) file-and-use, or (iii) use-and-file laws. In states having prior approval laws, the regulator must approve a price before the insurer may use it. In states having file-and-use laws, the insurer does not have to wait for the regulator's approval to use a price, but the price must be filed with the regulatory authority prior to being used. A use-and-file law requires an insurer to file prices within a certain period of time after the insurer begins using them. Approximately one half of the states, including California, Florida and New York, have prior approval laws. Under all three types of pricing systems, the regulator has the authority to disapprove a price subsequent to its filing.

        An insurer's ability to adjust its pricing in response to competition or to increasing costs is often dependent on an insurer's ability to demonstrate to the regulator that its pricing or proposed pricing meets the requirements of the pricing laws. In those states that significantly restrict an insurer's discretion in selecting the business that it wants to underwrite, an insurer can manage its risk of loss by charging a price that reflects the cost and expense of providing the insurance. In those states that significantly restrict an insurer's ability to charge a price that reflects the cost and expense of providing the insurance, the insurer can manage its risk of loss by being more selective in the type of business it underwrites. When a state significantly restricts both underwriting and pricing, it becomes more difficult for an insurer to maintain its profitability.

        Changes in Allstate's claim settlement process may require Allstate to actuarially adjust loss information used in its pricing application process. Some state insurance regulatory authorities may not approve price increases that give full effect to these adjustments.

        From time to time, the private passenger auto insurance industry comes under pressure from state regulators, legislators and special interest groups to reduce, freeze or set prices at levels that do not correspond with underlying costs and expenses, in our opinion. The homeowners insurance business comes under similar pressure, particularly as regulators in catastrophe prone states struggle to identify an acceptable methodology to price for catastrophe exposure. We expect this kind of pressure to persist. In addition, our use of credit history for underwriting and pricing regularly comes under attack by regulators, legislators and special interest groups in various states. The result could be legislation or regulation that adversely affects the profitability of Allstate's Personal Property and Casualty segment. We cannot predict the impact on our results of operations, liquidity or financial position of possible future legislative and regulatory measures regarding pricing.

        Involuntary Markets—As a condition of maintaining our licenses to do business in various states, we are required to participate in mandatory shared market mechanisms or pooling

27


arrangements (including reinsurance arrangements) that provide various lines of insurance coverage to individuals or entities that otherwise are unable to purchase such coverage from private insurers. Underwriting results related to these organizations, which tend to be adverse, have been immaterial to our results of operations.

        Guaranty Funds—Under state insurance guaranty fund laws, insurers doing business in a state can be assessed, up to prescribed limits, for certain obligations of insolvent insurance companies to policyholders and claimants. Allstate's expenses related to these funds have not been material.

        Investment Regulation—Our insurance subsidiaries are subject to state laws and regulations that require investment portfolio diversification and that limit the amount of investment in certain categories. Failure to comply with these laws and regulations would cause non-conforming investments to be treated as non-admitted assets for purposes of measuring statutory surplus and, in some instances, would require divestiture. As of December 31, 2001 the investment portfolios of our insurance subsidiaries complied with such laws and regulations in all material respects.

        Exiting Geographic Markets; Canceling and Non-Renewing Policies—Many states have laws and regulations that limit an insurer's ability to exit a market. For example, certain states limit a private passenger auto insurer's ability to cancel and non-renew policies. Furthermore, certain states prohibit an insurer from withdrawing one or more lines of insurance business from the state, except pursuant to a plan that is approved by the state insurance department. The state insurance departments can refuse to approve these plans on the grounds that they could lead to market disruption. Laws and regulations that limit cancellation and non-renewal and that subject withdrawal plans to prior approval requirements may restrict an insurer's ability to exit unprofitable markets.

        Regulation and Legislation Affecting Consolidation in the Financial Services Industry—The Gramm-Leach-Bliley Act of 1999 permits mergers that combine commercial banks, insurers and securities firms within one holding company group. Until passage of the Gramm-Leach-Bliley Act, the Glass Steagall Act of 1933 had limited the ability of banks to engage in securities-related businesses and the Bank Holding Company Act of 1956 had restricted banks from being affiliated with insurers. With the passage of the Gramm-Leach-Bliley Act, bank holding companies may acquire insurers and insurance holding companies may acquire banks. In addition grandfathered unitary thrift holding companies, including our parent company, may engage in activities that are not financial in nature. The ability of banks to affiliate with insurers may materially adversely affect all of our product lines by substantially increasing the number, size and financial strength of potential competitors.

        In some states mutual insurance companies can convert to a hybrid structure known as a mutual holding company. This process converts insurance companies owned by their policyholders to stock insurance companies owned (through one or more intermediate holding companies) by their policyholders and, in some instances, in part by third-party stockholders.

28


Also some states permit the conversion of mutual insurance companies into stock insurance companies (demutualization). The ability of mutual insurance companies to convert to mutual holding companies or to demutualize may materially adversely affect all of our product lines by substantially increasing competition for capital in the financial services industry.

        Tax—Under current U.S. tax law and regulations, deferred and immediate annuities and life insurance, including interest-sensitive products, receive favorable policyholder tax treatment. Any legislative or regulatory changes that adversely alter this treatment are likely to negatively affect the demand for these products. In addition, recent changes in the federal estate tax laws will affect the demand for the types of life insurance used in estate planning.

        Environmental—Environmental pollution clean-up of polluted waste sites is the subject of both federal and state regulation. The Comprehensive Environmental Response Compensation and Liability Act of 1980 ("Superfund") and comparable state statutes ("mini-Superfund") govern the clean-up and restoration of waste sites by "Potentially Responsible Parties" (PRPs). Superfund and the mini-Superfunds (Environmental Clean-up Laws or ECLs) establish a mechanism to pay for clean-up of waste sites if PRPs fail to do so, and to assign liability to PRPs. The extent of liability to be allocated to a PRP is dependent on a variety of factors. By some estimates, there are thousands of potential waste sites subject to clean-up, but the exact number is unknown. As of the end of 2000, clean-up construction had been completed at just over half of the designated Superfund sites. The extent of clean-up necessary and the process of assigning liability remain in dispute. The insurance industry is involved in extensive litigation regarding coverage issues arising out of the clean-up of waste sites by insured PRPs and insured parties' alleged liability to third parties responsible for the clean-up. The insurance industry, including Allstate, is disputing many such claims. Key coverage issues include whether Superfund response, investigation and clean-up costs are considered damages under the policies, trigger of coverage, applicability of several types of pollution exclusions, proper notice of claims, whether administrative liability triggers the duty to defend, appropriate allocation of liability among triggered insurers, and whether the liability in question falls within the definition of an "occurrence." Identical coverage issues exist for clean-up and waste sites not covered under Superfund. To date, courts have been inconsistent in their rulings on these issues. Allstate's exposure to liability with regard to its insureds that have been, or may be, named as PRPs is uncertain. See the discussion of Allstate's discontinued lines and coverages segment in "Other Business Segments," above.

        Comprehensive Superfund reform proposals have been introduced in Congress, but only modest reform measures have been enacted. Allstate will support Superfund reform which minimizes litigation and other transaction costs; hastens the clean-up of waste sites without imposing new or additional taxes; addresses the elimination of strict, retroactive, and joint and several liability; allows for the selection of cost-effective, efficient and practical remedial measures; eliminates retroactive natural resource damage awards; and encourages local input into the clean-up process. At this time, there can be no assurance that any comprehensive Superfund reform legislation will be enacted or that any such legislation will provide for a fair, effective and cost-efficient system for settlement of Superfund related claims.

29


OTHER INFORMATION ABOUT ALLSTATE

        As of December 31, 2001, Allstate had approximately 39,627 full-time employees and 1,203 part-time employees.

        Allstate's four business segments use shared services provided by Allstate Insurance Company and other affiliates, including human resources, investment, finance, information technology and legal services.

        Although the insurance business generally is not seasonal, claims and claims expense for the Personal Property and Casualty segment tend to be higher for periods of severe or inclement weather.

        We use the following names, logos and slogans extensively in our business:

Allstate
Allstate Bank
Allstate Bank design logo
Allstate Financial design logo
Allstate Life
Allstate Motor Club
Allstate Motor Club design logo
American Heritage Life
Deerbrook
Deerbrook Insurance Company
Deerbrook Insurance Company design logo
  Encompass Insurance
Encompass Insurance design logo
Glenbrook
Good Hands
Ivantage
Lincoln Benefit
Northbrook design logo
The Good Hands Network
The Good Hands People
The slant "A" Allstate logo
The Workplace Marketer

You're In Good Hands With Allstate
The Right Hands Make All The Difference

In addition, we use the graphic "Good Hands" design logos featuring cupped hands. Our rights in the United States to these names, logos and slogans continue so long as we continue to use them in commerce. Most of these service marks are the subject of renewable U.S. and/or foreign service mark registrations. We believe that these service marks are important to our business and we intend to maintain our rights to them by continued use.

FORWARD-LOOKING STATEMENTS AND
RISK FACTORS AFFECTING ALLSTATE

        This document contains "forward-looking statements" that anticipate results based on management's plans that are subject to uncertainty. These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.

30


        Forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like "plans," "expects," "will," "anticipates," "estimates," "intends," "believes" and other words with similar meanings. These statements may address, among other things, our strategy for growth, product development, regulatory approvals, market position, expenses, financial results and reserves. Forward-looking statements are based on management's current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate. However, we believe that our forward-looking statements are based on reasonable, current expectations and assumptions. We assume no obligation to update any forward-looking statements as a result of new information or future events or developments.

        If the expectations or assumptions underlying our forward-looking statements prove inaccurate or if risks or uncertainties arise, actual results could differ materially from those predicted in our forward-looking statements. In addition to the normal risks of business, Allstate is subject to significant risk factors, including those listed below.

31


32


33


34


35


36


37


38


Executive Officers

        The following table sets forth the names of our executive officers, their current ages, their positions, and the dates of their first election as officers. "AIC" refers to Allstate Insurance Company. "ALIC" refers to Allstate Life Insurance Company.

Name

  Age
  Position/Offices

  Date First Elected Officer
Edward M. Liddy   56   Chairman, President and Chief Executive Officer of The Allstate Corporation and AIC; also a director of The Allstate Corporation   1994

Robert S. Apatoff

 

43

 

Senior Vice President and Chief Marketing Officer of AIC

 

1999

John L. Carl

 

54

 

Vice President and Chief Financial Officer of The Allstate Corporation; Senior Vice President and Chief Financial Officer of AIC

 

1999

Richard I. Cohen

 

57

 

Senior Vice President of AIC (President, Property and Casualty)

 

1989

Joan M. Crockett

 

51

 

Senior Vice President of AIC (Human Resources)

 

1994

Steven L. Groot

 

52

 

Senior Vice President of AIC (President, Direct Distribution and E-Commerce)

 

1988

Ernest A. Lausier

 

56

 

Senior Vice President of AIC (President, Ivantage)

 

2000

Michael J. McCabe

 

56

 

Vice President and General Counsel of The Allstate Corporation; Senior Vice President and General Counsel of AIC

 

1980

Ronald D. McNeil

 

49

 

Senior Vice President of AIC (Field and Product Operations)

 

1994

Robert W. Pike

 

60

 

Vice President and Secretary of The Allstate Corporation; Executive Vice President Administration and Secretary of AIC

 

1978

Samuel H. Pilch

 

55

 

Controller of The Allstate Corporation; Group Vice President and Controller of AIC

 

1995

Francis W. Pollard

 

59

 

Senior Vice President and Chief Information Officer of AIC

 

1984

Casey J. Sylla

 

58

 

Senior Vice President and Chief Investment Officer of AIC (President and Chief Investment Officer, Allstate Investments, LLC)

 

1995

Thomas J. Wilson

 

44

 

Senior Vice President of AIC (President, Allstate Financial)

 

1995

        Mr. Carl intends to retire by the end of the second quarter of 2002 as a result of health-related concerns.

        No family relationships exist among the above-named individuals. Each of the officers named above may be removed from office at any time, with or without cause, by the board of directors of the relevant company.

        With the exception of Messrs. Apatoff, Carl and Lausier, these officers have held the listed positions for at least the last five years or have served Allstate in various executive or

39


administrative capacities for at least five years. Prior to his election in November 1999 to the position stated above, Mr. Apatoff served as Corporate Vice President, Marketing for Aetna Inc. from 1995 to 1999. Prior to his election in April 1999 to the position stated above, Mr. Carl served as Executive Vice President and Chief Financial Officer of Amoco Corporation from 1991 to 1999. Prior to his election in February 2000 to the position stated above, Mr. Lausier was President of CNA Personal Insurance from 1997 to 1999.

Item 2.    Properties

        Our home office complex is located in Northbrook, Illinois. As of January 31, 2002, the complex consists of several buildings totaling approximately 2.35 million square feet of office space on a 250-acre site. We lease approximately 320,000 square feet of this office space.

        We also operate from approximately 1,212 administrative, data processing, claims handling and other support facilities in North America. Approximately 3.2 million square feet are owned and 7.6 million are leased. Generally, only major facilities are owned. In almost all cases, lease terms are for five years or less.

        The locations out of which the Allstate exclusive agencies operate in the U.S. are normally leased by the agencies.

Item 3.    Legal Proceedings

        Incorporated in this Item 3 by reference to the "Regulation and Legal Proceedings" discussion beginning on page C-47 of Appendix C to the Proxy Statement.

Item 4.    Submission of Matters to a Vote of Security Holders

        None.

Part II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

        As of March 18, 2002, there were 179,166 record holders of The Allstate Corporation's common stock and the closing sale price as of 4:00 p.m. as reported in the New York Stock Exchange Composite listing was $37.42. The principal market for the common stock is the New York Stock Exchange but it is also listed on the Chicago Stock Exchange. Set forth below are the high and low New York Stock Exchange Composite listing prices of, and cash dividends declared for, the common stock during 2001 and 2000. Because the New York Stock Exchange completed its conversion to decimal pricing in January 2001, all prices have been converted to decimals and rounded to two decimal places.

40


 
  High
  Low
  Close
  Dividends Declared
2001                
First quarter   42.94   33.56   41.94   .19
Second quarter   45.90   40.18   43.99   .19
Third quarter   44.89   30.00   37.35   .19
Fourth quarter   38.38   30.58   33.70   .19

2000

 

 

 

 

 

 

 

 
First quarter   25.50   17.19   23.81   .17
Second quarter   30.13   20.06   22.25   .17
Third quarter   35.63   22.50   34.75   .17
Fourth quarter   44.75   30.81   43.56   .17

        The discussion of "Limitations on Dividends By Insurance Subsidiaries" beginning on page 25 of this Form 10-K is incorporated by reference in this Item 5. In addition, the discussion of "Liquidity" beginning on page C-44 of Appendix C to the Proxy Statement is incorporated by reference in this Item 5.

Item 6.    Selected Financial Data

        Incorporated in this Item 6 by reference to "11-Year Summary of Selected Financial Data" beginning on page C-2 of Appendix C to the Proxy Statement.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        Incorporated in this Item 7 by reference to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page C-4 of Appendix C to the Proxy Statement.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

        Incorporated in this Item 7A by reference to the "Market Risk" discussion beginning on page C-37 of Appendix C to the Proxy Statement.

Item 8.    Financial Statements and Supplementary Data

        The consolidated financial statements of The Allstate Corporation, including the notes to such statements, beginning on page C-57 of Appendix C to the Proxy Statement are incorporated in this Item 8 by reference. Quarterly results are discussed in Note 20 on page C-109.

41


Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Part III

Item 10.    Directors and Executive Officers of the Registrant

        Information regarding directors of The Allstate Corporation who are standing for election at the annual meeting to be held on May 16, 2002 is incorporated in this Item 10 by reference to the descriptions under "Election of Directors" in the Proxy Statement. The following information pertains to directors who are not standing for reelection at the annual meeting:

        Information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated in this Item 10 by reference to "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement.

        Information regarding executive officers of The Allstate Corporation is incorporated in this Item 10 by reference to Part I, Item 1 of this report under the caption "Executive Officers."

Item 11.    Executive Compensation

        Information regarding executive compensation is incorporated in this Item 11 by reference to the material under the caption "Directors' Compensation and Benefits" on page 9 of the Proxy Statement and under the caption "Executive Compensation" beginning on page 16 of the Proxy Statement.

42


Item 12.    Security Ownership of Certain Beneficial Owners and Management

        Information regarding security ownership of certain beneficial owners and management is incorporated in this Item 12 by reference to the material under the headings "Security Ownership of Directors and Executive Officers" and "Security Ownership of Certain Beneficial Owners" on pages 10-11 of the Proxy Statement.

Item 13.    Certain Relationships and Related Transactions

        Information regarding certain relationships and related transactions is incorporated in this Item 13 by reference to the material under the heading "Certain Transactions" on page 25 of the Proxy Statement.

Part IV

Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) 1 and 2   An "Index to Financial Statements and Financial Statement Schedules" has been filed as a part of this Form 10-K beginning on page S-1 hereof and is incorporated by reference in this Item 14.

(a) 3

 

An "Exhibit Index" has been filed as a part of this Form 10-K beginning on page E-1 hereof and is incorporated in this Item 14 by reference.

(b)

 

Current Reports on Form 8-K were filed during the fourth quarter of 2001 on the following dates for the items indicated:
        October 16, Items 5 and 7
        December 3, Items 5 and 7
        December 27, Items 5 and 7

43


SIGNATURES

        Pursuant to the Requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

    THE ALLSTATE CORPORATION
    (Registrant)

 

 

/s/ Samuel H. Pilch
   
    By: Samuel H. Pilch
    Controller
    (Principal Accounting Officer)

 

 

March 12, 2002

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature

  Title

  Date
/s/Edward M. Liddy
Edward M. Liddy
  Chairman, President and Chief Executive Officer and a Director (Principal Executive Officer)   March 12, 2002

/s/John L. Carl

John L. Carl

 

Vice President and Chief Financial Officer (Principal Financial Officer)

 

March 12, 2002

44



/s/F. Duane Ackerman

F. Duane Ackerman

 

Director

 

March 12, 2002

/s/James G. Andress

James G. Andress

 

Director

 

March 12, 2002

/s/Warren L. Batts

Warren L. Batts

 

Director

 

March 12, 2002

/s/Edward A. Brennan

Edward A. Brennan

 

Director

 

March 12, 2002

/s/James M. Denny

James M. Denny

 

Director

 

March 12, 2002

/s/W. James Farrell

W. James Farrell

 

Director

 

March 12, 2002

/s/Jack M. Greenberg

Jack M. Greenberg

 

Director

 

March 12, 2002

/s/Ronald T. LeMay

Ronald T. LeMay

 

Director

 

March 12, 2002

/s/Michael A. Miles

Michael A. Miles

 

Director

 

March 12, 2002

/s/J. Christopher Reyes

J. Christopher Reyes

 

Director

 

March 12, 2002

/s/H. John Riley, Jr.

H. John Riley, Jr.

 

Director

 

March 12, 2002

45



/s/Joshua I. Smith

Joshua I. Smith

 

Director

 

March 12, 2002

/s/Judith A. Sprieser

Judith A. Sprieser

 

Director

 

March 12, 2002

/s/Mary Alice Taylor

Mary Alice Taylor

 

Director

 

March 12, 2002

46


THE ALLSTATE CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS SCHEDULES
YEAR ENDED DECEMBER 31, 2001

The following consolidated financial statements, notes thereto and related information of The Allstate Corporation (the "Company") are incorporated herein by reference to the Company's Proxy Statement.

 
  Page*
   
Consolidated Statements of Operations **   C-57    
Consolidated Statements of Comprehensive Income **   C-58    
Consolidated Statements of Financial Position **   C-59    
Consolidated Statements of Shareholders' Equity **   C-60    
Consolidated Statements of Cash Flows **   C-61    
Notes to the Consolidated Financial Statements**   C-62    
Quarterly Results **   C-109    

The following additional financial statement schedules and independent auditors' report are furnished herewith pursuant to the requirements of Form 10-K.

The Allstate Corporation

 
   
  Page
Schedules required to be filed under the provisions of Regulation S-X Article 7:    

Schedule I

 

Summary of Investments—Other than Investments in Related Parties

 

S-2
Schedule II   Condensed Financial Information of The Allstate Corporation (Registrant)   S-3
Schedule III   Supplementary Insurance Information   S-7
Schedule IV   Reinsurance   S-8
Schedule V   Valuation Allowances and Qualifying Accounts   S-9
Schedule VI   Supplementary Information Concerning Consolidated Property-Liability Insurance Operations   S-10

Independent Auditors' Report

 

S-11

All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the Consolidated Financial Statements or in notes thereto.

* Refers to page number in the Company's Proxy Statement.
** Incorporated by reference in Item 8 herein.

S-1


THE ALLSTATE CORPORATION AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2001
(in millions)

 
  Cost/
amortized cost

  Fair value
  Carrying value
Type of Investment                  
Fixed Income Securities, Available for Sale:                  
  Bonds:                  
    United States government, government agencies and authorities   $ 3,302   $ 3,810   $ 3,810
    States, municipalities and political subdivisions     19,037     19,724     19,724
    Foreign governments     888     911     911
    Public utilities     2,969     3,059     3,059
    Convertibles and bonds with warrants attached     700     728     728
    All other corporate bonds     21,582     22,330     22,330
  Mortgage-backed securities     10,653     10,929     10,929
  Asset-backed securities     3,933     3,996     3,996
  Redeemable preferred stocks     231     233     233
   
 
 
    Total fixed income securities   $ 63,295   $ 65,720   $ 65,720
   
 
 

Equity Securities:

 

 

 

 

 

 

 

 

 
  Common Stocks:                  
    Public utilities     121   $ 130     130
    Banks, trusts and insurance companies     377     505     505
    Industrial, miscellaneous and all other     3,673     4,388     4,388
  Nonredeemable preferred stocks     214     222     222
   
 
 
    Total equity securities   $ 4,385   $ 5,245   $ 5,245
   
 
 
Mortgage loans on real estate     5,710           5,710
Derivative instruments     (34 )         51
Real estate     37           37
Policy loans     1,205           1,205
Short-term investments     1,908           1,908
   
       
    Total Investments   $ 76,506         $ 79,876
   
       

S-2


THE ALLSTATE CORPORATION AND SUBSIDIARIES
SCHEDULE II-
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
(in millions)

 
  Year ended December 31,
 
 
  2001
  2000
  1999
 
Revenues                    
  Investment income, less investment expense   $ 12   $ 40   $ 47  
  Realized capital gains and losses         (1 )   (6 )
  Other income     48     72     72  
   
 
 
 
      60     111     113  
Expenses                    
  Interest expense     338     312     210  
  Other operating expenses     11     6     22  
   
 
 
 
      349     318     232  
   
 
 
 
Loss from operations before income tax benefit and equity in net income of                    
  subsidiaries     (289 )   (207 )   (119 )
Income tax benefit     (122 )   (102 )   (68 )
   
 
 
 
Loss before equity in net income of subsidiaries     (167 )   (105 )   (51 )
Equity in net income of subsidiaries     1,325     2,316     2,771  
   
 
 
 
  Net income   $ 1,158   $ 2,211   $ 2,720  
   
 
 
 

Other comprehensive income, after-tax

 

 

 

 

 

 

 

 

 

 
 
Unrealized net capital gains and losses

 

 

(191

)

 

611

 

 

(1,625

)
  Unrealized foreign currency translation adjustments     11     (30 )   14  
  Unrealized minimum pension liability adjustment     (83 )        
   
 
 
 
  Other comprehensive (loss) income, after-tax     (263 )   581     (1,611 )
   
 
 
 
  Comprehensive income   $ 895   $ 2,792   $ 1,109  
   
 
 
 

See accompanying notes to condensed financial information and notes to Consolidated Financial Statements incorporated herein by reference.

S-3



THE ALLSTATE CORPORATION AND SUBSIDIARIES
SCHEDULE II (CONTINUED)—
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF FINANCIAL POSITION
(in millions except par value data)

 
  December 31,
 
 
  2001
  2000
 
Assets              
  Investments in subsidiaries   $ 21,512   $ 21,153  
  Investments              
    Fixed income securities, at fair value (amortized cost $5 and $31)     5     31  
    Short-term     11     52  
   
 
 
    Total investments     16     83  
  Cash     7     8  
  Receivable from subsidiaries     85     235  
  Dividends receivable from subsidiaries         422  
  Other assets     164     161  
   
 
 
    Total assets   $ 21,784   $ 22,062  
   
 
 
Liabilities              
  Short-term debt   $ 217   $ 219  
  Long-term debt     3,575     3,025  
  Payable to subsidiaries     616     1,195  
  Dividends payable to shareholders     136     124  
  Other liabilities     44     48  
   
 
 
    Total liabilities     4,588     4,611  
   
 
 
Shareholders' Equity              
  Preferred stock, $1 par value, 25 million shares authorized, none issued          
  Common stock, $.01 par value, 2.0 billion shares authorized and 900 million issued,              
    712 million and 728 million shares outstanding     9     9  
  Additional capital paid-in     2,599     2,604  
  Retained income     19,044     18,433  
  Deferred compensation expense     (193 )   (207 )
  Treasury stock, at cost (188 million and 172 million shares)     (5,926 )   (5,314 )
  Accumulated other comprehensive income:              
    Unrealized net capital gains and losses     1,789     1,980  
    Unrealized foreign currency translation adjustments     (43 )   (54 )
    Minimum pension liability adjustment     (83 )    
   
 
 
      Total accumulated other comprehensive income     1,663     1,926  
   
 
 
      Total shareholders' equity     17,196     17,451  
   
 
 
      Total liabilities and shareholders' equity   $ 21,784   $ 22,062  
   
 
 

See accompanying notes to condensed financial information and notes to Consolidated Financial
Statements incorporated herein by reference.

S-4


THE ALLSTATE CORPORATION AND SUBSIDIARIES
SCHEDULE II (CONTINUED)—
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(in millions)

 
  Year ended
December 31,

 
 
  2001
  2000
  1999
 
Cash flows from operating activities                    
Net income   $ 1,158   $ 2,211   $ 2,720  
  Adjustments to reconcile net income to net cash provided by operating                    
    activities:                    
    Equity in net income of subsidiaries     (1,325 )   (2,316 )   (2,771 )
    Realized capital gains and losses         1     6  
    Dividends received from subsidiaries     1,287     655     2,211  
    Other operating assets and liabilities     11     (1 )   86  
   
 
 
 
      Net cash provided by operating activities     1,131     550     2,252  
   
 
 
 
Cash flows from investing activities                    
  Proceeds from sales and collections of investments     164     1,574     853  
  Investment purchases     (136 )   (782 )   (908 )
  Capital contributions to subsidiaries     (173 )   (199 )   (609 )
  Change in short-term investments, net     41     406     (4 )
  Acquisitions, net of cash received             (87 )
   
 
 
 
      Net cash (used in) provided by investing activities     (104 )   999     (755 )
   
 
 
 
Cash flows from financing activities                    
  Change in short-term debt, net     (2 )   (375 )   202  
  Transfers to subsidiaries through intercompany loan agreement, net     152     154     84  
  Repayment of long-term debt     (550 )        
  Proceeds from issuance of long-term debt     545     900     825  
  Dividends paid to shareholders     (535 )   (502 )   (471 )
  Treasury stock purchases     (721 )   (1,783 )   (2,173 )
  Other     83     60     41  
   
 
 
 
      Net cash used in financing activities     (1,028 )   (1,546 )   (1,492 )
   
 
 
 
Net (decrease) increase in cash     (1 )   3     5  
Cash at beginning of year     8     5      
   
 
 
 
Cash at end of year   $ 7   $ 8   $ 5  
   
 
 
 

See accompanying notes to condensed financial information and notes to Consolidated Financial
Statements incorporated herein by reference.

S-5


THE ALLSTATE CORPORATION AND SUBSIDIARIES
SCHEDULE II (CONTINUED)-
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION

1.    General

        The financial statements of the Registrant should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the 2002 Proxy Statement of The Allstate Corporation (the "Company" or "Registrant"). The short-term debt and long-term debt presented in Note 11 "Capital Structure" beginning on page C-91 of the 2002 Proxy Statement are direct obligations of the Company, with the exception of the following obligations at December 31:

(in millions)

  2001
  2000
Short-term:            
Advance from Federal Home Loan Bank   $ 10   $

Long-term:

 

 

 

 

 

 
Floating Rate Notes     99     87
6.00% Notes, due 2002 to 2003     9    
Various Notes, due 2002 to 2008     11    

2.    Receivable and Payable to Subsidiaries

        The majority of the proceeds from the issuance of commercial paper has been loaned to subsidiaries through an intercompany loan agreement and is used for general purposes.

        In 1996, the Registrant borrowed $750 million from its subsidiary trusts at a weighted-average interest rate of 7.92%. These borrowings consist of $550 million and $200 million of debentures with a contractual maturity of 2026 and 2045, respectively. In December 2001, the Company redeemed all of the $550 million of debentures at a price of $25 per share plus accrued and unpaid interest. The $200 million of debentures are redeemable by the Company in whole, or in part, in 2006. The Registrant recorded $57 million, $64 million and $60 million of interest expense in 2001, 2000 and 1999, respectively, related to these borrowings.

3.    Supplemental Disclosures of Non-Cash Investing Activity and Cash Flow Information

        The Registrant paid $331 million, $293 million and $206 million of interest on debt in 2001, 2000 and 1999, respectively.

        The Registrant received dividends from subsidiaries of $789 million in the form of fixed income securities in 1999.

        In August 2000, the Company issued 7 million shares of its common stock in exchange for settlement of its obligation of subordinated debentures to the subsidiary trust (see Note 4 "Supplemental Disclosure of Non-Cash Flow Information" on page C-74 of the 2002 Proxy Statement).

S-6


THE ALLSTATE CORPORATION AND SUBSIDIAIRIES
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
(in millions)

 
  At December 31,
  For the Year Ended December 31,
Segment

  Deferred Policy Acquisition Costs
  Reserves for Claims, Claims Expense and Contract Benefits
  Unearned Premiums
  Premium Revenue and Contract Charges
  Net Investment Income (1)
  Claims, Claims Expense and Contract Benefits
  Amortization of Deferred Policy Acquisition Costs
  Other Operating Costs and Expenses
  Premiums Written (Excluding Life)
2001                                                      
Property-liability operations                                                      
  PP&C   $ 1,135   $ 14,424   $ 7,931   $ 22,182         $ 17,506   $ 3,060   $ 2,244   $ 22,601
  Discontinued lines and Coverages         2,076         15           26         12     8
   
 
 
 
 
 
 
 
 
  Total property-liability     1,135     16,500     7,931     22,197   $ 1,745     17,532     3,060     2,256     22,609
Allstate Financial operations     3,286     42,694     30     2,230     2,968     3,404     402     600     410
Corporate and other                     83             15    
   
 
 
 
 
 
 
 
 
Total   $ 4,421   $ 59,194   $ 7,961   $ 24,427   $ 4,796   $ 20,936   $ 3,462   $ 2,871   $ 23,019
   
 
 
 
 
 
 
 
 

2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Property-liability operations                                                      
  PP&C   $ 1,100   $ 14,595   $ 7,553   $ 21,868         $ 16,386   $ 3,008   $ 2,288   $ 21,856
  Discontinued lines and Coverages         2,264         3           9         7     2
   
 
 
 
 
 
 
 
 
  Total property-liability     1,100     16,859     7,553     21,871   $ 1,814     16,395     3,008     2,295     21,858
Allstate Financial operations     3,209     37,338     54     2,205     2,715     3,190     450     514     352
Corporate and other                     104             6    
   
 
 
 
 
 
 
 
 
Total   $ 4,309   $ 54,197   $ 7,607   $ 24,076   $ 4,633   $ 19,585   $ 3,458   $ 2,815   $ 22,210
   
 
 
 
 
 
 
 
 

1999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Property-liability operations                                                      
  PP&C   $ 1,132   $ 15,204   $ 7,607   $ 20,103         $ 14,642   $ 2,908   $ 1,977   $ 20,381
  Discontinued lines and Coverages         2,610         9           37         21     8
   
 
 
 
 
 
 
 
 
  Total property-liability     1,132     17,814     7,607     20,112   $ 1,761     14,679     2,908     1,998     20,389
Allstate Financial operations     2,987     32,796     64     1,623     2,260     2,578     374     372     187
Corporate and other                     91             24    
   
 
 
 
 
 
 
 
 
Total   $ 4,119   $ 50,610   $ 7,671   $ 21,735   $ 4,112   $ 17,257   $ 3,282   $ 2,394   $ 20,576
   
 
 
 
 
 
 
 
 

(1)    A single investment portfolio supports both property-liability segments.

S-7


THE ALLSTATE CORPORATION AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
(in millions)

 
  Gross amount
  Ceded to other
companies

  Assumed from
other companies

  Net amount
  Percent of
amount
assumed
to net

Year Ended December 31, 2001                            
Life insurance in force   $ 374,169   $ 144,438   $ 12,870   $ 242,601   5.3%
   
 
 
 
   
Premiums and contract charges:                            
  Life insurance   $ 1,949   $ 313   $ 68   $ 1,704   4.0%
  Accident-health insurance     553     106     79     526   15.0%
  Property-liability insurance     20,671     281     1,807     22,197   8.1%
   
 
 
 
   
Total premiums and contract charges   $ 23,173   $ 700   $ 1,954   $ 24,427   8.0%
   
 
 
 
   
Year Ended December 31, 2000                            
Life insurance in force   $ 359,332   $ 125,479   $ 8,582   $ 242,435   3.5%
   
 
 
 
   
Premiums and contract charges:                            
  Life insurance   $ 1,962   $ 308   $ 54   $ 1,708   3.2%
  Accident-health insurance     499     71     69     497   13.9%
  Property-liability insurance     20,222     268     1,917     21,871   8.8%
   
 
 
 
   
Total premiums and contract charges.   $ 22,683   $ 647   $ 2,040   $ 24,076   8.5%
   
 
 
 
   
Year Ended December 31, 1999                            
Life insurance in force   $ 328,400   $ 107,234   $ 6,495   $ 227,661   2.9%
   
 
 
 
   
Premiums and contract charges:                            
  Life insurance   $ 1,536   $ 229   $ 20   $ 1,327   1.5%
  Accident-health insurance     313     31     14     296   4.7%
  Property-liability insurance     19,977     389     524     20,112   2.6%
   
 
 
 
   
Total premiums and contract charges   $ 21,826   $ 649   $ 558   $ 21,735   2.6%
   
 
 
 
   

S-8


THE ALLSTATE CORPORATION AND SUBSIDIARIES
SCHEDULE V - VALUATION ALLOWANCES AND QUALIFYING ACCOUNTS
(in millions)

 
   
  Additions
   
   
Description

  Balance at
Beginning of
Period

  Charged to
costs and
expenses

  Other
Additions

  Deductions
  Balance at
End of
Period

Year Ended December 31, 2001                              
Allowance for estimated losses on                              
  mortgage loans   $ 10   $ 2   $   $ 7   $ 5
Allowance for reinsurance recoverable     102     (7 )       6     89
Allowance for premium installment                              
  receivable     69     80         95     54
Allowance for deferred tax assets     79     (64 )           15

Year Ended December 31, 2000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Allowance for estimated losses on                              
  mortgage loans   $ 14   $ (4 ) $   $   $ 10
Allowance for reinsurance recoverable     111     (5 )       4     102
Allowance for premium installment                              
  receivable     76     145         152     69
Allowance for deferred tax assets     58     21             79

Year Ended December 31, 1999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Allowance for estimated losses on                              
  mortgage loans   $ 15   $ (1 ) $   $   $ 14
Allowance for reinsurance recoverable     141     (3 )       27     111
Allowance for premium installment                              
  receivable     54     123     1     102     76
Allowance for deferred tax assets     33     25             58

S-9


THE ALLSTATE CORPORATION AND SUBSIDIARIES
SCHEDULE VI - SUPPLEMENTARY INFORMATION CONCERNING
CONSOLIDATED PROPERTY-LIABILITY INSURANCE OPERATIONS
(in millions)

 
  At December 31,
 
  2001
  2000
  1999
Deferred policy acquisition costs   $ 1,135   $ 1,100   $ 1,132
Reserves for insurance claims and claims expense     16,500     16,859     17,814
Unearned premiums     7,931     7,553     7,607

 


 

Year Ended December 31,


 
 
  2001
  2000
  1999
 
Earned premiums   $ 22,197   $ 21,871   $ 20,112  

Net investment income

 

 

1,745

 

 

1,814

 

 

1,761

 

Claims and claims adjustment expense incurred

 

 

 

 

 

 

 

 

 

 
  Current year     17,190     17,117     15,266  
  Prior years     342     (722 )   (587 )
Amortization of deferred policy acquisition costs     3,060     3,008     2,908  
Paid claims and claims adjustment expense     17,924     17,331     14,964  
Premiums written     22,609     21,858     20,389  

S-10


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
The Allstate Corporation:

We have audited the consolidated financial statements of The Allstate Corporation and subsidiaries as of December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, and have issued our report thereon dated February 20, 2002; such consolidated financial statements and report are included in The Allstate Corporation Notice of Annual Meeting and Proxy Statement dated March 25, 2002 and are incorporated herein by reference. Our audits also include the financial statement schedules of The Allstate Corporation and subsidiaries, listed in the Index at Item 14(a)2. These financial statement schedules are the responsibility of the Registrant's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche LLP
Chicago, Illinois
February 20, 2002

S-11


EXHIBIT INDEX

The Allstate Corporation Form 10-K
For the Year Ended December 31, 2001

Exhibit No.

  Document Description

3(i)   Restated Certificate of Incorporation filed with the Secretary of State of Delaware on February 4, 1999. Incorporated herein by reference to Exhibit 3(a) to The Allstate Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.**

3(ii)

 

Amended and Restated By-Laws of The Allstate Corporation effective September 10, 2001. Incorporated herein by reference to Exhibit 3 to The Allstate Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.**

4(i).1

 

Rights Agreement dated as of February 12, 1999 between The Allstate Corporation and Rights Agent First Chicago Trust Company of New York. Incorporated herein by reference to Exhibit 4 to The Allstate Corporation's Current Report on Form 8-K filed February 19, 1999.**

4(i).2

 

Statement regarding Change of Rights Agent.

4(iii)

 

The Allstate Corporation hereby agrees to furnish to the Commission, upon request, the instruments defining the rights of holders of each issue of long-term debt of it and its consolidated subsidiaries.

10.1

 

Tax Sharing Agreement dated May 14, 1993 between Sears, Roebuck and Co. and its subsidiaries. Incorporated herein by reference to Exhibit 10.6 to Amendment No. 3 to Registration Statement No. 33-59676.

10.2

 

Supplemental Tax Sharing Agreement dated January 27, 1995 between Sears, Roebuck and Co. and The Allstate Corporation. Incorporated herein by reference to Exhibit 10(d) to The Allstate Corporation's Current Report on Form 8-K dated February 22, 1995.**

E-1


10.3*     Allstate Insurance Company Supplemental Retirement Income Plan, as amended and restated effective January 1, 1996. Incorporated herein by reference to Exhibit 10.11 to The Allstate Corporation's Annual Report on Form 10-K for 1995.**

10.4*

 

 

The Allstate Corporation Deferred Compensation Plan, as amended and restated as of November 1, 2001.

10.5*

 

 

The Allstate Corporation Amended and Restated Deferred Compensation Plan for Non-Employee Directors, as amended and restated as of February 5, 1997. Incorporated herein by reference to Exhibit 4 to Registration Statement No. 333-16129.**

10.6*

 

 

The Allstate Corporation Annual Executive Incentive Compensation Plan, as amended and restated as of March 9, 1999. Incorporated herein by reference to Exhibit 10.14 to The Allstate Corporation's Annual Report on Form 10-K for 1998.**

10.7*

 

 

The Allstate Corporation Long-Term Executive Incentive Compensation Plan, as amended and restated as of March 9, 1999. Incorporated herein by reference to Exhibit 10.15 to The Allstate Corporation's Annual Report on Form 10-K for 1998.**

10.8*

 

 

The Allstate Corporation Equity Incentive Plan, as amended and restated as of November 10, 1998. Incorporated herein by reference to Exhibit 10.16 to The Allstate Corporation's Annual Report on Form 10-K for 1998.**

10.9*

 

 

Amendments approved by the Board of Directors on March 3, 1999 and March 13, 2001 to The Allstate Corporation Equity Incentive Plan, as amended and restated as of November 10, 1998. Incorporated herein by reference to Exhibit 10.1 to The Allstate Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.**

10.10*

 

 

Form of stock option under the Equity Incentive Plan. Incorporated by reference to Exhibit 10.15 to The Allstate Corporation Annual Report on Form 10-K for 1999**.

10.11*

 

 

Form of stock option with reload under the Equity Incentive Plan. Incorporated by reference to Exhibit 10.16 to The Allstate Corporation Annual Report on Form 10-K for 1999**.

E-2


10.12*     Form of restricted stock grant under the Equity Incentive Plan. Incorporated by reference to Exhibit 10.17 to The Allstate Corporation Annual Report on Form 10-K for 1999**.
10.13*     The Allstate Corporation Equity Incentive Plan for Non-Employee Directors as amended and restated on September 18, 2000 effective June 1, 2001. Incorporated herein by reference to Exhibit 10.12 to The Allstate Corporation's Annual Report on Form 10-K for 2000.**
10.14*     The Allstate Corporation Employees Replacement Stock Plan, as amended and restated on November 10, 1998. Incorporated herein by reference to Exhibit 10.20 to The Allstate Corporation's Annual Report on Form 10-K for 1998.**
10.15*     Amendments approved by the Board of Directors on March 3, 1999 and March 13, 2001 to The Allstate Corporation Employees Replacement Stock Plan, as amended and restated on November 10, 1998. Incorporated herein by reference to Exhibit 10.2 to The Allstate Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.**
10.16*     Form of stock option under the Employees Replacement Stock Plan. Incorporated herein by reference to Exhibit 10.21 to The Allstate Corporation's Annual Report on Form 10-K for 1995.**
10.17*     Form of restricted stock grant under the Employees Replacement Stock Plan. Incorporated herein by reference to Exhibit 10.22 to The Allstate Corporation's Annual Report on Form 10-K for 1995.**
10.18*     The Allstate Corporation Annual Covered Employee Incentive Compensation Plan adopted and made effective on March 9, 1999. Incorporated herein by reference to Exhibit 10.23 to The Allstate Corporation's Annual Report on Form 10-K for 1998.**
10.19*     The Allstate Corporation 2001 Equity Incentive Plan effective May 15, 2001. Incorporated herein by reference to Exhibit 10.3 to The Allstate Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.**
10.20*     Form of Option Award Agreement under The Allstate Corporation 2001 Equity Incentive Plan. Incorporated herein by reference to Exhibit 10.4 to The Allstate Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.**

E-3


10.21*   Retirement Benefits of Edward M. Liddy, John L. Carl, and Casey J. Sylla.

10.22*

 

CEO Change of Control Employment Agreement. Incorporated herein by reference to Exhibit 10.3 to The Allstate Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.**

10.23*

 

Other Named Executive Officer Change of Control Employment Agreement. Incorporated herein by reference to Exhibit 10.4 to The Allstate Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.**

11      

 

Computation of Earnings per Common Share

12      

 

Computation of Earnings to Fixed Charges Ratio

21      

 

Subsidiaries of The Allstate Corporation

23      

 

Independent Auditors' Consent

99      

 

The Allstate Corporation's Notice of Annual Meeting and Proxy Statement dated March 25, 2002 is incorporated herein by reference.
*   A management contract or compensatory plan or arrangement
**   SEC File Number 1-11840

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