Allstate Incurs More than $300 Million in Southern California Wildfire Losses

December 19, 2007

The Allstate Corp. reported that the company has received more than 7,000 claims from the Southern California wildfires in October of this year, resulting in approximately $315 million to $335 million in wildfire-related catastrophe losses to be recorded in fourth quarter 2007.

In addition to the California wildfires, a number of weather events in October and November have affected Allstate’s catastrophe losses to-date for the fourth quarter. Allstate declared 10 catastrophes during October and November, notably wind and hail in the Northwest and ice storms in the Midwest. Including California wildfire losses, total catastrophe losses in October and November were between $360 million to $400 million, or an estimated 7.9 points to 8.8 points on the combined ratio. These catastrophe losses are approximately $100 million above catastrophe losses for the full fourth quarter of 2006. December weather events, including ice and snow storms, are expected to further impact catastrophe losses and auto and homeowner frequency for the quarter.

Allstate expects its 2007 property-liability combined ratio for total year 2007, excluding the effect of catastrophes and prior year reserve re-estimates to be at the high end of the previously affirmed outlook of 84 to 86.

According to The Goldman Sachs Group Inc., the estimate for the Southern California wildfires is “significantly above” what it had forecasted for the entire quarter ($260 million). Additionaly, the analyst predicted that December Midwest and Northeast storms will generate incremental weather-related losses for the quarter would likely raise total catastrophe losses for the insurer closer to $500 million. And the storms are also likely to raise the frequency of auto-related claims.

Consequently, the analyst revised down its fourth quarter and full-year 2007 earnings per share estimates by $0.46 and $0.45 to $1.35 and $6.60, respectively. The company made no changes to its out-year estimates. But the company noted a more pronounced reduction in personal auto rates or a significant pickup in loss cost trends could call its estimates into question.

For information, visit www.allstate.com.

Sources: Allstate, Goldman Sachs