The Allstate Corporation Q2 2006 Earnings Conference Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Tom Cholnoky - Goldman Sachs - Analyst : Dan, I thought it was a great addendum you put on your -- about your reinsurance programs. The question I guess I have is, in all of your examples, what size kind of industry losses are we kind of talking about for you to come up with your gross losses? Would be kind of the first part of the question.

Question: Tom Cholnoky - Goldman Sachs - Analyst : But what I'm trying to get at, though, Dan, is that, you know, for instance, in Florida, $5.2 billion gross loss coming down to 1.80 -- that has got to assume some sort of level of loss. I mean, are we talking Hurricane Andrew? Are we talking Katrina hitting Miami? Because at some point, I assume you are at risk of still going through your Cat program, are you not?

Question: Tom Cholnoky - Goldman Sachs - Analyst : Of all of the pieces -- sorry.

Question: Tom Cholnoky - Goldman Sachs - Analyst : Okay. I guess the question really then is what kind of event would have to occur for you to exceed those numbers? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Tom Cholnoky - Goldman Sachs - Analyst : All right. Maybe I will pursue this off-line. But the other question I guess I have regarding your guidance -- can you just be -- provide us just a little bit more detail in your level of confidence -- or what is driving the incremental -- the higher guidance in the quarter -- or for the remainder of the year?

Question: Bill Wilt - Morgan Stanley - Analyst : Somewhat unrelated to the quarter, looking at '05 versus '04 advertising expenditures, it looked like Allstate really shrank print and network TV advertising, really ramped up syndicated TV and cable. So, I guess the question is I'm wondering if that continued into 2006. Can you add any color? How should we interpret the change, I guess, in the context of the drive for growth and potentially gunning for a different demographic profile?

Question: Bill Wilt - Morgan Stanley - Analyst : Thanks. Is the shift to the syndicated TV and cable relevant, I guess having grown significantly, relative to the other forms of media?

Question: Bill Wilt - Morgan Stanley - Analyst : Thanks. Second very quick one -- is it fair to think of the catastrophe management policy you have undertaken -- I guess specifically, the nonrenewal of homeowners policies along the coasts -- is it fair to think of that as a multiyear process?

Question: Bill Wilt - Morgan Stanley - Analyst : Thanks very much.

Question: Bill Wilt - Morgan Stanley - Analyst : Thanks, the numbers reflect that. I was just looking at the shift within. But that is very helpful. Thank you.

Question: Jay Gelb - Lehman Brothers - Analyst : Tom, I wanted to touch base on your ability to pass along the higher reinsurance costs going forward. I believe you gave the number -- that 35% of the increased costs are anticipated to be pass-along currently. How much of the ultimate cost do you think you can pass along, and how long should that take?

Question: Jay Gelb - Lehman Brothers - Analyst : Okay. Thanks for that detail. Then separately, on the claims cost trends in auto, it seems that Allstate has some permanent improvements in its claim process that allows it not only to benefit from the secular trends of better frequency. Can you talk to us a little bit about that in terms of how we should think about it? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Jay Gelb - Lehman Brothers - Analyst : Great, thanks for the answers.

Question: Ron Frank - Smith Barney Citigroup - Analyst : I wanted to ask about new applications. It seems like virtually all of the growth, as you alluded to, is coming from Florida and California. I know you have the new rating plan in Florida that has had a big impact. I am just wondering if you can give us a sense as a what is driving it in California, and if there is an anniversary or a lap date out there where the comparisons start to get more difficult because of the first anniversary of whatever it is you did?

Question: Ron Frank - Smith Barney Citigroup - Analyst : Yes. I just want to follow up, Tom. My comment about Florida and California being the drivers was feeding off the new issued apps data on Page 19 of the press release where it said the hurricane exposure states were up 4.8%, all of which came from Florida, that California was up 5.7, and all other states were nearly flat at 0.6.

Question: Ron Frank - Smith Barney Citigroup - Analyst : Okay, so I am inferring from the average there. All right. Then just one other quick thing -- Dan, I just want to confirm something you said. Did you say that the guidance was based on an assumed Cat burden of about 6 loss ratio points for the second half? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Ron Frank - Smith Barney Citigroup - Analyst : Thanks very much. I appreciate that.

Question: Bob Glasspiegel - Langen McAlenney - Analyst : I just wanted to follow a little bit more on Ron's question on California and shift to just sort of what is going on on the regulatory landscape and specifically your outlook towards zip codes not being able to be used potentially in rating, how significant might that be to SRM and (indiscernible) hearings on profitability?

Question: Bob Glasspiegel - Langen McAlenney - Analyst : Okay, one other question -- just fixed annuity sales were up 43%, sort of in a high CD flat yield curve environment. Most of my Life companies are not showing much growth in that segment. Is that just a function of -- you are either VA and your forces can sell more, or you saw some opportunity somewhere?

Question: Bob Glasspiegel - Langen McAlenney - Analyst : That's way above the last six-quarter trend which has been in a narrow band.

Question: Matthew Heimermann - JP Morgan - Analyst : A couple of quick questions -- first, in Your Choice Auto, if I recall correctly, you tried to price that business to a similar loss ratio as the rest of your book. Has your experience thus far been consistent with that goal, or has it run a little bit better than maybe you thought?

Question: Matthew Heimermann - JP Morgan - Analyst : Okay. Then in terms of the Life business, can you -- I did the math in a prior quarter when you announce the reinsurance agreement. But can you just, at this point, now that it has closed, give us a sense of what your view of the lost earnings from that block of business are?

Question: Matthew Heimermann - JP Morgan - Analyst : Okay. Then just from a rate perspective, as you are filing, I suspect that frequency makes its way into your rating programs, just based on your experience data. But I guess at what point does the accumulation of all of these frequencies decline start to make a difference in terms of seeing maybe a continuation of flat or even negative rate revisions going forward?

Question: Gary Ransom - Fox-Pitt Kelton - Analyst : If I wanted to follow up on a comment from Tom about how there were fewer spots where you could compete effectively because other companies were starting to use sophisticated pricing, and to put that against your desire to go after this high lifetime value customer, I just wanted to get the connection. Are you still -- is it tougher to get your targeted customer now? Or is it still possible to do just as well going forward, finding the growth, finding the customers you want?

Question: Gary Ransom - Fox-Pitt Kelton - Analyst : Just a follow-up on the independent agent side, could you talk about how the difficulty of competing in that might be different from your direct side?

Question: Jay Cohen - Merrill Lynch - Analyst : Good morning. It looks like some other insurance executives are watching syndicated TV, because it seems that Your Choice Auto is being duplicated, sometimes pretty closely, by some others. I saw Hartford had an announcement just this morning. I am watching the tape. And Safeco has a new auto product. How long do you think you have before just about everybody else has some sort of choice built into their products? And how do you maintain competitive advantage with it?

Question: Jay Cohen - Merrill Lynch - Analyst : I imagine also your advertising spending and marketing effort is quite a bit larger than some of these other players, as well.

Question: Jay Cohen - Merrill Lynch - Analyst : If I could squeeze in one more quick question? Progressive came out and pretty publicly said that they are dissatisfied with their growth, and they want to find a better balance between growth and margins. Have you noticed a difference in their behavior in the market to date?

Question: Kelly Nash - KeyBanc Capital Markets - Analyst : I wonder. You have been reducing your coastal exposure and indicated that that is kind of a continual process. Can you just give us a sense of how much exposure reduction is left relative to what you have accomplished to date?

Question: Kelly Nash - KeyBanc Capital Markets - Analyst : Okay, so it is safe to say that it sounds like there is still quite a bit of exposure reduction going forward? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Kelly Nash - KeyBanc Capital Markets - Analyst : Okay. Then I wonder if you could just comment on consumer behavior. Are you seeing any increase in shopping or anything unusual going on from that perspective?

Question: Paul Newsome - A.G. Edwards & Sons - Analyst : After Hurricane Andrew, there was a change in shopping behavior where the direct underwriters gained a lot of share because homeowners prices were going up and most people were upset about that, and it cost a lot of shopping events. It doesn't seem like that is happening this time around. I was wondering if you maybe had any comments as to why that may have happened this time around? It seems like you have got a different market here.

Question: Paul Newsome - A.G. Edwards & Sons - Analyst : You know, it was one state.