Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2009 AND
2008

OVERVIEW

The following discussion highlights significant factors influencing the consolidated financial position and results of operations of The Allstate Corporation (referred to in this document as "we", "our", "us", the "Company" or "Allstate"). It should be read in conjunction with the condensed consolidated financial statements and notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, consolidated financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of The Allstate Corporation Annual Report on Form 10-K for 2008. Further analysis of our insurance segments is provided in the Property-Liability Operations (which includes the Allstate Protection and the Discontinued Lines and Coverages segments) and in the Allstate Financial Segment sections of Management's Discussion and Analysis ("MD&A"). The segments are consistent with the way in which we use financial information to evaluate business performance and to determine the allocation of resources.

Allstate is focused on three priorities: protecting Allstate's financial strength, improving customer loyalty, and continuing to reinvent protection and retirement for the consumer. In addition, we will continue to monitor market conditions and will consider business start-ups, acquisitions and alliances that would forward our business objectives and represent prudent uses of corporate capital.

HIGHLIGHTS

† Consolidated net income was $389 million in the second quarter of 2009 compared to $25 million in the second quarter of 2008, and $115 million in the first six months of 2009 compared to $373 million in the first six months of 2008. Net income per diluted share was $0.72 in the second quarter of 2009 compared to $0.05 in the second quarter of 2008, and $0.21 in the first six months of 2009 compared to $0.67 in the first six months of 2008.

† Property-Liability net income was $422 million in the second quarter of 2009 compared to $439 million in the second quarter of 2008, and $522 million in the first six months of 2009 compared to $942 million in the first six months of 2008.

† The Property-Liability combined ratio was 100.0 in the second quarter of 2009 compared to 94.4 in the second quarter of 2008, and 98.4 in the first six months of 2009 compared to 94.2 in the first six months of 2008.

† Allstate Financial had net income of $19 million in the second quarter of 2009 compared to a net loss of $379 million in the second quarter of 2008, and a net loss of $308 million in the first six months of 2009 compared to a net loss of $490 million in the first six months of 2008.

† Total revenues were $8.49 billion in the second quarter of 2009 compared to $7.42 billion in the second quarter of 2008, and $16.37 billion in the first six months of 2009 compared to $15.51 billion in the first six months of 2008.

† Property-Liability premiums earned in the second quarter of 2009 totaled $6.56 billion, a decrease of 2.8% from $6.75 billion in the second quarter of 2008, and $13.14 billion in the first six months of 2009, a decrease of 2.8% from $13.51 billion in the first six months of 2008.

† Net realized capital gains were $328 million in the second quarter of 2009 compared to net realized capital losses of $1.22 billion in the second quarter of 2008, and net realized capital losses were $31 million in the first six months of 2009 compared to net realized capital losses of $1.87 billion in the first six months of 2008.

† Investments as of June 30, 2009 totaled $96.46 billion, an increase of 0.5% from $96.00 billion as of December 31, 2008. Net investment income in the second quarter of 2009 was $1.11 billion, a decrease of 21.5% from $1.41 billion in the second quarter of 2008, and $2.28 billion in the first six months of 2009, a decrease of 22.3% from $2.94 billion in the first six months of 2008.

† Financial Accounting Standards Board ("FASB") Staff Position No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments ("FSP FAS 115-2"), was adopted April 1, 2009 resulting in the reclassification of $1.15 billion of previously recorded other-than-temporary impairment write-downs from retained income to unrealized capital losses. The cumulative effect of adoption, net of related deferred policy acquisition costs ("DAC"), deferred sales inducements ("DSI") and tax adjustments, was an increase in retained income of $863 million and a decrease in unrealized net capital gains and losses of $578 million, with a net benefit to equity of $285 million. The benefit to equity resulted from a decrease in the

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2009 AND
2008

deferred tax asset valuation allowance.

† Income tax expense for the six months ended June 30, 2009 includes expense of $254 million attributable to an increase in the valuation allowance relating to the deferred tax asset on capital losses recorded in the first quarter of 2009. This valuation allowance was released in connection with the adoption of FSP FAS 115-2 on April 1, 2009; however, the release was recorded as an increase to retained income and therefore did not reverse the amount recorded in income tax expense on a year-to-date basis.

† Book value per diluted share (ratio of shareholders' equity to total shares outstanding and dilutive potential shares outstanding) was $27.87 as of June 30, 2009, a decrease of 22.3% from $35.87 as of June 30, 2008 and an increase of 18.7% from $23.47 as of December 31, 2008.

† For the twelve months ended June 30, 2009, return on the average of beginning and ending period shareholders' equity was (11.1)%, a decrease of 21.3 points from 10.2% for the twelve months ended June 30, 2008.

† At June 30, 2009, we held $15.07 billion in capital. This total included $3.38 billion in deployable invested assets at the parent holding company level.