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, 2012 AND 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 2011 and Current Report on Form 8-K filed May 2, 2012. 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 the following priorities:

† maintain auto profitability;

† raise returns in homeowners and annuity businesses;

† grow insurance premiums; and

† proactively manage investments and capital.

HIGHLIGHTS

† Consolidated net income was $423 million in the second quarter of 2012 compared to a net loss of $624 million in the second quarter of 2011, and net income was $1.19 billion in the first six months of 2012 compared to a net loss of $100 million in the first six months of 2011. Net income per diluted share was $0.86 in the second quarter of 2012 compared to net loss per diluted share of $1.19 in the second quarter of 2011, and net income per diluted share was $2.39 in the first six months of 2012 compared to net loss per diluted share of $0.19 in the first six months of 2011.
† Property-Liability net income was $354 million in the second quarter of 2012 compared to net loss of $737 million in the second quarter of 2011, and net income was $1.05 billion in the first six months of 2012 compared to net loss of $269 million in the first six months of 2011.
† The Property-Liability combined ratio was 98.0 in the second quarter of 2012 compared to 123.3 in the second quarter of 2011 and 95.1 in the first six months of 2012 compared to 109.1 in the first six months of 2011.
† Allstate Financial net income was $132 million in the second quarter of 2012 compared to $161 million in the second quarter of 2011, and $244 million in the first six months of 2012 compared to $263 million in the first six months of 2011.
† Total revenues were $8.28 billion in the second quarter of 2012 compared to $8.08 billion in the second quarter of 2011, and $16.64 billion in the first six months of 2012 compared to $16.18 billion in the first six months of 2011.
† Property-Liability premiums earned totaled $6.67 billion in the second quarter of 2012, an increase of 3.2% from $6.46 billion in the second quarter of 2011, and $13.30 billion in the first six months of 2012, an increase of 3.0% from $12.91 billion in the first six months of 2011.
† Net realized capital gains were $27 million in the second quarter of 2012 compared to $57 million in the second quarter of 2011, and $195 million in the first six months of 2012 compared to $153 million in the first six months of 2011.
† Investments totaled $97.32 billion as of June 30, 2012, an increase of 1.8% from $95.62 billion as of December 31, 2011. Net investment income in the second quarter of 2012 was $1.03 billion, an increase of 0.6% from $1.02 billion in the second quarter of 2011, and $2.04 billion in the first six months of 2012, an increase of 1.7% from $2.00 billion in the first six months of 2011.
† Book value per diluted share (ratio of shareholders' equity to total shares outstanding and dilutive potential shares outstanding) was $39.73 as of June 30, 2012, an increase of 12.8% from $35.21 as of June 30, 2011 and an increase of 9.8% from $36.18 as of December 31, 2011.
† For the twelve months ended June 30, 2012, return on the average of beginning and ending period shareholders' equity was 11.0%, an increase of 7.9 points from 3.1% for the twelve months ended June 30, 2011.
† As of June 30, 2012, shareholders' equity was $19.48 billion. This total included $2.29 billion in deployable invested assets at the parent holding company level.

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