The Allstate Corp. reported a fourth quarter loss of $1.13billion and says it plans to eliminate 1,000 positions in the nexttwo years in response to the economic downturn.

Reporting its fourth quarter results, the company said itsincome loss came in at an estimated $1.13 billion compared to netincome of $760 during the same period of 2007. This translated intoloss income per share of $2.11 compared to earnings per share of$1.36 the year before. Consolidated revenues during the perioddropped 27 percent, or $2.42 billion, to $6.57 billion.

The company said its 1000 job reduction in its life unit willtake place over the next two years by attrition and elimination ofjobs. Allstate said it plans to save 20 percent in operatingexpenses, for savings of $90 million by 2011.

For the year, loss income stood at $1.68 billion, or loss incomeper share of $3.07, compared the prior year's net income of $4.64billion, or $7.77 a share. Consolidated earnings were down $7.38billion to $29.39 billion.

The Northbrook, Ill., insurer said total catastrophe losses for2008 were $3.3 billion compared to $1.4 billion in 2007.

The full year combined ratio stood at 99.4 leading toproperty-liability operating income of $1.4 billion. The companysaid that if it had not taken action to lessen its property lossexposure in 2005, its losses for the year would have been twice ashigh as reported.

Allstate said the results of the financial turmoil garneredunrealized losses of $8.8 billion in the quarter. The company'sfixed income securities portfolio provided approximately $8.6 inprincipal and interest cash flow.

"We expect 2009 to challenge businesses and consumers alike,"said Thomas J. Wilson, chairman, president and chief executiveofficer for the company in a statement. "As people focus more onvalue, we're reaching out with a variety of initiatives to helpconsumers make the best use of their insurance and investmentdollars. We are taking the actions necessary to protect Allstate'sfinancial strength, improve customer loyalty and introduce newproducts and services."

On the property-casualty side, the company said it plans toreduce homeowners exposure to catastrophe losses; limit short termgrowth with stronger underwriting and reduction of catastropheexposure; keep the p-c combined ratio to between 87 and 89 for2009, excluding the effects of catastrophes and prior year reservere-estimates.

During a conference call with financial analysts, Don Civgin,senior vice president and chief financial officer for Allstate saidthe company has $20 billion in cash or other liquid investmentsthat are saleable in one quarter without generating net investmentlosses.

"In this financial environment, we believe that strong liquidityis an absolutely critical component to protecting Allstate'sfinancial strength," he said.

"We feel comfortable with where we are on capital," added Mr.Wilson later during the conference call, adding, "Our number onegoal this year is to protect Allstate's financial strength thisyear."

Reflecting on business growth, Mr. Wilson said the majorstrategy will be to improve customer loyalty. Improvements incustomer loyalty index will be tied to the 401(k) plan benefits. Healso warned that those Allstate agency owners and employees who donot treat customers well "will no longer be a part of the Allstatefamily."

Today, Standard & Poor's downgraded the company's financialstrength and counterparty credit rating of its coreproperty-liability and life insurance business to "double-A-minus"from "double-A." It also lowered the counterparty credit rating onthe corporation to "A-minus/A-2" from "A-plus/A-one." The outlookis negative.

S&P said the action reflected "significant deterioration inthe operating companies' capital adequacy" and financially"weakened flexibility." The rating agency expects strong underlyingearnings power in 2009, but it does not expect it to returnhistoric highs in the near term. If the company can turn around itscurrent losses in the next two years, S&P could revise itsoutlook to stable.

Mr. Wilson said the rating would have no impact on the company'sbusiness and adding that it was still a "pretty good rating."

(This story was updated at 3:45 p.m.)