UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported) July 24, 2006

Allstate Life Insurance Company
(Exact Name of Registrant as Specified in Charter)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                                        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))

o                                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR240.13e-4(c))

 

Section 2 — Financial Information

Item 2.02.      Results of Operations and Financial Condition.

The registrant furnishes below its Condensed Consolidated Statements of Operations for the three-month and six- month periods ended June 30, 2006 and 2005 and Condensed Consolidated Statements of Financial Position as of June 30, 2006 and December 31, 2005, prepared in conformity with accounting principles generally accepted in the United States of America, and certain non-GAAP and operating measures:

ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		Est.						Est.
($ in millions)		2006			2005			2006			2005
Revenues
Premiums		$	146		$	113		$	263		$	255
Contract charges		277			263			562			522
Net investment income		1,017			915			1,991			1,803
Realized capital gains and losses		(80		)	24			(107		)	25
		1,360			1,315			2,709			2,605
Costs and expenses
Contract benefits		327			337			653			684
Interest credited to contractholder funds		635			571			1,238			1,147
Amortization of deferred policy acquisition costs		176			164			281			333
Operating costs and expenses		98			110			201			226
Restructuring and related charges		3			-			18			-
		1,239			1,182			2,391			2,390
Loss on disposition of operations		(35		)	(3		)	(88		)	(8		)
Income from operations before income tax expense		86			130			230			207
Income tax expense		30			43			78			52
Net income		$	56		$	87		$	152		$	155

 

 

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ALLSTATE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

		June 30,			December 31,
($in millions, except par value data)		2006 (Est.)			2005
Assets
Investments
Fixed income securities, at fair value (amortized cost $60,114 and $59,717)		$	60,400		$	61,977
Mortgage loans		8,538			8,108
Equity securities		418			324
Short-term		2,525			927
Policy loans		730			729
Other		1,012			691
Total investments		73,623			72,756
Cash		308			154
Deferred policy acquisition costs		3,902			3,948
Reinsurance recoverables, net		3,415			1,699
Accrued investment income		661			648
Deferred income taxes		77			-
Other assets		523			582
Separate Accounts		15,372			15,235
Total assets		$	97,881		$	95,022
Liabilities
Contractholder funds		$	60,208		$	58,190
Reserve for life-contingent contract benefits		11,588			11,881
Unearned premiums		34			35
Payable to affiliates, net		110			98
Other liabilities and accrued expenses		4,808			3,054
Deferred income taxes		-			340
Long-term debt		269			181
Separate Accounts		15,372			15,235
Total liabilities		92,389			89,014
Shareholder’s Equity
Redeemable preferred stock — series A, $100 par value, 1,500,000 shares
authorized, 49,230 and outstanding		5			5
Redeemable preferred stock — series B, $100 par value, 1,500,000 shares
authorized, none issued		-			-
Common stock, $227 par value, 23,800 shares authorized and outstanding		5			5
Additional capital paid-in		1,108			1,108
Retained income		4,329			4,302
Accumulated other comprehensive income:
Unrealized net capital gains and losses		45			588
Total accumulated other comprehensive income		45			588
Total shareholder’s equity		5,492			6,008
Total liabilities and shareholder’s equity		$	97,881		$	95,022

 

 

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Definitions of Non-GAAP and Operating Financial Measures

We believe that investors’ understanding of our performance is enhanced by our disclosure of the following non-GAAP financial measure.  Our methods of calculating this measure may differ from those used by other companies and therefore comparability may be limited.

Operating income is income excluding:

·                  realized capital gains and losses, after-tax, except for periodic settlements and accruals on non-hedge derivative instruments which are reported with realized capital gains and losses but included in operating income,

·                  amortization of deferred policy acquisition costs (“DAC”) and deferred sales inducements (“DSI”), to the extent that they resulted from the recognition of certain realized capital gains and losses,

·                  (loss) gain on disposition of operations, after-tax, and

·                  adjustments for other significant non-recurring, infrequent or unusual items, when (a) the nature of the charge or gain is such that it is reasonably unlikely to recur within two years, or (b) there has been no similar charge or gain within the prior two years.

Net income is the GAAP measure that is most directly comparable to operating income.

We use operating income to evaluate our results of operations. It reveals trends in our insurance and financial services business that may be obscured by the net effect of realized capital gains and losses, (loss) gain on disposition of operations and adjustments for other significant non-recurring, infrequent or unusual items.  Realized capital gains and losses and (loss) gain on disposition of operations may vary significantly between periods and are generally driven by business decisions and economic developments such as market conditions, the timing of which is unrelated to the insurance underwriting process.  Moreover, we reclassify periodic settlements on non-hedge derivative instruments into operating income to report them in a manner consistent with the economically hedged investments, replicated assets or product attributes (e.g. net investment income and interest credited to contractholder funds) and by doing so, appropriately reflect trends in product performance.  Non-recurring items are excluded because, by their nature, they are not indicative of our business or economic trends. Therefore, we believe it is useful for investors to evaluate these components separately and in the aggregate when reviewing our performance. We use adjusted measures of operating income in incentive compensation. Operating income should not be considered as a substitute for net income and does not reflect the overall profitability of our business.

The following table reconciles operating income and net income.

 

		Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)		Est. 2006			2005			Est. 2006			2005
Operating income		$	143		$	126		$	275		$	269
Realized capital gains and losses		(80		)	24			(107		)	25
Income tax benefit (expense)		29			(9		)	38			(9		)
Realized capital gains and losses, after-tax		(51		)	15			(69		)	16
DAC and DSI amortization relating to realized capital gains and losses, after-tax		(3		)	(43		)	24			(104		)
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax		(9		)	(10		)	(19		)	(22		)
Loss on disposition of operations, after-tax		(24		)	(1		)	(59		)	(4		)
Net income		$	56		$	87		$	152		$	155

 

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Operating income return on equity is a ratio that uses a non-GAAP measure. It is calculated by dividing the rolling 12-month operating income by the average of shareholder’s equity at the beginning and at the end of the 12-month period, after excluding the effect of unrealized net capital gains. We use it to supplement our evaluation of net income and return on equity. We believe that this measure is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period and that are driven by economic developments, the magnitude and timing of which are generally not influenced by management:  the after-tax effects of realized and unrealized capital gains and losses and the cumulative effect of change in accounting principle, and non-recurring items that are not indicative of our business or economic trends. Return on equity is the most directly comparable GAAP measure.  The following table shows the reconciliation.

 

($ in millions)		For the twelve months ended June 30,
		Est. 2006			2005
Return on equity
Numerator:
Net income		$	414		$	365
Denominator:
Beginning shareholder’s equity		6,320			5,897
Ending shareholder’s equity		5,492			6,320
Average shareholder’s equity		$	5,906		$	6,109
Return on equity		7.0		%	6.0		%

 

 

($ in millions)				For the twelve months ended June 30,
				Est. 2006			2005
Operating income return on equity
Numerator:
Operating income				$	557		$	529
Denominator:
Beginning shareholder’s equity				6,320			5,897
Unrealized net capital gains				952			667
Adjusted beginning shareholder’s equity				5,368			5,230
Ending shareholder’s equity				5,492			6,320
Unrealized net capital gains				45			952
Adjusted ending shareholder’s equity				5,447			5,368
Average shareholder’s equity				$	5,408		$	5,299
Operating income return on equity				10.3		%	10.0		%

 

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Operating Measure

We believe that investors’ understanding of our performance is enhanced by our disclosure of the following operating financial measure.  Our method of calculating this measure may differ from that used by other companies and therefore comparability may be limited.

Premiums and deposits is an operating measure that we use to analyze production trends for sales.  It includes premiums on insurance policies and annuities and all deposits and other funds received from customers on deposit-type products, which we account for under GAAP as increases to liabilities rather than as revenue.

The following table illustrates where premiums and deposits are reflected in the condensed consolidated financial statements.

 

		Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)		Est. 2006			2005			Est. 2006			2005
Premiums and deposits excluding variable annuities		$	3,778		$	3,325		$	5,797		$	6,650
Variable annuity deposits		243			459			678			863
Total premiums and deposits		4,021			3,784			6,475			7,513
Deposits to contractholder funds		(3,634		)	(3,291		)	(5,570		)	(6,540		)
Deposits to separate accounts		(243		)	(379		)	(648		)	(722		)
Change in unearned premiums and other adjustments		2			(1		)	6			4
Premiums		$	146		$	113		$	263		$	255

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ALLSTATE LIFE INSURANCE COMPANY
	By	/s/ Samuel H. Pilch
	Name:   Samuel H. Pilch
	Title:    Group Vice President and Controller
July 24, 2006

 

 

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