Allstate 2015 Annual Report Download - page 251

The Allstate Corporation 2015 Annual Report 245
All states require domiciled insurance companies to prepare statutory-basis financial statements in conformity
with the NAIC Accounting Practices and Procedures Manual, subject to any deviations prescribed or permitted by the
applicable insurance commissioner and/or director. Statutory accounting practices differ from GAAP primarily since they
require charging policy acquisition and certain sales inducement costs to expense as incurred, establishing life insurance
reserves based on different actuarial assumptions, and valuing certain investments and establishing deferred taxes on a
different basis.
Statutory net income (loss) and capital and surplus of Allstate’s domestic insurance subsidiaries, determined in
accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities are as
follows:
($ in millions) Net income (loss) Capital and surplus
2015 2014 2013 2015 2014
Amounts by major business type:
Property‑Liability (1) $ 1,826 $ 2,501 $ 2,707 $ 13,332 $ 14,412
Allstate Financial (56) 1,130 504 3,154 2,907
Amount per statutory accounting practices $ 1,770 $ 3,631 $ 3,211 $ 16,486 $ 17,319
(1) The Property-Liability statutory capital and surplus balances exclude wholly-owned subsidiaries included in the Allstate Financial segment.
Dividend Limitations
There are no regulatory restrictions that limit the payment of dividends by the Corporation, except those generally
applicable to corporations incorporated in Delaware. Dividends are payable only out of certain components of
shareholders’ equity as permitted by Delaware law. However, the ability of the Corporation to pay dividends is dependent
on business conditions, income, cash requirements of the Company, receipt of dividends from AIC and other relevant
factors.
The payment of shareholder dividends by AIC without the prior approval of the Illinois Department of Insurance
(“ILDOI”) is limited to formula amounts based on net income and capital and surplus, determined in conformity with
statutory accounting practices, as well as the timing and amount of dividends paid in the preceding twelve months. AIC
paid dividends of $2.31 billion in 2015. The maximum amount of dividends AIC will be able to pay without prior IL DOI
approval at a given point in time during 2016 is $1.71 billion, less dividends paid during the preceding twelve months
measured at that point in time. The payment of a dividend in excess of this amount requires 30days advance written
notice to the IL DOI. The dividend is deemed approved, unless the IL DOI disapproves it within the 30day notice period.
Additionally, any dividend must be paid out of unassigned surplus excluding unrealized appreciation from investments,
which for AIC totaled $10.65 billion as of December31, 2015, and cannot result in capital and surplus being less than the
minimum amount required by law.
Under state insurance laws, insurance companies are required to maintain paid up capital of not less than the
minimum capital requirement applicable to the types of insurance they are authorized to write. Insurance companies are
also subject to risk-based capital (“RBC”) requirements adopted by state insurance regulators. A company’s “authorized
control level RBC” is calculated using various factors applied to certain financial balances and activity. Companies that
do not maintain adjusted statutory capital and surplus at a level in excess of the company action level RBC, which is
two times authorized control level RBC, are required to take specified actions. Company action level RBC is significantly
in excess of the minimum capital requirements. Total adjusted statutory capital and surplus and authorized control
level RBC of AIC were $15.62 billion and $2.48 billion, respectively, as of December31, 2015. Substantially all of the
Corporation’s insurance subsidiaries are subsidiaries of and/or reinsure all of their business to AIC, including ALIC. The
subsidiaries are included as a component of AIC’s total statutory capital and surplus.
The amount of restricted net assets, as represented by the Corporation’s investment in its insurance subsidiaries,
was $23 billion as of December31, 2015.
Intercompany transactions
Notification and approval of intercompany lending activities is also required by the IL DOI for transactions that exceed
a level that is based on a formula using statutory admitted assets and statutory surplus.