Allstate 2008 Annual Report Download - page 229

Management’s Discussion and Analysis
of Financial Condition and Results of Operations–(Continued)
Cash used in financing activities in 2008, compared to cash provided by in 2007, was primarily due to
decreased tax benefits of share based arrangements in 2008. Cash flows were provided by financing activities in
2007 compared to being used in the financing activities in 2006, primarily due to the repayment of short-term
debt in 2006.
Cash flows were impacted by dividends paid by AIC to its parent, the Corporation, totaling $3.40 billion,
$4.92 billion and $1.01 billion in 2008, 2007 and 2006, respectively. Cash flows were also impacted by capital
contributions paid by the Corporation to AIC totaling $1.00 billion and capital contributions paid by AIC to ALIC
totaling $1.41 billion in 2008. There were no capital contributions to ALIC in 2007 and 2006.
Allstate Financial Lower operating cash flows for Allstate Financial in 2008, compared to 2007, were
primarily related to a decrease in investment income and lower premiums, partially offset by income tax refunds in
2008 compared to 2007. Higher operating cash flows for Allstate Financial in 2007, compared to 2006, primarily
related to lower operating expenses and tax payments, an increase in investment income, partially offset by
increased policy and contract benefit payments and the absence in 2007 of contract charges on the reinsured
variable annuity business.
Cash flows provided by investing activities increased in 2008 compared to 2007, primarily due to decreased
purchases of fixed income securities and mortgage loans, partially offset by lower investment collections and net
change in short-term investments. Cash flows from investing activities increased in 2007, compared to 2006,
primarily due to increased cash provided by operating activities, partially offset by increased cash used in
financing activities.
Higher cash flows used in financing activities in 2008 compared to 2007 were primarily due to higher
maturities and retirements of institutional products, partially offset by higher contractholder fund deposits. Cash
flows used in financing activities increased in 2007, compared to 2006, primarily due to lower contractholder fund
deposits. For quantification of the changes in contractholder funds, see the Allstate Financial Segment section of
the MD&A.
There were no dividends paid by Allstate Financial in 2008. In 2007 and 2006, financing cash flows were
impacted by dividends paid by Allstate Financial totaling $742 million and $725 million, respectively. Allstate
Financial cash flows from financing activities were also impacted by funds paid by AIC to ALIC totaling
$1.41 billion in 2008. The $1.41 billion includes capital contributions paid in cash totaling $607 million and the
issuance of two surplus notes, each with a principal sum of $400 million, to AIC in exchange for cash totaling
$800 million. Allstate Financial cash flows from financing activities exclude capital contributions to ALIC
comprising the transfer to ALIC from AIC of non-cash assets totaling $342 million and the transfer of a
$50 million surplus note to Kennett Capital Inc. from ALIC in exchange for a note receivable with a principal sum
equal to that of the surplus note, which was originally issued to ALIC by a subsidiary of ALIC. One of the surplus
notes issued to AIC in 2008 was subsequently canceled and forgiven by AIC resulting in the recognition of a
capital contribution equal to the outstanding principal balance of the surplus note of $400 million. There were no
capital contributions to ALIC in 2007 and 2006.
Corporate and Other Fluctuations in the Corporate and Other operating cash flows were primarily due to
the timing of intercompany settlements. Investing activities primarily relate to investments in the portfolios of
Kennett Capital Holdings, LLC. Financing cash flows of the Corporate and Other segment reflect actions such as
fluctuations in short-term debt, repayment of debt, proceeds from the issuance of debt, dividends to shareholders
of The Allstate Corporation and share repurchases; therefore, financing cash flows are affected when we increase
or decrease the level of these activities.
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MD&A