Allstate Corp., the insurer that posted its biggest loss as a publicly traded company last year, got $1.38 billion in relief after state regulators allowed it to carry less money to back policies.
The relaxed accounting rules boosted capital and surplus at Allstate Life Insurance Co., a subsidiary of the Chicago-based carrier, to $3.25 billion at the end of 2008, according to a chart posted on the Web site of the National Association of Insurance Commissioners. Allstate led a group of life insurers that won accounting benefits, according to the NAIC data.
The relief provides life insurers with a thicker capital cushion after losses in the second half of 2008 depleted funds and stock drops across the industry made raising cash from private investors more expensive. Prudential Plc, the U.K.'s second-largest insurer, and Hartford Financial Services Group Inc. both won more than $600 million in accounting aid, according to the NAIC.
Allstate got most of its benefit from an exemption, granted by Illinois Director of Insurance Michael McRaith, that allowed the company to value assets backing annuities at so-called book value instead of market prices. Allstate, which reported a $1.7 billion net loss last year, slashed the dividend and is cutting 1,000 jobs at its life insurance business.
"Allstate life insurance company is well capitalized and our ratings remain investment grade," Maria Gemskie, a spokeswoman for Allstate, said in an interview. "We have ample liquidity and are not dependent on short-term financing to meet our obligations." Allstate's life insurance businesses have an A1 financial strength grade at Moody's Investors Service, according to a Feb. 3 statement by the rating firm.
Requests for accounting changes must be "consistent with our emphasis on consumer protection," Illinois's McRaith said in an interview. He declined to comment on Allstate specifically.
Allstate, the largest publicly traded home and auto insurer, is scaling back its life coverage after losses at the business overwhelmed the company's profitable property-casualty operations. In 2008, life insurance accounted for about 9 percent of Allstate's revenue, according to Bloomberg data. That compares with more than 15 percent in the previous four years.
Life insurers, which often guarantee minimum returns on annuities linked to the performance of stocks, suffered in the second half as the equity market tumble forced them to set aside more money to fund potential future payouts. The Standard & Poor's 500 dropped 38 percent last year.
Life insurers "have taken huge hits, overall in their capital position," Joel Levine, senior vice president at Moody's, said in a March 5 interview. "Clearly for some companies the continued declines in the equity markets are going to continue to pressure their capital adequacy."
Hartford, based in the Connecticut city of the same name, got a benefit of $655.2 million at its Hartford Life Insurance Co. unit, according to the NAIC. Hartford had about $4.1 billion in capital and surplus, the NAIC said. London-based Prudential won $825.6 million in relief through its Jackson National Life Insurance Co. subsidiary, which had about $3.7 billion in capital and surplus.
Hartford said in its annual filing last month that it got $987 million in relief across its life insurance operations.