This excerpt taken from the ALL 8-K filed Aug 5, 2009.
Progress on Restructuring at Allstate Financial
Allstate Financial continued to make progress on its Focus to Win restructuring, which will improve returns by reducing expenses, shifting fixed to variable costs, and streamlining product offerings. Actions taken through June 30, 2009 have reduced the annual expense run rate by approximately $65 million, and the company remains on track to achieve annual cost savings of $90 million by 2011. Additionally, Allstate Financials outstanding contractholder liabilities declined by 13.5% since June 30, 2008, primarily as a result of proactive strategies that reduced institutional product obligations by $8.7 billion.
Allstate Financials operating income was $65 million in the second quarter of 2009, a $53 million decline from the second quarter of 2008, primarily due to a lower investment spread. The investment spread during the second quarter declined to $63 million versus $242 million in the second quarter of 2008, due to historically low short-term yields, lower total investment balances and higher levels of short-term investments. The benefit spread increased 3.1% to $131 million from the prior year quarter, driven by higher premiums on
accident and health products sold through the Allstate Workplace Division. Operating expenses declined to $105 million in the second quarter of 2009 from $125 million in the same period of 2008, reflecting progress made on restructuring initiatives.
Allstate Financials net income was $19 million in the second quarter of 2009, compared to a net loss of $379 million for the same period of 2008. After-tax net realized capital gains of $82 million, compared to after-tax realized capital losses of $627 million in the prior year quarter, contributed $709 million to the increase and were partly offset by higher deferred acquisition costs and deferred sales inducements (DAC) amortization related to the realized capital gains and lower operating income.