Allstate 2012 Annual Report Download - page 134

The table below summarizes reserves and claim activity for asbestos and environmental claims before (Gross) and
after (Net) the effects of reinsurance for the past three years.
2011 2010 2009
($ in millions, except ratios)
Gross Net Gross Net Gross Net
Asbestos claims
Beginning reserves $ 1,655 $ 1,100 $ 1,780 $ 1,180 $ 1,933 $ 1,228
Incurred claims and claims expense 38 26 (7) 5 (3) (8)
Claims and claims expense paid (86) (48) (118) (85) (150) (40)
Ending reserves $ 1,607 $ 1,078 $ 1,655 $ 1,100 $ 1,780 $ 1,180
Annual survival ratio 18.7 22.5 14.0 12.9 11.9 11.5
3-year survival ratio 13.6 13.6 12.6 12.2 12.4 12.9
Environmental claims
Beginning reserves $ 248 $ 201 $ 247 $ 198 $ 250 $ 195
Incurred claims and claims expense (2) — 19 18 16 13
Claims and claims expense paid (21) (16) (18) (15) (19) (10)
Ending reserves $ 225 $ 185 $ 248 $ 201 $ 247 $ 198
Annual survival ratio 10.7 11.6 13.8 13.4 12.7 12.1
3-year survival ratio 11.8 11.6 8.0 8.7 7.1 7.5
Combined environmental and asbestos
claims
Annual survival ratio 17.1 19.7 14.0 13.0 12.0 11.6
3-year survival ratio 13.4 13.3 11.7 11.6 11.4 11.7
Percentage of IBNR in ending reserves 59.0% 60.1% 62.3%
The survival ratio is calculated by taking our ending reserves divided by payments made during the year. This is a
commonly used but extremely simplistic and imprecise approach to measuring the adequacy of asbestos and
environmental reserve levels. Many factors, such as mix of business, level of coverage provided and settlement
procedures have significant impacts on the amount of environmental and asbestos claims and claims expense reserves,
claim payments and the resultant ratio. As payments result in corresponding reserve reductions, survival ratios can be
expected to vary over time. The 2009 net survival ratios in the table above have been adjusted to remove the claims and
claims expense paid of $63 million for asbestos and $7 million for environmental attributable to commutation activity
related to three reinsurers.
In 2011, the asbestos net 3-year survival ratio increased due to lower average annual payments. In 2010, the
asbestos net 3-year survival ratio decreased due to lower reserve levels as the result of loss settlements. The
environmental net 3-year survival ratio increased in both 2011 and 2010 due to lower average annual payments.
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