Allstate 2013 Annual Report Download - page 167

concentrated among fewer companies. In addition, some companies have segregated asbestos, environmental, and
other discontinued lines exposures into separate legal entities with dedicated capital. Regulatory bodies in certain cases
have supported these actions. We are unable to determine the impact, if any, that these developments will have on the
collectability of reinsurance recoverables in the future.
The effects of reinsurance ceded on our property-liability premiums earned and claims and claims expense for the
years ended December 31 are summarized in the following table.
($ in millions) 2012 2011 2010
Ceded property-liability premiums earned $ 1,090 $ 1,098 $ 1,092
Ceded property-liability claims and claims
expense
Industry pool and facilities
MCCA $ 962 $ 509 $ 142
National Flood Insurance Program 758 196 50
FHCF — 8 10
Other 70 84 64
Subtotal industry pools and facilities 1,790 797 266
Other 261 130 5
Ceded property-liability claims and claims
expense $ 2,051 $ 927 $ 271
In 2012, ceded property-liability premiums earned decreased $8 million compared to 2011, primarily due to
decreased premiums in our catastrophe reinsurance program. In 2011, ceded property-liability premiums earned
increased $6 million compared to 2010 year, primarily due to higher premium rates and an increase in policies written
for the National Flood Insurance Program.
Ceded property-liability claims and claims expense increased in 2012 primarily due to amounts ceded to the
National Flood Insurance Program related to Sandy, reserve increases in the MCCA program, and amounts ceded under
our catastrophe reinsurance program related to Sandy. The reserve increases in the MCCA program are attributable to
an increased recognition of longer term paid loss trends. The paid loss trends are rising due to increased costs in medical
and attendant care and increased longevity of claimants. Ceded property-liability claims and claims expense increased
in 2011 primarily due to reserve increases in the MCCA program and an increase in claim activity on the National Flood
Insurance Program due to multiple flooding events throughout the year.
For a detailed description of the MCCA, FHCF and Lloyd’s, see Note 10 of the consolidated financial statements. As
of December 31, 2012, other than the recoverable balances listed in the table above, no other amount due or estimated
to be due from any single Property-Liability reinsurer was in excess of $26 million.
We enter into certain intercompany insurance and reinsurance transactions for the Property-Liability operations in
order to maintain underwriting control and manage insurance risk among various legal entities. These reinsurance
agreements have been approved by the appropriate regulatory authorities. All significant intercompany transactions
have been eliminated in consolidation.
Catastrophe reinsurance
Our catastrophe reinsurance program is designed, utilizing our risk management methodology, to address our
exposure to catastrophes nationwide. Our program is designed to provide reinsurance protection for catastrophes
including hurricanes, windstorms, hail, tornados, fires following earthquakes, earthquakes and wildfires. These
reinsurance agreements are part of our catastrophe management strategy, which is intended to provide our
shareholders an acceptable return on the risks assumed in our property business, and to reduce variability of earnings,
while providing protection to our customers.
We anticipate completing the placement of our 2013 catastrophe reinsurance program in March 2013. We expect
the program will be similar to our 2012 catastrophe reinsurance program. For further details of the existing 2012
program, see Note 10 of the consolidated financial statements.
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