Allstate 2013 Annual Report Download - page 258

participation in the FHCF, effective June 1, 2012 to May 31, 2013. The agreement, including the contract that
provides coverage through the FHCF, provides an estimated provisional limit of $666 million excess of a
provisional retention of $30 million.
The Company ceded premiums earned of $531 million, $531 million and $582 million under catastrophe reinsurance
agreements in 2012, 2011 and 2010, respectively.
Asbestos, environmental and other
Reinsurance recoverables include $190 million and $193 million from Lloyd’s of London as of December 31, 2012 and
2011, respectively. Lloyd’s of London, through the creation of Equitas Limited, implemented a restructuring plan in 1996
to solidify its capital base and to segregate claims for years prior to 1993.
Allstate Financial
The Company’s Allstate Financial segment reinsures certain of its risks to other insurers primarily under yearly
renewable term, coinsurance, modified coinsurance and coinsurance with funds withheld agreements. These
agreements result in a passing of the agreed-upon percentage of risk to the reinsurer in exchange for negotiated
reinsurance premium payments. Modified coinsurance and coinsurance with funds withheld are similar to coinsurance,
except that the cash and investments that support the liability for contract benefits are not transferred to the assuming
company and settlements are made on a net basis between the companies. Allstate Financial cedes 100% of the
morbidity risk on substantially all of its long-term care contracts.
For certain term life insurance policies issued prior to October 2009, Allstate Financial ceded up to 90% of the
mortality risk depending on the year of policy issuance under coinsurance agreements to a pool of fourteen unaffiliated
reinsurers. Effective October 2009, mortality risk on term business is ceded under yearly renewable term agreements
under which Allstate Financial cedes mortality in excess of its retention, which is consistent with how Allstate Financial
generally reinsures its permanent life insurance business. The following table summarizes those retention limits by
period of policy issuance.
Period Retention limits
April 2011 through current Single life: $5 million per life, $3 million age 70 and
over, and $10 million for contracts that meet specific
criteria
Joint life: $8 million per life, and $10 million for
contracts that meet specific criteria
July 2007 through March 2011 $5 million per life, $3 million age 70 and over, and
$10 million for contracts that meet specific criteria
September 1998 through June 2007 $2 million per life, in 2006 the limit was increased to
$5 million for instances when specific criteria were met
August 1998 and prior Up to $1 million per life
In addition, Allstate Financial has used reinsurance to effect the acquisition or disposition of certain blocks of
business. Allstate Financial had reinsurance recoverables of $1.69 billion and $1.68 billion as of December 31, 2012 and
2011, respectively, due from Prudential related to the disposal of substantially all of its variable annuity business that
was effected through reinsurance agreements. In 2012, life and annuity premiums and contract charges of $128 million,
contract benefits of $91 million, interest credited to contractholder funds of $23 million, and operating costs and
expenses of $25 million were ceded to Prudential. In 2011, life and annuity premiums and contract charges of
$152 million, contract benefits of $121 million, interest credited to contractholder funds of $20 million, and operating
costs and expenses of $27 million were ceded to Prudential. In 2010, life and annuity premiums and contract charges of
$171 million, contract benefits of $152 million, interest credited to contractholder funds of $29 million, and operating
costs and expenses of $31 million were ceded to Prudential. In addition, as of December 31, 2012 and 2011 Allstate
Financial had reinsurance recoverables of $160 million and $165 million, respectively, due from subsidiaries of Citigroup
(Triton Insurance and American Health and Life Insurance) and Scottish Re (U.S.) Inc. in connection with the disposition
of substantially all of the direct response distribution business in 2003.
As of December 31, 2012, the gross life insurance in force was $536.04 billion of which $209.87 billion was ceded to
the unaffiliated reinsurers.
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