Allstate 2014 Annual Report Download - page 128

Other Discontinued Lines and Coverages The following table shows reserves for other discontinued lines which
provide for remaining loss and loss expense liabilities related to business no longer written by us, other than asbestos
and environmental, as of December 31.
($ in millions) 2014 2013 2012
Other mass torts $ 167 $ 183 $ 166
Workers’ compensation 94 105 112
Commercial and other 134 133 140
Other discontinued lines $ 395 $ 421 $ 418
Other mass torts describes direct excess and reinsurance general liability coverage provided for cumulative injury
losses other than asbestos and environmental. Workers’ compensation and commercial and other include run-off from
discontinued direct primary, direct excess and reinsurance commercial insurance operations of various coverage
exposures other than asbestos and environmental. Reserves are based on considerations similar to those described
above, as they relate to the characteristics of specific individual coverage exposures.
Potential reserve estimate variability Establishing Discontinued Lines and Coverages net loss reserves for asbestos,
environmental and other discontinued lines claims is subject to uncertainties that are much greater than those
presented by other types of claims. Among the complications are lack of historical data, long reporting delays,
uncertainty as to the number and identity of insureds with potential exposure and unresolved legal issues regarding
policy coverage; unresolved legal issues regarding the determination, availability and timing of exhaustion of policy
limits; plaintiffs’ evolving and expanding theories of liability; availability and collectability of recoveries from reinsurance;
retrospectively determined premiums and other contractual agreements; estimates of the extent and timing of any
contractual liability; the impact of bankruptcy protection sought by various asbestos producers and other asbestos
defendants; and other uncertainties. There are also complex legal issues concerning the interpretation of various
insurance policy provisions and whether those losses are covered, or were ever intended to be covered, and could be
recoverable through retrospectively determined premium, reinsurance or other contractual agreements. Courts have
reached different and sometimes inconsistent conclusions as to when losses are deemed to have occurred and which
policies provide coverage; what types of losses are covered; whether there is an insurer obligation to defend; how policy
limits are determined; how policy exclusions and conditions are applied and interpreted; and whether clean-up costs
represent insured property damage. Our reserves for asbestos and environmental exposures could be affected by tort
reform, class action litigation, and other potential legislation and judicial decisions. Environmental exposures could also
be affected by a change in the existing federal Superfund law and similar state statutes. There can be no assurance that
any reform legislation will be enacted or that any such legislation will provide for a fair, effective and cost-efficient
system for settlement of asbestos or environmental claims. We believe these issues are not likely to be resolved in the
near future, and the ultimate costs may vary materially from the amounts currently recorded resulting in material
changes in loss reserves. Historical variability of reserve estimates is demonstrated in the Property-Liability Claims and
Claims Expense Reserves section of this document.
Adequacy of reserve estimates Management believes its net loss reserves for environmental, asbestos and other
discontinued lines exposures are appropriately established based on available facts, technology, laws, regulations, and
assessments of other pertinent factors and characteristics of exposure (i.e. claim activity, potential liability, jurisdiction,
products versus non-products exposure) presented by individual policyholders, assuming no change in the legal,
legislative or economic environment. Due to the uncertainties and factors described above, management believes it is
not practicable to develop a meaningful range for any such additional net loss reserves that may be required.
Further discussion of reserve estimates For further discussion of these estimates and quantification of the impact of
reserve estimates, reserve reestimates and assumptions, see Notes 8 and 14 to the consolidated financial statements
and the Property-Liability Claims and Claims Expense Reserves section of this document.
Reserve for life-contingent contract benefits estimation Due to the long term nature of traditional life insurance,
life-contingent immediate annuities and voluntary accident and health insurance products, benefits are payable over
many years; accordingly, the reserves are calculated as the present value of future expected benefits to be paid, reduced
by the present value of future expected net premiums. Long-term actuarial assumptions of future investment yields,
mortality, morbidity, policy terminations and expenses are used when establishing the reserve for life-contingent
contract benefits payable under these insurance policies. These assumptions, which for traditional life insurance are
applied using the net level premium method, include provisions for adverse deviation and generally vary by
characteristics such as type of coverage, year of issue and policy duration. Future investment yield assumptions are
determined based upon prevailing investment yields as well as estimated reinvestment yields. Mortality, morbidity and
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