Allstate 2008 Annual Report Download - page 152

Allstate Protection Outlook
●Allstate Protection premiums written in 2009 are anticipated to be lower than 2008 levels due to continued
emphasis on preserving auto insurance margins by providing customer-focused products and services.
Short-term growth will be limited reflecting a transition to a value-based strategy in the competitive
environment as consumers buy fewer autos and choose lower product coverages, and reductions of
catastrophe exposure.
●We expect that volatility in the level of catastrophes we experience will contribute to variation in our
underwriting results; however, this volatility will be somewhat mitigated due to our catastrophe
management actions, including purchases of reinsurance.
●We plan to continue to study the efficiencies of our operations and cost structure for additional areas
where costs may be reduced.
DISCONTINUED LINES AND COVERAGES SEGMENT
Overview The Discontinued Lines and Coverages segment includes results from insurance coverage that
we no longer write and results for certain commercial and other businesses in run-off. Our exposure to asbestos,
environmental and other discontinued lines claims is reported in this segment. We have assigned management of
this segment to a designated group of professionals with expertise in claims handling, policy coverage
interpretation, exposure identification and reinsurance collection. As part of its responsibilities, this group is also
regularly engaged in policy buybacks, settlements and reinsurance assumed and ceded commutations.
Summarized underwriting results for the years ended December 31, are presented in the following table.
2008 2007 2006
($ in millions)
Premiums written $ — $ — $ 1
Premiums earned $ — $ 1 $ 3
Claims and claims expense (18) (47) (132)
Operating costs and expenses (7) (8) (10)
Underwriting loss $(25) $(54) $(139)
Underwriting losses of $25 million in 2008 primarily related to an $8 million unfavorable reestimate of
asbestos reserves and a $13 million unfavorable reestimate of other reserves as a result of the annual third
quarter 2008 grounds up reserve review, partially offset by a $16 million reduction of our bad debt allowance for
future uncollectible reinsurance recoverables. The cost of administering claims settlements totaled $13 million,
$14 million and $19 million for the years ended December 31, 2008, 2007 and 2006, respectively.
Underwriting loss of $54 million in 2007 primarily related to a $63 million reestimate of environmental
reserves and a $6 million reestimate of asbestos reserves as a result of the annual third quarter 2007 grounds up
reserve review, partially offset by a $46 million reduction in the reinsurance recoverable valuation allowance
related to Equitas Limited’s improved financial position as a result of its reinsurance coverage with National
Indemnity Company.
Underwriting loss of $139 million in 2006 primarily related to an $86 million reestimate of asbestos reserves, a
$10 million reestimate of environmental reserves and a $26 million increase in the allowance for future
uncollectible reinsurance recoverables.
See the Property-Liability Claims and Claims Expense Reserves section of the MD&A for a more detailed
discussion.
Discontinued Lines and Coverages Outlook
●We may continue to experience asbestos and/or environmental losses in the future. These losses could be
due to the potential adverse impact of new information relating to new and additional claims or the impact
of resolving unsettled claims based on unanticipated events such as litigation or legislative, judicial and
regulatory actions. Environmental losses may also increase as the result of additional funding for
environmental site cleanup from the new administration. Because of our annual ‘‘grounds up’’ review, we
believe that our reserves are appropriately established based on available information, technology, laws and
regulations.
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MD&A