Allstate 2008 Annual Report Download - page 230

Contractual Obligations and Commitments Our contractual obligations as of December 31, 2008 and the
payments due by period are shown in the following table.
Less than
Total 1 year 1-3 years 4-5 years Over 5 years
($ in millions)
Liabilities for collateral and repurchase agreements(1) $ 340 $ 340 $ — $ — $ —
Contractholder funds(2) 77,303 10,797 24,190 10,739 31,577
Reserve for life-contingent contract benefits(2) 32,986 1,338 3,814 2,516 25,318
Long-term debt(3) 12,320 1,094 620 1,138 9,468
Capital lease obligations(3) 62 12 17 10 23
Operating leases(3) 712 198 261 136 117
Unconditional purchase obligations(3) 302 122 131 40 9
Defined benefit pension plans and other postretirement
benefit plans(3)(4) 5,595 338 356 369 4,532
Reserve for property-liability insurance claims and
claims expense(5) 19,456 8,699 5,923 2,088 2,746
Other liabilities and accrued expenses(6)(7) 4,100 3,972 85 17 26
Net unrecognized tax benefits(8) 21 — 21 — —
Total contractual cash obligations $153,197 $26,910 $35,418 $17,053 $73,816
(1) Liabilities for collateral and repurchase agreements are typically fully secured with cash. We manage our short-term liquidity position to
ensure the availability of a sufficient amount of liquid assets to extinguish short-term liabilities as they come due in the normal course of
business, including utilizing potential sources of liquidity as disclosed previously.
(2) Contractholder funds represent interest-bearing liabilities arising from the sale of products such as interest-sensitive life, fixed annuities,
including immediate annuities without life contingencies, bank deposits and institutional products. The reserve for life-contingent
contract benefits relates primarily to traditional life and immediate annuities with life contingencies. These amounts reflect the present
value of estimated cash payments to be made to contractholders and policyholders. Certain of these contracts, such as immediate
annuities without life contingencies and institutional products, involve payment obligations where the amount and timing of the payment
is essentially fixed and determinable. These amounts relate to (i) policies or contracts where we are currently making payments and will
continue to do so and (ii) contracts where the timing of a portion or all of the payments has been determined by the contract. Extendible
funding agreements backing medium-term notes outstanding are reflected in the table above at the maturity date accelerated in
accordance with the contractholders’ election to not extend the maturity date. Other contracts, such as interest-sensitive life, fixed
deferred annuities, traditional life and immediate annuities with life contingencies and voluntary accident and health insurance, involve
payment obligations where a portion or all of the amount and timing of future payments is uncertain. For these contracts and bank
deposits, the Company is not currently making payments and will not make payments until (i) the occurrence of an insurable event such
as death or illness or (ii) the occurrence of a payment triggering event such as the surrender of or partial withdrawal on a policy or
deposit contract, which is outside of the control of the Company. We have estimated the timing of payments related to these contracts
based on historical experience and our expectation of future payment patterns. Uncertainties relating to these liabilities include mortality,
morbidity, expenses, customer lapse and withdrawal activity, estimated additional deposits for interest-sensitive life contracts, and
renewal premium for life policies, which may significantly impact both the timing and amount of future payments. Such cash outflows
reflect adjustments for the estimated timing of mortality, retirement, and other appropriate factors, but are undiscounted with respect to
interest. As a result, the sum of the cash outflows shown for all years in the table exceeds the corresponding liabilities of $58.41 billion
for contractholder funds and $12.88 billion for reserve for life-contingent contract benefits as included in the Consolidated Statements of
Financial Position as of December 31, 2008. The liability amount in the Consolidated Statements of Financial Position reflects the
discounting for interest as well as adjustments for the timing of other factors as described above.
(3) Our payment obligations relating to long-term debt, capital lease obligations, operating leases, unconditional purchase obligations and
pension and OPEB contributions are managed within the structure of our intermediate to long-term liquidity management program.
Amount differs from the balance presented on the Consolidated Statements of Financial Position as of December 31, 2008 because the
long-term debt amount above includes interest.
(4) The pension plans’ obligations in the next 12 months represent our planned contributions, and the remaining years’ contributions are
projected based on the average remaining service period using the current underfunded status of the plans. The OPEB plans’ obligations
are estimated based on the expected benefits to be paid. These liabilities are discounted with respect to interest, and as a result the
sum of the cash outflows shown for all years in the table exceeds the corresponding liability amount of $1.93 billion included in other
liabilities and accrued expenses on the Consolidated Statements of Financial Position.
(5) Reserve for property-liability insurance claims and claims expense is an estimate of amounts necessary to settle all outstanding claims,
including claims that have been incurred but not reported as of the balance sheet date. We have estimated the timing of these payments
based on our historical experience and our expectation of future payment patterns. However, the timing of these payments may vary
significantly from the amounts shown above, especially for IBNR claims. The ultimate cost of losses may vary materially from recorded
amounts which are our best estimates. The reserve for property-liability insurance claims and claims expense includes loss reserves
related to asbestos and environmental claims as of December 31, 2008, of $1.93 billion and $250 million, respectively.
(6) Other liabilities primarily include accrued expenses and certain benefit obligations and claim payments and other checks outstanding.
Certain of these long-term liabilities are discounted with respect to interest, as a result the sum of the cash outflows shown for all years
in the table exceeds the corresponding liability amount of $4.09 billion.
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