Allstate 2011 Annual Report Download - page 193

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
Basis of presentation
The accompanying consolidated financial statements include the accounts of The Allstate Corporation and its
wholly owned subsidiaries, primarily Allstate Insurance Company (‘‘AIC’’), a property-liability insurance company with
various property-liability and life and investment subsidiaries, including Allstate Life Insurance Company (‘‘ALIC’’)
(collectively referred to as the ‘‘Company’’ or ‘‘Allstate’’). These consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of America (‘‘GAAP’’). All significant
intercompany accounts and transactions have been eliminated.
To conform to the current year presentation, certain amounts in the prior years’ consolidated financial statements
and notes have been reclassified.
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
Nature of operations
Allstate is engaged, principally in the United States, in the property-liability insurance, life insurance, retirement and
investment product business. Allstate’s primary business is the sale of private passenger auto and homeowners
insurance. The Company also sells several other personal property and casualty insurance products, life insurance,
annuities, voluntary accident and health insurance, funding agreements, and select commercial property and casualty
coverages. Allstate primarily distributes its products through exclusive agencies, financial specialists and independent
agencies. Certain products are also sold through call centers and the internet.
The Allstate Protection segment principally sells private passenger auto and homeowners insurance, with earned
premiums accounting for 83% of Allstate’s 2010 consolidated revenues. Allstate was the country’s second largest
insurer for both private passenger auto and homeowners insurance as of December 31, 2009. Allstate Protection,
through several companies, is authorized to sell certain property-liability products in all 50 states, the District of
Columbia and Puerto Rico. The Company is also authorized to sell certain insurance products in Canada. For 2010, the
top geographic locations for premiums earned by the Allstate Protection segment were New York, California, Texas,
Florida and Pennsylvania. No other jurisdiction accounted for more than 5% of premiums earned for Allstate Protection.
Allstate has exposure to catastrophes, an inherent risk of the property-liability insurance business, which have
contributed, and will continue to contribute, to material year-to-year fluctuations in the Company’s results of operations
and financial position (see Note 7). The nature and level of catastrophic loss caused by natural events (high winds,
winter storms, tornadoes, hailstorms, wildfires, tropical storms, hurricanes, earthquakes and volcanoes) and man-made
events (terrorism and industrial accidents) experienced in any period cannot be predicted and could be material to
results of operations and financial position. The Company considers the greatest areas of potential catastrophe losses
due to hurricanes to generally be major metropolitan centers in counties along the eastern and gulf coasts of the United
States. The Company considers the greatest areas of potential catastrophe losses due to earthquakes and fires
following earthquakes to be major metropolitan areas near fault lines in the states of California, Oregon, Washington,
South Carolina, Missouri, Kentucky and Tennessee. The Company also has exposure to asbestos, environmental and
other discontinued lines claims (see Note 13).
The Allstate Financial segment sells life insurance, retirement and investment products and voluntary accident and
health insurance. The principal individual products are interest-sensitive, traditional and variable life insurance; fixed
annuities; and voluntary accident and health insurance. The institutional product line, which the Company offers on an
opportunistic basis, consists primarily of funding agreements sold to unaffiliated trusts that use them to back
medium-term notes issued to institutional and individual investors. Banking products and services have been offered to
customers through the Allstate Bank. On February 8, 2011, the Company announced that they reached an agreement to
sell substantially all of the deposits of Allstate Bank to Discover Bank and plan to enter into a multi-year distribution and
marketing agreement whereby Discover Bank will provide banking products and services to Allstate customers in the
future. Allstate Financial does not intend to originate banking products or services after the transaction closes, which is
expected to be by mid-year 2011, pending regulatory approval.
Allstate Financial, through several companies, is authorized to sell life insurance and retirement products in all
50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands and Guam. For 2010, the top geographic locations
for statutory premiums and annuity considerations for the Allstate Financial segment were California, Florida, Texas,
New York and Nebraska. No other jurisdiction accounted for more than 5% of statutory premiums and annuity
considerations for Allstate Financial. Allstate Financial distributes its products to individuals through multiple
113
Notes