Allstate 2012 Annual Report Download - page 149

Loss on disposition of $15 million in 2011 includes $22 million related to the dissolution of Allstate Bank. In 2011, after
receiving regulatory approval to voluntarily dissolve, Allstate Bank ceased operations. In the first half of 2012, we expect
to cancel the bank’s charter and deregister The Allstate Corporation as a savings and loan holding company.
Income tax expense was $286 million in 2011 compared to income tax expense of $8 million in 2010 and an income
tax benefit of $82 million in 2009. The change in 2011 was due to the proportionate change in income on which income
tax expense was determined. The income tax benefit for 2009 included expense of $142 million attributable to an
increase in the valuation allowance relating to the deferred tax asset on capital losses recorded in the first quarter of
2009. This valuation allowance was released in connection with the adoption of new OTTI accounting guidance on
April 1, 2009; however, the release was recorded as an increase to retained income and therefore did not reverse the
amount recorded in income tax benefit.
Reinsurance ceded We enter into reinsurance agreements with unaffiliated reinsurers to limit our risk of mortality
and morbidity losses. In addition, Allstate Financial has used reinsurance to effect the acquisition or disposition of
certain blocks of business. We retain primary liability as a direct insurer for all risks ceded to reinsurers. As of
December 31, 2011 and 2010, 42% and 45%, respectively, of our face amount of life insurance in force was reinsured.
Additionally, we ceded substantially all of the risk associated with our variable annuity business and we cede 100% of
the morbidity risk on substantially all of our long-term care contracts.
Our reinsurance recoverables, summarized by reinsurer as of December 31, are shown in the following table.
($ in millions) Standard & Poor’s Reinsurance
financial strength recoverable on paid
rating (4) and unpaid benefits
2011 2010
Prudential Insurance Company of America AA- $ 1,681 $ 1,633
Employers Reassurance Corporation A+ 960 853
Transamerica Life Group AA- 454 402
RGA Reinsurance Company AA- 359 360
Swiss Re Life and Health America, Inc. (1) AA- 212 210
Scottish Re Group (2) N/A 134 136
Paul Revere Life Insurance Company A- 132 140
Munich American Reassurance AA- 127 124
Mutual of Omaha Insurance A+ 96 98
Security Life of Denver A- 71 79
Manulife Insurance Company AA- 64 68
Lincoln National Life Insurance AA- 63 64
Triton Insurance Company N/A 56 58
American Health & Life Insurance Co. N/A 48 50
Other (3) 120 125
Total $ 4,577 $ 4,400
(1) The Company has extensive reinsurance contracts directly with Swiss Re and its affiliates and indirectly through Swiss
Re’s acquisition of other companies with whom we had reinsurance or retrocession contracts.
(2) The reinsurance recoverable on paid and unpaid benefits related to the Scottish Re Group as of December 31, 2011
comprised $73 million related to Scottish Re Life Corporation and $61 million related to Scottish Re (U.S.), Inc. The
reinsurance recoverable on paid and unpaid benefits related to the Scottish Re Group as of December 31, 2010
comprised $73 million related to Scottish Re Life Corporation and $63 million related to Scottish Re (U.S.), Inc.
(3) As of December 31, 2011 and 2010, the other category includes $103 million and $106 million, respectively, of
recoverables due from reinsurers with an investment grade credit rating from Standard & Poor’s (‘‘S&P’’).
(4) N/A reflects no rating available.
Certain of our reinsurers experienced rating downgrades in 2011 by S&P, including Surety Life of Denver and Mutual
of Omaha. We continuously monitor the creditworthiness of reinsurers in order to determine our risk of recoverability on
an individual and aggregate basis, and a provision for uncollectible reinsurance is recorded if needed. No amounts have
been deemed unrecoverable in the three-years ended December 31, 2011.
We enter into certain intercompany reinsurance transactions for the Allstate Financial operations in order to
maintain underwriting control and manage insurance risk among various legal entities. These reinsurance agreements
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