Allstate 2012 Annual Report Download - page 178

including the acquisition of Esurance and Answer Financial. Financing cash flows of the Corporate and Other segment
reflect actions such as fluctuations in short-term debt, repayment of debt, proceeds from the issuance of debt, dividends
to shareholders of The Allstate Corporation and share repurchases; therefore, financing cash flows are affected when we
increase or decrease the level of these activities.
Contractual obligations and commitments Our contractual obligations as of December 31, 2011 and the
payments due by period are shown in the following table.
($ in millions) Less than Over
Total 1 year 1-3 years 4-5 years 5 years
Liabilities for collateral (1) $ 462 $ 462 $ — $ — $ —
Contractholder funds (2) 55,368 6,771 12,808 7,651 28,138
Reserve for life-contingent contract
benefits (2) 35,097 1,140 2,154 2,067 29,736
Long-term debt (3) 12,086 701 1,887 539 8,959
Capital lease obligations (3) 38 7 14 4 13
Operating leases (3) 591 182 230 113 66
Unconditional purchase obligations (3) 318 125 155 38 —
Defined benefit pension plans and other
postretirement benefit plans (3)(4) 3,207 459 286 294 2,168
Reserve for property-liability insurance
claims and claims expense (5) 20,375 9,041 6,148 2,218 2,968
Other liabilities and accrued expenses (6)(7) 3,769 3,530 191 22 26
Net unrecognized tax benefits (8) 25 25 — — —
Total contractual cash obligations $ 131,336 $ 22,443 $ 23,873 $ 12,946 $ 72,074
(1) Liabilities for collateral are typically fully secured with cash or short-term investments. 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 and institutional products. The reserve for life-contingent contract benefits relates primarily to
traditional life insurance, immediate annuities with life contingencies and voluntary accident and health insurance. 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. Other contracts, such as interest-
sensitive life, fixed deferred annuities, traditional life insurance, 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, we are
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 or partial withdrawal on a policy or deposit contract, which is outside of our control.
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 $42.33 billion for contractholder funds and $14.45 billion for reserve for life-contingent contract benefits as included in the
Consolidated Statements of Financial Position as of December 31, 2011. 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
other post employment benefits (‘‘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, 2011 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 $1.89 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 IBNR 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, 2011,
of $1.61 billion and $225 million, respectively.
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