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These excerpts taken from the ALL 10-K filed Feb 25, 2010. Catastrophe reinsurance Our personal lines catastrophe reinsurance program was designed, utilizing our risk management methodology, to address our exposure to catastrophes nationwide. Our program provides reinsurance protection for catastrophes including storms named or numbered by the National Weather Service, fires following earthquakes, earthquakes and wildfires including California wildfires. These reinsurance agreements are part of our catastrophe management strategy, which is intended to provide our shareholders an acceptable return on the risks assumed in our property business and to reduce variability of earnings, while providing protection to our customers. A description of our catastrophe reinsurance treaties, most of which are placed on a multi-year basis, that reinsure Allstate Protection personal lines property excess catastrophe losses in geographic regions or single states and provide reinsurance for specific perils follows:
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replaced
with a three year term contract effective June 1, 2010 to May 31, 2013. The two remaining contracts will continue in effect and expire May 31, 2011 and May 31,
2012, respectively. The limit for the contract effective June 1, 2010 will be $250 million. In addition, the placement will be increased to 95% to replace coverage previously provided by
the North-East contract which expires June 8, 2010 and will not be replaced. New
Jersey — The current agreement provides a $300 million limit in excess of a $200 million retention and is 95% placed. One contract providing one-third
of the coverage expires May 31, 2010 and will be replaced with a three year term contract effective June 1, 2010 to May 31, 2013. The two remaining contracts will continue in
effect and expire May 31, 2011 and May 31, 2012, respectively. The agreement effective June 1, 2010 to May 31, 2013 provides a $300 million limit in excess of a
$200 million retention. For the term June 1, 2010 to
May 31, 2011 the Company retains 5% of the $300 million reinsurance limit. New
Jersey Excess — The current agreement provides a $200 million limit in excess of a $500 million retention and is 80% placed. The contract expiring May 31,
2010 will be replaced with a three year term contract effective June 1, 2010 to May 31, 2013. The remaining two contracts will continue in effect and expire May 31, 2011 and
May 31, 2012, respectively. The agreement effective June 1, 2010 to May 31, 2013 provides a $200 million limit in excess of a $500 million retention. The
June 1, 2010 placement will be increased to 95% to replace coverage previously provided by the North-East contract which expires June 8, 2010 and will not be replaced.
New
York — The current agreement provides a $1.00 billion limit in excess of a $750 million retention and is 80% placed. The contract expiring May 31, 2010 will
be replaced with a three year term contract effective June 1, 2010 to May 31, 2013. The remaining two contracts will continue in effect and expire May 31, 2011 and May 31,
2012, respectively. The limit for the agreement effective June 1, 2010 will be $1.00 billion. The retention for the new contract effective June 1, 2010 will be
$600 million. The June 1, 2010 placement will be increased to 95% to replace coverage previously provided by the North-East contract which expires June 8, 2010 and
will not be replaced. Pennsylvania —
The Pennsylvania agreement provides coverage for Allstate Protection personal lines property excess catastrophe losses for multi-perils and is effective
June 1, 2009 through May 31, 2012. The current agreement provides a $100 million limit in excess of a $100 million retention and is 95% placed. North
Carolina — The North Carolina agreement effective July 1, 2009 to June 30, 2010 provides a $150 million limit in excess of a $150 million retention
for losses to Allstate Protection personal lines property excess catastrophe losses for multi-perils and is 95% placed. Upon its expiration, this agreement will not be replaced as its coverage will be
included in the Atlantic States reinsurance contract discussed below. Texas — Effective May 31, 2010 the multi-peril Texas agreement will be cancelled as Texas will be included in a new Gulf States reinsurance agreement discussed below. 68
We estimate that the total annualized cost of all catastrophe reinsurance programs for the year beginning June 1, 2010 will be approximately $580 million or $145 million per quarter, compared to $640 million annualized cost for the year beginning June 1, 2009. The total cost of our reinsurance programs during 2009 was $158 million in the first quarter, $156 million in the second quarter, $162 million in the third quarter and $153 million in the fourth quarter. We continue to attempt to capture our reinsurance cost in premium rates as allowed by state regulatory authorities. Catastrophe reinsurance The Company has the following catastrophe reinsurance treaties in effect as of December 31, 2009:
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The Company ceded premiums earned of $616 million and $679 million under catastrophe reinsurance agreements in 2009 and 2008, respectively. These excerpts taken from the ALL 10-K filed Feb 26, 2009. Catastrophe Reinsurance Our personal lines catastrophe reinsurance program was designed, utilizing our risk management methodology, to address our exposure to catastrophes nationwide. Our program provides reinsurance protection to us for catastrophes including storms named or numbered by the National Weather Service, wildfires, earthquakes and fires following earthquakes. Our catastrophe reinsurance program which will be effective June 1, 2009 is currently being negotiated. We expect to bind coverage in March 2009, except for certain coverage in Florida which we expect to bind by June 1, 2009. We anticipate reporting the details of our catastrophe reinsurance program renewal upon finalizing coverage. See The Allstate Corporation Annual Report on Form 10-K for 2007 and The Allstate Corporation Form 10-Qs for 2008 for additional details on our current program. We expect to renew expiring coverages including the coverage expiring on programs placed for 2 years (Aggregate excess), 3 years (various state specific), and 1 year (South-East and Florida). We anticipate purchasing coverage that has similar retentions and limits as our expiring program, with either retentions and limits or premiums being subject to re-measurement for exposure differences from estimates initially provided to reinsurers. In addition, effective June 1, 2009, we are contemplating two new agreements: a Pennsylvania only agreement (up to $100 million limit, $100 million retention) to enhance protection in Pennsylvania, and a Texas/Louisiana agreement (up to $150 million limit, $500 million retention) whereby losses resulting from the same 68 named or numbered storm but taking place in both Texas and Louisiana may be combined to meet the agreement's per occurrence retention and limit. We also intend to purchase a portion of our annual Florida reinsurance program in the first quarter of 2009, deferring our remaining Florida reinsurance purchase until the FHCF reimbursement program is finalized. Our reinsurance program, effective June 1, 2008 to May 31, 2009 is comprised of agreements that provide coverage for the occurrence of certain qualifying catastrophes in specific states including New York, New Jersey, Connecticut, Rhode Island and Texas ("multi-peril"); additional coverage for hurricane catastrophe losses in New York, New Jersey and Connecticut ("North-East") in other states along the southern and eastern coasts ("South-East") and in Texas ("Texas"); in California for fires following earthquakes ("California fires following earthquakes"); in Kentucky for earthquakes and fires following earthquakes ("Kentucky"); and four agreements for our exposure in Florida. The Florida component of the reinsurance program, which expires on May 31, 2009, is designed separately from the other components of the program to address the distinct needs of our separately capitalized legal entities in that state. Another reinsurance agreement provides coverage nationwide, excluding Florida, for the aggregate or sum of catastrophe losses in excess of an annual retention associated with storms named or numbered by the National Weather Service, California wildfires, earthquakes and fires following earthquakes ("aggregate excess"). For further discussion on catastrophe reinsurance, see Note 9 to the consolidated financial statements. The multi-peril agreements have various retentions and limits commensurate with the amount of catastrophe risk, measured on an annual basis, in each covered state. The multi-peril agreement for Connecticut and Rhode Island provides that losses resulting from the same occurrence but taking place in both states may be combined to meet the agreement's per occurrence retention and limit. One-third of the coverage expires each year with each of the three contracts in this agreement. The North-East agreement was placed with Willow Re Ltd., a Cayman Island insurance company, and covers Allstate Protection personal property and auto excess catastrophe losses. Amounts payable under the reinsurance agreement are based on an index created by applying predetermined percentages representing our market share to insured personal property industry losses in New York, New Jersey and Connecticut as reported by Property Claim Services ("PCS"), a division of Insurance Services Offices, Inc., limited to our actual losses. This agreement covers 38% of $658 million, our estimated share of estimated modified personal property industry catastrophe losses between $9.2 billion and $13.5 billion, or 38% of our catastrophe losses between $1.6 billion (initial trigger) and $2.2 billion (exhaustion point) in the states of New York, New Jersey and Connecticut. The initial trigger and exhaustion points are reset by AIR Worldwide Corporation ("AIR") annually based on changes in the underlying industry exposures and our share of industry exposures. Willow Re Ltd. issued to unrelated investors principal-at-risk variable market rate notes of $250 million to collateralize hurricane catastrophe losses covered by this reinsurance agreement. Willow Re Ltd. entered into a total return swap with Lehman Brothers Special Financing, Inc. ("Lehman") which guaranteed the value of the collateral and a predetermined fixed rate of return to be paid to note holders. Upon the failure of Lehman in the third quarter of 2008, the total return swap was settled and terminated without replacement. Allstate continues to make the required premium payments to Willow Re and the reinsurance remains in place, but the underlying assets have not generated enough interest to meet the quarterly bond interest payment requirement due in February 2009, resulting in a default to note holders. The default does not create any obligations for Allstate and the reinsurance contract remains in place, although the value of the reinsurance provided by Willow Re depends upon the market value of the underlying assets held in collateral for reinsurance trust, with Allstate as the beneficiary. The underlying assets held in collateral are comprised largely of illiquid mortgaged-backed securities and cash with a current market value less than $250 million. The Texas agreement provides coverage for Allstate Protection personal property excess catastrophe losses in Texas for hurricane catastrophe losses. The agreement was placed with Willow Re Ltd., which completed an offering to unrelated investors for principal at risk, variable market rate notes of $250 million to collateralize hurricane catastrophe losses covered by this agreement. Amounts payable under the reinsurance agreement will be based on an index created by applying predetermined percentages representing our market share to insured personal property industry losses in Texas as reported by PCS limited to our actual losses. The limits on our Texas agreement are designed to replicate as close as possible 100% of $250 million, our estimated market share of estimated modified personal property industry catastrophe losses between $12.5 billion and $15.8 billion, or 100% of our catastrophe losses between $950 million (retention) and $1.2 billion (exhaustion point). The Texas agreement placed with Willow Re is independent of the North-East agreement and is not impacted by the termination of the North-East agreement's total return swap. 69 The Florida reinsurance program, which will be effective June 1, 2009, should be similar in design to the current program, however containing limits based on reduced underlying exposure, assuming there is no further change in Florida insurance markets. Our current program comprises, four separate agreements entered into by Allstate Floridian for personal property excess catastrophe losses in Florida, effective June 1, 2008 for one year. These agreements coordinate coverage with the Florida Hurricane Catastrophe Fund, including our elected participation in the optional temporary increase in coverage limit ("TICL"), (collectively "FHCF"). We chose not to participate in the optional temporary emergency additional coverage option ("TEACO") that is below the mandatory FHCF coverage. The FHCF provides 90% reimbursement on qualifying Allstate Floridian property losses up to an estimated maximum of $398 million in excess of a $80 million retention, including reimbursement of eligible loss adjustment expenses at 5%, for each of the two largest hurricanes and $27 million for all other hurricanes for the season beginning June 1, 2008. The four agreements are listed and described below.
We are currently evaluating the FHCF's capacity to timely reimburse us in the event of a major catastrophe, and await any changes that might be made by the FL legislature. We have approximately $175 million or 9% of the Aggregate excess agreement limits for the June 1, 2008 to May 31, 2009 period, $25 million or 5% of the South-East agreement limit, $250 million or 100% of the North-East agreement limit; $250 million or 100% of the Texas agreement, and $2 million or less than 1% of the Florida limit placed with alternative market sources. Alternative market sources refers to a reinsurer that hedge funds, private equity firms, or investment banks substantially or wholly support; retrocedes 100% of its assumed liability to a specific retrocessionaire; provides collateral to us equal to its assumed per occurrence limit; or funding is provided by an unrelated third party issuance of bonds financing the reinsurance limit ("catastrophe bond"). Our total annualized cost for catastrophe reinsurance for the year beginning June 1, 2008 is $613 million (originally $660 million before annual exposure re-measurements). The total cost of our reinsurance program during 2008 was $227 million in the first quarter, $223 million in the second quarter, $164 million in the third quarter and $136 million in the fourth quarter. We estimate that the total annualized cost of our catastrophe reinsurance program for the year beginning June 1, 2009, including the new Pennsylvania and Texas/Louisiana agreements, to be within 10% of our expiring annualized reinsurance contract premiums of $613 million. We continue to attempt to capture our reinsurance cost in premium rates as allowed by state regulatory authorities. The reinsurance agreements have been placed in the global reinsurance market, with all limits on our current Florida program and the majority of limits on our other programs placed with reinsurers who currently have an A.M. Best insurance financial strength rating of A or better. The remaining limits are placed with reinsurers who currently have an A.M. Best insurance financial strength rating no lower than A-, with three exceptions. Of the three exceptions, one has a Standard & Poor's ("S&P") rating of AA, one has an S&P rating of AA- and we have collateral for the entire contract limit exposure for the reinsurer which is not rated by either rating agency. 70 Catastrophe Reinsurance Our personal lines catastrophe reinsurance program was designed, utilizing our risk management methodology, to address our exposure to Our We 68 named Our The The The 69 The
We We Our The 70 Catastrophe reinsurance The Company has the following catastrophe reinsurance treaties in effect:
Under all reinsurance agreements, the Company ceded premiums earned of $679 million and $811 million in the years ended December 31, 2008 and 2007, respectively. Catastrophe reinsurance The Company has the following catastrophe reinsurance treaties in effect:
Under These excerpts taken from the ALL 10-K filed Feb 27, 2008. Catastrophe reinsurance The Company has the following catastrophe reinsurance treaties in effect:
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Under all reinsurance agreements, the Company ceded premiums earned of $811 million and $521 million in the years ended December 31, 2007 and 2006. Catastrophe reinsurance The Company has the following catastrophe reinsurance treaties in effect:
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Under This excerpt taken from the ALL 10-K filed Feb 22, 2007. Catastrophe reinsurance The Company has multi-year reinsurance treaties, effective from June 1, 2005 to May 31, 2008, that cover excess catastrophe losses in Connecticut, New Jersey, New York, and Texas. The Company also has an excess of loss agreement, effective from June 1, 2005 to May 31, 2007, that covers excess catastrophe losses in Florida. On May 31, 2006, the Company terminated its previously existing multi-year treaties, effective June 1, 2005, in North Carolina and South Carolina. The Company entered into the following reinsurance agreements effective from June 1, 2006 to May 31, 2007: aggregate excess of loss agreement that covers storms named or numbered by the National Weather Service, earthquakes, and fires following earthquakes for personal lines auto and property business countrywide except for Florida; New Jersey excess of loss agreement that covers personal property catastrophe losses in excess of the New Jersey multi-year agreement entered into in 2005; South-East agreement that covers personal property excess catastrophe losses for storms named or numbered by the National Weather Service in 10 Atlantic and Gulf states and the District of Columbia; and four reinsurance agreements entered into by Allstate Floridian Insurance Company ("AFIC"), a subsidiary of the Company that sells and services residential property policies in the state of Florida, for personal property excess catastrophe losses in Florida. The Company also entered into a California Fire Following agreement, effective from February 1, 2006 to 180 May 31, 2008, that covers personal property excess catastrophe losses in California for fires following earthquakes. Under these contracts, the Company ceded premiums earned of $521 million and $111 million in the years ended December 31, 2006 and 2005. This excerpt taken from the ALL 10-K filed Feb 23, 2006. Catastrophe reinsurance Effective June 1, 2005, multi-year reinsurance treaties cover excess catastrophe losses in seven states: Connecticut, New Jersey, New York, North Carolina, South Carolina, Texas and Florida. These reinsurance treaties replaced the reinsurance contracts entered in 2004 that reinsured losses from future catastrophic events in the state of Florida, which expired in May 2005, and five three-year cancelable excess of loss reinsurance contracts that reinsured personal property losses in New Jersey, New York, North Carolina, South Carolina and Texas. In 2005, the Company ceded $111 million of premiums earned under these reinsurance treaties. At December 31, 2005, Allstate Texas Lloyd's ("ATL"), a syndicate insurance company, had $250 million of reinsurance recoverable on the Texas treaty related to losses incurred from Hurricane Rita. ATL cedes 100% of its business net of reinsurance with external parties to AIC. With the exception of the recoverable balances from the MCCA, FHCF, NFIP, Lloyd's of London and other industry pools and facilities, the largest reinsurance recoverable balance the Company had outstanding was $91 million and $87 million from Employers' Reinsurance Company at December 31, 2005 168 and 2004. No other amount due or estimated to be due from any single property-liability reinsurer was in excess of $57 million and $52 million at December 31, 2005 and 2004, respectively. The allowance for uncollectible reinsurance was $213 million and $230 million at December 31, 2005 and 2004, respectively, and is primarily related to the Company's discontinued lines and coverages segment. There were $17 million of net recoveries in 2005, and $138 million of bad debt expense and $9 million of deductions related to previous year provisions in 2004. | EXCERPTS ON THIS PAGE:
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