Document/Exhibit Description Pages Size
1: 10-K Annual Report 109 702K
2: EX-10.1 Material Contract 40 113K
3: EX-10.12 Material Contract 9 32K
4: EX-10.19 Material Contract 4 19K
5: EX-10.20 Material Contract 5 25K
6: EX-10.21 Material Contract 5 22K
7: EX-10.22 Material Contract 3 20K
8: EX-10.24 Material Contract 8 27K
9: EX-10.39 Material Contract 22 122K
10: EX-10.40 Material Contract 17 88K
11: EX-10.41 Material Contract 17 81K
12: EX-23 Consent of Experts or Counsel 1 11K
13: EX-31.1 Certification -- Sarbanes-Oxley Act - Sect. 302 2± 11K
14: EX-31.2 Certification -- Sarbanes-Oxley Act - Sect. 302 2± 11K
15: EX-32 Certification -- Sarbanes-Oxley Act - Sect. 906 1 7K
EXHIBIT 10.1
FORM OF
AMENDED AND RESTATED SERVICE AND EXPENSE AGREEMENT
AMONG
ALLSTATE INSURANCE COMPANY
AND
THE ALLSTATE CORPORATION
AND
CERTAIN AFFILIATES
This Amended and Restated Service and Expense Agreement (this "Agreement") made
and effective as of the 1st day of January 2004, among ALLSTATE INSURANCE
COMPANY, an Illinois insurance company ("Allstate"), THE ALLSTATE CORPORATION, a
Delaware corporation ("Allcorp"), and those affiliates of Allstate whose
signatures appear below (together with Allcorp, individually, an "Affiliate" and
collectively, the "Affiliates").
WITNESSETH:
WHEREAS, Allstate entered into a Service and Expense Agreement, dated as of
January 1, 1999, with Allcorp and certain of its insurance company affiliates
and another Service and Expense Agreement, dated as of January 1, 2000, with
certain of its non-insurance affiliates, pursuant to which Allstate provided
certain services and facilities (collectively, the "Original Agreements");
WHEREAS, the parties amended the Original Agreements on January 1, 2002 (the
"Amended Agreements") and with the establishment of Allstate Investments, LLC,
terminated the provision of investment management services by Allstate;
WHEREAS, the parties desire to consolidate and further amend the Amended
Agreements to include provision by the Affiliates of certain services and
facilities to Allstate and to other Affiliates from time to time, subject to the
terms and conditions hereinafter set forth, and to provide for possible future
alternative methods of costing for facilities and services provided pursuant to
this Agreement; and
WHEREAS, the parties desire to restate the Amended Agreements as amended.
NOW, THEREFORE, it is agreed as follows:
1. Allstate shall furnish or cause to be furnished, at cost and in the same
manner as such services and facilities are furnished to its other
affiliates, those categories of facilities and services listed on
Schedule A, including marketing, claims, underwriting and
policyholder services. Additional specifications regarding these services
and facilities, and the basis upon which costs to be charged for these
services and facilities are determined: (a) with respect to an Affiliate
that is a property and casualty insurer, are listed on Exhibit A; (b) with
respect to an Affiliate that is a life insurer, are listed on Exhibit B;
and (c) with respect to an Affiliate that is a non-insurance company, in
accordance with Generally Accepted Accounting Principles. The relevant
parties may from time to time agree that only certain of the listed
services and facilities will be provided by the Providing Party (as defined
below).
Services shall be performed in the name of and on behalf of an Affiliate
and in a manner intended to assure the separate operating identity of the
Affiliate. By way of example and without limiting the foregoing, (i) all
forms utilized in connection with an Affiliate's business and all
correspondence with holders of insurance policies or annuity contracts
(collectively, "policies") shall bear its name and contain its address;
(ii) all communications with policyholders shall be in such Affiliate's
name; and (iii) all bank accounts into which such Affiliate's funds are
deposited or from which its funds are withdrawn shall be such Affiliate's
accounts, except that premiums collected on behalf of an Affiliate may be
held by Allstate in a fiduciary capacity and transferred to such Affiliate
as soon as practicable subsequent to collection, but in any event within
two (2) business days.
Services shall be provided in accord with all applicable state and federal
legal and regulatory requirements, including those relating to privacy of
customer information.
The performance of any party under this Agreement with respect to the
business and operations of an Affiliate shall at all times be subject to
the direction and control of the Board of Directors of each such Affiliate.
To the extent required by applicable regulation, such services with respect
to any Affiliate shall be performed under guidelines and procedures
established by that Affiliate. All service providers must comply with all
licensing provisions applicable to any Affiliate for which they are
providing services under this Agreement.
2. Each Affiliate may furnish or cause to be furnished to Allstate or to any
other Affiliate, at cost, the services and facilities listed in Schedule A
attached hereto or such other facilities and services as the parties may
from time to time agree in writing. Any supplemental agreement whereby any
Affiliate provides services to or receives services from another Affiliate
shall be subject to review where required under applicable insurance law.
3. Costs are defined as the actual costs and expenses incurred by the party
providing the services (each, a "Providing Party") which are attributable
to the services and facilities provided under this Agreement, such as:
salaries and benefits; space rental; overhead expenses which may include
items such as electricity, heat, and water; building maintenance services;
furniture and other office equipment; supplies and special equipment such
as reference libraries, electronic data processing equipment and the like.
2
4. Charges for the above services and facilities shall be determined by
Allstate in accordance with the general provisions contained in Exhibits A
through D. Exhibits A and B are based upon NAIC expense classification and
allocation guidelines. In the event such guidelines are amended, Exhibits A
and B shall be deemed amended to conform thereto. Allstate's Corporate
Controller's Department will exercise reasonable judgment in appropriately
revising these Exhibits, maintain proper documentation for revisions and
communicate changes in allocation requirements to each party receiving
services (each, a "Receiving Party") in a timely manner. Exhibit C provides
a narrative overview of the expense management process and Exhibit D
provides certain definitions used throughout. Cost bases shall be reviewed
and adjusted on a prospective basis not less than annually to reflect the
actual costs incurred.
5. The amount charged to a Receiving Party shall not exceed the cost to the
Providing Party with respect to providing such service or facility.
Notwithstanding this provision or any other provision contained in this
Agreement to the contrary, subject to obtaining any required regulatory
approvals, the parties may agree in writing that one or more specific
services or facilities may be provided on a basis other than cost. Each
Providing Party will exercise reasonable judgment in periodically reviewing
the expenses incurred and the percentage thereof allocated to each
Receiving Party. Any Receiving Party may request a review of such expenses
and their allocation and such review will occur promptly thereafter. Any
basis other than cost that is utilized shall be intended to reasonably
relate to the cost of the services or facilities involved.
6. A Providing Party will charge each Receiving Party for all the services and
facilities provided pursuant to this Agreement via the monthly expense
allocation process, and payments will be through the monthly intercompany
settlement process. This process will be completed by Allstate personnel in
the most timely and effective method available.
7. The Providing Parties will maintain such records as may be required
relating to the accounting system of Allstate and the Affiliates. The
Affiliates understand and accept the financial records generated by this
system, which utilizes the concepts detailed in the addenda attached to
Exhibits A and B, respectively.
All Affiliate records shall be maintained in accordance with applicable
insurance laws and accepted industry standards. Allstate shall maintain
processes to provide backup records that will be available in the event the
underlying records are destroyed in a natural or manmade catastrophe or
disaster.
In the event and to the extent that the books and records of an Affiliate
are maintained hereunder in an electronic format, the following
requirements shall apply. A computer terminal that is linked to the
electronic system that generates the electronic records that constitute
such Affiliate's books of account as they relate to the business covered by
this Agreement, shall be kept and maintained at such Affiliate's principal
3
office. During all normal business hours, there shall be ready availability
and easy access through such terminal (either directly by personnel of such
Affiliate's domestic insurance regulator or indirectly with the aid of such
Affiliate's employees) to the electronic media used to maintain the records
comprising such Affiliate's books of account hereunder. The electronic
records shall be in a readable form. The Providing Parties shall maintain
format integrity and compatibility of the electronic records that
constitute an Affiliate's books of account hereunder. If the electronic
system that created such records is to be replaced by a system with which
the records would be incompatible, the Providing Parties shall convert such
pre-existing records to a format that is compatible with the new system.
The Providing Parties shall maintain acceptable backup of the records
constituting an Affiliate's books of account hereunder.
8. Upon reasonable notice, and during normal business hours, any Receiving
Party shall be entitled to, at its own expense, inspect records that
pertain to the computation of charges for the facilities or services
provided pursuant to this Agreement. The Providing Parties shall at all
times maintain correct and complete books, records and accounts of all
services and facilities furnished pursuant to this Agreement. Each
Receiving Party shall have unconditional right of ownership of any records
prepared on its behalf under this Agreement. The records maintained by a
Providing Party in connection with services provided to an Affiliate under
this Agreement shall be subject to inspection and review by such
Affiliate's domestic insurance regulator.
9. Any employee of a Providing Party who is performing duties hereunder at all
times during the term of this Agreement shall be under the supervision and
control of such Providing Party and shall not be deemed an employee of any
Receiving Party.
10. The scope of, and the manner in which, a Providing Party provides
facilities and services to a Receiving Party shall be reviewed periodically
by the parties involved in each transaction under this Agreement. All
services and facilities shall be of good quality and suitable for the
purpose for which they are intended.
11. No party shall assign its obligations or rights under this Agreement
without the written consent of the other parties and any required
regulatory approvals. Allstate may terminate this Agreement in its
entirety, and an Affiliate may cancel its participation in the arrangements
under this Agreement, each by giving six months written notice to the other
parties to this Agreement; provided, however, that in the event that the
affiliate relationship ceases to exist with respect to an Affiliate, this
Agreement shall terminate immediately with respect to such Affiliate. Under
no circumstances will the initial term of this Amended and Restated
Agreement exceed five (5) years from its effective date.
12. All communications provided for hereunder shall be in writing, and if to an
insurance company Affiliate, mailed or delivered to such Affiliate at its
office at the address listed in such Affiliate's Statutory Annual Statement
Blank, Attention: Secretary, or if to Allstate or Allcorp, mailed or
delivered to its office at 3075 Sanders Road,
4
Northbrook, Illinois 60062, Attention: Controller, or addressed to any
party at the address such party may hereafter designate by written notice
to the other parties.
13. This Agreement together with such amendments and supplements as may from
time to time be executed in writing by the parties in accordance with
applicable insurance law, constitutes the entire agreement and
understanding between the parties in respect of the transactions
contemplated hereby and supercedes any other agreements arrangements or
understandings between the parties relating to the subject matter hereof.
Those service and administrative services agreements between and among any
parties to this Agreement that are listed on Exhibit E are terminated as of
the effective date of this Amended and Restated Agreement.
14. Any unresolved dispute or difference between the parties arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association and the Expedited Procedures thereof. The
award rendered by the Arbitrator shall be final and binding upon the
parties, and judgment upon the award rendered by the Arbitrator may be
entered in any Court having jurisdiction thereof.
15. This Agreement may be executed by the parties hereto in any number of
counterparts, and by each of the parties hereto in separate counterparts,
each of which counterparts, when so executed and delivered, shall be deemed
to be an original, but all such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
effective as of the day and year above written.
THE ALLSTATE CORPORATION
By:
-------------------------
[Various Allstate Affiliates]
5
SCHEDULE A
Each of the attached supporting schedules depicts examples of services to be
provided, and are not intended by the parties to be all-inclusive.
[Download Table]
DESCRIPTION OF SERVICE SCHEDULE
--------------------------------------------------------------------- ------------
Finance Shared Services A-1
Technical Shared Service - Information Technologies and Field Support A-2
Human Resource Shared Services A-3
Law and Regulation A-4
Corporate Relations A-5
Marketing and Research/Planning Center A-6
Print Communication Center A-7
Real Estate & Construction / Facilities A-8
Schedule A-1
Finance Shared Services
PROVIDER SERVICES
- ACCOUNTING: Provide actual monthly, quarterly and annual financial results.
Specific services include producing financial statements and consulting on
account coding, reporting, accounting research, shared service
administration, expense allocation administration accounting governance and
policies, and maintenance of any required central accounting computer system.
- AUDITING: Perform internal audits, which meet Generally Accepted Auditing
Standards (GAAS) at intervals deemed necessary by Allstate.
- CLAIM RESERVES: Provide risk management services including exposure analysis,
risk retention and risk financing.
- FINANCE AND PLANNING: Provide services related to the segment of Allstate's
annual operating plan, long-term strategic plan and capital management
allocation.
- FINANCE INNOVATION: Provide reporting and analysis templates and database
support.
- GENERAL: Provide financial administrative services to ensure compliance with
Service Provider's corporate policies
- PURCHASING: Provide services related for graphic arts and printing for
internal and external communications.
- TAX: Comply with Federal and State tax filing requirements along with any tax
research needed.
- TREASURY: Provide cash management services, including the pass through of all
fees associated with setting up and maintaining bank accounts.
- PROCUREMENT: Strategic sourcing and the procuring of commodities inclusive of
contract negotiation.
17
Schedule A-2
Technical Shared Service
PROVIDER SERVICES
Services are divided into two categories: Information Technologies and Field
Support, and include but are not limited to:
INFORMATION TECHNOLOGIES:
- Build and maintain systems necessary to process Affiliate's business.
- Support of online networks and end-user/desktop applications.
- Technical architecture design to include application development and end-user
equipment via Technology Asset Management.
- Enterprise office tools, software licenses, maintenance, upgrades, Microsoft
Office and client software packages.
- Telecommunications support for business applications to include equipment
sourcing and voice-mail solutions.
- Database production support and development for mainframe and distributed
applications.
- Enterprise Help Center for end-user problem resolution, equipment repair,
system password resets.
FIELD SUPPORT
- Process and pay invoices, expense accounts, and related bills.
- Maintain necessary bank accounts. This would include, but would not be
limited to, a depository account, refund account and investment accounts.
- Deposit and balance remittance from Affiliate's clients. Process payments
against client balances in the billing database.
- Pay and track non-computer related fixed asset transactions.
- Utilize the SAP general ledger system for financial recording.
- Perform movement of funds from depository accounts to investment accounts as
needed via wire transfers or other means.
18
- System production, job scheduling and runs including technical support.
- Data processing support including data storage, data communication solutions,
and network availability.
19
Schedule A-3
Human Resource Shared Services
PROVIDER SERVICES
- Disburse compensation, distribute pay stubs and paychecks, remit payroll
taxes, calculate and remit to vendors benefit contributions
(employer/employee), mail W-2's, provide lines of expense details and create
new company pay system. These services will be delivered to client within
agreed upon timeframes, and will meet the client's quality requirements.
- Design compensation and incentive structure, provide support services for
salary planning, incentive plan and pay communications. Provide Affiliate
with current market research/data to structure the most cost effective and
competitive compensation plan.
- Provide technical interview with employees to determine skills and tasks
necessary to a particular job function. This work will be used to create job
descriptions in order to obtain market data to determine competitive salary
structures.
- Coordinate participation in technical job fairs to attract qualified
individuals, deliver new employee orientation, coordinate internship
programs, provide sources of qualified candidates for technical recruiter and
intern openings, and provide seven days of training to technical recruiters.
- Provide timely coaching and guidance on human resource related issues at
Affiliate's request. Accurately assess the appropriate Center of Excellence
within the human resource organization to assist in all problem resolutions.
- Provide Affiliate with the most competitive benefits package for all
employees. Conduct annual election to provide all employees with the option
of changing benefit coverages.
- Provide all employees with required services for any payroll or benefit
inquiries or processing.
- Provide Affiliate with up to date professional education programs and
research. Provide access to just-in-time training.
- Provide Affiliate with accurate and timely payroll stubs, checks and tax
remittances.
20
Schedule A-4
Legal Services
PROVIDER SERVICES
- The Law and Regulation Department will provide legal advice, assist in the
completion of business transactions, implement compliance programs, assist
with dispute resolution and provide public advocacy for Affiliate.
- Provide for legal advice, assist in the completion of business transactions,
assist with dispute resolution and provide for public advocacy.
- All legal services will be performed in a manner that is in compliance with
all applicable laws, regulations and Codes of Professional Responsibility.
21
Schedule A-5
Corporate Relations
PROVIDER SERVICES
Support and implement communication strategies.
- Development of communication packages, scripts, and presentations.
- Sourcing and coordination of meetings with internal and external customers.
- Media preparation for external use.
- Coordination of production and recognition and/or special events as
requested.
22
Schedule A-6
Marketing, Advertising, and Distribution
PROVIDER SERVICES
- Provide market research, perform database analysis to identify target
customers and utilize focus groups to determine customer preferences.
- Support and implement marketing strategies.
- Development of marketing strategies, coordination of print and/or media
requirements.
- Sourcing of marketing vendors.
- Coordination of media/print advertising.
- Assist in the development and implementation of distribution policy and
practices, and provide other marketing and distribution support services.
- Upon request of a life insurance Affiliate, Allstate shall assist such life
insurance Affiliate in preparation of marketing material, assist in the
recruitment, supervision, and product training of agents, assist in the
development and implementation of distribution policy and practices, and
provide other marketing and distribution support services. However, all
decisions regarding the approval of marketing material and the acceptance,
appointment or termination of agents shall be made by any such life insurance
Affiliate.
23
Schedule A-7
Allstate Print Communication Center
Customer Document Processing
PROVIDER SERVICES
Provide print services for document processing to include: quick print, web and
sheet-fed print and "laser print stuff mail".
- Provide programming support and consulting along with complete print project
management.
- Provide for storage and retention of documents and/or equipment.
24
Schedule A-8
Real Estate & Construction / Facilities
Provider Services
- Real Estate Portfolio Management.
- Capital improvement management and construction.
- Engineering standards.
- Building / Facility compliance to local and governmental codes.
- Support of employee moves and relocation.
- Housekeeping and Security
- All other facilities necessary for the conduct of the business.
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EXHIBIT A
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE INSURANCE COMPANY AND PROPERTY & CASUALTY AFFILIATES
[Enlarge/Download Table]
EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
--------------------- ------------------------------------------------------------- ----------------------
1. Claim Investigation and adjustment of policy claims for direct, No allocation -
adjustment reinsurance assumed and ceded business. The more direct charge to
services significant expenses and fees related to: (1) all outside company
costs associated with independent adjusters, (2) lawyers for
legal services in the defense, trial, or appeal of suits,
(3) general court costs, (4) medical testimony, (5) expert
and lay witnesses, (6) medical examinations for the purpose
of trial and resolution of liability and (7) miscellaneous
(appraisals, surveys, detective reports, audits, character
reports, etc.).
2. Commission and All payments, reimbursements and allowances (on direct and No allocation -
brokerage reinsurance assumed and ceded business) to managers, agents, direct charge to
brokers, solicitors or other producer types. company based on
agent contract
----------
* Expense classifications per the statutory Underwriting and Investment
Exhibit, Part 3, Expenses. Parties to the Agreement use these twenty-one
classifications to record their operating expenses incurred. As described
in Exhibit C, expenses for these classifications are also spread to three
distinct functional expense groups: loss adjustment, other underwriting and
investment.
** This description provides only a synopsis of the types of expenses for each
classification. Parties to the Agreement will utilize the NAIC Property &
Casualty Annual Statement Instructions Appendix in expense handling.
*** Before consideration of any applicable reinsurance agreement.
26
[Enlarge/Download Table]
EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
--------------------- ------------------------------------------------------------- ----------------------
4. Advertising Typical expenses would include services of: (1) advertising Direct charge by
agents, (2) public relations counsel, (3) advertisements in company where known.
newspapers, periodicals, billboards, pamphlets and Allocated items
literature issued for advertising or promotional purposes, handled as follows:
(4) related paper and printing charges for advertising See Exhibit A
purposes, (5) radio broadcasts, (6) prospect and mailing Appendix at B; C 1; D
lists, (7) signs and medals for agents and (8) television 1 and E 1 for
commercials and production. explanation of
allocation by type of
office
5. Boards, bureaus Various dues, assessments, fees and charges for items such No allocation -
and associations as: (1) underwriting boards, rating organizations, direct charge to
statistical agencies, inspection and audit bureaus, (2) company
underwriters' advisory and service organizations, (3)
accident and loss prevention organizations, (4) claim
organizations, (5) underwriting syndicates, pools and
associations, assigned risk plans.
6. Surveys and Costs to support the business including: (1) survey, See Exhibit A
underwriting credit, moral hazard, character reports for underwriting, Appendix at B; D 1;
reports (2) appraisals for underwriting, (3) fire records, (4) and E 1 for
inspection and engineering billed specifically, (5) medical explanation of
examiner services relating to underwriting. allocation by type of
office
7. Audit of Auditing fees and expenses of independent auditors for No allocation -
assureds' auditing payroll and other premium bases. direct charge to
records company
8. Salary and Salaries, bonus, overtime, contingent compensation, and See Exhibit A
related items other compensation of employees. This would include Appendix at A; B; C
commission and brokerage to employees when the activities 1, 2; D 1, 2, 3, 4; E
for which the commission is paid are a part of their duties 2, 5; and F 1, 2, 3,
as employees. 4 for explanation by
type of office
27
[Enlarge/Download Table]
EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
--------------------- ------------------------------------------------------------- ----------------------
9. Employee This category includes a variety of pension and insurance See Exhibit A
relations and benefits for employees, as well as some miscellaneous Appendix at A; B; C
welfare expenditures. The first area entails: (1) cost of 1, 2; D 1, 2, 3, 4; E
retirement insurance, pensions or other retirement 2, 5; and F 1, 2, 3,
allowances and funds irrevocably devoted to the payment of 4 for explanation by
pensions or other employees' benefits, and (2) accident, type of office
health and hospitalization insurance, group life insurance
and workers' compensation insurance. The miscellaneous
category may include the following items (1) training and
welfare; (2) physical exams for employees or candidates; (3)
gatherings, outings and entertainment; (4) education; and
(5) donations to or on behalf of employees.
10. Insurance Costs of insurance for employee/agent fidelity or surety See Exhibit A
bonds, public liability, burglary and robbery, automobiles Appendix at D 1; E 1;
and office contents. and F 1, 2, 3, 4 for
explanation by type
of office
11. Directors fees Amounts relate to fees and other compensation paid to Direct charge to
directors for attending Board or committee meetings. company
12. Travel and Major expense subcategories include: (1) transportation, See Exhibit A
travel items hotel, meals, telephone and other related costs associated Appendix at A; B; C
for employees traveling, (2) expense for transfer of 1, 2; D 1, 2, 3, 4; E
employees, (3) automobile rental and license plates, 2, 5; and F 1, 2, 3,
depreciation, repairs and other operating costs of 4 for explanation by
automobiles (4) transportation, hotel and type of office
meals/entertainment of guests, (5) dues and subscriptions to
accounting, legal, actuarial or similar societies and
associations.
14. Equipment Rent and repair of furniture and equipment, include the See Exhibit A
related depreciation charges. Appendix at A; B; C
1, 2; D 1, 2, 3, 4; E
1, 2, 3, 4; and F 1,
2, 3, 4
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[Enlarge/Download Table]
EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
--------------------- ------------------------------------------------------------- ----------------------
15. Cost or Rent and repair of processing equipment and non-operating Charged to
depreciation of systems electronic data software, including the related companies. See
EDP equipment depreciation and amortization. Exhibit A, Appendix
and software at A; B; C2; D1, 2,
3, 4
16. Printing and Generally, printing, stationery and office supplies (paper See Exhibit A
stationery stock, printed forms and manuals, Photostat copies, pens and Appendix at A; B; C
pencils, etc.). Also included would be policies and policy 1, 2; D 1, 2, 3, 4; E
forms, in-house employee publications, books, newspapers and 2, 5; and F 1, 2, 3, 4
periodicals including, tax and legal publications and
services.
17. Postage, All express, freight and cartage expenses, postage, and See Exhibit A
telephone, etc. telephone. Appendix at A; B; C
1, 2; D 1, 2, 3, 4; E
2, 5; and F 1, 2, 3, 4
18. Legal & auditing Legal fees and retainers excluding loss and salvage related, See Exhibit A
auditing fees of independent auditors for examining records, Appendix at A; D 2,
services of tax experts and counsel, custodian fees, notary 3, 4; E 2; and F 1, 2
and trustees' fees.
20. Taxes, licenses Several categories comprise this expense classification: No allocation -
and fees (1) state and local insurance taxes; (2) Insurance direct charge to
Department licenses and fees; (3) payroll taxes; and (4) all company
other, excluding real estate and federal income. Taxes,
licenses and fees based on premiums and payments to state
industrial commissions for administration of workers'
compensation or other state benefit acts would be in the
first classification. Expenses relating to the Insurance
Department would include agents' licenses, filing fees,
certificates of authority and fees and expenses of
examination. Payroll related expenses normally include old
age benefit and unemployment insurance taxes. More
significant expenses in the all other section would be
financial statement publication fees, legally mandated
advertising and personal property and state income taxes.
29
[Enlarge/Download Table]
EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
--------------------- ------------------------------------------------------------- ----------------------
21. Real estate Salaries, wages and other compensation of maintenance Direct charges by
expenses workers in connection with owned real estate. Other expense company are based on
items assigned to this category may also include expenses square footage.
associated with: operations; maintenance and insurance.
Allocated expenses
handled per Exhibit A
Appendix at A; B; C
1, 2; D 1, 2, 3, 4; E
1, 2, 3, 4; and F 1,
2, 3, 4
22. Real estate Taxes, licenses and fees on owned real estate. Direct charges by
taxes company are based on
square footage.
Allocated expenses
handled per Exhibit A
Appendix at A; B; C
1, 2; D 1, 2, 3, 4; E
1, 2, 3, 4; and F 1,
2, 3, 4
24. Aggregate Items for which no pre-printed statutory line exists. Cost Management will
write-ins for Description/title shown in Part 3 will vary based on need. develop the most
miscellaneous appropriate
expenses allocation basis and
maintain documentation
30
[Enlarge/Download Table]
EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
--------------------- ------------------------------------------------------------- ----------------------
6.5 Collection and Collection charges on checks and drafts and charges for
bank service checking accounts and money orders.
charges
NOTE: Expense classification for lines 3 and 23 are not applicable for the
Allstate Group.
31
APPENDIX TO EXHIBIT A
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE INSURANCE COMPANY AND AFFILIATES
A. Offices 001 (Corporate Home Office), 191 (Ivantage Product), 195 (Technology
Support/Appservice), 198 (Broker Dealer), 200 (Procurement Governance), 201
Allstate Investments, LLC), 203 (Research Center Shared Services), 204
(Human Resources Shared Service), 205 (Corporate Relations Shared Services),
206 (Technical Shared Services), 207 (Law and Regulation Shared Services),
208 (Finance Shared Services) 209 (Market Brand Development), 211 (Facility
Services), 212 (Real Estate & Construction), and 304 (Litigation Services)
factors are based on Service Agreements. These Agreements are written
documents detailing services and associated costs performed by the provider
for the benefit of the recipient and are generated and approved through
extensive discussions between service providers and service recipients.
B. Support Centers, Data Centers, and Output Processing Centers (OPC) factors
are based on Stat Policies in Force, Statistical Data and Time and Effort
studies that roll-up to the Support Center/Data Center/OPC.
C. P&C Head Office (Office 032) factors are based on:
1. Compensation
2. Time and effort studies
3. Statistical data
D. Regional Office factors are based on the following methodologies:
1. Compensation
2. Time and effort studies
3. System capacity studies
4. Statistical data
E. Regional Commercial Centers factors are based on the following
methodologies:
1. Compensation
2. Time and effort studies
3. System capacity studies
4. Statistical data
F. Claim Service Areas factors are based on the following:
33
1. Headcount (Property vs. Auto)
2. Notice counts
3. Incurred loss
4. Claim legal matter counts
5. Statistical data
34
EXHIBIT B
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE LIFE INSURANCE COMPANY AND LIFE AFFILIATES
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EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT 2* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
-------------------- ------------------------------------------------------------ ----------------------
1. Rent Rent for all premises occupied by the company, including any Direct charges by
adequate rent for occupancy of its own buildings, in whole company are based on
or in part, except to the extent that allocation to other square footage.
expense classifications on a functional basis is permitted Allocated expenses
and used. are handled per
Exhibit B Appendix at
A; B 1, 2; C 1, 2 and
D 1, 2
2. Salaries and Salaries and wages, bonuses and incentive compensation to Agents' compensation
wages employees, overtime payments, continuation of salary during is a direct charge to
temporary short-term absences, dismissal allowances, company. The
payments to employees while in training and other remaining expenses in
compensation to employees not specifically designated this category are
herein, except to the extent that allocation to their allocated per Exhibit
expense classifications is permitted and used. B Appendix at A; B 1,
2; C 1, 2; and D 1, 2
Contributions by company for pension and total permanent See Exhibit B
disability benefits, life insurance benefits, accident, Appendix at A; B 1,
health, hospitalization, medical, surgical, or other 2; C 1, 2; and
----------
* Expense classifications per Statutory Exhibits 2 & 3. Parties to the
Agreement use these classifications to record their operating expenses
incurred. This expense data is also captured by four distinct functional
expense groups: life, accident and health, all other lines of business and
investment.
** These descriptions were written using the NAIC Life Annual Statement
Instructions. Refer to this publication for a complete breakdown of the
expenses included in each line item.
*** Before consideration of any applicable reinsurance agreement.
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3.11 Contributions temporary disability benefits under a self-administered or D 1, 2
for benefit trusteed plan or for the purchase of annuity or insurance
plans for contracts. Appropriation of any other assignment of funds by
employees company in connection with any benefit plan of the types
enumerated herein.
3.12 Contributions Contributions by company for pension and total permanent See Exhibit B
for benefit disability benefits, life insurance benefits, accident, Appendix at C 1, 2;
plans for agents health, hospitalization, medical, surgical, or other and D 1, 2
temporary disability benefits under a self-administered or
trusteed plan or for the purchase of annuity or insurance
contracts. Appropriation of any other assignment of funds by
company in connection with any benefit plan of the types
enumerated herein.
3.21 Payments to Payments by company under a program for pension and total No allocation -
employees under and permanent disability benefits, death benefits, accident, direct charge to
non- funded health, hospitalization, medical, surgical or other company
benefit plans temporary disability benefits where no contribution or
appropriation is made prior to the payment of the benefit.
3.22 Payments to Payments by company under a program for pension and total No allocation -
agents under and permanent disability benefits, death benefits, accident, direct charge to
non-funded health, hospitalization, medical, surgical or other company
benefit plans temporary disability benefits where no contribution or
appropriation is made prior to the payment of the benefit.
3.31 Other employee The net periodic postretirement benefit cost, meals to Agents' compensation
welfare employees, contribution to employee associations or clubs, is a direct charge to
dental examinations, medical dispensary or convalescent home company. The
expenses for employees. remaining expenses in
this category are
allocated per Exhibit
B Appendix at A; B 1,
2; C 1, 2; and D 1, 2
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EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
-------------------- ------------------------------------------------------------ ----------------------
3.32 Other agent The net periodic postretirement benefit cost, meals to Agents' compensation
welfare employees, contribution to employee associations or clubs, is a direct charge to
dental examinations, medical dispensary or convalescent home company. The
expenses for agents. remaining expenses in
this category are
allocated per Exhibit
B Appendix at C 1, 2;
and D 1, 2
4.1 Legal fees and Court costs, penalties and all fees or retainers for legal No allocation -
expenses services or expenses in connection with matters before direct charge to
administrative or legislative bodies. company
4.2 Medical Fees to medical examiners in connection with new business See Exhibit B
examination fees reinstatements, policy changes and applications for Appendix at D 1, 2
employment.
4.3 Inspection Fee for inspection reports in connection with new business, See Exhibit B
report fees reinstatements, policy changes and applications for Appendix at D 1, 2; C
employment. Cost of services furnished by the Medical
Information Bureau.
4.4 Fees of public Include expenses relating to this category except exclude See Exhibit B
accountants and examination fees made by State Departments and internal Appendix at A; B 1,
consulting audits by company employees. 2; C 1, 2; and D 1, 2
actuaries
4.6 Expense of Payment to other than employees of fees and expenses for the See Exhibit B
investigation investigation, litigation and settlement of policy claims. Appendix at D 1, 2
and settlement
of policy claims
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EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
-------------------- ------------------------------------------------------------ ----------------------
5.1 Traveling Traveling expense of officers, other employees, directors See Exhibit B
expenses and agents, including hotel, meals, telephone, telegraph and Appendix at A; B 1,
postage charges incurred while traveling. Also include 2; C 1, 2; and D 1, 2
amounts allowed employees for use of their own cars on
company business and the cost of, or depreciation on, and
maintenance and running expenses of company-owned
automobiles.
5.2 Advertising Newspaper, magazine and trade journal advertising for the See Exhibit B
purpose of solicitation and conservation of business. Appendix At A, B 1,
Billboard, sign and telephone directory, television, radio 2; C 1; and D 1, 2
broadcasting and motion picture advertising, excluding
subjects dealing wholly with health and welfare. All
canvassing or other literature, such as pamphlets,
circulars, leaflets, policy illustration forms and other
sales aids, printed material, etc., prepared for
distribution to the public by agents or through the mail for
the purposes of solicitation and conservation of business.
All calendars, blotters, wallets, advertising novelties,
etc., for distribution to the public. Printing, paper stock,
etc. in connection with advertising. Prospect and mailing
lists when used for advertising purposes. Fees and expenses
of advertising agencies related to advertising.
5.3 Postage, Freight and cartage, cables, radiograms and teletype. Also See Exhibit B
express, charges for use, installation and maintenance of related Appendix at A; B 1,
telegraph and equipment if not included elsewhere. 2; C 1, 2; and D 1, 2
telephone
5.4 Printing and Policy forms, riders, supplementary contracts, applications, See Exhibit B
stationery etc., rate books, instruction manuals, punch-cards, house Appendix at A; B 1,
organs, and all other printed material which is not required 2; C 1, 2; and D 1, 2
to be included in any other expense classification. Office
supplies and pamphlets on health, welfare and education
subjects. Also include annual reports to policyholders and
stockholders if not included in Line 5.2.
5.5 Cost or The cost or depreciation of office machines except for such See Exhibit B
depreciation of charges as may be reported in Line 5.3. Appendix at A; B 1,
furniture and 2; C 1, 2; and D 1, 2
equipment
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EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
-------------------- ------------------------------------------------------------ ----------------------
5.6 Rental of Rental of office machines except for such charges as may be See Exhibit B
equipment reported in Line 5.3. Appendix at A; B 1,
2; C 1, 2; and D 1, 2
5.7 Cost or Include cost, depreciation and amortization for EDP Charged to Companies
depreciation of equipment and operating and non-operating systems software. See Exhibit B at A;
EDP equipment B; C
and software
6.1 Books and Books, newspapers, periodicals, etc., including investment See Exhibit B
periodicals tax and legal publications and information services, and Appendix at A; B 1,
including all such material for company's law department and 2; C 1, 2; and D 1, 2
libraries.
6.2 Bureau and All dues and assessments of organizations of which the No allocation -
association fees company is a member. All dues for employees' and agents' direct charge to
memberships on the company's behalf. company
6.3 Insurance, Premiums for Workers' Compensation, burglary, holdup, See Exhibit B
except on real forgery and the public liability insurance, fidelity or Appendix at A; B 1,
estate surety bonds, insurance on contents of company-occupied 2; C 1, 2; and D 1, 2
buildings and all other insurance or bonds not included
elsewhere.
6.4 Miscellaneous Uncollectible losses due to deficiencies, defalcations, Primarily a direct
losses robbery, or forgery, except those offset by bonding charge to company.
companies' payments. Also include Worker's Compensation Remaining expenses
benefits not covered by insurance and other uninsured losses are allocated per
not included elsewhere. Exhibit B Appendix at
A; and D 1, 2
6.5 Collection and Collection charges on checks and drafts and charges for See Exhibit B
bank service checking accounts and money orders. Appendix at A; and D
charges 1, 2
6.6 Sundry general Direct expense of local agency meetings, luncheons and See Exhibit B
expenses dinners, tabulating service rendered by outside Appendix at A; B 1,
organizations, gifts and donations. Any portion of 2; C 1, 2; and D 1, 2
commissions and expense allowances on reinsurance assumed
for group business which represents specific reimbursement
of expenses. Reimbursement to another insurer for expense of
jointly underwritten group contracts.
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EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
-------------------- ------------------------------------------------------------ ----------------------
6.7 Group service Administration fees, service fees, or any other form of See Exhibit B
and allowance, reimbursement of expenses, or compensation (other Appendix at D 1, 2;
administration than commissions) to agents, brokers, applicants, and B
fees policyholders or third parties in connection with the
solicitation, sale, issuance, service and administration of
group business.
6.8 Reimbursements Report as a negative amount administrative fees, direct No allocation -
by uninsured reimbursement of expenses, or other similar receipts or direct charge to
accident and credits attributable to uninsured accident and health plans company
health plans and the uninsured portion of partially insured accident and
health plans.
7.1 Agency expense All bona fide allowance for agency expense, but not No allocation -
allowance allowances constituting additional compensation. direct charge to
company
7.2 Agents' Agents' balances charged off less any amounts recovered No allocation -
balances during the year. direct charge to
charged off company
7.3 Agency Cost of banquets and rental of meeting rooms. Expenses of Primary dollars are a
conferences all persons traveling to conferences and their expenses at direct charge to
other than conferences. company. The
local meetings remaining expenses in
this category are
allocated per Exhibit
B Appendix at C 1;
and D 1
9.1 Real estate The cost of repairs, maintenance, service, and operation of Direct charges by
expenses all real estate properties including insurance whether company are based on
occupied by the company or not; salaries and other square footage.
compensation of managing agents and their employees; Allocated expenses
expenses incurred in connection with rental of such are handled per
properties; legal fees specifically associated with real Exhibit B Appendix at
estate transactions other than sale; rent, salaries and A; B 1, 2; C 1, 2;
wages, and other direct expenses of any branch of Home and D 1, 2
Office until engaged solely in real estate work (not real
estate and mortgages combined).
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EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
-------------------- ------------------------------------------------------------ ----------------------
9.2 Investment Only items for which no specific provisions has been made See Exhibit B
expenses not elsewhere, e.g., contributions or assessments for Appendix at A; and D
included bondholders' protective committees, fees of investment 1, 2
elsewhere counsel, custodian and trustee fees.
9.3 Aggregate Items for which no pre-printed statutory line exists. Cost Management will
write-ins for Description title shown in Exhibit 2 will vary based on need. develop the most
expenses appropriate
allocation basis and
maintain documentation
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EXPENSE LINE ITEM
PER TAXES,
LICENSES AND FEES BASIS OF EXPENSE
EXHIBIT 3* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
-------------------- ------------------------------------------------------------ ----------------------
1. Real estate Those taxes directly assessed against property owned by the Direct charges by
taxes company. Canadian and other foreign taxes should be included company are based on
appropriately. square footage.
Allocated expenses
are handled per
Exhibit B Appendix at
A; B 1, 2; C 1, 2;
and D 1, 2
2. State insurance Assessments to defray operating expenses of any state No allocation -
department insurance department. Canadian and other foreign taxes direct charge to
licenses and should be included appropriately. Fees for examinations by company
fees state departments.
3. State taxes on State taxes based on policy reserves, if in lieu of premium No allocation -
premiums taxes. Canadian and other foreign taxes should be included direct charge to
appropriately. Any portion of commissions or allowances on company
reinsurance assumed for group business which represents
specific reimbursement of premium taxes. Deduct any portion
of commissions or allowances on reinsurance ceded for group
business which represents specific reimbursement of premium
taxes.
4. Other state Assessments of state industrial or other boards for No allocation -
taxes operating expenses or for benefits to sick unemployed direct charge to
persons in connection with disability benefit laws or company
similar taxes levied by states. Canadian and other foreign
taxes are to be included appropriately. Advertising required
by law, regulation or ruling, except in connection with
investments. State sales taxes, if company does not exercise
option of including such taxes with the cost of goods and
services purchased. State income taxes.
5. U.S. Social Company's contribution is based on the current tax rate, See Exhibit B
Security taxes which is applied to all wages, salary or compensation Appendix at A; B 1,
entered on the employees earning record and federal 2; C 1, 2; and D 1, 2
unemployment tax.
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6. All other taxes Guaranty fund assessments and taxes of Canada or of any No allocation -
other foreign country not specifically provided for direct charge to
elsewhere. Sales taxes, other than state sales taxes, company
if company does not exercise option of including such
taxes with the cost of goods and services purchased.
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APPENDIX TO EXHIBIT B
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE LIFE INSURANCE COMPANY AND LIFE AFFILIATES
A. Office 001, 191, 195,198, 200, 201, 203, 204, 205, 206, 207, 208, 209, 211,
212, and 304 factors to Allstate or Affiliate are based on this Agreement.
Once expenses are charged to Allstate or Affiliate, a second and third tier
of allocation occurs, which allocates expenses to Life Profit Centers.
B. P&C Head Office (Office 032) allocations to the Life Company and Affiliates
are based on:
1. Compensation
2. Time and effort studies
3. Statistical data
C. Regional Office allocations to the Life Company and Affiliates are based on:
1. Compensation
2. Time and effort/usage studies
3. System capacity studies
4. Statistical Data
D. Life Parent Company allocations to Life Affiliates are based on:
1. Expenses are direct coded to the appropriate company.
2. Determination of how expense is to be allocated to profit center is
based on time studies, project activity, required capital, invested
assets and statistical data.
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EXHIBIT C
EXPENSE PROCESS OVERVIEW
ALLSTATE INSURANCE GROUP
For purposes of operational analysis and financial reporting, functional expense
groups are made up of three primary categories: (1) Loss adjustment expenses,
(2) Other underwriting expenses; and (3) Investment expenses. A more detailed
description of expense items, which comprise these categories, is provided in
Exhibits A and B. These exhibits are the framework for reporting expenses
required by the NAIC. The expense categories, in turn, flow into the financial
records based on the following cost allocation methods: a direct charge basis;
an allocated or shared basis; or in accordance with the terms of one or several
reinsurance agreements. The combined expense process ultimately provides for
financial records that reflect the financial performance of the business.
On a day-to-day basis, expenses are incurred directly by companies within the
Allstate Group. The expenses are charted numerically by account. Formalized
procedures are used in order to ensure that the expenses are accurately recorded
and allocated to the appropriate office, company, cost center and cost element.
Allocations are also provided for various support costs, which include: company,
cost center and general ledger account (cost element) level with the objective
of providing for an accurate means of tracking expenses.
A brief description of each of the three expense categories follows:
- Loss adjustment expenses are various costs associated with the claim
handling process. These costs, which comprise all aspects of the claims
handling function, include: the adjustment, factual investigation, defense
and record keeping functions. Salaries of claim personnel and allocated
executive salaries, as well as other basic costs associated with the claim
function (accounting, data processing, rent, utilities, etc.) are grouped in
this category. Generally, these expenses may be either direct charged,
allocated, or flow to an entity by means of a separate reinsurance
agreement.
- Other underwriting expenses include acquisition, general expenses, taxes,
licenses and fees. The larger piece, acquisition expenses, is comprised of
agent commissions, various expenses related to underwriting (motor vehicle
reports, home inspections, etc.), salaries, marketing and other allocations
of expenses which support the production of new and renewal business.
General expenses are typically administrative in nature and do not fit
cleanly in any other expense grouping. Taxes, licenses and fees pertain to:
taxes (income and franchise) and licenses fees levied by state and local
government; insurance department expenses; and guaranty fund assessments.
These expense categories are charged to an entity in any of the same three
methods shown above for Loss adjustment expenses.
45
- Investment expenses for research, purchase and sale activities, safekeeping,
accounting and data support are the bulk of expenses in this bucket.
Generally, these expenses will flow to an entity by direct charges to an
entity or on an allocated basis.
The mechanism for recording expenses can occur by means of one of the following
three methods:
- DIRECT CHARGES - This method is used where the expenses are unique to the
company incurring them. These types of expenses are not allocated to another
Allstate Company due to their unique relationship to the company incurring
them. Expense payments are classified to the responsible company through an
accounting coding expense system involving charge company, cost center, and
cost element (See Exhibits A and B for more detail). By way of example:
agents' commissions, taxes, licenses and fees, and bad debt expense are
company specific, and therefore, coded directly to the appropriate company.
- ALLOCATIONS
THE EXPENSE ALLOCATION PROCESS CAN BE DIVIDED INTO 3 SUBCATEGORIES:
1. OFFICE - The objective of this phase of the allocation process is to
properly transfer various support costs performed by one organization to
another organization that they directly relate to. The basic justification
for this cost transfer is efficiency gain, which is mutually beneficial to
both parties. Certain processes are centrally performed on behalf of a
number of entities, then allocated to the office/company being supported.
Routine expenses of this nature often include support activities from the
following functional areas: Accounting; Systems; Investments; Corporate
Relations; Law and Regulation; and Human Resources. These costs cannot be
directly expensed. It is necessary to provide for an appropriate method of
allocation. An example of this method of allocation would relate to the
accounting treatment of costs and expenses attributable to Allstate's
Internal Audit Department (IAD). As part of the Allstate Corporate Home
Office structure, IAD salaries and related expenses are allocated to other
Affiliates companies and/or offices (i.e. data and profit centers) based on
time and effort studies. The terms for this allocation are delineated in a
separate agreement between the parties which is referred to as a Shared
Service Agreement (SSA). The SSA is a vehicle which allows the parties to
agree in advance on certain essential terms and conditions which include: a
description of the services to be provided; the period covered; costs and
standards. The SSA concept can be used to transfer expenses between Brands
(e.g., Allstate, Ivantage, Indemnity, Life), between Shared Services (e.g.,
Finance, Investments, Human Resources, Technical) or between a Brand and
Shared Service.
The Accounting Department database is programmed to perform the allocation
process on a monthly basis. The process begins with the extraction of direct
costs for each office, company, cost center and general ledger account.
Varying premium and claim statistics (e.g., policies in force, claim counts)
as well as other common factors (e.g., number of employees, number of
retirees) are then entered into the program.
46
The resulting data provides the bases, or allocation drivers, for
transferring expenses from an office/cost center /general ledger account
level of detail to other charge offices/cost centers /general ledger
accounts. Detail records are generated in order to provide the source and
recipient of the allocated expenses.
A separate process has been initiated in order to periodically review the
accuracy of the factors or drivers of the allocations. The accuracy of
service provider time and effort studies may be taken into account (i.e.
projected v. actual). Other factors that may be considered include an
inventory of activities and customers in order to ensure that allocations
are accurate. Intensive discussions and management agreement between the
provider and customer are also an integral part of the process. Flexibility
in the overall allocation process must routinely occur to provide for
changes in the business activities or organizational structure.
2. COMPANY - This step in the expense allocation process is similar the office
expense allocation process described above in that allocations are charged
to other affiliates. For instance, both Allstate Insurance Company and
Allstate Life Insurance Company incur expenses on a direct basis for
themselves and on behalf of their affiliates. A portion of these expenses
may be transferred to the affiliated companies, as appropriate. Fixed
factors are normally based on internal time and effort studies, agents'
compensation, or statistical criteria such as gross policies issued or claim
notice counts.
3. UNIFORM ACCOUNTING TRANSFER (UAT) - The next step in the process is to
reclassify all of the general office expenses addressed in the direct
charges and expense allocation (office and company) sections above, having
been recorded on a management basis, to their required statutory expense
classifications. The use of a consistent basis for reporting expenses, as
dictated by the NAIC, allows the Regulators to better compare various
insurance companies' operations. On the property/casualty side, broad
expense categories and detail breakouts are required for both the Expense
Exhibit in the annual Statutory Statement as well as the Supplemental
Expense Filing, which is contained in the Insurance Expense Exhibit. For
Life companies, the General Expense and the Taxes, Licenses and Fees
Exhibits from the annual Statutory Statement have distinct expense
categories. A synopsis of these required expense categories, along with a
description of each expense category and the basis of allocation presently
used by Allstate is contained in Exhibit A and appendix (Property & Casualty
affiliates) and Exhibit B and appendix (Life Company affiliates).
In order to provide for accurate summarization and reporting, each general
ledger account (cost element) included in the Chart of Accounts is assigned
a statutory expense classification. Loss adjustment, other underwriting and
investment expenses are the broad classifications that UAT applies to. By
way of example, a systems function, whether relating to claims, sales, or
investments, is initially classified as a general office expense on a
management basis. Based on the UAT process, these expenses are reclassified
for statutory reporting purposes to loss adjustment, other underwriting or
investments. Taxes, licenses and fees, although included in the other
underwriting expense category, are not used in the UAT calculation process.
These
47
expenses are directly charged to the appropriate statutory classification
within company.
REINSURANCE AGREEMENTS - Separate arrangements exist between the
property/casualty parent, Allstate Insurance Company, and certain
affiliates, and the life parent, Allstate Life Insurance Company, and
certain affiliates that drive expenses. Terms and conditions relating to
methods of expense classification are contained in each of the individual
reinsurance agreements. Typically, the reinsurer will be liable for a pre
determined pro-rata share of all underwriting related expenses to support
the assumed business. However, the reinsurer is not generally liable for the
investment expenses.
48
EXHIBIT D
DEFINITIONS
The following terms shown by "process flow" and "general" categories are
commonly used in explanation of the Allstate Group's overall expense process.
Presentation of the "process flow" section follows the same hierarchical order
of our current expense processing methodology.
PROCESS FLOW
COMPANY - Identifies legal entity that expense is charged to and may be
disbursed from. Each entity who is a party to this agreement is assigned a
separate three digit company code (e.g., Allstate Insurance Company - 010,
Allstate Life Insurance Company - 030). A "charged company" is the Allstate
entity charged with the expense under review and whose Statement of Income would
be ultimately impacted.
COST CENTERS -- Describe where specific costs were incurred. Cost Centers will
be the most common object used. Cost centers are areas of organizational
responsibility in which costs are incurred and planned. Identifies
administrative grouping within an office and duties as well as the manager
responsible. Regional Office Departments include: Underwriting; Sales; Human
Resources; and Claims. Each Regional Office is assigned a distinct four digit
number.
COST ELEMENTS -- They describe what specific costs have occurred. They are used
to plan and incur direct expenses for cost objects representing a unique item or
category of expense to the company.
INTERNAL ORDERS -- A short-term cost collector used to collect, identify and
allocate costs associated with a process, event or activity.
OFFICE -- Typically, office codes identify high level responsibility for the
expenses charged. Office level configuration (by type or geographical location)
is a key building block in the accumulation of Allstate's expenses. This data is
used in preparing the various expense analyses/reports prepared. A "charged
office" is the office within an Allstate entity charged with the expense under
review. The decision regarding which office to charge with an expense is based
on Statement of Income impact analysis. Offices may include various high level
types, such as Profit Centers (Midwest Regional Office - 002), Data Centers
(Atlantic - 136), Shared Services (Human Resources - 204), and Home Offices
(Corporate Home Office - 001, PP&C Head Office - 032). Each Office is designated
by a three-digit code.
PROFIT CENTER -- Aligns expense to a distribution channel, geographic location
and product grouping (i.e. Denver Region, Colorado, Standard Auto).
49
GENERAL
ASSESSMENTS/ALLOCATED EXPENSES - which, are incurred by one Allstate Company or
office and charged, or allocated, to other companies or offices on the basis of
mutual benefit. Examples of the types of allocated expenses include: Loss
Adjustment, Other Underwriting and Investment Expenses. These expenses include
allocations in Cost Centers from Cost Elements to Secondary Cost Elements and
are described in Exhibit C. Criteria for cost allocation "drivers" are based on
the implementation of management objectives. The assessments can use all three
methods of allocations: Field Percentage; Fixed Amount; and Variable Portions,
which contain Statistical Key Figures. Additional information is included in the
Exhibits and Appendixes attached. Allocation drivers agreed to by Management are
used to allocate expenses, and these are described in detail in the various
exhibits and appendixes.
REINSURANCE AGREEMENT - An agreement between two parties where one insurer
spreads its risk (premium, loss and expense) of losses with other insurers.
50
EXHIBIT E
TERMINATED AGREEMENTS
Addendum to Service and Expense Agreement between Allstate Insurance Company and
Allstate North American Insurance Company effective August 27, 2001.
Administrative Service Agreement between Lincoln Benefit Life Company and ALFS,
Inc. (f/k/a Allstate Life Financial Services, Inc.) effective December 1, 1998.
Administrative Services Agreement between Allstate Insurance Company and
Intramerica Life Insurance Company effective July 1, 1999.
Administrative Services Agreement between Allstate Life Insurance Company and
AFD, Inc. effective January 1, 2000.
Administrative Services Agreement between Allstate Life Insurance Company and
ALFS, Inc. (f/k/a Allstate Life Financial Services, Inc.) effective May 1, 1999.
Administrative Services Agreement between Allstate Life Insurance Company and
Lincoln Benefit Life Company effective February 1, 1998.
Administrative Services Agreement between Allstate Life Insurance Company and
Allstate Distributors, L.L.C. effective May 1, 1999.
Amended and Restated Service and Expense Agreement between Allstate Insurance
Company and certain of its affiliated insurance companies effective April 29,
2003 to include Encompass Insurance Company of New Jersey.
Business Operations and Service Agreement between Allstate Life Insurance
Company of New York and Allstate Life Insurance Company effective October 1,
1997.
Cost Sharing Agreement between American Heritage Life Insurance Company and
Keystone State Life Insurance Company effective October 1, 1998.
Expense Allocation Agreement between Allstate Life Insurance Company of New York
and Intramerica Life Insurance Company effective July 1, 1999.
Service Agreement between Allstate Insurance Company and Allstate Life Insurance
Company of New York executed February 27, 1990 and effective July 1, 1989.
Service Agreement between Allstate Life Insurance Company and Allstate Life
Insurance Company of New York executed February 27, 1990 and effective July 1,
1989.
Service Agreement between Allstate Life Insurance Company and Surety Life
Insurance Company effective January 1, 1995.
Service Agreement between Lincoln Benefit Life Company and Allstate Life
Insurance Company effective July 16, 1984.
Service and Expense Agreement among Allstate Insurance Company and certain of
its affiliated insurance companies, effective January 1, 1999, except with
respect to Glenbrook Life and Annuity Company, Columbia Universal Life Insurance
Company and LSA Asset Management LLC.
Service and Expense Agreement between Allstate Insurance Company and Certain of
its Non-Insurance Company Affiliates effective January 1, 2000.
Service and Expense Agreement between Surety Life Insurance Company and Lincoln
Benefit Life Company effective August 10, 1994.
Administrative Services Agreement between Allstate Life Insurance Company of
New York and American Heritage Life Insurance Company.
Administrative Services Agreement between Allstate Life Insurance Company of
New York and Allstate Distributors, L.L.C.
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Dates Referenced Herein and Documents Incorporated by Reference
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| This ‘10-K’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| Filed as of: | | 3/17/08 |
| Filed on: | | 3/14/08 |
| For Period End: | | 12/31/07 | | | | | | | 13F-HR |
| | 4/29/03 | | 40 |
| | 1/1/02 | | 1 |
| | 8/27/01 | | 40 |
| | 1/1/00 | | 1 | | 40 |
| | 7/1/99 | | 40 |
| | 5/1/99 | | 40 |
| | 1/1/99 | | 1 | | 40 |
| | 12/1/98 | | 40 |
| | 10/1/98 | | 40 |
| | 2/1/98 | | 40 |
| | 10/1/97 | | 40 |
| | 1/1/95 | | 40 |
| | 8/10/94 | | 40 |
| List all Filings |
41 Subsequent Filings that Reference this Filing
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Filing Submission 0001047469-08-002842 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
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