EXHIBIT 10.22
SERVICE AND EXPENSE AGREEMENT
AMONG
ALLSTATE INSURANCE COMPANY
AND
THE ALLSTATE CORPORATION
AND
CERTAIN INSURANCE SUBSIDIARIES
This Agreement made and effective as of this 1st day of January, 1999, among
ALLSTATE INSURANCE COMPANY, an Illinois insurance company ("Allstate"), THE
ALLSTATE CORPORATION, a Delaware corporation and parent of Allstate ("Allcorp"),
and Certain Insurance Subsidiaries identified as follows: ALLSTATE COUNTY MUTUAL
INSURANCE COMPANY, a Texas county mutual insurance company, ALLSTATE TEXAS
LLOYD'S, a Texas Lloyds plan insurer, LINCOLN BENEFIT LIFE COMPANY, a Nebraska
insurance company, SURETY LIFE INSURANCE COMPANY, a Nebraska insurance company,
ALLSTATE INDEMNITY COMPANY, an Illinois insurance company, ALLSTATE PROPERTY AND
CASUALTY INSURANCE COMPANY, an Illinois insurance company, DEERBOOK INSURANCE
COMPANY, an Illinois insurance company, FORESTVIEW MORTGAGE INSURANCE COMPANY, a
California insurance company, ALLSTATE LIFE INSURANCE COMPANY, an Illinois
insurance company, NORTHBROOK LIFE INSURANCE COMPANY, an Arizona insurance
company, GLENBROOK LIFE AND ANNUITY COMPANY, an Arizona insurance company,
ALLSTATE FLORIDIAN INDEMNITY COMPANY, an Illinois insurance company, ALLSTATE
FLORIDIAN INSURANCE COMPANY, an Illinois insurance company, ALLSTATE NEW JERSEY
INSURANCE COMPANY, an Illinois insurance company, AMERICAN SURETY & CASUALTY
COMPANY, a Florida insurance company, CHARTER NATIONAL LIFE INSURANCE COMPANY,
an Illinois insurance company, AMERICAN HERITAGE LIFE INSURANCE COMPANY, a
Florida insurance company, FIRST COLONIAL REINSURANCE COMPANY, a Florida
insurance company, COLUMBIA UNIVERSAL LIFE INSURANCE COMPANY, a Texas insurance
company, KEYSTONE STATE LIFE INSURANCE COMPANY, a Pennsylvania insurance
company, CONCORD HERITAGE LIFE INSURANCE COMPANY, INC., a New Hampshire
insurance company, and AHL SELECT HMO, INCORPORATED, a Florida insurance
company. For purposes of this agreement, the Insurance Subsidiaries shall be
referred to herein, individually as "Affiliate" and collectively as
"Affiliates."
W I T N E S S E T H:
WHEREAS, Allcorp and each Affiliate desire that Allstate furnish or cause to be
furnished to them certain services and facilities.
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, (a.) to each Affiliate that is a property and casualty insurer,
services and facilities listed on Exhibit A; (b.) to each Affiliate that is
a life insurer, services and facilities listed on Exhibit B; (c.) to
ALLCORP such services and facilities as are required; and (d) to Allcorp
and each Affiliate the investment services as described in Exhibit E, each
attached hereto. Allstate and any Affiliate may from time to time agree
that only certain of the listed services and facilities will be provided by
Allstate.
2. Costs are defined as Allstate's actual costs and expenses incurred 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.
3. Allocations for the above services and facilities shall be made by Allstate
in accordance with the general provisions contained in Exhibits A through
E. 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 will exercise
reasonable judgment in appropriately revising these Exhibits, maintain
proper documentation for revisions and communicate changes in allocation
requirements to affected Affiliates or Allcorp parties in a timely manner.
Exhibit C provides a narrative overview of the expense management process
and Exhibit D provides certain definitions used throughout.
4. Notwithstanding anything contained in this Agreement to the contrary, the
amount charged to any Affiliate or Allcorp shall not exceed the cost to
Allstate. Allstate will exercise reasonable judgement in periodically
reviewing the expenses incurred and the percentage thereof allocated. Any
Affiliate or Allcorp may request a review of such expenses and their
allocation and such review will occur promptly thereafter.
5. Allstate will charge Allcorp and each Affiliate 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. The process will be completed by Allstate personnel in
the most timely and effective method available.
6. Allstate shall maintain such records as may be required relating to the
accounting system of Allstate, Allcorp and its Affiliates. Each Affiliate
and Allcorp 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.
7. Upon reasonable notice, and during normal business hours, each Affiliate
and Allcorp shall be entitled to, at its own expense, inspect records which
pertain to the computation of charges for the facilities or services
provided pursuant to this Agreement. Allstate shall at all times maintain
correct and complete books, records and accounts of all services and
facilities furnished pursuant to this Agreement.
Each Affiliate and Allcorp shall have unconditional right of ownership of
any records prepared on its behalf under this Agreement.
8. Certain agreements relating to reinsurance and other service and expense
sharing exist by and among Allstate and certain of its Affiliates. Except
for those Agreements listed on Exhibit F, nothing in this Agreement shall
be deemed to amend any such previously executed agreement between the
parties.
9. Allstate employees performing duties hereunder at all times during the term
of this Agreement shall be in the employment, under the supervision and
control of Allstate and shall not be deemed employees of Allcorp or any
Affiliate.
10. The scope of, and the manner in which, Allstate provides facilities and
services to Allcorp and the Affiliates shall be reviewed periodically by
Allstate, Allcorp and each Affiliate. All services and facilities shall be
of good quality and suitable for the purpose for which they are intended.
11. Allstate shall not assign its obligations or rights under this Agreement
without the written consent of each Affiliate and Allcorp. Allstate may
terminate this Agreement in its entirety, and Allcorp or any 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 any Affiliate, this Agreement shall terminate
immediately with respect to such Affiliate. Under no circumstances will the
initial term of this Agreement exceed five (5) years.
12. All communications provided for hereunder shall be in writing, and if to an
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 Allcorp or Allstate, mailed or delivered to
its office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Controller, or addressed to any party at the address such party may
hereafter designate by written notice to the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
as of the day and year above written.
ALLSTATE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Group Vice President and Controller
ALLSTATE COUNTY MUTUAL INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
ALLSTATE TEXAS LLOYDS, INC.
On behalf of ALLSTATE TEXAS LLOYDS
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Controller
LINCOLN BENEFIT LIFE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Chief Executive Officer
SURETY LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Chief Executive Officer
ALLSTATE INDEMNITY COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
ALLSTATE PROPERTY AND CASUALTY
INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
DEERBROOK INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
FORESTVIEW MORTGAGE INSURANCE
COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
ALLSTATE LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Treasurer
NORTHBROOK LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Treasurer
GLENBROOK LIFE AND ANNUITY COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Treasurer
THE ALLSTATE CORPORATION
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Treasurer
ALLSTATE FLORIDIAN INDEMNITY COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
ALLSTATE FLORIDIAN INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
ALLSTATE NEW JERSEY INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
AMERICAN SURETY & CASUALTY COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
CHARTER NATIONAL LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
▇▇▇▇▇ ▇. ▇▇▇▇
Vice President and Treasurer
AMERICAN HERITAGE LIFE INSURANCE COMPANY
By /s/ C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
Name: C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
FIRST COLONIAL INSURANCE COMPANY
By /s/ C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
Name: C. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President and Treasurer
COLUMBIA UNIVERSAL LIFE INSURANCE
COMPANY
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
KEYSTONE STATE LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇ ▇. Athens
------------------
Name: ▇▇▇▇ ▇. Athens
Title: Chief Financial Officer
CONCORD HERITAGE LIFE INSURANCE COMPANY,
INC.
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & CEO
AHL SELECT HMO INCORPORATED
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
EXHIBIT A
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE INSURANCE COMPANY AND PROPERTY & CASUALTY AFFILIATES
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
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1. Claim Adjustment Investigation and adjustment of policy claims for direct, reinsurance assumed No allocation-direct
Services and ceded business. The more significant expenses and fees related to: (1) all charge to company
outside 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.).
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2. Commission and All payments, reimbursements and allowances (on direct and reinsurance assumed No allocation-direct
Brokerage and ceded business) to managers, agents, brokers, solicitors or other producer charge to company based
types. on agent contract
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EXPENSE LINE ITEM BASIS OF EXPENSE
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* Expense classifications per the statutory Underwriting and Investment
Exhibit, Part 4, Expenses. The company uses these twenty-one
classifications to record its 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 expenses.
** This description provides only a synopsis of the types of expenses for
each classification. Parties to the Agreement will utilize the NAIC
Examiners Handbook in expense handling.
*** Before consideration of any applicable reinsurance agreement.
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PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
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4. Advertising Typical expenses would include services of: (1) advertising agents, (2) public Direct charge by company
relations counsel, (3) advertisements in newspapers, periodicals, billboards, where known. Allocated
pamphlets and literature issued for advertising or promotional purposes, (4) items handled as
related paper and printing charges for advertising purposes, (5) radio follows: See Exhibit A
broadcasts, (6) prospect and mailing lists, (7) signs and medals for agents and Appendix at B; C 1; D 1
(8) television commercials. and E 1 for explanation
of allocation by type of
office
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5. Boards, Bureaus Various dues, assessments, fees and charges for items such as: (1) underwriting No allocation - direct
and boards, rating organizations, statistical agencies, inspection and audit charge to company
Associations bureaus, (2) underwriters' advisory and service organizations, (3) accident and
loss prevention organizations, (4) claim organizations, (5) underwriting
syndicates, pools and associations, assigned risk plans.
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6. Surveys and Costs to support the business including: (1) survey, credit, moral hazard, See Exhibit A Appendix at
Underwriting character reports for underwriting, (2) appraisals for underwriting, (3) fire B; D1; and E1 for
Reports records, (4) inspection and engineering billed specifically, (5) medical explanation of allocation
examiner services relating to underwriting. by type of office
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7. Audit of Auditing fees and expenses of independent auditors for auditing payroll and No allocation - direct
Assured's other premium bases. charge to company
Records
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8. Salary and Salaries, bonus, overtime, contingent compensation, and other compensation of See Exhibit A Appendix at
Related Items employees. This would include commission and brokerage to employees when the A; B; C 1, 2; D 1, 2, 3,
activities for which the commission is paid are a part of their duties as 4; E 2, 5; and F 1, 2, 3,
employees. 4 for explanation by type
of office
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9. Employee This category includes a variety of pension and insurance benefits for See Exhibit A Appendix at
Relations and employees, as well as some miscellaneous expenditures. The first area entails: A; B; C 1, 2; D 1, 2,
Welfare (1) cost of retirement insurance, pensions or other retirement allowances and 3, 4; E 2, 5; and F 1, 2,
funds irrevocably devoted to the payment of pensions or other employees' 3, 4 for explanation by
benefits, and (2) accident, health and hospitalization insurance, type of office
group life insurance for explanation by type of and workers'
compensation insurance. The miscellaneous category may include the following
items office (1) training and welfare; (2) physical exams for employees or
candidates; (3) gatherings, outings and entertainment; (4) supper money; and (5)
donations to or on behalf of employees.
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EXPENSE LINE ITEM BASIS OF EXPENSE
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PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
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10. Insurance Costs of insurance for employee/agent fidelity or surety bonds, public See Exhibit A Appendix at
liability, burglary and robbery, automobiles and office contents. D 1; E 1; and F 1, 2, 3,
4 for explanation by type
of office
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12. Travel and Major expense subcategories include: (1) transportation, hotel, meals, telephone See Exhibit A Appendix at
Travel Items and other related costs associated for employees traveling, (2) expense for A; B; C 1, 2; D 1, 2,
transfer of employees, (3) automobile rental and license plates, depreciation, 3, 4; E 2, 5; and F 1,
repairs and other operating costs of automobiles (4) transportation, 2, 3, 4 for explanation
hotel and meals/entertainment of guests, (5) dues and by type of office
subscriptions to accounting, for explanation by type of legal, actuarial or
similar societies and associations.
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13. Rent and Rent Rent of home office and branch offices, space occupied in company owned Direct charges by company
Items buildings, storage and warehouse space, safe deposit boxes and post office are based on square
boxes. Related expenses for: (1) light, heat, power and water, (2) interest, footage.
taxes, (3) cost of alterations and repairs to leased properties, and (4) costs
of cleaning and general maintenance. Allocated expenses
handled per Exhibit A
Appendix at A; B; C 1, 2;
D 1, 2, 3, 4; E 2, 5; and
F 1, 2, 3, 4
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14. Equipment Rent and repair of furniture, equipment, and office machines, including the See Exhibit A Appendix at
related depreciation charges. 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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15. Printing and Generally, printing, stationery and office supplies (paper stock, printed forms See Exhibit A Appendix at
Stationery and manuals, Photostat copies, pens and pencils, etc.). Also included would be A; B; C 1, 2; D 1, 2, 3,
policies and policy forms, in-house employee publications, books, newspapers and 4; E 2, 5; and F 1, 2, 3,
periodicals including investment, tax and legal publications and services. 4
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
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16. Postage, All express, freight and cartage expenses, postage, and telephone. See Exhibit A Appendix
Telephone, etc. at A; B; C 1, 2; D 1,2,3,
4; E 2, 5; and F 1, 2, 3,
4
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17. Legal & Auditing Legal fees and retainers excluding loss and salvage related, auditing fees of See Exhibit A Appendix at
independent auditors for examining records, services of tax experts and A; D 2, 3 , 4; E 2;
investment counsel, custodian fees, notary and trustees' fees. and F 1, 2
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18. Taxes, Licenses Several categories comprise this expense classification: (1) state and local No allocation - direct
and Fees insurance taxes; (2)Insurance Department licenses and fees; (3) payroll taxes; charge to company
and (4) all 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.
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19. Real Estate Salaries, wages and other compensation of maintenance workers in connection with Direct charges by company
Expenses owned real estate. Other expense items assigned to this category may also are based on square
include expenses associated with: operations; maintenance; insurance and footage.
advertising.
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
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
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20. Real Estate Taxes, licenses and fees on owned real estate. Direct charges by company
Taxes 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
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NOTE: Expense classification for lines 3, 11 and 20a are not applicable for the
Allstate Group.
EXHIBIT A
APPENDIX
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE INSURANCE COMPANY AND AFFILIATES
A. Offices 001 (Corporate Home Office), 201 (Investment Shared Services), 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) and
209 (Market Brand Development) factors are based on Service Level
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 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. Total agents' compensation
2. Time and effort studies
D. Regional Office factors are based on the following methodologies:
1. Agent compensation
2. Gross policies issued (GPI)
3. Notice counts
4. Time and effort studies 5. System capacity studies
E. Regional Commercial Centers factors are based on the following
methodologies:
1. Agent compensation
2. Gross policies issued (GPI)
3. Notice counts
4. Time and effort studies
5. General office compensation
F. Claim Service Areas factors are based on the following:
1. Headcount (Property vs. Auto)
2. Notice counts
3. Incurred loss
4. Claim legal matter counts
EXHIBIT B
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE LIFE INSURANCE COMPANY AND LIFE AFFILIATES
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER GENERAL EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
EXPENSE EXHIBIT*
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1. Rent Rent for all premises occupied by the company, including any adequate rent for Direct charges by company
occupancy of its own buildings, in whole or in part, except to the extent that are based on square
allocation to other expense classifications on a functional basis is permitted footage.
and used. Allocated expenses are
handled per Exhibit B
Appendix at A; B 1, 2; C
1, 2 and D 1, 2, 3
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2. Salaries and Salaries and wages, bonuses and incentive compensation to employees, overtime Agents' compensation is a
wages payments, continuation of salary during temporary short-term absences, dismissal direct charge to company.
allowances, payments to employees while in training and other compensation to The remaining expenses in
employees not specifically designated herein, except to the extent that this category are
allocation to their expense classifications is permitted and used. allocated per Exhibit B
Appendix at A; B 1, 2; C
1, 2; and D 1, 2, 3
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* Expense classifications per Statutory Exhibits 5 & 6. The company uses
these classifications to record its 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
expenses.
** 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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EXPENSE LINE ITEM BASIS OF EXPENSE
PER GENERAL EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
EXPENSE EXHIBIT*
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3.11 Contributions Contributions by company for pension and total permanent disability benefits, See Exhibit B Appendix at
for plans life insurance benefits, accident, health, hospitalization, medical, surgical, A; B 1, 2; C 1, 2; and D
benefits for or other temporary disability benefits under a self-administered or trusteed 1, 2, 3
employees 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.
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3.12 Contributions Contributions by company for pension and total permanent disability benefits, See Exhibit B Appendix at
for benefit life insurance benefits, accident, health, hospitalization, medical, surgical, C 1, 2; and D 1, 2, 3
plans for or other temporary disability benefits under a self-administered or trusteed
agents 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.
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3.21 Payments to Payments by company under a program for pension and total and permanent No allocation - direct
employees under disability benefits, death benefits, accident, health, hospitalization, medical charge to company
non-funded surgical or other temporary disability benefits where no contribution or
benefit plans appropriation is made prior to the payment of the benefit.
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3.22 Payments to Payments by company under a program for pension and total and permanent No allocation - direct
agents under disability benefits, death benefits, accident, health, hospitalization, medical, charge to company
non-funded surgical or other temporary disability benefits where no contribution or
benefit plans appropriation is made prior to the payment of the benefit.
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3.31 Other employee The net periodic postretirement benefit cost, meals to employees, contribution Agents' compensation is a
welfare to employee associations or clubs, dental examinations, medical dispensary or direct charge to company.
convalescent home expenses for employees. The remaining expenses in
this category are
allocated per Exhibit B
Appendix at A; B 1, 2; C
1, 2; and D 1, 2, 3
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER GENERAL EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
EXPENSE EXHIBIT*
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3.32 Other agent The net periodic postretirement benefit cost, meals to employees, contribution Agents' compensation is a
welfare to employee associations or clubs, dental examinations, medical dispensary or direct charge to company.
convalescent home expenses for agents. The remaining expenses in
this category are
allocated per Exhibit B
Appendix at C 1, 2; and
D 1, 2, 3
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4.1 Legal fees and Court costs, penalties and all fees or retainers for legal services or expenses No allocation - direct
expenses in connection with matters before administrative or legislative bodies. charge to company
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4.2 Medical Fees to medical examiners in connection with new business reinstatements, policy See Exhibit B Appendix at
examination fees changes and applications for employment. D 1, 2
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4.3 Inspection Fee for inspection reports in connection with new business, reinstatements, See Exhibit B Appendix at
report fees policy changes and applications for employment. Cost of services furnished by D 1, 2
the Medical Information Bureau.
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4.4 Fees of public Include expenses relating to this category except exclude examination fees made See Exhibit B Appendix at
accountants by State Departments and internal audits by company employees. A; B 1, 2; C 1, 2; and D
and consulting 1, 2
actuaries
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4.6 Expense of Payment to other than employees of fees and expenses for the investigation, See Exhibit B Appendix at
investigation litigation and settlement of policy claims. D 1, 2
and
settlement of
policy claims
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5.1 Traveling Traveling expense of officers, other employees, directors and agents, including See Exhibit B Appendix at
expenses hotel, meals, telephone, telegraph and postage charges incurred while traveling. A; B 1, 2; C 1, 2; and D
Also include amounts allowed employees for use of their own cars on company and 1, 2, 3
business and the cost of, or depreciation on, maintenance and running expenses
of company-owned automobiles.
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER GENERAL EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
EXPENSE EXHIBIT*
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5.2 Advertising Newspaper, magazine and trade journal advertising for the purpose of See Exhibit B Appendix at
solicitation and conservation of business. Billboard, sign and telephone B 1, 2; C 1; and D 1, 2
directory, television, radio 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.
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5.3 Postage, express, Freight and cartage, cables, radiograms and teletype. Also charges for use, See Exhibit B Appendix at
telegraph and installation and maintenance of related equipment if not included elsewhere. A; B 1, 2; C 1, 2; and D
telephone 1, 2, 3
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5.4 Printing and Policy forms, riders, supplementary contracts, applications, etc., rate books, See Exhibit B Appendix at
stationery instruction manuals, punch-cards, house organs, and all other printed material A; B 1, 2; C 1, 2; and D
which is not required to be included in any other expense classification. Office 1, 2, 3
supplies and pamphlets on health, welfare and education subjects. Also
include annual reports to policyholders and stockholders if not included in Line
5.2.
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5.5 Cost or The cost or depreciation of office machines except for such charges as may be See Exhibit B Appendix at
depreciation reported in Line 5.3. A; B 1, 2; C 1, 2; and D
of furniture and 1, 2, 3
equipment
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5.6 Rental of Rental of office machines except for such charges as may be reported in Line See Exhibit B Appendix at
equipment 5.3. A; B 1, 2; C 1, 2; and D
1, 2, 3
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6.1 Books and Books, newspapers, periodicals, etc., including investment tax and legal See Exhibit B Appendix at
periodicals publications and information services, and including all such material for A; B 1, 2; C 1, 2; and D
company's law department and libraries. 1, 2, 3
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER GENERAL EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
EXPENSE EXHIBIT*
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6.2 Bureau and All dues and assessments of organizations of which the company is a member. All No allocation - direct
association dues for employees' and agents' memberships on the company's behalf. charge to company
fees
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6.3 Insurance, Premiums for Workers' Compensation, burglary, holdup, forgery and the public See Exhibit B Appendix a
except on liability insurance, fidelity or surety bonds, insurance on contents of A; B 1, 2; C 1, 2; and D
real estate company-occupied buildings and all other at insurance or bonds not included 1, 2, 3
elsewhere.
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6.4 Miscellaneous Uncollectible losses due to deficiencies, defalcations, robbery, or forgery, Primarily a direct charge
losses except those offset by bonding companies' payments. Also include Worker's to company. Remaining
Compensation benefits not covered by insurance and other uninsured losses not expenses are allocated
included elsewhere. per Exhibit B Appendix at
A; D 1, 2, 3
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6.5 Collection and Collection charges on checks and drafts and charges for checking accounts and See Exhibit B Appendix at
bank service money orders. A; and D 1, 2, 3
charges
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6.6 Sundry Direct expense of local agency meetings, luncheons and dinners, tabulating See Exhibit B Appendix
general service rendered by outside organizations, gifts and donations. Any portion of at A; B 1, 2; C 1, 2; and
expenses commissions and expense allowances on reinsurance assumed for group business D 1, 2, 3
which represents specific reimbursement of expenses. Reimbursement to another
insurer for expense of jointly underwritten group contracts.
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6.7 Group service Administration fees, service fees, or any other form of allowance, reimbursement See Exhibit B Appendix at
and of expenses, or compensation (other than commissions) to agents, brokers, D 1, 2
administration applicants, policyholders or third parties in connection with the solicitation,
fees sale, issuance, service and administration of group business.
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER GENERAL EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
EXPENSE EXHIBIT*
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6.8 Reimbursements Report as a negative amount administrative fees, direct reimbursement of No allocation - direct
by uninsured expenses, or other similar receipts or credits attributable to uninsured charge to company
accident and accident and health plans and the uninsured portion of partially insured
health plans accident and health plans.
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7.1 Agency expense All bona fide allowance for agency expense, but not allowances constituting No allocation - direct
allowance additional compensation. charge to company
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7.2 Agents' balances Agents' balances charged off less any amounts recovered during the year. No allocation - direct
charged off charge to company
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7.3 Agency Cost of banquets and rental of meeting rooms. Expenses of all persons traveling Primary dollars are a
conferences to conferences and their expenses at conferences. direct charge to company.
other than local The remaining expenses in
meetings this category are
allocated per Exhibit B
Appendix at C 1; and D 1
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9.1 Real estate The cost of repairs, maintenance, service, and operation of all real estate Direct charges by company
expenses properties including insurance whether occupied by the company or not; salaries are based on square
and other compensation of managing agents and their employees; expenses incurred footage. Allocated
in connection with rental of such properties; legal fees specifically associated expenses are handled per
with real estate transactions other than sale; rent, salaries and wages, and Exhibit B Appendix at A;
other direct expenses of any branch of Home Office until engaged solely in real B 1, 2; C 1, 2; and D 1,
estate work (not real estate and mortgages combined). 2, 3
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9.2 Investment Only items for which no specific provisions has been made elsewhere, e.g., See Exhibit B Appendix at
expenses not contributions or assessments for bondholders' protective committees, fees of A; and D 1, 2, 3
included investment counsel, custodian and trustee fees.
elsewhere
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NOTE: Line 9.3, Aggregate write-ins for expenses, was not detailed in this
exhibit. The types of expenses, if any, and the corresponding allocation
basis are completely variable year-to-year. The Cost Management
Department will maintain appropriate records for this line item.
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER GENERAL EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
EXPENSE EXHIBIT*
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1. Real estate Those taxes directly assessed against property owned by the company. Canadian Direct charges by company
taxes and other foreign taxes should be included appropriately. are based on square
footage. Allocated
expenses are handled per
Exhibit B Appendix at A;
B 1, 2; C 1, 2; and D 1,
2, 3
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2. State insurance Assessments to defray operating expenses of any state insurance department. No allocation - direct
department Canadian and other foreign taxes should be included appropriately. Fees for charge to company
licenses examinations by state departments.
and fees
------------------------------------------------------------------------------------------------------------------------------------
3. State taxes on State taxes based on policy reserves, if in lieu of premium taxes. Canadian and No allocation - direct
premiums other foreign taxes should be included appropriately. Any portion of commissions charge to company
or allowances on 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.
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4. Other state Assessments of state industrial or other boards for operating expenses or for No allocation - direct
taxes benefits to sick unemployed persons in connection with disability benefit laws charge to company
or 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.
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5. U.S. Social Company's contribution is based on the current tax rate, which is applied to all See Exhibit B Appendix at
Security taxes wages, salary or compensation entered on the employees earning record and A; B 1, 2; C 1, 2; and D
federal unemployment tax. 1, 2, 3
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6. All other taxes Guaranty fund assessments and taxes of Canada or of any other foreign country No allocation - direct
not specifically provided for elsewhere. Sales taxes, other than state sales charge to company
taxes, if company does not exercise option of including such taxes with the cost
of goods and services purchased.
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EXHIBIT B
APPENDIX
INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX
ALLSTATE LIFE INSURANCE COMPANY AND LIFE AFFILIATES
A. Office 001, 201, 203, 204, 205, 206, 207, 208 and 209 factors to the Life
Parent Company are based on Service Level Agreements. Once expenses are
charged to the Life Parent Company a second and third tier of allocation
occurs, which allocates expenses to Profit Centers and Life Affiliates.
B. P&C Head Office (Office 032) allocations to the Life Parent Company are
based on:
1. Agents' compensation
2. Time and effort studies
C. Regional Office allocations to the Life Parent Company are based on:
1. Agents' compensation
2. Time and effort/usage studies
3. System capacity studies
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 and invested
assets.
The intercompany factors are based on the following methodology:
PROFIT CENTER METHODOLOGY COMPANY
Allstate Agent Policies in force 030, ▇▇▇
▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in force 031, 036,038
Structured Settlements Premium income 030, 036
Direct Response Premium income 030, 036
Lincoln Benefit Time and effort studies direct to 034
Surety Life Time and effort studies direct to 032
Group Pensions Time and effort studies direct to 030
3. Any Investment Expense is based on Invested Assets.
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 recordkeeping 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.
- 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, 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. 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 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.
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). -
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.
EXHIBIT E
INVESTMENT SERVICES
A. APPOINTMENT. The Board of Directors of Affiliate (the "Board") has
appointed Allstate as the investment advisor and manager of its investment
assets (the "Account"). Pursuant to the
Service and Expense Agreement of which
this is Exhibit E (the "Agreement"), AFFILIATE grants Allstate the power and
authority to advise, manage, and direct the investment and reinvestment of the
assets of the Account for the period and on the terms and conditions set forth
herein, subject to the supervision of the Board. Such Activities shall be
conducted subject to and in accordance with the investment objectives,
restrictions, and strategies set forth in the of Investment Policy and
Investment Plan (the "Policy") adopted by the Board, and in accordance with such
other limitations and guidelines as may be established from time to time for the
Account by the Board (such investment objectives, restrictions, strategies,
limitations, and guidelines herein referred to collectively as the "Investment
Guidelines"). Allstate hereby accepts such responsibility and agrees during such
period to render the services and to assume the obligations herein set forth.
B. ALLSTATE AS AGENT. Allstate shall, for purposes of this Agreement, be
granted and exercise full investment discretion and authority in buying, selling
or otherwise disposing of or managing the investment of the assets held in the
Account and in the performance of the services rendered hereunder, and shall do
so as AFFILIATE's agent only, subject to Allstate's adherence to the policy
stated in Item A, above. AFFILIATE hereby authorizes Allstate to exercise all
such powers with respect to the assets of the Account as may be necessary or
appropriate for the performance by Allstate of its obligations under this
Agreement, subject to the supervision of the Board and any limitations contained
herein.
C. INVESTMENT ADVISORY SERVICES. In furtherance of the foregoing, and in
carrying out its obligations to manage the investment and reinvestment of the
assets in the Account, Allstate shall, as appropriate and consistent with the
Investment Guidelines:
(a) perform research and obtain and evaluate such information relating to
the economics, industries, businesses, markets and new investment structures,
techniques, practices, and financial data as Allstate deems appropriate in its
discharge of its duties under this Agreement; (b) consult with and furnish to
the Board recommendations with respect to overall investment strategies for the
Account; (c) seek out and implement specific investment opportunities,
consistent with such overall investment strategies approved by the Board,
including making and carrying out day-to-day decisions to acquire or dispose of
permissible investments, managing the investment of the assets of the Account,
and providing or obtaining such services as may be necessary in managing,
acquiring or disposing of investments; (d) regularly report to the Board with
respect to the implementation of investment strategies and any other activities
in connection with management of the Account's assets, including furnishing to
the Board, within 45 days after the end of each quarter, a report including a
summary of investment activity during the quarter; (e) maintain all required
accounts, records, memoranda, instructions or
authorizations relating to the acquisition or disposition of investments for the
Account; (f) determine the securities to be purchased or sold by the Account and
place orders either directly with the issuer, with any broker-dealer or
underwriter that specializes in the securities for which the order is made, or
with any other broker or dealer that Allstate selects; and (g) perform the
services hereunder in a manner consistent with investment objectives and
policies of AFFILIATE as detailed in the Investment Guidelines, as amended from
time to time, and in compliance with the applicable provisions of the insurance
laws and regulations of AFFILIATE's domicile, as amended and any other
applicable insurance laws.
D. ALLOCATION OF BROKERAGE. Allstate is authorized in its sole
discretion to select the brokers or dealers that will execute the purchases and
sales of securities for the Account. In making such selection, Allstate shall
use its best efforts to obtain for the Account the most favorable net price and
execution available taking into account all appropriate factors, including
price, dealer spread or commission, if any, and size and difficulty of the
transaction.
If, in the judgment of Allstate, AFFILIATE would be benefited by
supplemental investment research, Allstate is authorized, but not obligated, to
select brokers or dealers on the basis of research information, materials, or
services they could furnish to Allstate for potential use in supplementing
Allstate's own information and in making investment decisions for the Account.
The expenses of Allstate and the charges to AFFILIATE may not necessarily be
reduced as a result of receipt of such supplemental information. Subject to the
above requirements, nothing shall prohibit Allstate from selecting brokers or
dealers with which it or AFFILIATE is affiliated.
E. SERVICE TO OTHER CLIENTS. AFFILIATE acknowledges that Allstate may
perform services for clients other than AFFILIATE which are similar to the
services to be performed pursuant to this Agreement, and that Allstate is free
to do so provided that its services pursuant to this Agreement are not in any
way impaired. AFFILIATE agrees that Allstate may provide investment advice to
any of its other clients that may differ from advice given to AFFILIATE, or take
action with respect to assets owned by it or its other clients that may differ
from the action taken with respect to the Account and/or assets held therein, so
long as Allstate, to the extent reasonable and practicable, allocates investment
opportunities to the Account on a fair and equitable basis relative to
Allstate's other clients. It is understood that Allstate shall have no
obligation to purchase or sell, or to recommend for purchase or sale for the
Account, any security which Allstate, its affiliates, employees or agents may
purchase or sell for its or their own accounts or for the account of any other
client, if, in the opinion of Allstate, such transaction or investment appears
unsuitable, impractical or undesirable for the Account. It is agreed that
Allstate may use any supplemental investment research obtained for the benefit
of AFFILIATE in providing investment advice to its other clients or its own
accounts. Conversely, such supplemental information obtained by the placement of
business for Allstate or other entities advised by Allstate will be considered
by and may be useful to Allstate in carrying out its obligations to AFFILIATE.
F. ALLOCATION OF TRADES. It is acknowledged that securities held by
AFFILIATE may also be held by separate investment accounts or other funds for
which Allstate may act as a manager or by Allstate or its other affiliates. If
purchases or sales of securities for AFFILIATE or other entities for which
Allstate or its affiliates act as investment manager arise for consideration at
or about the same time, AFFILIATE agrees that Allstate may make transactions in
such securities, insofar as feasible, for the respective entities in a manner
deemed equitable to all. To the extent that transactions on behalf of more than
one client of Allstate during the same period may increase the demand for
securities being purchased or the supply of securities being sold, AFFILIATE
recognizes that there may be an adverse effect on price.
It is agreed that, on occasions when Allstate deems the purchase or sale of
a security to be in the best interests of AFFILIATE as well as other accounts or
companies, it may, to the extent permitted by applicable laws and regulations,
but will not be obligated to, aggregate the securities to be so sold or
purchased for AFFILIATE with those to be sold or purchased for other accounts or
companies in order to obtain favorable execution and lower brokerage
commissions. In that event, allocation of the securities purchased or sold, as
well as the expenses incurred in the transaction, will be made by Allstate in
the manner it considers to be most equitable and consistent with its obligations
to AFFILIATE and to such other accounts or companies. AFFILIATE recognizes that
in some cases this procedure may adversely affect the size of the position
obtainable for AFFILIATE.
G. CONTRACTS; AUTHORIZED SIGNATORIES. Allstate shall have the full power,
right and authority, as AFFILIATE's agent, in accordance with this Agreement and
the Investment Guidelines, to negotiate, apply for, enter into, execute,
deliver, amend, modify and/or terminate legal documents of every kind and nature
relating to or required by the investment of the assets of the Account. All such
documents may be entered into in AFFILIATE's name or in Allstate's name (as
agent for AFFILIATE), as Allstate shall determine, and all such documents shall
be legally binding on AFFILIATE. Those certain employees and officers of
Allstate who are authorized to execute transactions and sign documentation
pursuant to the Policies and Procedures and Investment Guidelines adopted
pursuant to authorization of the Investment Committee of Allstate, as they may
be amended from time to time, shall also be authorized to the same extent to
execute transactions and sign documentation on behalf of AFFILIATE and/or
Allstate in connection with transactions entered into on behalf of the assets of
the Account pursuant to this Agreement.
H. COMPLIANCE WITH LEGAL REQUIREMENTS. Allstate shall make all reasonable
efforts to comply with and cause to be complied with all applicable laws, rules,
and regulations of the AFFILIATE's domicile, and any federal, state or municipal
authority governing this Agreement, the services rendered hereunder, the Account
and the assets held therein. Without limiting the foregoing, Allstate shall
comply with all securities laws and other laws applicable to the services
provided under this Agreement.
I. TRANSACTION PROCEDURES. The assets of the Account are or will be held in
custody by the bank custodian(s) appointed by AFFILIATE from time to time.
Allstate shall not act as custodian for the assets of the Account and shall not
under any circumstances have or be deemed to have ownership, custody or physical
control of any of the assets of the Account. Allstate may, however, issue
instructions to, and communicate with, the bank custodian for the Account as may
be necessary and appropriate in connection with provision of its services
pursuant to this Agreement. At the option of Allstate, instructions by Allstate
to the bank custodian may be made orally or by computer, electronic instruction
systems or telecommunications terminals. Allstate will confirm that the bank
custodian has effected such instructions either by access to the bank's
computerized identification system or by telephonic confirmation. The bank
custodian will confirm with Allstate receipt of trade instructions orally or by
computer for the Account. Allstate will instruct all brokers, dealers and
counterparties executing orders on behalf of the assets of the Account to
forward to Allstate and AFFILIATE copies of all confirmations.
J. STANDARD OF PERFORMANCE. Allstate shall discharge its duties hereunder
at all times in good faith and with that degree of prudence, diligence, care and
skill which a prudent person rendering services as an institutional investment
manager and adviser would exercise under similar circumstances. The provisions
of this Agreement shall not be interpreted to imply any obligation on the part
of Allstate to observe any standard of care other than as set forth in this
Section J.
K. RECORDKEEPING. Allstate shall keep and maintain an accurate and detailed
accounting of each transaction concerning the assets of the Account and of all
receipts, disbursements, and other transactions relating to the purchase and
sale transactions arising hereunder. Allstate agrees to preserve such records
for the greater of (i) six years; (ii) the required period pursuant to the
insurance laws of AFFILIATE's domicile and related regulations; or (iii) such
other time period that AFFILIATE may from time to time request. Allstate
acknowledges that all such records shall be the property of AFFILIATE and shall
be made available, within five (5) business days of a written request, to
AFFILIATE, its accountants, auditors or other representatives of AFFILIATE for
inspection and/or copying (at AFFILIATE's expense) during regular business
hours. In addition, Allstate shall provide any materials, reasonably related to
the investment advisory services provided hereunder, as may be reasonably
requested in writing by the directors or officers of AFFILIATE or as may be
required by any governmental agency with jurisdiction hereunder.
Allstate further agrees to prepare and furnish to AFFILIATE and to other
persons designated by AFFILIATE, at such regular intervals and other times as
may be specified by AFFILIATE from time to time (i) such balance sheets, income
and expense statements and other financial statements and reports, and (ii) such
other statements, reports and information, in each case regarding the assets of
the Account as AFFILIATE shall from time to time reasonably require.
In the event of termination for any reason, all such records or copies
thereof shall be returned promptly to AFFILIATE, free from any claim or
retention of rights by Allstate.
L. LIABILITY OF ALLSTATE. In the absence of Allstate's willful or negligent
misconduct (or the willful or negligent misconduct of its officers, directors,
agents, employees, controlling persons, shareholders, and any other person or
entity affiliated with Allstate or retained by it to perform or assist in the
performance of its obligations under this Agreement), neither Allstate nor any
of its officers, directors, employees or agents shall be subject to liability to
AFFILIATE for any act or omission in the course of, or connected with, rendering
services hereunder.
M. INDEPENDENT CONTRACTOR. Allstate shall for all purposes be deemed to be
an independent contractor. Allstate shall have no power or authority to bind
AFFILIATE or to assume or create an obligation or responsibility, express or
implied, on behalf of AFFILIATE, nor shall it represent to anyone that it has
such power or authority, except as expressly provided in this Agreement. Nothing
in this Agreement shall be deemed to create a partnership between or among the
parties, whether for purposes of taxation or otherwise.
EXHIBIT F
TO INCLUDE A LIST OF AGREEMENTS WHICH WILL TERMINATE AS OF THE EFFECTIVE DATE OF
THE MASTER
SERVICE AND EXPENSE AGREEMENT./
Investment Advisory and Management Agreement between Allstate Insurance Company
and Lincoln Benefit Life Company effective as of January 1, 1996 pursuant to
which Allstate Insurance Company provides investment advisory services to
Lincoln Benefit Life Company, as amended effective January 1, 1996. (Form D-1
filed with Illinois Insurance Department on April 5, 1996 and Forms D filed in
April and May 1996 with the Department of Insurance of Nebraska.)
Investment Advisory and Management Agreement between Allstate Insurance Company
and Surety Life Insurance Company effective as of January 1, 1996 pursuant to
which Allstate Insurance Company provides investment advisory services to Surety
Life Insurance Company, as amended effective January 1, 1996. (Form D-1 filed
with Illinois Insurance Department on April 5, 1996 and Forms D filed in April
and May 1996 with the Department of Insurance of Utah.)
Investment Advisory and Management Agreement effective as of August 21, 1996
between Allstate Floridian Insurance Company and Allstate Insurance Company,
pursuant to which Allstate Insurance provides investment advisory and management
services to Allstate Floridian. (See Form D-1 dated July 23, 1996 filed with the
Illinois Department of Insurance. See also letter dated January 23, 1997 from
Florida Department of Insurance.)
Services Agreement executed September 25, 1996 and effective as of June 25, 1996
between Allstate Insurance Company and Allstate Floridian Insurance Company
pursuant to which Allstate Insurance provides Allstate Floridian underwriting,
claims, actuarial, policy processing, tax, legal, systems, accounting and
customer support services. (See Form D-1 dated July 23, 1996 filed with the
Illinois Department of Insurance. See also letter dated January 23, 1997 from
Florida Department of Insurance.)
Service and Expense Agreement between Allstate Insurance Company and certain of
its Subsidiaries and Affiliates effective June 16, 1997. (See Form D-1 filed
with the Illinois Department of Insurance in May 1997 and other prior
notification forms filed with the insurance departments of California, Nebraska,
Texas and Utah in May 1997. Texas HCS# 27286.)
Investment Advisory and Management Agreement effective as of January 1, 1998
between Allstate Insurance Company and Allstate Floridian Indemnity Company
pursuant to which Allstate Insurance provides investment services to Allstate
Floridian Indemnity.
Investment Advisory and Management Agreement effective as of January 1, 1998
between Allstate Insurance Company and Allstate New Jersey Insurance Company
pursuant to which Allstate Insurance provides investment services to Allstate
New Jersey.
Investment Advisory and Management Agreement between American Surety and
Casualty Company ("ASCC") and Allstate Insurance Company ("Allstate") dated
January 1, 1999 pursuant to which Allstate will provide investment management
services, investment advisory services, and certain other operational and
administrative support services to ASCC for those assets so designated by ASCC
(Form D-1 filed with Illinois Department of Insurance on November 17, 1998 and
accepted pursuant to a letter dated December 3, 1998).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and American Heritage Life Insurance Company ("AHL") dated October
31, 1999 pursuant to which Allstate will provide investment management services,
investment advisory services, and certain other operational and administrative
support services to AHL for those assets so designated by AHL (Form D-1 filed
with the
Illinois Department of Insurance in October 1999 and other prior notification
forms filed with the Florida Department of Insurance in October 1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and AHL Select HMO Incorporated ("AHL Select") dated October 31,
1999 pursuant to which Allstate will provide investment management services,
investment advisory services, and certain other operational and administrative
support services to AHL Select for those assets so designated by AHL Select
(Form D-1 filed with the Illinois Department of Insurance in October 1999 and
other prior notification forms filed with the Florida Department of Insurance in
October 1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and First Colonial Insurance Company ("First Colonial") dated
October 31, 1999 pursuant to which Allstate will provide investment management
services, investment advisory services, and certain other operational and
administrative support services to First Colonial for those assets so designated
by First Colonial (Form D-1 filed with the Illinois Department of Insurance in
October 1999 and other prior notification forms filed with the Florida
Department of Insurance in October 1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and Columbia Universal Life Insurance Company ("Columbia") dated
October 31, 1999 pursuant to which Allstate will provide investment management
services, investment advisory services, and certain other operational and
administrative support services to Columbia for those assets so designated by
Columbia (Form D-1 filed with the Illinois Department of Insurance in October
1999 and other prior notification forms filed with the Texas Department of
Insurance in October 1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and Concord Heritage Life Insurance Company, Inc. ("Concord") dated
October 31, 1999 pursuant to which Allstate will provide investment management
services, investment advisory services, and certain other operational and
administrative support services to Concord for those assets so designated by
Concord (Form D-1 filed with the Illinois Department of Insurance in October
1999 and other prior notification forms filed with the New Hampshire Department
of Insurance in October 1999).
Investment Advisory and Management Agreement between Allstate Insurance Company
("Allstate") and Keystone Life Insurance Company ("Keystone") dated October 31,
1999 pursuant to which Allstate will provide investment management services,
investment advisory services, and certain other operational and administrative
support services to Keystone for those assets so designated by Keystone (Form
D-1 filed with the Illinois Department of Insurance in October 1999 and other
prior notification forms filed with the Pennsylvania Department of Insurance in
October 1999).