EXHIBIT 10.1
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.
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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
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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 0000 Xxxxxxx Xxxx,
0
Xxxxxxxxxx, Xxxxxxxx 00000, 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
as of the day and year above written.
THE ALLSTATE CORPORATION
By:
---------------------------------
Xxxxxx X. Xxxxx
Group Vice President
ALLSTATE INSURANCE COMPANY
By:
---------------------------------
Xxxxxx X. Xxxxx
Group Vice President
AFD, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Assistant Treasurer
AFDW, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
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ALFS, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Assistant Treasurer
ALLSTATE ASSIGNMENT COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE ASSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE CALIFORNIA HOLDINGS, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE CALIFORNIA INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE COUNTY MUTUAL INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE DISTRIBUTORS, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Assistant Treasurer
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ALLSTATE FINANCIAL, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE FINANCIAL ADVISORS, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE FINANCIAL CORPORATION
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE FINANCIAL SERVICES, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE FIRE AND CASUALTY INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE FLORIDIAN INDEMNITY COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE FLORIDIAN INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
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ALLSTATE HOLDINGS, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE INDEMNITY COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE INSURANCE COMPANY OF CANADA
By:
---------------------------------
ALLSTATE INTERNATIONAL INSURANCE HOLDINGS, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE INVESTMENT MANAGEMENT COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE INVESTMENTS, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE LIFE INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE LIFE INSURANCE COMPANY OF CANADA
By:
---------------------------------
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ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE MOTOR CLUB, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE MOTOR CLUB, INC. OF CANADA
By:
---------------------------------
ALLSTATE NEW JERSEY INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE NON-INSURANCE HOLDINGS, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE NORTH AMERICAN INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE PROPERTY AND CASUALTY INSURANCE
COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
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ALLSTATE REINSURANCE LTD.
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ALLSTATE SETTLEMENT CORPORATION
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
ALLSTATE TEXAS LLOYD'S, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
AMERICAN HERITAGE LIFE INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Assistant Treasurer
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
AMERICAN HERITAGE SERVICE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
CHARTER NATIONAL LIFE INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
10
COLUMBIA UNIVERSAL LIFE INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
CONCORD HERITAGE LIFE INSURANCE COMPANY INC.
By:
---------------------------------
Xxxxx X. Xxxx
Assistant Treasurer
DEERBROOK GENERAL AGENCY, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
DEERBROOK INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ENCOMPASS INDEMNITY COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ENCOMPASS INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
ENCOMPASS NEW JERSEY INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
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E.R.J. INSURANCE GROUP INCORPORATED
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
FIDELITY INTERNATIONAL COMPANY LIMITED
By:
---------------------------------
FIDELITY INTERNATIONAL INSURANCE COMPANY LIMITED
By:
---------------------------------
FIRST COLONIAL INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Assistant Treasurer
GLENBROOK LIFE AND ANNUITY COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
INTRAMERICA LIFE INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
IVANTAGE GROUP, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
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IVANTAGE SELECT AGENCY, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
KENNETT CAPITAL, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
KEYSTONE STATE LIFE INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
LINCOLN BENEFIT LIFE COMPANY
By:
Xxxxx X. Xxxx
Treasurer
LSA ASSET MANAGEMENT, LLC
By:
----------------------------------
Xxxxx X. Xxxx
Treasurer
NEW JERSEY HOLDINGS, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
NORTHBROOK HOLDINGS, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
13
NORTHBROOK INDEMNITY COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Vice President and Treasurer
NORTHBROOK SERVICES, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
PAFCO INSURANCE COMPANY
By:
---------------------------------
PEMBRIDGE AMERICA INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
PEMBRIDGE INSURANCE COMPANY
By:
---------------------------------
ROADWAY PROTECTION AUTO CLUB, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
STERLING COLLISION CENTERS, INC.
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
SURETY LIFE INSURANCE COMPANY
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
14
TECH-COR, LLC
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
THE ALLSTATE FOUNDATION
By:
---------------------------------
Xxxxx X. Xxxx
Treasurer
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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.
Description of Service Schedule
---------------------- --------
Finance Shared Services A-1
Technical Shared Service
- Information Technologies A-2
and Field Support
Human Resource Shared Services A-3
Law and Regulation A-4
Corporate Relations A-5
Marketing and Research/Planning Center X-0
Xxxxx Xxxxxxxxxxxxx Xxxxxx X-0
Xxxx Xxxxxx & 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.
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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.
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- 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.
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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.
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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
EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
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1. Claim adjustment services Investigation and adjustment of policy claims for direct, No allocation - direct
reinsurance assumed and ceded business. The more significant charge to company
expenses and fees related to: (1) all 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.).
2. Commission and brokerage All payments, reimbursements and allowances (on direct and No allocation - direct
reinsurance assumed and ceded business) to managers, agents, charge to company based on
brokers, solicitors or other producer types. 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.
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
4. Advertising Typical expenses would include services of: (1) advertising agents, Direct charge by company
(2) public relations counsel, (3) advertisements in newspapers, where known. Allocated
periodicals, billboards, pamphlets and literature issued for items handled as follows:
advertising or promotional purposes, (4) related paper and printing See Exhibit A Appendix at
charges for advertising purposes, (5) radio broadcasts, (6) prospect B; C 1; D 1 and E 1 for
and mailing lists, (7) signs and medals for agents and explanation of allocation
(8) television commercials and production. by type of office
5. Boards, bureaus and Various dues, assessments, fees and charges for items such as: (1) No allocation - direct
associations underwriting boards, rating organizations, statistical agencies, charge to company
inspection and audit 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.
6. Surveys and underwriting Costs to support the business including: (1) survey, credit, moral See Exhibit A Appendix at
reports hazard, character reports for underwriting, (2) appraisals for B; D 1; and E 1 for
underwriting, (3) fire records, (4) inspection and engineering explanation of allocation
billed specifically, (5) medical examiner services relating to by type of office
underwriting.
7. Audit of assureds' records Auditing fees and expenses of independent auditors for auditing No allocation - direct
payroll and other premium bases. charge to company
8. Salary and related items Salaries, bonus, overtime, contingent compensation, and other See Exhibit A Appendix at
compensation of employees. This would include commission and A; B; C 1, 2; D 1, 2, 3, 4;
brokerage to employees when the activities for which the commission E 2, 5; and F 1, 2, 3, 4
is paid are a part of their duties as employees. for explanation by type of
office
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EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
9. Employee relations and This category includes a variety of pension and insurance benefits See Exhibit A Appendix at
welfare for employees, as well as some miscellaneous expenditures. The A; B; C 1, 2; D 1, 2, 3,
first area entails: (1) cost of retirement insurance, pensions or 4; E 2, 5; and F 1, 2, 3,
other retirement allowances and funds irrevocably devoted to the 4 for explanation by type
payment of pensions or other employees' benefits, and (2) accident, 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 bonds, See Exhibit A Appendix at D
public liability, burglary and robbery, automobiles and office 1; E 1; and F 1, 2, 3, 4
contents. for explanation by type of
office
11. Directors fees Amounts relate to fees and other compensation paid to directors for Direct charge to company
attending Board or committee meetings.
12. Travel and travel Major expense subcategories include: (1) transportation, hotel, See Exhibit A Appendix at
items meals, telephone and other related costs associated for employees A; B; C 1, 2; D 1, 2, 3,
traveling, (2) expense for transfer of employees, (3) automobile 4; E 2, 5; and F 1, 2, 3,
rental and license plates, depreciation, repairs and other 4 for explanation by type
operating costs of automobiles (4) transportation, hotel and 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 related See Exhibit A Appendix at
depreciation charges. A; B; C 1, 2; D 1, 2, 3, 4;
E 1, 2, 3, 4; and F 1, 2,
3, 4
28
EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
15. Cost or depreciation of Rent and repair of processing equipment and non-operating systems Charged to companies. See
EDP equipment and software electronic data software, including the related depreciation and Exhibit A, Appendix at A;
amortization. B; C2; D1, 2, 3, 4
16. Printing and stationery Generally, printing, stationery and office supplies (paper stock, See Exhibit A Appendix at
printed forms and manuals, Photostat copies, pens and pencils, A; B; C 1, 2; D 1, 2, 3, 4;
etc.). Also included would be policies and policy forms, in-house E 2, 5; and F 1, 2, 3, 4
employee publications, books, newspapers and periodicals including,
tax and legal publications and services.
17. Postage, telephone, etc. All express, freight and cartage expenses, postage, and telephone. See Exhibit A 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 Appendix at
auditing fees of independent auditors for examining records, A; D 2, 3, 4; E 2; and F 1,
services of tax experts and counsel, custodian fees, notary and 2
trustees' fees.
20. Taxes, licenses and fees Several categories comprise this expense classification: (1) state No allocation - direct
and local insurance taxes; (2) Insurance Department licenses and charge to company
fees; (3) payroll taxes; 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.
29
EXPENSE LINE ITEM BASIS OF EXPENSE
PER U&I EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
21. Real estate expenses Salaries, wages and other compensation of maintenance workers in Direct charges by company
connection with owned real estate. Other expense items assigned to are based on square
this category may also include expenses associated with: footage.
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 Taxes, licenses and fees on owned real estate. Direct charges by 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 X 0, 0,
0, 0
00. Xxxxxxxxx write-ins for Items for which no pre-printed statutory line exists. Cost Management will
miscellaneous expenses Description/title shown in Part 3 will vary based on need. develop the most
appropriate allocation
basis and maintain
documentation
30
EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
6.5 Collection and bank Collection charges on checks and drafts and charges for checking
service charges accounts and money orders.
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
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 company
adequate rent for occupancy of its own buildings, in whole or in are based on square
part, except to the extent that allocation to other expense footage. Allocated expenses
classifications on a functional basis is permitted and used. are handled per Exhibit B
Appendix at A; B 1, 2; C 1,
2 and D 1, 2, 3
2. Salaries and wages Salaries and wages, bonuses and incentive compensation to Agents' compensation is a
employees, overtime payments, continuation of salary during direct charge to company.
temporary short-term absences, dismissal allowances, payments to The remaining expenses in
employees while in training and other compensation to employees not this category are allocated
specifically designated herein, except to the extent that per Exhibit B Appendix at
allocation to their expense classifications is permitted and used. A; B 1, 2; C 1, 2; and D 1,
2, 3
Contributions by company for pension and total permanent disability See Exhibit B Appendix
benefits, life insurance benefits, accident, health, at A; B 1, 2; C 1, 2; and
hospitalization, medical, surgical, or other D 1, 2
----------
* 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.
35
EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT 2* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
3.11 Contributions for temporary disability benefits under a self-administered or D 1, 2, 3
benefit plans for trusteed plan or for the purchase of annuity or insurance contracts.
employees Appropriation of any other assignment of funds by company in
connection with any benefit plan of the types enumerated herein.
3.12 Contributions for Contributions by company for pension and total permanent disability See Exhibit B Appendix
benefit plans for benefits, life insurance benefits, accident, health, at C 1, 2; and D 1, 2, 3
agents hospitalization, medical, surgical, or other 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 and No allocation - direct
employees under non- permanent disability benefits, death benefits, accident, health, charge to company
funded benefit plans hospitalization, medical, surgical or other temporary disability
benefits where no contribution or appropriation is made prior to
the payment of the benefit.
3.22 Payments to agents Payments by company under a program for pension and total and No allocation - direct
under non-funded permanent disability benefits, death benefits, accident, health, charge to company
benefit plans hospitalization, medical, surgical or other 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 employees, Agents' compensation is a
welfare contribution to employee associations or clubs, dental direct charge to company.
examinations, medical dispensary or convalescent home expenses for The remaining expenses in
employees. this category are allocated
per Exhibit B Appendix at
A; B 1, 2; C 1, 2; and D 1,
2, 3
36
EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
3.32 Other agent welfare The net periodic postretirement benefit cost, meals to Agents' compensation
employees, contribution to employee associations or clubs, is a direct charge to
dental examinations, medical dispensary or convalescent home company. The remaining
expenses for agents. expenses in this
category are allocated
per Exhibit B Appendix
at C 1, 2; and D 1, 2,
3
4.1 Legal fees and Court costs, penalties and all fees or retainers for legal No allocation - direct
expenses services or expenses in connection with matters before charge to company
administrative or legislative bodies.
4.2 Medical examination Fees to medical examiners in connection with new business See Exhibit B Appendix
fees reinstatements, policy changes and applications for at D 1, 2
employment.
4.3 Inspection report Fee for inspection reports in connection with new business, See Exhibit B Appendix
fees reinstatements, policy changes and applications for 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 Appendix
accountants and examination fees made by State Departments and internal audits at A; B 1, 2; C 1, 2;
consulting actuaries by company employees. and D 1, 2
4.6 Expense of Payment to other than employees of fees and expenses for the See Exhibit B Appendix
investigation and investigation, litigation and settlement of policy claims. at D 1, 2
settlement of
policy claims
37
EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
5.1 Traveling expenses Traveling expense of officers, other employees, directors and See Exhibit B Appendix
agents, including hotel, meals, telephone, telegraph and at A; B 1, 2; C 1, 2;
postage charges incurred while traveling. Also include amounts and D 1, 2, 3
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 Appendix
purpose of solicitation and conservation of business. At A, B 1, 2; C 1; and
Billboard, sign and telephone directory, television, radio 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, express, Freight and cartage, cables, radiograms and teletype. Also See Exhibit B Appendix
telegraph and charges for use, installation and maintenance of related at A; B 1, 2; C 1, 2;
telephone equipment if not included elsewhere. and D 1, 2, 3
5.4 Printing and Policy forms, riders, supplementary contracts, applications, See Exhibit B Appendix
stationery etc., rate books, instruction manuals, punch-cards, house at A; B 1, 2; C 1, 2;
organs, and all other printed material which is not required and D 1, 2, 3
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 depreciation The cost or depreciation of office machines except for such See Exhibit B Appendix
of furniture and charges as may be reported in Line 5.3. at A; B 1, 2; C 1, 2;
equipment and D 1, 2, 3
38
EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
5.6 Rental of equipment Rental of office machines except for such charges as may be See Exhibit B Appendix at
reported in Line 5.3. A; B 1, 2; C 1, 2; and D 1,
2, 3
5.7 Cost or depreciation of Include cost, depreciation and amortization for EDP equipment and Charged to Companies See
EDP equipment and software operating and non-operating systems software. Exhibit B at A; B; C
6.1 Books and periodicals Books, newspapers, periodicals, etc., including investment tax and See Exhibit B Appendix at
legal publications and information services, and including all such A; B 1, 2; C 1, 2; and D 1,
material for company's law department and libraries. 2, 3
6.2 Bureau and association All dues and assessments of organizations of which the company is a No allocation - direct
fees member. All dues for employees' and agents' memberships on the charge to company
company's behalf.
6.3 Insurance, except on real Premiums for Workers' Compensation, burglary, holdup, forgery and See Exhibit B Appendix
estate the public liability insurance, fidelity or surety bonds, insurance at A; B 1, 2; C 1, 2; and
on contents of company-occupied buildings and all other insurance D 1, 2, 3
or bonds not included elsewhere.
6.4 Miscellaneous losses Uncollectible losses due to deficiencies, defalcations, robbery, or Primarily a direct charge
forgery, except those offset by bonding companies' payments. Also to company. Remaining
include Worker's Compensation benefits not covered by insurance and expenses are allocated per
other uninsured losses not included elsewhere. Exhibit B Appendix at A;
and D 1, 2, 3
6.5 Collection and bank Collection charges on checks and drafts and charges for checking See Exhibit B Appendix at
service charges accounts and money orders. A; and D 1, 2, 3
6.6 Sundry general expenses Direct expense of local agency meetings, luncheons and dinners, See Exhibit B Appendix at
tabulating service rendered by outside organizations, gifts and A; B 1, 2; C 1, 2; and D 1,
donations. Any portion of commissions and expense allowances on 2, 3
reinsurance assumed for group business which represents specific
reimbursement of expenses. Reimbursement to another insurer for
expense of jointly underwritten group contracts.
39
EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
6.7 Group service and Administration fees, service fees, or any other form of allowance, See Exhibit B Appendix at
administration fees reimbursement of expenses, or compensation (other than commissions) D 1, 2; and B
to agents, brokers, applicants, policyholders or third parties in
connection with the solicitation, sale, issuance, service and
administration of group business.
6.8 Reimbursements by Report as a negative amount administrative fees, direct No allocation - direct
uninsured accident and reimbursement of expenses, or other similar receipts or credits charge to company
health plans attributable to uninsured accident and health plans and the
uninsured portion of partially insured accident and health plans.
7.1 Agency expense allowance All bona fide allowance for agency expense, but not allowances No allocation - direct
constituting additional compensation. charge to company
7.2 Agents' balances charged Agents' balances charged off less any amounts recovered during the No allocation - direct
off year. charge to company
7.3 Agency conferences other Cost of banquets and rental of meeting rooms. Expenses of all Primary dollars are a
than local meetings persons traveling to conferences and their expenses at conferences. direct charge to company.
The remaining expenses in
this category are allocated
per Exhibit B Appendix at C
1; and D 1
9.1 Real estate expenses The cost of repairs, maintenance, service, and operation of all Direct charges by company
real estate properties including insurance whether occupied by the are based on square
company or not; salaries and other compensation of managing agents footage. Allocated expenses
and their employees; expenses incurred in connection with rental of are handled per Exhibit B
such properties; legal fees specifically associated with real Appendix at A; B 1, 2; C 1,
estate transactions other than sale; rent, salaries and wages, and 2; and D 1, 2, 3
other direct expenses of any branch of Home Office until engaged
solely in real estate work (not real estate and mortgages
combined).
40
EXPENSE LINE ITEM
PER GENERAL BASIS OF EXPENSE
EXPENSE EXHIBIT* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
9.2 Investment expenses Only items for which no specific provisions has been made See Exhibit B Appendix not
elsewhere elsewhere, e.g., contributions or included assessments for at A; and D 1, 2, 3
bondholders' protective committees, fees of investment counsel,
custodian and trustee fees.
9.3 Aggregate write-ins for Items for which no pre-printed statutory line exists. Description Cost Management will
expenses title shown in Exhibit 2 will vary based on need. develop the most
appropriate allocation
basis and maintain
documentation
41
EXPENSE LINE ITEM
PER TAXES,
LICENSES AND FEES BASIS OF EXPENSE
EXHIBIT 3* EXPENSE CLASSIFICATION DESCRIPTION** ALLOCATION***
----------------------------------------------------------------------------------------------------------------------------------
1. Real estate taxes Those taxes directly assessed against property owned by the Direct charges by company
company. Canadian and other foreign taxes should be included are based on square
appropriately. footage. Allocated
expenses are handled per
Exhibit B Appendix at A; B
1, 2; C 1, 2; and X 0, 0, 0
0. Xxxxx insurance department Assessments to defray operating expenses of any state insurance No allocation - direct
licenses and fees department. Canadian and other foreign taxes should be included charge to company
appropriately. Fees for examinations by state departments.
3. State taxes on premiums State taxes based on policy reserves, if in lieu of premium taxes. No allocation - direct
Canadian and other foreign taxes should be included appropriately. charge to company
Any portion of commissions 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.
4. Other state taxes Assessments of state industrial or other boards for operating No allocation - direct
expenses or for benefits to sick unemployed persons in connection charge to company
with disability benefit laws 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.
5. U.S. Social Security Company's contribution is based on the current tax rate, which is See Exhibit B Appendix
taxes applied to all wages, salary or compensation entered on the at A; B 1, 2; C 1, 2; and
employees earning record and federal unemployment tax. D 1, 2, 3
42
6. All other taxes Guaranty fund assessments and taxes of Canada or of any other No allocation - direct
foreign country not specifically provided for elsewhere. Sales charge to company
taxes, other than state sales taxes, if company does not exercise
option of including such taxes with the cost of goods and services
purchased.
43
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.
44
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
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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.
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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).
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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.
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EXHIBIT E
TERMINATED AGREEMENTS
1. Service Agreement effective as of July 1, 1989 between Allstate Insurance
Company and
Allstate Life Insurance Company of New York ("ALNY").
2. Service Agreement effective July 1, 1989 between
Allstate Life Insurance
Company ("XXXX") and ALNY.
3. Business Operations and Service Agreement effective October 1, 1997 between
XXXX and ALNY.
4. Service Agreement dated March 1, 1999 between Lincoln Benefit Life Company
and ALNY.
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