8-KEarnings & ResultsOther EventsExhibits & Filings

ALLSTATE CORP 8-K Report, Financial Results (Feb 1, 2006)

Filed February 1, 2006For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

Allstate Corporation filed this Form 8-K on January 31, 2006, primarily to disclose information about its extensive reinsurance program. The company detailed its strategy of utilizing reinsurance to mitigate catastrophe risk, manage capital, reduce earnings volatility, and support its financial strength ratings. This filing provides a comprehensive overview of their various reinsurance treaties, including multi-year agreements for personal property catastrophe coverage in several key states (like Connecticut, New Jersey, New York, North Carolina, South Carolina, Texas, and Florida) and an aggregate excess agreement covering personal lines property and auto for storms, earthquakes, and fires following earthquakes. The report highlights significant changes and additions to their reinsurance program expected in 2006, including expanded coverage limits for New Jersey and Texas treaties, termination of North Carolina and South Carolina treaties, a new agreement for California fire following earthquake losses, and a new aggregate excess of loss reinsurance agreement. Investors are informed about the costs associated with these programs, with an anticipated annual increase of approximately $600 million, and Allstate's intention to seek regulatory approval to incorporate these costs into future premium rates.

Key Highlights

  • 1Allstate is actively managing its catastrophe risk exposure through a robust global reinsurance program.
  • 2The company has multi-year reinsurance treaties in place for personal property catastrophe losses in several key states, with specific retentions and limits.
  • 3New reinsurance agreements are being implemented or considered for 2006, including coverage for California fire following earthquake losses and an aggregate excess agreement for property and auto.
  • 4Expectation of expanded coverage limits for New Jersey and Texas reinsurance treaties effective June 1, 2006.
  • 5Termination of existing reinsurance treaties in North Carolina and South Carolina is planned for May 31, 2006.
  • 6The total anticipated annual cost for the reinsurance program is approximately $600 million, an increase of $400 million per year.
  • 7Allstate intends to seek regulatory approval to pass on increased reinsurance costs to policyholders through premium rates.

Frequently Asked Questions

The primary purpose of this 8-K filing is to provide detailed information about Allstate's significant reinsurance program and its associated costs and benefits, particularly concerning catastrophe risk management.

Allstate utilizes a comprehensive reinsurance program designed to reduce exposure to catastrophe risk, manage capital, lessen earnings volatility, and support its financial strength ratings. This includes state-specific treaties, aggregate excess agreements, and coverage for events like hurricanes, earthquakes, and fires following earthquakes.

The company anticipates the total cost of its reinsurance agreements to be approximately $600 million per year, which is an increase of about $400 million per year compared to previous costs. Allstate plans to seek regulatory approval to include these increased costs in future premium rates.

Yes, several changes are expected in 2006, including expanded coverage limits in New Jersey and Texas, termination of treaties in North Carolina and South Carolina, new coverage for California fire following earthquake losses, and a new aggregate excess of loss reinsurance agreement that will be effective June 1, 2006.