11. Reinsurance

The effects of reinsurance on property-liability insurance premiums written and earned and life and annuity premiums and contract charges for the years ended December 31 are as follows:

($ in millions)	2013			2012			2011

Property-liability insurance premiums written
Direct	$	29,241		$	28,103		$	27,066
Assumed		52			35			22
Ceded		(1,129	)		(1,111	)		(1,108	)


Property-liability insurance premiums written, net of reinsurance	$	28,164		$	27,027		$	25,980




Property-liability insurance premiums earned
Direct	$	28,638		$	27,794		$	27,016
Assumed		49			33			24
Ceded		(1,069	)		(1,090	)		(1,098	)


Property-liability insurance premiums earned, net of reinsurance	$	27,618		$	26,737		$	25,942




Life and annuity premiums and contract charges
Direct	$	2,909		$	2,860		$	2,953
Assumed		82			55			35
Ceded		(639	)		(674	)		(750	)


Life and annuity premiums and contract charges, net of reinsurance	$	2,352		$	2,241		$	2,238

Property-Liability

The Company purchases reinsurance after evaluating the financial condition of the reinsurer, as well as the terms and price of coverage. Developments in the insurance and reinsurance industries have fostered a movement to segregate asbestos, environmental and other discontinued lines exposures into separate legal entities with dedicated capital. Regulatory bodies in certain cases have supported these actions. The Company is unable to determine the impact, if any, that these developments will have on the collectability of reinsurance recoverables in the future.

Property-Liability reinsurance recoverable

Total amounts recoverable from reinsurers as of December 31, 2013 and 2012 were $4.75 billion and $4.08 billion, respectively, including $85 million and $69 million, respectively, related to property-liability losses paid by the Company and billed to reinsurers, and $4.66 billion and $4.01 billion, respectively, estimated by the Company with respect to ceded unpaid losses (including IBNR), which are not billable until the losses are paid.

With the exception of the recoverable balances from the Michigan Catastrophic Claim Association ("MCCA"), Lloyd's of London and other industry pools and facilities, the largest reinsurance recoverable balance the Company had outstanding was $85 million and $95 million from Westport Insurance Corporation (formerly Employers' Reinsurance Company) as of December 31, 2013 and 2012, respectively. No other amount due or estimated to be due from any single property-liability reinsurer was in excess of $34 million and $42 million as of December 31, 2013 and 2012, respectively.

The allowance for uncollectible reinsurance was $92 million and $87 million as of December 31, 2013 and 2012, respectively, and is primarily related to the Company's Discontinued Lines and Coverages segment.

Industry pools and facilities

Reinsurance recoverable on paid and unpaid claims including IBNR as of December 31, 2013 and 2012 includes $3.46 billion and $2.59 billion, respectively, from the MCCA. The MCCA is a mandatory insurance coverage and reinsurance indemnification mechanism for personal injury protection losses that provides indemnification for losses over a retention level that increases every other MCCA fiscal year. The retention level is $530 thousand per claim and $500 thousand per claim for the fiscal years ending June 30, 2014 and 2013, respectively. The MCCA operates similar to a reinsurance program and is funded by participating companies through a per vehicle annual assessment. This assessment is included in the premiums charged to the Company's customers and when collected, the Company remits the assessment to the MCCA. These assessments provide funds for the indemnification for losses described above. The MCCA is required to assess an amount each year sufficient to cover lifetime claims of all persons catastrophically injured in that year, its operating expenses, and adjustments for the amount for excesses or deficiencies in prior assessments. The MCCA prepares statutory-basis financial statements in conformity with accounting practices prescribed or permitted by the State of Michigan Department of Insurance and Financial Services ("MI DOI"). The MI DOI has granted the MCCA a statutory permitted practice that expires in 2016 to discount its liabilities for loss and loss adjustment expense. As of June 30, 2013, the date of its most recent annual financial report, the permitted practice reduced the MCCA's accumulated deficit by $51.48 billion to $1.87 billion.

Allstate sells and administers policies as a participant in the National Flood Insurance Program ("NFIP"). The amounts recoverable as of December 31, 2013 and 2012 were $32 million and $428 million, respectively. Ceded premiums earned include $316 million, $311 million and $312 million in 2013, 2012 and 2011, respectively. Ceded losses incurred include $289 million, $758 million and $196 million in 2013, 2012 and 2011, respectively. Under the arrangement, the Federal Government is obligated to pay all covered claims.

Ceded premiums earned under the Florida Hurricane Catastrophe Fund ("FHCF") agreement were $16 million, $18 million and $27 million in 2013, 2012 and 2011, respectively. There were no ceded losses incurred in 2013 or 2012. Ceded losses incurred were $8 million in 2011. The Company has access to reimbursement provided by the FHCF for 90% of qualifying personal property losses that exceed its current retention of $72 million for the 2 largest hurricanes and $24 million for other hurricanes, up to a maximum total of $198 million effective from June 1, 2013 to May 31, 2014. There were no amounts recoverable from the FHCF as of December 31, 2013 or 2012.

Catastrophe reinsurance

The Company has the following catastrophe reinsurance treaties in effect as of December 31, 2013:

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The Nationwide Per Occurrence Excess Catastrophe Reinsurance agreement comprises five contracts, placed in six layers, incepting as of June 1, 2011 and with one, two and three year terms. This agreement reinsures Allstate Protection personal lines auto and property business countrywide, in all states except Florida and New Jersey, for excess catastrophe losses caused by multiple perils. The first four layers, which are 95% placed and subject to reinstatement, comprise three contracts and cover $1.75 billion in per occurrence losses subject to a $500 million retention and after $250 million in losses "otherwise recoverable." Losses from multiple qualifying occurrences can apply to this $250 million threshold which applies once to each contract year and only to the agreement's first layer. Coverage for the first $500 million of the $1 billion limit of the fifth layer is 95% placed and comprises three contracts, one of which expires May 31, 2014 and two of which expire May 31, 2015. Coverage for the second $500 million of the fifth layer is 63% placed and comprises two contracts expiring May 31, 2014 and May 31, 2015. The entire fifth layer is subject to reinstatement. The sixth layer provides $500 million in per occurrence losses in excess of a $3.25 billion retention and is 38.04% placed. This layer comprises three contracts, two of which expire May 31, 2014 and one of which expires May 31, 2015. The sixth layer is not subject to reinstatement.

•

The Top and Drop Excess Catastrophe Reinsurance agreement comprises a three year term contract, incepting June 1, 2011, and provides $250 million of reinsurance limits which may be used for Coverage A, Coverage B, or a combination of both. Coverage A reinsures 6.33% of $500 million in limits excess of a $3.25 billion retention. Coverage B provides 12.66% of $250 million in limits excess of a $750 million retention and after $500 million in losses "otherwise recoverable" under the agreement. Losses from multiple qualifying occurrences can apply to this $500 million threshold.

•

The Property Claims Services ("PCS") Excess Catastrophe Reinsurance agreement reinsures personal lines property and auto excess catastrophe losses caused by hurricanes in 28 states and the District of Columbia, and earthquakes, including fires following earthquakes, in California, New York, and Washington. This agreement comprises two contracts: a Class B Excess Catastrophe Reinsurance contract which provides $150 million in limits excess of a $2.75 billion retention, and a Class A Excess Catastrophe contract which provides $200 million in limits excess of a $3.25 billion retention. The contracts' risk period is May 4, 2013 to May 3, 2017, with no reinstatement of limits. The placement of these contracts achieves, for the perils of hurricanes and earthquakes, including fires following earthquakes, a 94% placement of the reinsurance limits of the fifth layer of the Nationwide Per Occurrence Excess Catastrophe agreement, and, in conjunction with the Top and Drop Excess Catastrophe Reinsurance agreement, an 84.37% placement of the sixth layer of the reinsurance limits of the Nationwide Per Occurrence Excess Catastrophe Reinsurance agreement.

Losses recoverable under the Company's New Jersey, Kentucky and Pennsylvania reinsurance agreements, described below, are disregarded when determining coverage under the Nationwide Per Occurrence Excess Catastrophe Reinsurance agreement, the Top and Drop Excess Catastrophe Reinsurance agreement, and the PCS Excess Catastrophe Reinsurance agreement.

•

The New Jersey Excess Catastrophe Reinsurance agreement comprises three contracts. Two contracts that provide coverage for Allstate Protection personal lines property excess catastrophe losses for multiple perils in New Jersey expire May 31, 2014 and May 31, 2015, and provide 32% of a $400 million limit excess of a $134 million retention and 32% of a $400 million limit excess of a $154 million retention, respectively. One contract that reinsures personal lines property and automobile excess catastrophe losses in New Jersey expires May 31, 2016 and provides 32% of a $400 million limit excess of a $150 million retention. Each contract contains one reinstatement each year. The reinsurance premium and retention applicable to the agreement are subject to redetermination for exposure changes annually.

•

The Kentucky Excess Catastrophe Reinsurance agreement provides coverage for Allstate Protection personal lines property excess catastrophe losses in the state for earthquakes and fires following earthquakes effective June 1, 2011 to May 31, 2014. The agreement provides three limits of $25 million excess of a $5 million retention subject to two limits being available in any one contract year and is 95% placed.

•

The Pennsylvania Excess Catastrophe Reinsurance agreement provides coverage for Allstate Protection personal lines property excess catastrophe losses in the state for multi-perils effective June 1, 2012 through May 31, 2015. The agreement provides three limits of $100 million excess of a $100 million retention subject to two limits being available in any one contract year and is 95% placed.

•

Four separate contracts for Castle Key Insurance Company and its subsidiary ("Castle Key") provide coverage for personal lines property excess catastrophe losses in Florida and coordinate coverage with Castle Key's participation in the FHCF, effective June 1, 2013 to May 31, 2014. All the contracts comprising the Florida agreement including the contract that provides coverage through the FHCF, provides an estimated provisional limit of $535 million excess of a provisional retention of $25 million.

The Company ceded premiums earned of $471 million, $531 million and $531 million under catastrophe reinsurance agreements in 2013, 2012 and 2011, respectively.

Asbestos, environmental and other

Reinsurance recoverables include $191 million and $190 million from Lloyd's of London as of December 31, 2013 and 2012, respectively. Lloyd's of London, through the creation of Equitas Limited, implemented a restructuring plan in 1996 to solidify its capital base and to segregate claims for years prior to 1993.

Allstate Financial

The Company's Allstate Financial segment reinsures certain of its risks to other insurers primarily under yearly renewable term, coinsurance, modified coinsurance and coinsurance with funds withheld agreements. These agreements result in a passing of the agreed-upon percentage of risk to the reinsurer in exchange for negotiated reinsurance premium payments. Modified coinsurance and coinsurance with funds withheld are similar to coinsurance, except that the cash and investments that support the liability for contract benefits are not transferred to the assuming company and settlements are made on a net basis between the companies.

For certain term life insurance policies issued prior to October 2009, Allstate Financial ceded up to 90% of the mortality risk depending on the year of policy issuance under coinsurance agreements to a pool of fourteen unaffiliated reinsurers. Effective October 2009, mortality risk on term business is ceded under yearly renewable term agreements under which Allstate Financial cedes mortality in excess of its retention, which is consistent with how Allstate Financial generally reinsures its permanent life insurance business. The following table summarizes those retention limits by period of policy issuance.

Period		Retention limits

April 2011 through current		Single life: $5 million per life, $3 million age 70 and over, and $10 million for contracts that meet specific criteria Joint life: $8 million per life, and $10 million for contracts that meet specific criteria
July 2007 through March 2011		$5 million per life, $3 million age 70 and over, and $10 million for contracts that meet specific criteria
September 1998 through June 2007		$2 million per life, in 2006 the limit was increased to $5 million for instances when specific criteria were met
August 1998 and prior		Up to $1 million per life

In addition, Allstate Financial has used reinsurance to effect the acquisition or disposition of certain blocks of business. Allstate Financial had reinsurance recoverables of $1.51 billion and $1.69 billion as of December 31, 2013 and 2012, respectively, due from Prudential related to the disposal of substantially all of its variable annuity business that was effected through reinsurance agreements. In 2013, life and annuity premiums and contract charges of $120 million, contract benefits of $139 million, interest credited to contractholder funds of $22 million, and operating costs and expenses of $23 million were ceded to Prudential. In 2012, life and annuity premiums and contract charges of $128 million, contract benefits of $91 million, interest credited to contractholder funds of $23 million, and operating costs and expenses of $25 million were ceded to Prudential. In 2011, life and annuity premiums and contract charges of $152 million, contract benefits of $121 million, interest credited to contractholder funds of $20 million, and operating costs and expenses of $27 million were ceded to Prudential. In addition, as of December 31, 2013 and 2012 Allstate Financial had reinsurance recoverables of $156 million and $160 million, respectively, due from subsidiaries of Citigroup (Triton Insurance and American Health and Life Insurance) and Scottish Re (U.S.) Inc. in connection with the disposition of substantially all of the direct response distribution business in 2003.

As of December 31, 2013, the gross life insurance in force was $542.48 billion of which $196.27 billion was ceded to the unaffiliated reinsurers.

Allstate Financial's reinsurance recoverables on paid and unpaid benefits as of December 31 are summarized in the following table.

($ in millions)	2013		2012

Annuities	$	1,648	$	1,831
Life insurance		1,029		1,609
Long-term care insurance		78		1,163
Other		117		85


Total Allstate Financial	$	2,872	$	4,688

As of December 31, 2013 and 2012, approximately 92% and 95%, respectively, of Allstate Financial's reinsurance recoverables are due from companies rated A- or better by S&P.