**Exhibit 10.1**

 

**AMENDED AND RESTATED SERVICE AND EXPENSEAGREEMENT**

** **

**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 INSURANCECOMPANY, an Illinois insurance company (“Allstate”), THE ALLSTATE CORPORATION,a Delaware corporation (“Allcorp”), and those affiliates of Allstate whosesignatures appear below (together with Allcorp, individually, an “Affiliate”and collectively, the “Affiliates”).

 

**WITNESSETH:**

 

**WHEREAS**, Allstateentered into a Service and Expense Agreement, dated as of January 1, 1999, withAllcorp and certain of its insurance company affiliates and another Service andExpense Agreement, dated as of January 1, 2000, with certain of itsnon-insurance affiliates, pursuant to which Allstate provided certain servicesand facilities (collectively, the “Original Agreements”);

 

**WHEREAS**, theparties amended the Original Agreements on January 1, 2002 (the “AmendedAgreements”) and with the establishment of Allstate Investments, LLC,terminated the provision of investment management services by Allstate;

 

**WHEREAS**, theparties desire to consolidate and further amend the Amended Agreements toinclude provision by the Affiliates of certain services and facilities toAllstate and to other Affiliates from time to time, subject to the terms andconditions hereinafter set forth, and to provide for possible futurealternative methods of costing for facilities and services provided pursuant tothis Agreement; and

 

**WHEREAS**, theparties desire to restate the Amended Agreements as amended.

 

**NOW, THEREFORE**, itis agreed as follows:

 

1.               Allstate shallfurnish or cause to be furnished, at cost and in the same manner as suchservices and facilities are furnished to its other affiliates, those categoriesof facilities and services listed on Schedule A, including marketing, claims,underwriting and

 

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policyholder services. Additional specifications regarding these services and facilities, andthe basis upon which costs to be charged for these services and facilities aredetermined: (a) with respect to an Affiliate that is a property and casualtyinsurer, are listed on Exhibit A; (b) with respect to an Affiliate that is alife insurer, are listed on Exhibit B; and (c) with respect to an Affiliatethat is a non-insurance company, in accordance with Generally AcceptedAccounting Principles.  The relevantparties may from time to time agree that only certain of the listed servicesand facilities will be provided by the Providing Party (as defined below).

 

Servicesshall be performed in the name of and on behalf of an Affiliate and in a mannerintended to assure the separate operating identity of the Affiliate.  By way of example and without limiting theforegoing, (i) all forms utilized in connection with an Affiliate’s businessand 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 fromwhich its funds are withdrawn shall be such Affiliate’s accounts, except thatpremiums****collected on behalf of an Affiliatemay be held by Allstate in a fiduciary capacity and transferred to suchAffiliate as soon as practicable subsequent to collection, but in any eventwithin two (2) business days.

 

Servicesshall be provided in accord with all applicable state and federal legal andregulatory requirements, including those relating to privacy of customerinformation.

 

The performance of anyparty under this Agreement with respect to the business and operations of anAffiliate shall at all times be subject to the direction and control of theBoard of Directors of each such Affiliate. To the extent required by applicable regulation, such services withrespect to any Affiliate shall be performed under guidelines and proceduresestablished by that Affiliate.  Allservice providers must comply with all licensing provisions applicable to anyAffiliate for which they are providing services under this Agreement.

 

2.               Each Affiliate mayfurnish or cause to be furnished to Allstate or to any other Affiliate, atcost, the services and facilities listed in Schedule A attached hereto or suchother facilities and services as the parties may from time to time agree inwriting.  Any supplemental agreement wherebyany Affiliate provides services to or receives services from another Affiliateshall be subject to review where required under applicable insurance law.

 

3.               Costs are definedas the actual costs and expenses incurred by the party providing the services(each, a “Providing Party”) which are attributable to the services andfacilities provided under this Agreement, such as: salaries and benefits; spacerental; 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 dataprocessing equipment and the like.

 

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4.               Charges for theabove services and facilities shall be determined by Allstate in accordancewith the general provisions contained in Exhibits A through D.**** Exhibits A and B****are based upon NAIC expense classification and allocationguidelines**.  **Inthe event such guidelines are amended, Exhibits A and B shall be deemed amendedto conform thereto.  Allstate’s CorporateController’s Department will exercise reasonable judgment in appropriatelyrevising these Exhibits, maintain proper documentation for revisions andcommunicate changes in allocation requirements to each party receiving services(each, a “Receiving Party”) in a timely manner. Exhibit C provides a narrativeoverview of the expense management process and Exhibit D provides certaindefinitions used throughout.  Cost basesshall be reviewed and adjusted on a prospective basis not less than annually toreflect the actual costs incurred.

 

5.               The amount chargedto a Receiving Party shall not exceed the cost to the Providing Party withrespect to providing such service or facility.** **Notwithstanding this provision orany other provision contained in this Agreement to the contrary, subject toobtaining any required regulatory approvals, the parties may agree in writingthat one or more specific services or facilities may be provided on a basisother than cost.  Each Providing Partywill exercise reasonable judgment in periodically reviewing the expensesincurred and the percentage thereof allocated to each Receiving Party.****  Any Receiving Partymay request a review of such expenses and their allocation and such review willoccur promptly thereafter.  Any basisother than cost that is utilized shall be intended to reasonably relate to thecost of the services or facilities involved.

 

6.               A Providing Partywill charge each Receiving Party****for all theservices and facilities provided pursuant to this Agreement****viathe monthly expense allocation process,****and paymentswill be through the monthly intercompany settlement process. This process willbe completed by Allstate personnel in the most timely and effective methodavailable.

 

7.               The ProvidingParties will maintain such records as may be required relating to theaccounting system of Allstate and the Affiliates.  The Affiliates understand and accept thefinancial records generated by this system, which utilizes the conceptsdetailed in the addenda attached to Exhibits A and B**,** respectively.

 

AllAffiliate records shall be maintained in accordance with applicable insurancelaws and accepted industry standards.  Allstate shall maintain processes to provide backup records that will beavailable in the event the underlying records are destroyed in a natural ormanmade catastrophe or disaster.

 

Inthe event and to the extent that the books and records of an Affiliate aremaintained hereunder in an electronic format, the following requirements shallapply.  A computer terminal that islinked to the electronic system that generates the electronic records thatconstitute such Affiliate’s books of account as they relate to the businesscovered by this Agreement, shall be kept and maintained at such Affiliate’sprincipal

 

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office.  During all normal business hours, there shallbe ready availability and easy access through such terminal (either directly bypersonnel of such Affiliate’s domestic insurance regulator or indirectly withthe aid of such Affiliate’s employees) to the electronic media used to maintainthe records comprising such Affiliate’s books of account hereunder.  The electronic records shall be in a readableform.  The Providing Parties shallmaintain format integrity and compatibility of the electronic records thatconstitute an Affiliate’s books of account hereunder.  If the electronic system that created suchrecords 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 thatis compatible with the new system.  TheProviding Parties shall maintain acceptable backup of the records constitutingan Affiliate’s books of account hereunder.

 

8.               Upon reasonablenotice, and during normal business hours, any Receiving Party shall be entitledto, at its own expense, inspect records that pertain to the computation ofcharges for the facilities or services provided pursuant to this Agreement.****  The ProvidingParties shall at all times maintain correct and complete books, records andaccounts of all services and facilities furnished pursuant to thisAgreement.  Each Receiving Party shallhave unconditional right of ownership of any records prepared on its behalfunder this Agreement.  The recordsmaintained by a Providing Party in connection with services provided to anAffiliate under this Agreement shall be subject to inspection and review bysuch Affiliate’s domestic insurance regulator.

 

9.               Any employee of aProviding Party who is performing duties hereunder at all times during the termof this Agreement shall be under the supervision and control of such ProvidingParty and shall not be deemed an employee of any Receiving Party.

 

10.         The scope of, and themanner in which, a Providing Party provides facilities and services to aReceiving Party shall be reviewed periodically by the parties involved in eachtransaction under this Agreement.   Allservices and facilities shall be of good quality and suitable for the purposefor which they are intended.

 

11.         No party shall assign itsobligations or rights under this Agreement without the written consent of theother parties and any required regulatory approvals.  Allstate may terminate this Agreement in itsentirety, and an Affiliate may cancel its participation in the arrangementsunder this Agreement, each by giving six months written notice to the otherparties to this Agreement; provided, however, that in the event that theaffiliate relationship ceases to exist with respect to an Affiliate, thisAgreement shall terminate immediately with respect to such Affiliate.  Under no circumstances will the initial termof this Amended and Restated Agreement exceed five (5) years from its effectivedate.

 

12.         All communicationsprovided for hereunder shall be in writing, and if to an insurance companyAffiliate, mailed or delivered to such Affiliate at its office at the addresslisted in such Affiliate’s Statutory Annual Statement Blank, Attention:Secretary, or if to Allstate or Allcorp, mailed or delivered to its office at3075 Sanders Road,

 

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Northbrook, Illinois 60062, Attention: Controller, oraddressed to any party at the address such party may hereafter designate bywritten notice to the other parties.

 

13.         This Agreement togetherwith such amendments and supplements as may from time to time be executed inwriting by the parties in accordance with applicable insurance law, constitutesthe entire agreement and understanding between the parties in respect of thetransactions contemplated hereby and supercedes any other agreementsarrangements or understandings between the parties relating to the subjectmatter hereof.   Those service andadministrative services agreements between and among any parties to thisAgreement that are listed on Exhibit E are terminated as of the effective dateof this Amended and Restated Agreement.

 

14.         Any unresolved dispute ordifference between the parties arising out of or relating to this Agreement, orthe breach thereof, shall be settled by arbitration in accordance with theCommercial Arbitration Rules of the American Arbitration Association and theExpedited Procedures thereof.   The awardrendered by the Arbitrator shall be final and binding upon the parties, andjudgment upon the award rendered by the Arbitrator may be entered in any Courthaving jurisdiction thereof.

 

15.         This Agreement may beexecuted by the parties hereto in any number of counterparts, and by each ofthe parties hereto in separate counterparts, each of which counterparts, whenso executed and delivered, shall be deemed to be an original, but all suchcounterparts shall together constitute but one and the same instrument.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to beeffective as of the day and year above written.

 

 
|       |       | **The  Allstate Corporation**   |
|------------|------------|---------------------------------|
|       |       |                            |
|       |       | By:                             | /s/ Samuel H.  Pilch |   |
|       |       | Samuel H. Pilch                 |
|       |       | Group Vice President            |
|       |       |                            |
| ** ** | ** ** | **Allstate  Insurance Company** |
|       |       |                            |
|       |       | By:                             | /s/ Samuel H. Pilch |   |
|       |       | Samuel H. Pilch                 |
|       |       | Group Vice President            |
|       |       |                            |
|       |       | **AFD, Inc.**                   |
|       |       |                            |
|       |       | By:                             | /s/ James P. Zils |   |
|       |       | James P. Zils                   |
|       |       | Assistant Treasurer             |

 

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|   |   | **AFDW, Inc.**                                |
|--------|--------|-----------------------------------------------|
|   |   |                                          |
|   |   | By:                                           | /s/ James P. Zils |   |
|   |   | James P. Zils                                 |
|   |   | Treasurer                                     |
|   |   |                                          |
|   |   | **ALFS, Inc.**                                |
|   |   |                                          |
|   |   | By:                                           | /s/ James P. Zils |   |
|   |   | James P. Zils                                 |
|   |   | Assistant Treasurer                           |
|   |   |                                          |
|   |   | **Allstate Assignment Company**               |
|   |   |                                          |
|   |   | By:                                           | /s/ James P. Zils |   |
|   |   | James P. Zils                                 |
|   |   | Treasurer                                     |
|   |   |                                          |
|   |   | **Allstate Assurance Company**                |
|   |   |                                          |
|   |   | By:                                           | /s/ James P.  Zils |   |
|   |   | James P. Zils                                 |
|   |   | Vice President and Treasurer                  |
|   |   |                                          |
|   |   | **Allstate California Holdings, LLC**         |
|   |   |                                          |
|   |   | By:                                           | /s/ James P. Zils |   |
|   |   | James P. Zils                                 |
|   |   | Vice President and Treasurer                  |
|   |   |                                          |
|   |   | **Allstate California Insurance  Company**    |
|   |   |                                          |
|   |   | By:                                           | /s/ James P. Zils |   |
|   |   | James P. Zils                                 |
|   |   | Vice President and Treasurer                  |
|   |   |                                          |
|   |   | **Allstate  County Mutual Insurance Company** |
|   |   |                                          |
|   |   | By:                                           | /s/ James P.  Zils |   |
|   |   | James P. Zils                                 |
|   |   | Vice President and Treasurer                  |

 

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|       |       | **Allstate Distributors, LLC**                    |               |
|------------|------------|---------------------------------------------------|--------------------|
|       |       |                                              |               |
|       |       | By:                                               | /s/ James P. Zils  |   |   |
|       |       | James P. Zils                                     |               |
|       |       | Assistant Treasurer                               |               |
|       |       |                                              |               |
| ** ** | ** ** | **Allstate  Financial, LLC**                      |               |
|       |       |                                              |               |
|       |       | By:                                               | /s/ James P. Zils  |   |   |
|       |       | James P. Zils                                     |               |
|       |       | Treasurer                                         |               |
|       |       |                                              |               |
| ** ** | ** ** | **Allstate Financial Advisors, LLC**              |               |
|       |       |                                              |               |
|       |       | By:                                               | /s/ James P. Zils  |   |   |
|       |       | James P. Zils                                     |               |
|       |       | Treasurer                                         |               |
|       |       |                                              |               |
| ** ** | ** ** | **Allstate Financial Corporation**                |
|       |       |                                              |
|       |       | By:                                               | /s/ James P. Zils  |   |
|       |       | James P. Zils                                     |
|       |       | Treasurer                                         |
| ** ** | ** ** | ** **                                        |
| ** ** | ** ** | **Allstate Financial Services, LLC**              |
|       |       |                                              |
|       |       | By:                                               | /s/ James P. Zils  |   |
|       |       | James P. Zils                                     |
|       |       | Treasurer                                         |
|       |       |                                              |
|       |       | **Allstate  Fire and Casualty Insurance Company** |
|       |       |                                              |
|       |       | By:                                               | /s/ James P.  Zils |   |
|       |       | James P. Zils                                     |
|       |       | Vice President  and Treasurer                     |
|       |       |                                              |
|       |       | **Allstate  Floridian Indemnity Company**         |
|       |       |                                              |
|       |       | By:                                               | /s/ James P.  Zils |   |
|       |       | James P. Zils                                     |
|       |       | Vice President  and Treasurer                     |
|            |            |                                                   |                    |  |  |  |

 

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|       |       | **Allstate  Floridian Insurance Company**            |
|------------|------------|------------------------------------------------------|
|       |       |                                                 |
|       |       | By:                                                  | /s/ James P.  Zils |   |
|       |       | James P. Zils                                        |
|       |       | Vice President  and Treasurer                        |
|       |       |                                                 |
|       |       | **Allstate  Holdings, LLC**                          |
|       |       |                                                 |
|       |       | By:                                                  | /s/ James P. Zils |   |
|       |       | James P. Zils                                        |
|       |       | Treasurer                                            |
|       |       |                                                 |
| ** ** | ** ** | **Allstate Indemnity Company**                       |
|       |       |                                                 |
|       |       | By:                                                  | /s/ James P. Zils |   |
|       |       | James P. Zils                                        |
|       |       | Vice President and Treasurer                         |
|       |       |                                                 |
| ** ** | ** ** | **Allstate  Insurance Company of Canada**            |
|       |       |                                                 |
|       |       | By:                                                  | /s/ Robert J. Young,  Jr. |   |
|       |       | Robert J. Young, Jr.                                 |
|       |       | Chairman of the Board                                |
|       |       | Execution Date:                                      |   3/28/05 |   |
|       |       |                                                 |
| ** ** | ** ** | **Allstate International Insurance  Holdings, Inc.** |
|       |       |                                                 |
|       |       | By:                                                  | /s/ James P. Zils |   |
|       |       | James P. Zils                                        |
|       |       | Treasurer                                            |
|       |       |                                                 |
|       |       | **Allstate  Investment Management Company**          |
|       |       |                                                 |
|       |       | By:                                                  | /s/ Catherine Winn |   |
|       |       | Catherine Winn                                       |
|       |       | Assistant Vice  President and Treasurer              |
|       |       |                                                 |
| ** ** | ** ** | **Allstate Investments, LLC**                        |
|       |       |                                                 |
|       |       | By:                                                  | /s/ James P. Zils |   |
|       |       | James P. Zils                                        |
|       |       | Treasurer                                            |
|            |            |                                                      |  |  |  |  |  |  |

 

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|       |       | **Allstate  Life Insurance Company**             |
|------------|------------|--------------------------------------------------|
|       |       |                                             |
|       |       | By:                                              | /s/ James P.  Zils |   |
|       |       | James P. Zils                                    |
|       |       | Treasurer                                        |
|       |       |                                             |
|       |       | **Allstate  Life Insurance Company of Canada**   |
|       |       |                                             |
|       |       | By:                                              | /s/ Robert J. Young, Jr. |   |
|       |       | Robert J. Young, Jr.                             |
|       |       | Chairman of the  Board                           |
|       |       | Execution Date:                                  |  3/28/05 |   |
|       |       |                                             |
|       |       | **Allstate  Life Insurance Company of New York** |
|       |       |                                             |
|       |       | By:                                              | /s/ Samuel H. Pilch |   |
|       |       | Samuel H. Pilch                                  |
|       |       | Group Vice  President and Controller             |
|       |       | Execution Date:                                  |     4/19/05 |   |
|       |       |                                             |
| ** ** | ** ** | **Allstate Motor Club, Inc.**                    |
|       |       |                                             |
|       |       | By:                                              | /s/ James P. Zils |   |
|       |       | James P. Zils                                    |
|       |       | Treasurer                                        |
|       |       |                                             |
| ** ** | ** ** | **Allstate Motor Club, Inc. of Canada**          |
|       |       |                                             |
|       |       | By:                                              | /s/ Jamin Ejupi |   |
|       |       | Jamin Ejupi                                      |
|       |       | Vice President                                   |
|       |       | Execution Date:                                  | 3/31/05 |   |
|       |       |                                             |
|       |       | **Allstate  New Jersey Insurance Company**       |
|       |       |                                             |
|       |       | By:                                              | /s/ James P.  Zils |   |
|       |       | James P. Zils                                    |
|       |       | Vice President  and Treasurer                    |
|       |       |                                             |
| ** ** | ** ** | **Allstate  Non-Insurance Holdings, Inc.**       |
|       |       |                                             |
|       |       | By:                                              | /s/ James P. Zils |   |
|       |       | James P. Zils                                    |
|       |       | Treasurer                                        |
|            |            |                                                  |  |  |  |  |  |  |  |  |

 

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|       |       | **Allstate  North American Insurance Company**         |
|------------|------------|--------------------------------------------------------|
|       |       |                                                   |
|       |       | By:                                                    | /s/ James P.  Zils |   |
|       |       | James P. Zils                                          |
|       |       | Vice President  and Treasurer                          |
|       |       |                                                   |
| ** ** | ** ** | **Allstate  Property and Casualty Insurance  Company** |
| ** ** | ** ** | ** **                                             |
|       |       | By:                                                    | /s/ James P.  Zils |   |
|       |       | James P. Zils                                          |
|       |       | Vice President  and Treasurer                          |
|       |       |                                                   |
| ** ** |       | **Allstate  Reinsurance Ltd.**                         |
|       |       |                                                   |
|       |       | By:                                                    |  /s/ James  P. Zils |   |
|       |       | James P. Zils                                          |
|       |       | Vice President  and Treasurer                          |
|       |       |                                                   |
| ** ** |       | **Allstate  Settlement Corporation**                   |
|       |       |                                                   |
|       |       | By:                                                    | /s/ James P. Zils |   |
|       |       | James P. Zils                                          |
|       |       | Treasurer                                              |
|       |       |                                                   |
| ** ** |       | **Allstate  Texas Lloyd’s, Inc.**                 |
|       |       |                                                   |
|       |       | By:                                                    |  /s/ James  P. Zils |   |
|       |       | James P. Zils                                          |
|       |       | Vice President  and Treasurer                          |
|       |       |                                                   |
| ** ** |       | **American  Heritage Life Insurance Company**          |
|       |       |                                                   |
|       |       | By:                                                    |  /s/ James  P. Zils |   |
|       |       | James P. Zils                                          |
|       |       | Assistant  Treasurer                                   |
|       |       |                                                   |
|       |       | **American Heritage Life Investment  Corporation**     |
|       |       | ** **                                             |
|       |       | By:                                                    | /s/ James P. Zils |   |
|       |       | James P. Zils                                          |
|       |       | Treasurer                                              |

 

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|       |       | **American  Heritage Service Company**            |
|------------|------------|---------------------------------------------------|
|       |       |                                              |
|       |       | By:                                               | /s/ James P. Zils |   |
|       |       | James P. Zils                                     |
|       |       | Treasurer                                         |
|       |       |                                              |
| ** ** |       | **Charter  National Life Insurance Company**      |
|       |       |                                              |
|       |       | By:                                               |  /s/ James  P. Zils |   |
|       |       | James P. Zils                                     |
|       |       | Treasurer                                         |
|       |       |                                              |
| ** ** |       | **Concord  Heritage Life Insurance Company Inc.** |
|       |       |                                              |
|       |       | By:                                               |   |   |
|       |       | Samuel H. Pilch                                   |
|       |       | Group Vice  President and Controller              |
|       |       | Execution Date:                                   |   |   |
|       |       |                                              |
| ** ** |       | **Deerbrook  General Agency, Inc.**               |
|       |       |                                              |
|       |       | By:                                               | /s/ James P. Zils |   |
|       |       | James P. Zils                                     |
|       |       | Vice President  and Treasurer                     |
|       |       |                                              |
|       |       | **Deerbrook  Insurance Company**                  |
|       |       |                                              |
|       |       | By:                                               | /s/ James P.  Zils |   |
|       |       | James P. Zils                                     |
|       |       | Vice President  and Treasurer                     |
|       |       |                                              |
| ** ** | ** ** | **Encompass Financial Group, LLC**                |
|       |       |                                              |
|       |       | By:                                               | /s/ James P. Zils |   |
|       |       | James P. Zils                                     |
|       |       | Treasurer                                         |
|            |            |                                                   |  |  |  |

 

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|       |       | **Encompass  Indemnity Company**                       |
|------------|------------|--------------------------------------------------------|
|       |       |                                                   |
|       |       | By:                                                    | /s/ James P.  Zils |   |
|       |       | James P. Zils                                          |
|       |       | Vice President  and Treasurer                          |
|       |       |                                                   |
|       |       | **Encompass  Insurance Company**                       |
|       |       |                                                   |
|       |       | By:                                                    | /s/ James P.  Zils |   |
|       |       | James P. Zils                                          |
|       |       | Vice President  and Treasurer                          |
| ** ** |       |                                                   |
|       |       | **Encompass  Insurance Company of New Jersey**         |
|       |       |                                                   |
|       |       | By:                                                    | /s/ James P.  Zils |   |
|       |       | James P. Zils                                          |
|       |       | Vice President  and Treasurer                          |
|       |       |                                                   |
| ** ** | ** ** | **E.R.J. Insurance Group Incorporated**                |
| ** ** | ** ** | ** **                                             |
|       |       | By:                                                    | /s/ James P. Zils |   |
|       |       | James P. Zils                                          |
|       |       | Treasurer                                              |
|       |       |                                                   |
| ** ** | ** ** | **Fidelity  International Company Limited**            |
|       |       |                                                   |
|       |       | By:                                                    | /s/ James P.  Zils |   |
|       |       | James P. Zils                                          |
|       |       | Treasurer                                              |
|       |       |                                                   |
|       |       | **Fidelity  International Insurance Company  Limited** |
|       |       |                                                   |
|       |       | By:                                                    | /s/ James P.  Zils |   |
|       |       | James P. Zils                                          |
|       |       | Treasurer                                              |
|       |       |                                                   |
| ** ** |       | **First  Colonial Insurance Company**                  |
|       |       |                                                   |
|       |       | By:                                                    | /s/ James P.  Zils |   |
|       |       | James P. Zils                                          |
|       |       | Assistant  Treasurer                                   |
|            |            |                                                        |  |  |  |

 

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|       |       | **Intramerica  Life Insurance Company**    |
|------------|------------|--------------------------------------------|
|       |       |                                       |
|       |       | By:                                        | /s/ Samuel H.  Pilch |   |
|       |       | Samuel H. Pilch                            |
|       |       | Group Vice  President and Controller       |
|       |       | Execution Date:                            | 4/19/05 |   |
|       |       |                                       |
| ** ** | ** ** | **Ivantage Select Agency, Inc.**           |
|       |       |                                       |
|       |       | By:                                        | /s/ James P. Zils |   |
|       |       | James P. Zils                              |
|       |       | Treasurer                                  |
|       |       |                                       |
| ** ** | ** ** | **Kennett Capital, Inc.**                  |
|       |       |                                       |
|       |       | By:                                        | /s/ James P. Zils |   |
|       |       | James P. Zils                              |
|       |       | Treasurer                                  |
|       |       |                                       |
| ** ** |       | **Keystone  State Life Insurance Company** |
|       |       |                                       |
|       |       | By:                                        | /s/ James P.  Zils |   |
|       |       | James P. Zils                              |
|       |       | Treasurer                                  |
|       |       |                                       |
|       |       | **Lincoln  Benefit Life Company**          |
|       |       |                                       |
|       |       | By:                                        | /s/ James P.  Zils |   |
|       |       | James P. Zils                              |
|       |       | Treasurer                                  |
|       |       |                                       |
|       |       |                                       |
|       |       | **New  Jersey Holdings, LLC**              |
|       |       |                                       |
|       |       | By:                                        | /s/ James P. Zils |   |
|       |       | James P. Zils                              |
|       |       | Treasurer                                  |
|            |            |                                            |  |  |  |  |

 

13

----

 
|       |       | **Northbrook  Holdings, LLC**           |
|------------|------------|-----------------------------------------|
|       |       |                                    |
|       |       | By:                                     | /s/ James P.  Zils |   |
|       |       | James P. Zils                           |
|       |       | Treasurer                               |
|       |       |                                    |
| ** ** |       | **Northbrook  Indemnity Company**       |
|       |       |                                    |
|       |       | By:                                     | /s/ James P.  Zils |   |
|       |       | James P. Zils                           |
|       |       | Vice President  and Treasurer           |
|       |       |                                    |
| ** ** | ** ** | **Northbrook Services, Inc.**           |
|       |       |                                    |
|       |       | By:                                     | /s/ James P. Zils |   |
|       |       | James P. Zils                           |
|       |       | Treasurer                               |
|       |       |                                    |
| ** ** |       | **Pafco  Insurance Company**            |
|       |       |                                    |
|       |       | By:                                     | /s/ Robert J. Young,  Jr. |   |
|       |       | Robert J. Young, Jr.                    |
|       |       | Chairman of the  Board                  |
|       |       | Execution Date:                         |   3/28/05 |   |
|       |       |                                    |
| ** ** |       | **Pembridge  America Inc.**             |
|       |       |                                    |
|       |       | By:                                     | /s/ James P. Zils |   |
|       |       | James P. Zils                           |
|       |       | Treasurer                               |
|       |       |                                    |
| ** ** |       | **Pembridge  Insurance Company**        |
|       |       |                                    |
|       |       | By:                                     | /s/ Robert J. Young,  Jr. |   |
|       |       | Robert J. Young, Jr.                    |
|       |       | Chairman of the  Board                  |
|       |       | Execution Date:                         | 3/28/05 |   |
|       |       |                                    |
|       |       | **Roadway  Protection Auto Club, Inc.** |
|       |       |                                    |
|       |       | By:                                     | /s/ James P. Zils |   |
|       |       | James P. Zils                           |
|       |       | Treasurer                               |
|            |            |                                         |  |  |  |  |  |

 

14

----

 
|       |   | **Sterling Collision Centers, Inc.** |
|------------|--------|--------------------------------------|
|       |   |                                 |
|       |   | By:                                  | /s/ Steven T.  Klodzinski |   |
|       |   | Steven T. Klodzinski                 |
|       |   | Treasurer                            |
|       |   |                                 |
| ** ** |   | **Surety  Life Insurance Company**   |
|       |   |                                 |
|       |   | By:                                  | /s/ James P.  Zils |   |
|       |   | James P. Zils                        |
|       |   | Treasurer                            |
|       |   |                                 |
| ** ** |   | **Tech-Cor, LLC**                    |
|       |   |                                 |
|       |   | By:                                  | /s/ James P. Zils |   |
|       |   | James P. Zils                        |
|       |   | Treasurer                            |
|       |   |                                 |
|       |   |                                 |
|       |   | **The  Allstate Foundation**         |
|       |   |                                 |
|       |   | By:                                  | /s/ James P.  Zils |   |
|       |   | James P. Zils                        |
|       |   | Treasurer                            |

 

 

Except as indicated above, executed by the above companies on January27, 2005.

 

15

----

 

**Schedule A**

 

Each of the attached supporting schedules depicts examples of servicesto 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 and Field Support |       | A-2          |
|                                                                   |       |         |
| Human Resource Shared  Services                                        |       | A-3          |
|                                                                   |       |         |
| Law and Regulation                                                     |       | A-4          |
|                                                                   |       |         |
| Corporate Relations                                                    |       | A-5          |
|                                                                   |       |         |
| Marketing and  Research/Planning Center                                |       | A-6          |
|                                                                   |       |         |
| Print Communication  Center                                            |       | A-7          |
|                                                                   |       |         |
| Real Estate  & Construction / Facilities                           |       | A-8          |

 

----

 

Schedule A-1

Finance Shared Services

 

Provider Services

 

•                  Accounting:   Provide actual monthly, quarterly and annualfinancial results. Specific services include producing financial statements andconsulting on account coding, reporting, accounting research, shared serviceadministration, expense allocation administration accounting governance andpolicies, and maintenance of any required central accounting computer system.

•                  Auditing:   Perform internal audits, which meetGenerally Accepted Auditing Standards (GAAS) at intervals deemed necessary byAllstate.

•                  ClaimReserves:  Provide risk managementservices including exposure analysis, risk retention and risk financing.

•                  Finance andPlanning:  Provide services relatedto the segment of Allstate’s annual operating plan, long-term strategic planand capital management allocation.

•                  FinanceInnovation:  Provide reporting andanalysis templates and database support.

•                  General:  Provide financial administrative services toensure compliance with Service Provider’s corporate policies

•                  Purchasing:   Provide services related for graphic artsand printing for internal and external communications.

•                  Tax:   Comply with Federal and State tax filingrequirements along with any tax research needed.

•                  Treasury:   Provide cash management services, includingthe pass through of all fees associated with setting up and maintaining bankaccounts.

•                  Procurement:  Strategic sourcing and the procuring ofcommodities inclusive of contract negotiation.

 

17

----

 

Schedule A-2

Technical Shared Service

 

Provider Services

 

Services are divided into two categories: Information Technologies andField Support, and include but are not limited to:

 

Information Technologies:

 

•                  Build and maintainsystems necessary to process Affiliate’s business.

 

•                  Support ofonline networks and end-user/desktop applications.

 

•                  Technicalarchitecture design to include application development and end-user equipmentvia Technology Asset Management.

 

•                  Enterpriseoffice tools, software licenses, maintenance, upgrades, Microsoft Office andclient software packages.

 

•                  Telecommunicationssupport for business applications to include equipment sourcing and voice-mailsolutions.

 

•                  Databaseproduction support and development for mainframe and distributed applications.

 

•                  Enterprise HelpCenter for end-user problem resolution, equipment repair, system passwordresets.

 

## **Field Support**

## ** **

•                  Process and payinvoices, expense accounts, and related bills.

 

•                  Maintain necessarybank accounts. This would include, but would not be limited to, a depositoryaccount, refund account and investment accounts.

 

•                  Deposit andbalance remittance from Affiliate’s clients. Process payments against client balances in the billing database.

 

•                  Pay and tracknon-computer related fixed asset transactions.

 

•                  Utilize the SAPgeneral ledger system for financial recording.

 

•                  Perform movementof funds from depository accounts to investment accounts as needed via wiretransfers or other means.

 

18

----

 

•                  Systemproduction, job scheduling and runs including technical support.

 

•                  Data processingsupport including data storage, data communication solutions, and networkavailability.

 

19

----

 

Schedule A-3

Human Resource SharedServices

 

Provider Services

 

•                  Disbursecompensation, distribute pay stubs and paychecks, remit payroll taxes,calculate and remit to vendors benefit contributions (employer/employee), mailW-2’s, provide lines of expense details and create new company pay system.These services will be delivered to client within agreed upon timeframes, andwill meet the client’s quality requirements.

 

•                  Designcompensation and incentive structure, provide support services for salaryplanning, incentive plan and pay communications.  Provide Affiliate with current marketresearch/data to structure the most cost effective and competitive compensationplan.

 

•                  Providetechnical interview with employees to determine skills and tasks necessary to aparticular job function.  This work willbe used to create job descriptions in order to obtain market data to determinecompetitive salary structures.

 

•                  Coordinateparticipation in technical job fairs to attract qualified individuals, delivernew employee orientation, coordinate internship programs, provide sources ofqualified candidates for technical recruiter and intern openings, and provideseven days of training to technical recruiters.

 

•                  Provide timelycoaching and guidance on human resource related issues at Affiliate’srequest.  Accurately assess theappropriate Center of Excellence within the human resource organization toassist in all problem resolutions.

 

•                  ProvideAffiliate with the most competitive benefits package for all employees.  Conduct annual election to provide allemployees with the option of changing benefit coverages.

 

•                  Provide allemployees with required services for any payroll or benefit inquiries orprocessing.

 

•                  ProvideAffiliate with up to date professional education programs and research.  Provide access to just-in-time training.

 

•                  ProvideAffiliate with accurate and timely payroll stubs, checks and tax remittances.

 

20

----

 

Schedule A-4

Legal Services

 

Provider Services

 

•                  The Law andRegulation Department will provide legal advice, assist in the completion ofbusiness transactions, implement compliance programs, assist with disputeresolution and provide public advocacy for Affiliate.

 

•                  Provide forlegal advice, assist in the completion of business transactions, assist withdispute resolution and provide for public advocacy.

 

•                  All legalservices will be performed in a manner that is in compliance with allapplicable laws, regulations and Codes of Professional Responsibility.

 

21

----

 

# **Schedule A-5**

Corporate Relations

 

### **Provider Services**

 

Support and implement communication strategies.

 

•                  Development ofcommunication packages, scripts, and presentations.

 

•                  Sourcing andcoordination of meetings with internal and external customers.

 

•                  Mediapreparation for external use.

 

•                  Coordination ofproduction and recognition and/or special events as requested.

 

22

----

 

Schedule A-6

Marketing, Advertising,and Distribution

 

### **Provider Services**

 

•                  Providemarket research, perform database analysis to identify target customers andutilize focus groups to determine customer preferences.

 

•                  Support andimplement marketing strategies.

 

•                  Developmentof marketing strategies, coordination of print and/or media requirements.

 

•                  Sourcing ofmarketing vendors.

 

•                  Coordinationof media/print advertising.

 

•                  Assist inthe development and implementation of distribution policy and practices, andprovide other marketing and distribution support services.

 

•                  Upon requestof a life insurance Affiliate, Allstate shall assist such life insuranceAffiliate in preparation of marketing material, assist in the recruitment,supervision, and product training of agents, assist in the development andimplementation of distribution policy and practices, and provide othermarketing and distribution support services. However, all decisions regarding the approval of marketing material andthe acceptance, appointment or termination of agents shall be made by any suchlife insurance Affiliate.

 

23

----

 

Schedule A-7

Allstate PrintCommunication Center

 

Customer DocumentProcessing

 

Provider Services

 

Provide print services for document processing to include: quick print,web and sheet-fed print and “laser print stuff mail”.

 

•                  Provideprogramming support and consulting along with complete print projectmanagement.

 

•                  Provide forstorage and retention of documents and/or equipment.

 

24

----

 

Schedule A-8

Real Estate &Construction / Facilities

 

Provider Services

 

•                  Real EstatePortfolio Management.

 

•                  Capitalimprovement management and construction.

 

•                  Engineeringstandards.

 

•                  Building /Facility compliance to local and governmental codes.

 

•                  Support ofemployee moves and relocation.

 

•                  Housekeepingand Security

 

•                  All otherfacilities necessary for the conduct of the business.

 

25

----

# ** **

# **EXHIBITA**

 

**INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX**

**ALLSTATE INSURANCE COMPANY AND PROPERTY & CASUALTY AFFILIATES**

 
| **Expense Line Item  Per U&I Exhibit***                | ** ** | **Expense Classification Description****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | ** ** | **Basis of Expense  Allocation*****                                    |
|------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------|
| 1.      Claim adjustment services |       | Investigation and  adjustment of policy claims for direct, reinsurance assumed and ceded  business. The more significant 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.). |       | No allocation – direct  charge to company                         |
|                                                       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |       |                                                                   |
| 2.      Commission and brokerage  |       | All payments,  reimbursements and allowances (on direct and reinsurance assumed and ceded  business) to managers, agents, brokers, solicitors or other producer types.                                                                                                                                                                                                                                                                                                                                                                                          |       | No allocation – direct  charge to company based on agent contract |

 

----

*******                                        **Expenseclassifications per the statutory Underwriting and Investment Exhibit, Part 3,Expenses.  Parties to the Agreement usethese twenty-one classifications to record their operating expensesincurred.  As described in Exhibit C,expenses for these classifications are also spread to three distinct functionalexpense groups:  loss adjustment, otherunderwriting and investment.

 

********                                 **This****description provides only a synopsis of the types ofexpenses for each classification. Parties to the Agreement will utilize the NAIC Property & CasualtyAnnual Statement Instructions Appendix in expense handling.

 

*********                          **Beforeconsideration of any applicable reinsurance agreement.

 

26

----

 
| **Expense Line Item  Per U&I Exhibit***                       | ** ** | **Expense Classification Description****                                                                                                                                                                                                                                                                                                                                                                                                          | ** ** | **Basis of Expense  Allocation*****                                                                                                                                        |
|-------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.      Advertising                      |       | Typical expenses would  include services of: (1) advertising agents, (2) public relations counsel,  (3) advertisements in newspapers, periodicals, billboards, pamphlets and  literature issued for advertising or promotional purposes, (4) related paper  and printing charges for advertising purposes, (5) radio broadcasts, (6)  prospect and mailing lists, (7) signs and medals for agents and (8)  television commercials and production. |       | Direct charge by  company where known. Allocated items handled as follows: See Exhibit A  Appendix at B; C 1; D 1 and E 1 for explanation of allocation by type of  office |
|                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                              |       |                                                                                                                                                                       |
| 5.      Boards, bureaus and associations |       | Various dues,  assessments, fees and charges for items such as: (1) underwriting boards,  rating organizations, statistical agencies, 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.                                                              |       | No allocation - direct  charge to company                                                                                                                                  |
|                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                              |       |                                                                                                                                                                       |
| 6.      Surveys and underwriting reports |       | Costs to support the  business including: (1) survey, credit, moral hazard, character reports for  underwriting, (2) appraisals for underwriting, (3) fire records, (4)  inspection and engineering billed specifically, (5) medical examiner services  relating to underwriting.                                                                                                                                                                 |       | See Exhibit A Appendix  at B; D 1; and E 1 for explanation of allocation by type of office                                                                            |
|                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                              |       |                                                                                                                                                                       |
| 7.      Audit of assureds’ records  |       | Auditing fees and  expenses of independent auditors for auditing payroll and other premium  bases.                                                                                                                                                                                                                                                                                                                                                |       | No allocation - direct  charge to company                                                                                                                                  |
|                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                              |       |                                                                                                                                                                       |
| 8.      Salary and related items         |       | Salaries, bonus,  overtime, contingent compensation, and other compensation of employees. This  would include commission and brokerage to employees when the activities for  which the commission is paid are a part of their duties as employees.                                                                                                                                                                                                |       | See Exhibit A Appendix  at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1, 2, 3, 4 for  explanation by type of office                                               |

 

27

----

 
| **Expense Line Item  Per U&I Exhibit***                     | ** ** | **Expense Classification Description****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | ** ** | **Basis of Expense  Allocation*****                                                                                          |
|-----------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------|
| 9.      Employee relations and welfare |       | This category includes a  variety of pension and insurance benefits for employees, as well as some  miscellaneous expenditures. The first area entails: (1) cost of retirement  insurance, pensions or other retirement allowances and funds irrevocably  devoted to the payment of pensions or other employees’ benefits, and (2)  accident, 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. |       | See Exhibit A Appendix at  A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1, 2, 3, 4 for  explanation by type of office |
|                                                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       |                                                                                                                         |
| 10.    Insurance                                 |       | Costs of insurance for  employee/agent fidelity or surety bonds, public liability, burglary and  robbery, automobiles and office contents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |       | See Exhibit A Appendix  at D 1; E 1; and F 1, 2, 3, 4 for explanation by type of office                                      |
|                                                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       |                                                                                                                         |
| 11.    Directors fees                            |       | Amounts relate to fees  and other compensation paid to directors for attending Board or committee  meetings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       | Direct charge to  company                                                                                                    |
|                                                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       |                                                                                                                         |
| 12.    Travel and travel items                   |       | Major expense  subcategories include: (1) transportation, hotel, meals, telephone and other  related costs associated for employees traveling, (2) expense for transfer of  employees, (3) automobile rental and license plates, depreciation,  repairs and other operating costs of automobiles (4) transportation, hotel  and meals/entertainment of guests, (5) dues and subscriptions to accounting,  legal, actuarial or similar societies and associations.                                                                                                                                                                                                                                     |       | See Exhibit A Appendix  at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1, 2, 3, 4 for  explanation by type of office |
|                                                            |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       |                                                                                                                         |
| 14.    Equipment                                 |       | Rent and repair of  furniture and equipment, include the related depreciation charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       | See 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                              |

 

28

----

 
| **Expense Line Item  Per U&I Exhibit***                               | ** ** | **Expense Classification Description****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | ** ** | **Basis of Expense  Allocation*****                                                       |
|---------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------|
| 15.    Cost or depreciation of EDP equipment and  software |       | Rent and repair of  processing equipment and non-operating systems electronic data software,  including the related depreciation and amortization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | Charged to companies.  See Exhibit A, Appendix at A; B; C2; D1, 2, 3, 4                   |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                                                                      |
| 16.    Printing and stationery                             |       | Generally, printing,  stationery and office supplies (paper stock, printed forms and manuals,  Photostat copies, pens and pencils, etc.). Also included would be policies  and policy forms, in-house employee publications, books, newspapers and  periodicals including, tax and legal publications and services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       | See Exhibit A Appendix  at A; B; C 1, 2; D 1, 2, 3, 4; E 2, 5; and F 1, 2, 3, 4 |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                                                                      |
| 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, auditing fees of independent  auditors for examining records, services of tax experts and counsel,  custodian fees, notary and trustees’ fees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |       | See Exhibit A Appendix  at A; D 2, 3, 4; E 2; and F 1, 2                             |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                                                                      |
| 20.    Taxes, licenses and fees                            |       | Several categories  comprise this expense classification: (1) state and local insurance taxes;  (2) Insurance Department licenses and 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. |       | No allocation - direct  charge to company                                                 |

 

29

----

 
| **Expense Line Item  Per U&I Exhibit***                           | ** ** | **Expense Classification Description****                                                                                                                                                                                               | ** ** | **Basis of Expense  Allocation*****                                                                                                                                                 |
|-----------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 21.    Real estate expenses                            |       | Salaries, wages and  other compensation of maintenance workers in connection with owned real  estate. Other expense items assigned to this category may also include  expenses associated with: operations; maintenance and insurance. |       | 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 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 F 1, 2,  3, 4 |
|                                                                  |       |                                                                                                                                                                                                                                   |       |                                                                                                                                                                                |
| 24.    Aggregate write-ins for miscellaneous  expenses |       | Items for which no  pre-printed statutory line exists. Description/title shown in Part 3 will  vary based on need.                                                                                                                     |       | Cost Management will  develop the most appropriate allocation basis and maintain documentation                                                                                      |

 

30

----

 
| **Expense Line Item  Per General  Expense Exhibit***      | ** ** | **Expense Classification Description****                                                     | ** ** | **Basis of Expense  Allocation***** |
|-----------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|-------------------------------------|
| 6.5    Collection and bank service charges |       | Collection charges on  checks and drafts and charges for checking accounts and money orders. |       |                                |

 

**Note**:       Expenseclassification for lines 3 and 23 are not applicable for the Allstate Group.

 

31

----

 

# **APPENDIXTO EXHIBIT A**

 

**INTERCOMPANY SERVICE AND EXPENSE ALLOCATIONSUMMARY MATRIX**

**ALLSTATE INSURANCE COMPANY AND AFFILIATES**

** **

A.           Offices 001(Corporate Home Office), 191 (Ivantage Product), 195 (TechnologySupport/Appservice), 198 (Broker Dealer), 200 (Procurement Governance), 201Allstate Investments, LLC), 203 (Research Center Shared Services), 204 (HumanResources 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 (LitigationServices) factors are based on Service Agreements.  These Agreements are written documentsdetailing services and associated costs performed by the provider for thebenefit of the recipient and are generated and approved through extensivediscussions between service providers and service recipients.

 

B.             Support Centers, Data Centers, and OutputProcessing Centers (OPC) factors are based on Stat Policies in Force,Statistical Data and Time and Effort studies that roll-up to the SupportCenter/Data Center/OPC.

 

C.             P&C Head Office (Office 032) factors arebased 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 followingmethodologies:

 

1.               Compensation

2.               Time and effort studies

3.               System capacity studies

4.               Statistical data

 

33

----

 

F. Claim Service Areas factors are based on the following:

 

1.               Headcount (Property vs. Auto)

2.               Notice counts

3.               Incurred loss

4.               Claim legal matter counts

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  Expense Exhibit 2*** | ** ** | **Expense Classification Description****                                                                                                                                                                                                                                                                                                                                                     | ** ** | **Basis of Expense  Allocation*****                                                                                                                                      |
|--------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.      Rent                  |       | Rent for all premises  occupied by the company, including any adequate rent for occupancy of its own  buildings, in whole or in part, except to the extent that allocation to other  expense classifications on a functional basis is permitted and used.                                                                                                                                    |       | Direct charges by  company are based on square footage. Allocated expenses are handled per  Exhibit B Appendix at A; B 1, 2; C 1, 2 and D 1, 2                           |
|                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                         |       |                                                                                                                                                                     |
| 2.      Salaries and wages    |       | Salaries and wages,  bonuses and incentive compensation to employees, overtime payments,  continuation of salary during temporary short-term absences, dismissal  allowances, payments to employees while in training and other compensation to  employees not specifically designated herein, except to the extent that  allocation to their expense classifications is permitted and used. |       | Agents’ compensation  is a direct charge to company. The remaining expenses in this category are  allocated per Exhibit B Appendix at A; B 1, 2; C 1, 2; and D 1, 2 |

 

----

*******                                         **Expenseclassifications per Statutory Exhibits 2 & 3.   Parties to the Agreement use theseclassifications to record their operating expenses incurred.  This expense data is also captured by fourdistinct functional expense groups: life, accident and health, all other lines of business and investment.

 

**                                  These descriptions were written using theNAIC Life Annual Statement Instructions. Refer to this publication for a complete breakdown of the expensesincluded in each line item.

 

***                           Before consideration of any applicablereinsurance agreement.

 

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| 3.11  Contributions for benefit plans for  employees        |   | Contributions by  company for pension and total permanent disability benefits, life insurance  benefits, accident, health, 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. |   | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2                                                                                                                 |
|------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                                                                     |
| 3.12  Contributions for benefit plans for agents            |   | Contributions by  company for pension and total permanent disability benefits, life insurance  benefits, accident, health, 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. |   | See Exhibit B Appendix  at C 1, 2; and D 1, 2                                                                                                                       |
|                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                                                                     |
| 3.21  Payments to employees under non-funded  benefit plans |   | Payments by company  under a program for pension and total and permanent disability benefits,  death benefits, accident, health, hospitalization, medical, surgical or other  temporary disability benefits where no contribution or appropriation is made  prior to the payment of the benefit.                                                                                                                                          |   | No allocation - direct  charge to company                                                                                                                                |
|                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                                                                     |
| 3.22  Payments to agents under non-funded benefit  plans    |   | Payments by company  under a program for pension and total and permanent disability benefits,  death benefits, accident, health, hospitalization, medical, surgical or other  temporary disability benefits where no contribution or appropriation is made  prior to the payment of the benefit.                                                                                                                                          |   | No allocation - direct  charge to company                                                                                                                                |
|                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                                                                                                                                     |
| 3.31  Other employee welfare                                |   | The net periodic  postretirement benefit cost, meals to employees, contribution to employee  associations or clubs, dental examinations, medical dispensary or  convalescent home expenses for employees.                                                                                                                                                                                                                                 |   | Agents’ compensation  is a direct charge to company. The remaining expenses in this category are  allocated per Exhibit B Appendix at A; B 1, 2; C 1, 2; and D 1, 2 |

 

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| **Expense Line Item  Per General  Expense Exhibit***                            | ** ** | **Expense Classification Description****                                                                                                                                                               | ** ** | **Basis of Expense  Allocation*****                                                                                                                           |
|---------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.32  Other agent welfare                                                  |       | The net periodic  postretirement benefit cost, meals to employees, contribution to employee  associations or clubs, dental examinations, medical dispensary or  convalescent home expenses for agents. |       | Agents’ compensation  is a direct charge to company. The remaining expenses in this category are  allocated per Exhibit B Appendix at C 1, 2; and D 1, 2 |
|                                                                            |       |                                                                                                                                                                                                   |       |                                                                                                                                                          |
| 4.1    Legal fees and expenses                                   |       | Court costs, penalties  and all fees or retainers for legal services or expenses in connection with  matters before administrative or legislative bodies.                                              |       | No allocation - direct  charge to company                                                                                                                     |
|                                                                            |       |                                                                                                                                                                                                   |       |                                                                                                                                                          |
| 4.2    Medical examination fees                                  |       | Fees to medical  examiners in connection with new business reinstatements, policy changes and  applications for employment.                                                                            |       | See Exhibit B Appendix  at D 1, 2                                                                                                                             |
|                                                                            |       |                                                                                                                                                                                                   |       |                                                                                                                                                          |
| 4.3    Inspection report fees                                    |       | Fee for inspection  reports in connection with new business, reinstatements, policy changes and  applications for employment. Cost of services furnished by the Medical  Information Bureau.           |       | See Exhibit B Appendix  at D 1, 2; C                                                                                                                          |
|                                                                            |       |                                                                                                                                                                                                   |       |                                                                                                                                                          |
| 4.4    Fees of public accountants and consulting  actuaries      |       | Include expenses  relating to this category except exclude examination fees made by State  Departments and internal audits by company employees.                                                       |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2                                                                                                      |
|                                                                            |       |                                                                                                                                                                                                   |       |                                                                                                                                                          |
| 4.6    Expense of investigation and settlement of  policy claims |       | Payment to other than  employees of fees and expenses for the investigation, litigation and  settlement of policy claims.                                                                              |       | See Exhibit B Appendix  at D 1, 2                                                                                                                             |

 

37

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| **Expense Line Item  Per General  Expense Exhibit***                   | ** ** | **Expense Classification Description****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | ** ** | **Basis of Expense  Allocation*****                      |
|------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------|
| 5.1    Traveling expenses                               |       | Traveling expense of  officers, other employees, directors and agents, including hotel, meals,  telephone, telegraph and postage charges incurred while traveling. Also  include amounts allowed employees for use of their own cars on company  business and the cost of, or depreciation on, and maintenance and running  expenses of company-owned automobiles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2 |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                     |
| 5.2    Advertising                                      |       | Newspaper, magazine  and trade journal advertising for the purpose of solicitation and  conservation of business. Billboard, sign and telephone directory,  television, radio broadcasting and motion picture advertising, excluding  subjects dealing wholly with health and welfare. All canvassing or other  literature, such as pamphlets, circulars, leaflets, policy illustration forms  and other sales aids, printed material, etc., prepared for distribution to  the public by agents or through the mail for the purposes of solicitation and  conservation of business. All calendars, blotters, wallets, advertising  novelties, etc., for distribution to the public. Printing, paper stock, etc.  in connection with advertising. Prospect and mailing lists when used for  advertising purposes. Fees and expenses of advertising agencies related to  advertising. |       | See Exhibit B Appendix  At A, B 1, 2; C 1; and D 1, 2    |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                     |
| 5.3    Postage, express, telegraph and telephone        |       | Freight and cartage,  cables, radiograms and teletype. Also charges for use, installation and  maintenance of related equipment if not included elsewhere.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2 |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                     |
| 5.4    Printing and stationery                          |       | Policy forms, riders,  supplementary contracts, applications, etc., rate books, instruction manuals,  punch-cards, house organs, and all other printed material which is not  required 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2 |
|                                                                   |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |       |                                                     |
| 5.5    Cost or depreciation of furniture and  equipment |       | The cost or depreciation  of office machines except for such charges as may be reported in Line 5.3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2 |

 

38

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| **Expense Line Item  Per General  Expense Exhibit***                      | ** ** | **Expense Classification Description****                                                                                                                                                                                                                                                                                                                                               | ** ** | **Basis of Expense  Allocation*****                                                                              |
|---------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|
| 5.6    Rental of equipment                                 |       | Rental of office  machines except for such charges as may be reported in Line 5.3.                                                                                                                                                                                                                                                                                                     |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2                                                         |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                   |       |                                                                                                             |
| 5.7    Cost or depreciation of EDP equipment and  software |       | Include cost,  depreciation and amortization for EDP equipment and operating and  non-operating systems software.                                                                                                                                                                                                                                                                      |       | Charged to Companies See  Exhibit B at A; B; C                                                                   |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                   |       |                                                                                                             |
| 6.1    Books and periodicals                               |       | Books, newspapers,  periodicals, etc., including investment tax and legal publications and  information services, and including all such material for company’s law  department and libraries.                                                                                                                                                                                    |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2                                                         |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                   |       |                                                                                                             |
| 6.2    Bureau and association fees                         |       | All dues and  assessments of organizations of which the company is a member. All dues for  employees’ and agents’ memberships on the company’s behalf.                                                                                                                                                                                                                  |       | No allocation - direct  charge to company                                                                        |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                   |       |                                                                                                             |
| 6.3    Insurance, except on real estate                    |       | Premiums for Workers’  Compensation, burglary, holdup, forgery and the public liability insurance,  fidelity or surety bonds, insurance on contents of company-occupied buildings  and all other insurance or bonds not included elsewhere.                                                                                                                                       |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2                                                         |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                   |       |                                                                                                             |
| 6.4    Miscellaneous losses                                |       | Uncollectible losses  due to deficiencies, defalcations, robbery, or forgery, except those offset  by bonding companies’ payments. Also include Worker’s Compensation benefits  not covered by insurance and other uninsured losses not included elsewhere.                                                                                                                  |       | Primarily a direct  charge to company. Remaining expenses are allocated per Exhibit B Appendix at  A; and D 1, 2 |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                   |       |                                                                                                             |
| 6.5    Collection and bank service charges                 |       | Collection charges on  checks and drafts and charges for checking accounts and money orders.                                                                                                                                                                                                                                                                                           |       | See Exhibit B Appendix  at A; and D 1, 2                                                                         |
|                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                   |       |                                                                                                             |
| 6.6    Sundry general expenses                             |       | Direct expense of  local agency meetings, luncheons and dinners, tabulating service rendered by  outside organizations, gifts and donations. Any portion of commissions and  expense allowances on reinsurance assumed for group business which represents  specific reimbursement of expenses. Reimbursement to another insurer for  expense of jointly underwritten group contracts. |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2                                                         |

 

39

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| **Expense Line Item  Per General  Expense Exhibit***                         | ** ** | **Expense Classification Description****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ** ** | **Basis of Expense  Allocation*****                                                                                                                  |
|------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| 6.7    Group service and administration fees                  |       | Administration fees,  service fees, or any other form of allowance, reimbursement of expenses, or  compensation (other than commissions) to agents, brokers, applicants,  policyholders or third parties in connection with the solicitation, sale,  issuance, service and administration of group business.                                                                                                                                                                                                                                            |       | See Exhibit B Appendix  at D 1, 2; and B                                                                                                             |
|                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |       |                                                                                                                                                 |
| 6.8    Reimbursements by uninsured accident and  health plans |       | Report as a negative  amount administrative fees, direct reimbursement of expenses, or other  similar receipts or credits attributable to uninsured accident and health  plans and the uninsured portion of partially insured accident and health  plans.                                                                                                                                                                                                                                                                                               |       | No allocation - direct  charge to company                                                                                                            |
|                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |       |                                                                                                                                                 |
| 7.1    Agency expense allowance                               |       | All bona fide  allowance for agency expense, but not allowances constituting additional  compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                  |       | No allocation - direct  charge to company                                                                                                            |
|                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |       |                                                                                                                                                 |
| 7.2    Agents’ balances charged off                      |       | Agents’ balances  charged off less any amounts recovered during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |       | No allocation - direct  charge to company                                                                                                            |
|                                                                         |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |       |                                                                                                                                                 |
| 7.3    Agency conferences other than local  meetings          |       | Cost of banquets and  rental of meeting rooms. Expenses of all persons traveling to conferences and  their expenses at conferences.                                                                                                                                                                                                                                                                                                                                                                                                                     |       | Primary dollars are a  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 real estate properties including  insurance whether occupied by the company or not; salaries and other compensation  of managing agents and their employees; expenses incurred in connection with  rental of such properties; legal fees specifically associated with real  estate transactions other than sale; rent, salaries and wages, and other  direct expenses of any branch of Home Office until engaged solely in real  estate work (not real estate and mortgages combined). |       | Direct charges by  company are based on square footage. Allocated expenses are handled per  Exhibit B Appendix at A; B 1, 2; C 1, 2; and D 1, 2 |

 

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| **Expense Line Item  Per General  Expense Exhibit***             | ** ** | **Expense Classification Description****                                                                                                                                                                        | ** ** | **Basis of Expense  Allocation*****                                                            |
|------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------|
| 9.2    Investment expenses not included elsewhere |       | Only items for which  no specific provisions has been made elsewhere, e.g., contributions or  assessments for bondholders’ protective committees, fees of investment  counsel, custodian and trustee fees. |       | See Exhibit B Appendix  at A; and D 1, 2                                                       |
|                                                             |       |                                                                                                                                                                                                            |       |                                                                                           |
| 9.3    Aggregate write-ins for expenses           |       | Items for which no  pre-printed statutory line exists. Description title shown in Exhibit 2 will  vary based on need.                                                                                           |       | Cost Management will  develop the most appropriate allocation basis and maintain documentation |

 

41

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| **Expense Line Item  Per Taxes,  Licenses and Fees  Exhibit 3***               | ** ** | **Expense Classification Description****                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | ** ** | **Basis of Expense  Allocation*****                                                                                                                  |
|--------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.      Real estate taxes                             |       | Those taxes directly  assessed against property owned by the company. Canadian and other foreign  taxes should be included appropriately.                                                                                                                                                                                                                                                                                                                                                                             |       | Direct charges by  company are based on square footage. Allocated expenses are handled per  Exhibit B Appendix at A; B 1, 2; C 1, 2; and D 1, 2 |
|                                                                           |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |       |                                                                                                                                                 |
| 2.      State insurance department licenses and  fees |       | Assessments to defray  operating expenses of any state insurance department. Canadian and other  foreign taxes should be included appropriately. Fees for examinations by  state departments.                                                                                                                                                                                                                                                                                                                         |       | No allocation - direct  charge to company                                                                                                            |
|                                                                           |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |       |                                                                                                                                                 |
| 3.      State taxes on premiums                       |       | State taxes based on policy  reserves, if in lieu of premium taxes. Canadian and other foreign taxes  should be included appropriately. 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.                                                                            |       | No allocation - direct  charge to company                                                                                                            |
|                                                                           |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |       |                                                                                                                                                 |
| 4.      Other state taxes                             |       | Assessments of state  industrial or other boards for operating expenses or for benefits to sick  unemployed persons in connection 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. |       | No allocation - direct  charge to company                                                                                                            |
|                                                                           |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |       |                                                                                                                                                 |
| 5.      U.S. Social Security taxes                    |       | Company’s contribution  is based on the current tax rate, which is applied to all wages, salary or  compensation entered on the employees earning record and federal unemployment  tax.                                                                                                                                                                                                                                                                                                                          |       | See Exhibit B Appendix  at A; B 1, 2; C 1, 2; and D 1, 2                                                                                             |

 

42

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| 6.      All other taxes |   | Guaranty fund  assessments and taxes of Canada or of any other foreign country not  specifically provided for elsewhere. Sales taxes, other than state sales  taxes, if company does not exercise option of including such taxes with the  cost of goods and services purchased. |   | No allocation - direct  charge to company |
|--------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|

 

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**APPENDIX TO****EXHIBIT B**

 

**INTERCOMPANY SERVICE AND EXPENSE ALLOCATION SUMMARYMATRIX**

**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 thisAgreement.  Once expenses are charged toAllstate or Affiliate, a second and third tier of allocation occurs, whichallocates expenses to Life Profit Centers.

** **

B.             P&C Head Office (Office 032) allocationsto the Life Company and Affiliates are based on:

 

1.     Compensation

2.     Time and effort studies

3.     Statistical data

 

C.             Regional Office allocations to the LifeCompany and Affiliates are based on:

 

1.     Compensation

2.     Time and effort/usage studies3.     System capacity studies

4.     Statistical Data

 

D.            Life Parent Company allocations to LifeAffiliates are based on:

 

1.               Expenses are direct coded to the appropriatecompany.

2.               Determination of how expense is to beallocated to profit center is based on time studies, project activity, requiredcapital, invested assets and statistical data.

 

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**EXHIBIT C**

 

**EXPENSE PROCESS OVERVIEW**

**ALLSTATE INSURANCE GROUP**

 

For purposes of operational analysis andfinancial reporting, functional expense groups are made up of three primarycategories:  (1) Loss adjustmentexpenses, (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 forreporting expenses required by the NAIC.   The expense categories, in turn, flow into the financial records basedon the following cost allocation methods: a direct charge basis; an allocatedor shared basis; or in accordance with the terms of one or several reinsuranceagreements.  The combined expense processultimately provides for financial records that reflect the financialperformance of the business.

 

On a day-to-day basis, expenses are incurreddirectly by companies within the Allstate Group.  The expenses are charted numerically byaccount. Formalized procedures are used in order to ensure that the expensesare accurately recorded and allocated to the appropriate office, company, costcenter and cost element.  Allocations arealso provided for various support costs, which include:  company, cost center and general ledgeraccount (cost element) level with the objective of providing for an accuratemeans of tracking expenses.

 

A brief description of each of the threeexpense categories follows:

 

•                    Loss adjustment expenses are various costsassociated with the claim handling process. These costs, which comprise all aspects of the claims handling function,include: the adjustment, factual investigation, defense and record keepingfunctions.  Salaries of claim personneland allocated executive salaries, as well as other basic costs associated withthe claim function (accounting, data processing, rent, utilities, etc.) aregrouped in this category.  Generally,these expenses may be either direct charged, allocated, or flow to an entity bymeans of a separate reinsurance agreement.

 

•                    Other underwriting expenses includeacquisition, general expenses, taxes, licenses and fees.  The larger piece, acquisition expenses, iscomprised of agent commissions, various expenses related to underwriting (motorvehicle reports, home inspections, etc.), salaries, marketing and otherallocations of expenses which support the production of new and renewalbusiness.  General expenses are typicallyadministrative in nature and do not fit cleanly in any other expense grouping.  Taxes, licenses and fees pertain to:  taxes (income and franchise) and licensesfees levied by state and local government; insurance department expenses; andguaranty fund assessments.  These expensecategories are charged to an entity in any of the same three methods shownabove for Loss adjustment expenses.

 

45

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•                    Investment expenses for research, purchaseand sale activities, safekeeping, accounting and data support are the bulk ofexpenses in this bucket.  Generally,these expenses will flow to an entity by direct charges to an entity or on anallocated basis.

 

The mechanism for recordingexpenses can occur by means of one of the following three methods:

 

•                    Direct Charges – This method is used where the expenses areunique to the company incurring them. These types of expenses are not allocated to another Allstate Companydue to their unique relationship to the company incurring them.  Expense payments are classified to theresponsible company through an accounting coding expense system involvingcharge company, cost center, and cost element (See Exhibits A and B for moredetail).  By way of example: agents’commissions, taxes, licenses and fees, and bad debt expense are companyspecific, and therefore, coded directly to the appropriate company.

 

•                    Allocations

 

Theexpense allocation process can be divided into 3 subcategories:

 

1.               Office – The objective of this phase of the allocation process is to properlytransfer various support costs performed by one organization to anotherorganization that they directly relate to. The basic justification for this cost transfer is efficiency gain, whichis mutually beneficial to both parties. Certain processes are centrally performed on behalf of a number ofentities, then allocated to the office/company being supported.  Routine expenses of this nature often includesupport activities from the following functional areas: Accounting; Systems;Investments; Corporate Relations; Law and Regulation; and Human Resources.   Thesecosts cannot be directly expensed. It is necessary to provide for anappropriate method of allocation.  Anexample of this method of allocation would relate to the accounting treatmentof costs and expenses attributable to Allstate’s Internal Audit Department(IAD).  As part of the Allstate CorporateHome Office structure, IAD salaries and related expenses are allocated to otherAffiliates companies and/or offices (i.e. data and profit centers) based ontime and effort studies.   The terms forthis allocation are delineated in a separate agreement between the partieswhich is referred to as a Shared Service Agreement (SSA).  The SSA is a vehicle which allows the partiesto agree in advance on certain essential terms and conditions which include: adescription of the services to be provided; the period covered; costs andstandards.  The SSA concept can be usedto 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 Departmentdatabase is programmed to perform the allocation process on a monthlybasis.  The process begins with theextraction of direct costs for each office, company, cost center and generalledger account.  Varying premium andclaim statistics (e.g., policies in force, claim counts) as well as othercommon factors (e.g., number of employees, number of retirees) are then enteredinto the program.

 

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The resulting dataprovides the bases, or allocation drivers, for transferring expenses from anoffice/cost center /general ledger account level of detail to other chargeoffices/cost centers /general ledger accounts. Detail records are generated in order to provide the source andrecipient of the allocated expenses.

 

A separate process hasbeen initiated in order to periodically review the accuracy of the factors ordrivers of the allocations.  The accuracyof service provider time and effort studies may be taken into account (i.e.projected v. actual).  Other factors thatmay be considered include an inventory of activities and customers in order toensure that allocations are accurate.  Intensive discussions and management agreement between the provider andcustomer are also an integral part of the process.  Flexibility in the overall allocation processmust routinely occur to provide for changes in the business activities ororganizational structure.

 

2.               Company – This step in the expense allocation process is similar the officeexpense allocation process described above in that allocations are charged toother affiliates.  For instance, bothAllstate Insurance Company and Allstate Life Insurance Company incur expenseson a direct basis for themselves and on behalf of their affiliates.  A portion of these expenses may betransferred to the affiliated companies, as appropriate.  Fixed factors are normally based on internaltime and effort studies, agents’ compensation, or statistical criteria such asgross policies issued or claim notice counts.

 

3.               Uniform Accounting Transfer (UAT) – The next step in the process is toreclassify all of the general office expenses addressed in the direct chargesand expense allocation (office and company) sections above, having beenrecorded on a management basis, to their required statutory expenseclassifications.  The use of a consistentbasis for reporting expenses, as dictated by the NAIC, allows the Regulators tobetter compare various insurance companies’ operations.  On the property/casualty side, broad expensecategories and detail breakouts are required for both the Expense Exhibit inthe annual Statutory Statement as well as the Supplemental Expense Filing,which is contained in the Insurance Expense Exhibit.  For Life companies, the General Expense andthe Taxes, Licenses and Fees Exhibits from the annual Statutory Statement havedistinct expense categories.  A synopsisof these required expense categories, along with a description of each expensecategory and the basis of allocation presently used by Allstate is contained inExhibit A and appendix (Property & Casualty affiliates) and Exhibit B andappendix (Life Company affiliates).

 

Inorder to provide for accurate summarization and reporting, each general ledgeraccount (cost element) included in the Chart of Accounts is assigned astatutory expense classification.  Lossadjustment, other underwriting and investment expenses are the broadclassifications that UAT applies to.  Byway of example, a systems function, whether relating to claims, sales, orinvestments, is initially classified as a general office expense on amanagement basis.  Based on the UATprocess, these expenses are reclassified for statutory reporting purposes toloss adjustment, other underwriting or investments.  Taxes, licenses and fees, although includedin the other underwriting expense category, are not used in the UAT calculationprocess. These

 

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expensesare directly charged to the appropriate statutory classification withincompany.

 

ReinsuranceAgreements – Separate arrangements exist betweenthe property/casualty parent, Allstate Insurance Company, and certainaffiliates, and the life parent, Allstate Life Insurance Company, and certainaffiliates that drive expenses.   Termsand conditions relating to methods of expense classification are contained ineach of the individual reinsurance agreements. Typically, the reinsurer will be liable for a pre determined pro-ratashare of all underwriting related expenses to support the assumedbusiness.  However, the reinsurer is notgenerally liable for the investment expenses.

 

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**EXHIBITD**

 

**DEFINITIONS**

 

Thefollowing terms shown by “process flow” and “general” categories are commonlyused in explanation of the Allstate Group’s overall expense process.  Presentation of the “process flow” sectionfollows the same hierarchical order of our current expense processingmethodology.

 

**PROCESS FLOW**

 

**Company** –Identifies legal entity that expense is charged to and may be disbursedfrom.  Each entity who is a party to thisagreement is assigned a separate three digit company code (e.g., AllstateInsurance Company – 010, Allstate Life Insurance Company – 030).  A “charged company” is the Allstate entitycharged with the expense under review and whose Statement of Income would beultimately impacted.

 

**CostCenters**– Describe where specific costs wereincurred.  Cost Centers will be the mostcommon object used. Cost centers are areas of organizational responsibility inwhich costs are incurred and planned. Identifies administrative grouping within an office and duties as wellas the manager responsible. Regional Office Departments include: Underwriting;Sales; Human Resources; and Claims. Each Regional Office is assigned a distinctfour digit number.

 

**Cost Elements –**They describe what specific costs haveoccurred.  They are used to plan andincur direct expenses for cost objects representing a unique item or categoryof expense to the company.

 

**InternalOrders** – 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 orgeographical location) is a key building block in the accumulation of Allstate’sexpenses.  This data is used in preparingthe various expense analyses/reports prepared. A “charged office” is the office within an Allstate entity charged withthe expense under review.  The decisionregarding which office to charge with an expense is based on Statement ofIncome impact analysis.    Offices mayinclude various high level types, such as Profit Centers (Midwest RegionalOffice – 002),  Data Centers (Atlantic –136), Shared Services (Human Resources – 204), and Home Offices (Corporate HomeOffice – 001, PP&C Head Office – 032). Each Office is designated by a three-digit code.

 

**ProfitCenter** – Aligns expense to a distribution channel,geographic location and product grouping (i.e. Denver Region, Colorado,Standard Auto). 

 

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**GENERAL**

 

## **Assessments/AllocatedExpenses –**which, areincurred by one Allstate Company or office and charged, or allocated, to othercompanies or offices on the basis of mutual benefit.  Examples of the types of allocated expensesinclude: Loss Adjustment, Other Underwriting and Investment Expenses.   These expenses include allocations in CostCenters from Cost Elements to Secondary Cost Elements and are described inExhibit C.  Criteria for cost allocation “drivers”are based on the implementation of management objectives.   The assessments can use all three methods ofallocations: Field Percentage; Fixed Amount; and Variable Portions, whichcontain Statistical Key Figures. Additional information is included in the Exhibits and Appendixesattached.  Allocation drivers agreed toby Management are used to allocate expenses, and these are described in detailin the various exhibits and appendixes.

 

**Reinsurance Agreement** – Anagreement between two parties where one insurer spreads its risk (premium, lossand expense) of losses with other insurers.

 

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**EXHIBITE**

 

**TERMINATED AGREEMENTS**

 

Addendum to Service and ExpenseAgreement between Allstate Insurance Company and Allstate North AmericanInsurance Company effective August 27, 2001.

 

Administrative ServiceAgreement between Lincoln Benefit Life Company and ALFS, Inc. (f/k/a AllstateLife Financial Services, Inc.) effective December 1, 1998.

 

Administrative ServicesAgreement between Allstate Insurance Company and Intramerica Life InsuranceCompany effective July 1, 1999.

 

Administrative Services Agreementbetween Allstate Life Insurance Company and AFD, Inc. effective January 1,2000.

 

Administrative ServicesAgreement between Allstate Life Insurance Company and ALFS, Inc. (f/k/aAllstate Life Financial Services, Inc.) effective May 1, 1999.

 

Administrative ServicesAgreement between Allstate Life Insurance Company and Lincoln Benefit LifeCompany effective February 1, 1998.

 

Administrative ServicesAgreement between Allstate Life Insurance Company and Allstate Distributors,L.L.C. effective May 1, 1999.

 

Amended and Restated Serviceand Expense Agreement between Allstate Insurance Company and certain of itsaffiliated insurance companies effective April 29, 2003 to includeEncompass Insurance Company of New Jersey.

 

Business Operations and ServiceAgreement between Allstate Life Insurance Company of New York and Allstate LifeInsurance Company effective October 1, 1997.

 

Cost Sharing Agreement betweenAmerican Heritage Life Insurance Company and Keystone State Life InsuranceCompany effective October 1, 1998.

 

Expense Allocation Agreementbetween Allstate Life Insurance Company of New York and Intramerica LifeInsurance Company effective July 1, 1999.

 

Service Agreement between Allstate InsuranceCompany and Allstate Life Insurance Company of New York executed February 27,1990 and effective July 1, 1989.

 

Service Agreement between Allstate LifeInsurance Company and Allstate Life Insurance Company of New York executedFebruary 27, 1990 and effective July 1, 1989.

 

Service Agreement between Allstate LifeInsurance Company and Surety Life Insurance Company effective January 1, 1995.

 

Service Agreement between Lincoln BenefitLife Company and Allstate Life Insurance Company effective July 16, 1984.

 

Service and ExpenseAgreement among Allstate Insurance Company and certain of its affiliatedinsurance companies, effective January 1, 1999, except with respect toGlenbrook Life and Annuity Company, Columbia Universal Life Insurance Companyand LSA Asset Management LLC.

 

Service and Expense Agreementbetween Allstate Insurance Company and Certain of its Non-Insurance CompanyAffiliates effective January 1, 2000.

 

Service and ExpenseAgreement between Surety Life Insurance Company and Lincoln Benefit LifeCompany effective August 10, 1994.

 

Administrative Services Agreement betweenAllstate Life Insurance Company of New York and American Heritage LifeInsurance Company.

 

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Administrative Services Agreement betweenAllstate Life Insurance Company of New York and Allstate Distributors, L.L.C.

 

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