EXHIBIT 10.1


 


AMENDED
AND RESTATED SERVICE AND EXPENSE AGREEMENT


 


Among


 


ALLSTATE INSURANCE COMPANY


And


THE ALLSTATE CORPORATION


And


Certain Affiliates


 


This Amended and Restated Service and Expense Agreement (this “Agreement”)
made and effective as of the 1st day of January 2004, among ALLSTATE INSURANCE
COMPANY, an Illinois insurance company (“Allstate”), THE ALLSTATE CORPORATION,
a Delaware corporation (“Allcorp”), and those affiliates of Allstate whose
signatures appear below (together with Allcorp, individually, an “Affiliate”
and collectively, the “Affiliates”).


 


WITNESSETH:


 


WHEREAS, Allstate entered into a Service and Expense Agreement, dated as of
January 1, 1999, with Allcorp and certain of its insurance company affiliates
and another Service and Expense Agreement, dated as of January 1, 2000, with
certain of its non-insurance affiliates, pursuant to which Allstate provided
certain services and facilities (collectively, the “Original Agreements”);


 


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


 


WHEREAS, the parties desire to consolidate and further amend the Amended Agreements
to include provision by the Affiliates of certain services and facilities to
Allstate and to other Affiliates from time to time, subject to the terms and
conditions hereinafter set forth, and to provide for possible future
alternative methods of costing for facilities and services provided pursuant to
this Agreement; and


 


WHEREAS, the parties desire to restate the Amended Agreements as amended.


 


NOW, THEREFORE, it is agreed as follows:


 


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


 





















 


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


 


Services shall be performed in the name
of and on behalf of an Affiliate and in a manner intended to assure the
separate operating identity of the Affiliate. 
By way of example and without limiting the foregoing, (i) all forms
utilized in connection with an Affiliate’s business and all correspondence with
holders of insurance policies or annuity contracts (collectively, “policies”)
shall bear its name and contain its address; (ii) all communications with
policyholders shall be in such Affiliate’s name; and (iii) all bank accounts
into which such Affiliate’s funds are deposited or from which its funds are
withdrawn shall be such Affiliate’s accounts, except that premiums collected on behalf of an Affiliate may be held by Allstate
in a fiduciary capacity and transferred to such Affiliate as soon as
practicable subsequent to collection, but in any event within two (2) business
days.


 


Services shall be provided in accord with
all applicable state and federal legal and regulatory requirements, including
those relating to privacy of customer information.


 


The
performance of any party under this Agreement with respect to the business and
operations of an Affiliate shall at all times be subject to the direction and
control of the Board of Directors of each such Affiliate.  To the extent required by applicable
regulation, such services with respect to any Affiliate shall be performed
under guidelines and procedures established by that Affiliate.  All service providers must comply with all
licensing provisions applicable to any Affiliate for which they are providing
services under this Agreement.


 


2.               Each Affiliate may furnish or cause to be
furnished to Allstate or to any other Affiliate, at cost, the services and
facilities listed in Schedule A attached hereto or such other facilities and
services as the parties may from time to time agree in writing.  Any supplemental agreement whereby any
Affiliate provides services to or receives services from another Affiliate
shall be subject to review where required under applicable insurance law.


 


3.               Costs are defined as the actual costs and
expenses incurred by the party providing the services (each, a “Providing Party”)
which are attributable to the services and facilities provided under this
Agreement, such as: salaries and benefits; space rental; overhead expenses
which may include items such as electricity, heat, and water; building
maintenance services; furniture and other office equipment; supplies and
special equipment such as reference libraries, electronic data processing
equipment and the like.


 


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4.               Charges for the above services and facilities
shall be determined by Allstate in accordance with the general provisions
contained in Exhibits A through D.  Exhibits A and B are based upon NAIC expense classification and allocation
guidelines.  In
the event such guidelines are amended, Exhibits A and B shall be deemed amended
to conform thereto.  Allstate’s Corporate
Controller’s Department will exercise reasonable judgment in appropriately
revising these Exhibits, maintain proper documentation for revisions and
communicate changes in allocation requirements to each party receiving services
(each, a “Receiving Party”) in a timely manner. Exhibit C provides a narrative
overview of the expense management process and Exhibit D provides certain
definitions used throughout.  Cost bases
shall be reviewed and adjusted on a prospective basis not less than annually to
reflect the actual costs incurred.


 


5.               The amount charged to a Receiving Party shall
not exceed the cost to the Providing Party with respect to providing such
service or facility.  Notwithstanding this provision or
any other provision contained in this Agreement to the contrary, subject to
obtaining any required regulatory approvals, the parties may agree in writing
that one or more specific services or facilities may be provided on a basis
other than cost.  Each Providing Party
will exercise reasonable judgment in periodically reviewing the expenses
incurred and the percentage thereof allocated to each Receiving Party.  Any Receiving Party may request a review of
such expenses and their allocation and such review will occur promptly
thereafter.  Any basis other than cost
that is utilized shall be intended to reasonably relate to the cost of the
services or facilities involved.


 


6.               A Providing Party will charge each Receiving
Party for all the services and facilities
provided pursuant to this Agreement via the
monthly expense allocation process, and payments
will be through the monthly intercompany settlement process. This process will
be completed by Allstate personnel in the most timely and effective method
available.


 


7.               The Providing Parties will maintain such
records as may be required relating to the accounting system of Allstate and
the Affiliates.  The Affiliates
understand and accept the financial records generated by this system, which
utilizes the concepts detailed in the addenda attached to Exhibits A and B, respectively.


 


All Affiliate records shall be maintained
in accordance with applicable insurance laws and accepted industry
standards.  Allstate shall maintain
processes to provide backup records that will be available in the event the
underlying records are destroyed in a natural or manmade catastrophe or
disaster.


 


In the event and to the extent that the
books and records of an Affiliate are maintained hereunder in an electronic
format, the following requirements shall apply. 
A computer terminal that is linked to the electronic system that
generates the electronic records that constitute such Affiliate’s books of
account as they relate to the business covered by this Agreement, shall be kept
and maintained at such Affiliate’s principal


 


3





















 


office. 
During all normal business hours, there shall be ready availability and
easy access through such terminal (either directly by personnel of such
Affiliate’s domestic insurance regulator or indirectly with the aid of such
Affiliate’s employees) to the electronic media used to maintain the records
comprising such Affiliate’s books of account hereunder.  The electronic records shall be in a readable
form.  The Providing Parties shall
maintain format integrity and compatibility of the electronic records that
constitute an Affiliate’s books of account hereunder.  If the electronic system that created such
records is to be replaced by a system with which the records would be incompatible,
the Providing Parties shall convert such pre-existing records to a format that
is compatible with the new system.  The
Providing Parties shall maintain acceptable backup of the records constituting
an Affiliate’s books of account hereunder.


 


8.               Upon reasonable notice, and during normal
business hours, any Receiving Party shall be entitled to, at its own expense,
inspect records that pertain to the computation of charges for the facilities
or services provided pursuant to this Agreement.  The Providing Parties shall at all times
maintain correct and complete books, records and accounts of all services and
facilities furnished pursuant to this Agreement.  Each Receiving Party shall have unconditional
right of ownership of any records prepared on its behalf under this
Agreement.  The records maintained by a
Providing Party in connection with services provided to an Affiliate under this
Agreement shall be subject to inspection and review by such Affiliate’s
domestic insurance regulator.


 


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


 


10.         The scope of, and the manner in which, a
Providing Party provides facilities and services to a Receiving Party shall be
reviewed periodically by the parties involved in each transaction under this
Agreement.  All services and facilities
shall be of good quality and suitable for the purpose for which they are
intended.


 


11.         No party shall assign its obligations or
rights under this Agreement without the written consent of the other parties
and any required regulatory approvals. 
Allstate may terminate this Agreement in its entirety, and an Affiliate
may cancel its participation in the arrangements under this Agreement, each by
giving six months written notice to the other parties to this Agreement;
provided, however, that in the event that the affiliate relationship ceases to
exist with respect to an Affiliate, this Agreement shall terminate immediately
with respect to such Affiliate.  Under no
circumstances will the initial term of this Amended and Restated Agreement
exceed five (5) years from its effective date.


 


12.         All communications provided for hereunder
shall be in writing, and if to an insurance company Affiliate, mailed or
delivered to such Affiliate at its office at the address listed in such
Affiliate’s Statutory Annual Statement Blank, Attention: Secretary, or if to
Allstate or Allcorp, mailed or delivered to its office at 3075 Sanders Road,


 


4





















 


Northbrook,
Illinois 60062, Attention: Controller, or addressed to any party at the address
such party may hereafter designate by written notice to the other parties.


 


13.         This Agreement together with such amendments
and supplements as may from time to time be executed in writing by the parties
in accordance with applicable insurance law, constitutes the entire agreement
and understanding between the parties in respect of the transactions
contemplated hereby and supercedes any other agreements arrangements or
understandings between the parties relating to the subject matter hereof.  Those service and administrative services
agreements between and among any parties to this Agreement that are listed on
Exhibit E are terminated as of the effective date of this Amended and Restated
Agreement.


 


14.         Any unresolved dispute or difference between
the parties arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and the Expedited
Procedures thereof.  The award rendered
by the Arbitrator shall be final and binding upon the parties, and judgment
upon the award rendered by the Arbitrator may be entered in any Court having
jurisdiction thereof.


 


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


 


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
effective 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

  



 


7





















 


	
   

  	
  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

  
					



 


8





















 


	
   

  	
  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

  
					



 


9





















 


	
   

  	
  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:

  	
  /s/ Samuel H. Pilch

  	
   

  
	
   

  	
  Samuel H. Pilch

  
	
   

  	
  Group Vice President and Controller

  
	
   

  	
  Execution Date:

  	
  5/27/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  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

  
					



 


11





















 


	
   

  	
  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

  



 


12





















 


	
   

  	
  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 January 27, 2005.


 


15





















 


Schedule A


 


Each
of the attached supporting schedules depicts examples of services to be
provided, and are not intended by the parties to be all-inclusive.


 


	
  Description of Service

  	
   

  	
  Schedule

  
	
   

  	
   

  	
   

  
	
  Finance
  Shared Services

  	
   

  	
  A-1

  
	
   

  	
   

  	
   

  
	
  Technical
  Shared Service - Information Technologies 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 annual financial results. Specific services include producing
financial statements and consulting on account coding, reporting, accounting
research, shared service administration, expense allocation administration
accounting governance and policies, and maintenance of any required central
accounting computer system.


•                  Auditing:   Perform internal audits,
which meet Generally Accepted Auditing Standards (GAAS) at intervals deemed
necessary by Allstate.


•                  Claim Reserves: 
Provide risk management services including exposure analysis, risk
retention and risk financing.


•                  Finance and Planning: 
Provide services related to the segment of Allstate’s annual operating
plan, long-term strategic plan and capital management allocation.


•                  Finance Innovation: 
Provide reporting and analysis templates and database support.


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


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


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


•                  Treasury:   Provide cash management
services, including the pass through of all fees associated with setting up and
maintaining bank accounts.


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


 


17





















 


Schedule A-2


Technical Shared Service


 


Provider
Services


 


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


 


Information
Technologies:


 


•                  Build and maintain systems necessary to
process Affiliate’s business.


 


•                  Support of online networks and end-user/desktop
applications.


 


•                  Technical architecture design to include
application development and end-user equipment via Technology Asset Management.


 


•                  Enterprise office tools, software licenses,
maintenance, upgrades, Microsoft Office and client software packages.


 


•                  Telecommunications support for business
applications to include equipment sourcing and voice-mail solutions.


 


•                  Database production support and development
for mainframe and distributed applications.


 


•                  Enterprise Help Center for end-user problem
resolution, equipment repair, system password resets.


 


Field Support


 


•                  Process and pay invoices, expense accounts,
and related bills.


 


•                  Maintain necessary bank accounts. This would
include, but would not be limited to, a depository account, refund account and
investment accounts.


 


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


 


•                  Pay and track non-computer related fixed
asset transactions.


 


•                  Utilize the SAP general ledger system for
financial recording.


 


•                  Perform movement of funds from depository
accounts to investment accounts as needed via wire transfers or other means.


 


18





















 


•                  System production, job scheduling and runs
including technical support.


 


•                  Data processing support including data
storage, data communication solutions, and network availability.


 


19





















 


Schedule A-3


Human Resource Shared
Services


 


Provider Services


 


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


 


•                  Design compensation and incentive structure,
provide support services for salary planning, incentive plan and pay
communications.  Provide Affiliate with
current market research/data to structure the most cost effective and
competitive compensation plan.


 


•                  Provide technical interview with employees to
determine skills and tasks necessary to a particular job function.  This work will be used to create job descriptions
in order to obtain market data to determine competitive salary structures.


 


•                  Coordinate participation in technical job
fairs to attract qualified individuals, deliver new employee orientation,
coordinate internship programs, provide sources of qualified candidates for
technical recruiter and intern openings, and provide seven days of training to
technical recruiters.


 


•                  Provide timely coaching and guidance on human
resource related issues at Affiliate’s request. 
Accurately assess the appropriate Center of Excellence within the human
resource organization to assist in all problem resolutions.


 


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


 


•                  Provide all employees with required services
for any payroll or benefit inquiries or processing.


 


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


 


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


 


20





















 


Schedule A-4


Legal Services


 


Provider
Services


 


•                  The Law and Regulation Department will
provide legal advice, assist in the completion of business transactions,
implement compliance programs, assist with dispute resolution and provide
public advocacy for Affiliate.


 


•                  Provide for legal advice, assist in the
completion of business transactions, assist with dispute resolution and provide
for public advocacy.


 


•                  All legal services will be performed in a
manner that is in compliance with all applicable laws, regulations and Codes of
Professional Responsibility.


 


21





















 


Schedule A-5


Corporate Relations


 


Provider Services


 


Support
and implement communication strategies.


 


•                  Development of communication packages,
scripts, and presentations.


 


•                  Sourcing and coordination of meetings with
internal and external customers.


 


•                  Media preparation for external use.


 


•                  Coordination of production and recognition
and/or special events as requested.


 


22





















 


Schedule A-6


Marketing, Advertising, and Distribution


 


Provider Services


 


•                  Provide
market research, perform database analysis to identify target customers and
utilize focus groups to determine customer preferences.


 


•                  Support and
implement marketing strategies.


 


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


 


•                  Sourcing of
marketing vendors.


 


•                  Coordination
of media/print advertising.


 


•                  Assist in
the development and implementation of distribution policy and practices, and
provide other marketing and distribution support services.


 


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


 


23





















 


Schedule A-7


Allstate Print Communication Center


Customer Document Processing


 


Provider
Services


 


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


 


•                  Provide programming support and consulting
along with complete print project management.


 


•                  Provide for storage and retention of
documents and/or equipment.


 


24





















 


Schedule A-8


Real Estate & Construction / Facilities


 


Provider Services


 


•                  Real Estate
Portfolio Management.


 


•                  Capital
improvement management and construction.


 


•                  Engineering
standards.


 


•                  Building /
Facility compliance to local and governmental codes.


 


•                  Support of
employee moves and relocation.


 


•                  Housekeeping
and Security


 


•                  All other
facilities necessary for the conduct of the business.


 


25





















 


EXHIBIT
A


 


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

  



 










*                                         Expense
classifications per the statutory Underwriting and Investment Exhibit, Part 3,
Expenses.  Parties to the Agreement use
these twenty-one classifications to record their operating expenses
incurred.  As described in Exhibit C,
expenses for these classifications are also spread to three distinct functional
expense groups:  loss adjustment, other
underwriting and investment.


 


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


 


***                           Before
consideration of any applicable reinsurance agreement.


 


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:   Expense classification for
lines 3 and 23 are not applicable for the Allstate Group.


 


31





















 


APPENDIX
TO EXHIBIT A


 


INTERCOMPANY
SERVICE AND EXPENSE ALLOCATION SUMMARY MATRIX


ALLSTATE
INSURANCE COMPANY AND AFFILIATES


 


A.           Offices 001
(Corporate Home Office), 191 (Ivantage Product), 195 (Technology
Support/Appservice), 198 (Broker Dealer), 200 (Procurement Governance), 201
Allstate Investments, LLC), 203 (Research Center Shared Services), 204 (Human
Resources Shared Service), 205 (Corporate Relations Shared Services), 206
(Technical Shared Services), 207 (Law and Regulation Shared Services),
208 (Finance Shared Services) 209 (Market Brand Development), 211
(Facility Services), 212 (Real Estate & Construction), and 304 (Litigation
Services) factors are based on Service Agreements.  These Agreements are written documents detailing
services and associated costs performed by the provider for the benefit of the
recipient and are generated and approved through extensive discussions between
service providers and service recipients.


 


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


 


C.             P&C Head Office (Office 032) factors are
based on:


 


1.                                       Compensation


2.                                       Time and effort studies


3.                                       Statistical data


 


D.  Regional Office factors are based on the
following methodologies:


 


1.                                       Compensation


2.                                       Time and effort studies


3.                                       System capacity studies


4.                                       Statistical data


 


E.  Regional Commercial Centers factors are based
on the following methodologies:


 


1.                                       Compensation


2.                                       Time and effort studies


3.                                       System capacity studies


4.                                       Statistical data


 


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


 


33





















 


1.                                       Headcount (Property vs. Auto)


2.                                       Notice counts


3.                                       Incurred loss


4.                                       Claim legal matter counts


5.                                       Statistical data


 


34





















 


EXHIBIT B


INTERCOMPANY SERVICE AND
EXPENSE ALLOCATION SUMMARY MATRIX


ALLSTATE LIFE INSURANCE COMPANY AND LIFE
AFFILIATES


 


	
  Expense Line Item

  Per General

  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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Contributions by
  company for pension and total permanent disability benefits, life insurance
  benefits, accident, health, hospitalization, medical, surgical, or other

  	
   

  	
  See Exhibit B Appendix
  at A; B 1, 2; C 1, 2; and

  



 










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


 


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


 


***                           Before
consideration of any applicable reinsurance agreement.


 


35





















 


	
   

  3.11        Contributions
  for benefit plans for employees

  	
   

  	
  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.

  	
   

  	
  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

  



 


36





















 


	
  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





















 


	
  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





















 


	
  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





















 


	
  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

  



 


40





















 


	
  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





















 


	
  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





















 


	
  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

  



 


43





















 


APPENDIX TO EXHIBIT B


 


INTERCOMPANY SERVICE AND EXPENSE ALLOCATION
SUMMARY MATRIX


ALLSTATE LIFE INSURANCE
COMPANY AND LIFE AFFILIATES


 


A.           Office 001, 191, 195,198, 200, 201, 203, 204, 205, 206, 207, 208, 209,
211, 212, and 304 factors to Allstate or Affiliate are based on this
Agreement.  Once expenses are charged to
Allstate or Affiliate, a second and third tier of allocation occurs, which
allocates expenses to Life Profit Centers.


 


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


 


1.               Compensation


2.               Time and effort studies


3.               Statistical data


 


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


 


1.               Compensation


2.               Time and effort/usage studies


3.               System capacity studies


4.               Statistical Data


 


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


 


1.               Expenses are direct coded to the appropriate
company.


2.               Determination of how expense is to be
allocated to profit center is based on time studies, project activity, required
capital, invested assets and statistical data.


 


44





















 


EXHIBIT C


 


EXPENSE PROCESS OVERVIEW


ALLSTATE INSURANCE GROUP


 


For
purposes of operational analysis and financial reporting, functional expense
groups are made up of three primary categories: 
(1) Loss adjustment expenses, (2) Other underwriting expenses; and (3)
Investment expenses.  A more detailed
description of expense items, which comprise these categories, is provided in
Exhibits A and B.  These exhibits are the
framework for reporting expenses required by the NAIC.  The expense categories, in turn, flow into
the financial records based on the following cost allocation methods: a direct
charge basis; an allocated or shared basis; or in accordance with the terms of
one or several reinsurance agreements. 
The combined expense process ultimately provides for financial records
that reflect the financial performance of the business.


 


On
a day-to-day basis, expenses are incurred directly by companies within the
Allstate Group.  The expenses are charted
numerically by account. Formalized procedures are used in order to ensure that
the expenses are accurately recorded and allocated to the appropriate office,
company, cost center and cost element. 
Allocations are also provided for various support costs, which
include:  company, cost center and
general ledger account (cost element) level with the objective of providing for
an accurate means of tracking expenses.


 


A
brief description of each of the three expense categories follows:


 


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


 


•                  Other underwriting expenses include
acquisition, general expenses, taxes, licenses and fees.  The larger piece, acquisition expenses, is
comprised of agent commissions, various expenses related to underwriting (motor
vehicle reports, home inspections, etc.), salaries, marketing and other
allocations of expenses which support the production of new and renewal
business.  General expenses are typically
administrative in nature and do not fit cleanly in any other expense
grouping.  Taxes, licenses and fees
pertain to:  taxes (income and franchise)
and licenses fees levied by state and local government; insurance department expenses;
and guaranty fund assessments.  These
expense categories are charged to an entity in any of the same three methods
shown above for Loss adjustment expenses.


 


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


 


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


 


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


 


•                  Allocations


 


The expense allocation process can be divided into 3 subcategories:


 


1.               Office – The objective of this phase of the allocation process is to properly
transfer various support costs performed by one organization to another
organization that they directly relate to. 
The basic justification for this cost transfer is efficiency gain, which
is mutually beneficial to both parties. 
Certain processes are centrally performed on behalf of a number of
entities, then allocated to the office/company being supported.  Routine expenses of this nature often include
support activities from the following functional areas: Accounting; Systems;
Investments; Corporate Relations; Law and Regulation; and Human Resources.  These costs cannot be directly expensed. It
is necessary to provide for an appropriate method of allocation.  An example of this method of allocation would
relate to the accounting treatment of costs and expenses attributable to
Allstate’s Internal Audit Department (IAD). 
As part of the Allstate Corporate Home Office structure, IAD salaries
and related expenses are allocated to other Affiliates companies and/or offices
(i.e. data and profit centers) based on time and effort studies.  The terms for this allocation are delineated
in a separate agreement between the parties which is referred to as a Shared
Service Agreement (SSA).  The SSA is a
vehicle which allows the parties to agree in advance on certain essential terms
and conditions which include: a description of the services to be provided; the
period covered; costs and standards.  The
SSA concept can be used to transfer expenses between Brands (e.g., Allstate,
Ivantage, Indemnity, Life), between Shared Services (e.g., Finance,
Investments, Human Resources, Technical) or between a Brand and Shared Service.


 


The Accounting Department
database is programmed to perform the allocation process on a monthly
basis.  The process begins with the
extraction of direct costs for each office, company, cost center and general
ledger account.  Varying premium and
claim statistics (e.g., policies in force, claim counts) as well as other
common factors (e.g., number of employees, number of retirees) are then entered
into the program.


 


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The resulting data
provides the bases, or allocation drivers, for transferring expenses from an
office/cost center /general ledger account level of detail to other charge
offices/cost centers /general ledger accounts. 
Detail records are generated in order to provide the source and
recipient of the allocated expenses.


 


A separate process has
been initiated in order to periodically review the accuracy of the factors or
drivers of the allocations.  The accuracy
of service provider time and effort studies may be taken into account (i.e.
projected v. actual).  Other factors that
may be considered include an inventory of activities and customers in order to
ensure that allocations are accurate. 
Intensive discussions and management agreement between the provider and
customer are also an integral part of the process.  Flexibility in the overall allocation process
must routinely occur to provide for changes in the business activities or
organizational structure.


 


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


 


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


 


In
order to provide for accurate summarization and reporting, each general ledger
account (cost element) included in the Chart of Accounts is assigned a
statutory expense classification.  Loss
adjustment, other underwriting and investment expenses are the broad
classifications that UAT applies to.  By
way of example, a systems function, whether relating to claims, sales, or
investments, is initially classified as a general office expense on a
management basis.  Based on the UAT
process, these expenses are reclassified for statutory reporting purposes to
loss adjustment, other underwriting or investments.  Taxes, licenses and fees, although included
in the other underwriting expense category, are not used in the UAT calculation
process. These


 


47





















 


expenses
are directly charged to the appropriate statutory classification within
company.


 


Reinsurance
Agreements – Separate arrangements exist between
the property/casualty parent, Allstate Insurance Company, and certain
affiliates, and the life parent, Allstate Life Insurance Company, and certain
affiliates that drive expenses.  Terms
and conditions relating to methods of expense classification are contained in
each of the individual reinsurance agreements. 
Typically, the reinsurer will be liable for a pre determined pro-rata
share of all underwriting related expenses to support the assumed
business.  However, the reinsurer is not
generally liable for the investment expenses.


 


48





















 


EXHIBIT D


 


DEFINITIONS


 


The
following terms shown by “process flow” and “general” categories are commonly
used in explanation of the Allstate Group’s overall expense process.  Presentation of the “process flow” section
follows the same hierarchical order of our current expense processing
methodology.


 


PROCESS FLOW


 


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


 


Cost
Centers — Describe where specific costs were
incurred.  Cost Centers will be the most
common object used. Cost centers are areas of organizational responsibility in
which costs are incurred and planned. 
Identifies administrative grouping within an office and duties as well
as the manager responsible. Regional Office Departments include: Underwriting;
Sales; Human Resources; and Claims. Each Regional Office is assigned a distinct
four digit number.


 


Cost
Elements — They
describe what specific costs have occurred. 
They are used to plan and incur direct expenses for cost objects
representing a unique item or category of expense to the company.


 


Internal
Orders — A short-term cost collector used to collect,
identify and allocate costs associated with a process, event or activity.


 


Office —Typically,
office codes identify high level responsibility for the expenses charged.  Office level configuration (by type or
geographical location) is a key building block in the accumulation of Allstate’s
expenses.  This data is used in preparing
the various expense analyses/reports prepared. 
A “charged office” is the office within an Allstate entity charged with
the expense under review.  The decision
regarding which office to charge with an expense is based on Statement of
Income impact analysis.  Offices may
include various high level types, such as Profit Centers (Midwest Regional
Office – 002), Data Centers (Atlantic – 136), Shared Services (Human Resources –
204), and Home Offices (Corporate Home Office – 001, PP&C Head Office –
032).  Each Office is designated by a
three-digit code.


 


Profit
Center — Aligns expense to a distribution channel,
geographic location and product grouping (i.e. Denver Region, Colorado,
Standard Auto).


 


49





















 


GENERAL


 


Assessments/Allocated
Expenses – which, are incurred by
one Allstate Company or office and charged, or allocated, to other companies or
offices on the basis of mutual benefit. 
Examples of the types of allocated expenses include: Loss Adjustment,
Other Underwriting and Investment Expenses. 
These expenses include allocations in Cost Centers from Cost Elements to
Secondary Cost Elements and are described in Exhibit C.  Criteria for cost allocation “drivers” are
based on the implementation of management objectives.  The assessments can use all three methods of
allocations: Field Percentage; Fixed Amount; and Variable Portions, which
contain Statistical Key Figures. 
Additional information is included in the Exhibits and Appendixes
attached.  Allocation drivers agreed to
by Management are used to allocate expenses, and these are described in detail
in the various exhibits and appendixes.


 


Reinsurance Agreement – An
agreement between two parties where one insurer spreads its risk (premium, loss
and expense) of losses with other insurers.


 


50





















 


EXHIBIT E


TERMINATED AGREEMENTS


 


	
  Addendum to Service and Expense Agreement between
  Allstate Insurance Company and Allstate North American Insurance Company
  effective August 27, 2001.

  
	
   

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

  
	
   

  
	
  Administrative
  Services Agreement between Allstate Insurance Company and Intramerica Life
  Insurance Company effective July 1, 1999.

  
	
   

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

  
	
   

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

  
	
   

  
	
  Administrative
  Services Agreement between Allstate Life Insurance Company and Lincoln
  Benefit Life Company effective February 1, 1998.

  
	
   

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

  
	
   

  
	
  Amended and Restated Service and Expense Agreement
  between Allstate Insurance Company and certain of its affiliated insurance
  companies effective April 29, 2003 to include Encompass Insurance
  Company of New Jersey.

  
	
   

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

  
	
   

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

  
	
   

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

  
	
   

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

  
	
   

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

  
	
   

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

  
	
   

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

  
	
   

  
	
  Service and Expense Agreement among Allstate Insurance
  Company and certain of its affiliated insurance companies, effective January
  1, 1999, except with respect to Glenbrook Life and Annuity Company, Columbia
  Universal Life Insurance Company and LSA Asset Management LLC.

  
	
   

  
	
  Service and Expense Agreement between Allstate Insurance Company and
  Certain of its Non-Insurance Company Affiliates effective January 1, 2000.

  
	
   

  
	
  Service and Expense Agreement between Surety Life
  Insurance Company and Lincoln Benefit Life Company effective August 10, 1994.

  
	
   

  
	
  Administrative
  Services Agreement between Allstate Life Insurance Company of New York and
  American Heritage Life Insurance Company.

  
	
   

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

  



 


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ADDENDUM TO


AMENDED AND RESTATED SERVICE AND EXPENSE AGREEMENT


 


ALLSTATE INSURANCE COMPANY, an
Illinois insurance company (“Allstate”), and certain affiliates of Allstate
entered into an Amended and Restated Service and ExpenseAgreement effective as
of January 1, 2004 (the “Agreement”), a copy of which is attached to this
Addendum.  The Agreement provides that
Allstate will furnish or cause to be furnished certain services and facilities
subject to the terms and conditions set forth in the Agreement.


 


Each
signatory to this Addendum is an Affiliate of Allstate and wishes to become a
party to the Agreement.  By execution of
this Addendum each entity agrees to be bound by all of the terms and conditions
of the Agreement, as if an original signatory.


 


This
Agreement will be effective as to any entity, and such entity will be an
Affiliate for all purposes of this Agreement, effective as of May 3, 2004.


 


 


	
  ENCOMPASS
  FLORIDIAN INDEMNITY COMPANY

  
	
   

  
	
  By:

  	
   

  	
  /s/ James P. Zils

  	
   

  
	
   

  
	
  Name:

  	
  James P. Zils

  	
   

  
	
   

  
	
  Title:

  	
  Vice President and
  Treasurer

  	
   

  
	
   

  
	
  Date:

  	
  February 10, 2005

  	
   

  
	
   

  
	
   

  
	
  ENCOMPASS
  FLORIDIAN INSURANCE COMPANY

  
	
   

  
	
  By:

  	
   

  	
  /s/ James P. Zils

  	
   

  
	
   

  
	
  Name:

  	
  James P. Zils

  	
   

  
	
   

  
	
  Title:

  	
  Vice President and
  Treasurer

  	
   

  
	
   

  
	
  Date:

  	
  February 10, 2005

  	
   

  
					



 


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ADDENDUM TO


AMENDED AND RESTATED SERVICE AND EXPENSE AGREEMENT


 


ALLSTATE
INSURANCE COMPANY, an Illinois insurance company (“Allstate”), and certain
affiliates of Allstate (“Affiliates”) entered into an Amended and Restated
Service and Expense Agreement effective as of January 1, 2004 (the “Agreement”),
a copy of which is attached to this Addendum. 
The Agreement provides that Allstate will furnish or cause to be furnished
certain services and facilities subject to the terms and conditions set forth
in the Agreement.  The Agreement also
provides that the Affiliates may furnish certain services and facilities to
Allstate and to other Affiliates from time to time, subject to the terms and
conditions in the Agreement, and it provides for possible future alternative
methods of costing for facilities and services provided pursuant to the
Agreement.


 


Each
signatory to this Addendum is an Affiliate of Allstate and wishes to become a
party to the Agreement.  By execution of
this Addendum each entity agrees to be bound by all of the terms and conditions
of the Agreement, as if an original signatory.


 


This Addendum may be executed by the parties hereto in any number of
counterparts, and by each of the parties hereto in separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.


 


This
Agreement will be effective as to any entity, and such entity will be an
Affiliate for all purposes of this Agreement, effective as of July 1, 2005.


 


ALIC REINSURANCE COMPANY


 


 


	
  By:

  	
    /s/ John C.
  Pintozzi

  	
   

  
	
  Name:

  	
  John C. Pintozzi

  	
   

  
	
  Title:

  	
  Chairman of the Board

  and President

  	
   

  
	
  Date:

  	
  7/8/05

  	
   

  
				



 


Allstate
Insurance Company acknowledges that the above listed entities have become
parties to the Amended and Restated Service and Expense Agreement, subject to
all of the terms and conditions as if an original party thereto.


 


ALLSTATE INSURANCE
COMPANY


 


 


	
  By:

  	
      /s/
  Samuel H. Pilch

  	
   

  
	
  Name:

  	
   Samuel H. Pilch

  	
   

  
	
  Title:

  	
   Group Vice President
  and Controller

  	
   

  
	
  Date:

  	
  7/8/05

  	
   

  
				



 


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