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PDF Pipeline for SERFF Tracking Number ALSX-G126868638 Generated 06/03/2011 08:43 AM

SERFF Tracking Number: ALSX-G126868638 State: Rhode Island

Filing Company: Allstate Property & Casualty Insurance

Company

State Tracking Number:

Company Tracking Number: R23090 :34.0% RATE LEVEL INCREASE

TOI: 04.0 Homeowners Sub-TOI: 04.0000 Homeowners Sub-TOI Combinations

Product Name: Homeowners

Project Name/Number: Rule and Rate Change/R23090

Filing at a Glance

Company: Allstate Property & Casualty Insurance Company

Product Name: Homeowners SERFF Tr Num: ALSX-

G126868638

State: Rhode Island

TOI: 04.0 Homeowners SERFF Status: Closed-(02)

Approved

State Tr Num:

Sub-TOI: 04.0000 Homeowners Sub-TOI

Combinations

Co Tr Num: R23090 :34.0% RATE

LEVEL INCREASE

State Status: (08) Closed -

Approved With Review

Filing Type: Rate/Rule Reviewer(s): Candy Casala, CIC,

Debra Stein, Ronald Make,

Augustine Park, Paula Pallozzi

Author: Bonnie Wittman Disposition Date: 05/24/2011

Date Submitted: 10/20/2010 Disposition Status: (02) Approved

Effective Date Requested (New): 06/06/2011 Effective Date (New):

Effective Date Requested (Renewal): 07/21/2011 Effective Date (Renewal):

General Information

Project Name: Rule and Rate Change Status of Filing in Domicile:

Project Number: R23090 Domicile Status Comments:

Reference Organization: Reference Number:

Reference Title: Advisory Org. Circular:

Filing Status Changed: 05/24/2011

State Status Changed: 05/24/2011 Deemer Date:

Created By: SPI AllState Submitted By: SPI AllState

Corresponding Filing Tracking Number:

Filing Description:

With this filing, Allstate Property and Casualty Insurance Company (AP&C) is proposing a 34.0% rate level increase on

premium (excluding premium for the net cost of reinsurance) for the Homeowners program in the state of Rhode Island.

The attached exhibits provide information supporting an overall indicated rate level change based off an assumed

effective date of 10/1/2010. Due to internal restrictions regarding the timing of this implementation, the rate change will

actually be implemented with an effective date of 12/13/2010 for new business and 1/27/2011 for renewals.




Company






With this change, Allstate is revising rate adjustment factors and introducing Retained Risk Provision (RRP).

As discussed in a previous conversation between the Department and Allstate, the RRP has been filed in the following

jurisdictions:

- Filed/approved and implemented in at least one company for owners in 6 states (IL, KY, LA, MN, NJ and WI)

- Currently filed and pending in 3 states (GA, NE, NY)

- Filings in progress in several other states (including OH, NC, SC, TX, VA, WV)

Company and Contact

Filing Contact Information

Bonnie Wittman, State Filings Director [email protected]

2775 Sanders Road 847-402-3144 [Phone] 23144 [Ext]

Suite A5 847-402-9757 [FAX]

Northbrook, IL 60062

Filing Company Information

Allstate Property & Casualty Insurance

Company

CoCode: 17230 State of Domicile: Illinois

2775 Sanders Road Group Code: 8 Company Type:

Suite A5 Group Name: Allstate State ID Number:

Northbrook, IL 60062 FEIN Number: 36-3341779

(847) 402-5000 ext. [Phone]

---------

Filing Fees

Fee Required? Yes

Fee Amount: $65.00

Retaliatory? No

Fee Explanation:

Per Company: Yes

COMPANY AMOUNT DATE PROCESSED TRANSACTION #

Allstate Property & Casualty Insurance

Company

$65.00 10/20/2010 40956242




Company






State Specific

This is a rate filing and I have completed the Rate Data fields on the Rate/Rule Schedule (Yes/No).: yes




Company






Correspondence Summary

Dispositions

Status Created By Created On Date Submitted

(02)

Approved

Candy Casala, CIC 05/24/2011 05/24/2011



Filing Company: Allstate Property & Casualty Insurance Company State Tracking Number:





Disposition

Disposition Date: 05/24/2011

Effective Date (New):

Effective Date (Renewal):

Status: (02) Approved

Comment:

Company Name: Overall %

Indicated

Change:

Overall % Rate

Impact:

Written

Premium

Change for

this

Program:

# of Policy

Holders

Affected for this

Program:

Written

Premium for

this Program:

Maximum %

Change (where

required):

Minimum %

Change (where

required):

Allstate Property &

Casualty Insurance

Company

104.300% 34.000% $4,072,491 14,163 $11,977,916 181.900% 11.900%




Company






Schedule Schedule Item Schedule Item Status Public Access

Supporting Document (revised) Actuarial Support- RI Rate Procedural

Informational Summary FormYes

Supporting Document Actuarial Support- RI Rate Procedural


Supporting Document Actuarial Support- RI Rate Procedural


Supporting Document Supporting Documents Yes

Supporting Document (revised) Rate & Rule Schedule AP&C Yes

Supporting Document Rate & Rule Schedule AP&C Yes

Supporting Document Rate & Rule Schedule AP&C Yes

Rate Checking List Yes

Rate Manual Pages Yes







Filing Company: Allstate Property & Casualty Insurance Company State Tracking Number:





Rate InformationRate data applies to filing.

Filing Method: Prior Approval

Rate Change Type: Increase

Overall Percentage of Last Rate Revision: 2.500%

Effective Date of Last Rate Revision: 08/23/2010

Filing Method of Last Filing: Prior Approval

Company Rate InformationCompany Name: Overall %

Indicated

Change:

Overall % Rate

Impact:

Written

Premium

Change for

this Program:

# of Policy

Holders

Affected for this

Program:

Written

Premium for

this Program:

Maximum %

Change (where

required):

Minimum %

Change (where

required):

Allstate Property &

Casualty Insurance

Company

104.300% 17.000% $2,036,246 14,163 $11,977,916 43.800% 2.700%




Company






Rate/Rule Schedule

Schedule Item

Status:

Exhibit Name: Rule # or Page

#:

Rate Action Previous State Filing

Number:

Attachments

Checking List R23090 New CheckingR23090.PDF

Manual Pages R23090 Replacement ManualR23090.PDF

Checking List R23090 A#1 New CheckingR23090,A#1.

PDF

Manual Pages R23090 A#1 Replacement ManualR23090,A#1.P

DF

Checking List R23090 A#2 New CheckingListR23090A

2.pdf

Manual Pages R23090 A#2 Replacement ManualR23090A2.pdf

Rhode Island

CHECKING LIST FOR HOMEOWNERS

Printing dates are shown on each page to facilitate identification of differenteditions, but have no direct connection with the effective date of the page.

RULE

Enclosed: Page HOPC14-2 dated 12-1-2010

RETAINED RISK PROVISION

Enclosed: Page HOPCRR-1 dated 12-1-2010

PREMIUM CALCULATION PAGE

Enclosed: Page PCP-1 dated 12-1-2010

Withdrawn: Page PCP-1 dated 2-1-2009

RATE FACTOR PAGES

Enclosed: Page RFP-4 dated 12-1-2010Page RFP-16 through RFP-19 dated 12-1-2010

Withdrawn: Page RFP-4 dated 9-1-2009Page RFP-16 dated 6-1-2010Page RFP-17 dated 7-1-2007

Filing Number: R23090 Allstate Property and Casualty Insurance Company

Rhode Island



PREMIUM SECTION

Enclosed: Page RFP-4 dated 12-2-2010Page RFP-16 dated 12-2-2010

Withdrawn: Page RFP-4 dated 12-1-2010Page RFP-16 dated 12-1-2010

Filing Number: R23090 A# 1Allstate Property and Casualty Insurance Company

Rhode Island



PREMIUM SECTION

Enclosed: Page RFP-4 dated 12-3-2010Page RFP-16 dated 12-3-2010

Withdrawn: Page RFP-4 dated 12-2-2010Page RFP-16 dated 12-2-2010

Filing Number: R23090 A# 2Allstate Property and Casualty Insurance Company

RHODE ISLANDHOMEOWNERS

RATE FACTOR PAGES

Order inCalculation

2 Rate Adjustment Factor:

Factor: 1.417

3 Claim Rating Factor:

Rating Groups 1 # of Chargeable Claims in the past 3 years Group A

0 1 2 3 4 5# of C # of B

0 0 0 0.390 0.507 0.690 0.938 1.275 1.7341 0 1 0.390 0.507 0.690 0.938 1.275 1.7341 1 0 0.449 0.583 0.793 1.078 1.467 1.9952 0 2 0.468 0.608 0.827 1.125 1.530 2.0812 1 1 0.449 0.583 0.793 1.078 1.467 1.9952 2 0 0.561 0.729 0.991 1.348 1.833 2.493

Each Additional Chargeable Group A Claim - apply factor of 1.360 to the claim rating factorEach Additional Chargeable Group B Claim - apply factor of 1.200 to the claim rating factorEach Additional Chargeable Group C Claim - apply factor of 1.250 to the claim rating factor

Rating Groups 2# of Chargeable Claims in the past 3 years Group A

0 1 2 3 4 5# of C # of B

0 0 0 0.440 0.572 0.778 1.058 1.439 1.9571 0 1 0.440 0.572 0.778 1.058 1.439 1.9571 1 0 0.506 0.658 0.895 1.217 1.655 2.2502 0 2 0.528 0.686 0.934 1.270 1.727 2.3482 1 1 0.506 0.658 0.895 1.217 1.655 2.2502 2 0 0.633 0.822 1.118 1.521 2.068 2.813


Rating Groups 3# of Chargeable Claims in the past 3 years Group A

0 1 2 3 4 5# of C # of B

0 0 0 0.450 0.585 0.796 1.082 1.472 2.0011 0 1 0.450 0.585 0.796 1.082 1.472 2.0011 1 0 0.518 0.673 0.915 1.244 1.692 2.3012 0 2 0.540 0.702 0.955 1.298 1.766 2.4022 1 1 0.518 0.673 0.915 1.244 1.692 2.3012 2 0 0.647 0.841 1.144 1.555 2.115 2.877


Total Group B and C

Total Group B and C

Total Group B and C

12-3-2010 Allstate Property and Casualty Insurance Company RFP - 4


RATE FACTOR PAGESOrder in

Calculation

24 Retained Risk Provision

Determine the charge as follows: a. Determine the appropriate Base Retained Risk Provision from the Chart below.

The deductible amount should match the policy’s Hurricane deductible. If the Hurricane deductible on the policy is waived due to loss mitigation efforts,a 5% deductible should be used to calculate the Base Retained Risk Provision.

b. Multiply the appropriate charge by a Retained Risk Provision Rate Adjustment Factor of 3.357(round to three decimals).

c. Multiply by the appropriate Coverage A limits factor as shown on RFP-17.

1% 2% 3% 5%1 0.27 0.24 0.22 0.192 0.15 0.13 0.11 0.093 0.09 0.08 0.07 0.06

1% 2% 3% 5%1 0.23 0.21 0.19 0.162 0.12 0.10 0.09 0.083 0.07 0.06 0.06 0.05

BASE RETAINED RISK PROVISIONS

OWNERSFRAME

RETAINED RISK PROVISION ZONE

OWNERSALL OTHER

RETAINED RISK PROVISION ZONE

12-3-2010 Allstate Property and Casualty Insurance Company RFP - 16




Company






Supporting Document Schedules

Item Status: Status

Date:

Satisfied - Item: Actuarial Support- RI Rate

Procedural Informational Summary

Form

Comments:

Attachment:

RI Rate Procedural Information AP&C A_2.pdf

Item Status: Status

Date:

Satisfied - Item: Supporting Documents

Comments:

Attachment:

RI AP&C Support.PDF

Item Status: Status

Date:

Satisfied - Item: Rate & Rule Schedule AP&C

Comments:

Attachment:

RI Rate & Rule Schedule AP&C A_2.pdf

Index Page 1

ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY OWNERS FORMS RHODE ISLAND

INDEX OF ATTACHMENTS

Attachment I – Summary of Disclosures

Page 1 Definitions Page 2 Actuarial Standards of Practice Page 4 Material Changes in Sources of Data, Assumptions, or Methods

Attachment II – Summary of Rate Level Indication

Page 1 Summary of the Development of Statewide Rate Level Indication Page 2 Base Data Page 3 Adjustments to Losses Page 6 Retained Risk Provision Page 7 Expenses, Profit Provision and Contingency Factor Page 10 Adjustments to Premiums

Attachment III – Non-Modeled Catastrophe Provision Page 1 Summary of the Total Non-Modeled Catastrophe Adjustment

Attachment IV – Modeled Catastrophe Provision Page 1 Development of the Hurricane Provision Based on the 2009/08 AIR

Version 11.0 Hurricane Model in the Statewide Rate Level Indication Explanatory Memorandum

Attachment V – Retained Risk Provision

Page 1 Development of Retained Risk Provision due to Catastrophe Exposure Exhibit 1 Summary of Catastrophe Bond Profit Multiples Exhibit 2 Development of Retained Risk Provision

Index Page 2


INDEX OF ATTACHMENTS (continued)

Attachment VI – Rate Level Indication Exhibits

Exhibit 1 Determination of Statewide Rate Level Indication Exhibit 2 Development of Provision for Non-Catastrophe Loss and LAE Exhibit 3 Ultimate Losses & ALAE Exhibits 4-5 Calculation of Loss Development Factors Exhibit 6 Unallocated Loss Adjustment Expense Provision Exhibit 7 Calculation of Pure Premium Trend Factor Exhibit 8 Loss Trends – Pure Premium Exhibit 9 Development of Provisions for Catastrophe Loss and LAE and Retained

Risk Provision Exhibit 10 Development of the Non-Modeled Catastrophe Provision Exhibit 11 Development of the Owners Catastrophe Provision by Line Exhibit 12 Development of the Owners Catastrophe Provision by Company Exhibit 13 AIY Trends Exhibit 14 Summary of Expense Provisions Exhibit 15 Countrywide Expense Experience For Other Acquisition and General

Expenses Exhibit 16 Factor to Adjust for Subsequent Change in Fixed Expense Exhibit 17 Investment Income Exhibit 18 Development of Projected Average Earned Premium Exhibit 19 Calculation of Premium Trend Factor Exhibit 20 Premium Trends

Attachment VII – Summary of Manual Changes Page 1 Summary of Manual Changes

Attachment VIII – Rule Side-by-Sides Page 1 Rule 14 – Interpolation of Policy Amounts Page 2 Retained Risk Provision Zones

Attachment IX – Summary of Policyholder Impacts Page 1 Summary of Policyholder Impacts

ATTACHMENT I

Summary of Disclosures

Attachment I Page 1


DEFINITIONS Please note that throughout this filing, the following terms and their definitions are used: Owners Policy – a policy which covers a freestanding dwelling or townhome that is not classified

as a manufactured home. Homeowners Policy – An owners, condo, co-op, or renters policy.

Attachment I Page 2


ACTUARIAL STANDARDS OF PRACTICE

This document confirms compliance with the following Actuarial Standards of Practices that are applicable to the preparation of statewide rate filings performed by casualty actuaries as stated in “Applicability Guidelines for Actuarial Standards of Practice” (American Academy of Actuaries, September 2004). In addition, references to relevant sections of this filing are included, where applicable.

• Actuarial Standard of Practice No. 9, Documentation and Disclosure in Property and Casualty Insurance Ratemaking, Loss Reserving, and Valuations

- Attachment I, Page 4: Material Changes in Sources of Data, Assumptions, or Methods

- Attachment II, Page 1: Summary of the Development of Statewide Rate Level Indication

• Actuarial Standard of Practice No. 13, Trending Procedures in Property/Casualty Insurance Ratemaking

- Attachment II, Page 1: Summary of the Development of Statewide Rate Level Indication

- Attachment II, Page 4: Adjustment to Losses – Loss Trend - Attachment II, Page 5: Adjustment to Losses – Catastrophes (AIY’s) - Attachment II, Page 6: Retained Risk Provision (AIY’s) - Attachment II, Page 8: Expenses, Profit Provision, and Contingency Factor – Fixed

Expenses – Trend (Inflation) - Attachment II, Page 10: Adjustments to Premiums – Premium Trend

• Actuarial Standard of Practice No. 23, Data Quality - Attachment II, Page 1: Summary of the Development of Statewide Rate Level

Indication - Attachment IV, Page 1: Development of the Hurricane Provision Based on the

2009/08 AIR Version 11.0 Hurricane Model in the Statewide Rate Level Indication Explanatory Memorandum

- Attachment V, Page 1: Development of Retained Risk Provision due to Catastrophe Exposure

• Actuarial Standard of Practice No. 25, Credibility Procedures Applicable to Accident and Health, Group Term Life, and Property/Casualty Coverages

- Attachment II, Page 4: Adjustment to Losses – Loss Trend - Attachment II, Page 2: Base Data – Accident Year Weights

• Actuarial Standard of Practice No. 29, Expense Provisions in Property/Casualty Insurance Ratemaking

- Attachment II, Page 7: Expenses, Profit Provision, and Contingency Factor • Actuarial Standard of Practice No. 30, Treatment of Profit and Contingency Provisions

and the Cost of Capital in Property/Casualty Insurance Ratemaking - Attachment II, Page 9: Expenses, Profit Provision, and Contingency Factor –

Variable Expenses – Underwriting Profit

Attachment I Page 3

• Actuarial Standard of Practice No. 38, Using Models Outside the Actuary’s Area of Expertise (Property and Casualty)

- Attachment IV, Page 1: Development of the Hurricane Provision Based on the 2009/08 AIR Version 11.0 Hurricane Model in the Statewide Rate Level Indication Explanatory Memorandum


• Actuarial Standard of Practice No. 39, Treatment of Catastrophe Losses in Property/Casualty Insurance Ratemaking

- Attachment III, Page 1: Summary of the Total Non-Modeled Catastrophe Adjustment

- Attachment IV, Page 1: Development of the Hurricane Provision Based on the 2009/08 AIR Version 11.0 Hurricane Model in the Statewide Rate Level Indication Explanatory Memorandum


• Actuarial Standard of Practice No. 41, Actuarial Communications - Applies to this filing in its entirety

Attachment I Page 4


MATERIAL CHANGES IN SOURCES OF DATA, ASSUMPTIONS, OR METHODS This document lists all material changes in sources of data, assumptions, or methods from the last Owners Allstate rate level indication filing. These changes are further described in the subsequent memos in compliance with Actuarial Standard of Practice No. 9, Documentation and Disclosure in Property and Casualty Insurance Ratemaking, Loss Reserving, and Valuations.

• Accident Year Loss Data - Accident year weights adjusted as described in Attachment II, Page 2

• Loss Development Methodology Revisions - Evaluation of accident year losses at 12 months as described in Attachment II, Page 2

• ULAE Provision - Use of two-year average, rather than three-year average, as described in Attachment

II, Page 4 • Non-Modeled Catastrophe Provision

- Update to methodology as described in Attachment III, Page 1 • Projected Average Premium

- Used 1 year of premium to project average earned premium as described in Attachment II, Page 10

• Modeled Hurricane Provision - Updated the hurricane model used in the development of the modeled hurricane

provision to the 2009/08 AIR Version 11.0 Hurricane Model • Retained Risk Provision

- Retained Risk Provision included in calculating statewide rate level indication, as described in Attachment II, Page 6

ATTACHMENT II

Summary of Rate Level Indication

Attachment II Page 1


SUMMARY OF THE DEVELOPMENT OF STATEWIDE RATE LEVEL INDICATION

The data used in the calculation of the rate level indication was selected in accordance with the considerations listed in Section 3.2 of Actuarial Standard of Practice No. 23, Data Quality. The calculation of the rate level indication is consistent with the Statement of Principles Regarding Property and Casualty Insurance Ratemaking contained in Appendix 1 of Actuarial Standard of Practice No. 9, Documentation and Disclosure in Property and Casualty Insurance Ratemaking, Loss Reserving, and Valuations. A rate level indication is a test of the adequacy of expected revenues versus expected costs during the future policy period. Therefore, to derive the indicated rate level need accurately, Allstate's historical premium and loss experience needs to be adjusted. In accordance with Section 3.1 of Actuarial Standard of Practice No. 13, Trending Procedures in Property/Casualty Insurance Ratemaking, Allstate trends the underlying historical experience for premiums, losses, and fixed expenses to appropriately reflect historical and projected changes in these components of the rate level indications. In addition, historical premiums must be adjusted to reflect the current rate level; and historical losses must be adjusted to reflect expected development over time. All actual catastrophe losses during the experience period were removed and then replaced with a provision to reflect expected catastrophe losses. Details of these necessary adjustments to the historical data used in the rate level indication are described in this memorandum. The adjustments have been applied to Rhode Island’s premium and loss experience in deriving the indicated rate level change. The table below summarizes the indicated rate change, and the actual rate level change being proposed. The determination of the overall indicated change is included in Attachment VI, Exhibit 1, and described in detail throughout this filing.

Premium Dist. at Current Rates

Indicated Change

Selected Change**

Fixed Expense Premium 7.8% NA N/C Variable Package Premium 79.8% NA 42.6% Total Owners Package 87.7% NA 38.8% Additional Coverages 12.3% NA N/C Total Owners 100.0% 104.3% 34.0% **We implicitly assume no indicated change for fixed expenses and additional coverages.



BASE DATA In developing rate level indications for Rhode Island, data from fiscal accident years ending March, 31, 2009 and 2010 was used. With this filing Allstate will begin evaluating accident year experience as of 12 months of development instead of 15 months of development. Analysis has shown that using 12 months of development, which allows for three more recent months of experience in our indication, is more predictive of future loss. Each of these fiscal accident years is evaluated as of March 31, 2010. Accident Year Weights A weight is applied to each year in order to appropriately consider responsiveness and stability. In developing the rate level indication for Rhode Island, the following accident year weights were applied: Latest Year Ending 3/31/2010: 61% First Prior Ending 3/31/2009: 39% This approach for incorporating credibility in determination of the accident year weights is consistent with the Current Practices and Alternatives detailed in Section 3 of Actuarial Standard of Practice No. 25, Credibility Procedures Applicable to Accident and Health, Group Term Life, and Property/Casualty Coverages.



ADJUSTMENTS TO LOSSES Loss Development As with past filings, Allstate determines ultimate accident year losses (including allocated loss adjustment expense) after analyzing ultimate incurred loss estimates arising from two methods: the link ratio method and the additive method. While the link ratio method assumes that future development is proportional to losses that have already emerged as of a given evaluation date, the additive method assumes that future development is proportional to the number of earned exposures in the accident period, where the expected development per exposure is based on historical development patterns per exposure, adjusted to account for differences in frequency and severity over time. Allstate believes the approach of considering two loss development procedures when estimating ultimate losses better upholds the suggestion contained in the Statement of Principles Regarding Property and Casualty Loss and Loss Adjustment Expense Reserves that “Ordinarily the actuary will examine the indications of more than one method when estimating the loss and loss adjustment expense liability for a specific group of claims.” Loss development factors and additive amounts were based on Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company data. Loss development patterns for Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company are expected to be similar, since claims settlement practices are the same for each company. To calculate estimated ultimate losses using the link ratio method, historical age-to-age link ratios are calculated, which represent loss development between different evaluation periods. An average of the historical link ratios is then used to estimate the ultimate level of paid losses to be used in ratemaking. This method assumes that historical loss development patterns can be used to estimate future loss development on current immature claims. For the additive loss development method, historical losses are first trended to today’s price level using pure premium trends selected from Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company data. This is done to avoid distortions due to changes in the underlying loss costs. Trended additive amounts per exposures are calculated, which represent trended loss development between different evaluation periods. An average of the historical trended additive amount per exposure is then used to estimate the ultimate trended level of paid losses. Trended age-to-ultimate additive amounts per exposure are multiplied by earned exposures for each accident year to calculate trended losses that have yet to emerge. A final step in the additive method is to detrend the trended losses yet to emerge. Losses are detrended because the application of trend is accounted for in a separate step in the


ratemaking process. This method assumes that historical loss development patterns per exposure can be used to estimate future loss development on current immature claims. Refer to Exhibits 4 and 5 of Attachment VI for the loss development using both the link ratio and additive methods of loss development. A summary of the estimated ultimate losses using each method as well as the selected ultimate losses is shown on Exhibit 3 of Attachment VI. Please note that the actual five year average loss development factors and additive amounts per exposure were used for all perils. Loss Adjustment Expenses Allocated loss adjustment expense (ALAE) is included in the losses. Losses in the experience period have been adjusted to account for non-hurricane unallocated loss adjustment expenses (ULAE). A provision is developed using countrywide Allstate Insurance Group personal property data. A two-year average of the ratios of countrywide calendar year non-hurricane ULAE to countrywide calendar year non-hurricane incurred losses and allocated loss adjustment expense is used to determine the ULAE provision. The average ratio is then applied to the losses for each year used in the formula calculation. The ULAE ratio used in this filing is shown in Exhibit 6 of Attachment VI. Loss Trend Using Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company data for the state of Rhode Island, the past changes in actual frequency and severity on a twelve-month-moving basis (evaluated at each quarter) over a five-year period were examined. After considering past results, knowledge of changes in various inflation indices relating to insurance, credibility level of Allstate data, industry data, and actuarial judgment, annual pure premium trends were selected. The Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company data has been adjusted as described below. Frequency and severity amounts are calculated using the methodology in “The Effect of changing Exposure Levels on Calendar Year Loss Trends” (Casualty Actuarial Society Forum, Winter 2005) by Chris Styrsky. This methodology helps to more consistently match losses and claims paid with the exposures that produced the claims. The selected trends are displayed in Exhibit 7 of Attachment VI. These annual selections are used to project the data from the average occurrence date of the experience period to the average occurrence date of the future policy period. The projection is also shown in Exhibit 7 of Attachment VI. Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company trend data is included in Exhibit 8 of Attachment VI.


Selections were based on Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company data. Exhibit 8 of Attachment VI displays the twenty-four-, twelve-, and six-point paid pure premium trends Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company in Rhode Island. This approach for selecting pure premium trends and projections is consistent with the Current Practices and Alternatives detailed in Appendix 1 – Background and Current Practices of Actuarial Standard of Practice No. 13, Trending Procedures in Property/Casualty Insurance Ratemaking. Catastrophes Allstate separately identifies and accounts for its exposure to loss due to the occurrence of catastrophic events within a state. All actual catastrophe losses during the experience period were removed and then replaced with a provision to reflect expected catastrophe losses in Rhode Island. The catastrophe provision is composed of a non-modeled catastrophe provision and a modeled catastrophe provision. The non-modeled catastrophe provision is described in detail in Attachment III. The modeled catastrophe provision is described in detail in Attachment IV. Exhibit 9 of Attachment VI, Development of Provision for Catastrophe Loss and LAE and Retained Risk Provision, displays the total catastrophe provision used in Rhode Island. Please note that in developing the Provision for Catastrophe Loss and LAE, the Amount of Insurance Years (AIY’s) are used as an exposure base. One AIY is equal to $1,000 of Coverage in force for one year. The AIY’s must be adjusted to represent the AIY’s that we expect to be in force during the policy period. Selections were based on Allstate Property and Casualty Insurance Company data. Exhibit 13 of Attachment VI shows the twenty-, twelve-, and six-point average AIY trends for Rhode Island. We have selected a -1.5% provision to project the AIY’s to the average earned date of the proposed policy period.

This approach for selecting AIY projections is consistent with the Current Practices and Alternatives detailed in Appendix 1 – Background and Current Practices of Actuarial Standard of Practice No. 13, Trending Procedures in Property/Casualty Insurance Ratemaking.



RETAINED RISK PROVISION With this filing, Allstate is introducing a retained risk provision in determining the rate level need in Rhode Island. This provision is meant to provide appropriate returns on the high-layer retained hurricane catastrophe exposure. Attachment V describes the development of the retained risk provision per Amount of Insurance Year (AIY). Exhibit 9 of Attachment VI, Development of Provisions for Catastrophe Loss and LAE and Retained Risk Provision, displays the retained risk provision per AIY used in Rhode Island. Similar to the Provision for Catastrophe Loss and LAE, AIY’s are used as an exposure base. Additionally, the same methodology was used to project the AIY’s to the average earned date of the proposed policy period and ultimately to calculate the expected retained risk provision in dollars. This approach is consistent with the Current Practices and Alternatives detailed in Appendix 1 – Background and Current Practices of Actuarial Standard of Practice No. 13, Trending Procedures in Property/Casualty Insurance Ratemaking. Since the retained risk provision represents an appropriate return for this high-layer retained hurricane catastrophe exposure, the underwriting profit provision for the corresponding loss and LAE is not applied. The methodology used to develop this retained risk provision is based upon the approach detailed in the presentation “Quantifying Risk Load for Property Catastrophe Exposure” by David Appel, director of Economics Consulting for Milliman, Inc., from the 2010 Casualty Actuarial Society Ratemaking and Product Management Seminar (http://www.casact.org/education/rpm/2010/handouts/RR3-Appel.pdf).

http://www.casact.org/education/rpm/2010/handouts/RR3-Appel.pdf



EXPENSES, PROFIT PROVISION & CONTINGENCY FACTOR The expense provisions described below were derived in accordance to Section 3.2, Determining Expense Provisions, of Actuarial Standard of Practice No 29, Expense Provisions in Property/Casualty Insurance Ratemaking. Exhibit 14 of Attachment VI shows the expense provisions used in developing the current fixed and variable expense ratios, as well as the underwriting profit and debt provisions.

Fixed Expenses

General and Other Acquisition Expense

Provisions The provisions for general expense and other acquisition expense are based on countrywide data. Since the methods and procedures that incur these expenses are uniform within each state, it is a reasonable assumption that these expense provisions are uniform across all states. To develop the provision for other acquisition and general expenses, a three-year average of countrywide calendar year incurred expense divided by countrywide calendar year direct earned premium was calculated. Because premiums charged for the net cost of reinsurance (NCOR) do not include provisions for general and other acquisition expenses, the earned premium used in the development of the general and other acquisition expenses is countrywide direct earned premium less countrywide NCOR premium. The expense figures are derived from the Insurance Expense Exhibit. The provision for other acquisition expense has been reduced by the amount of installment fees collected. In addition, the provision has been adjusted for premiums written off.

Rate Need Calculations In developing the dollar provision for general and other acquisition expenses used in the calculation of our Rhode Island rate level need, the three-year countrywide average expense ratio for general and other acquisition expenses is applied to the average earned group premium of Rhode Island. The Rhode Island group average earned premium is developed using the same three-year period used in the calculation of the countrywide expense ratio. The provision is then adjusted for the trend expected to occur from the midpoint of the three years used in the calculation of the average earned premium to the average earned date of the proposed policy period to derive the provision included in the rate level indications. The expense provisions for other acquisition and general expenses are developed on Exhibit 15 of Attachment VI.


Licenses & Fees A provision for licenses and fees that do not vary by premium size is determined by taking the arithmetic average ratio of these licenses and fees from the latest three calendar years in Rhode Island. The provision for licenses and fees is considered, along with the general and other acquisition expense provisions, to be a fixed expense and is shown on Exhibit 14 of Attachment VI.

Trend (Inflation) The method used to calculate the fixed expense trend is similar to the method used by the Insurance Services Office (I.S.O.) and other competitors to determine a fixed expense trend. The method utilizes the CPI (Consumer Price Index) and the ECI (Employment Cost Index – Insurance Carriers, Agents, Brokers, & Service) and is discussed by Geoffrey Todd Werner, FCAS, MAAA in his paper Incorporation of Fixed Expenses, which was published in the CAS Forum (Winter 2004). Based on a review of the historical indices, an annual percentage change is selected for each index. These selected annual percent changes are then weighted together using the distribution of the Allstate expenditures in the latest calendar year for the two broad expense categories that these indices represent. This method is expected to produce stable and reasonable estimates of the true trend in fixed expenses and is consistent with the Current Practices and Alternatives detailed in Appendix 1 – Background and Current Practices of Actuarial Standard of Practice No. 13, Trending Procedures in Property/Casualty Insurance Ratemaking. This trend is applied to all fixed expenses. The factor to adjust for subsequent change in Fixed Expense is shown on Exhibit 16 of Attachment VI.

Variable Expenses

Commission and Brokerage Expense The proposed commission and brokerage expense provision has been developed from the 2008 calendar year commission and brokerage incurred expense ratio in Rhode Island. The provision is shown on Exhibit 14 of Attachment VI.

Taxes The provision for taxes is determined by taking the currently prescribed Rhode Island premium tax ratio and adding to that the arithmetic average ratio of other assessments that vary by the size of the premium from the latest three or five calendar years ending 12/31/2008 in Rhode Island. The provision is shown on Exhibit 14 of Attachment VI.


Contingency Provision As with previous Allstate filings, the contingency provision of 2% is shown on Exhibit 14 of Attachment VI. Please note that the contingency provision does not apply to the retained risk provision.

Underwriting Profit Provision Allstate performs two separate cost of capital analyses in the estimation of its cost of equity. The first uses the Fama-French Three-factor Model (FF3F), which reflects developments in the field of financial economics as published in the Casualty Actuarial Society Forum, Winter, 2004 and in Journal of Risk and Insurance, Vol. 72, No. 3, September 2005 (“Estimating the Cost of Equity Capital For Property-Liability Insurers” by J. David Cummins and Richard D. Phillips). The second is a Discounted Cash Flow (DCF) analysis, which estimates the expected future cash flows to investors in order to gauge the proper cost of equity. Once both the DCF and FF3F estimates had been calculated, Allstate selected a cost of equity of 10.0%, which reflected the outcomes of both analyses. An analysis of premium, loss and expense cash flows is used to calculate the investment income on policyholder supplied funds (PHSF). This methodology is one of the two examples given in Actuarial Standard of Practice, No. 30, Treatment of Profit and Contingency Provisions and the Cost of Capital in Property/Casualty Insurance Ratemaking, as appropriate methods for recognizing investment income from insurance operations (page 4). The calculations detailing this investment income analysis are found on Exhibit 17 of Attachment VI. The expected investment yield rate (applied as a force of interest) used to discount losses and expenses includes anticipated net investment income and anticipated capital gains, both realized and unrealized. Operating cash flows are discounted to the average time of earnings of premium and profit for the policy year, rather than to the start of the policy year. The final pre-tax underwriting profit provision at present value is shown in Exhibit 17 of Attachment VI as well. The underwriting profit provision will not apply to the retained risk provision or the high-layer retained hurricane losses.

Debt Provision The cost of debt is listed as a separate provision in the Variable Expense and Profit Ratio. The debt provision amount is shown on Exhibit 14 of Attachment VI.



ADJUSTMENTS TO PREMIUMS Current Rate Level All premiums in the experience period were adjusted to current rate level in Rhode Island. As in the last filing, Allstate uses the “Miller-Davis-Karlinski” method to do this since it more accurately calculates factors to current rate level in instances when exposures are changing throughout the year, whether through growth, shrinkage or seasonality. When exposures are, in fact, written uniformly throughout the year, this method produces approximately the same answers as the parallelogram method.

We also use the Miller-Davis-Karlinski method to bring premiums to current rate level prior to calculating the changes in average premium (the premium trends). Premium Trend In addition to bringing premiums to current rate level, changes in the average written premium at the current premium level were reviewed on a state basis. Unlike losses, premium is relatively stable. Only the latest year of premium is used in the calculation of the indication, which eliminates the need for premium trend. Premium projections are still selected to account for shifts in the distribution of various underlying factors. Since the effects on losses caused by these shifts are reflected in the loss projections, it is important that Allstate also account for the anticipated future changes in premiums. Projections were based on Allstate Property and Casualty Insurance Company data. The selected projections are displayed in Exhibit 19 of Attachment VI. These annual projections are used to project the data from the average occurrence date of the most recent experience period to the average occurrence date of the future policy period. This approach for selecting premium trends and projections is consistent with the Current Practices and Alternatives detailed in Appendix 1 – Background and Current Practices of Actuarial Standard of Practice No. 13, Trending Procedures in Property/Casualty Insurance Ratemaking.

ATTACHMENT III

Summary of Non-Modeled Catastrophe Provision

Attachment III Page 1

ALLSTATE INSURANCE GROUP (INCLUDES ALLSTATE INSURANCE COMPANY, ALLSTATE INDEMNITY COMPANY, AND ALLSTATE PROPERTY AND

CASUALTY INSURANCE COMPANY) HOMEOWNERS FORMS

RHODE ISLAND

SUMMARY OF THE TOTAL NON-MODELED CATASTROPHE ADJUSTMENT Allstate separately identifies and accounts for its exposure to loss due to the occurrence of catastrophic events within a state. The adjustment to account for non-modeled catastrophes described below is consistent with the Analysis of Issues and Recommended Practices detailed in Section 3.4 of Actuarial Standard of Practice No. 39, Treatment of Catastrophe Losses in Property/Casualty Insurance Ratemaking. An estimation of our non-hurricane, non-earthquake catastrophe exposure is first developed on a total company statewide level. Subsequent relativities are used to estimate our catastrophe exposure by line and by company. In order to estimate our non-hurricane, non-earthquake catastrophe exposure at a state-wide level, we develop a long-term relativity of each state to our countrywide catastrophe factor for the latest fifteen years of data. We then apply this relativity to a countrywide catastrophe factor based on the most recent ten calendar years of data ending 3/31/2010. By using this approach, we are able to balance the stability of a long-term estimate of catastrophe potential in Rhode Island (needed because of the infrequent occurrence of catastrophes) and the responsiveness of more recent data (needed because of changing demographic conditions). Within our method we incorporated a credibility procedure designed to stabilize the results of individual states. The credibility is based on the standard (Buhlmann/Bayesian) credibility method as described in Loss Models, by Klugman, Panjer and Willmot, chapter 5, pages 436 to 441. The credibility reflects the confidence we have in the state’s average relativity. In order to develop the credibility, we consider the number of years used to determine the relativity as well as the variance of all states’ relativities to countrywide.* The complement of credibility is applied to a relativity of 1.000. The final relativity is applied to the countrywide catastrophe factor to develop the Rhode Island catastrophe factor. Exhibit 10 of Attachment VI displays the Development of the Total non-hurricane, non-earthquake, catastrophe provision of .266 for Rhode Island. This total non-hurricane, non-earthquake, catastrophe provision is then adjusted to account for the difference in the average catastrophe ratio between Owners and Homeowners as well as the difference in the average amount of insurance between Allstate Property and Casualty Insurance Company and Allstate Insurance Group.

Attachment III Page 2

Exhibit 11 of Attachment VI displays the development of the Allstate Insurance Group line-specific (Owners, Renters, Condo) non-hurricane, non-earthquake, catastrophe provision. Allstate Insurance Group Homeowner data is used to develop a non-hurricane, non-earthquake catastrophe provision for the state. Line specific loss data is used to develop catastrophe ratio relativities by line. These relativities are then re-indexed using the most recent year’s AIYs and then are applied to the state-specific non-hurricane, non-earthquake catastrophe provision for each line. Exhibit 12 of Attachment VI displays the development of the Allstate company-specific Owners non-hurricane, non-earthquake catastrophe provision. To more appropriately allocate the non-hurricane, non-earthquake catastrophe provision between companies Allstate has researched an Amount of Insurance scale based upon wind and non-hurricane catastrophes. The relativity is based on the average Amount of Insurance by company. This line specific and company specific provision is the final non-modeled Catastrophe provision per AIY used in the Development of Provisions for Catastrophe Loss and LAE and Retained Risk Provision shown on Exhibit 9 of Attachment VI. * Note: The number of years is used rather than exposures (as recommended in the standard model) because increased exposures does not necessarily lead to more stable estimates for catastrophes, particularly when the exposures are geographically concentrated.

ATTACHMENT IV

Summary of Modeled Catastrophe Provision

Attachment IV Page 1

ALLSTATE INSURANCE GROUP

OWNERS RHODE ISLAND

DEVELOPMENT OF THE HURRICANE PROVISION

BASED ON THE 2009/08 AIR VERSION 11.0 HURRICANE MODEL IN THE STATEWIDE RATE LEVEL INDICATION

EXPLANTATORY MEMORANDUM

I. INTRODUCTION The Casualty Actuarial Society Statement of Principles Regarding Property and Casualty Ratemaking defines a rate as “…an estimate of the expected value of future costs” and further states that “a rate provides for all costs associated with the transfer of risk”. Rates are therefore an estimate of the costs for the policies to which the rates will apply. In our property ratemaking we assume that the proposed rates will apply to the policies written for one year from the effective date of the rates. Each provision of the rate is based on an estimate of the costs associated with those policies. Losses expected from a hurricane are significantly different than losses expected from other types of catastrophic events. Hurricanes are unique because of the large potential impact such storms can have on the company's solvency and because of the relatively less frequent pattern for such events than those accounted for in the basic catastrophe provision. The significant variation in the frequency of different magnitudes of hurricanes diminishes the accuracy of historical hurricane loss experience for projecting expected loss levels for the policies to which proposed rates will apply. Average expected recurrence periods for the larger, more severe storms are so long that many external variables will change in the time periods between occurrences. For example, the area of southern Florida hit by Hurricane Andrew in 1992 was last hit by a major hurricane, Hurricane Betsy, in 1965. The type, number, value, vulnerability and geographical distribution of exposed properties in the area impacted by Hurricane Andrew are very different than those of the exposed properties in 1965. Actual loss statistics from a hurricane that occurred many years ago are not easily adjusted for the type, number, value, and vulnerability of present day structures. Since historical hurricane losses cannot be used to accurately estimate current hurricane loss potential, Allstate has contracted with an outside vendor, AIR Worldwide Corporation (AIR), which uses an alternative methodology based on Monte Carlo simulation to arrive at Allstate's expected annual hurricane losses. This approach involves the development of computer programs that describe in detail the frequency of hurricanes, their meteorological characteristics, and their effects on exposed properties. A high-speed computer then simulates a large set of hypothetical hurricanes and estimates the resulting property losses based on Allstate's exposure.


In order to estimate the potential loss from hurricanes, 100,000 scenario years of hurricane experience are simulated. This large number of simulations attempts to ensure that the resulting probability distribution of losses converges to a stable representative distribution of potential annual hurricane loss.

The pattern of simulated hurricanes is representative of what has occurred historically because meteorological data on the actual events since 1900 were used to estimate the parameters of the AIR hurricane simulation model. The meteorological sources used to develop the model are the most complete and accurate databases available from various agencies of the National Weather Service and the National Oceanographic and Atmospheric Administration (NOAA), including the National Hurricane Center. This explanatory memorandum incorporates text taken directly from documents supplied to Allstate by AIR Worldwide Corporation (AIR) and should not be copied or distributed without the express, written permission of AIR.

II. HURRICANE PARAMETERS AND WIND SPEED ESTIMATION HURRICANE PARAMETERS The primary characteristics of hurricanes used to simulate each storm and resulting wind speeds are: 1. Hurricane Frequency 2. Landfall Location 3. Central Pressure 4. Radius of Maximum Winds 5. Forward Speed

6. Track Angle at Landfall 7. Storm Track

The probability distributions of these variables are estimated for coastal segments of equal length from Texas to Maine. Random samples are generated from the probability distributions of these input variables to assign values to the variables for each simulated hurricane.

1. Hurricane Frequency More than one hundred years of history, spanning the period 1900-2007, were used to

estimate the parameters of the annual frequency distribution.

2. Landfall Location There are 3,100 possible landfall points in the AIR hurricane simulation model. The

cumulative distribution of landfall locations is developed for fifty nautical mile lengths of


coastline. This is done by first tabulating historical landfalls by fifty-mile coastal segments. The historical frequencies are then smoothed to produce an estimate of the landfall probability for each segment.

3. Central Pressure Central pressure is the lowest sea-level pressure at the center of the hurricane. This

variable is the primary determinant of hurricane wind speed. All else being equal, wind speeds increase as the central pressure decreases, or more precisely, as the difference between the central and peripheral pressure increases. Distributions are first fitted to historical central pressure data for each hundred nautical mile coastal segment. Separate distributions are then estimated for larger regions defined based on broad meteorological differences. The final distribution used for each segment is a combination, with appropriate weights applied, of the regional distributions and the segment distribution.

4. Radius of Maximum Winds Radius of Maximum Winds (Rmax) is the distance from the storm’s center (eye) to the

point where the strongest winds are found. The radius of maximum winds (Rmax) of stochastic events is estimated using a procedure that relates the radius of maximum winds to the central pressure of the storm and to latitude.

5. Forward Speed Forward Speed is the speed at which a hurricane moves from point to point. The

parameters of the distribution of forward speed are estimated for 100 nautical mile coastal segments. The lower bound of the distribution of forward speed is four nautical miles. The upper bound is dependent on latitude.

6. Track Angle at Landfall

Track Angle at Landfall is the angle between track direction and due north at landfall location. Separate distributions for track angle at landfall are estimated for segments of coastline that are variable in length with length dependent on general orientation of coastline.

7. Storm Track

The track direction of each simulated hurricane has the capability to curve and recurve on a fully probabilistic basis. Thus, the AIR hurricane simulation model has the ability to propagate a storm track that more accurately imitates actual storm motion.


HURRICANE WIND SPEED ESTIMATION Once the key parameters have been generated, the meteorological relationships among them are used to develop a complete time profile of wind speeds for each location affected by the storm. This involves the following calculations for each simulated hurricane: 1. Maximum Gradient-Level Wind Speed 2. Storm Asymmetry 3. Storm Decay (Filling) 4. Radial Decay (Storm Center-Relative Wind Speed) 5. Adjustment of Wind Speed for Surface Friction and Averaging Time

1. Maximum Gradient-Level Wind Speed The generated maximum wind speed is based on central and peripheral pressures, as well

as radius of maximum winds and meteorological coefficients accounting for air density and latitude coordinates. This wind, called the gradient-level wind speed, is estimated over a 10-minute averaging time and is reduced to the 10-meter height level through a scaling factor. The resulting wind represents the maximum wind speed attainable over water.

2. Storm Asymmetry

An asymmetry factor is calculated based on the forward speed of the hurricane and the relationship between the track direction and the surface wind direction. This factor is added to the wind speeds calculated to the right of the hurricane track and is subtracted from those calculated to the left of the hurricane track. This accounts for the additional wind speed contributed by the forward speed of the hurricane due to the counterclockwise movement of winds relative to the hurricane track. The wind field’s asymmetry is therefore a function of how quickly the storm is propagating.

3. Storm Decay (Filling) Once over land, the hurricane moves away from its source of energy, i.e., warm ocean

water. As a result, the eye “fills” and winds degrade subsequent to landfall. Filling equations used in the AIR model estimate the reduction in over-water wind speed as a function of time since landfall, rather than distance. A fast moving storm can produce damaging winds further inland than a slow moving storm with the same landfall intensity (wind speed). The filling equations vary by coastal region and smoothing is performed to ensure that there are no unrealistic jumps between regions.

4. Radial Decay (Storm Center-Relative Wind Speed)


The wind speed in any five-digit zip code is dependent on the distance of the zip code centroid from the eye of the storm. The estimated wind speed at any point within the hurricane is dependent on the maximum wind speed at each hour, the radius of maximum winds (Rmax), and the distance between the eye of the storm and the centroid of the zip code area. As a zip code centroid lies farther from the eyewall (at Rmax), the winds decay until they reach an ambient level at the periphery of the storm.

5. Adjustment of Wind Speeds for Surface Friction and Averaging Time

Differences in surface terrain also affect wind speeds. The roughness of the underlying surface induces friction which tends to slow down the winds, and induces turbulence effects which tend to generate short-lived gusts. The friction and gust effects are estimated based on the roughness of the surface over which the wind passes.

A friction factor is calculated to capture surface roughness at each affected site and the associated decrease in wind speed that results from surface obstacles. Estimates of surface roughness are derived from digital US Geological Survey (USGS) land use/land cover data. Each terrain type has a different “roughness value” that will lead to different frictional effects on wind speeds at different locations. In general, the rougher the terrain the larger the effect of friction on wind speeds.

As soon as a storm crosses the coastline, there is an immediate reduction in wind speed.

The reduction factors reach equilibrium values when the terrain is homogeneous over sufficiently large areas such that the surface winds come in balance with the surface. Thus, most local variability occurs when the underlying surface is diverse.

A gust factor is calculated to capture the effects of surface turbulence and is also

associated with the roughness of the terrain. Smooth surfaces impart only a small turbulent effect such that the 10-minute average wind speed is similar to the 1-minute average. The adjustment for rougher surfaces is more substantial since rough surfaces tend to generate short-lived gusts which will translate to a stronger maximum 1-minute sustained wind speed. The gust factor is computed using the same USGS land use data set as is used for the friction calculation.

III. DAMAGE ESTIMATION AND DEMAND SURGE AIR engineers have developed damage functions that describe the interaction between buildings, (including both structural and nonstructural components) and their contents, and the local wind speeds to which they are exposed. These functions relate the mean damage level as well as the variability of damage to wind speed at each location. Because different structural types will experience different degrees of damage, the damage functions vary according to construction class, occupancy, and height. The model estimates a complete distribution around the mean level


of damage for each local wind speed and each structural type. Losses are calculated by applying the appropriate damage function to the replacement value of the insured property. The AIR damage functions capture the effects of wind duration as well as the effect of peak wind speed. The longer a property experiences severe wind speeds, the greater the damage. The hurricane damageability relationships incorporate well-documented engineering studies published by wind engineers and other experts outside of AIR. They also incorporate the results of post-hurricane field surveys performed by AIR engineers. These relationships are continually refined and validated based on actual client companies’ loss data. Any major catastrophic event causes an increase in demand for materials and services to repair and rebuild damaged property. This can put pressure on costs, resulting in higher than expected costs. Therefore, AIR applies aggregate demand surge functions to loss estimates to take into account the combined effects of events clustered in both time and geography. This year, demand surge is incorporated within the modeled losses. In prior years, the modeled losses did not include demand surge and thus had a separate demand surge factor applied to the losses to account for demand surge.

IV. LOSS CALCULATION ALLSTATE EXPOSURE DETAIL Allstate has supplied AIR with a detailed exposure database containing insured values by policy level and ZIP Code for each line of business, construction, and deductible combination. Damage functions relating wind speed and wind duration to the percentage of property damaged for varying types of coverage and construction are used to produce loss estimates by zip code for each simulated hurricane. MODELED LOSS ESTIMATES Losses estimated from 100,000 years of simulated hurricane experience are summed and divided by 100,000 to produce the expected annual losses from all hurricanes for each ZIP Code. ZIP Code loss estimates are then aggregated to produce expected annual loss by county and state. Hurricane factors are then calculated as the total loss estimate for a given ZIP Code, county, or state divided by the total insured value in thousands of dollars (amount of insurance years). The hurricane factor for the state is displayed on Exhibit 9 of Attachment VI. This factor is applied to the expected average amount of insurance years in the determination of the overall rate level indication. ADJUSTMENTS TO MODELED LOSS ESTIMATES As advances in science and changes in claim payment behaviors evolve, Allstate re-evaluates how it currently reflects modeled catastrophe losses in ratemaking. At times it is necessary to adjust the modeled losses to more accurately estimate the Property and Casualty industry’s risk from catastrophes. Note that all adjustments made to the modeled losses are under continual development and may change in the future as Allstate learns more about the changing risk environment. Modeled loss estimates include adjustments for:


1. Atlantic Warm Sea Surface Temperature 2. Loss Adjustment Expenses

1. Atlantic Warm Sea Surface Temperature Adjustment

Meteorological research has identified correlations between naturally varying ocean temperatures and hurricane activity originating in the Atlantic that affects both the Gulf and the Atlantic coastlines. The active 2004 and 2005 hurricane seasons have heightened Allstate’s awareness of such relationships. Scientists have concluded that the climate is presently undergoing a cycle of warmer than average sea surface temperatures which is expected to result in increased hurricane activity in the United States. It is well known that the ocean is able to retain heat for very long periods of time, a physical characteristic known as persistence. Due to the ocean’s long-term persistence and the associated ocean current cycle known as the Atlantic Thermohaline Circulation, most scientists believe that the Atlantic Ocean is likely to remain warmer than average for the next several years. Methodology: Since our cost estimates are for the policy period to which rates will apply, it is important that we use a methodology that recognizes any cyclical patterns. The AIR WSST hurricane catalog (using 50,000 years of simulations) is a catalog developed to account for the impact of warm sea surface temperatures in the Atlantic Ocean on hurricane landfall activity. The WSST catalog is based on AIR’s standard hurricane catalog with adjustments made to landfall frequencies by region to reflect the expected impact of warmer-than-average sea surface temperatures. All of the model components aside from the catalog are that of the AIR Atlantic Tropical Cyclone Model, Version 11.0. The AIR WSST catalog was used to calculate an Average Annual Loss net of deductible and gross of reinsurance (referred to as “Gross AAL”). In addition, the AIR standard hurricane catalog (using the first 50,000 years of simulations) was used to calculate an Average Annual Loss net of deductible and gross of reinsurance (referred to as “Gross AAL”). The WSST Factor was developed by taking the ratio of the Gross AAL from the WSST hurricane catalog to the Gross AAL from the standard hurricane model.

Indicated WSST Factor = Gross AAL from AIR WSST hurricane catalog

Gross AAL from AIR standard hurricane catalog The WSST Factors were calculated for each state and line of business. Allstate reviewed the methodology for WSST factors and determined to remove the wind pool policies from the factor calculations to be consistent with the Hurricane Factor Methodology. The impact of removing wind pool losses had minimal to no impact to the WSST factors.


Data: 2009/08 WSST Factors - Without Wind Pool

State Factor

Rhode Island 1.009

* Uses 50,000 Years

2. Loss Adjustment Expenses

Loss Adjustment Expenses (LAE), both allocated and unallocated, represent the costs of adjusting, investigating and settling losses. Allocated expenses are incurred while investigating and settling claims during the catastrophe and are considered allocated since they can be linked directly to a claim file. Unallocated expenses are associated with processing claims but cannot be linked directly to a claim file. Modeled hurricane losses provided by AIR do not include LAE. Therefore it is necessary to develop a LAE provision to be applied to these losses for use in pricing and catastrophe exposure management. In order to account for the LAEs associated with hurricane losses, we have applied a factor of 1.16 to the modeled losses for all property lines. The selection of this provision was based on a study of the LAE associated with hurricane losses for Allstate. Methodology: Allocated Loss Adjustment Expense (ALAE) Ten years of loss and allocated expense information is obtained from our corporate database with the 2008 hurricanes as the latest addition to the analysis. Tropical storms are not included in the ALAE analysis, as they are not simulated in the modeled loss data. Ratios of allocated expenses to losses were developed for events from 1999 through 2008. Unallocated Loss Adjustment Expense (ULAE) Loss and unallocated expense information is obtained from various corporate databases starting in 1999 and includes the 2008 hurricane as the latest addition. Tropical storms are not included in the ULAE analysis, as they are not simulated in the modeled loss data. Ratios of unallocated expenses to losses were developed for events from 1999 through 2008.


Allstate Insurance GroupAllstate Personal and Commercial Lines CombinedLoss Adjustment Expense Analysis ‐ Hurricane Peril

ALAE 1.4%ULAE 17.0%Total 18.4%

Selected: 16.0%

V. ACTUARIAL STANDARDS OF PRACTICE The rules and procedures as set forth in Actuarial Standard of Practice No. 23, Data Quality and Actuarial Standard of Practice No. 38, Using Models Outside the Actuary’s Area of Expertise (Property and Casualty) were applied in reviewing the modeled losses.

ATTACHMENT V

Retained Risk Provision

Attachment V Page 1


OWNERS RHODE ISLAND

DEVELOPMENT OF RETAINED RISK PROVISION DUE TO CATASTROPHE

EXPOSURE With this filing, Allstate is introducing a provision in the rates to cover the risk of exposing its capital to large catastrophic events. This retained risk provision (RRP) is intended to provide appropriate compensation to Allstate relative to its retained, high-layer catastrophe risk. The provision described below is consistent with the rules and procedures set forth in the Actuarial Standard of Practice No. 38, Using Models Outside the Actuary’s Area of Expertise (Property and Casualty) and Actuarial Standard of Practice No. 39, Treatment of Catastrophe Losses in Property/Casualty Insurance Ratemaking. The procedure for developing the RRP calls for identifying the portion of catastrophic losses that will be retained by Allstate and then estimating the cost to Allstate of holding the capital required to pay such losses. To measure the amount of retained losses, Allstate’s actual reinsurance contracts are applied to the modeled losses based on the 2009/08 AIR Version 11.0 Hurricane and Earthquake Model for Rhode Island. This provides an estimate of the portion of the losses that will be covered by Allstate’s reinsurance contracts and the amounts that will be retained by Allstate. Once the retained losses in excess of a 1-in-5-year event (i.e., 20% annual occurrence probability) have been determined, we then calculate the appropriate compensation for exposure to such losses by using data from capital markets – specifically the market for catastrophe bonds. The details of the procedures used to determine the magnitude of retained losses at various occurrence probabilities, and the investor-required compensation for bearing the risk of those losses, are explained in more detail below. Catastrophe bonds are one of a class of financial instruments known collectively as “insurance linked securities (ILS).” ILS have payoffs conditional on future contingent events, such as the occurrence of hurricanes. While there are a variety of ILS traded in today’s capital markets, the most common and prominent of these are catastrophe bonds, which are bonds that may default on both principal and interest if a specific catastrophic event occurs. Typically a catastrophe bond is issued by an insurance company with a provision that if a specified catastrophic event (e.g., hurricane in Florida, earthquake in California, winter storm in Europe, etc.) of a particular magnitude occurs, the issuer may default on the payment of principal and/or interest on the bond. In that respect, the bond functions similarly to reinsurance – once the “attachment point” is breached, the insurer receives a benefit that at maximum is equal to the face amount of the bond. When catastrophe bonds are sold, investors naturally demand a yield premium as compensation for the risk of default. Mechanically, when catastrophe bonds are sold, the issuer deposits the proceeds of the sale into a segregated account which pays interest at the risk free rate. However, because of the default risk, the yields on such bonds must be higher than the risk free rate. Thus, the interest in excess of the risk free rate is an excellent basis for measuring the risk premium that the marketplace has

Attachment V Page 2

established for bearing catastrophe exposure. Furthermore, since insurers face the same risk of catastrophic loss as investors, the risk premiums paid in capital markets provide an appropriate measure of the compensation required for the insurer as well. There are several reasons why this is a particularly useful way to quantify a RRP in ratemaking. First, the data are drawn directly from capital markets, meaning they reflect the consensus of all investors as to the compensation required for bearing catastrophe risk. Second, they reflect exactly the types of risks to which insurers are exposed when they write property coverage in catastrophe prone states; as such they represent an appropriate estimate of the return demanded for the catastrophe exposure. Third, the entire analysis is free of assumptions regarding insurer-specific factors such as cost of capital, leverage, and investment income. Finally, the data required to adapt this information to insurance ratemaking is readily available and reported regularly at annual (or more frequent) intervals. The data used in the calculation of the retained risk provision was selected in accordance with the considerations listed in Section 3.2 of Actuarial Standard of Practice No. 23, Data Quality. As regards the data, the sources Allstate relies upon are the annual publications of Lane Financial LLC, the most prominent analyst of the ILS market in the US. Annually, Lane Financial provides a summary of all newly issued catastrophe bonds, which includes information on the following critical variables:

• Face amount of bond • Insured peril • Yield spread to risk free rate (the excess return or risk premium on the bond) • Probability of first loss (the probability that the insured event will cause any loss of

principal or interest) • Probability of exhaustion (the probability that the loss will be large enough to exhaust the

entire principal of the bond) • Expected value of loss (the annual average loss given the probability of attachment and

exhaustion, expressed as a percent of the face amount of the bond)

Allstate uses this data to develop the appropriate RRP by state, line, and company in the following manner. First, profit multiples are calculated, which are obtained by subtracting the expected value of loss from the excess return on the bond, and then dividing that quantity by the expected loss. This profit multiple is essentially a measure of the profit an investor expects per dollar of expected loss on the bond. However, as might be expected, the amount of profit that investors require per dollar of loss depends on the riskiness of the losses themselves. For bonds that are extremely risky (i.e., that have very low probabilities of attachment) the profit multiples are considerably higher than for less risky instruments. Therefore, when the data are compiled, the profit multiples are computed for bonds in several different groups: those with attachment probabilities of 20% - 10%, 10% - 5%, 5% - 2%, 2% - 1%, 1% - 0.4%, and less than 0.4%. As expected, these profit multiples increase as the attachment probabilities decrease. The next step is to apply these profit multiples to the amount of catastrophe losses retained by Allstate. To do this, the amount of retained catastrophe losses are compiled by layer, where the layers are defined by occurrence probabilities in the same ranges as the profit multiples described above. Given the expected retained losses within each layer and the required profit per dollar of

Attachment V Page 3

loss as measured by the profit multiples, the RRP (in dollars) is calculated by multiplying the expected retained losses within each layer by the corresponding profit multiple and summing across the layers. This result can be used to estimate the appropriate compensation to Allstate for its retained catastrophe exposure. These calculations are performed using annual aggregate catastrophe losses since Allstate’s surplus is exposed to multiple events in the same year. The aggregate annual occurrence probabilities are determined by using all catastrophe losses in Rhode Island using the AIR model event sets. The AIR model produces 50,000 years of modeled losses, which are initially ranked from high to low. The loss sizes are determined for each of the occurrence probabilities that are used to define the loss layers (0.4%, 1%, 2%, 5%, 10%, and 20%). For example, the 1-in-100-year loss (1% probability) is the amount of catastrophe loss in the 500th largest year (1% of 50,000), the 1-in-250-year loss (0.4% probability) is the amount of catastrophe loss in the 200th largest year, etc. Once the loss sizes are determined for the boundaries of each layer, all expected losses from the AIR model are distributed into these layers of loss. Next, the amount of losses in each layer that are covered by Allstate’s reinsurance contracts is determined by applying Allstate’s reinsurance contracts to the modeled losses. The following items need to be considered when applying Allstate’s reinsurance contracts:

• For events that impact more than one state, the reinsured losses are allocated to each affected state proportional to those events’ expected losses in each state.

• Allstate’s countrywide (excluding Florida) reinsurance contract is an annual aggregate excess-of-loss contract that covers catastrophe losses in a year, subject to the terms and limits of that contract.

• The reinsurance coverage provided by the countrywide contract is applied to each state proportional to each state’s expected losses in the reinsured layer.

• Some states have multiple reinsurance contracts that provide coverage for various types of catastrophe losses – these may include state-specific or regional reinsurance contracts in addition to the countrywide contract.

• Additional considerations are required when there are multiple events in a year to ensure that the reinsured losses are allocated properly to each state.

Allstate’s retained losses for each event are derived by subtracting the losses covered by reinsurance from the total expected losses. In some years, the retained losses exceed the total amount of Allstate’s statutory surplus. Those years with retained losses in excess of Allstate’s surplus are identified and Rhode Island’s portion of the excess losses is determined proportional to the retained losses in that year. The losses in excess of Allstate’s statutory surplus are subtracted from the retained losses to determine the exposed losses covered by Allstate’s surplus. The indicated RRP is then developed by applying the profit multiple indicated by capital markets to the exposed Rhode Island losses covered by surplus in each layer. The dollars of RRP are summed across the layers, and a diversification factor is applied to account for the fact that Allstate is a multi-line, multi-state company, to determine the total RRP.

Attachment V Page 4

Finally, the dollars of calculated RRP are divided by Amount of Insurance Years (AIYs) to develop a per-AIY charge that is included in the rate level indication.

Attachment V Page 5


OWNERS RHODE ISLAND

DEVELOPMENT OF RETAINED RISK PROVISIONS BY ZONE, CONSTRUCTION,

DEDUCTIBLE, AND AMOUNT OF INSURANCE With this filing, Allstate is introducing rates for the Retained Risk Provision (RRP) described in Pages 1 through 4 of this attachment. These have been estimated per unit of exposure (and not directly in proportion to premium). The exposure base used to derive these Retained Risk Provisions is amount of insurance years (AIYs). The indicated RRP per AIY, as determined in Exhibit 2, has been distributed by RRP zone, construction type, and deductible. The RRP for an individual policy will be calculated by multiplying the base RRP, which will vary by RRP zone, construction type, and deductible, by two factors. The first factor, the RRP Rate Adjustment Factor, will adjust all provisions by a fixed proportion. The second factor will vary depending on the policy’s amount of insurance. Currently, these factors are proportional to a policy’s amount of insurance. Note that the deductible used in the RRP calculation is specific to the deductible applicable to hurricane losses. Please see the attached Manual Pages for RRP zone definitions, RRP limit factors (amount of insurance scale), and base RRPs. Also note that the RRP zone definitions are the same as our current reinsurance zone definitions in Allstate Property and Casualty Insurance Company.

Attachment VExhibit 1


Summary of Catastrophe Bond Profit MultiplesBased on Short-Term Cat Bonds issued between 2006 and 2010 for all U.S. bonds

with a probability of loss between 0.05% and 20.00%

Probability # of Cat BondsAverage Size of Issue

($ Millions) Profit Multiple 1

10% to 20% 7 $27.1 2.055% to 10% 15 47.5 2.082% to 5% 42 82.9 4.381% to 2% 23 121.6 5.69

0.4% to 1% 20 177.1 7.97less than 0.4% 14 59.7 15.70

Total 121 $95.5 6.11

Source: Lane Financial LLC, Annual Securitization ReviewsNotes: The 14 cat bonds in the "less than 0.4%" layer are from 1999 through 2010 1 Excludes cat bonds with no stated profit multiples

Attachment VExhibit 2

Development of Retained Risk ProvisionWind/Hurricane Peril

(1) (2) (3) (4) = (1) - (2) - (3) (5) (6) = (4) x (5)

LayerProbability of

AttachingExpected

LossReinsured

LossExposed LossesAbove Surplus

Exposed LossesCovered by Surplus

Cat BondProfit Multiple

Retained Risk Provision by Layer

1 100.0% $0 $0 $0 $0 0.00 $02 20.0% 0 0 0 0 2.05 03 10.0% 356,958 9,416 13 347,529 2.08 723,5554 5.0% 592,069 64,218 401 527,450 4.38 2,312,3425 2.0% 213,054 79,123 520 133,411 5.69 758,5746 1.0% 210,891 131,928 289 78,674 7.97 626,9537 0.4% 375,819 132,256 676 242,886 15.70 3,813,309

Total $1,748,791 $416,942 $1,899 $1,329,950 $8,234,733

0.374

$3,083,548Notes: Losses include loss and 16.0% LAE

3,681,639

0.838

*1 AIY = One Amount of Insurance Years = $1000 of Coverage in Force for One Year

Allstate Property and Casualty Insurance CompanyOwners FormsRhode Island

= (8) / (9)

(7) Diversification Factor:

= (6) Total * (7)(8)Total Diversified Retained Risk Provision (in $):

(9)Rhode Island AIC Owners AIYs*:

(10) Indicated Retained Risk Provision per AIY:

ATTACHMENT VI

Rate Level Indication Exhibits

Attachment VIExhibit 1

$918.02

a) Non-Catastrophe Loss and LAE $677.59b) Non-Modeled Catastrophe Loss and LAE $91.48c) Low-Layer Retained and Ceded Hurricane Catastrophe Loss and LAE $35.75d) High-Layer Retained Hurricane Catastrophe Loss and LAE $113.20

8.7%

$799.67

$69.57

1.115

$77.57

24.9%

a) Variable Expense Ratio (including Commissions, Taxes, and Debt Provision) 15.1%b) Contingencies Ratio 2.0%c) Profit Ratio 7.8%

$252.16

$1,608.51

a) Non-Catastrophe Loss and LAE $1,174.95Non-Modeled Catastrophe Loss and LAE Low-Layer Retained and Ceded Hurricane Catastrophe Loss and LAE Fixed Expense [ (1a) + (1b) + (1c) + (6) ]/[ 1 - (7 Total) ]

b) High-Layer Retained Hurricane Catastrophe Loss and LAE (1d)/[ 1 - (7a) - (7b)] $136.55c) Retained Risk Provision (8) / [1 - (7a)] $297.01

$787.18

104.3%

8) Indicated Retained Risk Provision

9) Indicated Average Premium [ (a)+(b)+(c) ]

4) Current Dollar Provision for Fixed Expense [ (2) x (3) ]

5) Factor to Adjust for Subsequent Change in Fixed Expense

6) Indicated Provision for Fixed Expense [ (4) x (5) ]

7) Variable Expense, Contingencies Ratio and Profit Ratio [ (a) + (b) + (c) ]

10) Projected Average Earned Premium at Current Rates

11) Indicated Rate Level Change [ (9 Total) / (10) - 1.0 ]


Determination of Statewide Rate Level Indication

1) Indicated Provision for Loss and Loss Adjustment Expense [(a)+(b)+(c)+(d)]

2) Current Fixed Expense Ratio

3) Three Year Average Earned Premium


Fiscal Year Ending(1)

Earned Exposures

(2)Accident Year *Non-Catastrophe

Ultimate Loss

(3)Non-Cat Ultimate

Loss andLAE

(4)Factor to AdjustLosses for PurePremium Trend

(5)Projected Non-Cat.

UltimateLoss and LAE

(6)Projected Average

Non-Cat.Loss and LAE

(5) / (1)

(7)Experience Year

Weights

3/31/2009 6,749 $3,132,000 $3,620,592 1.225 $4,435,225 $657.17 39 %3/31/2010 11,660 6,084,000 7,033,104 1.145 8,052,904 690.64 61

$677.59

* Evaluated at 12 months

Allstate Property and Casualty Insurance CompanyOwners

Rhode Island

Development of Provision for Non-Cat Loss and LAETotal All Perils excluding Earthquake

Development of Provision for Non-Cat Loss and LAE

(8) Indicated Provision for Non-Cat Loss and LAE


Link Ratio AdditiveYear Estimate Estimate Selected

2009 3,211,007 3,131,049 3,132,0002010 6,438,943 6,083,675 6,084,000

Ultimate Losses & ALAE

OwnersRhode Island

Allstate Property and Casualty Insurance Company

Total All PerilUltimate Losses & ALAE


Fiscal AccidentYear Ending 3/31 12 Months 24 Months 36 Months 48 Months 60 Months 72 Months 84 Months 96 Months 108 Months 120 Months‡

1997 3,974,007 4,421,531 4,488,230 4,505,881 4,545,844 4,616,722 4,642,156 4,674,040 4,666,993 4,662,3321998 2,988,344 3,304,982 3,283,560 3,377,756 3,475,049 3,479,620 3,492,463 3,523,089 3,523,317 3,523,3171999 3,817,220 4,042,640 4,084,527 4,127,831 4,130,292 4,145,273 4,148,464 4,144,125 4,144,125 4,144,1252000 4,043,955 4,419,325 4,471,696 4,531,952 4,544,793 4,568,899 4,582,143 4,604,614 4,583,235 4,583,2352001 4,305,130 4,830,678 4,934,103 5,044,603 5,138,008 5,126,399 5,055,826 5,085,826 5,059,853 5,059,8532002 3,929,586 4,276,200 4,392,205 4,371,023 4,509,967 4,536,345 4,550,561 4,557,469 4,557,4692003 3,992,989 4,569,123 4,508,088 4,595,995 4,793,650 4,824,836 4,939,181 4,948,0532004 4,628,649 5,233,377 5,336,986 5,433,792 5,401,172 5,396,820 5,303,0682005 3,996,576 4,449,335 4,616,958 4,726,607 4,739,524 4,781,6432006 6,565,547 7,037,749 7,422,555 7,871,608 8,038,4382007 7,322,878 7,836,949 7,723,383 7,730,3902008 12,327,953 12,793,559 13,275,0962009 11,299,207 12,372,0472010 13,036,959

Development 12 to 24 24 to 36 36 to 48 48 to 60 60 to 72 72 to 84 84 to 96 96 to 108 108 to 1204th Prior 1.113 1.020 1.019 1.032 0.998 1.003 0.999 1.000 0.9993rd Prior 1.072 1.038 1.018 1.043 1.006 0.986 1.005 1.000 1.0002nd Prior 1.070 1.055 1.024 0.994 1.007 1.003 1.006 0.995 1.0001st Prior 1.038 0.986 1.060 1.003 0.999 1.024 1.002 0.995 1.000

Latest 1.095 1.038 1.001 1.021 1.009 0.983 1.002 1.000 1.000

3 Year Average: 1.068 1.026 1.028 1.006 1.005 1.003 1.003 0.997 1.0005 Year Average: 1.078 1.027 1.024 1.019 1.004 1.000 1.003 0.998 1.000

5 Year Excluding High/Low Outliers: 1.079 1.032 1.020 1.019 1.004 0.997 1.003 0.998 1.0005 Year Excluding Outliers: 1.078 1.027 1.024 1.019 1.004 1.000 1.003 0.998 1.000

Selected: 1.078 1.027 1.024 1.019 1.004 1.000 1.003 0.998 1.000

Loss Development Period ( months ): 12 - 120 24 - 120Loss Development Factor: 1.161 1.077Selected Ultimate Losses: 6,084,000 3,132,000

Year Inc. Loss Factor to UltimateUltimate Loss &

ALAE2009 $2,981,436 1.077 3,211,0072010 $5,546,032 1.161 6,438,943

Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance CompanyOwners

Rhode Island

†Includes ALAE‡Includes supplemental reserves in addition to case reserves

Calculation of Loss Development FactorsTotal All Perils excluding Earthquake

Incurred Losses †

Link Ratios


Fiscal Accident Earned Year Ending 3/31 12 Months 24 Months 36 Months 48 Months 60 Months 72 Months 84 Months 96 Months 108 Months 120 Months‡ Exposures

1997 3,974,007 4,421,531 4,488,230 4,505,881 4,545,844 4,616,722 4,642,156 4,674,040 4,666,993 4,662,332 23,6301998 2,988,344 3,304,982 3,283,560 3,377,756 3,475,049 3,479,620 3,492,463 3,523,089 3,523,317 3,523,317 23,0951999 3,817,220 4,042,640 4,084,527 4,127,831 4,130,292 4,145,273 4,148,464 4,144,125 4,144,125 4,144,125 22,8822000 4,043,955 4,419,325 4,471,696 4,531,952 4,544,793 4,568,899 4,582,143 4,604,614 4,583,235 4,583,235 22,6862001 4,305,130 4,830,678 4,934,103 5,044,603 5,138,008 5,126,399 5,055,826 5,085,826 5,059,853 5,059,853 22,5662002 3,929,586 4,276,200 4,392,205 4,371,023 4,509,967 4,536,345 4,550,561 4,557,469 4,557,469 22,7872003 3,992,989 4,569,123 4,508,088 4,595,995 4,793,650 4,824,836 4,939,181 4,948,053 23,1292004 4,628,649 5,233,377 5,336,986 5,433,792 5,401,172 5,396,820 5,303,068 23,9392005 3,996,576 4,449,335 4,616,958 4,726,607 4,739,524 4,781,643 25,9172006 6,565,547 7,037,749 7,422,555 7,871,608 8,038,438 28,4482007 7,322,878 7,836,949 7,723,383 7,730,390 31,2122008 12,327,953 12,793,559 13,275,096 35,4712009 11,299,207 12,372,047 38,1542010 13,036,959 39,748

Selected Trend: 7.0%

Fiscal AccidentYear Ending 3/31 12 Months 24 Months 36 Months 48 Months 60 Months 72 Months 84 Months 96 Months 108 Months 120 Months‡

1997 11,246,730 11,235,4971998 7,934,671 7,935,185 7,935,1851999 8,731,903 8,722,770 8,722,770 8,722,7702000 8,987,716 9,013,769 9,057,973 9,015,917 9,015,9172001 9,446,018 9,424,675 9,294,930 9,350,084 9,302,333 9,302,3332002 7,510,231 7,748,963 7,794,285 7,818,711 7,830,580 7,830,5802003 7,239,004 7,380,164 7,697,554 7,747,632 7,931,245 7,945,4922004 7,853,888 8,009,377 8,154,657 8,105,703 8,099,172 7,958,4752005 5,605,405 6,240,423 6,475,522 6,629,311 6,647,428 6,706,5022006 8,606,093 9,225,053 9,729,455 10,318,072 10,536,7522007 8,970,840 9,600,600 9,461,476 9,470,0602008 14,114,273 14,647,346 15,198,6572009 12,090,151 13,238,0902010 13,036,959

Development 12 to 24 24 to 36 36 to 48 48 to 60 60 to 72 72 to 84 84 to 96 96 to 108 108 to 1204th Prior 24.502 6.495 6.103 10.477 -0.946 1.148 -0.399 0.022 -0.4753rd Prior 21.758 9.071 6.069 13.723 1.989 -5.750 1.949 0.000 0.0002nd Prior 20.177 17.731 5.934 -2.045 2.165 1.072 2.444 -1.854 0.0001st Prior 15.028 -4.457 20.691 0.699 -0.273 7.939 0.521 -2.116 0.000

Latest 30.087 15.543 0.275 7.687 2.279 -5.877 0.616 0.000 0.000

5 Year Weighted Average: 22.39 9.02 7.82 5.99 1.07 -0.32 1.02 -0.78 -0.10Selected: 22.39 9.02 7.82 5.99 1.07 -0.32 1.02 -0.78 -0.10

Loss Development Period ( months ): 12 - 120 24 - 120Additive Amt per Exp: 46.11 23.72

Selected Ultimate Losses: 6,084,000 3,132,000

Year

TrendedAge-to-Ult

Additive AmtPer Exposure

EarnedExposures

TrendedLosses YetTo Emerge

De-TrendedLosses YetTo Emerge

IncurredLoss & ALAE

UltimateLoss & ALAE

2009 23.72 6,749 160,086 149,613 2,981,436 3,131,0492010 46.11 11,660 537,643 537,643 5,546,032 6,083,675

†Includes ALAE‡Includes supplemental reserves in addition to case reserves

Incurred Losses †

Trended Incurred Losses

Trended Additive Amounts per Exposure

Calculation of Loss Development FactorsTotal All Perils excluding Earthquake

Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance CompanyOwners

Rhode Island

Attachment VIExhibit 6ALLSTATE INSURANCE GROUP*

Personal Property LinesCountrywide Expense Experience - Unallocated (Adjusting and Other Expense) Factors

2007 & 2008

2007 - 2008

1. Direct Losses and Allocated Loss Adjustment Expense Incurred excluding Earthquake and 7,137,196 Hurricane Losses

2. Direct Unallocated Loss Adjustment ExpenseIncurred excluding Earthquake and Hurricane 1,111,509

3. Ratio (2)/(1) 0.156

4 Proposed Provision 0.156

* Allstate Insurance Company, Allstate Indemnity Company, Allstate Property and Casualty Insurance Company Allstate County Mutual Insurance Company and Allstate Fire & Casualty.

(000 Omitted)


PerilTotal All Perils excluding Earthquake 7.00 % 7.00 %

1st Prior Year Current Year1) Loss Trend Projection Date 10/1/2011 10/1/20112) Mid-Point of Current Year's Experience Period 9/30/2009 9/30/20093) Experience Period Ended 3/31/2009 3/31/20104) Midpoint of Experience Period 9/30/2008 9/30/20095) Historical: Number of Years from (4) to (2) 1.000 0.0006) Projected: Number of Years from (2) to (1) 2.003 2.003

Calculation of Trend Factors

(b) Projected Pure Premium Factors are the Annual Projected Impacts plus unity compounded for the number of years in (6)

(c) Factor to Adjust Losses for Pure Premium Trend = (a) x (b)

Historical Projected

Calculation of Pure Premium Trend Factor

Selected Annual Pure Premium Impacts

(a) Historical Pure Premium Factors are the Annual Historical Impacts plus unity compounded for the number of years in (5)


Rhode Island


Year Ending 6 pt.06/04 $200.63 -3.91 % $177.2409/04 188.89 -6.98 183.0812/04 190.35 -5.59 189.1203/05 179.81 -13.10 195.3506/05 186.47 -7.06 201.8009/05 203.35 7.66 208.4512/05 212.95 11.87 215.3203/06 239.66 33.29 222.4206/06 234.57 25.80 229.7609/06 235.20 15.66 237.3412/06 221.63 4.08 245.1603/07 218.15 -8.98 253.2506/07 247.01 5.30 261.60 $273.7009/07 260.15 10.61 270.22 281.2612/07 287.06 29.52 279.13 289.0303/08 318.93 46.20 288.34 297.0106/08 331.75 34.31 297.85 305.2209/08 347.40 33.54 307.67 313.6512/08 361.77 26.03 317.82 322.31 $336.2503/09 346.06 8.51 328.30 331.22 338.1706/09 315.72 -4.83 339.12 340.37 340.1009/09 305.87 -11.95 350.30 349.77 342.0512/09 340.16 -5.97 361.86 359.43 344.0003/10 382.81 10.62 373.79 369.36 345.97

6 pt.

2.30 %

8.04 %

41 %

5.69 %

11.52 %

10.84 %

41 %

11.12 %

In Year Ending 3/2010:

Credibility Weighted Annual Trend:

13.86 %

8.00 %

41 %

10.40 %

Avg Annual Percent Change Based on Best Fit:

CountrywideAvg Annual Percent Change Based on Best Fit:

State Credibility based on 1,816 Paid Claims

Regression 24 pt. 12 pt.

Loss Trends - Pure PremiumTotal All Perils excluding Earthquake

Exponential Curve of Best Fit

Actual Paid Pure Premium Annual Change 24 pt. 12 pt.


Rhode Island


0.263

2) Non-Modeled Catastrophe Provision Per AIY Including All LAE 0.304

3) Hurricane Provision Per AIY Including All LAE 0.495

4) Retained Risk Provision Per AIY 0.838

5) Earned Exposures 11,660

6) Earned AIY* 3,617,170

7) Average Earned AIY* (6)/(5) 310.22

8) Factor to Adjust to Projected Average AIY Level 0.970

9) Average AIY Projected to 10/1/2011 (7)*(8) 300.91

10) Expected Non-Modeled Catastrophe Pure Premium (2)*(9) $91.48

11) Proportion of High-Layer Retained Modeled Losses to Total Expected Modeled Losses 0.76

12) Expected Modeled Catastrophe Pure Premium (3)*(9) $148.95

a) Low-Layer Retained and Ceded Hurricane Catastrophe Pure Premium [ 1 - (11) ]*(12 Total) $35.75 b) High-Layer Retained Hurricane Catastrophe Pure Premium (11)*(12 Total) $113.20

13) Expected Retained Risk Provision (4)*(9) $252.16

*1 AIY = One Amount of Insurance Years = $1000 of Coverage in Force for One Year

Development of Provisions for Catastrophe Loss and LAE and Retained Risk Provision

1) Non-Modeled Catastrophe Provision Per AIY



(1) (2) (3) (4) (5) (6)

AMOUNT OF CATASTROPHE STATE COUNTRYWIDECALENDAR INSURANCE INCURRED CATASTROPHE CATASTROPHE

YEAR YEARS LOSS RATIO RATIO RELATIVITIES

1995 3,089,068 554,000 0.179 0.645 0.2781996 3,089,743 953,000 0.308 0.742 0.4151997 3,087,974 166,000 0.054 0.246 0.2201998 3,084,242 2,000 0.001 0.427 0.0021999 3,076,809 3,000 0.001 0.432 0.0022000 3,133,912 460,000 0.147 0.598 0.2462001 3,247,730 61,000 0.019 0.517 0.0372002 3,396,662 174,000 0.051 0.371 0.1372003 3,650,627 189,000 0.052 0.704 0.0742004 4,208,860 952,000 0.226 0.236 0.9582005 5,136,819 2,245,000 0.437 0.209 2.0912006 6,240,342 334,000 0.054 0.457 0.1182007 7,784,483 1,381,000 0.177 0.536 0.3302008 9,345,863 1,473,000 0.158 0.795 0.1992009 10,327,611 846,000 0.082 0.832 0.099

(7) Average Relativity 0.347

(8) Standard Deviation 0.537

(9) Credibility 0.764

(10) Credibility Weighted Relativity 0.501

(11) Countrywide Selected Catastrophe Factor 0.530

(12) Rhode Island Catastrophe Factor 0.266

DEVELOPMENT OF NON-MODELED CATASTROPHE PROVISION




(1a)

CalendarYear

(2a)Amount ofInsurance

Years

(3a)Catastrophe

IncurredLoss

(4a)State

CatastropheRatio

(1b)

CalendarYear

(2b)Amount ofInsurance

Years

(3b)Catastrophe

IncurredLoss

(4b)State

CatastropheRatio

1995 2,998,421 544,844 0.182 1995 56,931 6,298 0.1111996 2,993,423 906,410 0.303 1996 60,742 1,786 0.0291997 2,988,528 166,475 0.056 1997 63,320 0 0.0001998 2,980,758 2,093 0.001 1998 66,284 0 0.0001999 2,968,254 3,120 0.001 1999 69,415 0 0.0002000 3,022,398 457,698 0.151 2000 72,090 1,046 0.0152001 3,132,251 59,224 0.019 2001 74,336 0 0.0002002 3,277,851 171,221 0.052 2002 74,839 0 0.0002003 3,526,784 187,711 0.053 2003 77,192 0 0.0002004 4,079,126 930,081 0.228 2004 79,078 1,707 0.0222005 4,995,347 2,232,062 0.447 2005 84,203 0 0.0002006 6,081,522 327,683 0.054 2006 93,018 1,427 0.0152007 7,604,641 1,373,535 0.181 2007 103,759 0 0.0002008 9,145,982 1,469,064 0.161 2008 115,182 2,956 0.0262009 10,108,317 836,008 0.083 2009 128,707 8,907 0.069

(1c)

CalendarYear

(2c)Amount ofInsurance

Years

(3c)Catastrophe

IncurredLoss

(4c)State

CatastropheRatio

(1d)

CalendarYear

(2d)Amount ofInsurance

Years

(3d)Catastrophe

IncurredLoss

(4d)State

CatastropheRatio

1995 33,716 3,301 0.098 1995 3,089,068 554,443 0.1791996 35,578 44,521 1.251 1996 3,089,743 952,717 0.3081997 36,126 0 0.000 1997 3,087,974 166,475 0.0541998 37,200 0 0.000 1998 3,084,242 2,093 0.0011999 39,140 0 0.000 1999 3,076,809 3,120 0.0012000 39,424 1,257 0.032 2000 3,133,912 460,001 0.1472001 41,143 1,314 0.032 2001 3,247,730 60,538 0.0192002 43,972 2,769 0.063 2002 3,396,662 173,990 0.0512003 46,651 846 0.018 2003 3,650,627 188,557 0.0522004 50,656 19,744 0.390 2004 4,208,860 951,532 0.2262005 57,269 12,504 0.218 2005 5,136,819 2,244,566 0.4372006 65,802 4,651 0.071 2006 6,240,342 333,761 0.0532007 76,083 7,061 0.093 2007 7,784,483 1,380,596 0.1772008 84,699 668 0.008 2008 9,345,863 1,472,688 0.1582009 90,587 701 0.008 2009 10,327,611 845,616 0.082

(5)Average

StateCatastrophe

Ratio

(6)

Line ToHomeowners*

Ratio

(7)2009

Amount OfInsurance

(8)2009

Weighted LineTo Homeowners*

Ratio

(9)

RatioBalanced To

Homeowners*

(10)

Line SpecificCatastrophe

FactorCondominium 0.152 1.169 90,587 1.169 1.170 0.311Renters 0.019 0.146 128,707 0.146 0.146 0.039Owners 0.131 1.008 10,108,317 1.008 1.009 0.268Homeowners 0.130 1.000 10,327,611 0.999 1.000 0.266

* Includes Owners, Renters and Condominium lines

Development of Owners Catastrophe Provisions by Line

OWNERS RENTERS

CONDOMINIUM HOMEOWNERS


Rhode Island


CompanyEarned

Exposures

ProjectedAverage

AIYs

ExpectedCatastrophe

LossRelativity

ExpectedCatastrophe

Loss PerPolicy

IndicatedCatastropheProvision

AIC/AI 28,088 241.53 1.391 65.40 0.271AP&C 11,660 300.91 1.680 78.99 0.263

Total 39,748 258.95 1.476 69.40 0.268

Development of Owners Catastrophe Provisions by Company


Rhode Island


Year Ending 6 pt.06/05 .00 0.00 % .0009/05 .00 0.00 .0012/05 .00 0.00 .0003/06 .00 0.00 .0006/06 .00 0.00 .0009/06 .00 0.00 .0012/06 .00 0.00 .0103/07 .00 0.00 .0206/07 .00 0.00 .07 3.9209/07 325.36 0.00 .22 6.9312/07 323.46 0.00 .65 12.2703/08 321.70 0.00 1.99 21.7306/08 317.38 0.00 6.06 38.4709/08 316.55 -2.71 18.45 68.1112/08 314.34 -2.82 56.16 120.59 313.8903/09 312.36 -2.90 170.91 213.50 312.6806/09 311.42 -1.88 520.14 378.00 311.4909/09 309.91 -2.10 1582.95 669.24 310.2912/09 309.12 -1.66 4817.41 1184.87 309.1103/10 308.23 -1.32 14660.91 2097.76 307.92

6 pt.

-1.52 %Avg Annual Percent Change Based on Best Fit: 8478.03 % 882.54 %


AIY Trends


AIY Trends Annual Change 20 pt. 12 pt.


Rhode Island


Commissions 0 % 11.1 %Licenses and Fees 100 0.0Taxes † 0 2.7Other Acquisition 100 5.2General Expense 100 3.5Contingency Provision 0 2.0Debt Provision 0 1.3Profit Provision 0 7.8

† State Taxes - Does not include Federal Income Tax

Summary of Expense Provisions

Percent Fixed Expense Provision


Rhode Island

Attachment VIExhibit 15ALLSTATE INSURANCE GROUP*

Personal Property Lines Excluding EarthquakeCountrywide Expense Experience For Other Acquisition and General Expenses

Other Acquisition Expense2006 2007 2008

1. Direct Premium Earned Less Reinsurance Premium**** $5,750,206 $5,988,021 $6,116,057

2. Other Acquisition Expense Incurred** 288,175 331,511 300,573

3. Ratio (2)/(1) 0.0501 0.0554 0.0491

4. Three Year Average 0.052

5. Proposed Provision 0.052

General Expense2006 2007 2008

1. Direct Premium Earned Less Reinsurance Premium**** $5,750,206 $5,988,021 $6,116,057

2. General Expense Incurred 212,288 196,359 232,841

3. Ratio (2)/(1) 0.0369 0.0328 0.0381

4. Three Year Average 0.036

5. Proposed Provision*** 0.035

* Allstate Insurance Company, Allstate Property and Casualty Insurance Company, Allstate Indemnity Company, Allstate Fire & Casualty and Allstate County Mutual ** Expenses are reduced by the amount of Payment Fees collected and includes Premium Write offs.***Reduction in force adjustment included ****Premiums for Net Cost of Reinsurance (NCOR) do not include provisions for General and Other Acquisitionexpenses. Therefore, direct premiums must be reduced by NCOR premiums to get the premium base uponwhich general and other acquisition expense provisions are applied.(000's) omitted


6/30/2007

10/1/2011

3) Number of Years from (1) to (2) 4.254

2.60 %

1.115

4) Selected Annual Impact

5) Factor to Adjust for Subsequent Change in Fixed Expense [ 1.0 + (4) ] ^ (3)

Factor to Adjust for Subsequent Change in Fixed Expense(For calendar years 2006-2008 )

1) Average Earned Date of Experience Period

2) Average Earned Date of Proposed Policy Period


Rhode Island

Attachment VIExhibit 17ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY

HOMEOWNERS

Rhode Island

Calculation of Present Value, as of the Average Earning Date

and twelve-month Policy Terms

Rhode Island Rhode Island Time Discounted **Years From Cumulative Yearly from Start to avg time

Start of Percent of Percent of of Policy of profit @ DiscountedPolicy Year Losses Paid Losses Paid Year 2.4% Payments

1 18.7% 18.7% 0.70 1.007 18.8%2 76.2% 57.5% 1.40 0.990 56.9%3 91.7% 15.5% 2.50 0.965 15.0%4 94.9% 3.2% 3.30 0.946 3.0%5 95.1% 0.2% 4.70 0.915 0.2%

Subsequent 100.0% 4.9% 6.90 0.868 4.3%

Total 100.0% 98.2%

Expected Losses and Loss Expense Ratio 66.4%

Present Value of Loss and Loss Expense Payments 65.2%

General Expense 3.5% 0.75 1.006 3.5%Other Acquisition 5.2% 0.63 1.009 5.3%Taxes 2.7% 0.45 1.013 2.7%Commissions 11.1% 0.58 1.010 11.2%Debt Provision 1.3% 1.00 1.000 1.3%Profit Provision 7.8% 1.00 1.000 7.8%Contingency Provision 2.0% 1.00 1.000 2.0%Licenses and Fees 0.0% 0.45 1.013 0.0%

Total Present Value of Outgo 99.0%

Premiums 100.0% 0.57 1.010 101.0%

Difference, Present Value of IncomeLess Present Value of Outgo 2.0%

*Discount rate from Investments Department forecast

**exp (0.024 x (timing of profit being earned - timing of cash flow))

of a Policy year, of all Income and Outgo @ 2.4%* force of interest, given an Operating Profit of 7.1%


Fiscal Year Ending(1)

Earned Exposures

(2)Earned Premiumat Current Rates

(3)Factor to Adjust toProjected Premium

Level

(4)Projected Earned

Premium atCurrent Rates

(2) x (3)

(5)Projected AverageEarned Premiumat Current Rates

(4) / (1)

(6)Experience Year

Weights

3/31/2010 11,660 $10,610,950 0.865 $9,178,472 $787.18 100 %

$787.18

Development of Projected Average Earned Premium

Development of Projected Average Earned Premium at Current Rates

(7) Projected Average Earned Premium at Current Rates


Rhode Island


PerilTotal All Peril excluding EQ -7.00 %

Current Year1)Average Earned Date of Proposed Policy Period 10/1/20112) Mid-Point of Current Year's Experience Period 9/30/20093) Experience Period Ended 3/31/20104) Midpoint of Experience Period 9/30/20095) Historical: Number of Years from (4) to (2) 0.0006) Projected: Number of Years from (2) to (1) 2.003

Calculation of Trend Factors

(b) Projected Premium Factors are the Annual Projected Impacts plus unity compounded for the number of years in (6)

(c) Factor to Adjust to Projected Premium Level = (a) x (b)

Calculation of Premium Trend Factor

Selected Annual Premium ImpactsProjected

(a) Historical Premium Factors are the Annual Historical Impacts plus unity compounded for the number of years in (5)


Rhode Island


Year Ending 6 pt.06/05 $.00 0.00 % $.0009/05 .00 0.00 .0012/05 .00 0.00 .0003/06 .00 0.00 .0006/06 .00 0.00 .0009/06 .00 0.00 .0012/06 .00 0.00 .0103/07 .00 0.00 .0306/07 .00 0.00 .12 $8.9909/07 1,039.17 0.00 .38 16.4712/07 1,026.96 0.00 1.26 30.1803/08 1,012.81 0.00 4.15 55.2906/08 993.79 0.00 13.69 101.3109/08 972.87 -6.38 45.18 185.6312/08 954.74 -7.03 149.09 340.14 $957.0803/09 942.00 -6.99 491.99 623.24 942.0806/09 929.84 -6.43 1,623.61 1,141.97 927.3109/09 915.43 -5.90 5,358.00 2,092.45 912.7812/09 897.24 -6.02 17,681.68 3,834.03 898.4703/10 882.87 -6.28 58,350.51 7,025.14 884.39

6 pt.

-6.12 %Avg Annual Percent Change Based on Best Fit: 11759.99 % 1027.19 %


Premium Trends


Average Written Premium @ CRL Annual Change 20 pt. 12 pt.

Allstate Property & Casualty Insurance CompanyOwners

Rhode Island

ATTACHMENT VII

Summary of Manual Changes

Attachment VII Page 1

ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY OWNERS

RHODE ISLAND

SUMMARY OF MANUAL CHANGES Rule Pages Rule 14 – Interpolation of Policy Amounts, Page HOPC14-1

- Clarified rounding approach for Retained Risk Provision calculation of policy amounts Retained Risk Provision Zones Page HOPCRR-1

- Added Retained Risk Provision Zones - Added Construction Types wording below Retained Risk Provision Zones

Rate Pages Premium Calculations Pages, Page PCP-1

- Added Retained Risk Provision step before Reinsurance step - Modified numbers to reflect appropriate order

Rate Factor Pages, Page RFP-4

- Revised Rate Adjustment Factor Rate Factor Pages, Page RFP-16

- Added Retained Risk Provision calculations - Moved Reinsurance calculations to RFP-18


- Added Retained Risk Provision limit factors - Moved Reinsurance limit factors to RFP-19


- Moved Reinsurance calculations from RFP-16 - Clarified Reinsurance language*

Rate Factor Pages, Page RFP-19 Added Reinsurance limit factors to from RFP-17

* Revisions to Reinsurance wording do not have any effect on how we currently calculate the net cost of reinsurance.

ATTACHMENT VIII

Rule Side-By-Sides

Attachment VIII Page 1

Rule 14 – Interpolation of Policy Amounts

Attachment VIII Page 2

Retained Risk Provision Zones (New Page)

ATTACHMENT IX

Summary of Policyholder Impacts

Attachment IX Page 1

ALLSTATE PROPERTY AND CASULATY INSURANCE COMPANY OWNERS

RHODE ISLAND

SUMMARY OF POLICYHOLDER IMPACTS

Effective March 1, 2007

PC RRFS-1 INS02040 © 2007 National Association of Insurance Commissioners

PROPERTY & CASUALTY

RATE/RULE FILING SCHEDULE (This form must be provided ONLY when making a filing that includes rate-related items such as Rate; Rule; Rate &

Rule; Reference; Loss Cost; Loss Cost & Rule or Rate, etc.) (Do not refer to the body of the filing for the component/exhibit listing, unless allowed by state.)

1. This filing transmittal is part of Company Tracking # R23090A#2

2. This filing corresponds to form filing number (Company tracking number of form filing, if applicable) N/A

Rate Increase Rate Decrease Rate Neutral (0%)

3. Filing Method (Prior Approval, File & Use, Flex Band, etc.) Prior Approval 4a. Rate Change by Company (As Proposed)

Company Name Overall % Indicated Change (when

Applicable)

Overall % Rate Impact

Written Premium Change for this

program

# of policyholders

affected for this

program

Written premium for this

program

Maximum%Change

(where required)

Minimum%Change

(where required)

Allstate Indemnity Company 104.3%* 17.0%* $2,036,246* 14,163 $11,977,916 43.8%^ 2.7%^

* excludes net cost of reinsurance premium ^ includes net cost of reinsurance premium

4b. Rate Change by Company (As Accepted) For State Use Only Company Name Overall %

Indicated Change (when

Applicable)

Overall % Rate Impact

Written Premium Change for this

program

# of policyholders

affected for this

program


program

Maximum%Change

(where required)

Minimum %Change

(where required)

5. Overall Rate Information (Complete for Multiple Company Filings only) COMPANY USE STATE USE

5a. Overall percentage rate indication(when applicable) 5b. Overall percentage rate impact for this filing

5c. Effect of Rate Filing – Written premium change for this program

5d. Effect of Rate Filing - Number of policyholders affected

6. Overall percentage of last rate revision 1.6% 7. Effective Date of last rate revision 10/7/2010

8. Filing Method of Last filing (Prior Approval, File & Use, Flex Band, etc.) Prior Approval

9. Rule # or Page # Submitted for Review

Replacement or withdrawn?

Previous state filing number, if required by state

01 See attached checking list New Replacement Withdrawn




Company






Superseded Schedule Items

Please note that all items on the following pages are items, which have been replaced by a newer version. The newest

version is located with the appropriate schedule on previous pages. These items are in date order with most recent first.

Creation Date: Schedule Schedule Item Name Replacement

Creation Date

Attached Document(s)

12/08/2010 Supporting

Document

Actuarial Support- RI Rate


Form

03/15/2011 RI Rate Procedural

Information AP&C A#1.PDF

(Superceded)


Document

Rate & Rule Schedule AP&C 03/15/2011 RI Rate & Rule Schedule

AP&C A#1.PDF

(Superceded)


Document

Actuarial Support- RI Rate


Form

12/08/2010 RI Rate Procedural

Information AP&C.PDF

(Superceded)


Document

Rate & Rule Schedule AP&C 12/08/2010 RI Rate & Rule Schedule

AP&C.PDF (Superceded)

INS02296

STATE OF RHODE ISLANDRATE PROCEDURAL INFORMATIONAL SUMMARY FOR ALL NEW

AND REVISED RATE FILINGS

Insurers must provide a reply to the following interrogatories for all new and revised rate filings in accordance with the instructions provided below. While the insurer may attach/link exhibits to respective interrogatories, referring the Department to other exhibits to "find" information is not proper protocol for form completion. Further, if a question is not applicable, please so indicate and provide the basis for such position. Wherever the word “proposed rate” appears, the requirements also apply to all new or revised rate filings where applicable.

1. Provide a general description of the filing; i.e., list all factors and proposed rates or proposed changes to rates and rating factors. In doing so, include the current and proposed territory base rates for each coverage for which a rate level change is being proposed, the current and proposed territory definitions for each rating territory for which a change in definition is being proposed, and the current and proposed rating factors for each set of rating factors for which a new factor or change is being proposed.

The Rhode Island Allstate Property and Casualty Insurance Company Owners program was introduced on 7/16/2007 at the same rate level as Allstate Insurance Company. All new business written on or after that date has been placed into Allstate Property and Casualty Insurance Company. Since the inception of the Owners program into this company, the overall rate level as remained the same.

With this filing, Allstate Property and Casualty Insurance Company (AP&C) is proposing a 34.0% rate level increase on premium (excluding premium for the net cost of reinsurance) for the Owners program in the state of Rhode Island. With this change, Allstate is revising the rate adjustment factors and introducing Retained Risk Provision.

The 34.0% rate level increase is the same as what we are proposing for Allstate Insurance Company and Allstate Indemnity Company filings R23088 and R23089, respectively.

2. Provide the indicated rate level changes (where applicable), proposed rate level changes, and premium weights using premiums adjusted to current rate level for each coverage (e.g. bodily injury, property damage), subline (e.g. liability, physical damage), and all coverages combined.

Proposed Rate Level Change Components*

Coverage

IndicatedRate LevelChange

ProposedRate LevelChange Weights Base Rates

Retained Risk Provision _________ ____

(a) (b) (c) (d)

All Perils Combined 104.3% 34.0% 100% 7.8% 24.3%

All CoveragesCombined 34.0% 34.0% 100% 7.8% 24.3%

*Describe components of proposed change, e.g., class, increased limits, deductibles, age and symbols, territories, policy coverage, rules, etc.

3. Provide actuarially based rate level indications to support the proposed rate or proposed rate level changes by coverage. In so doing, provide the underlying data, assumptions, and derivation of each of the following components of the indications:

INS02296

a) premiums adjusted to the current rate level;

All premiums in the experience period were adjusted to current rate level in Rhode Island. As in the last filing, Allstate uses the “Miller-Davis-Karlinski” method to do this since it more accurately calculates factors to current rate level in instances when exposures are changing throughout the year. Please see Attachment II, Page 10 for more details.

b) premium trend;

In addition to bringing premiums to current rate level, changes in the average written premium at the current premium level were reviewed on a state basis. Unlike losses, premium is relatively stable. Only the latest year of premium is used in the calculation of the indication, which eliminates the need for premium trend. Premium projections are still selected to account for shifts in the distribution of various underlying factors. Since the effects on losses caused by these shifts are reflected in the loss projections, it is important that Allstate also account for the anticipated future changes in premiums. Please see Attachment II, Page 10 for more details.

c) losses and allocated loss adjustment expense (ALAE, which is now referred to as defense and cost containment expense) developed to an ultimate basis including the loss development triangles and the selected loss development factors;

As with past filings, Allstate determines ultimate accident year losses (including allocated loss adjustment expense) after analyzing ultimate incurred loss estimates arising from two methods: the link ratio method and the additive method. Please see Attachment II, Pages 3 and 4 for more details.

d) losses and ALAE adjusted to reflect prospective cost levels, including selected trendfactors;

Using Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company data for the state of Rhode Island, the past changes in actual frequency and severity on a twelve-month-moving basis (evaluated at each quarter) over a five-year period were examined. After considering past results, knowledge of changes in various inflation indices relating to insurance, credibility level of Allstate data, industry data, and actuarial judgment, annual pure premium trends were selected. Please see Attachment II, Pages 4 and 5 for more details.

e) any adjustments made for large, catastrophic, or weather related losses;

Allstate separately identifies and accounts for its exposure to loss due to the occurrence of catastrophic events within a state. The adjustment to account for non-modeled catastrophes is consistent with the Analysis of Issues and Recommended Practices detailed in Section 3.4 of Actuarial Standard of Practice No. 39, Treatment of Catastrophe Losses in Property/Casualty Insurance Ratemaking.

An estimation of our non-hurricane, non-earthquake catastrophe exposure is first developed on a total company statewide level. Subsequent relativities are used to estimate our catastrophe exposure by line and by company. Please see Attachment II, Page 5 for more details.

Allstate has also utilized the 2009/08 AIR VERSION 11.0 HURRICANE MODEL to develop the hurricaneprovision used in this filing. Please see Attachment III and Attachment IV for more details.

f) any adjustments made to reflect the credibility of the experience;

A weight is applied to each year in order to appropriately consider responsiveness and stability. The weights for fiscal accident years ending March 31, 2009 and 2010 are 39% and 61% respectively. Please see Attachment II, Page 2 for more details.

g) expense provisions – Support should include five years of expense history for each expense provision including unallocated loss adjustment expense (ULAE, which is now referred to as claim adjustment service) with an explanation if the expenses underlying the expected loss ratio or expense multiplier vary from the company’s historical expenses; recognition should be given to fixed and variable expense components; and

The expense provisions were derived in accordance to Section 3.2, Determining Expense Provisions, of Actuarial Standard of Practice No 29, Expense Provisions in Property/Casualty Insurance Ratemaking. Please

INS02296

see Attachment II, Pages 7 through 9 for more details.

h) profit & contingency provision – Support should include rationale for the target rate of return (if applicable), and an explanation (including underlying calculations, data, and assumptions) of how investment income was considered. Data used should be the most recent available to the company.

Allstate performs two separate cost of capital analyses in the estimation of its cost of equity. The first uses the Fama-French Three-factor Model (FF3F), which reflects developments in the field of financial economics as published in the Casualty Actuarial Society Forum, Winter, 2004 and in Journal of Risk and Insurance, Vol. 72, No. 3, September 2005 (“Estimating the Cost of Equity Capital For Property-Liability Insurers” by J. David Cummins and Richard D. Phillips). The second is a Discounted Cash Flow (DCF) analysis, which estimates the expected future cash flows to investors in order to gauge the proper cost of equity. Once both the DCF and FF3F estimates had been calculated, Allstate selected a cost of equity of 10.0%, which reflected the outcomes of both analyses.

An analysis of premium, loss and expense cash flows is used to calculate the investment income on policyholder supplied funds (PHSF). This methodology is one of the two examples given in Actuarial Standard of Practice, No. 30, Treatment of Profit and Contingency Provisions and the Cost of Capital in Property/Casualty Insurance Ratemaking, as appropriate methods for recognizing investment income from insurance operations.

Please see Attachment II, Page 9 for more details.

4. Provide actuarial support and any other considerations for any proposed factors or proposed changes in rating factors or class definitions; i.e., territory definitions or relativities, class plan definitions or relativities, increased limit factors, deductible factors, discounts, surcharges, etc. Actuarial support should reflect your company’s experience. If credit history is utilized in the rating or underwriting process, for homeowner’s insurance or personal motor vehicle insurance, the insurer must demonstrate the predictive nature of its insurance scoring process to the Department. Question 5 and 6 enumerates additional filing requirements to support the insurer’s use of credit. In addition, a) all motor vehicle filings must include the information requested in Question 15, b) all filings for territory changes must be supported pursuant to Rhode Island Insurance Regulation 62 and c) all property insurance filings must include the information requested in Question 16.

If you are proposing rates, rating factors, discounts/surcharges, class/territory definitions, etc. that are based on those currently in effect in Rhode Island for another insurance company(ies) or rating organization, provide the rates, rating factors, discounts/surcharges, class/territory definitions, etc. of that other company(ies), and explain how you have considered possible differences in coverage offered, underwriting standards, claim practices, expenses, etc. betweenyour company and the referenced company(ies).

We are proposing base rate revisions and the introduction of the retained risk provision. We are proposing no other revisions with this filing. For more information regarding the introduction of the retained risk provision, please see Attachment V for more details.

5. In order to demonstrate the predictive nature of insurance scoring, the insurer must provide an analysis that confirms the statistical correlation between insurance score and loss experience. The analysis should be performed in such a manner that adjusts for any potential distributional biases, such as among states (if multi-state data is used) with different levels of rate adequacy, or among vehicle use risk classes with different levels of rate adequacy. Inaddition:

a) The source of the data must be identified, e.g., number of years of data; whether the data is by accident year or policy year; whether the data is from Rhode Island or other states; if a sample of states or a sample of risks is used, a description of how the data was collected, including data verification procedures; the percentage of the overall business that is used in the sample; etc.

b) All data adjustments must be explained and supported, e.g., loss development; adjustments for the effect of large losses; how credibility was considered in the analysis; etc.

c) The data underlying the analysis must be relatively recent.

The insurance scoring algorithm used in the Allstate Property and Casualty Insurance Company Owners program was approved with filing R18021. No scores, cutoffs, or factors associated with the insurance scoring algorithm have been changed since that approval.

INS02296

6. Appropriate support for the rates/rating factors that reflect the use of insurance score should include an analysis that supports the appropriateness of each proposed rate/rating factor as opposed to any other rate/rating factor. As above, the source of the data must be identified, all data adjustments must be explained and supported, and the data underlying the analysis must be relatively recent. In addition,

a) An explanation must be provided as to how risks with insufficient or no credit history will be treated.b) An explanation must be provided as to how risks that refuse to allow access to their credit score will be treated.

c) The company's timing and procedure for updating credit scores must be provided, e.g., at each renewal; only on the customer's request; etc.

d) The rationale behind any grouping of credit scores for rating or underwriting purposes must be provided i.e., how the beginning and end points of any ranges of insurance score were selected.


7. In providing the information in (3), (4), (5) and (6) above:

a) Explain all differences from the ratemaking procedures employed in your last rate filing in Rhode Island.

All of the differences from our prior filing are duly noted.

b) Clearly describe or label the type of information used; e.g., calendar year, policy year, or accident year; basic limits or total limits; Rhode Island or countrywide; by coverage or all coverages combined; etc.

All information provided has been clearly described or labeled.

8. Provide rationale for any proposed rate or proposed rate level change, by coverage or overall, that differs from your indicated change.

The rate need in Allstate Property and Casualty Insurance Company is 104.3%. Allstate is proposing to implement a 34.0% rate increase at this time to remain at the same rate level as Allstate Insurance Company and Allstate Indemnity Company.

9. Provide the derivation of the estimated overall premium effect of any proposed rate or proposed changes to a rating factor or definition. Explain how you have considered each of these effects in calculating the overall proposed rate level change.

We re-rated each policy with current and proposed rates. The overall proposed rate level change due to the revisions within this filing equals the percentage difference between the aggregate premium using the proposed rates and the aggregate premium using the current rates.

10. Provide any additional information that you feel may be helpful to the Department of Business Regulation in its review of this filing. For example, if the company has undergone changes in its operations that affect its expense provision, then this information should be provided.

We have included all information we believe to be relevant to the review of this filing. Should further information be desired, please do not hesitate to contact us.

11. Provide the length of time the proposed rates are expected to remain in effect.

We anticipate that the proposed rates will remain in effect for 1 year.

12. Provide a description of the risk that will receive the largest rate increase and a description of the risk that will receive the largest rate decrease as a result of the changes proposed in this filing. Include the amount of the rate change for each risk described.

The risk with the largest rate increase is a home insured for approximately $1,500,000 of base coverage in Westerly. This risk has an all peril deductible of $5,000 and a Hurricane Deductible of 5.0%. This risk includes increased liability and medical limits. The Protective Device, Age 55 and Retired, Claim Free, Home and Auto,

INS02296

Age of Home, and Home Buyer discounts are applied. This risk will see, approximately, a 207.6% rate increase, which equals, approximately, $128 per month.

There are no risks that will receive a rate decrease as a result of the changes proposed in this filing.

13. Provide an estimate of the number and percent of exposures that will receive a rate increase in excess of 15% due to the changes proposed in this filing.

We estimate that 14,142 exposures, or 99.9% of the distribution, will receive a rate increase greater than 15% with this filing.

14. Provide a statement signed by an actuary or an officer of the company to certify that the data submitted in the filing is accurate and reliable.

I, Emily C. Moore, FCAS, MAAA an actuary of Allstate Insurance Company, certify that the data submitted in the filing is accurate and reliable to the best of my knowledge and belief.

15. For all motor vehicle filings provide a copy of the relevant pages (and cite the manual page number and rule number) from your company’s rating manual that confirm that your company is in compliance with:

a) RI Gen. Laws §27-9-53 & Insurance Regulation 25 (8), Motor Vehicle Insurance RateIncreases Relating to Violations and Accidents.

b) RI Gen. Laws §27-9-4, Consideration in Making of Rates: (4)(a)(1)(i),

(4)(d), (4)(e), and Section 45-19-17, Operation of Emergency Vehicles – Accidents.

c) RI Gen. Laws §27-29-13, Payment of Premium – Cancellation

d) Insurance Regulation 25(5)&(6), Additive and Reductive Amounts for Policy Credits,Regulation 25(7), Chargeable Accident

e) RI Gen. Laws §27-9-7.1, Premium Reduction for Completing a Motor Vehicle AccidentPrevention Course

f) RI Gen. Laws §27-9-7.2, Premium Reduction for Anti-theft Devices, and Regulation 84

g) RI Gen. Laws §27-9-56, Use of Credit Rating

h) Insurance Regulation 98, Rhode Island Automobile Insurance Plan

This question is not applicable to this filing as this is an Owners rate filing.

16. For all property insurance filings provide a copy of the relevant pages (and cite the manualpage number and rule number) from your company’s rating manual that confirm that yourcompany is in compliance with:

a) RI Gen. Laws §27-6-53, and Bulletin 2002-16, Use of Credit

b) RI Gen. Laws §27-29-4.3, Refusal to Issue or Increased Premium Due to Nonoccupancy.

c) RI Gen. Laws §27-29-4(7) (i,ii,iii), Unfair Competition and Practices, and InsuranceBulletin #2003-9“Underwriting Restriction Based on Age/Location of Property”.

d) RI Gen. Laws §27-5-3.7 and Insurance Regulation 110, Hurricane Deductibles,triggers and Policyholder Notices

In response to a, b, c, and d, above:

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a). The insurance scoring algorithm used in the Allstate Property and Casualty Insurance Company Owners program was approved with filing R18021. No scores, cutoffs, or factors associated with the insurance scoring algorithm have been changed since that approval.

b). There are no references in any of Allstate’s rating manuals regarding a charge of increased premium for a building due solely because of the fact that it was formerly unoccupied or vacant. However, certain buildings may be written under the Dwelling in the Course of Construction Endorsement as described under 4.B.4 on Page HOPC4-3 of the Allstate Property and Casualty Insurance Company rule manual if the relevant criteria is met.

c). There are no references in any of Allstate’s rating manuals or renewal guidelines that violate any of the protections listed in R.I. Gen. Laws §27-29-4(7) (iii), (iv), and (vi).

d). Allstate is compliant with RI Gen. Laws §27-5-3.7 and Insurance Regulation 110, Hurricane Deductibles, triggers and Policyholder Notices.

17. For all Title Insurance Filings, insurers must confirm that it offers a reduced mortgagerefinance rate based upon actuarially supported rates, filed and approved for use in RI.



PC RRFS-1INS02040

© 2007 National Association of Insurance Commissioners

PROPERTY & CASUALTYRATE/RULE FILING SCHEDULE

(This form must be provided ONLY when making a filing that includes rate-related items such as Rate; Rule; Rate & Rule; Reference; Loss Cost; Loss Cost & Rule or Rate, etc.)

(Do not refer to the body of the filing for the component/exhibit listing, unless allowed by state.)1. This filing transmittal is part of Company Tracking # R23090A#1

2.This filing corresponds to form filing number(Company tracking number of form filing, if applicable)

N/A


3. Filing Method (Prior Approval, File & Use, Flex Band, etc.) Prior Approval

4a. Rate Change by Company (As Proposed)Company Name Overall %

IndicatedChange(when

Applicable)

Overall% RateImpact

WrittenPremiumChangefor this

program

# of policyholders

affectedfor this

program


program

Maximum%Change

(where required)

Minimum%Change

(where required)

Allstate Property andCasualty Insurance

Company104.3% 34.0% $4,072,491 14,163 $11,977,916 207.6% 13.6%

4b. Rate Change by Company (As Accepted) For State Use OnlyCompany Name Overall %


Applicable)

Overall% RateImpact


program

# of policyholders

affectedfor this

program


program

Maximum%Change

(where required)

Minimum%Change

(where required)

5. Overall Rate Information (Complete for Multiple Company Filings only)COMPANY USE STATE USE

5a. Overall percentage rate indication(when applicable)5b. Overall percentage rate impact for this filing

5c.Effect of Rate Filing – Written premium change for this program


6. Overall percentage of last rate revision 2.5%

7. Effective Date of last rate revision 8/23/2010

8.Filing Method of Last filing(Prior Approval, File & Use, Flex Band, etc.) Prior Approval

9.Rule # or Page # Submitted for Review

Replacementor withdrawn?

Previous state filing number,if required by state

01 See attached checking list

NewReplacementWithdrawn

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STATE OF RHODE ISLANDRATE PROCEDURAL INFORMATIONAL SUMMARY FOR ALL NEW

AND REVISED RATE FILINGS

Insurers must provide a reply to the following interrogatories for all new and revised rate filings in accordance with the instructions provided below. While the insurer may attach/link exhibits to respective interrogatories, referring the Department to other exhibits to "find" information is not proper protocol for form completion. Further, if a question is not applicable, please so indicate and provide the basis for such position. Wherever the word “proposed rate” appears, the requirements also apply to all new or revised rate filings where applicable.

1. Provide a general description of the filing; i.e., list all factors and proposed rates or proposed changes to rates and rating factors. In doing so, include the current and proposed territory base rates for each coverage for which a rate level change is being proposed, the current and proposed territory definitions for each rating territory for which a change in definition is being proposed, and the current and proposed rating factors for each set of rating factors for which a new factor or change is being proposed.

The Rhode Island Allstate Property and Casualty Insurance Company Owners program was introduced on 7/16/2007 at the same rate level as Allstate Insurance Company. All new business written on or after that date has been placed into Allstate Property and Casualty Insurance Company. Since the inception of the Owners program into this company, the overall rate level as remained the same.

With this filing, Allstate Property and Casualty Insurance Company (AP&C) is proposing a 34.0% rate level increase on premium (excluding premium for the net cost of reinsurance) for the Owners program in the state of Rhode Island. With this change, Allstate is revising the rate adjustment factors and introducing Retained Risk Provision.

The 34.0% rate level increase is the same as what we are proposing for Allstate Insurance Company and Allstate Indemnity Company filings R23088 and R23089, respectively.

2. Provide the indicated rate level changes (where applicable), proposed rate level changes, and premium weights using premiums adjusted to current rate level for each coverage (e.g. bodily injury, property damage), subline (e.g. liability, physical damage), and all coverages combined.

Proposed Rate Level Change Components*

Coverage

IndicatedRate LevelChange

ProposedRate LevelChange Weights Base Rates

Retained Risk Provision _________ ____

(a) (b) (c) (d)

All Perils Combined 104.3% 34.0% 100% 7.8% 24.3%

All CoveragesCombined 34.0% 34.0% 100% 7.8% 24.3%

*Describe components of proposed change, e.g., class, increased limits, deductibles, age and symbols, territories, policy coverage, rules, etc.

3. Provide actuarially based rate level indications to support the proposed rate or proposed rate level changes by coverage. In so doing, provide the underlying data, assumptions, and derivation of each of the following components of the indications:

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a) premiums adjusted to the current rate level;

All premiums in the experience period were adjusted to current rate level in Rhode Island. As in the last filing, Allstate uses the “Miller-Davis-Karlinski” method to do this since it more accurately calculates factors to current rate level in instances when exposures are changing throughout the year. Please see Attachment II, Page 10 for more details.

b) premium trend;

In addition to bringing premiums to current rate level, changes in the average written premium at the current premium level were reviewed on a state basis. Unlike losses, premium is relatively stable. Only the latest year of premium is used in the calculation of the indication, which eliminates the need for premium trend. Premium projections are still selected to account for shifts in the distribution of various underlying factors. Since the effects on losses caused by these shifts are reflected in the loss projections, it is important that Allstate also account for the anticipated future changes in premiums. Please see Attachment II, Page 10 for more details.

c) losses and allocated loss adjustment expense (ALAE, which is now referred to as defense and cost containment expense) developed to an ultimate basis including the loss development triangles and the selected loss development factors;

As with past filings, Allstate determines ultimate accident year losses (including allocated loss adjustment expense) after analyzing ultimate incurred loss estimates arising from two methods: the link ratio method and the additive method. Please see Attachment II, Pages 3 and 4 for more details.

d) losses and ALAE adjusted to reflect prospective cost levels, including selected trendfactors;

Using Allstate Insurance Company, Allstate Indemnity Company, and Allstate Property and Casualty Insurance Company data for the state of Rhode Island, the past changes in actual frequency and severity on a twelve-month-moving basis (evaluated at each quarter) over a five-year period were examined. After considering past results, knowledge of changes in various inflation indices relating to insurance, credibility level of Allstate data, industry data, and actuarial judgment, annual pure premium trends were selected. Please see Attachment II, Pages 4 and 5 for more details.

e) any adjustments made for large, catastrophic, or weather related losses;

Allstate separately identifies and accounts for its exposure to loss due to the occurrence of catastrophic events within a state. The adjustment to account for non-modeled catastrophes is consistent with the Analysis of Issues and Recommended Practices detailed in Section 3.4 of Actuarial Standard of Practice No. 39, Treatment of Catastrophe Losses in Property/Casualty Insurance Ratemaking.

An estimation of our non-hurricane, non-earthquake catastrophe exposure is first developed on a total company statewide level. Subsequent relativities are used to estimate our catastrophe exposure by line and by company. Please see Attachment II, Page 5 for more details.

Allstate has also utilized the 2009/08 AIR VERSION 11.0 HURRICANE MODEL to develop the hurricaneprovision used in this filing. Please see Attachment III and Attachment IV for more details.

f) any adjustments made to reflect the credibility of the experience;

A weight is applied to each year in order to appropriately consider responsiveness and stability. The weights for fiscal accident years ending March 31, 2009 and 2010 are 39% and 61% respectively. Please see Attachment II, Page 2 for more details.

g) expense provisions – Support should include five years of expense history for each expense provision including unallocated loss adjustment expense (ULAE, which is now referred to as claim adjustment service) with an explanation if the expenses underlying the expected loss ratio or expense multiplier vary from the company’s historical expenses; recognition should be given to fixed and variable expense components; and

The expense provisions were derived in accordance to Section 3.2, Determining Expense Provisions, of Actuarial Standard of Practice No 29, Expense Provisions in Property/Casualty Insurance Ratemaking. Please

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see Attachment II, Pages 7 through 9 for more details.

h) profit & contingency provision – Support should include rationale for the target rate of return (if applicable), and an explanation (including underlying calculations, data, and assumptions) of how investment income was considered. Data used should be the most recent available to the company.

Allstate performs two separate cost of capital analyses in the estimation of its cost of equity. The first uses the Fama-French Three-factor Model (FF3F), which reflects developments in the field of financial economics as published in the Casualty Actuarial Society Forum, Winter, 2004 and in Journal of Risk and Insurance, Vol. 72, No. 3, September 2005 (“Estimating the Cost of Equity Capital For Property-Liability Insurers” by J. David Cummins and Richard D. Phillips). The second is a Discounted Cash Flow (DCF) analysis, which estimates the expected future cash flows to investors in order to gauge the proper cost of equity. Once both the DCF and FF3F estimates had been calculated, Allstate selected a cost of equity of 10.0%, which reflected the outcomes of both analyses.

An analysis of premium, loss and expense cash flows is used to calculate the investment income on policyholder supplied funds (PHSF). This methodology is one of the two examples given in Actuarial Standard of Practice, No. 30, Treatment of Profit and Contingency Provisions and the Cost of Capital in Property/Casualty Insurance Ratemaking, as appropriate methods for recognizing investment income from insurance operations.

Please see Attachment II, Page 9 for more details.

4. Provide actuarial support and any other considerations for any proposed factors or proposed changes in rating factors or class definitions; i.e., territory definitions or relativities, class plan definitions or relativities, increased limit factors, deductible factors, discounts, surcharges, etc. Actuarial support should reflect your company’s experience. If credit history is utilized in the rating or underwriting process, for homeowner’s insurance or personal motor vehicle insurance, the insurer must demonstrate the predictive nature of its insurance scoring process to the Department. Question 5 and 6 enumerates additional filing requirements to support the insurer’s use of credit. In addition, a) all motor vehicle filings must include the information requested in Question 15, b) all filings for territory changes must be supported pursuant to Rhode Island Insurance Regulation 62 and c) all property insurance filings must include the information requested in Question 16.

If you are proposing rates, rating factors, discounts/surcharges, class/territory definitions, etc. that are based on those currently in effect in Rhode Island for another insurance company(ies) or rating organization, provide the rates, rating factors, discounts/surcharges, class/territory definitions, etc. of that other company(ies), and explain how you have considered possible differences in coverage offered, underwriting standards, claim practices, expenses, etc. betweenyour company and the referenced company(ies).

We are proposing base rate revisions and the introduction of the retained risk provision. We are proposing no other revisions with this filing. For more information regarding the introduction of the retained risk provision, please see Attachment V for more details.

5. In order to demonstrate the predictive nature of insurance scoring, the insurer must provide an analysis that confirms the statistical correlation between insurance score and loss experience. The analysis should be performed in such a manner that adjusts for any potential distributional biases, such as among states (if multi-state data is used) with different levels of rate adequacy, or among vehicle use risk classes with different levels of rate adequacy. Inaddition:

a) The source of the data must be identified, e.g., number of years of data; whether the data is by accident year or policy year; whether the data is from Rhode Island or other states; if a sample of states or a sample of risks is used, a description of how the data was collected, including data verification procedures; the percentage of the overall business that is used in the sample; etc.

b) All data adjustments must be explained and supported, e.g., loss development; adjustments for the effect of large losses; how credibility was considered in the analysis; etc.

c) The data underlying the analysis must be relatively recent.


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6. Appropriate support for the rates/rating factors that reflect the use of insurance score should include an analysis that supports the appropriateness of each proposed rate/rating factor as opposed to any other rate/rating factor. As above, the source of the data must be identified, all data adjustments must be explained and supported, and the data underlying the analysis must be relatively recent. In addition,

a) An explanation must be provided as to how risks with insufficient or no credit history will be treated.b) An explanation must be provided as to how risks that refuse to allow access to their credit score will be treated.

c) The company's timing and procedure for updating credit scores must be provided, e.g., at each renewal; only on the customer's request; etc.

d) The rationale behind any grouping of credit scores for rating or underwriting purposes must be provided i.e., how the beginning and end points of any ranges of insurance score were selected.


7. In providing the information in (3), (4), (5) and (6) above:

a) Explain all differences from the ratemaking procedures employed in your last rate filing in Rhode Island.

All of the differences from our prior filing are duly noted.

b) Clearly describe or label the type of information used; e.g., calendar year, policy year, or accident year; basic limits or total limits; Rhode Island or countrywide; by coverage or all coverages combined; etc.

All information provided has been clearly described or labeled.

8. Provide rationale for any proposed rate or proposed rate level change, by coverage or overall, that differs from your indicated change.

The rate need in Allstate Property and Casualty Insurance Company is 104.3%. Allstate is proposing to implement a 34.0% rate increase at this time to remain at the same rate level as Allstate Insurance Company and Allstate Indemnity Company.

9. Provide the derivation of the estimated overall premium effect of any proposed rate or proposed changes to a rating factor or definition. Explain how you have considered each of these effects in calculating the overall proposed rate level change.

We re-rated each policy with current and proposed rates. The overall proposed rate level change due to the revisions within this filing equals the percentage difference between the aggregate premium using the proposed rates and the aggregate premium using the current rates.

10. Provide any additional information that you feel may be helpful to the Department of Business Regulation in its review of this filing. For example, if the company has undergone changes in its operations that affect its expense provision, then this information should be provided.

We have included all information we believe to be relevant to the review of this filing. Should further information be desired, please do not hesitate to contact us.

11. Provide the length of time the proposed rates are expected to remain in effect.

We anticipate that the proposed rates will remain in effect for 1 year.

12. Provide a description of the risk that will receive the largest rate increase and a description of the risk that will receive the largest rate decrease as a result of the changes proposed in this filing. Include the amount of the rate change for each risk described.

The risk with the largest rate increase is a home insured for approximately $1,500,000 of base coverage in Westerly. This risk has an all peril deductible of $5,000 and a Hurricane Deductible of 5.0%. This risk includes increased liability and medical limits. The Protective Device, Age 55 and Retired, Claim Free, Home and Auto,

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Age of Home, and Home Buyer discounts are applied. This risk will see an approximately 181.9% rate increase, which equals approximately just over $112 per month.

There are no risks that will receive a rate decrease as a result of the changes proposed in this filing.

13. Provide an estimate of the number and percent of exposures that will receive a rate increase in excess of 15% due to the changes proposed in this filing.

We estimate that 14,037 exposures ,or 99.1% of the distribution, will receive a rate increase greater than 15% with this filing.

14. Provide a statement signed by an actuary or an officer of the company to certify that the data submitted in the filing is accurate and reliable.

I, Seth Goodchild, FCAS, MAAA an actuary of Allstate Insurance Company, certify that the data submitted in the filing is accurate and reliable to the best of my knowledge and belief.

15. For all motor vehicle filings provide a copy of the relevant pages (and cite the manual page number and rule number) from your company’s rating manual that confirm that your company is in compliance with:

a) RI Gen. Laws §27-9-53 & Insurance Regulation 25 (8), Motor Vehicle Insurance RateIncreases Relating to Violations and Accidents.

b) RI Gen. Laws §27-9-4, Consideration in Making of Rates: (4)(a)(1)(i),

(4)(d), (4)(e), and Section 45-19-17, Operation of Emergency Vehicles – Accidents.

c) RI Gen. Laws §27-29-13, Payment of Premium – Cancellation

d) Insurance Regulation 25(5)&(6), Additive and Reductive Amounts for Policy Credits,Regulation 25(7), Chargeable Accident

e) RI Gen. Laws §27-9-7.1, Premium Reduction for Completing a Motor Vehicle AccidentPrevention Course

f) RI Gen. Laws §27-9-7.2, Premium Reduction for Anti-theft Devices, and Regulation 84

g) RI Gen. Laws §27-9-56, Use of Credit Rating

h) Insurance Regulation 98, Rhode Island Automobile Insurance Plan


16. For all property insurance filings provide a copy of the relevant pages (and cite the manualpage number and rule number) from your company’s rating manual that confirm that yourcompany is in compliance with:

a) RI Gen. Laws §27-6-53, and Bulletin 2002-16, Use of Credit

b) RI Gen. Laws §27-29-4.3, Refusal to Issue or Increased Premium Due to Nonoccupancy.

c) RI Gen. Laws §27-29-4(7) (i,ii,iii), Unfair Competition and Practices, and InsuranceBulletin #2003-9“Underwriting Restriction Based on Age/Location of Property”.

d) RI Gen. Laws §27-5-3.7 and Insurance Regulation 110, Hurricane Deductibles,triggers and Policyholder Notices

In response to a, b, c, and d, above:

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a). The insurance scoring algorithm used in the Allstate Property and Casualty Insurance Company Owners program was approved with filing R18021. No scores, cutoffs, or factors associated with the insurance scoring algorithm have been changed since that approval.

b). There are no references in any of Allstate’s rating manuals regarding a charge of increased premium for a building due solely because of the fact that it was formerly unoccupied or vacant. However, certain buildings may be written under the Dwelling in the Course of Construction Endorsement as described under 4.B.4 on Page HOPC4-3 of the Allstate Property and Casualty Insurance Company rule manual if the relevant criteria is met.

c). There are no references in any of Allstate’s rating manuals or renewal guidelines that violate any of the protections listed in R.I. Gen. Laws §27-29-4(7) (iii), (iv), and (vi).

d). Allstate is compliant with RI Gen. Laws §27-5-3.7 and Insurance Regulation 110, Hurricane Deductibles, triggers and Policyholder Notices.

17. For all Title Insurance Filings, insurers must confirm that it offers a reduced mortgagerefinance rate based upon actuarially supported rates, filed and approved for use in RI.



PC RRFS-1INS02040

© 2007 National Association of Insurance Commissioners

PROPERTY & CASUALTYRATE/RULE FILING SCHEDULE

(This form must be provided ONLY when making a filing that includes rate-related items such as Rate; Rule; Rate & Rule; Reference; Loss Cost; Loss Cost & Rule or Rate, etc.)

(Do not refer to the body of the filing for the component/exhibit listing, unless allowed by state.)1. This filing transmittal is part of Company Tracking # R23090

2.This filing corresponds to form filing number(Company tracking number of form filing, if applicable)

N/A


3. Filing Method (Prior Approval, File & Use, Flex Band, etc.) Prior Approval

4a. Rate Change by Company (As Proposed)Company Name Overall %


Applicable)

Overall% RateImpact


program

# of policyholders

affectedfor this

program


program*

Maximum%Change

(where required)

Minimum%Change

(where required)

Allstate Property andCasualty Insurance

Company104.3% 34.0% $4,072,491 14,163 $11,977,916 181.9% 11.9%

* Annualized

4b. Rate Change by Company (As Accepted) For State Use OnlyCompany Name Overall %


Applicable)

Overall% RateImpact


program

# of policyholders

affectedfor this

program


program

Maximum%Change

(where required)

Minimum%Change

(where required)

5. Overall Rate Information (Complete for Multiple Company Filings only)COMPANY USE STATE USE

5a. Overall percentage rate indication(when applicable)5b. Overall percentage rate impact for this filing

5c.Effect of Rate Filing – Written premium change for this program


6. Overall percentage of last rate revision 2.5%

7. Effective Date of last rate revision 8/23/2010

8.Filing Method of Last filing(Prior Approval, File & Use, Flex Band, etc.) Prior Approval

9.Rule # or Page # Submitted for Review

Replacementor withdrawn?

Previous state filing number,if required by state

01 See attached checking list

NewReplacementWithdrawn