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Variable Interest Entities | 6 Months Ended
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Jun. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Variable Interest Entities |
Note 7 | Variable Interest Entities
Consolidated VIEs primarily include Adirondack Insurance Exchange (“Adirondack”), a New York reciprocal insurer, and New Jersey Skylands Insurance Association (“Skylands”), a New Jersey reciprocal insurer. The Reciprocal Exchanges are insurance carriers organized as unincorporated associations. The Company does not own the equity of the Reciprocal Exchanges, which is owned by their respective policyholders. The results of the Reciprocal Exchanges are included in the Allstate Protection segment as the Company manages the business operations of the Reciprocal Exchanges and has the power to direct their activities that most significantly impact their economic performance. The Company receives a management fee for the services provided to the Reciprocal Exchanges totaling $11 million and $21 million for the three and six months ended June 30, 2024, respectively, compared to $12 million and $23 million for the three and six months ended June 30, 2023, respectively. In addition, as of June 30, 2024 and December 31, 2023, the Company holds interests of $123 million in the form of surplus notes that provide capital to the Reciprocal Exchanges and would absorb expected losses. As of June 30, 2024, Adirondack’s capital was below levels required by insurance regulations and its December 31, 2023 statutory-basis audited financial statements included disclosure expressing substantial doubt about Adirondack’s ability to continue as a going concern. Due to ongoing operating losses and the inability of the Reciprocal Exchanges to obtain approval for premium rate increases that are commensurate with increases in claims and claims expense, the Company recorded a loss for the carrying value of the surplus notes in the amount of $123 million in the first quarter of 2024. The loss has been reflected as a capital transaction attributable to noncontrolling interest as the Company expects 100% of its interests in surplus notes to absorb expected losses of the Reciprocal Exchanges. In addition, the Company has a 100% quota share reinsurance agreement with Skylands to cede all of Skylands’ business to the Company. Claims and claims expense ceded to the Company were $18 million and $30 million for the three and six months ended June 30, 2024, respectively, compared to $10 million and $17 million for the three and six months ended June 30, 2023, respectively. The Reciprocal Exchanges generated $61 million and $122 million of earned premiums for the three and six months ended June 30, 2024, respectively, compared to $57 million and $114 million for the three and six months ended June 30, 2023, respectively. Total costs and expenses were $58 million and $145 million for the three and six months ended June 30, 2024, respectively, compared to $85 million and $144 million for the three and six months ended June 30, 2023, respectively. In the event of dissolution, policyholders would share any residual unassigned surplus but are not subject to assessment for any deficit in unassigned surplus of the Reciprocal Exchanges. The assets of the Reciprocal Exchanges can be used only to settle the obligations of the Reciprocal Exchanges and general creditors have no recourse to the Company. The table below reflects the consolidated VIE results, which exclude all intercompany transactions including surplus notes and related accrued interest, management fees and intercompany reinsurance transactions.
Assets and liabilities of Reciprocal Exchanges included in the condensed consolidated statement of financial position (1) |  |
($ in millions) |  | June 30, 2024 |  | December 31, 2023 |  |
Assets |  |  |  |  |  |
Fixed income securities |  | $ | 227 |  |  | $ | 267 |  |  |
Short-term investments |  | 30 |  |  | 7 |  |  |
Deferred policy acquisition costs |  | 17 |  |  | 25 |  |  |
Premium installment and other receivables, net |  | 41 |  |  | 44 |  |  |
Reinsurance recoverables, net |  | 75 |  |  | 76 |  |  |
Other assets |  | 15 |  |  | 54 |  |  |
Total assets |  | 405 |  |  | 473 |  |  |
Liabilities |  |  |  |  |  |
Reserve for property and casualty insurance claims and claims expense |  | 226 |  |  | 201 |  |  |
Unearned premiums |  | 160 |  |  | 177 |  |  |
Other liabilities and expenses |  | 26 |  |  | 77 |  |  |
Total liabilities |  | $ | 412 |  |  | $ | 455 |  |  |
(1) Intercompany balances eliminated in consolidation |  |  |  |  |  |
Total assets |  | $ | (57) |  |  | $ | (26) |  |  |
Total liabilities |  | (198) |  |  | (189) |  |  |

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/810/tableOfContent + Details
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