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24 Provisions (continued)
Our strategy
Our performance
Governance
Financials
Investors
V
Ahold Annual Report 2013
Self-insurance program
Ahold is self-insured for certain potential losses, mainly relating to general liability, vehicle liability, workers' compensation and property losses relating to its subsidiaries. The maximum self-
insurance retention per occurrence, including defense costs, is $2 million (€1 million) for general liability, $5 million (€4 million) for commercial vehicle liability, $5 million (€4 million) for
workers' compensation, and effective as of December 1, 2012, $17.5 million (€13 million) for property losses. For property losses the maximum self-insurance retention per occurrence,
including defense costs, was $8 million (€6 million) before December 12012. For property losses, Ahold purchased a stop-loss coverage of $50 million (€37 million) to limit the aggregate
exposure for named windstorms through June 1, 2014. A portion of this risk is reinsured to third parties, see Note 15.
Measurement of the provision for the self-insurance program requires significant estimates. These estimates and assumptions include an estimate of claims incurred but not yet reported,
historical loss experience, projected loss development factors, estimated changes in claim reporting patterns, claim settlement patterns, judicial decisions and legislation.
Loyalty programs
This provision relates to a third-party customer loyalty program in the Netherlands and reflects the estimated cost of benefits to which customers participating in the loyalty program are entitled.
Claims and legal disputes
The Company is a party to a number of legal proceedings arising out of its business operations. Such legal proceedings are subject to inherent uncertainties. Management, supported by
internal and external legal counsel, where appropriate, determines whether it is more likely than not that an outflow of resources will be required to settle an obligation. If this is the case, the best
estimate of the outflow of resources is recognized. During 201 3, Ahold paid €92 million in settlement of the adverse judgment received in Stop Shop's legal proceedings against Vornado.
The amount was provided for in 2011.
In 2013, Ahold recognized restructuring provisions of €33 million, mainly related to Ahold's U.S. operations, which includes a restructuring provision of €23 million in connection with the
closure of six stores and three gas stations in New Hampshire. The provisions are based on formal and approved plans using the best information available at the time. The amounts that are
ultimately incurred may change as the plans are executed. The balance of the provision as of December 29, 2013, consisted of €57 million related to rent and closing costs within US
operations (including provisions for Ahold's former Tops stores of €22 million) and €13 million for restructurings within Ahold's Czech operations.
Onerous contract provisions mainly relate to unfavorable lease contracts and include the excess of the unavoidable costs of meeting the obligations under the contracts over the benefits
expected to be received under such contracts. Ahold recognized an onerous contract provision of €12 million for the loss on divestment of its Slovakian operations upon signing a binding sale
agreement.
Restructuring
Onerous contracts
Other
Other provisions include asset retirement obligations, provisions for environmental risks, jubilee payments, supplemental medical benefits and severance payments, other than those resulting
from restructurings.
