Notes to the consolidated financial statements
114
76
24 Provisions (continued)
Self-insurance program
Loyalty programs
Claims and legal disputes
Restructuring
Onerous contracts
Other
Ahold at a glance
Business review
Governance
Financials
Total
603
42
Ahold
Annual Report 2014
Maturities of total provisions as of December 28, 2014, are as follows:
millior
Self-
insurance
program
Loyalty
programs
Claims
and legal
disputes
Restructuring
Onerous
contracts
Other
Total
Amount due within one year
151
14
1
33
34
7
240
Amount due between two and five years
305
28
2
29
49
14
427
Amount due after five years
147
1
14
36
38
236
119
59
903
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 (€2 million) for general liability, $5 million (€4 million) for commercial vehicle liability, $5 million (€4 million) for workers' compensation, and $175 million (€14 million) for property losses.
Ahold purchased a stop-loss coverage of $50 million (€41 million) for property losses to limit the aggregate exposure for named windstorms through June 1, 2015. 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.
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.
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 2014,
the Company received approval from the United States District Court for the District of Connecticut to settle a class action pending in the court. The Company has recorded a provision for this settlement in the amount of
€215 million ($297 million), which was settled prior to December 28, 2014. This is further described in Note 34, under the heading U.S. Foodservice - Waterbury litigation.
In 2014, Ahold recognized restructuring provisions totaling €28 million that related to a reorganization of the support roles at Albert Heijn and the Corporate Center. 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 28, 2014, consisted of €42 million related to rent
and closing costs within U.S. operations (including provisions for Ahold's former Tops stores of €19 million), €22 million related to the reorganization of the support roles at Albert Heijn and the Corporate Center and €12 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. Included in the balance of the provision as of December 28, 2014 were the remaining provision relating to BI-LO and Bruno's (see Note 34of €24 million and a provision of €59 million recognized during 2014
in connection with the acquisition of SPAR in the Czech Republic, mainly for unfavorable lease contracts.
Other provisions include asset retirement obligations, provisions for environmental risks, jubilee payments, supplemental medical benefits and severance payments, other than those resulting from restructurings.