Allstate 2011 Annual Report Download - page 217

relevant observable inputs as a result of the decrease in liquidity that has been experienced in the market for
these securities, all CDO are categorized as Level 3.
ABS – student loans and other: The primary inputs to the valuation include quoted prices for identical or similar
assets in markets that exhibit less liquidity relative to those markets supporting Level 2 fair value
measurements, contractual cash flows, benchmark yields, prepayment speeds, collateral performance and
credit spreads. Also included are ABS that are valued based on non-binding broker quotes. Due to the reduced
availability of actual market prices or relevant observable inputs as a result of the decrease in liquidity that has
been experienced in the market for these securities, certain ABS are categorized as Level 3.
• Other investments: Certain OTC derivatives, such as interest rate caps and floors, certain credit default swaps
and OTC options (including swaptions), are valued using models that are widely accepted in the financial
services industry. These are categorized as Level 3 as a result of the significance of non-market observable
inputs such as volatility. Other primary inputs include interest rate yield curves and credit spreads.
• Contractholder funds: Derivatives embedded in certain life and annuity contracts are valued internally using
models widely accepted in the financial services industry that determine a single best estimate of fair value for
the embedded derivatives within a block of contractholder liabilities. The models primarily use stochastically
determined cash flows based on the contractual elements of embedded derivatives, projected option cost and
applicable market data, such as interest rate yield curves and equity index volatility assumptions. These are
categorized as Level 3 as a result of the significance of non-market observable inputs.
Assets and liabilities measured at fair value on a non-recurring basis
Mortgage loans written-down to fair value in connection with recognizing impairments are valued based on the fair
value of the underlying collateral less costs to sell. Limited partnership interests written-down to fair value in connection
with recognizing other-than-temporary impairments are valued using net asset values.
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Notes