Allstate 2012 Annual Report Download - page 204

RMBS, CMBS and ABS in an unrealized loss position were evaluated based on actual and projected collateral losses
relative to the securities’ positions in the respective securitization trusts, security specific expectations of cash flows,
and credit ratings. This evaluation also takes into consideration credit enhancement, measured in terms of
(i) subordination from other classes of securities in the trust that are contractually obligated to absorb losses before the
class of security the Company owns, (ii) the expected impact of other structural features embedded in the securitization
trust beneficial to the class of securities the Company owns, such as overcollateralization and excess spread, and (iii) for
RMBS and ABS in an unrealized loss position, credit enhancements from reliable bond insurers, where applicable.
Municipal bonds in an unrealized loss position were evaluated based on the quality of the underlying securities.
Unrealized losses on equity securities are primarily related to temporary equity market fluctuations of securities that are
expected to recover.
As of December 31, 2011, the Company has not made the decision to sell and it is not more likely than not the
Company will be required to sell fixed income securities with unrealized losses before recovery of the amortized cost
basis. As of December 31, 2011, the Company had the intent and ability to hold equity securities with unrealized losses
for a period of time sufficient for them to recover.
Limited partnerships
As of December 31, 2011 and December 31, 2010, the carrying value of equity method limited partnership interests
totaled $3.13 billion and $2.47 billion, respectively. The Company recognizes an impairment loss for equity method
investments when evidence demonstrates that the loss is other than temporary. Evidence of a loss in value that is other
than temporary may include the absence of an ability to recover the carrying amount of the investment or the inability of
the investee to sustain a level of earnings that would justify the carrying amount of the investment. In 2011, 2010 and
2009, the Company had write-downs related to equity method limited partnership interests of $2 million, $1 million and
$11 million, respectively.
As of December 31, 2011 and December 31, 2010, the carrying value for cost method limited partnership interests
was $1.57 billion and $1.35 billion, respectively. To determine if an other-than-temporary impairment has occurred, the
Company evaluates whether an impairment indicator has occurred in the period that may have a significant adverse
effect on the carrying value of the investment. Impairment indicators may include: significantly reduced valuations of
the investments held by the limited partnerships; actual recent cash flows received being significantly less than
expected cash flows; reduced valuations based on financing completed at a lower value; completed sale of a material
underlying investment at a price significantly lower than expected; or any other adverse events since the last financial
statements received that might affect the fair value of the investee’s capital. Additionally, the Company’s portfolio
monitoring process includes a quarterly review of all cost method limited partnerships to identify instances where the
net asset value is below established thresholds for certain periods of time, as well as investments that are performing
below expectations, for further impairment consideration. If a cost method limited partnership is
other-than-temporarily impaired, the carrying value is written down to fair value, generally estimated to be equivalent to
the reported net asset value of the underlying funds. In 2011, 2010 and 2009, the Company had write-downs related to
cost method investments of $4 million, $45 million and $297 million, respectively.
Mortgage loans
The Company’s mortgage loans are commercial mortgage loans collateralized by a variety of commercial real estate
property types located throughout the United States and totaled, net of valuation allowance, $7.14 billion and
$6.68 billion as of December 31, 2011 and 2010, respectively. Substantially all of the commercial mortgage loans are
non-recourse to the borrower. The following table shows the principal geographic distribution of commercial real estate
represented in the Company’s mortgage loan portfolio. No other state represented more than 5% of the portfolio as of
December 31.
(% of mortgage loan portfolio carrying value) 2011 2010
California 22.6% 23.2%
Illinois 9.1 9.4
New Jersey 6.5 6.5
Texas 6.2 5.3
New York 5.8 6.6
Pennsylvania 5.3 5.6
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