Allstate 2013 Annual Report Download - page 238

The following table presents the rollforward of Level 3 assets and liabilities held at fair value on a recurring basis
during the year ended December 31, 2010.
Total gains (losses)
($ in millions) included in:
Purchases,
Balance as of sales, Transfers Transfers Balance as of
December 31, Net issues and into out of December 31,
2009 income (1) OCI settlements, net Level 3 Level 3 2010
Assets
Fixed income securities:
Municipal $ 2,706 $ (40) $ 46 $ (588) $ 38 $ (146) $ 2,016
Corporate 2,241 5 115 (167) 444 (730) 1,908
Foreign government 20 — — (20) — — —
ABS 2,001 55 275 553 — (467) 2,417
RMBS 1,671 (421) 736 (135) — (57) 1,794
CMBS 1,404 (233) 592 (526) 107 (421) 923
Redeemable preferred stock 2 — — (1) — — 1
Total fixed income securities 10,045 (634) 1,764 (884) 589 (1,821) 9,059
Equity securities 69 8 5 (12) — (7) 63
Other investments:
Free-standing derivatives, net 55 (202) — 126 — — (21) (2)
Other assets 2 (1) — — — — 1
Total recurring Level 3 assets $ 10,171 $ (829) $ 1,769 $ (770) $ 589 $ (1,828) $ 9,102
Liabilities
Contractholder funds:
Derivatives embedded in life and annuity
contracts $ (110) $ (31) $ — $ 3 $ (515) $ — $ (653)
Total recurring Level 3 liabilities $ (110) $ (31) $ — $ 3 $ (515) $ — $ (653)
(1) The effect to net income totals $(860) million and is reported in the Consolidated Statements of Operations as follows: $(901) million in realized
capital gains and losses, $73 million in net investment income, $(1) million in interest credited to contractholder funds and $(31) million in life and
annuity contract benefits.
(2) Comprises $74 million of assets and $95 million of liabilities.
Transfers between level categorizations may occur due to changes in the availability of market observable inputs,
which generally are caused by changes in market conditions such as liquidity, trading volume or bid-ask spreads.
Transfers between level categorizations may also occur due to changes in the valuation source. For example, in
situations where a fair value quote is not provided by the Company’s independent third-party valuation service provider
and as a result the price is stale or has been replaced with a broker quote whose inputs have not been corroborated to be
market observable, the security is transferred into Level 3. Transfers in and out of level categorizations are reported as
having occurred at the beginning of the quarter in which the transfer occurred. Therefore, for all transfers into Level 3, all
realized and changes in unrealized gains and losses in the quarter of transfer are reflected in the Level 3 rollforward
table.
During 2012, certain U.S. government securities were transferred into Level 1 from Level 2 as a result of increased
liquidity in the market and a sustained increase in the market activity for these assets. There were no transfers between
Level 1 and Level 2 during 2011 or 2010.
During 2011, certain ABS, RMBS and CMBS were transferred into Level 2 from Level 3 as a result of increased
liquidity in the market and a sustained increase in the market activity for these assets. Additionally, in 2011 certain ABS
that were valued based on non-binding broker quotes were transferred into Level 2 from Level 3 since the inputs were
corroborated to be market observable. During 2010, certain ABS and CMBS were transferred into Level 2 from Level 3 as
a result of increased liquidity in the market and a sustained increase in market activity for these assets. When
transferring these securities into Level 2, the Company did not change the source of fair value estimates or modify the
estimates received from independent third-party valuation service providers or the internal valuation approach.
Accordingly, for securities included within this group, there was no change in fair value in conjunction with the transfer
resulting in a realized or unrealized gain or loss.
Transfers into Level 3 during 2012 and 2011 included situations where a fair value quote was not provided by the
Company’s independent third-party valuation service provider and as a result the price was stale or had been replaced
with a broker quote where the inputs have not been corroborated to be market observable resulting in the security being
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