Allstate 2008 Annual Report Download - page 117

There can be no assurance that actions of the U.S. federal government, Federal Reserve and other
governmental and regulatory bodies for the purpose of stabilizing the financial markets and stimulating
the economy will achieve the intended effect
In response to the financial crises affecting the banking system, the financial markets and the broader
economy, the U.S. federal government, the Federal Reserve and other governmental and regulatory bodies have
taken or are considering taking action to address such conditions including, among other things, purchasing
mortgage-backed and other securities from financial institutions, investing directly in banks, thrifts and bank and
savings and loan holding companies and increasing federal spending to stimulate the economy. There can be no
assurance as to what impact such actions will have on the financial markets or on economic conditions. Such
continued volatility and economic deterioration could materially and adversely affect our business, financial
condition and results of operations.
Losses from litigation may be material to our operating results or cash flows and financial condition
As is typical for a large company, we are involved in a substantial amount of litigation, including class action
litigation challenging a range of company practices and coverage provided by our insurance products. In the
event of an unfavorable outcome in one or more of these matters, the ultimate liability may be in excess of
amounts currently reserved and may be material to our operating results or cash flows for a particular quarter or
annual period and to our financial condition.
We are subject to extensive regulation and potential further restrictive regulation may increase our
operating costs and limit our growth
As insurance companies, broker-dealers, investment advisers and/or investment companies, many of our
subsidiaries are subject to extensive laws and regulations. These laws and regulations are complex and subject to
change. Moreover, they are administered and enforced by a number of different governmental authorities,
including state insurance regulators, state securities administrators, the SEC, Financial Industry Regulatory
Authority, the U.S. Department of Justice, and state attorneys general, each of which exercises a degree of
interpretive latitude. Consequently, we are subject to the risk that compliance with any particular regulator’s or
enforcement authority’s interpretation of a legal issue may not result in compliance with another’s interpretation of
the same issue, particularly when compliance is judged in hindsight. In addition, there is risk that any particular
regulator’s or enforcement authority’s interpretation of a legal issue may change over time to our detriment, or
that changes in the overall legal environment may, even absent any particular regulator’s or enforcement
authority’s interpretation of a legal issue changing, cause us to change our views regarding the actions we need
to take from a legal risk management perspective, thus necessitating changes to our practices that may, in some
cases, limit our ability to grow and improve the profitability of our business. Furthermore, in some cases, these
laws and regulations are designed to protect or benefit the interests of a specific constituency rather than a range
of constituencies. For example, state insurance laws and regulations are generally intended to protect or benefit
purchasers or users of insurance products, not holders of securities issued by The Allstate Corporation. In many
respects, these laws and regulations limit our ability to grow and improve the profitability of our business.
In recent years, the state insurance regulatory framework has come under public scrutiny and members of
Congress have discussed proposals to provide for federal chartering of insurance companies. We can make no
assurances regarding the potential impact of state or federal measures that may change the nature or scope of
insurance regulation.
Reinsurance may be unavailable at current levels and prices, which may limit our ability to write new
business
Our personal lines catastrophe reinsurance program was designed, utilizing our risk management
methodology, to address our exposure to catastrophes nationwide. Market conditions beyond our control
determine the availability and cost of the reinsurance we purchase. No assurances can be made that reinsurance
will remain continuously available to us to the same extent and on the same terms and rates as are currently
available. For example, our ability to afford reinsurance to reduce our catastrophe risk in designated areas may be
dependent upon our ability to adjust premium rates for its cost, and there are no assurances that the terms and
rates for our current reinsurance program will continue to be available next year. If we were unable to maintain
our current level of reinsurance or purchase new reinsurance protection in amounts that we consider sufficient
and at prices that we consider acceptable, we would have to either accept an increase in our exposure risk,
reduce our insurance writings, or develop or seek other alternatives.
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Risk Factors