Allstate 2008 Annual Report Download - page 118

Reinsurance subjects us to the credit risk of our reinsurers and may not be adequate to protect us
against losses arising from ceded insurance, which could have a material adverse effect on our
operating results and financial condition
The collectability of reinsurance recoverables is subject to uncertainty arising from a number of factors,
including changes in market conditions, whether insured losses meet the qualifying conditions of the reinsurance
contract and whether reinsurers, or their affiliates, have the financial capacity and willingness to make payments
under the terms of a reinsurance treaty or contract. Our inability to collect a material recovery from a reinsurer
could have a material adverse effect on our operating results and financial condition.
The continued threat of terrorism and ongoing military actions may adversely affect the level of claim
losses we incur and the value of our investment portfolio
The continued threat of terrorism, both within the United States and abroad, and ongoing military and other
actions and heightened security measures in response to these types of threats, may cause significant volatility
and losses from declines in the equity markets and from interest rate changes in the United States, Europe and
elsewhere, and result in loss of life, property damage, disruptions to commerce and reduced economic activity.
Some of the assets in our investment portfolio may be adversely affected by declines in the equity markets and
reduced economic activity caused by the continued threat of terrorism. We seek to mitigate the potential impact of
terrorism on our commercial mortgage portfolio by limiting geographical concentrations in key metropolitan areas
and by requiring terrorism insurance to the extent that it is commercially available. Additionally, in the event that
terrorist acts occur, both Allstate Protection and Allstate Financial could be adversely affected, depending on the
nature of the event.
A downgrade in our financial strength ratings may have an adverse effect on our competitive position,
the marketability of our product offerings, and our liquidity, operating results and financial condition
Financial strength ratings are important factors in establishing the competitive position of insurance
companies and generally have an effect on an insurance company’s business. On an ongoing basis, rating
agencies review the financial performance and condition of insurers and could downgrade or change the outlook
on an insurer’s ratings due to, for example, a change in an insurer’s statutory capital; a change in a rating
agency’s determination of the amount of risk-adjusted capital required to maintain a particular rating; an increase
in the perceived risk of an insurer’s investment portfolio; a reduced confidence in management or a host of other
considerations that may or may not be under the insurer’s control. The current insurance financial strength ratings
of Allstate Insurance Company are A+, AA- and Aa3 from A.M. Best, Standard & Poor’s and Moody’s, respectively.
The current insurance financial strength ratings of Allstate Life Insurance Company are A+, AA- and A1
from A.M. Best, Standard & Poor’s and Moody’s, respectively. The Allstate Corporation currently maintains a senior
debt rating of a-, A- and A3 from A.M. Best, Standard & Poor’s and Moody’s, respectively. Several other affiliates
have been assigned their own financial strength ratings by one or more rating agencies. Because all of these
ratings are subject to continuous review, the retention of these ratings cannot be assured. A downgrade in any of
these ratings could have a material adverse effect on our sales, our competitiveness, the marketability of our
product offerings, and our liquidity, operating results and financial condition.
Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs
or our ability to obtain credit on acceptable terms
The capital and credit markets have been experiencing extreme volatility and disruption. In some cases, the
markets have exerted downward pressure on the availability of liquidity and credit capacity. In the event that we
need access to additional capital to pay our operating expenses, make payments on our indebtedness, pay for
capital expenditures or fund acquisitions, our ability to obtain such capital may be limited and the cost of any
such capital may be significant. Our access to additional financing will depend on a variety of factors such as
market conditions, the general availability of credit, the overall availability of credit to our industry, our credit
ratings and credit capacity, as well as lenders’ perception of our long- or short-term financial prospects. Similarly,
our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us.
If a combination of these factors were to occur, our internal sources of liquidity may prove to be insufficient, and
in such case, we may not be able to successfully obtain additional financing on favorable terms.
Changes in accounting standards issued by the Financial Accounting Standards Board (‘‘FASB’’) or
other standard-setting bodies may adversely affect our financial statements
Our financial statements are subject to the application of generally accepted accounting principles, which are
periodically revised, interpreted and/or expanded. Accordingly, we are required to adopt new guidance or
interpretations, or could be subject to existing guidance as we enter into new transactions, which may have a
material adverse effect on our results of operations and financial condition that is either unexpected or has a
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Risk Factors