Allstate 2008 Annual Report Download - page 186

The following table presents realized capital gains and losses and principal transactions relating to our
illiquid portfolios for the year ended December 31, 2008.
Realized capital gains and losses Principal transactions
Impairment Change in intent Principal
Sales write-downs write-downs Sold received Acquired
($ in millions)
MBS
Prime $ (25) $ (9) $ (20) $ 340 $ 103 $ 21
Alt-A (37) (206) (138) 130 130 —
CMBS
CMBS (15) — (226) 2,319 177 1,294
CRE CDO (44) (45) (331) 280 5 —
ABS
ABS RMBS (33) (224) (282) 142 623 —
ABS CDO — (63) — 3 1 —
Other CDO 3 (335) — 31 18 11
Total $(151) $(882) $(997) $3,245 $1,057 $1,326
Securities included in our illiquid portfolios with a fair value less than 70% of amortized cost as of
December 31, 2008 are shown in the following table.
Fair Unrealized
value gain/loss
($ in millions)
MBS
Prime $ 113 $ (113)
Alt-A 146 (122)
CMBS
CMBS 858 (1,625)
CRE CDO — —
ABS
ABS RMBS 781 (878)
ABS CDO 4 (3)
Other CDO 459 (1,054)
Total $2,361 $(3,795)
We continue to believe that the unrealized losses on these securities are not predictive of the ultimate
performance of the underlying collateral. In the absence of further deterioration in the collateral relative to our
positions in the securities’ respective capital structures, which could be other than temporary, the unrealized
losses should reverse over the remaining lives of the securities.
The cash flows of the underlying mortgages or collateral for MBS, CMBS (including CRE CDO) and ABS are
generally applied in a pre-determined order and are designed so that each security issued qualifies for a specific
original rating. The security issue is typically referred to as the ‘‘class’’. For example, the ‘‘senior’’ portion or ‘‘top’’
of the capital structure which would originally qualify for a rating of Aaa is referred to as the ‘‘Aaa class’’ and
typically has priority in receiving the principal repayments on the underlying mortgages. In a sequential structure,
underlying collateral principal repayments are directed to the most senior rated Aaa class in the structure until
paid in full, after which principal repayments are directed to the next most senior Aaa class in the structure until
it is paid in full. Although the various Aaa classes may receive principal sequentially, they may share any losses
from the underlying collateral on a pro-rata basis after losses are absorbed by classes with lower original ratings
or what may be referred to as more ‘‘junior’’ or ‘‘subordinate’’ securities in the capital structure. The underlying
mortgages have fixed interest rates, variable interest rates (such as adjustable rate mortgages (‘‘ARM’’)) or are
hybrid, meaning that they contain features of both fixed and variable rate mortgages.
MBS totaled $4.49 billion, with 97.9% rated investment grade, at December 31, 2008. The MBS portfolio is
subject to interest rate risk since price volatility and the ultimate realized yield are affected by the rate of
prepayment of the underlying mortgages. The credit risk associated with our MBS is mitigated due to the fact that
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MD&A