Allstate 2008 Annual Report Download - page 188

The following table shows our CMBS portfolio, excluding CRE CDO, at December 31, 2008 by vintage year,
based upon our participation in the capital structure.
($ in millions)
Capital structure Par Amortized Fair Unrealized
classification(2) value cost(1) value gain/loss
Aaa
2007:
Super senior(3) $ 383 $ 378 $ 263 $ (115)
Mezzanine senior(4) 130 122 58 (64)
Subordinated senior(5) 596 569 166 (403)
Other(6) 21 22 9 (13)
1,130 1,091 496 (595)
2006:
Super senior(3) 121 121 79 (42)
Mezzanine senior(4) 81 77 41 (36)
Subordinated senior(5) 314 300 94 (206)
Other(6) 63 64 45 (19)
579 562 259 (303)
2005:
Super senior(3) 326 329 260 (69)
Mezzanine senior(4) 22 22 13 (9)
Subordinated senior(5) 108 115 48 (67)
Other(6) 95 95 70 (25)
551 561 391 (170)
Pre-2005(7) 2,126 2,154 1,936 (218)
Aaa total 4,386 4,368 3,082 (1,286)
Aa 1,111 1,179 522 (657)
A 350 225 172 (53)
Baa 64 39 39 —
Ba or lower 4 4 4 —
Total CMBS $5,915 $5,815 $3,819 $(1,996)
(1) Amortized cost includes other-than-temporary impairment charges, as applicable.
(2) May not be consistent with current ratings due to upgrades and downgrades.
(3) Most senior of the Aaa rated tranches, typically has a high level of credit enhancement of approximately 30%, meaning actual losses in
the deal have to reach 30% before incurring a first dollar loss.
(4) Middle Aaa rated tranche, typically having credit enhancement of approximately 20%, are subordinate only to the Super senior bonds.
(5) Lowest Aaa rated tranche, typically with credit enhancement in the low teens. This bond is subordinate to the Super senior and
Mezzanine senior tranches, but still senior to all tranches rated below Aaa.
(6) Includes Aaa bonds that were originated in 2005 through 2007 that do not fall into the categories above. These are non-traditional
CMBS bonds (large loan pools, single borrower transactions) that did not have a Aaa Senior type breakdown.
(7) Prior to 2005, the Aaa bonds in a transaction were generally not divided into Super senior, Mezzanine senior, or Subordinated senior
(with the exception of a few deals structured very late in 2004); therefore all 2004 and prior Aaa-rated securities are grouped into this
category.
The unrealized net capital loss of $2.00 billion at December 31, 2008 on our CMBS portfolio was a result of
significant widening of credit spreads due to deteriorating macro economic conditions and continued credit
market deterioration. Credit spread widening occurred in all rating classes but was particularly evident in our
subordinated senior Aaa, Pre-2005 Aaa-rated and lower rated securities. These holdings accounted for
$1.66 billion, or approximately 83% of the unrealized net capital loss. Our analysis suggests that the vast majority
of our CMBS portfolio is well insulated from a severe rise in commercial mortgage default rates. Credit
protections in the portfolio, including those on subordinated senior Aaa and Aa-rated securities, are multiples of
historic high commercial mortgage loss experience and well in excess of our current loss expectations.
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MD&A