Allstate 2008 Annual Report Download - page 204

Net Realized Capital Gains and Losses The following table presents the components of realized capital
gains and losses and the related tax effect for the years ended December 31.
2008 2007 2006
($ in millions)
Sales(1) $ (464) $1,483 $ 491
Impairment write-downs(2) (1,983) (163) (47)
Change in intent write-downs(1)(3) (1,752) (147) (112)
Valuation of derivative instruments (1,280) (77) 26
EMA LP income(4) (97) — —
Settlement of derivative instruments 486 139 (72)
Realized capital gains and losses, pre-tax (5,090) 1,235 286
Income tax benefit (expense) 1,779 (437) (100)
Realized capital gains and losses, after-tax $(3,311) $ 798 $ 186
(1) To conform to the current period presentation, certain amounts in the prior periods have been reclassified.
(2) Impairment write-downs reflect issue specific other-than-temporary declines in fair value, including instances where we could not
reasonably assert that the recovery period would be temporary.
(3) Change in intent write-downs reflect instances where we cannot assert a positive intent to hold until recovery.
(4) Beginning in the fourth quarter of 2008, income from EMA LP is reported in realized capital gains and losses. EMA LP income for
periods prior to the fourth quarter of 2008 is reported in net investment income.
Sales net realized losses in 2008 were due to net realized losses on equity securities of $701 million
comprised of gross losses of $1.45 billion and gross gains of $751 million. The gross losses primarily resulted from
the execution of tax planning strategies primarily within our equity portfolios that are effectively carried on a lower
of cost or fair value basis to realize capital loss carryback benefits. The net realized gains on sales in 2007 were
primarily due to net realized gains on equity securities of $1.14 billion comprised of gross gains of $1.39 billion
and gross losses of $252 million. The gross gains were attributable to our continuing tactical reallocation of equity
securities in the Property-Liability portfolio.
The ten largest losses from sales of individual securities for the year ended December 31, 2008 totaled
$239 million and ranged from $12 million to $46 million. Five securities totaling $54 million were in an unrealized
loss position greater than or equal to 20% of amortized cost for fixed income securities or cost for equity
securities for a period of less than six consecutive months. One security totaling $13 million was in an unrealized
loss position greater than or equal to 20% of amortized cost for fixed income securities or cost for equity
securities for a period of more than six but less than twelve consecutive months.
Our largest aggregate loss on sales and write-downs are shown in the following table by issuer and its
affiliates. No other issuer together with its affiliates had an aggregated loss on sales and write-downs greater
than 0.8% of the total gross loss on sales and write-downs on fixed income and equity securities.
Fair value Gain/ December 31, Net
at sales loss on Write- 2008 unrealized
(‘‘proceeds’’) Sales downs holdings(1) gain (loss)
($ in millions)
Finance company $ 173 $(12) $(109) $ 7 $ (1)
Savings and loan 22 (3) (87) — —
MBS Alt-A — — (71) 23 (6)
Large international insurer 102 (3) (59) 54 (6)
Brokerage 164 (7) (53) 121 (3)
Synthetic CDO — — (50) 14 (10)
Exchange traded funds—Dow Jones Financial Index 150 (33) (16) — —
Exchange traded funds—International exposure 24 (12) (34) 764 (17)
Bank 100 5 (51) 206 (14)
Finance company — — (45) — —
Mortgage association 386 10 (55) 231 10
Total $1,121 $(55) $(630) $1,420 $(47)
(1) Holdings include fixed income securities at amortized cost or equity securities at cost.
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