Allstate 2008 Annual Report Download - page 227

Management’s Discussion and Analysis
of Financial Condition and Results of Operations–(Continued)
authority granted by the Corporation and AIC boards on October 15, 2008 and October 20, 2008, respectively, to
make capital contributions in the form of cash or securities, by providing a guaranty or guaranties, or by
purchasing one or more surplus notes or other securities on or before April 30, 2009.
Moreover, in addition to these historic external sources of capital, access to funding from additional sources,
including participation in programs offered by the U.S. Treasury and other governmental organizations, are
potentially available to the Corporation and its operating subsidiaries for capital and liquidity needs.
The Corporation has access to additional borrowing to support liquidity as follows:
●A commercial paper facility with a borrowing limit of $1.00 billion to cover short-term cash needs. As of
December 31, 2008, there were no balances outstanding and therefore the remaining borrowing capacity
was $1.00 billion; however, the outstanding balance can fluctuate daily.
●Our primary credit facility is available for short-term liquidity requirements and backs our commercial paper
facility. Our $1.00 billion unsecured revolving credit facility has an initial term of five years expiring in 2012
with two optional one-year extensions that can be exercised at the end of any of the remaining four years
of the facility upon approval of existing or replacement lenders providing more than two-thirds of the
commitments to lend. The program is fully subscribed among 11 lenders with the largest commitments
being $185 million. The commitments of the lenders are several and no lender is responsible for any other
lender’s commitment if such lender fails to make a loan under the facility. None of the borrowing capacity
under this credit facility has been utilized. This facility contains an increase provision that would allow up
to an additional $500 million of borrowing provided the increased portion could be fully syndicated at a
later date among existing or new lenders. This facility has a financial covenant requiring that we not
exceed a 37.5% debt to capital resources ratio as defined in the agreement. This ratio at December 31,
2008 was 20.5%. Although the right to borrow under the facility is not subject to a minimum rating
requirement, the costs of maintaining the facility and borrowing under it are based on the ratings of our
senior, unsecured, nonguaranteed long-term debt. There were no borrowings under this line of credit
during 2008. The total amount outstanding at any point in time under the combination of the commercial
paper program and the credit facility cannot exceed the amount that can be borrowed under the credit
facility.
●A universal shelf registration statement was filed with the Securities and Exchange Commission in May
2006 and will expire May 2009. In April 2009, we expect to ask our board of directors for authority to file a
replacement universal shelf registration. We can use our current shelf registration to issue an unspecified
amount of debt securities, common stock (including 364 million shares of treasury stock as of
December 31, 2008), preferred stock, depositary shares, warrants, stock purchase contracts, stock purchase
units and securities of subsidiaries. The specific terms of any securities we issue under this registration
statement will be provided in the applicable prospectus supplements.
Liquidity Exposure Contractholder funds as of December 31, 2008 were $58.41 billion. The following table
summarizes contractholder funds by their contractual withdrawal provisions at December 31, 2008.
% to
Total
($ in millions)
Not subject to discretionary withdrawal $13,604 23.3%
Subject to discretionary withdrawal with adjustments:
Specified surrender charges(1) 25,781 44.1
Market value adjustments(2) 9,586 16.4
Subject to discretionary withdrawal without adjustments(3) 9,442 16.2
Total contractholder funds(4) $58,413 100.0
(1) Includes approximately $11.24 billion of liabilities with a contractual surrender charge of less than 5% of the account balance.
(2) Approximately $7.96 billion of the contracts with market value adjusted surrenders have a 30-45 day period during which there is no
surrender charge or market value adjustment.
(3) Includes extendible funding agreements backing medium-term notes outstanding with a par value of $1.45 billion that have been
non-extended and become due by October 31, 2009. We have accumulated, and expect to maintain, short-term and other maturing
investments to fund the retirement of these obligations.
(4) Includes approximately $1.47 billion of contractholder funds on variable annuities reinsured to Prudential effective June 1, 2006.
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MD&A