Allstate 2008 Annual Report Download - page 263

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Gross unrealized
Fair Unrealized net
value Gains Losses gains (losses)
($ in millions)
At December 31, 2007
Fixed income securities $94,451 $3,151 $(2,195) $ 956
Equity securities 5,257 1,096 (106) 990
Derivative instruments(1) (33) 4 (37) (33)
Unrealized net capital gains and losses, pre-tax 1,913
Amounts recognized for:
Insurance reserves (1,059)
DAC and DSI 512
Amounts recognized (547)
Deferred income taxes (478)
Unrealized net capital gains and losses, after-tax $ 888
(1) Included in the fair value of derivative securities are $(9) million classified as assets and $24 million classified as liabilities.
Change in unrealized net capital gains and losses
The change in unrealized net capital gains and losses for the years ended December 31 is as follows:
2008 2007 2006
($ in millions)
Fixed income securities $ (9,452) $(1,584) $(748)
Equity securities (1,322) (761) 460
Short-term investments 3 — —
Derivative instruments 44 (16) (11)
To t al (10,727) (2,361) (299)
Amounts recognized for:
Insurance reserves 681 70 213
DAC and DSI 2,988 467 61
Increase in amounts recognized 3,669 537 274
Deferred income taxes 2,432 638 9
Decrease in unrealized net capital gains and losses $ (4,626) $(1,186) $ (16)
Portfolio monitoring
Inherent in the Company’s evaluation of a particular security are assumptions and estimates about the
financial condition of the issue or issuer and its future earnings potential. Some of the factors considered in
evaluating whether a decline in fair value is other than temporary are: 1) the Company’s ability and intent to
retain the investment for a period of time sufficient to allow for an anticipated recovery in value; 2) the expected
recoverability of principal and interest; 3) the length of time and extent to which the fair value has been less than
amortized cost for fixed income securities, or cost for equity securities; 4) the financial condition, near-term and
long-term prospects of the issue or issuer, including relevant industry conditions and trends, and implications of
rating agency actions and offering prices; and 5) the specific reasons that a security is in a significant unrealized
loss position, including market conditions which could affect liquidity.
153
Notes