Allstate 2008 Annual Report Download - page 277

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Off-balance-sheet financial instruments and unconsolidated investments in VIEs
The contractual amounts and fair values of off-balance-sheet financial instruments at December 31 are as
follows:
2008 2007
Contractual Fair Contractual Fair
amount value amount value
($ in millions)
Commitments to invest in limited partnership interests $1,889 $— $2,206 $—
Commitments to invest—other 3 — 15 —
Commitments to extend mortgage loans 3 — 326 3
Private placement commitments — — 30 —
In the preceding table, the contractual amounts represent the amount at risk if the contract is fully drawn
upon, the counterparty defaults and the value of any underlying security becomes worthless. Unless noted
otherwise, the Company does not require collateral or other security to support off-balance-sheet financial
instruments with credit risk.
Commitments to invest generally represent commitments to acquire financial interests or instruments. The
Company enters into these agreements to allow for additional participation in certain limited partnership
investments. Because the equity investments in the limited partnerships are not actively traded, it is not practical
to estimate the fair value of these commitments.
Commitments to extend mortgage loans are agreements to lend to a borrower provided there is no violation
of any condition established in the contract. The Company enters into these agreements to commit to future loan
fundings at a predetermined interest rate. Commitments generally have fixed expiration dates or other termination
clauses. Commitments to extend mortgage loans, which are secured by the underlying properties, are valued
based on estimates of fees charged by other institutions to make similar commitments to similar borrowers.
Private placement commitments represent conditional commitments to purchase private placement debt and
equity securities at a specified future date. The Company regularly enters into these agreements in the normal
course of business. The fair value of these commitments generally cannot be estimated on the date the
commitment is made as the terms and conditions of the underlying private placement securities are not yet final.
The Company established two VIEs that are not consolidated because the Company is not the primary
beneficiary. The VIEs hold investments on behalf of unrelated third party investors that are managed by Allstate
Investment Management Company, a subsidiary of the Company. Their assets primarily consist of investment
securities and cash, and the liabilities consist primarily of long-term debt. The Company’s maximum loss exposure
related to the VIEs is the amortized cost of its investment. Information on each VIE as of December 31, 2008 is
listed in the following table.
($ in millions) Maximum
Year established Assets Liabilities loss exposure
2006 $400 $378 $7
2005 335 313 4
167
Notes