Allstate (ALL)

Conservative Management of Liquidity

Allstate actively manages its financial position and liquidity levels in light of changing market, economic, and business conditions and we believe our liquidity levels remain more than adequate.  In order to enhance our ability to hold our investment portfolio assets to recovery, we conservatively managed our available liquidity to higher levels of cash and liquid short-term investment positions.  As a result, at year-end 2008 we held 21.3% of our total investment portfolio, or $20.6 billion, in cash and other liquid investments that are saleable within one quarter without generating significant additional net realized capital losses.  This provides ample liquidity to service upcoming cash needs, though it did reduce net investment income in 2008.

Allstate has exposure to discretionary withdrawals of contractholder funds.  While we are able to quantify scheduled maturities for our institutional products of $3.3 billion in 2009, anticipating retail product surrenders are less precise.  Key factors that impact customer surrenders include the level of surrender charges, the length of time the contract has been in force, market interest rates, and potential tax implications.  We track surrenders and partial withdrawals closely, and have experienced lower retail surrenders in 2008 compared with 2007.