This excerpt taken from the ALL 8-K filed Jan 28, 2009.
Consolidated total investments were $96.0 billion as of December 31, 2008, a decline of $9.0 billion from September 30, 2008, due primarily to a $4.7 billion increase in unrealized net capital losses and net reductions in both contractholder obligations of $1.7 billion and securities lending balances of $1.2 billion.
Net realized capital losses were $1.9 billion on a pre-tax basis for the fourth quarter of 2008, due to $652 million of impairment write-downs, $585 million of net losses on the settlement and valuation of derivative instruments, $357 million of net losses on sales, $241 million of change in intent write-downs and $97 million of net losses on the valuation of limited partnerships. The impairment write-downs of $652 million were recorded on investments in instances where the fair value of the investment has declined below the cost basis and we concluded that the decline in fair value is other than temporary. The derivative losses primarily reflect $448 million in losses on interest rate swaps used in our asset-liability management activities to shorten the duration of the Allstate Financial portfolio, which on an economic basis were more than offset by changes in the fair values of the related liabilities, although changes in the fair values of the liabilities are not recognized in the income statement. These losses were partially offset by $215 million in gains from our macro hedge on equity markets. Losses from sales primarily resulted from the execution of tax planning strategies executed primarily within our equity portfolios that are effectively carried on a lower of cost or fair value basis to realize capital loss carryback benefits.
Unrealized net capital losses increased $4.7 billion during the fourth quarter to $8.8 billion primarily due to significantly widening credit spreads. Details by asset class are provided on page 18 of this release.
A limited portion of our macro hedge program was dedicated to protect against credit spread movements. Gains from the credit spreads hedge were largely offset by the cost of the interest rate hedges.