This excerpt taken from the ALL 8-K filed Apr 23, 2008.
Privately Placed Fixed Income Securities
Privately placed fixed income securities totaling $16.8 billion are reported in Level 2 and 3 at March 31, 2008. On $4.7 billion of the portfolio, we received indicative values from our valuation service provider, and they are reported in Level 2 primarily due to the existence of market observable inputs in the form of external ratings from independent third party rating agencies. The $12.1 billion of privately placed fixed income securities included in Level 3 primarily comprise $10.4 billion valued using an internal model and $1.4 billion valued using non-binding valuation broker quotes. The internally modeled securities are valued based on internal ratings, which are not observable in the market.