Related Party Transactions

6 Months Ended

Jun. 30, 2011

Related Party Transactions

Related Party Transactions

2.  Related Party Transactions

In March 2011, Road Bay Investments, LLC (“RBI”), a consolidated subsidiary of ALIC, entered into an asset purchase agreement with AIC, which allows RBI to purchase from AIC mortgage loans, participations in mortgage loans, bonds, or real estate acquired in connection with such loans, with an aggregate fair value of up to $25 million.  As consideration for the purchase of the assets, RBI issues notes to AIC.  In March 2011, RBI purchased from AIC real estate with a fair value of $10 million on the date of sale and issued a 5.75% note due March 24, 2018 to AIC for the same amount.  In April 2011, RBI purchased from AIC mortgage loans with a fair value of $4 million on the date of sale and issued a 5.75% note due April 19, 2018 to AIC for the same amount.  Since the transactions were between affiliates under common control, the purchased investments were recorded by RBI at AIC’s carrying value on the date of sale.  The investments that were purchased were impaired; therefore, the carrying value on the date of sale equaled fair value.  

In June 2011, in accordance with an asset purchase agreement between RBI and Allstate Heritage Life Insurance Company (“AHL”), an unconsolidated affiliate of the Company, RBI purchased from AHL mortgage loans with a fair value of $3 million on the date of sale and issued a 5.80% note due June 17, 2018 for the same amount.  Since the transaction was between affiliates under common control, the mortgage loans were recorded by RBI at AHL’s carrying value on the date of sale.  The mortgage loans that were purchased were impaired loans; therefore, their carrying value on the date of sale equaled fair value.