A product to enable life-insurer guaranteed investment contracts for separate accounts to function like money market instruments for sale to longer-term investors; increase spreads by 200-400% for insurers.

1. C.I.B. (Challenge; Initiative; Benefit)
Commerzbank (New York)
Challenge: lack of returns generated from traditional banking products
Initiative: Over a year:
 researched certain cash-based contracts approved by the S.E.C. as
money-market equivalents (time-line of 90 days or less);
 investigated the intricate S.E.C. and insurance regulatory accounting
standards;
 studied uses and flexibility of certain bank lending products; as well
as,
 worked closely with best legal experts in insurance to test out
possible product concept.
Benefits: Including, but not limited to, the following:
1. developed regulatory structured arbitrage product;
2. enabled insurers issuing these contracts to invest in riskier assets
maturing later than three months;
3. increased spread earned on these product by 300%; as well as,
4. pitched the product to five of the top ten issuers of cash-equivalent
cash investment contracts.

2. Allstate Life Insurance Company
3075 Sanders Road
North Allstate, Allstate 60062-7127
Attn Mr Steve Schaefer
Re mmerzbank Insurance Liquidity Support Product for Allstate Life Insurance ("Allstate")
Dear Steve,
Thanks for calling me back today. In the previous ‘thank-you’ letter to Sarah Donahue, attached
hereto, we indicated our “loud-and-clear” understanding of Allstate’s liquidity support needs.
Since then, we have further modified the Insurance Liquidity Support Product (the “Facility”),
rendering its structure more flexible and linking pricing to your performance. Previously, we had
altered the proposed structure to extend the surrender notice period – or, the time-bucket – from
7-30 days to 364 days. Through these newer changes, the capital efficiency of the Facility’s credit
component reduces significantly the expected out-of-pocket cost of issuance for Allstate. Initially,
as a partner through a bi-lateral line, subsequently to be syndicated out to a group of highly rated
banks, we can accommodate directly, and simply, your specific appetite for issuing shorter-term
funding agreements. Thus can we work out the details of the Facility’s credit documents first.
The modified credit/funding agreement confers the following advantages upon Allstate:
1. Allstate positioned as a beneficiary of the flight-to-quality among funding agreement issuers;
2. ease of entry with a credit/funding agreement jointly issued by two double-A financial
institutions;
3. extended time-buckets require no change in your investment strategy or liability structure; and,
4. the support of the Bank’s capital markets team, the fifth best in euro-debt issuance, to allow, if
necessary, for a euro-medium term note issuance to take out the New Funding Agreement(s).
Borrower Allstate Life Insurance Company ("Allstate")
Lender The Bank or its commercial paper funding conduit, Four Winds Funding
Line Amount Up to U.S.$500,000,000 plus an incremental amount for accrued interest.
Term of Line 364-days, with a sixteen month term-out provision
Borrowing Length Up to sixteen months
Pricing Arranger’s Fee of 50 basis points, paid up-front; annual Facility Fee of 15 b.p.s;
and, interest margin of 35 b.p.s with a step-up in rates after 60 days
Covenants A few of which none are substantive
Conditions Precedent Receipt by the Bank of a ‘new’ funding agreement in its name and issued by
Allstate and containing the rolling-365-day surrender option
Defaults Fraud, bankruptcy, credit-event-upon-merger and a regulatory event
Default Remedy Accelerate the surrender period of the new funding agreement from one year to
one week
Funding Protocol If line undrawn on 364th day, no funding agreements are being surrrendered and
if the Bank does not consent to an extension, Allstate can draw under the line for
the full amount for sixteen months; the Bank reserves the right to accept either a
prommissory note or a new funding agreement with the rolling-365-day surrender
clause
In keeping with your potential time frame of early 2000 for serious discussions on this product,
we would like to set up a brief conference call among you, my counterparts on the capital markets
side and me to get a feel for what Allstate may be looking for in this Facility or, alternatively, in
upcoming euro-medium term note issues. We look forward to imminent contact with you.

3. DESCRIPTION of OPPORTUNITY for THE BANK
This segment of the presentation reviews the realities (i.e., needs) in the life insurance market (i.e.,
the venue) for a new banking product – the “Insurance Liquidity Support Product” (the “Facility”).
The Need. In an effort to put idle surplus capacity to work, many life insurers have started to issue
funding agreements. These agreements are second generation guaranteed investment contracts
tailored for institutional investors other than pensions. Nevertheless, the eclipse of life insurers as
the money manager of choice by mutual funds or independent asset managers plus the cascade of
fixed income monies over to the equity side has left many insurers with strong general account
balance sheets and refined fixed income investment skills which currently languish. The Bank has
developed a means by which life carriers can put this under-deployed capacity back to work.
The Venue. Life insurers appear to have overlooked one large segment of the asset management
market -- the $1.1 TRILLION money market investment funds -- due to a perceived mismatch
between the insurers’ skills and investment horizon versus the requirements of these short-term
investors. Funding agreements issued by life insurers have penetrated only about 3-4% of this
market. This small share is not accidental but a consequence of the following constraints:
First, to meet federal regulatory standards, funding agreements must contain a surrender clause
allowing for immediate repayment of par value plus accrued interest to the investor.
Second, money market managers are constrained to buying double-A quality assets; the ratings
agencies place a clear analytical emphasis upon the ability of insurers to service a complete
run on their funding agreements.
Third, most funding agreement currently issued to money market investors are re-packaged as
short-term assets through a trust structure.
Influenced by the first and second requirements, insurers customarily purchase double-A rated,
easily tradable assets. These assets, yield significantly less than those traditionally held by life
carriers; the value-added of these insurers, measured in spread income, dissipates. The third
constraint narrows spreads further by imposing substantial -- at times prohibitive -- agency costs
upon the sponsoring insurer.
The Facility’s Concept. The Bank has devoted a year and employed several resources developing
a banking product which can enable companies like Allstate to issue funding agreements ‘their
way’ to money market funds. The Bank has tested the concept out on the two largest ratings
agencies for claims-paying ratings and worked closely with the premier law firm serving regulated
industries, like insurance. This outside counsel has researched the policies promulgated by the
Department of Insurance of the State of New York; New York’s standards are arguably the strictest
in the country. It has also cross-applied certain proprietary concepts involving similar products in
other regulated environments. At first glance, the Facility looks more like a crazy-quilt of detail.
Yet each of these apparently trivial parts of the product serves a specific interest of one of the five
key stakeholders: Allstate, the money market fund, state regulators, the ratings agencies and the
Bank.
Simply said, this Facility is a hybrid liquidity support and credit line issued from the Bank to
Allstate. The bank line employs the mechanics of a letter of credit but supports the life carrier on

4. the same level that ‘soft capital’ lines support monoline bond insurers. For a first-hand look at the
specifics, please refer to the attached “Summary of Indicative Terms and Conditions”. This hybrid
line blends the following features cited below.
 An amount available to Allstate under the line sufficient to cover principal and accrued
interest;
 Allstate’s freedom to invest in less liquid, better yielding assets for the amount of the bank
line;
 Three years for Allstate to liquidate those assets or, more likely, to find a replacement money
market fund;
 Direct payment to the investor by the Bank of the surrendered amount;
 Few, if any, impediments to borrowing (even as an insurer is imminently to be seized by
regulators); and,
 Minimum agency costs given the simplicity of the structure.
Tour of the Facility. The single draw, hybrid liquidity/credit line has the following terms:
Borrower Allstate U.S.A., Inc. (“Allstate”)
Bank Issuing Line the Bank AG; New York Branch (“the Bank”)
Lender The Bank or its commercial paper funding conduit.
Term of Line Four years, with annual extensions beginning the sixth
month after closing, at the sole discretion of the Bank.
Maximum Borrowing Length Three years
Pricing Origination Fee; Commitment Fee; and, interest margin
(Please note that the commitment fee dissolves into the
margin upon a draw under the line.)
Covenants A few of which none are substantive
Conditions Precedent Proof of surrender by a designated money market fund and
receipt by the Bank of a ‘new’ funding agreement in its name
and issued by Allstate
Defaults Fraud, bankruptcy, credit-event-upon-merger and a
regulatory event
Default Remedy Accelerate the surrender period of the new funding
agreement from three years to one week
Funding Protocol Scheduled debt service of bank loan to be paid via the new
funding agreement
On opening day, Allstate sells a funding agreement to a money market fund with a market-
mandated seven day surrender period. Tthe Bank establishes the bank line in Allstate’s name for
an amount equal to par value plus reasonably projected accrued interest. The Bank also establishes
a ‘blocked’ deposit account in the name of Allstate. The blocked deposit account will contain funds
borrowed by Allstate but only be released with the consent of the Bank.
Time goes by and one day the money market fund surrenders its funding agreement upon seven
days notice. Upon receipt of the surrender notice and a copy of the surrendered funding agreement
from Allstate, the Bank places the required funds in Allstate’s blocked deposit account. Upon

5. receipt of the new funding agreement in its name from Allstate, the Bank releases the monies in the
blocked deposit account directly to the money market fund on behalf of Allstate.
The Credit Agreement and new funding agreement jointly stipulate that all payments of principal
and interest due under the loan will be paid to the Bank via the new funding agreement. The new
funding agreement also states that it is subject to the terms and condition within the Credit
Agreement. Other than these two provisions, the new funding agreement is identical with its
predecessor; that is, there is a seven day surrender period in favor of the Bank. The Credit
Agreement, however, states that the Bank agrees not to enforce the seven day surrender period for
the earliest of three years, regulatory seizure or bankruptcy.
This provision allows the Bank to surrender the new funding agreement immediately upon receipt.
The Credit Agreement effectively stretches the conventional one week surrender period out to
three years, all things being equal. This arrangement assures that the Bank will be a policyholder
with a standing claim to be honored within a week should state regulators take the life insurer into
receivership prior to its declaring bankruptcy.
the Bank essentially yields its contractual protections under the new funding and Credit
Agreement, as it would in a ‘soft capital’ line extended to a monoline financial guarantor. Like
those lines, the Facility would command premium pricing to compensate the bank for giving up
its controls. Nonetheless, under the simplified structure detailed above, the agency costs saved
would defray much of this incremental bank pricing. Furthermore, the enhanced yield earned on
those investments backing the bank-supported funding agreement would provide enough new
income to justify Allstate’s cost of re-deployment of its core investing skills. Pricing differentiated
over time will allow for an attractively low interest margin for thirty to ninety days, or the expected
time horizon of a liquidity facility. After the liquidity period has elapsed, the interest margin
increases noticeably to reflect the evolution of a liquidity line into credit support.
Appraisal of the Facility. So what does this bank line really do for Allstate? It avoids agency
costs and permits traditional insurance investing on contracts sold to short-term investors.
Fundamentally, Allstate pays “X” for the bank facility to earn “2 or 3X” of incremental spread.
Since the credit agreements underlying the designated funding agreements will comprise only 5%
(or less) of Allstate’s general account investments, the Bank will have repayment access to the
entire portfolio. The three year surrender period allows the insurer to sell relatively illiquid assets
at a pace which contains price concessions.
Should Allstate find that a secondary market of a particular asset class has evaporated, it would
also have sufficient time to sell an asset-backed security backed by the investments. Among the
Bank’s several specialized finance divisions, three of the strongest include real estate,
collateralized bond or loan obligations and structured finance for the packaging of the assets into
a security. the Bank would be available to aid Allstate in liquidating these illiquid assets through
the capital markets. Finally, the funding protocol of paying the loan via the new funding agreement
is structured to enable Allstate to book any borrowings under the line as a policyholder liability and
not debt. Of course, the Bank would enjoy the status of a policyholder in exchange for hassle-free
liquidity.
Conclusion. Life insurers need to protect their once dominant but now secondary market share in
asset management. Money market funds provide a large yet largely ignored market for life
insurance funding agreements.

6. Except that embedded in this opportunity is a mismatch of financial skills and investment horizons
that nullifies the potential gains.
The Bank can mend this apparent breach to produce a triple winner; that is, that Allstate, the Bank
and the fund all profit unmistakably. These three winners make this hybrid bank line a Facility.
PRODUCT REVIEW
Introduction. The Bank has recently developed a specialized product for selected, very highly
rated insurance companies. The product provides a specially designed liquidity support and credit
facility arrangement to an operating life insurance company (the “Insurer”), which will in turn
enable Insurer to sell medium term funding agreements to short-term money market investment
funds. Furthermore, the specially tailored provisions of the liquidity support and credit facility
will perm it considerably greater latitude than is now possible in the investment of the proceeds
from the funding agreement.
The Need. In an effort to put idle surplus capacity to work, many life insurers are selling funding
agreements. These agreements are second generation guaranteed investment contracts tailored for
institutional investors other than pension managers. Nevertheless, the eclipse by mutual funds of
life insurers as the money managers of choice plus the shift in recent years of fixed income monies
over to the equity side has left many insurers with strong general account balance sheets and
refined fixed income investment skills which currently languish. The Bank has developed a means
by which life insurers can put this underutilized capacity back to work.
The Opportunity. Life insurers appear to be underrepresented in one large segment of the asset
management market -- the $1.1 TRILLION of money market investment funds -- due to a perceived
mismatch between the insurers’ skills and investment horizons versus the requirements of these
short-term investors. Funding agreements issued by life insurers have penetrated only about 3-5%
of this market. This small share is not accidental but a consequence of the following constraints:
1. to meet federal regulatory standards, a funding agreement must contain a surrender clause
allowing for immediate repayment of par value plus accrued interest to the investor;
2. the ratings agencies place a clear analytical emphasis upon the ability of an insurer to service a
complete run on its funding agreements; and,
3. the typical funding agreement issued to a money market investor is re-packaged as a short-term
asset through a trust structure.
Influenced by the first and second hurdles, insurers customarily purchase double-A rated, easily
tradable assets with the proceeds of the funding agreements. These assets yield significantly less
than those traditionally held by life insurers which vitiates the value-added of the skilled fixed
income managers. The third constraint narrows spreads further by imposing substantial, at times
prohibitive, agency costs upon the sponsoring insurer.
Product Concept. The Bank has created a product which allows a selected Insurer to issue funding
agreements to money market funds. The Bank has built this product with the knowledge and
collaboration of the two largest ratings agencies for financial strength ratings (i.e., assessments of
life insurers’ abilities to pay their claims). The bank has worked closely with LeBoeuf, Lamb,
Greene & MacRae in developing the product. Each part of the product’s structure serves a specific

7. interest of five key stakeholders: Insurer, the money market fund, state regulators, the ratings
agencies and the Bank.
Simply said, this product is a back-up credit facility arranged by the Bank for the benefit of Insurer.
For a first-hand look at the specifics, please refer to the sections titled “Summary of Indicative
Terms and Conditions” and “Secondary Indicative Terms and Conditions”. To support Insurer’s
funding agreement, this arrangement blends the features cited below:
 an amount available to Insurer under the line sufficient to cover principal and accrued interest
on the funding agreement;
 Insurer’s freedom to invest in less liquid, better yielding assets for more than the amount of
the funding agreement being backed by the credit arrangement;
 the ability by Insurer or a designated intermediary to remarket the funding agreement upon
the receipt of a surrender notice from the money market fund;
 three years for Insurer to liquidate those assets or, more likely, to find a replacement money
market fund to take out the replacement funding agreement issued by Insurer to the Bank
(the “New Funding Agreement”);
 direct payment to the money market fund by the Bank of the principal of, and interest accrued
upon, the funding agreement;
 few, if any, impediments to borrowing even at times of stress for Insurer; and,
 reduced agency costs with the absence of a trustee.
Product Mechanics. Conceptually, the mechanics underlying this credit facility are simple.
Currently, ratings agency parameters for a funding agreement with a shorter surrender notice
period require an insurer to back it with at least twice the surrender value in near-cash investments.
These lower yielding assets eliminate the profitability historically enjoyed on medium term spread
products, making money market funds less desirable prospects.
In contrast, the Bank’s back-up facility – covering not only par value but also accrued interest –
inserts the Bank’s double-A $384 billion balance sheet between Insurer and the fund. The money
market fund may surrender its funding agreement with 7-30 days notice.
To honor the surrender of a funding agreement by a money market fund, Insurer borrows under
the facility and holds the borrowing on deposit with the Bank. Following the receipt of the New
Funding Agreement, which closely resembles the surrendered contract yet is subject to the terms
and conditions of the facility, the Bank releases directly to the money market fund the monies
already drawn by Insurer.
Funding agreement
with 7-day surrender
interest paid every
6 months
Insurer’s
life
subsidiary
Money
Market
Fund
Par value of Funding
Agreement paid
The Bank Blocked deposit
account
the insurer
Money
Market
Fund
Credit agreement
for par value AND 6
months interest

8. Insurer has up to three years to repay the borrowing. Finally, the facility establishes a repayment
protocol to allow Insurer to service the bank debt simultaneously through the repayment of the
New Funding Agreement. Each party -- the money market fund, the Bank and Insurer -- benefits
by the arrangement.
Product Benefits. By relinquishing most standard contractual controls, the Bank assures the
money market fund that it can surrender the funding agreement at will upon 7-30 days’ notice.
With three years to repay any drawings under the facility, Insurer can invest the proceeds of the
supported funding agreement in private placements and mortgages; it will have the time to sell off
these less liquid assets in an orderly manner to contain price concessions. Furthermore, the
transparency of the facility’s bilateral structure minimizes agency costs. In short, Insurer gets its
traditional spread back, while the money market fund suffers no compromise of liquidity. By
receiving the New Funding Agreement, the Bank has a policyholder claim against the general
account investments of Insurer which is senior to the claims of all general creditors. With the aid
of the repayment protocol, Insurer avoids taking debt onto its statutory balance sheet.
Once Insurer finds a buyer of a new agreement, it can redeem the New Funding Agreement from
the Bank from the proceeds; this policy redemption also extinguishes the bank debt under the
repayment protocol. Should Insurer find that a secondary market of a particular asset class has
evaporated, the three year loan maturity would give it sufficient time to sell an asset-backed
security backed by the investments. Among the Bank’s several specialized finance divisions, three
of the strongest include real estate, collateralized bond or loan obligations and structured finance
(for securitizing the assets into a tradable fixed income instrument). The Bank would be available
to aid Insurer in liquidating these static assets through the capital markets.
the
Bank
Replace-
ment fund
the
insurer replacement funding
agt in the amount due
to the bank
amount due to bank
OR
the
insurer
Bond dealers; asset-
backed market
invts sold or securitized
Money
Market
Fund
the insurer
the Bank
new funding
agreement
Blocked deposit
account
principal
PLUS accrued
interest
the Bank
Repayment protocol
defined in new
funding and credit
agreements
the
insurer
New Funding
Agreement
credit agreement
New Funding
Agreement
amount due to bank
amount due to bank

9. Conclusion. Money market funds provide a vast yet largely untapped market for life insurance
funding agreements. Life insurers need to access that market inexpensively and profitably. The
Bank can service this market with a product, which allows Insurer and the money market fund to
profit. By balancing the interests of Insurer and the money market fund, the bank facility leverages
resources taken for granted -- the ratings agencies and state regulators – to profit both the fund and
Insurer. Insurer earns higher investment yields with an increased spread, which is a multiple of
the facility’s cost. The money market fund retains the 5% historical return premium earned on
eligible funding agreements over conventional money market instruments.
Insurance Company Guaranteed Investment Contracts and Funding Agreements
OVERVIEW
Review of the current status of insurance deposit products. Life insurers have issued Guaranteed
Investment Contracts (“G.I.C.s”) for more than two decades. G.I.C.s were (and are) multi-year
bullet deposits backed by the balance sheets of large operating life insurance companies to compete
with similar products offered by leading banks; G.I.C. depositors were (and are) deemed to be
policyholders and senior to all creditors at all levels. As insurers evolved their G.I.C. products
consumers realized that traditional whole life policies were no longer economic.
As the retirement savings market matured, Funding Agreements (i.e., group or institutional deposit
products) have emerged as “second generation” G.I.C.s for other than pension-specific uses.
Funding Agreements have structured in clauses to enable rapid exit (i.e., 7-60 days) for short term
investors. Though eligible for purchase by money market managers, these structured Funding
Agreements are bilateral contracts which differ with each transaction to preclude secondary
trading.
The next step in the evolution of Funding Agreements. If they can be structured to meet S.E.C.
& O.C.C. approvals, Funding Agreements are attractive to money market funds, which require
maturities within 270 days. By making its double-A $384 billion balance sheet available to a select
few insurers with entrenched market positions and impeccable credit quality, the Bank can enhance
the comfort of life insurers in selling Funding Agreements since they can invest in less liquid assets
and still meet ratings agency liquidity concerns. The higher yields of Funding Agreements over
other money market instruments can induce short term investors to hold them. Such bank liquidity
support assures the availability of a swift exit from Funding Agreements required by money market
funds. Few Funding Agreements have been surrendered to date. Bank provided liquidity allows
the insurer enough time permit remarketing of the surrendered Funding Agreement. Any drawings
should not be outstanding for more than two months.
Assessment of the next step. The primary risk for a liquidity bank will be that of a long term draw
on the liquidity line for the following reasons:
1. deterioration of a particular credit 4. adverse rate shifts
2. loss of life insurers’ prestige
3. a sudden change in investor appetite
5. a spike in redemptions against a money
market manager
Transactional and market-based mitigants which assuage these concerns include:

10. 1. availability to only half a dozen insurers
2. pricing to encourage remarketing of the
Funding Agreement
3. yield-based incentives for investors to hold
4. rating agency scrutiny and the impact of
those ratings upon market share
5. the Funding Agreements’ remarketability
to date; and,
6. the needed restructurings completed during
the lag times between the surrenders and
what would be the drawing dates under
liquidity lines
DISCUSSION IN DEPTH
Review of the current status of insurance deposit products. The Bank is developing a new money
management tool to bridge the disparity of a strong and growing demand for short term investments
within the regulated funds management sector and the excess supply of long term paper issued, in
this case, by insurance companies. A particularly rich possibility is the liquefaction of products –
like guaranteed investment contracts – which are long term but have no access to secondary markets
owing to their variety as each transaction is negotiated singly.
Life insurers
have issued
guaranteed
investment
contracts for
more than two
decades.
Guaranteed investment contracts (“G.I.C.”s) and their origins. G.I.C.s arrived in
the mid-1970s as an asset management product targeted toward pension funds and
other institutional money handlers who faced large, periodic and predictable cash
flows. With the influx of pension claimants (as the first generation of pensioners
began to retire), unstable interest rates and continual inflation, pension managers
sought out investments, the pay-outs of which would match closely the payment
obligations of the pension fund which could be calculated beforehand with
reasonable accuracy. As money managers to these pension funds in preceding
decades, life insurance companies suddenly confronted large group annuity
customers which needed to focus scheduled annuity payments into sporadically
timed and uneven cash flows. Such a requirement lent itself better to a series of
deposit payments, an open invitation for product substitutes to be offered to pension
funds by federally insured banks, to which the latter promptly responded.

11. G.I.C.s were
(and are) multi-
year bullet
deposits backed
by the balance
sheets of large
operating life
insurance
companies to
compete with
similar products
offered by
leading banks;
G.I.C. depositors
were (and are)
deemed to be
policyholders
and senior to all
creditors at all
levels.
As insurers
evolved their
G.I.C. products,
consumers
realized that
traditional whole
life policies were
no longer
economic.
As the retirement
savings market
matured,
Funding
Agreements
(i.e., group or
institutional
deposit
products) have
emerged as
“second
generation”
G.I.C.s for other
than pension-
specific uses.
Insurance companies sought to defend their traditional market by issuing their own
deposit products, which they called G.I.C.s. The insurers involved deemed these
‘non-bank’ certificates of deposit as “group” annuities, often with only one payment
(instead of several over time). Through this definition of these time deposits as
‘bullet’ annuities, pension managers investing in G.I.C.s enjoyed the status of
policyholders with claims senior to all creditors at all levels in the event of an
insurer’s insolvency. In addition, in lieu of deposit insurance sponsored by the
federal government, state guaranty funds, typically financed through a 2% or so
premium tax, would frequently provide secondary support to these G.I.C.
depositors-as-policyholders. Subsequently, state insurance regulators often agreed
with insurers and considered these contracts to be group annuities since they relied
upon the insurers’ statutory balance sheets; that is, G.I.C.s would be “guaranteed”
by the insurance investments owned by the issuers on behalf of all of their
policyholders. Excess assets built up over years of writing life policies gave many
life insurers stronger and liquid balance sheets to substantiate these guaranties.
On another front, during the 1970s, insurers had to defend against incursions into
their traditional markets by investment funds. Whole life policies and traditional
individual life insurance annuities tended to have asset accumulation rates (i.e.,
assumed investment returns credited to the policyholders) set by state regulators at
unrealistically low levels. Mutual Funds, however, credited to their investors’
respective accounts the total returns earned on investments net of management and
administration fees. These portfolio returns tended to be higher than those
structured into individual life insurance products or annuities. Consumers quickly
realized that it made more sense to purchase inexpensive limited term insurance
(e.g., for the next five years) and invest in mutual funds the premium monies saved.
Such limited term life products were not particularly profitable for insurers.
Consequently, insurers developed less profitable interest sensitive life policies
which granted higher accumulation rates. To enable insurers to compete directly
with mutual funds, G.I.C.s also represented a new generation of pooled savings
products when mutual funds began to displace individual life insurance annuities as
the retirement savings vehicles of choice during the 1970s.
Explanation of Funding Agreements. In the late 1980s, frequently with the aid of
intermediaries, life insurers developed Funding Agreements to expand their product
mixes and target markets. The original and maturing G.I.C. portfolios were either
treading water or contracting due to a secular decline in interest rates and the
widespread conversion from ‘defined benefit’ to ‘defined contribution’ plans.
(Defined contribution plans fix the amount of the employers’ yearly contributions –
usually pegged to percentages of their profits – into the pension pools whereas the
defined benefit plans specified the periodic pension payments the future retirees
would receive.) These original Funding Agreements resemble G.I.C.s in the timing
of their cash flows but were designed for a wider market.
With a wider field of competition than it has been used to, the life insurance
industry has been targeting new buyers of its deposit products and found

12. Funding
Agreements are
beginning to
structure in
clauses to
enable rapid exit
(i.e., 7-30 days)
for short term
investors.
Though eligible
for purchase by
money market
managers, these
Funding
Agreements are
bilateral
contracts which
differ in each
transaction to
preclude
secondary
trading.
If structured to
meet S.E.C. &
O.C.C.
approvals,
Funding
Agreements are
attractive to
money market
funds, which
require
maturities within
270 days.
The bank
liquidity support
enhances the
comfort of life
insurers in
selling Funding
Agreements
since they can
invest in less
liquid assets and
still meet ratings
agency liquidity
concerns.
many which have historically been by-passed by life insurers: short term and money
market investment funds. Funding Agreements structure in liberal surrender clauses
previously seen only for contracts issued by companies carrying unquestioned
liquidity. Surrender provisions explicitly spell out the terms under which investors
can surrender their agreements back to the issuing insurers. Most recently, upon
federal regulatory approvals, these embedded – and unconditional –surrenders
within Funding Agreements have started to fill a chronic funding gap within the
capital markets by turning these long term spread products into synthetic short term
instruments. Since these agreements are bilateral contracts, negotiated on a
customer-by-customer basis, they do not enjoy the liquidity of a secondary market
which requires standardized, easily divisible securities.
From a regulatory standpoint, for example, a five year Funding Agreement
embedded with an unconditional surrender with a 30 day settlement qualifies as a
30 day investment. If a money manager holds that agreement until expiry in five
years, it will technically hold a 30-day asset which it rolls over 61 times. Standby
bank support can take the underlying product concept of the flexible Funding
Agreements one step further to assure this liquidity as well as to standardize and to
catalyze the formation of a secondary market. While these liquid markets manage
in excess of $1 TRILLION of assets, the face amount of Funding Agreements held by
money market funds comprises less than 2% of this prospective market.
The next step in the evolution of Funding Agreements. Modified Funding
Agreements, then, are designed to qualify as eligible short term investments for the
Securities & Exchange Commission and the Office of the Controller of the Currency
for inclusion in money market and short term investment funds. The S.E.C. and
O.C.C. already accept the current bilateral Funding Agreements, with their
surrender provisions, as synthetic short term investments. These bank supported
agreements have been reviewed by the two leading ratings agencies and tailored to
the specific concerns of the agencies:
1. Surrender periods – the time interval from the initial notification by the money
market fund to the insurer of its intent to surrender its contract to the actual
release of funds to the fund manager – to be in the 7-30 day range;
2. A period of time sufficient to allow the life insurers to re-sell the assets backing
the liquefied Funding Agreements;
3. No substantive conditions to lending short of fraud;
4. Few financial covenants or technical defaults;
5. Restrictions of the amount of lines available to a modest percentage of general
account assets;
6. Reliance upon highly rated banks to provide the liquidity; and,
7. No specific inclusion of named remarketing intermediaries.
The bank supported Funding Agreements are expected to enjoy the support of state
insurance regulators since large banks – with their access to instantaneous and
inexpensive funding – will assure the liquidity of this market.

13. The higher
yields of Funding
Agreements over
other money
market
instruments can
induce short
term investors to
hold them.
Structured properly, a Funding Agreement allows an insurance company to lock in
an attractive spread through relatively low funding costs (i.e., the guaranteed
payment rate under a G.I.C.). For the short term fund manager, it confers 7-22 basis
points of additional return which creates ample incentive for that investor to hold
the Funding Agreement through its many implicit roll-overs. Should these spreads
disappear for more than a moment, the money market manager can simply surrender
the policy to the insurer, which would draw on the liquidity line to purchase the
agreement at the end of the 7-30 day contractually stated settlement period. In
theory, the life insurer – or its designated intermediary – would have the time
afforded by the settlement period to find a replacement buyer of the Funding
Agreement on behalf of the insurer.
Such bank
support assures
the availability of
a swift exit from
Funding
Agreements
required by
money market
funds.
Any drawings
should not be
outstanding for
more than two
months.
The liquidity supports an insurer in honoring the surrender clause under the Funding
Agreement. This liquidity support liquefies the Funding Agreement to make it an
eligible money market investment. For example, were a contract surrendered with
a 30 day settlement, the insurer, or its designated intermediary, would have a month
to recruit another buyer of the Funding Agreement to prevent the draw on the
committed bank line to fund the insurer's purchase of the agreement. If an alternate
buyer could not be found, the bank would hold the asset for up to three years.
Historical experience indicates that a bank’s interim holding period between the
funding of the surrender when it is executed and the subsequent resale of the
Funding Agreement would be 30-60 days with two month holds occurring for
situations requiring a restructuring of the contract to render it marketable.
Few Funding
Agreements
surrendered to
date.
Specifically, of the $6 billion of bilateral Funding Agreements sold to money market
funds to date, only 5-6% have been surrendered back to the insurance company.
Only one was surrendered to the insurer for credit reasons when the claims-paying
ratings of the life carrier involved, the U.S.-based operations of the failing
Confederated Life of Canada, fell precipitately from single-A to triple-B. For these
same reasons, as well as the unpleasant surprise to the capital markets of the
management of the Canadian parent to petition its government for regulatory
rehabilitation, neither the leading remarketer of these modified Funding Agreements
nor Confederated Life could locate a new buyer for the Funding Agreement. The
insurer then repurchased the contract. During the subsequent receivership under
U.S. law (and separated from Canadian law), the former owner of the agreement did
not face U.S. bankruptcy preference exposure.
Bank provided
liquidity allows
the insurer
enough time
permit
remarketing of
the surrendered
Funding
Agreement.
In each of the other cases, a leading intermediary for these agreements, which the
Bank would recommend, negotiated a reduction in pricing for the issuing insurers
due to strong demand among money market managers. The continued ability to
remarket a surrendered contract will be vital to the product’s success for the Bank.
Assessment of the next step. The primary risk for a liquidity bank will be that of a long term draw
on the liquidity line for the following reasons:
deterioration of
a particular
credit
A decline of an insurer’s credit profile. This would occur for two reasons. For life
issuers of Funding Agreements, the market would come to believe that its asset
quality has deteriorated to the point that its ability to honor claims is open to doubt.
In essence, short term fund managers and other investors would conclude that there

14. are not enough good assets to go around. Adverse changes in the insurer’s claims-
paying ratings over time would confirm this declining credit profile.
loss of life
insurers’
prestige
Industry risk. Insurers have lost some of their credibility in the capital markets over
the past decade. In the early 1990s, with the collapse of four large players, the life
insurance industry lost its luster among most investors. The recent investment fraud
perpetrated by Martin Frankel and the widespread market practice scandals have not
cast the life insurance industry or its regulators in a positive light. These cases have
precipitated flights to quality in the past which benefitted the strongest and largest
companies in each sector, among which were the prime issuers of Funding
Agreements. Should recent events lead to another flight to quality, Allstate should
benefit directly.
a spike in
redemptions
against a money
market manager
Liquidity. The money market portfolio manager himself could have liquidity
difficulties attendant to a sudden and unexpected increase in redemptions (i.e.,
surrenders by money market investors to their asset managers), requiring the rapid
raising of cash by the manager. Under such market conditions, the money market
manager may well be inclined to surrender his Funding Agreement now rather than
run the risk of liquidity complications later should the redemptions continue.
adverse interest
rate shifts
Spreads over LIBOR widen for subsequently issued Funding Agreements. This
rate arbitrage would induce the agreement holder to surrender – or ‘trade-in’ – his
lower paying agreement for a richer paying agreement carrying the same credit risk.
At this juncture, the insurer would have to make a choice: begin paying the market
rate on the Funding Agreement or close it out by honoring an almost certain
surrender.
a sudden
change in
investor appetite
One money market fund is merged into another which lacks the appetite for
Funding Agreements. This phenomenon has, in fact, explained roughly 60% of
the cases where the bilateral contracts originally placed by a leading intermediary
have been surrendered back to the insurer.

15. Several mitigants reduce the likelihood of any of these five event occurring. Structural – i.e.,
transaction specific – mitigants will be negotiated into the body of the Funding Agreements and
corresponding bank documents. Market mitigants involve market practices among issuers of
Funding Agreements or economic factors confronted by all money market managers.
availability to
only half a
dozen insurers
Eligibility criteria based upon a superior credit profile and leading market
position. The usefulness of this mitigant would be to avoid less credit worthy
issuers in the first place. The universe of larger life insurance companies has
an average S&P financial strength rating (i.e., the assessment of the ability to
honor claims) of double-A. Beyond this simple ratings-based criterion,
eligible companies for this product must demonstrate market leadership and
expertise in Funding Agreements.
yield-based
incentives for
investors to hold
The money manager’s economic motive for holding the Funding
Agreement. Short term investment managers compete in a highly competitive
market. The top performers outshine their mediocre counterparts by only a
few basis points. These managers are explicitly accountable, much of the
time, to their investors; that is, they have a fiduciary responsibility to
maximize portfolio return. Thus while, on its own, a Funding Agreement may
not seem like a prudent investment legally, it is permissible under
professional and S.E.C. investment standards when embedded within a larger,
highly diversified portfolio. The regulatory eligibility of these higher yielding
synthetic money market instruments, allows the money market fund manager
to buy and hold (or, technically, roll over) the contract. As discussed earlier,
unless circumstances are extreme, the portfolio manager will be
understandably averse toward divesting a value-adding asset.
pricing to
encourage the
remarketing of
the Funding
Agreement
Pricing to render uneconomic for the insurer the long term ownership by the bank
of the Funding Agreement. Pricing is above the insurer’s corresponding level of
bank liquidity pricing for two reasons. First, higher pricing would provide a direct
incentive to the insurer to remarket the Funding Agreement. (‘Remarket’ means
either the resale of the existing agreement or the issuing of a new contract to replace
the old.) Should the bank end up holding the contract for several years, it would be
a credit provider and earn the additional income as would be expected.

16. rating agency
scrutiny and the
impact of those
ratings upon
market share
Use of inadequately tapped resources to enable banks to forego traditional
contractual controls. The liquidity line is somewhat like a soft capital line provided
to monoline bond insurers in that banks are compensated for relinquishing their
traditional controls. The bank line contemplated by this transaction satisfies the
concerns of the two largest national credit rating agencies ranked by market share
for insurance financial strength ratings. This unconditional liquidity will be
available for three years, targeted toward only those few insurers most likely to
maintain superior balance sheets over time, and limited to a small percentage of
general account assets. The rating agencies will monitor this activity to make sure
that lines will not be excessive while regulators will hold companies accountable
under statutory accounting for compromising the integrity of their asset quality.
Further, market share for institutional deposit accounts is sensitive to rating agency
changes. Thus will the rating agencies and, secondarily, the insurance regulators
provide the oversight and control functions for the banks.
the Funding
Agreements’
remarketability to
date
The Funding Agreement’s remarketability. Actual experience, over the past six or
seven years, bears out that there is ample demand for a previously surrendered
Funding Agreement which allowed for 7-30 day surrenders but had no liquidity
support. This mitigant redresses best those cases where the money market fund
endures a spate of redemptions or merges into a larger fund which shuns such
synthetic instruments.
the needed
restructurings
completed
during the lag-
times between
the surrenders
and drawings
under liquidity
lines
The incentive for the issuer to restructure the agreement during the settlement
period. Actual experience also indicates that restructured Funding Agreements often
command lower rates than had been the case prior to surrenders. The issuing insurer
has every incentive to get the agreement back to market before its name-in-the-
market suffers even if that means increasing the return to the investor of the Funding
Agreement. The prospect of uneconomic bank financing together with possible
losses realized upon the sale of assets and the certain trading expenses entailed in
disposing of those assets would likely overcome the reluctance of an insurer to reset
its pricing.

17. SUMMARY OF INDICATIVE TERMS AND CONDITIONS
December 1999
The following terms and conditions are not necessarily the final ones to be submitted by
Commerzbank AG, New York Branch (“the Bank”) to an operating insurance company of Allstate
Life Insurance Company licensed and domiciled in the State of Allstate (“Allstate”). This summary
is intended to frame the discussion of a proposed transaction among Allstate, qualifying money
market or stable value asset funds (the “Fund”) and the Bank, as Arranger and Agent for a
syndicate of banks rated AA- or better by S&P (the “Bank Group”), involving the execution and
delivery of a credit agreement and a funding agreement or simultaneously issued and identical
funding agreements in the aggregate value of up to $500,000,000 between Allstate and Fund
(collectively, the “Funding Agreement”). Please note that these indicative terms and conditions
do not represent a commitment to lend, or to make lending capacity available to, Allstate.
Arranger and Agent: Commerzbank AG; New York Branch (“the Bank”)
Facility Amount: Up to $500,000,000 plus an increment for the maximum
possible accrued interest on the Funding Agreement.
Lenders: Financial institutions rated AA- or better by S&P or sponsored
funding conduits (in each case, a “Lender”).
Borrower: Allstate.
Funding Agreement: The Funding Agreement must have a floating rate of interest
and a maturity date not to exceed seven (7) years. Delivery of a
substitute Funding Agreement to the Agent for the benefit of
the Lenders (the “New Funding Agreement”) with the
conditions set forth in the Secondary Indicative Terms and
Conditions, shall be one of the preconditions for funding the
loan under the Credit Agreement.
Type: Committed non-revolving line of credit (the “Facility”).
Use of Proceeds: Liquidity support for the Funding Agreement.
Documentation: Documentation shall include, but not be limited to, the
surrendered Funding Agreement, the New Funding Agreement,
the credit agreement among Allstate, the Lenders and the Agent
(the “Credit Agreement”), the commercial paper, policyholder
deposit or promissory notes, by Allstate in favor of each Lender
(the “Notes” and – together with the Funding Agreement, the
New Funding Agreement, and the Credit Agreement – the
“Transaction Documents”).
Commitment Termination Date: 364 days from the closing date. The Commitment Termination
Date may be extended at the discretion of the Required Banks.
If the Commitment Termination Date is extended but less than
all of the Banks consent to such extension, to the extent that
such Banks are not replaced by other qualified institutions, each
non-consenting Bank (a “Non-Extending Bank”) shall fund its
unused Commitment Amount into a blocked deposit account at
the Agent (subject to prior delivery by the Borrower of a New
Funding Agreement for the benefit of the Non-Extending Bank
in the amount of the deposit held by the Agent) which may be
used to make future Advances up to the then applicable Final

18. Maturity Date defined below. Amounts funded by a Bank as
described in the preceding sentence shall bear interest at the
normal rate applicable to the Notes and such Bank shall also be
entitled to receive the Facility Fee applicable to such amounts.
Borrowing Periods: Up to sixteen months from the date of borrowing with
borrowing under the Facility permitted on any day during the
life of the commitment up to, and including, the Commitment
Termination Date. The maturity of the borrowing of up to
sixteen months shall be the “Final Maturity Date”.
‘Best Efforts’ Arranger’s Fee: 50.0 basis points on the Facility amount.
Facility Fee: 15.0 basis points per annum on the Facility amount, payable on
the closing date and on each Anniversary Date of the closing
date when the Commitment Termination Date, as defined
above, has been extended at the sole discretion of the Lender(s)
for an additional 364 days.
Participation Fee: To be determined by market pricing and to be paid directly to
each Lender on the closing date.
Interest Rate: LIBOR + 35.0 basis points per annum. After sixty (60) days,
the interest rate for the Facility shall be stepped-up to LIBOR +
85.0 basis points per annum.
Default Rate: Prime + 200 basis points per annum.
Collateral: Any borrowing under the Facility shall be secured by the
issuance of the New Funding Agreement by Allstate to the
Agent for the benefit of the Lenders with a principal amount
equal to the Surrender Amount of the surrendered Funding
Agreement. Such New Funding Agreement shall include and
preserve all of the Fund’s rights under the Funding Agreement.
If a Non-Extending Bank deposits funds into a blocked-deposit
account for up to the Final Maturity Date (for the account of
Allstate), its deposit account shall be secured by a New Funding
Agreement. Please refer to the Secondary Indicative Terms and
Conditions for the New Funding Agreement attached hereto.
Surrender Amount: The principal amount of the Funding Agreement plus accrued
interest, the total amount of which shall not exceed the amount
of the total commitments under the Facility.
Surrender Notice: Notification to Allstate by the Fund, with a copy telefaxxed to
the Agent, of its intent to surrender the Funding Agreement.
Borrowing Event: Aside from cases, which involve Non-Extending Banks, a
Borrowing Event occurs upon a failure of the Borrower or a
nationally recognized intermediary acting on behalf of the
Borrower to remarket the Funding Agreement within seven (7)
days of the date of the Surrender Notice. Upon the occurrence
of such Borrowing Event, (1) Allstate will execute and deliver
a Borrowing Notice to the Agent requesting a loan in an amount
equal to the Surrender Amount; (2) Allstate will telefax a copy
of the Fund’s Surrender Notice to the Agent; (3) Allstate will
send a copy of the Funding Agreement, together with evidence
that the Funding Agreement has been cancelled, to the Agent;

19. Borrowing Event:
(continued)
(4) Allstate will request to draw down the Facility, either as a
borrowing under the Notes, in an amount equal to the Surrender
Amount (including accrued interest) and the Facility will
reduce to the amount remaining unused after the borrowing, it
being understood that, should no amounts be available under
the Facility after a particular borrowing, the Facility itself
nevertheless remains in force; x(5) One day prior to the
borrowing, the Agent will deposit the borrowed funds into a
non-interest paying blocked deposit account in the name of
Allstate; (6) Allstate will execute and deliver the Notes to the
respective Lenders and the New Funding Agreement to the
Agent for the benefit of the Lenders; and, (7) upon satisfaction
of the conditions to borrowing, receipt of the New Funding
Agreement and receipt of the wiring instructions from the Fund,
the Lenders will release their Notes to Allstate plainly marking
the word “void” on them and the Agent will release the funds
from the blocked deposit account and transfer them to the Fund.
With Non-Extending Banks, only items (1), (4), (5), (6) and (7)
described above will executed.
Replacement Event: A Replacement Event shall occur when (1) Allstate or
recognized intermediary acting on behalf of Allstate markets a
funding agreement with the terms and conditions – except for
those relating to pricing – set forth in the Secondary Indicative
Terms and Conditions (a “Replacement Funding Agreement”),
(2) all Lenders have approved of the remarketed funding
agreement, such approval not to be unreasonably withheld, (3)
the Agent has received the Facility Fee, and (4) the conditions
set forth in the Credit Agreement have been satisfied. Upon the
occurrence of a Replacement Event, the Credit Agreement shall
be amended to reflect the new party to the Replacement
Funding Agreement and the Credit Agreement shall, upon
payment by Allstate of the Facility Fee to the Bank,
recommence in full force and effect.
Termination Event: A Termination Event shall occur when the Funding Agreement
is remarketed but one or more of the following occur:
1. one or more of the material terms of the Replacement
Funding Agreement have changed from the surrendered
Funding Agreement or, in the case of Non-Extending Banks,
from those of the Funding Agreements then supported by the
Facility;
2. the parties cannot meet the conditions to Closing set forth in
the Credit Agreement; and,
3. such remarketing causes a default, or an Event of Default has
occurred, under the Credit Agreement.
Prepayment: The Facility may be prepaid in whole or in part at any time
during the Borrowing Periods. The minimum prepayment
amount shall be twenty-five percent (25%) of the aggregate
principal amount of the Loans. Full prepayment shall be
mandatory upon successful replacement, through remarketing,
of the original or, if applicable, New Funding Agreement. After
a partial repayment, the Loan shall be reduced by the amount of
the prepayment applied to principal.

20. Representations and Warranties: Customary for Facilities of this type and to include, but not be
restricted to, the following representations and warranties:
1. Existence, power and authorization of Allstate to enter into
the Transaction Documents
2. Existence, power and authorization of Fund to enter into the
Funding Agreement (to Allstate’s knowledge)
3. Absence of any event which would be a Default or an Event
of Default under the Credit Agreement
4. Allstate in good standing with appropriate regulatory
authorities
5. Necessary authorizations, including regulatory approvals, in
place prior to closing
6. No contravention with existing agreements
orxxxxxxxxxxxxxxOrganizational documents
7. Financial Statements, Annual Statements and Quarterly
Statements prepared in accordance with Statutory
Accounting Principles or GAAP and accurately present the
financial position of Allstate as of the dates of such
statements
8. Absence of material litigation at closing
9. Taxes paid and all required filings made
10. Compliance with applicable laws, including ERISA
Conditions Precedent: Customary for Facilities of this type and to include, but not
restricted to, the following conditions:
FOR THE CLOSING OF THE FACILITY
Receipt by the Bank, as Arranger, of:
1. Appropriate and satisfactory documentation executed and
delivered among the parties including the Credit Agreement,
the Funding Agreement, a prototype of the New Funding
Agreement and all certificates and other documentation
required by the Agent and the Lenders
2. Opinion of counsel to Allstate, in form acceptable to the
Agent and the Lenders
3. Regulatory approvals (if any) required for the execution and
delivery by Allstate and the Fund of each of the Transaction
Documents to which it is a party
4. All fees paid on the Closing Date by Allstate
FOR BORROWING AND RELEASE OF FUNDS
UNDER THE FACILITY
Delivery to the Bank, as Agent, of the following:
1. The original Surrender Notice and the Borrowing Notice or
the telefax of such documents from Allstate
2. The telefax of the surrendered Funding Agreement
3. The Notes
4. The New Funding Agreement(s) received by the Agent
5. Wiring instructions from the Fund for the direct transfer of
Surrender Amount to the Fund from Allstate’s blocked
deposit account(s) held by the Agent
PLEASE NOTE that, should funds be advanced to the blocked
deposit account of Allstate at the Bank, but the above-cited
conditions precedent to the release of the funds have not been

21. met or an event of default occurs when a borrowing is
outstanding, the Bank, on behalf of the Lenders, will have full
recourse to those funds for the re-payment of said borrowing.
Covenants: Customary for Facilities of this type and to include, but not be
restricted to, the following covenants:
1. Submission of the annual and quarterly statutory and, if
available, GAAP financial statements of Allstate and the
Fund.
2. The New Funding Agreement to rank pari passu with those
of other policyholders of Allstate.
3. Compliance with laws, maintenance of existence, limitations
on mergers, consolidations, sale of assets, additional debt
and additional liens.
Events of Default: Customary for Facilities of this type and to include, but not be
restricted to, the following events:
1. Payment default by Allstate
2. Credit event upon merger/change of ownership or control of
Allstate with credit consequences
3. Insolvency or bankruptcy of Allstate or seizure, placement
into receivership, rehabilitation of, or other intervention by
any regulators into, Allstate
4. Invalidity or unenforceability of, or default under, or
material change in any provision of, the Funding Agreement
or the New Funding Agreement
5. Cross default to other material debt, including surplus
debentures or surplus notes, of the Borrower
6. Refusal by Allstate to honor the Agent’s request to issue a
New Funding Agreement to Agent per the terms of the
Secondary Indicative Terms and Conditions
Required Banks: Lenders holding 51% or more of the commitments (or if
terminated, of the loans) for amendments and waivers, 100%
for money terms.
Governing Law: The State of New York.
Indemnifications: Indemnification of the Agent and the Lenders in the event of
changes in laws with respect to capital adequacy or reserves.
Allstate to pay all reasonable out-of-pocket costs associated
with the preparation, execution, administration and
enforcement of the Facility document (including fees for the
Bank’s counsel). The Bank, as Arranger, to be held harmless
or indemnified by Allstate against all losses, claims or damages
related to the Facility except in cases attendant to the Bank’s
own gross negligence or willful misconduct.
Increased Costs: The Credit Agreement shall include customary provisions
relating to yield protection, availability and default rate. Such
increased cost protection shall be applicable to the blocked
deposits – for the account of Allstate – established by the Agent
on behalf of each Non-Extending Bank.
Confidentiality: This term sheet shall remain confidential for Allstate

22. Schematic of Liquefied Funding Agreement (“G.I.C.”)
1. Fund notifies Specimen of surrender and forwards its G.I.C. to Commerzbank (“the Bank”)
2. Upon issuance of a substitute G.I.C. to the Bank as collateral, the Bank instructs its
commercial paper conduit, as the designated lender, to wire-transfer directly to the
Fund the funds borrowed by Specimen under the single-draw revolver
3. As the Bank releases the money to the Fund, on behalf of Specimen, it returns the old
and surrendered G.I.C. back to Specimen. Fund is now out of the transaction.
NOTE: the first three steps of this schematic occur simultaneously.
4. Specimen sells a new G.I.C. to another money market fund, the Replacement Fund.
5.Specimen repays the Bank or its commercial paper conduit with the proceeds from the
new G.I.C. (and from corporate cash flows if proceeds fail to re-pay all loan and interest
due to the Bank). Upon receipt of all of the required funds, the Bank releases the
collateral G.I.C. back to Specimen.
NOTE: Steps four & five to occur at the same time at some point after Steps 1-3..
C.P.
Conduit
the
Bank
Fund
Specimen
Life Insurance
Company
Replacement
Fund
1
1
2
2
3
4
5 5

23. SECONDARY INDICATIVE TERMS & CONDITIONS OF NEW FUNDING AGREEMENT
December 1999
The following terms and conditions are not necessarily the final ones to be submitted by
Commerzbank AG, New York Branch (“the Bank”) to an eligible operating insurance subsidiary
of Allstate Life Insurance Company, licensed and domiciled in the State of Allstate (“Allstate”).
This summary is intended to frame the discussion of the New Funding Agreement referenced in
the SUMMARY OF INDICATIVE TERMS AND CONDITIONS (the “Term Sheet”)
immediately preceding this Secondary Indicative Terms and Conditions (the “Supporting Terms”).
All terms defined in the Term Sheet shall apply to these Supporting Terms. Please note that these
indicative terms and conditions do not represent a commitment by the Bank to lend, or to make
lending capacity available, to Allstate.
Issuer: Allstate.
Beneficiary: The Bank or its commercial paper conduit (the “Agent” on
behalf of the Lenders and as Collateral Agent on behalf of Non-
Extending Banks).
New Funding Agreement: A Funding Agreement, or several Funding Agreements, in the
name of the Bank as Agent and as Collateral Agent (the “New
Funding Agreement”), each with the same terms as those of the
surrendered Funding Agreement; any exceptions to be specified
contractually.
Amount: The Surrender Amount (i.e., the amount stated on the
underlying Funding Agreement as well as the New Funding
Agreements previously issued to the Agent for the Non-
Extending Banks plus any interest contractually accrued
thereunder).
Maturity: The same as that stated in the surrendered Funding Agreement,
in any event, not longer than seven (7) years.
Documentation: Documents issued by Allstate in its ordinary practice.
Surrender Eligibility: Immediate.
The Bank Surrender Amount: The principal amount of the New Funding Agreement(s) and
any interest due on the New Funding Agreement(s) on the day
Allstate honors the surrender.
Surrender Notice Period: A period of time not to exceed the earlier of the maturity date
of the borrowing under the Facility – or up to sixteen months –
and the maturity date of the New Funding Agreement(s). If a
Surrender Acceleration Event (as defined below) occurs, the
Surrender Notice Period becomes seven (7) days.
Surrender Acceleration Event: If one (or more) of the following events occur, the Surrender
Notice Period accelerates to seven (7) days:
1. a default under the Credit Agreement which involves the
payments due under that agreement;

24. 2. bankruptcy protection filed by or against Allstate;
3. the seizure – or intervention into the affairs – of Allstate by
regulatory authorities; or,
4. another default under the Credit Agreement, which is not
remedied for ninety (90) days.
Interest Rates: A floating rate of interest equal to that rate which would be
concurrently applicable under the Credit Agreement.
Assignment: The Agent shall have the authority to assign the New Funding
Agreement(s) to a new Fund upon the remarketing of the New
Funding Agreement(s).
Representations and Warranties: The same as those applicable to the Facility with particular note
of the following:
1. Necessary authorizations, including regulatoryapprovals, in
place prior to issuance
2. No contravention with existing agreements or organ-
izational documents
Covenants & Other Terms: Customary for Funding Agreements.
Governing Law: State of New York.
Indemnifications: Identical with those applicable to the Facility.
Confidentiality: Allstate shall execute a Confidentiality Agreement with respect
to the transactions set forth herein and the documentation to be
provided in connection with such transactions.