Last week, the ratings agency, A.M. Best Co. affirmed the issuer
credit ratings (ICR) and debt ratings of
) and its subsidiaries. Accordingly, the ratings agency affirmed
the ICR of "a-" of the holding company.
Additionally, A.M. Best affirmed the ICR of "aa-" and financial
strength rating (
) of "A+" of Allstate's subsidiary - Allstate Insurance Group and
all of its units except North Light Specialty Insurance Company and
First Colonial Insurance Company.
Meanwhile, North Light's FSR was upgraded to "A+" from "A" and
ICR to "aa-" from "a". Besides, First Colonial was affirmed with an
FSR of "A-" and ICR of "a-". The ratings agency also assigned a
debt rating of "a-" to the new 30-year senior unsecured notes worth
$500 million, issued by Allstate Insurance, which carries an
interest rate of 5.2%, along with a stable outlook for all the
Additionally, A.M. Best affirmed the FSR of "A+" and ICR of
"aa-" of another Allstate subsidiary - Allstate Financial Companies
and its units. Moreover, it affirmed the debt rating of "aa-" of
the outstanding notes of Allstate Life Insurance Company and
revised the outlook for the ratings of Allstate Financial and
Allstate Life Insurance to stable from negative.
Allstate's ratings were affirmed on the basis of the company's
strong underwriting and investment incomes that have helped it to
generate high operating earnings over the years. The company's
ample liquidity and restrained financial leverage were other
positives. Moreover, the company's new debt will increase its fixed
charges but is not expected to have any significant impact on its
Further, Allstate Insurance's operating efficiency, strong
capitalization and widespread market penetration helped the company
in retaining A.M. Best's confidence and led to the affirmation of
the ratings. Although the company is substantially exposed to
natural calamities and suffers from high catastrophe losses, its
non-catastrophe earnings are strong. Additionally, Allstate
Insurance has taken several measures in the recent years to reduce
its catastrophe risk. However, the company maintains a high
underwriting and investment leverage, although strong underwriting
performance and investment income substantially offset potential
Besides, North Light's rating upgrade was based on the company's
strong capitalization and low operating risk spurred by Allstate
Insurance's contributions from reinsurance contracts.
Meanwhile, the improved results of Allstate Financial's
fixed-income portfolio, strong market position, wide product
portfolio and ample risk-adjusted capitalization have inspired A.M.
Best's confidence in the company and have led to an outlook
revision to stable. Additionally, a strong brand name of the group
company and its widespread clientele played a role in the outlook
upgrade of Allstate Financial.
However, A.M. Best is concerned about Allstate Financial's
fluctuation in operating earnings, high investment losses,
substantial non-recurring changes as well as the impact of the
ongoing low interest rate scenario. Going ahead, a severe economic
downturn could lead to substantial asset impairments.
Overall, the strong ratings and stable outlook of Allstate and
its subsidiaries are expected to boost investors' confidence in the
company, which competes with
Currently, Allstate carries a Zacks #3 Rank (short-term Hold
rating) supported by a long-term Underperform recommendation.
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