Last week, Fitch Ratings asserted the debt and credit ratings
) and assigned rating of "BBB+" on the company's newly issued
notes worth $1 billion as well.
Recently, Allstate raised about $1 billion in a two-part note
offering. The first tranche of notes worth $500 million were
issued for 10 years with a coupon rate of 3.15%. This is expected
to yield 102 basis points above the Treasury benchmark. The
remaining $500 million of notes were issued for 30 years, bearing
a coupon of 4.5% and are projected to yield 122 basis points
above the Treasury.
Meanwhile, both sets of notes carry "A3" and "BBB+" ratings
from Moody's investor Service of
) and Fitch, respectively. The raised debt is expected to be
utilized for enhancing the operating leverage of the company.
Simultaneously, Fitch affirmed its issuer default rating (IDR)
of "A-"on Allstate. Further, an insurer financial strength (IFS)
rating of "A+" was avowed on the company's property-casualty
(P&C) divisions, while an IFS of "A-" remains static on
Allstate's life insurance and other financial subsidiaries. The
outlook for all remains stable.
The rating affirmations exhibit Fitch's confidence in
Allstate's recent debt refinancing activities, which are likely
to improve the financial leverage and reduce the borrowing costs,
stemming from the ongoing low interest rate environment. Even the
current debt-to-capital ratio of 27.3% at the end of Mar 2013 is
well within the rating agency's benchmark of 28%. Moreover,
Allstate is well funded to meet the immediate debt maturity of
$250 million, scheduled next month.
On the other hand, with 10% of the market based on premiums
written, spurred by favorable underwriting capabilities and
strong risk-based capitalization, Allstate holds a leading
position in the P&C market. However, uncertainty led by
catastrophe losses and sluggishness in the company's life
insurance operations raise some concerns. Although Allstate
P&C's statutory surplus improved to $17.2 billion at the end
of Mar 2013, it is still well-below $19.1 billion reported at
2006-end, prior to the financial downturn.
Nevertheless, Fitch believes that Allstate's overall operating
leverage of 2.0x is fairly ahead of its 1.8x benchmark. Going
ahead, modest investment gains along with the company's focus on
shifting its life insurance business away from spread-based
products should improve Allstate's risk profile.
While Allstate carries a Zacks Rank #3 (Hold), Moody's carries
a Zacks Rank #2 (Buy). Other outperformers of the insurance
Hilltop Holdings Inc.
). Both the stocks carry a Zacks Rank #1 (Strong Buy).
ALLSTATE CORP (ALL): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
MOODYS CORP (MCO): Free Stock Analysis Report
MONTPELIER RE (MRH): Free Stock Analysis
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