On Nov 20, 2009, A.M. Best Company affirmed the ratings of Allstate Corporation (ALL) and its subsidiaries. The rating agency cited that the rating actions primarily reflect Allstate’s solid risk-adjusted capitalization, favorable operating performance and significant market presence. However, the agency remains concerned about Allstate’s exposure to frequent weather-related events, significant dividend payments to its parent and above average underwriting and investment leverage. 

For Allstate Insurance Group and its members, the agency has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-”. The agency has also affirmed the ICR and debt ratings of the parent company. The outlook for all these ratings remains stable. Additionally, A.M. Best has affirmed the FSR of A+ (Superior) and ICRs of “aa-” of the primary life/health member companies of Allstate Financial. 

The agency also affirmed the debt ratings of “aa-” of the outstanding notes issued under various funding agreement-backed securities (FABS) programs of Allstate Life Insurance Company. However, the outlook for these ratings has been revised to negative from stable. Though Allstate is well positioned to take benefit of the improved economy, the rating agency noted that the severity of investment losses incurred in 2008 and 2009 and the remaining investment risk in the portfolio have weakened Allstate 

Financial’s stand-alone credit profile. Also, the operating trends at life/health operations have diminished. These negatives drive the negative outlook. Though Allstate’s capital and liquidity levels are impressive and we anticipate continued benefits from its industry-leading position, diversification and pricing discipline, we think that the uncertain economic environment will continue to impact its premium writings in the coming quarters. 

The company is also experiencing deterioration in auto frequency trend. Additionally, we cannot ignore the risk associated with the company’s significant exposure to catastrophes.
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