A.M. Best Affirms Allstate Ratings - Analyst Blog
On Dec 22, 2009, A.M. Best Co. affirmed the ratings of Allstate Corporation’s (ALL) subsidiary Allstate New Jersey Insurance Group (Allstate New Jersey) and its associates namely, Allstate New Jersey Insurance Co., Allstate New Jersey Property and Casualty Insurance Co., Encompass Insurance Co. of New Jersey and Encompass Property and Casualty Insurance Co. of New Jersey.
The rating agency has affirmed the financial strength rating (FSR) of “A-" (Excellent) and issuer credit ratings (ICR) of “a-" for Allstate New Jersey and its members. The outlook for all ratings is stable. A.M. Best cited solid risk-adjusted capitalization reasons that included the issuance of a $150 million surplus note from Allstate New Jersey to Allstate Insurance Co. in exchange for cash, completed in Apr 2009.
A.M. Best rates the financial strength of insurance companies and the security of holding companies' debt and preferred stock, thereby indicating its future performance. Although the rating actions principally reflect a favorable operating performance for the company and a significant market presence, A.M. Best remains concerned about Allstate’s exposure to recurrent weather-related events, significant dividend payments to its parent company, capital losses and deteriorating underwriting and investment leverage.
The company is also experiencing deterioration in auto frequency trend due to an increase in the private passenger automobile loss ratio. However, the company is taking strategic actions to improve the personal automobile profitability through increased limits factor adjustments, stricter underwriting guidelines and other operational initiatives.
With an operational strategy that enables acclimatizing to changing market regulations, Allstate is well positioned to benefit from the improved economy. While 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 and investment risk in the coming quarters.
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