Press Release - APRIL 07, 2016

A.M. Best Affirms Ratings of The Allstate Corporation and Its Key Subsidiaries; Upgrades Ratings of Allstate Assurance Company


CONTACTS:
 Greg Williams
Assistant Vice President—P/C
+1 908 439 2200, ext. 5815
greg.williams@ambest.com

Tom Zitelli
Managing Senior Financial Analyst—L/H
+1 908 439 2200, ext. 5412
tom.zitelli@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - APRIL 07, 2016
A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of “aa-” of the members of Allstate Insurance Group (Allstate).

Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and the ICRs of “aa-” of the key life/health members of the Allstate Financial Companies (Allstate Financial). A.M. Best has also affirmed the existing issue ratings related to Allstate Financial.

In addition, A.M. Best has upgraded the FSR to A+ (Superior) from A (Excellent) and the ICR to “aa-” from “a+” of Allstate Assurance Company (AAC). The outlook for both of these ratings has been revised to stable from positive. AAC is a wholly owned subsidiary of Allstate Financial Insurance Holdings Corporation, a holding company directly owned by The Allstate Corporation (Allcorp) [NYSE: ALL].

A.M. Best has also affirmed the FSR of A- (Excellent) and the ICRs of “a-” of the members of Allstate New Jersey Insurance Group (collectively referred to as Allstate New Jersey) (headquartered in Bridgewater, NJ).

Lastly, A.M. Best has affirmed the ICR of “a-” and all issue ratings of the ultimate parent, Allcorp. The outlook for all of the aforementioned ratings is stable. All the above named companies are headquartered in Northbrook, IL, except where specified. (See link below for a detailed listing of the companies and ratings.)

Allstate’s strong capital position reflects its favorable earnings, which has contributed to surplus growth in most of the past five-year periods, excluding dividends paid to its parent company. Allstate’s operating results continue to be favorable as a result of enhanced pricing sophistication and improved loss cost management while maintaining underwriting discipline. Additionally, Allstate has a significant market presence and strong overall business profile as one of the largest personal lines writers in the United States. Allstate also benefits from the additional liquidity provided by both Allcorp and its subsidiary, Kennett Capital, Inc., and through access to capital markets, lines of credit and its commercial paper program. The group’s favorable margins are attributable to enhanced pricing accuracy and risk optimization along with its solid core underwriting capabilities, prudent capital management and sizable investment income. Lastly, underwriting results also reflect the favorable impact of Allstate’s ongoing risk management actions, various expense management initiatives and its significant investment in technology.

Partially offsetting these positive rating attributes is Allstate’s inherent exposure to natural disasters due to its expansive market presence throughout the United States. This exposure was more evident in earlier periods with net catastrophe losses having a larger impact on the group’s overall results. However, over the past several years, Allstate has executed an extensive catastrophe risk exposure reduction program, including a significantly enhanced property catastrophe reinsurance program, non-renewals, stricter underwriting guidelines, increased deductibles and discontinuance of selected lines of coverage, including earthquake. The group’s underwriting results in recent years have benefited from these risk reduction actions and generally lower catastrophe losses. While the group maintains above average underwriting and investment leverage, relative to industry norms, it has been able to maintain capital levels supportive of its business risks.

Key rating drivers that could produce a revision in the outlooks or lead to a downgrade include capitalization that does not meet A.M. Best’s standards for the present rating level or consolidated financial leverage that exceeds stated guidelines for the current rating level. Conversely, positive rating action could occur if underwriting and operating performance is sustained at recent levels and risk-adjusted capital remains strong.

The ratings of Allstate Financial reflect its positive and diversified GAAP operating performance, which has benefited from the organization’s strategy to focus on growing its core protection and workplace supplemental health products while continuing to de-emphasize its exposure to spread-based products, and its adequate consolidated stand-alone risk-adjusted capitalization. The affirmation also recognizes the financial strength and continued support of Allstate Insurance Company (AIC), as well as Allcorp. The rating affirmations also reflect the benefit received from the Allstate brand name, as well as the competitive advantages derived from Allstate’s exclusive agencies and insurance specialists that provide cross-selling opportunities.

These strengths are partially offset by the challenges Allstate Financial faces to sustain and improve operating performance given the prolonged low interest rate environment and the group’s lower asset base. Managing its large, albeit declining, interest sensitive liabilities that remain exposed to interest rate, credit, reinvestment and disintermediation risks add to the challenge. The ratings also reflect Allstate’s increasing allocation to alternative assets, primarily limited partnerships and private equities. A.M. Best notes that the increase in alternative assets reflects Allstate Financial’s current immediate annuity investment strategy, which calls for nearer-term immediate annuity cash flows to be backed by bonds and longer-term cash flows to be backed by growth-based investments including Schedule BA assets.

The upgrade of AAC’s ratings reflects the company’s improved business profile and strategic value to Allstate Financial. During 2015, AAC started to issue the majority of Allstate Financial’s new life insurance business using Allstate’s exclusive agencies. A.M. Best notes that AAC’s stand-alone capitalization, which has benefited from capital contributions, is adequate to support the company’s business, insurance and investment risks at this time. A.M. Best believes that the company may be challenged to maintain adequate risk-adjusted capitalization to support its anticipated new business growth without additional capital infusions from its parent. However, given AAC’s increased strategic role within the organization, A.M. Best expects that capital support will be provided as needed.

A.M. Best believes that the potential for a positive rating action would be dependent upon a positive rating action being taken on AIC. Conversely, a negative rating action could occur if there is a negative rating action taken on AIC or there is a material change in A.M. Best’s view of Allstate Financial’s importance to the enterprise. Additionally, a negative rating action could occur if there is a decline in risk-adjusted capitalization due to the decapitalization of the life companies or an increase in investment risk appetite.

The affirmation of the ratings of the members of Allstate New Jersey reflects favorable risk-adjusted capitalization, improved underwriting trends and management’s local market knowledge. These positive rating attributes are partially offset by the group’s business concentration within one state, resulting in potential operating variability due to local market disruptions and localized catastrophic weather events.

While the outlooks for Allstate New Jersey are stable, positive rating action may result if underwriting and operating results continue to generate organic surplus growth that results in continued strong levels of risk-adjusted capitalization. Negative rating action could occur if underwriting or operating results deteriorate significantly, which causes a material decline in overall risk-adjusted capitalization, or if there is a lessening of parental support.

For a complete listing of The Allstate Corporation and its property/casualty and life/health subsidiaries’ FSRs, ICRs and issue ratings, please visit The Allstate Corporation.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.


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