A.m. Best Company - Press Releases Press Release

A.M. Best Company - Press Releases

Press Release - FEBRUARY 02, 2009

A.M. Best Comments on the Ratings of Allstate Insurance Group and Allstate Financial Print this article

CONTACTS: Analyst(s) Kenneth Tappen—P/C (908) 439-2200, ext. 5248 [email protected]

Public Relations Jim Peavy (908) 439-2200, ext. 5644 [email protected]

Darian Hala—L/H (908) 439-2200, ext. 5802 [email protected]

Rachelle Morrow (908) 439-2200, ext. 5378 [email protected]

FOR IMMEDIATE RELEASE

OLDWICK, N.J., FEBRUARY 02, 2009 A.M. Best Co. has commented that the ratings and outlook of Allstate Insurance Group (Allstate) and The Allstate Corporation (Allcorp) (Northbrook, IL) [NYSE: ALL] remain unchanged, despite recently reported fourth quarter 2008 financial results, which included substantial realized and unrealized capital losses on Allstate's and Allcorp's investment portfolio. On October 23, 2008, A.M. Best had affirmed the financial strength rating (FSR) of A+ (Superior) but downgraded the issuer credit ratings (ICR) to "aa-" from "aa" of Allstate and its members. Additionally, A.M. Best had downgraded the ICR and the debt ratings to "a-" from "a" of Allstate's parent, Allcorp. Concurrently, A.M. Best had affirmed the FSR of A+ (Superior) and downgraded the ICRs to "aa-" from "aa" of the primary life/health member companies of Allstate Financial. A.M. Best also had downgraded the debt ratings to "aa-" from "aa" for the outstanding notes issued under various funding agreement-backed securities (FABS) programs of Allstate Life Insurance Company (ALIC). The outlook for all ratings remains stable. The rating actions in October contemplated Allstate's recent adverse trend in its risk-adjusted capital position. However, the group continues to maintain adequate risk-adjusted capitalization for its current ratings, despite significant realized and unrealized capital losses, dividend payments to Allcorp and modest operating earnings in 2008, driven by sizeable catastrophe losses. The ratings and outlook also reflect A.M. Best's expectation that Allstate's underlying operating performance will continue to produce favorable results, thus allowing the group to replenish its risk-adjusted capital position over the near term. Allstate continues to maintain a significant market presence and strong overall business profile as the second-largest personal lines writer, a distinct advantage contributing to the expectation that the group will continue to produce favorable operating results. Furthermore, Allstate maintains moderate financial leverage as well as additional liquidity at the holding company level in both Allcorp and affiliate, Kennett Capital, Inc. The ratings of the primary life/health members of Allstate Financial continue to reflect the financial strength and support from its direct parent, Allstate Insurance Company (AIC). To offset statutory net losses incurred in 2008, AIC provided ALIC with $1.75 billion in capital contributions. A.M. Best believes this support demonstrates Allcorp's commitment to Allstate Financial and that its operations remain strategically important to the Allstate group. In response to the current economic climate, Allstate Financial has initiated a number of actions to reduce risk and improve returns such as reducing its concentration in spread-based products, maintaining high liquidity in the investment portfolio and decreasing the number of product offerings. While A.M. Best views this restructuring as a positive, it notes that the actions have reduced Allstate Financial's expected earnings run-rate and narrowed its operating profile. Additionally, A.M. Best notes that Allstate Financial's unrealized loss position as of December 31, 2008 was nearly $7 billion, indicating the likelihood of additional investment-related losses. The principal methodologies used in determining these ratings, including any additional methodologies and factors which may have been considered, can be found at Best's Rating Methodology. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. View a list of companies related to this press release. The list will include Best's Ratings along with links to additional company specific information including related news and reports.

A.M. Best’s credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. A.M. Best receives compensation for interactive rating services provided to organizations that it rates. A.M. Best may also receive compensation from rated entities for non-rating related services or products offered by A.M. Best. A.M. Best does not offer consulting or advisory services. For more information regarding A.M. Best’s rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the A.M. Best Code of Conduct.

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