NEW YORK, Feb. 11 /PRNewswire/ -- Standard & Poor's today affirmed its
ratings on Allstate Corp. (Allstate) and related subsidiaries (see list).
The outlook on Allstate Life Insurance Co. and related life subsidiaries,
commonly referred to as Allstate Financial, has been revised to negative from
stable. The outlook on Allstate Insurance Co. and related companies and the
parent, Allstate Corp. remains stable.
Today's decision to affirm the ratings on Allstate reflects the diversity
and strength of the company's franchise in the U.S. personal auto, homeowners,
life and asset accumulation businesses, its conservative capital position, and
the above-average underwriting performance of its property/casualty (P/C)
operations.
The negative outlook on Allstate Financial reflects the increased risk
profile associated with growth in the asset accumulation businesses, some
weakening in asset quality (consistent with market and industry trends), and
resulting net spread compression.
In the personal auto and homeowners insurance business, Allstate
Insurance Co. is the second-largest insurer based on net premiums written with
a market share of approximately 13%. Standard & Poor's believes that
preeminent market position, in conjunction with prudent underwriting and
efficient claims management, has allowed the company to consistently
outperform many of its peers despite the weak operating fundamentals in
today's personal P/C insurance market. For full-year 2001, the company
reported a GAAP combined ratio of 102.8% versus Standard & Poor's estimate for
the industry of about 112%. Although underwriting results, and consequently
operating income, deteriorated significantly for Allstate and much of the
industry in 2001, Standard & Poor's believes the company's underwriting
actions and significant pricing actions taken in that same period will begin
to positively affect results in the latter half of 2002.
Allstate Financial, unlike its parent is not a market leader in any of its
businesses but is well diversified and positioned in each of its products and
distribution channels. In recent years, the product liability profile of the
company has shifted from traditional life insurance toward lines of business
with narrower margins and the potential for greater volatility in earnings.
Although performance has improved and continues to be in line with historical
norms, Standard & Poor's performance expectations for the new profile of
Allstate Financial (and similarly positioned life insurance companies in the
industry) are more demanding because of the increased volatility of these
product lines. As a result, the outlook on the organization has been revised
to negative to reflect that slight increase in risk.
Capitalization of the respective insurance organizations is considered
very strong as indicated by a Standard & Poor's capital adequacy ratio of 160%
for the P/C operations and 180% for Allstate Financial. An important
consideration of capital adequacy for this organization given its mix of
business is the significant improvement in catastrophe management over the
years. As a result, Standard & Poor's believes the company's earnings and
capital are significantly less exposed to severe catastrophe losses. In
addition, financial leverage including preferred stock at the parent remains
conservative at about 24% after adjusting for other comprehensive income.
Fixed-charge coverage was lower at approximately 7.6 times but should improve
as underwriting and pricing actions begin to favorably affect P/C earnings in
2002. Finally, the parent has close to $1.2 billion in liquid assets at its
wholly owned noninsurance subsidiary, Kennett Capital, which could be used to
fund a variety of needs.
The stable outlook assumes that underwriting results for the P/C
operations will begin to improve in the latter half of 2002. Similarly, the
capital adequacy and financial leverage of the respective organization is
expected to remain near current levels.
OUTSTANDING RATINGS AFFIRMED
MEMBERS OF THE ALLSTATE INSURANCE CO. INTERCOMPANY POOL
Allstate Insurance Co.
Allstate Indemnity Co.
Deerbrook Insurance Co.
Allstate County Mutual Insurance Co.
Allstate Texas Lloyd's
Allstate Property & Casualty Insurance Co.
Counterparty credit rating AA/Stable
Financial strength rating AA
Allstate Corp.
Counterparty credit rating A+/Stable/A-1
Senior debt rating A+
Preferred stock rating A-
Commercial paper rating A-1
Allstate Life Insurance Co.
Counterparty credit rating AA+/Negative/A-1+
Financial strength rating AA+/A-1+
American Heritage Life Insurance Co.
Allstate Life Insurance Co. of New York
Glenbrook Life & Annuity Co.
Lincoln Benefit Life Co.
Northbrook Life Insurance Co.
Surety Life Insurance Co.
Counterparty credit rating AA+/Negative
Financial strength rating AA+
SOURCE Standard & Poor's
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Related links:
http://www.standardandpoors.com/ratings
CONTACT:
Matthew T. Coyle, New York, +1-212-438-7183,
or Thomas Upton, New York, +1-212-438-7249, both for Standard &
Poor's
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