(The following statement was released by the rating agency)
CHICAGO, June 07 (Fitch) Fitch Ratings has assigned a 'BBB+'
Allstate's issuance of senior notes. At the same time, Fitch
affirmed the 'A-'
Issuer Default Rating (IDR) of The Allstate Corporation
(Allstate) as well as
the 'A+' Insurer Financial Strength (IFS) ratings of Allstate
Insurance Co. and
its property/casualty subsidiaries, and the 'A-' IFS ratings of
Insurance Co. and the other life subsidiaries (Allstate
Financial). The Rating
Outlook is Stable. A full list of ratings follows at the end of
Allstate has also issued preferred stock, and Fitch expects to
KEY RATING DRIVERS
Key issues supporting the rating are Allstate's market position
as a top tier
personal lines writer, good property/liability underwriting
acceptable capitalization at the operating subsidiaries.
Balanced against these
strengths is a history of material catastrophe losses and
with undertaking a strategic shift in the life operations.
Allstate announced a plan to retire approximately $3 billion in
senior debt and subordinated notes funded by a combination of
debt and cash. The company has $1.2 billion in debt maturing in
2013 and 2014
which will be included in the capital plan. Financial leverage
ratios are likely
to improve depending in part on the amount of cash used. The
likely reduce interest expense given the prevailing low interest
Debt-to-total capital remained appropriate for the current
rating category at
27.3% at March 31, 2013, relative to Fitch's median guideline of
28%. This ratio
was calculated excluding unrealized investment gains on fixed
from shareholders' equity.
Allstate has the second leading market position in both private
and homeowners insurance with an approximate market share of 10%
premium written. State Farm Mutual Automobile Insurance Co.
remains the largest
with market share near 20%.
Underwriting results for Allstate's property/liability business
with a GAAP combined ratio of 93.2% for the first quarter of
2013 relative to
92.1% for the comparable period in 2012. Personal auto accounts
approximately 70% of property/liability written premiums and
reported a combined
ratio of 95.7% for the first quarter of 2013, improving from
97.1% in the
comparable period of 2012.
Approximately one-fifth of Allstate's property/liability written
from the homeowners line of business. Underwriting results for
line continue to be positive, reporting a combined ratio of
85.6% for the first
quarter of 2013. Greater catastrophe losses in the first quarter
of 2013 explain
the modest deterioration in the homeowners' combined ratio from
80.5% in the
first quarter of 2012.
Allstate's 10-year average annual catastrophe loss remains high
at 9.7% of
earned premiums. Losses attributable to catastrophes in 2012
were slightly below
the 10-year average at 8.8% of earned premiums, while 2011 was a
challenging year with catastrophe losses amounting to 14.7% of
Statutory surplus at Allstate Insurance Company (AIC), the
property/casualty underwriting subsidiary, was $17.2 billion as
of March 31,
2013. While this level of capitalization is acceptable at the
category, it remains below pre-financial crisis levels of $19.1
at year-end 2006. Operating leverage, excluding $3.6 billion in
attributable to Allstate's life operations, was nearly 2.0x,
which is considered
consistent with the 1.8x median guideline for 'A' rated
companies in Fitch's
Allstate Financial reported net income of $146 million for the
months of 2013, up from $112 million in the same period of 2012.
investment gains in 2013 relative to losses in 2012 were
responsible for the
period-to-period change. This result continues to represent an
relative to material net losses during the financial crisis.
The rating on Allstate's life operations reflects Fitch's
assessment of its
limited strategic importance within the Allstate enterprise and
view that the
'standalone' IFS rating is in the 'BBB' range. The ratings of
operations continue to benefit from the Capital Support
Agreement from Allstate
Insurance Co. and its access to the holding company credit
The life operations focus on traditional underwritten products
spread-based products, which improve its risk profile. Increased
Allstate Financial could eventually improve its strategic
importance within the
Allstate enterprise, but Fitch believes it will take time for a
increase in earnings to occur.
Fitch's rating rationale anticipates a continuation of
Allstate's practice of
maintaining sizeable liquid assets at the holding company level.
$2.2 billion in holding company assets that could be liquidated
months, relative to forecasted annual interest expense and
common dividends of
approximately $900 million. Further, holding company resources
are sufficient to
meet the July 2013 maturity of $250 million of senior notes.
Key rating triggers for Allstate that could lead to an upgrade
--Growth in surplus leading to an improved capitalization
profile measured by
operating leverage approaching 1.1x and a score of 'Strong' or
better on Fitch's
proprietary capital model, Prism;
--Reduced volatility in earnings from catastrophe losses and
results consistent with companies in the 'AA' rating category;
--Standalone ratings for Allstate's life subsidiaries could
increase if their
consolidated statutory Risky Assets/TAC ratio falls below 100%
and they are able
to sustain a GAAP based Return on Assets ratio over 80 basis
Key rating triggers for Allstate that could lead to a downgrade
--A prolonged decline in underwriting profitability that is
industry averages or is driven by an effort to grow market share
--Substantial adverse reserve development that is inconsistent
--Significant deterioration in capital strength as measured by
model, NAIC risk-based capital and traditional operating
if operating leverage, excluding the surplus of the life
approached 2.5x it would place downward pressure on ratings;
--Significant increases in financial leverage ratio to greater
--Unexpected and adverse surrender activity on liabilities in
the life insurance
--Liquid assets at the holding company less than one year's
interest expense and
Fitch has assigned the following ratings:
--3.15% $500 million senior notes 'BBB+';
--4.50% $500 million senior notes 'BBB+'.
Fitch affirms the following ratings for Allstate and
The Allstate Corporation
--Long-term IDR at 'A-'.
The following junior subordinated debt at 'BBB-':
--6.125% $500 million debenture due May 15, 2037;
--5.10% $500 million subordinated debenture due Jan. 15, 2053;
--6.5% $500 million debenture due May 15, 2067.
The following senior unsecured debt at 'BBB+':
--7.5% $250 million debenture due June 15, 2013;
--6.2% $300 million debenture due 2014;
--5% $650 million note due Aug. 15, 2014;
--6.75% $250 million debenture due May 15, 2018;
--7.45% $700 million debenture due 2019;
--6.9% $250 million debenture due May 15, 2038;
--6.125% $250 million note due Dec. 15, 2032;
--5.35% $400 million note due June 1, 2033;
--5.55% $800 million note due May 9, 2035;
--5.95% $650 million note due April 1, 2036;
--5.2% $500 million note due Jan. 15, 2042.
Fitch also affirms the the following:
--Commercial paper at 'F1';
--Short-term IDR at 'F1'.
Allstate Insurance Company
Allstate County Mutual Insurance Co.
Allstate Indemnity Co.
Allstate Property & Casualty Insurance Co.
Allstate Texas Lloyd's
Allstate Vehicle and Property Insurance Co.
Encompass Home and Auto Insurance Co.
Encompass Independent Insurance Co.
Encompass Insurance Company of America
Encompass Insurance Company of Massachusetts
Encompass Property and Casualty Co.
--IFS at 'A+'.
Allstate Life Insurance Co.
Allstate Life Insurance Co. of NY
American Heritage Life Insurance Co.
Lincoln Benefit Life Insurance Co.
--IFS at 'A-'.
Allstate Life Global Funding Trusts Program
--The following medium-term notes at 'A-'.
--$85 million note due Nov. 25, 2016.
Douglas M. Pawlowski,CFA (Allstate Corp. & Allstate Insurance)
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
Cynthia J. Crosson (Allstate Life Insurance Co.)
Fitch Ratings, Inc.
One State Street Plaza
New York, New York 10004
Julie Burke, CPA, CFA
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria & Related Research:
--'Insurance Rating Methodology' (January 2013)
Applicable Criteria and Related Research:
Insurance Rating Methodology â€” Amended
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