Due to its cat risk exposure reduction programme, AM Best has revised its outlook on Allstate from negative to stable
AM Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings of “aa” of Allstate Insurance Group (Allstate) and its members. The outlook for all ICRs and debt ratings has been revised to stable from negative.
Allstate's superior capital position reflects management's conservative operating philosophy and correspondingly strong balance sheet. Its operating returns compare favourably to its industry composite peers due to its solid underwriting capabilities and increasing stream of investment income from its well-diversified investment portfolio. The favourable operating performance reflects Allstate's tightened underwriting guidelines, improved risk segmentation, adequate pricing and favourable loss trends. Furthermore, Allstate maintains an outstanding market presence as the second-largest personal lines writer.
Partially offsetting these positive rating attributes is Allstate's inherent exposure to natural disasters due to its expansive market presence throughout the US. This exposure was particularly evident in recent years as net catastrophe losses totalled $5.7bn in 2005. Nevertheless, Allstate's operating results improved significantly in 2006, which enabled it to restore statutory surplus through retained earnings to a higher level than prior to the 2005 hurricane season. Furthermore, in 2005 and prior, Allstate had property catastrophe reinsurance protection only in some of the states that experienced significant losses. However, in 2006, it executed an extensive catastrophe risk exposure reduction programme.
Based on the entire organisation's improved statutory capital position and the resulting restoration of its risk-adjusted capitalisation, as well as the implementation of various catastrophe risk management initiatives, AM Best revised the outlook for the ICRs and debt ratings to stable from negative.