AM Best has taken various actions on the credit rating of Allstate Insurance Corporation and its subsidiaries and has given a strong outlook to most of them.
The credit rating agency downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “aa-” (Superior) from “aa” (Superior) and affirmed the Financial Strength Rating (FSR) at A+ (Superior ) to members of the Allstate Insurance Group (Allstate).
According to the rating agency, the downgrade reflects the negative impact of challenging macro-economic trends on underwriting results and risk-adjusted capitalization.
This was driven by higher-than-expected personal auto loss expense trends and higher-than-average homeowner business line catastrophe losses.
The agency said: “AM Best expects that Allstate’s underwriting and operational expertise, significant pricing actions and continued cost efficiencies will lead to improved operating results. Additionally, the new the company’s announced suspension of its share buyback program is expected to have a positive impact on its capital generation capabilities.
“However, despite Allstate’s sophisticated risk management and robust reinsurance program, the company remains inherently exposed to natural disasters occurring throughout the United States. AM Best said Allcorp maintains strong financial flexibility through its access to capital markets and various sources of liquidity. The organization’s financial leverage and coverage metrics are in line with peers and are adequate for its current ratings.”
AM Best also removed from a below review with negative implications and lowered the FSR to B (Fair) from B+ (Good) and the Long-Term ICR to “bb” (Fair) from “bbb -” (Good) by members of the Castle Key Group (Castle Key).
The outlook given by all the above ratings is strong.
The rating agency acknowledged Castle Key’s weak balance sheet, as well as its marginal operating performance, limited business profile and appropriate ERM.
Castle Key’s downgrade was a result of a material deterioration in its surplus position as a result of the challenging personal property insurance conditions in Florida, including higher loss severity, catastrophe-related losses and the increase in reinsurance costs.
The Long-Term ICRs of “aa” (Superior) at American Heritage Life Insurance Company (American Heritage) (Jacksonville, FL), Direct General Life Insurance Company (Orangeburg, SC) and National Health Insurance Company (Dallas, TX) were lowered to grade of “aa-” (Superior) and FSR of A+ (Superior) are confirmed. The outlook for these ratings is stable.
AM Best assesses American Heritage’s balance sheet as very strong, as well as its strong operating performance, neutral business profile and appropriate ERM. The company is operating profitably in the competitive employee benefits market reporting strong return and loss ratios in line with expectations.
The rating agency assessed the balance sheet of Direct General Life Insurance Company and National Health Insurance Company as the strongest. None of these companies add depth and diversity to the Allstate organization by marketing their various life and health products.
At the same time, AM Best changed the outlook to negative from stable and affirmed the FSR at “A” (Excellent) and the Long-Term ICRs at “a” (Excellent) of Allstate New Jersey members. Insurance Group.
Allstate New Jersey’s ratings reflect its strong balance sheet, AM is best known. The negative outlook reflected higher-than-expected trends in personal auto loss costs and higher-than-average homeowner business line catastrophe losses, which drove a material which reduced the surplus within this group of companies.
In addition, the rating agency downgraded the Long-Term ICR to “a-” (Excellent) from “a” (Excellent), and all existing Long- and Short-Term Issue Credit Ratings, (Long- Term IR; Short-Term IR) of the ultimate parent, The Allstate Corporation (Allcorp). The outlook for these ratings is stable.
National General Holdings Corp. (Delaware), an intermediate holding company of Allcorp, also saw a change in their credit ratings because AM Best lowered its Long-Term ICR to “a-” (Excellent) from “a” (Excellent). ) and Long-Term IRs.
Finally, AM Best confirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of the members of ASMI Auto Group. It also affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of First Colonial Insurance Company (Jacksonville, FL) (FCIC). The outlook for these ratings is stable.
ASMI Auto Group’s balance sheet strength is estimated to be very strong. Its ratings also reflect Allcorp’s risk management and service agreement support. FCIC’s balance sheet is also estimated to be very strong. Its ratings have also benefited from the explicit and implicit support provided by Allcorp, AM Best added.