AM Best has taken various credit rating actions on the Allstate Insurance Corporation and its subsidiaries and assigned a stable outlook to most of them.
The credit rating agency has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “aa-” (Superior) from “aa” (Superior) and affirmed the Financial Strength Rating (FSR) of A+ (Superior) of the members of 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.
These were driven by higher than anticipated loss cost trends in personal auto and higher than average catastrophe losses in the homeowners’ line of business.
The agency stated: “AM Best expects that Allstate’s underwriting and operational expertise, significant pricing actions and ongoing expense efficiencies will lead to an improvement in operating results. In addition, the company’s recently announced suspension of its share repurchase program is expected to have a positive impact on capital generation capabilities.
“However, despite Allstate’s sophisticated risk management practices and robust reinsurance program, the company remains inherently exposed to natural disasters occurring throughout the United States. AM Best notes that Allcorp maintains strong financial flexibility through its access to capital markets and various other sources of liquidity. The organisation’s financial leverage and coverage metrics are in line with peers and are adequate for its current ratings.”
AM Best has also removed from under review with negative implications and downgraded the FSR to B (Fair) from B+ (Good) and the Long-Term ICR to “bb” (Fair) from “bbb-” (Good) of the members of Castle Key Group (Castle Key).
The outlook assigned to all the ratings above is stable.
The rating agency assed Castle Key’s balance sheet as weak, as well as its marginal operating performance, limited business profile and appropriate ERM.
The downgrade of Castle Key is a result of material deterioration in its surplus position as a result of challenging personal property insurance conditions in Florida, including higher loss severity, catastrophe-related losses and the increased cost of reinsurance.
The Long-Term ICRs of “aa” (Superior) of American Heritage Life Insurance Company (American Heritage) (Jacksonville, FL), Direct General Life Insurance Company (Orangeburg, SC) and National Health Insurance Company (Dallas, TX) was downgraded to “aa-” (Superior) and FSR of A+ (Superior) was affirmed. The outlook of these ratings is stable.
AM Best assessed American Heritage’s balance sheet as very strong, as well as its strong operating performance, neutral business profile and appropriate ERM. The company operates profitably in the competitive employee benefits market reporting strong returns 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. Nothing that the companies add depth and diversification to the Allstate organization through the marketing of their various life and health products.
At the same time, AM Best has revised the outlooks to negative from stable and affirmed the FSR of “A” (Excellent) and the Long-Term ICRs of “a” (Excellent) of the members of Allstate New Jersey Insurance Group.
The ratings of Allstate New Jersey reflect its strong balance sheet, AM best noted. The negative outlook reflects the higher than anticipated loss cost trends in personal auto and higher than average catastrophe losses in the homeowners’ line of business, which have driven a material decline in surplus within this group of companies.
Moreover, the rating agency has 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 of these ratings is stable.
The National General Holdings Corp. (Delaware), an intermediate holding company of Allcorp, has also seen a change in their credit ratings as AM Best has downgraded its Long-Term ICR to “a-” (Excellent) from “a” (Excellent) and Long-Term IRs.
Finally, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of ASMI Auto Group’s members. It also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of First Colonial Insurance Company (Jacksonville, FL) (FCIC). The outlook of these ratings is stable.
ASMI Auto Group balance sheet strength was assessed as very strong. Its ratings also reflect the risk management and service agreement support of Allcorp. FCIC’s balance sheet was also assessed as very strong. Its ratings also benefit from the explicit and implicit support provided by Allcorp, AM Best added.
