Fitch Ratings has downgraded the rating outlook for The Allstate Corporation and its core insurance subsidiaries to stable from positive, due to the significant uncertainty being caused by the global coronavirus pandemic.
The ongoing COVID-19 outbreak has led to high levels of volatility in capital markets, which, has in turn driven a sharp decline in interest rates and significant variability in stock, bond and derivative prices.
Global financial services ratings agency Fitch explains that life insurers, which include Allstate’s core life insurance subsidiaries, are also exposed to higher rates in mortality as a result of the virus outbreak.
Ultimately, Fitch expects the combined impacts to add some pressure on earnings and variability in capital levels, adding that it remains uncertain just how severe and lasting such pressures would be.
“Fitch believes the totality of these conditions no longer support a Positive Outlook,” explains the ratings agency.
Fitch notes that it will continue to monitor the potential impact of the virus on ratings, including development of appropriate base case ratings assumptions.
Expanding on its revision for Allstate and its core insurance subsidiaries, Fitch notes that the affirmation of the ratings and revision of the outlook to stable reflects the company’s very favourable business profile, underpinned by consistently favourable underwriting margins and operating returns, somewhat offset by higher than peer average allocation to risky investment assets.