Moody's Investors Service has lowered the credit ratings of Allstate Corp. after the company's announcement yesterday of a $1.3 billion loss in the fourth quarter of last year.
The market in morning trading reacted by sending the company stock price down by more than 9 percent to $21.30 a share.
New York-based Moody's said it reduced the rating of the company and its subsidiaries because of "significant investment losses, weak earnings and reduced capitalization."
Moody's downgraded the insurance financial strength rating of Allstate Insurance Co., the corporation's property-casualty subsidiary, to "Aa3" from "Aa2."
The move reflects Allstate Insurance's "reduced risk-adjusted capital position and the volatility associated with its investment portfolio," Moody's said.
Statutory surplus has declined close to 27 percent since 2007, Moody's said, driven by investment and catastrophe losses, adding that its in-force premiums and exposure to catastrophes have declined commensurately.
"We expect continued investment volatility risk and credit losses given the turbulent financial and economic climate," said Moody's vice president and senior credit officer, Pano Karambelas.
The company said yesterday that its plan to reduce catastrophe exposures resulted in halving the catastrophe losses it experienced last year to $3.3 billion.
However, Moody's acknowledged that Allstate Insurance's rating remained high because of its support from the corporation.
The outlook for Allstate Insurance and the corporation's life insurance subsidiaries was changed to negative.
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