Fitch Downgrades Allstate; Best Takes No Action

Two rating agencies have come to different conclusions about the latest earnings news from Allstate, with A.M. Best saying it would take no action while Fitch downgraded the company and its subsidiaries.

Their actions followed Friday's move by New York-based Moody's Investors Service, which reacted to the insurer's announcement of a fourth-quarter $1.3 billion loss by reducing the rating of the company and its subsidiaries, citing "significant investment losses, weak earnings and reduced capitalization."

Oldwick, N.J.-based Best said the ratings and outlook on Allstate Insurance Group and The Allstate Corp. remained unchanged.

Best said it affirmed the financial strength rating of "A-plus (Superior)" on Oct. 23, 2008, but downgraded the issuer credit ratings to "double-a-minus" from "double-a" of Allstate and its members.

The financial strength rating of "A-plus (Superior)" was affirmed on the primary life and health member companies of Allstate Financial.

Best said the October downgrade anticipated the "recent adverse trend in its risk-adjusted capital position" but it continues to "maintain adequate risk-adjusted capitalization for its current ratings."

The rating service added that it expects the company will produce favorable results and replenish its risk-adjusted capital position in the near term.

Fitch Ratings downgraded the financial strength ratings of Allstate's property-casualty to "A-plus" from "double-A" and life insurance subsidiaries to "A" from "double-A-minus," with negative outlook.

Fitch said the negative outlook reflected the company's weaker financial position and uncertainty regarding further investment portfolio deterioration this year. It also reflects capital ratios that "are still somewhat below targets for even the new ratings levels."

Deterioration in risk-based capital would result in further downgrades, said Fitch, while an increase in capital from "more normalized operating results" and less investment losses would produce a stable outlook.

Fitch added that the company's p-c business continues to offer favorable cash flow and earnings potential.

Last week, the Northbrook, Ill.-based insurer in announcing its fourth-quarter loss said it plans to eliminate 1,000 positions over the next two years at its life operations (see NU Online, Jan. 29).

Moody's reduced the insurance financial strength rating of Allstate Insurance Co., the corporation's property-casualty subsidiary, to "Aa3" from "Aa2."