A.M. Best Affirms Ratings of Allstate Floridian Insurance Group.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of B+ (Good) and issuer credit ratings (ICR) of "bbb-" of Allstate Floridian Insurance Group (Allstate Floridian) (Northbrook, IL) and its members. The outlook for all ratings is negative.

The ratings reflect Allstate Floridian's adequate capitalization, historically favorable operating results in years that major catastrophes did not occur and the financial and operating support from its ultimate insurance company parent, Allstate Insurance Company (Northbrook, IL) (NYSE: ALL).

Partially offsetting these positive rating factors is the group's geographic business concentration, which makes it susceptible to catastrophic loss accumulation, market dislocations and regulatory changes. The rating outlook reflects Allstate Floridian's continued significant exposure to catastrophic losses relative to its surplus.

The ratings also recognize the variety of risk management initiatives that were recently implemented to reduce Allstate Floridian's susceptibility to hurricane losses. These initiatives include a moratorium on new business writings since August 2004, the transfer of a portion of homeowner and condo renewals to third-party carriers, the non-renewal of residential fire business and the withdrawal from landlord and manufactured home business. Furthermore, Allstate Floridian has significantly enhanced its external catastrophe reinsurance protection.

Despite these initiatives, the group remains susceptible to catastrophic loss accumulation, market dislocations and regulatory changes. As a predominant property writer in a state that is susceptible to catastrophes such as Florida, Allstate Floridian's gross and net probable maximum loss remain high. Most recently, operating earnings have been unfavorable due to underwriting losses that were driven by declining net premiums earned and increasing expenses, as well as a continued decline in investment income.

Although, Allstate Floridian is separately capitalized and is not reinsured by its parent, the ratings reflect the ongoing operational and past financial support of Allstate. Accordingly, the ratings also acknowledge A.M. Best's expectation that parental support and corresponding claims paying ability will be maintained in the event of significant hurricane activity. In the event of frequent or severe hurricane activity beyond A.M. Best's expectations, additional parental capital support would likely be required to maintain the current ratings.

The FSR of B+ (Good) and ICRs of "bbb-" have been affirmed for Allstate Floridian Insurance Group and its following members:

* Allstate Floridian Insurance Company

* Allstate Floridian Indemnity Company

* Encompass Floridian Insurance Company

* Encompass Floridian Indemnity Company

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.