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A.M. BEST COMPANY LOWERS RATINGS ON ALLSTATE AND AFFIRMS SKANDIA AMERICA

 OLDWICK, N.J., Nov. 23 ~PRNewswire~ -- A.M. Best Company has lowered the Best's Ratings assigned to the property~casualty and life~health operations of Allstate Insurance Group, Northbrook, Ill.
 Effective immediately, A.M. Best Company has lowered Allstate Insurance Group's Best's Rating (property~casualty) from "A" (Excellent) to "A-" (Excellent), after placing the group's rating under review on Oct. 7, 1992.
 This rating action reflects the magnitude of the group's Hurricane Andrew losses which have weakened its capitalization levels. In addition, it reflects the group's continued vulnerability to significant catastrophe exposures, which are not adequately protected by its current reinsurance program. The rating applies to the group's eight property~casualty members, led by Allstate Insurance Company.
 Allstate may experience some potential upward revision in its previously announced Hurricane Andrew gross loss estimate of $1.9 billion. However, claim activity for reopened claims and supplemental payments have not yet emerged making the ultimate impact from the storm unknown as of this date. Allstate's previously announced Andrew loss resulted in a $1.4 billion net after-tax charge to statutory earnings. Allstate's surplus was $4.5 billion at Sept. 30, 1992, compared to $5.4 billion at year-end 1991.
 This reduction in capital has put further pressure on the group's leverage, which remains high relative to its personal lines peers. At this time, Allstate's management expects that the losses from Hurricane Andrew will be partially offset by statutory earnings and other positive surplus adjustments in the fourth quarter.
 Allstate is in the process of reevaluating its risk management strategy in light of Hurricane Andrew losses. The company is considering a number of corrective actions to minimize its vulnerability to catastrophe exposures, including purchasing additional reinsurance protection.
 "The Allstate Insurance Group (property~casualty) continues to maintain excellent financial strength," said John H. Snyder, senior vice president of Best's Property~Casualty Division. "In the last two years, management has taken a number of positive steps to refocus its personal lines operating strategy which will yield significantly improved operating earnings and capitalization. Unfortunately, Hurricane Andrew set back Allstate's progress a year or two. Going forward, to the extent Allstate's risk management strategies are successful, they should reduce the volatility of its operating earnings and enable the group to improve its capitalization levels relative to its peers."
 Also effective immediately, the Best's Rating of Allstate Life Insurance Company has been lowered from "A++" (Superior) to "A+" (Superior). This action reflects the uncertain strategic issues and capital constraints surrounding both its immediate and ultimate parent companies, Allstate Insurance Company and Sears Roebuck and Company, respectively. On Sept. 30, 1992, Sears announced its intention to sell 20% of its ownership of the Allstate Insurance Units through an initial public offering, and ultimately spin-off its entire holdings of Dean Witter Reynolds, Inc., in order to pay down approximately $3 billion of Sears' debt. As a result, A.M. Best believes that these conditions have reduced Allstate Life's overall financial flexibility.
 Due to continued vulnerabilities to catastrophe losses, A.M. Best feels that Allstate Insurance Company will be inhibited in its ability to provide the level of financial commitment which Allstate Life has historically enjoyed as a subsidiary of one of the nation's largest property and casualty insurers. In addition, the sale of Dean Witter may potentially impact Allstate Life's product distribution, as approximately one-fifth of its business is sold through Dean Witter representatives.
 Allstate Life's earnings and capitalization remain strong through the first nine months of 1992. As of Sept. 30 the company reported operating gains of $117 million and capital and surplus funds of nearly $923 million, both of which represent a continuation of favorable trends evidenced during 1991. Although the company's commercial mortgage experience has been favorable relative to the industry, a further downturn in the real estate markets could place pressure on Allstate Life's future earnings.
 According to Larry G. Mayewski, vice president of Best's Life~Health Division, "Although Allstate Life's rating level has been lowered, the company's rating remains within Best's "Superior" category due to its strong operating earnings, excellent liquidity, and favorable capitalization."
 As subsidiaries of Allstate Life, the Best's Ratings of Allstate Life Insurance Company of New York, Glenbrook Life Insurance Company, Glenbrook Life and Annuity Company, Lincoln Benefit Life Insurance Company, Northbrook Life Insurance Company, and Surety Life Insurance Company have also been revised to "A+" (Superior). These ratings are based on the consolidated performance of Allstate Life and the subsidiaries.
 In addition, A.M. Best has affirmed the "A" (Excellent) rating of Skandia America Reinsurance Corporation, New York, N.Y. and three affiliated companies after placing the ratings under review on Nov. 10, 1992. The decision to affirm the reinsurer's rating was made after lengthy discussions with company management and reinsurance brokers in assessing the company's plans to significantly reduce its operations, which were announced Oct. 26, 1992. The reorganization will involve a downsizing of net premium volume from approximately $450 million to $100 million and a strategic refocusing on its more profitable casualty treaty and facultative business.
 "We feel comfortable with Skandia America's strategic repositioning. It will enable the reinsurer to improve its longer term profitability and capitalization levels, and more importantly, it will not jeopardize its current business or future marketing opportunities in the casualty reinsurance marketplace," said John H. Snyder, senior vice president of Best's Property~Casualty Division.
 Skandia America's Swedish parent has indicated to Best that it remains committed to the North American market and has no intentions at this time of reducing the statutory capital levels of Skandia America Reinsurance, which was $311 million at Sept. 30, 1992.
 -0- 11~23~92
 ~CONTACT: Christina Stein, public relations coordinator of A.M. Best Company, 908-439-2200 ext 5642~


CO: A.M. Best Company; Allstate Insurance Group ST: New Jersey IN: INS SU: RTG

TS -- NY053 -- 0558 11~23~92 12:50 EST
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Date:Nov 23, 1992
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