A.M. Best Affirms Ratings of The Allstate Corporation and Its Key Subsidiaries

A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of “aa-” of the members of Allstate Insurance Group (Allstate).

Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of “a” of First Colonial Insurance Company (First Colonial)(Jacksonville, FL). Additionally, A.M. Best has affirmed the ICR of “a-” and all debt ratings of the ultimate parent, The Allstate Corporation (Allcorp) [NYSE:ALL]. The outlook for the above ratings is stable. All the above named companies are domiciled in Northbrook, IL, except where specified. (See link below for a detailed listing of the companies and ratings.)

The ratings reflect Allstate’s solid risk-adjusted capitalization, favorable operating earnings and strong business profile with a significant market presence. The group’s capital position reflects its stable earnings trend, which has contributed to surplus growth in most of the past five-year period, excluding parental dividends. Allstate’s non-catastrophe operating results continue to be favorable as a result of enhanced pricing sophistication and improved loss cost management while maintaining underwriting discipline. Additionally, Allstate has a significant market presence and strong overall business profile as one of the largest personal lines writers in the United States. Furthermore, Allstate maintains moderate financial leverage, as well as additional liquidity at the holding company level in both Allcorp and its subsidiary, Kennett Capital, Inc., and through access to capital markets, lines of credit and its commercial paper program. The group’s strong automobile profitability and improved homeowners’ margins are attributable to enhanced pricing accuracy and risk optimization along with solid core underwriting capabilities, prudent capital management and sizeable investment income. Moreover, Allstate’s underwriting results also reflect the favorable impact of its ongoing risk management actions, various expense management initiatives and significant investment in technology.

Partially offsetting these positive rating attributes is Allstate’s inherent exposure to natural disasters due to its expansive market presence throughout the United States. This exposure was evident in earlier periods with net catastrophe losses having a larger impact on the group’s overall results. However, over the past few years, Allstate has executed an extensive catastrophe risk exposure reduction program, including a significantly enhanced property catastrophe reinsurance program, non-renewals, stricter underwriting guidelines, increased deductibles and the discontinuance of selected lines of coverage, including earthquakes. The group’s underwriting results in recent years have benefited from these risk reduction actions and generally lower catastrophe losses.

Key rating drivers that could produce a revision in Allstate’s outlook or a downgrading of its ratings include capitalization that does not meet A.M. Best’s “Superior” FSR standards; a sustained period of net losses or catastrophe losses out of proportion with market share; and consolidated financial leverage, including short-term debt of greater than 30%.

The affirmation of the ratings for First Colonial reflects its solid risk-adjusted capitalization and explicit and implicit support provided by Allstate. As a subsidiary, First Colonial benefits from Allstate’s expansive market presence and brand name recognition. The company’s capital position reflects its conservative investment risk profile and historical record of financial support from Allcorp. Furthermore, First Colonial’s steady stream of investment income has complemented underwriting earnings in most years.

Any material negative deviation in terms of earnings, capitalization or risk profile could result in downward pressure on First Colonial’s ratings and/or a revision in its outlook.

For a complete listing of The Allstate Corporation and its property/casualty and life/health subsidiaries’ FSRs, ICRs and debt ratings, please visit The Allstate Corporation.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Catastrophe Analysis in A.M. Best Ratings

• Rating Members of Insurance Groups

• Risk Management and the Rating Process for Insurance Companies

• Understanding BCAR for Property/Casualty Insurers

• Analyzing Insurance Holding Company Liquidity

• Equity Credit for Hybrid Securities

• Insurance Holding Company and Debt Ratings

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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