Fitch Ratings has assigned a 'BBB+' rating to Allstate Corporation's(Allstate) $700 million 10-year senior notes and $300 million five-yearsenior notes. Proceeds from the issuance will be used to repay $750million of senior notes maturing in December of this year with thebalance used for general corporate purposes.

 

The Rating Outlook for Allstate's ratings, including financial strengthratings at both the property/casualty and life insurance operations, isNegative. A complete list of ratings can be found below.

 

Allstate's holding company proforma May 31, 2009 financial leverageadjusted for hybrid equity credit increased to 31% with the newissuance, but will decline to approximately 28% once the maturing seniordebt is repaid in December. This level of financial leverage isconsidered the upper boundary for the rating category. Favorably,Allstate's financial flexibility appears strong as the $1 billion bankline remains completely available and the holding company hasapproximately $3.3 billion of cash and securities to meet liquidityneeds. In addition, Allstate Insurance Company (AIC) can pay dividendsof approximately $1.3 billion in 2009 without prior regulatory approval.

 

Allstate reported a net loss of $274 million through the first threemonths of 2009 compared to net income of $348 million during the sameperiod in 2008. The net loss included $359 million in realizedinvestment losses driven by significant impairment write-downs andlosses on limited partnerships that were only partially offset by gainsfrom sales of long-dated Treasury securities.

 

The Negative Outlook continues to reflect Allstate's weaker currentfinancial position, as well as uncertainty regarding further investmentportfolio deterioration during 2009. The Negative Outlook also considerscapital ratios that are somewhat below targets for the rating level.Additional investment losses leading to further deterioration inrisk-based capital would result in further downgrades. An increase incapital due to a return to more normalized operating results, and lessrealized investment losses, would likely lead to a movement toward aStable Outlook.

 

Fitch believes that Allstate's property/casualty operations continue tooffer favorable cash flow and earnings potential. However, currentresults continue to be adversely affected by catastrophe losses,reporting net income of $100 million in the first quarter of 2009, down$403 million from the comparable period in 2008. Specifically,Allstate's personal lines property/casualty business posted a combinedratio of 96.8% for the first three months of 2009 that included 7.8percentage points of catastrophe losses.

 

The life operations reported a net loss of $327 million for the firstthree months of 2009 compared to a $111 million net loss during the sameperiod of 2008. Specific items contributing to the net loss were a $209million charge-off of deferred acquisition costs as well as $142 millionof tax expenses related to an increase in the valuation allowancerelating to the deferred tax asset on capital losses.

 

The 'standalone' financial strength ratings of Allstate's life operationare lower than the current 'A' level. The lower standalone ratingreflects its greater exposure to troubled assets relative to theproperty/casualty operation, liquidity needs from institutional productmaturities and generally weak performance. The current ratings on thelife insurance subsidiaries receive an uplift due to the Capital SupportAgreement from AIC and its access to company credit facilities.

 

Fitch has assigned the following ratings:

 

The Allstate Corporation

 

The following senior unsecured debt is rated 'BBB+':

 

$700 million debenture due 2019;

 

$300 million debenture due 2014.

 

No action was taken on the following ratings:

 

The Allstate Corporation

 

--Issuer default rating 'A-';

 

--The following junior subordinated debt is rated 'BBB':

 

6.125% $500 million debenture due May 15, 2037;

 

6.5% $500 million debenture due May 15, 2067.

 

--The following senior unsecured debt is rated 'BBB+':

 

7.5% $250 million debenture due July 15, 2013;

 

6.75% $250 million debenture due May 15, 2018;

 

6.9% $250 million debenture due May 15, 2038;

 

7.2% $750 million note due Dec. 1, 2009;

 

6.125% $350 million note due Feb. 15, 2012;

 

5% $650 million note due Aug. 15, 2014;

 

6.125% $250 million note due Dec. 15, 2032;

 

5.35% $400 million note due June 1, 2033;

 

5.55% $800 million note due May 9, 2035;

 

5.95% $650 million note due April 1, 2036;

 

--Commercial paper issuer rating 'F1'.

 

Allstate Insurance Company

 

Allstate County Mutual Insurance Co.

 

Allstate Indemnity Co.

 

Allstate P&C Insurance Co.

 

Allstate Texas Lloyd's

 

Deerbrook Insurance Co.

 

Encompass Home and Auto Insurance Co.

 

Encompass Independent Insurance Co.

 

Encompass Insurance Company of America

 

Encompass Insurance Company of Massachusetts

 

Encompass Property and Casualty Co.

 

--Insurer financial strength (IFS) 'A+'.

 

Allstate Life Insurance Co.

 

Allstate Life Insurance Co. of NY

 

American Heritage Life Insurance Co.

 

Lincoln Benefit Life Insurance Co.

 

--IFS 'A'.

 

Allstate Life Global Funding Trusts Program 'A'.

 

The Rating Outlook for all ratings is Negative.

 

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