A.M. Best Affirms Ratings of Allstate and Subsidiaries

January 9, 2008

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

Additionally, A.M. Best has affirmed the ICR of “a” and all debt ratings of Allstate’s parent, The Allstate Corp. of Northbrook, Ill.

At the same time, A.M. Best has affirmed the FSRs and ICRs of the life/health member companies of Allstate Financial.

A.M. Best said the outlook for all ratings is stable.

A.M. Best said that Allstate’s “superior capital position” reflects a conservative operating philosophy, improved risk management and a strong balance sheet.

Allstate’s operating returns compare favorably to its industry composite peers due to its “solid underwriting capabilities and
increasing stream of investment income from its well-diversified investment portfolio, according to the rating firm.

This favorable operating performance reflects tightened underwriting guidelines, improved risk segmentation, adequate pricing and favorable loss trends. Furthermore, A.M. Best said, Allstate maintains an “outstanding market presence” as the second-largest personal lines writer.

Partially offsetting these positive rating attributes, according to A.M. best, is the insurer’s “inherent exposure to natural disasters” due to its expansive market presence throughout the United States. This exposure was particularly evident over the previous five-year period as net catastrophe losses totaled $5.7 billion in 2005, with an overall combined ratio impact of 21 points, and $2.5 billion in 2004, with an overall combined ratio impact of 10 points.

As a result of these catastrophe losses and significant
dividend payments to its parent, Allstate’s statutory surplus declined in 2005, resulting in deterioration of risk-adjusted capitalization.

A.M. Best noted that Allstate’s operating results “improved significantly” in recent years, which enabled it to restore statutory surplus through retained earnings to a higher level than prior to the 2005 hurricane season.

Furthermore, in 2005 and prior, Allstate had property catastrophe reinsurance protection only in some of the states that experienced significant losses. However, in recent years, Allstate executed an
“extensive catastrophe risk exposure reduction program,” including a
significantly enhanced property catastrophe reinsurance program,
non-renewals, stricter underwriting guidelines, policy transfers, increased deductibles and discontinuance of selected lines of coverage, including earthquakes.

Source: A.M. Best

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