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

Business Wire, Jan 9, 2008

OLDWICK, N.J. -- 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 Corporation (Northbrook, IL) (NYSE: ALL). Concurrently, A.M. Best has affirmed the FSRs and ICRs of the life/health member companies of Allstate Financial. A.M. Best also has affirmed the debt ratings of the outstanding notes issued under Allstate Life Insurance Company's (Northbrook, IL) various funding agreement-backed securities (FABS) programs. The outlook for all ratings is stable. (See link below for a detailed listing of the companies and ratings.)

Allstate's superior capital position reflects management's conservative operating philosophy, improved risk management and correspondingly strong balance sheet. Furthermore, management's commitment to capital discipline is reflected in the moderate financial leverage maintained at The Allstate Corporation, as well as the additional liquidity provided at the holding company level through available lines of credit, its Kennett Capital, Inc. investment company, access to capital markets as well as its commercial paper program. 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. The favorable operating performance reflects Allstate's tightened underwriting guidelines, improved risk segmentation, adequate pricing and favorable loss trends. Furthermore, Allstate maintains an outstanding market presence as the second-largest personal lines writer.

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 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. In addition, 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. Nevertheless, 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.

The ratings of the life/health members of Allstate Financial reflect their competitive market position, multi-channel distribution system, diverse earnings profile and effective asset/liability risk management techniques with well integrated investing practices. Partially offsetting the group's strengths are its exposure to interest sensitive lines of business and the challenge to increase cross sales between the property/casualty and life/health operations. Additionally, with Allstate's transition to enterprise risk and capital management, the ratings for the life/health members of Allstate Financial will be more dependent on the financial strength and support of Allstate Insurance Company (Northbrook, IL) and The Allstate Corporation. A.M. Best notes that the risks associated with The Allstate Corporation's property/casualty and life/health businesses are largely uncorrelated and present diversification opportunities.

For a complete listing of The Allstate Corporation's FSRs, ICRs and debt ratings, please visit www.ambest.com/press/010901allstate.pdf.> Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.