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

Concurrently, A.M. Best has affirmed the FSR of A+ (Superior) and ICRs of "aa-" of the key life/health insurance members of the Allstate Financial Companies (Allstate Financial). In addition, A.M. Best has affirmed the debt rating of "aa-" of the remaining outstanding note issued under the funding agreement-backed securities programs of Allstate Financial's lead life company, Allstate Life Insurance Company (Allstate Life). The outlook for the above ratings is stable.

A.M. Best also has upgraded the FSR to A (Excellent) from A- (Excellent) and the ICR to "a" from "a-" of First Colonial Insurance Company (First Colonial) (Jacksonville, FL). The outlook for both ratings has been revised to stable from positive.

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 these 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, improved operating performance and strong business profile with a significant market presence. The group's capital position reflects its improved 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 the second-largest personal lines writer 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 rate adequacy 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 discontinuance of selected lines of coverage, including earthquakes. The group's underwriting results in recent years have benefited from these risk reduction actions and 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%.

In affirming Allstate Financial's ratings, A.M. Best notes that the ratings continue to benefit from the financial strength and support of its immediate parent, Allstate Insurance Company (AIC), as well as Allcorp. The rating affirmations also recognize the benefits Allstate Financial receives from the strong, well-known Allstate brand name as well as the competitive advantages derived from Allstate's exclusive agencies and insurance specialists that provide Allstate Financial with significant cross-selling opportunities.

The current rating actions also reflect Allstate Financial's adequate consolidated stand-alone risk-adjusted capitalization. Additionally, the affirmation of the ratings acknowledges Allstate Financial's positive and diversified GAAP operating performance and improving levels of statutory earnings, which have benefited from the group's strategy to focus on growing its core protection and workplace supplemental health products while continuing to de-emphasize its spread-based products.

Offsetting these positive rating factors are the challenges Allstate Financial faces to sustain and improve its overall operating performance, which remains modest relative to A.M. Best's expectations. Managing its large, but declining, interest sensitive liabilities that remain exposed to interest rate, credit, reinvestment and disintermediation risks add to the challenge.

In conjunction with the affirmation of Allstate Financial's ratings, A.M. Best also has affirmed the FSR of A+ (Superior) and the ICR of "aa-" of Lincoln Benefit Life Company (LBL) (Lincoln, NE). Both ratings remain under review with negative implications. These ratings continue to reflect the pending definitive agreement announced by Allstate in July 2013 to sell LBL to Resolution Life Holdings, Inc. LBL's ratings acknowledge that until the transaction closes, it will continue to reinsure virtually all of its business to Allstate Life.

Positive rating actions for Allstate Financial could result from positive movement in A.M. Best's ratings of AIC. Factors that could result in negative rating actions include negative rating actions taken by A.M. Best on AIC, a material change in A.M. Best's view of Allstate Financial's importance to the enterprise or a significant and sustained decline in its consolidated risk-adjusted capitalization.

The upgrading 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 www.ambest.com/press/013108allstate.pdf.

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.

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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A.M. Best
Michael T. Venezia?P/C, 908-439-2200, ext. 5034
Senior Financial Analyst
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or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
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Steven Faulks?L/H, 908-439-2200, ext. 5035
Senior Financial Analyst
steven.faulks@ambest.com
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Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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