A.M. Best Affirms Ratings of Allstate New Jersey Insurance Group and Its Members

A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of “a-” of Allstate New Jersey Insurance Group (Allstate New Jersey) (headquartered in Bridgewater, NJ) and its members. The outlook for all ratings is stable. Allstate New Jersey’s ultimate parent is The Allstate Corporation (Northbrook, IL) [NYSE: ALL]. (See below for a detailed listing of the companies.)

The rating affirmations are based on Allstate New Jersey’s solid risk-adjusted capitalization and generally favorable operating performance. Allstate New Jersey's management has undertaken various actions to enhance its overall profitability since it became the dedicated New Jersey property and casualty carrier for Allstate. The impact of these initiatives has been evident in Allstate New Jersey's historically favorable operating results for most of the past five-year period. Allstate New Jersey's operating performance also has been positively impacted by management's local market knowledge and ability to quickly react to changing market conditions.

Furthermore, private passenger automobile margins have shown improvement due to recent rate activity, new business acceptance criteria and renewal book actions. Allstate New Jersey also has taken steps to improve its homeowners' profitability, including rate increases, targeted customer/property inspections and a reduction in mono-line homeowners’ exposure. The ratings also acknowledge the operational and financial benefits obtained as affiliates of the members of Allstate Insurance Group (Northbrook, IL), which is a market leader in the U.S. insurance industry.

Allstate New Jersey's positive rating factors are somewhat offset by its geographic concentration within one state, which exposes its capitalization and earnings to weather-related losses, competitive pressures and regulatory mandates. This exposure was evident in 2010 as its homeowners’ line of business was adversely impacted by net catastrophe losses totaling approximately $40 million, with an overall combined ratio impact of approximately six points.

The FSR of A- (Excellent) and ICRs of “a-” have been affirmed for Allstate New Jersey Insurance Group and its following members:

Allstate New Jersey Insurance Company
Allstate New Jersey Property and Casualty Insurance Company
Encompass Insurance Company of New Jersey
Encompass Property and Casualty Insurance Company of New Jersey

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Catastrophe Risk Management Incorporated Within the Rating Analysis”; and “Rating Members of Insurance Groups.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, 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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