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 management’s local market knowledge. Allstate New Jersey continues to undertake various actions to enhance its overall operating results since it became the dedicated New Jersey property/casualty carrier for Allstate. In addition, Allstate New Jersey’s operating performance has generally benefited from its 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. The group also has taken steps to improve its homeowners’ business, including rate increases, targeted customer/property inspections and a reduction in mono-line homeowners’ exposure. Additionally, the ratings acknowledge the operational and financial benefits Allstate New Jersey receives as affiliates of Allstate Insurance Company, 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 has been evident in recent years as its homeowners’ line of business was adversely impacted by net catastrophe losses totaling approximately $70 million in 2011 and $40 million in 2010, with an overall combined ratio impact of approximately nine points and six points, respectively. However, to reduce surplus volatility, Allstate New Jersey has not paid dividends since 2007 and maintains a conservative investment portfolio.

While the outlook is stable, the ratings/outlook for the group could be downgraded if underwriting performance falls materially short of A.M. Best’s expectations.

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
Esurance Insurance Company of New Jersey

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. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Catastrophe Analysis in A.M. Best Ratings”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology 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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