Understanding Allstate’s AM Best Rating

AM Best is the leading credit rating agency focused on the insurance industry. The company provides independent evaluations of insurers’ financial strength and ability to meet policy and contract obligations. AM Best ratings are a trusted benchmark referenced by insurance professionals, regulators, and consumers when assessing an insurance company.

In this article, we’ll take a closer look at AM Best’s rating for Allstate Insurance Group and what it means for consumers.

Overview of AM Best Ratings

AM Best uses a proprietary rating methodology to assess thousands of insurance companies and groups worldwide. Their ratings analyze factors such as:

• Balance sheet strength
• Operating performance
• Business profile
• Enterprise risk management

Based on the analysis, insurers are assigned a Financial Strength Rating (FSR) reflecting ability to pay claims. FSRs range from A++ (Superior) to D (Poor).

Insurers are also given an Issuer Credit Rating (ICR) assessing overall creditworthiness. ICRs range from aaa (Exceptional) to d (Poor).

Higher rated insurers are considered to have superior financial security and claims payment ability. AM Best is a trusted standard referenced by regulators, financial professionals, and consumers.

Allstate’s Current AM Best Ratings

AM Best recently evaluated Allstate Insurance Group subsidiaries and assigned the following ratings:

Financial Strength Rating: A+ (Superior)

Long-Term Issuer Credit Rating: aa- (Superior)

Both ratings have a “stable” outlook, meaning they are unlikely to change in the near term barring significant positive or negative events.

Allstate has maintained its A+ FSR rating since 2009. The ICR was downgraded from aa (Superior) to aa- (Superior) in 2022 based on five-year operating performance trends. However, the high double-A range still indicates strong credit quality.

Overall, Allstate retains AM Best’s confidence in its balance sheet strength, operating success, and ability to pay out future claims.

Understanding Allstate’s Rating Details

Let’s explore aspects of Allstate’s position that factor into its AM Best rating:

Very Strong Balance Sheet

• Total assets of over $140 billion provides scale and resources to pay claims

• High quality investment portfolio lowers risk

• Conservative reinsurance strategies limit per-risk exposure

• Debt leverage ratios better than industry median

Strong Operating Performance

• 10-year average combined ratio of 95.1% outperforms peer average of 98.6%

• Consistent underwriting profitability in both personal and commercial lines

• Capable enterprise risk management framework

Favorable Business Profile

• Ranked #2 U.S. personal lines insurer based on premium

• Broad distribution network of exclusive captive agents and third party channels

• Long-standing brand with over 90 years of market presence

• Product and geographic diversification lowers risk

• Demonstrated ability to retain customers and grow policies-in-force

Prudent Capital Management

• Risk-adjusted capital ratio consistently over 400% of authorized control level

• Liquid assets to liabilities ratio better than industry average

• Financial flexibility supported by strong earnings and additional borrowing capacity

Overall, Allstate exhibits balance sheet strength, operating prowess, a robust market position, and sound capital management qualifying it for high ratings from AM Best.

What the Rating Means for Consumers

AM Best’s A+ rating and aa- issuer credit rating reflect Allstate’s ability to successfully meet obligations to insurance customers. More specifically for consumers, Allstate’s ratings indicate:

• Low risk of insolvency – Allstate has superior financial strength to continue paying claims even under stressed scenarios.

• Strong capacity to pay claims – Extensive capital resources and liquidity provide funds to satisfy policyholder obligations.

• Top-tier status – The rating places Allstate among the highest-rated options for financial security and claims payment ability.

• Peace of mind – Customers can have confidence in Allstate’s ability to deliver on promises when a claim arises.

While not a guarantee of future success, Allstate’s strong AM Best ratings provide assurance the insurer can provide financial security for those it protects.

Rating History and Outlook

AM Best has recognized Allstate with strong ratings for decades reflecting its staying power:

• 1933 – Allstate founded as a subsidiary of Sears

• 1953 – Received inaugural “A” (Excellent) rating from AM Best

• 2009 – Upgraded to current “A+” (Superior) FSR

• 2022 – Affirmed “A+” FSR and revised ICR to aa- (Superior)

Allstate’s ratings have proven resilient, underscored by over 25 years at the A+/A+ levels. The “stable” outlook indicates continued strength is anticipated. However, AM Best will remain attuned to operating trends that may impact the ratings going forward.

How Allstate Compares to Peers

Allstate’s AM Best ratings are consistent with other leading national insurers:

• State Farm: A++ (Superior)

• Farmers: A (Excellent)

• Progressive: A+ (Superior)

• Nationwide: A+ (Superior)

• Liberty Mutual: A (Excellent)

The company ranks comparably to top industry competitors, with State Farm the only U.S. auto and home insurer exceeding Allstate’s A+ rating. Overall, Allstate provides the financial security expected from a premier insurance carrier.

The Importance of AM Best Ratings

As a trusted benchmark in the insurance industry, AM Best ratings provide valuable insight into a company’s financial position and ability to meet obligations to policyholders and claimants. Allstate maintains high ratings reflecting balance sheet strength, operating success, and enterprise risk management.

For insurance consumers, AM Best’s analysis offers added confidence in Allstate’s capacity to deliver resources and support when needed most. While not a perfect guarantee of future results, the ratings signify that customers can depend on Allstate to provide the financial security they expect.