Monday, Fitch Ratings said it downgraded the ratings of Allstate Corp. (ALL) citing deterioration in its investment portfolio and termed its outlook Negative. Fitch also downgraded Allstate's property/casualty and life subsidiaries one notch to 'AA' and 'AA-', respectively.
The Northbrook, Illinois-based property and casualty insurer Allstate on Wednesday reported a net loss of $923 million or $1.71 per share compared to net income of $978 million or $1.70 per share in the prior year period.
During the quarter, Allstate incurred catastrophe losses of $1.82 billion due to calamity events including Hurricane Ike and Gustav. Net realized capital losses for the third quarter were $1.3 billion on a pre-tax basis.
During the first nine month period of 2008 Allstate reported a nearly $5 billion or 22% decrease in stockholders' equity hurt by more than $3 billion in pre-tax realized capital losses and a $6 billion unfavorable shift in pre-tax unrealized gains and losses.
The Negative Rating Outlook reflects Fitch's concerns related to Allstate's investment portfolio and the potential for additional impairments.
Fitch said Allstate's life operations account for a significant portion of the realized and unrealized investment losses. Fitch said more troubled assets reside at the life operation and the relatively modest franchise and capital quality together with the weakened performance of the life operations contribute to its opinion.
Fitch believes that Allstate's property/casualty operations remain strong, however, ratings were effectively pulled down by the underperformance and related support provided to the life insurance operations.
Allstate financial flexibility appears solid as financial leverage remains consistent with the rating category at 25% of total capital. In addition, Allstate's $1 billion bank line remains completely available and the holding company has about $5 billion of cash and securities at September 30, 2008 relative to estimated annual fixed charges of $1.3 billion, Fitch noted.
ALL declined $1.12 or 4.39% and closed Monday's regular trading session at $24.41. After-hours, ALL declined further $1.11 or 4.55% and traded at $23.30.
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