Recently, A.M. Best Co. affirmed the financial strength rating (FSR) of Allstate New Jersey Insurance Group – a subsidiary of Allstate Corporation (ALL - Analyst Report) – at “A-” and its issuer credit ratings (ICR) at “a-." Both ratings carry a stable outlook.
Allstate New Jersey’s sufficient adequate risk-adjusted capitalization and management’s understanding of the local market prompted A.M. Best to affirm the ratings. Moreover, the company is constantly striving to boost its operating results. The company’s proficiency in adapting to the changing market conditions helps it achieve this aim.
Moreover, the recent rate changes, new criteria for business acceptance and changes in the renewal books have boosted the margins in Allstate New Jersey’s private passenger automobile business. Further, the company is aiming at improving its homeowners’ business line and bringing pricing at par with risk through various actions such as rate increases, targeted inspections of clients and properties and cutback in exposure to mono-line homeowners.
A.M. Best’s ratings also consider the operational and financial advantages received by Allstate New Jersey as a result of being a subsidiary of a leading U.S. insurance company. However, these positive attributes are partially offset by a few negatives, the most prominent being the lack of geographic diversification.
The company has operations solely in N.J., which increases the catastrophe loss risk in case of adverse weather-related events in the state. The geographic concentration also exposes the company to significant competition and regulatory requirements.
In order to deal with this volatility, Allstate New Jersey did not pay dividends in the past few years and has tried to maintain moderate risk in its investment portfolio. While the stable outlook on the ratings indicates a low possibility of rating change in the near future, A.M. Best can downgrade the ratings if the underwriting performance and capitalization levels deteriorate significantly below expectation.
Allstate New Jersey manages Allstate’s entire New Jersey property and casualty business. It is the holding company for 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 and Esurance Insurance Company of New Jersey.
Allstate currently carries a Zacks Rank #2 (Buy). Other property and casualty insurers worth considering are AmTrust Financial Services, Inc. (AFSI - Snapshot Report), Fidelity National Financial, Inc. (FNF - Snapshot Report) and Cincinnati Financial Corp. (CINF - Analyst Report). All these companies carry a Zacks Rank #1 (Strong Buy).