Allstate has been hit with a downgraded rating outlook from Fitch Ratings, driven by the global coronavirus pandemic and the uncertainty it creates in the life insurance business.

Fitch said it revised the rating outlook for Allstate and its core insurance subsidiaries to stable from positive as the coronavirus has advanced. The ratings agency blames, in part, the financial market volatility created by coronavirus uncertainty, as well as the resulting plunge in interest rates and “significant” variabilities in stock, bond and derivative prices.

But Allstate has a significant life insurance business as well as its property/casualty insurance operations, and Fitch said life insurance could be particularly problematic as the coronavirus pandemic evolves.

“Life insurers, which include Allstate’s core life insurance subsidiaries, are also exposed to spikes in mortality,” Fitch said in its outlook change announcement. What that means is financial market instability combined with life insurance exposure “will likely create some pressure on earnings and variability in capital in capital levels, the severity and duration of which is impossible to predict at this time,” Fitch said.

At the same time, Fitch affirmed existing ratings for the company, including the “A+” financial strength ratings it has for Allstate and its subsidiaries.

Both actions, according to Fitch, reflect “Allstate’s very favorable business profile with market leading underwriting expertise and significant operating scale, strong risk-based capital position, and very strong financial performance with consistently favorable underwriting margins and operating returns, offset by its higher-than-peer-average allocation to risky investment assets.”

Source: Fitch Ratings

Topics Trends COVID-19 Allstate