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Allstate's Notes Get a- Rating

Zacks Equity Research

Credit ratings agency A.M. Best Co. has assigned “a–” debt rating to The Allstate Corporation’s (ALL) newly-issued $1 billion debt offerings. Additionally, A.M. Best allotted a “bbb” debt rating to the $287.5 million non-cumulative perpetual preferred stock issued by Allstate. All the above ratings carried a stable outlook.

Allstate had recently issued 3.5% fixed senior unsecured notes worth $500 million and 4.5% fixed senior unsecured notes worth $500 million with maturity scheduled in 2023 and 2043, respectively.

The proceeds from the issuances will be used to retire partially outstanding debt worth approximately $3 billion related to Allcorp’s capital restructuring plans announced in May 2013 and for general corporate purposes. This $3 billion includes the $1.8 billion principal amount of bonds tendered, repayment of $250 million of senior notes in Jun 2013, and the pre-funding of senior notes worth $950 million that are scheduled to mature in 2014.

To fund the capital management plan, Allstate also issued short-term debt in the form of commercial paper during the current quarter. The company expects to complete the remaining funding through the rest of 2013 subject to market conditions.
Earlier this month, Fitch ratings asserted the debt and credit ratings of Allstate and assigned “BBB+” rating on the $1 billion notes. The ratings reflect Fitch’s confidence in Allstate’s debt refinancing activities, which are expected to improve the financial leverage. The set of notes also carry a rating of “A3” from Moody’s Investor Service of Moody’s Corp (MCO).

Allstate currently carries a Zacks Rank #3 (Hold). Among others in the industry, both American Safety Insurance Holdings Ltd (ASI) and Markel Corporation (MKL) carry a favorable Zacks Rank #1 (Strong Buy) and appear impressive.

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