Moody's downgrades Allstate

Moody's Investors Service said it downgraded Allstate Corp.'s senior debt to A2 from A1 and subordinated debt to A3 from A2. The secured senior debt of Allstate Financial Global Funding, LLC, Allstate Financial Global Funding II, Allstate Life Funding LLC and Allstate Life Global Funding Trusts was lowered to Aa3 from Aa2, and Allstate's short-term debt was affirmed at Prime-1.

This concludes the review for possible downgrade begun on July 25, and the outlook is negative.

The agency said the downgrade was based on the weakening of the company's intrinsic credit profile as a result of continuing asset deterioration and rising losses since January 2008 and on Moody's expectation that Allstate Life Insurance Co. and its life insurance subsidiaries will continue to place greater emphasis on asset returns and on capital optimization, resulting in higher levels of investment risk, weaker capital adequacy and greater earnings volatility.

The downgrade of Allstate's debt ratings is based on anticipated reductions in the liquidity levels maintained at Allstate and its unregulated subsidiary, Kennett Capital Inc., reflecting stresses at downstream operating companies, particularly to cover significant investment losses at Allstate Life Insurance, the agency said.

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