Allstate Raising $250 Million for Disaster Protection, S&P Says

Allstate Corp. (ALL), the home and auto insurer that had $359 million of first-quarter costs from catastrophes, plans to obtain $250 million of protection with bonds designed to guard against losses linked to earthquakes and hurricanes, according to Standard & Poor’s.

The firm will buy protection from Sanders Re Ltd., a Bermuda-based special-purpose reinsurance company that plans to issue $100 million of Class A bonds and $150 million of Class B securities due in four years, S&P analysts led by Gary Martucci wrote in an April 19 report. The so-called catastrophe bonds will cover losses linked to hurricanes in states from Alabama to New York as well as earthquake damage in California.

Maryellen Thielen, a spokeswoman at Northbrook, Illinois- based Allstate, didn’t immediately respond to a request for comment on the reinsurance premium the company will pay. The Class A securities will probably be rated BB+(sf), one level below investment-grade, with the Class B notes probably receiving a grade of BB(sf), S&P said.

Similarly rated corporate bonds in the U.S. due in about four years yielded 4.1 percent last week, down from 5.66 percent a year ago, according to Bank of America Merrill Lynch index data. Dollar-denominated catastrophe bonds have returned 4.37 percent this year, exceeding the 3.61 percent delivered by corporate junk debt.

To contact the reporter on this story: Charles Mead in New York at cmead11@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.