Best Affirms Allied World, Operating Affiliates ‘A’ Ratings; Outlook Stable

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Bermuda-based Allied World Assurance Company, Ltd. and its operating affiliates.

Best also affirmed the ICR of “bbb”, debt rating of “bbb” on $500 million 7.50 percent senior unsecured notes due 2016 and the indicative ratings of Allied World Assurance Company Holdings, Ltd. (AWH). The outlook for all of the ratings is stable.

“Allied World is a diversified property/casualty insurer/reinsurer with significant geographic reach,” Best explained. The rating affirmations reflect the company’s “strong risk-adjusted capitalization, experienced management team and historically strong operating performance.

“During the last couple of years, Allied World has strategically expanded its presence in select regions and has been able to acquire teams of underwriters to deepen its talent base. The breadth of Allied World’s operations has been enhanced while the company has delivered strong results.”

As offsetting factors Best cited Allied World’s “casualty orientation, when pricing for this class of business is particularly soft at this stage of the market cycle. Many of Allied World’s peers have chosen to modify their business mix toward shorter-tail property business. However, Allied World has chosen a targeted business strategy, while taking steps to hone its cycle management capability.”

Best added that while Allied World has a “prudent reserving philosophy and has been able to recognize substantial favorable loss reserve development for several years, it is difficult to assess the quality and price adequacy of the current business being written.

“As a result, there is greater uncertainty with regard to the company’s ability to sustain its historically excellent level of underwriting and overall profitability. If Allied World can sustain its historical results going forward, it will demonstrate that it has built a business model, which is well-established to withstand varying market conditions.

Best summarized its rating actions as follows:
The FSR of A (Excellent) and ICRs of “a” have been affirmed for Allied World Assurance Company, Ltd and its following operating affiliates:
— Allied World Assurance Company (U.S.) Inc.
— Allied World National Assurance Company
— Allied World Reinsurance Company
— Allied World Assurance Company (Europe) Limited
— Allied World Assurance Company (Reinsurance) Limited
— Darwin Select Insurance Company
— Darwin National Assurance Company

The following indicative ratings have been affirmed for securities available under the shelf registration:
Allied World Assurance Company Holdings, Ltd—
— “bbb” on senior unsecured
— “bbb-” on subordinated
— “bb+” on preferred stock

Source: A.M. Best