--Issuer Default Rating (IDR) at 'A-';
--Senior debt at 'BBB+'.
Fitch has also affirmed the ratings for Alleghany's wholly owned subsidiary,
--IDR at 'A-';
--Senior debt at 'BBB+'.
In addition, Fitch has affirmed the 'A+' Insurer Financial Strength (IFS) rating for Transatlantic's property/casualty reinsurance subsidiaries and the 'A' IFS rating for
The Rating Outlook is Stable.
A complete list of ratings follows at the end of this release.
KEY RATING DRIVERS
Fitch's affirmation of Alleghany's ratings reflects the company's strong earnings, conservative capitalization, modest financial leverage, strong fixed charge coverage, and favorable financial flexibility. These positive factors are partially offset by exposure to possible adverse reserve development due to the relatively large portion of loss reserves related to casualty lines as well as Fitch's negative sector outlook on global reinsurance.
Alleghany posted net income of
Alleghany reported a nine-month 2016 consolidated combined ratio of 92%, which included 4.3 points for catastrophe losses and 7.1 points of favorable reserve development. This is up from 89.3% for the first nine months of 2015, which included lower catastrophe losses of 1.7 points and reduced favorable reserve development of 4.8 points. Alleghany continues to report reasonable underlying run-rate accident-year combined ratios normalized for average catastrophes in the mid-90s.
Transatlantic posted a combined ratio of 93.9% for the first nine months of 2016, which included 4.1 points of catastrophe losses and 7.4 points of reserve releases.
Transatlantic recently entered into a five-year agreement with
Fitch believes Alleghany utilizes a reasonable amount of operating leverage comparable to (re)insurer peers, with statutory NPW to policyholders' surplus in 2015 of approximately 0.6x in both its reinsurance operations and insurance operations. Total GAAP stockholders' equity of
Alleghany's financial leverage ratio was reasonable for the rating category at 14.9% as of
Alleghany maintained a beneficial amount of holding company cash and marketable securities of
Key rating triggers that could result in a downgrade include significant adverse loss reserve development; movement to materially below-average underwriting or operating performance; sizable deterioration in subsidiary capitalization that caused net written premiums-to-surplus to exceed 1.0x for reinsurance operations and 1.2x for insurance operations; financial leverage maintained above 25%; run-rate operating earnings-based interest and preferred dividend coverage of less than 7x; significant acquisitions that reduce the company's financial flexibility; and a substantial decline in the holding company's cash position.
Key rating triggers that could lead to an upgrade include continued favorable underwriting results in line with higher rated property/casualty (P/C) (re)insurer peers and enhanced competitive positioning into a larger market position and size/scale while maintaining strong profitability with low earnings volatility. In addition, the ratings of its subsidiary,
FULL LIST OF RATING ACTIONS
Fitch has affirmed the following ratings with a Stable Outlook:
--Long-term IDR at 'A-';
--Long-term IDR at 'A-';
--IFS at 'A+'.
--IFS at 'A'.
The Rating Outlook is Stable
Additional information is available on www.fitchratings.com
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Source: Fitch Ratings