A.M. Best Revises Issuer Credit Rating Outlook to Positive for Allied World Assurance Company, Ltd. and Its Operating Affiliates

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has revised the outlook to positive from stable and affirmed the issuer credit ratings (ICR) of “a” of Allied World Assurance Company, Ltd (Allied World) and its operating affiliates. A.M. Best also has affirmed the financial strength rating (FSR) of A (Excellent) of Allied and its affiliates. The outlook for the FSR is stable.

In addition, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of “bbb” as well as the debt ratings of “bbb” on $500 million 7.50% senior unsecured notes due 2016 and on $300 million 5.5% senior unsecured notes due 2020 of Allied World Assurance Company Holdings, Ltd (Allied World Holdings Bermuda).

A.M. Best also has assigned an ICR of “bbb” to the ultimate parent, Allied World Assurance Company HoldingsAG (Switzerland)(NYSE: AWH), which unconditionally and irrevocably guarantees both senior debt issuances of Allied World Holdings Bermuda. The outlook assigned to this rating is positive. All the above companies are domiciled in Bermuda, unless otherwise specified. (See below for a detailed listing of the companies and ratings.)

Allied World is a property/casualty insurer/reinsurer with significant geographic reach. The rating affirmations reflect the company’s diversified mix of business, strong risk-adjusted capitalization and experienced management team. The positive outlook reflects Allied World’s strong operating performance, sound risk management culture and strategic expansions in terms of geography, products and distribution. These positive rating attributes are expected to put the company in a favorable position to successfully execute its business plans.

The breadth of Allied World’s operations has been enhanced while the company has delivered strong results.

Partially offsetting these positive ratings factors is Allied World’s casualty orientation, as 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. Allied World has chosen a targeted business strategy, while taking steps to hone its cycle management capability. However, Allied World’s continued focus on casualty business has helped to limit its exposure to the recent increase in global catastrophes including the New Zealand earthquakes and the Japanese earthquake and tsunami. Allied World appears to have a prudent reserving philosophy, maintaining a significant portion of Incurred But Not Reported reserves. As a result, the company has been able to recognize substantial favorable loss reserve development for several years, which has facilitated strong operating returns through the current soft phase of the casualty market. Accordingly, the revised outlook is long term in nature to allow more recent accident years to mature given the current soft pricing dynamics of the casualty market. Any future shortfall in reserves, combined with a deterioration in investment income resulting from a continuation of lower interest rates, could cause A.M. Best to reconsider its positive outlook on Allied World. If Allied World can sustain its historical results going forward, the company will have demonstrated that it has built a business model, which is well-established to withstand varying market conditions and support a higher FSR.

The FSR of A (Excellent) and ICR of “a” have been affirmed forAllied 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
• Darwin National Assurance Company

• Allied World Assurance Company (Reinsurance) Limited
• Darwin Select Insurance Company

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; “Natural Catastrophe Stress Test Methodology”; “Catastrophe Analysis in A.M. Best Ratings”; “Catastrophe Risk Management Incorporated Within the Rating Analysis”; “Rating Members of Insurance Groups”; and “A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Greg Reisner, 908-439-2200, ext. 5224
Senior Financial Analyst
[email protected]
or
Steven Chirico, CPA, 908-439-2200, ext. 5087
Assistant Vice President
[email protected]
or
Carole Lovell, 908-439-2200, ext. 5445
Public Relations Associate
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Co.