AM Best Downgrades Issuer Credit Ratings and Affirms Financial Strength Rating of Allied World Assurance Company, Ltd and Its Subsidiaries

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has downgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a” from “a+” and affirmed the Financial Strength Rating (FSR) of A (Excellent) of Allied World Assurance Company, Ltd (Allied World) (Bermuda) and its operating affiliates.

Concurrently, AM Best has downgraded the Long-Term ICR to “bbb” from “bbb+” of the ultimate parent, Allied World Assurance Company Holdings, GmbH (formerly known as Allied World Assurance Company Holdings, AG) (Switzerland), and its downstream holding company, Allied World Assurance Company Holdings, Ltd (Allied World Holdings Bermuda) (Bermuda). AM Best also has downgraded the Long-Term Issue Credit Rating (Long-Term IR) to “bbb” from “bbb+” of Allied World Holdings Bermuda. The outlook of all of these Credit Ratings (ratings) remains stable.

The ratings of Allied World reflect the group’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The Long-Term ICR downgrade reflects erosion in the group’s commercial casualty profitability, which, over the past several years, has been subject to deteriorating loss ratio levels and adverse reserve development patterns. The commercial casualty market remains very competitive. While rate increases have been achieved and continue to be pursued, the sufficiency of that action has not yet been demonstrated conclusively. Additionally, property losses have impacted underwriting performance over the same time period. While the volatility related to property losses have primarily impacted earnings, the losses in 2017 resulted in a reduction to capital. Changes have been made in the group’s reinsurance structure to mitigate the impact of future catastrophe losses on its capital position.

The group’s risk-adjusted capital is supportive of its current loss reserve position, which has shown some variability in recent accident years; premium growth; and catastrophe loss exposure.

Additionally, Allied World benefits from being part of Fairfax Financial Holdings Limited’s diversified business platform, decentralized yet collaborative business practices, and fungible and strong capital position.

The group maintains a neutral business profile. Over the past few years, the group has reduced its reinsurance premiums in response to competitive market conditions. Growth has continued on the direct casualty business, more than offsetting the decline in the reinsurance segment. While this growth has diversified the group’s exposures, the benefit of the diversification has been limited by competitive market conditions and challenges in achieving adequate rate levels. The group is well-diversified geographically with a global market presence.

Allied World maintains a comprehensive risk management program, which is viewed as appropriate for the complexity of its operations.

The Long-Term ICR has been downgraded to “a” from “a+” and the FSR of A (Excellent) affirmed of the following operating subsidiaries of Allied World Assurance Company Holdings, GmbH, with a stable outlook:

Vantapro Specialty Insurance Company
Allied World Assurance Company, Ltd
Allied World Surplus Lines Insurance Company
Allied World Assurance Company (US) Inc.
Allied World National Assurance Company
Allied World Specialty Insurance Company
Allied World Insurance Company
Allied World Assurance (Europe) Designated Activity Company
Vault E&S Insurance Company

The following Long-Term IR has been downgraded with a stable outlook for Allied World Assurance Company Holdings, Ltd:

-- to “bbb” from “bbb+” on $500 million 4.35% senior unsecured notes, due 2025 (all notes are unconditionally and irrevocably guaranteed by AWH)

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.