AM Best Upgrades Issuer Credit Ratings of Fairfax Financial Holdings Limited, Its Subsidiaries and Allied World Assurance Company Holdings, Ltd.

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has upgraded the Long-Term Issuer Credit Rating (Long- Term ICR) to “bbb+” (Good) from “bbb” (Good) and the Long-Term Issue Credit Ratings (Long-Term IR) on the unsecured debt and preferred equity of Fairfax Financial Holdings Limited (Fairfax) (Toronto, Canada). In addition, AM Best has upgraded the Long-Term ICRs to “bbb+” (Good) from “bbb” (Good) and the Long-Term IRs of Zenith National Insurance Corp. (headquartered in Woodland Hills, CA) and Fairfax (US) Inc. (Delaware), both of which are indirectly, wholly owned downstream holding companies of Fairfax. The outlook of these Credit Ratings (ratings) has been revised to stable from positive. (See below for a detailed listing of Long-Term IRs.)

At the same time, AM Best has upgraded the Long-Term ICR to “a+” Excellent) from “a” (Excellent) and affirmed the Financial Strength Rating (FSR) of A (Excellent) of Allied World Assurance Company Holdings, Ltd.’s (Bermuda) (Allied World Holdings) operating affiliates (collectively referred to as Allied World or the group). Concurrently, AM Best has upgraded the Long-Term ICRs to “bbb+” (Good) from “bbb” (Good) of Allied World Holdings and its downstream holding company, Allied World Assurance Company Holdings I, Ltd (Bermuda). AM Best also has upgraded the Long-Term IR to “bbb+” (Good) from “bbb” (Good) on the $500 million, 4.35% senior unsecured notes of Allied World Assurance Company Holdings I, Ltd, due 2025, which are unconditionally and irrevocably guaranteed by Allied World Holdings. The outlook of these ratings is stable. (See below for a detailed listing of the companies and ratings.)

The Long-Term ICR upgrade for Fairfax reflects its ability to limit investment volatility through year-end 2022, and the prospective earnings outlook from deploying substantial cash into higher yielding debt instruments. Fairfax has benefited from solid underlying returns among its core operating subsidiaries in recent years, despite elevated catastrophic losses in the North American market. Furthermore, due to its relatively low duration and strong cash position at year-end 2021, Fairfax’s unrealized losses from the market turmoil in 2022 were materially less than peer averages. The upgrade also considers that Fairfax’s financial leverage has improved materially compared with historically higher levels and has been consistently maintained at levels largely in line with comparably rated peers in recent years. AM Best expects that Fairfax will continue to maintain financial leverage at or near current levels going forward. The group’s capital position should continue to improve over time, as it benefits from higher levels of dividend and interest incomes, which should further reduce the group’s reliance on external debt.

The ratings of Allied World reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The upgrading of Allied World group’s Long-Term ICRs follow AM Best’s recognition of implicit support provided by Fairfax to Allied World, which represents roughly one quarter of Fairfax’s overall gross written premiums and has been a steady contributor to Fairfax’s earnings over the last five years. The ratings of Allied World benefit from the favorable financial flexibility and significant levels of cash and marketable securities held at the ultimate holding company level. In addition, the members of the group benefit from shared resources including ERM, reinsurance, actuarial, talent and investment management among other less quantifiable benefits, such as best practices and capital management.

Furthermore, AM Best notes that Allied World’s operating performance has been on a steadily positive trajectory for the last five years, reflecting broad rate improvement across many of the company’s key business lines, as well as changes in underwriting strategy. Notably, the company has reduced its catastrophe exposure, which has reduced volatility. AM Best expects that Allied World’s risk-adjusted capitalization as measured by the Best’s Capital Adequacy Ratio (BCAR) will continue to be supportive of the overall balance sheet assessment, supported by capital growth from operating earnings and supplemented by an eventual recovery of equity and fixed income markets prices over time.

The Long-Term ICRs have been upgraded to “a+” (Excellent) from “a” (Excellent) and the FSR of A (Excellent) affirmed with stable outlooks for the following operating subsidiaries of Allied World Assurance Company Holdings, Ltd:

• Vantapro Specialty Insurance Company

• Allied World Assurance Company, Ltd

• Allied World Surplus Lines Insurance Company
• Allied World Assurance Company (U.S.) Inc.

• Allied World National Assurance Company

• Allied World Specialty Insurance Company

• Allied World Insurance Company

• Allied World Assurance Company (Europe) Designated Activity Company

The following Long-Term IRs have been upgraded with the outlooks revised to stable from positive:

Fairfax (US) Inc.—

-- to “bbb+” (Good) from “bbb” (Good) on USD 300 million 4.875% senior unsecured notes, due 2024

Zenith National Insurance Corp.—

-- to “bbb” (Good) from “bbb-” (Good) on USD 77.3 million 8.55% subordinated deferrable debentures, due 2028

Fairfax Financial Holdings Limited—

-- to “bbb+” (Good) from “bbb” (Good) on CAD 350 million 4.95% senior unsecured notes, due 2025

-- to “bbb+” (Good) from “bbb” (Good) on USD 125 million 8.3% senior unsecured notes, due 2026

-- to “bbb+” (Good) from “bbb” (Good) on CAD 450 million 4.7% senior unsecured notes, due 2026

-- to “bbb+” (Good) from “bbb” (Good) on CAD 650 million 4.25% senior unsecured notes, due 2027

-- to “bbb+” (Good) from “bbb” (Good) on EUR 750 million 2.75% senior unsecured notes, due 2028

-- to “bbb+” (Good) from “bbb” (Good) on USD 600 million 4.85% senior unsecured notes, due 2028

-- to “bbb+” (Good) from “bbb” (Good) on CAD 500 million 4.23% senior unsecured notes, due 2029

-- to “bbb+” (Good) from “bbb” (Good) on USD 650 million 4.625% senior unsecured notes, due 2030

-- to “bbb+” (Good) from “bbb” (Good) on USD 600 million 3.375% senior unsecured notes, due 2031

-- to “bbb+” (Good) from “bbb” (Good) on CAD 850 million 3.95% senior unsecured notes, due 2031

-- to “bbb+” (Good) from “bbb” (Good) on USD 750 million 5.625 % senior unsecured notes, due 2032

-- to “bbb+” (Good) from “bbb” (Good) on USD 125 million 7.75% senior unsecured notes, due 2037

-- to “bbb-” (Good) from “bb+” (Fair) on CAD 187.9 million Series C cumulative, five-year rate reset preferred shares

-- to “bbb-” (Good) from “bb+” (Fair) on CAD 62.1 million Series D cumulative, floating rate preferred shares

-- to “bbb-” (Good) from “bb+” (Fair) on CAD 136.0 million Series E cumulative, five-year rate reset preferred shares

-- to “bbb-” (Good) from “bb+” (Fair) on CAD 52.5 million Series F cumulative, floating rate preferred shares

-- to “bbb-” (Good) from “bb+” (Fair) on CAD 193.0 million Series G cumulative, five-year rate reset preferred shares

-- to “bbb-” (Good) from “bb+” (Fair) on CAD 57.0 million Series H cumulative, floating rate preferred shares

-- to “bbb-” (Good) from “bb+” (Fair) on CAD 260.5 million Series I cumulative, five-year rate reset preferred shares

-- to “bbb-” (Good) from “bb+” (Fair) on CAD 39.5 million Series J cumulative, floating rate preferred shares

-- to “bbb-” Good) from “bb+” (Fair) on CAD 237.5 million Series K cumulative, five-year rate reset preferred shares

-- to “bbb-” (Good) from “bb+” (Fair) on CAD 230 million Series M cumulative, five-year rate reset preferred shares

The following indicative Long-Term IRs on securities available on the universal shelf registration have been upgraded with the outlooks revised to stable from positive:

Fairfax Financial Holdings Limited—

-- to “bbb+” (Good) from “bbb” (Good) on senior unsecured debt

-- to “bbb” (Good) from “bbb-” (Good) on subordinated debt

-- to “bbb-” (Good) from “bb+” (Fair) on preferred shares

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 Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Dan Hofmeister, CFA, FRM, CAIA

Senior Financial Analyst

+1 908 439 2200, ext. 5385

dan.hofmeister@ambest.com

Christopher Sharkey
Associate Director, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Guilherme Monteiro Simoes, CFA

Senior Financial Analyst

+1 908 439 2200, ext. 5301

guy.simoes@ambest.com

Al Slavin
Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Gregory Dickerson Director

+1 908 439 2200, ext. 5161

gregory.dickerson@ambest.com

Source: AM Best