Yesterday, the issuer credit rating (ICR) of
Allied World Assurance Company Holdings AG
) was affirmed at "bbb" by A.M. Best Co. Additionally, the
financial strength rating (FSR) and ICR of subsidiary Allied
World Assurance Company Ltd (Allied Assurance) and its operating
subsidiaries were affirmed by the rating agency at "A" and "a",
While the FSR carries a stable outlook, the ICR of Allied
Assurance has a positive outlook indicating high chances of an
upward revision in the near term. Further, A.M. Best affirmed the
ICR of Allied World Assurance Company Holdings Ltd (Allied World
Holdings Bermuda) and debt ratings on $500 million 7.5% senior
unsecured notes due 2016 and $300 million 5.5% senior unsecured
notes due 2020 at "bbb" with a positive outlook.
The affirmation of Allied Assurance's ratings is based on its
broad business mix, impressive risk-adjusted capitalization and
veteran management. Moreover, the sturdy operating results,
efficient risk management and strategic expansions
(geographically, product-wise and in terms of distribution
channel) have resulted in the positive outlook on the ICR. While
these positive attributes demonstrate the successful
implementation of the company's business plans, they are somewhat
offset by the company's focus on the casualty business, which is
suffering from soft pricing. Nevertheless, this negative factor
also has a silver lining since it protects the company from
substantial exposure to catastrophes.
However, in case Allied Assurance's loss reserves fall short
of the required level and the sustained low interest rates lead
to a fall in investment income, A.M. Best can revise its positive
outlook on the ratings. Conversely, in case the company's
operating results continue to improve, the rating agency can
revise the FSR upwards even if it carries a stable outlook,
indicating low probability of a revision in the near term.
Last month, A.M. Best reiterated the ICR of Allied World's
peer in the property and casualty insurance business -
XL Group plc
) - at "bbb". Concurrently, the rating agency reiterated the FSR
at "A" (Excellent) and ICR at "a" of the property/casualty
subsidiaries of the company.
Allied World carries a Zacks #3 Rank, which translates into a
short-term Hold rating. We have a long-term 'Neutral'
recommendation on the stock.
ALLIED WORLD AS (AWH): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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