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Allied World on A.M. Best Radar After Merger Announcement

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Allied World Assurance Company Holdings, AGAWH and its units' credit ratings were recently put under review by credit rating giant, A.M. Best, with negative implications. The rating agency has placed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "a+" of Allied Word Assurance Company, Ltd. and its operating affiliates under review with negative implications.

Concurrently, the credit rating giant put the Long-Term ICRs of "bbb+" of Allied World under review with negative implications. Moreover, Allied World Assurance Company Holdings, Ltd.'s Long-Term ICRs and Long-Term Issue Credit Rating (Long-Term IR) of "bbb+" have been put under review with negative implications by the rating agency.

The rating actions came following the merger agreement between Fairfax Financial Holdings Limited and Allied World. Per the terms of the agreement, Fairfax Financial is set to acquire all outstanding registered ordinary shares of Allied World. The purchase consideration of $4.9 billion or $54.00 per share consists of $10.00 in cash and $44.00 in Fairfax Financial shares. The rating agency's "under review with negative implications" status represents the execution risks concerning the buyout, and the difference between the credit ratings of Fairfax Financial and Allied World. Also, the status reflects the risks to the Zacks Rank #4 (Sell) property and casualty insurer's ratings if the deal does not progress according to schedule. The transaction, which is pending approvals, is expected culminate in the first half of 2017.

The credit rating giant will continue to track the progress and current performance of both Fairfax Financial and Allied World and asses the developments and implications. This, in turn, can influence the ratings.

Notably, Allied World's shares gained 42.5%, comfortably outperforming the Zacks categorized Property and Casualty insurance industry's growth of 22.5%, year to date. Solid improvement in the top line and the bottom line resulted in the outperformance. Robust investment income and decline in total expenses were particularly responsible for the outperformance.

Stocks to Consider

Some better-ranked stocks from the same space include Alleghany Corporation Y , NMI Holdings, Inc. NMIH and Arch Capital Group Ltd. ACGL . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Alleghany Corporation deals with P&C reinsurance and insurance businesses in the U.S. and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 20.52%.

NMI Holdings offers private mortgage guaranty insurance services in the U.S. The company delivered positive surprises in all of the last four quarters with an average beat of 62.80%.

Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It delivered positive surprises in all of the last four quarters with an average beat of 9.27%.

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ALLIED WORLD AS (AWH): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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