Sept 21 - Fitch Ratings has assigned ratings to Allied World Assurance
Company Holdings, Ltd. (Allied World) as follows:
--Issuer Default Rating (IDR) 'A';
--Senior debt 'A-'.
Fitch has also assigned an 'A+' Insurer Financial Strength (IFS) rating to
Allied World's property/casualty and reinsurance subsidiaries. A full rating
list is shown below. The Rating Outlook is Stable.
Fitch's rating rationale for the assignment of Allied World's rating reflects
the company's history of strong underwriting results, solid level of
capitalization, robust reserve position and high-quality investment portfolio.
Allied World reported an 85.2% combined ratio in the first six months of 2012,
which is in line with the company's strong five-year average combined ratio of
84.5%, but down from 109.6% posted for the first six months of 2011. Results in
2012 have improved largely due to below historical-average levels of catastrophe
losses after results in 2011 were materially impacted by unusually large global
The company generates the vast majority of its earned premium through primary
commercial liability lines business, both domestic U.S. and international with
commercial reinsurance business representing approximately one third of the
company's premium allocation. Allied World also writes property business and is
exposed to the effects of industry-wide catastrophe losses, but to a lesser
extent than its Bermuda peers.
Allied World's shareholders' equity increased by 4.3% to $3.3 billion at June
30, 2012, led by strong first half 2012 net earnings of $315 million, offset
somewhat by $159 million of share repurchase activity during the first half of
Fitch believes that Allied World uses a conservative amount of operating
leverage relative to (re)insurer peers, with net premiums written to total
shareholders' equity averaging 0.46x over the past five years.
Allied World also uses a moderate amount of financial leverage in its capital
structure. At June 30, 2012, debt securities represented approximately 19.6% of
the company's over $4 billion of capital.
The company maintains a high-quality asset portfolio with 76.7% invested in
fixed-income securities with average credit ratings of 'AA-', while maintaining
12.4% of its invested assets in cash and short term assets at June 30, 2012.
Allied World maintains a modest position in higher yielding alternative
investments and equity securities which has grown in recent years but they total
less than 15% of the company's total invested assets.
Allied World reported $81 million of reserve releases in the first half of 2012,
representing 9.8% of year-to-date net earned premium. Allied World has a history
of conservative reserving practices and has benefited from an average of 19.0
percentage points on the combined ratio of favorable reserve development during
the period 2007 and 2011, which is more than double the company's Bermuda peer
average of 9.2 points of benefit from reserve releases during the same period.
Key rating triggers that could result in a downgrade include a material loss of
capital, underwriting results that no longer outperform peers, significant
adverse reserve development, increases in underwriting leverage above a 1.0x net
written premiums-to-equity ratio, financial leverage increasing above 25%, and
catastrophe loss experience that greatly exceeds the company's probable maximum
Key rating triggers that could result in an upgrade include continued favorable
underwriting results in line with higher rated property/casualty (re)insurer
peers. Material improvement in key financial metrics (e.g. net premiums written
to equity) to more overcapitalized levels, and enhanced competitive positioning
while maintaining strong profitability with low earnings volatility.
Fitch assigns the following ratings with a Stable Outlook:
Allied World Assurance Company Holdings, Ltd.
--$500 million 7.50% senior notes due Aug. 1, 2016 'A-';
--$300 million 5.50% senior notes due Nov. 1, 2020 'A-'.
Allied World Assurance Company, Ltd.
Allied World Assurance Company (U.S.) Inc.
Allied World National Assurance Company
Allied World Reinsurance Company
Additional information is available at 'www.fitchratings.com'. The issuer did
not participate in the rating process other than through the medium of its
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Sept. 2012)
Applicable Criteria and Related Research:
Insurance Rating Methodology