Allied ratings boost from Moody’s

Moody’s Investors Services has upgraded the insurance financial strength (IFS) ratings of Allied World’s insurance subsidiaries from A3 to A2, including Bermuda-headquartered Allied World Assurance Company Holdings. It also affirmed Allied World Assurance Company Holdings’ Baa2 senior debt rating.

The outlook for the ratings is stable.

The ratings agency said the upgrade reflected the group’s significantly improved underwriting performance over the past several years, improved capital adequacy, and “meaningful reduction in catastrophe exposures”.

“Allied World maintains a diversified mix of specialty insurance and reinsurance businesses, which enables the company to opportunistically shift its business as underwriting cycles change,” it noted.

However, it added that this was tempered by potential volatility from long-duration casualty reserves, “significant earnings volatility due to catastrophe losses”, and exposure to high-risk investments. High financial leverage at Fairfax Financial, Allied’s owners, as also a factor, it added.

The stable outlook reflects Moody’s expectation that the re/insurer would maintain good underwriting discipline and solid capitalization, it added.

For the first nine months of 2021, Allied World reported operating income of $238 million, compared to $218m in the same period of 2020, primarily driven by lower natural catastrophe losses. Its combined ratio improved to 94.5% for the period,  down from 95.2%. “Moody’s expects Allied World’s underlying combined ratio, which excludes catastrophes and reserve development, will remain strong as a result of solid pricing increases as well as underwriting and expense discipline,” the agency stated.