AM Best places Allied World Bermuda units under review with negative implications following Fairfax deal


AM Best has placed Allied World Bermuda-based units under review with negative implications and S&P Global Ratings has placed Switzerland-based Allied World on CreditWatch with negative implications following the acquisition deal with Canada-based Fairfax.

Fairfax Financial Holdings, a property and casualty re/insurer, is acquiring Allied World Assurance Company Holdings for $4.9 billion in cash and stock as the two companies have entered into a merger agreement approved by their boards.

As a result, AM Best has placed under review with negative implications the financial strength rating of A (excellent) of Allied World Assurance Company and its operating subsidiaries domiciled in Bermuda.

The ‘under review with negative implications’ status reflects the execution risks associated with the transaction and he variation between Fairfax’s and Allied World’s credit ratings, AM Best explained.

This status also reflects the risks to Allied World’s ratings should the transaction not close as planned. The closing is subject to regulatory and shareholder approvals and other customary closing conditions.

In addition, S&P placed all of its ratings on Allied World Assurance and its operating companies on CreditWatch with negative implications. The ratings agency argued that as with other Fairfax re/insurance subsidiaries, Allied World would continue to operate independently, with no anticipated revenue or expense synergies.

Allied World’s executives have not entered into any long-term contracts to remain employed with the company, which S&P deems a strongly performing re/insurance group. Therefore, the potential departure of Allied World’s key executives after the transaction closes is a negative rating.

S&P said that it will likely lower the counterparty credit and financial strength ratings on Allied World by one notch to 'A-' to align them with those on Fairfax's core operating subsidiaries.

AM Best, Allied World, Bermuda, Fairfax Financial Holdings, Europe, M&A, Insurance, Reinsurance, Property, Casualty, Ratings, S&P Global Ratings

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