Fitch Rates Allied World's $500MM Debt Offering 'BBB+'

CHICAGO--()--Fitch Ratings has assigned a 'BBB+' debt rating to Allied World Assurance Company Holdings, Ltd's (Allied World) new $500 million issuance of 4.35% senior debt due 2025.

KEY RATING DRIVERS

Allied World expects to use the net proceeds from the offering for the repayment, upon maturity, of the company's outstanding $500 million 7.50% senior notes due Aug. 1, 2016.

Allied World's reported financial leverage as of Sept. 30, 2015, was 18.8%. Pro forma financial leverage as of Sept. 30, 2015 including the additional debt is 27.1%, which exceeds Fitch's rating trigger for the current rating level. Once the notes that mature in 2016 are repaid, leverage is expected to return below 25%.

Reported interest coverage was 5.0 times (x) through Sept. 30, 2015 with a five-year average from 2010-2014 of 7.6x. Fitch believes that with the additional debt interest coverage will be modestly lower over the near term.

RATING SENSITIVITIES

Key rating triggers that could result in a downgrade include:

--Deterioration in reinsurance sector fundamentals or consolidation in the reinsurance landscape that Fitch viewed as weakening Allied World's competitive position, operating profile or overall profitability;

--Failure to maintain a multi-year average calendar-year combined ratio of 100% or better;

--Growth in premiums considerably greater than peers;

--Significant adverse reserve development;

--Material loss of capital that leads to an increase in underwriting leverage above a 1.0x net written premiums-to-equity ratio or financial leverage increasing above 25%;

--Catastrophe loss experience that greatly exceeds the company's probable maximum loss estimates.

Key rating triggers that could lead to an upgrade include:

--Enhanced scale and relative competitive position with maintenance of current operating performance in the challenging reinsurance environment;

--Material improvement in key financial metrics (e.g. net premiums written to equity) to more overcapitalized levels;

--Underwriting results and returns on capital in line with higher rated property/casualty (re)insurer peers.

FULL LIST OF RATING ACTIONS

Fitch has assigned a 'BBB+' to the following debt issue:

Allied World Assurance Company Holdings, Ltd

--$500 million 4.35% senior notes due Oct. 29, 2025.

Additional information is available on www.fitchratings.com.

Applicable Criteria

Insurance Rating Methodology (pub. 16 Sep. 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871172

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=993233

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=993233

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Christopher A. Grimes, CFA, +1-312-368-3263
Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Brian C. Schneider, CPA, CPCU, ARe, +1-312-606-2321
Senior Director
or
Committee Chairperson
Julie A. Burke, CPA, CFA, +1-312-368-3158
Managing Director
or
Media Relations
Hannah James, New York, +1-646-582-4947
hannah.james@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Christopher A. Grimes, CFA, +1-312-368-3263
Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Brian C. Schneider, CPA, CPCU, ARe, +1-312-606-2321
Senior Director
or
Committee Chairperson
Julie A. Burke, CPA, CFA, +1-312-368-3158
Managing Director
or
Media Relations
Hannah James, New York, +1-646-582-4947
hannah.james@fitchratings.com