OREANDA-NEWS. Fitch Ratings has affirmed the ratings for Allied World Assurance Company Holdings, Ltd (Allied World) as follows:

--Issuer Default Rating (IDR) at 'A-';
--Senior debt at 'BBB+'.

Fitch has also affirmed the 'A+' Insurer Financial Strength (IFS) ratings of Allied World's property/casualty and reinsurance subsidiaries. A full list of ratings follows at the end of this release.

The Rating Outlook is Stable.

KEY RATING DRIVERS

Fitch's affirmation of Allied World's ratings reflects the company's consistently strong underwriting profitability, solid capitalization, and well-managed reserve risk. The ratings also reflect potential volatility from large catastrophe-related events, recent significant growth rate in primary premiums, offset somewhat by decreases in the reinsurance portfolio, potential adverse development due to the relatively large proportion of its reserves derived from longer duration casualty lines of business, and allocation to higher yielding alternative investments.

In addition, the ratings reflect Fitch's negative sector outlook on global reinsurance, as the fundamentals of the reinsurance sector have deteriorated with declining premium pricing and weakening of terms and conditions, particularly for property catastrophe risk. This is leading to consolidation in the reinsurance sector as companies aim to enhance their relative competitive positions.

AWH's market position and size/scale is characterized as 'Medium' by Fitch when measured by net written premium and equity. Allied World maintains a unique portfolio of business lines relative to its Bermuda peers and includes a mix of primary insurance and reinsurance business.

Allied World reported 12.7% growth in North American Insurance net premiums written (NPW) in the first nine months of 2015, particularly in its Casualty book of business. Increases in NPW in the Global Markets Insurance segment were largely a result of the inclusion of premium from the acquisition of the Hong Kong and Singapore operations of Royal & Sun Alliance Insurance Plc. (RSA) into Allied World's results in 2015. Premium increases were largely offset however with a 13.4% decrease in reinsurance NPW. Total growth in net premiums written at 9M 2015 was limited to 4.7%.

Allied World's underwriting ratios deteriorated modestly during the first nine months of 2015 as Allied World reported a combined ratio of 94.6%, including 3.2 percentage points from catastrophe related losses and 5.0 points of favorable reserve development. Each of the major reporting segments, North American Insurance, Global Markets Insurance and Reinsurance reported higher combined ratios relative to the prior year.

Allied World reported decreased net earnings of $82 million through nine-months 2015, generating an annualized net return on equity of 3.0%. The decline in earnings was largely the result of $113 million of mark-to-market losses in the company's investment portfolio during the year that the company reports through the income statement, compared to $5.6 million of mark to market gains in the prior year period.

Pre-tax operating earnings covered fixed charges declined to 5.0x through the first nine months of 2015 down from the prior five-year average from 2010 - 2014 of 7.6x.

Allied World benefited from $94 million of reserve releases reported through the first nine months of 2015, representing 5.0% of net earned premium, down from 8.8% in the prior year.

Fitch views Allied World's capitalization as strong, with metrics such as GAAP operating (net premiums written-to-total shareholders' equity) at median guidelines for the 'AA' rating category. Allied World has historically used a conservative amount of operating leverage relative to (re)insurer peers, averaging 0.54x in the five years between 2010 - 2014.

Total shareholders' equity decreased by 5.9% to $3.6 billion at Sep. 30, 2015, as modest positive net earnings were offset by $245 million of share repurchase activity during the first nine months of the year.

Allied World increased the amount of financial leverage in its capital structure in October 2015, as the company issued $500 million of 4.35% senior debt due 2025 and will use the 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 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%.

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

FULL LIST OF RATING ACTIONS

Fitch affirms the following ratings:

Allied World Assurance Company Holdings, Ltd
--IDR at 'A-';
--$500 million 7.50% senior notes due Aug. 1, 2016 at 'BBB+';
--$300 million 5.50% senior notes due Nov. 1, 2020 at 'BBB+';
--$500 million 4.35% senior notes due Oct. 29, 2025 at 'BBB+';

Allied World Assurance Company, Ltd
Allied World Assurance Company (U.S.) Inc
Allied World National Assurance Company
Allied World Insurance Company
--IFS at 'A+'

The Rating Outlook is Stable.