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Rating Action:

Moody's affirms Alleghany Corporation’s ratings (Baa1 senior), stable outlook

14 January 2020

New York , January 14, 2020 – Moody's Investors Service ("Moody's") has affirmed the Baa1 senior debt and long-term issuer ratings of Alleghany Corporation (Alleghany, NYSE: Y) and the A1 insurance financial strength (IFS) rating of Transatlantic Reinsurance Company (TransRe). In the same rating action, Moody's has affirmed the A2 IFS ratings of RSUI Indemnity Company and Landmark American Insurance Company (collectively, RSUI), the principal operating companies of Alleghany Property and Casualty Insurance Group. Refer to list below for all ratings impacted by this action. The outlook for the ratings is stable.

RATINGS RATIONALE

Alleghany Corporation/TransRe

According to Moody's, the rating affirmation of Alleghany reflects the group's strong competitive position as a leading global broker-market reinsurer and its long-standing track record in the primary US excess and surplus (E&S) market, strong capital adequacy, conservative financial leverage and very good holding company liquidity. These strengths are tempered by the group's significant exposure to natural and manmade catastrophes, potential reserve volatility given its sizable presence in the medium to long-tail casualty lines, and earnings volatility from catastrophe losses.

For the first nine months of 2019, Alleghany reported net income of $826 million, compared to net income of $752 million for the prior year period, largely driven by higher investment income and improved underwriting results. The consolidated combined ratio for Alleghany improved to 94.3% for the first nine months of 2019 compared to 97.6% in the prior year period, largely attributed to improved pricing and lower catastrophes, offset by lower reserve releases. Alleghany maintains strong holding company liquidity and conservative financial leverage (less than 20%). In addition, Alleghany Capital owns several private equity interests in various non-insurance operations that could provide increasing unregulated cash flows to the parent over time.

Alleghany's Baa1 senior debt rating is three notches below TransRe's A1 insurance financial strength rating reflecting our standard notching for the US insurance holding companies.

Factors that could lead to an upgrade of Alleghany's or TransRe's ratings include: 1) a material improvement in competitive position of TransRe in line with higher rated global reinsurance peers such as Munich Re and Swiss Re; 2) reduced catastrophe risk at the consolidated level as well as at TransRe relative to shareholders' equity; 3) sustained strong earnings relative to peers; 4) financial leverage maintained below 15%.

Factors that could lead to a downgrade of Alleghany's or TransRe's ratings include: 1) material increase in aggregate catastrophe exposures relative to capital at Alleghany and TransRe; 2) sustained weaker earnings relative to peers; 3) decline in shareholders' equity by more than 10% over a twelve-month period; 4) material adverse reserve development at TransRe.

RSUI

According to Moody's, the rating affirmation of RSUI reflects its strong competitive position in the US E&S insurance markets, solid track record of delivering superior underwriting profitability, and good and stable capital adequacy. These strengths are tempered by RSUI's significant exposure to natural and manmade catastrophes, large dependence on reinsurance, reserve risk from higher claims inflation given its sizable presence in long-tail casualty lines, and potential earnings volatility due to catastrophes.

For the first nine months of 2019, RSUI reported a combined ratio of 81.7% compared to a combined ratio of 84.5% for the same period in 2018, largely driven by lower catastrophe losses offset by lower reserve releases. RSUI reported net premiums written of $662 million for the first nine months of 2019, up 14% from the prior year period reflecting stronger rates and tighter terms and conditions in the E&S market.

Factors that could lead to an upgrade of RSUI's ratings include: 1) explicit support including capital and/or reinsurance from TransRe or Alleghany; 2) significantly increased scale and spread of risk.

Factors that could lead to a downgrade of RSUI's ratings include: 1) material increase in gross and net catastrophe exposure relative to statutory surplus; 2) statutory combined ratio above 100% on a sustained basis; 3) a decline in statutory surplus by more than 10% over a twelve-month period.

OUTLOOK

Alleghany/TransRe/RSUI

The stable outlook reflects Moody's view that the group will continue to deliver solid underwriting profitability, prudently manage gross and net catastrophe exposure and maintain good capitalization.

Moody's has affirmed the following ratings:

Alleghany Corporation – senior unsecured debt at Baa1, long term issuer rating at Baa1;

Transatlantic Holdings, Inc. – senior unsecured debt at Baa1;

Transatlantic Reinsurance Company – insurance financial strength at A1;

RSUI Indemnity Company – insurance financial strength at A2;

Landmark American Insurance Company – insurance financial strength at A2.

The rating outlook for these entities is stable.

Alleghany Corp. is a holding company that focuses primarily on domestic and international property & casualty reinsurance (through TransRe) and specialty primary insurance (primarily through RSUI Indemnity and Landmark insurance and to a considerably lesser degree through CapSpecialty, Inc.), which together comprise the Alleghany's P&C insurance operations. For the first nine months ending September 2019, Alleghany Corporation reported net premiums written of $4.2 billion and net income attributable to common shareholders of $826 million. Shareholders' equity was approximately $8.8 billion as of September 30, 2019.

The principal methodologies used in rating Alleghany Corporation were Reinsurers Methodology published in November 2019 and Property and Casualty Insurers Methodology published in November 2019. The principal methodology used in rating Transatlantic Holdings, Inc. and Transatlantic Reinsurance Company was Reinsurers Methodology published in November 2019. The principal methodology used in rating RSUI Indemnity Company and Landmark American Insurance Company was Property and Casualty Insurers Methodology published in November 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay senior policyholder claims and obligations. For more information, visit our website at www.moodys.com/insurance.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Siddhartha Ghosh
VP-Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Sarah Hibler
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

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