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Announcement:

Moody's affirms Allied World's A2 IFS ratings

17 Dec 2007
Moody's affirms Allied World's A2 IFS ratings

$500 million of securities affected.

New York, December 17, 2007 -- Moody's Investors Service today affirmed its Baa1 senior debt rating on Allied World Assurance Company Holdings, Ltd's ("Allied World"; NYSE: AWH) and the A2 insurance financial strength ratings on its insurance subsidiaries. The rating outlook remains stable. This rating action follows Allied World's announcement that it has entered into an agreement to repurchase approximately 19.4% of its outstanding shares currently held by one of its original founding members.

According to Moody's, Allied World's ratings reflect its market position as a specialty niche provider of property and casualty insurance and reinsurance, its low underwriting and financial leverage targets following its July 2006 initial public offering (IPO), and a high-quality investment portfolio. These core strengths are tempered by the company's limited operating history relative to a full underwriting cycle in the highly cyclical specialty insurance and reinsurance sectors, and by the inherent underwriting volatility in many of these specialty lines, which include catastrophe-exposed property risks and complex casualty-based exposures including directors' and officers' liability.

The total cost for Allied World to acquire 11.7 million shares is approximately $563 million. While this amount exceeds a full year's earnings for the company, Moody's notes that, since the IPO, Allied World has not repurchased any shares and has maintained a dividend payout ratio lower than industry average. In addition, since the IPO, profitability has been very strong with over $550 million of growth in retained earnings since June 30, 2006 while premium volume has fallen by 12% (NPW for the nine months ended September 30, 2007 compared to the corresponding period in 2006). Given the return of capital to shareholders, Moody's expects only modest growth, if any, in premiums over the near term. It is further expected that operating and financial leverage metrics, although negatively impacted by this share repurchase, will remain within current rating expectations, as Allied World continues to actively manage its capital.

The last rating action on Allied World occurred on July 17, 2006, when Moody's initially assigned insurance financial strength and debt ratings to the company.

The following ratings have been affirmed with a stable outlook:

Allied World Assurance Company Holdings, Ltd -senior debt at Baa1;

Allied World Assurance Company, Ltd - insurance financial strength at A2;

Allied World Assurance Company (U.S.) Inc. - insurance financial strength at A2; and

Allied World National Assurance Company- insurance financial strength at A2.

Allied World Assurance Company Holdings, Ltd is a Bermuda-based specialty provider of property and casualty insurance and reinsurance. For the first nine months of 2007, Allied World reported total revenue and net income of $1,084 million and $346 million, respectively. As of September 30, 2007, shareholders' equity was $2.6 billion.

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

New York
Jeffrey S. Berg
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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