AM Best Revises Issuer Credit Rating Outlook to Positive for Fairfax Financial Holdings Limited and Subsidiary; Affirms Credit Ratings of Allied World Assurance Company Holdings, Ltd.

AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Long-Term ICR of “bbb” (Good) and the various Long-Term Issue Credit Ratings (Long-Term IR) on the unsecured debt and preferred equity of Fairfax Financial Holdings Limited (Fairfax) (Toronto, Canada). In addition, AM Best has revised the outlooks to positive from stable for the Long-Term ICR and affirmed the Long-Term ICR of “bbb” (Good) and the Long-Term IR of Zenith National Insurance Corp. (headquartered in Woodland Hills, CA) and Fairfax (US) Inc. (Delaware), both of which are indirectly, wholly owned downstream holding companies of Fairfax. (See below for a detailed listing of Long-Term IRs).

At the same time, AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Allied World Assurance Company Holdings, Ltd.’s (Bermuda) (Allied World Holdings) operating affiliates (collectively referred to as Allied World or the group). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb” (Good) of Allied World Assurance Company Holdings, Ltd. and its downstream holding company, Allied World Assurance Company Holdings I, Ltd (Bermuda). AM Best also has affirmed the Long-Term IR of “bbb” (Good) on the $500 million, 4.35% senior unsecured notes of Allied World Assurance Company Holdings I, Ltd, due 2025, which are unconditionally and irrevocably guaranteed by Allied World Holdings. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies and ratings).

The Long-Term ICR outlook revision to positive for Fairfax reflects its improved financial leverage position and the associated decreased reliance on external debt. The group’s long-term value investing policy has also been beneficial with the increase in investment market volatility at the start of 2022, resulting in relatively smaller unrealized losses than most of its peers. In addition, Fairfax’s operating subsidiaries have reported improved underwriting trends over the past five years, which have been accretive to overall earnings.

The ratings of Allied World reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Since 2018, the group has generated improved underwriting results, reflecting rate improvement in most key business lines and prudent underwriting actions, which included curtailing exposure to natural catastrophe events. As a result, Allied World has generated underwriting profits in each of the past four calendar years, which includes periods during which the property/casualty (re)insurance industry experienced significant natural catastrophe activity. Allied World’s underwriting income is supplemented by investment income; however, the group’s reported investment yield has been generally lower than peers. These results reflect Allied World’s investment strategy, which includes lower-risk, short-term high-quality bonds, and value stocks, and is managed for long-term accretion to capital via retained earnings.

The group’s risk-adjusted capital is supportive of its current underwriting strategy and premium growth, investment risks and catastrophe loss exposure. Short-term holdings, predominantly high quality fixed-income securities and cash support liquidity.

Allied World maintains a neutral business profile. The group is a specialty (re)insurance entity that underwrites a diversified portfolio of property/casualty business. The company is well-diversified geographically, with a global market presence, although it does compete directly with much larger companies in several of its key business lines.

The FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) have been affirmed with a stable outlook for the following operating subsidiaries of Allied World Assurance Company Holdings, Ltd:

• Vantapro Specialty Insurance Company
• Allied World Assurance Company, Ltd
• Allied World Surplus Lines Insurance Company
• Allied World Assurance Company (U.S.) Inc.
• Allied World National Assurance Company
• Allied World Specialty Insurance Company
• Allied World Insurance Company
• Allied World Assurance Company (Europe) Designated Activity Company

The following Long-Term IRs have been affirmed with positive outlooks:

Fairfax (US) Inc.—

-- “bbb” (Good) on USD 300 million 4.875% senior unsecured notes, due 2024

Zenith National Insurance Corp.—

-- “bbb-” (Good) on USD 77.3 million 8.55% subordinated deferrable debentures, due 2028

Fairfax Financial Holdings Limited—

-- “bbb” (Good) on CAD 350 million 4.95% senior unsecured notes, due 2025

-- “bbb” (Good) on USD 125 million 8.3% senior unsecured notes, due 2026

-- “bbb” (Good) on CAD 450 million 4.7% senior unsecured notes, due 2026

-- “bbb” (Good) on CAD 650 million 4.25% senior unsecured notes, due 2027

-- “bbb” (Good) on EUR 750 million 2.75% senior unsecured notes, due 2028

-- “bbb” (Good) on USD 600 million 4.85% senior unsecured notes, due 2028

-- “bbb” (Good) on CAD 500 million 4.23% senior unsecured notes, due 2029

-- “bbb” (Good) on USD 650 million 4.625% senior unsecured notes, due 2030

-- “bbb” (Good) on USD 600 million 3.375% senior unsecured notes, due 2031

-- “bbb” (Good) on CAD 850 million 3.95% senior unsecured notes, due 2031

-- “bbb” (Good) on USD 125 million 7.75% senior unsecured notes, due 2037

-- “bb+” (Fair) on CAD 187.9 million Series C cumulative, five-year rate reset preferred shares

-- “bb+” (Fair) on CAD 62.1 million Series D cumulative, floating rate preferred shares

-- “bb+” (Fair) on CAD 136.0 million Series E cumulative, five-year rate reset preferred shares

-- “bb+” (Fair) on CAD 52.5 million Series F cumulative, floating rate preferred shares

-- “bb+” (Fair) on CAD 193.0 million Series G cumulative, five-year rate reset preferred shares

-- “bb+” (Fair) on CAD 57.0 million Series H cumulative, floating rate preferred shares

-- “bb+” (Fair) on CAD 260.5 million Series I cumulative, five-year rate reset preferred shares

-- “bb+” (Fair) on CAD 39.5 million Series J cumulative, floating rate preferred shares

-- “bb+” (Fair) on CAD 237.5 million Series K cumulative, five-year rate reset preferred shares

-- “bb+” (Fair) on CAD 230 million Series M cumulative, five-year rate reset preferred shares

The following indicative Long-Term IRs have been affirmed on the universal shelf registration with positive outlooks:

Fairfax Financial Holdings Limited—

-- “bbb” (Good) on senior unsecured debt

-- “bbb-” (Good) on subordinated debt

-- “bb+” (Fair) on preferred shares

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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