Best Upgrades Darwin Group’s Ratings after Acquisition by Allied World

October 29, 2008

A.M. Best Co. has upgraded the financial strength ratings (FSR) to ‘A’ (Excellent) from ‘A-‘ (Excellent) and issuer credit ratings (ICR) to “a” from “a-” of the Delaware-based Darwin Group and its members. Best also removed the ratings from under review with positive implications and assigned a stable outlook.

Bermuda-based Allied World Assurance Company Holdings recently completed its acquisition of the Darwin group (See IJ web site – https://www.insurancejournal.com/news/international/2008/10/21/94823.htm).

Best said it had also affirmed the ICR of “bbb” and debt rating of “bbb” on $500 million of senior notes due 2016 of Allied World Holdings with stable outlooks.

In addition Best affirmed the FSR of ‘A-‘ (Excellent) and ICR of “a-” of Darwin’s separately rated entity, Chicago-based Vantapro Specialty Insurance Company, and removed the ratings from under review with developing implications and assigned a negative outlook. Best also said it has withdrawn the ratings and “assigned a category NR-3 (Rating Procedure Inapplicable) to the FSR and an “nr” to the ICR because the company is inactive and has no concrete business plans at this time.”

In further rating actions Best upgraded the ICR to “bbb” from “bbb-” with a stable outlook for Darwin’s holding company, Darwin Professional Underwriters, Inc, (DPUI), “due to the support afforded its subsidiary members by Allied World Assurance Company. Best concurrently withdrew the ICR of “bbb” and assigned an “nr” due to DPUI no longer being a publicly traded company. In addition Best affirmed the FSR of ‘A’ (Excellent) and ICRs of “a” of Allied World and its operating affiliates with a stable outlook.

“The acquisition of Darwin marks Allied World’s second significant move in 2008 with regards to its U.S. expansion initiative,” Best explained. “Darwin’s book of business allows Allied World greater access to small and mid-size accounts in the U.S. healthcare and professional liability sector, and it is complementary to Allied World’s casualty focused strategy.

“The ratings of Darwin receive enhancement, in part, based on a substantial quota share agreement between Darwin National Assurance Company (DNA) and Allied World. Furthermore, Allied World is a stronger parent, and the benefits for Darwin include access to existing business relationships, financial strength and more resources.”

Best said that in its view, “Allied World’s ratings reflect its strong risk-adjusted capital position, stable management team and solid operating performance. The company has established itself as a well-diversified property/casualty insurer and reinsurer with a solid risk management philosophy and awareness. Allied World continues to enhance their risk management controls with recent developments such as formal crisis management plans, a catastrophe committee and an entity-wide risk assessment framework that identifies each risk and assigns an individual responsible for its mitigation and control.

“Partially offsetting these positive ratings factors is the current soft pricing environment in addition to the turbulence in the financial markets, which has been impacting many insurance and reinsurance companies’ investment portfolios and access to capital. In addition, there is a level of integration risk associated with any acquisition.”

Source: A.M. best – www.ambest.com

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