A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent and the issuer credit ratings (ICR) of “a” of Allied World Assurance Company, Ltd (Allied World) and its operating affiliates. The outlook for the FSR is stable, while the outlook for the ICRs is positive. A.M. Best also has affirmed the ICR of “bbb” of the ultimate parent, Allied World Assurance Company HoldingsAG (Switzerland) [NYSE: AWH], which unconditionally and irrevocably guarantees both senior debt issuances of Allied World Assurance Company Holdings, Ltd (Allied World Holdings Bermuda). In addition, A.M. Best has affirmed the positive outlook of the ICR of “bbb” as well as the debt ratings of “bbb” on $500 million 7.50% senior unsecured notes due 2016 and on $300 million 5.5% senior unsecured notes due 2020 of Allied World Holdings Bermuda. The outlook for these ratings is positive. All the above companies are domiciled in Bermuda, unless otherwise specified. (See below for a detailed listing of the companies and ratings.) Allied World is a property/casualty insurer/reinsurer with significant geographic reach. The rating affirmations reflect its diversified mix of business, strong risk-adjusted capitalization and experienced management team. The positive outlook reflects Allied World’s strong operating performance, sound risk management culture and strategic expansions in terms of geography, products and distribution. These positive rating attributes are expected to put the company in a favorable position to successfully execute its business plans. The breadth of Allied World’s operations has been enhanced as the company has delivered strong results. Partially offsetting these positive ratings factors is Allied World’s casualty orientation, as pricing for this class of business is particularly soft at this stage of the market cycle. Many of Allied World’s peers have chosen to modify their business mix toward shorter-tail property business. Allied World has chosen a targeted business strategy while taking steps to refine its cycle management capability. However, Allied World’s continued focus on casualty business has helped to limit its exposure to the recent increase in global catastrophes including the New Zealand earthquakes and the Japanese earthquake and tsunami. Allied World appears to have a prudent reserving philosophy, maintaining a significant portion of incurred but not reported reserves. As a result, the company has been able to recognize substantial favorable loss reserve development for several years, which has facilitated strong operating returns through the current soft phase of the casualty market. Accordingly, the outlook is long term in nature to allow more recent accident years to mature given the current soft pricing dynamics of the casualty market. Any future shortfall in reserves, combined with a deterioration in investment income resulting from a continuation of lower interest rates, could cause A.M. Best to reconsider its positive outlook on Allied World’s ratings. If Allied World can sustain its historical results going forward, it will have demonstrated that it has built a business model, which is well-established to withstand varying market conditions and support an upgrading of its FSR.