A.M. Best Revises Outlook to Positive for Alleghany Corporation, Transatlantic Reinsurance Company and Its Subsidiaries

A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a+” of Transatlantic Reinsurance Company (TransRe), and its subsidiaries, Fair American Insurance and Reinsurance Company, Fair American Select Insurance Company and Trans Re Zurich Ltd. (Switzerland).

In addition, A.M. Best has revised the outlook to positive from stable and affirmed the ICRs of “bbb+” and debt ratings of Alleghany Corporation (Alleghany) [NYSE:Y] and Transatlantic Holdings Inc. (TransRe Holdings).

Concurrently, A.M. Best Europe – Rating Services Limited has revised the outlook to positive from stable and affirmed the FSR of A (Excellent) and the ICR of “a+” of TransRe London Limited (United Kingdom). All companies are headquartered in New York, unless otherwise specified. (See below for a detailed listing of the debt ratings.)

The positive outlook reflects TransRe’s strong global business profile, solid operating results and robust risk management practices. The ratings also reflect TransRe’s excellent risk-adjusted capitalization, diversified book of business and stabilized reserve position. Year-end 2013 results were at or near historic highs, due to discipline underwriting and the relatively benign level of catastrophic events and strong investment income despite a difficult investment environment for TransRe’s largely fixed income portfolio.

TransRe also benefits from the support and stability provided by Alleghany, as both organizations have benefitted from TransRe’s acquisition and integration into the Alleghany operations. Both Alleghany and TransRe Holdings’ debt-to-capital and coverage ratios remain well within the acceptable range for their current ratings.

Partially offsetting these positive attributes are A.M. Best’s concerns regarding current conditions in the reinsurance market, which have become increasingly competitive due to increased capacity in the market and greater retentions among primary insurers putting additional pressure on traditional reinsurers.

Potential upward movement on TransRe’s ratings could result from continued consistent operating performance and sustained strong risk-adjusted capitalization. Negative rating actions could occur if TransRe incurs an outsized catastrophic or investment loss relative to its peer group, or its operating performance consistently falls below the market, resulting in erosion of its capital base and a decline in its risk-based capitalization.

The following debt ratings have been affirmed:

Alleghany Corporation—
- “bbb+” on $299 million 5.625% senior unsecured notes, due 2020
- “bbb+” on $400 million 4.95% senior unsecured notes, due 2022

Transatlantic Holdings Inc.—
- “bbb+” on $750 million 5.75% senior unsecured notes, due 2015 ($667 million currently outstanding)
- “bbb+” on $350 million 8% senior unsecured notes, due 2039

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

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