A.M. Best Affirms Ratings of Alleghany Corporation, Transatlantic Reinsurance Company and Its Subsidiaries; Maintains Positive Outlook

A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a+” of Transatlantic Reinsurance Company and its subsidiaries, Fair American Insurance and Reinsurance Company, Fair American Select Insurance Company,TransRe London Limited (United Kingdom) and Trans Re Zurich Ltd. (Switzerland), collectively referred to as TransRe. In addition, A.M. Best has affirmed the ICRs of “bbb+” and debt ratings of Alleghany Corporation (Alleghany)(NYSE:Y) and Transatlantic Holdings Inc. The outlook of all ratings remains positive. All companies are headquartered in New York, NY, unless otherwise specified. (See below for a detailed listing of the debt ratings.)

The positive outlook continues to reflect TransRe’s strong risk-adjusted capitalization, solid operating results and robust risk management practices. The ratings also reflect TransRe’s well-regarded global business profile, with roughly 50% of premiums coming from outside the United States, which provides a favorable balance of diversification on a line of business and geographic basis. TransRe also has been successful in utilizing third-party capital through its use of its Pillar and Pangaea facilities without materially impacting its risk profile. Despite the challenging investment and reinsurance market conditions, the relatively low level of catastrophic activity has helped TransRe produce two consecutive years of strong overall earnings and allowed for surplus appreciation.

TransRe also benefits from being part of a more widely diversified organization with the operational support and stability provided by Alleghany. Alleghany’s ownership has allowed TransRe to focus on operations while providing financial flexibility and access to capital if needed.

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 or improved 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, its operating performance consistently falls below the market, or an 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 floating rate senior unsecured notes, due 2022
-- “bbb+” on $300 million 4.9% senior unsecured notes, due 2044

Transatlantic Holdings Inc.—
-- “bbb+” on $750 million 5.75% senior unsecured notes, due 2015 ($367 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.

Key insurance criteria reports utilized:

• Analyzing Insurance Holding Company Liquidity
• Catastrophe Analysis in A.M. Best Ratings
• Equity Credit for Hybrid Securities
• Insurance Holding Company and Debt Ratings
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• Understanding BCAR for Property/Casualty Insurers
• Understanding Universal BCAR

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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