Allied World Assurance Company Ltd. and its operating affiliates have been affirmed the financial strength rating (FSR) of A (excellent) and issuer credit ratings (ICR) of "a" by AM Best Co.

In addition, Best has affirmed the ICR of "bbb", debt rating of "bbb" on $500 million 7.50 percent senior unsecured notes due 2016 and the indicative ratings of Allied World Assurance Company. The outlook for all ratings is stable.

The rating affirmations reflect the company's strong risk-adjusted capitalisation, experienced management team and historically strong operating performance. Best said that during the past couple of years, Allied World has strategically expanded its presence in select regions and has been able to acquire teams of underwriters to deepen its talent base.

The breadth of Allied World's operations has been enhanced while the company has delivered strong results, said the ratings agency.

But Best said that partially offsetting these positive ratings factors was Allied World's casualty orientation, when pricing for this class of business was particularly soft at this stage of the market cycle, with many of Allied World's peers choosing to modify their business mix toward shorter-tail property business.

However, Allied World has chosen a targeted business strategy, while taking steps to hone its cycle management capability, said Best.

While Allied World has a prudent reserving philosophy and has been able to recognise substantial favourable loss reserve development for several years, it is difficult to assess the quality and price adequacy of the current business being written. As a result, there is greater uncertainty with regard to the company's ability to sustain its historically excellent level of underwriting and overall profitability.

The ratings agency said that if Allied World could sustain its historical results going forward, the company would demonstrate that it has built a business model, which is well-established to withstand varying market conditions.