Standard & Poor’s Ratings Services has upgraded the financial strength rating of Allied World Assurance Company to A from A-.The Switzerland-based re/insurer, which redomiciled from Bermuda last year, “continues to outperform its peer group”, S&P said in a statement released yesterday.“The ratings upgrade reflects the company’s strong financial profile, which encompasses a track record of strong operating results, with a five-year average combined ratio of 81 percent and a return on revenue of 34 percent from 2006 to 2010, as well as strong investments and capitalisation for the rating,” explained credit analyst Tracy Dolin.The company’s counterparty credit rating on the holding company was raised to BBB+ from BBB and the counterparty credit and financial strength ratings on its core operating subsidiaries has been raised to A from A-. The outlook for the ratings is stable.S& P said Allied World had a good track record of favourable reserve development.“The company’s earnings quality is strong considering that its standard deviation is lower than many of its peers,” S&P said. “In addition the ratings upgrade also takes into account our view that its enterprise-risk management (ERM) is strong.”The rating agency said the “upgrade reflects the subsidiaries’ strong operating performance since inception, strong capitalisation, and strong ERM.”However, S&P added that “soft pricing remains in casualty lines,” and it believes that “Allied World might not be able to sustain the reduction in loss costs and claims frequency in those lines.”In addition S&P noted that this “concern is augmented under an inflationary environment where loss reserves and current pricing might prove to be inadequate to support future claims leading to potential adverse reserve development.“Although we view Allied World’s reserving approach as conservative, its short operating history and consequently limited internal loss experience make its adequacy of reserves less certain.“We also believe that the company’s appetite for growth and expansion, even amid soft market conditions, could contribute to further significant shifts in its risk profile.”