AM Best has revised the outlooks to positive for Fairfax Financial Holdings, its subsidiaries, and Allied World, reflecting the improved earnings profile of the consolidated group.
The rating agency noted that Fairfax deployed significant cash into highly rated fixed income instruments as interest rates increased in 2022, which resulted in dividend and interest income run rate more than tripling by year-end 2023.
“This improved investment cash flow, coupled with continued stabilisation of underwriting earnings at various operating subsidiaries, has resulted in improved operating performance metrics relative to peers in recent years, and prospectively,” AM Best explained.
Spelt out, the rating agency affirmed the Long-Term Issuer Credit Rating (Long- Term ICR) of “bbb+” (Good) and the Long-Term Issue Credit Ratings (Long-Term IR) on the unsecured debt and preferred equity of Fairfax.
In addition, AM Best has revised the outlook to positive from stable and affirmed the Long-Term ICR of “bbb+” (Good) of Fairfax (US) Inc. and the Long-Term ICR of “bbb+” (Good) and Long-Term IRs of Zenith National Insurance Corp., both of which are indirectly, wholly owned downstream holding companies of Fairfax.
Meanwhile, AM Best has additionally revised the outlooks to positive from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of “a+” (Excellent) of the operating affiliates of Allied World Assurance Company Holdings.
AM Best stated that the ratings of Allied World reflect its balance sheet strength, which it assesses as strongest, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management.
In its Q1 2024 results, Fairfax revealed that its property and casualty insurance and reinsurance operations produced an adjusted operating income of $977.1 million, up from $843 million in the opening quarter of 2023.
According to the firm, this operating income increase largely contributed to its Q1 2024 net earnings of $776.5 million.
Fairfax also noted that all of its insurance and reinsurance reporting segments continued to achieve undiscounted combined ratios below 100% in Q1 for an improved consolidated combined ratio of 93.6% and an increased consolidated underwriting profit of $373 million.
