S&P Global Ratings on Dec. 19 placed all the ratings of Allied World Assurance Co. Holdings AG and its operating companies on CreditWatch with negative implications, following an announcement that Fairfax Financial Holdings Ltd. will acquire the company for $4.9 billion.
The agency, which intends to resolve the CreditWatch placement or provide an update within the next three months, expects Allied World to become a strategically important entity within the Fairfax group following the completion of the transaction.
Allied World's counterparty credit and financial ratings could be lowered by a notch to A- in line with those of Fairfax's core operating subsidiaries, S&P said, adding that it could downgrade the company's BBB+ issuer credit rating by one or two notches.
"Although we view Allied World's enterprise risk management as strong, we view Fairfax's ERM as adequate, which could weaken our view of Allied World's ERM construct under Fairfax's ownership," the agency added.
S&P also noted that as none of Allied World's executives signed long-term contracts to stay with the company, the probability of them quitting post acquisition could be a negative rating factor.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.