A.M. Best Affirms Ratings of Allied World Assurance Company Ltd and Its Subsidiaries and Assigns Ratings to Allied World Assurance Company Holdings, Ltd.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Allied World Assurance Company, Ltd and its affiliates. These ratings have been removed from under review and assigned a stable outlook. A.M. Best has also assigned an ICR of "bbb" to Allied World Assurance Company Holdings, Ltd (AWAC) (NYSE: AWH) (both of Hamilton, Bermuda) and a debt rating of "bbb" to its $500 million 7.50% 10-year senior notes due 2016. The outlook for these ratings is stable. (See below for a detailed list of the ratings.)

These rating actions follow AWAC's successful completion of its capital action plan, which included net proceeds of approximately $316 million from the issuance of common shares along with the issuance of $500 million in senior notes. These actions were taken to repay an existing bank loan, seek new market opportunities and to maintain capital levels for the 2006 hurricane season. Following the senior note issue, AWAC's debt-to-capital ratio is in the low 20% range with fixed charge coverage anticipated to be in the mid-single-digit range.

In addition to returning AWAC to a risk-based capital level in line with A.M. Best's expectations, the capital action plan also continues AWAC's transition away from one of its original sponsors, American International Group, Inc. (AIG) (New York, NY), as AWAC develops its own independent support systems and U.S. distribution platforms. A.M. Best believes that AWAC's transition will be successful as the company is expected to produce excellent operating results due to the development and successful implementation of stringent underwriting and risk management controls, along with favorable broker market acceptance. AWAC has established a diversified book of business in commercial property/casualty lines, which include general and professional liability insurance, as well as coverage on energy, transportation and commercial real estate property risks. While AWAC remains focused as an insurance writer of such coverages, the company also provides other specialty and reinsurance lines of business.

The FSR of A (Excellent) and the ICRs of "a" have been affirmed for Allied World Assurance Company, Ltd and its following affiliates:

--Allied World Assurance Company (U.S.) Inc.

--Newmarket Underwriters Insurance Company

--Allied World Assurance Company (Europe) Limited

--Allied World Assurance Company (Reinsurance) Limited

The ICR of "bbb" has been assigned to Allied World Assurance Company Holdings, Ltd.

The following debt rating has been assigned:

Allied World Assurance Company Holdings, Ltd--

--"bbb" on $500 million 7.50% senior notes, due 2016

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.