Allied World Assurance Company Ltd and ist operating affiliates have had their outlook revised to positive from stable and have been affirmed the issuer credit ratings (ICR) of “a” by AM Best Co.Best has also affirmed the financial strength rating (FSR) of A (excellent) of Allied and its affiliates. The outlook for the FSR is stable.In addition, the ratings agency has revised the outlook to positive from stable and affirmed the ICR of “bbb”as well as the debt ratings of “bbb” on $500 million 7.50 percent senior unsecured notes due in 2016 and on $300 million 5.5 percent senior unsecured notes due in 2020 of Allied World Assurance Company Holdings Ltd.Best has also assigned an ICR of “bbb” to the ultimate parent, Allied World Assurance Company Holdings AG, which unconditionally and irrevocably guarantees both senior debt issuances of Allied World Holdings Bermuda. The outlook assigned to this rating is positive.The rating affirmations reflect the company’s diversified mix of business, strong risk-adjusted capitalisation and experienced management team, said Best.“The positive outlook reflects Allied World’s strong operating performance, sound risk management culture and strategic expansions in terms of geography, products and distribution. These positive rating attributes are expected to put the company in a favourable position to successfully execute its business plans,” said Best. “The breadth of Allied World’s operations has been enhanced while the company has delivered strong results.”But Best said that partially offsetting these positive ratings factors was the company’s casualty orientation, as pricing for this class of business was particularly soft at this stage of the market cycle and many of its peers choosing to modify their business mix toward shorter-tail property business.“Allied World has chosen a targeted business strategy, while taking steps to hone its cycle management capability,” said Best. “However, Allied World’s continued focus on casualty business has helped to limit its exposure to the recent increase in global catastrophes including the New Zealand earthquakes and the Japanese earthquake and tsunami.“Allied World appears to have a prudent reserving philosophy, maintaining a significant portion of incurred but not reported reserves. As a result, the company has been able to recognise substantial favourable loss reserve development for several years, which has facilitated strong operating returns through the current soft phase of the casualty market.“Accordingly, the revised outlook is long term in nature to allow more recent accident years to mature given the current soft pricing dynamics of the casualty market. Any future shortfall in reserves, combined with a deterioration in investment income resulting from a continuation of lower interest rates, could cause AM Best to reconsider its positive outlook on Allied World. If Allied World can sustain its historical results going forward, the company will have demonstrated that it has built a business model, which is well-established to withstand varying market conditions and support a higher FSR.”