OREANDA-NEWS. Fitch Ratings has affirmed the ratings for Alleghany Corporation (Alleghany) as follows:

--Issuer Default Rating (IDR) at 'A-';
--Senior debt at 'BBB+'.

Fitch has also affirmed the ratings for Alleghany's wholly owned subsidiary, Transatlantic Holdings, Inc. (Transatlantic) as follows:

--IDR at 'A-';
--Senior debt at 'BBB+'.

In addition, Fitch has affirmed the 'A+' Insurer Financial Strength (IFS) rating for Transatlantic's property/casualty reinsurance subsidiaries and the 'A' IFS rating for RSUI Group, Inc.'s (RSUI) property/casualty insurance subsidiaries.

The Rating Outlook is Stable.

A complete list of ratings follows at the end of this release.

KEY RATING DRIVERS

Fitch's affirmation of Alleghany's ratings reflects the company's conservative capitalization, modest financial leverage, strong fixed charge coverage, and favorable financial flexibility. These favorable factors are partially offset by exposure to possible adverse reserve development due to the relatively large portion of loss reserves related to casualty lines.

The ratings also reflect Fitch's negative sector outlook on global reinsurance as the shifting market landscape in reinsurance is pressuring profitability and sparking consolidation as companies aim to enhance their relative competitive position.

Alleghany posted net earnings of $560 million in 2015, compared to $679 million for full year 2014. These favorable results are driven by solid underwriting performance in both the reinsurance and insurance segments, with manageable catastrophe losses and favorable loss reserve development at Transatlantic and RSUI.

Included in 2015 net earnings is an after-tax loss reserve charge of $24.8 million ($38.2 million pre-tax) related to a commutation and release agreement entered into by Transatlantic with AIG Property Casualty, Inc. and National Indemnity Company for certain reinsurance contracts, including those covering asbestos and environmental (A&E) liabilities. Fitch views this agreement favorably as it significantly reduces the company's risk exposure to A&E reserves, with Transatlantic estimating that its $400 million settlement payment eliminates approximately 90% of its liabilities for A&E losses occurring in 1986 and prior years.

Alleghany reported a consolidated combined ratio of 89.0% in 2015, which included 1.5 points for catastrophe losses and 5.1 points of favorable reserve development. This compares to 88.8% for 2014, which included 2.2 points for catastrophe losses and 4.9 points of favorable reserve development. Alleghany continues to report reasonable underlying run-rate accident year combined ratios normalized for average catastrophes in the mid-90s.

Fitch believes that Alleghany utilizes a conservative amount of operating leverage comparable to (re)insurer peers, with net premiums written to statutory surplus in 2015 of approximately 0.62x for the reinsurance operations and 0.61x for the insurance operations. Total GAAP stockholders' equity of $7.6 billion at Dec. 31, 2015 is up from $7.5 billion at Dec. 31, 2014, as favorable net income was partially offset by share repurchases and a decrease in unrealized investment gains due to increases in interest rates, widening credit spreads and equity market declines.

Alleghany's financial leverage ratio was modest at 15.6% as of Dec. 31, 2015, down from 19.4% at Dec. 31, 2014 as Transatlantic repaid its $367 million senior notes at maturity in December 2015. Operating earnings-based interest coverage was a strong 8.4x in 2015 and 9x in 2014. Fitch expects Alleghany to maintain coverage levels of at least 7x.

Alleghany maintained a beneficial amount of holding company cash and marketable securities totalling $821 million at Dec. 31, 2015. Fitch believes that this resource provides the company an additional favorable cushion in meeting potential operating subsidiary company cash flow shortages and liquidity to service its debt.

RATING SENSITIVITIES

Key rating triggers that could result in a downgrade include significant adverse loss reserve development; movement to materially below-average underwriting or operating performance; sizable deterioration in subsidiary capitalization that caused net written premiums-to-surplus to exceed 1.0x for reinsurance operations and 1.2x for insurance operations; financial leverage maintained above 25%; run-rate operating earnings-based interest and preferred dividend coverage of less than 7x; significant acquisitions that reduce the company's financial flexibility; and a substantial decline in the holding company's cash position.

Key rating triggers that could lead to an upgrade include continued favorable underwriting results in line with higher rated property/casualty (P/C) (re)insurer peers and enhanced competitive positioning into a larger market position and size/scale while maintaining strong profitability with low earnings volatility. In addition, the ratings of its subsidiary, RSUI, could be upgraded should Fitch consider the ratings core relative to Transatlantic and apply a single group IFS rating.

Fitch affirms the following ratings with a Stable Outlook:

Alleghany Corporation
--Long-term IDR at 'A-';
--$300 million 5.625% senior notes due Sept. 15, 2020 at 'BBB+';
--$400 million 4.95% senior notes due June 27, 2022 at 'BBB+';
--$300 million 4.9% senior notes due Sept. 15, 2044 at 'BBB+'.

Transatlantic Holdings, Inc.
--Long-term IDR at 'A-';
--$350 million 8.0% senior notes due Nov. 30, 2039 at 'BBB+'.

Transatlantic Reinsurance Company
Fair American Insurance and Reinsurance Company
--IFS at 'A+'.

RSUI Indemnity Company
Covington Specialty Insurance Company
Landmark American Insurance Company
--IFS at 'A'.

The Rating Outlook is Stable