Alleghany set for upgrade if $11.6bn merger with ‘much larger’ Berkshire Hathaway goes through

Alleghany Corporation has been placed on “review for upgrade” by ratings agency  Moody’s following announcement that Warren Buffett’s  Berkshire Hathaway has agreed to buy the insurer for $11.6bn all-cash.

Alleghany owns global reinsurer TransRe, wholesale specialty insurers RSUI, and CapSpecialty, an underwriter of specialty casualty and surety insurance.

Moody’s Investors Service has placed the Baa1 senior debt rating of Alleghany, the A1 insurance financial strength (IFS) rating of TransRe and the A2 IFS ratings of RSUI Indemnity Company and Landmark American Insurance Company (collectively, RSUI), all on review for upgrade.

The rating outlook for these entities has been changed to “rating under review” from “stable”.

The ratings’ review will focus on the Alleghany’s prospective business strategy and capital adequacy as well as the level of implicit and explicit support it receives from Berkshire, Moody’s said.

The agency believes that Alleghany’s overall credit profile will benefit from being part of a much larger, diversified organisation, with substantial capital resources and financial flexibility.

“ Alleghany’s ratings reflect the group’s strong competitive position as a leading global reinsurer in the broker-market and in the primary US excess and surplus markets, well diversified product lines, strong capital adequacy, conservative financial leverage and very good holding company liquidity,” Moody’s noted.

The key factor that would secure Alleghany ratings upgrade is the completion of the transaction with Berkshire coupled with strong capitalisation, Moody’s said.

However, if the deal falls through with “no material change to Alleghany's current business and financial profile”, no negative changes are expected.

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