Allied World Assurance Company Holdings, AG (AWH) recently announced a strategic partnership between its subsidiary Allied World Financial Services Company, Inc. and MatlinPatterson, whereby it will purchase a minority ownership stake in the latter.
The capital provided by Allied World will be used to develop the asset management business of MatlinPatterson. In return, MatlinPatterson will employ various liquid credit strategies to manage about $500 million worth of portfolio of Allied World.
Expansion of the asset management business was the primary reason for this strategic alliance by Allied World. Management believes that it will also boost the strength and flexibility of the company.
Moreover, Allied World has had an extended business relationship with a co-founder of MatlinPatterson, who was once a part of Allied World’s board and contributed to the growth of the company. Thus, the partnership is expected to be strong and enduring. Considering the present investment scenario, both companies believe that this collaboration is the most appropriate investment approach.
Allied World has been trying to diversify its earning sources by forming business associations that are complementary to its core business of property and casualty insurance and can boost shareholder value. Toward this aim, the company also launched its Financial Services Company recently.
The new company endeavors to boost the expertise and earnings of Allied World by purchasing ownership stakes in renowned companies dealing with investment management and various other businesses.
Allied World carries a Zacks #3 Rank, which translates into a short-term Hold rating. We maintain a long-term Neutral recommendation on the stock. ACE Limited (ACE) and Endurance Specialty Holdings Ltd. (ENH), which closely compete with Allied World, also carry Zacks #3 Ranks (short term Hold) and long-term Neutral recommendations.
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