Allied World Assurance Co Holdings, AG - FORM 8-K - EX-99.2 - EXHIBIT 99.2

Attached files

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8-K - FORM 8-K - Allied World Assurance Co Holdings, AG	c95941e8vk.htm
EX-99.1 - EXHIBIT 99.1 - Allied World Assurance Co Holdings, AG	c95941exv99w1.htm
EX-99.3 - EXHIBIT 99.3 - Allied World Assurance Co Holdings, AG	c95941exv99w3.htm

Exhibit 99.2

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
4^th Quarter and Year Ended December 31, 2009


Investor Contact:		This report is for informational purposes only. It should be read in conjunction with documents filed by Allied World Assurance Company Holdings, Ltd with the U.S. Securities and Exchange Commission.
Keith Lennox
Phone: (646) 794-0750
email: keith.lennox@awac.com

Page 1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Any forward-looking statements made in this report reflect our current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, which may cause actual results to differ materially from those set forth in these statements. For example, our forward-looking statements could be affected by pricing and policy term trends; increased competition; the impact of acts of terrorism and acts of war; greater frequency or severity of unpredictable catastrophic events; investigations of market practices and related settlement terms; negative rating agency actions; the adequacy of our loss reserves; the company or its subsidiaries becoming subject to significant income taxes in the United States or elsewhere; changes in regulations or tax laws; changes in the availability, cost or quality of reinsurance or retrocessional coverage; adverse general economic conditions including those related to the ongoing financial crisis; and judicial, legislative, political and other governmental developments, as well as management’s response to these factors, and other factors identified in our filings with the U.S. Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We are under no obligation (and expressly disclaim any such obligation) to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise.

Page 2

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
FINANCIAL SUPPLEMENT TABLE OF CONTENTS


		Page

	Basis of Presentation		4

I.	Financial Highlights
	- Consolidated Financial Highlights		5

II.	Consolidated Results
	- Consolidated Statements of Operations — Consecutive Quarters		6
	- Consolidated Statements of Operations — Year to Date		7
	- Consolidated Premium Distribution Analysis by Segment — Current Quarter		8
	- Consolidated Premium Distribution Analysis by Line of Business — Current Quarter		9
	- Consolidated Premium Distribution Analysis by Segment — Year to Date		10
	- Consolidated Premium Distribution Analysis by Line of Business — Year to Date		11

III.	Segment Results
	- Consolidated Segment Results — Current Quarter		12
	- Consolidated Segment Results — Prior Year Quarter		13
	- Consolidated Segment Results — Current Year to Date		14
	- Consolidated Segment Results — Prior Year to Date		15

IV.	Balance Sheet Details
	- Condensed Consolidated Balance Sheets		16
	- Consolidated Investment Portfolio		17
	- Consolidated Investment Portfolio — Additional Detail		18
	- Reserves for Losses and Loss Expenses		20
	- Capital Structure and Leverage Ratios		21

V.	Other
	- Operating Income Reconciliation and Basic and Diluted Earnings per Share — Consecutive Quarters		22
	- Operating Income Reconciliation and Basic and Diluted Earnings per Share — Year to Date		23
	- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity — Consecutive Quarters		24
	- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity — Year to Date		25
	- Diluted Book Value per Share		26
	- Annualized Investment Book Yield		27
	- Regulation G		29

Page 3

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION

•		All financial information contained herein is unaudited.

•		Unless otherwise noted, all data is in thousands of U.S. dollars, except for share, per share, percentage and ratio information.

•		Allied World Assurance Company Holdings, Ltd, along with others in the industry, use underwriting ratios as measures of performance. The loss and loss expense ratio is calculated by dividing net losses and loss expenses by net premiums earned. The acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned. The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned. The expense ratio is calculated by combining the acquisition cost ratio and the general and administrative expense ratio. The combined ratio is calculated by combining the loss and loss expense ratio, the acquisition cost ratio and the general and administrative expense ratio. These ratios are relative measurements that describe for every $100 of net premiums earned, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned premium. A combined ratio below 100% demonstrates underwriting profit; a combined ratio above 100% demonstrates underwriting loss.

•		In presenting the company’s results, management has included and discussed certain “non-GAAP” financial measures, as such term is defined in Regulation G promulgated by the SEC. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with generally accepted accounting principles (“GAAP”). The reconciliation of such non-GAAP financial measures to their respective most directly comparable GAAP financial measures in accordance with Regulation G is included in this financial supplement. See page 29 for further details.

Page 4

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED FINANCIAL HIGHLIGHTS


		THREE MONTHS ENDED						YEAR ENDED						Previous			Previous
		DECEMBER 31,						DECEMBER 31,						Quarter			Year to Date
		2009			2008			2009			2008			Change			Change

HIGHLIGHTS
	Gross premiums written	$	322,129		$	310,945		$	1,696,345		$	1,445,584			3.6	%		17.3	%
	Net premiums written		233,694			226,503			1,321,125			1,107,228			3.2	%		19.3	%
	Net premiums earned		330,481			302,984			1,316,892			1,116,905			9.1	%		17.9	%
	Net investment income		73,252			82,583			300,675			308,775			(11.3	%)		(2.6	%)
	Net income		161,255			19,852			606,887			183,635			712.3	%		230.5	%
	Operating income		131,920			141,129			537,726			455,065			(6.5	%)		18.2	%
	Total investments and cash & cash equivalents		7,536,014			6,863,397			7,536,014			6,863,397			9.8	%		9.8	%
	Total assets		9,597,483			9,022,480			9,597,483			9,022,480			6.4	%		6.4	%
	Total shareholders’ equity		3,213,295			2,416,862			3,213,295			2,416,862			33.0	%		33.0	%
	Cash flows from operating activities		100,990			147,069			668,189			656,943			(31.3	%)		1.7	%

PER SHARE AND SHARE DATA
	Basic earnings per share
	Net income	$	3.25		$	0.40		$	12.26		$	3.75			712.5	%		226.9	%
	Operating income	$	2.66		$	2.88		$	10.86		$	9.30			(7.6	%)		16.8	%
	Diluted earnings per share
	Net income	$	3.05		$	0.39		$	11.67		$	3.59			682.1	%		225.1	%
	Operating income	$	2.49		$	2.80		$	10.34		$	8.90			(11.1	%)		16.3	%
	Weighted average common shares outstanding
	Basic		49,662,575			49,028,249			49,503,438			48,936,912
	Diluted		52,880,733			50,366,814			51,992,674			51,147,215
	Book value per share	$	64.61		$	49.29		$	64.61		$	49.29			31.1	%		31.1	%
	Diluted book value per share	$	59.56		$	46.05		$	59.56		$	46.05			29.3	%		29.3	%

FINANCIAL RATIOS
	Annualized return on average equity (ROAE), net income		21.7	%		3.4	%		22.6	%		8.3	%		18.3	pts		14.3	pts
	Annualized ROAE, operating income		17.7	%		24.5	%		20.0	%		20.6	%		(6.8)	pts		(0.6)	pts
	Annualized investment book yield		4.0	%		4.6	%		4.2	%		4.7	%		(0.6)	pts		(0.5)	pts

	Loss and loss expense ratio		42.8	%		47.4	%		45.9	%		57.4	%		(4.6)	pts		(11.5)	pts
	Acquisition cost ratio		11.5	%		10.2	%		11.3	%		10.1	%		1.3	pts		1.2	pts
	General and administrative expense ratio		21.9	%		18.3	%		18.9	%		16.6	%		3.6	pts		2.3	pts

	Expense ratio		33.4	%		28.5	%		30.2	%		26.7	%		4.9	pts		3.5	pts

	Combined ratio		76.2	%		75.9	%		76.1	%		84.1	%		0.3	pts		(8.0)	pts

Page 5

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS — CONSECUTIVE QUARTERS


	THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED
	DECEMBER 31, 2009			SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009			DECEMBER 31, 2008
Revenues
Gross premiums written	$	322,129		$	401,837		$	492,782		$	479,597		$	310,945
Net premiums written	$	233,694		$	320,956		$	361,438		$	405,038		$	226,503

Net premiums earned	$	330,481		$	328,771		$	333,668		$	323,972		$	302,984
Net investment income		73,252			73,032			76,537			77,854			82,583
Net realized investment gains (losses)		37,796			46,861			5,093			36,602			(19,454	)
Net impairment charges recognized in earnings		(187	)		(1,953	)		(5,474	)		(41,963	)		(100,593	)
Other income		373			298			369			466			746

Total revenues	$	441,715		$	447,009		$	410,193		$	396,931		$	266,266


Expenses
Net losses and loss expenses:
Current year	$	219,065		$	209,971		$	214,334		$	208,683		$	233,789
Prior years		(77,662	)		(73,530	)		(36,615	)		(60,186	)		(90,258	)

Total net losses and loss expenses	$	141,403		$	136,441		$	177,719		$	148,497		$	143,531
Acquisition costs		38,126			36,630			36,963			37,129			30,849
General and administrative expenses		72,212			57,521			61,495			57,365			55,405
Amortization and impairment of intangible assets		7,856			1,065			1,065			1,065			710
Interest expense		9,527			9,523			9,522			10,447			10,205
Foreign exchange loss (gain)		1,408			(273	)		(1,222	)		835			1,230

Total expenses	$	270,532		$	240,907		$	285,542		$	255,338		$	241,930


Income before income taxes	$	171,183		$	206,102		$	124,651		$	141,593		$	24,336
Income tax expense		9,928			5,548			10,981			10,185			4,484

Net income	$	161,255		$	200,554		$	113,670		$	131,408		$	19,852


GAAP Ratios
Loss and loss expense ratio		42.8	%		41.5	%		53.3	%		45.8	%		47.4	%
Acquisition cost ratio		11.5	%		11.1	%		11.1	%		11.5	%		10.2	%
General and administrative expense ratio		21.9	%		17.5	%		18.4	%		17.7	%		18.3	%

Expense ratio		33.4	%		28.6	%		29.5	%		29.2	%		28.5	%

Combined ratio		76.2	%		70.1	%		82.8	%		75.0	%		75.9	%


Per Share Data
Basic earnings per share
Net income	$	3.25		$	4.05		$	2.30		$	2.67		$	0.40
Operating income	$	2.66		$	3.13		$	2.28		$	2.79		$	2.88
Diluted earnings per share
Net income	$	3.05		$	3.83		$	2.22		$	2.57		$	0.39
Operating income	$	2.49		$	2.97		$	2.20		$	2.69		$	2.80

Page 6

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS — YEAR TO DATE


	YEAR ENDED			YEAR ENDED
	DECEMBER 31, 2009			DECEMBER 31, 2008
Revenues
Gross premiums written	$	1,696,345		$	1,445,584
Net premiums written		1,321,125			1,107,228

Net premiums earned	$	1,316,892		$	1,116,905
Net investment income		300,675			308,775
Net realized investment gains (losses)		126,352			(59,954	)
Net impairment charges recognized in earnings		(49,577	)		(212,897	)
Other income		1,506			746

Total revenues	$	1,695,848		$	1,153,575


Expenses
Net losses and loss expenses:
Current year	$	852,053		$	921,217
Prior years		(247,993	)		(280,095	)

Total net losses and loss expenses		604,060			641,122
Acquisition costs		148,847			112,569
General and administrative expenses		248,592			185,850
Amortization and impairment of intangible assets		11,051			710
Interest expense		39,019			38,743
Foreign exchange loss (gain)		748			(1,421	)

Total expenses	$	1,052,317		$	977,573


Income before income taxes	$	643,531		$	176,002
Income tax expense (recovery)		36,644			(7,633	)

Net income	$	606,887		$	183,635


GAAP Ratios
Loss and loss expense ratio		45.9	%		57.4	%
Acquisition cost ratio		11.3	%		10.1	%
General and administrative expense ratio		18.9	%		16.6	%

Expense ratio		30.2	%		26.7	%

Combined ratio		76.1	%		84.1	%


Per Share Data
Basic earnings per share
Net income	$	12.26		$	3.75
Operating income	$	10.86		$	9.30
Diluted earnings per share
Net income	$	11.67		$	3.59
Operating income	$	10.34		$	8.90

Page 7

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — CURRENT QUARTER


THREE MONTHS ENDED DECEMBER 31, 2009		THREE MONTHS ENDED DECEMBER 31, 2008

Gross Premiums Written = $322,129		Gross Premiums Written = $310,945

Page 8

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — CURRENT QUARTER


THREE MONTHS ENDED DECEMBER 31, 2009		THREE MONTHS ENDED DECEMBER 31, 2008

Gross Premiums Written = $322,129		Gross Premiums Written = $310,945


*		Excludes general casualty reinsurance negative gross premiums written of $7,643 caused by downward premium adjustments on estimated premiums.

Page 9

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — YEAR TO DATE


YEAR ENDED DECEMBER 31, 2009		YEAR ENDED DECEMBER 31, 2008

Gross Premiums Written = $1,696,345		Gross Premiums Written = $1,445,584

Page 10

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — YEAR TO DATE


YEAR ENDED DECEMBER 31, 2009		YEAR ENDED DECEMBER 31, 2008

Gross Premiums Written = $1,696,345		Gross Premiums Written = $1,445,584

Page 11

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2009


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS

Revenues
Gross premiums written	$	169,116		$	130,272		$	22,741		$	322,129
Net premiums written	$	123,155		$	87,827		$	22,712		$	233,694
Net premiums earned	$	119,641		$	92,464		$	118,376		$	330,481
Other income	$	373		$	—		$	—		$	373

Total revenues	$	120,014		$	92,464		$	118,376		$	330,854


Expenses
Net losses and loss expenses:
Current year	$	83,047		$	65,792		$	70,226		$	219,065
Prior years		(14,774	)		(49,325	)		(13,563	)		(77,662	)

Total net losses and loss expenses	$	68,273		$	16,467		$	56,663		$	141,403
Acquisition costs		15,806			(501	)		22,821			38,126
General and administrative expenses		32,474			25,791			13,947			72,212

Total expenses	$	116,553		$	41,757		$	93,431		$	251,741


Underwriting income	$	3,461		$	50,707		$	24,945		$	79,113

Net investment income											73,252
Net realized investment gains											37,796
Net impairment charges recognized in earnings											(187	)
Amortization and impairment of intangible assets											(7,856	)
Interest expense											(9,527	)
Foreign exchange loss											(1,408	)


Income before income taxes										$	171,183


GAAP Ratios
Loss and loss expense ratio		57.1	%		17.8	%		47.9	%		42.8	%
Acquisition cost ratio		13.2	%		(0.5	%)		19.3	%		11.5	%
General and administrative expense ratio		27.1	%		27.9	%		11.8	%		21.9	%

Expense ratio		40.3	%		27.4	%		31.1	%		33.4	%

Combined ratio		97.4	%		45.2	%		79.0	%		76.2	%

Page 12

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2008


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS

Revenues
Gross premiums written	$	153,671		$	147,025		$	10,249		$	310,945
Net premiums written	$	108,541		$	107,833		$	10,129		$	226,503
Net premiums earned	$	86,060		$	115,434		$	101,490		$	302,984
Other income	$	746		$	—		$	—		$	746

Total revenues	$	86,806		$	115,434		$	101,490		$	303,730


Expenses
Net losses and loss expenses:
Current year	$	60,046		$	101,015		$	72,728		$	233,789
Prior years		(25,474	)		(53,879	)		(10,905	)		(90,258	)

Total net losses and loss expenses	$	34,572		$	47,136		$	61,823		$	143,531
Acquisition costs		9,363			1,525			19,961			30,849
General and administrative expenses		27,359			16,399			11,647			55,405

Total expenses	$	71,294		$	65,060		$	93,431		$	229,785


Underwriting income	$	15,512		$	50,374		$	8,059		$	73,945

Net investment income											82,583
Net realized investment losses											(19,454	)
Net impairment charges recognized in earnings											(100,593	)
Amortization and impairment of intangible assets											(710	)
Interest expense											(10,205	)
Foreign exchange loss											(1,230	)


Income before income taxes										$	24,336


GAAP Ratios
Loss and loss expense ratio		40.2	%		40.8	%		60.9	%		47.4	%
Acquisition cost ratio		10.9	%		1.3	%		19.7	%		10.2	%
General and administrative expense ratio		31.8	%		14.2	%		11.5	%		18.3	%

Expense ratio		42.7	%		15.5	%		31.2	%		28.5	%

Combined ratio		82.9	%		56.3	%		92.1	%		75.9	%

Page 13

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE YEAR ENDED DECEMBER 31, 2009


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS

Revenues
Gross premiums written	$	674,826		$	555,944		$	465,575		$	1,696,345
Net premiums written	$	493,067		$	362,893		$	465,165		$	1,321,125
Net premiums earned	$	447,491		$	413,170		$	456,231		$	1,316,892
Other income	$	1,506		$	—		$	—		$	1,506

Total revenues	$	448,997		$	413,170		$	456,231		$	1,318,398


Expenses
Net losses and loss expenses:
Current year	$	281,787		$	297,518		$	272,748		$	852,053
Prior years		(70,424	)		(139,456	)		(38,113	)		(247,993	)

Total net losses and loss expenses	$	211,363		$	158,062		$	234,635		$	604,060
Acquisition costs		58,114			2,742			87,991			148,847
General and administrative expenses		115,797			84,390			48,405			248,592

Total expenses	$	385,274		$	245,194		$	371,031		$	1,001,499


Underwriting income	$	63,723		$	167,976		$	85,200		$	316,899

Net investment income											300,675
Net realized investment gains											126,352
Net impairment charges recognized in earnings											(49,577	)
Amortization and impairment of intangible assets											(11,051	)
Interest expense											(39,019	)
Foreign exchange loss											(748	)


Income before income taxes										$	643,531


GAAP Ratios
Loss and loss expense ratio		47.2	%		38.3	%		51.4	%		45.9	%
Acquisition cost ratio		13.0	%		0.7	%		19.3	%		11.3	%
General and administrative expense ratio		25.9	%		20.4	%		10.6	%		18.9	%

Expense ratio		38.9	%		21.1	%		29.9	%		30.2	%

Combined ratio		86.1	%		59.4	%		81.3	%		76.1	%

Page 14

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE YEAR ENDED DECEMBER 31, 2008


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS

Revenues
Gross premiums written	$	319,985		$	695,459		$	430,140		$	1,445,584
Net premiums written	$	212,978		$	465,869		$	428,381		$	1,107,228
Net premiums earned	$	179,818		$	472,550		$	464,537		$	1,116,905
Other income	$	746		$	—		$	—		$	746

Total revenues	$	180,564		$	472,550		$	464,537		$	1,117,651


Expenses
Net losses and loss expenses:
Current year	$	139,810		$	457,208		$	324,199		$	921,217
Prior years		(36,447	)		(168,588	)		(75,060	)		(280,095	)

Total net losses and loss expenses	$	103,363		$	288,620		$	249,139		$	641,122
Acquisition costs		17,832			3,774			90,963			112,569
General and administrative expenses		66,810			75,490			43,550			185,850

Total expenses	$	188,005		$	367,884		$	383,652		$	939,541


Underwriting (loss) income	$	(7,441	)	$	104,666		$	80,885		$	178,110

Net investment income											308,775
Net realized investment losses											(59,954	)
Net impairment charges recognized in earnings											(212,897	)
Amortization and impairment of intangible assets											(710	)
Interest expense											(38,743	)
Foreign exchange gain											1,421


Income before income taxes										$	176,002


GAAP Ratios
Loss and loss expense ratio		57.5	%		61.1	%		53.6	%		57.4	%
Acquisition cost ratio		9.9	%		0.8	%		19.6	%		10.1	%
General and administrative expense ratio		37.2	%		16.0	%		9.4	%		16.6	%

Expense ratio		47.1	%		16.8	%		29.0	%		26.7	%

Combined ratio		104.6	%		77.9	%		82.6	%		84.1	%

Page 15

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONDENSED CONSOLIDATED BALANCE SHEETS


	DECEMBER 31, 2009		DECEMBER 31, 2008

ASSETS
Fixed maturity investments available for sale, at fair value (amortized cost: 2009: $4,260,844; 2008: $5,872,031)	$	4,427,072	$	6,032,029
Fixed maturity investments trading, at fair value		2,544,322		—
Other invested assets trading, at fair value		184,869		69,902
Other invested assets available for sale, at fair value (cost: 2009: nil; 2008: $89,229)		—		55,199

Total investments		7,156,263		6,157,130
Cash and cash equivalents		379,751		706,267
Securities lending collateral		—		171,026
Insurance balances receivable		395,621		347,941
Prepaid reinsurance		186,610		192,582
Reinsurance recoverable		919,991		888,314
Accrued investment income		53,046		50,671
Deferred acquisition costs		87,821		86,181
Goodwill		268,376		268,532
Intangible assets		60,359		71,410
Net balances on purchases and sales of investments		184		12,371
Net deferred tax assets		21,895		22,452
Other assets		67,566		47,603

TOTAL ASSETS	$	9,597,483	$	9,022,480


LIABILITIES
Reserve for losses and loss expenses	$	4,761,772	$	4,576,828
Unearned premiums		928,619		930,358
Reinsurance balances payable		102,837		95,129
Securities lending payable		—		177,010
Syndicated loan		—		243,750
Senior notes		498,919		498,796
Accounts payable and accrued liabilities		92,041		83,747

TOTAL LIABILITIES	$	6,384,188	$	6,605,618


SHAREHOLDERS’ EQUITY
Common shares, par value $0.03 per share:
issued and outstanding 2009: 49,734,487; 2008: 49,036,159 shares	$	1,492	$	1,471
Additional paid-in capital		1,359,934		1,314,785
Retained earnings		1,702,020		994,974
Accumulated other comprehensive income:
net unrealized gains on investments, net of tax		149,849		105,632

TOTAL SHAREHOLDERS’ EQUITY	$	3,213,295	$	2,416,862

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	9,597,483	$	9,022,480


Book value per share	$	64.61	$	49.29
Diluted book value per share	$	59.56	$	46.05

Page 16

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED TOTAL INVESTMENT PORTFOLIO


	DECEMBER 31, 2009					SEPTEMBER 30, 2009					JUNE 30, 2009					MARCH 31, 2009					DECEMBER 31, 2008
	FAIR MARKET					FAIR MARKET					FAIR MARKET					FAIR MARKET					FAIR MARKET
	VALUE					VALUE					VALUE					VALUE					VALUE

MARKET VALUE
Fixed maturities available for sale	$	4,427,072		58.7	%	$	5,673,793		75.1	%	$	6,286,561		87.6	%	$	5,808,176		86.5	%	$	6,032,029		87.9	%
Fixed maturities trading		2,544,322		33.8	%		1,372,287		18.2	%		233,583		3.2	%		—		—			—		—
Other invested assets trading		184,869		2.5	%		162,125		2.1	%		132,694		1.8	%		139,199		2.1	%		69,902		1.0	%
Other invested assets available for sale		—		—			—					4		0.0	%		58,305		0.9	%		55,199		0.8	%
Cash and cash equivalents		379,751		5.0	%		345,954		4.6	%		534,742		7.4	%		704,419		10.5	%		706,267		10.3	%

Total	$	7,536,014		100.0	%	$	7,554,159		100.0	%	$	7,187,584		100.0	%	$	6,710,099		100.0	%	$	6,863,397		100.0	%


ASSET ALLOCATION BY MARKET VALUE
U.S. government and agencies	$	1,378,565		18.3	%	$	1,364,043		18.1	%	$	1,514,542		21.1	%	$	1,474,343		22.0	%	$	1,770,235		25.8	%
Non-U.S. government securities		511,001		6.8	%		454,676		6.0	%		384,531		5.3	%		297,258		4.4	%		280,156		4.1	%
Corporate securities		2,584,585		34.3	%		2,410,484		31.9	%		2,129,275		29.6	%		1,643,561		24.5	%		1,361,970		19.8	%
State, municipalities and political subdivisions		243,218		3.2	%		323,916		4.3	%		343,382		4.8	%		374,504		5.6	%		369,619		5.4	%
Mortgage-backed securities		1,721,254		22.8	%		2,043,514		27.1	%		1,918,539		26.7	%		1,843,933		27.5	%		2,089,937		30.5	%
Asset-backed securities		532,771		7.1	%		449,447		5.9	%		229,875		3.2	%		174,577		2.5	%		160,112		2.3	%
Fixed income sub-total		6,971,394		92.5	%		7,046,080		93.3	%		6,520,144		90.7	%		5,808,176		86.5	%		6,032,029		87.9	%
Global high-yield bond fund		—		—			—		0.0	%		4		0.0	%		58,305		0.9	%		55,199		0.8	%
Hedge funds		184,725		2.5	%		161,840		2.1	%		132,560		1.8	%		120,708		1.8	%		48,573		0.7	%
Equity securities		144		0.0	%		285		0.0	%		134		0.0	%		18,491		0.3	%		21,329		0.3	%
Cash & cash equivalents		379,751		5.0	%		345,954		4.6	%		534,742		7.5	%		704,419		10.5	%		706,267		10.3	%

Total	$	7,536,014		100.0	%	$	7,554,159		100.0	%	$	7,187,584		100.0	%	$	6,710,099		100.0	%	$	6,863,397		100.0	%


FIXED INCOME CREDIT QUALITY BY MARKET VALUE
U.S. government and agencies	$	1,378,565		19.8	%	$	1,364,043		19.4	%	$	1,514,542		23.2	%	$	1,474,343		25.4	%	$	1,770,235		29.3	%
AAA/Aaa		3,076,133		44.1	%		3,314,343		47.0	%		3,081,380		47.3	%		2,734,874		47.1	%		3,244,639		53.8	%
AA/Aa		684,291		9.8	%		571,871		8.1	%		465,556		7.1	%		444,081		7.6	%		166,244		2.8	%
A/A		1,347,557		19.3	%		1,323,415		18.8	%		1,159,173		17.8	%		882,140		15.2	%		685,461		11.4	%
BBB/Baa		318,253		4.6	%		324,007		4.6	%		283,552		4.4	%		265,541		4.6	%		156,132		2.6	%
BB		34,843		0.5	%		29,082		0.4	%		1,499		0.0	%		3,709		0.1	%		8,350		0.1	%
B/B		24,393		0.4	%		29,248		0.4	%		11,395		0.2	%		2,172		0.0	%		969		0.0	%
CCC+ and below		107,359		1.5	%		90,071		1.3	%		3,047		0.0	%		1,316		0.0	%		—		0.0	%

Total	$	6,971,394		100.0	%	$	7,046,080		100.0	%	$	6,520,144		100.0	%	$	5,808,176		100.0	%	$	6,032,030		100.0	%


STATISTICS
Annualized book yield, year to date		4.2	%				4.3	%				4.4	%				4.6	%				4.7	%
Duration	3.0 years					3.2 years					3.0 years					2.8 years					3.3 years
Average credit quality (S&P)	AA					AA					AA+					AA+					AA+

Page 17

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
INVESTMENT PORTFOLIO — ADDITIONAL DETAIL
DECEMBER 31, 2009


	FAIR MARKET VALUE		AVERAGE RATING	PORTFOLIO PERCENTAGE
Cash & cash equivalents	$	379,751	AAA		5.0	%
U.S. government securities		820,756	AAA		10.9	%
U.S. government agencies		557,809	AAA		7.4	%
Non-U.S. government securities		511,001	AAA		6.8	%
Mortgage-backed securities:
Agency MBS		876,297	AAA		11.6	%
Non-agency RMBS		237,021	AA		3.1	%
Non-agency RMBS — Non investment grade strategy		184,867	B+		2.5	%
CMBS		423,069	AAA		5.6	%
Total mortgage-backed securities		1,721,254			22.8	%
Corporate securities:
Financials		1,300,461	AA-		17.3	%
Industrials		1,117,938	A		14.8	%
Utilities		166,186	BBB+		2.2	%
Total corporate securities		2,584,585			34.3	%
Asset-backed securities
Credit cards		80,466	AAA		1.1	%
Auto receivables		163,897	AAA		2.2	%
Other		155,157	AAA		2.0	%
Collateralized loan obligations		133,251	AAA		1.8	%
Total asset-backed securities		532,771			7.1	%

State, municipalities and political subdivisions		243,218	AA+		3.2	%
Hedge Funds		184,725	N/A		2.5	%
Equities		144	N/A		0.0	%


Total Investment Portfolio	$	7,536,014			100.0	%

TOP 10 CORPORATE EXPOSURES


CORPORATE	FAIR MARKET VALUE		PORTFOLIO PERCENTAGE
Bank of America Corp	$	88,239		1.2	%
Wells Fargo & Co		87,317		1.2	%
Verizon Communications Inc		86,839		1.2	%
JPMorgan Chase & Co		78,806		1.0	%
Citigroup Inc		64,166		0.9	%
Morgan Stanley		59,521		0.8	%
AT&T Inc		57,071		0.8	%
HSBC Holdings PLC		54,237		0.7	%
France Telecom SA		51,490		0.7	%
JC Flowers & Co LLC		45,200		0.6	%

Page 18

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
INVESTMENT PORTFOLIO — ADDITIONAL DETAIL
DECEMBER 31, 2009

NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES DETAIL
NON INVESTMENT GRADE STRATEGY


																					AVERAGE
																			TOTAL		CREDIT
Vintage	AAA		AA		A		BBB		BB		B		CCC		CC		D		FAIR VALUE		ENHANCEMENT**

2007	$	—	$	—	$	—	$	8,211	$	—	$	—	$	47,623	$	—	$	2,538	$	58,372		29.1	%
2006		—		11,369		2,308		661		10,174		22,014		37,638		—		—		84,164		25.2	%
2005 and prior		15,481		—		325		2,498		7,115		490		16,422		—		—		42,331		27.7	%

Total*	$	15,481	$	11,369	$	2,633	$	11,370	$	17,289	$	22,504	$	101,683	$	—	$	2,538	$	184,867		27.0	%


*		Included in the above is fair value of $4.4 million of subprime mortgages with an average rating of BB+.

NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES DETAIL
CORE FIXED INCOME ACCOUNT


																					AVERAGE
																			TOTAL		CREDIT
Vintage	AAA		AA		A		BBB		BB		B		CCC		CC		D		FAIR VALUE		ENHANCEMENT**

2007	$	1,130	$	—	$	27	$	—	$	1,307	$	—	$	1,288	$	—	$	—	$	3,752		6.7	%
2006		32,387		—		10,353		—		274		1,888		—		597		—		45,499		17.2	%
2005 and prior		149,221		3,396		2,931		14,994		15,973		—		1,255		—		—		187,770		10.0	%

Total*	$	182,738	$	3,396	$	13,311	$	14,994	$	17,554	$	1,888	$	2,543	$	597	$	—	$	237,021		11.3	%


*		Included in the above is fair value of $0.2 million of subprime mortgages with an average rating of AAA.

COMMERCIAL MORTGAGE BACKED SECURITIES DETAIL


																					AVERAGE
																			TOTAL		CREDIT
Vintage	AAA		AA		A		BBB		BB		B		CCC		CC		D		FAIR VALUE		ENHANCEMENT**

2006	$	93,119	$	—	$	—	$	190	$	—	$	—	$	—	$	—	$	—	$	93,309		30.4	%
2005 and prior		294,262		35,047		451		—		—		—		—		—		—		329,760		25.7	%

Total	$	387,381	$	35,047	$	451	$	190	$	—	$	—	$	—	$	—	$	—	$	423,069		26.8	%


**		Average credit enhancement is the amount, reported as a percentage, of subordination and/or overcollateralization available to support the security.

Page 19

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
RESERVES FOR LOSSES AND LOSS EXPENSES


	AT DECEMBER 31, 2009
	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTAL

Case reserves (net of reinsurance recoverable)	$	183,376		$	388,882		$	313,239		$	885,497
IBNR (net of reinsurance recoverable)		718,492			1,401,231			836,561			2,956,284

Total	$	901,868		$	1,790,113		$	1,149,800		$	3,841,781

IBNR/Total reserves (net of reinsurance recoverable)		79.7	%		78.3	%		72.8	%		77.0	%


	AT DECEMBER 31, 2008
	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTAL

Case reserves (net of reinsurance recoverable)	$	160,807		$	385,323		$	255,985		$	802,115
IBNR (net of reinsurance recoverable)		658,554			1,411,707			816,138			2,886,399

Total	$	819,361		$	1,797,030		$	1,072,123		$	3,688,514

IBNR/Total reserves (net of reinsurance recoverable)		80.4	%		78.6	%		76.1	%		78.3	%

Page 20

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CAPITAL STRUCTURE AND LEVERAGE RATIOS


	DECEMBER 31,			SEPTEMBER 30,			JUNE 30,			MARCH 31,			DECEMBER 31,
	2009			2009			2009			2009			2008

Senior notes	$	498,919		$	498,888		$	498,857		$	498,826		$	498,796
Syndicated loan		—			—			—			—			243,750
Shareholders’ equity		3,213,295			3,078,894			2,741,427			2,491,860			2,416,862

Total capitalization	$	3,712,214		$	3,577,782		$	3,240,284		$	2,990,686		$	3,159,408


Leverage ratios
Debt to total capitalization		13.4	%		13.9	%		15.4	%		16.7	%		23.5	%

Closing shareholders’ equity	$	3,213,295		$	3,078,894		$	2,741,427		$	2,491,860		$	2,416,862
Add/deduct: accumulated other comprehensive income		(149,849	)		(185,043	)		(48,669	)		(48,204	)		(105,632	)

Adjusted shareholders’ equity	$	3,063,446		$	2,893,851		$	2,692,758		$	2,443,656		$	2,311,230

Net premiums written (trailing 12 months)	$	1,321,125		$	1,313,935		$	1,226,882		$	1,185,694		$	1,107,228
Net premiums written (trailing 12 months) to adjusted shareholders’ equity		0.43			0.45			0.46			0.49			0.48

Total investments and cash & cash equivalents	$	7,536,014		$	7,554,159		$	7,187,584		$	6,710,099		$	6,863,397
Total investments and cash & cash equivalents to adjusted shareholders’ equity		2.46			2.61			2.67			2.75			2.97

Reserve for losses and loss expenses	$	4,761,772		$	4,749,602		$	4,713,727		$	4,603,078		$	4,576,828
Deduct: reinsurance recoverable		(919,991	)		(913,964	)		(909,716	)		(880,390	)		(888,314	)

Net reserve for losses and loss expenses	$	3,841,781		$	3,835,638		$	3,804,011		$	3,722,688		$	3,688,514
Net reserve for losses and loss expenses to adjusted shareholders’ equity		1.25			1.33			1.41			1.52			1.60

Page 21

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION


	THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED
	DECEMBER 31, 2009			SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009			DECEMBER 31, 2008

Net income	$	161,255		$	200,554		$	113,670		$	131,408		$	19,852
Add:
Net realized investment (gains) losses		(37,796	)		(46,861	)		(5,093	)		(36,602	)		19,454
Net impairment charges in earnings		187			1,953			5,474			41,963			100,593
Impairment of intangible assets		6,866			—			—			—			—
Foreign exchange loss (gain)		1,408			(273	)		(1,222	)		835			1,230

Operating income	$	131,920		$	155,373		$	112,829		$	137,604		$	141,129


Weighted average common shares outstanding
Basic		49,662,575			49,574,266			49,523,459			49,248,118			49,028,249
Diluted		52,880,733			52,345,913			51,257,887			51,120,049			50,366,814

Basic per share data
Net income	$	3.25		$	4.05		$	2.30		$	2.67		$	0.40
Add:
Net realized investment (gains) losses		(0.76	)		(0.95	)		(0.10	)		(0.74	)		0.40
Net impairment charges in earnings		—			0.04			0.11			0.85			2.05
Impairment of intangible assets		0.14			—			—			—			—
Foreign exchange loss (gain)		0.03			(0.01	)		(0.03	)		0.01			0.03

Operating income	$	2.66		$	3.13		$	2.28		$	2.79		$	2.88


Diluted per share data
Net income	$	3.05		$	3.83		$	2.22		$	2.57		$	0.39
Add:
Net realized investment (gains) losses		(0.72	)		(0.89	)		(0.10	)		(0.71	)		0.39
Net impairment charges in earnings		—			0.04			0.11			0.82			2.00
Impairment of intangible assets		0.13			—			—			—			—
Foreign exchange loss (gain)		0.03			(0.01	)		(0.03	)		0.01			0.02

Operating income	$	2.49		$	2.97		$	2.20		$	2.69		$	2.80

Page 22

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION


	YEAR ENDED			YEAR ENDED
	DECEMBER 31, 2009			DECEMBER 31, 2008

Net income	$	606,887		$	183,635
Add:
Net realized investment (gains) losses		(126,352	)		59,954
Net impairment charges in earnings		49,577			212,897
Impairment of intangible assets		6,866			—
Foreign exchange loss (gain)		748			(1,421	)

Operating income	$	537,726		$	455,065


Weighted average common shares outstanding
Basic		49,503,438			48,936,912
Diluted		51,992,674			51,147,215

Basic per share data
Net income	$	12.26		$	3.75
Add:
Net realized investment (gains) losses		(2.55	)		1.23
Net impairment charges in earnings		1.00			4.35
Impairment of intangible assets		0.14			—
Foreign exchange loss (gain)		0.01			(0.03	)

Operating income	$	10.86		$	9.30


Diluted per share data
Net income	$	11.67		$	3.59
Add:
Net realized investment (gains) losses		(2.43	)		1.17
Net impairment charges in earnings		0.96			4.16
Impairment of intangible assets		0.13			—
Foreign exchange loss (gain)		0.01			(0.02	)

Operating income	$	10.34		$	8.90

Page 23

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY


	THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED
	DECEMBER 31, 2009			SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009			DECEMBER 31, 2008

Opening shareholders’ equity	$	3,078,894		$	2,741,427		$	2,491,860		$	2,416,862		$	2,272,828
Deduct/add: accumulated other comprehensive (income) loss		(185,043	)		(48,669	)		(48,204	)		(105,632	)		19,775

Adjusted opening shareholders’ equity	$	2,893,851		$	2,692,758		$	2,443,656		$	2,311,230		$	2,292,603

Closing shareholders’ equity	$	3,213,295		$	3,078,894		$	2,741,427		$	2,491,860		$	2,416,862
Deduct/add: accumulated other comprehensive income		(149,849	)		(185,043	)		(48,669	)		(48,204	)		(105,632	)

Adjusted closing shareholders’ equity	$	3,063,446		$	2,893,851		$	2,692,758		$	2,443,656		$	2,311,230

Average shareholders’ equity	$	2,978,649		$	2,793,305		$	2,568,207		$	2,377,443		$	2,301,917

Net income available to shareholders	$	161,255		$	200,554		$	113,670		$	131,408		$	19,852
Annualized net income available to shareholders		645,020			802,216			454,680			525,632			79,408

Annualized return on average shareholders’ equity — net income available to shareholders		21.7	%		28.7	%		17.7	%		22.1	%		3.4	%


Operating income available to shareholders	$	131,920		$	155,373		$	112,829		$	137,604		$	141,129
Annualized operating income available to shareholders		527,680			621,492			451,316			550,416			564,516

Annualized return on average shareholders’ equity — operating income available to shareholders		17.7	%		22.2	%		17.6	%		23.2	%		24.5	%

Page 24

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY


	YEAR ENDED			YEAR ENDED
	DECEMBER 31, 2009			DECEMBER 31, 2008

Opening shareholders’ equity	$	2,416,862		$	2,239,842
Deduct: accumulated other comprehensive income		(105,632	)		(136,214	)

Adjusted opening shareholders’ equity	$	2,311,230		$	2,103,628

Closing shareholders’ equity	$	3,213,295		$	2,416,862
Deduct: accumulated other comprehensive income		(149,849	)		(105,632	)

Adjusted closing shareholders’ equity	$	3,063,446		$	2,311,230

Average shareholders’ equity	$	2,687,338		$	2,207,429

Net income available to shareholders	$	606,887		$	183,635

Annualized return on average shareholders’ equity — net income available to shareholders		22.6	%		8.3	%


Operating income available to shareholders	$	537,726		$	455,065

Annualized return on average shareholders’ equity — operating income available to shareholders		20.0	%		20.6	%

Page 25

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
DILUTED BOOK VALUE PER SHARE


	DECEMBER 31,			DECEMBER 31,
	2009			2008

Price per share at period end	$	46.07		$	40.60

Total shareholders’ equity	$	3,213,295		$	2,416,862

Basic common shares outstanding		49,734,487			49,036,159

Add: unvested restricted share units		915,432			971,907

Add: performance based equity awards		1,583,237			1,345,903

Add: dilutive options/warrants outstanding		6,805,157			6,371,151
Weighted average exercise price per share	$	34.44		$	33.38
Deduct: options bought back via treasury method		(5,087,405	)		(5,237,965	)


Common shares and common share equivalents outstanding		53,950,908			52,487,155

Basic book value per common share	$	64.61		$	49.29
Diluted book value per common share	$	59.56		$	46.05

Page 26

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
ANNUALIZED INVESTMENT BOOK YIELD


	THREE MONTHS ENDED			THREE MONTHS ENDED			YEAR ENDED			YEAR ENDED
	DECEMBER 31, 2009			DECEMBER 31, 2008			DECEMBER 31, 2009			DECEMBER 31, 2008


Net investment income	$	73,252		$	82,583		$	300,675		$	308,775
Deduct: annual and non-recurring items		—			7,921			880			14,540	*

Net investment income, recurring	$	73,252		$	74,662		$	299,795		$	294,235

Annualized net investment income, recurring	$	293,008		$	298,648		$	299,795		$	294,235

Add: annual and non-recurring items		—			7,921			880			6,619	*

Normalized net investment income	$	293,008		$	306,569		$	300,675		$	300,854

Opening aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,815,658		$	5,440,019		$	5,872,031		$	5,595,943
Other invested assets, available for sale, cost		—			81,262			89,229			291,458
Equity securities, cost		46			—			21,493			—
Other invested assets, at cost		168,704			180,716			100,198			—
Cash and cash equivalents		345,954			791,934			706,267			270,468
Net balances on purchases and sales of investments		(110,040	)		(32,417	)		12,371			(56,464	)

Opening aggregate invested assets	$	7,220,322		$	6,461,514		$	6,801,589		$	6,101,405

Closing aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,792,563		$	5,872,031		$	6,792,563		$	5,872,031
Other invested assets, available for sale, cost		—			89,229			—			89,229
Equity securities, cost		309			21,493			309			21,493
Other invested assets, cost		184,237			100,198			184,237			100,198
Cash and cash equivalents		379,751			706,267			379,751			706,267
Net balances on purchases and sales of investments		184			12,371			184			12,371

Closing aggregate invested assets	$	7,357,044		$	6,801,589		$	7,357,044		$	6,801,589

Average aggregate invested assets	$	7,288,683		$	6,631,552		$	7,079,317		$	6,451,497

Annualized investment book yield		4.0	%		4.6	%		4.2	%		4.7	%


*		Includes an annual dividend received at the beginning of the year and excludes the annual dividend received at the end of the year.

Page 27

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
ANNUALIZED INVESTMENT BOOK YIELD


	NINE MONTHS ENDED			SIX MONTHS ENDED			THREE MONTHS ENDED
	SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009


Net investment income	$	227,423		$	154,391		$	77,854
Deduct: annual and non-recurring items		880			880			—

Net investment income, recurring	$	226,543		$	153,511		$	77,854

Annualized net investment income, recurring	$	302,057		$	307,022		$	311,416

Add: annual and non-recurring items		880			880			—

Normalized net investment income	$	302,937		$	307,902		$	311,416

Opening aggregate invested assets:
Fixed maturity investments, amortized cost	$	5,872,031		$	5,872,031		$	5,872,031
Other invested assets, available for sale, cost		89,229			89,229			89,229
Other invested assets, at cost		21,493			21,493			21,493
Cash and cash equivalents		756,026			756,026			756,026
Balances receivable on sale of investments		50,439			50,439			50,439
Balances due on purchase of investments		12,371			12,371			12,371

Opening aggregate invested assets	$	6,801,589		$	6,801,589		$	6,801,589

Closing aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,815,658		$	6,456,549		$	5,712,331
Other invested assets, available for sale, cost		—			4			89,250
Equity securities, cost		46			46			20,985
Other invested assets, at cost		168,704			146,485			139,790
Cash and cash equivalents		345,954			534,742			704,419
Net balances on purchases and sales of investments		(110,040	)		(92,606	)		3,654

Closing aggregate invested assets	$	7,220,322		$	7,045,220		$	6,670,429

Average aggregate invested assets	$	7,010,956		$	6,923,405		$	6,736,009

Annualized investment book yield		4.3	%		4.4	%		4.6	%

Page 28

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
REGULATION G

In presenting the company’s results, management has included and discussed certain non-GAAP financial measures. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP.

OPERATING INCOME

Operating income is an internal performance measure used by the company in the management of its operations and represents after-tax operational results excluding, as applicable, net realized investment gains or losses, net impairment charges recognized in earnings and foreign exchange gain or loss. The company excludes net realized investment gains or losses, net impairment charges recognized in earnings, impairment of intangible assets and net foreign exchange gain or loss from its calculation of operating income because the amount of these gains or losses is heavily influenced by, and fluctuates in part according to, the availability of market opportunities. The Company excludes impairment of intangible assets as these are non-recurring charges. The company believes these amounts are largely independent of its business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net income determined in accordance with GAAP, the company believes that showing operating income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the company’s results of operations in a manner similar to how management analyzes the company’s underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. See pages 22 and 23 for reconciliation of operating income to net income.

ANNUALIZED RETURN ON AVERAGE SHAREHOLDERS’ EQUITY (“ROAE”)

Annualized return on average shareholders’ equity is calculated using average equity, excluding the average after tax unrealized gains or losses on investments. Unrealized gains (losses) on investments are primarily the result of interest rate and risk premium movements and the resultant impact on fixed income securities. Such gains (losses) are not related to management actions or operational performance, nor are they likely to be realized. Therefore, the company believes that excluding these unrealized gains (losses) provides a more consistent and useful measurement of operating performance, which supplements GAAP information. In calculating ROAE, the net income (loss) available to shareholders for the period is multiplied by the number of such periods in a calendar year in order to arrive at annualized net income (loss) available to shareholders. The company presents ROAE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. See pages 24 and 25 for reconciliation of average shareholders’ equity.

ANNUALIZED OPERATING RETURN ON AVERAGE SHAREHOLDERS’ EQUITY

Annualized operating return on average shareholders’ equity is calculated using operating income (as defined above and annualized in the manner described for net income (loss) available to shareholders under ROAE above), and average shareholders’ equity, excluding the average after tax unrealized gains (losses) on investments. Unrealized gains (losses) are excluded from equity for the reasons outlined in the annualized return on average shareholders’ equity explanation above. See pages 22 and 23 for the reconciliation of net income to operating income and pages 24 and 25 for the reconciliations of average shareholders’ equity.

DILUTED BOOK VALUE PER SHARE

The company has included diluted book value per share because it takes into account the effect of dilutive securities; therefore, the company believes it is a better measure of calculating shareholder returns than book value per share. See page 26 for a reconciliation of diluted book value per share to basic book value per share.

ANNUALIZED INVESTMENT BOOK YIELD

Annualized investment book yield is calculated by dividing normalized net investment income by average aggregate invested assets at book value. In calculating annualized investment book yield, normalized net investment income for the period is multiplied by the number of such periods in a calendar year in order to arrive at annualized net investment income. Normalized net investment income is adjusted for known annual or non-recurring items. The company utilizes and presents the investment yield in order to better disclose the performance of the company’s investments and to show the components of the company’s ROAE. See pages 27 and 28 for reconciliation of annualized investment book yield.

Page 29

Allied World Assurance Co Holdings, AG - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - February 11, 2010

Attached files

Allied World Assurance Co Holdings, AG Reports